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
Date of Report - June 30, 1997
SUN BANCORP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 000-14745
--------------------- ---------------
State or other jurisdiction (Commission File
of incorporation) Number)
23-2233584
------------
(IRS Employer Identification Number)
2-16 South Market Street 17870
Post Office Box 57 ---------
Selinsgrove, Pennsylvania (Zip Code)
- --------------------------
(Address of principal
executive offices)
Registrant's telephone number including area code: (717) 374-1131
---------------
N/A
------------------------------------------
(Former name or former address, if changed since last report)
Page 1 of 79 Sequentially Numbered Pages
Index to Exhibits Found on Page 6
<PAGE>
Item 1. Changes in Control of Registrant.
Not Applicable.
Item 2. Acquisition or Disposition of Assets.
Sun Bancorp, Inc. ("Sun" or the "Registrant") completed
the acquisition of Bucktail Bank and Trust Company, a
Pennsylvania chartered bank and trust company, ("Bucktail") from
F.N.B. Corporation ("FNB"), Bucktail's parent multi bank holding
company, (the "Acquisition") and the merger of Bucktail with,
into and under the charter of Sun Bank, a wholly-owned subsidiary
of the Registrant and a Pennsylvania chartered bank and trust
company, (the "Merger"), effective at 4:59 p.m., June 30, 1997.
The Acquisition and the Merger are collectively referred to
herein as the "Transaction." The transaction was effected
pursuant to the terms and conditions of an Agreement and Plan of
Reorganization, dated November 6, 1996, among the Registrant, Sun
Bank, FNB and Bucktail (the "Agreement"). The Agreement is
attached hereto as Exhibit 2. All capitalized terms used herein
and not defined herein have the meanings ascribed to them in the
Agreement.
Under the terms of the Agreement, Sun issued 565,384
shares of its common stock, par value $1.25 per share (the "Sun
Common Stock") for all of the issued and outstanding shares of
Bucktail, pursuant to a Private Placement Memorandum.
Simultaneously therewith, Bucktail merged with, into and under
the charter of Sun Bank.
The addition of Bucktail's approximately $118 million in
assets, increases, on a proforma basis, Sun's total assets,
deposits and shareholders equity to approximately $495.9 million,
$311.9 million and $58.4 million, respectively. With the
addition of Bucktail's main office in Emporium, Pennsylvania, and
six (6) branch offices in the Emporium, Pennsylvania market area
and the Williamsport, Pennsylvania market area, Sun now has
thirteen (13) banking offices in Cameron, Elk, Lycoming,
Northumberland, Snyder and Union counties, Pennsylvania. Sun
Bank trades and does business under the names, Snyder County
Trust Company, incorporated as Sun Bank, and The Watsontown Bank,
incorporated as Sun Bank. Sun Bank will operate Bucktail's
Emporium and Johnsontown branches under the name "Bucktail Bank
and Trust Company," and Bucktail's Williamsport, Pennsylvania
offices under the name "Central Pennsylvania Bank."
The transaction was structured to qualify as a tax free
reorganization under the Internal Revenue Code of 1986, as
amended, and will be treated as a purchase for financial
reporting purposes.
Pursuant to the Agreement, Sun and FNB entered into a
Stock Investment Agreement, dated November 6, 1996 (the "Stock
Investment Agreement"). The Stock Investment Agreement sets
forth certain restrictions and limitations with respect to, and
governs all rights of FNB to acquire, hold or transfer, shares of
Sun Common Stock. The Stock Investment Agreement survives the
Acquisition and the Merger. The Stock Investment Agreement does
not grant FNB any preemptive or other right to purchase or
receive authorized but unissued shares of Sun Common Stock. In
the event that Sun issues any shares of Sun Common Stock for any
reason, there is no obligation on the part of Sun to issue
authorized, but unissued shares of Sun Common Stock to FNB in
order for FNB to maintain its percentage ownership interest in
Sun. In the event that Sun issues shares of Sun Common Stock
such that the issuance increases the number of outstanding shares
of Sun Common Stock by more than one percent, Sun must give
concurrent written notice to FNB of such issuance of stock.
<PAGE>
The Stock Investment Agreement prohibits FNB, for a
period of five years following the Effective Date, from acquiring
or gaining beneficial ownership of shares of Sun Common Stock or
other capital stock of Sun if the result of such acquisition
would be to cause FNB to be the beneficial owner of more than 20
percent of the shares of Sun Common Stock or other capital stock
of Sun then outstanding. Further, FNB is prohibited from
transferring, selling or exchanging shares of Sun Common Stock
beneficially owned by FNB for a period of two years after the
Effective Date. Subject to the notice provisions of the Stock
Investment Agreement, from a period commencing two years after
the Effective Date and ending four years after the Effective
Date, FNB may only transfer, sell or exchange during each
calendar quarter Sun Common Stock beneficially owned by FNB in an
aggregate amount no greater than one-half of one percent of the
shares of Sun Common Stock then outstanding. Subject to the
notice provisions of the Stock Investment Agreement, from a
period commencing four years after the Effective Date and ending
six years after the Effective Date, FNB may only transfer, sell
or exchange during each calendar quarter Sun Common Stock
beneficially owned by FNB in an aggregate amount no greater than
one percent of the shares of Sun Common Stock then outstanding.
FNB has agreed, pursuant to the Stock Investment
Agreement, to promptly give Sun written notice if at any time:
(i) FNB desires or intends to transfer, sell, or exchange Sun
Common Stock, or enters into any contract or arrangement to do
so; (ii) FNB enters into an agreement to merge, consolidate, or
sell or transfer all or substantially all of the assets of FNB,
where FNB is not the surviving entity or institution; (iii) FNB
becomes or is about to become insolvent, bankrupt under the
federal bankruptcy laws, in receivership under the laws of any
jurisdiction, or the subject or cause of any assignment for the
benefit of creditors; or (iv) any Sun Common Stock owned or held
by FNB is or is about to be exchanged or transferred by operation
of law, or by reason of or pursuant to any judgment, decree,
order of any court (other than one enforcing the provisions of
the Stock Investment Agreement). Such written notice must
contain the identification of the proposed transferee, the amount
of Sun Common Stock transferred, sold or exchanged or to be
transferred, sold or exchanged or, if applicable, that the shares
of Sun Common Stock are intended to be offered or distributed in
an open market transaction. The Stock Investment Agreement also
grants Sun the right of first refusal, but not the obligation to
purchase, any or all of FNB's Sun Common Stock in the event that
FNB elects to dispose of such stock as provided in accordance
with the Stock Investment Agreement.
Under the terms of the Stock Investment Agreement, FNB
has certain registration rights with respect to the shares of Sun
Common Stock received in the Transaction. In addition, Sun
proposes to file a Registration Statement on Form S-3,
registering the resale of the 565,384 shares of Sun Common Stock,
received by FNB in the Transaction.
The description of the transaction set forth herein is
qualified in its entirety by reference to the Agreement, the
Agreement and Plan of Merger, dated as of November 6, 1996,
between Sun Bank and Bucktail and the Stock Investment Agreement,
which Agreement and Plan of Merger and Stock Investment Agreement
are attached as Exhibits A and B respectively, to the Agreement,
attached hereto as Exhibit 2.
Item 3. Bankruptcy or Receivership.
Not Applicable.
<PAGE>
Item 4. Changes in Registrant's Certifying Accountant.
Not Applicable.
Item 5. Other Events.
Not Applicable.
Item 6. Resignations of Registrant's Directors.
Not Applicable.
Item 7. Financial Statements and Exhibits.
(a) The financial statements required hereunder are set
forth at Exhibit 99.2.
(b) The Registrant will file the pro forma financial
information required hereunder, by Amendment
hereto, at Exhibit 99.3, not later than Monday,
September 15, 1997.
(c) Exhibits:
2 Agreement and Plan of Reorganization dated
November 6, 1996, among Registrant, Sun Bank,
F.N.B. Corporation and Bucktail Bank and Trust
Company.
23.1 Consent of Parente, Randolph, Orlando, Carey &
Associates, Independent Accountants.*
23.2 Consent of Ernst & Young LLP, Independent
Auditors.
99.1 Press Release, of Registrant, dated July 1,
1997, re: Acquisition of Bucktail Bank and Trust
Company.
99.2 Audited Financial Statements of Bucktail Bank
and Trust Company, including Report of
Independent Auditors for the year ended December
31, 1996.
99.3 Pro forma financial information.*
_____________
* To Be Filed By Amendment
Item 8. Change in Fiscal Year.
Not Applicable.
<PAGE>
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.
SUN BANCORP, INC.
(Registrant)
Dated: July 11, 1997 /s/ Fred W. Kelly,Jr.
----------------------------
Fred W. Kelly, Jr., President and
Chief Executive Officer
(Principal Executive Officer)
/s/ Jeffrey E. Hoyt
-----------------------------
Jeffrey E. Hoyt, Secretary
<PAGE>
EXHIBIT INDEX
-------------
Page Number
in Manually
Exhibit Signed Original
- ------- ----------------
2 Agreement and Plan of Reorganization dated 8
November 6, 1996, among Registrant, Sun Bank,
F.N.B. Corporation and Bucktail Bank and
Trust Company.
23.1 Consent of Parente, Randolph, Orlando,
Carey & Associates, Independent Accountants.*
23.2 Consent of Ernst & Young LLP, Independent 58
Auditors.
99.1 Press Release, dated July 1, 1997, 60
of Registrant re: Acquisition of Bucktail
Bank and Trust Company.
99.2 Audited Financial Statements of Bucktail Bank 62
and Trust Company, including Report of
Independent Auditors, for the year ended
December 31, 1996.
99.3 Pro forma financial information.*
_______________________________
* To be filed by Amendment.
Exhibit 2
Agreement and Plan of Reorganization
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
SUN BANCORP, INC.,
SUN BANK,
F.N.B. CORPORATION,
AND
BUCKTAIL BANK AND TRUST COMPANY
November 6, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I AGREEMENT AND PLAN OF MERGER AND
STOCK INVESTMENT AGREEMENT
1.1 Agreement and Plan of Merger 2
1.2 Stock Investment Agreement 2
ARTICLE II CONVERSION OF SHARES AND EXCHANGE OF STOCK
CERTIFICATES
2.1 Conversion of Shares 2
2.2 Exchange of Stock Certificates 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF FNB AND
BUCKTAIL BANK
3.1 Authority 4
3.2 Organization and Standing 5
3.3 No Subsidiaries 5
3.4 Capitalization 5
3.5 Articles of Incorporation, Bylaws
and Minute Books 6
3.6 Financial Statements 6
3.7 Absence of Undisclosed Liabilities 6
3.8 Absence of Changes 6
3.9 Dividends, Distributions and
Stock Purchases 6
3.10 Taxes 7
3.11 Title to and Condition of Assets 7
3.12 Contracts 7
3.13 Litigation and Governmental Directives 8
3.14 Compliance with Laws: Governmental
Authorizations 8
3.15 Insurance 8
3.16 Financial Institutions Bond 8
3.17 Labor Relations 9
3.18 Employee Benefit Plans 9
3.19 Related Party Transactions 10
3.20 No Finder 10
3.21 Significant Customers 10
3.22 Complete and Accurate Disclosure 10
3.23 Beneficial Ownership of Sun Common Stock 11
3.24 Environmental Matters 11
3.25 Non-Registration Under the 1934 Act 13
3.26 Deposit Insurance 13
i
<PAGE>
3.27 Repurchase Agreements 13
3.28 Assumability of Leases and Contracts 13
3.29 Loans 13
3.30 Accuracy of Representations 13
3.31 Absence of Questionable Payments 13
3.32 Powers of Attorney, Guarantees 14
3.33 Adjustable Rate Mortgages 14
3.34 CRA Compliance 14
3.35 Derivatives 14
3.36 Loan Loss Reserve 14
3.37 Loan Portfolio 14
3.38 Trust Department and Fiduciary
Relationships 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SUN
4.1 Authority 15
4.2 Organization and Standing 15
4.3 Capitalization 16
4.4 Articles of Incorporation and Bylaws 16
4.5 Financial Statements 16
4.6 Absence of Undisclosed Liabilities 16
4.7 Absence of Changes 16
4.8 Litigation 17
4.9 Compliance with Laws: Government
Authorizations 17
4.10 Complete and Accurate Disclosure 17
4.11 Registration Under the 1934 Act 18
4.12 Accuracy of Representations 18
4.13 CRA Compliance 18
4.14 Loan Loss Reserve 18
4.15 Derivatives 18
4.16 Reports 18
4.17 Fundamental Corporate Change 18
4.18 Brokers 18
4.19 National Market System 18
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SUN BANK
5.1 Capital Structure of Sun Bank 19
5.2 Organization and Standing 19
5.3 Authorized and Effective Agreement 19
ARTICLE VI COVENANTS OF FNB AND BUCKTAIL BANK
6.1 Conduct of Business 20
6.2 Best Efforts 22
6.3 Access to Properties and Records 23
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<PAGE>
6.4 Subsequent Financial Statements 23
6.5 Update Schedule 23
6.6 Notice 24
6.7 Other Proposals 24
6.8 Dividends and Management Fees 24
6.9 Accounting Treatment 24
6.10 Laws, Rules, Etc. 24
6.11 Asset, Liability and Capital Transfers 24
6.12 Liability Transfer 25
6.13 Branches 25
6.14 Insurance Reports 25
ARTICLE VII COVENANTS OF SUN AND SUN BANK
7.1 Best Efforts 25
7.2 Access to Properties and Records 26
7.3 Subsequent Financial Statements 26
7.4 Update Schedule 26
7.5 Notice 26
7.6 Sun Authorization and Approvals 26
7.7 Conduct of Business 26
7.8 Preservation of Business 27
7.9 Insurance 27
7.10 Laws, Rules, Etc. 27
ARTICLE VIII CONDITIONS PRECEDENT
8.1 Common Conditions 27
8.2 Conditions Precedent to Obligations
of Sun and Sun Bank 28
8.3 Conditions Precedent to the Obligations
of FNB and Bucktail Bank 32
ARTICLE IX TERMINATION AMENDMENT AND WAIVER
9.1 Termination 35
9.2 Effect of Termination 36
9.3 Amendment 36
9.4 Waiver 36
ARTICLE X CLOSING AND EFFECTIVE DATE
10.1 Closing 37
10.2 Effective Date 37
iii
<PAGE>
ARTICLE XI NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES
11.1 No Survival 37
ARTICLE XII POST-MERGER AGREEMENTS
12.1 Employees 37
12.2 Board of Directors of Sun 39
12.3 Continuing Services 39
ARTICLE XIII GENERAL PROVISIONS
13.1 Expenses 40
13.2 Publicity 40
13.3 Confidentiality 40
13.4 Other Mergers and Acquisitions 40
13.5 Notices 41
13.6 Counterparts 42
13.7 Governing Law 42
13.8 Parties in Interest 42
13.9 Entire Agreement 42
EXHIBITS: AGREEMENT AND PLAN OF MERGER A-1
("BANK MERGER AGREEMENT")
STOCK INVESTMENT AGREEMENT B-1
FNB CORPORATION STOCK ASSIGNMENT C-1
RELEASE D-1
SCHEDULE I I-1
SCHEDULE II II-1
iv
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (hereinafter
"Agreement") is dated and made this 6th day of November, 1996, by
and among SUN BANCORP, INC., a Pennsylvania business corporation
having its corporate headquarters at 2-16 South Market Street,
P.O. Box 57, Selinsgrove, Pennsylvania 17870 ("Sun"); SUN BANK, a
Pennsylvania state-chartered bank and trust company and a
subsidiary of Sun, having its corporate headquarters at 2-16
South Market Street, P.O. Box 57, Selinsgrove, Pennsylvania 17870
("Sun Bank"), F.N.B. CORPORATION, a Pennsylvania business
corporation having its corporate headquarters at Hermitage
Square, 3320 E. State Street, Hermitage, Pennsylvania 16148-3389
("FNB"); and BUCKTAIL BANK AND TRUST COMPANY, a Pennsylvania
state-chartered bank and trust company and a subsidiary of FNB,
having its corporate headquarters at 2 E. 4th Street, Emporium,
Pennsylvania 15834-0350 ("Bucktail Bank"). (Collectively,
sometimes referred to as the "Parties".)
Background:
----------
Sun is a Pennsylvania business corporation and a registered
bank holding company. Sun Bank is a Pennsylvania state-chartered
bank and trust company and a wholly-owned subsidiary of Sun. Sun
Bank trades and does business under the names Snyder County Trust
Company and Watsontown Bank. FNB is a Pennsylvania business
corporation and a multibank holding company. Bucktail Bank is a
Pennsylvania state-chartered bank and trust company and a
wholly-owned
subsidiary of FNB. Sun wishes to acquire Bucktail Bank by
offering and exchanging shares of Sun Common Stock. FNB desires
to exchange all outstanding shares of Bucktail Bank for shares of
Sun. Bucktail Bank wishes to merge with and into Sun Bank.
Subject to the terms and conditions of this Agreement, the
foregoing transaction will be accomplished by means of a
reorganization and merger under which Bucktail Bank will be
merged with and into Sun Bank. Sun Bank will survive the merger,
and all of the outstanding shares of the $25.00 par value common
stock of Bucktail Bank ("Bucktail Common Stock") will be
converted into shares of the $1.25 par value common stock of Sun
("Sun Common Stock") in the manner, on the terms, and subject to
the conditions of this Agreement and a Stock Investment Agreement
by and between Sun and FNB.
WITNESSETH:
----------
NOW, THEREFORE, in consideration of the premises, mutual
promises, covenants, agreements, representations and warranties
hereinafter set forth, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the
parties agree as follows:
1
<PAGE>
ARTICLE I
AGREEMENT AND PLAN OF MERGER AND STOCK INVESTMENT AGREEMENT
Section 1.1 Agreement and Plan of Merger. Subject to the
terms and conditions of this Agreement, Bucktail Bank shall merge
with and into Sun Bank ("Merger") in accordance with the
Agreement and Plan of Merger attached hereto as Exhibit "A"
("Bank Merger Agreement") and pursuant to the provisions of the
Pennsylvania Banking Code of 1965, as amended ("Banking Code").
Section 1.2 Stock Investment Agreement. Subject to terms
and conditions of this Agreement, Sun and FNB shall enter into
the Stock Investment Agreement attached hereto as Exhibit "B."
ARTICLE II
CONVERSION OF SHARES AND
EXCHANGE OF STOCK CERTIFICATES
Section 2.1 Conversion of Shares. On the Effective Date
(as defined in Section 10.2 of this Agreement) the shares of
Bucktail Common Stock then outstanding shall be converted into
shares of Sun Common Stock, as follows:
(a) General. Subject to the provisions of this
Article II, each share of Bucktail Common Stock issued and
outstanding immediately before the Effective Date (other than
shares of such common stock, if any, then owned by Bucktail Bank)
shall, on the Effective Date, be converted into and become,
without any action on the part of the holder thereof, the right
to receive 10.052290 shares of Sun Common Stock. The aggregate
number of shares of Sun Common Stock exchanged for all
outstanding shares of Bucktail Common Stock shall be 538,461
shares of Sun Common Stock.
