<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
July 18, 1996
- -------------------------------------------------------------------------------
Date of Report (Date of earliest event reported)
Susquehanna Bancshares, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 0-10674 23-2201716
- -------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation or organization) File Number) ID No.)
26 North Cedar Street
Lititz, Pennsylvania 17543
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(717) 626-4721
- -------------------------------------------------------------------------------
(registrant's telephone number, including area code)
Not Applicable
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
Item 5. Other Events.
On July 18, 1996, Susquehanna Bancshares, Inc. (herein referred
to as "SBI" or the "Registrant"), a Pennsylvania business corporation registered
as a bank holding company under the Bank Holding Company Act of 1956, as amended
(the "BHC Act"), entered into: (i) an Agreement and Plan of Affiliation with
Susquehanna Bancshares East, Inc. ("SBI Merger Sub"), a New Jersey corporation
and a wholly-owned subsidiary of SBI, Atcorp, Inc. ("Atcorp"), a New Jersey
corporation registered as a bank holding company under the BHC Act, and Equity
National Bank ("ENB"), a national banking association and a wholly-owned
subsidiary of Atcorp (the "Atcorp Merger Agreement"); and (ii) an Agreement and
Plan of Affiliation with Susquehanna Bancshares East II, Inc. ("SBI Merger Sub
II"), a New Jersey corporation and a wholly-owned subsidiary of SBI, Farmers
Banc Corp. ("FBC"), a New Jersey corporation registered as a bank holding
company under the BHC Act, and Farmers National Bank ("FNB"), a national banking
association and a wholly-owned subsidiary of FBC (the "Farmers Merger
Agreement") (the Atcorp Merger Agreement and the Farmers Merger Agreement are
hereinafter collectively referred to as the "Merger Agreements"). A copy of the
Atcorp Merger Agreement and the Farmers Merger Agreement, as well as a copy of
the Press Release announcing the execution of the Merger Agreements, are filed
as exhibits to this Current Report on Form 8-K.
1. The Atcorp Merger Agreement. The following is a summary
---------------------------
of the terms and conditions of the Atcorp Merger Agreement and the merger
described therein (the "Atcorp Merger"). This summary is qualified in its
entirety by reference to the full text of the Atcorp Merger Agreement which is
filed as an exhibit to this Current Report on Form 8-K.
General.
Pursuant to the Atcorp Merger Agreement, SBI Merger Sub will
merge with and into Atcorp, with Atcorp as the surviving entity (sometimes
referred to as the "Surviving Corporation"), as a result of which Atcorp will
become a direct wholly-owned subsidiary of SBI, and ENB will become a second-
tier subsidiary of SBI. The name of the Surviving Corporation will be
"Susquehanna Bancshares East, Inc."
As consideration for all of the outstanding capital stock of
Atcorp, SBI has agreed to exchange the outstanding Atcorp Common Stock, par
value $5.00 per share (the "Atcorp Common Stock"), for common stock of SBI, par
value $2.00 per share (the "SBI Common Stock"), at the exchange rate ("Exchange
Ratio") provided in the Atcorp Merger Agreement.
At the effective time of the Atcorp Merger (the "Atcorp
Effective Time"), each share of Atcorp Common Stock issued and outstanding shall
become and be converted into the right to receive shares of SBI Common Stock
determined in conformity with the Exchange Ratio, as set forth below:
(i) So long as the Average Price Per Share of SBI Common Stock
Before Closing is between $25.00 and $31.00, then, 771,750 shares of
SBI Common Stock (the "Atcorp Merger Consideration") shall be
exchanged for all of the outstanding Atcorp Common Stock. The Average
Price Per Share of SBI Common Stock Before Closing will be determined
by adding the price at which SBI Common Stock is reported to have
closed by The Nasdaq Stock Market (or if SBI Common Stock is not
quoted on The Nasdaq Stock Market then as reported by a recognized
source as to the principal trading market on which such shares are
traded) over the period of ten business days ending on the second
business day preceding the date set for the Atcorp Closing, and
dividing such total by ten.
(ii) In the event the Average Price Per Share of SBI Common
Stock Before Closing is less than $25.00 per share (subject to
adjustment pursuant to the Atcorp Merger Agreement), Atcorp
-2-
<PAGE>
may terminate the Atcorp Merger Agreement upon written notice within
two days of such determination.
(iii) If the Average Closing Price Per Share of SBI Common Stock
Before Closing is greater than $31.00 per share (subject to adjustment
pursuant to the Atcorp Merger Agreement), SBI may terminate the Atcorp
Merger Agreement upon written notice within two days of such
determination.
(iv) In the event the transactions described in the Atcorp
Merger Agreement are not consummated by March 31, 1997, then either
party may terminate the Atcorp Merger Agreement unless the failure to
so consummate by such time is due to the breach of any representation,
warranty or covenant contained in the Atcorp Merger Agreement by the
party seeking to terminate; provided, however, that such date may be
extended by the written agreement of the parties. If such date is
extended beyond the record date set for SBI's second quarterly
dividend for 1997 and if the Atcorp Effective Time has not occurred
prior to or on such record date, then Atcorp shall receive an
additional 5,000 shares of SBI Common Stock as Atcorp Merger
Consideration.
As of the Atcorp Effective Time, each share of Atcorp Common Stock
held by SBI (other than shares held in a fiduciary capacity or in satisfaction
of a debt previously contracted) and all shares of Atcorp Common Stock owned by
Atcorp as treasury stock will be cancelled, and no exchange or payment will be
made with respect thereto.
The Atcorp Merger Agreement provides that Atcorp shall not declare,
pay or set aside any dividend or other distribution in respect of its capital
stock.
The shares of common stock of SBI Merger Sub and ENB issued and
outstanding immediately prior to the Atcorp Effective Time shall remain
outstanding and unchanged after the merger, and shall thereafter constitute all
of the issued and outstanding shares of the capital stock of the Surviving
Corporation and ENB, respectively. At such time, all of the capital stock of
ENB will be owned by the Surviving Corporation and all of the shares of the
Surviving Corporation will be owned by SBI.
At the Atcorp Effective Time, all issued and outstanding options,
warrants or rights to acquire Atcorp Common Stock or any capital stock of ENB
will be cancelled. No compensation will be payable in the transactions
contemplated in the Atcorp Merger Agreement in respect of any such rights which
remain unexercised at the Atcorp Effective Time.
If prior to the Atcorp Effective Time, the outstanding shares of SBI
Common Stock shall have been increased, decreased, changed into or exchanged for
a different number or kind of shares or securities through a reclassification,
stock dividend, stock split or reverse stock split, or other similar change,
appropriate adjustment will be made to the Exchange Ratio.
Within five business days after the Atcorp Effective Time, SBI shall
cause to be sent to each person who immediately prior to the Atcorp Effective
Time was a holder of record of Atcorp Common Stock transmittal materials and
instructions for surrendering certificates for Atcorp Common Stock in exchange
for the number of whole shares of SBI Common Stock to which such person is
entitled pursuant to the Exchange Ratio.
No certificates for fractional shares of SBI Common Stock will be
issued; rather, SBI will furnish to any holder of Atcorp Common Stock entitled
to a fractional share a check for an amount of cash equal to the fraction of a
share of SBI Common Stock represented by the certificates so surrendered in
accordance with the Exchange Ratio.
-3-
<PAGE>
Closing; Effective Date; Termination.
The Atcorp Merger Agreement provides that the Atcorp Closing will
occur following three business days notice to Atcorp, as shall be agreed upon by
all parties which date shall not be later than the 22nd business day after (i)
the last approval of required governmental authorities is granted and any
related waiting periods expire, (ii) the lifting, discharge or dismissal of any
stay of any such governmental approval or of any injunction against the
transactions described in the Atcorp Merger Agreement, and (iii) all shareholder
approvals required by the parties pursuant to the Atcorp Merger Agreement are
received. The Atcorp Merger, and the transactions described by the Atcorp
Merger Agreement, will become effective at 12:01 a.m. on the day following the
day on which the certificate of merger has been duly filed and accepted by the
Secretary of State of New Jersey (the "Atcorp Merger Effective Date"). The
presentation of the certificate for acceptance and filing is subject to the
rights of the Boards of Directors of SBI and Atcorp to terminate the Atcorp
Merger Agreement under certain circumstances.
The Atcorp Merger Agreement provides that, whether before or after its
approval by the shareholders of Atcorp or SBI, it may be terminated and the
transactions contemplated in the Atcorp Merger Agreement abandoned at any time
prior to the Atcorp Effective Date: (a) by mutual consent of SBI and Atcorp, if
the Board of Directors of each so determines by majority vote of the members of
the entire board; (b) by Atcorp in the event (i) of a material breach by SBI of
any representation, warranty, covenant or agreement contained in the Atcorp
Merger Agreement which is not cured or not curable within 30 days after written
notice of such breach is given to SBI by Atcorp or (ii) by written notice to SBI
that any condition precedent to Atcorp's obligations as set forth in the Atcorp
Merger Agreement Article V has not been met or waived by Atcorp at such time as
such condition can no longer be satisfied, or (iii) the Board of Directors of
Atcorp fails to make, withdraws or modifies or changes the favorable
recommendation described at Section 4.2 of the Atcorp Merger Agreement or (iv)
the Board of Directors of Atcorp recommends to the stockholders of Atcorp that
an Acquisition Proposal (as defined in the Atcorp Merger Agreement) is likely to
be more favorable, from a financial point of view, to the stockholders of Atcorp
than the Atcorp Merger; (c) by SBI in the event (i) of a material breach by
Atcorp or ENB of any representation, warranty, covenant or agreement contained
in the Atcorp Merger Agreement which is not cured or not curable within 30 days
after written notice of such breach is given to Atcorp by SBI or (ii) any
condition precedent to SBI's obligations as set forth in Article V of the Atcorp
Merger Agreement has not been met or waived by SBI at such time as such
condition can no longer be satisfied; (d) by Atcorp, by giving written notice of
such election to SBI within two business days following a determination that the
Average Closing Price Per Share of SBI Common Stock Before Closing is less than
$25.00 per share at the time such calculation is required to be made pursuant to
the Atcorp Merger Agreement; (e) by SBI, if it chooses to give written notice of
such election within two business days following a determination that the
Average Closing Price Per Share of SBI Common Stock Before Closing is greater
than $31.00 per share; or (f) by SBI or Atcorp if the Atcorp Merger and the
transactions described in the Atcorp Merger Agreement are not consummated by
March 31, 1997, unless the parties agree to extend the time by which such
closing must occur.
Waiver; Amendment.
Prior to the Atcorp Merger Effective Time, any provision of the Atcorp
Merger Agreement may be: (i) waived by the party benefitted by the provision;
or (ii) amended or modified at any time (including the structure of the
transaction) by an agreement in writing between the parties approved by their
respective boards of directors, except that no amendment or waiver may be made
that would change the form or the amount of the Atcorp Merger Consideration or
otherwise have the effect of prejudicing the Atcorp shareholders' interest in
the Atcorp Merger Consideration following the AI Meeting (as defined in the
Atcorp Merger Agreement).
-4-
<PAGE>
Conditions Precedent.
In addition to the shareholder approval by SBI, if applicable, and FBC
shareholders, the Atcorp Merger is contingent upon the satisfaction of a number
of conditions, including, among others: (a) all required approvals, consents,
or waivers, including without limitation, approval by the Board of Governors of
the Federal Reserve System, the Office of the Comptroller of the Currency, the
Pennsylvania Department of Banking, if applicable, the Commissioner of Banking
of the State of New Jersey, and the New Jersey Department of Environmental
Protection and Energy, if applicable, and all applicable statutory waiting
periods shall have expired except those approvals for which failure to obtain
would not have a materially adverse effect on SBI, Atcorp or ENB; (b) there
shall not have occurred any change in the financial condition, properties,
assets, business or results of operation of Atcorp or ENB which, individually or
in the aggregate, has had or might reasonably be expected to result in a
material adverse effect on Atcorp or ENB; (c) the absence of any order, decree
or injunction of a court or agency of competent jurisdiction which would enjoin
or prohibit the consummation of the Atcorp Merger, or any litigation or
proceeding pending against SBI or Atcorp or their subsidiaries by any
governmental agency seeking to prevent consummation of the transactions
described in the Atcorp Merger Agreement; (d) the absence of any statute, rule,
regulation, order, injunction or decree enacted, entered, promulgated or
enforced by any governmental authority which would prohibit, restrict or make
illegal consummation of the Atcorp Merger; (e) any litigation pending against
Atcorp or ENB which, individually or in the aggregate, would have a Material
Adverse Effect (as defined in the Atcorp Merger Agreement) on Atcorp's
consolidated operations, shall have been settled or otherwise resolved on terms
reasonably satisfactory to SBI, Atcorp and ENB; (f) the Atcorp Merger shall meet
the requirements for pooling-of-interests accounting treatment under generally
accepted accounting principles and under the accounting rules of the SEC; (g)
Arthur Andersen LLP shall have furnished to SBI a "cold comfort" letter dated
the date of the notice of the Atcorp Meeting, which letter shall be in customary
form, reasonably acceptable to SBI, and a letter , dated the Effective Date,
inform and substance satisfactory to SBI to the effect that, based upon a
subsequent event review performed with respect to the financial condition of
Atcorp and ENB, and affiliates, for the period from December 31, 1995 to a
specified date not more than five (5) days prior to the date of such letter,
nothing has come to their attention that would indicate that (A) during that
same time period there was any change in the capitalization of Atcorp or ENB on
a consolidated basis, or (B) any material adjustments required to be made to the
audited financial statements for the period ended December 31, 1995 in order for
them to be in conformity with generally accepted accounting principles applied
on a consistent basis with that of prior periods; (h) there shall not have
occurred any change in the financial condition, properties, assets, business or
results of operation of Atcorp or ENB which, individually or in the aggregate,
had or might reasonably be expected to result in a Material Adverse Effect on
Atcorp or ENB; (i) the shares of SBI Common Stock to be issued in the Atcorp
Merger shall have been authorized to be listed for quotation on The Nasdaq Stock
Market; (j) Atcorp shall have received an updated opinion from Janney Montgomery
Scott Inc., dated as of a date no later than the date of the Proxy
Statement/Prospectus mailed to the Atcorp shareholders in connection with the
Atcorp Merger and not subsequently withdrawn, to the effect that the Atcorp
Merger Consideration is fair to Atcorp's shareholders from a financial point of
view. For purposes of the Atcorp Merger Agreement, in the case of ENB, receipt
of a CAMEL rating in connection with a safety and soundness examination which is
lower than the rating given to ENB in connection with the safety and soundness
examination most recently reported prior to the date of the Atcorp Merger
Agreement shall be deemed to have a Material Adverse Effect on ENB.
Representations and Warranties.
The representations and warranties of SBI, SBI Merger Sub, Atcorp and
ENB are set forth in Article III of the Atcorp Merger Agreement. The
representations and warranties relate, among other things, to representations as
to corporate existence and authority and the ability of each party to carry out
the transactions as contemplated by the Atcorp Merger Agreement. Atcorp and ENB
have made additional representations as to the non-existence of any contract
which would be breached by the Atcorp Merger; the accuracy and completeness of
its financial statements and filings with federal or state regulatory agencies,
including state and federal tax filings; the absence of any change in the
financial condition, properties, assets, business, or results of operations
which might
-5-
<PAGE>
be expected to result in a material adverse effect; the absence of material
litigation not otherwise disclosed; the absence of regulatory actions; the
absence of undisclosed material liabilities; labor and employee benefits
matters; the status of title to properties; environmental matters; the adequacy
of the allowance for losses on loans; and board and shareholder action. SBI has
made additional representations as to the accuracy and completeness of published
financial statements, filings with the Securities and Exchange Commission and
other federal or state regulatory agencies, and all employee benefit plans; the
non-existence of any contract which would be breached by the Atcorp Merger
Agreement; and the good standing and adequate capitalization of SBI Merger Sub.
On the Atcorp Effective Date, SBI, Atcorp and ENB must each present to the other
certificates evidencing the continued accuracy of the representations and
warranties.
2. The Farmers Merger Agreement. The following is a summary
----------------------------
of the terms and conditions of the Farmers Merger Agreement. This summary is
qualified in its entirety by reference to the full text of the Farmers Merger
Agreement which is filed as an exhibit to this Current Report on Form 8-K.
General.
Pursuant to the Farmers Merger Agreement, SBI Merger Sub II will
merge with and into FBC (the "FBC Merger"), with FBC as the surviving entity
(sometimes referred to as the "Surviving Corporation") as a result of which FBC
will become a direct wholly-owned subsidiary of SBI, and FNB will become a
second-tier subsidiary of SBI (the "FNB Bank Acquisition"). The name of the
Surviving Corporation will be "Susquehanna Bancshares East II, Inc."
As consideration for all of the outstanding capital stock of
FBC, SBI has agreed to exchange the outstanding FBC Common Stock, par value $.83
per share (the "FBC Common Stock"), for common stock of SBI, par value $2.00 per
share (the "SBI Common Stock"), at the exchange rate ("Exchange Ratio") provided
in the Farmers Merger Agreement (the "FBC Merger Consideration").
At the effective time of the FBC Merger and FNB Bank Acquisition
(the "Farmers Effective Time"), each share of FBC Common Stock issued and
outstanding shall become and be converted into the right to receive shares of
SBI Common Stock determined in conformity with the Exchange Ratio, as set forth
below:
(i) So long as the Average Price Per Share of SBI Common Stock
Before Closing is between $25.00 and $31.00, then, pursuant to the
terms of the Farmers Merger, FBC Common Stock will be exchanged for
SBI Common Stock at a ratio of 2.281 shares of SBI Common Stock for
each share of FBC Common Stock. The Average Price Per Share of SBI
Common Stock Before Closing will be determined by adding the price at
which SBI Common Stock is reported to have closed by the NASDAQ NMS
(or if SBI Common Stock is not quoted on the NASDAQ NMS then as
reported by a recognized source as to the principal trading market on
which such shares are traded) over the period of ten business days
ending on the fifth business day preceding the date set for the FBC
Closing, and dividing such total by ten.
(ii) FBC shall have the right to terminate the Farmers Merger
Agreement if the Average Price Per Share of SBI Common Stock Before
Closing is less than $25.00 (subject to adjustment pursuant to the
Farmers Merger Agreement).
(iii) SBI shall have the right to terminate the Farmers Merger
Agreement if the Average Price Per Share of SBI Common Stock Before
Closing is greater than $31.00 (subject to adjustment pursuant to the
Farmers Merger Agreement); provided, however, if such price is greater
than $31.00 and SBI does not exercise its right to terminate the
Farmers Merger Agreement, then all of the shares of FBC shall be
exchanged for the number of shares as provided in (i) above.
-6-
<PAGE>
As of the Farmers Effective Time, each share of FBC Common Stock
held by SBI (other than shares held in a fiduciary capacity or in satisfaction
of a debt previously contracted) shall be cancelled, and no exchange or payment
shall be made with respect thereto.
The shares of Common Stock of SBI Merger Sub II issued and
outstanding immediately prior to the Farmers Effective Time, by virtue of and
after the Farmers Merger, shall be converted into and thereafter constitute the
issued and outstanding shares of the capital stock of the Surviving Corporation.
If prior to the Farmers Effective Time, the outstanding shares of
SBI Common Stock shall have been increased, decreased, changed into or exchanged
for a different number or kind of shares or securities through a
reclassification, stock dividend, stock split or reverse stock split, or other
similar change, appropriate adjustment will be made to the Exchange Ratio.
Within five business days after the Farmers Effective Time, SBI
shall cause to be sent to each person who immediately prior to the Farmers
Effective Time was a holder of record of FBC Common Stock transmittal materials
and instructions for surrendering certificates for FBC Common Stock in exchange
for the number of whole shares of SBI Common Stock to which such person is
entitled pursuant to the Exchange Ratio.
No certificates for fractional shares of SBI Common Stock will be
issued; rather, SBI will furnish to any holder of FBC Common Stock entitled to a
fractional share a check for an amount of cash equal to the fraction of a share
of SBI Common Stock represented by the certificates so surrendered in accordance
with the Exchange Ratio.
Closing; Effective Date; Termination.
The Farmers Merger Agreement provides that the closing of the FBC
Merger and the FNB Bank Acquisition by SBI (the "FBC Closing") will occur
following three business days' notice to FBC, as shall be agreed upon by all
parties, which date shall not be later than the 22nd business day after (a) the
last approval of required regulatory authorities is granted and any related
waiting periods expire, (b) the lifting, discharge or dismissal of any stay of
any governmental approval or of any injunction against the transactions
contemplated in the Farmers Merger Agreement, and (c) all shareholder approvals
required by the parties have been received. Immediately following the FBC
Closing, and provided the FBC Merger Agreement has not been terminated or
abandoned in accordance with the terms thereof, SBI Merger Sub II and FBC will
cause a certificate of merger to be properly prepared and completed and filed
with the Secretary of State of New Jersey. The FBC Merger shall become
effective at 12:01 a.m. on the day (the "Farmers Effective Date") following the
day of which the certificate of merger has been filed and accepted by the
Secretary of State of New Jersey (the "FBC Effective Time").
The Farmers Merger Agreement provides that, whether before or
after the annual meeting of the shareholders of FBC and notwithstanding approval
by the shareholders of FBC, it may be terminated and the transactions
contemplated in the Farmers Merger Agreement abandoned at any time prior to the
Farmers Effective Date: (a) by mutual, written consent of SBI and FBC, if the
Board of Directors of each so determines by majority vote of the members of the
entire board; (b) by FBC if (i) by written notice to SBI that there has been a
material breach by SBI of any representation, warranty, covenant or agreement
contained in the Farmers Merger Agreement and such breach is not cured or not
curable within 30 days after written notice of such breach is given to SBI by
FBC, or (ii) by written notice to SBI that any condition precedent to FBC's
obligations has not been met or waived by FBC at such time as such condition can
no longer be satisfied, (iii) the Board of Directors of FBC fails to make,
withdraws or modifies or changes its favorable recommendation to shareholders,
or (iv) the Board of Directors of FBC recommends to the shareholders of FBC that
an Acquisition Proposal (as defined in the Farmers Merger Agreement) is likely
to be more favorable, from a financial point of view, to the shareholders of FBC
than the FBC Merger; (c) by SBI by written notice to the other parties, in the
event (i) of a material breach by FBC or FNB of any representation, warranty,
covenant or agreement contained in the Farmers Merger Agreement and such breach
is not cured or not curable within 30 days after written notice of such breach
is given to FBC, or (ii) that any
-7-
<PAGE>
condition precedent to SBI's obligations has not been met or waived by SBI at
such time as such condition can no longer be satisfied; (d) by FBC, whether
before or after FBC shareholder approval, by giving written notice of such
election to SBI within one business day following a determination that the
Average Closing Price Per Share of the SBI Common Stock Before Closing is less
than $25.00 per share; and (e) by SBI, whether before or after SBI shareholder
approval, if SBI chooses to give written notice as described in the Farmers
Merger Agreement within one business day following a determination that the
Average Closing Price Per Share of the SBI Common Stock Before Closing is
greater than $31.00 per share; or (f) by SBI or FBC by written notice to the
other, in the event that the FBC Merger and FNB Bank Acquisition are not
consummated by March 31, 1997 unless the failure to so consummate by such time
is due to the breach of any representation, warranty or covenant contained in
the FBC Merger Agreement by the party seeking to terminate; provided, however,
that such date may be extended by the written agreement of the parties.
Prior to the Farmers Effective Time, any provision of the Farmers
Merger Agreement may be: (a) waived by the party benefitted by the provision;
or (b) amended or modified at any time (including the structure of the
transaction) by agreement in writing between the parties approved by their
respective Boards of Directors, except that no amendment or waiver may be made
that would change the form or amount of the FBC Merger Consideration or
otherwise have the effect of prejudicing the FBC shareholders' interest in the
FBC Merger Consideration following the FBC Meeting (as defined in the Farmers
Merger Agreement).
Conditions Precedent.
In addition to shareholder approval by FBC shareholders, the
Farmers Merger and the FNB Bank Acquisition are contingent upon the satisfaction
of a number of conditions, including, among others: (a) all required approvals,
consents, or waivers, including without limitation, approval by the Board of
Governors of the Federal Reserve System, the Office of the Comptroller of the
Currency, the Commissioner of Banking of the State of New Jersey, the
Pennsylvania Department of Banking, and the New Jersey Department of
Environmental Protection and Energy, if applicable, and all applicable statutory
waiting periods shall have expired except those approvals for which failure to
obtain would not have a materially adverse effect on SBI, FBC or FNB; (b) the
absence of any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits the consummation of the Farmers Merger
or the FNB Bank Acquisition, and the transactions contemplated by the Farmers
Merger Agreement, and the absence of any litigation or proceeding pending
against any of the parties or their subsidiaries by any governmental agency
seeking to prevent consummation of the transactions contemplated by the Farmers
Merger Agreement; (c) no enactment, promulgation or enforcement of any statute,
rule, regulation, order, injunction or decree by any governmental authority
which prohibits, restricts or makes illegal consummation of the FBC Merger or
the FNB Bank Acquisition; (d) all litigation which would have a material adverse
effect on FBC's consolidated operations shall have been concluded on terms
satisfactory to SBI, FBC and FNB; (e) Coopers & Lybrand, L.L.P. shall have
furnished to SBI an "agreed upon procedures" letter, dated the Farmers Effective
Date, to the effect that based upon procedures performed with respect to the
financial condition of FBC and FNB, nothing has come to their attention that
would indicate that, since the date of the most recent audited financial
statements, there has been a material adverse change in capital stock, long-term
debt or total or net assets and, as compared with the same period of the prior
year, there has been no material adverse change in the total or per share
amounts of income before extraordinary items or net income; (f) there shall not
have occurred any change in the financial condition, properties, assets,
business or results of operation of FBC or FNB which, individually or in the
aggregate, has had or might reasonably be expected to result in a material
adverse effect on FBC or FNB; (g) the shares of SBI Common Stock to be issued in
the Farmers Merger shall have been authorized to be listed on the NASDAQ NMS;
(h) a ruling from the Internal Revenue Service or an opinion of Morgan, Lewis
and Bockius LLP, counsel to SBI, shall have been received to the effect set
forth in the Farmers Merger Agreement; and (i) FBC shall have received an
updated opinion from its financial advisor, dated as of the date the Proxy
Statement/Prospectus described in the Farmers Merger Agreement is mailed to
FBC's shareholders, to the effect that the Farmers Merger is fair to FBC's
shareholders from a financial point of view. For purposes of the Farmers Merger
Agreement, in the case of FNB, receipt of a CAMEL rating in connection with a
safety and soundness examination which is lower than the rating
-8-
<PAGE>
given to FNB in connection with the safety and soundness examination most
recently reported prior to the date of the Farmers Merger Agreement shall be
deemed to have a material adverse effect on FNB.
Representations and Warranties.
The representations and warranties of SBI, SBI Merger Sub II, FBC
and FNB are set forth in Article III of the Farmers Merger Agreement. The
representations and warranties relate, among other things, to representations as
to corporate existence and authority and the ability of each party to carry out
the transactions as contemplated by the Farmers Merger Agreement. FBC and FNB
have made additional representations as to the non-existence of any contract
which would be breached by the Farmers Merger; the accuracy and completeness of
its financial statements and filings with federal or state regulatory agencies,
including state and federal tax filings; the absence of any material contracts
and certain other contracts; the absence of litigation not otherwise disclosed;
the absence of regulatory actions; the absence of undisclosed liabilities; labor
and employee benefits matters; the adequacy of its allowances for possible loan
losses; the condition of its tangible assets; assurances as to its loan
portfolio, on an adjusted bases; its compliance with applicable state and
federal laws on matters material to its operations; and environmental matters.
SBI has made additional representations as to the ownership by SBI of all of the
issued and outstanding shares of its bank subsidiaries; the accuracy and
completeness of published financial statements, filings with the Securities and
Exchange Commission and other federal or state regulatory agencies, and all
employee benefit plans; the non-existence of any contract which would be
breached by the Farmers Merger Agreement; the truthfulness and completeness of
all filings made by SBI with the Securities and Exchange Commission in
connection with the Farmers Merger Agreement and the transactions contemplated
by it except for information relating to FBC or FNB; the good standing and
adequate capitalization of SBI Merger Sub II; its compliance with applicable
state and federal laws on matters material to its operations; the absence of
regulatory actions; the absence of litigation not otherwise disclosed; the
absence of undisclosed liabilities; and environmental matters. On the Farmers
Effective Date, SBI, FBC and FNB must each present to the other certificates
evidencing the continued accuracy of the representations and warranties.
-9-
<PAGE>
Item 7. Financial Statements and Exhibits.
(c) Exhibits. Reference is made to the Exhibit Index annexed
--------
hereto and made a part hereof.
-10-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
SUSQUEHANNA BANCSHARES, INC.
Date: July 29, 1996 By: /s/ Robert S. Bolinger
-------------------------------
Robert S. Bolinger
President and Chief Executive
Officer
-11-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
- -------
2 Plan of Acquisition, Reorganization, Arrangement, Liquidation
or Succession
(a) Agreement and Plan of Affiliation Dated as of the
18th Day of July, 1996, By and Among Susquehanna
Bancshares, Inc., Susquehanna Bancshares East, Inc.,
Atcorp, Inc. and Equity National Bank
Schedule 1.2 Exchange Provisions
The Disclosure Schedules to the above-referenced
Agreement are omitted. Pursuant to paragraph (2) of Item
601(b) of Regulation S-K, the Registrant agrees to furnish
a copy of such schedules to the Commission upon request.
(b) Agreement and Plan of Affiliation Dated as of
the 18th Day of July, 1996, By and Among Susquehanna
Bancshares, Inc., Susquehanna Bancshares East II, Inc.,
Farmers Banc Corp. and Farmers National Bank
Schedule 1.2 Exchange Provisions
The Disclosure Schedules to the above-referenced
Agreement are omitted. Pursuant to paragraph (2) of Item
601(b) of Regulation S-K, the Registrant agrees to furnish
a copy of such schedules to the Commission upon request.
99 Press Release of the Registrant, Dated July 18, 1994, Regarding
the Execution of (1) the Atcorp Merger Agreement, and
(2) the Farmers Merger Agreement.
-12-
<PAGE>
EXHIBIT 2A
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
AGREEMENT AND PLAN OF AFFILIATION
DATED AS OF THE 18TH DAY OF JULY, 1996
BY AND AMONG
SUSQUEHANNA BANCSHARES, INC.,
SUSQUEHANNA BANCSHARES EAST, INC.,
ATCORP, INC.
