As filed with the Securities and Exchange Commission on November 19, 2007
Registration No. 333-146734
UNITED STATES SECURITIES AND EXCHANGE COMMISSION ON JUNE 20, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
Washington, D.C. 20549
FORM
Amendment No. 1
To
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
IBT BANCORP, INC.
(Exact
(Exact name of registrant as specified in its charter)
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| Michigan | 6712 | 38-2830092 | ||
| (State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
200 East Broadway
Mt. Pleasant, MichiganMI 48858
(517)
(989) 772-9471
(Address,
(Address, including zip code, and telephone number, including area code,
of registrant'sregistrant’s principal executive offices)
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DAVID W. HOLE
PRESIDENT
IBT BANCORP, INC.
Dennis P. Angner, President & CEO
200 East Broadway
Mt. Pleasant, MichiganMI 48858
(517)
(989) 772-9471
(Name, address,
(Address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Matt G. | Robert B. Borsos, Esq. | |
Foster, Swift, Collins & | Kreis, Enderle, Callander & | |
313 | 171 Monroe Avenue, N.W., Suite 900B | |
Lansing, Michigan 48933 | Grand Rapids, Michigan 49503 | |
(517) 371-8100 | (616) 254-8400 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statementRegistration Statement becomes effective.
effective and satisfaction or waiver of the conditions to the proposed merger transaction, as described in this Registration Statement.
If the securities being registered on this form are beingto be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: [ ]
o
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ]
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offering. o
If this formForm is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ]
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offering. o
CALCULATION OF REGISTRATION FEE
| Proposed Maximum | Proposed Maximum | Amount of | ||||||||||
| Title of Each Class of | Amount to be | Offering Price per | Aggregate | Registration | ||||||||
| Securities to be Registered | Registered | Share | Offering Price | Fee | ||||||||
| Common Stock, no par value per share | 514,809 shares(1) | $15.46(2) | $7,958,947(2) | $244.34(2)(3) | ||||||||
| (1) | This amount represents a bona fide estimate of the maximum amount of IBT Bancorp, Inc. common stock | |
| (2) | The registration fee has been computed pursuant to Rule 457(f)(2) and Rule 457(f)(3). Pursuant to those rules and solely for purposes of calculating the registration fee, the Proposed Maximum Offering Price Per Share and the Proposed Maximum Aggregate Offering Price have been calculated on the basis of the book value of the common stock of Greenville Community Financial Corporation at September 30, 2007. | |
| (3) | Calculated by multiplying (a) the proposed maximum aggregate offering price for all securities to be registered ($7,958,947) by (b) 0.00003070. |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective time until the Registrant shall file a further amendment which specifically states that this Registration shall thereafter become effective in accordance with Rule 457(f)(2) based on the book value on March
31, 2000Section 8(a) of the maximum numberSecurities Act of shares of FSB Bancorp, Inc. common stock
expected1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to be received by the registrant in the merger and calculated by
multiplying (i) the book value of a share of FSB Bancorp, Inc. common stock
on March 31, 2000 ($26.38) by (ii) 409,649, representing the maximum
approximate number of shares of FSB Bancorp, Inc. common stock expected to
be received by the registrant in the merger.
(2) Based on .000264 of the proposed maximum aggregate offering price.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A)said Section 8(a), may determine.
GREENVILLE COMMUNITY FINANCIAL CORPORATION
1405 WEST WASHINGTON STREET
GREENVILLE, MI 48838
1405 WEST WASHINGTON STREET
GREENVILLE, MI 48838
NOTICE OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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2
FSB BANCORP, INC.
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD, 2000
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To the Shareholders of FSB Bancorp, Inc.:
AON DECEMBER 17, 2007
TO BE HELD
NOTICE IS HEREBY GIVEN that a special meeting of the shareholders of FSB Bancorp, Inc., a Michigan
corporation ("FSB"),Greenville Community Financial Corporation will be held on , , 2000, at
a.m., local time, at the United Methodist Church, 125 Third Street,
Breckenridge,Stanley & Blanche Ash Technology & Learning Center (M-TEC Center), 1325 Yellow Jacket Drive, Greenville, Michigan, 48615,48838 at 2 p.m. Michigan time, on December 17, 2007, for the following purposes:
1. To consider and vote upon a proposal to approveadopt the Agreement and Plan of Merger dated as of April 7, 2000, (the "Merger Agreement"), by and between FSBGreenville Community Financial Corporation and IBT Bancorp, Inc. ("IBT"), pursuant to which, among other
things, FSB will merge withdated as of August 21, 2007, as amended on September 24, 2007, and into IBT upon the terms and subject to the
conditions set forth intransactions contemplated by the Merger Agreement, as more fully described in
the proxy statement-prospectus that follows this notice.
Agreement.
2. To transact suchany other business as maythat properly be broughtcomes before the special meeting andof shareholders, or any adjournments or postponements of the special meeting.
meeting, including, without limitation, a motion to adjourn the special meeting to another time or place for the purpose of soliciting additional proxies in order to approve the Merger Agreement and the merger or otherwise.
The boardproposed merger is described in more detail in this Proxy Statement-Prospectus, which you should read carefully in its entirety before voting. A copy of directorsthe Merger Agreement is attached as Appendix A to this document. Only Greenville Community Financial Corporation shareholders of FSB has fixedrecord as of the close of business on , 2000 as the record date for determining those shareholders
entitled to vote at the special meeting and any adjournments or postponements of
the special meeting. Only shareholders of record on this dateNovember 20, 2007, are entitled to notice of and to vote at the special meeting andof shareholders or any adjournments or
postponements of the special meeting. By OrderPursuant to Section 762 of the BoardMichigan Business Corporation Act, Greenville Community Financial Corporation’s shareholders are entitled to dissenters’ rights. A copy of Directors
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Chairman
Breckenridge,Sections 761 to 774 of the Michigan , 2000
Please promptly complete, sign, dateBusiness Corporation Act, relating to dissenters’ rights is attached as Appendix C to this Proxy Statement-Prospectus.
YOUR VOTE IS VERY IMPORTANT. TO ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING OF SHAREHOLDERS, PLEASE COMPLETE, EXECUTE AND PROMPTLY MAIL YOUR PROXY CARD IN THE ENCLOSED RETURN ENVELOPE. This will not prevent you from voting in person, but it will help to secure a quorum and return the enclosedavoid added solicitation costs. Your proxy card whether
or not you planmay be revoked at any time before it is voted.
BY ORDER OF THE BOARD OF DIRECTORS
Jae A. Evans, Secretary
Greenville, Michigan
November 27, 2007
THE BOARD OF DIRECTORS OF GREENVILLE COMMUNITY FINANCIAL CORPORATION UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF THE MERGER AGREEMENT.
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY CARD PROMPTLY, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING OF SHAREHOLDERS.
DO NOT SEND STOCK CERTIFICATES WITH THE PROXY CARD. UNDER SEPARATE COVER, YOU WILL RECEIVE INSTRUCTIONS FOR DELIVERING YOUR STOCK CERTIFICATES.
GREENVILLE COMMUNITY FINANCIAL CORPORATION
1405 WEST WASHINGTON STREET
GREENVILLE, MI 48838
1405 WEST WASHINGTON STREET
GREENVILLE, MI 48838
DEAR SHAREHOLDER OF GREENVILLE COMMUNITY FINANCIAL CORPORATION:
You are cordially invited to attend the special meeting. Failure to return a properly
executed proxy or to vote at the meeting will have the same effect as a vote
against the Merger Agreement and the merger. You may still vote at the special
meeting even if you have previously returned your proxy card.
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[FSB LOGO]
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The board of directors of FSB has approved the sale of FSB to IBT (the
"Merger"). The Merger requires the approval of FSB's shareholders. A special meeting of shareholders of Greenville Community Financial Corporation, to be held on December 17, 2007, at 2 p.m., local time, at the Stanley & Blanche Ash Technology & Learning Center (M-TEC Center), 1325 Yellow Jacket Drive, Greenville, Michigan 48838. At this special meeting, you will be heldasked to vote onapprove the proposed merger.acquisition of Greenville Community Financial Corporation by IBT Bancorp, Inc. The date,
timeacquisition will be accomplished through the merger of Greenville Community Financial Corporation with and place of the meeting are set forth in the notice of special meeting on
the preceding page.
into IBT Bancorp, Inc.
If the merger is completed IBT expectsas proposed, subject to exchange 2.1362 of shares of its
common stock forcertain possible adjustments, each share of FSBGreenville Community Financial Corporation common stock then outstanding.
will be converted into the right to receive .6659 of a share of IBT Bancorp, Inc. common stock and $14.70 in cash.
The last transaction price in IBT Bancorp, Inc. common stock known to management occurring prior to the public announcement of the Mergermerger was $30.00$44.00 a share on March 29, 2000, making 2.1362August 1, 2007. The last transaction price in IBT Bancorp, Inc. common stock known to management occurring prior to the mailing of this Proxy Statement-Prospectus was $44 a share on November 15, 2007. Based on that price, your Greenville Community Financial Corporation common shares which are exchanged for IBT Bancorp, Inc. common stock and cash will be worth $44 per share.
YOUR VOTE IS VERY IMPORTANT. The parties cannot complete the merger unless, among other things, our shareholders approve the merger. THE GREENVILLE COMMUNITY FINANCIAL CORPORATION BOARD OF DIRECTORS HAS APPROVED THE MERGER AND RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF THE MERGER. Please review and consider this Proxy Statement-Prospectus carefully. Under Michigan law, holders of common stock of Greenville Community Financial Corporation have dissenters’ rights of appraisal with respect to the merger.
It is important that your shares are represented at the meeting, whether or not you plan to attend. An abstention or failure to vote will have the same effect as a vote against the merger. Accordingly, please complete, date, sign, and return promptly your proxy card in the enclosed envelope. You may attend the meeting and vote your shares in person if you wish, even if you have previously returned your proxy.
Sincerely,
| /s/ Ted Kortes |
Ted Kortes
President and Chief Executive Officer of
Greenville Community Financial Corporation
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGER OR DETERMINED IF THIS DOCUMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGER ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY. IBT BANCORP, INC. COMMON STOCK IS SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF VALUE.
THIS DOCUMENT IS DATED NOVEMBER 27, 2007
AND IS FIRST BEING MAILED ON OR ABOUT NOVEMBER 27, 2007.
AND IS FIRST BEING MAILED ON OR ABOUT NOVEMBER 27, 2007.
TABLE OF CONTENTS
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| APPENDICES | ||||||||
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| C-1 | ||||||||
| Consent of Rehmann Robson, P.C. | ||||||||
| Form of Proxy | ||||||||
This Proxy Statement-Prospectus incorporates business and financial information about IBT Bancorp, Inc. (“IBT”) that is not included in or delivered with this Proxy Statement-Prospectus. Documents incorporated by reference are available from IBT without charge. You may obtain documents incorporated by reference in this Proxy Statement-Prospectus by requesting them in writing or by telephone from IBT at the following address:
IBT Bancorp, Inc.
Attn: Dennis P. Angner
President & Chief Executive Officer
200 East Broadway
Mt. Pleasant, Michigan 48858
(989) 772-9471
TO OBTAIN DELIVERY OF THIS INFORMATION PRIOR TO THE SPECIAL SHAREHOLDERS MEETING OF GREENVILLE COMMUNITY FINANCIAL CORPORATION (“GCFC”), YOU MUST REQUEST THE INFORMATION NO LATER THAN DECEMBER 10, 2007, WHICH IS FIVE BUSINESS DAYS BEFORE THE DATE OF THE SPECIAL MEETING AT WHICH YOU ARE REQUESTED TO VOTE. You should rely only on the information contained or incorporated by reference in this Proxy Statement-Prospectus to vote on the merger and the related issuance of IBT common stock. Neither IBT nor GCFC has authorized anyone to provide you with information that is different from what is contained in this Proxy Statement-Prospectus.
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| Q: | What is the Proposed Transaction? | |
| A: | Pursuant to the Agreement and Plan of Merger by and between Greenville Community Financial Corporation and IBT Bancorp, Inc. dated August 21, 2007, as amended (the “Merger Agreement”) (attached as Appendix A to this Proxy Statement-Prospectus), IBT Bancorp, Inc. (“IBT”) will acquire Greenville Community Financial Corporation (“GCFC”) through a merger transaction in which GCFC will merge with and into IBT. At or after the effective time of the merger, Greenville Community Bank, a wholly-owned subsidiary of GCFC (“GCB”), will merge with and into Isabella Bank and Trust, a wholly-owned subsidiary of IBT (“Isabella”), and the resulting bank will operate under the name “Isabella Bank and Trust” (the “Subsidiary Bank Merger”). | |
| Q: | What is the Purpose of this Document? | |
| A: | This document serves as both a proxy statement of GCFC and a prospectus of IBT. As a proxy statement, this document is being provided to you by GCFC because the board of directors of GCFC is soliciting your proxy for use at the special meeting of shareholders called to vote on the proposed merger of GCFC with and into IBT. When we use the term “Merger Agreement” in this document, we are referring to the agreement and plan of merger, as amended, a copy of which is included in this document as Appendix A. As a prospectus, this document is being provided to you by IBT because part of the consideration IBT is offering in exchange for your shares of GCFC common stock in connection with the merger is shares of IBT common stock. | |
| Q: | What will Shareholders of GCFC Receive in the Merger? | |
| A: | If the Merger Agreement is approved and the merger is subsequently completed, each outstanding share of GCFC common stock (other than any dissenting shares) will be converted into the right to receive .6659 of a share of IBT common stock and $14.70 in cash subject to adjustment under certain circumstances. Cash will be paid in lieu of any fractional share of IBT common stock. | |
| Q: | What are the Tax Consequences of the Merger to me? | |
| A: | Generally speaking, because you will receive a combination of IBT common stock and cash, you should recognize capital gain, but not loss, on the exchange to the extent of the lesser of cash received or gain realized in the exchange. This tax treatment may not apply to all GCFC shareholders. GCFC shareholders should consult their own tax advisors for a full understanding of the tax consequences of the merger. GCFC recommends that GCFC shareholders carefully read the complete explanation of the “Material Federal Income Tax Consequences” of the merger beginning on page . | |
| Q: | What do I Need to do Now? | |
| A: | After reviewing this document, submit your proxy by promptly executing and returning the enclosed proxy card. By submitting your proxy, you authorize the individuals named in the proxy to represent you and to vote your shares at the special meeting of shareholders in accordance with your instructions. These persons also may vote your shares to adjourn the special meeting and will be authorized to vote your shares at any adjournments or postponements of the special meeting. | |
| Your vote is important. Whether or not you plan to attend the special meeting, please promptly submit your proxy in the enclosed, prepaid, return envelope. | ||
| Q: | Why is My Vote Important? |
| A: | The Merger Agreement must be adopted by a majority of the shares of GCFC issued and outstanding as of the record date for the special meeting (November 20, 2007). A failure to vote will have the same effect as a vote against the Merger Agreement. |
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| Q: | If My Broker Holds My Shares in “Street Name” will My Broker Automatically Vote My Shares for Me? | |
| A: | No. Your broker willnot be able to vote your shares without instructions from you. You should instruct your broker to vote your shares, following the directions your broker provides. | |
| Q: | What If I Fail to Instruct My Broker to Vote My Shares? | |
| A: | If you fail to instruct your broker to vote your shares, the broker will submit an unvoted proxy (a broker non-vote) as to your shares. Broker non-votes will count toward a quorum at the special meeting. However, broker non-votes willnot count as a vote with respect to the Merger Agreement, and therefore will have the same effect as a voteagainst the Merger Agreement. | |
| Q: | How will My Shares be Voted If I Return a Blank Proxy Card? | |
| A: | If you sign, date and return your proxy card and do not indicate how you want to vote, your proxy will be counted as a vote in favor of the merger and the Merger Agreement and will be voted in the discretion of the persons named as proxies in any other matters properly presented for a vote at the special meeting. | |
| Q: | Can I Attend the Special Meeting and Vote My Shares in Person? | |
| A: | Yes. All shareholders are invited to attend the special meeting. Shareholders of record can vote in person at the special meeting by executing a proxy card. If a broker holds your shares in street name, then you are not the shareholder of record and you must ask your broker how you can vote your shares at the special meeting. | |
| Q: | Can I Change My Vote? | |
| A: | Yes. If you have not voted through your broker, you can change your vote after you have sent in your proxy card by: | |
| • providing written notice to the Secretary of GCFC; | ||
| • submitting a new proxy card. Any earlier proxies will be revoked automatically; or | ||
• attending the special meeting and voting in person. Any earlier proxy will be revoked. However, simply attending the special meeting without voting willnot revoke your proxy. | ||
| If you have instructed a broker to vote your shares, you must follow your broker’s directions to change your vote. | ||
| Q: | Should I Send in My Stock Certificates Now? | |
| A: | PLEASE DO NOT send your stock certificates with your proxy card. You will be sent a letter of transmittal to complete and return with your GCFC common stock certificate after the completion of the merger. | |
| Q: | When do you Expect the Merger to be Completed? | |
| A: | IBT and GCFC currently expect to complete the merger in the fourth quarter of 2007, assuming all of the conditions to completion of the merger have been satisfied. | |
| Q: | Whom Should I Call with Questions? | |
| A: | You should direct any questions regarding the special meeting of shareholders or the merger to Ted Kortes, President and Chief Executive Officer of GCFC at(616) 754-8004. |
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This summary highlights selected information included in this document and does not contain all of the information that may be important to you. You should read this entire document and its appendices and the other documents to which we refer you before you decide how to vote with respect to the Merger Agreement. You may obtain the information incorporated by reference into this document without charge by following the instructions in the section entitled “Where You Can Find More Information” on page 41. Each item in this summary includes a page reference directing you to a more complete description of that item.
This document, including information included or incorporated by reference in this document, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to: (i) statements of goals, intentions and expectations; (ii) statements regarding business plans, prospects, growth and operating strategies; (iii) statements regarding the asset quality of loan and investment portfolios; (iv) statements regarding estimates of risks and future costs and benefits; and (v) other statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” or words of similar meaning. These forward-looking statements are based on current beliefs and expectations of the management of IBT and GCFC and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the anticipated results discussed in these forward-looking statements. See “Forward-Looking Statements” on page 43.
The Merger
THE MERGER AGREEMENT IS ATTACHED TO THIS DOCUMENT AS APPENDIX A. WE ENCOURAGE YOU TO READ THIS AGREEMENT CAREFULLY, AS IT IS THE LEGAL DOCUMENT THAT GOVERNS THE MERGER OF GCFC WITH AND INTO IBT.
Parties to the Merger
IBT (page 31)
IBT, headquartered in Mt. Pleasant, Michigan, is the holding company for Isabella Bank and Trust (“Isabella”), which operates twenty-one full-service offices and IBT Title and Insurance Agency, Inc. which operates six offices. IBT is a financial holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). IBT was organized in 1988. As of June 30, 2007, IBT had consolidated assets of $918.3 million, deposits of $724.2 million and shareholders’ equity of $118.8 million. The principal executive office of IBT is located at 200 East Broadway, Mt. Pleasant, Michigan, 48858, and the telephone number is(989) 772-9471.
GCFC (page 33)
GCFC, headquartered in Greenville, Michigan, is the holding company for Greenville Community Bank (“GCB”), which operates two offices. GCFC is a bank holding company under the BHC Act. GCFC was organized in 1998. As of June 30, 2007, GCFC had consolidated assets of $107.2 million, deposits of $88.4 million and shareholders’ equity of $11.7 million. GCFC’s principal executive office is located at 1405 West Washington Street, Greenville, Michigan, 48838, and the telephone number is(616) 754-5100.
What GCFC Shareholders Will Receive In the Merger (page 12)
If the Merger Agreement is approved and the merger is subsequently completed, each outstanding share of GCFC common stock (other than dissenting shares) will be converted into the right to receive .6659 of a share of IBT common stock and $14.70 in cash, subject to adjustment under certain circumstances.
Material United States Federal Income Tax Consequences of the Merger (page 28)
As a result of receiving a combination of IBT common stock and cash in exchange for shares of GCFC common stock, you will likely recognize gain, but not loss, equal to the lesser of (1) the amount of cash received or
1
(2) the amount of gain realized in the transaction. Generally, the actual U.S. federal income tax consequences to you will depend on whether your shares of GCFC common stock are held as a capital asset within the meaning of Section 1221 of the Internal Revenue Code.
You should read “Material United States Federal Income Tax Consequences of the Merger” starting on page 28 for a more complete discussion of the federal income tax consequences of the merger. Tax matters can be complicated and the tax consequences of the merger to you will depend on your particular tax situation. You should consult your own tax advisor to fully understand the tax consequences of the merger to you.
Your Board of Directors Unanimously Recommends Shareholder Approval of the Merger (page 11)
The Board of Directors of GCFC believes that the merger presents an opportunity to join a financial institution that will have greater financial strength and earning power than GCFC would have on its own, as well as the added scale necessary to undertake and solidify leadership positions.
As a result, the Board of Directors of GCFC unanimously approved the Merger Agreement. The Board of Directors of GCFC believes that the merger and the Merger Agreement are fair to and in the best interests of GCFC and its shareholders and unanimously recommends that you vote “FOR” adoption of the Merger Agreement.
Opinion of GCFC’s Financial Advisor (page 15 and Appendix B)
In connection with the merger, the Board of Director of GCFC received the written opinion of Donnelly Penman & Partners, that the terms of the merger are fair to GCFC’s shareholders from a financial point of view. The full text of the opinion of Donnelly Penman & Partners dated September 20, 2007 is included in this document as Appendix B. GCFC encourages you to read this opinion carefully in its entirety for a description of the procedures followed, assumptions made, matters considered and limitations of the review undertaken by Donnelly Penman & Partners. The opinion does not constitute a recommendation to you or any other shareholder as to how to vote with respect to the merger, or any other matter relating to the proposed transaction. Donnelly Penman & Partners will receive a fee for rendering their fairness opinion in connection with the merger.
Special Meeting of Shareholders of GCFC (page 10)
GCFC will hold a special meeting of its shareholders on December 17, 2007 at 2:00 p.m., Michigan time, at the Stanley & Blanche Ash Technology & Learning Center (M-TEC Center), 1325 Yellow Jacket Drive, Greenville, Michigan 48838. At the special meeting of shareholders, you will be asked to vote to adopt the Merger Agreement. As of the date of this document, GCFC’s board of directors did not know of any other matters that would be presented at the GCFC special meeting.
You may vote at the special meeting of shareholders if you owned shares of GCFC common stock at the close of business on the record date, November 20, 2007. On that date, equalthere were 773,103 shares of GCFC common stock outstanding and entitled to $64.09.vote at the special meeting of shareholders. You may cast one vote for each share of GCFC common stock you owned on the record date.
Even if you expect to attend the special meeting of shareholders, GCFC recommends that you promptly complete and return your proxy card in the enclosed return envelope.
Shareholder Vote Required (page 11)
Adoption of the Merger Agreement requires the affirmative vote of the holders of a majority of the shares of GCFC common stock issued and outstanding on the record date. A failure to vote or an abstention will have the same effect as a vote against the merger. As of the record date, directors and executive officers of GCFC beneficially owned 172,667 shares of GCFC common stock entitled to vote at the special meeting of shareholders. This represents approximately 22.33% of the total votes entitled to be cast at the special meeting of shareholders. These individuals have indicated that they will vote “FOR” adoption of the Merger Agreement.
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Comparative Stock Prices
There is no public or active market for IBT common stock. The last sale price of IBT common stock, of which management is aware, preceding the execution of the Merger Agreement was $44 per share and preceding the printing of this Proxy Statement-Prospectus was $44.
There is no public or active market for GCFC common stock. The last sale price of GCFC common stock, of which management is aware, preceding both the execution of the Merger Agreement and the printing of this Proxy Statement-Prospectus was $19. As of November 20, 2007, there were approximately 188 holders of record of GCFC common stock. See “Comparative Per Share Price and Dividend Information” on page 39.
Dissenters’ Rights of Appraisal (page 30 and Appendix C)
Under Sections 761 to 774 of the Michigan Business Corporation Act (the “MBCA”), holders of GCFC common stock have the right to demand that GCFC pay them in cash the fair value of their shares of GCFC common stock in connection with the merger. The right to make this demand is known as “dissenters’ rights.” To exercise dissenters’ rights, a GCFC shareholder must not vote in favor of the Merger Agreement and must strictly comply with all of the procedures required under Sections 761 to 774 of the MBCA.
We have included a copy of Sections 761 to 774 of the MBCA relating to dissenters’ rights as Appendix C to this document.
Interests of GCFC’s Directors and Executive Officers In the Merger (page 21)
In considering the recommendation of the Board of Directors of GCFC to approve the merger, you should be aware that certain directors and executive officers of GCFC have employment and other compensation agreements or plans and continuing indemnification protection that give them interests in the merger that are somewhat different from, or in addition to, the interests of GCFC shareholders.
Action by IBT Shareholders Not Required
Approval of the merger and the Merger Agreement by IBT’s shareholders is not required. Accordingly, IBT has not called a special meeting of its shareholders.
Regulatory Approvals (page 26)
We may consummate the merger and the subsidiary bank merger only upon receipt of approvals from the Federal Reserve Board (“FRB”) and the Michigan Office of Financial and Insurance Services (“OFIS”). The parties have received the Letter, dated November 16, 2007, approving the Application for the merger from the FRB. The parties have received the Order of the Commissioner of OFIS, dated October 30, 2007, approving the application for the subsidiary bank merger. No conditions or requirements were placed on the approvals by either the FRB or OFIS that affect the advisability or consummation of the mergers.
Conditions to the Merger (page 25)
Completion of the merger depends on a number of conditions being satisfied or waived, including but not limited to the following:
| • | the GCFC shareholders must have adopted the Merger Agreement; | |
| • | the FRB and OFIS must have approved or not objected to the merger, as appropriate, and all statutory waiting periods must have expired; | |
| • | no stop order suspending the effectiveness of IBT’s registration statement of which this document is a part shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the United States Securities and Exchange Commission; and | |
| • | the holders of no more than 10% of GCFC’s shares of common stock have indicated their intention to seek dissenter’s rights of appraisal. |
3
Other conditions to the completion of the merger are described beginning on page 25. We cannot be certain when, or if, the conditions to the merger will be satisfied or waived or whether or not the merger will be completed.
Ownership of IBT Following the Merger
As a result of the merger, we estimate that GCFC shareholders will own approximately 7.51% of the outstanding IBT common shares.
No Solicitation (page 26)
GCFC has agreed, subject to certain limited exceptions, not to initiate discussions with another party regarding a business combination with such other party while the merger with IBT is pending.
Termination of the Merger Agreement (page 27)
IBT and GCFC may mutually agree at any time to terminate the Merger Agreement without completing the merger, even if GCFC shareholders have approved it. Also, either party may decide, without the consent of the other party, to terminate the Merger Agreement under specified circumstances, if the required regulatory approvals are not received or if the other party breaches its agreements. If the Merger Agreement is terminated by either IBT or GCFC on account of any willful breach by the other party of any of the representations or warranties set forth in the Merger Agreement or any willful breach by the other party of any of the agreements or covenants set forth in the Merger Agreement, the breaching party shall be required to pay to the nonbreaching party liquidated damages of $850,000. In addition, if GCFC terminates the Merger Agreement because it accepts a superior proposal, it shall be required to pay IBT a termination fee of $850,000.
Differences in Rights of Shareholders (page 35)
The rights of GCFC shareholders after the merger who continue as IBT shareholders will be governed by Michigan corporate law and the Articles of Incorporation and Bylaws of IBT rather than the Articles of Incorporation and Bylaws of GCFC.
4
The following tables show summarized historical consolidated financial data for IBT and GCFC. This information is derived from IBT’s audited financial statements for 2002 through 2006 and unaudited financial statements for the six-month period ended June 30, 2007 and GCFC’s audited financial statements for 2002 through 2006 and unaudited financial statements for the six-month period ended June 30, 2007. This information is only a summary. You should read the IBT financial data in conjunction with the historical financial statements (and related notes) contained or incorporated by reference in IBT’s annual reports onForm 10-K, quarterly reports onForm 10-Q, and other information filed with the Securities and Exchange Commission (“SEC”). See “Where You Can Find More Information” on page 41.
SUMMARY OF SELECTED FINANCIAL DATA
(Dollars in Thousands Except per Share Data)
(Dollars in Thousands Except per Share Data)
IBT BANCORP, INC.
| Six Months Ended | ||||||||||||||||||||||||
| June 30, | Year Ended December 31, | |||||||||||||||||||||||
| 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| INCOME STATEMENT DATA | ||||||||||||||||||||||||
| Net interest income | $ | 13,628 | $ | 24,977 | $ | 23,909 | $ | 23,364 | $ | 23,528 | $ | 22,905 | ||||||||||||
| Provision for loan losses | 350 | 682 | 777 | 735 | 1,455 | 1,025 | ||||||||||||||||||
| Net income | 3,566 | 7,001 | 6,776 | 6,645 | 7,205 | 6,925 | ||||||||||||||||||
| BALANCE SHEET DATA (period end) | ||||||||||||||||||||||||
| Assets | $ | 918,265 | $ | 910,127 | $ | 741,654 | $ | 678,034 | $ | 664,079 | $ | 652,717 | ||||||||||||
| Deposits | 724,157 | 725,840 | 592,478 | 563,876 | 567,707 | 561,456 | ||||||||||||||||||
| Loans (gross) | 607,219 | 591,042 | 483,242 | 452,895 | 421,859 | 391,088 | ||||||||||||||||||
| Borrowings | 67,376 | 58,303 | 52,165 | 30,982 | 18,053 | 17,793 | ||||||||||||||||||
| Shareholders’ equity | 118,790 | 115,749 | 80,902 | 72,594 | 68,936 | 63,457 | ||||||||||||||||||
| Common Stock Share Summary(1) | ||||||||||||||||||||||||
| Net income — basic | $ | 0.56 | $ | 1.23 | $ | 1.25 | $ | 1.24 | $ | 1.36 | $ | 1.33 | ||||||||||||
| Net income — diluted | 0.55 | 1.19 | 1.25 | 1.24 | 1.36 | 1.33 | ||||||||||||||||||
| Cash dividends | 0.24 | 0.64 | 0.60 | 0.57 | 0.55 | 0.50 | ||||||||||||||||||
| Book value | 18.22 | 18.27 | 14.78 | 13.48 | 12.94 | 12.09 | ||||||||||||||||||
| Average shares outstanding — basic | 6,336,898 | 5,699,514 | 5,416,961 | 5,344,585 | 5,270,085 | 5,193,885 | ||||||||||||||||||
| Average shares outstanding — diluted | 6,515,227 | 5,864,314 | 5,416,961 | 5,344,585 | 5,270,085 | 5,193,885 | ||||||||||||||||||
| (1) | all per share data was adjusted for common stock dividends |
5
GREENVILLE COMMUNITY FINANCIAL CORPORATION
| Six Months Ended | ||||||||||||||||||||||||
| June 30, | Year Ended December 31, | |||||||||||||||||||||||
| 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| INCOME STATEMENT DATA | ||||||||||||||||||||||||
| Net interest income | $ | 1,770 | $ | 3,820 | $ | 3,420 | $ | 3,136 | $ | 3,091 | $ | 2,886 | ||||||||||||
| Provision for loan losses | 51 | 220 | 300 | 477 | 319 | 403 | ||||||||||||||||||
| Net income | 443 | 994 | 1,008 | 776 | 916 | 684 | ||||||||||||||||||
| BALANCE SHEET DATA (period end) | ||||||||||||||||||||||||
| Assets | $ | 107,170 | $ | 107,836 | $ | 103,462 | $ | 103,675 | $ | 101,257 | $ | 89,486 | ||||||||||||
| Deposits | 88,382 | 89,071 | 85,519 | 85,804 | 84,075 | 74,320 | ||||||||||||||||||
| Loans (gross) | 89,597 | 91,004 | 87,445 | 82,406 | 76,216 | 75,498 | ||||||||||||||||||
| Borrowings | 6,500 | 6,500 | 7,000 | 8,000 | 8,000 | 7,000 | ||||||||||||||||||
| Shareholders’ equity | 11,709 | 11,306 | 10,424 | 9,520 | 8,899 | 7,880 | ||||||||||||||||||
| Common Stock Share Summary | ||||||||||||||||||||||||
| Net income — basic | $ | 0.61 | $ | 1.37 | $ | 1.40 | $ | 1.10 | $ | 1.32 | $ | 0.99 | ||||||||||||
| Net income — diluted | 0.59 | 1.32 | 1.37 | 1.08 | 1.29 | 0.97 | ||||||||||||||||||
| Book value | 16.13 | 15.62 | 14.47 | 13.49 | 12.83 | 11.44 | ||||||||||||||||||
| Cash dividends | 0.10 | 0.20 | 0.20 | 0.12 | 0.10 | 0.10 | ||||||||||||||||||
| Average shares outstanding — basic | 724,883 | 723,948 | 720,154 | 776,342 | 693,855 | 688,518 | ||||||||||||||||||
| Average shares outstanding — diluted | 755,717 | 754,782 | 745,155 | 720,336 | 708,258 | 705,574 | ||||||||||||||||||
Under the “risk-based” capital guidelines presently in effect for banks and bank holding companies, minimum capital levels are based on the perceived risk in the various asset categories. Certain off-balance-sheet instruments, such as loan commitments and letters of credit, require capital allocations. Bank holding companies such as IBT and GCFC are required to maintain minimum risk-based capital ratios. IBT’s and GCFC’s ratios are above the regulatory minimum guidelines, GCFC and IBT met the regulatory criteria to be categorized as a “well-capitalized” institution as of December 31, 2006. The “well-capitalized” classification may permit banks to minimize the cost of FDIC insurance assessments by being charged a lesser rate than those that do not meet this definition. Designation as a “well-capitalized” institution does not constitute a recommendation by federal bank regulators. The following table shows capital ratios and requirements as of June 30, 2007.
| Risk-Based Capital | ||||||||||||
| Leverage % | Tier 1 % | Total % | ||||||||||
| IBT’s capital ratios | 10.28 | 15.82 | 17.07 | |||||||||
| GCFC’s capital ratios | 10.28 | 12.38 | 13.03 | |||||||||
| Pro forma combined capital ratios — Consolidated IBT Bancorp, Inc. | 9.15 | 13.65 | 14.90 | |||||||||
| Regulatory capital ratios — “well-capitalized” definition | 5.00 | 6.00 | 10.00 | |||||||||
| Regulatory capital ratios — minimum requirement | 4.00 | N/A | N/A | |||||||||
6
The following table shows pro forma information about earnings per share, dividends per share, and book value per share. IBT anticipates that the combined institution will derive financial benefits from the merger that include reduced operating expenses and the opportunity to earn more revenue. The pro forma information, while helpful in illustrating the financial characteristics of the combined entities under one set of assumptions, does not reflect these benefits and, accordingly, does not attempt to predict or suggest future results. The pro forma information also does not necessarily reflect what the historical results of the combined entities would have been had the institutions actually been combined during these periods.
| Equivalent | ||||||||||||||||
| IBT | GCFC | Pro Forma | Pro Forma | |||||||||||||
| Historical | Historical | Combined | of GCFC | |||||||||||||
| Comparative Per Share Data | (1 | ) | (4 | ) | ||||||||||||
| BASIC EARNINGS | ||||||||||||||||
| Year ended December 31, 2006 | $ | 1.23 | $ | 1.37 | $ | 1.23 | $ | 1.19 | ||||||||
| Six months ended June 30, 2007 | 0.56 | 0.61 | 0.56 | 0.52 | ||||||||||||
| DILUTED EARNINGS | ||||||||||||||||
| Year ended December 31, 2006 | $ | 1.19 | $ | 1.32 | $ | 1.19 | $ | 1.19 | ||||||||
| Six months ended June 30, 2007 | 0.55 | 0.59 | 0.54 | 0.52 | ||||||||||||
| CASH DIVIDENDS | ||||||||||||||||
| Year ended December 31, 2006 | $ | 0.64 | $ | 0.20 | $ | 0.64 | $ | 0.64 | (2) | |||||||
| Six months ended June 30, 2007 | 0.24 | 0.10 | 0.24 | 0.24 | (2) | |||||||||||
| TANGIBLE BOOK VALUE (3) | ||||||||||||||||
| December 31, 2006 | $ | 18.27 | $ | 15.62 | $ | 20.96 | $ | 21.36 | ||||||||
| June 30, 2007 | 18.22 | 16.13 | 21.44 | 20.54 | ||||||||||||
| (1) | The Pro Forma Combined earnings per share amounts were calculated by totaling the historical earnings of IBT and GCFC and dividing the resulting amount by the average pro forma shares of IBT and GCFC giving effect to the merger as if it had occurred as of the beginning of the periods presented. The average pro forma shares of IBT and GCFC reflect historical basic and diluted shares, plus historical basic and diluted average shares of GCFC, as adjusted based on an assumed exchange ratio of .6659 of a share of IBT common stock and $14.70 in cash, for each share of GCFC common stock. The aggregate merger consideration to be paid by IBT is subject to certain adjustments pursuant to the Merger Agreement. The pro forma earnings amounts do not take into consideration any operating efficiencies that may be realized as a result of the merger. | |
| (2) | Pro Forma Combined cash dividends paid represents IBT’s historical amount only. | |
| (3) | The Pro Forma Combined tangible book value data gives effect to the merger as if it had occurred on June 30, 2007 or December 31, 2006. | |
| (4) | The Equivalent Pro Forma Per Share of GCFC amounts were calculated by multiplying the Pro Forma Combined amounts by the assumed exchange ratio of .6659 of a share of IBT common stock and $14.70 in cash for each share of GCFC common stock. These amounts do not take into consideration any operating efficiencies that may be realized as a result of the merger. This data is presented for comparative purposes only. |
7
In addition to the other information contained in or incorporated by reference into this Proxy Statement-Prospectus, including the matters addressed under the caption “Forward-Looking Statements,” on page 43 you should carefully consider the following risk factors in deciding whether to vote for adoption of the Merger Agreement.
Risks Related to the Merger
IBT May Fail to Realize the Anticipated Benefits of the Merger.
The success of the merger will depend on a number of factors, including (but not limited to) IBT’s ability to:
| • | timely and successfully integrate the operations of IBT and GCFC; | |
| • | maintain existing relationships with depositors in GCB to minimize withdrawals of deposits subsequent to the merger; | |
| • | maintain and enhance existing relationships with borrowers to limit unanticipated losses of customer relationships and credit losses from loans of GCB; | |
| • | control the incremental noninterest expense from IBT and GCFC to maintain overall operating efficiencies; | |
| • | retain and attract qualified personnel at IBT and GCFC; and | |
| • | compete effectively in the communities served by IBT and GCFC and in nearby communities. |
GCFC Shareholders Will Have Less Influence as a Shareholder of IBT Than as a Shareholder of GCFC.