(b) Antidilution Provision. In the event that Sun
shall at any time before the Effective Date: (i) declare or pay a
dividend in shares of Sun Common Stock, (ii) combine the
outstanding shares of Sun Common Stock into a smaller number of
shares, or (iii) subdivide the outstanding shares of Sun Common
Stock into a greater number of shares, then the number of shares
of Sun Common Stock into which each share of Bucktail Common
Stock is to be converted pursuant to Section 2.1(a) of this
Article II shall be proportionately adjusted (calculated to four
decimal places), so that FNB, as sole shareholder of Bucktail
Bank, shall on the Effective Date receive in exchange for its
shares of Bucktail Common Stock the number of shares of Sun
Common Stock as would then have been owned by it if the Effective
Date had occurred before the record date of such event. The
Maximum Market Price (as defined in Section 2.1(d) below) shall
be proportionately adjusted to two decimal places and the Minimum
Market Price (as defined in Section 2.1(d) below) shall be
proportionately adjusted to two decimal places.
2
<PAGE>
(c) No Fractional Shares. No fractional shares of Sun
Common Stock, and no scrip or certificates therefor, shall be
issued in connection with the Merger. In lieu of the issuance of
any fractional share to which FNB would otherwise be entitled,
FNB shall receive in cash an amount equal to the fair market
value of its fractional interest which fair market value shall be
determined by multiplying such fraction by the Closing Market
Price (as defined in Section 2.1(d) of this Article II).
(d) Closing Market Price. For purposes of this
Agreement, the Closing Market Price shall be the arithmetic
average of the average of the per share closing bid and asked
reported prices for Sun Common Stock for the fifteen (15) trading
days immediately preceding the date of receipt of the last
required regulatory approval for the transactions contemplated by
this Agreement, the Bank Merger Agreement and the Stock
Investment Agreement from the Pennsylvania Department of Banking,
the Federal Deposit Insurance Corporation, and the Board of
Governors of the Federal Reserve System ("Approval Date"), as
reported on the National Market System of the National
Association of Securities Dealers Automated Quotation System
(NASDAQ/NMS), the foregoing fifteen (15) trading days being
hereinafter sometimes referred to as the "Price Determination
Period." (For example, if March 3, 1997 is the Approval Date,
the Price Determination Period, would be February 7, 10, 11, 12,
13, 14, 18, 19, 20, 21, 22, 25, 26, 27 and 28, 1997). In the
event that NASDAQ/NMS shall fail to report closing bid and asked
prices for Sun Common Stock for any trading day during the Price
Determination Period, then the closing bid and asked reported
prices for that day shall be equal to the arithmetic average of
the closing bid and asked quoted prices as reported: (i) by
Janney Montgomery Scott, Inc. and by F. J. Morrissey & Co., Inc.;
or, in the event that neither of these firms is then making a
market in Sun Common Stock, (ii) by two brokerage firms then
making a market in Sun Common Stock to be selected by Sun and
approved by FNB. The Maximum Market Price (which is subject to
adjustment under Section 2.1(b) of this Article II) is Forty
Dollars ($40.00) per share. As provided in Section 8.2(g) of
this Agreement, the obligations of Sun and Sun Bank to consummate
this Agreement is subject to the condition that the Closing
Market Price not be more than the Maximum Market Price. The
Minimum Market Price (which is subject to adjustment under
Section 2.1(b) of this Article II) is Twenty-Eight Dollars and
Forty-Four Cents ($28.44) per share. As provided in Section
8.3(d) of this Agreement, the obligations of FNB and Bucktail
Bank to consummate this Agreement is subject to the condition
that the Closing Market Price not be less than the Minimum Market
Price.
(e) Bucktail Treasury Stock. Each share of Bucktail
Common Stock issued and held in the treasury of Bucktail Bank as
of the Effective Date, if any, shall be cancelled, and no cash,
stock, or other property shall be delivered in exchange therefor.
(f) Sun Common Stock.
(1) Each share of Sun Common Stock issued and
outstanding immediately prior to the Effective Date, shall, on
and after the Effective Date, continue to be issued and
outstanding as an identical share of Sun Common Stock.
3
<PAGE>
(2) Each share of Sun Common Stock issued and
held in the treasury of Sun as of the Effective Date, if any,
shall, on and after the Effective Date, continue to be issued and
held in the treasury of Sun.
Section 2.2. Exchange of Stock Certificates. Bucktail
Common Stock certificates shall be exchanged for Sun Common Stock
certificates at Closing in accordance with the following
procedures:
(a) Surrender of Bucktail Bank Certificates. At
Closing (as defined in Section 10.1 of this Agreement), FNB shall
surrender all of its Bucktail Common Stock certificates to Sun.
Upon receiving a proper surrender of Bucktail Common Stock
certificates from FNB, Sun shall issue to FNB, in exchange
therefor, a Sun Common Stock certificate representing the whole
number of shares of Sun Common Stock into which the shares of
Bucktail Common Stock held by FNB have been converted in
accordance with this Article II, together with a check in the
amount of any cash to which FNB is entitled, pursuant to Section
2.1(c) of this Agreement, in lieu of the issuance of a fractional
share.
(b) Exchange Procedures. Each certificate for shares
of Bucktail Common Stock delivered for exchange under this
Article II must be endorsed in blank by FNB and be accompanied by
an assignment of transfer of such shares in the form attached
hereto as Exhibit "C." FNB hereby agrees to surrender to Sun and
exchange all shares representing 100% of its ownership interest
in Bucktail Bank. If more than one certificate is surrendered by
FNB, the number of whole shares of Sun Common Stock for which
certificates will be issued pursuant to this Article II will be
computed on the basis of the aggregate number of shares
represented by the certificates so surrendered.
(c) Closing of Stock Transfer Books; Cancellation of
Bucktail Bank Certificates. Upon the Effective Date, the stock
transfer books for Bucktail Common Stock will be closed and no
further transfers of shares of Bucktail Common Stock will
thereafter be made or recognized. All certificates for shares of
Bucktail Common Stock surrendered pursuant to this Article II
will be cancelled by Sun.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FNB AND BUCKTAIL BANK
FNB and Bucktail Bank represent and warrant to Sun and Sun Bank
as follows:
Section 3.1 Authority. Each of FNB and Bucktail Bank has
all requisite corporate power and authority to enter into and
perform all of its obligations under this Agreement, the Bank
Merger Agreement and the Stock Investment Agreement. The
execution and delivery of this Agreement, the Bank Merger
Agreement and the Stock Investment Agreement and the performance
of the transactions contemplated herein and therein,
respectively, have been duly and validly authorized by the Board
of Directors of FNB and Bucktail Bank and, subject to approval of
this Agreement, the Bank Merger Agreement and the Stock
Investment Agreement
4
by any required shareholder approvals, FNB and Bucktail Bank have
taken all corporate action necessary on their part to authorize
this Agreement, the Bank Merger Agreement and the Stock
Investment Agreement and the performance of the transactions
contemplated herein and therein, respectively. This Agreement,
the Bank Merger Agreement and the Stock Investment Agreement have
been duly executed and delivered by FNB and Bucktail Bank and,
assuming due authorization, execution and delivery by Sun and Sun
Bank, constitute valid and binding obligations of FNB and
Bucktail Bank, in each case enforceable against them in
accordance with their respective terms, subject to bankruptcy,
insolvency, and other laws of general applicability relating to
or affecting creditors' rights and general equity principles.
Neither the execution and delivery of this Agreement, the Bank
Merger Agreement and the Stock Investment Agreement, nor
consummation of the transactions contemplated hereby or thereby
respectively, nor compliance by FNB or Bucktail Bank with any of
the provisions hereof or thereof respectively shall (i) conflict
with or result in a breach of any provisions of the Articles of
Incorporation or By-laws of FNB or Bucktail Bank, (ii) constitute
or result in a material breach of any term, condition or
provisions of, or constitute a default under or give rise to any
right of termination, cancellation or acceleration with respect
to, or result in the creation of any lien, charge or encumbrance
upon any property or asset of FNB or Bucktail Bank pursuant to
any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation, or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to FNB
or Bucktail Bank.
Section 3.2 Organization and Standing. FNB is a duly
organized Pennsylvania business corporation. Bucktail Bank is a
duly organized Pennsylvania state-chartered bank and trust
company. Both FNB and Bucktail Bank are validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania.
FNB and Bucktail Bank (i) have full power and authority to carry
out their own business as now conducted and (ii) are duly
qualified to do business in the states of the United States and
foreign jurisdictions where their ownership or leasing of
property or the conduct of their business requires such
qualification and where failure to so qualify would have a
material adverse effect on the financial condition, results of
operations, business or prospects of Bucktail Bank.
Section 3.3 No Subsidiaries. Bucktail Bank owns no
subsidiaries, directly or indirectly.
Section 3.4 Capitalization. The authorized capital stock
of Bucktail Bank consists solely of 100,000 shares of common
stock, par value Twenty Five Dollars ($25.00) per share
("Bucktail Common Stock"), of which, at the date hereof, 53,566
shares are issued and outstanding. All outstanding shares of
Bucktail Common Stock have been duly issued and are validly
outstanding, fully paid and nonassessable. None of the shares of
Bucktail Common Stock have been issued in violation of the
preemptive rights of any person or entity. There are no
authorized, issued, or outstanding options, convertible
securities, warrants or other rights to purchase or acquire any
of the Bucktail Common Stock from Bucktail Bank or FNB, and there
is no commitment of Bucktail Bank to issue the same. There are
no outstanding agreements, restrictions, contracts, commitments
or demands of any character to which Bucktail Bank is a party,
which relate to the transfer or restrict the transfer of any
shares of Bucktail Common Stock. There are no shareholder
agreements, understandings or commitments relating to the right
of FNB to vote or dispose of its shares of Bucktail Common Stock.
All issued and
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outstanding shares of Bucktail Common Stock are owned by FNB, and
Bucktail Bank is a wholly-owned subsidiary of FNB. FNB has no
agreements, contracts or understandings in connection with shares
of Bucktail Common Stock. FNB has no agreements in which
Bucktail Common Stock serves as collateral.
Section 3.5 Articles of Incorporation, Bylaws and Minute
Books. The copies of the Articles of Incorporation and Bylaws of
Bucktail Bank which have been delivered to Sun and Sun Bank are
true, correct and complete. Except as disclosed on Schedule I,
all minute books of Bucktail Bank have been made available to Sun
and Sun Bank for inspection and are true, correct and complete in
all material respects and record the actions taken by the Board
of Directors of Bucktail Bank at the meetings documented in the
minutes in all material respects.
Section 3.6 Financial Statements. Bucktail Bank has
delivered to Sun and Sun Bank (i) Balance Sheets, Statements of
Earnings and Statements of Stockholders' Equity of Bucktail Bank
for the years ended December 31, 1995 and December 31, 1994; and
(ii) Consolidated Reports of Condition and Income as of September
30, 1996, as filed with the Federal Deposit Insurance Corporation
(the aforementioned Consolidated Report of Condition as of
September 30, 1996, being hereinafter referred to as the "Bank
Balance Sheet"). Each of the foregoing financial statements
fairly presents the financial condition, assets and liabilities,
and results of operations of Bucktail Bank at their respective
dates and for the respective periods then ended and has been
prepared in accordance with generally accepted accounting
principles consistently applied, except as otherwise noted in a
footnote thereto. The books and records of Bucktail Bank are
maintained in accordance with generally accepted accounting
principles consistently applied.
Section 3.7 Absence of Undisclosed Liabilities. Except as
disclosed in Schedule I, or as reflected, noted or adequately
reserved against in the Bank Balance Sheet, as at September 30,
1996, Bucktail Bank had no liabilities (whether accrued,
absolute, contingent or otherwise) or asset impairment which are
required to be reflected, noted or reserved against therein under
generally accepted accounting principles or which are, in any
case or in the aggregate, material. Except as disclosed in
Schedule I, since September 30, 1996, Bucktail Bank has not
incurred any such liability, other than liabilities of the same
nature as those set forth in the Bank Balance Sheet, all of which
have been reasonably incurred in the ordinary course of business
consistent with customary business practices of prudently-managed
banks (hereinafter referred to as "Ordinary Course of Business").
Section 3.8 Absence of Changes. Since September 30, 1996,
Bucktail Bank has conducted its business in the Ordinary Course
of Business and, except as disclosed in Schedule I, Bucktail Bank
has not undergone any material and adverse change in condition
(financial or otherwise), assets, liabilities, business,
operations, or future prospects.
Section 3.9 Dividends, Distributions and Stock Purchases.
Except as disclosed on Schedule I, since January 1, 1996,
Bucktail Bank has not declared, set aside, made or paid any
dividend or other distribution in respect of the Bucktail Common
Stock, or purchased, issued or sold any shares of Bucktail Common
Stock.
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Section 3.10 Taxes. FNB and Bucktail Bank have filed or
caused to be filed all federal, state, county, municipal and
foreign tax returns, reports and declarations which are required
to be filed by Bucktail Bank relating to Bucktail Bank. No tax
liens have been imposed on FNB relating to Bucktail Bank which
may affect the transferability of Bucktail Bank's assets or the
transferability of outstanding shares of Bucktail Bank. Except
as disclosed in Schedule I, (i) Bucktail Bank has paid all taxes,
penalties and interest which have become due pursuant to such
returns or which became due pursuant to assessments, and (ii)
Bucktail Bank has not received any notice of deficiency or
assessment of additional taxes and no tax audits are in process.
The Internal Revenue Service ("IRS") has not, to the knowledge of
FNB and Bucktail Bank, commenced, or given notice of its
intention to commence any examination or audit of the federal
income tax returns of Bucktail Bank for any year through and
including the year ended December 31, 1992. Bucktail Bank has
not granted any waiver of any statute of limitations or otherwise
agreed to any extension of a period for the assessment of any
federal, state, county, municipal or foreign income tax. Except
as disclosed in Schedule I, the accruals and reserves reflected
in the Bank Balance Sheet are adequate to cover all taxes
(including interest and penalties, if any, thereon) payable or
accrued as a result of its operations for all periods prior to
the date of the Bank Balance Sheet.
Section 3.11 Title to and Condition of Assets. Except as
disclosed in Schedule I, Bucktail Bank has good and marketable
title to all real and personal properties and assets reflected in
the Bank Balance Sheet or acquired subsequent to September 30,
1996 (other than property and assets disposed of in the Ordinary
Course of Business), free and clear of all liens or encumbrances
of any kind whatsoever other than: (i) as reflected in the Bank
Balance Sheet or in Schedule I; (ii) liens of current taxes not
yet due; and (iii) such imperfections of title, encumbrances and
easements, if any, as are not substantial in character, amount or
extent and do not materially detract from the value, or interfere
with the present or proposed use, of the properties and assets
subject thereto. The structures and other improvements to real
estate, furniture, fixtures and equipment reflected in the Bank
Balance Sheet or acquired subsequent to September 30, 1996, are
in good operating condition and repair (ordinary wear and tear
excepted) and comply in all material respects with all applicable
laws, ordinances and regulations, including without limitation
all building codes, zoning ordinances and other similar laws.
Bucktail Bank owns or has the right to use all real and personal
properties and assets necessary to the conduct of its business as
now conducted.
Section 3.12 Contracts. Each written or oral contract
(other than contracts with customers reasonably incurred by
Bucktail Bank in the Ordinary Course of Business) which involves
aggregate payments or receipts in excess of $15,000 per year,
including without limitation every employment contract,
employment benefit plan, agreement, lease, license, and other
commitment to which Bucktail Bank is a party or by which Bucktail
Bank or its properties may be bound ("Material Contracts"), is
identified in Schedule I. Except as disclosed in Schedule I, all
such contracts, agreements, leases, licenses and other
commitments are valid and in full force and effect, and to the
best of Bucktail Bank's knowledge, all parties thereto have in
all material respects performed all obligations required to be
performed by them to date and are not in default in any material
respect. Schedule I identifies all such contracts, agreements,
leases, licenses and other commitments which require the consent
or approval of third parties to the
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execution and delivery of this Agreement or to the consummation
of the transactions contemplated herein.
Section 3.13 Litigation and Governmental Directives.
Except as disclosed in Schedule I: (i) there is no litigation,
investigation or proceeding pending, or to the knowledge of FNB
and Bucktail Bank threatened, that involves Bucktail Bank or its
properties and that, if determined adversely, would materially
and adversely affect the condition (financial or otherwise),
assets, liabilities, business, operations or future prospects of
Bucktail Bank; (ii) there are no outstanding orders, writs,
injunctions, judgments, decrees, regulations, directives, consent
agreements or memoranda of understanding issued by any federal,
state or local court or governmental authority or arbitration
tribunal issued against or with the consent of Bucktail Bank that
materially and adversely affect the condition (financial or
otherwise), assets, liabilities, business, operations or future
prospects of Bucktail Bank or that in any manner restrict
Bucktail Bank's right to conduct its business as presently
conducted; and (iii) Bucktail Bank is not aware of any fact or
condition presently existing that might give rise to any
litigation, investigation or proceeding which, if determined
adversely to Bucktail Bank, would materially and adversely affect
the condition (financial or otherwise), assets, liabilities,
business, operations or future prospects of Bucktail Bank. All
litigation in which Bucktail Bank is involved as a plaintiff
(other than routine collection and foreclosure suits initiated in
the Ordinary Course of Business in which the amount sought to be
recovered is less than $25,000) is identified in Schedule I.
Section 3.14 Compliance with Laws: Governmental
Authorizations. Except as disclosed in Schedule I or where
noncompliance would not have a material and adverse effect upon
the condition (financial or otherwise), assets, liabilities,
business, operations or future prospects of Bucktail Bank: (i)
Bucktail Bank is in compliance with all statutes, laws,
ordinances, rules, regulations, judgments, orders, decrees,
directives, consent agreements, memoranda of understanding,
permits, concessions, grants, franchises, licenses, and other
governmental authorizations or approvals applicable to Bucktail
Bank or to any of its properties; and (ii) all permits,
concessions, grants, franchises, licenses and other governmental
authorizations and approvals necessary for the conduct of the
business of Bucktail Bank as presently conducted have been duly
obtained and are in full force and effect and there are no
proceedings pending, or to the knowledge of Bucktail Bank
threatened, which may result in the revocation, cancellation,
suspension or materially adverse modification of any thereof.