AND
EQUITY NATIONAL BANK
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page(s)
ARTICLE I. THE PLAN OF MERGER ............................................-1-
SECTION 1.1 The Merger and Bank Acquisition; Closing; Effective Time..-1-
SECTION 1.2 Effect on Outstanding Share...............................-2-
SECTION 1.3 Surrender and Exchange of AI Certificates.................-2-
SECTION 1.4 Dissenters' Rights........................................-3-
SECTION 1.5 Other Matters.............................................-3-
ARTICLE II. CONDUCT PENDING THE MERGER AND BANK ACQUISITION................-4-
SECTION 2.1 Conduct of AI's and ENB's Businesses Prior to the
Effective Time............................................-4-
SECTION 2.2 Forbearance by AI or ENB..................................-4-
SECTION 2.3 Cooperation...............................................-5-
SECTION 2.4 Conduct of SBI's Business Prior to the Effective Time.....-5-
ARTICLE III. REPRESENTATIONS AND WARRANTIES.................................-5-
SECTION 3.1 Representations and Warranties of AI and ENB..............-5-
SECTION 3.2 Representations and Warranties of SBI and its Material
Subsidiaries.............................................-16-
ARTICLE IV. COVENANTS.....................................................-21-
SECTION 4.1 Acquisition Proposals....................................-21-
SECTION 4.2 Securities Registration and Disclosure...................-21-
SECTION 4.3 Employees................................................-22-
SECTION 4.4 Access and Information...................................-23-
SECTION 4.5 Certain Filings, Consents and Arrangements...............-24-
SECTION 4.7 Additional Agreements....................................-24-
SECTION 4.8 Publicity................................................-24-
SECTION 4.9 Shareholders' Meeting....................................-25-
SECTION 4.10 Notification of Certain Matters..........................-25-
SECTION 4.11 Insurance................................................-25-
SECTION 4.12 Dividends................................................-25-
SECTION 4.13 Indemnification..........................................-25-
ARTICLE V. CONDITIONS TO CONSUMMATION....................................-26-
SECTION 5.1 Conditions to Closing....................................-26-
SECTION 5.2 Conditions to Obligations of SBI and SBI Merger Sub......-28-
SECTION 5.3 Conditions to the Obligations of AI and ENB..............-29-
ARTICLE VI. TERMINATION...................................................-29-
SECTION 6.1 Termination..............................................-29-
SECTION 6.2 Effect of Termination....................................-30-
SECTION 6.3 Expenses.................................................-30-
-i-
<PAGE>
ARTICLE VII. OTHER MATTERS................................................-31-
SECTION 7.1 Certain Definitions; Interpretation......................-31-
SECTION 7.2 Survival.................................................-31-
SECTION 7.3 Parties in Interest......................................-31-
SECTION 7.4 Waiver and Amendment.....................................-32-
SECTION 7.5 Counterparts.............................................-32-
SECTION 7.6 Governing Law............................................-32-
SECTION 7.7 Expenses.................................................-32-
SECTION 7.8 Notices..................................................-32-
SECTION 7.9 Entire Agreement; Etc....................................-33-
-ii-
<PAGE>
AGREEMENT AND PLAN OF AFFILIATION dated as of the 18th day of July,
1996 (this "Plan" or this "Agreement"), by and among Susquehanna Bancshares,
Inc., a Pennsylvania corporation ("SBI"), Susquehanna Bancshares East, Inc., a
New Jersey corporation ("SBI Merger Sub"), ATCORP, Inc., a New Jersey
corporation ("AI"), and Equity National Bank, a national banking association
("ENB").
RECITALS:
WHEREAS, the boards of directors of SBI, SBI Merger Sub and AI have
each determined that it is in the best interests of their respective
shareholders for SBI to acquire AI and ENB by means of a merger of SBI Merger
Sub with and into AI (the "Merger") as a result of which AI will become a direct
wholly-owned subsidiary of SBI and ENB will become a second-tier subsidiary of
SBI (the "Bank Acquisition"), all upon the terms and subject to the conditions
set forth herein; and
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement and to
set forth the conditions to the Merger and the Bank Acquisition; and
WHEREAS, AI and SBI desire to merge in the manner provided for herein
and to adopt this Agreement as a plan of reorganization and to consummate such
plan in accordance with the provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of their mutual promises and
obligations hereunder, the parties hereto adopt and make this Agreement and
prescribe the terms and conditions hereof and the manner and basis of carrying
it into effect, which shall be as follows:
ARTICLE I. THE PLAN OF MERGER
SECTION 1.1 The Merger and Bank Acquisition; Closing; Effective Time.
--------------------------------------------------------
(a) Subject to the terms and conditions of this Agreement and in
accordance with the applicable laws of the State of New Jersey at the Effective
Time (as defined in Section 1.1(c)), SBI Merger Sub shall be merged with and
into AI and the separate corporate existence of SBI Merger Sub shall thereupon
cease. AI shall be the surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation") and shall continue to be
governed by the laws of the State of New Jersey and shall continue to be a
registered bank holding company under the Bank Holding Company Act of 1956, as
amended, and the separate corporate existence of AI with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger. The name of the Surviving Corporation shall be "Susquehanna Bancshares
East, Inc." The Merger shall have the effects specified in the New Jersey
Business Corporation Act, as amended ("NJBCA").
(b) The closing of the Merger and the Bank Acquisition (the
"Closing") shall take place contemporaneously at such place and time and on such
date, following three (3) business days' notice to AI, as shall be agreed upon
by all parties, which date shall not be later than the 22nd business day after
(i) the last approval required of any of the Regulatory Agencies (as defined at
Section 5.1(b)) is granted and any related waiting periods expire, (ii) the
lifting, discharge or dismissal of any stay of any such governmental approval or
of any injunction against the Merger or the Bank Acquisition and (iii) all
shareholder approvals required by the parties hereunder are received.
(c) Immediately following the Closing, and provided that this
Agreement has not been terminated or abandoned pursuant to Article VI hereof,
SBI Merger Sub and AI will cause a certificate of merger ("Certificate of
Merger") to be properly prepared and completed and filed with the Secretary of
State of New Jersey. The Merger shall become effective at 12:01 a.m. on the day
following the day on which the Certificate
<PAGE>
of Merger has been duly filed and accepted by the Secretary of State of New
Jersey (the "Effective Time"). The "Effective Date" when used herein means the
day on which the Effective Time for the Merger occurs.
(d) At the Effective Time, the certificate of incorporation and
bylaws of SBI Merger Sub in effect immediately prior to the Effective Time shall
continue as the charter and bylaws of the Surviving Corporation. At the
Effective Time, the directors and officers of SBI Merger Sub immediately prior
to the Effective Time shall be and become the directors and officers of the
Surviving Corporation.
SECTION 1.2 Effect on Outstanding Shares.
----------------------------
(a) At the Effective Time, by virtue of the Merger, automatically
and without any action on the part of the holder thereof, subject to the
provisions of Section 1.3 hereof with respect to the payment of fractional
shares in cash and Section 1.4 hereof with respect to dissenters' rights, if
any, each share of common stock, par value $5.00 per share, of AI (the "AI
Common Stock") issued and outstanding at the Effective Time (other than (i)
shares the holders of which (each a "Dissenting Stockholder") are exercising
appraisal rights pursuant to the NJBCA (the "Dissenters' Shares"), if any, and
(ii) shares held directly or indirectly by SBI, other than shares held in a
fiduciary capacity or in satisfaction of a debt previously contracted) shall
become and be converted into the right to receive shares of Common Stock par
value $2.00 per share, of SBI ("SBI Common Stock") determined in conformity with
the Exchange Ratio set forth at Schedule 1.2 hereof (such SBI Common Stock,
determined on the basis of the Exchange Ratio, as to each AI shareholder and,
collectively, to all AI shareholders is the "Merger Consideration"). As of the
Effective Time, each share of AI Common Stock held directly or indirectly by
SBI, other than shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted, shall be cancelled and retired and cease to exist, and no
exchange or payment shall be made with respect thereto.
(b) The shares of common stock of SBI Merger Sub issued and
outstanding immediately prior to the Effective Time, by virtue of and after the
Merger, shall be converted into and thereafter constitute the issued and
outstanding shares of the capital stock of the Surviving Corporation.
(c) If prior to the Effective Time, the outstanding shares of SBI
Common Stock shall have been increased, decreased, changed into or exchanged for
a different number or kind of shares or securities through a reclassification,
stock dividend, stock split or reverse stock split, or other similar change,
appropriate adjustment shall be made to the Exchange Ratio.
SECTION 1.3 Surrender and Exchange of AI Certificates.
-----------------------------------------
(a) Within five (5) business days after the Effective Time, SBI
shall cause to be sent to each person who immediately prior to the Effective
Time was a holder of record of AI Common Stock transmittal materials and
instructions for surrendering certificates for AI Common Stock ("Old
Certificates") in exchange for a certificate for the number of whole shares of
SBI Common Stock to which such person is entitled under Section 1.2 hereof.
(b) No certificates for fractional shares of SBI Common Stock shall
be issued in connection with the Merger. In lieu thereof, SBI shall issue to any
holder of AI Common Stock certificates otherwise entitled to a fractional share,
upon surrender of such certificates in accordance with the instructions
furnished by SBI, a check for an amount of cash equal to the fraction of a share
of SBI Common Stock represented by the certificates so surrendered multiplied by
the Average Price Per Share of SBI Common Stock Before Closing as determined in
conformity with Schedule 1.2.
(c) If the record date of any dividend on SBI Common Stock occurs
after the Effective Time, the declaration shall include dividends on all whole
shares of SBI Common Stock into which shares of AI Common Stock have been
converted under this Agreement, but no former holder of AI Common Stock shall be
-2-
<PAGE>
entitled to receive payment of any such dividend until surrender of the
shareholder's Old Certificates shall have been effected in accordance with the
instructions furnished by SBI. Upon surrender for exchange of a shareholder's
Old Certificates, such shareholder shall be entitled to receive from SBI an
amount equal to all such dividends, without interest thereon and less the amount
of taxes, if any, which may have been imposed or paid thereon, declared, and for
which the payment date has occurred, on the whole shares of SBI Common Stock
into which the shares represented by such Old Certificates have been converted.
(d) After the Effective Time, there shall be no transfer on the
stock transfer books of AI or SBI of shares of AI Common Stock. If Old
Certificates are presented for transfer after the Effective Time, they shall be
cancelled and certificates representing whole shares of SBI Common Stock (and a
check in lieu of any fractional share) shall be issued in exchange therefor as
provided herein.
(e) In the event that any Old Certificates have not been surrendered
for exchange in accordance with this Section on or before the second anniversary
of the Effective Time, SBI may at any time thereafter, with or without notice to
the holders of record of such Old Certificates, sell for the accounts of any or
all of such holders any or all of the shares of SBI Common Stock which such
holders are entitled to receive under Section 1.2 hereof (the "Unclaimed
Shares"). Any such sale may be made by public or private sale or sale at any
broker's board or on any securities exchange in such manner and at such times as
SBI shall determine. If, in the opinion of counsel for SBI, it is necessary or
desirable, any Unclaimed Shares may be registered for sale under the Securities
Act of 1933, as amended (the "Securities Act") and applicable state laws. SBI
shall not be obligated to make any sale of Unclaimed Shares if it shall
determine not to do so, even if notice of sale of the Unclaimed Shares has been
given. The net proceeds of any such sale of Unclaimed Shares shall be held for
holders of the unsurrendered Old Certificates whose Unclaimed Shares have been
sold, to be paid to them upon surrender of the Old Certificates. From and after
any such sale, the sole right of the holders of the unsurrendered Old
Certificates whose Unclaimed Shares have been sold shall be the right to collect
the net sale proceeds held by SBI for their respective accounts, and such
holders shall not be entitled to receive any interest on such net sale proceeds
held by SBI.
(f) If outstanding certificates for shares of AI Common Stock are
not surrendered prior to the date on which such certificates would otherwise
escheat to or become the property of any governmental unit or agency, the
unclaimed items shall, to the extent permitted by abandoned property and any
other applicable law, become the property of SBI (and to the extent not in its
possession shall be paid over to it), free and clear of all claims or interest
of any person previously entitled to such claims. Notwithstanding the foregoing,
neither SBI nor its agents or any other person shall be liable to any former
holder of AI Common Stock for any property delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(g) In the event any Old Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Old Certificate to be lost, stolen or destroyed and, if required by SBI,
the posting by such person of a bond in such amount as SBI may direct as
indemnity against any claim that may be made against it with respect to such Old
Certificate, SBI will issue in exchange for such lost, stolen or destroyed Old
Certificate, the shares of SBI Common Stock into which the AI Common Stock
represented by such Old Certificate have been converted pursuant to this
Agreement.
SECTION 1.4 Dissenters' Rights. In accordance with the provisions of
------------------
Section 14A:11-1 of the NJBCA, the AI Shareholders are not entitled to
Dissenters' Rights.
SECTION 1.5 Other Matters. Notwithstanding any term of this
--------------
Agreement to the contrary, SBI may, in its discretion at any time prior to the
Effective Time, designate a direct or indirect wholly-owned subsidiary to
substitute for SBI Merger Sub as a constituent corporation in the Merger by
written notice to AI so long as the exercise of this right does not materially
adversely affect the interests of the AI shareholders in a manner which has not
been disclosed to them in the Proxy Statement/Prospectus (as hereinafter
defined) or cause a material delay in consummation of the transactions described
herein. SBI shall also have the right to cause
-3-
<PAGE>
SBI Merger Sub or such substitute, to be the surviving corporation of the
Merger, so long as the exercise of such right does not have a material adverse
effect on the interests of the holders of the capital stock of AI in a manner
which has not been disclosed to them in the Proxy Statement/Prospectus or cause
a material delay in, or otherwise adversely affect, consummation of the
transactions described herein; if such right is exercised, and such substitute
corporation is organized under the laws of another state, this Agreement shall
be deemed to be modified to accord such change, including, without limitation,
that the laws of such other state, together with the laws of New Jersey, will
govern the Merger if such substitute corporation shall be the survivor. Nothing
in this Agreement shall be deemed to restrict the ability of SBI or any of its
subsidiaries to merge with or with and into another entity so long as no such
other transaction shall materially adversely affect the parties' ability to
consummate the Bank Acquisition or cause a material delay in, or otherwise
adversely affect, consummation of the transactions described herein.
ARTICLE II. CONDUCT PENDING THE MERGER AND BANK ACQUISITION
SECTION 2.1 Conduct of AI's and ENB's Businesses Prior to the
-------------------------------------------------
Effective Time.
--------------
Except as expressly provided in this Agreement, during the period from
the date of this Agreement to the Effective Time, AI and ENB shall (and the word
"it" in this Article II refers to each of AI, ENB, and each subsidiary of
either, as the case may be) (i) conduct its business in the usual, regular and
ordinary course consistent with past practice, (ii) maintain and preserve intact
in all material respects its business organization, assets, leases, properties,
investment securities, employees and advantageous business relationships and use
its reasonable efforts to retain the services of its officers and key employees,
(iii) not knowingly take any action which would materially adversely affect or
delay its ability to obtain any necessary approvals, consents or waivers of any
governmental authority required for the transactions described herein or to
perform its covenants and agreements on a timely basis under this Agreement, and
(iv) not knowingly take any action that is reasonably likely to have a Material
Adverse Effect (as defined in Section 7.1 hereof) on AI or ENB.
SECTION 2.2 Forbearance by AI or ENB. During the period from the
------------------------
date of this Agreement to the Effective Time, neither AI nor ENB shall, without
the prior written consent of SBI, which consent shall not be unreasonably
withheld:
(a) other than in the ordinary course of business consistent with
past practice, make any advance or loan or incur any indebtedness for borrowed
money, assume, guarantee, endorse or otherwise as an accommodation become
responsible for, the obligations of any individual, corporation or other person.
(b) adjust, split, combine or reclassify any capital stock; make,
declare or pay any dividend, or make any distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible into or exchangeable for any
shares of its capital stock, or grant any stock appreciation rights or grant,
sell or issue to any individual, corporation or other person any shares of its
capital stock or any right to acquire, or securities evidencing a right to
convert into or acquire any shares of its capital stock, or issue any additional
shares of capital stock;
(c) other than in the ordinary course of business consistent with
past practice and pursuant to policies, if any, currently in effect, sell,
transfer, mortgage, encumber or otherwise dispose of any of its properties,
leasehold interests or assets to any individual, corporation or other entity, or
cancel, release or assign any indebtedness of any such person or any contracts
or agreements as in force at the date of this Agreement;
(d) except as set forth in Annex 2.2(d), increase in any manner the
compensation or fringe benefits of any of its employees or directors or pay any
pension or retirement allowance not required by law or by any existing plan or
agreement to any such employees, or become a party to, amend or commit itself to
any pension, retirement, profit-sharing or welfare benefit plan or agreement or
employment agreement with or for the
-4-
<PAGE>
benefit of any employee or director, other than general increases in
compensation in the ordinary course of business consistent with past practice
not in excess of 4%, on an aggregated basis, in any 12-month period, and payment
of bonuses in the ordinary course, or voluntarily accelerate the vesting of any
stock options or other compensation or benefit; provided, however, the parties
confirm and understand that on July 16, 1996, the Board of Directors of AI
resolved to set aside a total of $420,000 to be paid to a certain officers of AI
and ENB as bonuses. The recipients of bonuses, the allocation of this amount
among such recipients and the timing of payments of such bonuses will be
determined in the next few weeks, based upon, among other things, the
recommendations of senior management of AI, by the directors of AI in
consultation with representatives of SBI.
(e) amend the ENB charter or the Second Restated Certificate of
Incorporation of AI (the "AI Certificate"), as the case may be, or the bylaws of
either, except as expressly contemplated by this Agreement or required by law or
regulation, in each case as concurred in by its counsel;
(f) except as set forth in Annex 2.2(f) hereto, change its method of
accounting as in effect at December 31, 1995, except as required by changes in
generally accepted accounting principles or required by law or regulation, in
each case, as concurred in by its independent auditors; or
(g) permit or allow its direct or indirect ownership of the capital
stock of any subsidiary described in Annex 3.1(c) hereto to be less than 100% of
their respective total capital stock.
SECTION 2.3 Cooperation. AI and ENB each shall cooperate with SBI
-----------
and SBI Merger Sub and SBI and SBI Merger Sub each shall cooperate with AI and
ENB in completing the transactions described herein and each shall not take,
cause to be taken or agree or make any commitment to take any action: (i) that
would cause any of the representations or warranties of it that are set forth in
Article III hereof not to be true and correct in all material respects, or (ii)
in the case of AI or ENB, that is inconsistent with or prohibited by Section 2.1
or Section 2.2.
SECTION 2.4 Conduct of SBI's Business Prior to the Effective Time.
-----------------------------------------------------
Except as expressly provided in this Agreement, during the period from the date
of this Agreement to the Effective Time, SBI shall not knowingly take any action
and shall not knowingly cause its Material Subsidiaries (as hereinafter defined)
to take any action which would materially adversely affect or delay its ability
to obtain any necessary approvals, consents or waivers of any governmental
authority required for the transactions described herein or that is reasonably
likely to have a Material Adverse Effect on SBI, on a consolidated basis.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of AI and ENB. AI and ENB
--------------------------------------------
represent and warrant to SBI and SBI Merger Sub (and the word "it" in this
Article III refers to each of AI, ENB, and each subsidiary of either, as the
case may be), that, except as specifically disclosed in the Annex of disclosure
schedules included herewith, to the best of its knowledge:
(a) Corporate Organization and Qualification. AI is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of New Jersey and is in good standing as a foreign corporation in each
jurisdiction where the properties owned, leased or operated, or the business
conducted, by AI requires such qualification, except for such failure to qualify
or be in such good standing which, when taken together with all other such
failures, would not have a Material Adverse Effect on AI and its subsidiaries,
taken as a whole. AI is a bank holding company duly registered with the Board
(as hereinafter defined). ENB is a national banking association duly organized
and in good standing under the laws of the United States of America. AI and ENB
each has the requisite corporate and other power and authority (including all
federal, state, local and foreign governmental authorizations) to carry on their
respective businesses
-5-
<PAGE>
as they are now being conducted and to own their respective properties and
assets. AI has made available to SBI and SBI Merger Sub a complete and correct
copy of the AI Certificate and charter of ENB, and the bylaws of each, and such
charter or certificate, as applicable, and such bylaws are in full force and
effect as of the date hereof.
(b) Authorized Capital. The authorized capital stock of AI consists
of 2,000,000 shares of AI Common Stock of which approximately 771,750 shares of
AI Common Stock were issued and outstanding as of the date of this Agreement and
1,000,000 shares of serial preferred stock of which no shares were issued and
outstanding as of the date of this Agreement and an additional 8,516 shares of
AI Common Stock were issued and held as treasury stock as of the date of this
Agreement. The authorized capital stock of ENB consists of 1,000,000 shares of
common stock, $5.00 par value per share, of which 875,000 shares of common stock
were issued and outstanding as of the date of this Agreement; all of these
shares are held by AI. All of the outstanding shares of capital stock of AI and
ENB have been duly authorized and are validly issued, fully paid and
nonassessable (except in the case of ENB, as provided at 12 U.S.C.A. (S) 55).
Neither AI nor ENB has any shares of capital stock reserved for issuance except
pursuant to the AI Stock Option Plans. Neither AI nor ENB has any outstanding
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or convertible into or exercisable for securities having the
right to vote) with shareholders on any matter. The shares of ENB Common Stock
owned by AI are owned free and clear of all liens, pledges, security interests,
claims or other encumbrances. The outstanding shares of capital stock of AI and
ENB have not been issued in violation of any preemptive rights. Except as set
forth in Annex 3.1(b) or in Annex 3.1(m), there are no outstanding
subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock or other securities of AI or ENB. After the Effective Time
neither SBI nor SBI Merger Sub will have any obligation to issue, transfer or
sell any shares of capital stock pursuant to any Employee Plan (as defined in
Section 3.1(m)).
(c) Subsidiaries. The only subsidiaries of AI are as listed and
described at Annex 3.1(c). The only subsidiaries of ENB are listed and
described at Annex 3.1(c).
Each such subsidiary is duly organized and existing as a corporation,
is in good standing under the laws of the jurisdiction in which it was
organized, and has adequate corporate power to carry on its business as now
conducted. All of the outstanding capital stock of all such subsidiaries has
been validly issued, is fully paid and nonassessable and is owned by AI or ENB,
free and clear of all liens, security interests and encumbrances. All such
subsidiaries, other than ENB, are organized under Delaware or New Jersey law and
make no use of fictitious names in the conduct of their respective businesses.
(d) Corporate Authority. Subject only to approval of this Agreement
by the holders of the number of votes required by the AI Certificate or bylaws
of AI cast by all holders of AI Common Stock (without any minority, class or
series voting requirement), and, subject to the regulatory approvals specified
in Section 5.1(b) hereof, AI and ENB each has the requisite corporate power and
authority, and legal right, and has taken all corporate action necessary in
order to execute and deliver this Agreement and to consummate the transactions
applicable to either AI or ENB described herein. This Agreement has been duly
and validly executed and delivered by AI and ENB and constitutes the valid and
binding obligations of AI and ENB enforceable against each, in accordance with
its terms, except to the extent enforcement is limited by bankruptcy, insolvency
and other similar laws affecting creditors' rights or the application by a court
of equitable principles.
(e) No Violations. The execution, delivery and performance of this
Agreement by it does not, and the consummation of the transactions described
herein by it will not, constitute (i) subject to receipt of the required
regulatory approvals specified in Section 5.1(b), a breach or violation of, or a
default under, any law, rule or regulation or any judgment, decree, order,
governmental permit or license, to which it (or any of its respective
properties) is subject, which breach, violation or default would have a Material
Adverse Effect on it, or enable any person to enjoin the Merger or the Bank
Acquisition, (ii) a breach or violation of, or a default
-6-
<PAGE>
under, the AI Certificate or the charter of ENB or bylaws of either of them,
(iii) a breach of any duty owed by AI to ENB, or any person holding an interest
in ENB, or (iv) except as disclosed in Annex 3.1(e), a breach or violation of,
or a default under (or an event which with due notice or lapse of time or both
would constitute a default under), or result in the termination of, accelerate
the performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the properties or
assets of it under any of the terms, conditions or provisions of any note, bond,
indenture, deed of trust, loan agreement or other agreement, instrument or
obligation to which it is a party, or to which any of their respective
properties or assets may be bound or affected, except for any of the foregoing
that, individually or in the aggregate, would not have a Material Adverse Effect
on it or enable any person to enjoin the Merger or the Bank Acquisition; and the
consummation of the transactions described herein will not require any approval,
consent or waiver under any such law, rule, regulation, judgment, decree, order,
governmental permit or license or the approval, consent or waiver of any other
party to any such agreement, indenture or instrument, other than (i) the
required approvals, consents and waivers of governmental authorities referred to
in Section 5.1(b) and (ii) the approval of its shareholders referred to in
Section 3.1(d), (iii) any such approval, consent or waiver that already has been
obtained and (iv) any other approvals, consents or waivers, the absence of
which, individually or in the aggregate, would not result in a Material Adverse
Effect on it or enable any person to enjoin the Merger or the Bank Acquisition.
(f) Reports.
i. AI's consolidated statement of financial condition as of
March 31, 1996 previously provided to SBI and each statement of financial
condition provided after the date hereof to SBI (including in each case any
related notes and schedules) as required by Section 4.4 hereof fairly presents
or will fairly present the financial position of it as of its date and each of
the consolidated statements of income and shareholders' equity and of cash flows
provided therewith (including in each case any related notes and schedules),
fairly presents or will fairly present the results of operations, shareholders'
equity and cash flows, as the case may be, of it for the periods set forth
therein (subject, in the case of unaudited interim statements, to normal year-
end audit adjustments that are not material in amount or effect), in each case
in accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein.
ii. Except as set forth in Annex 3.1(f), it has timely filed
all material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that it was required to file since
January 1, 1993 with (A) the Office of the Comptroller of the Currency (the
"OCC"), (B) the Federal Deposit Insurance Corporation (the "FDIC"), (C) the
Board of Governors of the Federal Reserve System (the "Board"), (D) the
Securities and Exchange Commission (the "SEC"), and (E) any state banking
commission or other regulatory authority (collectively, the Regulatory Agencies
listed (A) through (E) are the "AI Regulatory Agencies"), and all other material
reports and statements required to be filed by it since January 1, 1993,
including, without limitation, any report or statement required to be filed
pursuant to the laws, rules or regulations of the United States or any AI
Regulatory Agency and has paid all fees and assessments due and payable in
connection therewith, and no such report, registration or statement contains any
material misstatement or omission or is otherwise in material noncompliance with
any law, regulation or requirement.
(g) Absence of Certain Changes or Events. Since January 1, 1996, to
the date hereof, it has not incurred any material liability, except in the
ordinary course of its business consistent with past practice, nor has there
been any change in the financial condition, properties, assets, business,
results of operations or prospects of it which, individually or in the
aggregate, has had, or might reasonably be expected to result in, a Material
Adverse Effect on it.
(h) Taxes. Its federal income tax returns have been examined and
closed or otherwise closed by operation of law through December 31, 1991. All
federal, state, local and foreign tax returns required to be filed by it or on
its behalf have been timely filed or requests for extensions have been timely
filed and any
-7-
<PAGE>
such extension shall have been granted and not have expired, and, to the
knowledge of management, all such filed returns are complete and accurate in all
material respects. All taxes shown on such returns, and all taxes required to
be shown on returns for which extensions have been granted, have been paid in
full or adequate provision has been made for any such taxes on its balance sheet
(in accordance with generally accepted accounting principles) other than those
taxes which are being contested in appropriate forums in proceedings which are
being diligently pursued. Adequate provision has been made on its balance sheet
(in accordance with generally accepted accounting principles consistently
applied) for all federal, state, local and foreign tax liabilities for periods
subsequent to those for which returns have been filed. There is no audit
examination, deficiency, or refund litigation pending or, to the knowledge of AI
or ENB, threatened, with respect to any taxes that could result in a
determination that would have a Material Adverse Effect on it. All taxes,
interest, additions and penalties due with respect to completed and settled
examinations or concluded litigation relating to it have been paid in full or
adequate provision has been made for any such taxes on its balance sheet (in
accordance with generally accepted accounting principles). It has not executed
an extension or waiver of any statute of limitations on the assessment or
collection of any tax due that is currently in effect, other than an extension
until September 15, 1996 of the due date of its tax returns for 1995.
(i) Litigation and Liabilities. Except as set forth in Annex 3.1(i),
there are no (i) civil, criminal or administrative actions, suits, claims,
hearings, investigations or proceedings before any court, governmental agency or
otherwise pending or, to the knowledge of management, threatened against it or
involving any Employee Plan as defined at subsection (m) hereof or (ii)
obligations or liabilities, whether or not accrued, contingent or otherwise,
including, without limitation, those relating to environmental and occupational
safety and health matters, or any other facts or circumstances of which its
management is aware that could reasonably be expected to result in any claims
against or obligations or liabilities of it, that, alone or in the aggregate,
are reasonably likely to have a Material Adverse Effect on it or to hinder or
delay, in any material respect, consummation of the transactions described in
this Agreement.
(j) Absence of Regulatory Actions. It is not a party to any
currently effective cease and desist order, written agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or subject to any order or directive by, or a recipient of any extraordinary
supervisory letter from, nor since January 1, 1995, except as set forth in
minutes of meetings of the Board of Directors of ENB in 1995, has it adopted any
board resolutions at the request of, federal or state governmental authorities,
including, without limitation, the AI Regulatory Agencies, charged with the
supervision or regulation of national banking associations or bank holding
companies or engaged in the insurance of bank deposits nor has it been advised
by any AI Regulatory Agency that it is contemplating issuing or requesting (or
is considering the appropriateness of issuing or requesting) any such order,
directive, written agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter, board resolution or similar undertaking.
(k) Agreements.
i. Except as set forth in Annex 3.1(k) attached hereto, as of
the date of this Agreement it is not a party to, or bound by, any oral or
written:
(A) "material contract" as such term is defined in Item
601(b)(10) of Regulation S-K promulgated by the Securities and Exchange
Commission;
(B) consulting agreement not terminable on thirty (30)
days' or less notice involving the payment of more than $10,000 per annum, in
the case of any such agreement;
(C) agreement with any officer or other key employee the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of the transactions described in this Agreement;
-8-
<PAGE>
(D) agreement with respect to any officer providing any
term of employment or compensation guarantee extending for a period longer than
one year or for a payment in excess of $75,000;
(E) agreement or plan, including any stock option plan,
stock appreciation rights plan, employee stock ownership plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions described in this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
described in this Agreement;
(F) agreement containing covenants that limit its ability
to compete in any line of business or with any person, or that involve any
restriction on the geographic area in which, or method by which, it may carry on
its business (other than as may be required by law or any regulatory agency);
(G) agreement, contract or understanding, other than this
Agreement, regarding the capital stock of AI and/or ENB or committing to dispose
of some or all of the capital stock or substantially all of the assets of AI
and/or ENB; or
(H) collective bargaining agreement, contract, or other
agreement or understanding with a labor union or labor organization.
ii. It is not in default under or in violation of any
provision of any note, bond, indenture, mortgage, deed of trust, loan agreement,
lease or other agreement to which it is a party or by which it is bound or to
which any of its respective properties or assets is subject, other than such
defaults or violations as could not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on it.
(l) Labor Matters. Except as disclosed in Annex 3.1(l), it is not the
subject of any proceeding asserting that it has committed an unfair labor
practice or seeking to compel it to bargain with any labor organization as to
wages and conditions of employment, nor is there any strike, other labor dispute
or organizational effort involving it pending or threatened.