GCFC shareholders currently have the right to vote in the election of the Board of Directors of GCFC and on other matters affecting GCFC. Assuming that one share of GCFC common stock will be exchanged for .6659 of a share of IBT common stock and $14.70 in cash in the merger, the shareholders of GCFC as a group will own approximately 7.51% of the combined organization. When the merger occurs, each GCFC shareholder that receives IBT common stock will become a shareholder of IBT with a percentage ownership of the combined organization that is much smaller than such shareholder’s percentage ownership of GCFC. Because of this, GCFC shareholders will have less influence on the management and policies of IBT than they now have on the management and policies of GCFC.
GCFC Directors and Executive Officers Have Interests in the Merger that Differ from Those of a Shareholder.
GCFC’s directors and executive officers have various interests in the merger that differ from, or are in addition to, the interests of GCFC shareholders. These interests include:
| • | the agreement by IBT to assume and perform the Amended and Re-Stated Management Continuity Agreements currently in effect for Mr. Gregg Peters, Mr. Jae Evans, Mr. James Beckman and Ms. Kathy Korson. | |
| • | following completion of the merger, the GCB officers will continue to serve with Isabella in its Greenville division and the GCB directors will serve on a regional advisory board for the Greenville division of Isabella and shall receive the same board member compensation as provided by GCB prior to the merger. | |
| • | upon completion of the merger, Ted Kortes shall join IBT’s Board of Directors. | |
| • | the agreement by IBT to provide indemnification protection to GCFC directors and officers. |
8
Risks About IBT
IBT’s Current Concentration of Loans in its Primary Market Area May Increase its Risk.
IBT’s success depends primarily on the general economic conditions in Mid-Michigan. Unlike larger banks that are more geographically diversified, IBT provides banking and financial services to customers primarily in Mid-Michigan. The local economic conditions in the Mid-Michigan area have a significant impact on its loans, the ability of the borrowers to repay these loans and the value of the collateral securing these loans. A significant decline in general economic conditions caused by inflation, recession, unemployment or other factors beyond IBT’s control would impact these local economic conditions and could negatively affect the financial results of its banking operations.
IBT targets its business lending and marketing strategy for loans to serve primarily the banking and financial services needs of small to medium size businesses. These small to medium size businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities. If general economic conditions negatively impact these businesses, IBT’s results of operations and financial condition may be adversely affected.
Changes in Interest Rates Could Adversely Affect IBT’s Results of Operations and Financial Condition.
IBT’s results of operations and financial condition are significantly affected by changes in interest rates. IBT’s results of operations depend substantially on its net interest income, which is the difference between the interest income earned on its interest-earning assets and the interest expense paid on its interest-bearing liabilities. At June 30, 2007, IBT’s interest rate risk profile indicated that net interest income would increase in a rising long term interest rate environment, but would decrease in a declining long term interest rate environment.
Changes in interest rates also affect the value of IBT’s interest-earning assets, and in particular IBT’s securities portfolio. Generally, the value of securities fluctuates inversely with changes in interest rates. At June 30, 2007, IBT’s available for sale and trading account securities totaled $206 million. Decreases in the fair value of these securities could have an adverse effect on shareholders’ equity or earnings.
IBT also is subject to reinvestment risk associated with changes in interest rates. Changes in interest rates may affect the average life of loans and mortgage-related securities. Decreases in interest rates can result in increased prepayments of loans and mortgage-related securities, as borrowers refinance to reduce borrowing costs. Under these circumstances, IBT is subject to reinvestment risk to the extent that it is unable to reinvest the cash received from such prepayments at rates that are comparable to the rates on existing loans and securities. Additionally, increases in interest rates may decrease loan demand and make it more difficult for borrowers to repay adjustable rate loans.
Strong Competition Within IBT’s Market Area May Limit its Growth and Profitability.
Competition in the banking and financial services industry is intense. In IBT’s market area, IBT competes with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Many of these competitors (whether regional or national institutions) have substantially greater resources and lending limits than IBT does and may offer certain services that IBT does not or cannot provide. IBT’s profitability depends upon its continued ability to successfully compete in its market area.
IBT Operates in a Highly Regulated Environment and May Be Adversely Affected By Changes in Laws and Regulations.
IBT is subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve. Isabella is subject to regulation by the Office of Financial and Insurance Services of the State of Michigan and by the Federal Deposit Insurance Corporation, as insurer of its deposits. Such regulation and supervision govern the activities in which a bank and its holding company may engage and are intended primarily for the protection of the deposit insurance funds and depositors. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of a bank, the classification of assets by a bank and the adequacy of a bank’s allowance for loan losses. Any change in such
9
regulation and oversight, whether in the form of regulatory policy, regulations, or legislation, could have a material impact on IBT and its operations.
IBT’s operations are also subject to extensive regulation by other federal, state and local governmental authorities and are subject to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of its operations. IBT believes that it is in substantial compliance in all material respects with applicable federal, state and local laws, rules and regulations. Because its business is highly regulated, the laws, rules and regulations applicable to IBT are subject to regular modification and change. There are currently proposed various laws, rules and regulations that, if adopted, would impact its operations, including, among other things, matters pertaining to corporate governance and SEC rules pertaining to public reporting disclosures. There can be no assurance that these proposed laws, rules and regulations, or any other laws, rules or regulations, will not be adopted in the future, which could make compliance more difficult or expensive or otherwise adversely affect its business, financial condition or prospects.
GCFC is mailing this Proxy Statement-Prospectus to you as a GCFC shareholder on or about November 27, 2007. With this document, GCFC is sending you a notice of the GCFC special meeting of shareholders and a form of proxy that is solicited by GCFC’s Board of Directors. The special meeting will be held on December 17, 2007 at 2:00 p.m., local time, at the Stanley & Blanche Ash Technology & Learning Center (M-TEC Center), 1325 Yellow Jacket Drive, Greenville, Michigan.
Purpose of the Meeting
The purpose of the special meeting of shareholders is to vote on the adoption of the Merger Agreement by which GCFC will merge with and into IBT. GCFC shareholders are also being asked to approve a proposal to transact any other business that may properly come before the special meeting and any adjournment or postponement of the special meeting, including a proposal to adjourn or postpone the special meeting of shareholders. GCFC could use any adjournment or postponement for the purpose, among others, of allowing additional time to solicit proxies. As of the date of this document, the GCFC Board of Directors did not know of any other matters that would be presented at the special meeting.
Proxy Card, Revocation of Proxy
You should complete and return the proxy card accompanying this document to ensure that your vote is counted at the special meeting of shareholders, regardless of whether you plan to attend. You can revoke your proxy at any time before the vote is taken at the special meeting by:
| • | submitting written notice of revocation to the Secretary of GCFC; | |
| • | submitting a properly executed proxy bearing a later date before the special meeting of shareholders; or | |
| • | voting in person at the special meeting of shareholders. However, simply attending the special meeting without voting will not revoke an earlier proxy. |
If your shares are held in street name, you should follow the instructions of your broker regarding revocation of proxies.
All shares represented by valid proxies, and not revoked, will be voted in accordance with your instructions on the proxy card. If you sign your proxy card, but make no specification on the card as to how you want your shares voted, your proxy card will be voted “FOR” approval of the foregoing proposal. The Board of Directors is presently unaware of any other matter that may be presented for action at the special meeting of shareholders. If any other matter does properly come before the special meeting, the Board of Directors intends that shares represented by properly submitted proxies will be voted, or not voted, by and at the discretion of the persons named as proxies on the proxy card.
10
Record Date
The close of business on November 20, 2007 has been fixed as the record date for determining the GCFC shareholders entitled to receive notice of and to vote at the special meeting of shareholders. At that time, 773,103 shares of GCFC common stock were outstanding, and were held by approximately 188 holders of record.
Voting Rights, Quorum Requirements and Vote Required
The presence, in person or by properly executed proxy, of the holders of a majority of the outstanding shares of GCFC common stock entitled to vote is necessary to constitute a quorum at the special meeting of shareholders. Abstentions and broker non-votes will be counted for the purpose of determining whether a quorum is present but will not be counted as votes cast either for or against the Merger Agreement.
Adoption of the Merger Agreement requires the affirmative vote of a majority of the shares of GCFC common stock issued and outstanding on the record date. Accordingly, a failure to vote, an abstention or a broker non-vote will have the same effect as a vote against the Merger Agreement. As of the record date, directors and executive officers of GCFC beneficially owned 172,667 shares of GCFC common stock entitled to vote at the special meeting of shareholders. This represents approximately 22.33% of the total votes entitled to be cast at the special meeting. These individuals have indicated that they will vote “FOR” adoption of the Merger Agreement.
Solicitation of Proxies
For GCFC shareholders, the proxy that accompanies this document is being solicited by GCFC’s Board of Directors. In addition to solicitations by mail, directors, officers, and regular employees of GCFC may solicit proxies from shareholders personally or by telephone or other electronic means. Such individuals will not receive any additional compensation for doing so. GCFC will bear its own costs of soliciting proxies, which GCFC estimates will be less than $31,000. GCFC also will make arrangements with brokers and other custodians, nominees, and fiduciaries to send this document to beneficial owners of GCFC common stock and, upon request, will reimburse those brokers and other custodians for their reasonable expenses in forwarding these materials.
Authority to Adjourn Special Meeting to Solicit Additional Proxies
GCFC is asking its shareholders to grant full authority for the special meeting to be adjourned, if necessary, to permit solicitation of additional proxies to approve the transactions proposed by this Proxy Statement-Prospectus. If it is necessary to adjourn the special meeting, no notice of the adjourned special meeting is required to be given to shareholders (unless a new record date is fixed), other than an announcement at the special meeting of the hour, date and place to which the special meeting is adjourned.
Recommendation of the Board of Directors
GCFC’s Board of Directors has unanimously approved the Merger Agreement and the transactions contemplated by the Merger Agreement. The Board of Directors believes that the Merger Agreement is fair to GCFC shareholders and is in the best interest of GCFC and its shareholders and recommends that you vote “FOR” the approval of the Merger Agreement. See “The Merger and the Merger Agreement-Recommendation of the GCFC Board of Directors and Reasons for the Merger.”
The description of the merger and the Merger Agreement contained in this Proxy Statement-Prospectus describes the material terms of the Merger Agreement; however, it does not purport to be complete. It is qualified in its entirety by reference to the Merger Agreement. We have attached a copy of the Merger Agreement as Appendix A and urge you to carefully review it.
11
General
Pursuant to the Merger Agreement, GCFC will merge with and into IBT. Outstanding shares of GCFC common stock will be converted into the right to receive .6659 of a share of IBT common stock and $14.70 in cash, subject to adjustment under certain circumstances. Cash will be paid in lieu of any fractional share of IBT common stock. See “Merger Consideration” below. At the effective time of the merger, GCFC’s corporate existence will terminate; and IBT will continue as the surviving corporation with a Board of Directors consisting of its current members and Ted Kortes, a current member of GCFC’s board of directors. At or after the effective time of the merger, Greenville Community Bank (“GCB”) will be merged with and into Isabella Bank and Trust (“Isabella”) and the resulting bank will operate under the name “Isabella Bank and Trust” (the “Subsidiary Bank Merger”).
Merger Consideration
Under the terms of the Merger Agreement, each outstanding share of GCFC common stock (other than dissenting shares) will be converted upon completion of the merger into the right to receive .6659 of a share of IBT common stock and $14.70 in cash, subject to adjustment under certain circumstances. No fractional shares of IBT will be issued in connection with the merger. Instead, IBT will make a cash payment to each GCFC shareholder who would otherwise receive a fractional share.
Based on the last transaction price in IBT common stock known to management occurring prior to the mailing of this Proxy Statement-Prospectus was
$on November 27, 2007, each share of GCFC common stock that is exchanged solely for .6659 of a share on , 2000, making 2.1362 shares of IBT common stock equaland $14.70 in cash would have a value of $44.
Surrender of Stock Certificates
PLEASE DO NOT FORWARD YOUR GCFC STOCK CERTIFICATES WITH YOUR PROXY CARDS. STOCK CERTIFICATES SHOULD BE RETURNED TO THE EXCHANGE AGENT IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED IN THE LETTER OF TRANSMITTAL WHICH WILL BE PROVIDED TO SHAREHOLDERS AS SOON AS PRACTICABLE AFTER COMPLETION OF THE MERGER.
GCFC Stock Options
As of September 30, 2007, there were 47,285 issued and outstanding options to acquire GCFC common stock under the Greenville Community Financial Corporation Stock Compensation Plan. Each option to acquire GCFC common stock must be exercised on thator before the closing date to $ .
The Merger is expected to be generally tax free to FSB shareholders, except
for cash received instead of fractional shares.
This proxy statement-prospectus provides detailed information about the proposed merger. Please read this entire document carefully. You can find
additional information about IBT from documents filed with the Securities
Exchange Commission.
Whethermerger or not you plan to attend the meeting, please complete and mail the
enclosed proxy card. If you sign, date and mail your proxy card without
indicating how you want to vote, your proxyit will be voted in favorcancelled and extinguished for no consideration as of the Merger. If you fail to return your proxy card, or if you fail to instruct your
broker how to vote shares held for youmerger’s effective time.
Background of Merger
The terms and conditions of the Merger Agreement are the result of arm’s length negotiations between the representatives of IBT and the representatives of GCFC. A summary of the background of these negotiations is set forth below.
GCB has operated since its organization in the broker's name, the effect will be
the same1999 as a vote againstcommunity oriented Michigan-chartered commercial bank. From its inception, GCB’s main objectives were to attract deposits from the merger.
No vote of IBT's shareholders is requiredgeneral public and use such deposits to approveinvest primarily in residential and commercial real estate loans and commercial business loans.
Management and the transaction.
Herbert C. Wybenga
President
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE IBT COMMON STOCK TO BE ISSUED OR
DETERMINED IF THIS PROXY STATEMENT-PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF IBT COMMON STOCK TO BE ISSUED IN THE MERGER ARE NOT SAVINGS
OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OR ANY BANK OR NON-BANK SUBSIDIARY OF
IBT, AND THEY ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
BANK INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
------------------
Proxy Statement-Prospectus dated , 2000.
First mailed to FSB shareholders on or about , 2000.
4
ADDITIONAL INFORMATION
This proxy statement-prospectus incorporates important business and
financial information about IBT that is not included in or delivered with this
document. See "Where You Can Find More Information" on page 79 for a list of the
documents that IBT has incorporated into this proxy statement-prospectus. The
documents are available to you without charge upon written or oral request made
as follows:
IBT BANCORP, INC.
200 East Broadway
Mt. Pleasant, Michigan 48858
(517) 772-9471
TO OBTAIN DOCUMENTS IN TIME FOR THE SPECIAL MEETING, YOUR REQUEST SHOULD BE
RECEIVED BY , 2000.
QUESTIONS AND ANSWERS ABOUT THIS DOCUMENT
WHAT IS THE PURPOSE OF THIS DOCUMENT?
This document serves as both a proxy statement of FSB and a prospectus of
IBT. As a proxy statement, it's being provided to you because FSB's board of directors is soliciting your proxyhave continually monitored the financial service industry’s evolution which has required increasing investments in technology to remain competitive and satisfy regulatory imperatives. Management and the board have been concerned about GCB’s ability to grow as a relatively small institution in the competitive Michigan banking market. The board of directors has also been aware of the trend towards consolidation in the industry and has periodically reviewed and discussed GCB’s strategic alternatives.
In the summer of 2005, GCFC was approached by a regional community bank (Regional Community Bank) with regard to a combination. During the next six months GCFC and the Regional Community Bank conducted discussions with regard to an affiliation, did limited due diligence and discussed a range of prices they would be
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willing to pay for use atGCFC. GCFC’s board considered the special meetingmatter and determined that the consideration was not sufficient to warrant a sale of shareholders calledGCFC.
During late 2005 and 2006 the GCFC’s Board continued to consider whether a sale would be in the best interest of the bank. During the summer of 2006, GCFC held discussions with Donnelly Penman & Partners (“Donnelly Penman”) with regard to overall market conditions in the merger and voteacquisition market in Michigan. On November 7, 2006 Donnelly Penman was invited to attend GCFC’s Board of Directors meeting. At this meeting Donnelly Penman presented, amongst other things, an overview of the merger and acquisition market for small banks.
As a result of these and other discussions, the continued consolidation of the banking market and the probable need for significant additional investment to increase GCB’s assets and earnings, GCFC’s board of directors, on January 15, 2007, determined that an affiliation by GCB with a larger entity might produce superior value for GCFC’s shareholders and authorized the bank’s management to engage the assistance of Donnelly Penman, to pursue a review of GCB’s strategic options. On March 1, 2007 the Company engaged Donnelly Penman.
Over the next several weeks, GCB’s management and Donnelly Penman developed a process to contact and elicit interest from a group of prospective strategic partners who would be provided a confidential descriptive memorandum presenting GCFC and its business, subject to the prior execution of a confidentiality agreement. In April 2007, Donnelly Penman began contacting potential acquirers.
On June 19, 2007, Donnelly Penman reviewed with GCFC’s board the results of the preliminary proposal solicitation process. During this process, conducted on GCFC’s behalf, Donnelly Penman contacted 11 potential strategic partners, of which 10 entered into confidentiality agreements and then received the confidential descriptive memorandum. Based on the consideration proposed mergerby IBT, GCFC’s board decided to move forward with IBT on an exclusive basis and directed GCB’s management to meet with senior management of FSBIBT.
In July 2007, GCB’s executive officers met with senior executives of IBT. Also during this period, GCB permitted IBT to IBT.
Asconducton-site due diligence investigations of GCB. Donnelly Penman requested that IBT provide GCFC with a prospectus, it's being provided to you because IBT is offering to exchange
shares of its common stock for your shares of FSB common stock.
DO I NEED TO READ THE ENTIRE DOCUMENT?
Absolutely. Much of this proxy statement-prospectus summarizes information
that isreaffirmation letter, in greater detail elsewhere in this document or in the appendices to
this document. Each summary discussion is qualified by referenceregards to the full
text. For example,consideration proposed, following completion of their due diligence investigations which IBT did.
Over the summaryensuing weeks and with regular updates to their respective boards, the parties, assisted by financial and legal advisers, began negotiating a definitive merger agreement. Additionally, after IBT confirmed their proposal, senior executives from GCFC and GCB performedon-site due diligence at IBT on August 9, 2007. GCFC’s board held a meeting on August 20, 2007, that was also attended by representatives of Donnelly Penman and Kreis, Enderle, Callander & Hudgins, P.C., counsel to GCFC. The meeting included a detailed discussion of the proposed transaction with IBT, a presentation of certain materials provided by Donnelly Penman and a description by Kreis, Enderle, Callander & Hudgins, P.C. of the terms of the Merger Agreement is qualified
byagreement and plan of merger. Donnelly Penman reviewed the actual terms of the Merger Agreement, a copy of which is attached as
Appendix A.
IS THERE OTHER INFORMATION I SHOULD CONSIDER?
Yes. Much of the business and financial information about IBT that may be
importantprocess leading to you is not included in this document. Instead, this information is
incorporated by reference to documents filed by IBT with the SEC. This means
that IBT may satisfy its disclosure obligations to you by referring you to one
or more documents separately filed by it with the SEC.
See "Where You Can Find More Information" on page 79 for a list of
documents that IBT has incorporated by reference into this proxy
statement-prospectus and for instructions on how to obtain copies of these
documents. The documents are available to you without charge.
WHAT IF THERE IS A CONFLICT BETWEEN DOCUMENTS?
You should rely on the later filed document. Information in this proxy
statement-prospectus may update information contained in one or more of the IBT
documents incorporated by reference. Similarly, information in documents that
IBT may file after the date of this proxy statement-prospectus may update
information in this proxy statement-prospectus or information in previously
filed documents.
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WHAT IF I CHOOSE NOT TO READ THE INCORPORATED DOCUMENTS?
Information contained in a document that is incorporated by reference is
part of this proxy statement-prospectus, unless it is superseded by information
contained directly in this proxy statement-prospectus or in one or more
documents filed with the SEC after the date of this proxy statement-prospectus.
Information that is incorporated from another document is considered to have
been disclosed to you whether or not you choose to read the document.
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TABLE OF CONTENTS
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APPENDIX A -- AGREEMENT AND PLAN OF MERGER
APPENDIX B -- MBCA PROVISIONS ON DISSENTER'S RIGHTS
APPENDIX C -- OPINION OF AUSTIN ASSOCIATES, INC.
APPENDIX D -- OPINION OF AUSTIN FINANCIAL SERVICES, INC.
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SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
Merger fully, and for a more complete description of the legal terms of the
Merger, you should carefully read this document and the other documents to which
this document refers you. See "Where You Can Find More Information" on page 79.
Each item in this summary includes a page reference to a more complete
description of that item.
THE MERGER (PAGE 8)
In the proposed transaction IBT will acquire FSB through the merger of FSB
with and into IBT. IBT will survive the Merger and Farmers State Bank of
Breckenridge ("Farmers Bank") shall becomeprovided a wholly owned subsidiary of IBT. If
the Merger is completed, IBT will exchange shares of its common stock for shares
of FSB common stock so that, after the Merger is completed, IBT will own allfinancial analysis of the outstanding stock of Farmers Bank.
The Merger Agreement is attached to this proxy statement-prospectus as
Appendix A. Please readproposed transaction. At the Merger Agreement as it is the document that governs
the Merger.
THE COMPANIES (PAGES 33 AND 40)
IBT BANCORP, INC.
200 East Broadway
Mt. Pleasant, Michigan 48858
(517) 772-9471
IBT is a financial holding company whose subsidiaries provide banking,
insurance and investments through fifteen offices located throughout Isabella
County, northeastern Montcalm County, and southern Clare County, all of which
are located in central Michigan. At March 31, 2000, IBT had assets of $401.1
million.
FSB BANCORP, INC.
316 East Saginaw Street
Breckenridge, Michigan 48615
(517) 842-3191
FSB is a bank holding company with one subsidiary state bank and one
insurance agency subsidiary. The insurance agency conducts no business other
than obtaining insurance for FSB. FSB owns minority interests of Michigan
Bankers Title Company of Northern Michigan, LLC, and of West Shore Computer
Services, Inc. Its subsidiary bank provides a full range of banking services
from three offices in Gratiot and Saginaw Counties of Michigan. At March 31,
2000, FSB had assets of $99.7 million.
WHAT YOU WILL RECEIVE (PAGE 24)
Shares Of IBT Common Stock
If the Merger is completed, you will receive a certain number of IBT common
stock for each share of FSB common stock you own. The number of shares is
referred to as the exchange ratio.
FSB and IBT expect the exchange ratio to be 2.1362. The exchange ratio
formula is described in more detail in "The Merger Agreement -- Basic Plan Of
Reorganization."
Cash Instead Of Fractional Shares
IBT will not issue fractional shares in the Merger. If the total number of
shares of IBT common stock you will receive in the Merger does not equal a whole
number, you will receive cash instead of the fractional share.
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FEDERAL INCOME TAX CONSEQUENCES TO FSB SHAREHOLDERS (PAGE 22)
FSB shareholders generally will not recognize gain or loss for U.S. federal
income tax purposes from the exchange of their shares of FSB common stock for
shares of IBT common stock. FSB shareholders will be taxed on cash they receive
instead of fractional shares and cash received pursuant to the exercise of
dissenters' rights.
THE TAX TREATMENT DESCRIBED ABOVE MAY NOT APPLY TO EVERY FSB SHAREHOLDER.
DETERMINING THE TAX CONSEQUENCES OF THE MERGER TO YOU MAY BE COMPLICATED. YOU
SHOULD CONSULT YOUR OWN ADVISOR FOR A FULL UNDERSTANDING OF THE MERGER'S TAX
CONSEQUENCES.
The parties are not obligated to complete the Merger unless they receive anmeeting Donnelly Penman delivered its oral opinion of their respective counsel that no gain or loss will be recognized by
the holders of FSB common stock upon receipt of IBT common stock except for cash
received instead of fractional shares and cash received pursuant to the exercise
of dissenters' rights.
REASONS FOR THE MERGER (PAGE 8)
FSB's board of directors believes that the Merger is in the best interests
of FSB shareholders and recommends that FSB shareholders approve the Merger.
FSB's board believes that, as a result of the Merger, FSB shareholders will have
the potential for greater stock value appreciation than they would if FSB had
remained independent. Currently Farmers Bank has a substantial amount of
agricultural lending. Isabella Bank and Trust has a more diverse loan portfolio,
which helps alleviate the risk of a concentration in agricultural lending. The
Merger Agreement provides that Farmers Bank shall remain in existence as a state
chartered commercial bank, its banking offices will remain open and that there
will be no layoffs of Farmers Bank employees as a result of the Merger.
FAIRNESS OPINIONS (PAGE 10)
Austin Associates, Inc. has given its opinion to FSB's and IBT's boards of
directors that theproposed merger consideration to be received in the Merger by FSBGCFC’s common shareholders iswas fair from a financial point of view. Austin Financial Services,
Inc. has given its opinion to FSB's board of directors that the consideration to
be received in the Merger by FSB shareholders is fair from a financial point of
view.
SURRENDER OF FSB SHARES (PAGE 21)
To receive certificates for your shares of FSB common stock, you will need
to surrender your FSB share certificates. After the Merger is completed, IBT's
stock transfer agent will send you written instructions for exchanging your
stock certificates.
PLEASE DO NOT SEND IN YOUR CERTIFICATES UNTIL YOU RECEIVE THESE
INSTRUCTIONS.
ADDITIONAL BENEFITS TO FSB MANAGEMENT (PAGE 19)
In considering FSB's board of directors' recommendation to approve the
Merger, you should be aware that the President of FSB has an interest in the
Merger that is in addition to his interests as an FSB shareholder. This interest
involves an employment agreement with Farmers Bank and generated by IBT. The
board of directors of FSB was aware of this additional interest when it approved
the Merger Agreement.
DISSENTERS' RIGHTS (PAGE 19)
FSB shareholders will have dissenters' rights under Michigan law in
connection with the Merger.
SPECIAL MEETING (PAGE 6)
FSB will hold the special meeting of shareholders at a.m., local time,
on , , 2000, at the United Methodist Church, 125 Third
Street, Breckenridge, Michigan 48615. You can vote at
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the meeting if you owned FSB common stock at the close of business on
, 2000, the record date for the meeting.
VOTE REQUIRED TO APPROVE MERGER (PAGE 6)
Approval of the Merger requires the affirmative vote of a majority of the
outstanding shares of FSB common stock entitled to vote at the special meeting.
Not voting, or failing to instruct your broker how to vote shares held for you
in the broker's name, will have the same effect as voting against the Merger.
At the record date for the special meeting, FSB's directors and executive
officers beneficially owned a total of 61,648 shares of FSB common stock,
representing approximately 15% of the shares of FSB common stock entitled to
vote at the special meeting. At the record date, IBT and its subsidiaries
beneficially owned no shares of FSB common stock.
DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS (PAGE 29)
Your rights as an FSB shareholder are currently governed by Michigan law
and FSB's articles of incorporation and bylaws. Upon completion of the Merger,
you will become an IBT shareholder, and your rights will be governed by Michigan
law and IBT's articles of incorporation and bylaws.
REGULATORY APPROVALS (PAGE 21)
The Board of Governors of the Federal Reserve System must approve the
Merger before it can be completed. IBT believes that it has filed the required
application with the Federal Reserve Board. As of the date of this proxy
statement-prospectus, the Federal Reserve Board had not acted on IBT's
application for approval of the Merger. Although IBT expects that the Federal
Reserve Board will approve the Merger, it cannot be certain when or if, or on
what terms and conditions, the required approvals will be given.
OTHER CONDITIONS TO COMPLETING THE MERGER (PAGE 27)
In addition to the receipt of regulatory approvals, there are a number of
other conditions that must be met before the Merger can be completed. These
conditions include obtaining requisite shareholder and regulatory approvals, the
absence of any materially burdensome requirement or condition imposed in
connection with obtaining any such regulatory approval, the accuracy in all
material respects of the representations and warranties of the two companies and
receipt of opinions of counsel in respect of certain Federal income tax
consequences of the Merger.
TERMINATION OF THE MERGER AGREEMENT (PAGE 27)
IBT and FSB can agree to terminate the Merger Agreement at any time without
completing the Merger. Also, either company can terminate the Merger Agreement
without the consent of the other under certain circumstances, including:
- a court or other governmental authority prohibits or denies the Merger;
or
- the Merger is not completed by December 31, 2000.
ACCOUNTING TREATMENT (PAGE 23)
IBT expects to account for the Merger under the pooling of interests method
of accounting.
REGULATION OF IBT (PAGE 35)
IBT, its banking subsidiary and its nonbanking subsidiaries are subject to
extensive regulation by a number of federal and state agencies. This regulation,
among other things, may restrict IBT's ability to diversify into other areas of
financial services, acquire depository institutions in certain states and pay
dividends on its stock. It may also require IBT to provide financial support to
its subsidiary bank, maintain
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capital balances in excess of those desired by management and pay higher deposit
premiums as a result of the deterioration in the financial condition of
depository institutions in general.
On November 12, 1999, President Clinton signed into law the
Gramm-Leach-Bliley Act of 1999 that, effective March 11, 2000, will permit bank
holding companies to become financial holding companies and thereby affiliate
with securities firms and insurance companies and engage in other activities
that are financial in nature. The Gramm-Leach-Bliley Act defines "financial in
nature" to include:
- securities underwriting, dealing and market making;
- sponsoring mutual funds and investment companies;
- insurance underwriting and agency;
- merchant banking activities; and
- activities that the Board of Governors of the Federal Reserve System has
determined to be closely related to banking.
On February 12, 2000, IBT filed application with the Federal Reserve to
become a financial holding company. IBT's application was approved by the
Federal Reserve effective March 13, 2000.
Under the Gramm-Leach-Bliley Act, securities firms and insurance companies
that elect to become financial holding companies may acquire banks and other
financial institutions. The Gramm-Leach-Bliley Act may significantly change the
competitive environment in which IBT and its subsidiaries conduct business.
SELECTED FINANCIAL DATA
The following financial information is to aid you in your analysis of the
financialKreis, Enderle, Callander & Hudgins, P.C. reviewed legal aspects of the Merger. The IBT financial data is derived from its
audited consolidated financial statements for 1995 through 1999. The FSB
financial data is derived from its audited consolidated financial statements for
1995 through 1999. The information inproposed transaction and the table is only a summarycurrent draft of the agreement and should be
readplan of merger with the full financial statementsGCFC board and related notes of IBT and FSB. The
information in the table has been adjusted for stock splits and stock dividends.
IBT AND SUBSIDIARIES
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FSB AND SUBSIDIARIES
COMPARATIVE PER COMMON SHARE DATA
The following table shows comparative per share data for IBT common stock
on a historical and pro forma combined basis and for FSB common stock on a
historical and pro forma equivalent basis. The information in the table assumes
that IBT will account for the Merger as a pooling of interests and will exchange
2.1362 shares of its common stock for each share of FSB common stock. The pro
forma equivalent information for FSB is calculated by multiplying the pro forma
basic and diluted earnings per share, the historical cash dividends declared per
share of FSB common stock and the pro forma shareholders' equity per share by
the assumed exchange ratio of 2.1362.
You should read the data with the historical financial statements and
related notes of IBT and FSB. IBT's historical financial statements are included
in documents filed with the SEC; FSB's financial statements are included
elsewhere in this document. See "Where You Can Find More Information" on page
79. Amounts are in U.S. dollars. The information has been adjusted for stock
splits and stock dividends.
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SPECIAL MEETING OF SHAREHOLDERS
DATE, TIME AND PLACE
The date, time and place of the special meeting of FSB shareholders called
to consider and vote on the Merger Agreement are:
, , 2000
a.m., local time
United Methodist Church
125 Third Street
Breckenridge, Michigan 48615
RECORD DATE
FSB's board of directors has established , 2000 as the record
date for the meeting. Only shareholders of record on that date are entitled to
attend and vote at the special meeting.
VOTE REQUIRED TO APPROVE MERGER
On the record date, there were 409,649 shares of FSB common stock
outstanding and entitled to vote at the special meeting. The holders of FSB
common stock are entitled to one vote per share. The presence, in person or by
proxy, at the special meeting of the holders of a majority of the outstanding
shares entitled to vote is necessary for a quorum. Approval of the Merger
requires the affirmative vote, in person or by proxy, of the holders of a
majority of the shares of FSB common stock outstanding on the record date.
At the record date for the special meeting, FSB's directors and executive
officers beneficially owned a total of 61,648 shares of FSB common stock,
representing approximately 15% of the shares of FSB common stock entitled to
vote at the special meeting. At the record date, IBT and its subsidiaries
beneficially owned no shares of FSB common stock.
VOTING AND REVOCATION OF PROXIES
All shares of FSB common stock represented at the special meeting by a
properly executed proxy will be voted in accordance with the instructions
indicated on the proxy, unless the proxy is revoked before a vote is taken. If
you sign and return a proxy without voting instructions, and do not revoke the
proxy, the proxy will be voted FOR the Merger.
You may revoke your proxy at any time before it is voted by (a) filing
either an instrument revoking the proxy or a duly executed proxy, in either case
bearing a later date, with the corporate secretary of FSB before or at the
special meeting or (b) voting the shares subject to the proxy in person at the
special meeting. Attendance at the special meeting will not by itself result in
your proxy being revoked.
A proxy may indicate that all or a portion of the shares represented by the
proxy are not being voted with respect to a specific proposal. This could occur,
for example, when a broker is not permitted to vote shares held in the name of a
nominee on certain proposals in the absence of instructions from the beneficial
owner. Shares that are not voted with respect to a specific proposal will be
considered as not present for that proposal, even though the shares will be
considered present for purposes of determining a quorum and voting on other
proposals. Abstentions on a specific proposal will be considered as present but
will not be counted as voting in favor of the proposal.
The proposal to approve the Merger must be approved by the holders of a
majority of the shares of FSB common stock outstanding at the record date.
Because approval of the Merger requires the affirmative vote of a specified
percentage of outstanding shares, not voting on the proposal, or failing to
instruct your broker how to vote shares held for you by the broker, will have
the same effect as voting against the proposal.
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SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
FSB and its subsidiaries may solicit proxies from FSB shareholders, either
personally or by telephone or other form of communication. None of the foregoing
persons who solicit proxies will be specifically compensated for such services.
FSB does not anticipate that anyone will be specifically engaged to solicit
proxies or that special compensation will be paid for that purpose, but FSB
reserves the right to do so should it conclude that such efforts are necessary
or advisable.
Nominees, fiduciaries and other custodians will be requested to forward
soliciting materials to beneficial owners and will be reimbursed for their
reasonable expenses incurred in sending proxy material to beneficial owners. FSB
will bear its own expenses in connection with any solicitation of proxies for
the special meeting.
OTHER MATTERS CONSIDERED AT THE MEETING
If an insufficient number of votes for the Merger is received before the
scheduled meeting date, IBT and FSB may decide to postpone or adjourn the
special meeting. If this happens, proxies that have been received that either
have been voted for the Merger or contain no instructions will be voted for
adjournment.
FSB's board of directors is not aware of any business to be brought before
the special meeting other than the proposal to approve the Merger. If other
matters are properly brought before the special meeting or any adjournments or
postponements of the meeting, the persons appointed as proxies will have
authority to vote the shares represented by properly executed proxies in
accordance with their discretion and judgment as to the best interests of FSB.
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THE MERGER
EFFECT OF THE MERGERanswered directors’ questions. As a result of the Merger:
-presentations, the GCFC board approved the merger as being in the best interest of GCFC and GCB. The GCFC board authorized Theodore Kortes to sign the documents on behalf of GCFC and to submit the merger proposal to the shareholders with the board’s recommendation that it be approved.
On August 21, 2007, GCFC and IBT willexecuted the agreement and plan of merger and subsequently issued a joint press release, announcing the execution of the agreement.
Subsequent to the execution of the agreement on August 21, 2007, and after performing additional research into the IRS tax laws and accounting standards, IBT raised concerns that certain put rights in the agreement would prevent the exchange of stock from being tax free. To be eligible for a tax-free exchange of shares, the parties agreed to amend the Agreement and Plan of its common stock for shares of FSB common
stock.
- FSBMerger. Under the agreement as amended each GCFC share will be merged with and into IBT.
-exchanged for $14.70 in cash plus .6659 of a share of IBT will acquire allCommon Stock. The stock portion of the outstanding common stockexchange is intended to be a tax-free exchange under this arrangement while the cash portion will be taxable.
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The GCFC Board of Farmers Bank,
resulting in Farmers Bank becomingDirectors met on September 17, 2007, to discuss the revised transaction with the intention of taking formal action to approve the amendment on September 22, 2007. The GCFC Board of Directors approved the amendment to the original agreement at a wholly-owned subsidiarymeeting on September 22, 2007. The IBT Board met and approved the amendment on September 20, 2007.
On September 24, 2007, GCFC and IBT executed the amendment to the agreement and plan of IBT.
- FSBmerger and subsequently issued letters to their respective shareholders will become IBT shareholders, with their rights governed
by Michigan law and IBT's articles of incorporation and bylaws. See
"Comparison Of Shareholder Rights."
- The nameannouncing execution of the surviving holding company following consummationamendment.
Recommendation of GCFC’s Board of Directors and Reasons for the Merger
The Board of Directors of GCFC has approved the Merger will be "IBT Bancorp, Inc."
BACKGROUND OF AND REASONS FOR THE MERGER
BackgroundAgreement and has determined that the merger is fair to and in the best interests of GCFC and its shareholders. In reaching its decision to approve the Merger The Merger Agreement, was executed on April 7, 2000 and a press release
issued announcing the Board of Directors consulted with its outside counsel regarding the legal terms of the Merger on April 10, 2000.
FSB and IBT have enjoyed long histories of operating as independent
community banks. Given the geographic proximity of operations, senior managementmerger and the boardsBoard of directors are familiar with the business strategies,
philosophies and reputations of each company. EarlyDirector’s fiduciary obligations in the third quarter of
1999, IBT and FSB invited Austin Associates, Inc. ("AAI") to attend individual
meetings with each organization to outline the manner in which IBT and FSB could
accomplish a business combination transaction.
On August 4, 1999, AAI met with the FSB board and separately met with the
executive management of IBT to discuss the range of issues involved in this type
of transaction. Both FSB and IBT retained AAI in a joint engagement letter to
assist in evaluating and facilitating the potential acquisition of FSB by IBT.