Section 3.15 Insurance. All policies of insurance,
including all policies of title insurance and financial
institutions bonds, held by or on behalf of Bucktail Bank are
listed on Schedule I. All such policies of insurance are in full
force and effect and no notices of cancellation have been
received in connection therewith. All such policies of insurance
have been issued by reputable insurers, which in respect of
amounts, types and risks, is customary with industry practices
for the business conducted by Bucktail Bank.
Section 3.16 Financial Institutions Bond. Since January 1,
1994, Bucktail Bank has continuously maintained in full force and
effect a financial institutions bond as listed in Schedule I
insuring Bucktail Bank against acts of dishonesty by each of its
employees. Except as disclosed on Schedule I, no claim has been
made under any such bond and Bucktail Bank is not aware of any
fact or condition presently existing which might form the basis
of a claim under any
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such bond. Bucktail Bank has no reason to believe that its
present financial institutions bond will not be renewed by its
carrier on substantially the same terms and at the same rate as
now in effect.
Section 3.17 Labor Relations. Bucktail Bank is not a party
to or bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor
organization, nor is Bucktail Bank the subject of a proceeding
asserting that Bucktail Bank has committed an unfair labor
practice or seeking to compel Bucktail Bank to bargain with any
labor organization as to wages and conditions of employment, nor
is there any strike or other labor dispute involving Bucktail
Bank pending, or to the knowledge of Bucktail Bank, threatened,
that might materially adversely affect the condition (financial
or otherwise), assets, liabilities, business or operations of
Bucktail Bank. Except as set forth on Schedule I, Bucktail Bank
is not subject to or a party in any complaint or action before
the Pennsylvania Human Relations Commission, the Equal Employment
Opportunity Commission, or the Department of Labor. Except as
disclosed on Schedule I, there are no labor disputes pending, or
to the knowledge of Bucktail Bank threatened, that might
materially and adversely affect the condition (financial or
otherwise), assets, liabilities, business or operations of
Bucktail Bank.
Section 3.18 Employee Benefit Plans. All employee and
Board of Directors benefit plans, contracts or arrangements to
which Bucktail Bank is a party or by which Bucktail Bank is
bound, including without limitation all pension, retirement,
deferred compensation, incentive, bonus, profit sharing, stock
purchase, stock option, life insurance, death or survivor's
benefit, health insurance, sickness, disability, medical,
surgical, hospital, severance, layoff or vacation plans,
contracts or arrangements, are identified in Schedule I. The FNB
Pension Plan, in which the employees of Bucktail Bank
participate, ("Pension Plan") is exempt from tax under Sections
401 and 501 of the Internal Revenue Code of 1986, as amended
("Code"), has been maintained and operated in material compliance
with all applicable provisions of the Code and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), is
not subject to any accumulated funding deficiency within the
meaning of ERISA and the regulations promulgated thereunder, and
does not have any outstanding liability to the Pension Benefit
Guaranty Corporation ("PBGC"). No "prohibited transaction" or
"reportable event," (as such terms are defined in the Code or in
ERISA) other than routine reportable events, has occurred in
respect of the Pension Plan or any other employee benefit plan to
which Bucktail Bank is a party or by which Bucktail Bank is
bound. The Pension Plan is not a "Multiemployer Plan" or a
"Multiple Employer Plan" (as such terms are defined in ERISA and
the regulations of the Department of Labor, respectively). If
the Pension Plan or any other benefit plan were terminated at any
time prior to the Effective Date (as defined in Section 10.2 of
this Agreement), the assets of such plan would then be sufficient
to pay all vested accrued benefits thereunder of the Bucktail
Bank employees and there would be no employer liability under
Title IV of ERISA. There have been no breaches of fiduciary duty
by any fiduciary under or with respect to the Pension Plan or any
other employee benefit plan to which Bucktail Bank is a party or
by which Bucktail Bank is bound, and no claim is pending, or to
the knowledge of Bucktail Bank threatened, with respect to any
such plan other than claims for benefits made in the Ordinary
Course of Business. Bucktail Bank has not incurred any liability
for any tax imposed by Section 4975 of the Code or for any
penalty imposed by the Code or by ERISA with respect to any
employee benefit plan. There has not been any audit of the
Pension Plan or any of Bucktail Bank's other employee benefit
plans by
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the Department of Labor, the IRS or the PBGC since 1991.
Bucktail Bank has no obligation for retiree health and life
benefits under any benefit plan, contract, or arrangement, except
as set forth on Schedule I. Bucktail Bank has no obligation for
any post-retirement benefits under any plan, contract or
arrangement except as set forth on Schedule I.
Section 3.19 Related Party Transactions. Except as
disclosed in Schedule I, Bucktail Bank has no contract, extension
of credit, business arrangement or other relationship of any kind
with any of the following persons: (i) any present or former
officer or director of Bucktail Bank; (ii) any "associate" (as
defined in Securities and Exchange Commission ("SEC") Rule 405)
of the foregoing persons or any business in which any of the
foregoing persons is an officer, director, or employee; or (iii)
FNB. Each such extension of credit disclosed in Schedule I has
been made in the Ordinary Course of Business on substantially the
same terms, including interest rates and collateral, as those
prevailing at the time for comparable arms' length transactions
with other persons that do not involve more than a normal risk of
collectability or present other unfavorable features.
Section 3.20 No Finder. Except as disclosed in Schedule I,
neither FNB nor Bucktail Bank has paid or become obligated to pay
any fee or commission of any kind whatsoever to any broker,
finder or other intermediary for, on account of or in connection
with the transactions contemplated in this Agreement.
Section 3.21 Significant Customers. All significant
customers of Bucktail Bank are identified in Schedule I. For
purposes of this Section 3.21, a "significant customer" shall
mean any customer who, as of November 1, 1996, had or has (i)
aggregate outstanding loans in the amount of $100,000 or more, or
(ii) aggregate daily deposits in the amount of $100,000 or more.
Section 3.22 Complete and Accurate Disclosure. Neither
this Agreement (insofar as it relates to Bucktail Bank, Bucktail
Common Stock and FNB's and Bucktail Bank's involvement in the
transactions contemplated hereby) nor any financial statement,
schedule (including without limitation Schedule I), certificate,
or other statement or document delivered by FNB or Bucktail Bank
to Sun and Sun Bank in connection herewith contains any statement
which, at the time and in light of the circumstances under which
it is made, is false or misleading with respect to any material
fact or omits to state any material fact necessary to make the
statements contained herein or therein not materially false or
misleading. In particular, without limiting the generality of
the foregoing sentence, the information provided and the
representations made by FNB and Bucktail Bank to Sun and Sun Bank
in connection with the Registration Statement (as defined in
Section 7.1(b) of this Agreement), both at the time such
information and representations are provided and made and at the
time of the Closing, will be true and accurate in all material
respects and will not contain any false or misleading statement
with respect to any material fact or omit to state any material
fact necessary (i) to make the statements made therein not false
or misleading, or (ii) to correct any statement contained in an
earlier communication with respect to such information or
representations which has become false or misleading.
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Section 3.23 Beneficial Ownership of Sun Common Stock.
Prior to the Effective Date, FNB and Bucktail Bank and their
officers and directors will not in the aggregate own beneficially
(within the meaning of SEC Rule 13d-3(d)(1)) more than one
percent of the outstanding shares of Sun Common Stock.
Section 3.24 Environmental Matters. For purposes of this
Section 3.24, the following terms shall have the indicated
meaning:
"Environmental Law" means any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, judgment, decree,
injunction or agreement with any governmental entity relating to
(1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, surface soil,
subsurface soil, plant and animal life or any other natural
resource), and (2) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling,
production, release or disposal of Hazardous Substances. The
term Environmental Law includes without limitation (1) the
Comprehensive Environmental Response, Compensation and Liability
Act, as amended, ("CERCLA") 42 U.S.C. Section 9601, et seq.; the
Asset Conservation, Lender Liability and Deposit Insurance
Protection Act of 1996 amending CERCLA; the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. Section 6901, et seq.;
the Clean Air Act, as amended, 42 U.S.C. Section 7401, et seq.;
the Federal Water Pollution Control Act, as amended, 33 U.S.C.
Section 1251, et seq.,; the Toxic Substances Control Act, as
amended, 15 0U.S.C. Section 9601, et seq.; the Emergency Planning
and Community Right to Know Act, 42 U.S.C. Section 11001, et
seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f, et
seq.; the Solid Waste Disposal Act, 42 U.S.C. 6991b(h), as
amended; and all comparable state and local laws, and (2) any
common law (including without limitation common law that may
impose strict liability) that may impose liability or obligation
for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Substance.
"Hazardous Substance" means any substance presently 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
material containing any such substance as a component. Hazardous
Substances include without limitation petroleum or any derivative
or by-product thereof, asbestos, radioactive material, and
polychlorinated biphenyls.
"Bucktail Bank Loan Portfolio Properties and Other
Properties Owned" means those properties serving as collateral
for loans in Bucktail Bank's loan portfolio, or properties owned
or operated by Bucktail Bank (including, without limitation, in a
fiduciary capacity).
Except as set forth on Schedule I hereto:
(1) Bucktail Bank has not been or is not in violation of or
liable under any Environmental Law.
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(2) None of the Bucktail Bank Loan Portfolio Properties and
Other Properties Owned have been or are in violation of or liable
under any Environmental Law.
(3) None of the Bucktail Bank Loan Portfolio Properties and
Other Properties Owned have Hazardous Substances on or in them,
including but not limited to:
(a) any materials containing asbestos have been
used or incorporated in any building or other structure
or improvement located on any of the real estate now or
previously owned or acquired (including without
limitation any real estate acquired by means of
foreclosure or exercise of any other creditor's right)
or leased by Bucktail Bank;
(b) any electrical transformers, fluorescent
light fixtures with ballasts or other equipment
containing PCB's are or have been located on any of the
real estate now or previously owned or acquired
(including without limitation any real estate acquired
by means of foreclosure or exercise of any other
creditor's right) or leased by Bucktail Bank;
(c) any underground storage tanks for the storage
of gasoline, petroleum products or other toxic or
Hazardous Substances are or have ever been located on
any of the real estate now or previously owned or
acquired (including without limitation any real estate
acquired by means of foreclosure or exercise of any
other creditor's right) or leased by Bucktail Bank;
(d) any environmental contaminant, pollutant,
toxic or Hazardous Substance that, after reasonable
investigation, has been determined to have been
generated, used, stored, processed, disposed of, or
discharged in any manner that affects, or reasonably
may affect, any of the Bucktail Bank Loan Portfolio
Properties and other Properties Owned or any real
estate previously owned or acquired (including without
limitation any real estate acquired by means of
foreclosure or exercise of any other creditors' rights)
or leased by Bucktail Bank; and
(4) There are no actions, suits, demands, notices,
claims, investigations or proceedings pending or, to the
best knowledge of FNB or Bucktail Bank, threatened relating
to the liability of the Bucktail Bank Loan Portfolio
Properties and Other Properties Owned or leased under any
Environmental Law, including without limitation any notices,
demand letters or requests for information from any federal
or state environmental agency relating to any such
liabilities under or violations of Environmental Law. In
addition, to the best of Bucktail Bank's knowledge, there is
no reasonable basis for any actions, suits, demands,
notices, claims, investigations or proceedings, and Bucktail
Bank is not subject to any agreement, order, judgment,
decree, or memorandum by or with any court, governmental
authority, regulatory agency or third party imposing such
liability.
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Section 3.25 Non-Registration Under the 1934 Act. Bucktail
Bank Common Stock is neither registered nor required to be
registered under Section 12 of the Securities Exchange Act of
1934 (the "1934 Act") and is not subject to the periodic
reporting requirements imposed by Section 13 or 15(d) of the 1934
Act.
Section 3.26 Deposit Insurance. The deposits of Bucktail
Bank are insured by the Bank Insurance Fund, as administered by
the Federal Deposit Insurance Corporation ("FDIC") in accordance
with the Federal Deposit Insurance Act, and Bucktail Bank has
paid all assessments and filed all reports required by the
Federal Deposit Insurance Act. None of Bucktail Bank's deposits
are insured under the Savings Association Insurance Fund.
Section 3.27 Repurchase Agreements. With respect to any
agreement, pursuant to which Bucktail Bank has purchased
securities subject to an agreement to resell, if any, Bucktail
Bank has a valid, perfected first lien or security interest in
the government securities or other collateral securing the
repurchase agreement, and the value of such collateral equals or
exceeds the amount of the debt secured thereby. Except as
disclosed on Schedule I, which identifies location and type of
securities, Bucktail Bank maintains physical possession of
purchased securities that are subject to an agreement to resell.
Section 3.28 Assumability of Leases and Contracts. Except
as disclosed on Schedule I, all Material Contracts between
Bucktail Bank and any other entity or person are assumable and
assignable and do not contain any term or provision that would
accelerate or increase payments that would otherwise be due by
Bucktail Bank to such person or entity, or change or modify the
provisions or terms of such leases, contracts and agreements by
reason of this Agreement or the transactions contemplated hereby.
Section 3.29 Loans. Except as disclosed on Schedule I,
each loan reflected as an asset on Bucktail Bank's financial
statements as of September 30, 1996, or acquired since that date,
is the legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms, subject to
bankruptcy, insolvency and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles. All such loans, and the collateral and other
security therefor, and the documentation for the same, meet the
requirements, rules, regulations or directives of the
Pennsylvania Department of Banking ("Department of Banking") and
the FDIC.
Section 3.30 Accuracy of Representations. Until Closing,
FNB and Bucktail Bank will promptly notify Sun if any of the
representations contained in this Article III cease to be true
and correct subsequent to the date hereof.
Section 3.31 Absence of Questionable Payments. From and
after July 1, 1992, Bucktail Bank has not, nor, to the knowledge
of FNB and Bucktail Bank, has any director, officer, agent,
employee, consultant or other person associated with or acting on
behalf of, Bucktail Bank (i) used any Bucktail Bank corporate
funds for unlawful contributions, gifts, entertainment or
unlawful expenses relating to political activity; or (ii) made
any direct or indirect unlawful payments to governmental
officials from any Bucktail Bank corporate funds, or
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established or maintained any unlawful or unrecorded accounts
with funds received from Bucktail Bank.
Section 3.32 Powers of Attorney, Guarantees. Except as set
forth on Schedule I, Bucktail Bank does not have any power of
attorney outstanding, or any obligation or liability either
actual, construing or contingent, as guarantor, surety, cosigner,
endorser, co-maker or indemnitor in respect of the obligation of
any person, corporation, partnership, joint venture, association,
organization or other entity, except for letters of credit issued
in the Ordinary Course of Business which are listed on Schedule
I.
Section 3.33 Adjustable Rate Mortgages. Bucktail Bank has
made all interest rate adjustments to any mortgage loan according
to the terms of said mortgage loan and has complied and is in
compliance in all material respects with all federal, state and
other applicable laws, rules and regulations, including orders,
writs, decrees, injunctions and other requirements of any court
or governmental authorities having jurisdiction over adjustable
rate mortgages.
Section 3.34 CRA Compliance. Bucktail Bank has received a
satisfactory compliance rating and has received a satisfactory
Community Reinvestment Act rating. FNB and Bucktail Bank have no
knowledge of any facts or circumstances which would prevent it
from receiving such satisfactory ratings upon its next
appropriate examination.
Section 3.35 Derivatives. Except as set forth on Schedule
I, Bucktail Bank does not own or hold any derivatives, "caps", or
"floors", in its investment portfolio.
Section 3.36 Loan Loss Reserve. The loan loss reserve of
Bucktail Bank is and shall remain adequate in light of generally
accepted accounting principles, directives of governmental
authorities, and all regulations, rules and directives of the
FDIC and the Department of Banking.
Section 3.37 Loan Portfolio. Except as disclosed on
Schedule I, all evidences of indebtedness reflected as assets of
Bucktail Bank are in all respects binding obligations of the
respective primary obligors associated therewith, and no material
amount thereof is subject to any defenses known to FNB or
Bucktail Bank which may be asserted against Bucktail Bank.
Except as set forth in Schedule I, Bucktail Bank has delivered to
Sun a true and correct list and brief description of all real
property (other than personal residences) in which Bucktail Bank
has an interest as a creditor or mortgagee securing an amount or
amounts greater than $100,000 to one borrower or a series of
related borrowers. Except as set forth in such list (i) there
are no outstanding loans by Bucktail Bank with an unpaid balance
of $10,000 or more on which a default has occurred, and (ii)
Bucktail Bank has no loans reflected as assets in such financial
statements which have principal balances in excess of $100,000
except for fully-secured mortgage loans. For purposes hereof,
"default" shall mean a failure of an obligor to make payments
with respect to any loans for 30 days or more past the due date
for such payment.
Section 3.38 Trust Department and Fiduciary Relationships.
Bucktail Bank has established, maintained and administered all
fiduciary and custodian relationships, accounts and agreements;
and undertaken and performed all fiduciary and custodian duties,
obligations and
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responsibilities in material compliance with all applicable laws,
statutes, rules, regulations and the governing instruments of
such fiduciary and custodian relationships.
For purposes of this Article III, the terms "Material,"
"material" and "materially" refer to those items which, in the
aggregate, impact the financial position or results of operations
of Bucktail Bank in a pre-tax amount greater than a negative
$125,000 or to those items which individually impact the
financial position or results of operations of Bucktail Bank in a
pre-tax amount greater than a negative $75,000.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SUN
Sun represents and warrants to FNB and Bucktail Bank as
follows:
Section 4.1 Authority. Sun has all requisite corporate
power and authority to enter into and perform all of its
obligations under this Agreement, the Bank Merger Agreement and
the Stock Investment Agreement. The execution and delivery of
this Agreement, the Bank Merger Agreement and the Stock
Investment Agreement and the consummation of the transactions
contemplated herein and therein, respectively, have been duly and
validly authorized by the Board of Directors of Sun, and except
for the approval of this Agreement and the Bank Merger Agreement,
as the sole shareholder of Sun Bank, Sun has taken all corporate
action necessary on its part to authorize this Agreement, the
Bank Merger Agreement and the Stock Investment Agreement and the
performance of the transactions contemplated herein and therein,
respectively. This Agreement, the Bank Merger Agreement and the
Stock Investment Agreement have been duly executed and delivered
by Sun and, assuming due authorization, execution and delivery by
FNB and Bucktail Bank, and receipt of required regulatory and
shareholder approvals, constitute valid and binding obligations
of Sun in each case enforceable against Sun in accordance with
their respective terms, subject to bankruptcy, insolvency, and
other laws of general applicability relating to or affecting
creditors' rights and general equity principles. Subject to
regulatory approval, the execution, delivery and consummation of
this Agreement, the Bank Merger Agreement and the Stock
Investment Agreement will not constitute a violation or breach of
or default under the Articles of Incorporation or the Bylaws of
Sun or any statute, rule, regulation, order, decree, directive,
agreement, indenture or other instrument to which Sun is a party
or by which Sun or any of its properties are bound, nor
constitute a default under or give rise to any right of
termination, cancellation or acceleration with respect to, or
result in the creation of any lien, charge or encumbrance upon
any property or asset of Sun pursuant to any note, bond,
mortgage, indenture, license, agreement or other instrument or
obligation.