(m) Employee Benefit Plans. Annex 3.1(m) contains a complete list of
all pension, retirement, stock option, stock purchase, stock ownership, savings,
stock appreciation right, profit sharing, deferred compensation, consulting,
bonus, group insurance, severance and other employee benefits, incentive and
welfare policies, contracts, plans and arrangements, and all trust agreements
related thereto, which it sponsors or maintains or to which it is required to
contribute with respect to any of its present or former directors, officers, or
other employees (hereinafter referred to collectively as the "Employee Plans").
i. All of the Employee Plans comply in all material respects
with all applicable requirements of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), the Code and other applicable laws; no fiduciary
of any Employee Plan which is subject to ERISA has engaged in a "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
with respect to any Employee Plan which is likely to result in any material
penalties, taxes or other events under Section 502(i) of ERISA or Section 4975
of the Code which would have a Material Adverse Effect on it;
ii. it does not maintain or contribute to any Employee Plan
which is a "defined benefit" plan subject to Title IV of ERISA, or is a pension
plan subject to the funding requirements of Section 412 of the Code or Section
302 of ERISA;
-9-
<PAGE>
iii. neither it nor any entity which is considered one employer
with AI or ENB under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate") has contributed to any "multi-employer plan," as defined in Section
3(37) of ERISA, on or after September 26, 1980;
iv. each Employee Plan of it which is an "employee pension
benefit plan" (as defined in Section 3(2) of ERISA) and which is intended to be
qualified under Section 401(a) of the Code (a "Qualified Plan") has received a
favorable determination letter from the Internal Revenue Service ("IRS")
covering the requirements of the Tax Equity and Fiscal Responsibility Act of
1982, the Retirement Equity Act of 1984 and the Deficit Reduction Act of 1984
and the Tax Reform Act of 1986; and such Employee Plan has been amended to
reflect the requirement of subsequent legislation applicable to such plans and
it is not aware of any circumstances likely to result in revocation of any such
favorable determination letter; and each Qualified Plan has complied at all
relevant times in all material respects with all applicable requirements of
Section 401(a) of the Code;
v. each Qualified Plan which is an "employee stock ownership
plan" (as defined in Section 4975(e)(7) of the Code) has at all relevant times
satisfied all of the applicable requirements of Sections 409 and 4975(e)(7) of
the Code and the regulations thereunder;
vi. neither it nor any ERISA Affiliate has committed any act or
omission or engaged in any transaction that have caused it to incur, or created
a material risk that it may incur, liability for any excise tax under Sections
4971 through 4980B of the Code, other than excise taxes which heretofore have
been paid and fully reflected in its financial statements;
vii. there is no pending or threatened litigation,
administrative action or proceeding relating to any Employee Plan other than
routine claims for benefits;
viii. except as disclosed in Annex 3.1(m), there has been no
announcement or legally binding commitment by it to create an additional
Employee Plan, or to amend an Employee Plan except for amendments required by
applicable law which do not materially increase the cost of such Employee Plan;
ix. except as disclosed in Annex 3.1(m), the execution and
delivery of this Agreement and the consummation of the transactions described
herein will not result in any payment or series of payments by AI or ENB to any
person which is an "excess parachute payment" (as defined in Section 280G of the
Code) under any Employee Plan, increase any benefits payable under any Employee
Plan, or accelerate the time of payment or vesting of any such benefit;
x. except as disclosed in Annex 3.1(m)(x), all annual reports
have been timely filed with respect to each Employee Plan, and it has made
available to SBI a true and correct copy of (A) reports on the applicable form
of the Form 5500 series filed with the IRS for plan years beginning after 1987,
(B) such Employee Plan, including amendments thereto, (C) each trust agreement
and insurance contract relating to such Employee Plan, including amendments
thereto, (D) the most recent summary plan description for such Employee Plan,
including amendments thereto, if the Employee Plan is subject to Title I of
ERISA, (E) the most recent actuarial report or valuation if such Employee Plan
is a Pension Plan and (F) the most recent determination letter issued by the IRS
if such Employee Plan is a Qualified Plan;
xi. except as disclosed in Annex 3.1(m)(xi) hereof, there are
no retiree health benefit plans except as required to be maintained by COBRA.
(n) Title to Assets. It has good and marketable title to its
properties and assets (other than property as to which it is lessee), except for
(i) such items shown in the AI consolidated financial statements or notes
thereto, (ii) liens on real property for current real estate taxes not yet
delinquent or (iii) such defects in title
-10-
<PAGE>
which would not, individually or in the aggregate, have a Material Adverse
Effect on it. With respect to any property leased by it, there are no defaults
by it, or any of the other parties thereto, or any events which, with the giving
of notice or lapse of time or both, would become defaults by it or any of the
other parties thereto, under any of such leases, except for such defaults or
events which would not, individually or in the aggregate, have a Material
Adverse Effect on it; and all such leases are in full force and effect and are
enforceable against it, as the case may be, and there is no circumstance
existing as of the date of this Agreement which causes or would cause such
leases to be unenforceable against any of the other parties thereto except as
the same may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally as well as principles
of equity to the extent enforcement by a court of equity is required.
(o) Compliance with Laws. It has all permits, licenses, certificates
of authority, orders and approvals of, and has made all filings, applications
and registrations with, federal, state, local and foreign governmental or
regulatory bodies that are required in order to permit it to carry on its
business as it is presently conducted and the absence of which could,
individually or in the aggregate, have a Material Adverse Effect on it; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect, and no written notice of suspension or cancellation of any of
them has been received by it.
(p) Fees. Except as set forth in Annex 3.1(p) attached hereto,
neither it nor any of its respective officers, directors, employees or agents,
has employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees, and no broker or
finder has acted directly or indirectly for it in connection with the Agreement
or the transactions described herein.
(q) Environmental Matters. Except as set forth in Annex 3.1(q):
i. (A) It, its Participation Facilities and its Loan
Properties (each as defined below) are, and have been, in material compliance
with all Environmental Laws (as defined below), except where non-compliance
would, either individually or in the aggregate, not have a Material Adverse
Effect on AI or any of its subsidiaries taken as a whole. Set forth in Annex
3.1(q)(A) is a list of Participation Facilities and other real estate owned
("OREO") owned by it and the locations of such Participation Facilities and
OREO;
(B) It, its Participation Facilities and its Loan
Properties hold all permits, licenses, registrations and other authorizations
(the "Environmental Permits") necessary under the Environmental Laws, and all
such Environmental Permits are currently in effect. The Environmental Permits
are listed in Annex 3.1(q)(B), and any that will expire or terminate as a result
of the transactions described in this Agreement are so designated. It, its
Participation Facilities and its Loan Properties are in material compliance with
all the terms and conditions of such Environmental Permits and have not
materially violated any of them. Neither it, its Participation Facilities nor
its Loan Properties have received any notice of any proposal to amend, revoke,
reissue or replace any Environmental Permit, nor have any events occurred (other
than a change in applicable law) that could form a reasonable basis for any such
action. It, its Participation Facilities, and its Loan Properties have filed
timely and complete applications for renewal of any such Environmental Permits
that are required prior to the Closing.
(C) There is no suit, claim, action, demand, penalty,
executive or administrative order, directive, investigation or proceeding
pending or threatened before any court, governmental agency or board or other
forum against it or any Participation Facility (x) for alleged noncompliance
(including by any predecessor) with, or liability under, any Environmental Law
or (y) relating to the release into the environment of any Hazardous Material
(as defined below) or oil, whether or not occurring at or on a site owned,
leased or operated by it or any Participation Facility, except as to such
matters which, either individually or in the aggregate, do not, and will not,
individually or in the aggregate, have a Material Adverse Effect on AI and its
subsidiaries;
-11-
<PAGE>
(D) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or
threatened before any court, governmental agency or board or other forum
relating to or against it in respect of any Loan Property (x) relating to
alleged noncompliance (including by any predecessor) with, or liability under,
any Environmental Law or (y) relating to the release into the environment of any
Hazardous Material or oil, whether or not occurring at or on a site owned,
leased or operated by any Loan Property, except as to such matters which, either
individually or in the aggregate, would not have a Material Adverse Effect on AI
and its subsidiaries taken as a whole;
(E) There is no reasonable basis for any suit, claim, action,
demand, executive or administrative order, directive or proceeding of a type
described in Section 3.1(q)(i)(C) or (D);
(F) The properties currently or formerly owned or operated
(including, without limitation, in a fiduciary capacity) by it (including,
without limitation, soil, groundwater or surface water on or under the
properties, and buildings thereon) do not contain any Hazardous Material other
than as permitted under applicable Environmental Laws (provided, however, that
with respect to properties formerly owned or operated by it, such representation
is limited to the period it owned or operated such properties);
(G) It has not received any notice, demand letter, executive or
administrative order, directive or request for information from any federal,
state, local or foreign governmental entity or any third party indicating that
it may be in violation of, or liable under, any Environmental Law;
(H) There are no underground storage tanks on, in or under, and
during the period of its ownership and operation no underground storage tanks
have been closed or removed from, any properties or Participation Facility which
are or have been in its ownership;
(I) During the period of (l) its ownership or operation
(including without limitation in a fiduciary capacity) of any of its respective
current properties, (m) its participation in the management of any Participation
Facility, or (n) its holding of a security interest in a Loan Property, there
has been no release of Hazardous Material or oil in, on, under or affecting such
properties, except as permitted under applicable Environmental Laws or except in
quantities too small to be required to be reported to responsible government
oversight agencies. Prior to the period of (x) its ownership or operation of any
of its respective current properties, (y) its participation in the management of
any Participation Facility, or (z) its holding of a security interest in a Loan
Property, there was no release of Hazardous Material or oil in, on, under or
affecting any such property, Participation Facility or Loan Property, except as
permitted under applicable Environmental Laws or except in quantities too small
to be required to be reported to responsible government oversight agencies; and
(J) There has not been and is not any Environmental Condition
(as hereinafter defined) at or relating to any property at which wastes have
been deposited or disposed by or at the behest or direction of it, its
Participation Facilities or its Loan Properties, nor has it, its Participation
Facilities or its Loan Properties received written notice of any such
Environmental Condition. For purposes of this Agreement the term "Environmental
Condition" means any condition or circumstance that (i) requires abatement or
remediation under any Environmental Law currently in effect, (ii) gives rise to
any civil or criminal liability under any Environmental Law currently in effect,
or (iii) constitutes a public or private nuisance based on the presence of
Hazardous Materials, under laws applicable on the Closing Date.
(K) There are no environmental liens on any properties owned or
leased by it or on its Loan Properties ("Properties") and no government actions
which could subject the Properties to such liens have been taken, are pending,
or threatened.
-12-
<PAGE>
(L) No notice or restriction relating to the presence of
Hazardous Materials is required to be placed in the deed to any property subject
to this Agreement and no property subject to this Agreement has such a notice or
restriction in its deed.
(M) The only Loan Properties or Participation Facilities in
which it participates in management are those described in Annex 3.1(q)(i)(A)
hereto.
ii. The following definitions apply for purposes of this Section
3.1(q): (a) "Loan Property" means any property in which it holds a security
interest (except that with respect to loans which are secured by residential
property, all representation in this Section 3.1(q) are given to the best
knowledge, without inquiry), and where required by the context, includes the
owner or operator of such property, but only with respect to such property; (b)
"Participation Facility" means any facility in which it participates in the
management (including all property on which it conducts operations of its
business, or which is held as trustee or in any other fiduciary capacity) and,
where required by the context, includes the owner or operator of such property,
but only with respect to such property; (c) "Environmental Law" means (i) any
federal, state or local law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, legal doctrine, order,
directive, executive or administrative order, judgment, decree, injunction,
requirement or agreement with any governmental entity, relating to (A) the
protection, preservation or restoration of the environment (which includes,
without limitation, air, water vapor, surface water, groundwater, drinking water
supply, structures, soil, surface land, subsurface land, plant and animal life
or any other natural resource), or to human health or safety, or (B) the
exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of, Hazardous Materials, in each case as amended and as now in effect;
"Environmental Law" includes, without limitation, the federal Comprehensive
Environmental Response Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act, the federal Clean Air Act, the federal Clean
Water Act, the federal Resource Conservation and Recovery Act of 1976 (including
the Hazardous and Solid Waste Amendments thereto), the federal Solid Waste
Disposal Act and the federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Federal Occupational Safety and
Health Act of 1970, the Federal Hazardous Materials Transportation Act, or any
so-called "Superfund" or "Superlien" law enacted by any state having
jurisdiction over any Loan Property or Participation Facility, each as amended
and as now or hereafter in effect, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines such as
negligence, nuisance, trespass and strict liability) that may impose liability
or obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Material; and (d) "Hazardous Material"
means any substance which is or could be detrimental to human health or safety
or to the environment, currently or hereafter listed, defined, designated or
classified as hazardous, toxic, radioactive or dangerous, or otherwise
regulated, under any Environmental Law, whether by type or by quantity,
including any substance containing any such substance as a component. Hazardous
Material includes, without limitation, any toxic waste, pollutant, contaminant,
hazardous substance, toxic substance, hazardous waste, special waste, industrial
substance, oil or petroleum or any derivative or by-product thereof, radon,
radioactive material, asbestos, asbestos-containing material, urea formaldehyde
foam insulation, lead and polychlorinated biphenyls, any of which is regulated
by, or subject to regulation under, any Environmental Law.
(r) Allowance. The allowance for loan and lease losses shown on AI's
consolidated statement of financial condition as of December 31, 1995 was, and
the allowance for loan and lease losses shown on AI's consolidated statement of
financial condition for periods ending after the date of this Agreement will be,
in the opinion of management of AI and ENB, adequate, as of the date thereof,
under generally accepted accounting principles applicable to commercial banks
and bank holding companies and all other applicable regulatory requirements for
all losses reasonably anticipated in the ordinary course of business as of the
date thereof based on information available as of such date. Set forth in Annex
3.1(r) hereto are the amounts of all loans, leases, advances, credit
enhancements, other extensions of credit, commitments and interest-bearing
assets of it that it has classified internally as "Other Loans Specially
Mentioned," "Special Mention," "Substandard,"
-13-
<PAGE>
"Doubtful," "Loss," "Classified," "Criticized," "Credit Risk Assets," "Concerned
Loans" or words of similar import, and it shall promptly after the end of each
quarter after the date hereof and on the Effective Date inform SBI of the amount
of each such classification. The OREO and in-substance foreclosures included in
any of its non-performing assets are carried net of reserves at the lower of
cost or market value based on current independent appraisals or current
management appraisals.
(s) Anti-takeover Provisions Inapplicable. The provisions of the
NJBCA relating to protection of shareholders do not apply to AI, this Agreement,
the Merger, the Bank Acquisition and the transactions described herein.
(t) Material Interests of Certain Persons. Except as noted in Annex
3.1(t), none of its respective officers or directors, or any "associate" (as
such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934) of
any such officer or director, has any material interest in any material contract
or property (real or personal), tangible or intangible, used in or pertaining to
its business.
(u) Insurance. It is presently insured, and has been insured, in the
amounts, with the companies and since the periods set forth in Annex 3.1(u). All
of the insurance policies and bonds maintained by it are in full force and
effect, it is not in default thereunder and all material claims thereunder have
been filed in due and timely fashion. In the judgment of its management, such
insurance coverage is adequate.
(v) Dividends. The only dividends or other distributions which it
has made on its capital stock since January 1, 1994 are set forth in
Annex 3.1(v).
(w) Books and Records. Its books and records have been, and are
being, maintained in accordance with applicable legal and accounting
requirements and reflect in all material respects the substance of events and
transactions that should be included therein.
(x) Board Action. Its board of directors (at a meeting duly called
and held) has been duly convened and by the requisite vote of a quorum of
directors (a) determined that the Merger is advisable and in the best interests
of it and its shareholders, (b) approved this Agreement and the transactions
described herein and (c) directed that the Agreement be submitted for
consideration by its shareholders at the AI Meeting (as hereafter defined).
(y) Fairness Opinions. Its board of directors has received a written
opinion from each of Berwind Financial Group, L.P. and Janney Montgomery Scott
Inc., copies of which have been furnished to SBI, to the effect that the
consideration to be received by AI's shareholders pursuant to this Agreement, at
the time of its execution, is fair to such holders from a financial point of
view.
(z) INTENTIONALLY OMITTED.
(aa) Fidelity Bonds. Since at least January 1, 1993, ENB has
continuously maintained fidelity bonds insuring it against acts of dishonesty by
its employees in such amounts as is customary for a bank of its size. Since
January 1, 1993, the aggregate amount of all potential claims under such bonds
has not exceeded approximately $100,000 and neither AI nor ENB is aware of any
facts which would reasonably form the basis of a claim under such bonds.
Neither has a reason to believe that its fidelity coverage will not be renewed
by its carrier on substantially the same terms as its existing coverage.
(bb) Condition of Tangible Assets. Except as set forth in Annex
3.1(bb), all buildings, structures and improvements on the real property owned
or leased by it are in good condition, ordinary wear and tear excepted, and are
free from structural defects in all material respects except such defects to the
operations center as have been previously disclosed by AI to SBI. The
equipment, including heating, air conditioning and
-14-
<PAGE>
ventilation equipment owned by it, is in good operating condition, ordinary wear
and tear excepted. The operation and use of the property in the business
conform in all material respects to all applicable laws, ordinances,
regulations, permits, licenses and certificates.
(cc) Loans by ENB. As of January 1, 1993, and except as shown on
Annex 3.1(cc), in the aggregate, the loans by ENB have been lawfully made,
constitute valid debts of the obligors, have been incurred in the ordinary
course of business, are subject to the terms of payment as shall have been
agreed upon between ENB and each customer and ENB does not know of any
applicable setoff or counterclaim which in the aggregate would have a Material
Adverse Effect on it. A list of all loans thirty (30) days past due, as of June
30, 1996, is set forth in Annex 3.1(r). No part of the amount collectible under
any loan is contingent upon performance by ENB of any obligation and no
agreement for participation, in which ENB has relinquished or agreed to share
control with a participation in management of the facility, or agreement
providing for deductions or discounts have been made with respect to any part of
such loans, except as expressly disclosed in Annex 3.1(cc). ENB does not know
of any pending, threatened or expected actions in connection with any material
loans or commitments presently or previously made by ENB relating to claims
based on theories of "lenders' liability" or any other basis.
(dd) Regulatory Compliance - OCC. ENB is in compliance in all
material respects with the applicable rules and regulations of the OCC, except
as noted in Annex 3.1(dd) and except where the failure to comply would not have
a Material Adverse Effect on ENB.
(ee) Regulatory Compliance - FDIC. Except as noted on Annex 3.1(ee)
hereto and except where the failure to comply would not have a Material Adverse
Effect on it, it is in compliance in all material respects with the rules and
regulations of the FDIC to the extent such rules and regulations are deemed
applicable by regulatory determination.
(ff) Capital Compliance. As of December 31, 1995, ENB was in
compliance with the minimum capital requirements applicable to national banking
associations, including as to leverage ratio requirements, tangible capital
requirements and risk based capital requirements.
(gg) INTENTIONALLY OMITTED.
(hh) Investments. Except as may be noted on Annex 3.1(hh) hereto, ENB
does not, either directly or through a subsidiary, hold any corporate debt
security not of investment grade, as defined in Section 222 of the Financial
Institution Reform, Recovery and Enforcement Act of 1989 ("FIRREA"); provided,
further, ENB is in compliance with applicable divestiture requirements
established by the FDIC as to any such investments noted as exceptions on Annex
3.1(hh).
(ii) INTENTIONALLY OMITTED.
(jj) Default. It has not been advised by any AI Regulatory Agency
that it is in "default" or "in danger of default" (as those terms are defined in
FIRREA Sections 204(x)(1) and (2)).
(kk) Federal Reserve Act. Since the enactment of FIRREA, except as
may be noted in Annex 3.1(kk) hereto, it is in compliance in all material
respects with Sections 23A and 22(h) of the Federal Reserve Act.
(ll) INTENTIONALLY OMITTED.
-15-
<PAGE>
(mm) Assessments Fully Paid. All payments, fees and charges assessed
by the OCC against ENB, and due on or prior to the date of this Agreement, have
been paid in full. ENB's assessment category with the FDIC is 1A.
(nn) Exchange Act Reports and Financial Statements. AI has delivered
to SBI (i) AI's Annual Report on Form 10-K for AI's fiscal year ended December
31, 1995, containing consolidated balance sheets of AI at December 31, 1995 and
December 31, 1994 and consolidated statements of earnings, changes in
shareholders' equity and cash flows of AI for the three years ended December 31,
1995, 1994 and 1993 and such financial statements have been certified by
independent public accountants, and (ii) AI's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996 containing unaudited consolidated balance
sheets of AI as at such date and unaudited consolidated statements of earnings
and cash flows of AI for the three month period reflected therein. All such
reports (collectively, the "AI Reports") (i) comply in all material respects
with the requirements of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") and the rules and regulations of the SEC thereunder, (ii) do not
contain any untrue statement of a material fact and (iii) do not omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No documents to be filed by AI with the SEC or any AI
Regulatory Agency in connection with this Agreement, or the transactions
described herein will contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading. All documents which AI is responsible for filing with the SEC or
any Regulatory Agency in connection with the Merger and Bank Acquisition will
comply as to form in all material respects with the requirements of applicable
law.
(oo) Proxy Statement/Prospectus, Etc. With respect to information
relating to AI and its subsidiaries, neither (i) the Proxy Statement/Prospectus
(as defined hereinafter at Section 4.2) or any amendment or supplement thereto,
at the time it is filed with the SEC, at the time the Registration Statement (as
defined hereinafter at Section 4.2) is declared effective, at the time the Proxy
Statement/Prospectus is mailed to the shareholders of AI or at the date of the
AI Meeting to consider this Agreement nor (ii) any other documents to be filed
by AI with the SEC or any AI Regulatory Agency in connection with this Agreement
or the transactions described herein will contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading.
SECTION 3.2 Representations and Warranties of SBI and its Material
------------------------------------------------------
Subsidiaries. SBI represents and warrants to AI and ENB (and the word "it" in
- ------------
this Article III refers to SBI and each of its Material Subsidiaries, as that
term is defined at Section 3.2(d) hereof), that, except as specifically
disclosed in the Annex of disclosure schedules included herewith, to the best of
its knowledge:
(a) Corporate Organization and Qualification. SBI is a corporation
duly incorporated, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and is in good standing as a foreign corporation in
each jurisdiction where the properties owned, leased or operated, or the
business conducted, by SBI requires such qualification, except for such failure
to qualify or be in such good standing which, when taken together with all other
such failures, would not have a Material Adverse Effect on SBI. It has the
requisite corporate and other power and authority (including all federal, state,
local and foreign governmental authorizations) to carry on its business as now
conducted and to own its properties and assets. SBI owns directly or indirectly
all of the outstanding shares of capital stock of SBI Merger Sub. SBI has made
available to AI complete and correct copies of the articles of incorporation and
bylaws of SBI and will make available to AI complete and correct copies of the
certificate of incorporation and bylaws of SBI Merger Sub; such articles and
bylaws of SBI are in full force and effect as of the date hereof.
-16-
<PAGE>
(b) Corporate Authority. Subject only to approval of this Agreement
by the holders of two-thirds of the votes cast by all holders of SBI Common
Stock (without any minority, class or series voting requirement), if deemed
applicable by the management of SBI, and, subject to the regulatory approvals
specified in Section 5.1(b) hereof, SBI has the requisite corporate power and
authority, and legal right, and has taken all corporate action necessary in
order to execute and deliver this Agreement and to consummate the transactions
applicable to SBI described herein. This Agreement has been duly and validly
executed and delivered by SBI and constitutes the valid and binding obligation
of SBI enforceable against SBI in accordance with its terms, except to the
extent enforcement is limited by bankruptcy, insolvency and other similar laws
affecting creditors' rights or the application by a court of equitable
principles.
(c) Capitalization. In furtherance of the provisions of the NJBCA,
Section 14A:11-1, SBI Common Stock is held of record by not less than 4,000
persons. The authorized capital stock of SBI consists as of the date of this
Agreement of 32,000,000 shares of SBI Common Stock, of which approximately
13,500,000 shares are issued and outstanding (an additional 30,175 shares are
held as treasury stock) and 5,000,000 shares of Preferred Stock, no par value
per share, of which none are outstanding. Sufficient shares of authorized, but
unissued, shares of SBI Common Stock to effect the transactions described herein
will be reserved by SBI for such purpose.
(d) Bank Subsidiaries. SBI owns, directly, all of the issued and
outstanding shares of capital stock of Farmers First Bank, a bank and trust
company organized under the laws of the Commonwealth of Pennsylvania; Farmers &
Merchants Bank and Trust, a bank organized under the laws of the State of
Maryland; Citizens National Bank of Southern Pennsylvania, a national banking
association with headquarters in Greencastle, Pennsylvania; First National Trust
Bank, a national banking association with headquarters in Sunbury, Pennsylvania;
and Williamsport National Bank, a national banking association with headquarters
in Williamsport, Pennsylvania (collectively the "Bank Subsidiaries"). All of
the issued and outstanding capital stock of the Bank Subsidiaries is duly and
validly authorized and issued, fully paid and nonassessable (other than as
provided in 12 U.S.C.A. (S) 55 with respect to national banks) and is owned by
SBI free and clear of any liens, security interests, encumbrances, restrictions
on transfer or other rights of any third person with respect thereto. SBI owns,
directly or indirectly, all of the issued and outstanding shares of capital
stock of Atlantic Federal Savings Bank, Fairfax Savings, F.S.B. and Reisterstown
Federal Savings Bank, each a federal savings bank operating in Maryland
(collectively, the "Savings Bank Subsidiaries"). All of the issued and
outstanding capital stock of the Savings Bank Subsidiaries is duly and validly
authorized and issued free and clear of any liens, security interests,
encumbrances, restrictions on transfer or other rights of any third person with
respect thereto other than rights of account holders to liquidation accounts
maintained by the Savings Bank Subsidiaries in accordance with the rules of the
Office of Thrift Supervision (the "OTS"). The Bank Subsidiaries and the Savings
Bank Subsidiaries are the "Material Subsidiaries." There are no options, calls,
warrants, conversion privileges or other agreements obligating any Material
Subsidiary at present or upon the occurrence of any event to issue or sell any
shares of its capital stock. Each of Farmers First Bank and Farmers & Merchants
Bank and Trust is a bank and trust company duly organized, validly existing and
in good standing under the laws of the Commonwealth of Pennsylvania and the
State of Maryland, respectively, and is duly authorized to engage in the banking
and trust business as an insured bank under the Federal Deposit Insurance Act,
as amended. Each of Citizens National Bank of Southern Pennsylvania, First
National Trust Bank, and Williamsport National Bank is a national banking
association duly organized, validly existing and in good standing under the laws
of the United States and is duly authorized to engage in the banking and trust
business as an insured bank under the Federal Deposit Insurance Act, as amended.
Each of Atlantic Federal Savings Bank, Fairfax Savings, F.S.B. and Reisterstown
Federal Savings Bank is a federal savings and loan association, duly organized,
validly existing and in good standing under the laws of the United States and is
duly authorized to engage in the savings and loan business under the Federal
Deposit Insurance Act, as amended. Each Material Subsidiary has corporate power
and legal authority and governmental authorizations which are material to its
respective operations and to transact the respective businesses in which it is
presently engaged.
-17-
<PAGE>
(e) No Violations. The execution, delivery and performance of this
Agreement by SBI and SBI Merger Sub does not, and the consummation of the
transactions described herein by SBI and SBI Merger Sub will not, constitute (i)
a breach or violation of, or a default under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or agreement, indenture
or instrument to which SBI or SBI Merger Sub (or any of SBI's respective
properties or assets) is subject, which breach, violation or default would have
a Material Adverse Effect on SBI on a consolidated basis, or enable any person
to enjoin the Merger or the Bank Acquisition, (ii) a breach or violation of, or
a default under, SBI's or SBI Merger Sub's articles or certificate of
incorporation, respectively, or bylaws of either or (iii) a breach or violation
of, or a default under (or an event which with due notice or lapse of time or
both would constitute a default under), or result in the termination of,
accelerate the performance required by, or result in the creation of any lien,
pledge, security interest, charge or other encumbrance upon any of SBI's
properties or assets under, any of the terms, conditions or provisions of any
note, bond, indenture, deed of trust, loan agreement or other agreement,
instrument or obligation to which it is a party, or to which any of SBI's
properties or assets may be bound or affected, except for any of the foregoing
that, individually or in the aggregate, would not have a Material Adverse Effect
on SBI, on a consolidated basis; and the consummation of the transactions
described herein will not require any approval, consent or waiver under any such
law, rule, regulation, judgment, decree, order, governmental permit or license
or the approval, consent or waiver of any other party to any such agreement,
indenture or instrument, other than (i) the required approvals, consents and
waivers of governmental authorities referred to in Section 5.1(b), (ii) the
approval of shareholders referred to in Section 3.2(b), (iii) any such approval,
consent or waiver that already has been obtained and (iv) any other approvals,
consents or waivers the absence of which, individually or in the aggregate,
would not result in a Material Adverse Effect on SBI, on a consolidated basis,
or enable any person to enjoin the Merger or the Bank Acquisition.
(f) Required Consents. SBI has no reason to believe that it will be
unable to obtain consents and approvals, including, without limitation, all such
consents and approvals of governmental authorities and its shareholders,
necessary to consummate the transactions contemplated by this Agreement by March
31, 1997 or that any such consents or approvals would contain any condition or
requirement that would result in a Material Adverse Effect on SBI.
(g) Board and Shareholder Action. SBI's Board of Directors (at a
meeting duly called and held) has been duly convened and by the requisite vote
of all directors (a) determined that the Merger in the case of AI and the Bank
Acquisition in the case of ENB is advisable and in the best interests of it and
its shareholders, and (b) approved this Agreement and the transactions described
herein.
(h) SBI Merger Sub.
i. SBI Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey. All of
the outstanding shares of capital stock of SBI Merger Sub have been validly
issued, are fully paid and nonassessable and are owned directly by SBI free and
clear of any lien, charge or other encumbrance. SBI Merger Sub possesses no
assets nor is subject to any liabilities and will not acquire assets or incur
liabilities prior to the Effective Time. Since the date of its incorporation,
SBI Merger Sub has not engaged in any activities other than in connection with
the consummation of the Merger and the Bank Acquisition or as expressly
contemplated by this Agreement.
ii. SBI Merger Sub has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement by SBI Merger Sub and the
consummation of the transactions described herein have been duly and validly
authorized by all necessary corporate actions (including without limitation
stockholder action) in respect thereof on the part of SBI Merger Sub. This
Agreement is a valid and binding obligation of SBI Merger Sub, enforceable
against SBI Merger Sub in accordance with its terms.
-18-
<PAGE>
iii. All of the authorized capital stock of SBI Merger Sub,
which consists solely of 100 shares of common stock, $.01 par value per share,
is presently issued and outstanding.
iv. Subject to approval by its shareholders at the SBI
Meeting, SBI will, as the sole shareholder of SBI Merger Sub, vote to approve
this Agreement and the Merger.
(i) SBI Reports. SBI has furnished to AI and ENB true and complete
copies of: (i) all of its annual reports on Form 10-K filed with the SEC since
January 1, 1993 and its annual reports to shareholders for each of the three
years ended December 31, 1995, 1994 and 1993, respectively; (ii) all of its
quarterly reports on Form 10-Q and current reports, if any, on Form 8-K filed
with the SEC since January 1, 1996; (iii) each final registration statement,
prospectus or offering circular which SBI has used in connection with the sale
of securities since January 1, 1994; and (iv) each definitive proxy statement
distributed by SBI to its shareholders since January 1, 1994.
All such reports (i) comply in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
thereunder, (ii) do not contain any untrue statement of a material fact and
(iii) do not omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(j) SBI Benefit Plans. SBI has furnished to AI and ENB true, correct
and complete copies of all of SBI's bonus, deferred compensation, pension,
profit-sharing, retirement, medical, group life, disability income, stock
purchase, stock option, other "employee benefit plans" (as that term is used
within the meaning of Section 3(3) of ERISA) or any other fringe benefit plan,
agreement, arrangement or practice, all amendments thereto and all summary plan
descriptions thereof, or, in the alternative, SBI has provided materials
generally descriptive of the foregoing, and in such case, SBI will provide such
specific additional information as may reasonably be requested. The foregoing
are collectively referred to as the "SBI Benefit Plans."
(k) Reports. SBI has timely filed all material reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that it was required to file since January 1, 1994 with
(A) the Board, (B) the FDIC, (C) the OTS, (D) the SEC, (E) the OCC, and (F) the
Pennsylvania Department of Banking and the Maryland Banking Commissioner
(collectively, the Regulatory Agencies listed in (A) through (F) are the "SBI
Regulatory Agencies") and all other material reports and statements required to
be filed by it since January 1, 1994, including, without limitation, any report
or statement required to be filed pursuant to the laws, rules or regulations of
the United States or any SBI Regulatory Agency and has paid all fees and
assessments due and payable in connection therewith, and no such report,
registration or statement contains any material misstatement or omission or is
otherwise in material noncompliance with any law, regulation or requirement.
(l) SBI's Balance Sheets. SBI's balance sheets as of December 31,
1995 previously provided to AI and each balance sheet provided after the date
hereof to AI (including in each case any related notes and schedules) fairly
presents or will fairly present SBI's financial position as of its date and each
of the statements of income and shareholders' equity and of cash flows provided
therewith (including in each case any related notes and schedules), fairly
presents or will fairly present the results of operations, shareholders' equity
and cash flows, as the case may be, of it for the periods set forth therein
(subject, in the case of unaudited interim statements, to normal year-end audit
adjustments that are not material in amount or effect), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved.