On September 7, 1999, AAI issues its report related to the potential
transaction. The report consisted of a valuation of IBT on a minority share
level, a valuation of FSB on a sale of control level, and an exchange ratio
analysis to evaluate the pro forma impactconsideration of the transaction to FSBproposed merger, considered the financial aspects and IBT,
including the effect to per share earnings, book value and dividends.
On October 19, 1999, AAI met with the FSB board and IBT executive
management to review the AAI report. On December 14, AAI met with the FSB board
to further examine the report, to discuss various nonfinancial issues related to
a potential transaction, and to review additional information regarding IBT,
including its employee benefit program. The nonfinancial issues reviewed by the
board included the formal structurefairness of the transaction, name of the resulting
company, management and control issues following theproposed Merger and the impact of
the transaction to FSB's customers and employees.
Subsequent to the December 14, 1999 FSB board meeting, AAI facilitated
negotiation of various nonfinancial issues and on January 6, 2000, AAI met with
the IBT board to discuss these matters.
AAI met with the FSB board on February 1, 2000 to finalize the negotiation of
the substantive financial and nonfinancial issues in connection with the Merger.
Both the IBT and FSB boards of directors authorized the commencement of due
diligence of the other organization and each retained special legal counsel to
draft and negotiate the Merger Agreement.
Special legal counsel to FSB advised the FSB board to secure its own
financial fairness opinion in connection with the Merger. On February 9, 2000,
FSB retained Austin Financial Services, Inc. ("AFSI") to render such an opinion.
AFSI is not affiliated with AAI.
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At the FSB board of directors meeting held on April 4, 2000 and at the IBT
board of directors meeting held on February 29, 2000, the respective boards were
advised that AAI believed the financial terms of the Merger Agreement were fair, from a financial point of view to shareholdersand consulted with the management of both FSBGCFC regarding the future prospects of GCFC as an independent entity and as part of IBT. The FSB
board was also advised that AFSI believedWithout assigning any relative or specific weight, the financial terms of the Merger
Agreement were fair, from a financial point of view, to shareholders of FSB. The
boards of directors, with legal counsel, then considered the overall terms of
the Merger Agreement and voted unanimously to approve the Merger Agreement.
FSB's Board of Directors' Reasons for the Merger
Subject to satisfactionDirectors of certain conditions contained in the Merger
Agreement, FSB's board of directors believes the Merger to be fair and in the
best interest of FSB shareholders.
The terms of the proposed Merger are the result of arm's-length
negotiations by representatives of FSB and IBT, which culminated in the signing
of the Merger Agreement as of April 7, 2000. In arriving at its decision to
approve and recommend the terms of the Merger Agreement, the board of directors
of FSBGCFC considered a number of factors, including but not limited to, the following:
- the potential benefits to be derived for FSB shareholdersfollowing both from a combination of the two companies, including the potential for greater
stock appreciationshort-term and the efficiencies and economies provided by a
larger combined institution with greater resources and a larger customer
base;
- the strategic and financial alternatives available in the rapidly
consolidating financial services industry and the increasing cost and
difficulty for a smaller institution to meet technological changes;
-long-term perspective:
| • | The merger consideration to be paid to GCFC shareholders; | |
| • | The structure of the merger and the financial and other terms of the Merger Agreement, including the fact that the merger is conditioned upon GCFC’s receipt of financial analysis and opinion to be delivered by Donnelly, Penman & Partners that the terms of the Merger Agreement are fair to the shareholders of GCFC from a financial point of view; | |
| • | The fact that the transaction was structured to keep GCFC’s offices open; | |
| • | The Board of Directors’ review, with its legal and financial advisors, of alternatives to the merger, the range and possible value to GCFC shareholders obtainable through such alternatives and the timing and likelihood of the alternatives; | |
| • | The familiarity of the Board of Directors of GCFC with, and review of, its business, financial condition, results of operations and prospects, including, but not limited to, its potential growth, development, productivity and profitability and the business risks associated with the merger; | |
| • | The current and prospective environment in which GCFC operates, including national and local economic conditions, the highly competitive environment for financial institutions generally, the increased regulatory burden on financial institutions, the trend toward consolidation in the financial services industry, and the increasing importance of operational scale and financial resources in maintaining efficiency, remaining competitive, and capitalizing on technological developments; | |
| • | The potential for appreciation in market and book value of GCFC’s common stock on both a short- and long-term basis, as a stand-alone entity; | |
| • | Information concerning IBT’s management, business, financial condition, results of operations, asset quality and prospects, including the long-term growth potential of IBT, the future growth prospects of IBT combined with GCFC following the proposed merger, the potential synergies expected from the merger and the business risks associated with the merger; | |
| • | The United States federal income tax consequences to GCFC shareholders of receiving the merger consideration in exchange for their shares of GCFC common stock; | |
| • | The advantages and disadvantages of GCFC remaining an independent institution or affiliating with a larger institution; | |
| • | The short- and long-term interests of GCFC and its shareholders, the interests of the employees, customers, creditors and suppliers of GCFC, and the interests of GCFC’s community, all of which may benefit from an |
14
| appropriate affiliation with a larger institution with increased economies of scale and with a greater capacity to serve all of the banking needs of the community; |
| • | The fact that some of GCFC’s directors and executive officers have interests in the merger that are in addition to and may differ from the interests of GCFC shareholders. See “Interests of Directors and Executive Officers In the Merger”; and | |
| • | The compatibility of the businesses and management philosophies of GCFC and IBT as well as IBT’s strong commitment to the communities it serves. |
On the basis of these considerations, the Merger Agreement;
- the current and prospective economic, competitive and regulatory
environment facing FSB and other financial institutions;
- the fact that the transactionAgreement was structured to continue the existenceunanimously approved by GCFC’s Board of FSB, to keep its offices open to provide that no employee would be laid
off;
- the opinionsDirectors.
The Board Of Directors Unanimously Recommends Adoption Of The Agreement And Plan Of Merger By The Shareholders Of GCFC.
Fairness Opinion of FSB'sDonnelly Penman & Partners
The fairness opinion of GCFC’s financial advisor, that, as of March 31, 2000, and
May 26, 2000 subject to the assumptions and limitations set forth in the
opinions, the Merger from a financial point of view was fair to FSB and
its shareholders;
- the likely social and economic effect of the Merger on FSB's customers
and employees and the communities in which it operates;
- the diversification which will result from joining forces with IBT, which
has a more diverse loan portfolio than does FSB, which has a substantial
amount of agricultural lending;
- the qualification of the Merger as a tax-free transaction for United
States federal income tax purposes (except for tax resulting from any
cash received for fractional shares by the holders of FSB common stock)
and the expected accounting treatment as a pooling of interests;
- our board's review, based in part on presentation by our financial
advisors and our due diligence review of IBT, of the financial condition,
results of operation, businesses and prospects of each of the
institutions before and after giving effect to the Merger and the
determination of the Merger's effect on shareholder value; and
- the current market conditions for financial institution stocks,
historical market prices of FSB and IBT common stock, price volatility
and trading information.
The President of FSB has an interest in the Merger in addition to his
interests as a shareholder generally. This additional interest relates to a
future employment agreement. Shareholders may wish to
9
18
consider those interests in evaluating the recommendation of the FSB board of
directors that shareholders vote for approval of the Merger. See "Additional
Interests of FSB Management" below.
In reaching its determination to approve and recommend the Merger, the
board of directors of FSB did not assign any relative or specific weights to the
foregoing factors, and individual directors may have given different weights to
different factors.
FSB'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FSB SHAREHOLDERS
APPROVE THE MERGER AGREEMENT AND THE MERGER.
OPINIONS OF FSB'S AND IBT'S FINANCIAL ADVISORS
The fairness opinions of the financial advisors, Austin Associates, Inc.
("AAI"Donnelly Penman & Partners (“Donnelly Penman”) and Austin Financial Services, Inc. ("AFSI") areis described below. The full text of the fairness opinionsopinion which setsets forth, among other things, assumptions made, procedures followed, matters considered and limitations on the review undertaken are attached to this document as Appendix C and D,
respectively.B. Shareholders of FSBGCFC are urged to read the fairness opinionsopinion carefully and in theirits entirety. To the extent that the descriptions contain projections, estimatesand/or other forward-looking statements about the future earnings or other measures of the future performance of IBT, you should not rely on any of these statements as having been made or adopted by IBT unless they have been made by IBT in a document that is incorporated by reference into this proxy statement-prospectus.Proxy Statement-Prospectus. See "Where“Where You Can Find More Information."
AUSTIN ASSOCIATES, INC. OPINION
FSB and IBT”
GCFC retained Austin Associates, Inc. ("AAI") pursuantDonnelly Penman to an
engagement letter dated August 4, 1999 to provideact as GCFC’s financial advisory servicesadvisor in connection with facilitating a potential business combination transaction under
which IBT would acquire FSB. IBTthe merger and FSB selected AAIrelated matters based onupon its experience,qualifications, expertise and reputation, as well as its familiarity in representing community banks in similar
transactions. AAIwith GCFC. Donnelly Penman is a nationallyan investment-banking firm of recognized standing. As part of its investment banking firm andservices, it is
regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, private placements and valuations for stock plans, corporate and other purposes. AAI orally advisedDonnelly Penman is acting as financial advisor to GCFC in connection with the FSBmerger and IBT boardswill receive fees from GCFC for its services pursuant to the terms of directors that,its engagement letter with GCFC, dated as of April 7,
2000,March 1, 2007.
On August 21, 2007, IBT and GCFC entered into an Agreement and Plan of Merger (the “Agreement”) to which IBT would acquire GCFC (the “Merger”). In accordance with the financialterms of the Agreement, GCB will contemporaneously merge with and into Isabella. On September 24, 2007, IBT and GCFC entered into a First Amendment to the Agreement (together with the Agreement the “Merger Agreement”). Per the terms of the Merger Agreement, wereeach share of GCFC common stock issued and outstanding immediately prior to the effective time of the Merger shall be converted into the right to receive 0.6659 of a share of IBT common stock and $14.70 in cash, for total consideration of $43.50 per share (based on a trading value of $43.25 per share for IBT stock as of September 20, 2007 — the day Donnelly Penman delivered its opinion to the GCFC Board of Directors). Donnelly Penman has delivered its opinion that the exchange ratio and per share consideration is fair to each company and
their respective stockholders. AAI confirmed this oral opinionGCFC’s shareholders from a financial point of view. No limitations were imposed by deliveryGCFC on the scope of a
written opinion dated April 7, 2000, the date the Merger Agreement was signed.
AAI's written opinion has been updated to , 2000, and this updated
opinion is attached as Appendix C to this Proxy Statement/Prospectus.
You should consider the following when reading the discussion of AAI's
opinion in this document:
- The summary of the AAI opinion set forth in this Proxy
Statement/Prospectus is qualified in its entirety by reference to the
full text of the opinion that is attached as Appendix C to this document.
You should read the opinion in its entirety for a full discussion ofDonnelly Penman’s investigation or on the procedures followed assumptions made, matters considered and
qualifications and limitationsby Donnelly Penman in rendering its opinion.
THE FULL TEXT OF THE OPINION OF DONNELLY PENMAN, WHICH SETS FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN BY DONNELLY PENMAN, IS ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT — PROSPECTUS. HOLDERS OF GCFC COMMON STOCK ARE URGED TO READ THE OPINION IN ITS ENTIRETY. DONNELLY PENMAN’S OPINION IS DIRECTED ONLY TO THE MERGER CONSIDERATION DESCRIBED IN THE MERGER AGREEMENT AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY GCFC SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE GCFC SPECIAL SHAREHOLDER MEETING. THE SUMMARY SET FORTH IN THIS PROXY STATEMENT — PROSPECTUS OF THE OPINION OF DONNELLY PENMAN IS QUALIFIED
15
IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF ITS OPINION ATTACHED TO THIS DOCUMENT AS APPENDIX B.
In arriving at its opinion, Donnelly Penman engaged in discussions with members of the review undertaken by AAI in
connection with its opinion.
- The AAI opinion is addressed to bothmanagement of each of IBT and FSBGCFC concerning the historical and is substantially
identical to the written opinion delivered to thecurrent business operations, financial conditions and prospects of IBT and FSB boards
dated April 7, 2000.
- AAI expressed noGCFC, and reviewed:
| • | the Agreement and Plan of Merger dated August 21, 2007; | |
| • | the Amendment to the Agreement and Plan of Merger dated September 24, 2007; | |
| • | Independent Auditor’s Report for GCFC for the years ended December 31, 2004, 2005 and 2006 and the management’s unaudited balance sheet and statement of income for the eight months ended August 31, 2006 and August 31, 2007; | |
| • | certain information, including financial forecasts and projections (and the assumptions and bases therefore which were deemed reasonable by management), relating to earnings, assets, liabilities and prospects of GCFC as a stand alone company with the management of GCFC. Donnelly Penman confirmed with management that such forecasts and projections reflected the best currently available estimates and judgments by management; | |
| • | certain publicly-available information for IBT, including each of the Annual Reports to Stockholders and Annual Reports onForm 10-K for the years ended December 31, 2004, 2005 and 2006 and the quarterly reports onForm 10-Q for the quarters ended March 31, 2007 and June 30, 2007; | |
| • | certain information, including financial forecasts and projections (and the assumptions and bases therefore which were deemed reasonable by management), relating to earnings, assets, liabilities and prospects of IBT with the management of IBT. Donnelly Penman confirmed with management that such forecasts and projections reflected the best currently available estimates and judgments by management; | |
| • | the historical stock prices and trading volumes of IBT’s common stock; | |
| • | the terms of acquisitions of banking organizations which Donnelly Penman deemed generally comparable to GCFC; | |
| • | the amount and timing of the cost savings, income from additional growth, and other expenses and adjustments expected to result from the Merger furnished by senior management of IBT and deemed reasonable by them; | |
| • | the financial condition and operating results of IBT and GCFC compared to the financial conditions and operating results of certain other financial institutions that Donnelly Penman deemed comparable; and | |
| • | such other information, financial studies, analyses and investigations and such other factors that Donnelly Penman deemed relevant for the purposes of its opinion. |
In conducting its review and arriving at its opinion, as tocontemplated under the price at which IBT common stock would
actually be trading at any time.
- The AAI opinion does not address the relative meritsterms of the Merger and
the other business strategies consideredits engagement by IBT or FSB, nor does it
address the IBT or FSB board decision to proceedGCFC, Donnelly Penman, with the Merger.
- The AAI opinion to theconsent of IBT and FSB boards rendered in connection withGCFC, relied, without independent investigation, upon the Merger does not constitute a recommendation to any IBT or FSB shareholder
as to how he or she should vote at the special meeting.
10
19
In connection with its opinion, AAI made the following assumptions:
- that the Merger will be accounted for as a pooling in accordance with
generally accepted accounting principles;
- thataccuracy and completeness of all material governmental, regulatoryfinancial and other consents and
approvals necessary for the consummation of the Merger would be obtained
without any adverse effectinformation provided to IBT, FSB or on the anticipated benefits of
the Merger;
- that IBT and FSB had provided it with all of the information prepared by IBT and FSBGCFC or itsupon publicly-available information. Donnelly Penman participated in meetings and telephone conferences with certain members of IBT’s and GCFC’s senior management to discuss IBT’s and GCFC’s past and current business operations, regulatory standing, financial condition and future prospects, including any potential operating efficiencies and synergies that may arise as a result of the Merger. With respect to anticipated transactions costs, purchase accounting adjustments, expected cost savings and other representatives that might be material to AAI in
its review;synergies and - that the financial projections itother information prepared byand/or reviewed were reasonably prepared on a
basis reflecting the best currently available estimates and judgment ofwith the management of IBT and FSB asused in our analyses, IBT’s management confirmed to the future operating and financial
performance of IBT and FSB, respectively.
In addition, AAI:
- reviewed the Merger Agreement and publicly available business and
financial information relating to IBT and FSBus that it considered
relevant;
- reviewed other information relating to IBT and FSB, including internal
financial forecasts and forecasts of cost savings to be achieved in the
merger;
- held discussions with IBT and FSB management related to the business and
prospects of the pro forma company;
- considered financial and stock market information about IBT and FSB and
compared that information with similar information about other publicly
traded financial institutions;
- considered the financial terms of other recent business combinations
among financial institutions; and
- considered such other studies, analyses, inquiries and examinations as
AAI deemed appropriate.
In connection with its review, AAI did not assume any responsibility for
independent verification of any of the information provided to or otherwise
reviewed by AAI. AAI relied on this information being complete and accurate in
all material respects. As to the financial forecasts, including the estimates of
future cost savings and operating synergies expected to be achieved as a result
of the merger, AAI assumed that these forecasts were reasonably prepared andthey reflected the best currently available estimates and judgments of management with respect to such information. With respect to anticipated earnings of GCFC and other information prepared byand/or reviewed with the management of GCFC and used by us in our analyses, GCFC’s management confirmed to us that they reflected the best currently available estimates and judgments of management with respect to such information. Donnelly Penman did not undertake any responsibility for the accuracy, completeness or reasonableness of, or any obligation
16
independently to verify, such information. Donnelly Penman further relied upon the assurance of management of IBT and FSB asGCFC that they were unaware of any facts that would make the information provided or available to the future financial performance of IBT and FSB. In
addition, IBT and FSB did not ask AAI to make, and AAIDonnelly Penman incomplete or misleading in any respect. Donnelly Penman did not make anany independent evaluationevaluations, valuations or appraisalappraisals of the assets or liabilities contingent or
otherwise, of IBT or FSB, nor was AAI furnished withGCFC. Donnelly Penman is not an expert in the evaluation of loan portfolios or the allowance for loan losses and did not review any evaluationsindividual credit files of IBT or appraisals of this kind.GCFC and assumed that the aggregate allowances for credit losses for IBT and FSB placed no limitsGCFC were adequate to cover such losses. Donnelly Penman’s opinion was necessarily based upon economic and market conditions and other circumstances as they existed and evaluated by Donnelly Penman on the scopedate of analysis
performed, or opinion expressed, by AAI.
In preparingits opinion. Donnelly Penman does not have any obligation to update its opinion, AAIunless requested by GCFC in writing to do so, and Donnelly Penman expressly disclaims any responsibility to do so in the absence of any written request by GCFC.
In connection with rendering its opinion to the GCFC Board, Donnelly Penman performed a variety of financial and
comparative analyses, the material aspects of which are describedsummarized below. The
preparation of a fairness opinion is a complex analytic process involving
various determinations as to the most appropriate and relevant methods of
financial analyses and the application of those methods to the particular
circumstances. Therefore, such an opinion is not readily susceptible to partial
analysis or summary description. In arriving at its opinion, AAI made
qualitative judgments as to the significance and relevance of each analysis and
factor considered by it. Accordingly, AAIDonnelly Penman believes that its analyses must be considered as a whole and that selecting portions of its analyses and the factors considered by it, without consideringconsideration of all analysesfactors and factors,analyses, could create a misleading or
incomplete view of the process underlying its analyses and the processes underlying Donnelly Penman’s opinion. Donnelly Penman arrived at its opinion.
The following is a summary of the material financial analyses performed by
AAI in connection with its written opinion rendered to the IBT and FSB boards of
directors as of April 7, 2000 and its updated opinion as of , 2000.
Certain of these summaries include information presented in tabular
11
20
format. In order to fully understand the financial analyses used by AAI, these
tables must be read together with the accompanying narrative. The tables alone
do not constitute a complete description of the applicable financial analysis.
Summary of Financial Terms of Agreement: AAI reviewed the financial terms of the
proposed transaction, including the form of consideration and the exchange
ratio. Under the terms of the Merger Agreement, each outstanding share of FSB
common stock shall be exchanged for 2.1362 shares of IBT common stock. No
fractional shares of IBT common stock shall be issued in the Merger. Cash will
paid in lieu of fractional shares based on the valueresults of IBT common stock.
Preparationall the analyses it undertook assessed as a whole, and it did not draw conclusions from or with regard to any one method of Financial Analysis: In connection with AAI's role as financial
advisor pursuant to the engagement letter dated August 4, 1999, AAI prepared a
financial analysis comprisedanalysis. The preparation of a minority share valuation of IBT, a sale of
control valuation of FSB and an exchange ratio analysis evaluating the financial
impact of the transaction to both IBT and FSB. These reports were issued on
September 7, 1999 based on June 30, 1999 financial information.
Minority Share Valuation for IBT: In the minority share valuation for IBT,
AAI determined a value range between $20.30 to $22.73 per share (adjusted
for 3.3-for-1 stock split paid February 18, 2000). AAI used the following
techniques to determine the fair market value of IBT on a minority share
basis using financial performance data as of June 30, 1999:
- Income Approach: AAI completed a discounted cash flow analysis of IBT
operated as a going concern. The calculation is based on long term
projections for assets, earnings and capital levels, among other
variables. The future projected cash flows are discounted to a present
value amount under this methodology.
- Net Asset Value Approach: Under this method, the market value of IBT's
liabilities is subtracted from the market value of its assets to
determine a net asset value. Certain adjustments are made to reflect the
going concern nature of IBT.
- Guideline Transaction Approach: Indications of value are established for
IBT based on two sets of guideline transactions, including (1) price/book
and price/earnings multiples for selected publicly traded companies; and
(2) price/book and price/earnings multiples for selected bank sale
transactions. In determining minority share indications of value for IBT,
AAI applied a minority share discount to all sale transaction multiples.
- Market Price: The most recent trading prices of IBT's common shares based
on arm's length transactions.
The following chart highlights the valuation results for IBT:
12
21
In determining the fair market value of IBT on a minority share basis, AAI
considered each of the valuation results. No specific formula or weighting was
utilized in AAI's appraisal to reach its fair market value conclusion.
Sale of Control Valuation for FSB: In the sale of control valuation for FSB, AAI
determined a value range between $47.62 to $51.43 per share (adjusted for 5
percent stock dividend paid October 15, 1999) or $19.4 to $20.9 million in the
aggregate. AAI used the following techniques to determine the fair market value
of FSB on a sale of control basis as of June 30, 1999:
- Income Approach: AAI completed a discounted cash flow analysis of FSB on
a sale of control basis. The calculation is based on long term
projections for assets, earnings and capital levels, among other
variables. The future projected cash flows are discounted to a present
value amount under this methodology. A control premium was added to
reflect the nature of the proposed transaction.
- Net Asset Value Approach: Under this method, the market value of FSB's
liabilities is subtracted from the market value of its assets to
determine a net asset value. A control premium was added to reflect the
nature of the proposed transaction.
- Guideline Transaction Approach: Indications of value for FSB are
established based on guideline transactions. Price/book, price/earnings
and premium over book value as a percent of total asset multiples for the
selected bank sale transactions were reviewed in this analysis.
The following chart highlights the valuation results for FSB:
In determining the fair market value of FSB on a sale of control basis, AAI
considered each of the valuation results. No specific formula or weighting was
utilized in AAI's appraisal to reach its fair market value conclusion.
Exchange Ratio Analysis: AAI prepared an exchange ratio analysis to supplement
the individual valuations of IBT and FSB. The purpose of this analysis was to
evaluate the pro forma impact of the transaction to IBT, FSB and their
shareholders. Four individual analyses were included in this exchange ratio
analysis.
- Contribution Analysis: AAI considered the contribution of certain balance
sheet and income statement items that IBT and FSB would contribute to the
pro forma company.
- Guideline Transactions: AAI identified five transactions involving buyers
and sellers with similar balance sheet and income statement
characteristics to IBT and FSB. The financial terms of these transactions
were evaluated and considered.
13
22
- Fair Market Valuations of IBT and FSB: AAI calculated pro forma exchange
ratios based on the range of values established in the individual
valuations of IBT and FSB.
- Pro Forma Merger Analysis: AAI considered the pro forma effect of the
Acquisition to IBT and FSB per share data, including book value per
share, earnings per share and dividends per share.
Contribution Analysis: AAI analyzed selective pro forma financial measures that
IBT and FSB would be contributing to the combined company, excluding any
projected cost savings, and compared this to the pro forma ownership of IBT and
FSB stockholders.
Guideline Transactions: AAI analyzed the pro forma ownership and contribution
results of selected bank acquisitions announced between January 1, 1998 and June
30, 1999 with similar characteristics to IBT and FSB. The criteria for the peer
transactions included: (1) all stock as the form of consideration; (2) buyers
having assets less than $1 billion; (3) sellers having assets less than $500
million; (4) buyer and seller return on average assets ("ROA") ranging from 0.9
percent to 1.5 percent; and (5) buyer and seller return on average equity
("ROE") ranging from 10 percent to 15 percent.
Based on this criterion, five transactions were evaluated. The average
buyer had $319 million in assets, while the average seller had $75 million in
total assets. AAI considered the contribution of equity and net income of the
selling institutions in comparison to their resulting pro forma ownership in the
buying company. The selling institutions received an average ownership equal to
123 percent of their contribution of net income and 115 percent their
contribution of equity.
By applying these guideline transaction multiples to the IBT and FSB
financial data, AAI calculated alternative pro forma exchange ratios. The
following table highlights the results:
14
23
Fair Market Valuations of IBT and FSB: The following chart highlights the
individual appraisal results, and calculates a range of exchange ratios based on
the range of respective values for IBT and FSB.
- --------------------------------------------------------------------------------
APPRAISAL RESULTS
- --------------------------------------------------------------------------------
Pro Forma Merger Analysis: AAI analyzed the pro forma effect of the merger to
the estimated earnings per share of IBT and FSB for the four years following the
merger. This analysis assumed a closing date of June 30, 2000. In performing
this analysis, AAI considered pre-tax cost savings equal to 5% of FSB's
operating expenses in the first year after the Merger, 10% in the second year,
and 15% in both the third and fourth years.
The following chart highlights the results of the pro forma merger
analysis:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AAI also analyzed the pro forma effect of the merger on the estimated book
value per share of IBT and FSB for the four years following the transaction.
Based on this analysis, AAI calculated that the merger would be 0.9 percent
dilutive to IBT's estimated book value per share in 2004 and the transaction
would be 8.0 percent accretive to FSB's estimated book value per share in 2004
based on a 2.1362 exchange ratio to FSB.
Interim Financial Performance since June 30, 1999: AAI evaluated the interim
financial performance of IBT and FSB between June 30, 1999 and March 31, 2000.
Balance sheet and income statement data for the six and twelve months ended
December 31, 1999 and for the three months ended March 31, 2000 were reviewed.
- --------------------------------------------------------------------------------
IBT SELECTIVE FINANCIAL DATA ($000)
- --------------------------------------------------------------------------------
15
24
- --------------------------------------------------------------------------------
FSB SELECTIVE FINANCIAL DATA ($000)
- --------------------------------------------------------------------------------
Contribution Analysis as of March 31, 2000: AAI analyzed selective pro forma
financial measures that IBT and FSB would be contributing to the combined
company, excluding any projected cost savings, and compared this to the pro
forma ownership of IBT and FSB stockholders. AAI noted that, based on the IBT
exchange ratio and the number of shares of IBT stock and FSB stock outstanding
at March 31, 2000, IBT stockholders would own approximately 77.4 percent and FSB
stockholders would own approximately 22.6 percent of the pro forma shares
outstanding. AAI compared these percentages to the following pro forma data:
- --------------------------------------------------------------------------------
SELECTIVE CONTRIBUTION PERCENTAGES AS OF MARCH 31, 2000
--------------------
(1) Net income excluding goodwill amortization expense
(2) Adjusted to reflect effect of IBT Dividend Reinvestment Plan
- --------------------------------------------------------------------------------
Thefairness opinion expressed by AAI was based on market, economic and other
relevant considerations as they existed and could be evaluated as of the date of
the opinion. Events occurring after the date of issuance of the opinion,
including but not limited to, changes affecting the securities markets, the
results of operations or material changes in the financial condition of either
IBT or FSB could materially affect the assumptions used in preparing this
opinion.
IBT and FSB have agreed to pay AAI customary fees for its services as
financial advisor in connection with the Merger. In addition to its fees and
regardless of whether the merger is consummated, IBT and FSB have agreed to
reimburse AAI for its reasonable out-of-pocket expenses, and to indemnify AAI
against certain liabilities, including liabilities under securities laws.
16
25
AUSTIN FINANCIAL, INC. OPINION
AFSI is a nationally recognized investment banking firm specializing in the
bankingcomplex process involving subjective judgments, and financial services industry. ASFI is continually engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions, private placements and valuations for estate, corporate and other
purposes. AFSI does not contemplate any future business with FSBnecessarily susceptible to partial analysis or IBT arising
from this engagement, nor has its opinion concerning the fairness, from a
financial point of view, of the terms of the proposed Merger been subject to
indications of future business with either FSB or IBT.
AFSI rendered written opinions to FSB's Board of Directors to the effect
that the terms of the proposed merger are fair, from a financial point of view,
to the shareholders of FSB. The written opinions were delivered on March 31,
2000 and May 26, 2000. No limitations were imposed by the Board of Directors of
FSB upon AFSI withsummary description. With respect to the investigations made or procedures followed by
AFSI in rendering its opinion.
AFSI's opinions are directed onlyanalysis of selected comparable companies and analysis of selected comparable merger transactions summarized below, no public company utilized as a comparison is identical to the fairness, from a financial point
of view, of the terms of the proposed merger and do not constitute a
recommendation to any FSB shareholder as to how such shareholders should vote at
the special meeting of FSB shareholders or any other matter.
In connection with its opinions, AFSI reviewed material bearing upon the
financial operating conditions of FSB and IBT including, but not limited to: (1)
the Annual Reports of FSB and IBT for the year 1999; (2) Consolidated Reports of
Condition and Income of FSB and IBT for the years ending 1994-1999; (3) Uniform
Bank Performance Reports of FSB and IBT as of September 30, 1999; (4)
Consolidated Reports of Condition and Income of FSB and IBT for the period
ending March 31, 2000; (5) the interest rate schedule for FSB and IBT; (6) FSB's
and IBT's estimated depreciation schedule for the years 2000-2004; (7) other
internal financial and operating information which was provided to AFSI by FSB
and IBT; (8) publicly available information concerning certain other banks/
thrifts and bank/thrift holding companies merger and acquisition transactions;
(9) discussing the foregoing as well as other matters relevant to its inquiry,
including the past and current business operations and acquisitions, results of
regulatory examinations, financial condition, current loan quality and trends,
and future prospects of IBT with certain officers and representatives of IBT;
and (10) the Agreement. AFSI also took into account its assessment of general
economic market and financial conditions and its experience in other
transactions, as well as its experience in securities valuation and general
knowledge of the banking industry. AFSI's opinions were necessarily based upon
conditions as they existed and could be evaluated on the date of the opinions
and the information made available to AFSI through those dates.
AFSI relied upon and assumed without independent verification the accuracy
and completeness of all of the financial and other information provided to it by
FSB and IBT or from public sources. In particular, AFSI did not make an
independent evaluation of the assetsGCFC, and liabilities of FSB or IBT. Nor did AFSI
independently verify the aggregate allowance for loan loss set forth in the
balance sheets of FSB and IBT at March 31, 2000, and assumed on this date that
such allowances complied fully with applicable law, regulatory policy, and sound
banking practice. However, AFSI did perform the following due diligence of IBT:
(1) reviewed any pending litigation and solicited management's projected loss
related to any pending litigation; (2) reviewed IBT's "watch" loan list and
details involving the history of the loans contained within it; (3) reviewed
IBT's 1999/2000 corporate minute book including board and executive committee
meeting minutes; (4) reviewed IBT's most recent comprehensive regulatory exam;
(5) reviewed any administrative orders or other regulatory action imposed upon
IBT or its affiliate bank; and (6) posed several questions to IBT's management
concerning matters that could have a material impact on the future value of
IBT's common stock.
In its analyses, AFSI made numerous assumptions with respect to industry
performance, business and economic conditions, and other matters, many of which
are beyond the control of FSB and IBT. Any estimates contained in AFSI's
analyses do not necessarily denote future results since many unforeseen
occurrences could affect or alter such estimates. No financial institution or
transaction utilized in AFSI's analyses was identical to FSB or IBT or the
Agreement. Accordingly, such analyses are not based solely on arithmetic
calculations; rather, theynecessarily involve complex considerations and judgments by AFSI
concerning 17
26the differences in financial and operating characteristics of the relevant financial institutions the timing of the relevant transactions and prospective buyer
interest, as well as other factors that could affect the acquisition or public trading marketsvalues of the financial institutioninstitutions concerned.
The financial forecast information and cost savings and other synergies expected to result from the Merger furnished by management of IBT and GCFC, respectively, and deemed reasonable by them contained in or underlying Donnelly Penman’s analyses are not necessarily indicative of future results or values, which may be significantly more or less favorable than such forecasts and estimates. The forecasts and estimates were based on numerous variables and assumptions that are inherently uncertain, including factors related to general economic and competitive conditions. In that regard, Donnelly Penman assumed, with IBT’s and GCFC’s consent, that the financial forecasts, including the cost savings and other synergies expected to result from the Merger, were reasonably prepared on a basis reflecting the best currently available judgments of IBT and GCFC, and that such forecasts will be realized in the amounts and at the times that they contemplate. Estimates of values of financial institutions or assets do not purport to be appraisals or necessarily reflect the prices at which they are being
compared.
Since neither FSB'sfinancial institutions or IBT's common stock is publicly traded it was
paramount that AFSI perform an analysis of both institutionstheir securities actually may be sold. Accordingly, actual results could vary significantly from those assumed in order to derive
its opinion, from athe financial point of view, as to the fairnessforecasts and related analyses. None of the Agreement
to FSB.
analyses performed by Donnelly Penman was assigned a greater significance by Donnelly Penman than any other.
The following is a brief descriptionsummary of the analysisanalyses performed by Donnelly Penman. Certain analyses have been updated to reflect currently available information for purposes of FSBthe written fairness opinion.
Summary Analysis of the Transaction. The Merger Agreement provides that each share of GCFC common stock issued and outstanding immediately prior to the effective time of the Merger shall be converted into the right to receive 0.6659 shares of IBT common stock and $14.70 in cash, for total consideration of $43.50 per share (based on a trading value of $43.25 per share for IBT stock as of September 20, 2007 — the writtenday Donnelly Penman delivered its opinion to the GCFC Board of Directors).
Donnelly Penman reviewed the amended terms of the Merger. Each GCFC share will be exchanged for 0.6659 of a share of IBT common stock and $14.70 in cash, for total consideration of $43.50 per share (based on a trading value of $43.25 per share for IBT stock as of September 20, 2007 — the day Donnelly Penman delivered its opinion to the GCFC Board of Directors). As such, Donnelly Penman utilized a per share value of $43.50 in its analysis below, which represents a 284.1% premium to the book value and tangible book value per GCFC share (fully diluted) of $15.31; 37.3 times latest twelve month (“LTM”) earnings of $1.17 per share (fully diluted); and a 30.9% premium to core deposits as of August 31, 2007. Donnelly Penman also noted that, based on May 26, 2000).
Using a discounted futurethe exchange ratio and cash flow analysis, AFSI projected FSB's cash
flow from April 1, 2000 through March 31, 2005. The principal behind the
discounted future cash flow analysis isconsideration, that the worthtransaction had an implied aggregate value of a business is equalapproximately $33.6 million (exclusive of
17
transaction costs) as of September 20, 2007. The complete aggregate deal metrics in relation to the future expected cash flow discounted at a rate that reflects the riskiness
of the cash flow. Besides determining five years of future cash flows, AFSI also
estimated FSB's residual valueGCFC financial position as of MarchAugust 31, 2005. The residual value
represents2007 are displayed below:
| As of August 31, 2007/For the Twelve Months Ended August 31, 2007 | ||||||||||||||||||||||||||
| Price/Tangible | Price/LTM | Premium/Core | ||||||||||||||||||||||||
| Deal Price | Price/Book | Book | Earnings | Price/Assets | Price/Deposits | Deposits | ||||||||||||||||||||
| $ | 33,630 | 284.1 | % | 284.1 | % | 37.3x | 30.0 | % | 35.9 | % | 30.9 | % | ||||||||||||||
Donnelly Penman also noted when considering the value of the institution beyondtransaction based on a discounted dividend analysis implied an equity value per share of IBT of $23.42 meant that the explicit forecast period.
Thistotal consideration of $30.29 per share (constituted of 0.6659 shares of IBT stock valued at $23.42, or $15.59, plus $14.70 of cash per share of GCFC) represents a 197.9% premium to the book value and tangible book value per GCFC share (fully diluted) of $15.31; 25.96 times LTM earnings of $1.17 per share (fully diluted); and a 16.4% premium to core deposits as of August 31, 2007. The $23.42 implied per share value for IBT is based on the cash flow during the year following the final
projected year. The steps involved in determining FSB's value utilizing thea discounted future cash flowdividend analysis included the following: (1) the projected
earnings in excess over the amount necessary to maintain a 6.00% equity capital
to asset ratio were added to book charges such as depreciation less any
projected capital expenditures in order to determine future cash flow; (2) the
future cash flows were then converted to a present value equivalent usingof IBT performed by Donnelly Penman. This analysis utilized a discount rate of 16.55%, which11.5% and a terminal value multiples of 1.84 times projected 2011 tangible book value. The discount rate was derived utilizing the Ibbotson and Associates 2007 Yearbook1 on cost of equity buildup, in addition to Donnelly Penman analytical judgment. The terminal multiple was determined fromby reviewing the use ofmultiples for select publicly traded commercial banks in Illinois, Indiana, Michigan, and Ohio, with assets between $750 million and $1.5 billion and a latest twelve month return on average equity between 6% and 12%.
| (1) | Stocks, Bonds, Bills and Inflation — Valuation Edition 2007 Yearbook,© Ibbotson Associates, Inc. 2007 |
Donnelly Penman also noted when considering the Capital Asset
Pricing Model ("CAPM"); (3) the residual value was then calculated by dividing
the projected cash flows for the year 2005 by the capitalization rate. The
capitalization rate not only includes all aspects of the CAPM but also reflects
the long-term income growth prospects of FSB, as well as specific company risk
factors; (4) the present value equivalent of the projected residual value was
calculated using the 16.55% discount rate; and (5) the present value of the cash
flows and the residual value were added together. Thetransaction based on a comparable company analysis implied an equity value per share of FSB's
commonIBT of $23.13 meant that the total consideration of $30.10 per share (constituted of 0.6659 shares of IBT stock resulting from this analysis was $30.73 (assuming 408,237 current
shares outstanding).