Section 4.2 Organization and Standing. Sun is a business
corporation that is duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania. Sun
is a registered bank holding company under the Bank Holding
Company Act of 1956, as amended, and has full power and lawful
authority to own and hold its properties and to carry on its
present business. Sun owns all of the issued and outstanding
shares of capital
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stock of Sun Bank. Sun Bank does business under the names Snyder
County Trust Company and Watsontown Bank.
Section 4.3 Capitalization. The authorized capital stock
of Sun, as of the date of this Agreement, consists solely of
Twenty Million (20,000,000) shares of common stock, par value One
Dollar and Twenty-five Cents ($1.25) per share ("Sun Common
Stock") of which, as of the date of this Agreement, 3,366,860
shares were issued and outstanding. All outstanding shares of
Sun Common Stock have been duly issued and are validly
outstanding, fully paid and nonassessable. The shares of Sun
Common Stock to be issued in connection with this Agreement, the
Bank Merger Agreement and the Stock Investment Agreement have
been duly authorized and, when issued in accordance with the
terms of this Agreement, the Bank Merger Agreement and the Stock
Investment Agreement will be validly issued, fully paid and
nonassessable.
Section 4.4 Articles of Incorporation and Bylaws. The
copies of the Articles of Incorporation, as amended, of the
Bylaws, as amended, and any meeting minutes of Sun which have
been delivered to FNB and Bucktail Bank are true, correct, and
complete.
Section 4.5 Financial Statements. Sun has delivered to FNB
and Bucktail Bank the following financial statements: (i)
Consolidated Balance Sheets, Consolidated Statements of Income,
Consolidated Statements of Shareholders' Equity, and Consolidated
Statements of Cash Flows as of and for the years ended December
31, 1995 and December 31, 1994, certified by Parente, Randolph,
Orlando, Carey and Associates and set forth in the Annual Report
to the shareholders of Sun for the year ended on December 31,
1995; and (ii) a Consolidated Statement of Condition and a
Consolidated Statement of Income for the six-month period ended
June 30, 1996, set forth in a "Quarterly Report" to the
shareholders of Sun (the foregoing Consolidated Statement of
Condition being hereinafter referred to as the "Sun Balance
Sheet"). Each of the foregoing financial statements fairly
presents the consolidated financial position, assets, liabilities
and results of operations of Sun at their respective dates and
for the respective periods then ended and has been prepared in
accordance with generally accepted accounting principles
consistently applied, except as otherwise noted in a footnote
thereto and subject in the case of the interim financial
statements contained in the aforesaid Quarterly Report to normal
recurring year-end adjustments, which are not material in any
case or in the aggregate.
Section 4.6 Absence of Undisclosed Liabilities. Except as
disclosed in Schedule II or as reflected, noted or adequately
reserved against in the Sun Balance Sheet, at September 30, 1996,
Sun had no material liabilities (whether accrued, absolute,
contingent or otherwise) which are required to be reflected,
noted or reserved against therein under generally accepted
accounting principles or which are in any case or in the
aggregate material. Except as described in Schedule II, since
September 30, 1996, Sun has not incurred any such liability other
than liabilities of the same nature as those set forth in the Sun
Balance Sheet, all of which have been reasonably incurred in the
Ordinary Course of Business.
Section 4.7 Absence of Changes. Since September 30, 1996,
there has not been any material and adverse change in the
condition (financial or otherwise), assets, liabilities,
business, operations or future prospects of Sun or Sun Bank.
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Section 4.8 Litigation. Except as disclosed in Schedule
II: (i) there is no litigation, investigation or proceeding
pending, or to the knowledge of Sun threatened, that involves
Sun, Sun Bank or their properties and that, if determined
adversely to Sun, would materially and adversely affect the
condition (financial or otherwise), assets, liabilities,
business, operations or future prospects of Sun; (ii) there are
no outstanding orders, writs, injunctions, judgments, decrees,
regulations, consent agreements, memoranda of understanding or
other directives of any federal, state or local court or
governmental authority or of any arbitration tribunal against Sun
which materially and adversely affect the condition (financial or
otherwise), assets, liabilities, business, operations or future
prospects of Sun or restrict in any manner the right of Sun to
conduct its business as presently conducted; and (iii) Sun is not
aware of any fact or condition presently existing that might give
rise to any litigation, investigation or proceeding which, if
determined adversely to Sun, would materially and adversely
affect the condition (financial or otherwise), assets,
liabilities, business, operations or future prospects of Sun.
All litigation in which Sun is involved as a plaintiff (other
than routine collection and foreclosure suits initiated in the
Ordinary Course of Business in which the amount sought to be
recovered is less than $25,000) is identified in Schedule II.
For purposes of this Section 4.8, Sun shall be deemed to include
Sun Bank.
Section 4.9 Compliance with Laws: Governmental
Authorizations. Except as disclosed in Schedule II or where
noncompliance would not have a material and adverse effect
upon the condition (financial or otherwise), assets, liabilities,
business, operations or future prospects of Sun: (i) Sun is in
compliance with all statutes, laws, ordinances, rules,
regulations, judgments, orders, decrees, directives, consent
agreements, memoranda of understanding, permits, concessions,
grants, franchises, licenses, and other governmental
authorizations or approvals applicable to Sun or to any of its
properties; and (ii) all permits, concessions, grants,
franchises, licenses and other governmental authorizations and
approvals necessary for the conduct of the business of Sun as
presently conducted have been duly obtained and are in full force
and effect and there are no proceedings pending, or to the
knowledge of Sun threatened, which may result in the revocation,
cancellation, suspension or materially adverse modification of
any thereof.
Section 4.10 Complete and Accurate Disclosure. Neither
this Agreement (insofar as it relates to Sun, Sun Common Stock
and Sun's involvement in the transactions contemplated hereby)
nor any financial statement, schedule (including without
limitation Schedule II), certificate, or other statement or
document delivered by Sun to FNB and Bucktail Bank in connection
herewith contains any statement which, at the time and in light
of the circumstances under which it is made, is false or
misleading with respect to any material fact or omits to state
any material fact necessary to make the statements contained
herein or therein not materially false or misleading. In
particular, without limiting the generality of the foregoing
sentence, the information provided and the representations made
by Sun to FNB and Bucktail Bank in connection with the
Registration Statement (as defined in Section 7.1(b) of this
Agreement), both at the time such information and representations
are provided and made and at the time of the Closing, will be
true and accurate in all material respects and will not contain
any false or misleading statement with respect to any material
fact or omit to state any material fact necessary (i) to make the
statements made therein not false or misleading, or (ii) to
correct any statement
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contained in an earlier communication with respect to such
information or representations which has become false or
misleading.
Section 4.11 Registration Under the 1934 Act. Sun Common
Stock is registered under Section 12 of the 1934 Act and is
subject to the periodic reporting requirements imposed by Section
13 of the 1934 Act.
Section 4.12 Accuracy of Representations. Until Closing,
Sun will promptly notify FNB if any of the representations
contained in this Article IV cease to be true and correct
subsequent to the date hereof.
Section 4.13 CRA Compliance. Sun has received a
satisfactory compliance rating and has received a satisfactory
Community Reinvestment Act rating. Sun has no knowledge of any
facts or circumstances which would prevent it from receiving such
satisfactory ratings upon its next appropriate examination.
Section 4.14 Loan Loss Reserve. The loan loss reserve of
Sun is and shall remain adequate in light of generally accepted
accounting principles, directives of governmental authorities,
and all regulations, rules and directives of the FDIC and the
Department of Banking.
Section 4.15 Derivatives. Except as set forth on Schedule
II, Sun does not own or hold any derivatives, "caps," or
"floors," in its investment portfolio as defined by FASB
Statement No. 119.
Section 4.16 Reports. Sun has delivered to FNB complete
copies of (i) the Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, (ii) Quarterly Reports on Form 10-Q for
the periods ended March 31, 1996 and June 30, 1996, (iii) the
proxy statement relating to the 1996 Annual Meeting of
Shareholders, (iv) all Current Reports on Form 8-K filed during
1996, and (v) all Call Reports filed by Sun Bank with the FDIC
and Banking Department during 1996.
Section 4.17 Fundamental Corporate Change. Sun has not
entered into any negotiations, agreements, arrangements or
understandings, or in any transaction pursuant to which the
shares of Sun Common Stock or shares of a successor to Sun would
no longer be registered under Section 12 of the 1934 Act.
Section 4.18 Brokers. Sun only assumes responsibility for
payment of any broker, finder or investment banker entitled to
any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon
contracts or agreements made by or on behalf of Sun.
Section 4.19 National Market System. Sun Common Stock is
traded on the NASDAQ/NMS.
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For purposes of this Article IV, the terms "Material,"
"material" and "materially" refer to those items which, in the
aggregate, impact the financial position or results of operations
of Sun in a pre-tax amount greater than a negative $500,000.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SUN BANK
Sun Bank represents and warrants to FNB and Bucktail Bank as
follows:
Section 5.1 Capital Structure of Sun Bank. Sun Bank is
authorized to issue One Million (1,000,000) shares of capital
stock, par value Five Dollars ($5.00) per share, of which all
shares outstanding are owned by Sun.
Section 5.2 Organization and Standing. Sun Bank is a
Pennsylvania state-chartered bank and trust company. Sun Bank
trades and does business under the names Snyder County Trust
Company and Watsontown Bank. Sun Bank is duly organized, validly
existing and in good standing under the laws of the Commonwealth
of Pennsylvania. Sun Bank has full power and lawful authority to
own and hold its properties and to carry on its present business.
Section 5.3 Authorized and Effective Agreement. Sun Bank
has all requisite corporate power and authority to enter into and
perform all of its obligations under this Agreement and the Bank
Merger Agreement. The execution, delivery and performance of
this Agreement and the Bank Merger Agreement and the consummation
of the transactions contemplated herein and therein,
respectively, have been duly and validly authorized by the Board
of Directors of Sun Bank. This Agreement and the Bank Merger
Agreement have been duly executed and delivered by Sun Bank and,
assuming due authorization, execution and delivery by FNB and
Bucktail Bank, and receipt of required regulatory and shareholder
approvals, constitute valid and binding obligations of Sun Bank
in each case enforceable against Sun Bank in accordance with
their respective terms, subject to bankruptcy, insolvency, and
other laws of general applicability relating to or affecting
creditors' rights and general equity principles. Subject to
appropriate and required shareholder and regulatory approvals,
neither the execution and delivery of this Agreement or the Bank
Merger Agreement nor the consummation of the transactions
provided for herein or therein will violate any agreement to
which Sun Bank is a party or by which it is bound or any law,
regulation, order, decree or any provision of its Articles of
Incorporation or By-laws.
ARTICLE VI
COVENANTS OF FNB AND BUCKTAIL BANK
From the date of this Agreement until the Effective Date (as
defined in Section 10.2 of this Agreement), FNB and Bucktail Bank
covenant and agree to do the following:
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Section 6.1 Conduct of Business. Except as otherwise
consented to by Sun and Sun Bank in writing, FNB and Bucktail
Bank shall:
(a) use all reasonable efforts for Bucktail Bank to carry
on its business in, and only in, the Ordinary Course of Business
consistent with past practices and written policies;
(b) to the extent consistent with prudent business
judgment, use all reasonable efforts for Bucktail Bank to
preserve its present business organization, to retain the
services of its present officers and employees, and to maintain
its relationships with customers, suppliers and others having
business dealings with Bucktail Bank;
(c) maintain all of Bucktail Bank's structures, equipment
and other real property and tangible personal property in good
repair, order and condition, except for ordinary wear and tear
and damage by unavoidable casualty;
(d) use all reasonable efforts to preserve or collect all
material claims and causes of action belonging to Bucktail Bank;
(e) keep in full force and effect all insurance policies
now carried by Bucktail Bank;
(f) perform in all material respects each of Bucktail
Bank's obligations under all material agreements, contracts,
instruments and other commitments to which Bucktail Bank is a
party or by which Bucktail Bank may be bound or which relate to
or affect its properties, assets and business;
(g) maintain Bucktail Bank's books of account and other
records in the Ordinary Course of Business;
(h) comply in all material respects with all statutes,
laws, ordinances, rules and regulations, decrees, orders, consent
agreements, examination reports, memoranda of understanding and
other federal, state, and local governmental directives
applicable to Bucktail Bank and to the conduct of its business;
(i) not amend Bucktail Bank's Articles of Incorporation or
Bylaws;
(j) not have Bucktail Bank enter into or assume any
material contract, incur any material liability or obligation,
make any material commitment, acquire or dispose of any property
or asset or engage in any transaction or subject any of Bucktail
Bank's properties or assets to any material lien, claim, charge,
or encumbrance of any kind whatsoever;
(k) not take or permit to be taken any action which would
constitute a breach of any representation, warranty or covenant
set forth in this Agreement;
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(l) not declare, set aside or pay any dividend or make any
other distribution in respect of Bucktail Common Stock, except as
provided in Section 6.8 of this Article VI;
(m) not authorize, purchase, issue or sell (or authorize,
issue or grant options, warrants or rights to purchase or sell)
any shares of Bucktail Common Stock, any other equity or debt
securities of Bucktail Bank or any securities convertible into
Bucktail Common Stock;
(n) not increase the rate of compensation of, pay a bonus
or severance compensation to, or enter into any employment,
severance, deferred compensation or other agreement with any
officer, director, employee or consultant of Bucktail Bank,
except that Bucktail Bank may grant reasonable salary increases
and bonuses to its officers and employees in the Ordinary Course
of Business to the extent consistent with Bucktail Bank's past
practice;
(o) not to have Bucktail Bank enter into any related party
transaction of the kind contemplated in Section 3.19 of Article
III of this Agreement except such related party transactions
relating to extensions of credit made in accordance with all
applicable laws, regulations and rules and in the Ordinary Course
of Business on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable arms' length transactions with other persons that do
not involve more than the normal risk of collectability or
present other unfavorable features and after disclosure of such
to Bucktail Bank;
(p) not change the presently outstanding number of shares
of Bucktail Common Stock or effect any recapitalization,
reclassification, stock dividends, stock split or like change in
Bucktail Bank's capitalization;
(q) not have Bucktail Bank or FNB on behalf of Bucktail
Bank enter into or substantially modify (except as may be
required by applicable law) any pension, retirement, stock
option, stock warrant, stock purchase, stock appreciation right,
savings, profit sharing, deferred compensation, consulting,
bonus, group insurance or other employee benefit, incentive or
welfare contract, or plan or arrangement, or any trust agreement
related thereto, in respect to any of Bucktail Bank's directors,
officers, or other employees;
(r) not merge Bucktail Bank with or into, or consolidate
Bucktail Bank with, or have Bucktail Bank purchased or acquired
by, any other corporation, financial institution, entity, or
person (or agree to any such merger, consolidation, affiliation,
purchase or acquisition of Bucktail Bank) or permit (or agree to
permit) any other corporation, financial institution, entity or
person to be merged with Bucktail Bank or consolidate or
affiliate with any other corporation, financial institution,
entity or person; or cause Bucktail Bank to acquire control over
any other firm, financial institution, corporation or
organization or create any subsidiary; acquire, liquidate, sell
or dispose(or
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agree to acquire, liquidate, sell or dispose) of any assets,
other than in the Ordinary Course of Business and consistent with
prior practice;
(s) not solicit or encourage inquiries or proposals with
respect to, furnish any information relating to, or participate
in any negotiations or discussions concerning any acquisition or
purchase of all or a substantial equity interest or portion of
the assets in or of Bucktail Bank or any business combination
with Bucktail Bank other than as contemplated by this Agreement,
or authorize or permit any officer, director, agent or affiliate
of it to do any of the above; or fail to notify Sun immediately
if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations are
sought to be initiated with Bucktail Bank;
(t) not change any method, practice or principle of
accounting of Bucktail Bank except as may be required by
generally accepted accounting principles or any applicable
regulator;
(u) not make any Bucktail Bank loan or other credit
facility commitment in excess of $100,000 (including without
limitation, lines of credit and letters of credit) to any
affiliate of Bucktail Bank, including but not limited to FNB, or
compromise, expend, renew or modify any such commitment
outstanding;
(v) not enter into any Bucktail Bank swap or similar
commitment, agreement or arrangement which is not consistent with
past practice and which increases the credit or interest rate
risk over the levels existing at September 30, 1996;
(w) not enter into any derivative, cap or floor or similar
commitment, agreement or arrangement, except in the ordinary
course of business and consistent with past practices; and
(x) not agree to any of the foregoing.
Section 6.2 Best Efforts. FNB and Bucktail Bank shall
cooperate with Sun and Sun Bank and shall use their best efforts
to do or cause to be done all things necessary or appropriate on
their part in order to fulfill the conditions precedent set forth
in Article VIII, Sections 8.1 and 8.2, of this Agreement and to
consummate this Agreement. In particular, without limiting the
generality of the foregoing sentence, FNB and Bucktail Bank
shall:
(a) cooperate with Sun and Sun Bank in the preparation of
all required applications for regulatory approval of the
transactions contemplated by this Agreement and in the
preparation of a registration statement to register the shares to
be exchanged by Sun pursuant to this Agreement;
(b) take, in good faith, all actions which are necessary or
appropriate on their part in order to secure the approval and
adoption of this Agreement and the Bank Merger Agreement by FNB
as sole shareholder of Bucktail Bank;
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(c) cooperate with Sun Bank in making Bucktail Bank's
employees reasonably available for training by Sun Bank prior to
the Effective Date, to the extent that such training is deemed
reasonably necessary by Sun Bank to ensure that Bucktail Bank's
offices will be properly operated as a part of Sun Bank after the
Merger;
(d) make additions to loan loss reserves and make loan
writeoffs, write downs and other adjustments that reasonably
should be made by Bucktail Bank in light of generally accepted
accounting principles, directives of governmental authorities,
and all regulations, rules and directives of the FDIC and the
Department of Banking, prior to the closing of Bucktail Bank's
books of account for its fiscal year ending December 31, 1996,
and for the period from that date until the Effective Date, and
make such additions to the loan loss reserve such that the
percentage of the loan loss reserve to loans outstanding as of
Closing is no less than the percentage of the loan loss reserve
to loans outstanding as of September 30, 1996.
(e) execute and deliver the Stock Investment Agreement in
the form attached hereto as Exhibit "B"; and
(f) modify the Articles of Incorporation or Bylaws or any
other documents of Bucktail Bank reasonably requested by Sun
necessary to effectuate the transactions contemplated hereby.