(m) Absence of Certain Changes or Events. Since January 1, 1996, SBI
has not incurred any material liability, except in the ordinary course of its
business consistent with past practice, nor has there been any change in the
financial condition, properties, assets, business, results of operation or
prospects of it
-19-
<PAGE>
which, individually or in the aggregate, has had, or might reasonably be
expected to result in, a Material Adverse Effect on it.
(n) Fees. Neither SBI nor any of its officers, directors, employees
or agents, has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions, or finder's fees, and no
broker or finder has acted directly or indirectly for it in connection with the
Agreement or the transactions described herein.
(o) Registration Statement, Etc. Except for information relating to
AI and ENB, neither (i) the Registration Statement, the Proxy
Statement/Prospectus or any amendment or supplement thereto, or any other
registration statement filed with the SEC during the term of this Agreement, at
the time it is filed with the SEC, at the time it is declared effective, at the
time the Proxy Statement/Prospectus is mailed to the shareholders of AI or at
the date of the AI Meeting to consider the approval of this Agreement nor (ii)
any other documents to be filed by SBI with the SEC or any Regulatory Agency in
connection with this Agreement or the transactions described herein will contain
any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading. All
documents which SBI is responsible for filing with the SEC or any Regulatory
Agency in connection with the Merger and Bank Acquisition will comply as to form
in all material respects with the requirements of applicable law.
(p) Compliance with Laws. It has the permits, licenses, certificates
of authority, orders and approvals of, and has made all filings, applications
and registrations with, federal, state, local and foreign governmental
authorities, including Regulatory Agencies, that are required in order to permit
it to carry on its business as it is presently conducted and the absence of
which would, individually or in the aggregate, have a Material Adverse Effect on
SBI, on a consolidated basis; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect, and no suspension
or cancellation of any of them is threatened.
(q) Absence of Regulatory Actions. It is not a party to any cease
and desist order, written agreement or memorandum of understanding with, or a
party to any commitment letter or similar undertaking to, or subject to any
order or directive by, or a recipient of any extraordinary supervisory letter
from, nor has it adopted any board resolutions at the request of, federal or
state governmental authorities, including, without limitation, the SBI
Regulatory Agencies charged with the supervision or regulation of banks or bank
holding companies or savings and loan holding companies or engaged in the
insurance of bank and/or savings and loan deposits nor has it been advised by
any SBI Regulatory Agency that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
directive, written agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter, board resolutions or similar undertaking.
(r) Litigation and Liabilities. Except as set forth in Annex 3.2(r),
there are no (i) civil, criminal or administrative actions, suits, claims,
hearings, investigations or proceedings before any court, governmental agency or
otherwise pending or, to the knowledge of management, threatened against it or
(ii) obligations or liabilities, whether or not accrued, contingent or
otherwise, including, without limitation, those relating to environmental and
occupational safety and health matters, or any other facts or circumstances of
which its management is aware that could reasonably be expected to result in any
claims against or obligations or liabilities of it, that, alone or in the
aggregate, are reasonably likely to have a Material Adverse Effect on SBI, on a
consolidated basis, or to hinder or delay, in any material respect, consummation
of the transactions contemplated by this Agreement.
(s) Environmental Matters. SBI is unaware of any activity or
conditions on or in any property owned, occupied, leased, or held as security by
SBI or a Material Subsidiary which would subject SBI
-20-
<PAGE>
or any Material Subsidiary to damages, penalties, injunctive relief or cleanup
costs under any Environmental Laws.
ARTICLE IV. COVENANTS
SECTION 4.1 Acquisition Proposals. AI agrees that it and its
---------------------
officers and directors shall not, and that it shall direct and use its best
efforts to cause its employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by it) not
to, initiate, solicit or knowingly encourage, directly or indirectly, any
inquiries or the making of any proposal or offer (including, without limitation,
any proposal or offer to its shareholders) with respect to a merger,
consolidation or similar transaction involving, or any purchase, sale or other
disposition of all or any significant portion of the assets or any equity
securities of, AI or ENB (any such proposal or offer being hereinafter referred
to as an "Acquisition Proposal") or, except to the extent required for the
discharge by its board of directors of its fiduciary duties as determined upon
consultation with counsel, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise knowingly facilitate any
effort or attempt to make or implement an Acquisition Proposal. AI and ENB each
agrees that it will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. AI and ENB each agrees that it will take
the necessary steps to inform the appropriate individuals or entities referred
to in the first sentence hereof of the obligations imposed upon each of them in
this Section 4.1. AI and ENB each agree that it will notify SBI immediately if
any such inquiries or proposals are received by, any such information is
requested from, or any such negotiations, or discussions are sought to be
initiated or continued with, it.
SECTION 4.2. Securities Registration and Disclosure. AI shall
--------------------------------------
cooperate with SBI in the preparation, in accordance with the requirements of
the proxy rules under the Exchange Act, of the Proxy Statement/Prospectus and
the filing thereof as part of the Registration Statement. Within a reasonable
period following the date hereof, SBI will prepare and file with the SEC under
the Securities Act of 1933, as amended (the "Securities Act") a registration
statement for the registration of the shares of SBI Common Stock to be issued
pursuant hereto (the "Registration Statement"), and AI will file with the SEC
under the Exchange Act the preliminary form of the Proxy Statement/Prospectus
included in the Registration Statement, and each party shall be responsible for
providing all information concerning itself and its subsidiaries required to be
included therein. SBI shall take any action required to be taken under any
applicable state securities or "blue sky" laws in connection with the issuance
of shares of SBI Common Stock pursuant to this Agreement and AI shall furnish
SBI all information concerning AI and its shareholders as SBI may reasonably
request in connection with any such action. At least five (5) business days
prior to its filing with the SEC, SBI shall provide a copy of the Registration
Statement to AI and its counsel for review. Each party will promptly provide
the other with copies of all correspondence, comment letters, notices or other
communications to or from the SEC relating to the Registration Statement, the
Proxy Statement/Prospectus or any amendment or supplement thereto, and SBI will
advise AI promptly after it receives notice thereof, of the effectiveness of the
Registration Statement, of the issuance of any stop order with respect to the
effectiveness thereof, of the suspension of the qualification of the SBI Common
Stock issuable in connection herewith for offering or sale in any jurisdiction,
or the initiation or threat of any proceeding for any such purpose.
AI will take appropriate action to call a meeting of its shareholders
(the "AI Meeting") to be held not more than forty-five (45) days following the
effective date of the Registration Statement (which meeting may be the Annual
Meeting of Shareholders of AI), to consider approval of this Agreement and,
except to the extent legally required for the discharge by AI's board of
directors of its fiduciary duties and subject to receipt of an updated fairness
opinion from its financial advisor dated on or immediately prior to the date of
the Proxy Statement/Prospectus, will use its best efforts to secure such
approval. In connection with the AI Meeting, AI will duly solicit, in
compliance with Section 14(a) of the Exchange Act and the proxy rules of the SEC
thereunder, the vote of its shareholders by mailing or delivering to each such
shareholder, as soon as practicable
-21-
<PAGE>
after the effectiveness of the Registration Statement, the Proxy
Statement/Prospectus, and as soon as practicable thereafter, any amendments or
supplements thereto as may be necessary to assure that at the date of the AI
Meeting the Proxy Statement/Prospectus shall conform to the requirements of
Sections 3.1(oo) and 3.2(o) hereof.
AI will furnish to SBI a list of all persons known to AI who at the
date of the AI Meeting may be deemed to be "affiliates" of AI within the meaning
of Rule 145 under the Securities Act. AI will use its best efforts to cause
each such person identified in its list to deliver at or prior to the Closing a
written agreement providing that such person will not sell, pledge, transfer or
otherwise dispose of the shares of SBI Common Stock to be received by such
person hereunder except (i) in compliance with the applicable provisions of the
Securities Act and the rules and regulations thereunder and (ii) after such time
as financial results covering at least thirty (30) days of post-Merger combined
operations have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies.
SECTION 4.3 Employees.
---------
(a) SBI and any of its affiliates shall have the right (but not the
obligation) to employ, as officers and employees of SBI, the Surviving
Corporation, ENB or other affiliates of SBI immediately following the Effective
Time, any persons who are officers and employees of each of AI and ENB
immediately before the Effective Time. It shall be a condition to employment by
SBI or any of its affiliates that any former officer or employee of AI or ENB
agree to cancel any existing employment contract, agreement or understanding
between him or herself and AI or ENB, including without limitation all benefits
related to severance arrangements upon a change of control or otherwise, prior
to accepting such new employment and without accepting any of the severance
benefits or other benefits or payments associated with such contract, agreement
or understanding.
(b) Each person employed by AI or ENB prior to the Effective Time
who remains an employee of the Surviving Corporation, ENB or any other SBI
subsidiary following the Effective Time (each a "Continued Employee") shall be
entitled, as an employee of SBI or an SBI subsidiary, to participate in whatever
employee benefit plans, as defined in Section 3(3) of ERISA, or whatever stock
option, bonus or incentive plans or other fringe benefit programs that may be in
effect generally for employees of SBI or SBI's subsidiaries from time to time
("SBI's Plans"), if such Continued Employee shall be eligible or selected for
participation therein and otherwise shall not be participating in a similar plan
which continues to be maintained by the Surviving Corporation or ENB for such
employee. All such participation shall be subject to such terms of such plans as
may be in effect from time to time provided, that Continued Employees will be
eligible to participate in SBI's Plans on the same basis as similarly situated
employees of SBI or SBI's subsidiaries. Such Continued Employees will receive
credit for past service with AI or ENB for purposes of eligibility and vesting,
but not benefit accrual, under SBI's Plans.
(c) AI and ENB shall take all timely and necessary action to cease
participation or accrual of benefits, effective as of the Effective Time, by
each person employed by AI or ENB prior to the Effective Time in each Employee
Plan (as defined in Section 3.1(m)), and to terminate each Employee Plan, other
than an Employee Plan containing a cash or deferred arrangement qualified under
Section 401(k) of the Code ("Employee 401(k) Plan"), effective as of the
Effective Time; provided that SBI may, in its sole discretion, give notice to AI
or ENB, as the case may be, not less than twenty (20) days (sixty-one (61) days
in the case of any Pension Plan (as defined in Section 3.1(m)) prior to the
Effective Time, that any Employee Plan shall not be terminated and/or
participation or accrual of benefits thereunder shall not cease pursuant to this
Section 4.3(c). SBI shall, after receipt of an IRS favorable plan determination
letter confirming the ENB 401(k) Profit Sharing Plan's tax qualified status,
upon its termination, allow each participant to either roll-over his/her account
balance to the SBI 401(k) Plan or receive distribution of his/her closing
account balance. If the fair market value of the assets of any Pension Plan
does not equal or exceed the present value of its "benefits liabilities" (as
defined in Section 4001(a)(16) of ERISA) as of the date of its termination, as
determined by certification of an enrolled actuary in accordance with procedures
established by the Pension Benefit Guaranty Corporation, AI or ENB, as the case
may be, shall make such additional contributions to the Pension Plan as may be
necessary to permit its
-22-
<PAGE>
termination in a standard termination (within the meaning of Section 4041 of
ERISA). At the sole discretion of SBI, any Employee 401(k) Plan shall be merged
with any similar such plan maintained and designated by SBI, effective at or
after the Effective Time, as elected by SBI, and AI or ENB, as the case may be,
shall take any and all timely and necessary action to effect such merger.
SECTION 4.4 Access and Information.
----------------------
(a) Upon reasonable notice, and subject to applicable laws relating
to the exchange of information, each of AI and ENB shall afford to SBI and its
representatives (including, without limitation, directors, officers and
employees of SBI and its affiliates, and counsel, accountants and other
professionals retained) such access during normal business hours throughout the
period prior to the Effective Time to the books, records (including, without
limitation, tax returns and work papers of independent auditors), properties,
personnel and such other information as SBI may reasonably request (other than
reports or documentation which are not permitted to be disclosed under
applicable law); provided, however, that no investigation pursuant to this
Section 4.4 shall affect or be deemed to modify any representation or warranty
made herein. SBI will not, and will cause its representatives not to, use any
information obtained pursuant to this Section 4.4 for any purpose unrelated to
the consummation of the transactions contemplated by this Agreement and in no
event will SBI directly or indirectly use such information for any competitive
or commercial purpose. Subject to the requirements of law, SBI will keep
confidential, and will cause its representatives to keep confidential, all
information and documents obtained pursuant to this Section 4.4 unless such
information (i) was already known to SBI or an affiliate of SBI, (ii) becomes
available to SBI or an affiliate of SBI from other sources not known by such
person to be bound by a confidentiality agreement, (iii) is disclosed with the
prior written approval of AI or ENB, as the case may be, (iv) is or becomes
readily ascertainable from published information or trade sources or (v) was
already publicly available. Without in any way limiting the foregoing, ENB shall
provide to SBI within forty-five (45) days of the end of each calendar month and
AI shall provide to SBI within forty-five (45) days of the end of each calendar
quarter consolidated and consolidating financial statements (including a balance
sheet and income statement) as of the end of, and for, such period that are in
conformance with generally accepted accounting principles and the representation
set forth in Section 3.1(f). In the event that this Agreement is terminated or
the transactions contemplated by this Agreement shall otherwise not be
consummated, each party shall, if so requested, promptly cause all copies of
documents or extracts thereof containing information and data as to another
party hereto (or an affiliate of any party hereto) to be returned to the party
which furnished the same. This Section 4.4 supersedes and terminates any
agreement between the parties relating to the confidentiality of information
which may have been exchanged (the "Confidentiality Agreement").
(b) During the period from the date of this Agreement to the
Effective Date, SBI shall provide to AI and ENB the following documents and
information:
i. As soon as reasonably available, but in no event more than
forty-five (45) days after the end of each fiscal quarter of SBI ending after
the date of this Agreement, SBI will deliver to AI and ENB its quarterly report
on Form 10-Q as filed with the SEC.
ii. As soon as reasonably available, but in no event more than
ninety (90) days after the end of each fiscal year of SBI ending after the date
of this Agreement, SBI will deliver to AI and ENB its annual report on Form 10-K
as filed with the SEC.
iii. SBI will deliver to AI and ENB, contemporaneously with its
being filed with the SEC, a copy of each current report on Form 8-K filed by SBI
after the date of this Agreement.
iv. At least five (5) business days prior to submission, SBI
will furnish to AI and ENB the portions which describe the transactions
(including any financial information or pro forma financial information of, or
including, AI or ENB) described herein of (A) registration statements,
prospectuses or offering
-23-
<PAGE>
circulars used by SBI in connection with the sale of securities after the date
of this Agreement, (B) proxy statements distributed by SBI to its shareholders
after the date of this Agreement, and (C) all other publicly-available reports,
statements or other documents which are either distributed to shareholders or
filed by SBI or any of its subsidiaries with the SEC. Any comments timely
received by SBI from AI in connection with the foregoing will be reviewed and
considered in good faith, but SBI shall not be bound to comply with the
recommendations set forth in such comments. SBI also shall furnish AI with
copies of the foregoing in the form filed with the SEC or otherwise distributed
to shareholders.
v. SBI will promptly notify AI and ENB of any material
changes to SBI's Plans.
vi. SBI will make available on its premises to AI its Reports
of Examination, accountant's letters to management and any other items which
shall be mutually agreed upon by the parties hereto.
SECTION 4.5 Certain Filings, Consents and Arrangements. SBI shall
------------------------------------------
use all reasonable efforts to obtain all necessary approvals required to carry
out the transactions contemplated by this Agreement and to consummate the Merger
and Bank Acquisition. AI and ENB shall cooperate with SBI in connection
therewith, including, without limitation, furnishing all information concerning
AI or ENB, as the case may be, as may be reasonably requested by SBI in
connection with any such action. SBI shall use all reasonable efforts to
provide, five (5) business days prior to submission, AI with copies of all
material applications, notices, petitions or other filings or submissions
prepared by SBI in connection with consummation of the Merger and Bank
Acquisition. Any comments timely received by SBI from AI in connection with the
foregoing will be reviewed and considered in good faith, but SBI shall not be
bound to comply with the recommendations set forth in such comments. SBI will
consult with AI with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and governmental authorities
necessary or advisable to consummate the transactions described in this
Agreement and SBI will keep AI apprised of the status of matters relating to
completion of the transactions described herein. SBI shall promptly furnish AI
with copies of applications in the form filed with any governmental authority in
respect of the transactions described herein.
SECTION 4.6 Takeover Statutes. Neither the New Jersey Shareholders
-----------------
Protection Act (Section 14A:10A-1-10A-6 of the NJBCA), nor any other "fair
price," "moratorium," or other form of anti-takeover statute or regulation or
any similar provision of the AI Certificate or the charter of ENB, is applicable
to the transactions described in this Agreement and, if any such statute,
regulation or provisions shall become applicable to the transactions described
in this Agreement, AI and ENB and the members of the Boards of Directors of AI
and ENB shall grant such approvals and take such actions as are necessary so
that the transactions described herein may be consummated as promptly as
practicable on the terms described herein and otherwise act to eliminate or
minimize the effects of such statute or regulation or provision on the
transactions described herein.
SECTION 4.7 Additional Agreements. Subject to the terms and
---------------------
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take promptly, or cause to be taken promptly, all actions
and to do promptly, or cause to be done promptly, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions described in this Agreement as promptly as
practicable, including using efforts to obtain all necessary actions or non-
actions, extensions, waivers, consents and approvals from all applicable
governmental authorities, or other entities, effecting all necessary
registrations, applications and filings and obtaining any required contractual
consents and regulatory approvals.
SECTION 4.8 Publicity. Except as required by law, AI and ENB shall
---------
not, without the prior consent of SBI (which consent shall not be unreasonably
withheld), issue any press releases or otherwise make public filings under
securities laws, with respect to this Agreement or the transactions described
herein. Prior to
-24-
<PAGE>
issuing any press release or making any public filings under securities laws
which makes any reference to AI or ENB, SBI shall provide a copy to AI for
comment and in all such instances the parties shall cooperate.
SECTION 4.9 Shareholders' Meeting. If determined advisable by its
---------------------
board of directors, after consultation with its counsel, SBI shall take all
action necessary, in accordance with applicable law and its articles of
incorporation and bylaws, to convene a special meeting of the holders of its
capital stock (the "SBI Meeting") as promptly as practicable for the purpose of
considering and taking the action required by this Agreement and other
acquisition transactions which it has planned. Except to the extent legally
required for the discharge by SBI's board of directors of its fiduciary duties
as advised in writing by such board's counsel, its board of directors shall
recommend in writing to its shareholders that at the SBI Meeting, the holders of
its capital stock vote in favor of and approve the Merger, the Bank Acquisition
and this Agreement. To the extent required by applicable law, SBI shall prepare
a proxy statement or information statement or other documents in connection with
such SBI Meeting which shall comply with all applicable laws.
SECTION 4.10 Notification of Certain Matters. Each party shall give
-------------------------------
prompt notice to the others of: (a) any notice of, or other communication
relating to, a default or event that, with notice or lapse of time or both,
would become a default, received by it or any of its subsidiaries subsequent to
the date of this Agreement and prior to the Effective Time, under any contract
material to the financial condition, properties, businesses, results of
operations or prospects of it to which it is a party or is subject; and (b) any
material adverse change in its financial condition, properties, business, or
results of operations on a consolidated basis or the occurrence of any event
which, so far as reasonably can be foreseen at the time of its occurrence, is
reasonably likely to result in any such change. Each party shall give prompt
notice to the other parties of any notice or other communication from any third
party alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement.
SECTION 4.11 Insurance. AI and ENB shall use best efforts to retain
---------
no less than the level of insurance coverage presently held by them as of the
date hereof.
SECTION 4.12 Dividends. AI shall not declare, pay or set aside any
---------
dividend or other distribution in respect of its capital stock.
SECTION 4.13 Indemnification.
---------------
(a) From and after the Effective Time through the second anniversary
of the Effective Date, SBI agrees to indemnify and hold harmless each present
and former director and officer of AI or its Subsidiaries and each officer or
employee of AI or its Subsidiaries that is serving as a director or trustee of
another entity expressly at AI's request or direction (each, an "Indemnified
Party"), against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively, the
"Costs") incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, and
whether or not the Indemnified Party is a party thereto, arising out of matters
existing or occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement), whether asserted or claimed prior
to, at or after the Effective Time, to the fullest extent permitted under the AI
Certificate, the charter of ENB or the bylaws of either in effect on the date
hereof.
(b) Any Indemnified Party wishing to claim indemnification under
Section 4.13(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify SBI thereof, but the failure to so notify
shall not relieve SBI of any liability it may have hereunder to such Indemnified
Party if such failure does not materially and substantially prejudice SBI. In
the event of any such claim, action, suit, proceeding or investigation, (i) SBI
shall have the right to assume the defense thereof with counsel reasonably
acceptable to the Indemnified Party and SBI shall not be liable to such
Indemnified Party for any legal expenses of other counsel subsequently incurred
by such Indemnified Party in connection with the defense thereof, except that if
SBI does not elect to assume such defense within a reasonable time or counsel
for the Indemnified Party
-25-
<PAGE>
at any time advises that there are issues which raise conflicts of interest
between SBI and the Indemnified Party, the Indemnified Party may retain counsel
satisfactory to such Indemnified Party, and SBI shall remain responsible for the
reasonable fees and expenses of such counsel as set forth above, promptly as
statements therefor are received; provided, however, that SBI shall be obligated
pursuant to this paragraph (b) to pay for only one firm of counsel for all
Indemnified Parties in any one jurisdiction with respect to any given claim,
action, suit, proceeding or investigation unless the use of one counsel for such
Indemnified Parties would present such counsel with a conflict of interest; (ii)
the Indemnified Party will reasonably cooperate in the defense of any such
matter and (iii) SBI shall not be liable for any settlement effected by an
Indemnified Party without its prior written consent, which consent may not be
withheld unless such settlement is unreasonable in light of such claims,
actions, suits, proceedings or investigations against, and defenses available
to, such Indemnified Party.
(c) In the event SBI or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of SBI assume
the obligations set forth in this Section 4.13.
(d) The provisions of this Section 4.13 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and their
respective heirs and representatives.
ARTICLE V. CONDITIONS TO CONSUMMATION
SECTION 5.1 Conditions to Closing. The respective obligations of the
---------------------
parties to effect the Merger and Bank Acquisition shall be subject to the
satisfaction or waiver prior to the Effective Time of the following conditions:
(a) The Agreement and the transactions described herein shall have
been approved by the requisite vote of the shareholders of SBI, subject to the
qualifications set forth in Section 4.9 hereof, and AI in accordance with
applicable law.
(b) All of the required approvals, consents or waivers with respect
to this Agreement (including both the Merger and the Bank Acquisition) and the
transactions described herein including, without limitation, the approvals,
notices to, consents or waivers of (i) the Board, (ii) the OCC, (iii) the
Pennsylvania Department of Banking, if applicable, (iv) the Commissioner of
Banking of the State of New Jersey, and (v) the New Jersey Department of
Environmental Protection and Energy, if applicable, (which, together with the AI
Regulatory Agencies and the SBI Regulatory Agencies, are the "Regulatory
Agencies") shall have been obtained and shall remain in full force and effect,
and all applicable statutory waiting periods (including without limitation all
applicable statutory waiting periods relating to the Merger and the Bank
Acquisition) shall have expired; and the parties shall have procured all other
regulatory approvals, consents or waivers of governmental authorities or other
persons that are necessary or appropriate to the consummation of the
transactions contemplated by this Agreement except those approvals, consents or
waivers, if any, for which failure to obtain would not, individually or in the
aggregate, have a Material Adverse Effect on SBI, AI or ENB (after giving effect
to the transactions described herein); provided, however, that no approval,
consent or waiver referred to in this Section 5.1(b) shall be deemed to have
been received if it shall include any condition or requirement that reasonably
would result in a Material Adverse Effect on SBI.
(c) All other requirements prescribed by law which are necessary to
the consummation of the transactions described in this Agreement shall have been
satisfied.
(d) No party hereto shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger, the Bank Acquisition or
-26-
<PAGE>
any other transaction described in this Agreement, and no litigation or
proceeding shall be pending against any of the parties herein or any of their
subsidiaries brought by any governmental agency including, without limitation,
the Regulatory Agencies seeking to prevent consummation of the transactions
described herein.
(e) No statute, rule, regulation, order, injunction or decree shall
have been enacted, entered, promulgated or enforced by any governmental
authority which prohibits, restricts or makes illegal consummation of the
Merger, the Bank Acquisition, or any other transaction described in this Plan.
(f) The Merger shall as of the date of the Closing meet the
requirements for pooling-of-interests accounting treatment under generally
accepted accounting principles and under the accounting rules of the SEC, and
SBI shall have received a letter from Coopers & Lybrand in form and substance
reasonably satisfactory to SBI as to the matters specified in this Section
5.1(f).
(g) The Registration Statement shall have been filed (the date of
which is referred to herein as the "Filing Date") by SBI with the SEC under the
Securities Act, and shall have been declared effective prior to the time the
Proxy Statement/Prospectus is first mailed to the shareholders of AI, and no
stop order with respect to the effectiveness of the Registration Statement shall
have been issued; the SBI Common Stock to be issued pursuant to this Agreement
shall be duly registered or qualified under the securities or "blue sky" laws of
all states in which such action is required for purposes of the initial issuance
of such shares and the distribution thereof to the shareholders of AI entitled
to receive such shares.
(h) SBI shall have received a ruling from the Internal Revenue
Service (the "IRS") or an opinion of Morgan, Lewis & Bockius LLP, counsel to SBI
and SBI Merger Sub, to the effect that:
i. The Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and AI and SBI will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code;
ii. No gain or loss will be recognized by AI or SBI by reason
of the Merger;
iii. Except for cash received in lieu of fractional shares, no
gain or loss will be recognized by the shareholders of AI who receive solely SBI
Common Stock upon the exchange of their shares of AI Common Stock for shares of
SBI Common Stock;
iv. The basis of the SBI Common Stock to be received by the AI
shareholders will be, in each instance, the same as the basis of the AI Common
Stock surrendered in exchange therefor;
v. The holding period of the SBI Common Stock received by an
AI shareholder receiving SBI Common Stock will include the period during which
the AI Common Stock surrendered in exchange therefor was held; and
vi. Cash received by an AI shareholder in lieu of a fractional
share interest of SBI Common Stock will be treated as having been received as a
distribution in full payment in exchange for the fractional share interest of
SBI Common Stock which he, she or it would otherwise be entitled to receive and
will qualify as capital gain or loss.
In case a ruling from the IRS is sought, AI and SBI shall
cooperate and each shall furnish to the other and to the IRS such information
and representations as shall, in the opinion of counsel for SBI and AI, be
necessary or advisable to obtain such ruling.
-27-
<PAGE>
(i) All litigation pending against AI or ENB which, individually or
in the aggregate, would have a Material Adverse Effect on AI's consolidated
operations, shall have been settled or otherwise resolved on terms reasonably
satisfactory to SBI, AI and ENB.
(j) INTENTIONALLY OMITTED.
SECTION 5.2 Conditions to Obligations of SBI and SBI Merger Sub. The
---------------------------------------------------
obligations of SBI and SBI Merger Sub to effect the Merger and Bank Acquisition
shall be subject to the satisfaction or waiver prior to the Effective Time of
the following additional conditions:
(a) Each of the representations and warranties of AI and ENB
contained in this Agreement shall be true and correct in all material respects
as of the Effective Date as if made on such date (or on the date when made in
the case of any representation or warranty which specifically relates to an
earlier date); each of AI and ENB shall have performed each of its covenants and
agreements, which are material to its operations and prospects, contained in
this Agreement; and SBI and SBI Merger Sub shall have received certificates
signed by the Chief Executive Officer and the Controller of ENB and the
President and the Treasurer of AI, dated the Effective Date, to the foregoing
effect.
(b) Arthur Andersen LLP or such other accounting firm as is
acceptable to the parties, shall have furnished to SBI (i) a "cold comfort"
letter, dated the date of the mailing of the notice of the AI Meeting, which
letter shall be in customary form, reasonably acceptable to SBI, and (ii) a
letter, dated the Effective Date, in form and substance satisfactory to SBI to
the effect that, based upon a subsequent event review performed with respect to
the financial condition of AI and ENB, and affiliates, for the period from
December 31, 1995 to a specified date not more than five (5) days prior to the
date of such letter, including but not limited to (a) their inspection of the
minute books of AI, ENB and their affiliates, (b) inquiries made by them of
officers and other employees of AI, ENB and their affiliates responsible for
financial and accounting matters as to transactions and events during the
period, as to consistency of accounting procedures with prior periods and as to
the existence and disclosure of any material contingent liabilities, and (c) of
other specified procedures and inquiries performed by them, nothing has come to
their attention that would indicate that (A) during the period from December 31,
1995 to a specified date not more than five (5) days prior to the date of such
letter, there was any change in the capitalization of AI or ENB on a
consolidated basis, or (B) any material adjustments would be required to be made
to the audited financial statements for the period ended December 31, 1995 in
order for them to be in conformity with generally accepted accounting principles
applied on a consistent basis with that of prior periods.
(c) SBI shall have received an opinion or opinions dated as of the
Effective Date, from Ballard Spahr Andrews & Ingersoll, in a form reasonably
acceptable to SBI.
(d) There shall not have occurred any change in the financial
condition, properties, assets, business or results of operation of AI or ENB
which, individually or in the aggregate, has had or might reasonably be expected
to result in a Material Adverse Effect on AI or ENB other than such changes
resulting from (i) changes in banking laws or regulations, or (ii) changes in
generally accepted accounting principles, or interpretations thereof, that
affect the banking industry.
(e) SBI shall have received from each of the persons identified by
AI pursuant to Section 4.2 hereof an executed counterpart of an affiliate's
agreement in the form contemplated by such Section.
(f) Prior to Closing, all issued and outstanding options, warrants
or rights to acquire AI Common Stock or any capital stock of ENB ("ENB Common
Stock") shall have been cancelled, and no compensation or other rights will be
payable or exchangeable in the Merger and Bank Acquisition in respect of any
such rights which remain unexercised at the Effective Time.
-28-
<PAGE>
SECTION 5.3 Conditions to the Obligations of AI and ENB. The
-------------------------------------------
obligations of AI to effect the Merger and Bank Acquisition shall be subject to
the satisfaction or waiver prior to the Effective Time of the following
additional conditions:
(a) Each of the representations, warranties and covenants of SBI
contained in this Agreement shall be true and correct in all material respects
on the Effective Date as if made on such date (or on the date when made in the
case of any representation or warranty which specifically relates to an earlier
date); SBI shall have performed each of its covenants and agreements, which are
material to its operations and prospects, contained in this Agreement; and AI
shall have received certificates signed by the President or Vice President and
Secretary, as well as the Chief Financial Officer of SBI, dated the Effective
Date, to the foregoing effect.
(b) AI shall have received an opinion dated as of the Effective
Date, from Morgan, Lewis & Bockius LLP, Harrisburg, Pennsylvania, counsel to SBI
and SBI Merger Sub, in a form reasonably acceptable to AI.
(c) There shall not have occurred any change in the financial
condition, properties, assets, business or results of operation of SBI which,
individually or in the aggregate, has had or might reasonably be expected to
result in a Material Adverse Effect on SBI.
(d) AI shall have received an updated opinion from Janney Montgomery
Scott Inc., dated as of a date no later than the date of the Proxy
Statement/Prospectus mailed to the AI shareholders in connection with the Merger
and not subsequently withdrawn, to the effect that the Merger Consideration is
fair to AI's shareholders from a financial point of view.
(e) The shares of SBI Common Stock to be issued in the Merger shall
have been authorized to be listed for quotation on The Nasdaq Stock Market.