AFSI also determined the fair market valuevalued at $23.13, or $15.40, plus $14.70 of FSB utilizing the adjusted
book method as an alternative valuation method. The adjusted book value approach
requirescash per share of GCFC) represents a three-step process. First,196.6% premium to the book value and tangible book value per GCFC share (fully diluted) of $15.31; 25.79 times LTM earnings of $1.17 per share (fully diluted); and a 16.2% premium to core deposits as of August 31, 2007. The $23.13 implied per share value for IBT is determined. This figure
is derived frombased on an average of four indications: assumed price to book multiple of 1.34 times IBT’s book value of $18.74 as of June 30, 2007; assumed price to tangible book multiple of 1.84 times IBT’s tangible book value of $14.46 as of June 30, 2007; and assumed price to LTM earnings per share multiple of 15.9 times IBT’s LTM earnings per share of $1.21 for June 30, 2007. Additionally, the March 31, 2000analysis assumed a premium to core deposits of 8.24% applied to IBT’s core deposits of $592.2 million as of June 30, 2007, which equates to $21.65 per share. The implied multiples are based on a review of the multiples for select publicly traded commercial banks in Illinois, Indiana, Michigan, and Ohio with assets between $750 million and $1.5 billion and a latest twelve month return on average equity between 6% and 12%.
Contribution Analysis. The contribution analysis performed by Donnelly Penman compares the relative contribution of key balance sheet and it representsincome statement measures by IBT and GCFC to the summary
measurepro-forma company.
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Contribution Analysis
| IBT | Greenville | Percent Contribution | ||||||||||||||
| 6/30/2007 | 8/31/2007 | IBT | Greenville | |||||||||||||
| ($’s in thousands) | ||||||||||||||||
| Total Assets | $ | 918,265 | $ | 112,143 | 89.1 | % | 10.9 | % | ||||||||
| Total Loans, net | 599,475 | 90,643 | 86.9 | % | 13.1 | % | ||||||||||
| Total Deposits | 724,157 | 93,745 | 88.5 | % | 11.5 | % | ||||||||||
| Core Deposits | 592,244 | 70,601 | 89.3 | % | 10.7 | % | ||||||||||
| Total Equity | 118,790 | 11,837 | 90.9 | % | 9.1 | % | ||||||||||
| 2007E FYE Net Income | 8,500 | 869 | 90.7 | % | 9.3 | % | ||||||||||
| 2008E FYE Net Income | 9,223 | 834 | 91.7 | % | 8.3 | % | ||||||||||
| 2009E FYE Net Income | 10,006 | 1,047 | 90.5 | % | 9.5 | % | ||||||||||
| Shares Outstanding (Proforma Company) | 6,338,368 | 514,809 | 92.5 | % | 7.5 | % | ||||||||||
Average | 90.0 | % | 10.0 | % | ||||||||||||
The range of shareholders' claims againstcontribution from GCFC ranges from 7.5% to 13.1% in the pro forma company, with an average of 10.0%.
Analysis of Selected Comparable Transactions — GCFC. Donnelly Penman reviewed and compared actual information for 26 completed or pending bank merger transactions announced from a period of January 1, 2004 to July 31, 2007. Furthermore, the transactions listed involved commercial banks located in Illinois, Indiana, Michigan, and Ohio with total assets less than $250 million and a latest twelve month’s return on average equity of between 6% and 12%. These transactions consisted of:
(Buyer/Seller)
| • | National Bancorp, Inc./ Antioch Bancshares, Inc. | |
| • | Community Bancshares, Inc./ Salt Creek Valley Bancshares, Inc. | |
| • | Southern Michigan Bancorp, Inc./ FNB Financial Corporation | |
| • | Standard Bancshares, Inc./ Community Bank of Lemont | |
| • | Firstbank Corporation/ ICNB Financial Corporation | |
| • | Union County Bancshares, Inc./ Jonesboro Bancompany, Inc. | |
| • | Park National Corporation/ Anderson Bank Company | |
| • | Sky Financial Group, Inc./ Wells River Bancorp, Inc. | |
| • | First Banks, Inc./ TEAMCO, Inc. | |
| • | Hometown Community Bancorp, Inc./ Manito Bank Services, Inc. | |
| • | ChoiceOne Financial Services, Inc./ Valley Ridge Financial Corporation | |
| • | Community Bank Shares of Indiana, Inc./ Bancshares, Incorporated | |
| • | First Mid-Illinois Bancshares, Incorporated/ Mansfield Bancorp, Incorporated | |
| • | IBT Bancorp, Inc./ Farwell State Savings Bank | |
| • | German American Bancorp/ Stone City Bancshares, Inc. | |
| • | PSB Bancorp/ Oxford Bank Corporation | |
| • | Firstbank Corporation/ Keystone Financial Corporation | |
| • | Princeton National Bancorp, Inc./ Somonauk FSB Bancorp, Inc. |
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| • | Peoples Community Bancorp, Inc./ American State Corporation | |
| • | Croghan Bancshares, Inc./ Custar State Bank | |
| • | Metropolitan Bank Group, Inc./ Allegiance Community Bank | |
| • | Oak Hill Financial, Inc./ Ripley National Bank | |
| • | Metropolitan Bank Group, Inc./ Citizens Bank Illinois, NA | |
| • | Camco Financial Corporation/ London Financial Corporation | |
| • | Lincoln Bancorp/ First Shares Bancorp, Inc. | |
| • | Harrodsburg First Financial Bancorp, Inc./ Independence Bancorp |
This comparison showed that based on the transaction price calculated above compared with GCFC’s financial condition as of August 31, 2007:
| • | The transaction price to LTM earnings multiple was 37.3 times, compared with the comparable transaction group median of 23.3 times LTM earnings; | |
| • | The transaction price was 284.1% of book value and tangible book value, compared with the comparable transaction group median of 194.0%; | |
| • | The transaction price was 30.0% of total assets, compared with the comparable transaction group median of 18.6%; | |
| • | The transaction price was 35.9% of deposits, compared with the comparable transaction group median of 22.6%; and | |
| • | The transaction price represented a 30.9% premium to core deposits, compared with the comparable transaction group median of 12.0%. |
Donnelly Penman recognized that no transaction reviewed was identical to the Merger and that, accordingly, any analysis of comparable transactions necessarily involves complex considerations and judgments concerning differences in financial and operating characteristics of the parties to the transactions being compared.
Dividend Discount Analysis — GCFC. Donnelly Penman calculated an estimated equity value per share for GCFC based upon the values, discounted to the present, of estimates of projected dividends from the fiscal year ending December 31, 2007 through the fiscal year ending December 31, 2011 and a historicalprojected year 2011 terminal value assuming GCFC continued to operate as an independent company. The valuation date contemplated is August 31, 2007, with the entirety of the 2007 dividends being paid at the end of the year. In conducting its analysis, Donnelly Penman utilized financial estimates provided by and deemed reasonable by GCFC for 2007 through 2011. Donnelly Penman further assumed, which was deemed reasonable by GCFC management, a 25% dividend payout ratio in 2007 and each year thereafter.
This analysis utilized a discount rate of 11.5% and a terminal value multiple of 1.94 times projected 2011 tangible book value. The discount rate was derived utilizing the Ibbotson and Associates 2007 Yearbook1 on cost basis.
Second,of equity buildup, in addition to Donnelly Penman analytical judgment. The terminal multiple was determined by reviewing the multiples for select recent transactions of commercial banks in Illinois, Indiana, Michigan and Ohio with assets less than $250 million and liabilities are restated to their fair market values.latest twelve month return on average equity between 6% and 12%. The adjusted book value calculation considers each major asset and liability account
classification. Finally, additional "off-balance sheet" adjustments are
calculated, if necessary. Theanalysis resulted in an estimated equity value per share of FSB's common stock resulting
from this analysis was $44.30 (assuming 408,237 current shares outstanding.)
AFSI accorded$25.50.
Dividend Discount Analysis — IBT and GCFC Pro Forma. Donnelly Penman calculated an equal weight to each ofestimated equity value per share for GCFC based upon the values, deriveddiscounted to the present, of estimates of projected dividends from the fiscal year ending December 31, 2008 through the fiscal year ending December 31, 2012 and a projected year 2012 terminal value assuming IBT and GCFC were combined. The valuation date contemplated is December 31, 2007. In conducting its analysis, Donnelly Penman utilized financial estimates provided by and deemed reasonable by IBT for 2008 through 2012. Donnelly Penman then combined IBT with the GCFC estimates and factored in order to arrive at an aggregate valuecost
20
savings and other post-transaction adjustments. Donnelly Penman further assumed, which was deemed reasonable by IBT management, a dividend payout of FSB. The weightings were
based on AFSI's review of the financial position, history and recent performance
of FSB. The sum of the weighted values or $37.52$.70 per share equatesin 2008 and rising $.03 per share each year thereafter.
This analysis utilized a discount rate of 11.5% and a terminal value multiple of 1.84 times projected 2012 tangible book value. The discount rate was derived utilizing the Ibbotson and Associates 2007 Yearbook2( on cost of equity buildup, in addition to Donnelly Penman analytical judgment. The terminal multiple was determined by reviewing the fair
marketprice to tangible book value multiples of FSB as of March 31, 2000.
AFSI used the same valuation methods, rates, etc.,commercial banks in analyzing IBT's
common stock as it didIllinois, Indiana, Michigan and Ohio with FSB. Assuming 2,985,084 current shares outstanding,
the discounted future cash flowassets between $750 million and $1.5 billion and latest twelve month return on average equity between 6% and 12%. The analysis resulted in aan estimated equity value per share of $17.39
and$23.43. Donnelly Penman noted this is slightly higher than the adjusted book analysis resulted in aequity value per share derived from the dividend discount analysis performed for IBT stand-alone.
The above analyses were based upon IBT and GCFC senior management’s projections of $19.44. AFSI, as
itfuture performance on a stand alone basis and on a combined basis, which were based upon many factors and assumptions deemed reasonable by IBT and GCFC senior management. This analysis did with FSB, applied an equal weighting to the two values. The sum of the
weighted values equaled $18.42 per share, which equates to the fair market value
of IBT as of March 31, 2000.
Based on the exchange rate of the Agreement, a determined fair market value
of $18.42 per share for IBT's common stock, the transaction would result in a
$39.35 per share value for FSB's shareholders. Therefore, the exchange terms of
the Agreement would be favorable, from a financial standpoint, to FSB
shareholders since the transaction would result in a positive margin of $1.83
per share in comparison to the fair market value of IBT as determined by AFSI.
18
27
AFSI analyzed certain other mergers and acquisitions that have consummated
over the past fourteen months in Michigan as well as the neighboring states of
Ohio and Wisconsin, which involved target financial institutions with assets
under $700 million. AFSI compared the multiple produced by this reorganization
to the mean multiples for the transactions analyzed. See the opinion at Appendix
D for more details.
AFSI's analysis showed that the implied valuations of FSB, applying the
mean transaction multiples described above to FSB's last twelve months earnings
per share and book value per share as of March 31, 2000, were $67.56 per share
and $56.21 per share, respectively. The results produced in this analysis do not purport to be indicative of actual valuevalues or expected value of FSB shares of
common stock.
Summarizingactual future results and did not purport to reflect the contractual relationship between FSB and AFSI,prices at which any securities may trade at the feepresent or at any time in determining AFSI's opinion,the future. Donnelly Penman included this analysis because it is a contractual $17,500 plus outwidely used valuation methodology, but noted that the results of pocket
expenses.such methodology are highly dependent upon the numerous assumptions that must be made, including earnings growth rates, dividend payout rates, terminal values and discount rates.
For its financial advisory services provided to GCFC, Donnelly Penman has been paid ordinary and customary fees at or before the closing of the merger. In addition, FSB alsoGCFC has agreed to indemnify AFSIDonnelly Penman against various liabilities, including any which may arise under the federal securities laws.
Interests of Directors and Executive Officers In the Merger
General. Some members of GCFC’s board of directors and management may be deemed to have interests in the merger that are in addition to their interests as shareholders generally. The boards of directors of each of IBT and GCFC were aware of these interests and considered them, together with the other matters described in this Proxy Statement-Prospectus, in adopting the Merger Agreement and approving the merger.
Arrangements with Gregg Peters, Jae Evans, James Beckman and Kathy Korson. Concurrently with the closing of the merger, IBT will assume and perform the Amended and Re-Stated Management Continuity Agreements currently in effect for Gregg Peters, Jae Evans, James Beckman and Kathy Korson. In addition: (1) Mr. Jae Evans (president and chief executive officer of GCB) shall agree to serve as President and Chief Executive Officer of the Greenville division of Isabella; (2) Mr. James Beckman (Senior Vice President-Commercial Loans) shall agree to serve as Senior Vice President-Commercial Loans of the Greenville division of Isabella; and (3) Ms. Kathy Korson (Vice President-Mortgage Loans) shall agree to serve as Vice President-Mortgage Loans of the Greenville division of Isabella.
Arrangement with Gregg Peters. Concurrently with the closing of the merger, Mr. Gregg Peters (Chief Financial Officer) shall agree to serve as an assistant vice president of IBT.
Appointment of Director. The Merger Agreement provides that the effective time of the merger Mr. Ted Kortes, a member of the GCFC Board of Directors, shall be appointed to the Board of Directors of IBT.
Current GCB Board. Upon completion of the merger, the incumbent directors of GCB will serve on a regional advisory board for the Greenville division of Isabella and shall receive the same board member compensation as provided by GCB prior to the merger.
Indemnification. Pursuant to the Merger Agreement, IBT has agreed that from and after the effective time of the merger through the third anniversary thereof, it will indemnify and hold harmless each present and former director, officer and employee of GCFC against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation (each a “Claim”), arising in whole or in part out of, the fact that such person is or
((2) Stocks, Bonds, Bills and Inflation — Valuation Edition 2007 Yearbook,© Ibbotson Associates, Inc. 2007
21
was a director, officer, employee, fiduciary or agent of GCFC or its subsidiary or is or was serving at the request of GCFC or its subsidiary in such a role of another corporation, partnership, joint venture, trust or other enterprise if such Claim pertains to any matters existing or occurring at or before the effective time of the merger to the fullest extent to which said individuals are entitled under applicable law.
Management and Operations After the Merger
After the merger is completed, the directors and officers of IBT who were in office prior to the effective time of the merger will continue to serve as the directors and officers of IBT for the term for which they were elected or appointed, subject to IBT’s Articles of Incorporation and Bylaws and in accordance with applicable law. It also is contemplated that at or after the effective time of the merger, GCB will be merged into Isabella and the resulting bank will operate under the name “Isabella Bank and Trust.” In addition, certain officers of GCB will become officers of Isabella’s Greenville division and one GCB officer will become an officer of IBT. One director of GCFC will become a director of IBT. See “Interests of Directors and Executive Officers in the Merger” beginning on page 21.
Upon completion of the merger, Isabella will form a regional advisory board for the Greenville division of Isabella consisting of persons livingand/or working in the trade area currently served by GCB. The regional board will initially be comprised of the directors of GCB immediately preceding the merger. It is contemplated that within a reasonable time after the merger, a member of the IBT board will be added to the regional board.
The Articles of Incorporation and Bylaws of IBT will be the same as the Articles of Incorporation and Bylaws of the surviving entity.
Effective Time of Merger
The parties expect that the merger will be effective during the fourth quarter of 2007 or as soon as possible after the receipt of all regulatory and shareholder approvals, the expiration of all regulatory waiting periods and after the satisfaction of all conditions to the merger set forth in the Merger Agreement. Unless GCFC and IBT agree otherwise, the effective time of the merger will be contemporaneous with the closing upon filing of the certificate of merger and any other required documents with the state of Michigan, unless a later date is specified in such certificate of merger, in which case such later date will be the effective time of the merger.
Distribution of IBT Common Stock
At the effective time of the merger, GCFC’s shareholders will cease to own shares of GCFC. Subject to certain adjustments pursuant to the Merger Agreement, each share of GCFC common stock issued and outstanding immediately prior to the completion of the merger will automatically be converted into the right to receive .6659 of a share of IBT common stock and $14.70 in cash.
At the effective time of the merger, IBT will deliver to its exchange agent, Isabella Bank and Trust, the number of shares of IBT common stock and cash issuable in the merger. Within five business days after the closing of the merger, the exchange agent will send you and other former GCFC shareholders transmittal materials to be used to exchange the old GCFC stock certificates. The transmittal materials will contain instructions with respect to the surrender of old GCFC stock certificates. After the effective time of the merger, and once the exchange agent receives your old GCFC stock certificates, the exchange agent will register the shares of IBT common stock issuable to you in the name and at the address appearing on GCFC’s stock records as of the time of the merger or such other name or address as you request in the transmittal materials. The exchange agent will not be required to register the shares in that manner until it has received all of your old GCFC stock certificates (or an affidavit of loss for such certificate or certificates and an indemnity bond), together with properly executed transmittal materials. Such old GCFC stock certificates, transmittal materials, and affidavits must be in a form and condition reasonably acceptable to IBT and the exchange agent. The exchange agent will have discretion to determine reasonable rules and procedures relating to the exchange (or lack thereof) of old GCFC stock certificates and the payment of the per share merger consideration.
22
Conduct of Business Pending the Merger
The Merger Agreement contains various restrictions on the operations of GCFC before the effective time of the merger. In general, the Merger Agreement obligates GCFC to conduct its business in the usual, regular and ordinary course of business and to use reasonable efforts to preserve its business organization and assets and maintain its rights and franchises. In addition, GCFC has agreed that, except as expressly contemplated by the Merger Agreement or specified in a schedule to the Merger Agreement, without the prior written consent of IBT, it will not, among other things:
| • | change or waive any provision of its Articles of Incorporation or Bylaws, except as required by law; | |
| • | change the number of authorized or issued shares of its capital stock; | |
| • | enter into, amend in any material respect or terminate any material contract or agreement except in the ordinary course of business; | |
| • | make application for the opening or closing of any, or open or close any, branch or automated banking facility, except as required by regulators; | |
| • | change compensation or benefits of its employees, except for certain increases or bonuses subject to limits specified in the Merger Agreement; | |
| • | enter into or materially modify any employee benefit plans relating to any director, officer or employee, except as may be required by law; | |
| • | merge or consolidate with any other corporation or sell or lease all or any substantial portion of GCFC’s or GCB’s assets; | |
| • | sell or dispose of the capital stock of GCFC or otherwise dispose of any assets other than in the ordinary course of business; | |
| • | take any action that would cause any of the representations and warranties contained in the Merger Agreement to be untrue or would fail to cause any conditions precedent to be satisfied; | |
| • | change any method, practice or principle of accounting except as required by generally accepted accounting principles or any bank regulator; | |
| • | waive, release, grant or transfer any material rights of value or modify in any material respect any existing material agreement or indebtedness, other than in the ordinary course of business; | |
| • | purchase equity securities, or securities for its investment portfolio inconsistent with current investment policy; | |
| • | enter into, review, extend or modify any affiliate transaction (other than a deposit transaction) other than pursuant to existing insider loan policies; | |
| • | enter into any futures contract, option, interest rate caps, floors or interest rate exchange agreement for purposes of hedging the exposure of interest-earning assets and interest-bearing liabilities to changes in interest rates, except in the ordinary course of business; | |
| • | take any action that would give rise to a payment to any individual under any employment agreement; | |
| • | change policies with respect to extension of credit, establishment of reserves, investments, asset/liability management or other material banking policies; | |
| • | take any action that would result in acceleration of the right to payment under any benefit plan; | |
| • | sell any participation interest in any loan; | |
| • | enter into any lease or contract other than in the normal course of business; | |
| • | pay, discharge, settle or compromise any claim, action, litigation, arbitration or proceeding in an amount exceeding $10,000; |
23
| • | incur any capital expenditures in excess of $25,000 individually or in the aggregate other than pursuant to binding commitments existing on the date of the Merger Agreement or necessary to maintain existing assets in good repair; | |
| • | make any new loan or other credit facility commitment to any borrower or group of affiliated borrowers in excess of $500,000 for a construction loan, $1,000,000 for a commercial real estate loan, $250,000 for a commercial business loan or $500,000 for a residential loan, except for prior commitments previously disclosed to IBT and for any loan in excess of such amount to which IBT does not object within 24 hours after being notified of the intent to make the loan; | |
| • | sell or dispose of any assets or incur any liability other than in the ordinary course of business consistent with past practices and policies; and | |
| • | increase the number of directors, elect or appoint any person to an executive office, or hire any person to perform the services of an executive officer, except to reelect incumbent officers and directors at annual meetings. |
In addition to these covenants, the Merger Agreement contains various other customary covenants, including, among other things, access to information and each party’s efforts to cause its representations and warranties to be true and correct on the closing date.
Representations and Warranties
The Merger Agreement contains a number of customary representations and warranties by IBT and GCFC regarding aspects of their respective businesses, financial condition, structure and other facts pertinent to the merger that are customary for a transaction of this kind. They include, among other things:
| • | the organization, existence, and corporate power and authority, and capitalization of each of the companies; | |
| • | the absence of conflicts between the Merger Agreement and applicable laws and other documents, contracts and agreements; | |
| • | the absence of any development materially adverse to the companies; | |
| • | the obtaining of necessary consents; | |
| • | the absence of adverse material litigation; | |
| • | the accuracy of reports and financial statements of each party; | |
| • | the ownership of their respective material assets and properties; | |
| • | the existence, performance and legal effect of certain contracts; | |
| • | loan portfolio matters; | |
| • | compliance with applicable laws; | |
| • | the filing of tax returns, payment of taxes and other tax matters by either party; | |
| • | labor and employee benefit matters; and | |
| • | compliance with applicable environmental laws by GCFC. |
All representations, warranties and covenants of the parties, other than the covenants in specified sections which relate to continuing matters, terminate upon the merger.
24
Conditions to the Merger
Mutual Conditions to Close. The respective obligations of IBT and GCFC to complete the merger are subject to various conditions prior to the merger. The conditions include the following:
| • | Each of the FRB and OFIS approves or provides its non-objection of the merger and the Subsidiary Bank Merger and all statutory waiting periods expire; | |
| • | approval of the Merger Agreement by the affirmative vote of a majority of the issued and outstanding shares of GCFC; | |
| • | the absence of any litigation, statute, law, regulation, order, decree or injunction by which the merger is restrained or enjoined; | |
| • | the registration statement of which this Proxy Statement-Prospectus is a part must have been declared effective by the SEC and must not be subject to a stop order or threatened stop order; | |
| • | IBT and GCFC must have received a tax opinion from Foster, Swift, Collins & Smith, P.C. to the effect that the merger will qualify as a reorganization; and | |
| • | None of the regulatory approvals shall impose any term, condition or requirement that IBT in good faith reasonably determines would so materially adversely affect the transaction as to render inadvisable in the reasonable good faith judgment of IBT, the consummation of the merger. |
IBT’s Conditions to Close. In addition to the mutual conditions to close described above, IBT’s obligation to complete the merger is subject to fulfillment of additional conditions, including the following:
| • | the representations and warranties made by GCFC in the Merger Agreement must be true and correct as of the closing date or to a specifically related earlier date; | |
| • | GCFC must have performed in all material respects all of the agreements, obligations and covenants made in the Merger Agreement to be completed at or before the effective time; | |
| • | all requisite material permits, authorizations, consents, waivers, clearances or approvals have been obtained; | |
| • | the holders of no more than 10% of GCFC’s common stock shall have indicated their intention to seek dissenters’ rights of appraisal; | |
| • | IBT must have received an opinion from Kreis, Enderle, Callander & Hudgins, P.C. (legal counsel for GCFC) to the effect that GCFC is in good standing, the merger has been approved by GCFC’s Board of Directors and shareholders, and the Merger Agreement is binding on GCFC; | |
| • | IBT must have received a fairness opinion from Austin Associates, LLC to the effect that the terms of the merger are fair to IBT’s shareholders from a financial point of view; | |
| • | IBT shall have received a certificate dated as of closing and signed by GCFC’s secretary and transfer agent concerning outstanding GCFC shares and shares issuable after that date; and | |
| • | IBT must have received a certification by GCFC’s Chief Executive Officer and Chief Financial Officer concerning GCFC’s financial statements. |
GCFC’s Conditions to Close. In addition to the mutual conditions to close described above, GCFC’s obligation to complete the merger is subject to the fulfillment of additional conditions, including the following:
| • | the representations and warranties made by IBT in the Merger Agreement must be true and correct as of the closing date or to a specifically related earlier date; | |
| • | IBT must have performed in all material respects all of the agreements, obligations and covenants made in the Merger Agreement to be completed at or before the effective time; | |
| • | all requisite material permits, authorizations, consents, waivers, clearances or approvals have been obtained; |
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| • | GCFC must have received an opinion from Foster, Swift, Collins & Smith, P.C. (legal counsel for IBT) to the effect that IBT is in good standing, the Merger Agreement has been duly executed by IBT and is binding on IBT; | |
| • | IBT shall have delivered the merger consideration (IBT stock and cash) to the exchange agent; and | |
| • | GCFC must have received a fairness opinion from Donnelly Penman & Partners to the effect that the terms of the merger are fair to GCFC’s shareholders from a financial point of view. |
Regulatory Approvals
IBT and GCFC have agreed to use all reasonable efforts to obtain all permits, consents, approvals and authorizations of all third parties and governmental entities that are necessary or advisable to consummate the merger. The merger is subject to prior approval by the FRB under the BHC Act. The Subsidiary Bank Merger is subject to prior approval by the FRB under the Bank Merger Act, and subject to prior approval by OFIS under the Michigan Banking Code of 1999. The FRB and OFIS (collectively, the “Agencies”) are required under the respective acts to consider the financial and management resources including the competence, experience and integrity of the officers, directors and principal shareholders, and future prospects of the institution and the convenience and needs of the communities to be served. The Agencies have performed their review and have given approval for the mergers.
Other Requisite Approvals and Consents. Approvals or notices are also required from or to OFIS and may be required from or to certain other regulatory agencies.
Status of Regulatory Approvals. IBT has received the Letter, dated November 16, 2007, approving the Application for the merger from the FRB. IBT has received the Order of the Commissioner of OFIS, dated October 30, 2007, approving the application for the subsidiary bank merger. No conditions or requirements were placed on the approvals by either the FRB or OFIS that affect the advisability or consummation of the mergers.
We will be able to consummate the merger upon approval by the GCFC shareholders, but not earlier than 15 days from the date of the FRB Letter approving the merger. The statutory 30 day waiting period may be, and has here been, reduced to 15 days upon approval by the FRB and the Department of Justice.
No Solicitation
Until the merger is completed or the Merger Agreement is terminated, GCFC has agreed that it, its officers, directors shareholders, employees, representatives or agents will not:
| • | initiate, solicit or knowingly encourage any inquiries or the making of any acquisition proposal; | |
| • | enter into, maintain or continue any discussions or negotiations regarding any acquisition proposals; or | |
| • | agree to or endorse any other acquisition proposal. |
GCFC may, however, furnish information regarding GCFC to, or enter into and agentsengage in discussion with, any person or entity in response to an unsolicited proposal by the person or entity relating to an acquisition proposal if:
| • | GCFC’s Board of Directors determines in good faith that such proposal, if consummated, is reasonably likely to result in a transaction more favorable from a financial point-of-view to GCFC’s shareholders than the IBT merger; | |
| • | GCFC’s Board of Directors determines in good faith, after consultation with its legal counsel and financial advisors, that the action is required for GCFC’s directors to comply with their fiduciary obligations under applicable law; and | |
| • | GCFC promptly notifies IBT of such inquiries, proposals or offers, the material terms of such inquiries, proposals or offers and the identity of the person making such inquiry, proposal or offer. |
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Employee Benefit Matters
From and after the effective time of the merger until no later than January 1, 2009, IBT will continue the defined contribution plan of GCFC in effect immediately preceding the effective time. No later than January 1, 2009, or as required by the Employee Retirement Income Security Act of 1974, as amended, IBT will cause the employee defined contribution plan of IBT to be adopted by Isabella for all GCFC employees who were employed as of itsthe effective time expenses,of the merger. IBT will treat the prior service of each GCFC employee with GCFC as service with IBT for purposes of vesting and any liability incurredage or period of service requirements for participation with respect to IBT’s employee defined contribution plan. In addition, IBT will, from and after the effective time of the merger, continue in effect any material welfare benefit plan, life insurance, group health plan or disability plan in which the employees of GCFC participated immediately prior to the effective time (or an arrangement providing substantially similar benefits).
Termination; Amendment; Waiver
The Merger Agreement may be terminated prior to the closing, before or after approval by GCFC’s shareholders, as follows:
| • | by mutual written agreement of IBT and GCFC; | |
| • | by IBT or GCFC if GCFC shareholders do not approve the Merger Agreement and merger; | |
| • | by a non-breaching party if the other party (1) materially breaches any covenants or undertakings contained in the Merger Agreement or (2) materially breaches any representations or warranties contained in the Merger Agreement, in each case if such breach by its nature cannot be cured prior to February 1, 2008 or has not been cured within thirty days after written notice from the terminating party; | |
| • | by either party if any required regulatory approvals for consummation of the merger is not obtained; | |
| • | by either party if the closing does not occur by February 1, 2008; | |
| • | by either party if any condition to closing cannot be satisfied or fulfilled by February 1, 2008; | |
| • | by IBT if GCFC shall have received a “superior proposal” and GCFC Board of Directors shall have entered into an acquisition agreement with respect to a superior proposal and terminates the Merger Agreement or fails to recommend that the shareholders of GCFC approve the Merger Agreement or has withdrawn, modified or changed such recommendation in a manner which is adverse to IBT; or | |
| • | by GCFC in order to accept a “superior proposal,” which has been received and considered by GCFC in compliance with the applicable terms of the Merger Agreement, provided that GCFC has notified IBT at least five business days in advance of any such action and given IBT the opportunity during such period, if IBT elects in its sole discretion, to negotiate amendments to the Merger Agreement which would permit GCFC to proceed with the proposed merger with IBT. |
Termination Fee
If the Merger Agreement is terminated by either IBT or GCFC on account of any willful breach by the other party of any of the representations or warranties set forth in the Merger Agreement or any willful breach by the other party of any of the agreements or covenants set forth in the Merger Agreement, the nonbreaching party shall be entitled to liquidated damages from the breaching party in the amount of $850,000.
Additionally, GCFC must pay to IBT a termination fee in the amount of $850,000 if GCFC has terminated the Merger Agreement because it has entered into an acquisition agreement with respect to a superior proposal (as defined in the Merger Agreement) from a third party.
Fees and Expenses
Each party will each pay its own costs and expenses in connection with the Merger Agreement and the transactions contemplated thereby.
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Material United States Federal Income Tax Consequences Of The Merger
The following general discussion sets forth the anticipated material United States federal income tax consequences of the merger to U.S. holders (as defined below) of GCFC common stock that exchange their shares of GCFC common stock for shares of IBT common stock and cash in the merger. This discussion does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction, or under any United States federal laws other than those pertaining to income tax. This discussion is based upon the Code, the regulations promulgated under the Code and court and administrative rulings and decisions in effect on the date of this document. These laws may change, possibly retroactively, and any change could affect the continuing validity of this discussion.
This discussion addresses only those GCFC shareholders that hold their shares of GCFC common stock as capital assets within the meaning of Section 1221 of the Code. Further, this discussion does not address all aspects of United States federal income taxation that may be relevant to you in light of your particular circumstances or that may be applicable to you if you are subject to special treatment under the United States federal income tax laws, including if you are:
| • | a financial institution; | |
| • | a tax-exempt organization; | |
| • | an S corporation or other pass-through entity (or an investor in an S corporation or other pass-through entity); | |
| • | an insurance company; | |
| • | a mutual fund; | |
| • | a dealer in stocks and securities, or foreign currencies; | |
| • | a trader in securities that elects the mark-to-market method of accounting for your securities; | |
| • | a holder of GCFC common stock subject to the alternative minimum tax provisions of the Code; | |
| • | a holder of GCFC common stock that received GCFC common stock through the exercise of an employee stock option, through a tax qualified retirement plan or otherwise as compensation; | |
| • | a person that is not a U.S. holder (as defined below); | |
| • | a person that has a functional currency other than the U.S. dollar; or | |
| • | a holder of GCFC common stock that holds GCFC common stock as part of a hedge, straddle, constructive sale or conversion transaction. |
DETERMINING THE ACTUAL TAX CONSEQUENCES OF THE MERGER TO YOU MAY BE COMPLEX. THEY WILL DEPEND ON YOUR SPECIFIC SITUATION AND ON FACTORS THAT ARE NOT WITHIN OUR CONTROL. YOU SHOULD CONSULT WITH YOUR OWN TAX ADVISOR AS TO THE TAX CONSEQUENCES OF THE MERGER IN YOUR PARTICULAR CIRCUMSTANCES, INCLUDING THE APPLICABILITY AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND OF CHANGES IN THOSE LAWS.
For purposes of this discussion, the term “U.S. holder” means a beneficial owner of GCFC common stock that is (i) an individual citizen or resident of the United States, (ii) a corporation or partnership organized in or under the laws of the United States or any state thereof or the District of Columbia, (iii) a trust, if a United States court can exercise primary supervision over it, and one or more United States persons have authority to control substantial decisions that affect it, or (iv) an estate subject to United States income tax on its worldwide income.
Tax Consequences of the Merger Generally. The parties intend for the merger to qualify as a resultreorganization for United States federal income tax purposes. The consummation of AFSI's proposed engagementthe merger is conditioned on the delivery, by meansFoster, Swift, Collins & Smith, P.C., of legal action, administrative proceedings or threat thereof, unless such action,
pending or threat thereof is caused by AFSI's own unlawful conduct, breach of
duty or negligence duringan opinion to IBT and to GCFC to the course of performing AFSI's services.
AFSI, in rendering its opinion, has assumedeffect that (1) the transactionmerger will be a tax-free reorganization within the meaning of Section 368(a) of the Code, and (2) GCFC shareholders who exchange their GCFC common stock held as a capital asset for a combination of IBT common stock and cash will (if the
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receipt of cash is not treated as essentially equivalent to a dividend) recognize gain, but not loss, in an amount equal to the lesser of (A) the amount of cash received in the merger, or (B) the amount of gain realized in the merger (i.e., the excess of the sum of the amount of cash and the fair market value of the GCFC common stock received in the merger over such shareholder’s adjusted tax basis in its shares of GCFC common stock surrendered in the merger).
This opinion will be based on representation letters provided by IBT and GCFC and on customary factual assumptions, all of which must continue to be true and accurate in all material respects as of the effective time. None of the opinions described above will be binding on the Internal Revenue Service. IBT and GCFC have not sought and will not seek any ruling from the Internal Revenue Service regarding any matters relating to the merger, and as a result, there can be no assurance that the Internal Revenue Service will not disagree with no material adverseor challenge any of the conclusions described herein.
Backup Withholding. If you are a noncorporate holder of GCFC common stock, you may be subject to information reporting and backup withholding at a rate of 28% if the cash payment is $20 or more. You generally will not be subject to backup withholding, however, if you:
| • | furnish a correct taxpayer identification number and certify that you are not subject to backup withholding on the substitute FormW-9 or successor form included in the election form/letter of transmittal you will receive; or | |
| • | are otherwise exempt from backup withholding. |
Any amounts withheld under the backup withholding rules will generally be allowed as a refund or credit against your United States federal income tax liability, provided you timely furnish the required information to the Internal Revenue Service.
Reporting Requirements. If you receive shares of IBT common stock and cash as a result of the merger, you will be required to retain records pertaining to the merger and you will be required to file with your United States federal income tax return for the year in which the merger takes place a statement setting forth certain facts relating to the merger.
Dissenting Shareholders. Holders of GCFC common stock who dissent with respect to the merger as discussed in “Dissenters’ Rights” and who receive cash in respect of their shares of GCFC common stock will recognize capital gain or loss equal to the difference between the amount of cash received and their aggregate tax basis in their GCFC shares.
Holding IBT Common Stock. The following discussion describes the U.S. federal income tax consequences to anya holder of IBT common stockafter the merger. Any cash distribution paid by IBT out of earnings and profits, as determined under U.S. federal income tax law, will be subject to tax as ordinary dividend income and will be includible in your gross income in accordance with your method of accounting. See below under “Tax Rate Changes” for information regarding the rate of tax on dividends. Cash distributions paid by IBT in excess of its earnings and profits will be treated as (i) a tax-free return of capital to the extent of your adjusted basis in your IBT common stock (reducing such adjusted basis, but not below zero), and (ii) thereafter as gain from the sale or exchange of a capital asset.
Upon the sale, exchange or other disposition of IBT common stock, you will generally recognize gain or loss equal to the difference between the amount realized upon the disposition and your adjusted tax basis in the shares of IBT common stock surrendered. Any such gain or loss generally will be long-term capital gain or loss if your holding period with respect to the IBT common stock surrendered is more than one year at the time of the disposition. For the rate of tax on capital gains, see below under “Tax Rate Changes.”
Tax Rate Changes. Under the Jobs and Growth Tax Relief Reconciliation Act of 2003, the individual tax rates on long-term capital gains and dividend income have been reduced. The top individual rate for long-term capital gains from sales or exchanges on or after May 6, 2003 is 15%. The top individual rate for “qualified dividend income” received after December 31, 2002 is also 15%. To be considered “qualified dividend income” to a particular holder, the holder must have held the common stock for more than 60 days during the 120 day period beginning 60 days before the ex-dividend period as measured under Code Section 246(a). Dividend income that is
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not qualified dividend income will be taxed at ordinary income rates. You are urged to consult your tax advisor to determine whether a dividend, if any, would be treated as qualified dividend income.
Resale of IBT Common Stock
All shares of IBT common stock received by GCFC shareholders in the merger will be registered under the Securities Act of 1933 and will be freely transferable under the Securities Act of 1933, except that shares of IBT common stock received by persons who are deemed to be “affiliates,” as the term is defined under the Securities Act of 1933, of IBT or GCFC at the time of the special meeting may be resold by them only in transactions permitted by the resale provisions of Rule 145 under the Securities Act of 1933 or as otherwise permitted under the Securities Act of 1933. Persons who may be deemed to be affiliates of IBT or GCFC generally include individuals or entities that control, are controlled by, or are under common control with, the party and may include certain officers and directors of such party as well as principal shareholders of such party. Affiliates of both parties involved.have previously been notified of their status. The Merger Agreement requires GCFC to use reasonable efforts to receive an affiliate letter from each person who is an affiliate of GCFC.
This Proxy Statement-Prospectus does not cover resales of IBT common stock received by any person who may be deemed to be an affiliate of GCFC or IBT.