Section 6.3 Access to Properties and Records. Bucktail
Bank shall give to Sun, Sun Bank and their authorized
representatives (including without limitation their counsel,
accountants, economic and environmental consultants and other
designated representatives) reasonable access during normal
business hours to all properties, books, contracts, documents and
records of Bucktail Bank as Sun or Sun Bank may reasonably
request, subject to the obligation of Sun, Sun Bank and their
authorized representatives to maintain the confidentiality of all
nonpublic information concerning Bucktail Bank obtained by reason
of such access pursuant to Section 13.3 of this Agreement.
Section 6.4 Subsequent Financial Statements. Between the
date of signing of this Agreement and the Effective Date,
Bucktail Bank shall promptly prepare and deliver to Sun and Sun
Bank as soon as practicable all internal monthly and quarterly
financial statements and reports to regulatory authorities
prepared by or for Bucktail Bank. In particular, without
limiting the generality of the foregoing sentence, Bucktail Bank
shall deliver to Sun and Sun Bank as soon as practicable, after
FNB has completed its consolidated year end audit, a balance
sheet as of December 31, 1996, and a related statement of income
for the twelve (12) months then ended (which financial statements
are hereinafter referred to as the "December 31, 1996 Bank
Financial Statements"). The representations and warranties set
forth in Sections 3.6, 3.7 and 3.8 of this Agreement shall apply
to the December 31, 1996 Bank Financial Statements.
Section 6.5 Update Schedule. FNB and Bucktail Bank shall
promptly disclose to Sun and Sun Bank in writing any change,
addition, deletion or other modification to the information set
forth in Schedule I.
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Section 6.6 Notice. FNB and Bucktail Bank shall promptly
notify Sun and Sun Bank in writing of any actions, claims,
investigations, proceedings or other developments which, if
pending or in existence on the date of this Agreement, would have
been required to be disclosed to Sun and Sun Bank in order to
ensure the accuracy of the representations and warranties set
forth in this Agreement or which otherwise could materially and
adversely affect the condition (financial or otherwise), assets,
liabilities, business operations or future prospects of Bucktail
Bank.
Section 6.7 Other Proposals. FNB and Bucktail Bank shall
not, nor shall they permit any officer, director, employee,
agent, consultant, counsel or other representative of FNB or
Bucktail Bank to: (i) solicit, initiate or encourage any proposal
for a merger or other acquisition of Bucktail Bank with or by any
person, corporation or entity other than Sun and Sun Bank, or
(ii) cooperate with, or furnish any nonpublic information
concerning Bucktail Bank to, any person, corporation or entity in
connection with such a proposal.
Section 6.8 Dividends and Management Fees. Between the
date of this Agreement and the Effective Date, Bucktail Bank
shall only make, declare and pay its regular quarterly cash
dividend in an amount not to exceed $100,000 per calendar
quarter. Such regular quarterly cash dividend may only be paid
to FNB and shall only be paid on the 15th day of the months of
March, June, September and December. However, if the Effective
Date occurs before the 15th day of either March, June, September
or December, then the regular quarterly cash dividend shall be
prorated for the calendar quarter. FNB shall not permit and
Bucktail Bank shall not pay any management, service or other fees
to FNB or its affiliates, (the "Service Charges to Affiliates")
except that such fees may be paid so long as the monthly amount
paid to FNB, or its affiliates, by Bucktail Bank does not exceed
$49,000 per month. Such fee shall be prorated for the month in
which the Effective Date occurs.
Section 6.9 Accounting Treatment. FNB and Bucktail Bank
acknowledge that Sun and Sun Bank presently intend to treat the
business combination contemplated by this Agreement as a
"purchase" for financial reporting purposes. FNB and Bucktail
Bank shall not take (and shall use its best efforts not to permit
any of their directors, officers, employees, shareholders,
agents, consultants or other representatives to take) any action
which would preclude Sun and Sun Bank from treating such business
combination as a "purchase" for financial reporting purposes.
Section 6.10 Laws, Rules, Etc. FNB and Bucktail Bank shall
comply with and perform all material obligations and duties
imposed upon them by all federal and state laws and all rules,
regulations and orders imposed by federal or state governmental
authorities, except in respects not materially adverse to the
business, operations, assets or financial condition of Bucktail
Bank or which would not materially impair the ability of FNB and
Bucktail Bank to consummate the transactions contemplated hereby.
Section 6.11 Asset, Liability and Capital Transfers. FNB
or Bucktail Bank shall not transfer any Bucktail Bank assets,
liabilities or equity capital to FNB other than as provided in
Section 6.8 of this Agreement.
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Section 6.12 Liability Transfers. Prior to Closing, FNB
and Bucktail Bank shall transfer from Bucktail Bank to FNB, all
contracts, agreements, plans, arrangements and all liabilities
associated therewith, relating to or in connection with any
director deferred compensation, employee deferred compensation,
retirement plans and benefits, post retirement benefits, pension
benefits or rights, incentive compensation, supplemental employee
retirement benefits or rights, or split dollar insurance. It is
expressly understood that Sun and Sun Bank shall have no
financial or other liability under such contracts, agreements,
plans or arrangements.
Section 6.13 Branches. FNB and Bucktail Bank specifically
agree not to sell, exchange or transfer, or enter into an
agreement or arrangement to sell, exchange or transfer any branch
of Bucktail Bank without the prior written consent of Sun and Sun
Bank.
Section 6.14 Insurance Reports. Prior to the Closing
Date, FNB and Bucktail Bank shall inform and notify their
Directors and Officers, Errors and Omissions, and Trust
Department Errors and Omissions insurance carriers of events,
facts or occurrences which under such policies are required to be
reported and FNB and Bucktail Bank shall report such in
accordance with said policies.
ARTICLE VII
COVENANTS OF SUN AND SUN BANK
From the date of this Agreement until the Effective Date (as
defined in Section 10.2 of this Agreement), Sun and Sun Bank
covenant and agree to do the following:
Section 7.1 Best Efforts. Sun and Sun Bank shall cooperate
with FNB and Bucktail Bank and shall use their best efforts to
do or cause to be done all things necessary or appropriate on
their part in order to fulfill the conditions precedent set forth
in Article VIII, Sections 8.1 and 8.3, of this Agreement and to
consummate this Agreement, the Bank Merger Agreement and the
Stock Investment Agreement. In particular, without limiting the
generality of the foregoing sentence, Sun and Sun Bank agree to
do the following:
(a) Applications for Regulatory Approval. Sun and Sun Bank
shall promptly prepare and file, with the cooperation and
assistance of FNB and Bucktail Bank, all required applications
for regulatory approval of the transactions contemplated by this
Agreement, the Bank Merger Agreement and the Stock Investment
Agreement.
(b) Registration Statement. Sun shall promptly prepare,
with the cooperation and assistance of FNB and Bucktail Bank, and
file with the SEC a registration statement under the 1933 Act
("Registration Statement") for the purpose of registering the
shares of Sun Common Stock to be issued under the provisions of
this Agreement and the Stock Investment Agreement and shall use
its best efforts to cause the Registration Statement to be
declared effective. Sun may rely upon written information
provided to it by FNB and Bucktail Bank in this connection and
Sun shall not be liable for any untrue statement of a material
fact or any omission to state a material fact in the Registration
Statement or in the prospectus (the "Proxy Statement/Prospectus")
which is prepared as a part thereof, if
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such statement is made by Sun in reliance upon any information
provided to Sun by FNB and Bucktail Bank or by its agents and
representatives. Sun will advise FNB and Bucktail Bank, after it
receives notice thereof, of the time when the Registration
Statement or any Pre- or Post-Effective Amendment thereto has
become effective or any supplement or amendment has been filed.
(c) State Securities Laws. Sun and Sun Bank, with the
cooperation of FNB and Bucktail Bank, shall promptly take
all such actions as may be necessary or appropriate in order
to comply with all applicable securities laws of any state
having jurisdiction over the transactions contemplated by
this Agreement.
Section 7.2 Access to Properties and Records. Sun and Sun
Bank shall give to FNB and Bucktail Bank and to its authorized
representatives (including without limitation FNB and Bucktail
Bank's counsel, accountants, economic and environmental
consultants and other designated representatives) reasonable
access during normal business hours to all properties, books,
contracts, documents and records of Sun and Sun Bank as FNB and
Bucktail Bank may reasonably request, subject to the obligation
of FNB and Bucktail Bank and its authorized representatives to
maintain the confidentiality of all nonpublic information
concerning Sun or Sun Bank obtained by reason of such access
pursuant to Section 13.3 of this Agreement.
Section 7.3 Subsequent Financial Statements. Between the
date of signing of this Agreement and the Effective Date, Sun
shall promptly prepare and deliver to FNB and Bucktail Bank as
soon as practicable each report prepared and filed by Sun with
the SEC and all quarterly Call Reports prepared and filed by Sun
Bank with the FDIC and the Banking Department. The
representations and warranties set forth in Sections 4.5, 4.6 and
4.7 of this Agreement shall apply to the financial statements set
forth in the foregoing Quarterly Reports and any Annual Report to
Sun's shareholders.
Section 7.4 Update Schedule. Sun and Sun Bank shall
promptly disclose to FNB and Bucktail Bank in writing any change,
addition, deletion or other modification to the information set
forth in Schedule II.
Section 7.5 Notice. Sun and Sun Bank shall promptly notify
FNB and Bucktail Bank in writing of any actions, claims,
investigations or other developments which, if pending or in
existence on the date of this Agreement, would have been required
to be disclosed to FNB and Bucktail Bank in order to ensure the
accuracy of the representations and warranties set forth in this
Agreement or which otherwise could materially and adversely
affect the condition (financial or otherwise), assets,
liabilities, business, operations or future prospects of Sun or
Sun Bank.
Section 7.6 Sun Authorizations and Approvals. Sun shall
use its best efforts and take, in good faith, all actions which
are necessary or appropriate on its part in order to secure the
approval and adoption of this Agreement, the Bank Merger
Agreement and the Stock Investment Agreement.
Section 7.7 Conduct of Business. Sun and Sun Bank shall
conduct their business in a manner that will not adversely affect
Sun's and Sun Bank's ability to obtain all necessary
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regulatory approvals for the transactions contemplated hereby or
Sun's ability to perform its obligations under this Agreement,
the Bank Merger Agreement and the Stock Investment Agreement, and
conduct their business in the ordinary course.
Section 7.8 Preservation of Business. Sun and Sun Bank
shall use their best efforts to maintain and preserve their
business.
Section 7.9 Insurance. Sun and Sun Bank shall maintain in
full force and effect insurance customary with industry practices
for the businesses conducted by Sun.
Section 7.10 Laws, Rules, Etc. Sun and Sun Bank shall
comply with and perform all material obligations and duties
imposed upon it by all federal and state laws and all rules,
regulations and orders imposed by federal or state governmental
authorities, except in respects not materially adverse to the
business, operations, assets or financial condition of Sun or
which would not materially impair the ability of Sun to
consummate the transactions contemplated hereby.
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 Common Conditions. The obligations of the
parties to consummate this Agreement shall be subject to the
satisfaction of each of the following common conditions prior to
or as of the Closing, except to the extent that any such
condition shall have been waived in accordance with the
provisions of Section 9.4 of this Agreement:
(a) Corporate Approvals. This Agreement shall have
been duly authorized, approved and adopted by FNB and by FNB as
the sole shareholder of Bucktail Bank, as required by applicable
provisions of the Pennsylvania Banking Code of 1965, as amended,
and the required provisions of Bucktail Bank's Articles of
Incorporation. This Agreement shall have been duly authorized,
approved and adopted by Sun, as required by the applicable
provisions of the Business Corporation Law of 1988, as amended,
and the applicable provisions of Sun's Articles of Incorporation
and the applicable provisions of the rules and requirements of
NASDAQ/NMS. This Agreement shall have been duly authorized,
approved and adopted by Sun as the sole shareholder of Sun Bank,
as required by applicable provisions of the Pennsylvania Banking
Code of 1965, as amended, and the required provisions of Sun
Bank's Articles of Incorporation.
(b) Regulatory Approvals. The Parties hereto shall
have received all regulatory approvals required in connection
with the transactions contemplated by this Agreement, the Bank
Merger Agreement and the Stock Investment Agreement and all
notice periods and waiting periods required after the granting of
such approvals shall have passed; provided, however, that no such
approval shall have imposed any material adverse condition or
requirement upon Sun.
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(c) Registration Statement. The Registration
Statement (as defined in Section 7.1(b) of this Agreement,
including any amendments thereto) shall have been declared
effective by the SEC; the information contained therein shall be
true, complete and correct in all material respects as of the
date of mailing of the Proxy Statement/Prospectus (as defined in
Section 7.1(b) of this Agreement) to the shareholder of Bucktail
Bank; regulatory clearance for the offering contemplated by the
Registration Statement (the "Offering") shall have been received
from each federal and state regulatory authority having
jurisdiction over the Offering, and no stop order shall have been
issued or proceedings instituted or threatened by any federal or
state regulatory authority to suspend or terminate the
effectiveness of the Registration Statement or the Offering.
(d) No Suits. No action, suit or proceeding shall be
pending or threatened before any federal, state or local court or
governmental authority or before any arbitration tribunal which
seeks to modify, enjoin or prohibit or otherwise adversely and
materially affect the transactions contemplated by this
Agreement.
(e) Statutes; Orders. 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 the consummation of the
transactions contemplated by this Agreement.
(f) Antitrust Laws. All applicable notifications,
statutory and regulatory Antitrust Law requirements have been
met.
(g) Other Requirements. All other requirements
prescribed by law which are necessary to the consummation of the
transactions contemplated by this Agreement shall have been
satisfied.
Section 8.2 Conditions Precedent to Obligations of Sun and
Sun Bank. The obligations of Sun and Sun Bank to consummate this
Agreement shall be subject to the satisfaction of each of the
following conditions prior to or as of the Closing, except to the
extent that any such condition shall have been waived by Sun and
Sun Bank in accordance with the provisions of Section 9.4 of this
Agreement:
(a) Accuracy of Representations and Warranties. All
of the representations and warranties of FNB and Bucktail Bank as
set forth in this Agreement and the information contained in
Schedule I and all Closing Documents (as defined in Section
8.2(i) of this Agreement) shall be true and correct in all
material respects as of the Closing as if made on such date (or
on the date to which it relates in the case of any representation
or warranty which expressly relates to an earlier date).
(b) Covenants Performed. FNB and Bucktail Bank shall
have performed or complied in all material respects with each of
the covenants required by this Agreement to be performed or
complied with by each of them.
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(c) Opinion of Counsel for FNB and Bucktail Bank. FNB
and Bucktail Bank shall have delivered to Sun and Sun Bank an
opinion of its counsel, Cohen & Grigsby, P.C., in form and
substance reasonably satisfactory to Sun and Sun Bank, to the
effect that, as of the Closing:
(i) FNB is a business corporation that is duly
organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania. Bucktail Bank is a
Pennsylvania state-chartered bank and trust company duly
organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania and has full power and lawful
authority to own and hold its properties and to carry on its
present business;
(ii) Bucktail Bank is an insured bank under the
provisions of the Federal Deposit Insurance Act, as amended, and
is insured with the Bank Insurance Fund and has no deposits
insured by the Savings Association Insurance Fund;
(iii) the authorized capital of Bucktail Bank
consists exclusively of 100,000 shares of common stock of Twenty
Five Dollars ($25.00) par value per share, of which 53,566 shares
are validly issued, outstanding, fully paid and non-assessable,
no shares of preferred stock are authorized, issued nor
outstanding, and no shares are held as treasury shares; to the
Actual Knowledge of such counsel, there are no outstanding
obligations, options or rights of any kind entitling other
persons to purchase or sell any such shares of Bucktail Bank and
there are no outstanding securities or other instruments of any
kind convertible into such shares of Bucktail Bank; and, all such
shares of Bucktail Common Stock are owned by FNB and FNB is the
sole shareholder of Bucktail Bank;
(iv) FNB and Bucktail Bank have full corporate power
and authority to execute and deliver this Agreement, FNB has full
corporate power and authority to execute and deliver the Stock
Investment Agreement, and Bucktail Bank has full corporate power
and authority to execute and deliver the Bank Merger Agreement,
and FNB and Bucktail Bank have full corporate power and authority
to carry out the transactions contemplated herein and therein,
respectively; and all corporate actions required to be taken by
FNB and Bucktail Bank to authorize the execution and delivery of
this Agreement, all corporate actions required to be taken by FNB
to authorize the execution and delivery of the Stock Investment
Agreement, and all corporate actions required to be taken by
Bucktail Bank to authorize the execution and delivery of the Bank
Merger Agreement, and the performance of the transactions
contemplated herein and therein, respectively, have been taken;
(v) this Agreement has been duly executed and
delivered by FNB and Bucktail Bank, the Stock Investment has been
duly executed and delivered by FNB, and the Bank Merger Agreement
has been duly executed and delivered by Bucktail Bank and,
assuming due authorization, execution and delivery by Sun
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and Sun Bank, constitute valid and binding obligations of FNB and
Bucktail Bank, respectively, and are enforceable against FNB and
Bucktail Bank in accordance with their terms, subject to
bankruptcy, insolvency, and other laws of general applicability
relating to or affecting creditors' rights and general equity
principles;
(vi) the performance of this Agreement by FNB and
Bucktail Bank, the Bank Merger Agreement by Bucktail Bank, and
the Stock Investment Agreement by FNB will not violate the
Articles of Incorporation or the Bylaws of FNB or Bucktail Bank
or, to the Actual Knowledge of such counsel after reasonable
inquiry, any applicable statute, rule, regulation, order, decree,
directive, consent agreement, memorandum of understanding,
contract, indenture or other instrument to which FNB and Bucktail
Bank is a party or by which its properties are bound;
(vii) to the Actual Knowledge of such counsel, there
is no action, suit or proceeding pending or threatened of the
kind contemplated under Section 8.1(d) of this Agreement;
(viii) to the Actual Knowledge of such counsel,
there is no action, suit or proceeding pending or threatened
against FNB or Bucktail Bank (except as described in Schedule I
to this Agreement or in such counsel's opinion) that, if
determined adversely to FNB or Bucktail Bank, would have a
material and adverse effect upon the condition (financial or
otherwise), assets, liabilities, business, operations or future
prospects of Bucktail Bank;
(ix) no consent, approval, authorization or order
of any federal, state or local court or governmental authority is
required to be obtained by FNB or Bucktail Bank in connection
with the consummation of the transactions contemplated in this
Agreement, other than such consents, approvals, authorizations
and orders as have been obtained prior to the Closing; and
(x) such other legal matters incident to the matters
contemplated hereby as may reasonably be requested by Sun and Sun
Bank.