(f) A certificate for the required number of whole shares of the SBI
Common Stock, as determined in accordance with Section 1.2 and Schedule 1.2, and
cash payable for the fractional shares interests shall have been delivered to
Farmers First Bank, as Exchange Agent.
ARTICLE VI. TERMINATION
SECTION 6.1 Termination. This Agreement may be terminated, and the
-----------
Merger and the Bank Acquisition abandoned, prior to the Effective Date, either
before or after its approval by the shareholders of SBI and AI:
(a) by the mutual, written consent of AI and SBI if the board of
directors of each so determines by a vote of a majority of the members of the
entire board;
(b) by AI if (i) by written notice to SBI that there has been a
material breach by SBI of any representation, warranty, covenant or agreement
contained herein and such breach is not cured or not curable within thirty (30)
days after written notice of such breach is given to SBI by AI, (ii) by written
notice to SBI that any condition precedent to AI's obligations as set forth in
Article V of this Agreement has not been met or waived by AI at such time as
such condition can no longer be satisfied, (iii) the Board of Directors of AI
fails to make, withdraws or modifies or changes the favorable recommendation
described at Section 4.2 or (iv) the Board of Directors of AI recommends to the
stockholders of AI that an Acquisition Proposal is likely to be more favorable,
from a financial point of view, to the stockholders of AI than the Merger;
-29-
<PAGE>
(c) by SBI by written notice to the other parties, in the event (i)
of a material breach by AI or ENB of any representation, warranty, covenant or
agreement contained herein and such breach is not cured or not curable within
thirty (30) days after written notice of such breach is given to AI by SBI or
(ii) any condition precedent to SBI's obligations as set forth in Article V of
this Agreement has not been met or waived by SBI at such time as such condition
can no longer be satisfied;
(d) by AI, whether before or after approval of the Merger by the AI
stockholders, by giving written notice of such election to SBI within two (2)
business days following a determination that the Average Closing Price Per Share
of SBI Common Stock Before Closing is less than $25.00 per share (subject to
adjustment in accordance with Section 1.2(c) herein) at the time such
calculation is required to be made pursuant to Schedule 1.2 hereof.
(e) by SBI, whether before or after approval of the Merger by the
SBI shareholders, if it chooses to give written notice of the election described
in Schedule 1.2 to AI, but if at all, within two (2) business days following a
determination that the Average Closing Price Per Share of SBI Common Stock
Before Closing is greater than $31.00 per share (subject to adjustment in
accordance with Section 1.2(c) herein at the time such calculation is required
to be made pursuant to Schedule 1.2 hereof.
(f) by SBI or AI by written notice to the other, in the event that
the Merger and Bank Acquisition are not consummated by March 31, 1997, unless
the failure to so consummate by such time is due to the breach of any
representation, warranty or covenant contained in this Agreement by the party
seeking to terminate; provided, however, that such date may be extended by the
written agreement of the parties hereto.
SECTION 6.2 Effect of Termination. In the event of the termination
---------------------
of this Agreement, as provided above, this Agreement shall thereafter become
void and have no effect, except that the provisions of Sections 3.1(p) and
3.2(n) (Fees), 4.4 (relating to confidentiality and return of documents), 4.8
(Publicity) and 6.3 and 7.7 (Expenses) of this Agreement shall survive any such
termination and abandonment.
SECTION 6.3 Expenses. Any termination of this Agreement pursuant to
--------
Section 6.1(a) hereof shall be without cost, expense or liability on the part of
any party to the others. Subject to the provisions of the following paragraph,
any termination of this Agreement pursuant to Section 6.1(b)(i), (ii) or (iii)
or 6.1(c) hereof shall also be without cost, liability or expense on the part of
any party to the others, unless the breach of a representation or warranty or
covenant is caused by the willful conduct or gross negligence of a party, in
which event said party shall be liable to the other parties for all out-of-
pocket costs and expenses, including without limitation, reasonable legal,
accounting and investment banking fees and expenses, incurred by such other
party in connection with their entering into this Agreement and their carrying
out of any and all acts contemplated hereunder ("Expenses").
So long as SBI shall not have breached its obligations hereunder, if
this Agreement is terminated by AI pursuant to clause (iv) of Section 6.1(b)
hereof or if the Board of Directors of AI fails to make, withdraws or modifies
or changes the favorable recommendation described at Section 4.2 on a basis
other than a material adverse change in SBI, AI shall promptly, but in no event
later than two (2) business days after such termination, pay SBI a fee of
$500,000 which amount shall be payable by wire transfer of same day funds. If
AI fails to promptly pay the amount due pursuant to this Section 6.3, and, in
order to obtain such payment, SBI commences a suit which results in a judgment
against AI for all or a substantial portion of the fee set forth in this Section
6.3, AI shall pay to SBI its costs and expenses (including reasonable attorneys'
fees) in connection with such suit.
-30-
<PAGE>
ARTICLE VII. OTHER MATTERS
SECTION 7.1 Certain Definitions; Interpretation. As used in this
-----------------------------------
Agreement, the following terms shall have the meanings indicated:
"knowledge," with respect to a person, means actual knowledge without
independent investigation beyond such investigation as would be appropriate
to such person's office and position, and as to a person which is a
corporation, means the knowledge of such person's senior management.
"material" means material to the party in question (as the case may
be) and its respective subsidiaries, taken as a whole.
"Material Adverse Effect," with respect to a person, means any
condition, event, change or occurrence that has or results in a material
adverse effect upon (A) the financial condition, properties, assets,
business or results of operations of such person and its subsidiaries,
taken as a whole, or (B) the ability of such person to perform its
obligations under, and to consummate the transactions contemplated by, this
Agreement. In the case of ENB, receipt of a CAMEL rating in connection
with a safety and soundness examination which is lower than the rating
given to ENB in connection with the safety and soundness examination most
recently reported prior to the date of this Agreement shall be deemed to
have a "Material Adverse Effect" on ENB.
"person" includes an individual, corporation, partnership,
association, trust or unincorporated organization.
"senior management" of a person which is a corporation means such
person's executive officers.
"subsidiary," with respect to a person, means any other person
controlled by such person.
When a reference is made in this Agreement to Sections, Annexes or Schedules,
such reference shall be to a Section of, or Annex or Schedule to, this Agreement
unless otherwise indicated. The table of contents, tie sheet and headings
contained in this Agreement are for ease of reference only and shall not affect
the meaning or interpretation of this Agreement. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation". Any singular term in this Agreement
shall be deemed to include the plural, and any plural term the singular.
SECTION 7.2 Survival. The representations, warranties and agreements
--------
of the parties set forth in this Agreement shall not survive the Effective Time,
and shall be terminated and extinguished at the Effective Time, and from and
after the Effective Time none of the parties hereto shall have any liability to
the other on account of any breach or failure of any of those representations,
warranties and agreement; provided, however, that the foregoing clause shall not
-------- -------
(i) apply to agreements of the parties which by their terms are intended to be
performed either in whole or in part after the Effective Time, and (ii) shall
not relieve any person of liability for fraud, deception or intentional
misrepresentation.
SECTION 7.3 Parties in Interest. This Agreement shall be binding
-------------------
upon and inure solely to the benefit of each party hereto and their respective
successors and assigns, and, other than the right to receive the consideration
payable in the Merger pursuant to Article I hereof, is not intended to and shall
not confer upon any other person any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement.
-31-
<PAGE>
SECTION 7.4 Waiver and Amendment. Prior to the Effective Time, any
--------------------
provision of this Agreement may be: (i) waived by the party benefitted by the
provision; or (ii) amended or modified at any time (including the structure of
the transaction) by an agreement in writing between the parties hereto approved
by their respective boards of directors, except that no amendment or waiver may
be made that would change the form or the amount of the Merger Consideration or
otherwise have the effect of prejudicing the AI shareholders' interest in the
Merger Consideration following the AI Meeting.
SECTION 7.5 Counterparts. This Agreement may be executed in
------------
counterparts each of which shall be deemed to constitute an original, but all of
which together shall constitute one and the same instrument.
SECTION 7.6 Governing Law. This Agreement shall be governed by, and
-------------
interpreted in accordance with, the laws of the Commonwealth of Pennsylvania,
or, to the extent it may control, federal law, without reference to the choice
of law principles thereof.
SECTION 7.7 Expenses. Subject to the provisions of Section 6.3
--------
hereof, each party hereto will bear all expenses incurred by it in connection
with this Agreement and the transactions described herein; provided, however,
that all filing and other fees (other than federal and state income taxes)
required to be paid to any governmental agency or authority in connection with
the consummation of the transactions described herein shall be paid by SBI.
SECTION 7.8 Notices. All notices, requests, acknowledgments and
-------
other communications hereunder to a party shall be in writing and shall be
deemed to have been duly given when delivered by hand, telecopy, telegram or
telex (confirmed in writing) to such party at its address set forth below or
such other address as such party may specify by notice to the other party
hereto.
If to AI, to:
Atcorp, Inc.
Sagemore Corporate Center
Route 73 and Marlton Parkway
Marlton, NJ 08053
Attention: Marc L. Reitzes
With copies to:
Ballard Spahr Andrews & Ingersoll
1735 Market Street
51st Floor
Philadelphia, PA 17103-7599
Attention: Justin P. Klein, Esquire
If to ENB, to:
Equity National Bank
Sagemore Corporate Center
Route 73 and Marlton Parkway
Marlton, NJ 08053
Attention: Marc L. Reitzes
-32-
<PAGE>
With copies to:
Ballard Spahr Andrews & Ingersoll
1735 Market Street
51st Floor
Philadelphia, PA 17103-7599
Attention: Justin P. Klein, Esquire
If to SBI, to:
Susquehanna Bancshares, Inc.
26 North Cedar Street
Lititz, PA 17543
Attention: Robert S. Bolinger, President
and Chief Executive Officer
With copies to:
Morgan, Lewis & Bockius LLP
One Commerce Square
417 Walnut Street
Harrisburg, PA 17101-1904
Attention: Charles L. O'Brien, Esquire
and Wendy L. Holden, Esquire
If to SBI Merger Sub, to:
Susquehanna Bancshares East, Inc.
c/o Susquehanna Bancshares, Inc.
26 North Cedar Street
Lititz, PA 17543
Attention: Robert S. Bolinger, President
and Chief Executive Officer
With copies to:
Morgan, Lewis & Bockius LLP
One Commerce Square
417 Walnut Street
Harrisburg, PA 17101-1904
Attention: Charles L. O'Brien, Esquire
and Wendy L. Holden, Esquire
SECTION 7.9 Entire Agreement; Etc. This Agreement, together with
---------------------
such other agreements as are executed by the parties in connection herewith, on
the date hereof, represent the entire understanding of the parties hereto with
reference to the transactions described herein and supersede any and all other
oral or written agreements heretofore made, including, without limitation, the
Confidentiality Agreement. All terms and provisions of this Agreement, together
with such other agreements as are executed by the parties in connection
herewith, on the date hereof, shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
Nothing in this Agreement is intended to confer upon any other person any rights
or remedies of any nature whatsoever under or by reason of this Agreement except
as expressly provided.
-33-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Plan to be
executed by their duly authorized officers as of the day and year first above
written.
SUSQUEHANNA BANCSHARES, INC.
By: /s/ Robert S. Bolinger
--------------------------------
Title: President and CEO
SUSQUEHANNA BANCSHARES EAST, INC.
By: /s/ Wendy L. Holden
------------------------------
Title: Incorporator
ATCORP, INC.
By: /s/ Marc Reitzes
---------------------------------
Title: Chairman and CEO
EQUITY NATIONAL BANK
By: /s/ Marc Reitzes
---------------------------------
Title: Chairman and CEO
-34-
<PAGE>
SCHEDULE 1.2
Exchange Provisions
-------------------
So long as the Average Price Per Share of SBI Common Stock Before
Closing is between $25.00 and $31.00, then, 771,750 shares of SBI Common Stock
shall be exchanged for all of the outstanding AI Common Stock. In the event the
date set forth in Section 7.1(f) is extended beyond the record date set for
SBI's second quarterly dividend for 1997 and if the Effective Time has not
occurred prior to or on such record date (for SBI's second quarterly dividend of
1997), then AI shall receive 776,750 shares of SBI Common Stock rather than
771,750 shares of SBI Common Stock.
The Average Price Per Share of SBI Common Stock Before Closing shall
be determined by adding the price at which SBI Common Stock is reported to have
closed by The Nasdaq Stock Market (or if SBI Common Stock is not quoted on The
Nasdaq Stock Market then as reported by a recognized source as to the principal
trading market on which such shares are traded) over the period of ten business
days ending on the second business day preceding the date set for Closing,
pursuant to Section 1.1(b) hereof, and dividing such total by 10 (such Average
Price Per Share Before Closing is also referred to as the "Average Closing
Price").
The Exchange Ratio will be determined by dividing the total number of
shares of SBI Common Stock to be issued as provided above (subject to adjustment
in accordance with Section 1.2(c) hereof), by the total number of shares of AI
Common Stock outstanding on the Effective Date.
AI shall have the right to terminate this Agreement, in accordance
with Section 6.1(d), if the Average Price Per Share of SBI Common Stock Before
Closing is less than $25.00 (subject to adjustment in accordance with Section
1.2(c) herein). SBI shall have the right to terminate this Agreement, in
accordance with Section 6.1(e), if the Average Price Per Share of SBI Common
Stock Before Closing is greater than $31.00 (subject to adjustment in accordance
with Section 1.2(c) herein); provided, however, if such price is greater than
$31.00 (subject to adjustment in accordance with Section 1.2(c) herein) and SBI
does not exercise its termination right pursuant to Section 6.1(e), then all of
the shares of AI shall be exchanged for the number of shares of SBI Common Stock
as though the Average Price Per Share of SBI Common Stock Before Closing had
been $31.00.
<PAGE>
EXHIBIT 2B
<PAGE>
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF AFFILIATION
DATED AS OF THE 18th DAY OF JULY, 1996
BY AND AMONG
SUSQUEHANNA BANCSHARES, INC.,
SUSQUEHANNA BANCSHARES EAST II, INC.,
FARMERS BANC CORP.
AND
FARMERS NATIONAL BANK
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page(s)
ARTICLE I. THE PLAN OF MERGER.............................................. 1
SECTION 1.1 The Merger and Bank Acquisition; Closing; Effective Time.. 1
SECTION 1.2 Effect on Outstanding Shares.............................. 2
SECTION 1.3 Surrender and Exchange of FBC Certificates................ 2
SECTION 1.4 Dissenters' Rights........................................ 3
SECTION 1.5 Other Matters............................................. 3
ARTICLE II. CONDUCT PENDING THE MERGER AND BANK ACQUISITION................ 4
SECTION 2.1 Conduct of FBC's and FNB's Businesses Prior to the
Effective Time............................................ 4
SECTION 2.2 Forbearance by FBC or FNB................................. 4
SECTION 2.3 Cooperation............................................... 5
SECTION 2.4 Conduct of SBI's Business Prior to the Effective Time..... 5
ARTICLE III. REPRESENTATIONS AND WARRANTIES................................ 5
SECTION 3.1 Representations and Warranties of FBC and FNB............. 5
SECTION 3.2 Representations and Warranties of SBI and its Material
Subsidiaries.......................................................... 16
ARTICLE IV. COVENANTS...................................................... 20
SECTION 4.1 Acquisition Proposals..................................... 20
SECTION 4.2 Securities Registration and Disclosure.................... 20
SECTION 4.3 Employees................................................. 21
SECTION 4.4 Access and Information.................................... 22
SECTION 4.5 Certain Filings, Consents and Arrangements................ 23
SECTION 4.6 Takeover Statutes......................................... 24
SECTION 4.7 Additional Agreements..................................... 24
SECTION 4.8 Publicity 24
SECTION 4.9 Shareholder's Meeting..................................... 24
SECTION 4.10 Notification of Certain Matters........................... 24
SECTION 4.11 Insurance................................................. 25
SECTION 4.12 Dividends................................................. 25
SECTION 4.13 Indemnification........................................... 25
ARTICLE V. CONDITIONS TO CONSUMMATION...................................... 26
SECTION 5.1 Conditions to Closing..................................... 26
SECTION 5.2 Conditions to Obligations of SBI and SBI Merger Sub II.... 27
SECTION 5.3 Conditions to the Obligations of FBC and FNB.............. 28
ARTICLE VI. TERMINATION.................................................... 29
SECTION 6.1 Termination............................................... 29
SECTION 6.2 Effect of Termination..................................... 29
SECTION 6.3 Expenses 30
-i-
<PAGE>
ARTICLE VII. OTHER MATTERS 30
SECTION 7.1 Certain Definitions; Interpretation....................... 30
SECTION 7.2 Survival 30
SECTION 7.3 Parties in Interest 31
SECTION 7.4 Waiver and Amendment...................................... 31
SECTION 7.5 Counterparts.............................................. 31
SECTION 7.6 Governing Law............................................. 31
SECTION 7.7 Expenses 31
SECTION 7.8 Notices 31
SECTION 7.9 Entire Agreement; Etc..................................... 32
-ii-
<PAGE>
AGREEMENT AND PLAN OF AFFILIATION dated as of the 18th day of July,
1996 (this "Plan" or this "Agreement"), by and among Susquehanna Bancshares,
Inc., a Pennsylvania corporation ("SBI"), Susquehanna Bancshares East II, Inc.,
a New Jersey corporation ("SBI Merger Sub II"), Farmers Banc Corp., a New Jersey
corporation ("FBC"), and Farmers National Bank, a national banking association
("FNB").
RECITALS:
WHEREAS, the boards of directors of SBI, SBI Merger Sub II and FBC
have each determined that it is in the best interests of their respective
shareholders for SBI to acquire FBC and FNB by means of a merger of SBI Merger
Sub II with and into FBC (the "Merger") as a result of which FBC will become a
direct wholly-owned subsidiary of SBI and FNB will become a second-tier
subsidiary of SBI (the "Bank Acquisition"), all upon the terms and subject to
the conditions set forth herein; and
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement and to
set forth the conditions to the Merger and the Bank Acquisition; and
WHEREAS, FBC and SBI desire to merge in the manner provided for herein
and to adopt this Agreement as a plan of reorganization and to consummate such
plan in accordance with the provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of their mutual promises and
obligations hereunder, the parties hereto adopt and make this Agreement and
prescribe the terms and conditions hereof and the manner and basis of carrying
it into effect, which shall be as follows:
ARTICLE I. THE PLAN OF MERGER
SECTION 1.1 The Merger and Bank Acquisition; Closing; Effective Time.
--------------------------------------------------------
(a) Subject to the terms and conditions of this Agreement and in
accordance with the applicable laws of the State of New Jersey at the Effective
Time (as defined in Section 1.1(c)), SBI Merger Sub II shall be merged with and
into FBC and the separate corporate existence of SBI Merger Sub II shall
thereupon cease. FBC shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of New Jersey and shall
continue to be a registered bank holding company under the Bank Holding Company
Act of 1956, as amended, and the separate corporate existence of FBC with all
its rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger. The name of the Surviving Corporation shall be
"Susquehanna Bancshares East II, Inc." The Merger shall have the effects
specified in the New Jersey Business Corporation Act, as amended ("NJBCA").
(b) The closing of the Merger and the Bank Acquisition (the
"Closing") shall take place contemporaneously at such place and time and on such
date, following three (3) business days' notice to FBC, as shall be agreed upon
by all parties, which date shall not be later than the 22nd business day after
(i) the last approval required of any of the Regulatory Agencies (as defined at
Section 5.1(b)) is granted and any related waiting periods expire, (ii) the
lifting, discharge or dismissal of any stay of any such governmental approval or
of any injunction against the Merger or the Bank Acquisition and (iii) all
shareholder approvals required by the parties hereunder are received.
(c) Immediately following the Closing, and provided that this
Agreement has not been terminated or abandoned pursuant to Article VI hereof,
SBI Merger Sub II and FBC will cause a certificate of merger ("Certificate of
Merger") to be properly prepared and completed and filed with the Secretary of
State of
<PAGE>
New Jersey. The Merger shall become effective at 12:01 a.m. on the day
following the day on which the Certificate of Merger has been duly filed and
accepted by the Secretary of State of New Jersey (the "Effective Time"). The
"Effective Date" when used herein means the day on which the Effective Time for
the Merger occurs.
(d) At the Effective Time, the certificate of incorporation and
bylaws of SBI Merger Sub II in effect immediately prior to the Effective Time
shall continue as the certificate and bylaws of the Surviving Corporation. At
the Effective Time, the directors and officers of SBI Merger Sub II immediately
prior to the Effective Time shall be and become the directors and officers of
the Surviving Corporation.
SECTION 1.2 Effect on Outstanding Shares.
----------------------------
(a) At the Effective Time, by virtue of the Merger, automatically
and without any action on the part of the holder thereof, subject to the
provisions of Section 1.3 hereof with respect to the payment of fractional
shares in cash and Section 1.4 hereof with respect to dissenters' rights, if
any, each share of common stock, par value $.83 per share, of FBC (the "FBC
Common Stock") issued and outstanding at the Effective Time (other than (i)
shares the holders of which (each a "Dissenting Stockholder") are exercising
appraisal rights pursuant to the NJBCA (the "Dissenters' Shares"), if any, and
(ii) shares held directly or indirectly by SBI, other than shares held in a
fiduciary capacity or in satisfaction of a debt previously contracted) shall
become and be converted into the right to receive shares of Common Stock par
value $2.00 per share, of SBI ("SBI Common Stock") determined in conformity with
the Exchange Ratio set forth at Schedule 1.2 hereof (such SBI Common Stock,
determined on the basis of the Exchange Ratio, as to each FBC shareholder and,
collectively, to all FBC shareholders is the "Merger Consideration"). As of the
Effective Time, each share of FBC Common Stock held directly or indirectly by
SBI, other than shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted, shall be cancelled and retired and cease to exist, and no
exchange or payment shall be made with respect thereto.
(b) The shares of common stock of SBI Merger Sub II issued and
outstanding immediately prior to the Effective Time, by virtue of and after the
Merger, shall be converted into and thereafter constitute the issued and
outstanding shares of the capital stock of the Surviving Corporation.
(c) If prior to the Effective Time, the outstanding shares of SBI
Common Stock shall have been increased, decreased, changed into or exchanged for
a different number or kind of shares or securities through a reclassification,
stock dividend, stock split or reverse stock split, or other similar change,
appropriate adjustment shall be made to the Exchange Ratio.
SECTION 1.3 Surrender and Exchange of FBC Certificates.
------------------------------------------
(a) Within five (5) business days after the Effective Time, SBI
shall cause to be sent to each person who immediately prior to the Effective
Time was a holder of record of FBC Common Stock transmittal materials and
instructions for surrendering certificates for FBC Common Stock ("Old
Certificates") in exchange for a certificate for the number of whole shares of
SBI Common Stock to which such person is entitled under Section 1.2 hereof.
(b) No certificates for fractional shares of SBI Common Stock shall
be issued in connection with the Merger. In lieu thereof, SBI shall issue to any
holder of FBC Common Stock certificates otherwise entitled to a fractional
share, upon surrender of such certificates in accordance with the instructions
furnished by SBI, a check for an amount of cash equal to the fraction of a share
of SBI Common Stock represented by the certificates so surrendered multiplied by
the Average Price Per Share of SBI Common Stock Before Closing as determined in
conformity with Schedule 1.2.
-2-
<PAGE>
(c) If the record date of any dividend on SBI Common Stock occurs
after the Effective Time, the declaration shall include dividends on all whole
shares of SBI Common Stock into which shares of FBC Common Stock have been or
will be converted under this Agreement, but no former holder of FBC Common Stock
shall be entitled to receive payment of any such dividend until surrender of the
shareholder's Old Certificates shall have been effected in accordance with the
instructions furnished by SBI. Upon surrender for exchange of a shareholder's
Old Certificates, such shareholder shall be entitled to receive from SBI an
amount equal to all such dividends, without interest thereon and less the amount
of taxes, if any, which may have been imposed or paid thereon, declared, and for
which the payment date has occurred, on the whole shares of SBI Common Stock
into which the shares represented by such Old Certificates have been converted.
(d) After the Effective Time, there shall be no transfer on the
stock transfer books of FBC or SBI of shares of FBC Common Stock. If Old
Certificates are presented for transfer after the Effective Time, they shall be
cancelled and certificates representing whole shares of SBI Common Stock (and a
check in lieu of any fractional share) shall be issued in exchange therefor as
provided herein.
(e) In the event that any Old Certificates have not been surrendered
for exchange in accordance with this Section on or before the second anniversary
of the Effective Time, SBI may at any time thereafter, with or without notice to
the holders of record of such Old Certificates, sell for the accounts of any or
all of such holders any or all of the shares of SBI Common Stock which such
holders are entitled to receive under Section 1.2 hereof (the "Unclaimed
Shares"). Any such sale may be made by public or private sale or sale at any
broker's board or on any securities exchange in such manner and at such times as
SBI shall determine. If, in the opinion of counsel for SBI, it is necessary or
desirable, any Unclaimed Shares may be registered for sale under the Securities
Act of 1933, as amended (the "Securities Act") and applicable state laws. SBI
shall not be obligated to make any sale of Unclaimed Shares if it shall
determine not to do so, even if notice of sale of the Unclaimed Shares has been
given. The net proceeds of any such sale of Unclaimed Shares shall be held for
holders of the unsurrendered Old Certificates whose Unclaimed Shares have been
sold, to be paid to them upon surrender of the Old Certificates. From and after
any such sale, the sole right of the holders of the unsurrendered Old
Certificates whose Unclaimed Shares have been sold shall be the right to collect
the net sale proceeds held by SBI for their respective accounts, and such
holders shall not be entitled to receive any interest on such net sale proceeds
held by SBI.
(f) If outstanding certificates for shares of FBC Common Stock are
not surrendered prior to the date on which such certificates would otherwise
escheat to or become the property of any governmental unit or agency, the
unclaimed items shall, to the extent permitted by abandoned property and any
other applicable law, become the property of SBI (and to the extent not in its
possession shall be paid over to it), free and clear of all claims or interest
of any person previously entitled to such claims. Notwithstanding the foregoing,
neither SBI nor its agents or any other person shall be liable to any former
holder of FBC Common Stock for any property delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(g) In the event any Old Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Old Certificate to be lost, stolen or destroyed and, if required by SBI,
the posting by such person of a bond in such amount as SBI may direct as
indemnity against any claim that may be made against it with respect to such Old
Certificate, SBI will issue in exchange for such lost, stolen or destroyed Old
Certificate, the shares of SBI Common Stock into which the FBC Common Stock
represented by such Old Certificate has been converted pursuant to this
Agreement.
SECTION 1.4 Dissenters' Rights. In accordance with the provisions of
------------------
Section 14A:11-1 of the NJBCA, the FBC Shareholders are not entitled to
Dissenters' Rights.
SECTION 1.5 Other Matters. Notwithstanding any term of this
-------------
Agreement to the contrary, SBI may, in its discretion at any time prior to the
Effective Time, designate a direct or indirect wholly-owned
-3-
<PAGE>
subsidiary to substitute for SBI Merger Sub II as a constituent corporation in
the Merger by written notice to FBC so long as the exercise of this right does
not materially adversely affect the interests of the FBC shareholders, or cause
a material delay in consummation of the transactions contemplated herein. SBI
shall also have the right to cause SBI Merger Sub II or such substitute, to be
the surviving corporation of the Merger, so long as the exercise of such right
does not have a material adverse effect on the interests of the holders of the
capital stock of FBC, or cause a material delay in, or otherwise adversely
affect, consummation of the transactions described herein; if such right is
exercised, and such substitute corporation is organized under the laws of
another state, this Agreement shall be deemed to be modified to accord such
change, including, without limitation, that the laws of such other state,
together with the Laws of New Jersey, will govern in the Merger if such
substitute corporation shall be the survivor. Nothing in this Agreement shall
be deemed to restrict the ability of SBI or any of its subsidiaries to merge
with or with and into another entity so long as no such other transaction shall
materially adversely affect the parties' ability to consummate the Bank
Acquisition or cause a material delay in, or otherwise adversely affect,
consummation of the transactions contemplated herein.
ARTICLE II. CONDUCT PENDING THE MERGER AND BANK ACQUISITION
SECTION 2.1 Conduct of FBC's and FNB's Businesses Prior to the
--------------------------------------------------
Effective Time.
- --------------
Except as expressly provided in this Agreement, during the period from
the date of this Agreement to the Effective Time, FBC and FNB shall (and the
word "it" in this Article II refers to each of FBC, FNB, and each subsidiary of
either, as the case may be) (i) conduct its business in the usual, regular and
ordinary course consistent with past practice, (ii) maintain and preserve intact
in all material respects its business organization, assets, leases, properties,
investment securities, employees and advantageous business relationships and use
its reasonable efforts to retain the services of its officers and key employees,
(iii) not knowingly take any action which would materially adversely affect or
delay its ability to obtain any necessary approvals, consents or waivers of any
governmental authority required for the transactions described herein or to
perform its covenants and agreements on a timely basis under this Agreement, and
(iv) not knowingly take any action that is reasonably likely to have a Material
Adverse Effect (as defined in Section 7.1 hereof) on FBC or FNB.
SECTION 2.2 Forbearance by FBC or FNB. During the period from the
-------------------------
date of this Agreement to the Effective Time, neither FBC nor FNB shall, without
the prior written consent of SBI, which consent shall not be unreasonably
withheld:
(a) other than in the ordinary course of business consistent with
past practice, make any advance or loan or incur any indebtedness for borrowed
money, assume, guarantee, endorse or otherwise as an accommodation become
responsible for, the obligations of any individual, corporation or other person.
(b) adjust, split, combine or reclassify any capital stock; make,
declare or pay any dividend other than the semiannual regular cash dividend and
special cash dividend referred to in Section 4.12 or make any distribution on,
or directly or indirectly redeem, purchase or otherwise acquire, any shares of
its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or grant any stock
appreciation rights or grant, sell or issue to any individual, corporation or
other person any shares of its capital stock or any right to acquire, or
securities evidencing a right to convert into or acquire any shares of its
capital stock, or issue any additional shares of capital stock;
(c) other than in the ordinary course of business consistent with
past practice and pursuant to policies, if any, currently in effect, sell,
transfer, mortgage, encumber or otherwise dispose of any of its properties,
leasehold interests or assets to any individual, corporation or other entity, or
cancel, release or assign any indebtedness of any such person or any contracts
or agreements as in force at the date of this Agreement;
(d) increase in any manner the compensation or fringe benefits of any
of its employees or pay any pension or retirement allowance not required by law
or by any existing plan or agreement to any such
-4-
<PAGE>
employees, or become a party to, amend or commit itself to any pension,
retirement, profit-sharing or welfare benefit plan or agreement or employment
agreement with or for the benefit of any employee, other than general increases
in compensation in the ordinary course of business consistent with past practice
not in excess of 4%, on an aggregated basis, in any 12-month period, and payment
of bonuses in the ordinary course, or voluntarily accelerate the vesting of any
other compensation or benefit;
(e) amend FNB's charter or the certificate of incorporation of FBC
(the "FBC Certificate"), or the bylaws of either, except as expressly
contemplated by this Agreement or required by law or regulation, in each case as
concurred in by its counsel;
(f) except as set forth in Annex 2.2(f) hereto, change its method of
accounting as in effect at December 31, 1995, except as required by changes in
generally accepted accounting principles or required by law or regulation, in
each case, as concurred in by its independent auditors; or
(g) permit or allow its direct or indirect ownership of the capital
stock of any subsidiary described in the annex hereto to be less than 100% of
their respective total capital stock.
SECTION 2.3 Cooperation. FBC and FNB each shall cooperate with SBI
-----------
and SBI Merger Sub II and SBI and SBI Merger Sub II each shall cooperate with
FBC and FNB in completing the transactions described herein and each shall not
take, cause to be taken or agree or make any commitment to take any action: (i)
that would cause any of the representations or warranties of it that are set
forth in Article III hereof not to be true and correct in all material respects,
or (ii) in the case of FBC or FNB, that is inconsistent with or prohibited by
Section 2.1 or Section 2.2.