Accounting Treatment
In accordance with accounting principles generally accepted in the United States of America, the merger will be accounted for using the purchase method. As a result, the recorded assets and liabilities of IBT will be carried forward at their recorded amounts, the historical operating results will be unchanged for the prior periods being reported on and the assets and liabilities from the acquisition of GCFC will be adjusted to fair value at the date of the merger. In addition, AFSI has assumedall identified intangibles, which presently consists of a core deposit intangible, will be recorded at fair value and included as part of the net assets acquired. To the extent that the purchase price payable to former GCFC shareholders exceeds the fair value of the net assets including identifiable intangibles of GCFC at the merger date, that amount will be reported as goodwill. In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” goodwill will not be amortized but will be evaluated for impairment at least annually. Identified intangibles will be amortized over their estimated lives. Further, the purchase accounting method results in the courseoperating results of obtaining
the necessary regulatory approvals for the transaction, no condition will be
imposed upon FSB or IBT that will have a materially adverse impact on the
contemplated benefits of the proposed transaction to FSB and IBT and their
shareholders.
Based upon AFSI's analysis and subject to the qualifications described in
its fairness opinion, considering all circumstances known to AFSI and based upon
other matters considered relevant, AFSI believes that as of May 26, 2000, the
terms of the Agreement from a financial point of view are fair to FSB and its
shareholders.
ADDITIONAL INTERESTS OF FSB MANAGEMENT
The President of FSB has an interestGCFC being included in the Merger that is in addition to
his interests as a shareholderconsolidated income of FSB generally. This additional interest is
described below. FSB's board of directors was aware of this additional interest
when it approved the Merger Agreement.
Employment Agreement
Farmers Bank and Herbert C. Wybenga will enter into an employment agreement
that will become effective on the day immediately following the Merger's closing
date. Mr. Wybenga is currently FSB's President and Farmers Bank's President and
CEO.
For a termIBT beginning on the day immediately following the day the Merger
closes and ending three (3) years later, Farmers Bank will employ Mr. Wybenga as
a regular employee in the position of President and CEO. Mr. Wybenga will
receive an annual salary of $100,000.
Under the terms of his employment agreement, Mr. Wybenga is subject to
non-competition restrictions while employed by Farmers Bank and for a period of
two years from the date he ceases to be an employee of Farmers Bank.
DISSENTERS' RIGHTS
consummation of the merger.
Dissenters’ Rights
Each holder of FSBGCFC common stock has the right to dissent from the Mergermerger and receive the fair value of such shares of FSBGCFC common stock in cash if the shareholder follows the procedures required underSections 450.761-450.774 of the MBCA set forth in Appendix B,C., the material provisions of which are summarized below. Under the MBCA, a holder of FSBGCFC common stock may dissent and IBT will pay to such shareholder the fair value of such shareholder'sshareholder’s shares of FSBGCFC common stock if such shareholder: 19
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(1) files with FSBGCFC before the vote is taken, written notice of intent to demand payment for his or her shares and (2) does not vote in favor of the Merger.
merger.
If the Mergermerger is approved at the FSBGCFC special meeting, IBT will deliver written dissenters'dissenters’ notice to those FSBGCFC shareholders who complied with their notice requirements. This dissenters'dissenters’ notice will be sent no later than ten days after the Closing Date. The dissenters'dissenters’ notice will (1) state where payment demand must be sent and when certificates must be deposited; (2) supply a form for demanding payment that includes the date of the first announcement to the news media or to shareholders of the terms of the Mergermerger and requires that the shareholder certify whether he or she acquired beneficial ownership of the shares before such date; and (3) set a date by which the payment demand must be received, which date may be not less than thirty nor more than sixty days after the date the dissenters'dissenters’ notice was delivered to shareholders.
A shareholder sent a dissenters'dissenters’ notice must demand payment, certify whether he or she acquired beneficial ownership of the FSBGCFC common stock before the date required to be set forth in the dissenters'dissenters’ notice and deposit his or her certificates in accordance with the terms of the notice. FSBGCFC shareholders who do not demand payment or
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deposit certificates within the time set forth in the dissenters'dissenters’ notice lose all rights to payment for their FSBGCFC common stock.
Except for "after-acquired"“after-acquired” shares, which are discussed below, at the Closing Date or upon receipt of a payment demand, FSBIBT will pay each dissenter the amount IBT estimates to be the fair market value of the shares plus accrued interest. The payment will be accompanied by FSB'sGCFC’s most recent balance sheet, income statement, and statement of changes in shareholder equity plus the latest available interim financial statements, as well as IBT'sIBT’s estimate of the fair value of the FSBGCFC Common Stock, an explanation of how interest was calculated, and a statement of the dissenter'sdissenter’s right to make a supplemental demand for payment if dissatisfied with the payment made.
FSB
GCFC common stock acquired after the date of the first announcement to the news media or FSBGCFC shareholders of the terms of the Mergermerger still qualify for dissenters'dissenters’ rights, but the holder of the these shares may receive different and somewhat less favorable treatment than those shares acquired before such announcements. IBT, at its election, may withhold payment from a dissenter who holds "after-acquired"“after-acquired” shares, at a time when payment to other shareholders is required. Should IBT elect to withhold payment, IBT, after the Closing Date, will estimate the fair value of the dissenter'sdissenter’s shares plus interest and offer to pay this amount to each dissenter who agrees to accept it in full satisfaction. Along with its offer, IBT will send a statement of its estimate of the fair value of the shares, an explanation of how interest was calculated, and a statement of the dissenter'sdissenter’s right to make a supplemental demand for payment if dissatisfied with the offer.
In the event a shareholder is dissatisfied with the payment received, or with the amount offered in the case of after-acquired shares, he or she must notify IBT in writing of his or her own estimate of the fair value of the shares and interest due and make a supplemental demand for payment of the amount he or she believes to be owing. This right is waived unless the dissenter makes his or her demand within thirty days after IBT made or offered payment for his or her shares.
If a supplemental demand remains unsettled, IBT shall commence a proceeding within sixty days after receiving the demand, and petition the circuit court to determine the fair value and accrued interest. Should IBT fail to do so it must pay each dissenter whose demand remains unsettled, the amount demanded. Each dissenter made a party to the proceeding is entitled to judgment for the amount by which the court determined fair value of the shares plus interest exceeds the amount paid by IBT or, in the case of after-acquired shares for which payment was not made, the total amount of the fair value plus interest.
A PROXY OR VOTE AGAINST THE MERGER WILL NOT, BY ITSELF, BE REGARDED AS A WRITTEN OBJECTION FOR PURPOSES OF ASSERTING DISSENTERS'DISSENTERS’ RIGHTS.
THE ABOVE SUMMARY OF THE PROVISIONS REGARDING DISSENTERS'DISSENTERS’ RIGHTS UNDER THE MBCA IS QUALIFIED IN ITS ENTIRETY BY THE TEXT OF
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SECTIONS 450.761-450.774 OF THE MBCA. THE TEXT OFSECTIONS 450.761-450.774 IS ATTACHED HERETO AS APPENDIX B.
C.
SHAREHOLDERS OF FSBGCFC INTENDING TO EXERCISE DISSENTERS'DISSENTERS’ RIGHTS ARE URGED TO SEEK THE ADVICE OF COUNSEL. FAILURE TO COMPLY WITH ALL REQUIREMENTS OFSECTIONS 450.761-450.774 OF THE MBCA WILL RESULT IN THE LOSS OF DISSENTERS'DISSENTERS’ RIGHTS.
EXCHANGE OF CERTIFICATES
The conversion
Description of FSB Common Stock into Business
IBT Common Stock will occur
automatically at the Effective Time.
On the next business day after the Effective Time,is a community-based financial holding company headquartered in Mt. Pleasant, Michigan. IBT, through its wholly owned banking subsidiary, Isabella Bank and Trust in its capacity as Exchange Agent (the "Exchange Agent"(“Isabella”), will sendprovides a wide range of services, including traditional banking services, personal and corporate trust services and residential mortgage services. IBT’s principal operating subsidiary is Isabella, which is chartered as a Michigan state bank. Isabella operates in one business segment, community banking, providing a full range of services to each FSB
shareholderindividual and corporate customers. Isabella is a formcommunity-oriented, full-service commercial bank, providing traditional banking services to individuals, small-to-medium-sized businesses, governmental and public entities and not-for-profit organizations.
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Isabella operates 21 banking offices in the Michigan counties of letterIsabella, Montcalm, Mecosta, Clare, Gratiot and Saginaw.
IBT Title and Insurance Agency, Inc., a subsidiary of transmittal (which will specifyIBT, is a Michigan licensed title insurance agency that delivery
will be effected,provides title insurance, abstract searches and riskcloses loans in the Michigan counties of lossIsabella, Montcalm, Clare, Mecosta, Roscommon and title to certificatesNewaygo.
IBT is a Michigan corporation. IBT was founded in 1988 under the BHC Act as a bank holding company for sharesIsabella.
Certain Beneficial Owners of FSB
common stock will pass, only upon proper delivery of such certificatesIBT Common Stock
The following table sets forth, to the Exchange Agent)best knowledge and instructions for use in effectingbelief of IBT, certain information regarding the exchange of the
certificates for sharesbeneficial ownership of IBT common stock as of September 30, 2007, by (i) each director and cash in lieucertain named officers of fractional
shares.
FSB SHAREHOLDERS SHOULD NOT FORWARD FSB STOCK CERTIFICATES TO THE EXCHANGE
AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL FORMS. FSB SHAREHOLDERS SHOULD NOT
RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
UntilIBT; and (ii) all of IBT’s directors and officers as a group. There are no persons known to IBT to be the certificates representing FSB common stock are surrendered for
exchange after the consummationbeneficial owner of more than 5% of the Merger, holdersIBT common stock.
| Amount and Nature | ||||||||||||||||
| of Beneficial Ownership | ||||||||||||||||
| Sole Voting and | Shared Voting and | Total Beneficial | Percentage of Common Stock | |||||||||||||
Name of Owner | Investment Powers | Investment Powers | Ownership | Outstanding | ||||||||||||
Directors and Executive Officers | ||||||||||||||||
| Dennis P. Angner* | 14,016 | — | 14,016 | 0.22 | % | |||||||||||
| Richard J. Barz* | 16,637 | — | 16,637 | 0.26 | % | |||||||||||
| Sandra L. Caul | — | 8,997 | 8,997 | 0.14 | % | |||||||||||
| James C. Fabiano | 231,903 | — | 231,903 | 3.66 | % | |||||||||||
| David W. Hole | — | 16,299 | 16,299 | 0.26 | % | |||||||||||
| W. Joseph Manifold | 353 | — | 353 | 0.01 | % | |||||||||||
| W. Michael McGuire | — | 5,302 | 5,302 | 0.08 | % | |||||||||||
| Ronald E. Schumacher | — | 13,442 | 13,442 | 0.21 | % | |||||||||||
| William J. Strickler | 68,627 | 5,933 | 74,560 | 1.18 | % | |||||||||||
| Dale D. Weburg | 49,144 | 831 | 49,975 | 0.79 | % | |||||||||||
| David J. Maness | 253 | 835 | 1,088 | 0.02 | % | |||||||||||
| Timothy M. Miller | 3,138 | — | 3,138 | 0.05 | % | |||||||||||
| Peggy L. Wheeler | 5,133 | — | 5,133 | 0.08 | % | |||||||||||
| Douglas D. McFarlane | 426 | — | 426 | 0.01 | % | |||||||||||
| All Directors and Executive Officers as a Group (14 persons) | 389,630 | 51,639 | 441,269 | 6.96 | % | |||||||||||
| * | Trustees of the ESOP who vote ESOP stock |
Additional Information
Information concerning executive compensation, certain relationships and related transactions, and other related matters concerning IBT included or incorporated by reference in its Annual Report onForm 10-K for the year ended December 31, 2006, is incorporated by reference into this document. GCFC shareholders who would like a copy of such certificates will
not be paid dividendsthis annual report or other distributionsany document incorporated by reference into the report may contact IBT at the address or telephone number provided under “Where You Can Find More Information” on page 41.
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Description of Business
GCFC was formed under the laws of the state of Michigan in 1998 as a bank holding company registered under the BHC Act and as the parent company of Greenville Community Bank (“GCB”) which is chartered as a Michigan state bank. GCFC’s principal executive offices are located at 1405 West Washington Street, Greenville, Michigan, 48838, which is also the location of the main office of GCB. GCB has an additional branch operating in Stanton, Michigan.
As of June 30, 2007, GCFC reported total consolidated assets of $107.2 million, deposits of $88.4 million and shareholders’ equity of $11.7 million.
GCB is subject to supervision, regulation and examination by the FDIC and the Office of Financial and Insurance Services of the state of Michigan (“OFIS”) and its deposits are insured by the FDIC.
Additional information with respect to GCFC and GCB is included elsewhere in this Proxy Statement-Prospectus.
Properties
GCFC has two locations, including one corporate office in which banking offices are maintained and one where the banking branch is located. The following is a description of GCFC’s facilities in which the office and branch are located:
Location | Square Footage | Date Opened | Occupancy Status | |||
| Corporate and Banking Offices 1405 West Washington Street Greenville, Michigan 48838 | 12,000 square feet | March, 1999 | 34 employees of which 23 are full-time, 8 part-time and 3 are contract employees | |||
| Banking Branch | 3,182 square feet | June 8, 2007 | 6 employees of which 4 are full-time |
Legal Proceedings
GCFC is not a party to any litigation, the adverse determination of which would be likely to have a material adverse effect upon its business operations or assets.
Certain Beneficial Owners of GCFC Common Stock
The following table sets forth, to the best knowledge and belief of GCFC, certain information regarding the beneficial ownership of GCFC common stock as of September 30, 2007, by each person known to GCFC to be the beneficial owner of more than 5% of the GCFC common stock.
| Amount and Nature | ||||||||||||||||
| of Beneficial Ownership | ||||||||||||||||
| Sole Voting and | Shared Voting and | Total Beneficial | Percentage of Common Stock | |||||||||||||
Name of Owner | Investment Powers | Investment Powers | Ownership | Outstanding | ||||||||||||
| Todd and Stacey Taylor | 4,900 | 39,600 | 44,500 | 5.76 | % | |||||||||||
| Leland T. Wallin | 41,600 | 0 | 41,600 | 5.38 | % | |||||||||||
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The following table sets forth, to the best knowledge and belief of GCFC, certain information regarding the beneficial ownership of GCFC common stock as of September 30, 2007, by: (i) each director and certain named executive officers of GCFC; and (ii) all of GCFC’s directors and executive officers as a group.
| Amount and Nature | ||||||||||||||||
| of Beneficial Ownership | ||||||||||||||||
| Sole Voting | Shared | Percentage | ||||||||||||||
| and | Voting and | Total | of Common | |||||||||||||
| Investment | Investment | Beneficial | Stock | |||||||||||||
Name of Owner | Powers | Powers | Ownership | Outstanding | ||||||||||||
| Ted Kortes | 200 | 14,000 | 14,200 | 1.84 | % | |||||||||||
| Jae A. Evans | 5,000 | 0 | 5,000 | 0.65 | % | |||||||||||
| William T. Ham | 4,600 | 12,500 | 17,100 | 2.21 | % | |||||||||||
| James M Mullendore, Jr. | 0 | 15,434 | 15,434 | 2.00 | % | |||||||||||
| Todd N. Taylor | 4,900 | 39,600 | 44,500 | 5.76 | % | |||||||||||
| Kirk Faber | 15,433 | 0 | 15,433 | 2.00 | % | |||||||||||
| Greg Millard | 14,400 | 0 | 14,400 | 1.86 | % | |||||||||||
| L. Terry Wallin | 41,600 | 0 | 41,600 | 5.38 | % | |||||||||||
| James Beckman | 5,000 | 0 | 5,000 | 0.65 | % | |||||||||||
| All Directors and Executive Officers as a Group (9 persons) | 91,133 | 81,534 | 172,667 | 22.33 | % | |||||||||||
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There have been no changes in or disagreements with accountants on accounting and financial disclosures.
IBT is authorized to issue 10,000,000 shares of IBT
common stock, into which suchno par value. IBT is not authorized to issue any shares of FSB common stock have been converted.
When such certificates are surrendered, any such unpaid dividends or other
distributions will be paid (without interest) with respect to the number of
whole shares of IBT common stock represented by such certificates. Holders of
unsurrendered certificates shall not be entitled to vote after the Effective
Time at any meeting of IBT shareholders until they have exchanged their
certificates. For all other purposes (excluding the right to vote at meetings of
IBT's shareholders), however, each certificate which represents shares of FSB
common stock outstanding immediately prior to the Effective Time will be deemed
to evidence ownership of the number of whole shares of IBT common stock into
which such shares have been converted by virtue of the Merger.
After one year following the Effective Time, the Exchange Agent will return
any cash balances and IBT stock certificates held by it to IBT. Any FSB
shareholders who have not properly surrendered their FSB certificate(s) for
exchange may then do so directly to IBT.
Allpreferred stock. At September 30, 2007, there were 6,325,773 shares of IBT common stock issued upon conversion of shares of FSB
common stock shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of FSB common stock.
REGULATORY APPROVALS
The Merger is subject to the prior approval of the Board of Governors of
the Federal Reserve System.
The approval of the Federal Reserve Board is required because IBT is a
financial holding company registered under the Bank Holding Company Act. On June
1, 2000, IBT filed an application with the Federal Reserve Board requesting
approval of the Merger. As of the date of this proxy statement-prospectus, the
Federal Reserve Board had not acted on IBT's application.
The approval of an application means only that the regulatory criteria for
approval have been satisfied or waived. It does not mean that the approving
authority has determined that the consideration to be received by FSB
shareholders is fair. Regulatory approval does not constitute an endorsement or
recommendation of the Merger.
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IBT and FSB are not aware of any governmental approvals or compliance with
banking laws and regulations that are required for the Merger to become
effective other than those described above. IBT and FSB intend to seek any other
approval and to take any other action that may be required to effect the Merger.
There can be no assurance that any required approval or action can be obtained
or taken prior to the special meeting.
The Merger cannot be completed unless all necessary regulatory approvals
are granted. In addition, either party may elect not to complete the Merger if
any condition under which any regulatory approval is granted is unreasonably
burdensome to IBT. See "The Merger Agreement -- Conditions To The Merger."
EFFECT OF MERGER ON FSB'S EMPLOYEE BENEFIT PLANS
The Merger Agreement provides that, subject to any eligibility requirements
applicable to such plans, employees of FSB will be entitled to participate in
the IBT employee benefit and welfare plans.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary of the anticipated material U.S. federal income
tax consequences of the Merger to FSB shareholders who are citizens or residents
of the United States and who, on the date of disposition of their shares of FSB
common stock, hold such shares as capital assets. This summary does not purport
to deal with all aspects of taxation that may be relevant to particular
investors in light of their personal investment circumstances, or to certain
types of investors, including insurance companies, tax-exempt organizations,
financial institutions, broker-dealers, "S" corporations, limited liability
corporations, foreign corporations and taxpayers subject to alternative minimum
tax.
The summary is based on the U.S. federal income tax laws as currently in
effect and as currently interpreted. It does not cover issues of state, local or
foreign taxation. Nor does it address all aspects of U.S. federal income
taxation that may be important to particular shareholders in light of their
personal circumstances or to shareholders subject to special rules under U.S.
federal income tax laws. Future legislation, regulations, administrative rulings
and court decisions may alter the tax consequences summarized below.
The anticipated U.S. federal income tax consequences to FSB shareholders
are as follows:
- A shareholder who receives sharesoutstanding. Each share of IBT common stock has the same relative rights as, and is identical in exchange for
sharesall respects with, each other share of FSBcommon stock.
The common stock willof IBT is not recognizean account of an insurable type, and is not insured by the Federal Deposit Insurance Corporation or any gainother government agency.
Common Stock
Dividends. The holders of common stock of IBT are entitled to receive and share equally in dividends as may be declared by the Board of Directors of IBT out of funds legally available for the payment of dividends. The payment of dividends by IBT is subject to limitations that are imposed by law and applicable regulation.
Voting Rights. The holders of common stock of IBT have exclusive voting rights in IBT. They elect IBT’s Board of Directors and act on other matters as are required to be presented to them under Michigan law or loss onas are otherwise presented to them by the receiptBoard of Directors. Generally, each holder of common stock is entitled to one vote per share and does not have any right to cumulate votes in the election of directors. No vote of IBT shareholders is required for approval of the merger or Merger Agreement under Michigan law.
Liquidation. In the event of liquidation, dissolution or winding up of IBT, the holders of its common stock would be entitled to receive, after payment or provision for payment of all its debts and liabilities, all of the assets of IBT available for distribution.
Preemptive Rights. Holders of the common stock of IBT are not entitled to preemptive rights with respect to any shares ofthat may be issued. The common stock is not subject to redemption.
The transfer agent for IBT common stock except for cash received in
lieu of a fractional share. The shareholder's gain or loss onis Isabella Bank and Trust.
34
IBT and GCFC are both organized under the receipt
of cash in lieu of a fractional share will equal the difference between
the cash received and the basislaws of the fractional share exchanged.
- A shareholder's tax basisstate of Michigan. Any differences, therefore, in the sharesrights of holders of IBT commoncapital stock receivedand GCFC capital stock arise primarily from differences in their respective Articles of Incorporation and Bylaws. Upon completion of the merger, the Articles of Incorporation and Bylaws of IBT in effect immediately prior to the effective time of the merger will be the same asArticles of Incorporation and Bylaws of the shareholder's tax basissurviving corporation in the shares of FSB common
stock exchanged inmerger. Consequently, after the Merger, less any cash received in lieu of
fractional shares.
- The holding periodeffective time of the sharesmerger, the rights of the shareholders of GCFC who become shareholders of IBT common stock received by a
shareholder will include the holding period of the shareholder's shares
of FSB common stock exchanged in the Merger, but only if the shares of
FSB common stock were held as a capital asset at the time the Merger is
completed.
- Where a cash payment is received by a dissenting shareholder, the cash
will be treated as receiveddetermined by the shareholder as a distribution in
redemption of FSB common stock.
Neither party is required to complete the Merger unless it receives an
opinion of counsel that these will be the U.S. federal income tax consequences
of the Merger. The opinions may make certain assumptions and may rely on
representations of the partiesreference to the Merger as to factual matters. It will
reflect the opinion giver's judgment as to the tax statusIBT Articles of the Merger under
the CodeIncorporation and will not be bindingBylaws.
Set forth on the Internal Revenue Service ("IRS"). There
is no assurance that the IRS will not take a
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contrary position regarding the tax consequences of the Merger, nor is there any
assurance that the IRS would not prevail in the event the tax consequences of
the Merger were litigated.
THE U.S. FEDERAL INCOME TAX SUMMARY SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY OR MAY NOT BE APPLICABLE DEPENDING UPON A SHAREHOLDER'S
PARTICULAR SITUATION. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAW.
RESALE OF IBT COMMON STOCK ISSUED IN THE MERGER
The IBT common stock issued in the Merger will be freely transferable under
the Securities Act of 1933, except for shares issued to FSB shareholders who are
considered to be "affiliates" of FSB or IBT under Rule 145 under the Securities
Act. The definition of "affiliate" is complex and depends on the specific facts,
but generally includes directors, executive officers, 10% shareholders and other
persons with the power to direct the management and policies of the company in
question.
Affiliates of FSB may not sell the shares of IBT common stock received in
the Merger except (a) pursuant to an effective registration statement under the
Securities Act, (b) in compliance with an exemption from the registration
requirements of the Securities Act or (c) in compliance with Rule 144 and Rule
145 under the Securities Act. Generally, those rules permit resales of stock
received by affiliates so long as IBT has complied with certain reporting
requirements and the selling shareholder complies with certain volume and manner
of sale restrictions.
FSB has agreed to use its best efforts to deliver to IBT signed
representations by each person who may be deemed to be an affiliate of FSB that
the person will not sell, transfer or otherwise dispose of the shares of IBT
common stock to be received by the person in the Merger except in compliance
with the applicable provisions of the Securities Act and the rules and
regulations promulgated thereunder.
This proxy statement-prospectus does not cover any resales of IBT common
stock received by affiliates of FSB.
ACCOUNTING TREATMENT
The Merger is expected to qualify as a pooling of interests for accounting
and financial reporting purposes. Under this method of accounting, the recorded
assets and liabilities of IBT and FSB will be carried forward to the combined
corporation at their recorded amounts; income of the combined corporation will
include income of IBT and FSB for the entire fiscal year in which the
combination occurs; and the reported income of the separate corporations for
prior periods will be combined and restated as income of the combined
corporation. The unaudited pro forma condensed combined financial information
contained in this Proxy Statement/Prospectus has been prepared using the pooling
of interests method of accounting. See "Summary -- Comparative Per Common Share
Data."
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THE MERGER AGREEMENT
The following pages is a summary of certain provisionscomparison of the Merger Agreement. A
copyrights of an IBT shareholder under the Merger AgreementIBT Articles of Incorporation and the IBT Bylaws (right column) and the rights of a shareholder under the GCFC Articles of Incorporation and the GCFC Bylaws (left column). The summary set forth below is attachednot intended to this proxy statement-prospectus as
Appendix A and is incorporated by reference into this proxy
statement-prospectus.provide a comprehensive summary of each company’s governing documents. This summary is qualified in its entirety by reference to the full text of the Merger Agreement. FSB shareholders are encouraged to readIBT Articles of Incorporation and IBT Bylaws, and the Merger Agreement carefullyGCFC Articles of Incorporation and in its entirety. Parenthetical references are
to the relevant section or sectionsGCFC Bylaws.
GCFC | IBT | |
Authorized Capital | ||
| 1,000,000 shares of common stock, no par value. As of September 30, 2007, there were 773,103 shares of GCFC common stock issued and outstanding. | 10,000,000 shares of common stock no par value. As of September 30, 2007, there were 6,325,773 shares of IBT common stock issued and outstanding. | |
Number of Directors | ||
| The Articles of Incorporation of GCFC provide that the number of directors shall be determined from time to time by the affirmative vote of at least 80% of the directors and a majority of continuing directors. There are currently eight (8) directors in office. | The Bylaws of IBT fix the required number of directors at not less than five, with the actual number determined by the Board of Directors. There are currently eleven directors in office. The corporation’s Bylaws require that a majority of directors shall consist of individuals who are not employees of the corporation or an affiliated entity. | |
Vacancies and Newly Created Directorships | ||
| Vacancies occurring in the Board may be filled only by the Board of Directors acting by an affirmative vote of a majority of continuing directors and 80% affirmative vote of all directors in office. The person who fills any such vacancy holds office until the next election of the class for which the director shall have been chosen. | Vacancies are filled by a vote of the directors then in office. The person who fills any such vacancy holds office until the next election of the class for which the director shall have been chosen. | |
Special Meeting of the Board | ||
| Special meetings of the Board of Directors may be called by the Chairman of the Board or the President and shall be called by one of them on the written request of any five (5) directors, upon at least two (2) days’ written notice or twenty-four (24) hours’ personal, telephonic, or telegraphic notice. | Special meetings of the Board of Directors may be called by the president or by the written request of at least three directors as long as twenty-four hours notice is given to each director. | |
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GCFC | IBT | |
Special Meeting of Shareholders | ||
| Special meetings of the shareholders may be called by the Chairman of the Board, the President, or the Secretary and shall be called by one of them pursuant to resolution therefore by the Board of Directors or upon receipt of a request in writing, stating the purpose or purposes thereof, and signed by shareholders of record owning a majority of the issued and outstanding voting shares of the corporation. | Special meetings of the shareholders may be called by the President or Secretary, and shall be called by either of them on the request, in writing or by vote, of a majority of the directors or by the holders of at least a majority of the shares of common stock issued and outstanding. | |
Cumulative Voting | ||
| No cumulative voting for election of directors is provided for shareholders of GCFC. | No cumulative voting for election of directors is provided for shareholders of IBT. | |
Classes of Directors | ||
| The Bylaws and Articles of Incorporation of GCFC provide that the Board of Directors shall be divided into three (3) classes, with the term of one class of directors expiring each year. Consequently, directors of a particular class are elected to a three-year term. | The Bylaws of IBT provide that the Board of Directors shall be divided into three classes, with the term of one class of directors expiring each year. Consequently, directors of a particular class are elected to a three-year term. | |
Removal of Directors | ||
| The Bylaws and Articles of Incorporation of GCFC provide that a director may be removed from office with or without cause by either the affirmative vote of a majority of the continuing directors and at least 80% of the Board of Directors or the affirmative vote of at least 80% of issued and outstanding voting shares. | IBT’s Articles of Incorporation provide that a director may be removed from office only for “cause” by a majority of voting shares entitled to vote at an election of directors. | |
Retirement of Directors | ||
| The Bylaws and Articles of Incorporation of GCFC are silent on mandatory retirement of directors. | A member of the Board of Directors must retire from the board at the completion of the month in which he or she attains 70 years of age. | |
State Anti-takeover Provisions | ||
| Fair Price Act. Certain provisions of the Michigan Business Corporation Act, referred to as the Fair Price Act, establish a statutory scheme similar to the supermajority and fair price provisions found in many corporate charters. The Fair Price Act provides that a supermajority vote of 90% of the shareholders and no less than two-thirds of the votes of noninterested shareholders must approve a “business combination.” The Fair Price Act defines a “business combination” to include nearly any merger, consolidation, share exchange, sale of assets, stock issuance, liquidation, or reclassification of securities involving an “interested shareholder” or certain “affiliates” of an interested shareholder. An “interested shareholder” is generally any person who owns 10% or more of the outstanding voting shares of the corporation. An “affiliate” is a person who directly or indirectly controls, is controlled by, or is under common control with a specified person. | Fair Price Act. Certain provisions of the Michigan Business Corporation Act, referred to as the Fair Price Act, establish a statutory scheme similar to the supermajority and fair price provisions found in many corporate charters. The Fair Price Act provides that a supermajority vote of 90% of the shareholders and no less than two-thirds of the votes of noninterested shareholders must approve a “business combination.” The Fair Price Act defines a “business combination” to include nearly any merger, consolidation, share exchange, sale of assets, stock issuance, liquidation, or reclassification of securities involving an “interested shareholder” or certain “affiliates” of an interested shareholder. An “interested shareholder” is generally any person who owns 10% or more of the outstanding voting shares of the corporation. An “affiliate” is a person who directly or indirectly controls, is controlled by, or is under common control with a specified person. | |
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GCFC | IBT | |
| Control Share Act. Certain portions of the Michigan Business Corporation Act, referred to as the Control Share Act, also regulate the acquisition of “control shares” of widely held Michigan corporations. The Control Share Act establishes procedures governing “control share acquisitions.” A control share acquisition is defined as an acquisition of shares by an acquiror which, when combined with other shares held by that person or entity, would give the acquiror voting power in the election of directors of the corporation at or above any of the following thresholds: 20%, 33% and 50%. Under the Control Share Act, an acquiror may not vote “control shares” that were acquired in a control share acquisition unless the corporation’s disinterested shareholders (defined to exclude the acquiring person, officers of the target corporation and directors of the target corporation who are also employees of the corporation) vote to confer voting rights on the control shares. The Control Share Act does not affect the voting rights of shares owned by an acquiring person before the control share acquisition. The Control Share Act entitles corporations to redeem control shares from the acquiring person under certain circumstances. In other cases, the Control Share Act confers dissenters’ rights upon all of a corporation’s shareholders except the acquiring person. | Control Share Act. Certain portions of the Michigan Business Corporation Act, referred to as the Control Share Act, also regulate the acquisition of “control shares” of widely held Michigan corporations. The Control Share Act establishes procedures governing “control share acquisitions.” A control share acquisition is defined as an acquisition of shares by an acquiror which, when combined with other shares held by that person or entity, would give the acquiror voting power in the election of directors of the corporation at or above any of the following thresholds: 20%, 33% and 50%. Under the Control Share Act, an acquiror may not vote “control shares” that were acquired in a control share acquisition unless the corporation’s disinterested shareholders (defined to exclude the acquiring person, officers of the target corporation and directors of the target corporation who are also employees of the corporation) vote to confer voting rights on the control shares. The Control Share Act does not affect the voting rights of shares owned by an acquiring person before the control share acquisition. The Control Share Act entitles corporations to redeem control shares from the acquiring person under certain circumstances. In other cases, the Control Share Act confers dissenters’ rights upon all of a corporation’s shareholders except the acquiring person. | |
Super-Majority Vote On Certain Business Combinations | ||
| The Articles of Incorporation and Bylaws of GCFC do not contain super-majority vote requirements for business combinations. Consequently, only a majority of all outstanding voting shares must be voted affirmatively on a business combination. | The Articles of Incorporation of IBT have a super-majority vote on certain business combinations. A vote of 662/3% of all outstanding voting shares must be voted affirmatively on such business combination. | |
Consent Action by Shareholders | ||
| GCFC shareholders are not authorized to take action by written consent in lieu of a meeting. | Under IBT’s Articles of Incorporation, IBT shareholders are entitled to take action without a meeting if the minimum number of voting shares required to approve such action consent to taking such action in writing. | |
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GCFC | IBT | |
Indemnification of Directors and Officers | ||
| The Articles of Incorporation of GCFC provide for indemnification of its directors and executive officers to the fullest extent permitted by Michigan law. Michigan law generally provides for indemnification against liability incurred because a person is a director, officer, employee, or agent if that individual acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation or its shareholders; and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. If an indemnified individual is successful in defense of any such action, the corporation shall indemnify such individual for expenses actually and reasonably incurred in connection with such action. | The Articles of Incorporation of IBT provide for indemnification of its directors, officers, employees and agents to the fullest extent permitted by Michigan law. Michigan law generally provides for indemnification against liability incurred because a person is a director, officer, employee or agent if that individual acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation or its shareholders; and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. If an indemnified individual is successful in defense of any such action, the corporation shall indemnify such director or officer for expenses actually and reasonably incurred in connection with such action. | |
| Persons who are not directors or executive officers may be similarly indemnified to the extent authorized by the Board of Directors. | ||
Director Limitation of Liability | ||
| The Articles of Incorporation of GCFC provide that a director shall not be personally liable to the corporation or its shareholders for monetary damages for a breach of the director’s fiduciary duty. However, limitation of liability protection will not be provided to a director for any breach of the duty of loyalty to the corporation or its shareholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, liability under Section 551(1) of the Michigan Business Corporation Act, or for any transaction from which the director derived an improper personal benefit. | The Articles of Incorporation of IBT provide that a director shall not be personally liable to the corporation or its shareholders for monetary damages for a breach of the director’s fiduciary duty. However, limitation of liability protection will not be provided to a director for any breach of the duty of loyalty to the corporation or its shareholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, liability under Section 551(1) of the Michigan Business Corporation Act, or for any transaction from which the director derived an improper personal benefit. | |
Amendments to Governing Instruments | ||
| The Articles of Incorporation of GCFC may generally be amended by the affirmative vote of the holders of a majority of the issued and outstanding shares, provided that certain Articles may be amended only by the affirmative vote of at least 80% of the issued and outstanding shares. Under the Bylaws of GCFC, the Bylaws may be amended by a majority vote of the Board of Directors at any regular or special meeting, without prior notice of intent to do so, or by vote of the holders of a majority of the issued and outstanding voting shares of GCFC at any annual or special meeting, if notice of the proposed amendment, repeal, or adoption is contained in the notice of the meeting. | The Articles of Incorporation of IBT can be amended by the affirmative vote of the holders of 662/3% of the outstanding shares. Under the Bylaws of IBT, the Bylaws may be amended by a two-thirds vote of the Board of Directors or by a majority vote of shares in attendance at a duly called meeting. However, any amendment that relates to the classified board provisions of the Bylaws requires the approval of holders of a majority of outstanding shares. | |
Preemptive Rights | ||
| GCFC’s Articles of Incorporation do not provide for preemptive rights. | IBT’s Articles of Incorporation do not provide for preemptive rights. | |
38
The following discussion is a general summary of the Merger Agreement.
BASIC PLAN OF REORGANIZATIONmaterial provisions of IBT’s Articles of Incorporation and Bylaws and certain other regulatory provisions that may be deemed to have an “anti-takeover” effect. The Merger Agreement provides that FSB will merge by statutory merger withfollowing description of certain of these provisions is necessarily general and, into IBT, with IBT as the surviving corporation. (section 1.3).
Exchange Of IBT Shares For FSB Shares
In the Merger, each share of FSB common stock outstanding immediately
before the Merger will be exchanged for 2.1362 shares of IBT common stock
(subject to provisions with respect to fractional sharesprovisions contained in IBT’s Articles of Incorporation and shares for which
dissenters' rights have been effectively exercised and not withdrawn). (section
2.1(b))
Any shares of FSB common stock owned by IBT, FSB and their respective
subsidiaries (other than shares held directly or indirectly in trust accounts,
managed accounts and the like or otherwise held in a fiduciary capacity that are
beneficially owned by third parties ("Trust Account Shares")) will be canceled.
Each outstanding share of IBT common stock will remain outstanding and
unchanged as a result of the Merger.
Upon consummation of the Merger, the holders of FSB common stock will
receive, in the aggregate approximately 875,092 shares of IBT common stock
(depending on the calculation of the Exchange Ratio discussed above), except
those holders of shares of FSB common stock with respect to which the
shareholder has effectively exercised dissenter's rights and not withdrawn his
or her demand, therefor, in the manner required by the MBCA. There are currently
409,649 shares of FSB common stock issued and outstanding, and no shares are
issuable pursuant to the exercise of warrants or options, nor are any shares
issuable in conversion of any other securities. Based upon the outstanding
shares of stock of IBT and FSB as of June 15, 2000 the shareholders of FSB would
own IBT Common Stock representing approximately 22.7% of the outstanding voting
power of IBT following consummation of the Merger. For purposes of calculating
such percentage, it is assumed that no additional shares of IBT common stock
have been issued.
Adjustments For Changes In Capitalization
If before the Merger is completed the outstanding shares of IBT are
increased or decreased in number or changed into or exchanged for a different
number or kind of shares or securities as a result of a reorganization,
reclassification, recapitalization, stock dividend, stock split or other similar
change in capitalization, then an appropriate and proportionate adjustment will
be made to the Exchange Ratio. (section 2.1(a))
Cash In Lieu Of Fractional Shares
No fractional shares of IBT common stock will be issued to any FSB
shareholder upon consummation of the Merger. In lieu of the issuance of any
fractional share of IBT common stock, cash payments will be made to FSB
shareholders in respect of any fractional share of IBT common stock that would
otherwise be issuable in an amount equal to such fractional proportion of the
value of a share of IBT common stock. No interest on the cash payments toBylaws, reference should be made in lieu of the issuance of fractional shares will accrue pending surrendereach case to the Exchange Agentdocument in question.