For purposes of Clause (viii) above, any action, suit or
proceeding seeking to recover from FNB and Bucktail Bank damages,
fines, penalties or other relief having a monetary value of
$35,000 or more shall be deemed to be "material". The opinion of
FNB and Bucktail Bank's special counsel shall be governed by the
Legal Opinion Accord ("Accord") of the American Bar Association
Section of Business Law (1991). The term "Actual Knowledge" as
used herein shall have the meaning set forth in the Accord. In
addition, such opinion may be limited to present statutes,
regulations, rulings, and formal agency and judicial
interpretation and to facts as they presently exist; in rendering
such opinion, such counsel need assume no obligation to revise or
supplement it should the present laws be changed by legislative
or regulatory action, judicial decision or otherwise after such
opinion is rendered. Such counsel may assume that any agreement
is the valid
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and binding obligation of any Parties to such agreement other
than FNB and Bucktail Bank. In giving such opinion, such counsel
may rely as to all matters of fact on certificates of officers or
directors of FNB and Bucktail Bank and certificates of public
officials. Such counsel's opinion shall be limited to matters
governed by federal laws and by the laws of the Commonwealth of
Pennsylvania.
(d) Accounting Treatment. Sun, Sun Bank and their
accountants shall have established to their satisfaction that, as
of the Closing, the transactions contemplated by this Agreement
can be accounted for as a "purchase" for financial reporting
purposes.
(e) Tax Matters. An opinion from Parente, Randolph,
Orlando, Carey & Associates reasonably satisfactory in form and
substance to Sun and Sun Bank as to the tax matters relating to
this Agreement and the transactions contemplated thereby shall
have been received to the effect that:
(i) The transactions contemplated by this Agreement
and by the Bank Merger Agreement will constitute a
reorganization within the meaning of Sections 368(a)(1)(A) and
368 (a)(2)(D) of the Internal Revenue Code of 1986, as amended
(the "Code");
(ii) No gain or loss will be recognized by Sun or
Sun Bank as a result of the reorganization;
(iii) Sun Bank, as the surviving bank to the Bank
Merger, will carryover and take into account all accounting items
and tax attributes of Bucktail Bank, including but not limited to
earnings and profits, methods of accounting, and tax basis and
holding periods of the assets of Bucktail Bank.
(f) Federal and State Securities Laws. All applicable
securities laws of the federal government and of any state
government having jurisdiction over the transactions contemplated
by this Agreement shall have been complied with.
(g) Dissenting Shareholders. There shall be no
dissenting shares or shareholders to this transaction.
(h) Maximum Market Price. The Closing Market Price
shall not be more than the Maximum Market Price.
(i) Environmental Matters. No environmental problem of
the kind contemplated in Section 3.24 of Article III of this
Agreement and not previously disclosed on Schedule I shall have
been discovered which would, or which potentially could,
materially and adversely affect the condition (financial or
otherwise), assets, liabilities, business, operations or future
prospects of Bucktail Bank.
(j) Closing Documents. FNB and Bucktail Bank shall
have delivered to Sun and Sun Bank: (i) a certificate signed by
FNB's Chairman of the Board or President and
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by its Secretary, or such other designated and authorized
officers, verifying that, to the best of their knowledge after
reasonable investigation, all of the representations and
warranties of FNB and Bucktail Bank set forth in this Agreement,
the Bank Merger Agreement and the Stock Investment Agreement, are
true and correct in all material respects as of the Closing and
that FNB and Bucktail Bank have performed in all material
respects each of the covenants required to be performed by them
under this Agreement; (ii) all consents and authorizations of
landlords and other persons that are necessary to permit this
Agreement to be consummated without violation of any lease or
other agreement to which Bucktail Bank is a party or by which
Bucktail Bank or any of its properties are bound; and (iii) such
other certificates and documents as Sun, Sun Bank and their
counsel may reasonably request (all of the foregoing certificates
and other documents being herein referred to as the "Bank Closing
Documents").
(k) Bucktail Bank's Shareholders Equity. The total
shareholders equity of Bucktail Bank (excluding the reserve for
loan losses and excluding the effect of FASB 115) on the
Effective Date shall be no less than Nine Million, One Hundred
Thousand Dollars ($9,100,000).
Section 8.3 Conditions Precedent to the Obligations of FNB
and Bucktail Bank. The obligations of FNB and Bucktail Bank to
consummate this Agreement shall be subject to the satisfaction of
each of the following conditions prior to or as of the Closing,
except to the extent that any such condition shall have been
waived by FNB and Bucktail Bank in accordance with the provisions
of Section 9.4 of this Agreement:
(a) Accuracy of Representations and Warranties. All
of the representations and warranties of Sun and Sun Bank as set
forth in this Agreement and the information contained in Schedule
II and all Sun/Sun Bank Closing Documents (as defined in Section
8.3(e) of this Agreement) shall be true and correct in all
material respects as of the Closing as if made on such date (or
on the date to which it relates in the case of any representation
or warranty which expressly relates to an earlier date).
(b) Covenants Performed. Sun and Sun Bank shall have
performed or complied in all material respects with each of the
covenants required by this Agreement to be performed or complied
with by them.
(c) Opinion of Counsel for Sun and Sun Bank. Sun and
Sun Bank shall have delivered to FNB and Bucktail Bank an opinion
of its special counsel, Shumaker Williams, P.C., in form and
substance reasonably satisfactory to FNB and Bucktail Bank, to
the effect that, as of the Closing:
(i) Sun is a business corporation that is duly
organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania;
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(ii) Sun is a registered bank holding company under
the Bank Holding Company Act of 1956, as amended, and has full
corporate power and authority to own and hold its properties and
to carry on its present business;
(iii) Sun Bank is a bank and trust company that is
duly organized, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania and has full corporate
power and authority to own and hold its properties and to carry
on its present business;
(iv) Sun and Sun Bank have full corporate power and
authority to execute and deliver this Agreement, Sun Bank has
full corporate power and authority to execute and deliver the
Bank Merger Agreement, and Sun has full corporate power and
authority to execute and deliver the Stock Investment Agreement
and to carry out the transactions contemplated herein and
therein, respectively, and all corporate actions required to be
taken by Sun and Sun Bank to authorize the execution and delivery
of this Agreement, the Bank Merger Agreement and the Stock
Investment Agreement and the performance of the transactions
contemplated therein, respectively, have been taken;
(v) this Agreement and the Bank Merger Agreement have
been duly authorized, executed and delivered by Sun and Sun Bank,
and the Stock Investment Agreement has been duly authorized,
executed and delivered by Sun, and assuming due authorization,
execution and delivery by FNB and Bucktail Bank, constitute valid
and binding obligations of each of Sun and Sun Bank and are
enforceable against Sun and Sun Bank in accordance with their
respective terms, subject to bankruptcy, insolvency, and other
laws of general applicability relating to or affecting creditors'
rights and general equity principles;
(vi) to the Actual Knowledge of such counsel, there
is no action, suit, or proceeding pending or threatened against
Sun or Sun Bank (except as described in Schedule II to this
Agreement or in such counsel's opinion) that, if determined
adversely to Sun or Sun Bank, would have a material and adverse
affect upon the condition (financial or otherwise), assets,
liabilities, business, operations or future prospects of Sun or
Sun Bank;
(vii) to the Actual Knowledge of such counsel after
investigation, there is no action, suit or proceeding pending or
threatened of the kind contemplated under Section 8.1(d) of this
Agreement;
(viii) no consent, approval, authorization or order
of any federal, state or local court or governmental authority is
required to be obtained by Sun or Sun Bank in connection with the
consummation of the transactions contemplated in this Agreement,
other than such consents, approvals, authorizations and orders as
have been obtained prior to the Closing, and
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(ix) the authorized capital of Sun consists
exclusively of ________ shares of common stock, par value
________________________________ ($____) per share, ("Sun Common
Stock") of which as of______________, ______ shares are issued,
outstanding, fully paid and non-assessable, __________ shares of
preferred stock of which ______ shares are issued or outstanding.
All shares of Sun Bank Common Stock are owned by Sun and Sun is
the sole shareholder of Sun Bank.
(x) upon the effective date of the Registration
Statement, as defined in Section 7.1(b) of this Agreement, the
shares of Sun Common Stock to be issued in connection with this
Agreement, the Bank Merger Agreement and the Stock Investment
Agreement and which such shares are the subject of the
Registration Statement, have been duly authorized and, when
issued in accordance with the terms of this Agreement, the Bank
Merger Agreement and the Stock Investment Agreement, and the
Registration Statement relating to such shares, will be validly
issued, fully paid and nonassessable.
(xi) the Registration Statement is effective under
the 1933 Act; any required filing of the final Prospectus
pursuant to Rule 424 has been made in the manner and within the
time period required by Rule 424; to such counsel's Actual
Knowledge, no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued,
and no proceedings for that purpose have been instituted or
threatened, or to the Actual Knowledge of such counsel are
contemplated by the SEC.
(xii) the performance of this Agreement by Sun and
Sun Bank, the Bank Merger Agreement by Sun Bank, and the Stock
Investment Agreement by Sun will not violate the Articles of
Incorporation or the Bylaws of Sun or Sun Bank or, to the Actual
Knowledge of such counsel after reasonable inquiry, any
applicable statute, rule, regulation, order, decree, directive,
consent agreement, memorandum of understanding, contract,
indenture or other instrument to which Sun or Sun Bank is a party
or by which their properties are bound.
(xiii) such other legal matters incident to the
matters contemplated hereby as may reasonably be requested by FNB
and Bucktail Bank.
The opinion of Shumaker Williams, P.C. shall be governed by
the legal Opinion Accord ("Accord") of the American Bar
Association Section of Business Law (1991). The term "Actual
Knowledge" as used herein shall have the meaning set forth in the
Accord. In addition, such opinion may be limited to present
statutes, regulations, rulings, and formal agency and judicial
interpretation and to facts as they presently exist; in rendering
such opinion, such counsel need assume no obligation to revise or
supplement it should the present laws be changed by legislation
or regulatory action, judicial decision or otherwise, after such
opinion has been rendered. Such counsel may assume that any
agreement is the valid and binding obligation of any Parties to
such agreement, other than Sun or Sun Bank. In giving such
opinion, such counsel may relay as to all matters of fact
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on certificates of officers or directors of Sun and Sun Bank and
certificates of public officials. Such counsel's opinion shall
be limited to matters governed by federal laws and by the laws of
the Commonwealth of Pennsylvania.
(d) Minimum Market Price. The Closing Market Price
shall not be less than the Minimum Market Price.
(e) Closing Documents. Sun shall have delivered to
FNB and Bucktail Bank: (i) a certificate signed by its Chairman
of the Board or President and its Secretary, or other such
designated and authorized officers, verifying that, to the best
of their knowledge after reasonable investigation, all of the
representations and warranties of Sun and Sun Bank set forth in
this Agreement, the Bank Merger Agreement and the Stock
Investment Agreement, are true and correct in all material
respects as of the Closing and that Sun and Sun Bank have
performed in all material respects each of the covenants required
to be performed by them; and (ii) such other certificates and
documents as FNB and Bucktail Bank and their counsel may
reasonably request (all of the foregoing certificates and
documents being herein referred to as the "Sun/Sun Bank Closing
Documents").
ARTICLE IX
TERMINATION AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated
at any time before the Effective Date as follows:
(a) Mutual Consent. This Agreement may be
terminated by mutual consent of the parties upon the affirmative
vote of a majority of each of the Boards of Directors of FNB,
Bucktail Bank, Sun and Sun Bank, followed by written notices
given to each of the other Parties.
(b)Unilateral Action by Sun and Sun Bank. This
Agreement may be terminated unilaterally by the affirmative vote
of a majority of each of the Boards of Directors of Sun and Sun
Bank, followed by written notice given to FNB and Bucktail Bank,
if: (i) there has been a material breach by FNB or Bucktail Bank
of any representation, warranty or covenant set forth in this
Agreement and such breach has not been cured within thirty (30)
days after written notice of such breach has been given by Sun
and Sun Bank to FNB and Bucktail Bank; or (ii) any condition
precedent to Sun's and Sun Bank's obligations as set forth in
Article VIII of this Agreement remains unsatisfied, through no
fault of Sun or Sun Bank, on September 30, 1997.
(c) Unilateral Action By FNB and Bucktail Bank. This
Agreement may be terminated unilaterally by the affirmative vote
of a majority of each of the Board of Directors of FNB and
Bucktail Bank, followed by written notice given to Sun and Sun
Bank, if: (i) there has been a material breach by Sun or Sun Bank
of any representation, warranty or covenant set forth in this
Agreement and such breach has not been cured
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within thirty (30) days after written notice of such breach has
been given by FNB and Bucktail Bank to Sun and Sun Bank; or (ii)
any condition precedent to FNB's and Bucktail Bank's obligations
as set forth in Article VIII of this Agreement remains
unsatisfied, through no fault of FNB and Bucktail Bank, on
September 30, 1997.
(d) Automatic Termination. If, for any reason, this
transaction shall not have been consummated by September 30,
1997, this Agreement shall terminate automatically as of that
date unless extended, in writing, prior to said date by mutual
action of the Boards of Directors of the Parties hereto.
Section 9.2 Effect of Termination.
(a) Effect. In the event of termination, this Agreement
shall become null and void and the transactions contemplated
herein shall thereupon be abandoned, except that the provisions
relating to limited liability and confidentiality set forth in
Sections 9.2(b) and 9.2(c) of this Agreement shall survive.
(b) Limited Liability. The termination of this Agreement in
accordance with the terms of Section 9.1 shall create no
liability on the part of any Party, or on the part of any Party's
directors, officers, shareholders, agents or representatives,
except that if this Agreement is terminated by Sun and Sun Bank
by reason of a material breach by FNB or Bucktail Bank, or if
this Agreement is terminated by FNB and Bucktail Bank by reason
of a material breach by Sun or Sun Bank, and such breach involves
an intentional, willful or grossly negligent misrepresentation or
breach of covenant, the breaching party shall be liable to the
nonbreaching party or parties for all costs or such liability as
may be pursued and found as a matter of law or in equity,
including but not limited to, reasonable out-of-pocket costs and
expenses reasonably incurred by the nonbreaching party or parties
in connection with the preparation, execution and consummation of
this Agreement, including the fees of its or their counsel,
accountants, consultants and other representatives.
(c) Confidentiality. In the event of the termination
of this Agreement, neither Sun nor Sun Bank nor FNB nor Bucktail
Bank shall use or disclose to any other person any confidential
information obtained by it during the course of its investigation
of the other party or parties.
Section 9.3 Amendment. To the extent permitted by law,
this Agreement may be amended at any time before the Effective
Date by a written instrument duly authorized, executed and
delivered by Sun and Sun Bank and by FNB and Bucktail Bank.
Section 9.4 Waiver. Any term or condition of this
Agreement may be waived, to the extent permitted by law, by the
party or parties entitled to the benefit thereof at any time
before the Effective Date by a written instrument duly
authorized, executed and delivered by such party or parties.
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ARTICLE X
CLOSING AND EFFECTIVE DATE
Section 10.1 Closing. Provided that all conditions
precedent set forth in Article VIII of this Agreement shall have
been satisfied or shall have been waived in accordance with
Section 9.4 of this Agreement, the Parties shall hold a closing
("Closing") at the offices of Sun at 2-16 South Market Street,
Selinsgrove, Pennsylvania, or such other mutually agreed upon
location, within thirty-five (35) days after the receipt of all
required regulatory approvals and after the expiration of all
applicable waiting periods on a date to be agreed upon by the
Parties, at which time the Parties shall deliver the Bank Closing
Documents, the Sun/Sun Bank Closing Documents, the opinions of
counsel required by Sections 8.1(c), 8.2(c) and 8.3(c) of this
Agreement, and such other documents and instruments as may be
necessary or appropriate to effectuate the purposes of this
Agreement.
Section 10.2 Effective Date. The Merger of Bucktail Bank
with and into Sun Bank shall become effective and this Agreement
and the Bank Merger Agreement shall be consummated on the date
upon which Articles of Merger shall be filed with the
Pennsylvania Department of State or such later date as shall be
specified as the Effective Date in the Articles of Merger
pursuant to the mutual agreement of Sun Bank and Bucktail Bank
and in accordance with the Pennsylvania Banking Code of 1965, as
amended ("Effective Date"). At the Effective Date, Bucktail Bank
shall cease to exist as a separate banking institution, and Sun
Bank shall become the surviving institution of the Merger.
ARTICLE XI
NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 11.1 No Survival. The representations and
warranties of FNB and Bucktail Bank and of Sun and Sun Bank set
forth in this Agreement shall expire and be terminated on the
Effective Date by consummation of this Agreement, and no such
representation or warranty shall thereafter survive, except all
post-merger agreements contained in Article XII of this Agreement
shall survive.
ARTICLE XII
POST-MERGER AGREEMENTS
Section 12.1 Employees.
(a) Immediately prior to or as of the Closing Date,
Bucktail Bank shall withdraw as a participating provider from all
qualified and all non-qualified employee and director pension,
profit sharing, deferred compensation, incentive, supplemental
retirement and split dollar insurance plans, agreements and
contracts and will cease to provide any such employee benefits as
of the Closing Date. All benefits under such plans to which
employees and directors of Bucktail Bank are entitled will, to
the extent
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provided by the relevant agreement, contract or plan and by law,
be preserved until payment or distribution is permitted in
accordance with the terms of such plans. Sun, Sun Bank and
Bucktail Bank, after the Closing Date, shall have no liability
under such plans. Should any liability arise under any of these
plans after the Effective Date, FNB shall indemnify Sun and Sun
Bank with regard to any and all liabilities, costs and expenses
incurred by Sun and Sun Bank in addressing such liabilities.
(b) Bucktail Bank employees who become Sun Bank
employees by virtue of the Merger, shall be entitled to
participate in all employee welfare benefit plans and other
fringe benefit programs, (including, without limitation,
hospitalization, medical, life and disability benefit policies
and plans) provided by Sun Bank for its employees in accordance
with the terms of those policies and plans as they may be amended
and changed from time to time. If applicable under the
respective plans, the Bucktail Bank employees employed by Sun
shall receive service credit from their date of hire with
Bucktail Bank for purposes of eligibility to participate in such
plans.
(c) Upon the Effective Date, Bucktail Bank employees
who become Sun Bank employees by virtue of the Merger, will be
entitled to participate, pursuant to the terms of the applicable
plan, in the qualified profit sharing plans in effect at such
time for employees of Sun Bank as they may be amended and changed
from time to time. Bucktail Bank employees employed by Sun Bank
shall receive service credit from their hire date for employment
at Bucktail Bank for purposes of eligibility and vesting
requirements but not for benefit accrual.