SECTION 2.4 Conduct of SBI's Business Prior to the Effective Time.
-----------------------------------------------------
Except as expressly provided in this Agreement, during the period from the date
of this Agreement to the Effective Time, SBI shall not knowingly take any action
and shall not knowingly cause its Material Subsidiaries (as hereinafter defined)
to take any action which would materially adversely affect or delay its ability
to obtain any necessary approvals, consents or waivers of any governmental
authority required for the transactions described herein or that is reasonably
likely to have a Material Adverse Effect on SBI, on a consolidated basis.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of FBC and FNB. FBC and
---------------------------------------------
FNB represent and warrant to SBI and SBI Merger Sub II (and the word "it" in
this Article III refers to each of FBC, FNB, and each subsidiary of either, as
the case may be), that, except as specifically disclosed in the Annex of
disclosure schedules included herewith, to the best of its knowledge:
(a) Corporate Organization and Qualification. FBC is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of New Jersey and is in good standing as a foreign corporation in each
jurisdiction where the properties owned, leased or operated, or the business
conducted, by FBC requires such qualification, except for such failure to
qualify or be in such good standing which, when taken together with all other
such failures, would not have a Material Adverse Effect on FBC and its
subsidiaries, taken as a whole. FBC is a bank holding company duly registered
with the Board. FNB is a national banking association duly organized and in
good standing under the laws of the United States of America. FBC and FNB each
has the requisite corporate and other power and authority (including all
federal, state, local and foreign governmental authorizations) to carry on their
respective businesses as they are now being conducted and to own their
respective properties and assets. FBC has made available to SBI and SBI Merger
Sub II a complete and correct copy of the FBC Certificate and charter of FNB and
the bylaws of each, such charter or FBC Certificate as well as the bylaws of
each are in full force and effect as of the date hereof.
-5-
<PAGE>
(b) Authorized Capital. The authorized capital stock of FBC consists
of 500,000 shares of FBC Common Stock of which approximately 303,600 shares of
FBC Common Stock were issued and outstanding as of the date of this Agreement.
All of the outstanding capital stock of FNB is held by FBC. All of the
outstanding shares of capital stock of FBC and FNB have been duly authorized and
are validly issued, fully paid and nonassessable (except in the case of FNB, as
provided at 12 U.S.C.A. (S) 55). Neither FBC nor FNB has any shares of capital
stock reserved for issuance. Neither FBC nor FNB has any outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or convertible into or exercisable for securities having the right to
vote) with shareholders on any matter. The shares of FNB Common Stock owned by
FBC are owned free and clear of all liens, pledges, security interests, claims
or other encumbrances. The outstanding shares of capital stock of FBC and FNB
have not been issued in violation of any preemptive rights. There are no
outstanding subscriptions, options, warrants, rights, convertible securities or
other agreements or commitments of any character relating to the issued or
unissued capital stock or other securities of FBC or FNB. After the Effective
Time neither SBI nor SBI Merger Sub II will have any obligation to issue,
transfer or sell any shares of capital stock pursuant to any Employee Plan (as
defined in Section 3.1(m)).
(c) Subsidiaries. The only subsidiaries of FBC are as listed and
described at Annex 3.1(c). The only subsidiaries of FNB are listed and
described at Annex 3.1(c).
Each such subsidiary is duly organized and existing as a corporation,
is in good standing under the laws of the jurisdiction in which it was
organized, and has adequate corporate power to carry on its business as now
conducted. All of the outstanding capital stock of all such subsidiaries has
been validly issued, is fully paid and nonassessable (except in the case of FNB,
as provided at 12 U.S.C.A. (S) 55) and is owned by FBC or FNB, free and clear of
all liens, security interests and encumbrances. All such subsidiaries, other
than FNB, are organized under Delaware law and make no use of fictitious names
in the conduct of their respective businesses.
(d) Corporate Authority. Subject only to approval of this Agreement
by the holders of the number of votes required by the FBC Certificate or bylaws
of FBC cast by all holders of FBC Common Stock (without any minority, class or
series voting requirement), and, subject to the regulatory approvals specified
in Section 5.1(b) hereof, FBC and FNB each has the requisite corporate power and
authority, and legal right, and has taken all corporate action necessary in
order to execute and deliver this Agreement and to consummate the transactions
applicable to either FBC or FNB described herein. This Agreement has been duly
and validly executed and delivered by FBC and FNB and constitutes the valid and
binding obligations of FBC and FNB enforceable against each, in accordance with
its terms, except to the extent enforcement is limited by bankruptcy, insolvency
and other similar laws affecting creditors' rights or the application by a court
of equitable principles.
(e) No Violations. The execution, delivery and performance of this
Agreement by it does not, and the consummation of the transactions described
herein by it will not, constitute (i) subject to receipt of the required
regulatory approvals specified in Section 5.1(b), a breach or violation of, or a
default under, any law, rule or regulation or any judgment, decree, order,
governmental permit or license, to which it (or any of its respective
properties) is subject, which breach, violation or default would have a Material
Adverse Effect on it, or enable any person to enjoin the Merger or the Bank
Acquisition, (ii) a breach or violation of, or a default under, the FBC
Certificate or the charter of FNB or bylaws of either of them, (iii) a breach of
any duty owed by FBC to FNB, or any person holding an interest in FNB, or (iv)
except as disclosed in Annex 3.1(e), a breach or violation of, or a default
under (or an event which with due notice or lapse of time or both would
constitute a default under), or result in the termination of, accelerate the
performance required by, or result in the creation of any lien, pledge, security
interest, charge or other encumbrance upon any of the properties or assets of it
under any of the terms, conditions or provisions of any note, bond, indenture,
deed of trust, loan agreement or other agreement, instrument or obligation to
which it is a party, or to which any of their respective properties or assets
may be bound or affected, except for any of the foregoing that, individually or
in the aggregate, would not have a Material Adverse Effect on it or enable any
person to enjoin the Merger or the Bank Acquisition; and the
-6-
<PAGE>
consummation of the transactions described herein will not require any approval,
consent or waiver under any such law, rule, regulation, judgment, decree, order,
governmental permit or license or the approval, consent or waiver of any other
party to any such agreement, indenture or instrument, other than (i) the
required approvals, consents and waivers of governmental authorities referred to
in Section 5.1(b) and (ii) the approval of its shareholders referred to in
Section 3.1(d), (iii) any such approval, consent or waiver that already has been
obtained and (iv) any other approvals, consents or waivers, the absence of
which, individually or in the aggregate, would not result in a Material Adverse
Effect on it or enable any person to enjoin the Merger or the Bank Acquisition.
(f) Reports.
i. FBC's consolidated statement of financial condition as of
December 31, 1995 previously provided to SBI and each statement of financial
condition provided after the date hereof to SBI (including in each case any
related notes and schedules) as required by Section 4.4 hereof fairly presents
or will fairly present the financial position of it as of its date and each of
the consolidated statements of income and shareholders' equity and of cash flows
provided therewith (including in each case any related notes and schedules),
fairly presents or will fairly present the results of operations, stockholders'
equity and cash flows, as the case may be, of it for the periods set forth
therein (subject, in the case of unaudited interim statements, to normal year-
end audit adjustments that are not material in amount or effect), in each case
in accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein.
ii. Except as set forth in Annex 3.1(f), it has timely filed
all material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that it was required to file since
January 1, 1993 with (A) the Office of the Comptroller of the Currency (the
"OCC"), (B) the Federal Deposit Insurance Corporation (the "FDIC"), (C) the
Board of Governors of the Federal Reserve System (the "Board"), and (D) any
state banking commission or other regulatory authority (collectively, the
Regulatory Agencies listed in (A) through (D) are the "FBC Regulatory
Agencies"), and all other material reports and statements required to be filed
by it since January 1, 1993, including, without limitation, any report or
statement required to be filed pursuant to the laws, rules or regulations of the
United States or any FBC Regulatory Agency and has paid all fees and assessments
due and payable in connection therewith, and no such report, registration or
statement contains any material misstatement or omission or is otherwise in
material noncompliance with any law, regulation or requirement.
iii. FBC is not a reporting company registered under The
Securities Exchange Act of 1934, as amended.
(g) Absence of Certain Changes or Events. Since January 1, 1996, to
the date hereof, it has not incurred any material liability, except in the
ordinary course of its business consistent with past practice, nor has there
been any change in the financial condition, properties, assets, business,
results of operations or prospects of it which, individually or in the
aggregate, has had, or might reasonably be expected to result in, a Material
Adverse Effect on it.
(h) Taxes. Its federal income tax returns have been examined and
closed or otherwise closed by operation of law through December 31, 1993. All
federal, state, local and foreign tax returns required to be filed by it or on
its behalf have been timely filed or requests for extensions have been timely
filed and any such extension shall have been granted and not have expired, and,
to the knowledge of management, all such filed returns are complete and accurate
in all material respects. All taxes shown on such returns, and all taxes
required to be shown on returns for which extensions have been granted, have
been paid in full or adequate provision has been made for any such taxes on its
balance sheet (in accordance with generally accepted accounting principles)
other than those taxes which are being contested in appropriate forums in
proceedings
-7-
<PAGE>
which are being diligently pursued. Adequate provision has been made on its
balance sheet (in accordance with generally accepted accounting principles
consistently applied) for all federal, state, local and foreign tax liabilities
for periods subsequent to those for which returns have been filed. There is no
audit examination, deficiency, or refund litigation pending or, to the knowledge
of FBC or FNB, threatened, with respect to any taxes that could result in a
determination that would have a Material Adverse Effect on it. All taxes,
interest, additions and penalties due with respect to completed and settled
examinations or concluded litigation relating to it have been paid in full or
adequate provision has been made for any such taxes on its balance sheet (in
accordance with generally accepted accounting principles). It has not executed
an extension or waiver of any statute of limitations on the assessment or
collection of any tax due that is currently in effect.
(i) Litigation and Liabilities. Except as set forth in Annex 3.1(i),
there are no (i) civil, criminal or administrative actions, suits, claims,
hearings, investigations or proceedings before any court, governmental agency or
otherwise pending or, to the knowledge of management, threatened against it or
involving any Employee Plan as defined at subsection (m) hereof or (ii)
obligations or liabilities, whether or not accrued, contingent or otherwise,
including, without limitation, those relating to environmental and occupational
safety and health matters, or any other facts or circumstances of which its
management is aware that could reasonably be expected to result in any claims
against or obligations or liabilities of it, that, alone or in the aggregate,
are reasonably likely to have a Material Adverse Effect on it or to hinder or
delay, in any material respect, consummation of the transactions contemplated by
this Agreement.
(j) Absence of Regulatory Actions. It is not a party to any cease
and desist order, written agreement or memorandum of understanding with, or a
party to any commitment letter or similar undertaking to, or subject to any
order or directive by, or a recipient of any extraordinary supervisory letter
from, nor has it adopted any board resolutions at the request of, federal or
state governmental authorities, including, without limitation, the FBC
Regulatory Agencies, charged with the supervision or regulation of national
banking associations or bank holding companies or engaged in the insurance of
bank deposits nor has it been advised by any FBC Regulatory Agency that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, directive, written agreement, memorandum
of understanding, extraordinary supervisory letter, commitment letter, board
resolution or similar undertaking.
(k) Agreements.
i. Except as set forth Annex 3.1(k) attached hereto, as of
the date of this Agreement it is not a party to, or bound by, any oral or
written:
(A) "material contract" as such term is defined in Item
601(b)(10) of Regulation S-K promulgated by the Securities and Exchange
Commission;
(B) consulting agreement not terminable on thirty (30)
days' or less notice involving the payment of more than $10,000 per annum, in
the case of any such agreement;
(C) agreement with any officer or other key employee the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of the transactions described in this Agreement;
(D) agreement with respect to any officer providing any
term of employment or compensation guarantee extending for a period longer than
one year or for a payment in excess of $75,000;
(E) agreement or plan, including any stock option plan,
stock appreciation rights plan, employee stock ownership plan, restricted stock
plan or stock purchase plan, any of the
-8-
<PAGE>
benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions described in
this Agreement or the value of any of the benefits of which will be calculated
on the basis of any of the transactions described in this Agreement;
(F) agreement containing covenants that limit its ability
to compete in any line of business or with any person, or that involve any
restriction on the geographic area in which, or method by which, it may carry on
its business (other than as may be required by law or any regulatory agency);
(G) agreement, contract or understanding, other than this
Agreement, regarding the capital stock of FBC and/or FNB or committing to
dispose of some or all of the capital stock or substantially all of the assets
of FBC and/or FNB; or
(H) collective bargaining agreement, contract, or other
agreement or understanding with a labor union or labor organization.
ii. It is not in default under or in violation of any
provision of any note, bond, indenture, mortgage, deed of trust, loan agreement,
lease or other agreement to which it is a party or by which it is bound or to
which any of its respective properties or assets is subject, other than such
defaults or violations as could not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on it.
(l) Labor Matters. Except as disclosed in Annex 3.1(l), it is not
the subject of any proceeding asserting that it has committed an unfair labor
practice or seeking to compel it to bargain with any labor organization as to
wages and conditions of employment, nor is there any strike, other labor dispute
or organizational effort involving it pending or threatened.
(m) Employee Benefit Plans. Annex 3.1(m) contains a complete list of
all pension, retirement, stock option, stock purchase, stock ownership, savings,
stock appreciation right, profit sharing, deferred compensation, consulting,
bonus, group insurance, severance and other employee benefits, incentive and
welfare policies, contracts, plans and arrangements, and all trust agreements
related thereto, in respect to any of its present or former directors, officers,
or other employees (hereinafter referred to collectively as the "Employee
Plans").
i. All of the Employee Plans comply in all material respects
with all applicable requirements of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), the Code and other applicable laws; has not
engaged in a "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) with respect to any Employee Plan which is likely to
result in any material penalties, taxes or other events under Section 502(i) of
ERISA or Section 4975 of the Code which would have a Material Adverse Effect on
it;
ii. no liability to the Pension Benefit Guaranty Corporation
has been or is expected by it to be incurred with respect to any Employee Plan
which is subject to Title IV of ERISA ("Pension Plan"), or with respect to any
"single-employer plan" (as defined in Section 4001(a)(15) of ERISA) currently or
formerly maintained by it or any entity which is considered one employer with
FBC or FNB under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate");
iii. no Pension Plan or single-employer plan of an ERISA
Affiliate had an "accumulated funding deficiency" (as defined in Section 302 of
ERISA (whether or not waived)) as of the last day of the end of the most recent
plan year ending prior to the date hereof; all contributions to any Pension Plan
or single-employer plan of an ERISA Affiliate that were required by Section 302
of ERISA and were due prior to the date hereof have been made on or before the
respective dates on which such contributions were due; the fair market value of
the assets of each Pension Plan or single-employer plan of an ERISA Affiliate
exceeds the
-9-
<PAGE>
present value of the "benefit liabilities" (as defined in Section 4001(a)(16) of
ERISA) under such Pension Plan or single-employer plan of an ERISA Affiliate as
of the end of the most recent plan year with respect to the respective Pension
Plan or single-employer plan of an ERISA Affiliate ending prior to the date
hereof, calculated on the basis of the actuarial assumptions used in the most
recent actuarial valuation for such Pension Plan or single-employer plan of an
ERISA Affiliate as of the date hereof; no notice of a "reportable event" (as
defined in Section 4043 of ERISA) for which the 30-day reporting requirement has
not been waived has been required to be filed for any Pension Plan or single-
employer plan of an ERISA Affiliate within the 12 month period ending on the
date hereof.
iv. neither has it provided, nor is it required to provide,
security to any Pension Plan or to any single employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code;
v. neither it nor any ERISA Affiliate has contributed to any
"multi-employer plan," as defined in Section 3(37) of ERISA, on or after
September 26, 1980;
vi. each Employee Plan of it which is an "employee pension
benefit plan" (as defined in Section 3(2) of ERISA) and which is intended to be
qualified under Section 401(a) of the Code (a "Qualified Plan") has received a
favorable determination letter from the Internal Revenue Service ("IRS")
covering the requirements of the Tax Equity and Fiscal Responsibility Act of
1982, the Retirement Equity Act of 1984 and the Deficit Reduction Act of 1984
and the Tax Reform Act of 1986; each such Employee Plan has been amended to
reflect the requirements of subsequent legislation applicable to such plans it
is not aware of any circumstances likely to result in revocation of any such
favorable determination letter; and each Qualified Plan has complied at all
relevant times in all material respects with all applicable requirements of
Section 401(a) of the Code;
vii. each Qualified Plan which is an "employee stock ownership
plan" (as defined in Section 4975(e)(7) of the Code) has at all relevant times
satisfied all of the applicable requirements of Sections 409 and 4975(e)(7) of
the Code and the regulations thereunder;
viii. neither it nor any ERISA Affiliate has committed any act
or omission or engaged in any transaction that has caused it to incur, or
created a material risk that it may incur, liability for any excise tax under
Sections 4971 through 4980B of the Code, other than excise taxes which
heretofore have been paid and fully reflected in its financial statements;
ix. there is no pending or threatened litigation,
administrative action or proceeding relating to any Employee Plan other than
routine claims for benefits;
x. except as disclosed in Annex 3.1(m), there has been no
announcement or legally binding commitment by it to create an additional
Employee Plan, or to amend an Employee Plan except for amendments required by
applicable law which do not materially increase the cost of such Employee Plan,
and it does not have any obligations for retiree health and life benefits under
any Employee Plan that cannot be terminated without incurring any liability
thereunder;
xi. except as disclosed in Annex 3.1(m), the execution and
delivery of this Agreement and the consummation of the transactions described
herein will not result in any payment or series of payments by FBC or FNB to any
person which is an "excess parachute payment" (as defined in Section 280G of the
Code) under any Employee Plan, increase any benefits payable under any Employee
Plan, or accelerate the time of payment or vesting of any such benefit;
xii. except as disclosed in Annex 3.1(m), all annual reports
have been timely filed with respect to each Employee Plan, and it has made
available to SBI a true and correct copy of (A) reports on the applicable form
of the Form 5500 series filed with the IRS for plan years beginning after 1987,
(B) such
-10-
<PAGE>
Employee Plan, including amendments thereto, (C) each trust agreement and
insurance contract relating to such Employee Plan, including amendments thereto,
(D) the most recent summary plan description for such Employee Plan, including
amendments thereto, if the Employee Plan is subject to Title I of ERISA, (E) the
most recent actuarial report or valuation if such Employee Plan is a Pension
Plan and (F) the most recent determination letter issued by the IRS if such
Employee Plan is a Qualified Plan.
xiii. except as disclosed in Annex 3.1(m), there are no retiree
health benefit plans except as required to be maintained by COBRA.
(n) Title to Assets. It has good and marketable title to its
properties and assets (other than property as to which it is lessee), except for
(i) such items shown in the FBC consolidated financial statements or notes
thereto, (ii) liens on real property for current real estate taxes not yet
delinquent or (iii) such defects in title which would not, individually or in
the aggregate, have a Material Adverse Effect on it. With respect to any
property leased by it, there are no defaults by it, or any of the other parties
thereto, or any events which, with the giving of notice or lapse of time or
both, would become defaults by it or any of the other parties thereto, under any
of such leases, except for such defaults or events which would not, individually
or in the aggregate, have a Material Adverse Effect on it; and all such leases
are in full force and effect and are enforceable against it, as the case may be,
and there is no circumstance existing as of the date of this Agreement which
causes or would cause such leases to be unenforceable against any of the other
parties thereto except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally as well as principles of equity to the extent enforcement by a court
of equity is required.
(o) Compliance with Laws. It has all permits, licenses, certificates
of authority, orders and approvals of, and has made all filings, applications
and registrations with, federal, state, local and foreign governmental or
regulatory bodies that are required in order to permit it to carry on its
business as it is presently conducted and the absence of which could,
individually or in the aggregate, have a Material Adverse Effect on it; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect, and no suspension or cancellation of any of them is
threatened.
(p) Fees. Except as set forth in Annex 3.1(p) attached hereto,
neither it nor any of its respective officers, directors, employees or agents,
has employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees, and no broker or
finder has acted directly or indirectly for it in connection with the Agreement
or the transactions contemplated hereby.
(q) Environmental Matters. Except as disclosed in Annex 3.1(q):
i. (A) It, its Participation Facilities and its Loan
Properties (each as defined below) are, and have been, in material compliance
with all Environmental Laws (as defined below), except where non-compliance
would, either individually or in the aggregate, not have a Material Adverse
Effect on FBC or any of its subsidiaries taken as a whole. Set forth in Annex
3.1(q)(A) is a list of Participation Facilities or other real estate owned
("OREO") owned by it and the locations of such Participation Facilities or OREO;
(B) It, its Participation Facilities and its Loan
Properties hold all permits, licenses, registrations and other authorizations
(the "Environmental Permits") necessary under the Environmental Laws, and all
such Environmental Permits are currently in effect. The Environmental Permits
are listed in Annex 3.1(q)(B), and any that will expire or terminate as a result
of the transactions contemplated by this Agreement are so designated. It, its
Participation Facilities and its Loan Properties are in material compliance with
all the terms and conditions of such Environmental Permits and have not
materially violated any of them. Neither it, its Participation Facilities nor
its Loan Properties have received any notice of any proposal to amend, revoke,
reissue or replace any Environmental Permit, nor have any events occurred (other
than a change in applicable law) that could form a reasonable basis for any such
action. It, its Participation Facilities, and its
-11-
<PAGE>
Loan Properties have filed timely and complete applications for renewal of any
such Environmental Permits that are required prior to the Closing.
(C) There is no suit, claim, action, demand, penalty,
executive or administrative order, directive, investigation or proceeding
pending or threatened before any court, governmental agency or board or other
forum against it or any Participation Facility (x) for alleged noncompliance
(including by any predecessor) with, or liability under, any Environmental Law
or (y) relating to the release into the environment of any Hazardous Material
(as defined below) or oil, whether or not occurring at or on a site owned,
leased or operated by it or any Participation Facility. As to all such matters
set forth in Annex 3.1(q)(C), they do not, and will not, individually or in the
aggregate, have a Material Adverse Effect on FBC and its subsidiaries;
(D) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or
threatened before any court, governmental agency or board or other forum
relating to or against any Loan Property (or it in respect of such Loan
Property) (x) relating to alleged noncompliance (including by any predecessor)
with, or liability under, any Environmental Law or (y) relating to the release
into the environment of any Hazardous Material or oil, whether or not occurring
at or on a site owned, leased or operated by any Loan Property, except as to
such matters which, either individually or in the aggregate, would not have a
Material Adverse Effect on FBC and its subsidiaries taken as a whole;
(E) There is no reasonable basis for any suit, claim,
action, demand, executive or administrative order, directive or proceeding of a
type described in Section 3.1(q)(i)(C) or (D);
(F) The properties currently owned or operated
(including, without limitation, in a fiduciary capacity) by it (including,
without limitation, soil, groundwater or surface water on, under or adjacent to
the properties, and buildings thereon) do not contain any Hazardous Material
other than as permitted under applicable Environmental Laws (provided, however,
that with respect to properties formerly owned or operated by it, such
representation is limited to the period it owned or operated such properties);
(G) It has not received any notice, demand letter,
executive or administrative order, directive or request for information from any
federal, state, local or foreign governmental entity or any third party
indicating that it may be in violation of, or liable under, any Environmental
Law;
(H) There are no underground storage tanks on, in or
under, and during the period of its ownership and operation no underground
storage tanks have been closed or removed from, any properties or Participation
Facility which are or have been in its ownership;
(I) During the period of (l) its ownership or operation
(including, without limitation, in a fiduciary capacity) of any of its
respective current properties, (m) its participation in the management of any
Participation Facility, or (n) its holding of a security interest in a Loan
Property, there has been no release of Hazardous Material or oil in, on, under
or affecting such properties, except as permitted under applicable Environmental
Laws or except in quantities too small to be required to be reported to
responsible government oversight agencies. Prior to the period of (x) its
ownership or operation of any of its respective current properties, (y) its
participation in the management of any Participation Facility, or (z) its
holding of a security interest in a Loan Property, there was no release of
Hazardous Material or oil in, on, under or affecting any such property,
Participation Facility or Loan Property, except as permitted under applicable
Environmental Laws or except in quantities too small to be required to be
reported to responsible government oversight agencies; and
(J) There has not been and is not any Environmental
Condition (as hereinafter defined) at or relating to any property at which
wastes have been deposited or disposed by or at the behest or direction of it,
its Participation Facilities or its Loan Properties, nor has it, its
Participation Facilities or
-12-
<PAGE>
its Loan Properties received written notice of any such Environmental Condition.
For purposes of this Agreement the term "Environmental Condition" means any
condition or circumstance that (i) requires abatement or remediation under any
Environmental Law currently in effect, (ii) gives rise to any civil or criminal
liability under any Environmental Law currently in effect, or (iii) constitutes
a public or private nuisance based on the presence of Hazardous Materials, under
laws applicable on the Closing Date;
(K) There are no environmental liens on any properties
owned or leased by it or on its Loan Properties ("Properties") and no government
actions which could subject the Properties to such liens have been taken, are
pending, or threatened;
(L) No notice or restriction relating to the presence of
Hazardous Materials is required to be placed in the deed to any property subject
to this Agreement and no property subject to this Agreement has such a notice or
restriction in its deed; and
(M) The only Loan Properties or Participation Facilities
in which it participates in management are those described in Annex 3.1(q)(i)(A)
hereto.
ii. The following definitions apply for purposes of this
Section 3.1(q): (a) "Loan Property" means any property in which it holds a
security interest (except that with respect to loans which are secured by
residential property, all representation in this Section 3.1(q) are given to the
best knowledge, without inquiry), and where required by the context, includes
the owner or operator of such property, but only with respect to such property;
(b) "Participation Facility" means any facility in which it participates in the
management (including all property on which it conducts operations of its
business, or which is held as trustee or in any other fiduciary capacity) and,
where required by the context, includes the owner or operator of such property,
but only with respect to such property; (c) "Environmental Law" means (i) any
federal, state or local law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, legal doctrine, order,
directive, executive or administrative order, judgment, decree, injunction,
requirement or agreement with any governmental entity, relating to (A) the
protection, preservation or restoration of the environment (which includes,
without limitation, air, water vapor, surface water, groundwater, drinking water
supply, structures, soil, surface land, subsurface land, plant and animal life
or any other natural resource), or to human health or safety, or (B) the
exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of, Hazardous Materials, in each case as amended and as now in effect;
"Environmental Law" includes, without limitation, the federal Comprehensive
Environmental Response Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act, the federal Clean Air Act, the federal Clean
Water Act, the federal Resource Conservation and Recovery Act of 1976 (including
the Hazardous and Solid Waste Amendments thereto), the federal Solid Waste
Disposal Act and the federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Federal Occupational Safety and
Health Act of 1970, the Federal Hazardous Materials Transportation Act, or any
so-called "Superfund" or "Superlien" law enacted by any state having
jurisdiction over any Loan Property or Participation Facility, each as amended
and as now in effect, and (ii) any common law or equitable doctrine (including,
without limitation, injunctive relief and tort doctrines such as negligence,
nuisance, trespass and strict liability) that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Material; and (d) "Hazardous Material"
means any substance which is defined, designated or classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated, under any Environmental
Law, whether by type or by quantity, including any substance containing any such
substance as a component. Hazardous Material includes, without limitation, any
toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance, oil or petroleum or any
derivative or by-product thereof, radon, radioactive material, asbestos,
asbestos-containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyls, any of which is regulated by, or subject to
regulation under, any Environmental Law.
-13-
<PAGE>
(r) Allowance. The allowance for loan and lease losses shown on
FBC's consolidated statement of financial condition as of December 31, 1995 was,
and the allowance for loan and lease losses shown on FBC's consolidated
statement of financial condition for periods ending after the date of this
Agreement will be, in the opinion of management of FBC and FNB, adequate, as of
the date thereof, under generally accepted accounting principles applicable to
commercial banks and bank holding companies and all other applicable regulatory
requirements for all losses reasonably anticipated in the ordinary course of
business as of the date thereof based on information available as of such date.
It has disclosed to SBI in writing prior to the date hereof the amounts of all
loans, leases, advances, credit enhancements, other extensions of credit,
commitments and interest-bearing assets of it that it has classified internally
as "Other Loans Specially Mentioned," "Special Mention," "Substandard,"
"Doubtful," "Loss," "Classified," "Criticized," "Credit Risk Assets," "Concerned
Loans" or words of similar import, and it shall promptly after the end of each
quarter after the date hereof and on the Effective Date inform SBI of the amount
of each such classification. The OREO and in-substance foreclosures included in
any of its non-performing assets are carried net of reserves at the lower of
cost or market value based on current independent appraisals or current
management appraisals.
(s) Anti-takeover Provisions Inapplicable. The provisions of
the NJBCA relating to protection of shareholders do not apply to FBC, this
Agreement, the Merger, the Bank Acquisition and the transactions described
herein.
(t) Material Interests of Certain Persons. Except as noted in
Annex 3.1(t), none of its respective officers or directors, or any "associate"
(as such term is defined in Rule 12b-2 under the Securities Exchange Act of
1934) of any such officer or director, has any material interest in any material
contract or property (real or personal), tangible or intangible, used in or
pertaining to its business.
(u) Insurance. It is presently insured, and has been insured,
in the amounts, with the companies and since the periods set forth in Annex
3.1(u). All of the insurance policies and bonds maintained by it are in full
force and effect, it is not in default thereunder and all material claims
thereunder have been filed in due and timely fashion. In the judgment of its
management, such insurance coverage is adequate.
(v) Dividends. The only dividends or other distributions which
it has made on its capital stock since January 1, 1994 are set forth in Annex
3.1(v).
(w) Books and Records. Its books and records have been, and are
being, maintained in accordance with applicable legal and accounting
requirements and reflect in all material respects the substance of events and
transactions that should be included therein.
(x) Board Action. Its board of directors (at a meeting duly
called and held) has been duly convened and by the requisite vote of directors
(a) determined that the Merger is advisable and in the best interests of it and
its shareholders, (b) approved this Agreement and the transactions described
herein and (c) directed that the Agreement be submitted for consideration by its
shareholders at the FBC Meeting (as hereafter defined).
(y) Fairness Opinions. Its board of directors has received a
written opinion, a copy of which has been furnished to SBI, to the effect that
the consideration to be received by FBC shareholders pursuant to this Agreement,
at the time of its execution, is fair to such holders from a financial point of
view.
(z) INTENTIONALLY OMITTED.
(aa) Fidelity Bonds. Since at least January 1, 1993, FNB has
continuously maintained fidelity bonds insuring it against acts of dishonesty by
its employees in such amounts as is customary for a bank of its size. Since
January 1, 1993, the aggregate amount of all potential claims under such bonds
has not
-14-
<PAGE>
exceeded $0 and neither FBC nor FNB is aware of any facts which would reasonably
form the basis of a claim under such bonds. Neither has a reason to believe
that its fidelity coverage will not be renewed by its carrier on substantially
the same terms as its existing coverage.
(bb) Condition of Tangible Assets. Except as set forth in Annex
3.1(bb), all buildings, structures and improvements on the real property owned
or leased by it are in functional condition, and FBC and FNB are not aware of
any material structural defects. The equipment, including heating, air
conditioning and ventilation equipment owned by it, is in functional operating
condition and free of material defects to the best of FNB's and FBC's knowledge.
The operation and use of the property in the business conform in material
respect to all applicable laws, ordinances, regulations, permits, licenses and
certificates.
(cc) Loans by FNB. As of January 1, 1993, and except as shown on
Annex 3.1(cc), in the aggregate, the loans by FNB have been lawfully made,
constitute valid debts of the obligors, have been incurred in the ordinary
course of business, are subject to the terms of payment as shall have been
agreed upon between FNB and each customer and FNB does not know of any
applicable setoff or counterclaim which in the aggregate would have a Material
Adverse Effect on it. A list of all loans thirty (30) days past due, as of May
31, 1996, has been delivered to SBI. No part of the amount collectible under any
loan is contingent upon performance by FNB of any obligation and no agreement
for participation, in which FNB has relinquished or agreed to share control with
a participation in management of the facility, or agreement providing for
deductions or discounts have been made with respect to any part of such loans,
except as expressly disclosed in Annex 3.1(cc). FNB does not know of any
pending, threatened or expected actions in connection with any material loans or
commitments presently or previously made by FNB relating to claims based on
theories of "lenders' liability" or any other basis.