IBT’s Articles of certificates representing FSB common stock.
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Effective Date And Time Of The Merger
The Merger will become effective upon the filingIncorporation and Bylaws contain a number of provisions, relating to corporate governance and rights of shareholders, that might discourage future takeover attempts. As a Certificate of Merger
with the Department of Consumer and Industry Services of the State of Michigan
(the Effective Time") or such later time as is specifiedresult, shareholders who might desire to participate in such certificate.
The filing with respecttransactions may not have an opportunity to do so. In addition, these provisions will also render the Merger will occur as soon as practicable on or
after the first day which is the fifth business day after satisfaction or waiverremoval of the latest to occur
of certain conditions to the Merger specified in the Merger Agreement, unless
another date is agreed to in writing by FSB and IBT. See "THE MERGER
AGREEMENT -- Conditions to the Merger" below. It is expected that a period of
time will elapse between the Special Meeting and the Effective Time while the
parties seek to obtain the regulatory approvals required in order to consummate
the Merger. See "THE MERGER -- Regulatory Approvals Required" below. The Merger
Agreement may be terminated by either party if, among other reasons, the Merger
has not been consummated on or before December 31, 2000. See "THE MERGER
AGREEMENT -- Termination of the Merger Agreement" below.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties by IBT and FSB concerning, among other things (a) their organization
and legal authority to engage in their respective businesses; (b) their
capitalization; (c) their corporate authority to enter into the Merger Agreement
and complete the Merger, (d) the absence of certain material changes; (e)
compliance with applicable laws; (f) benefit plans; (g) absence of certain
litigation; (h) certain environmental matters; and (i) filing of tax returns and
payment of taxes. (sections 3.1 and 3.2) Because the representations and
warranties do not survive completion of the Merger, they function primarily as a
due diligence device and a closing condition (that is, they must continue to be
true in all material respects until the Merger is completed).
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Directors After the Merger. On the closing date of the Merger, FSB will be
merged with and into IBT and the separate corporate existence of FSB will cease.
IBT will be the surviving company in the Merger and will have a Board of
Directors consisting of those persons serving as directors of IBT immediately
prior to the Effective Time plus two additional members initially appointed,
prior to the Effective Time, by the FSB board of directors, with the consent of
IBT. Farmers Bank will operate with its current directors plus two additional
members to be designated by IBT. Isabella Bank and Trust will operate with its
current directors plus one additional member to be designated by FSB.
Executive Officers After the Merger. Following the Merger, it is
anticipated that (i) IBT, as the surviving corporation, will operate with IBT's
current executive officers, though the president of Farmers Bank shall be
appointed a Vice President of IBT and (ii) Farmers Bank and Isabella Bank and
Trust will operate with their current executive officers and employees.
Operations after the Merger. At and after the Closing Date:
- Farmers Bank shall remain a state-chartered commercial bank.
- The names of IBT, Farmers State Bank of Breckenridge and Isabella Bank
and Trust shall not change as a result of the Merger. In the future, the Board of Directors or management of IBT will consider the possibility ofmore difficult.
The following description is a name change
which is less geographically restrictive.
- All banking offices of Farmers Bank will remain open.
- There will be no layoffs at Farmers Bank as a resultsummary of the Merger. Any
reduction in staffing levels shall be accomplished through attrition.
CERTAIN COVENANTS
The Merger Agreement has a number of covenants and agreements that govern
the actions of FSB and IBT pending completionprovisions of the Merger. SomeArticles of the
covenantsIncorporation and agreements are summarized below.
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ConductBylaws. See “Where You Can Find More Information” as to how to review a copy of Business Pending the Merger
Pursuant to the Merger Agreement, FSB has agreed to carrythese documents.
Restrictions on its business
in the usual, regular and ordinary course in substantially the same manner as
conducted prior to the executionCall of the Merger Agreement. In addition, FSB has
agreedSpecial Meetings. The Bylaws provide that neither it nor its subsidiaries may, without the written consentspecial meetings of IBT, among other things: (i) enter into any new material line of business; (ii)
increase or decrease the current number of FSB directors except as consistent
with FSB's current Board of Directors' retirement policy; (iii) change its
lending, investment, liability management and other material banking policies in
any material respect; (iv) incur or commit to any capital expenditures or any
obligations or liabilities in connection therewith except in the ordinary course
of business consistent with past practice; (v) declare or pay any dividends on
shares of capital stock other than regular semi-annual cash dividends not in
excess of $0.75 per share of FSB Common Stock, and dividends by FSB's wholly
owned subsidiary, or split, combine or reclassify any of its capital stock or
repurchase, redeem or otherwise acquire any shares of its capital stock; (vi)
have any of its subsidiaries issue any shares of capital stock, other than to
its parent; (vii) make any acquisition or enter into any merger or similar
transaction, provided, however, that the foregoing shall not prohibit (a)
internal reorganizations, consolidations or dissolutions involvingshareholders can be called only existing
subsidiaries of FSB, (b) foreclosures and other acquisitions related to
previously contracted debt, in each case in the ordinary course of business, or
(c) acquisitions of financial assets and merchant banking activities, in each
case in the ordinary course of business; (viii) dispose of any assets, other
than as disclosed prior to the date of the Merger Agreement, as required in
order to consummate the transactions contemplated by the Merger AgreementPresident or in
the ordinary courseSecretary, or by either of business consistent with past practices; (ix) incur any
indebtedness other than in the ordinary course of business consistent with past
practice; (x) except as contemplated by or disclosed prior to execution of the
Merger Agreement, enter into, amend or terminate any employee benefit plan or
any agreement or arrangement between it and any of its directors or officer, or
(xi) authorize or permit any of its officers, directors, employees,
representatives or agents to solicit any takeover proposal or agree to endorse
any takeover proposal (See "THE MERGER AGREEMENT -- Certain
Covenants -- Competing Transactions" below).
Pursuant to the Merger Agreement, IBT and FSB have each agreed that neither
it nor any of its subsidiaries may, without written consent of the other, among
other things: (i) amend their articles of incorporation or bylaws other than an
amendment to IBT's articles of incorporation to increase its authorized common
stock to 10.0 million shares or any other amendments required to complete the
transaction; (ii) take any action intended to result in any of the
representations or warranties to the Merger Agreement being or becoming
materially untrue or any conditions to the Merger not being satisfied or in
violation of any provision of the Merger Agreement; or (iii) take any action
which would disqualify the Merger as a "pooling of interest" for accounting
purposes or a tax-free "reorganization" for tax purposes.
Competing Transactions
Except as the FSB board of directors deems necessary,them on the advice of
counsel,request in the exercise of its fiduciary obligations under applicable law, the
Merger Agreement provides that FSB and its subsidiaries will not, directlywriting or indirectly, authorize or permit any of their respective officers, directors,
employees, representatives or agents to solicit, encourage or take any other
action to facilitate any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any "takeover proposal,"
or agree to or endorse any takeover proposal or participate in any discussions
or negotiations or provide third parties with any nonpublic information,
relating to any such inquiry or proposal. The foregoing does not restrict or
prohibit any disclosure by FSB that is required, on the advice of counsel, in
any document to be filed with a regulatory authority after the date of the
Merger Agreement or in any document or statement otherwise required under
applicable law. The Merger Agreement provides that FSB shall promptly advise IBT
(orally and in writing) of any such inquiry or proposal. For these purposes, a
"takeover proposal" is defined as any tender or exchange offer, proposal for a
merger, consolidation or other business combination involving FSB or any
subsidiary of FSB, or any proposal or offer to acquire in
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any manner a substantial equity interest in, or a substantial portion of the
assets of, FSB or any of its subsidiaries, other than the transactions
contemplated or permitted by the Merger Agreement.
Other Covenants
The Merger Agreement contains various other covenants, including covenants
relating to the preparation and distribution of this proxy statement-prospectus
and access to information. In addition, FSB has agreed to use its best efforts
to deliver to IBT prior to completion of the Merger signed representations from
each executive officer, director or shareholder of FSB who may reasonably be
deemed an "affiliate" of FSB within the meaning of such term as used in Rule 145
of the Securities Act. (sections 5.1 and 5.6) See "The Merger -- Resale Of IBT
Common Stock Issued In The Merger."
CONDITIONS TO THE MERGER
Under the Merger Agreement, various conditions are required to be met
before the parties are obligated to complete the Merger. These conditions are
customary and include such items as the receipt of shareholder and regulatory
approval, the absence of any materially burdensome requirement or condition
imposed in connection with obtaining any regulatory approval, and the receipt by
FSB and IBT of favorable tax opinions. (sections 6.1, 6.2 and 6.3) See "The
Merger -- U.S. Federal Income Tax Consequences Of The Merger."
The obligations of the parties are also subject to the continued accuracy
of the other party's representations and warranties, the performance by the
other party of its obligations under the Merger Agreement, and, subject to
certain exceptions, the absence of any changes that have had or might be
reasonably expected to have an adverse effect on FSB. Some of the conditions to
the Merger are subject to exceptions and/or a "materiality" standard. Certain
conditions to the Merger may be waived by the party seeking to assert the
condition. (sections 6.2 and 6.3)
TERMINATION OF THE MERGER AGREEMENT
Termination by Mutual Consent
IBT and FSB can agree to terminate the Merger Agreement at any time before
completion of the Merger. (section 7.1)
Termination by Either IBT or FSB
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the matters presented in connection
with the Merger by the shareholders of FSB: (a) by mutual consent of IBT and FSB
if the Board of Directors of each so determines by a vote of a majority of the
membersdirectors or holders of its entire Board; (b) by either IBT or FSB upon written notice to the
other party if any Requisite Regulatory Approval is denied or if any
governmental entity of competent jurisdiction issuesat least a final nonappealable order
enjoining or otherwise prohibiting the consummationmajority of the transactions
contemplated by the Merger Agreement; (c) by eithershares of capital stock of IBT or FSB if the Merger
shall not have been consummated on or before December 31, 2000; (d) by either
IBT or FSB (provided that the terminating party is not in material breachissued and outstanding.
Prohibition of anyCumulative Voting. The Articles of its obligations) if any approval of the shareholders of FSB requiredIncorporation prohibit cumulative voting for the consummationelection of the Merger shall not have been obtained by reason of the failure
to obtain the required vote at a duly held meeting of shareholders or at any
adjournment or postponement thereof; (e) by eitherdirectors.
Authorized but Unissued Shares. IBT or FSB if there is a
material breach of any of the representations or warranties in the Merger
Agreement by the other party, which breach by its nature cannot be cured prior
to the Closing; or (f) by either IBT or FSB if there is a material breach of any
of the covenants or agreements in the Merger Agreement on the part of the other
party, which breach is not cured within twenty business days following receipt
by the breaching party of written notice of such breach from the other party.
In the event of termination of the Merger Agreement, the Merger Agreement
will become void and have no effect except (i) for certain specified provisions
of the Merger Agreement dealing with
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confidentiality and expenses; and (ii) that neither party will be relieved or
released from any liabilities or damages arising out of the willful breach by
the other party of any provisions of the Merger Agreement.
EFFECT OF TERMINATION
Generally, if either party terminates the Merger Agreement, it becomes void
without any liability to either party other than for willful breaches occurring
before termination; however, the provisions of the Merger Agreement governing
confidential information and expenses incurred in connection with the Merger
continue in effect after termination of the Merger Agreement. (section 7.2)
WAIVER AND AMENDMENT
Either IBT or FSB may waive any inaccuracies in the representations and
warranties of the other party or compliance by the other party with any of the
covenants or conditions contained in the Merger Agreement. (section 7.4)
IBT and FSB can amend the Merger Agreement at any time before the Merger is
completed; however, the Merger Agreement prohibits them from amending the Merger
Agreement after FSB shareholders approve the Merger if the amendment would
require further approval by FSB's shareholders, unless such further approval is
obtained. (section 7.3)
EXPENSES
Whether or not the Merger is consummated, all costs and expenses incurred
in connection with the Merger Agreement, and the transactions contemplated
thereby will be paid by the party incurring such expense, except (i) for
liabilities and damages arising out of the willful breach of the Merger
Agreement, and (ii) that expenses incurred in connection with printing and
mailing this Proxy Statement/Prospectus will be shared equally by IBT and FSB.
(section 5.8)
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COMPARISON OF SHAREHOLDER RIGHTS
The following is a summary of material differences between the rights of
FSB shareholders and the rights of IBT shareholders. It is not a complete
statement of the provisions affecting, and the differences between, the rights
of FSB shareholders and IBT shareholders. The summary is qualified in its
entirety by reference to the Michigan Business Corporation Act (MBCA), FSB's
articles of incorporation and bylaws, and IBT's articles of incorporation and
bylaws.
INTRODUCTION
Upon completion of the Merger, holders of FSB common stock will become
shareholders of IBT. There are material differences in the rights of FSB
shareholders as compared to the rights of IBT shareholders. The rights of FSB
shareholders are governed by Michigan law and FSB's articles of incorporation
and bylaws, and the rights of IBT shareholders are governed by Michigan law and
IBT's articles of incorporation and bylaws.
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
IBT
IBT's articles of incorporation currently authorize the issuance of
10,000,000has authorized but unissued shares of IBT common stock, no par value per share. At June 15, 2000,
there were 2,986,258 sharesstock. See “Description of IBT common stock outstanding.
FSB
FSB's articlesCapital Stock of incorporationIBT”. The Articles of Incorporation authorize the issuance of 600,000ten million (10,000,000) shares of common stock, no par value. An aggregateAs of 409,649September 30, 2007, there were 6,325,773 shares of IBT common stock were
issued and outstanding.
Amendments to Articles of Incorporation and Bylaws. Amendments to the Articles of Incorporation must be approved by 662/3% of the outstanding asshares of June 15, 2000.
NUMBER AND ELECTION OF DIRECTORSIBT’s voting stock. The Bylaws may be amended by a two-thirds vote of the directors of IBT IBT's bylaws provide foror the affirmative vote of a majority of shares in attendance at a duly constituted meeting of shareholders. However, any amendment that relates to the classified board provisions of directors consistingthe Bylaws requires the approval of not less than
five nor more than eleven persons.holders of a majority of outstanding shares.
Classified Board of Directors. The numberIBT Board of directors is currently nine.
The board of directorsDirectors is divided into three classes, with the directors in each class being elected for a term of three years.
“For Cause” Removal of Directors. Directors of IBT may be removed from office at any time, but only for cause by the affirmative vote of the holders of a majority of the shares of IBT common stock entitled to vote thereon. Vacancies on IBT's board
IBT
There is no established market for IBT’s common stock or public information with respect to its market price. There are occasional sales by shareholders of directors may be filled by majority votewhich management of IBT is aware. The prices were reported to management in only some of the remaining directors or, intransactions and management cannot confirm the event a vacancy is not so filled or if no
director remains, by the shareholders. Directors of IBT are elected by pluralityprices that were reported during these periods. All of the votesinformation has been adjusted to reflect the 10% stock dividend paid February 15, 2006.
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| Sale Price | ||||||||||||||||
Period | Number of Sales | Number of Shares | Low | High | ||||||||||||
| 2005 | ||||||||||||||||
| First Quarter | 34 | 19,429 | $ | 38.18 | $ | 38.18 | ||||||||||
| Second Quarter | 53 | 59,717 | 38.18 | 38.18 | ||||||||||||
| Third Quarter | 60 | 24,654 | 38.18 | 38.18 | ||||||||||||
| Fourth Quarter | 41 | 25,893 | 38.18 | 40.00 | ||||||||||||
| 188 | 129,693 | |||||||||||||||
| 2006 | ||||||||||||||||
| First Quarter | 27 | 19,003 | $ | 44.00 | $ | 44.00 | ||||||||||
| Second Quarter | 46 | 30,603 | 44.00 | 44.00 | ||||||||||||
| Third Quarter | 45 | 13,524 | 44.00 | 44.00 | ||||||||||||
| Fourth Quarter | 46 | 20,326 | 44.00 | 44.00 | ||||||||||||
| 164 | 83,456 | |||||||||||||||
| 2007 | ||||||||||||||||
| First Quarter | 52 | 39,424 | 44.00 | 48.00 | ||||||||||||
| Second Quarter | 100 | 31,081 | 44.00 | 44.00 | ||||||||||||
| Third Quarter | 52 | 18,706 | 44.00 | 44.00 | ||||||||||||
| 204 | 89,211 | |||||||||||||||
The following table sets forth the cash dividends paid for the following quarters, adjusted for the 10% stock dividend paid on February 15, 2006.
| Per Share | ||||||||||||
Period | 2007 | 2006 | 2005 | |||||||||
| First Quarter | $ | 0.12 | $ | 0.11 | $ | 0.10 | ||||||
| Second Quarter | $ | 0.12 | 0.11 | 0.10 | ||||||||
| Third Quarter | $ | 0.12 | 0.11 | 0.10 | ||||||||
| Fourth Quarter | 0.31 | 0.30 | ||||||||||
| Total | $ | 0.64 | $ | 0.60 | ||||||||
GCFC
There is no established public trading market for GCFC common stock. As a result, there is no readily obtainable market price for GCFC common stock. From time to time, management of GCFC has been made aware of transactions in its common stock. Transactions in 2005, 2006 and 2007 about which management of GCFC is aware are as follows:
| • | In 2005, 26,200 shares at $19.97 per share; | |
| • | In 2006, 24,050 shares at $18.79 per share; and | |
| • | In 2007, 9,600 shares at $20.61 per share. |
Although other transactions may have occurred in its common stock, GCFC has not been provided with information as to the sales prices in any transactions other than as indicated.
It is GCFC’s established practice to pay annual cash dividends. GCFC paid cash dividends of $0.12 and $0.20 per share in 2005 and 2006, respectively, and GCFC paid a cash dividend of $0.25 per share in 2007. As of November 20, 2007, there were 773,103 shares of IBTGCFC common stock entitled to vote thereon present in
person or by proxy at the meeting at which directors are elected. IBT's articlesissued and outstanding, and approximately 188 shareholders of incorporation do not currently permit cumulative voting in the election of
directors.
FSB
FSB's bylaws provide for a board of directors consisting of not less than
five nor more than twenty-five persons. record.
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The number of directors is currently
eight. The board of directors is divided into three classes, with the directors
in each class being elected for a term of three years. Directors of FSB may be
removed from office at any time, but only for cause by the affirmative votevalidity of the holders of a majority of the shares of FSB common stock entitled to vote
thereon. Vacancies on FSB's board of directors may be filled by majority vote of
the remaining directors. Directors of FSB are elected by plurality of the votes
of shares of FSB common stock entitled to vote thereon present in person or by
proxy at the meeting at which directors are elected. FSB's articles of
incorporation do not currently permit cumulative voting in the election of
directors.
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AMENDMENT OF GOVERNING DOCUMENTS
IBT
In general, IBT's articles of incorporation may be amended only if the
proposed amendment is approved by 66 2/3% of the outstanding IBT shares entitled
to vote thereon. IBT's bylaws may be amended by a two-thirds affirmative vote of
the board of directors or by a majority of the outstanding shares entitled to
vote thereon; provided however, the provision of the bylaws relating to the
classified board may not be amended by the board of directors.
FSB
In general, FSB's articles of incorporation may be amended only if the
proposed amendment is approved by a majority of the outstanding FSB shares
entitled to vote thereon. However, amendment of Article VII, dealing with the
Board of Directors, requires the approval of at least 80% of the outstanding FSB
shares entitled to vote thereon (and, in certain circumstances, if the amendment
is proposed by an "interested shareholder" controlling more than 20% of the
outstanding FSB shares, by 66 2/3% of the shareholders other than the
"interested shareholder"). Article VIII, dealing with business combinations, may
be amended by the affirmative vote of 66 2/3% of the outstanding FSB shares
(and, in addition, if the amendment has been proposed by an "interested
shareholder" controlling more than 20% of the outstanding FSB shares, also by a
majority of the shares held by shareholders other than the "interested
shareholder"). FSB's bylaws may be amended by the vote of the board of directors
or by the shareholders.
APPROVAL OF MERGERS AND ASSETS SALES
IBT
Except as described below, the affirmative vote of 66 2/3% of the
outstanding shares of IBT common stock entitled to vote thereon is required to
approve a merger or consolidation involving IBT or the sale, lease or exchange
of all or substantially all of IBT's corporate assets. No vote of the
shareholders is required, however, in connection with a merger in which IBT is
the surviving corporation and (a) the agreement of merger for the merger does
not amend in any respect IBT's articles of incorporation, (b) each IBT
shareholder whose shares were outstanding immediately before the effective date
of the merger will hold the same number of shares with identical descriptions,
preferences, limitations and relative rights, immediately after the merger and
(c) the number of shares of capital stock to be issued in the merger (or to be
issuable upon conversion of any convertible instruments to be issued in the
merger) does not exceed 100% of the shares of IBT capital stock outstanding
immediately before the merger.
FSB
The affirmative vote of a majority of the outstanding shares of FSB common
stock is required to approve the Merger. Under certain circumstances, not here
applicable, a higher percentage would be required. For such circumstances, see
Article VIII of FSB's articles of incorporation.
PREEMPTIVE RIGHTS
IBT
IBT's articles of incorporation do not grant shareholders preemptive rights
to subscribe to any or all issues of IBT shares or securities.
FSB
FSB's articles of incorporation do not grant shareholders preemptive rights
to subscribe to any or all issues of FSB shares or securities.
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SPECIAL MEETINGS
IBT
IBT's bylaws provide that a special meeting of shareholders may be called
by the president or the secretary and shall be called by either of them on the
request in writing or by vote of a majority of the directors or shareholders of
record.
FSB
FSB's articles of incorporation provide that a special meeting of
shareholders may be called by a resolution approved by a majority of the board
of directors.
ACTION WITHOUT A MEETING
IBT
IBT's articles of incorporation permit any action required or permitted by
the MBCA to be taken at an annual or special meeting of shareholders to be taken
without a meeting, without prior notice and without a vote, if a consent in
writing setting forth the action so taken is signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take the action at a meeting at which all shares
entitled to vote were present and voted.
Prompt notice of the taking of corporate action without a meeting by less
than unanimous written consent must be given to shareholders who did not consent
in writing.
FSB
FSB's articles of incorporation do not permit actions by FSB shareholders
to be taken by written consent. Instead, any action by shareholders must be
effected at a duly called annual or special meeting of the shareholders.
LIMITATIONS ON DIRECTORS' LIABILITY
IBT
IBT's articles of incorporation provide that a director of IBT shall not be
personally liable to IBT or its shareholders for monetary damages for breach of
fiduciary duty as a director, except for liability arising out of (a) any breach
of the director's duty of loyalty to IBT or its shareholders, (b) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) violation of Section 551(1) of the MBCA relating to
distributions or (d) any transaction from which the director derived an improper
personal benefit. This provision protects IBT's directors against personal
liability for monetary damages from breaches of their duty of care. It does not
eliminate the director's duty of care and has no effect on the availability of
equitable remedies, such as an injunction or rescission, based upon a director's
breach of his duty of care.
FSB
FSB's articles of incorporation provide that a director of FSB shall not be
personally liable to FSB or its shareholders for monetary damages for breach of
fiduciary duty as a director, except for liability arising out of (a) any breach
of the director's duty of loyalty to FSB or its shareholders, (b) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) violation of Section 551(1) of the MBCA relating to
distributions or (d) any transaction from which the director derived an improper
personal benefit. This provision protects FSB's directors against personal
liability for monetary damages from breaches of their duty of care. It does not
eliminate the director's duty of care and has no effect on the availability of
equitable remedies, such as injunction or rescission, based upon a director's
breach of his duty of care.
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INDEMNIFICATION OF OFFICERS AND DIRECTORS
IBT
IBT's articles of incorporation provide that IBT shall indemnify to the
full extent permitted by law each person who is or was or had agreed to become a
director or officer of the Corporation or who serves or served any other
enterprise at the request of the corporation. The MBCA permits such
indemnification if such individual has acted in good faith and in a manner the
person reasonably believed to be in the best interest of the corporation or its
shareholders, and, in the case of a criminal proceeding, had no reasonable cause
to believe the conduct of the person was unlawful.
FSB
FSB's articles of incorporation provide that FSB has the power to indemnify
to the full extent permitted by law each person who is or was or had agreed to
become a director or officer of the Corporation or who serves or served any
other enterprise at the request of the corporation. The MBCA permits such
indemnification if such individual has acted in good faith and in a manner the
person reasonably believed to be in the best interest of the corporation or its
shareholders, and , in the case of a criminal proceeding, has no reasonable
cause to believe the conduct of the person was unlawful.
DIVIDENDS
IBT
The holders of IBT common stock are entitled to receive dividends when and
as declared by IBT's board of directors out of funds legally available therefor.
The MBCA provides that a corporation may make a distribution to its shareholders
if after giving it effect the corporation is able to pay its debts as the debts
become due in the usual course of business, and the corporation's total assets
would equal or exceed the sum of its total liabilities plus the amount that
would be needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution. IBT is also subject to Federal Reserve Board policies regarding
payment of dividends, which generally limit dividends to operating earnings.
FSB
The holders of FSB common stock are entitled to receive dividends when and
as declared by FSB's board of directors out of funds legally available therefor.
The MBCA provides that a corporation may make a distribution to its shareholders
if after giving it effect the corporation is able to pay its debts as the debts
become due in the usual course of business, and the corporation's total assets
would equal or exceed the sum of its total liabilities plus the amount that
would be needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution. FSB is also subject to Federal Reserve Board policies regarding
payment of dividends, which generally limit dividends to operating earnings.
CORPORATE GOVERNANCE PROCEDURES; NOMINATION OF DIRECTORS
IBT
IBT's articles of incorporation and bylaws do not contain any provision
relating to the ability of shareholders to nominate directors of IBT. However,
pursuant to applicable law, an eligible shareholder may submit a proposal to be
presented at the annual meeting of shareholders provided it is received at IBT's
principal executive offices not less than 120 calendar days in advance of the
date of IBT's proxy statement released to shareholders in connection with the
previous year's annual meeting of the shareholders.
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41
FSB
FSB's articles of incorporation provide that nomination for the election of
directors shall be made by the board of directors, a nominating committee
appointed by the board of directors or any shareholder entitled to vote for
directors. In the case of a shareholder nomination, certain procedures that must
be followed. Shareholders intending to nominate candidates for election must
deliver written notice of the nomination to the secretary of FSB at least 60
days but not more than 90 days prior to the anniversary date of the immediately
preceding annual meeting of shareholders. The notice must include (i) the name
and address of the shareholder who intends to make the nomination; (ii) the
name, age, business address and if known, residence address of each nominee;
(iii) the principal occupation or employment of each nominee; (iv) the number of
shares of stock of FSB which are beneficially owned by each nominee and by the
nominating shareholders; (v) any other information concerning the nominee that
must be disclosed about nominees in a proxy statement soliciting proxies for the
election of the nominee; and (vi) the executed consent of each nominee to serve
as a director, if needed. The Chairman of the meeting may refuse to acknowledge
the nomination of any person not made in compliance with the foregoing
procedures.
INFORMATION ABOUT IBT
GENERAL
IBT is a registered financial holding company incorporated under Michigan
law in September 1988. The Corporation has four subsidiaries: Isabella Bank and
Trust, IBT Financial Services, Inc., IBT Title, Inc. and IBT Loan Production.
Its principal subsidiary, Isabella Bank and Trust has fifteen banking offices
located throughout Isabella County, northeastern Montcalm County, and southern
Clare County, all of which are located in central Michigan. IBT Financial
Services, Inc. is a full service retail brokerage offering stocks, bonds and
mutual funds to individuals. It is also authorized to sell life insurance,
casualty insurance, and fixed and variable annuities. IBT Title, Inc. provides
title insurance, abstract searches, and closes real estate loans. IBT Loan
Production originates residential real estate mortgages.
At March 31, 2000, IBT had consolidated total assets of $401.1 million,
consolidated total deposits of $357 million and shareholders' equity of $37.6
million.
IBT is a legal entity separate and distinct from its banking and nonbanking
subsidiaries. As a result, the right of IBT, and thus the right of IBT's
creditors, to participate in any distribution of assets or earnings of any
subsidiary, other than in its capacity as a creditor of such subsidiary, is
subject to the prior payment of claims of creditors of such subsidiary. The
principal sources of IBT's revenues are dividends and fees from its
subsidiaries. See "Regulation And Supervision Of IBT -- Dividend Restrictions"
for a discussion of the restrictions on the subsidiary bank's ability to pay
dividends to IBT.
IBT's executive offices are located at 200 East Broadway, Mt. Pleasant,
Michigan 48858, and its telephone number is (517) 772-9491.
MANAGEMENT AND ADDITIONAL INFORMATION
Information concerning executive compensation, the principal holders of
voting securities, certain relationships and related transactions, and other
related matters concerning IBT is included or incorporated by reference in its
annual report on Form 10-K for the year ended December 31, 1999. IBT's annual
report on Form 10-K is incorporated by reference into this proxy
statement-prospectus. FSB shareholders who want a copy of this annual report or
any document incorporated by reference into the report may contact IBT at the
address or phone number indicated below under "Where You Can Find More
Information."
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DESCRIPTION OF IBT CAPITAL STOCK
The following description contains a summary of the material features of
the capital stock of IBT but does not purport to be complete and is subject to
and qualified in its entirety by reference to the IBT articles of incorporation
which are filed as an exhibit to the Registration Statement of which
this Proxy Statement-Prospectus forms a part and are incorporated herein by
reference. The following description should be read carefully by FSB
shareholders since, at the Effective Time, each issued and outstanding share of
FSB common stock will be converted into 2.1362 shares of IBT common stock.
The authorized capital stock of IBT consists of 10,000,000 shares of common
stock no par value (of which 2,986,258 shares were issued and outstanding on
June 15, 2000.)
The holders of IBT common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of shareholders. IBT's
articles of incorporation do not provide for cumulative voting of the shares of
IBT common stock. Holders of IBT common stock are entitled to receive dividends
as may be declared by the board of directors out of funds legally available for
that purpose. In the event of a liquidation, holders of IBT common stock are
entitled to share ratably in all assets of IBT available for distribution to
holders of shares of IBT common stock. Holders of IBT common stock have no
preemptive rights and have no rights to convert their IBT common stock into any
other securities. All shares of IBT common stock now issued and outstanding are
fully paid and nonassessable.
The transfer agent for IBT common stock is Isabella Bank and Trust.
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REGULATION AND SUPERVISION OF IBT
To the extent that the following information describes statutory and
regulatory provisions, it is qualified in its entirety by reference to the full
text of those provisions. Also, such statutes, regulations and policies are
continually under review by Congress and state legislatures and federal and
state regulatory agencies. A change in statutes, regulations or regulatory
policies applicable to IBT could have a material effect on the business of IBT.
INTRODUCTION
IBT, its banking subsidiary and its nonbanking subsidiaries are subject to
extensive regulation by federal and state agencies. The regulation of federal
financial holding companies and their subsidiaries is intended primarily for the
protection of depositors, federal deposit insurance funds and the banking system
as a whole and not for the protection of security holders.
As discussed in more detail below, this regulatory environment, among other
things, may restrict IBT's ability to diversify into certain areas of financial
services, acquire depository institutions in certain states and pay dividends on
its capital stock. It may also require IBT to provide financial support to one
or more of its banking subsidiaries, maintain capital balances in excess of
those desired by management and pay higher deposit insurance premiums as a
result of the deterioration in the financial condition of depository
institutions in general.
REGULATORY AGENCIES
Financial Holding Company
IBT, as a federal financial holding company, is subject to regulation under
the Bank Holding Company Act of 1956 and to inspection, examination and
supervision by the Board of Governors of the Federal Reserve System (Federal
Reserve Board) under the Bank Holding Company Act of 1956.
Subsidiary Bank
IBT's state-chartered banking subsidiary is subject to primary federal
regulation and examination by the FDIC and, in addition, is regulated and
examined by the Financial Institutions Bureau of the State of Michigan.
Nonbank Subsidiaries
IBT's nonbank subsidiaries also are subject to regulation by the Federal
Reserve Board and other applicable federal and state agencies. IBT's brokerage
subsidiary is regulated by the SEC, the National Association of Securities
Dealers, Inc. and state securities regulators. IBT's insurance activities are
subject to regulation by applicable state insurance regulatory agencies.
FINANCIAL HOLDING COMPANY ACTIVITIES
Banking-Related Requirement
Effective March 11, 2000, subject to certain conditions, bank holding
companies that elect to become financial holding companies may affiliate with
securities firms and insurance companies and engage in other activities that are
financial in nature. Also effective March 11, 2000, no regulatory approval will
be required for a financial holding company to acquire a company, other than a
bank or savings association, engaged in activities that are financial in nature
or incidental to activities that are financial in nature, as determined by the
Federal Reserve Board. See "Financial Modernization" below.
Interstate Banking
Under the Riegle-Neal Interstate Banking and Branching Act (Riegle-Neal
Act), a bank holding company may acquire banks in states other than its home
state, subject to any state requirement that the
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bank has been organized and operating for a minimum period of time, not to
exceed five years, and the requirement that the bank holding company not
control, prior to or following the proposed acquisition, more than 10% of the
total amount of deposits of insured depository institutions nationwide or,
unless the acquisition is the bank holding company's initial entry into the
state, more than 30% of such deposits in the state, or such lesser or greater
amount set by the state.
The Riegle-Neal Act also authorizes banks to merge across state lines,
thereby creating interstate branches. States may opt out of the Interstate
Banking Act and thereby prohibit interstate mergers in the state. IBT will be
unable to consolidate its banking operations in one state with those of another
state if either state in question has opted out of the Riegle-Neal Act.
Regulatory Approval
In determining whether to approve a proposed bank acquisition, federal
banking regulators will consider, among other factors, the effect of the
acquisition on competition, the public benefits expected to be received from the
acquisition, the projected capital ratios and levels on a post-acquisition
basis, and the acquiring institution's record of addressing the credit needs of
the communities it serves, including the needs of low and moderate income
neighborhoods, consistent with the safe and sound operation of the bank, under
the Community Reinvestment Act of 1977.
DIVIDEND RESTRICTIONS
IBT is a legal entity separate and distinct from its subsidiary bank and
other subsidiaries. Its principal source of funds to pay dividends on its common
stock and debt service on its debt is dividends from its subsidiaries. Various
federal and state statutory provisions and regulations limit the amount of
dividends that IBT's bank subsidiary may pay without regulatory approval.
Dividends payable by a Michigan State bank are subject to state regulations that
limit dividends.
Before Isabella Bank and Trust can declare dividends in 2000 without the
prior approval of the Michigan Financial Institutions Bureau, it must have net
income of $ plus an amount equal to or greater than the dividends
declared in 2000.
HOLDING COMPANY STRUCTURE
Transfer of Funds from Banking Subsidiaries
IBT's banking subsidiaries are subject to restrictions under federal law
that limit the transfer of funds or other items of value from these subsidiaries
to IBT and its nonbanking subsidiaries, including affiliates, whether in the
form of loans and other extensions of credit, investments and asset purchases,
or as other transactions involving the transfer of value from a subsidiary to an
affiliate or for the benefit of an affiliate. Unless an exemption applies, these
transactions by a banking subsidiary with a single affiliate are limited to 10%
of the subsidiary bank's capital and surplus and, with respect to all covered
transactions with affiliates in the aggregate, to 20% of the subsidiary bank's
capital and surplus. Also, loans and extensions of credit to affiliates
generally are required to be secured in specified amounts.
Source of Strength Doctrine
The Federal Reserve Board has a policy that a financial holding company is
expected to act as a source of financial and managerial strength to each of its
subsidiary banks and, under appropriate circumstances, to commit resources to
support each such subsidiary bank. This support may be required at times when
the financial holding company may not have the resources to provide it. Capital
loans from IBT to its subsidiary bank are subordinate in right of payment to
deposits and certain other indebtedness of the subsidiary bank. In addition, in
the event of IBT's bankruptcy, any commitment by IBT to a federal bank
regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.
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Depositor Preference
The Federal Deposit Insurance Act (FDI Act) provides that, in the event of
the "liquidation or other resolution" of an insured depository institution, the
claims of depositors of the institution, including the claims of the FDIC as
subrogee of insured depositors, and certain claims for administrative expenses
of the FDIC as a receiver will have priority over other general unsecured claims
against the institution. If an insured depository institution fails, insured and
uninsured depositors, along with the FDIC, will have priority in payment ahead
of unsecured, nondeposit creditors, including IBT.
Liability of Commonly Controlled Institutions
Under the FDI Act, an insured depository institution is generally liable
for any loss incurred, or reasonably expected to be incurred, by the FDIC in
connection with (a) the default of a commonly controlled insured depository
institution or (b) any assistance provided by the FDIC to a commonly controlled
insured depository institution in danger of default. "Default" means generally
the appointment of a conservator or receiver. "In danger of default" means
generally the existence of certain conditions indicating that a default is
likely to occur in the absence of regulatory assistance.
CAPITAL REQUIREMENTS
IBT and its subsidiary bank are subject to capital adequacy requirements
and guidelines administered by the Federal Reserve Board and/or the FDIC.
The Federal Deposit Insurance Corporation Act of 1991 (FDICIA) required
that the Federal Reserve Board and the FDIC adopt regulations defining five
capital tiers for banks: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. Failure to meet minimum capital requirements can initiate
certain mandatory and possibly additional discretionary actions by regulators
that, if undertaken, could have a material adverse effect on IBT's business.
Quantitative measures, established by the regulators to ensure capital
adequacy, require that IBT and its bank subsidiary maintain minimum ratios of
total capital to risk-weighted assets of eight percent (8%) and of Tier 1
capital to risk-weighted assets of four percent (4%).
There are two categories of capital under the guidelines. Tier 1 capital
includes common shareholders' equity, qualifying preferred stock and, for bank
holding companies, trust preferred securities, less goodwill and certain other
deductions, including the unrealized net gains and losses, after applicable
taxes, on available-for-sale securities carried at fair value. Tier 2 capital
includes preferred stock not qualifying as Tier 1 capital, mandatory convertible
debt, subordinated debt, certain unsecured senior debt issued by IBT, the
allowance for loans losses and net unrealized gains on marketable securities,
subject to limitations established by the guidelines. At least half of total
capital must be in the form of Tier 1 capital.