(d) Pre-existing condition requirements for health,
life, disability and other benefits and any insurance waiting
period will be waived only for those Bucktail Bank employees who
become employed by Sun Bank and to the extent that Sun Bank's
benefit plans, insurance policies or programs would permit the
same.
(e) Nothing in this Agreement shall obligate or require
Sun Bank to hire or employ any Bucktail Bank employee after the
Effective Date. For two years after the Effective Date, both
former Bucktail Bank employees who become Sun Bank employees by
virture of the Merger on the Effective Date and former Bucktail
Bank employees who are terminated after the Effective Date, shall
be entitled to bid on any job positions posted at Sun Bank.
However, nothing in this Agreement shall obligate Sun to hire
such persons bidding on such positions.
(f) FNB shall assume and pay all liability, costs,
obligations, funding requirements, excise taxes and/or fines
associated with all employee and director pension, profit
sharing, health and welfare, and/or any other employee and
director benefit, deferred compensation, incentive or retirement
plan of Bucktail Bank existing prior to and, as of the Effective
Date, and FNB shall indemnify and hold harmless Sun and Sun Bank
from any such obligations and/or liabilities thereunder. Such
indemnification shall include, but not be limited to, all such
plans, arrangements, contracts and agreements within the scope of
Sections 6.12 and 3.39 of this Agreement.
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(g) As provided herein, Sun will provide severance
payments to those former employees of Bucktail Bank whose
employment is terminated (other than for cause) on or after the
Effective Date and before the expiration of six months following
the Effective Date, and who sign a release of any and all claims
the employee may have against FNB, Bucktail Bank, Sun and Sun
Bank. Upon receipt of the release, the former employee shall
receive the amount equal to one week's pay for each year of
service with Bucktail Bank up to a maximum of 26 weeks. The
release shall be substantially in the same form as set forth in
Exhibit "D" to this Agreement. In computing such severance
payments for non-exempt, full time employees, overtime and bonus
are excluded. In computing such severance payments for
non-exempt regular
part-time employees, the weekly compensation shall
be based on one-fifty-second (1/52) of the employee's total
salary, excluding overtime and bonus paid in 1996. For full time
exempt employees, weekly compensation is calculated by taking
1/52 of the employee's 1996 annual salary, excluding bonus.
(h) In addition to severance payments provided pursuant
to Section 12.1(g), Sun Bank shall either pay or provide former
Bucktail Bank employees COBRA expenses for the period in which
they receive severance payments from Sun under Section 12.1(g).
(i) It is the intention of FNB, that to the extent that
severance payments and COBRA benefits provided by Sun Bank,
pursuant to Sections 12.1(g) and (h) above, do not extend to the
end of 1997, then FNB will provide such payments through
December 31, 1997 for former Bucktail Bank employees terminated
by Sun after the Effective Date.
Section 12.2 Board of Directors of Sun. Promptly
following the Closing Date, and subject to receipt of any
required regulatory approvals, and qualification of such persons
under Sun's Bylaws, Sun will appoint two persons to its Board of
Directors proposed by FNB and agreed to by Sun, which agreement
shall not unreasonably be withheld, for a term expiring at the
next Sun Annual Shareholders Meeting. At the next Sun Annual
Shareholders Meeting, the Board of Directors of Sun shall
recommend that the two persons, proposed by FNB and agreed to by
Sun as provided above, be elected by the shareholders of Sun, one
person each to the next two successive classes of Director to be
elected by the shareholders. Provided, however, that if the
Closing Date is after the date that the proxy materials for the
1997 Annual Meeting of Shareholders have been sent to the
printer, then the two persons, agreed upon as provided above,
shall be appointed to the Sun Board of Directors, immediately
after the 1997 Annual Meeting of Shareholders with the
recommendation of the Sun Board of Directors that such persons
appointed to the Board of Directors, be elected to the next two
successive classes of Director to be elected at the 1998 Annual
Meeting of Shareholders.
Section 12.3 Continuing Services. If Closing as defined in
Section 10.1 hereof occurs prior to April 1, 1997, then FNB shall
provide Sun Bank with data processing services and customer
service center services at Bucktail Bank's current cost as
described more fully in the fee schedule which has been provided
to Sun.
39
<PAGE>
ARTICLE XIII
GENERAL PROVISIONS
Section 13.1 Expenses. Except as provided in Section
9.2(b) of this Agreement, each party shall pay its own expenses
incurred in connection with this Agreement and the consummation
of the transactions contemplated herein; provided, however, that
if the Securities and Exchange Commission requires audited
financial statements of Bucktail Bank for the Registration
Statement, then the Parties shall share equally in the expenses
to obtain such audited financial statements.
Section 13.2 Publicity. The content and timing of all
publicity and announcements concerning this Agreement, and all
transactions contemplated by this Agreement, shall be subject to
joint consultation and approval of Sun and FNB, subject, however,
to the legal obligations applicable to public companies.
Section 13.3 Confidentiality. Any non-public or
confidential information disclosed by FNB and Bucktail Bank or by
Sun and Sun Bank to the other Parties pursuant to this Agreement
or as a result of the discussions and negotiations leading to
this Agreement or otherwise, or to which any Party has acquired
or may acquire access pursuant to which the disclosing Party
indicates (either expressly, in writing or orally, or by the
context of the disclosure or access) that such information is
non-public or confidential shall be kept strictly confidential
and shall not be used in any manner by the recipient except in
connection with the transactions contemplated by this Agreement.
To that end, the Parties hereto will each, to the maximum extent
practicable, restrict knowledge of and access to non-public or
confidential information of the other Party to its officers,
directors, employees and professional advisors who are directly
involved in the transactions contemplated hereby and who
reasonably need to know such information. Further to that end,
all non-public or confidential documents (including all copies
thereof) obtained hereunder by any Party shall be returned as
soon as practicable after receiving a request from the other
Party following any termination of this Agreement.
Section 13.4 Other Mergers and Acquisitions. Subject to
the right of FNB and Bucktail Bank to refuse to consummate this
Agreement pursuant to Section 9.1(c) of this Agreement, nothing
set forth in this Agreement or any Exhibit hereto shall be
construed:
(a) to preclude Sun from acquiring, or to limit in any
way the right of Sun to acquire, prior to or following the
Effective Date, the stock or assets of any other financial
services institution or other corporation or entity, whether by
issuance or exchange of Sun Common Stock or otherwise;
(b) to preclude Sun from issuing, or to limit in any
way the right of Sun to issue, prior to or following the
Effective Date, Sun Common Stock, Sun Preferred Stock or other
securities;
(c) to preclude Sun from granting options at any time
with respect to Sun Common Stock, Sun Preferred Stock or other
securities;
40
<PAGE>
(d) to preclude option holders of Sun from exercising
options at any time with respect to Sun Common Stock, Sun
Preferred Stock or other securities; or
(e) to preclude Sun from taking, or to limit in any way
the right of Sun to take, any other action not expressly and
specifically prohibited by the terms of this Agreement.
Section 13.5 Notices. All notices, claims, requests,
demands, consents and other communications which are required or
permitted to be given under this Agreement shall be in writing
and shall be deemed to have been duly delivered if delivered in
person, transmitted by facsimile machine (but only if receipt is
acknowledged in writing) by overnight delivery service, or mailed
by registered or certified mail, postage prepaid, return receipt
requested, as follows:
(a) If to Sun and/or Sun Bank, to:
Raymond C. Bowen
Chairman of the Board
Sun Bancorp, Inc.
P. O. Box 57
2-16 South Market Street
Selinsgrove, PA 17870
And to:
Fred W. Kelly, Jr.
President/CEO
Sun Bancorp, Inc.
P. O. Box 57
2-16 South Market Street
Selinsgrove, PA 17870
With a copy to:
Nicholas Bybel, Jr., Esquire
Shumaker Williams, P.C.
3425 Simpson Ferry Road
Camp Hill, PA 17011
(b) If to FNB and/or Bucktail Bank, to:
Peter Mortensen
Chairman of the Board
F.N.B. Corporation
3320 E. State Street
Hermitage, PA 16148-3389
41
<PAGE>
And to:
John W. Rose
Executive Vice President
F.N.B. Corporation
Hermitage Square
3320 E. State Street
Hermitage, PA 16148-3389
Gene C. Maffey
President/CEO
Bucktail Bank and Trust Company
210 Market Street
Williamsport, PA 17701
With a copy to:
Daniel L. Wessels, Esquire
Cohen & Grigsby, P.C.
2900 CNG Tower
625 Liberty Avenue
Pittsburgh, PA 15222
Section 13.6 Counterparts. This Agreement may be executed
simultaneously in several counterparts, each of which shall be
deemed an original, but all such counterparts together shall be
deemed to be one and the same instrument.
Section 13.7 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania, except to the extent that federal
law is controlling.
Section 13.8 Parties in Interest. This Agreement shall be
binding upon and inure to the benefit of the Parties hereto and
their respective successors and assigns; provided, however, that
the rights and obligations of any Party under this Agreement may
not be assigned or delegated by that Party without the prior
written consent of each other Party.
Section 13.9 Entire Agreement. This Agreement, the Bank
Merger Agreement and the Stock Investment Agreement set forth the
entire understanding and agreement of the Parties hereto and
supersedes any and all prior agreements, arrangements and
understandings, oral or written, relating to the subject matter
hereof.
42
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound hereby,
this Agreement is executed as of the day and year first above
written.
ATTEST: SUN BANCORP, INC.
By: /s/ Robert C. Longenberger By: /s/ Raymond C. Bowen
-------------------------- ---------------------
Robert C. Longenberger Raymond C. Bowen
Secretary Chairman of the Board of
Directors
[CORPORATE SEAL]
ATTEST: SUN BANK
By: /s/ Robert C. Longenberger By: /s/ Fred W. Kelly, Jr.
-------------------------- -----------------------
Robert C. Longenberger Fred W. Kelly, Jr.
Secretary President
[BANK SEAL]
ATTEST: F.N.B. CORPORATION
By: /s/ James G. Orie, Esquire By: /s/ John W. Rose
-------------------------- ---------------------
James G. Orie, Esquire John W. Rose
General Counsel Executive Vice President
[CORPORATE SEAL]
ATTEST: BUCKTAIL BANK AND TRUST
COMPANY
By: /s/ James G. Orie, Esquire By: /s/ Gene C. Maffey
--------------------------- -----------------------
James G. Orie, Esquire Gene C. Maffey
General Counsel President
[BANK SEAL]
43
EXHIBIT 23.1
Consent of Parente, Randolph, Orlando,
Carey & Associates, Independent Accountants
(To Be Filed By Amendment)
EXHIBIT 23.2
Consent of Ernst & Young LLP, Independent Auditors
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Regarding:
1. Registration Statement on Form S-8 relating to Sun
Bancorp, Inc.'s 1994 Employee Stock Purchase Plan, 1994
Independent Directors Stock Option Plan and 1994 Stock Incentive
Plan (File #33-80220)
We consent to the incorporation by reference in the above listed
Registration Statement of Sun Bancorp, Inc. of our report dated
April 2, 1997, with respect to the financial statements of
Bucktail Bank and Trust Company for the year ended December 31,
1996 included in this Current Report on Form 8-K dated July 11,
1997.
/s/ ERNST & YOUNG LLP
---------------------
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
July 9, 1997
EXHIBIT 99.1
Press Release
<PAGE>
SUN BANCORP, INC.
FOR IMMEDIATE RELEASE
July 1, 1997
For further information, please contact:
Fred W. Kelly, Jr., President & CEO
SUN BANCORP, INC.
2-16 S. Market Street
Selinsgrove, PA 17870
Phone (717) 374-1131
Fred W. Kelly, Jr., President and CEO of SUN BANCORP, INC.
(NASDAQ Symbol - SUBI) announced the completion of the
acquisition of Bucktail Bank and Trust Company from F.N.B.
Corporation, Hermitage, PA. The transaction was the culmination
of an agreement between SUN and F.N.B. dated November 6, 1996.
F.N.B. received 565,384 shares of SUN common stock in exchange
for Bucktail. The transaction was structured to be a tax free
reorganization and will be treated by SUN as a purchase for
financial reporting purposes.
Simultaneously, Bucktail was merged into Sun Bank, the
banking subsidiary of SUN BANCORP, INC. With the approximately
$127,000,000 in assets of Bucktail, SUN will report over
$500,000,000 in assets as of June 30, 1997.
Sun Bank will now operate fourteen banking offices in
Snyder, Union, Northumberland, Lycoming, Cameron and Elk
counties. Sun Bank does business as Snyder County Trust Company,
Watsontown Bank, and Bucktail Bank and Trust Company, all
Incorporated as Sun Bank.
2-16 SOUTH MARKET STREET
POST OFFICE BOX 57
SELINSGROVE, PENNSYLVANIA 17870
TELEPHONE 717-374-1131
EXHIBIT 99.2
Audited Financial Statements of Bucktail
Bank and Trust Company, including Report of Independent
Auditors, for the year ended December 31, 1996
<PAGE>
Audited Financial Statements
Bucktail Bank and Trust Company
Year ended December 31, 1996
with Report of Independent Auditors
<PAGE>
Bucktail Bank and Trust Company
Audited Financial Statements
Year ended December 31, 1996
Contents
Report of Independent 1
Audited Financial Statements
Balance 2
Statement of Income 3
Statement of Changes in Stockholder's Equity 4
Statement of Cash Flows 5
Notes to Financial Statements 6
<PAGE>
Report of Independent Auditors
Board of Directors and Shareholder
Bucktail Bank and Trust Company
We have audited the accompanying balance sheet of Bucktail Bank
and Trust Company (Company), a wholly owned subsidiary of F.N.B.
Corporation, as of December 31, 1996, and the related statements
of income, changes in shareholders' equity, and cash flows for
the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Bucktail Bank and Trust Company at December 31, 1996, and the
results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
April 2, 1997
1
<PAGE>
<TABLE>
Bucktail Bank and Trust Company
Balance Sheet
<CAPTION>
Dollars in thousands, except par values
December 31 1996
-----
<S> <C>
Assets
Cash and due from banks $ 4,761
Interest bearing deposits with banks 29
Securities available for sale 7,380
Securities held to maturity
(fair value of $12,625) 12,714
Loans, net of deferred loan fees
and unearned income of $876 92,191
Allowance for loan losses (1,262)
----------
Net Loans 90,929
Premises and equipment 1,280
Other assets 1,271
----------
$ 118,364
=========
Liabilities
Deposits:
Non-interest bearing $ 13,520
Interest bearing 92,484
---------
Total Deposits 106,004
Other liabilities 1,042
Short-term borrowings 2,233
Long-term debt 89
---------
Total Liabilities 109,368
Stockholder's Equity
Common stock - $25 par value
Authorized - 100,000 shares
Outstanding - 53,566 shares 1,339
Additional paid-in capital 4,432
Retained earnings 3,208
Net unrealized securities gains 17
---------
Total Stockholder's Equity 8,996
---------
$118,364
========
See accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
Bucktail Bank and Trust Company
Statement of Income
<CAPTION>
Dollars in thousands
Year Ended December 31 1996
-----
<S> <C>
Interest Income
Loans, including fees $ 7,176
Securities:
Taxable 1,248
Tax exempt 237
Other 147
----------
Total Interest Income 8,808
Interest Expense
Deposits 3,923
Short-term borrowings 40
Long-term debt 5
----------
Total Interest Expense 3,968
----------
Net Interest Income 4,840
Provision for loan losses 289
----------
Net Interest Income After
Provision For Loan Losses 4,551
Non-Interest Income
Service charges 474
Trust 136
Net gain on sale of securities 8
Net gain on sale of securities 164
Other 90
-----------
Total Non-Interest Income 872
-----------
5,423
Non-Interest Expenses
Salaries and employee benefits 1,722
Net occupancy 343
Equipment 261
Professional services 810
Postage 123
Promotional 105
Other 786
-----------
Total Non-Interest Expenses 4,150
-----------
Income Before Income Tax Expense 1,273
Income tax expense 369
-----------
Net Income $ 904
===========
See accompanying Notes to Financial Statements
</TABLE>
3
<PAGE>
<TABLE>
Bucktail Bank and Trust Company
Statement of Changes in Stockholder's Equity
Dollars in thousands
<CAPTION>
Net
Additional Unrealized
Common Paid-In Retained Securities
Stock Capital Earnings Gains
----- --------- -------- ----------
<S> <C> <C> <C> <C>
Balance at $ 1,339 $ 4,432 $ 2,704 $ 67
January 1,
1996
Net Income 904
Cash dividends
declared (400)
Change in net
unrealized
securities
gains (50)
-------- -------- --------- ----------
Balance at $1,339 $ 4,432 $3,208 $ 17
December 31, ====== ======= ====== ==========
1996
See accompanying Notes to Financial Statements
</TABLE>
4
<PAGE>
<TABLE>
Bucktail Bank and Trust Company
Statement of Cash Flows
Dollars in thousands
<CAPTION>
Year Ended December 31 1996
----
<S> <C>
Operating Activities
Net income $ 904
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and accretion 145
Provision for loan losses 289
Deferred taxes 44
Net gain on sale of securities (8)
Net change in:
Interest receivable 106
Interest payable (12)
Other, net 543
----------
Net cash flows from operating
activities 2,011
Investing Activities
Net change in:
Interest bearing deposits with banks 2
Federal funds sold 4,881
Loans (15,772)
Purchase of securities available for sale (6,964)
Purchase of securities held to maturity (1,768)
Proceeds from sale of securities available
for sale 5,986
Proceeds from maturity of securities
available for sale 6,331
Proceeds from maturity of securities held
to maturity 2,763
Increase in premises and equipment (127)
-------
Net cash flows used in investing
activities (4,668)
Financing Activities
Net change in:
Non-interest bearing deposits (663)
Interest bearing deposits 1,834
Short-term borrowings 2,198
Decrease in long-term debt (17)
Cash dividends paid (400)
-------
Net cash flows from financing activities 2,952
-------
Net Increase In Cash And Due From Banks 295
Cash and due from banks at beginning of year 4,466
-------
Cash and due from banks at end of year $ 4,761
========
See accompanying Notes to Financial Statements
</TABLE>
5
<PAGE>
Bucktail Bank and Trust Company
Notes to Financial Statements
Business
- --------
Bucktail Bank and Trust Company (Bucktail or the Bank) is a
wholly-owned subsidiary of F.N.B. Corporation (the Corporation).
Bucktail operates seven offices in central Pennsylvania and is
commonly owned with the following affiliates: First National
Bank of Pennsylvania (First National), Reeves Bank, First County
Bank, The Metropolitan Savings Bank of Ohio, Regency Finance
Company (Regency), Penn-Ohio Life Insurance Company (Penn-Ohio),
Mortgage Service Corporation and F.N.B. Building Corporation. On
November 6, 1996, the Corporation announced a definitive
agreement to sell 100% of its ownership interest in Bucktail to
Sun Bancorp, Inc. (Sun), a bank holding company headquartered in
Selinsgrove, Pennsylvania, with assets of approximately $355
million. The sale of Bucktail is anticipated to be consummated
during the second quarter of 1997.