(dd) Regulatory Compliance - OCC. FNB is in compliance in all
material respects with the applicable rules and regulations of the OCC, except
as noted in Annex 3.1(dd) and except where the failure to comply would not have
a Material Adverse Effect on FNB.
(ee) Regulatory Compliance - FDIC. Except as noted on Annex
3.1(ee) hereto and except where the failure to comply would not have a Material
Adverse Effect on it, it is in compliance in all material respects with the
rules and regulations of the FDIC to the extent such rules and regulations are
deemed applicable by regulatory determination.
(ff) Capital Compliance. As of December 31, 1995, FNB was in
compliance with the minimum capital requirements applicable to national banking
associations, including as to leverage ratio requirements, tangible capital
requirements and risk based capital requirements.
(gg) INTENTIONALLY OMITTED.
(hh) Investments. Except as may be noted on Annex 3.1(hh)
hereto, FNB does not, either directly or through a subsidiary, hold any
corporate debt security not of investment grade, as defined in Section 222 of
the Financial Institution Reform, Recovery and Enforcement Act of 1989
("FIRREA"); provided, further, FNB is in compliance with applicable divestiture
requirements established by the FDIC as to any such investments noted as
exceptions on Annex 3.1(hh).
(ii) INTENTIONALLY OMITTED.
(jj) Default. It has not been advised by any FBC Regulatory
Agency that it is in "default" or "in danger of default" (as those terms are
defined in FIRREA Sections 204(x)(1) and (2)).
-15-
<PAGE>
(kk) Federal Reserve Act. Since the enactment of FIRREA, except
as may be noted in Annex 3.1(kk) hereto, it is in compliance in all material
respects with Sections 23A and 22(h) of the Federal Reserve Act.
(ll) INTENTIONALLY OMITTED.
(mm) Assessments Fully Paid. All payments, fees and charges
assessed by the OCC against FNB, and due on or prior to the date of this
Agreement, have been paid in full. FNB's assessment category with the FDIC is
1A.
(nn) Documents Filed with Regulatory Agencies. Documents to be
filed by FBC with any FBC Regulatory Agency in connection with this Agreement,
or the transactions contemplated hereby, will not contain any untrue statement
of material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading.
SECTION 3.2 Representations and Warranties of SBI and its
---------------------------------------------
Material Subsidiaries. SBI represents and warrants to FBC and FNB (and the
- ---------------------
word "it" in this Article III refers to SBI and each of its Material
Subsidiaries, as that term is defined at Section 3.2(d) hereof), that, except as
specifically disclosed in the Annex of disclosure schedules included herewith,
to the best of its knowledge:
(a) Corporate Organization and Qualification. SBI is a
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania and is in good standing as a foreign
corporation in each jurisdiction where the properties owned, leased or operated,
or the business conducted, by SBI requires such qualification, except for such
failure to qualify or be in such good standing which, when taken together with
all other such failures, would not have a Material Adverse Effect on SBI. It has
the requisite corporate and other power and authority (including all federal,
state, local and foreign governmental authorizations) to carry on its business
as now conducted and to own its properties and assets. SBI owns directly or
indirectly all of the outstanding shares of capital stock of SBI Merger Sub II.
SBI has made available to FBC complete and correct copies of the articles of
incorporation and bylaws of SBI and will make available to FBC complete and
correct copies of the certificate of incorporation and bylaws of SBI Merger Sub
II; such articles and bylaws of SBI are in full force and effect as of the date
hereof.
(b) Corporate Authority. Subject only to the regulatory
approvals specified in Section 5.1(b) hereof, SBI has the requisite corporate
power and authority, and legal right, and has taken all corporate action
necessary in order to execute and deliver this Agreement and to consummate the
transactions applicable to SBI described herein. This Agreement has been duly
and validly executed and delivered by SBI and constitutes the valid and binding
obligations of SBI enforceable against SBI, in accordance with its terms, except
to the extent enforcement is limited by bankruptcy, insolvency and other similar
laws affecting creditors' rights or the application by a court of equitable
principles.
(c) Capitalization. In furtherance of the provisions of the
NJBCA, Section 14A:11-1, SBI Common Stock is held of record by not less than
4,000 persons. The authorized capital stock of SBI consists as of the date of
this Agreement of 32,000,000 shares of SBI Common Stock, of which approximately
13,500,000 shares are issued and outstanding (an immaterial number of shares are
issuable pursuant to options, warrants and similar rights and 30,175 shares are
held as treasury stock) and 5,000,000 shares of Preferred Stock, no par value
per share, of which none are outstanding. Sufficient shares of authorized, but
unissued, shares of SBI Common Stock to effect the transactions described herein
will be reserved by SBI for such purpose.
(d) Bank Subsidiaries. SBI owns, directly, all of the issued
and outstanding shares of capital stock of Farmers First Bank, a bank and trust
company organized under the laws of the Commonwealth
-16-
<PAGE>
of Pennsylvania; Farmers & Merchants Bank and Trust, a bank organized under the
laws of the State of Maryland; Citizens National Bank of Southern Pennsylvania,
a national banking association with headquarters in Greencastle, Pennsylvania;
First National Trust Bank, a national banking association with headquarters in
Sunbury, Pennsylvania; and Williamsport National Bank, a national banking
association with headquarters in Williamsport, Pennsylvania (collectively the
"Bank Subsidiaries"). All of the issued and outstanding capital stock of the
Bank Subsidiaries is duly and validly authorized and issued, fully paid and
nonassessable (other than as provided in 12 U.S.C.A. (S) 55 with respect to
national banks) and is owned by SBI free and clear of any liens, security
interests, encumbrances, restrictions on transfer or other rights of any third
person with respect thereto. SBI owns, directly or indirectly, all of the
issued and outstanding shares of capital stock of Atlantic Federal Savings Bank,
Fairfax Savings, F.S.B. and Reisterstown Federal Savings Bank, each a federal
savings bank operating in Maryland (collectively, the "Savings Bank
Subsidiaries"). All of the issued and outstanding capital stock of the Savings
Bank Subsidiaries is duly and validly authorized and issued, free and clear of
any liens, security interests, encumbrances, restrictions on transfer or other
rights of any third person with respect thereto other than rights of account
holders to liquidation accounts maintained by the Savings Bank Subsidiaries in
accordance with the rules of the Office of Thrift Supervision ("OTS"). The Bank
Subsidiaries and the Savings Bank Subsidiaries are the "Material Subsidiaries."
There are no options, calls, warrants, conversion privileges or other agreements
obligating any Material Subsidiary at present or upon the occurrence of any
event to issue or sell any shares of its capital stock. Each of Farmers First
Bank and Farmers & Merchants Bank and Trust is a bank and trust company duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and the State of Maryland, respectively, and is
duly authorized to engage in the banking and trust business as an insured bank
under the Federal Deposit Insurance Act, as amended. Each of Citizens National
Bank of Southern Pennsylvania, First National Trust Bank, and Williamsport
National Bank is a national banking association duly organized, validly existing
and in good standing under the laws of the United States and is duly authorized
to engage in the banking and trust business as an insured bank under the Federal
Deposit Insurance Act, as amended. Each of Atlantic Federal Savings Bank,
Fairfax Savings, F.S.B. and Reisterstown Federal Savings Bank is a federal
savings and loan association, duly organized, validly existing and in good
standing under the laws of the United States and is duly authorized to engage in
the savings and loan business under the Federal Deposit Insurance Act, as
amended. Each Material Subsidiary has corporate power and legal authority and
governmental authorizations which are material to its respective operations and
to transact the respective businesses in which it is presently engaged.
(e) No Violations. The execution, delivery and performance of this
Agreement by SBI and SBI Merger Sub II does not, and the consummation of the
transactions described herein by SBI and SBI Merger Sub II will not, constitute
(i) a breach or violation of, or a default under, any law, rule or regulation or
any judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument to which SBI or SBI Merger Sub II (or any of SBI's
respective properties or assets) is subject, which breach, violation or default
would have a Material Adverse Effect on SBI on a consolidated basis, or enable
any person to enjoin the Merger or the Bank Acquisition, (ii) a breach or
violation of, or a default under, SBI's or SBI Merger Sub II's articles or
certificate of incorporation, respectively, or bylaws of either or (iii) a
breach or violation of, or a default under (or an event which with due notice or
lapse of time or both would constitute a default under), or result in the
termination of, accelerate the performance required by, or result in the
creation of any lien, pledge, security interest, charge or other encumbrance
upon any of SBI's properties or assets under, any of the terms, conditions or
provisions of any note, bond, indenture, deed of trust, loan agreement or other
agreement, instrument or obligation to which it is a party, or to which any of
SBI's properties or assets may be bound or affected, except for any of the
foregoing that, individually or in the aggregate, would not have a Material
Adverse Effect on SBI, on a consolidated basis; and the consummation of the
transactions contemplated hereby will not require any approval, consent or
waiver under any such law, rule, regulation, judgment, decree, order,
governmental permit or license or the approval, consent or waiver of any other
party to any such agreement, indenture or instrument, other than (i) the
required approvals, consents and waivers of governmental authorities referred to
in Section 5.1(b), (ii) any such approval, consent or waiver that already has
been obtained and (iii) any other approvals, consents or waivers the absence of
which, individually or in the aggregate, would not result
-17-
<PAGE>
in a Material Adverse Effect on SBI, on a consolidated basis, or enable any
person to enjoin the Merger or the Bank Acquisition.
(f) Required Consents. SBI has no reason to believe that it
will be unable to obtain consents and approvals, including, without limitation,
all such consents and approvals of governmental authorities and its
shareholders, necessary to consummate the transactions described in this
Agreement by March 31, 1997 or that any such consents or approvals would contain
any condition or requirement that would result in a Material Adverse Effect on
SBI.
(g) Board and Shareholder Action. SBI's Board of Directors (at
a meeting duly called and held) has been duly convened and by the requisite vote
of all directors (a) determined that the Merger in the case of FBC and the Bank
Acquisition in the case of FNB is advisable and in the best interests of it and
its shareholders, and (b) approved this Agreement and the transactions described
herein.
(h) SBI Merger Sub II.
i. SBI Merger Sub II is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Jersey.
All of the outstanding shares of capital stock of SBI Merger Sub II have been
validly issued, are fully paid and nonassessable and are owned directly by SBI
free and clear of any lien, charge or other encumbrance. SBI Merger Sub II
possesses no assets nor is subject to any liabilities and will not acquire
assets or incur liabilities prior to the Effective Time. Since the date of its
incorporation, SBI Merger Sub II has not engaged in any activities other than in
connection with the consummation of the Merger and the Bank Acquisition or as
expressly contemplated by this Agreement.
ii. SBI Merger Sub II has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The Execution, delivery and performance of this Agreement by SBI
Merger Sub II and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate actions (including
without limitation stockholder action) in respect thereof on the part of SBI
Merger Sub II. This Agreement is a valid and binding obligation of SBI Merger
Sub II, enforceable in accordance with its terms.
iii. All of the authorized capital stock of SBI Merger Sub
II, which consists solely of 100 shares of common stock, $.01 par value per
share, is presently issued and outstanding.
iv. SBI will, as the sole shareholder of SBI Merger Sub
II, vote to approve this Agreement and the Merger.
(i) SBI Reports. SBI has furnished to FBC and FNB true and
complete copies of (i) all of its annual reports on Form 10-K filed with the SEC
since January 1, 1993 and its annual reports to shareholders for each of the
three years ended December 31, 1995, 1994 and 1993, respectively; (ii) all of
its quarterly reports on Form 10-Q and current reports, if any, on Form 8-K
filed with the SEC since January 1, 1996; (iii) each final registration
statement, prospectus or offering circular which SBI has used in connection with
the sale of securities since January 1, 1994; and (iv) each definitive proxy
statement distributed by SBI to its shareholders since January 1, 1994.
All such reports (i) comply in all material respects with the requirements of
the Exchange Act and the rules and regulations of the SEC thereunder, (ii) do
not contain any untrue statement of a material fact and (iii) do not omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(j) SBI Benefit Plans. SBI has furnished to FBC and FNB true,
correct and complete copies of all of SBI's bonus, deferred compensation,
pension, profit-sharing, retirement, medical, group life,
-18-
<PAGE>
disability income, stock purchase, stock option, other "employee benefit plans"
(as that term is used within the meaning of Section 3(3) of ERISA) or any other
fringe benefit plan, agreement, arrangement or practice, all amendments thereto
and all summary plan descriptions thereof, or, in the alternative, SBI has
provided materials generally descriptive of the foregoing, and in such case, SBI
will provide such specific additional information as may reasonably be
requested. The foregoing are collectively referred to as the "SBI Benefit
Plans."
(k) Reports. SBI has timely filed all material reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that it was required to file since January 1, 1994 with
(A) the Board, (B) the FDIC, (C) the OTS, (D) the OCC, (E) the SEC, and (F) the
Pennsylvania Department of Banking and the Maryland Banking Commissioner
(collectively, the Regulatory Agencies listed (A) through (F) are the "SBI
Regulatory Agencies") and all other material reports and statements required to
be filed by it since January 1, 1994, including, without limitation, any report
or statement required to be filed pursuant to the laws, rules or regulations of
the United States or any SBI Regulatory Agency and has paid all fees and
assessments due and payable in connection therewith, and no such report,
registration or statement contains any material misstatement or omission or is
otherwise in material noncompliance with any law, regulation or requirement.
(l) SBI's Balance Sheets. SBI's balance sheets as of December 31,
1995 previously provided to FBC and each balance sheet provided after the date
hereof to FBC (including in each case any related notes and schedules) fairly
presents or will fairly present SBI's financial position as of its date and each
of the statements of income and shareholders' equity and of cash flows provided
therewith (including in each case any related notes and schedules), fairly
presents or will fairly present the results of operations, shareholders' equity
and cash flows, as the case may be, of it for the periods set forth therein
(subject, in the case of unaudited interim statements, to normal year-end audit
adjustments that are not material in amount or effect), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved.
(m) Absence of Certain Changes or Events. Since March 31, 1996, SBI
has not incurred any material liability, except in the ordinary course of its
business consistent with past practice, nor has there been any change in the
financial condition, properties, assets, business, results of operation or
prospects of it which, individually or in the aggregate, has had, or might
reasonably be expected to result in, a Material Adverse Effect on it.
(n) Fees. Neither SBI nor any of its officers, directors, employees
or agents, has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions, or finder's fees, and no
broker or finder has acted directly or indirectly for it in connection with the
Agreement or the transactions described herein.
(o) Registration Statement, Etc. Except for information relating to
FBC and FNB, neither (i) the Registration Statement, the Proxy
Statement/Prospectus or any amendment or supplement thereto, or any other
registration statement filed with the SEC during the term of this Agreement, at
the time it is filed with the SEC, at the time it is declared effective, at the
time the Proxy Statement/Prospectus is mailed to the shareholders of FBC or at
the date of the FBC Meeting to consider the approval of this Agreement nor (ii)
any other documents to be filed by SBI with the SEC or any Regulatory Agency in
connection with this Agreement or the transactions described herein will contain
any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading. All
documents which SBI is responsible for filing with the SEC or any Regulatory
Agency in connection with the Merger and Bank Acquisition will comply as to form
in all material respects with the requirements of applicable law.
(p) Compliance with Laws. It has the permits, licenses, certificates
of authority, orders and approvals of, and has made all filings, applications
and registrations with, federal, state, local and foreign
-19-
<PAGE>
governmental authorities, including Regulatory Agencies that are required in
order to permit it to carry on its business as it is presently conducted and the
absence of which would, individually or in the aggregate, have a Material
Adverse Effect on SBI, on a consolidated basis; all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect,
and no suspension or cancellation of any of them is threatened.
(q) Absence of Regulatory Actions. It is not a party to any cease
and desist order, written agreement or memorandum of understanding with, or a
party to any commitment letter or similar undertaking to, or subject to any
order or directive by, or a recipient of any extraordinary supervisory letter
from, nor has it adopted any board resolutions at the request of, federal or
state governmental authorities, including, without limitation, the SBI
Regulatory Agencies charged with the supervision or regulation of banks or bank
holding companies or savings and loan holding companies or engaged in the
insurance of bank and/or savings and loan deposits nor has it been advised by
any SBI Regulatory Agency that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
directive, written agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter, board resolutions or similar undertaking.
(r) Litigation and Liabilities. Except as set forth in Annex 3.2(r),
there are no (i) civil, criminal or administrative actions, suits, claims,
hearings, investigations or proceedings before any court, governmental agency or
otherwise pending or, to the knowledge of management, threatened against it or
(ii) obligations or liabilities, whether or not accrued, contingent or
otherwise, including, without limitation, those relating to environmental and
occupational safety and health matters, or any other facts or circumstances of
which its management is aware that could reasonably be expected to result in any
claims against or obligations or liabilities of it, that, alone or in the
aggregate, are reasonably likely to have a Material Adverse Effect on SBI, on a
consolidated basis, or to hinder or delay, in any material respect, consummation
of the transactions contemplated by this Agreement.
(s) Environmental Matters. SBI is unaware of any activity or
conditions on or in any property owned, occupied, leased, or held as security by
SBI or a Material Subsidiary which would subject SBI or any Material Subsidiary
to damages, penalties, injunctive relief or cleanup costs under any
Environmental Laws.
ARTICLE IV. COVENANTS
SECTION 4.1 Acquisition Proposals. FBC agrees that it shall direct
---------------------
and use its best efforts to cause its officers, directors, employees, agents and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it) not to, initiate or solicit, directly or
indirectly, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to its shareholders) with respect to a
merger, consolidation or similar transaction involving, or any purchase, sale or
other disposition of all or any significant portion of the assets or any equity
securities of, FBC or FNB (any such proposal or offer being hereinafter referred
to as an "Acquisition Proposal") or, except to the extent legally required for
the discharge by its board of directors of its fiduciary duties as determined
upon consultation with counsel, engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions with,
any person relating to an Acquisition Proposal, or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal. FBC and FNB
each agrees that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. FBC and FNB each agrees that
it will take the necessary steps to inform the appropriate individuals or
entities referred to in the first sentence hereof of the obligations imposed
upon each of them in this Section 4.1. FBC and FNB each agree that it will
notify SBI immediately if any such inquiries or proposals are received by, any
such information is requested from, or any such negotiations, or discussions are
sought to be initiated or continued with, it.
-20-
<PAGE>
SECTION 4.2. Securities Registration and Disclosure. FBC shall
--------------------------------------
cooperate with SBI in the preparation, in accordance with the requirements of
the proxy rules under the Exchange Act, of the Proxy Statement/Prospectus and
the filing thereof as part of the Registration Statement. Following the date
hereof, SBI will prepare and file with the SEC under the Securities Act of 1933,
as amended (the "Securities Act") a registration statement for the registration
of the shares of SBI Common Stock to be issued pursuant hereto (the
"Registration Statement"), FBC will cooperate with SBI and SBI will file with
the SEC under the Exchange Act the preliminary form of the Proxy
Statement/Prospectus included in the Registration Statement. Each of SBI and
FBC shall be responsible for providing all information concerning itself and its
subsidiaries required to be included in the Proxy Statement/Prospectus. SBI
shall take any action required to be taken under any applicable state securities
or "blue sky" laws in connection with the issuance of shares of SBI Common Stock
pursuant to this Agreement and FBC shall furnish SBI all information concerning
FBC and its shareholders as SBI may reasonably request in connection with any
such action. At least five (5) business days prior to its filing with the SEC,
SBI shall provide a copy of the Registration Statement to FBC and its counsel
for review. Each party will promptly provide the other with copies of all
correspondence, comment letters, notices or other communications to or from the
SEC relating to the Registration Statement, the Proxy Statement/Prospectus or
any amendment or supplement thereto, and SBI will advise FBC promptly after it
receives notice thereof, of the effectiveness of the Registration Statement, of
the issuance of any stop order with respect to the effectiveness thereof, of the
suspension of the qualification of the SBI Common Stock issuable in connection
herewith for offering or sale in any jurisdiction, or the initiation or threat
of any proceeding for any such purpose.
FBC will take appropriate action to call a meeting of its shareholders
(the "FBC Meeting"), to be held not more than sixty (60) days following the
effective date of the Registration Statement (which meeting may be the Annual
Meeting of Shareholders of FBC), to consider approval of this Agreement and,
except to the extent legally required for the discharge by FBC's board of
directors of its fiduciary duties and subject to receipt of an updated fairness
opinion from its financial advisor dated on or immediately prior to the date of
the Proxy Statement/Prospectus, will use its best efforts to secure such
approval. In connection with the FBC Shareholders' Meeting, FBC will duly
solicit the vote of its shareholders by mailing or delivering to each such
shareholder, as soon as practicable after the effectiveness of the Registration
Statement, the Proxy Statement/Prospectus, and as soon as practicable
thereafter, any amendments or supplements thereto as may be necessary to assure
that at the date of the FBC Meeting the Proxy Statement/Prospectus shall conform
to the requirements of Sections 3.1(nn) and 3.2(o) hereof.
FBC will furnish to SBI a list of all persons known to FBC who at the
date of the FBC Shareholders' Meeting may be deemed to be "affiliates" of FBC
within the meaning of Rule 145 under the Securities Act. FBC will use its best
efforts to cause each such person identified in its list to deliver at or prior
to the Closing a written agreement providing that such person will not sell,
pledge, transfer or otherwise dispose of the shares of SBI Common Stock to be
received by such person hereunder except (i) in compliance with the applicable
provisions of the Securities Act and the rules and regulations thereunder and
(ii) after such time as financial results covering at least thirty (30) days of
post-Merger combined operations have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies.
SECTION 4.3 Employees.
---------
(a) SBI and any of its affiliates shall have the right (but not the
obligation) to employ, as officers and employees of SBI, the Surviving
Corporation, FNB or other affiliates of SBI immediately following the Effective
Time, any persons who are officers and employees of each of FBC and FNB
immediately before the Effective Time; provided, however, SBI shall cause the
Surviving Corporation, or FNB, as the case may be, to continue the employment of
Joseph H. Doble, Richard M. Stuart and Joan Hoglen on substantially the same
terms as exist at the Effective Time for at least one year. If any of such
individuals refuses such employment with SBI or any of its affiliates or shall
refuse to cancel any existing employment contract, agreement or understanding
between him or herself and FBC or FNB, such refusal shall not constitute a basis
for termination of this Agreement. In all cases, including with respect to
Messrs. Doble and Stuart and Ms. Hoglen, it shall be a
-21-
<PAGE>
condition to employment by SBI or any of its affiliates (including the Surviving
Corporation and FNB) that any officer or employee of FBC or FNB agree to cancel
any existing employment contract, agreement or understanding between him or
herself and FBC or FNB, including without limitation all benefits related to
severance arrangements upon a change of control or otherwise, prior to accepting
such new employment and without accepting any of the severance benefits or other
benefits or payments associated with such contract, agreement or understanding.
(b) Each person employed by FBC or FNB prior to the Effective Time
who remains an employee of the Surviving Corporation, FNB or any other SBI
subsidiary following the Effective Time (each a "Continued Employee") shall be
entitled, as an employee of SBI or an SBI Subsidiary, to participate in whatever
employee benefit plans, as defined in Section 3(3) of ERISA, or whatever stock
option, bonus or incentive plans or other fringe benefit programs that may be in
effect generally for employees of SBI or SBI's subsidiaries from time to time
("SBI's Plans"), if such Continued Employee shall be eligible or selected for
participation therein and otherwise shall not be participating in a similar plan
which continues to be maintained by the Surviving Corporation or FNB for such
employee. All such participation shall be subject to such terms of such plans as
may be in effect from time to time provided, further that Continued Employees
will be eligible to participate in SBI's plans on the same basis as similarly
situated employees of SBI or SBI's subsidiaries. Such Continued Employees will
receive credit for past service with FBC or FNB for purposes of eligibility and
vesting, but not benefit accrual, under SBI's Plans.
(c) FBC and FNB shall take all timely and necessary action to cease
participation or accrual of benefits, effective as of the Effective Time, by
each person employed by FBC or FNB prior to the Effective Time in each Employee
Plan (as defined in Section 3.1(m)), and to terminate each Employee Plan, other
than an Employee Plan containing a cash or deferred arrangement qualified under
Section 401(k) of the Code ("Employee 401(k) Plan"), effective as of the
Effective Time; provided that SBI may, in its sole discretion, give notice to
FBC or FNB, as the case may be, not less than twenty (20) days (sixty-one (61)
days in the case of any Pension Plan (as defined in Section 3.1(m)) prior to the
Effective Time, that any Employee Plan shall not be terminated and/or
participation or accrual of benefits thereunder shall not cease pursuant to this
Section 4.3(c). SBI shall, after receipt of an IRS favorable plan determination
letter confirming the FBC Money Purchase Plan's tax qualified status, upon its
termination, allow each participant to either roll-over his/her account balance
to the SBI 401(k) Plan or receive distribution of his/her closing account
balance. If the fair market value of the assets of any Pension Plan does not
equal or exceed the present value of its "benefits liabilities" (as defined in
Section 4001(a)(16) of ERISA) as of the date of its termination, as determined
by certification of an enrolled actuary in accordance with procedures
established by the Pension Benefit Guaranty Corporation, FBC or FNB, as the case
may be, shall make such additional contributions to the Pension Plan as may be
necessary to permit its termination in a standard termination (within the
meaning of Section 4041 of ERISA). At the sole discretion of SBI, any Employee
401(k) Plan shall be merged with any similar such plan maintained and designated
by SBI, effective at or after the Effective Time, as elected by SBI, and FBC or
FNB, as the case may be, shall take any and all timely and necessary action to
effect such merger.
SECTION 4.4 Access and Information.
----------------------
(a) Upon reasonable notice, and subject to applicable laws relating
to the exchange of information, each of FBC and FNB shall afford to SBI and its
representatives (including, without limitation, directors, officers and
employees of SBI and its affiliates, and counsel, accountants and other
professionals retained) such access during normal business hours throughout the
period prior to the Effective Time to the books, records (including, without
limitation, tax returns and work papers of independent auditors), properties,
personnel and such other information as SBI may reasonably request (other than
reports or documentation which are not permitted to be disclosed under
applicable law); provided, however, that no investigation pursuant to this
Section 4.4 shall affect or be deemed to modify any representation or warranty
made herein. SBI will not, and will cause its representatives not to, use any
information obtained pursuant to this Section 4.4 for any purpose unrelated to
the consummation of the transactions contemplated by this Agreement and in no
event will SBI
-22-
<PAGE>
directly or indirectly use such information for any competitive or commercial
purpose. Subject to the requirements of law, SBI will keep confidential, and
will cause its representatives to keep confidential, all information and
documents obtained pursuant to this Section 4.4 unless such information (i) was
already known to SBI or an affiliate of SBI, (ii) becomes available to SBI or an
affiliate of SBI from other sources not known by such person to be bound by a
confidentiality agreement, (iii) is disclosed with the prior written approval of
FBC or FNB, as the case may be, (iv) is or becomes readily ascertainable from
published information or trade sources or (v) was already publicly available.
Without in any way limiting the foregoing, FNB shall provide to SBI within
forty-five (45) days of the end of each calendar month and FBC shall provide to
SBI within forty-five (45) days of the end of each calendar quarter consolidated
and consolidating financial statements (including a balance sheet and income
statement) as of the end of, and for, such period that are in conformance with
generally accepted accounting principles and the representation set forth in
Section 3.1(f). In the event that this Agreement is terminated or the
transactions contemplated by this Agreement shall otherwise not be consummated,
each party shall, if so requested, promptly cause all copies of documents or
extracts thereof containing information and data as to another party hereto (or
an affiliate of any party hereto) to be returned to the party which furnished
the same. This Section 4.4 supersedes and terminates any agreement between the
parties relating to the confidentiality of information which may have been
exchanged (the "Confidentiality Agreement").
(b) During the period from the date of this Agreement to the
Effective Date, SBI shall provide to FBC and FNB the following documents and
information:
i. As soon as reasonably available, but in no event more than
forty-five (45) days after the end of each fiscal quarter of SBI ending after
the date of this Agreement, SBI will deliver to FBC and FNB its quarterly report
on Form 10-Q as filed with the SEC.
ii. As soon as reasonably available, but in no event more than
ninety (90) days after the end of each fiscal year of SBI ending after the date
of this Agreement, SBI will deliver to FBC and FNB its annual report on Form 10-
K as filed with the SEC.
iii. SBI will deliver to FBC and FNB, contemporaneously with
its being filed with the SEC, a copy of each current report on Form 8-K filed by
SBI after the date of this Agreement.
iv. At least five (5) business days prior to submission, SBI
will furnish to FBC and FNB the portions which describe the transactions
(including any financial information or pro forma financial information of, or
including, FBC or FNB) described herein of (A) registration statements,
prospectuses or offering circulars used by SBI in connection with the sale of
securities after the date of this Agreement, (B) proxy statements distributed by
SBI to its shareholders after the date of this Agreement, and (C) all other
publicly-available reports, statements or other documents which are either
distributed to shareholders or filed by SBI or any of its subsidiaries with the
SEC. Any comments timely received by SBI from FBC in connection with the
foregoing will be reviewed and considered in good faith, but SBI shall not be
bound to comply with the recommendations set forth in such comments. SBI also
shall furnish FBC with copies of the foregoing in the form filed with the SEC or
otherwise distributed to shareholders.
v. SBI will promptly notify FBC and FNB of any material
changes to SBI's Plans.
vi. SBI will make available on its premises to FBC its Reports
of Examination, Accountant's Letters to Management and any other items which
shall be mutually agreed upon by the parties hereto.
SECTION 4.5 Certain Filings, Consents and Arrangements. SBI shall
------------------------------------------
use all reasonable efforts to obtain all necessary approvals required to carry
out the transactions contemplated by this Agreement and to consummate the Merger
and Bank Acquisition. FBC and FNB shall cooperate with SBI in connection
-23-
<PAGE>
therewith, including without limitation furnishing all information concerning
FBC or FNB, as the case may be, as may be reasonably requested by SBI in
connection with any such action. SBI shall use all reasonable efforts to
provide, five (5) business days prior to submission, FBC with copies of all
material applications, notices, petitions or other filings or submissions
prepared by SBI in connection with consummation of the Merger and Bank
Acquisition. Any comments timely received by SBI from FBC in connection with
the foregoing will be reviewed and considered in good faith, but SBI shall not
be bound to comply with the recommendations set forth in such comments. SBI
will consult with FBC with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and governmental authorities
necessary or advisable to consummate the transactions described in this
Agreement and SBI will keep FBC apprised of the status of matters relating to
completion of the transactions described herein. SBI shall promptly furnish FBC
with copies of applications in the form filed with any governmental authority in
respect of the transactions contemplated hereby.
SECTION 4.6 Takeover Statutes. Neither the New Jersey Shareholders
-----------------
Protection Act (Section 14A:10A-1 of the NJBCA), nor any other "fair price,"
"moratorium," or other form of anti-takeover statute or regulation or any
similar provision of FNB's charter or the FBC Certificate (other than as has
been previously disclosed with respect to the necessary FBC shareholder vote),
is applicable to the transactions described in this Agreement and, if any such
statute, regulation or provisions shall become applicable to the transactions
described in this Agreement, FBC and FNB and the members of the Boards of
Directors of FBC and FNB shall grant such approvals and take such actions as are
necessary so that the transactions described herein may be consummated as
promptly as practicable on the terms described herein and otherwise act to
eliminate or minimize the effects of such statute or regulation or provision on
the transactions described herein.