Under the guidelines, capital is compared to the relative risk related to
the balance sheet. To derive the risk included in the balance sheet, one of four
risk weights (0%, 20%, 50% and 100%) is applied to different balance sheet and
off-balance sheet assets, primarily based on the relative credit risk of the
counterparty. For example, claims guaranteed by the U.S. government or one of
its agencies are risk-weighted at 0%. Off-balance sheet items, such as loan
commitments and derivative financial instruments, are also assigned one of the
above risk weights after calculating balance sheet equivalent amounts. For
example, certain loan commitments are converted at 50% and then risk-weighted at
100%. Derivative financial instruments are converted to balance sheet
equivalents based on notional values, replacement costs and remaining
contractual terms. The capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors. In addition, the federal banking agencies have specified minimum
"leverage ratio" (the ratio of Tier 1 capital to quarterly average total assets)
guidelines for bank holding companies and state member banks. The minimum
leverage ratio guideline is three percent (3%) for banking organizations that
meet certain specified criteria, including that they have the highest regulatory
rating. All other banking organizations
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and state member banks are required to maintain a leverage ratio of three
percent (3%) plus an additional cushion of at least two percent (2%).
The Federal Reserve Board's capital guidelines provide that banking
organizations experiencing internal growth or making acquisitions are expected
to maintain strong capital positions substantially above the minimum supervisory
levels, without significant reliance on intangible assets. Also, the guidelines
indicate that the Federal Reserve Board will consider a "tangible Tier 1
leverage ratio" in evaluating proposals for expansion or new activities. The
tangible Tier 1 leverage ratio is the ratio of a banking organization's Tier 1
capital (excluding intangibles) to total assets (excluding intangibles).
The Federal Reserve Board and the FDIC have adopted rules to incorporate
market and interest rate risk components into their risk-based capital
standards. Amendments to the risk-based capital requirements, incorporating
market risk, became effective January 1, 1998. Under the new market risk
requirements, capital will be allocated to support the amount of market risk
related to a financial institution's ongoing trading activities.
At March 31, 2000, IBT's ratio of total capital (the sum of Tier 1 and Tier
2 capital) to risk-weighted assets was 14.8% and its ratio of Tier 1 capital to
risk-weighted assets was 13.6%. IBT's leverage ratio at March 31, 2000 was 8.8%.
IBT's management believes that IBT's subsidiary bank meets all capital
requirements to which it is subject.
As an additional means to identify problems in the financial management of
depository institutions, the FDI Act requires federal bank regulatory agencies
to establish certain non-capital safety and soundness standards for institutions
for which they are the primary federal regulator. The standards relate generally
to operations and management, asset quality, interest rate exposure and
executive compensation. The agencies are authorized to take action against
institutions that fail to meet such standards.
The FDI Act requires federal bank regulatory agencies to take "prompt
corrective action" with respect to FDIC-insured depository institutions that do
not meet minimum capital requirements. A depository institution's treatment for
purposes of the prompt corrective action provisions will depend upon how its
capital levels compare to various capital measures and certain other factors, as
established by regulation.
FDIC INSURANCE
Through the Bank Insurance Fund (BIF), the FDIC insures the deposits of
IBT's depository institution subsidiary up to prescribed limits for each
depositor. The amount of FDIC assessments paid by each BIF member institution is
based on its relative risk of default as measured by regulatory capital ratios
and other factors. Specifically, the assessment rate is based on the
institution's capitalization risk category and supervisory subgroup category. An
institution's capitalization risk category is based on the FDIC's determination
of whether the institution is well capitalized, adequately capitalized or less
than adequately capitalized. An institution's supervisory subgroup category is
based on the FDIC's assessment of the financial condition of the institution and
the probability that FDIC intervention or other corrective action will be
required.
The BIF assessment rate currently ranges from zero to 27 cents per $100 of
domestic deposits. The FDIC may increase or decrease the assessment rate
schedule on a semi-annual basis. An increase in the BIF assessment rate could
have a material adverse effect on IBT's earnings, depending on the amount of the
increase. The FDIC is authorized to terminate a depository institution's deposit
insurance upon a finding by the FDIC that the institution's financial condition
is unsafe or unsound or that the institution has engaged in unsafe or unsound
practices or has violated any applicable rule, regulation, order or condition
enacted or imposed by the institution's regulatory agency. The termination of
deposit insurance for one or more of IBT's subsidiary depository institutions
could have a material adverse effect on IBT's earnings, depending on the
collective size of the particular institutions involved.
All FDIC-insured depository institutions must pay an annual assessment to
provide funds for the payment of interest on bonds issued by the Financing
Corporation, a federal corporation chartered under
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the authority of the Federal Housing Finance Board. The bonds, commonly referred
to as FICO bonds, were issued to capitalize the Federal Savings and Loan
Insurance Corporation. FDIC-insured depository institutions continued to pay
approximately 1.2 cents per $100 of BIF-assessable deposits until the December
31, 1999. Thereafter, they will pay an assessment rate equal to the rate
assessed on deposits insured by the Savings Association Insurance Fund.
FISCAL AND MONETARY POLICIES
IBT's business and earnings are affected significantly by the fiscal and
monetary policies of the federal government and its agencies. IBT is
particularly affected by the policies of the Federal Reserve Board, which
regulates the supply of money and credit in the United States. Among the
instruments of monetary policy available to the Federal Reserve are (a)
conducting open market operations in United States government securities, (b)
changing the discount rates of borrowings of depository institutions, (c)
imposing or changing reserve requirements against depository institutions'
deposits, and (d) imposing or changing reserve requirements against certain
borrowing by banks and their affiliates. These methods are used in varying
degrees and combinations to directly affect the availability of bank loans and
deposits, as well as the interest rates charged on loans and paid on deposits.
For that reason alone, the policies of the Federal Reserve Board have a material
effect on the earnings of IBT.
COMPETITION
The financial services industry is highly competitive. IBT's subsidiaries
compete with financial services providers, such as banks, savings and loan
associations, credit unions, finance companies, mortgage banking companies,
insurance companies, and money market and mutual fund companies. They also face
increased competition from non-banking institutions such as brokerage houses and
insurance companies, as well as from financial services subsidiaries of
commercial and manufacturing companies. Many of these competitors enjoy the
benefits of advanced technology, fewer regulatory constraints and lower cost
structures.
Under the Gramm-Leach-Bliley Act, effective March 11, 2000, securities
firms and insurance companies that elect to become financial holding companies
may acquire banks and other financial institutions. The Gramm-Leach-Bliley Act
may significantly change the competitive environment in which the Company and
its subsidiaries conduct business. See "Financial Modernization" below. The
financial services industry is also likely to become more competitive as further
technological advances enable more companies to provide financial services.
These technological advances may diminish the importance of depository
institutions and other financial intermediaries in the transfer of funds between
parties.
FINANCIAL MODERNIZATION
On November 12, 1999, President Clinton signed into law the
Gramm-Leach-Bliley Act which, effective March 11, 2000, permits bank holding
companies to become financial holding companies and thereby affiliate with
securities firms and insurance companies and engage in other activities that are
financial in nature. A bank holding company may become a financial holding
company if each of its subsidiary banks is well capitalized under the FDICIA
prompt corrective action provisions, is well managed, and has at least a
satisfactory rating under the Community Reinvestment Act (CRA) by filing a
declaration that the bank holding company wishes to become a financial holding
company. No regulatory approval will be required for a financial holding company
to acquire a company, other than a bank or savings association, engaged in
activities that are financial in nature or incidental to activities that are
financial in nature, as determined by the Federal Reserve Board.
The Gramm-Leach-Bliley Act defines "financial in nature" to include
securities underwriting, dealing and market making; sponsoring mutual funds and
investment companies; insurance underwriting and agency; merchant banking
activities; and activities that the Board has determined to be closely related
to banking. A national bank also may engage, subject to limitations on
investment, in activities that are financial in nature, other than insurance
underwriting, insurance company portfolio investment, real estate
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development and real estate investment, through a financial subsidiary of the
bank, if the bank is well capitalized, well managed and has at least a
satisfactory CRA rating. Subsidiary banks of a financial holding company or
national banks with financial subsidiaries must continue to be well capitalized
and well managed in order to continue to engage in activities that are financial
in nature without regulatory actions or restrictions, which could include
divestiture of the financial in nature subsidiary or subsidiaries. In addition,
a financial holding company or a bank may not acquire a company that is engaged
in activities that are financial in nature unless each of the subsidiary banks
of the financial holding company or the bank has CRA rating of satisfactory or
better.
INFORMATION ABOUT FSB
GENERAL
FSB is a Michigan corporation registered as a bank holding company under
the Bank Holding Company Act of 1956. FSB owns one subsidiary bank, and conducts
banking activities in Gratiot and Saginaw Counties in Michigan. FSB's subsidiary
banks provide a full range of banking services from three banking locations and
three ATMs. FSB also wholly-owns and insurance agency which conducts no business
other than obtaining insurance for FSB. FSB owns minority interests of Michigan
Bankers Title Company of Northern Michigan, LLC, and of West Shore Computers
Services, Inc.
At March 31, 2000, FSB had consolidated total assets of $99.7 million,
consolidated total deposits of $88.1 million, and shareholders' equity of $10.77
million.
FSB's executive offices are located at 316 East Saginaw Street,
Breckenridge, Michigan 48615, and its telephone number is (517) 842-3191.
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FSB AUDITED CONSOLIDATED FINANCIAL STATEMENTS
ANDREWS HOOPER & PAVLIK P.L.C.
CERTIFIED PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
FSB Bancorp, Inc.
We have audited the accompanying consolidated balance sheets of FSB
Bancorp, Inc. and its wholly owned subsidiary, Farmers State Bank of
Breckenridge, as of December 31, 1999 and 1998, and the related consolidated
statements of income, shareholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of FSB Bancorp,
Inc. and its wholly owned subsidiary, Farmers State Bank of Breckenridge, as of
December 31, 1999 and 1998, and the consolidated results of their operations and
their cash flows for the years then ended in conformity with generally accepted
accounting principles.
Andrews Hooper & Pavlik P.L.C.
January 19, 2000
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FSB BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
See accompanying notes.
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FSB BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
See accompanying notes.
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FSB BANCORP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
See accompanying notes.
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FSB BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
See accompanying notes.
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FSB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1. ACCOUNTING POLICIES
Organization and Consolidation
FSB Bancorp, Inc. (the Corporation) is the parent of its 100% wholly owned
subsidiary, Farmers State Bank of Breckenridge (the Bank). Significant
intercompany transactions and accounts have been eliminated upon consolidation.
Nature of Operations
The Bank provides a variety of financial services to individuals and
corporate customers through its three offices in Breckenridge, Hemlock and
Ithaca, Michigan, which are primarily agricultural areas. The Bank's primary
deposit products are interest-bearing checking and saving accounts and
certificates of deposit. Its primary lending products are residential-mortgage
loans, installment loans and commercial loans. Agricultural loans represent
approximately 39% of the Bank's loan portfolio.
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.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses and the valuation
of other real estate acquired in connection with foreclosures or in satisfaction
of loans. In connection with the determination of the allowance for losses on
loans and foreclosed real estate, management obtains independent appraisals for
significant properties. While management uses available information to recognize
loan losses, further reductions in the carrying amounts of loans may be
necessary based on changes in local economic conditions. In addition, regulatory
agencies, as an integral part of their examination process, periodically review
the estimated loan losses. Such agencies may require the Bank to recognize
additional losses based on their judgments about information available to them
at the time of their examination. Because of these factors, it is possible that
the estimated loan losses may change in the near term. However, the amount of
the change cannot be estimated.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, interest-bearing deposits with other banks
and federal funds sold. The Bank reports customer loan and deposit transactions
on a net cash flow basis.
Investment Securities
The Bank has classified its investment securities as trading (none),
available-for-sale or held-to-maturity securities.
Investment securities held to maturity are those securities for which the
Bank has the positive intent and ability to hold to maturity. These securities
are reported at cost, adjusted for premiums and discounts that are recognized in
interest income using the straight-line method over the period to maturity.
Investment securities available for sale are those securities not
classified as trading or held-to-maturity securities. Unrealized holding gains
and losses, net of tax, are reported as a net amount in a separate component of
shareholders' equity until realized. Gains and losses on the sale of
available-for-sale
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FSB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
1. ACCOUNTING POLICIES -- CONTINUED
securities are determined using the specific-identification method. Premiums and
discounts are recognized in interest income using the straight-line method over
the period to maturity.
Federal Home Loan Bank Stock
Federal Home Loan Bank (FHLB) stock is recorded and traded at cost and can
only be sold to the FHLB or another member institution. The Bank is required to
maintain an investment in FHLB stock equal to one percent of the net permanent
home mortgage loan portfolio. At December 31, 1999 and 1998, the Bank's
investment in FHLB stock exceeded the required amount.
Allowance for Loan Losses
An allowance for loan losses is maintained at a level which, in
management's judgment, is adequate to absorb losses on loans. Management
determines the adequacy of the allowance for loan losses based on an evaluation
of the loan portfolio, past and recent loan loss experience, current economic
conditions, including agricultural land and equipment values, current commodity
prices, and other pertinent factors.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
For financial reporting purposes, the provision for depreciation is computed
principally by the straight-line method based upon the useful lives of the
assets.
Other Real Estate
Other real estate includes assets that have been acquired in satisfaction
of debt. Recorded values of other real estate are periodically reviewed and
carried at the lower of cost or fair market value less estimated costs to sell.
Interest on Loans
Interest on loans is generally accrued based upon the principal amount
outstanding. Loans are placed on nonaccrual status whenever the collectibility
of principal or interest is considered doubtful. When this occurs, previously
accrued but unpaid interest is reversed from current earnings and such loans are
placed on a cash basis for future recognition of interest income. Cash-basis
loans are restored to an accrual basis whenever interest and principal payments
are current and it is believed that the financial condition of the borrower has
improved to the extent that future principal and interest payments will be met.
Mortgage Banking Activities
The Bank originates and sells all mortgage loans with fixed rates and
maturities of 15 and 30 years and retains the servicing rights. The Bank
estimates the cost of servicing to approximate the servicing income received.
The Bank does not have any loans available for sale at December 31, 1999.
Employee Benefits
The profit sharing plan of the Bank covers substantially all employees.
Contributions to the plan, which are discretionary, totaled $95 in 1999 and $75
in 1998.
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FSB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
1. ACCOUNTING POLICIES -- CONTINUED
Federal Income Taxes
The provision for federal income taxes is based on amounts reported in the
consolidated financial statements (after exclusion of nontaxable interest
income) and reflects deferred federal income taxes on temporary differences
between financial statement and income tax accounting.
Net Income Per Share
Net income per share of common stock has been computed on the basis of the
weighted average number of shares of common stock outstanding and reflects a 5%
stock dividend in the current year (See Note 2).
Advertising Costs
The Bank expenses advertising costs as incurred. The total amount of
advertising costs charged to expense during 1999 and 1998 was approximately $75
and $76, respectively. The Bank has no direct-response advertising.
2. SHAREHOLDERS' EQUITY
On October 15, 1999 and September 15, 1998, the Corporation distributed
shares of common stock in connection with 5% stock dividends. As a result of the
stock dividends, capital surplus was increased by $841 in 1999 and $675 in 1998
and retained earnings was decreased by the same amounts. All per share amounts
have been restated to reflect the stock dividends.
During 1999 and 1998, the Corporation issued 2,410 and 3,192 shares of
common stock in conjunction with the Corporation's dividend reinvestment plan.
3. INVESTMENT SECURITIES
Investment securities have been classified in the consolidated financial
statements according to management's intent. The carrying amount of investment
securities and their approximate market values at December 31, are as follows:
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FSB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
3. INVESTMENT SECURITIES -- CONTINUED
The amortized cost and approximate market value of debt securities at
December 31, 1999 by contractual maturity are shown below. Actual maturities
could differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Investment securities with a carrying value of approximately $1,003 at
December 31, 1999 and $2,008 at December 31, 1998 were pledged to secure
overnight investments.
4. LOANS
The following summarizes the changes in the allowance for loan losses:
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FSB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
4. LOANS -- CONTINUED
Certain directors and executive officers of the Corporation and the Bank
(including their immediate families and companies in which they have 10% or more
ownership) were loan customers during 1999 and 1998. Such loans were made in the
ordinary course of business at normal credit terms, including interest rates and
collateralization, and do not represent more than a normal risk of collection.
Total loans to these customers aggregated $1,512 and $1,335 at December 31, 1999
and 1998, respectively.
Nonperforming loans include nonaccrual loans, restructured loans and loans
past due 90 days or more. These loans aggregated $779 and $458 at December 31,
1999 and 1998, respectively. Additional interest income that would have been
recorded on nonaccrual loans, if the loans had been current in accordance with
their original terms, was approximately $48 in 1999 and $56 in 1998.
The Bank grants loans to customers generally in their geographic area.
Although the Bank has a diversified loan portfolio, a substantial portion of its
debtors' ability to honor their loan agreements is dependent upon the
agriculture industry. These loans are primarily secured by residential and farm
real estate, equipment and crops.
5. PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31 follows:
6. DEPOSITS
Deposit account balances at December 31, are summarized as follows:
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FSB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
6. DEPOSITS -- (CONTINUED)
Certificates of deposit maturing in years ending December 31 are as
follows:
The Bank held related party deposits of approximately $2,900 at December
31, 1999.
7. ADVANCES FROM FEDERAL HOME LOAN BANK (FHLB)
During 1999, the Bank received $4,500 in advances from the FHLB and repaid
$3,500 leaving $1,000 outstanding at December 31, 1999. Pursuant to collateral
agreements with the FHLB, advances are secured by the FHLB stock and qualifying
first year mortgage loans. The outstanding balance was paid in full in January
2000.
8. FEDERAL INCOME TAXES
The components of federal income tax expense are as follows:
A reconciliation between federal income taxes and the amount computed by
applying the statutory federal income tax rate (34%) to income before federal
income taxes is as follows:
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for federal income
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FSB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
8. FEDERAL INCOME TAXES -- (CONTINUED)
tax purposes. Significant temporary differences which comprise the deferred tax
assets and liabilitiesconsequences of, the Bank as of December 31 are approximately as
follows:
9. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business there are various outstanding commitments
and contingent liabilities, such as commitments to extend credit and guarantees,
which are not reflected in the accompanying financial statements. Commitments to
extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses. Historically, the
majority of the commitments have not been drawn upon, and therefore do not
necessarily represent future cash requirements. The Bank evaluates each
customer's credit worthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Bank upon extension of credit, is based on
management's credit evaluation of the borrower. Collateral held varies, but may
include accounts receivable, inventory, property, plant and equipment, and
income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Bank
generally to guarantee the performance of a customer to a third party. These
arrangements have credit risk essentially the same as that involved in extending
loans to customers and are subject to the Bank's normal credit policies.
Outstanding loan commitments, lines of credit and standby letters of credit
aggregated $7,814, $701, and $493, respectively at December 31, 1999. Management
does not anticipate any losses as a result of these transactions.
10. OTHER MATTERS
The Bank is subject to limitations under the Federal Reserve Act on the
amount of loans or advances to the parent corporation and on the amount of
dividends that can be paid to the parent corporation. Approval is needed if
total dividends declared in any calendar year exceed the retained "net profit"
(as defined in the Federal Reserve Act) of that year plus the retained "net
profit" of the preceding two years. The amount that was not subject to this
restriction was $1,358 at January 1, 2000.
Banking regulations require that banks maintain cash reserves and cash
balances with the Federal Reserve or certain other qualifying banks. At December
31, 1999, the average cash reserve requirement was $269.
There were no material noncancelable lease commitments outstanding at
December 31, 1999.
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FSB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
11. CAPITAL REQUIREMENTS
The Bank is subjected 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 the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities, and certain off-balance sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
adjusted assets (as defined). Management believes that as of December 31, 1999
the Bank meets all capital adequacy requirements to which it is subject.
As of January 1999, the most recent notification from the Federal Reserve
Bank of Chicago, the Bank was categorized as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the Bank's
category.
The Bank's actual capital amounts and ratios are also presented in the
following tables:
12. FAIR VALUE DISCLOSURES
In 1999, the Corporation adopted Financial Accounting Standards Board
(FASB) Statement No. 107, Disclosures About Fair Value of Financial Instruments,
which requires disclosures about the estimated fair value of the Bank's
financial instruments. The following table presents the carrying amount and
estimated fair values of the Bank's financial instruments as of December 31,
1999. These estimates of fair value are significantly affected by the
assumptions made, and accordingly, do not necessarily indicate amounts which
could be realized in a current market exchange. It is also the Bank's general
practice and intent to hold the majority of its financial instruments until
maturity; therefore, the Bank does not expect to realize the estimated amount
below. In addition, the estimated fair values shown below do not include any
value for
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FSB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
12. FAIR VALUE DISCLOSURES -- (CONTINUED)
assets and liabilities which are not financial instruments as defined by FASB
Statement No. 107, such as the value of property and equipment, other assets,
the Bank's customer base or anticipated future business.
The following are the major methods and assumptions used in estimating the
fair value of financial instruments.
Cash and due from banks, federal funds sold, accrued interest receivable, FHLB
stock, advance from FHLB, and accrued interest payable
For these short-term instruments the fair value approximates their carrying
amount.
Investment securities
The fair values of investment securities are based on quoted market prices.
Net loans
For variable rate loans that reprice frequently with no significant change
in credit risk, fair values are based on carrying values. The fair values for
all other loans are estimated using discounted cash flow analysis at interest
rates currently offered for loans with similar terms to borrowers of similar
credit quality.
Deposits
The fair values disclosed for deposit accounts with no defined maturities
are, by definition, equal to the amount payable on demand at the reporting date.
Fair values for certificates of deposit are estimated using a discounted cash
flow calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated expected monthly maturities on time
deposits.
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FSB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
13. FSB BANCORP, INC. (PARENT ONLY) STATEMENTS
BALANCE SHEETS
CONDENSED STATEMENTS OF INCOME
STATEMENTS OF CASH FLOWS
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FSB MANAGEMENT'S DISCUSSION AND ANALYSIS
The following is management's discussion and analysis of the major factors
that influenced FSB Bancorp's ("FSB") financial performance as of the dates and
for the periods indicated. This analysis should be read in conjunction with
FSB's 1999 annual report and other financial information appearing elsewhere in
this document.
The data contained in this management discussion and analysis that are not
historical facts are forward looking statements subject to the safe harbor
created by the Private Securities Litigation Act of 1995. Forward looking
statements, which are based on certain assumptions and describe future plans,
strategies, and expectations of FSB, are generally identifiable by use of the
words "believe", "intend", "anticipate", "estimate", "project", or similar
expressions. FSB's ability to predict results or the actual effect of future
plans or strategies is inherently uncertain. Factors which could have an adverse
impact on the operations and future prospects of FSB include, but are not
limited to, changes in interest rates, general economic conditions, legislation,
regulations, fiscal policy of the United States government, monetary policy of
the Federal Reserve Board, competition from both other financial institutions
and nonfinancial institutions, and accounting principles. These risks and
uncertainties should be considered in evaluating forward looking statements and
undue reliance should not be placed on such statements.
RESULTS OF OPERATIONS
Net income equaled $1.19 million for the year ended December 31, 1999
compared to $1.07 million for the same period in 1998, an 11.8% increase. The
increase in net income was due primarily to higher net interest income. Return
on average assets, which measures the ability of FSB to profitably and
efficiently employ its resources, equaled 1.24% during 1999 and 1.14% in 1998.
Return on average equity, which indicates how effectively FSB is able to
generate earnings on shareholder invested capital, equaled 11.79% in 1999 versus
11.45% for the same period in 1998.
Net income for the first quarter of 2000 was $343,000, an $90,000 or 35.6%
increase when compared to the same period in 1999. Return on average assets was
1.39% and return on average equity was 12.9%. The increase in net income was
principally a result of a $223,000 increase in net interest income.
NET INTEREST INCOME
Net interest income equals interest income less interest expense and is the
primary source of income for FSB. For analytical purposes, net interest income
is adjusted to a "taxable equivalent" basis by adding the income tax savings
from interest on tax-exempt loans and securities, thus making year-to-year
comparisons more meaningful.
Average assets for the first quarter were $98.6 million, a $2.2 million
increase since December 31, 1999 and a $5.1 million increase since December 31,
1998. Since 1998, average loans outstanding have increased $9.2 million to $80.0
million, investments have decreased $4.0 million, and other assets have
decreased $150,000. Average asset growth since 1998 has been funded primarily by
a $2.3 million increase in interest bearing deposits and a $1.3 million increase
in shareholders' equity. FTE net interest income yield to average earning assets
equaled 5.67% during the first quarter of 2000 versus 5.12% during 1999. The
entire increase in the FTE yield was a result of $63,000 in interest recoveries
on loans previously charged off.
As shown in Tables 1 and 2, when comparing the twelve month period ending
December 31, 1999 to the same period in 1998, fully taxable earnings assets
provided $398,000 of FTE interest income. A 1.9% increase in interest bearing
liabilities resulted in $35,000 of additional interest expense. Overall, changes
in volume resulted in a $363,000 of additional FTE interest income. The average
FTE interest rate earned on assets decreased by 0.21%, decreasing FTE interest
income by $300,000 and the average rate paid on deposits decreased by 0.41%,
decreasing interest expense by $289,000. The decreased interest rates earned and
paid reduced FTE net interest income by $11,000.
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FSB's FTE net interest yield as a percentage of average earning assets
during 1999 increased by 0.21% to 5.12%. The increase is primarily a result of
three factors; an increase in the average loan to average deposit ratio from
85.1% in 1998 to 89.7% in 1999, the ratio of noninterest bearing liabilities and
equity to average earning assets increased by 1.0%, and the average earning
assets as a percent of total earning assets increased by 0.5% to 95.1%.
TABLE 1. AVERAGE BALANCES, INTEREST INCOME AND EXPENSE, AND AVERAGE RATES
(DOLLARS IN THOUSANDS)
The following schedules present the daily average amount outstanding for
each major category of interest earning assets, nonearning assets, interest
bearing liabilities, and noninterest bearing liabilities. This schedule also
presents an analysis of interest income and interest expense for the periods
indicated. All interest income is reported on a fully taxable equivalent (FTE)
basis using a 34% tax rate. Nonaccruing loans, for the purpose of the following
computations, are included in the average loan amounts outstanding.
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TABLE 2. VOLUME AND RATE VARIANCE ANALYSIS
(DOLLARS IN THOUSANDS)
The following table details the dollar amount of changes in FTE net
interest income for each major category of interest earning assets and interest
bearing liabilities, and the amount of change attributable to changes in average
balances (volume) or average rates. The change in interest due to both volume
and rate, has been allocated to volume and rate changes in proportion to the
relationship of the absolute dollar amounts of the change in each.
In addition to changes in asset and liability mix, changes in rates have an
impact on FSB's interest income. Management expects short term interest rates to
increase during 2000. Based on this expectation, and assets and liability
repricing characteristics, management projects that the FTE net interest margin
as a percentage of average assets will increase slightly in 2000. Due to the
many factors that can affect net interest income, interest income earned cannot
be predicted with any certainty.
PROVISION FOR LOAN LOSSES
The viability of any financial institution is ultimately determined by its
management of credit risk. Net loans outstanding represents 81% of the
Corporation's total assets and is the single largest concentration of risk as of
March 31, 2000. The allowance for loan losses is management's estimation of
potential future losses inherent in the existing loan portfolio. Factors used to
evaluate the loan portfolio, and thus to determine the current charge to
expense, include recent loan loss history, financial condition of borrowers,
amount of nonperforming and impaired loans, overall economic conditions, and
other factors. This evaluation is inherently subjective as it requires material
estimates, including the amounts and timing of future cash flows and may be
subject to significant change.
As shown in Table 3, net loan charge offs were $223,000 in 1999, a $13,000
increase from 1998. Net charged off loans were 0.29% of average loans in 1999
and 0.30% in 1998. The allowance for loan losses as a percentage of loans
equaled 1.79% and 1.99% as of December 31, 1999 and 1998 respectively.
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TABLE 3. SUMMARY OF LOAN LOSS EXPERIENCE
(DOLLARS IN THOUSANDS)
As shown in Table 4, loans classified as nonperforming plus other real
estate were $819,000 as of March 31, 2000, an increase of $14,000 since December
31, 1999 and a decrease of $133,000 since December 31, 1998. Nonperforming loans
as a percentage of outstanding loans were 0.99%, 1.02% and 1.32% as of March 31,
2000, and December 31, 1999 and 1998 respectively. During the first quarter of
2000, net charged off loans were $16,000 and the provision for loan losses was
$75,000, a $45,000 increase over the first quarter of 1999. Average loans
outstanding increased during 1999 by 7.6% and the provision for loan losses was
decreased 4.8% to $200,000. The policy of FSB is to transfer a loan, including
impaired loans, to nonaccrual status whenever it is determined that the interest
should be recorded on a cash basis instead of the accrual basis because of a
deterioration in the financial position of the borrower, it is determined that
the payment in full of principal or interest cannot be expected, or the loan has
been in default for a period of 90 days or more, unless it is both well secured
and in the process of collection. Restructured loans are loans whose terms have
been renegotiated to provide for deferral of interest or principal because of a
borrower's deterioration in their financial position.
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TABLE 4. NONPERFORMING LOANS
(DOLLARS IN THOUSANDS)
RISK ELEMENTS
The following loans are all the credits which require classification for
state or federal regulatory purposes. Nonperforming loans, including other real
estate acquired in satisfaction of loans, were as follows:
As of March 31, 2000, there were no other interest bearing assets which
would require classification. Management is not aware of any recommendations by
regulatory agencies which, if implemented, would have a significant impact on
liquidity, capital, or operations.
In management's opinion, the allowance for loan losses is adequate as of
December 31, 1999. Management has allocated, as shown in Table 5, the allowance
for loan losses to the following categories: commercial and agricultural, 29.4%;
real estate mortgages, 22.8%; installment loans, 42.4%; and unallocated, 5.4%.
TABLE 5. ALLOCATION ON THE ALLOWANCE FOR LOAN LOSSES
(DOLLARS IN THOUSANDS)
The allowance for loan losses has been allocated according to the amount
deemed to be reasonable necessary to provide for the possibility of losses being
incurred within the following categories:
NONINTEREST INCOME
Noninterest income consists of deposit service charges, fees for other
financial services, and gain on the sale of real estate mortgages. There were no
significant changes in noninterest income during the first quarter of 2000 when
compared to 1999. Total income earned from these sources declined $5,000 in
2000. During 1999, noninterest income earned increased $68,000. The most
significant changes were a $33,000 increase in the gain on the sale of other
real estate, a $15,000 increase in insurance premium revenue, and a $20,000
increase in gains on the sale of residential real estate mortgages.
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NONINTEREST EXPENSE
Total noninterest expense for the first three months of 2000 increased
$32,000 or 3.9%. Salary and benefits increased $22,000, equipment and occupancy
expense decreased $24,000 and all other expenses increased $34,000. These
expenses increased $240,000 or 8.1% during 1999 when compared to 1998. The
largest component of noninterest expense is salaries and employee benefits,
which increased $154,000 or 10.7%. The majority of this increase is related to
normal merit salary increases and increased benefit costs. Occupancy and
furniture and equipment expenses increased $2,000. The increase is associated
with an increase in equipment and building repairs. Other noninterest expenses
increased $84,000 or 7.7%. The most significant changes were increases in legal
expenses, ATM expenses, armored car transportation, director fees, and auditing
fees.
FEDERAL INCOME TAXES
Federal income tax expense in 1999 was $553,000 or 31.7% of pretax income
and in 1998 $497,000 or 31.8%. The effective rate during the first quarter of
2000 was 31.5%. The difference between the statutory rate of 34% and actual
rates paid is primarily due to the exclusion of interest income earned on tax
exempt municipal bonds from taxable income.
ANALYSIS OF CHANGES IN FINANCIAL CONDITION
When comparing year to date 1998 average balances to the average for the
first quarter of 2000, total average assets increased $5.1 million to $98.6
million. During this period average loans outstanding increased $9.2 million,
average fed funds sold and investment securities decreased $4.0 million. Changes
in the average balances of funding sources include a $1.2 million increase in
noninterest liabilities, a $2.6 million increase in interest bearing deposits,
and a $1.3 million increase in shareholders' equity.
INVESTMENT SECURITIES
The primary objective of investing activities is to provide for safety of
the principal invested. Secondary considerations include the need for earnings
and liquidity. During 1999 FSB's net holdings of investment securities decreased
$4.5 million. Table 6 shows the carrying value of investment securities
available for sale and held to maturity. Securities held to maturity are stated
at amortized cost. Securities not classified by management as held to maturity
are classified as available for sale and are stated at fair value. At December
31, 1999, FSB held no securities of any single issue that exceeded 10% of
shareholder equity.
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TABLE 6. INVESTMENT PORTFOLIO
(DOLLARS IN THOUSANDS)
The following is a schedule of the carrying value of investment securities
available for sale and held to maturity:
TABLE 7. SCHEDULE OF MATURITIES OF INVESTMENT SECURITIES AND WEIGHTED AVERAGE
YIELD
(DOLLARS IN THOUSANDS)
The following table shows the relative maturities of securities available
for sale at fair value and held to maturity at book value and their weighted
average interest rate for each maturity range as of December 31, 1999. There
were no investments with a stated maturity date greater than 5 but less than 10
years. All interest rates are reported on a fully taxable equivalent (FTE) basis
using a 34% tax rate.
LOANS
Loans are the largest component of earning assets. As a percentage of
assets, gross loans outstanding increased 3.7% to 77.9% as of December 31, 1999.
The proper management of credit risk and market risk is critical to the
financial well being of FSB. To control these risks, FSB has adopted strict
underwriting standards. The standards include limits against lending outside
FSB's defined market area, lending limits to a single borrower, and loan to
collateral value limits. FSB has no foreign loans, and there were no
concentrations greater than 10% of total loans that are not disclosed as a
separate category in Table 8.
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TABLE 8. LOAN PORTFOLIO
(DOLLARS IN THOUSANDS)
As shown in the following table, total loans increased 9.5% in 1999 to
$79.1 million. The increase was primarily in the residential real estate and
agricultural related loan categories.
TABLE 9. LOAN MATURITY AND INTEREST SENSITIVITY
(DOLLARS IN THOUSANDS)
The following table shows the maturity of commercial and agricultural loans
outstanding at December 31, 1999. Also provided are the amounts due after one
year, classified according to the sensitivity to changes in interest rates.
DEPOSITS
Deposits are the largest source of funds for financing asset growth. As
shown in Table 10, average deposits increased $1.7 million in 1999 or 2.0%.
Within the banking industry there is agreement that competition from equity
investments, the bond market, and other financial intermediaries has had a
significant impact on deposit growth. The result of this competition is a
general slowing of deposit growth. To fund asset growth in the future, it is
likely that FSB is going to have to obtain funds from other sources such as the
Federal Home Loan Bank.
TABLE 10. AVERAGE DEPOSITS
(DOLLARS IN THOUSANDS)
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TABLE 11. MATURITIES OF TIME CERTIFICATES OF DEPOSITS OVER $100,000
(DEPOSITS IN THOUSANDS)
The following table shows the maturity schedule and amounts of time
deposits of more than $100,000 for the dates indicated. These deposits represent
4.3% of the total deposits in 1999 and 5.8% in 1998.
CAPITAL
The capital of FSB consists solely of common stock, capital surplus,
retained earnings, and accumulated other comprehensive income. Total capital
increased $779,000 in 1999. FSB offers a dividend reinvestment plan. Under the
terms of the plan, 2,410 shares of common stock were issued in 1999.
The Federal Reserve Board's current recommended minimum primary capital to
assets requirement is 6.0%. FSB's primary capital to assets, which consists of
Shareholder's equity plus allowance for loan losses less acquisition intangibles
was 11.5% as of December 31, 1999.
The Federal Reserve has also established minimum capital requirements for
banks. Table 12 shows the minimum regulatory capital requirement to be
considered well capitalized and FSB's wholly owned subsidiary bank, Farmers
State Bank, ratios. Tier 1 capital consists of shareholders' equity, excluding
unrealized gains and losses on securities available for sale less intangible
assets. Total capital is comprised of Tier 1 capital plus the allowance for loan
losses. At March 31, 2000, the Bank continued to be well capitalized under the
prompt corrective action regulatory criteria, as shown below.
TABLE 12. CAPITAL RATIOS
LIQUIDITY
Liquidity management is designed to have adequate resources available to
meet depositor and borrower discretionary demands for funds. Liquidity is also
required to fund expanding operations, investment opportunities, and the payment
of cash dividends. The primary sources of FSB's liquidity are cash, cash
equivalents, and investment securities available for sale.
As of March 31, 2000, cash and cash equivalents as a percentage of total
assets equaled 3.3%, versus 9.0% as of December 31, 1999. During the first three
months of 2000, $634,000 in net cash was provided from operations. Investing
activities used $4.1 million and financing activities resulted in a $2.4 million
decrease in cash and cash equivalents. The accumulated effect of operating,
investing, and financial activities was a $5.9 million decrease in cash and cash
equivalents during the first three months of 2000.
Investment securities available for sale are another source of liquidity.
Securities available for sale equaled $4.1 million as of March 31, 2000 and $3.6
million as of December 31, 1999. Additionally, FSB
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has the ability to borrow in the federal funds market and from the Federal Home
Loan Bank. FSB's liquidity is considered adequate by management.
ASSET AND LIABILITY MANAGEMENT
Asset and liability management aims at achieving reasonable stability in
the net interest margins through periods of changing interest rates. One method
to measure the exposure to changes in interest rates is gap analysis. GAP
analysis measure the cash flows and/or the earliest repricing of the
Corporation's interest bearing assets and liabilities. The analysis is useful
for measuring trends in the repricing characteristics of the balance sheet. As
shown in Table 13, the gap analysis depicts the Corporation's position for
specific time periods and the cumulative gap as a percentage of total assets.
Investment securities and other investments are scheduled according to
their contractual maturity. Nonvariable rate loans are included in the
appropriate time frame based on their scheduled amortization. Variable rate
loans are included in the time frame of their earliest repricing. Time deposits
are scheduled according to their contractual maturity. Money market, NOW, and
savings accounts have no contractual maturity and are believed to be
predominantly noninterest sensitive by management. For purposes of gap analysis,
these deposits are included in the 0-3 month repricing time frame.
FSB has no foreign exchange risk, holds no trading account assets, nor does
it utilize interest rate swaps or derivatives in the management of its interest
rate risk. FSB does have a significant portion of its assets in agricultural
loans. Changes in farm commodity prices could have a significant impact on cash
flow, credit quality, and profitability.
TABLE 13. INTEREST RATE SENSITIVITY
(DOLLARS IN THOUSANDS)
The following table shows the time periods and the amount of assets and
liabilities available for interest rate repricing as of March 31, 2000. For
purposes of this analysis, nonaccrual loans and the allowance for loan losses
are excluded.