Summary of Significant Accounting Policies
- -------------------------------------------
Use of Estimates:
- -----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Securities:
- -----------
Debt securities are classified as held to maturity when
management has the positive intent and ability to hold securities
to maturity. Securities held to maturity are carried at
amortized cost.
Debt securities not classified as held to maturity and marketable
equity securities are classified as available for sale.
Securities available for sale are carried at fair value with net
unrealized securities gains (losses) reported separately as a
component of stockholder's equity, net of tax.
Amortization of premiums and accretion of discounts are recorded
as interest income from securities. Realized gains and losses
are recorded as net securities gains (losses). The adjusted cost
of specific securities sold is used to compute gains or losses on
sales.
Presently, Bucktail has no intention of establishing a trading
securities classification.
Loans and the Allowance for Loan Losses:
- ----------------------------------------
Loans are reported at their outstanding principal adjusted for
any charge-offs and any deferred fees or costs on originated
loans.
The Bank identifies impaired loans and measures these loans based
on the present value of expected future cash flows discounted at
the loan's effective interest rate, at the loan's observable
market price or at the fair value of the collateral if the loan
is collateral dependent. If the recorded investment in the loan
exceeds the measure of fair value, a valuation allowance is
established as a component of the allowance for loan losses.
Impaired loans consist of non-homogeneous loans, which based on
the evaluation of current information and events, management has
determined that it is probable that the Bank will not be able to
collect all amounts due according to the contractual terms of the
loan agreements. The Bank evaluates all commercial and
commercial real estate loans which have been classified for
regulatory reporting purposes, including non-accrual and
restructured loans, in determining impaired loans.
6
<PAGE>
Interest income on loans is accrued on the principal amount
outstanding. It is Bucktail's policy to discontinue interest
accruals on loans, except consumer installment loans, when
principal or interest is due and has remained unpaid for 90 days
or more unless the loan is both well secured and in the process
of collection. When a loan is placed on non-accrual status,
unpaid interest credited to income in the current year is
reversed and unpaid interest accrued in prior years is charged
against the allowance for loan losses. Non-accrual loans may not
be restored to accrual status until all delinquent principal and
interest has been paid, or the loan becomes both well secured and
in the process of collection. Consumer installment loans are
generally charged off against the allowance for loan losses upon
reaching 90 days past due. Loan origination fees and related
costs are deferred and recognized over the life of the loan as an
adjustment of yield.
The allowance for loan losses is based on management's evaluation
of potential losses in the loan portfolio, which includes an
assessment of past experience, current and estimated future
economic conditions, known and inherent risks in the loan
portfolio, the estimated value of underlying collateral and
industry standards. Additions are made to the allowance through
periodic provisions charged to income and recovery of principal
of loans previously charged off. Losses of principal are charged
to the allowance when the loss actually occurs or when a
determination is made that a loss is probable.
Premises and Equipment:
- -----------------------
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed generally on the
straight-line method.
Other Real Estate Owned:
- ------------------------
Assets acquired in settlement of indebtedness are included in
other assets at the lower of fair value minus estimated costs to
sell or at the carrying amount of the indebtedness. Subsequent
write-downs and net direct operating expenses attributable to
such assets are included in other expenses.
Income Taxes:
- -------------
Income taxes are computed utilizing the liability method. Under
this method, deferred taxes are determined based on differences
between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to
reverse. Bucktail files a consolidated federal income tax return
with the Corporation. Applicable income taxes of individual
entities are generally computed as if each had filed a separate
return.
Cash Equivalents:
- -----------------
Bucktail considers cash and due from banks as cash and cash
equivalents.
New Accounting Standards:
- -------------------------
Statement of Financial Accounting Standards (FAS) No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities," establishes new standards for
determining whether a transfer constitutes a sale and, if so, the
determination of the resulting gain or loss. These standards are
based on the consistent application of a financial components
approach that focuses on control. Under this approach, an entity
recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when
control has been surrendered, and derecognizes liabilities when
extinguished. Provisions of this Statement are effective for
certain transactions entered into in 1997 and 1998. Bucktail
does not anticipate this Standard will have a material effect on
its financial position or results of operations.
7
<PAGE>
Securities
- ----------
Following is a summary of the maturity distribution and weighted
average yield for each range of maturities of securities
available for sale (dollars in thousands):
<TABLE>
<CAPTION>
Fair Weighted
December 31, 1996 Value Average Yield
------ -------------
<S> <C> <C>
U.S. Treasury and other
U.S. Government agencies
and corporations:
Maturing within one year $ 4,009 5.90%
Maturing after one year but
within five years 1,982 6.53
--------
Total U.S. Treasury and
Other U.S. Government
Agencies and Corporations 5,991 6.11
Mortgage-backed securities 944 6.63
Equity securities 445 6.08
---------
Total Securities Available
for Sale $ 7,380 6.17
========
</TABLE>
Following is a summary of the maturity distribution and weighted
average yield for each range of maturities of securities held to
maturity (dollars in thousands):
<TABLE>
<CAPTION>
Amortized Weighted
December 31, 1996 Cost Average Yield
--------- -------------
<S> <C> <C>
States of the U.S. and
political subdivisions:
Maturing within one year $ 360 5.10%
Maturing after one year but
within five years 4,490 5.64
--------
Total States of the U.S.
and Political Subdivisions 4,850 5.60
Other securities:
Maturing after one year but
within five years 5 6.00
Mortgage-backed securities 7,859 5.90
--------
Total Securities Held to Maturity $12,714 5.79
=======
</TABLE>
Maturities may differ from contractual terms because borrowers
may have the right to call or prepay obligations with or without
penalties. Periodic payments are received on mortgage-backed
securities based on the payment patterns of the underlying
collateral. Yields on tax-exempt securities have been adjusted
to a taxable equivalent basis using a federal income tax rate of
35%.
Proceeds from sales of securities available for sale during 1996
were $6.0 million. Gross gains and gross losses which were
realized on those sales were $10,000 and $2,000, respectively.
8
<PAGE>
Following is a summary of securities available for sale (in
thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
December 31, 1996 Cost Gains Losses Value
--------- ---------- ---------- -----
<S> <C> <C> <C> <C>
U.S. Treasury and
other U.S. Government
agencies and
corporations $ 5,972 $ 19 $ 5,991
Mortgage-backed
securities 937 7 944
---------- --------- ------- --------
Total Debt
Securities 6,909 26 6,935
Equity securities 445 445
--------- --------- ------- --------
$ 7,354 $ 26 $ 7,380
========= ========== ======= ========
</TABLE>
Following is a summary of securities held to maturity (in
thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
December 31, 1996 Cost Gains Losses Value
--------- ---------- ---------- -----
<S> <C> <C> <C> <C>
States of the U.S.
and political
subdivisions $ 4,850 $ (55) $ 4,795
Mortgage-backed
securities 7,859 $ 5 (39) 7,825
Other debt securities 5 5
--------- --------- ------- --------
$ 12,714 $ 5 $ (94) $12,625
========= ========= ======= =======
</TABLE>
At December 31, 1996, securities with a carrying value of $12.0
million were pledged to secure public deposits, trust deposits
and for other purposes as required by law.
As of December 31, 1996, Bucktail had not entered into any
derivative transactions.
Loans
- -----
Following is a summary of loans (in thousands):
December 31 1996
----
Real estate:
Residential $ 40,842
Commercial 8,597
Construction 210
Installment loans to individuals 40,736
Commercial, financial and agricultural 2,682
Net deferred loan fees and unearned income (876)
---------
$ 92,191
=========
At December 31, 1996, the loan portfolio's largest concentration
included residential real estate loans collateralized by single
and multi-family residences and installment loans to individuals
financing automobile purchases. Bucktail generally avoids making
significant loans to any single borrower and requires sufficient
collateral based upon the financial strength of the borrower.
Non-performing Assets
- ---------------------
Following is a summary of non-performing assets (in thousands):
December 31 1996
----
Non-accrual loans $ 491
Other real estate owned 66
--------
Total Non-performing Assets $ 557
========
9
<PAGE>
For the year ended December 31, 1996, income recognized on
non-accrual loans
was $24,000. Income that would have been recognized
during 1996 on such loans if they were in accordance with their
original terms was $49,000. Accruing loans that are
contractually past due 90 days or more were $359,000 at December
31, 1996. At or during the year ended December 31, 1996, none of
Bucktail's loans were deemed to be impaired in accordance with
FAS No. 114, "Accounting by Creditors for Impairment of a Loan."
Allowance for Loan Losses
- -------------------------
Following is an analysis of changes in the allowance for loan
losses (in thousands):
Year Ended December 31 1996
----
Balance at beginning of year $ 1,317
Charge-offs:
Real estate (45)
Installment loans to individuals (282)
Commercial, financial and agricultural (73)
--------
(400)
Recoveries:
Installment loans to individuals 56
---------
56
---------
Net Charge-Offs (344)
Provision for loan losses 289
---------
Balance at end of year $1,262
========
At December 31, 1996, for purposes of this presentation,
management has allocated the allowance for loan losses to loan
categories as follows (in thousands):
<TABLE>
<CAPTION>
Percent of
Loans in
Each
Category
of Total
Amount Loans
------- ----------
<S> <C> <C>
Real estate $ 101 53%
Installment loans to
individuals 761 44
Commercial, financial
and agricultural 400 3
-------- ----
$ 1,262 100%
========= ====
</TABLE>
Premises and Equipment
- ----------------------
Following is a summary of premises and equipment (in thousands):
December 31 1996
----
Land $ 189
Premises 1,516
Equipment 2,205
--------
3,910
Accumulated depreciation (2,630)
--------
$ 1,280
========
Depreciation expense was $191,000 for 1996.
10
<PAGE>
Bucktail has operating leases extending to 2010 for certain land
and office locations. Leases that expire are generally expected
to be renewed or replaced by other leases. Rental expense was
$149,000 for 1996. Total minimum rental commitments under such
leases were $396,000 at December 31, 1996. Following is a
summary of future minimum lease payments for years following
December 31, 1996 (in thousands):
1997 $ 36
1998 28
1999 28
2000 28
2001 28
Later years 248
Deposits
- --------
Following is a summary of deposits (in thousands):
December 31 1996
----
Non-interest bearing $ 13,520
Savings 28,307
NOW 9,082
Certificates of deposit and
other time deposits 55,095
---------
$ 106,004
=========
Following is a summary of the scheduled maturities of time
deposits for each of the five years following December 31, 1996
(in thousands):
1997 $ 37,946
1998 8,914
1999 2,060
2000 4,845
2001 1,301
Later years 29
Time deposits of $100,000 or more were $9.0 million at December
31, 1996. Following is a summary of these time deposits by
remaining maturities at December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
Certificates Other Time
of Deposit Deposits Total
------------ ---------- -------
<S> <C> <C> <C>
Three months or less $ 3,270 $ 3,270
Three to six months 2,141 $ 39 2,180
Six to twelve months 1,491 79 1,570
Over twelve months 1,516 476 1,992
-------- -------- --------
$ 8,418 $ 594 $ 9,012
======== ======== ========
</TABLE>
Short-Term Borrowings
- ---------------------
Following is a summary of short-term borrowings (in thousands):
December 31 1996
----
Federal funds purchased $ 2,183
Other short-term borrowings 50
--------
$ 2,233
========
The weighted average interest rate on these short-term borrowings
was 7.25% at December 31, 1996. Bucktail has a line of credit
with the Federal Home Loan Bank, which if used would require
collateralization. No amounts were used as of December 31, 1996.
11
<PAGE>
Commitments and Credit Risk
- ---------------------------
Bucktail has commitments to extend credit and standby letters of
credit which involve certain elements of credit risk in excess of
the amount stated in the balance sheet. Bucktail's exposure to
credit loss in the event of non-performance by the customer is
represented by the contractual amount of those instruments.
Consistent credit policies are used by Bucktail for both on- and
off-balance sheet items. At December 31, 1996, Bucktail had
commitments to extend credit totaling $5.9 million and $25,000 of
standby letters of credit.
At December 31, 1996, funding of approximately 60% of the
commitments to extend credit is dependent on the financial
condition of the customer. Bucktail has the ability to withdraw
such commitments at its discretion. Commitments generally have
fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements.
Based on management's credit evaluation of the customer,
collateral may be deemed necessary. Collateral requirements vary
and may include accounts receivable, inventory, property, plant
and equipment and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by
Bucktail which may require payment at a future date. The credit
risk involved in issuing letters of credit is essentially the
same as that involved in extending loans to customers.
Income Taxes
- ------------
Income tax expense consists of the following (in thousands):
Year Ended December 31 1996
----
Federal income taxes:
Current $ 325
Deferred 44
-------
$ 369
=======
The tax effects of temporary differences that give rise to
deferred tax assets and liabilities are presented below (in
thousands):
December 31 1996
----
Deferred tax assets:
Allowance for loan losses $ 442
Deferred compensation 33
Loan fees 5
Other 7
-------
Total Gross Deferred Tax Assets 487
Deferred tax liabilities:
Depreciation 47
Unrealized gains on securities
available for sale 9
Other 9
-------
Total Gross Deferred Tax Liabilities 65
-------
Net Deferred Tax Assets $ 422
========
12
<PAGE>
Following is a reconciliation between federal statutory tax and
actual effective tax:
Year Ended December 31 1996
----
Federal statutory tax 35.0%
Effect of non-taxable interest
and dividend income (6.7)
Other items .7
-----
Actual taxes 29.0%
=====
Included in loan income is interest on tax-free loans of $49,245
for 1996.
Cash Flow Information
- ---------------------
Following is a summary of supplemental cash flow information (in
thousands):
Year Ended December 31 1996
-----
Cash paid during year for:
Interest $ 3,980
Income taxes 321
Non-cash Investing and Financing
Activities:
Acquisition of real estate
in settlement of loans $ 134
Regulatory Matters
- ------------------
Bucktail is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and
possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on Bucktail's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, Bucktail must
meet specific capital guidelines that involve quantitative
measures of assets, liabilities and certain off-balance sheet
items as calculated under regulatory accounting practices.
Bucktail's capital amounts and classifications are also subject
to qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulators to ensure capital
adequacy require Bucktail to maintain minimum amounts and ratios
of total and tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined) and of tier 1 capital to
average assets (as defined). Management believes, as of December
31, 1996, that Bucktail meets all capital adequacy requirements
to which it is subject. Capital ratios as of December 31, 1996
are as follows (dollars in thousands):
<TABLE>
<CAPTION>
For Capital
Actual Adequacy Purposes
--------------- -----------------
Amount Ratio Amount Ratio
------ ----- ------ -----
<S> <C> <C> <C> <C>
Total Capital (to
risk-weighted assets) $ 10,006 12.2% $ 6,558 8.0%
Tier 1 Capital (to
risk-weighted assets) 8,978 11.0 3,279 4.0
Tier 1 Capital (to
average assets) 8,978 7.5 4,772 4.0
<CAPTION>
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
----------------------------------
Amount Ratio
------ -----
<S> <C> <C>
Total Capital (to
risk-weighted assets) $ 8,198 10.0%
Tier 1 Capital (to
risk-weighted assets) 4,919 6.0
Tier 1 Capital (to
average assets) 5,964 5.0
</TABLE>
As of December 31, 1996, Bucktail has been categorized by the
regulators as "well capitalized" under the regulatory framework
for prompt corrective action. Management is not aware of any
conditions or events at March 31, 1997 which would change this
categorization.
13
<PAGE>
Bucktail was required to maintain aggregate reserves amounting to
$563,000 at December 31, 1996 to satisfy federal regulatory
requirements.
Certain limitations exist under applicable law and regulations by
regulatory agencies regarding dividend payments to a parent by
its subsidiaries. As of December 31, 1996, Bucktail had $1.8
million of retained earnings available for distribution as
dividends without prior regulatory approval.
Under current Federal Reserve regulations, Bucktail is limited in
the amount it may lend to non-bank affiliates, including the
Corporation. Such loans must be secured by specified collateral.
In addition, any such loans to a single non-bank affiliate may
not exceed 10% of Bucktail's capital and surplus and the
aggregate of loans to all such affiliates may not exceed 20%.
The maximum amount that may be borrowed by non-bank affiliates
under these provisions approximated $2.0 million at December 31,
1996.
Related Party Transactions
- --------------------------
Included in professional services are reimbursements to First
National of $659,000 for administrative and data processing
services for the year ended December 31, 1996.
Bucktail purchased federal funds from First National, which
totaled $2.2 million at December 31, 1996.
Fair Value of Financial Instruments
- -----------------------------------
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and Due from Banks:
- ------------------------
For these short-term instruments, the carrying amount is a
reasonable estimate of fair value.
Securities:
- -----------
For both securities available for sale and securities held to
maturity, fair value equals quoted market price, if available.
If a quoted market price is not available, fair value is
estimated using quoted market prices for similar securities.
Loans:
- ------
The fair value of loans is estimated by discounting the future
cash flows using the current rates at which similar loans would
be made to borrowers with similar credit ratings and for the same
remaining maturities.
Deposits:
- ---------
The fair value of demand deposits, savings accounts and certain
money market deposits is the amount payable on demand at the
reporting date. The fair value of fixed-maturity deposits is
estimated by discounting future cash flows using rates currently
offered for deposits of similar remaining maturities. The fair
value estimates do not include the benefits that result from
low-cost funding
provided by the deposit liabilities compared to the
cost of alternate sources of funds.
Short-Term Borrowings:
- ----------------------
The carrying amounts for short-term borrowings approximate fair
value for amounts that mature in 90 days or less. The fair value
of subordinated notes is estimated by discounting future cash
flows using rates currently offered.
14
<PAGE>
Long-Term Debt:
- ---------------
The fair value of long-term debt is estimated by discounting
future cash flows based on the market prices for the same or
similar issues or on the current rates offered to the Corporation
for debt of the same remaining maturities.
The estimated fair values of Bucktail's financial instruments are
as follows (in thousands):
<TABLE>
<CAPTION>
1996
----------------------------
Carrying Fair
Amount Value
------- ------
<S> <S> <S>
Financial Assets
Cash and short-term
investments $ 4,790 $ 4,790
Securities available
for sale 7,380 7,380
Securities held to maturity 12,714 12,625
Net loans 90,929 90,759
Financial Liabilities
Deposits $ 106,004 $ 106,342
Short-term borrowings 2,233 2,233
Long-term debt 89 79
</TABLE>
15
EXHIBIT 99.3
Pro forma financial information
(To Be Filed by Amendment)