SECTION 4.7 Additional Agreements. Subject to the terms and
---------------------
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take promptly, or cause to be taken promptly, all actions
and to do promptly, or cause to be done promptly, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions described in this Agreement as promptly as
practicable, including using efforts to obtain all necessary actions or non-
actions, extensions, waivers, consents and approvals from all applicable
governmental authorities, or other entities, effecting all necessary
registrations, applications and filings and obtaining any required contractual
consents and regulatory approvals.
SECTION 4.8 Publicity. Except as required by law, FBC and FNB shall
---------
not, without the prior consent of SBI (which consent shall not be unreasonably
withheld), issue any press releases or otherwise make public filings under
securities laws, with respect to this Agreement or the transactions described
herein. Prior to issuing any press release or making any public filings under
securities laws which makes any reference to FBC or FNB, SBI shall provide a
copy to FBC for comment and in all such instances the parties shall cooperate.
SECTION 4.9 Shareholder's Meeting. If determined advisable by its
---------------------
board of directors, after consultation with its counsel, SBI shall take all
action necessary, in accordance with applicable law and its articles of
incorporation and bylaws, to convene a special meeting of the holders of its
capital stock (the "SBI Meeting") as promptly as practicable for the purpose of
considering and taking the action required by this Agreement and other
acquisition transactions which it has planned. Except to the extent legally
required for the discharge by SBI's board of directors of its fiduciary duties
as advised in writing by such board's counsel, its board of directors shall
recommend in writing to its shareholders that at the SBI Meeting, the holders of
its capital stock vote in favor of and approve the Merger, the Bank Acquisition
and this Agreement. To the extent required by applicable law, SBI shall prepare
a proxy statement or information statement or other documents in connection with
such SBI Meeting which shall comply with all applicable laws.
SECTION 4.10 Notification of Certain Matters. Each party shall give
-------------------------------
prompt notice to the others of: (a) any notice of, or other communication
relating to, a default or event that, with notice or lapse of time or both,
would become a default, received by it or any of its subsidiaries subsequent to
the date of this Agreement and prior to the Effective Time, under any contract
material to the financial condition, properties,
-24-
<PAGE>
businesses, results of operations or prospects of it to which it is a party or
is subject; and (b) any material adverse change in its financial condition,
properties, business, or results of operations on a consolidated basis or the
occurrence of any event which, so far as reasonably can be foreseen at the time
of its occurrence, is reasonably likely to result in any such change. Each
party shall give prompt notice to the other parties of any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by this
Agreement.
SECTION 4.11 Insurance. FBC and FNB shall use best efforts to retain
---------
no less than the level of insurance coverage presently held by them as of the
date hereof.
SECTION 4.12 Dividends. FBC shall not declare, pay or set aside any
---------
dividend or other distribution in respect of its capital stock in excess of
FBC's semiannual regular cash dividend in an amount, and payable at a time,
consistent with past practice and a semiannual special cash dividend payable
through December 31, 1996 also in an amount, and payable at a time, consistent
with past practice. If the Effective Date extends beyond December 31, 1996, FBC
shall be entitled to pay, immediately prior to the Effective Date, a regular and
special cash dividend in an amount representing a pro rata portion, based on the
Effective Date, of the regular and special cash dividend previously paid, also
consistent with past practice.
SECTION 4.13 Indemnification.
---------------
(a) From and after the Effective Time through the second anniversary
of the Effective Date, SBI agrees to indemnify and hold harmless each present
and former director and officer of FBC or its Subsidiaries and each officer or
employee of FBC or its Subsidiaries that is serving as a director or trustee of
another entity expressly at FBC's request or direction (each, an "Indemnified
Party"), against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively, the
"Costs") incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, and
whether or not the Indemnified Party is a party thereto, arising out of matters
existing or occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement), whether asserted or claimed prior
to, at or after the Effective Time, to the fullest extent permitted under the
FBC Certificate, the charter of FNB, or the bylaws of either in effect on the
date hereof.
(b) Any Indemnified Party wishing to claim indemnification under
Section 4.13(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify SBI thereof, but the failure to so notify
shall not relieve SBI of any liability it may have hereunder to such Indemnified
Party if such failure does not materially prejudice the indemnifying party. In
the event of any such claim, action, suit, proceeding or investigation, (i) SBI
shall have the right to assume the defense thereof with counsel reasonably
acceptable to the Indemnified Party and SBI shall not be liable to such
Indemnified Party for any legal expenses of other counsel subsequently incurred
by such Indemnified Party in connection with the defense thereof, except that if
SBI does not elect to assume such defense within a reasonable time or counsel
for the Indemnified Party at any time advises that there are issues which raise
conflicts of interest between SBI and the Indemnified Party, the Indemnified
Party may retain counsel satisfactory to such Indemnified Party, and SBI shall
remain responsible for the reasonable fees and expenses of such counsel as set
forth above, promptly as statements therefor are received; provided, however,
that SBI shall be obligated pursuant to this paragraph (b) to pay for only one
firm of counsel for all Indemnified Parties in any one jurisdiction with respect
to any given claim, action, suit, proceeding or investigation unless the use of
one counsel for such Indemnified Parties would present such counsel with a
conflict of interest; (ii) the Indemnified Party will reasonably cooperate in
the defense of any such matter and (iii) SBI shall not be liable for any
settlement effected by an Indemnified Party without its prior written consent,
which consent may not be withheld unless such settlement is unreasonable in
light of such claims, actions, suits, proceedings or investigations against, and
defenses available to, such Indemnified Party.
-25-
<PAGE>
(c) In the event SBI or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of SBI assume
the obligations set forth in this Section 4.13.
(d) The provisions of this Section 4.13 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and their
respective heirs and representatives.
ARTICLE V. CONDITIONS TO CONSUMMATION
SECTION 5.1 Conditions to Closing. The respective obligations of the
---------------------
parties to effect the Merger and Bank Acquisition shall be subject to the
satisfaction or waiver prior to the Effective Time of the following conditions:
(a) The Agreement and the transactions described herein shall have
been approved by the requisite vote of the shareholders of SBI, subject to the
qualifications set forth in Section 4.9 hereof, and FBC in accordance with
applicable law.
(b) All of the required approvals, consents or waivers with respect
to this Agreement (including both the Merger and the Bank Acquisition) and the
transactions described herein including, without limitation, the approvals,
notices to, consents or waivers of (i) the Board, (ii) the Pennsylvania
Department of Banking, if applicable, (iv) the Commissioner of Banking of the
State of New Jersey, and (v) the New Jersey Department of Environmental
Protection and Energy, if applicable, (which, together with the FBC Regulatory
Agencies and the SBI Regulatory Agencies, are the "Regulatory Agencies") shall
have been obtained and shall remain in full force and effect, and all applicable
statutory waiting periods (including without limitation all applicable statutory
waiting periods relating to the Merger and the Bank Acquisition) shall have
expired; and the parties shall have procured all other regulatory approvals,
consents or waivers of governmental authorities or other persons that are
necessary or appropriate to the consummation of the transactions described in
this Agreement except those approvals, consents or waivers, if any, for which
failure to obtain would not, individually or in the aggregate, have a Material
Adverse Effect on SBI, FBC or FNB (after giving effect to the transactions
described herein); provided, however, that no approval, consent or waiver
referred to in this Section 5.1(b) shall be deemed to have been received if it
shall include any condition or requirement that reasonably would result in a
Material Adverse Effect on SBI.
(c) All other requirements prescribed by law which are necessary to
the consummation of the transactions described in this Agreement shall have been
satisfied.
(d) No party hereto shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger, the Bank Acquisition or any other
transaction described in this Agreement, and no litigation or proceeding shall
be pending against any of the parties herein or any of their subsidiaries
brought by any governmental agency (including, without limitation, the
Regulatory Agencies) seeking to prevent consummation of the transactions
described herein.
(e) No statute, rule, regulation, order, injunction or decree shall
have been enacted, entered, promulgated or enforced by any governmental
authority which prohibits, restricts or makes illegal consummation of the
Merger, the Bank Acquisition, or any other transaction described in this
Agreement.
(f) The Merger shall as of the date of the Closing meet the
requirements for pooling-of-interests accounting treatment under generally
accepted accounting principles and under the accounting rules of
-26-
<PAGE>
the SEC, and SBI shall have received a letter from Coopers & Lybrand in form and
substance reasonably satisfactory to SBI as to the matters specified in this
Section 5.1(f).
(g) The Registration Statement shall have been filed (the date of
which is referred to herein as the "Filing Date") by SBI with the SEC under the
Securities Act, and shall have been declared effective prior to the time the
Proxy Statement/Prospectus is first mailed to the shareholders of FBC, and no
stop order with respect to the effectiveness of the Registration Statement shall
have been issued; the SBI Common Stock to be issued pursuant to this Agreement
shall be duly registered or qualified under the securities or "blue sky" laws of
all states in which such action is required for purposes of the initial issuance
of such shares and the distribution thereof to the shareholders of FBC entitled
to receive such shares.
(h) SBI shall have received a ruling from the Internal Revenue
Service (the "IRS") or an opinion of Morgan, Lewis & Bockius LLP, counsel to SBI
and SBI Merger Sub II, to the effect that:
i. The Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and FBC and SBI will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code;
ii. No gain or loss will be recognized by FBC or SBI by reason
of the Merger;
iii. Except for cash received in lieu of fractional shares, no
gain or loss will be recognized by the shareholders of FBC who receive solely
SBI Common Stock upon the exchange of their shares of FBC Common Stock for
shares of SBI Common Stock;
iv. The basis of the SBI Common Stock to be received by the
FBC shareholders will be, in each instance, the same as the basis of the FBC
Common Stock surrendered in exchange therefor;
v. The holding period of the SBI Common Stock received by an
FBC shareholder receiving SBI Common Stock will include the period during which
the FBC Common Stock surrendered in exchange therefor was held; and
vi. Cash received by an FBC shareholder in lieu of a
fractional share interest of SBI Common Stock will be treated as having been
received as a distribution in full payment in exchange for the fractional share
interest of SBI Common Stock which he, she or it would otherwise be entitled to
receive and will qualify as capital gain or loss.
In case a ruling from the IRS is sought, FBC and SBI shall
cooperate and each shall furnish to the other and to the IRS such information
and representations as shall, in the opinion of counsel for SBI and FBC, be
necessary or advisable to obtain such ruling.
(i) All litigation pending against FBC or FNB which, individually or
in the aggregate, would have a Material Adverse Effect on FBC's consolidated
operations, shall have been settled or otherwise resolved on terms reasonably
satisfactory to SBI, FBC and FNB.
(j) INTENTIONALLY OMITTED.
SECTION 5.2 Conditions to Obligations of SBI and SBI Merger Sub II.
------------------------------------------------------
The obligations of SBI and SBI Merger Sub II to effect the Merger and Bank
Acquisition shall be subject to the satisfaction or waiver prior to the
Effective Time of the following additional conditions:
(a) Each of the representations and warranties of FBC and FNB
contained in this Agreement shall be true and correct in all material respects
as of the Effective Date as if made on such date (or
-27-
<PAGE>
on the date when made in the case of any representation or warranty which
specifically relates to an earlier date); each of FBC and FNB shall have
performed each of its covenants and agreements, which are material to its
operations and prospects, contained in this Agreement; and SBI and SBI Merger
Sub II shall have received certificates signed by the Chief Executive Officer
and the Controller of FNB and the President and the Treasurer of FBC, dated the
Effective Date, to the foregoing effect.
(b) Coopers & Lybrand L.L.P. shall have furnished to SBI an "agreed
upon procedures" letter, dated the Effective Date, in form and substance
satisfactory to SBI to the effect that based upon procedures performed with
respect to the financial condition of FBC and FNB, which procedures shall
include (a) reading of the minute books of FBC, FNB and their affiliates, (b)
inquiries made of officers and other employees of FBC, FNB and their affiliates
responsible for financial and accounting matters with respect to consistent
application of accounting procedures with prior periods and as to the existence
and disclosure of material contingent liabilities, and (c) other specified
procedures and inquiries performed by them, nothing has come to their attention
that would indicate that, since the date of the most recent audited financial
statements, there has been no material adverse change in capital stock, long-
term debt or total or net assets and, as compared with the same period of the
prior year, there has been no material adverse change in the total or per share
amounts of income before extraordinary items or net income.
(c) SBI shall have received an opinion or opinions dated as of the
Effective Date, from Blank Rome Comisky & McCauley, in a form reasonably
acceptable to SBI.
(d) There shall not have occurred any change in the financial
condition, properties, assets, business or results of operation of FBC or FNB
which, individually or in the aggregate, has had or might reasonably be expected
to result in a Material Adverse Effect on FBC or FNB other than such changes
resulting from (i) changes in banking laws or regulations, or (ii) changes in
generally accepted accounting principles, or interpretations thereof, that
affect the banking industry.
(e) SBI shall have received to the extent reasonably attainable from
each of the persons identified by FBC pursuant to Section 4.2 hereof an executed
counterpart of an affiliate's agreement in the form contemplated by such
Section.
SECTION 5.3 Conditions to the Obligations of FBC and FNB. The
--------------------------------------------
obligations of FBC to effect the Merger and Bank Acquisition shall be subject to
the satisfaction or waiver prior to the Effective Time of the following
additional conditions:
(a) Each of the representations, warranties and covenants of SBI
contained in this Agreement shall be true and correct in all material respects
on the Effective Date as if made on such date (or on the date when made in the
case of any representation or warranty which specifically relates to an earlier
date); SBI shall have performed each of its covenants and agreements, which are
material to its operations and prospects, contained in this Agreement; and FBC
shall have received certificates signed by the President or Vice President and
Secretary, as well as the Chief Financial Officer of SBI, dated the Effective
Date, to the foregoing effect.
(b) FBC shall have received an opinion dated as of the Effective
Date, from Morgan, Lewis & Bockius LLP, Harrisburg, Pennsylvania, counsel to SBI
and SBI Merger Sub II, in a form reasonably acceptable to FBC.
(c) There shall not have occurred any change in the financial
condition, properties, assets, business or results of operation of SBI which,
individually or in the aggregate, has had or might reasonably be expected to
result in a Material Adverse Effect on SBI.
-28-
<PAGE>
(d) FBC shall have received an updated opinion from its financial
advisor dated as of a date no later than the date of the Proxy
Statement/Prospectus mailed to the FBC shareholders in connection with the
Merger and not subsequently withdrawn, to the effect that the Merger
Consideration is fair to FBC's shareholders from a financial point of view.
(e) The shares of SBI Common Stock to be issued in the Merger shall
have been authorized to be listed for quotation on the NASDAQ National Market
Issues System.
(f) A certificate for the required number of whole shares of the SBI
Common Stock, as determined in accordance with Section 1.2 and Schedule 1.2, and
cash payable for the fractional shares interests shall have been delivered to
Farmers First Bank, as Exchange Agent.
ARTICLE VI. TERMINATION
SECTION 6.1 Termination. This Agreement may be terminated, and the
-----------
Merger and the Bank Acquisition abandoned, prior to the Effective Date, either
before or after its approval by the shareholders of FBC:
(a) by the mutual, written consent of FBC and SBI if the board of
directors of each so determines by a vote of a majority of the members of the
entire board;
(b) by FBC if (i) by written notice to SBI that there has been a
material breach by SBI of any representation, warranty, covenant or agreement
contained herein and such breach is not cured or not curable within thirty (30)
days after written notice of such breach is given to SBI by FBC, (ii) by written
notice to SBI that any condition precedent to FBC's obligations as set forth in
Article V of this Agreement has not been met or waived by FBC at such time as
such condition can no longer be satisfied, (iii) the Board of Directors of FBC
fails to make, withdraws or modifies or changes the favorable recommendation
described at Section 4.2, or (iv) the Board of Directors of FBC recommends to
the stockholders of FBC that an Acquisition Proposal is likely to be more
favorable, from a financial point of view, to the stockholders of FBC than the
Merger;
(c) by SBI by written notice to the other parties, in the event (i)
of a material breach by FBC or FNB of any representation, warranty, covenant or
agreement contained herein and such breach is not cured or not curable within
thirty (30) days after written notice of such breach is given to FBC by SBI or
(ii) any condition precedent to SBI's obligations as set forth in Article V of
this Agreement has not been met or waived by SBI at such time as such condition
can no longer be satisfied.
(d) by SBI or FBC by written notice to the other, in the event that
the Merger and Bank Acquisition are not consummated by March 31, 1997, unless
the failure to so consummate by such time is due to the breach of any
representation, warranty or covenant contained in this Agreement by the party
seeking to terminate; provided, however, that such date may be extended by the
written agreement of the parties hereto.
(e) by FBC, whether before or after approval of the Merger by the
FBC stockholders, by giving written notice of such election to SBI within one
(1) business day following a determination that the Average Closing Price Per
Share of the SBI Common Stock Before Closing is less than $25.00 per share
(subject to adjustment in accordance with Section 1.2(c) herein) at the time
such calculation is required to be made pursuant to Schedule 1.2 hereof.
(f) by SBI, whether before or after approval of the Merger by the
SBI shareholders, if it chooses to give written notice of the election described
in Schedule 1.2 to FBC, but if at all, within one (1) business day following a
determination that the Average Closing Price Per Share of SBI Common Stock
Before
-29-
<PAGE>
Closing is greater than $31.00 per share (subject to adjustment in accordance
with Section 1.2(c) herein at the time such calculation is required to be made
pursuant to Schedule 1.2 hereof.
SECTION 6.2 Effect of Termination. In the event of the termination
---------------------
of this Agreement, as provided above, this Agreement shall thereafter become
void and have no effect, except that the provisions of Sections 3.1(p) and
3.2(n) (Fees), 4.4 (relating to confidentiality and return of documents), 4.8
(Publicity) and 6.3 and 7.7 (Expenses) of this Agreement shall survive any such
termination and abandonment.
SECTION 6.3 Expenses. Any termination of this Agreement pursuant to
--------
Section 6.1(a) hereof shall be without cost, expense or liability on the part of
any party to the others. Any termination of this Agreement pursuant to Section
6.1(b)(i) or (ii) or 6.1(c) hereof shall also be without cost, liability or
expense on the part of any party to the others, unless the breach of a
representation or warranty or covenant is caused by the willful conduct or gross
negligence of a party, in which event said party shall be liable to the other
parties for all out-of-pocket costs and expenses, including without limitation,
reasonable legal, accounting and investment banking fees and expenses, incurred
by such other party in connection with their entering into this Agreement and
their carrying out of any and all acts contemplated hereunder ("Expenses").
So long as SBI shall not have breached its obligations hereunder, if
this Agreement is terminated by FBC pursuant to clauses (iii) or (iv) of Section
6.1(b) hereof, FBC shall promptly, but in no event later than two (2) business
days after such termination, pay SBI a fee of $500,000 which amount shall be
payable by wire transfer of same day funds. If FBC fails to promptly pay the
amount due pursuant to this Section 6.3, and, in order to obtain such payment,
SBI commences a suit which results in a judgment against FBC for all or a
substantial portion of the fee set forth in this Section 6.3, FBC shall pay to
SBI its costs and expenses (including reasonable attorneys' fees) in connection
with such suit.
ARTICLE VII. OTHER MATTERS
SECTION 7.1 Certain Definitions; Interpretation. As used in this
-----------------------------------
Agreement, the following terms shall have the meanings indicated:
"material" means material to the party in question (as the case may
be) and its respective subsidiaries, taken as a whole.
"Material Adverse Effect," with respect to a person, means any
condition, event, change or occurrence that has or results in a material
adverse effect upon (A) the financial condition, properties, assets,
business or results of operations of such person and its subsidiaries,
taken as a whole, or (B) the ability of such person to perform its
obligations under, and to consummate the transactions contemplated by, this
Agreement. In the case of FNB, receipt of a CAMEL rating in connection
with a safety and soundness examination which is two levels lower than the
rating given to FNB in connection with the safety and soundness examination
most recently reported prior to the date of this Agreement shall be deemed
to have a "Material Adverse Effect" on FNB.
"person" includes an individual, corporation, partnership,
association, trust or unincorporated organization.
"subsidiary," with respect to a person, means any other person
controlled by such person.
When a reference is made in this Agreement to Sections, Annexes or Schedules,
such reference shall be to a Section of, or Annex or Schedule to, this Agreement
unless otherwise indicated. The table of contents, tie sheet
-30-
<PAGE>
and headings contained in this Agreement are for ease of reference only and
shall not affect the meaning or interpretation of this Agreement. Whenever the
words "include," "includes," or "including" are used in this Agreement, they
shall be deemed followed by the words "without limitation". Any singular term
in this Agreement shall be deemed to include the plural, and any plural term the
singular.
SECTION 7.2 Survival. The representations, warranties and agreements
--------
of the parties set forth in this Agreement shall not survive the Effective Time,
and shall be terminated and extinguished at the Effective Time, and from and
after the Effective Time none of the parties hereto shall have any liability to
the other on account of any breach or failure of any of those representations,
warranties and agreement; provided, however, that the foregoing clause shall not
-------- -------
(i) apply to agreements of the parties which by their terms are intended to be
performed either in whole or in part after the Effective Time, and (ii) shall
not relieve any person of liability for fraud, deception or intentional
misrepresentation.
SECTION 7.3 Parties in Interest. This Agreement shall be binding
-------------------
upon and inure solely to the benefit of each party hereto and their respective
successors and assigns, and, other than the right to receive the consideration
payable in the Merger pursuant to Article I hereof, is not intended to and shall
not confer upon any other person any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement; provided, however, it is
expressly recognized that Joseph H. Doble, Richard M. Stuart and Joan Hoglen are
entitled to the benefit of SBI's undertaking at Section 4.3.
SECTION 7.4 Waiver and Amendment. Prior to the Effective Time, any
--------------------
provision of this Agreement may be: (i) waived by the party benefitted by the
provision; or (ii) amended or modified at any time (including the structure of
the transaction) by an agreement in writing between the parties hereto approved
by their respective boards of directors, except that no amendment or waiver may
be made that would change the form or the amount of the Merger Consideration or
otherwise have the effect of prejudicing the FBC shareholders' interest in the
Merger Consideration following the FBC Shareholders' Meeting.
SECTION 7.5 Counterparts. This Agreement may be executed in
------------
counterparts each of which shall be deemed to constitute an original, but all of
which together shall constitute one and the same instrument.
SECTION 7.6 Governing Law. This Agreement shall be governed by, and
-------------
interpreted in accordance with, the laws of the Commonwealth of Pennsylvania,
or, to the extent it may control, federal law, without reference to the choice
of law principles thereof.
SECTION 7.7 Expenses. Subject to the provisions of Section 6.3
--------
hereof, each party hereto will bear all expenses incurred by it in connection
with this Agreement and the transactions described herein; provided, however,
that all filing and other fees (other than federal and state income taxes)
required to be paid to any governmental agency or authority in connection with
the consummation of the transactions described herein shall be paid by SBI.
SECTION 7.8 Notices. All notices, requests, acknowledgments and
-------
other communications hereunder to a party shall be in writing and shall be
deemed to have been duly given when delivered by hand, telecopy, telegram or
telex (confirmed in writing) to such party at its address set forth below or
such other address as such party may specify by notice to the other party
hereto.
-31-
<PAGE>
If to FBC, to:
Farmers Banc Corp.
114 North Main Street
Mullica Hill, NJ 08062
Attention:
With copies to:
Blank Rome Comisky & McCauley
Four Penn Center Plaza
Philadelphia, PA 17103-2599
Attention: Lawrence R. Wiseman, Esquire
If to FNB, to:
Farmers National Bank
114 North Main Street
Mullica Hill, NJ 08062
Attention:
With copies to:
Blank Rome Comisky & McCauley
Four Penn Center Plaza
Philadelphia, PA 17103-2599
Attention: Lawrence R. Wiseman, Esquire
If to SBI, to:
Susquehanna Bancshares, Inc.
26 North Cedar Street
Lititz, PA 17543
Attention: Robert S. Bolinger, President
and Chief Executive Officer
With copies to:
Morgan, Lewis & Bockius LLP
One Commerce Square
417 Walnut Street
Harrisburg, PA 17101-1904
Attention: Charles L. O'Brien, Esquire
and Wendy L. Holden, Esquire
-32-
<PAGE>
If to SBI Merger Sub II, to:
Susquehanna Bancshares East II, Inc.
c/o Susquehanna Bancshares, Inc.
26 North Cedar Street
Lititz, PA 17543
Attention: Robert S. Bolinger, President and Chief Executive
Officer
With copies to:
Morgan, Lewis & Bockius LLP
One Commerce Square
417 Walnut Street
Harrisburg, PA 17101-1904
Attention: Charles L. O'Brien, Esquire
and Wendy L. Holden, Esquire
SECTION 7.9 Entire Agreement; Etc. This Agreement, together with
---------------------
such other agreements as are executed by the parties in connection herewith, on
the date hereof, represent the entire understanding of the parties hereto with
reference to the transactions described herein and supersede any and all other
oral or written agreements heretofore made, including, without limitation, the
Confidentiality Agreement. All terms and provisions of this Agreement, together
with such other agreements as are executed by the parties in connection
herewith, on the date hereof, shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
Nothing in this Agreement is intended to confer upon any other person any rights
or remedies of any nature whatsoever under or by reason of this Agreement except
as expressly provided in Sections 4.3 and 4.13.
-33-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Plan to be
executed by their duly authorized officers as of the day and year first above
written.
SUSQUEHANNA BANCSHARES, INC.
By: /s/ Robert S. Bolinger
--------------------------------
Title: President and CEO
SUSQUEHANNA BANCSHARES EAST II, INC.
By: /s/ Wendy L. Holden
------------------------------
Title:
FARMERS BANC CORP.
By: /s/ Joseph H. Doble
--------------------------------
Title: President
FARMERS NATIONAL BANK
By: /s/ Joseph H. Doble
--------------------------------
Title: President
-34-
<PAGE>
SCHEDULE 1.2
Exchange Provisions
-------------------
So long as the Average Price Per Share of SBI Common Stock Before
Closing is between $25.00 and $31.00, then, pursuant to the Merger, FBC Common
Stock will be exchanged for SBI Common Stock at a ratio of 2.281 shares of SBI
Common Stock for each share of FBC Common Stock.
The Average Price Per Share of SBI Common Stock Before Closing shall
be determined by adding the price at which SBI Common Stock is reported to have
closed by NASDAQ's NMS (or if SBI Common Stock is not quoted on NASDAQ's NMS
then as reported by a recognized source as to the principal trading market on
which such shares are traded) over the period of ten business days ending of the
fifth business day preceding the date set for Closing, pursuant to Section
1.1(b) hereof, and dividing such total by 10 (such Average Price Per Share
Before Closing is also referred to as the "Average Closing Price").
FBC shall have the right to terminate this Agreement, in accordance
with Section 6.1(e), if the Average Price Per Share of SBI Common Stock Before
Closing is less than $25.00 (subject to adjustment in accordance with Section
1.2(c) herein). SBI shall have the right to terminate this Agreement, in
accordance with Section 6.1(f), if the Average Price Per Share of SBI Common
Stock Before Closing is greater than $31.00 (subject to adjustment in accordance
with Section 1.2(c) herein); provided, however, if such price is greater than
$31.00 (subject to adjustment in accordance with Section 1.2(c) herein) and SBI
does not exercise its termination right pursuant to Section 6.1(f), then all of
the shares of FBC shall be exchanged for the number of shares of SBI Common
Stock as provided in the first paragraph hereof.
<PAGE>
EXHIBIT 99
<PAGE>
SUSQUEHANNA BANCSHARES, INC.
26 NORTH CEDAR STREET, P.0. BOX 1000
LITITZ, PA 17543-7000
(717) 626-4721
JOINT PRESS RELEASE Date: July 18, 1996
FOR IMMEDIATE RELEASE:
Lititz, Pennsylvania
SUSQUEHANNA BANCSHARES, INC., A $3 BILLION MULTI-STATE
BANK HOLDING COMPANY TO ACQUIRE TWO NEW JERSEY
INSTITUTIONS WITH OVER $275 MILLION IN ASSETS.
Susquehanna Bancshares, Inc., Lititz, Pennsylvania (Susquehanna) (NASDAQ
NMS: SUSQ), jointly announced today with each of Farmers Banc Corp., Mullica
Hill, New Jersey (FBC) and Atcorp, Inc., Marlton, New Jersey (AI), the execution
of definitive acquisition agreements. Pursuant to the definitive agreement with
FBC, Susquehanna will acquire Farmers National Bank (FNB), a national banking
association with $83 million in assets as of 3/31/96. Pursuant to the
definitive agreement with AI, Susquehanna will acquire Equity National Bank
(ENB), a national banking association with $189 million in total assets as of
3/31/96. Each of these national banking associations exceeds all applicable
regulatory capital requirements.
Susquehanna will acquire FBC and its subsidiaries for approximately 692,620
shares of Susquehanna common stock, representing approximately $63.01 per share
for each FBC fully diluted share. Susquehanna will acquire AI and its
subsidiaries for approximately 771,750 shares of Susquehanna common stock,
representing approximately $27.63 per share for each AI fully diluted share.
The acquisitions are subject to federal and state regulatory approvals as
well as approval of the shareholders of FBC and the shareholders of AI.
These transactions represent Susquehanna's first foray into New Jersey.
Susquehanna presently owns four banks in Pennsylvania with $1.6 billion in
assets and a bank and three savings banks in Maryland with $1.4 billion in
assets. FBC is traded on the over-the-counter market; AI is traded on the over-
the-counter market also, under the symbol ATTS. Their acquisition is expected
to qualify for pooling-of-interests accounting treatment.
On a pro forma consolidated basis, as a result of these transactions
announced today, Susquehanna's assets will increase from $3.0 billion to $3.3
billion.
Susquehanna became the first holding company to own banks in both
Pennsylvania and Maryland when it acquired Farmers & Merchants Bank and Trust,
Hagerstown, Maryland in 1989. Its venture into New Jersey is consistent with
Susquehanna's strategy of acquiring successful, community-oriented banks in the
mid-Atlantic region. Robert S. Bolinger, President and Chief Executive Officer
of Susquehanna stated that "our experiences in serving the people, companies and
communities in Maryland and Pennsylvania have encouraged us to expand into
similar markets in New Jersey. We are delighted that Farmers National Bank and
Equity National Bank have agreed to join the Susquehanna family. By working
together under our community banking concept, we will be able to provide
commercial banking and trust services to the markets and customers of Farmers
National Bank and Equity National Bank." Joseph H. Doble, President of FBC and
FNB, Marc L. Reitzes, Chairman and C.E.O. of AI, Michael M. Quick, President and
C.O.O. of AI and Mr. Bolinger joined together noting "We believe these
acquisitions will inure
-1-
<PAGE>
to the benefit of all parties. Even more importantly, we expect the communities
and customers to benefit as we continue to provide the quality banking services
that all of our customers have come to expect and appreciate, delivered in a
friendly, personalized manner by local people through a network of 10 financial
institutions with 112 community banking offices."
Susquehanna Bancshares, Inc. is the holding company for Atlantic Federal
Savings Bank, Baltimore, Md.; Citizens National Bank of Southern Pennsylvania,
Greencastle, Pa.; Fairfax Savings, AFSB, Baltimore, Md.; Farmers & Merchants
Bank and Trust, Hagerstown, Md.; Farmers First Bank, Lititz, Pa.; First National
Trust Bank, Sunbury, Pa.; Reisterstown Federal Savings Bank, Reisterstown, Md.;
Williamsport National Bank, Williamsport, Pa.; Susque-Bancshares Life Insurance
Company, Lititz, Pa.; and Susque-Bancshares Leasing Co., Inc., Lititz, Pa.
Susquehanna Bancshares, Inc.'s common stock is listed on the NASDAQ
National Market System under the symbol SUSQ. Susquehanna member banks now have
106 community banking offices throughout central Pennsylvania and Maryland.
For Further Information Contact: Robert S. Bolinger
President and C.E.O.
SUSQUEHANNA BANCSHARES, INC.
Office: (717) 626-4721
-2-