IMPACT OF INFLATION
The majority of assets and liabilities of financial institutions are
monetary in nature. Generally, changes in interest rates have a more significant
impact on earnings of FSB than inflation. Although influenced by inflation,
changes in rates do not necessarily move in either the same magnitude or
direction as changes in the price of goods and services. Inflation does impact
the growth of total assets, creating a need to increase equity capital at a
higher rate to maintain an adequate equity to assets ratio, which in turn
reduces the amount of earnings available for cash dividends.
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FSB CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FSB BANCORP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
See notes to unaudited condensed consolidated financial statements
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FSB BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
See notes to unaudited condensed consolidated financial statements
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FSB BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
See notes to unaudited condensed consolidated financial statements
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FSB BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
See notes to unaudited condensed consolidated financial statements
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FSB BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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FSB BANCORP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three month period ended March 31,
2000 are not necessarily indicative of the results that may be expected for the
year ended December 31, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in FSB's annual report for
the year ended December 31, 1999.
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IBT BANCORP, INC. AND FSB BANCORP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
The following unaudited pro forma condensed combined balance sheet as of
March 31, 2000 and the unaudited pro forma condensed combined statements of
income for the three month period ending March 31, 2000 for each of the three
year periods covering December 31, 1999, 1998, and 1997 give effect to the
pending merger accounted for as a pooling of interests.
The unaudited pro forma condensed combined financial information is based
on the historical consolidated statements of IBT and FSB under the assumptions
and adjustments set forth below and in the accompanying notes to the unaudited
pro forma condensed combined financial statements. The audited pro forma
condensed combined financial information does not give effect to any cost
savings that may occur in connection with the merger. Estimated merger costs are
reflected as a pro forma adjustment in the unaudited pro forma condensed
combined balance sheet. The nonrecurring expenses have been excluded from the
unaudited pro forma condensed combined statements of income.
Under generally accepted accounting principles, the transaction will be accounted for as a pooling of interests and, as such, the assets of FSB will be
combined with those of IBT at book value. The statements of income of FSB will
be combined with those of IBT for all periods presented. The unaudited pro forma
condensed statements of income give effectpassed upon by Foster, Swift, Collins & Smith, P.C., Lansing, Michigan, counsel to the merger as if the merger had
occurred at the beginning of the earliest period presented. The unaudited pro
forma condensed combined balance sheet assumes the merger was consummated on
March 31, 2000.
The accounting policies of both companies are in the process of being
reviewed for consistency. As a result of this review, certain conforming
accounting adjustments may be necessary. The nature and extent of these
adjustments have not been determined but are not expected to be significant.
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IBT BANCORP AND FSB BANCORP
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 2000
See notes to unaudited pro forma condensed combined financial statements
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IBT BANCORP AND FSB BANCORP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2000
See notes to unaudited pro forma condensed combined financial statements
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IBT BANCORP AND FSB BANCORP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1999
See notes to unaudited pro forma condensed combined financial statements
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IBT BANCORP AND FSB BANCORP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998
See notes to unaudited pro forma condensed combined financial statements
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IBT BANCORP AND FSB BANCORP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
See notes to unaudited pro forma condensed combined financial statements
77
86
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
NOTE 1
FSB is the sole shareholder of Farmers State Bank. The transaction will
result in FSB merging with and into IBT and Farmers State Bank of Breckenridge
becoming a wholly owned subsidiary of IBT. It is intended that the merger be
accounted for as a "pooling of interest." FSB shareholders will receive 2.1362
shares of IBT common stock for each share of FSB.
NOTE 2
The following are the pro forma adjustments to the condensed combined
balance sheet dated March 31, 2000.
(a) To reflect the issuance of 875,075 shares of IBT common stock to
acquire all outstanding shares of FSB common stock. The number of shares
issued is based on an exchange ratio of 2.1362 applied to shares
outstanding at March 31, 2000.
(b) To eliminate IBT investment in FSB for consolidation purposes.
(c) To reflect accrued and unpaid merger expenses. Reflects
management's estimate of accrued and unpaid nonrecurring legal, accounting,
consultant, and other costs associated with the merger and is recorded net
of taxes. These nonrecurring charges are a preliminary estimate and are
subject to change as more information is made available.
NOTE 3
Earnings per share for IBT is based on the historical average number of
common shares outstanding during the period. For purposes of the pro forma
earnings per share computation, the common shares for FSB have been adjusted by
the exchange ratio.
The consolidated financial statements of IBT and subsidiaries as of December 31, 19992006 and 1998,2005, and for each of the years in the three-year period ended December 31, 1999,2006, have been incorporated by reference herein, have been
incorporatedinto this Proxy Statement-Prospectus herein in reliance upon the report of Rehmann Robson, P.C., independent certifiedregistered public accountants,accounting firm, which report is incorporated by reference herein, and upon the authority of saidsuch firm as experts in accounting and auditing.
FSB'S INDEPENDENT ACCOUNTANTS
The consolidated financial statements of FSB Bancorp, Inc.
If the merger is approved by GCFC shareholders and subsidiarycompleted as of December 31, 1999planned, GCFC will not hold an annual shareholders meeting during 2008, and 1998, and for each of the years in the two-year
period ended December 31, 1999, included herein, have been audited by Andrews,
Hooper & Pavlik P.L.C., independent certified public accountants. Such financial
statements have been so included in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
OPINIONS
SHARE ISSUANCE
Foster, Swift, Collins & Smith, P.C., counsel for IBT, has rendered a legal
opinion that theGCFC shareholders receiving shares of IBT common stock offered hereby, when issued in accordance with the Merger Agreement, willmerger would be validly issued, fully paidentitled to attend and nonassessable.
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87
TAX MATTERS
Foster, Swift, Collins & Smith, P.C. and Bodman, Longley & Dahling LLP have
each given an opinion regardingvote at the material U.S. federal income tax
consequences2008 IBT annual meeting (if shares of IBT common stock are still held by such person as of the Merger. See "The Merger -- U.S. Federal Income Tax
Consequences Of The Merger."
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
IBT's articles of incorporation providerecord date for indemnification of directors
and officers. IBT believessuch meeting). In that such indemnification will assist IBT in
continuingcase, any shareholder proposal intended to attract and retain talented directors and officers in light of the
growing risk of litigation directed against directors and officers of publicly
held corporation. IBT's articles of incorporation provide that IBT shall
indemnify to the full extent permitted by law each person who is or was or had
agreed to become a director or officer of the Corporation or who serves or
served any other enterprisebe presented at the request of the corporation. The MBCA permits
such indemnification if such individual corporation or its shareholders, and,2008 IBT annual shareholder meeting must be received by IBT no later than December 24, 2007 in order to be included in the proxy statement relating to that meeting.
If the merger is not approved by GCFC shareholders or is otherwise not completed, GCFC would intend to hold its 2008 annual meeting as required by GCFC’s Bylaws. In that case, of a criminal proceeding, hadany shareholder proposal intended to be presented at the 2008 GCFC annual shareholder meeting must be received by GCFC no reasonable cause to believe the
conduct of the person was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling IBT
pursuant to the foregoing provisions, IBT has been informed that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
later than February 22, 2008.
IBT has filed a registration statement onForm S-4 to register with the SEC FILINGSthe offering of IBT common stock to be issued by IBT in the merger. This Proxy Statement-Prospectus is a part of that registration statement. As allowed by SEC rules, this Proxy Statement-Prospectus does not contain all of the information contained in the registration statement or the exhibits to the registration statement. This means that this proxy-statement prospectus incorporates important business and financial information about IBT that is not included in or delivered with this document.
IBT is subject to the informational requirements of the Securities Exchange Act of 1934, as amended. Accordingly, IBT files annual, quarterly, and current reports, proxy statements, and other information with the SEC. SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You can alsomay read and copy any document filed by IBT with the SECreports, statements, or other information that we file at the SEC's public reference rooms
located at 450 Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade Center,
Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. You can
also obtain copies of IBT's SEC filings at prescribed rates by writing to theSEC’s Public Reference Section of the SECRoom at 450 Fifth Street N.W., Washington, D.C. 20549. IBT'sYou may call the SEC at1-800-SEC-0330 for further information on the operation of the Public Reference Room. IBT’s SEC filings are also available to the public from commercial document retrieval services.
REGISTRATION STATEMENT
IBT filed a registration statement on Form S-4 to registerservices and at the website maintained by the SEC atwww.sec.gov. The website contains reports, proxy and information statements, and other information regarding companies that file electronically with the SEC.
The SEC allows IBT to incorporate by reference information into this Proxy Statement-Prospectus. This means that IBT can disclose important information by referring to another document filed separately with the IBT common stockSEC. The information incorporated by reference is considered to be issued to FSB shareholders in the Merger. This proxy
statement-prospectus is part of that registration statement. As allowedthis Proxy Statement-Prospectus, except for any information superseded by SEC
rules, this proxy statement-prospectus does not contain all of the information
you can find in the registration statement or the exhibits to the registration
statement.
DOCUMENTS INCORPORATED BY REFERENCE
Some of the information you may want to consider in deciding how to vote on
the Merger is not physically included in this proxy statement-prospectus.
Instead,Proxy Statement-Prospectus. This Proxy Statement-Prospectus incorporates by reference the documents set forth below that IBT has previously filed with the SEC. These documents contain important information is "incorporated by reference" toabout IBT and its finances.
41
IBT Commission Filings (FileNo. 000-18415)
Quarterly Report onForm 10-Q for the nine-month period ended September 30, 2007
Current Report onForm 8-K filed November 15, 2007
Current Report onForm 8-K filed September 28, 2007
Current Report onForm 8-K filed August 24, 2007
Current Report onForm 8-K filed August 6, 2007
Quarterly Report onForm 10-Q for the six-month period ended June 30, 2007
Current Report onForm 8-K filed May 7, 2007
Definitive Proxy Statement on Schedule 14A filed April 26, 2007
Quarterly Report onForm 10-Q for the three-month period ended March 31, 2007
Current Report onForm 8-K filed March 22, 2007
Annual Report onForm 10-K for year ended December 31, 2006
All documents filed as
appendixes to this proxy statement-prospectus or to documents that have beensubsequently filed by IBT with the SEC.
79
88
IBT Documents
This proxy statement-prospectus incorporates by reference the IBT SEC
documents set forth below. All of the documents were filed under SEC File No.
0-18415.
- Annual Report on Form 10-K for the year ended December 31, 1999,
including information specifically incorporated by reference into the
Form 10-K from IBT's 1999 Annual Report to Shareholders and IBT's
definitive Notice and Proxy Statement for IBT's 2000 Annual Meeting of
Shareholders;
- Quarterly Reports on Form 10-Q for the quarter ended March 31, 2000;
- Current Report on Form 8-K filed April 18, 2000;
- All other reports of IBT filed pursuant to SectionSections 13(a) or 15(d), 13(c), 14 and 15 of the Securities Exchange Act of 1934, since December 31, 1999;
- All reports and definitive proxy or information statements filed by IBT
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 afteras amended, between the date of this proxy statement-prospectusProxy Statement-Prospectus and before
completionthe date of the Merger andspecial meeting of the exchangeshareholders of IBT common stock for FSB
common stock.
DOCUMENTS AVAILABLE WITHOUT CHARGE
IBT will provide, without charge, copies of any reportGCFC are also incorporated by reference into this proxy statement-prospectus, excluding exhibits other than
those thatProxy Statement-Prospectus.
Documents incorporated by reference are specificallyavailable from IBT without charge. You may obtain documents incorporated by reference in this proxy
statement-prospectus. You may obtain a copy of any document incorporatedProxy Statement-Prospectus by reference byrequesting them in writing or callingby telephone from IBT as follows:
Corporate Secretary
at the following address:
IBT Bancorp, Inc.
Attn: Dennis P. Angner, President & Chief Executive Officer
200 East Broadway
Mt. Pleasant, Michigan 48858
(517)
(989) 772-9471
Attn: Dennis P. Angner, President & Chief Executive Officer
200 East Broadway
Mt. Pleasant, Michigan 48858
(989) 772-9471
TO ENSUREOBTAIN DELIVERY OF THIS INFORMATION PRIOR TO THE COPIES IN TIME FORSPECIAL GCFC SHAREHOLDERS MEETING, YOU MUST REQUEST THE INFORMATION NO LATER THAN DECEMBER 10, 2007, WHICH IS FIVE BUSINESS DAYS BEFORE THE DATE OF THE SPECIAL MEETING YOUR
REQUEST SHOULD BE RECEIVED BY , 2000.
IN DECIDING HOWAT WHICH YOU ARE REQUESTED TO VOTE ON THE MERGER, YOU SHOULD RELY ONLY ON THE
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT-PROSPECTUS. VOTE.
NEITHER IBT NOR FSBGCFC HAS AUTHORIZED ANY PERSONANYONE TO PROVIDE
YOU WITHGIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ABOUT THE MERGER OR OUR COMPANIES THAT IS DIFFERENT FROM, WHAT ISOR IN ADDITION TO, THAT CONTAINED IN THIS PROXY
STATEMENT-PROSPECTUS.DOCUMENT OR IN ANY OF THE MATERIALS THAT HAVE BEEN INCORPORATED INTO THIS PROXY STATEMENT-PROSPECTUS IS DATED ,
2000.DOCUMENT. THEREFORE, IF ANYONE DOES GIVE YOU INFORMATION OF THIS SORT, YOU SHOULD NOT ASSUME THATRELY ON IT. IF YOU ARE IN A JURISDICTION WHERE OFFERS TO EXCHANGE OR SELL, OR SOLICITATIONS OF OFFERS TO EXCHANGE OR PURCHASE, THE SECURITIES OFFERED BY THIS DOCUMENT OR THE SOLICITATION OF PROXIES IS UNLAWFUL, OR IF YOU ARE A PERSON TO WHOM IT IS UNLAWFUL TO DIRECT THESE TYPES OF ACTIVITIES, THEN THE OFFER PRESENTED IN THIS DOCUMENT DOES NOT EXTEND TO YOU. THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT-PROSPECTUS IS ACCURATEDOCUMENT SPEAKS ONLY AS OF ANYTHE DATE OTHER THAN SUCH DATE, AND
NEITHER THE MAILING TO YOU OF THIS PROXY STATEMENT-PROSPECTUS NORDOCUMENT UNLESS THE ISSUANCE
TO YOU OF SHARES OF IBT COMMON STOCK WILL CREATE ANY IMPLICATION TO THE
CONTRARY.
INFORMATION SPECIFICALLY INDICATES THAT ANOTHER DATE APPLIES.
42
This proxy statement-prospectus,document, including information included or incorporated by reference intoin this document may contain forward-looking statements aboutwithin the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to:
(i) the financial condition, results of operations and business of IBT and FSB, including one or moreGCFC;
(ii) statements about the benefits of the following:
- projections of revenues, income,merger, including future financial and operating results, cost savings, enhancements to revenue and accretion to reported earnings per share, capital
expenditures, dividends, capital structure orthat may be realized from the merger;
(iii) statements about our respective plans, objectives, expectations and intentions and other financial items;
- descriptions of plans or objectives of management for future operations,
products or services;
- forecasts of future economic performance;
- descriptions of assumptions underlying or relating to any of the
foregoing.
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89
Forward-looking statements can bethat are not historical facts; and
(iv) other statements identified by the fact that they do not
relate strictly to historical or current facts. They often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate,"“expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” or words of similar meaning, or future or conditional verbs such as "will," "would,"
"should," "could" or "may."
Forward-lookingmeaning. These forward-looking statements consistare based on current beliefs and expectations of expectations or predictionsour management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of future
conditions, events or results. Theywhich are not guarantees of future performance. By
their nature,beyond our control. In addition, these forward-looking statements are subject to risksassumptions with respect to future business strategies and uncertainties.
Theredecisions that are a number ofsubject to change. The following factors, -- many of which are beyondamong others, could cause actual results to differ materially from the control of IBT and
FSB --anticipated results or other expectations expressed in the forward-looking statements:
| • | general economic conditions in the areas in which we operate; | |
| • | our businesses may not be combined successfully, or such combination may take longer to accomplish than expected; | |
| • | delays or difficulties in the integration by IBT of recently acquired businesses; | |
| • | the growth opportunities and cost savings from the merger may not be fully realized or may take longer to realize than expected; | |
| • | operating costs, customer losses and business disruption following the merger, including adverse effects of relationships with employees, may be greater than expected; | |
| • | governmental approvals of the merger may not be obtained, or adverse regulatory conditions may be imposed in connection with governmental approvals of the merger; | |
| • | adverse governmental or regulatory policies may be enacted; | |
| • | the interest rate environment may change, causing margins to compress and adversely affecting net interest income; | |
| • | the risks associated with continued diversification of assets and adverse changes to credit quality; | |
| • | competition from other financial services companies in our markets; | |
| • | the concentration of IBT’s operations in Michigan may adversely affect results if the Michigan economy or real estate market declines; and | |
| • | the risk of an economic slowdown that would adversely affect credit quality and loan originations. |
Additional factors that could cause actual conditions, events or results to differ significantlymaterially from those described in the forward-looking statements.
There are other factors besides these that could cause actual conditions,
events or results to differ significantly from those describedexpressed in the forward-looking statements are discussed in IBT’s reports filed with the Securities and Exchange Commission.
All subsequent written and oral forward-looking statements concerning the proposed transaction or otherwise affectother matters attributable to either of us or any person acting on our behalf are expressly qualified in their entirety by the future IBT's and/cautionary statements above. Neither of us undertake any obligation to update any forward-looking statement to reflect circumstances or FSB's
business, results of operations and financial condition.
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90
APPENDIX A
events that occur after the date the forward-looking statements are made.
43
TABLE OF CONTENTS
| ARTICLE I — CERTAIN DEFINITIONS | A-1 | |||||||
| 1.1. | CERTAIN DEFINITIONS | A-1 | ||||||
| ARTICLE II — THE MERGER | A-5 | |||||||
| 2.1. | MERGER | A-5 | ||||||
| 2.2. | CLOSING; EFFECTIVE TIME | A-5 | ||||||
| 2.3. | ARTICLES OF INCORPORATION AND BYLAWS; NAME | A-5 | ||||||
| 2.4. | DIRECTORS AND OFFICERS OF SURVIVING CORPORATION | A-5 | ||||||
| 2.5. | EFFECTS OF THE MERGER | A-5 | ||||||
| 2.6. | TAX CONSEQUENCES | A-5 | ||||||
| 2.7. | ADDITIONAL ACTIONS | A-5 | ||||||
| 2.8. | POSSIBLE ALTERNATIVE STRUCTURES | A-6 | ||||||
| ARTICLE III — CONVERSION AND EXCHANGE OF GCFC SHARES | A-6 | |||||||
| 3.1. | CONVERSION OF GCFC COMMON STOCK; MERGER CONSIDERATION | A-6 | ||||||
| 3.2. | PROCEDURES FOR EXCHANGE OF GCFC COMMON STOCK | A-7 | ||||||
| 3.3. | ADJUSTMENTS | A-8 | ||||||
| 3.4. | RESERVATION OF SHARES | A-9 | ||||||
| 3.5. | GCFC STOCK OPTIONS | A-9 | ||||||
| ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF GCFC | A-9 | |||||||
| 4.1. | REPRESENTATIONS AND WARRANTIES OF GCFC | A-9 | ||||||
| ARTICLE V — REPRESENTATIONS AND WARRANTIES OF IBT | A-21 | |||||||
| 5.1. | REPRESENTATIONS AND WARRANTIES OF IBT | A-21 | ||||||
| ARTICLE VI — COVENANTS OF GCFC | A-25 | |||||||
| 6.1. | CONDUCT OF BUSINESS | A-25 | ||||||
| 6.2. | CURRENT INFORMATION | A-28 | ||||||
| 6.3. | ACCESS TO PROPERTIES AND RECORDS | A-28 | ||||||
| 6.4. | FINANCIAL AND OTHER STATEMENTS | A-28 | ||||||
| 6.5. | MAINTENANCE OF INSURANCE | A-29 | ||||||
| 6.6. | DISCLOSURE SUPPLEMENTS | A-29 | ||||||
| 6.7. | CONSENTS AND APPROVALS OF THIRD PARTIES | A-29 | ||||||
| 6.8. | ALL REASONABLE EFFORTS | A-29 | ||||||
| 6.9. | FAILURE TO FULFILL CONDITIONS | A-29 | ||||||
| 6.10. | NO SOLICITATION | A-29 | ||||||
| ARTICLE VII — COVENANTS OF IBT | A-30 | |||||||
| 7.1. | FINANCIAL AND OTHER STATEMENTS | A-30 | ||||||
| 7.2. | DISCLOSURE SUPPLEMENTS | A-30 | ||||||
| 7.3. | CONSENTS AND APPROVALS OF THIRD PARTIES | A-30 | ||||||
| 7.4. | ALL REASONABLE EFFORTS | A-30 | ||||||
| 7.5. | FAILURE TO FULFILL CONDITIONS | A-30 | ||||||
| 7.6. | EMPLOYEE BENEFITS | A-31 | ||||||
| 7.7. | DIRECTORS AND OFFICERS INDEMNIFICATION; INSURANCE | A-31 | ||||||
A-i
| ARTICLE VIII — REGULATORY AND OTHER MATTERS | A-32 | |||||||
| 8.1. | MEETINGS OF SHAREHOLDERS | A-32 | ||||||
| 8.2. | PROXY STATEMENT — PROSPECTUS; MERGER REGISTRATION STATEMENT | A-32 | ||||||
| 8.3. | REGULATORY APPROVALS | A-32 | ||||||
| 8.4. | AFFILIATES | A-33 | ||||||
| 8.5. | AMENDED AND RE-STATED MANAGEMENT CONTINUITY AGREEMENTS | A-33 | ||||||
| 8.6. | POST-CLOSING OPERATIONS | A-33 | ||||||
| 8.7. | BOARD MATTERS | A-33 | ||||||
| 8.8. | EXECUTION AND AUTHORIZATION OF BANK MERGER AGREEMENT | A-33 | ||||||
| 8.9. | PUT RIGHTS | A-33 | ||||||
| ARTICLE IX — CLOSING CONDITIONS | A-33 | |||||||
| 9.1. | CONDITIONS TO EACH PARTY’S OBLIGATIONS UNDER THIS AGREEMENT | A-33 | ||||||
| 9.2. | CONDITIONS TO THE OBLIGATIONS OF IBT UNDER THIS AGREEMENT | A-34 | ||||||
| 9.3. | CONDITIONS TO THE OBLIGATIONS OF GCFC UNDER THIS AGREEMENT | A-35 | ||||||
| ARTICLE X — THE CLOSING | A-35 | |||||||
| 10.1. | TIME AND PLACE | A-35 | ||||||
| 10.2. | DELIVERIES AT THE CLOSING | A-35 | ||||||
| ARTICLE XI — TERMINATION, AMENDMENT AND WAIVER | A-35 | |||||||
| 11.1. | TERMINATION | A-35 | ||||||
| 11.2. | EFFECT OF TERMINATION | A-36 | ||||||
| 11.3. | AMENDMENT, EXTENSION AND WAIVER | A-37 | ||||||
| ARTICLE XII — MISCELLANEOUS | A-37 | |||||||
| 12.1. | CONFIDENTIALITY | A-37 | ||||||
| 12.2. | PUBLIC ANNOUNCEMENTS | A-38 | ||||||
| 12.3. | SURVIVAL | A-38 | ||||||
| 12.4. | NOTICES | A-38 | ||||||
| 12.5. | PARTIES IN INTEREST | A-38 | ||||||
| 12.6. | COMPLETE AGREEMENT | A-39 | ||||||
| 12.7. | COUNTERPARTS | A-39 | ||||||
| 12.8. | SEVERABILITY | A-39 | ||||||
| 12.9. | GOVERNING LAW | A-39 | ||||||
| 12.10. | INTERPRETATION | A-39 | ||||||
| 12.11. | SPECIFIC PERFORMANCE | A-39 | ||||||
A-ii
AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 7, 2000
BETWEEN
IBT BANCORP, INC.
AND
FSB BANCORP, INC.
92
TABLE OF CONTENTS
A-1
93
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER,
This Agreement and Plan of Merger is dated as of April 7, 2000August 21, 2007 (the "Agreement"“Agreement”), by and between IBT Bancorp, Inc., a Michigan bankfinancial services holding company ("IBT"(“IBT”) and FSB Bancorp, Inc.,Greenville Community Financial Corporation, a Michigan bank holding company ("FSB"(“GCFC”).
WHEREAS, the BoardsBoard of Directors of each of IBT and FSB have approved,GCFC (i) has determined that this Agreement and deem it
advisablethe business combination and related transactions contemplated hereby are in the best interests of their respective companies and shareholders and (ii) has determined that this Agreement and the transactions contemplated hereby are consistent with and in furtherance of their shareholders to consummate therespective business combination transaction provided for
hereinstrategies, and (iii) has approved this Agreement at meetings of each of such Boards of Directors;
WHEREAS, in which FSB will, subject toaccordance with the terms of this Agreement, GCFC will merge with IBT with IBT as the surviving entity (the “Merger”). Concurrently, shareholders of GCFC shall exchange their shares of GCFC for shares of IBT;
WHEREAS, the parties currently intend that the Merger shall qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”) and conditions set forththat this Agreement be and is adopted as a “plan of reorganization” for the purposes of Code Sections 354 and 361;
WHEREAS, simultaneously with the execution and delivery of this Agreement, Greenville Community Bank, a Michigan chartered commercial bank and a wholly owned subsidiary of GCFC (“GCB”) and Isabella Bank and Trust, a Michigan chartered commercial bank and a wholly owned subsidiary of IBT (“Isabella” and sometimes referred to herein mergeas the “Surviving Institution”), will enter into a Plan of Merger (the “Bank Merger Agreement”) providing for the merger (the “Subsidiary Merger”) of GCB with and into IBT (the "Merger");
Isabella, and it is intended that the Subsidiary Merger be consummated immediately following the consummation of the Merger; and
WHEREAS, IBT and FSBthe parties desire to make certain representations, warranties and agreements in connection with the Mergerbusiness transactions described in this Agreement and also to prescribe variouscertain conditions thereto.
NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements herein contained, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I — CERTAIN DEFINITIONS
1.1. Certain Definitions. As used in this Agreement, the following terms have the following meanings (unless the context otherwise requires, references to articles and sections refer to articles and sections of this Agreement).
“Affiliates” shall mean any Person who directly, or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person and, without limiting the generality of the foregoing, includes any executive officer or director of such Person and any Affiliates of such executive officer or director.
“Agreement” shall mean this agreement, and any amendment hereto.
“Bank Merger Agreement” shall mean the plan of merger entered into between GCB and Isabella, and any amendment thereto.
“Bank Regulator” shall mean any Federal or state banking regulatory agency with supervisory authority over GCFC, GCB, IBT, Isabella or a subsidiary of any of them.
“Business Day”shall mean any day of the year on which Isabella Bank and Trust in Mt. Pleasant, Michigan, is open to the Merger;
WHEREAS,public for Federal income tax purposes, itconducting business and is intended thatnot required or authorized to close.
“Certificate” shall mean a certificate evidencing shares of GCFC Common Stock.
“Closing” shall have the Mergermeaning set forth in Section 2.2.
“Closing Date” shall qualifyhave the meaning set forth in Section 2.2.
A-1
“COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as a reorganization under the provisions of Section 368 ofamended.
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Dissenting Shareholder” shall have the meaning set forth in Section 3.1(d).
“Dissenting Shares” shall have the meaning set forth in Section 3.1(d).
“Effective Time” shall mean the date and time specified pursuant to Section 2.2 hereof as the effective time of the Merger.
“Environmental Laws” shall mean any applicable Federal, state or local law, statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent, order, judgment, decree, injunction or agreement with any governmental entity relating to (1) the protection, preservation or restoration of the environment (including, without limitation, air, water vapor, surface water, groundwater, drinking water supply, surface soil, subsurface soil, plant and animal life or any other natural resource)and/or (2) the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Materials of Environmental Concern. The term “Environmental Laws” includes without limitation (a) the comprehensive Environmental Response, Compensation and Liability Act, as amended, (the "Code")42 U.S.C. § 9601, et seq.; WHEREAS,the resource Conservation and Recovery Act, as amended, 42 U.S.C. §901, et seq.; the Clean Air Act, as amended, 42 U.S.C. §7401, et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. §1251, et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. §2601, et seq.; the Emergency Planning and Community Right to Know Act, 42 U.S.C. §11001, et seq.; the Safe Drinking Water Act, 42 U.S.C. §300f, et seq.; and all comparable state and local laws, and (b) any common law (including without limitation common law that may impose strict liability) that may impose liability or obligations for accounting purposes, it is intended thatinjuries or damages due to the presence of or exposure to any Materials of Environmental Concern.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
“Exchange Agent” shall mean Isabella, or such other bank or trust company or other agent designated by IBT, and reasonably acceptable to GCFC, which shall act as agent for IBT in connection with the exchange of the Certificates for the Merger Consideration.
“Exchange Fund” shall have the meaning set forth in Section 3.2(a).
“Exchange Ratio” shall mean the number of shares of IBT Common Stock into which one (1) share of GCFC Common Stock shall be accountedconverted at the Effective Time, which shall be as set forth below:
Subject to Section 3.3, one (1) share of IBT Common Stock for one (1) share of GCFC Common Stock, based on a maximum of 773,103 shares of GCFC Common Stock outstanding.
“FDIC” shall mean the Federal Deposit Insurance Corporation or any successor thereto.
“FRB” shall mean the Board of Governors of the Federal Reserve System or any successor thereto.
“GAAP” shall mean accounting principles generally applied in the United States of America.
“GCB” shall mean Greenville Community Bank, with its principal offices located at 1405 West Washington Street, Greenville, Michigan, 48838.
“GCFC” shall mean Greenville Community Financial Corporation, a Michigan corporation, with its principal executive offices located at 1405 West Washington Street, Greenville, Michigan, 48838.
“GCFC Common Stock” shall mean the common stock, no par value, of GCFC.
“GCFC Disclosure Schedule” shall mean a written disclosure schedule delivered by GCFC to IBT specifically referring to the appropriate section of this Agreement.
“GCFC Financial Statements” shall mean (i) the audited statements of financial condition (including related notes and schedules, if any) of GCFC as of December 31, 2006, 2005 and 2004 and the statements of income,
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changes in shareholders’ equity and cash flows (including related notes and schedules, if any) of GCFC for each of the three years ended December 31, 2006, 2005 and 2004 and (ii) the unaudited interim consolidated financial statements of GCFC as of the end of the six-month period ended June 30, 2007.
“GCFC Shareholders Meeting” shall have the meaning set forth in Section 8.1.
“GCFC Stock Benefit Plans” shall mean any and all stock-based benefit plans and amendments thereto of GCFC.
“GCFC Subsidiary” shall mean any corporation or entity, 50% or more of the equity interest of which is owned, either directly or indirectly, by GCFC, except any corporation or entity the equity interest of which is held in the ordinary course of the lending activities of GCB.
“Governmental Entity” shall mean any Federal or state court, administrative agency or commission or other governmental authority or instrumentality.
“IBT” shall mean IBT Bancorp, Inc., a Michigan corporation, with its principal executive offices located at 200 East Broadway Street, Mt. Pleasant, Michigan, 48858.
“IBT Common Stock” shall mean the common stock, no par value per share, of IBT.
“IBT Disclosure Schedule” shall mean a written disclosure schedule delivered by IBT to GCFC specifically referring to the appropriate section of this Agreement.
“IBT Financial Statements” shall mean the (i) the audited consolidated statements of financial condition (including related notes and schedules) of IBT as of December 31, 2006, 2005 and 2004 and the consolidated statements of income, changes in shareholders’ equity and cash flows (including related notes and schedules, if any) of IBT for each of the three years ended December 31, 2006, 2005 and 2004, as set forth in IBT’s annual report for the year ended December 31, 2006, and (ii) the unaudited interim consolidated financial statement of IBT as of the end of the three-month period ended March 31, 2007, as filed by IBT in its Securities Documents.
“IBT Stock Benefit Plans” shall mean any and all stock-based benefit plans and amendments thereto of IBT.
“IBT Subsidiary” shall mean any corporation or entity, 50% or more of the equity interest of which is owned, either directly or indirectly, by IBT, except any corporation or entity, the equity interest of which is held in the ordinary course of the lending activities of Isabella.
“IRS” shall mean the United States Internal Revenue Service.
“Isabella” shall mean Isabella Bank and Trust, with its principal offices located at 200 East Broadway, Mt. Pleasant, Michigan, 48858.
“Knowledge” as used with respect to a Person (including references to such person being aware of a particular matter) shall mean those facts that are known by the current executive officers and directors of such Person, and includes any and all facts, matters or circumstances set forth in any written notice from any Bank Regulator or any other material written notice received by such executive officer or director of that Person.
“Loan Property” shall have the meaning set forth in Section 4.1(r).
“Material Adverse Effect” shall mean, with respect to IBT or GCFC, respectively, any effect that (i) is material and adverse to the financial condition, results of operations or business of IBT and the IBT Subsidiaries taken as a "poolingwhole, or GCFC and the GCFC Subsidiaries taken as a whole, respectively, or (ii) does or would materially impair the ability of interests"; and
NOW, THEREFORE, in considerationeither GCFC, on the one hand, or IBT, on the other hand, to perform its obligations under this Agreement or otherwise materially threaten or materially impede the consummation of the foregoingtransactions contemplated by this Agreement; provided that “Material Adverse Effect” shall not be deemed to include the impact of (a) changes in laws and regulations affecting banks generally or interpretations thereof by courts or governmental agencies, (b) changes in GAAP or regulatory accounting principles generally applicable to financial institutions and their holding companies, (c) actions and omissions of a party hereto (or any of its subsidiaries) taken with the prior written consent of the other party, (d) compliance with this Agreement on the business, financial condition or results of operations of the parties and their respective representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby,subsidiaries, including the expenses incurred by the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 Effective Timein consummating the transactions
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contemplated by this Agreement (consistent with the information included in the Disclosure Schedules) and (e) any change in the value of the Merger. Subjectsecurities portfolio of IBT or GCFC, respectively, whether held as available for sale or held to the provisions of this
Agreement,maturity, resulting from a certificate of merger (the "Certificate of Merger") shall be duly
prepared, executed and acknowledged by the Surviving Corporation (as definedchange in Section 1.3(b)) and thereafter delivered for filing to the Department of
Consumer and Industry Services, Corporation Securities and Land Development
Bureauinterest rates value of the Statesecurities portfolio of Michigan,IBT or GCFC, respectively, whether held as providedtrading, available for sale or held to maturity, resulting from a change in interest rates generally.
“Materials of Environmental Concern” shall mean pollutants, contaminants, wastes, toxic substances, petroleum and petroleum products, and any other materials regulated under Environmental Laws.
“MBCA” shall mean the Michigan Business Corporation Act, (the "MBCA")as amended.
“Merger” shall mean the merger of GCFC with and into IBT pursuant to the terms hereof.
“Merger Consideration” shall mean the IBT Common Stock (and cash for any fractional share), to be paid by IBT for each share of GCFC Common Stock, as soonset forth in Section 3.1.
“Merger Registration Statement” shall mean the registration statement, together with all amendments, filed with the SEC under the Securities Act for the purpose of registering shares of IBT Common Stock to be offered to holders of GCFC Common Stock in connection with the Merger.
“Michigan Banking Law” shall mean the Michigan Banking Code of 1999, as practicableamended, and the rules and regulations promulgated thereunder, as amended, as administered by OFIS.
“OFIS” shall mean the Office of Financial and Insurance Services of the state of Michigan.
“Participation Facility” shall have the meaning set forth in Section 4.1(r).
“PBGC” shall mean the Pension Benefit Guaranty Corporation or any successor thereto.
“Pension Plan” shall have the meaning set forth in Section 4.1(n).
“Person” shall mean any individual, corporation, limited liability company, partnership, joint venture, association, trust “group” (as that term is defined under the Exchange Act) or entity.
“Proxy Statement — Prospectus” shall have the meaning set forth in Section 8.2.
“Regulatory Agreement” shall have the meaning set forth in Section 4.1(m).
“Regulatory Approvals” shall mean the approval of any Bank Regulator that is necessary in connection with the consummation of the Merger and the related transactions contemplated by this Agreement.
“Rights” shall mean warrants, options, rights, convertible securities, stock appreciation rights and other arrangements or commitments which obligate an entity to issue or dispose of any of its capital stock or other ownership interests or which provide for compensation based on the equity appreciation of its capital stock.
“SEC” shall mean the Securities and Exchange Commission or afterany successor thereto.
“Securities Act” shall mean the Closing
Date (asSecurities Act of 1933, as amended.
“Securities Documents” shall mean all reports, offering circulars, proxy statements, registration statements and all similar documents filed pursuant to the Securities Laws.
“Securities Laws” shall mean the Securities Act; the Exchange Act; the Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940, as amended; the Trust Indenture Act of 1939, as amended, and the rules and regulations of the SEC promulgated thereunder.
“Subsidiary Merger” shall mean the merger of GCB with and into Isabella pursuant to the Bank Merger Agreement.
“Surviving Corporation” shall have the meaning set forth in Section 2.1 hereof.
“Surviving Institution” shall have the meaning set forth in the preamble hereof.
“Termination Date” shall mean February 1, 2008.
Other terms used herein are defined in Section 1.2). The Merger shall become effective upon the filing of the Certificate of Merger with the Department of Consumerpreamble and Industry
Services, Corporation Securities and Land Development Bureau of the State of
Michigan or at such time thereafter as IBT and FSB may agreeelsewhere in writing to
provide in the Certificate of Merger (the "Effective Time").
1.2 Closing.this Agreement.
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ARTICLE II — THE MERGER
2.1. Merger. Subject to the terms and conditions hereof,of this Agreement, at the closingEffective Time, GCFC shall merge with IBT, with IBT as the resulting or surviving corporation (the “Surviving Corporation”). As part of the Merger, (the "Closing") will take place at 5:00 p.m. on a date to be
specified by the parties, whicheach share of GCFC Common Stock shall be converted into the fifth business day afterright to receive the Merger Consideration pursuant to the terms of Article III hereof.
2.2. Closing; Effective Time. Subject to the satisfaction or waiver (subjectof all conditions to applicable law) ofclosing contained in Article IX hereof and in the Subsidiary Merger Agreement, the Closing shall occur no later than five (5) Business Days following the latest to occur of (i) the conditions set forth in Section 6.1, 6.2(c)receipt of all required Regulatory Approvals, and 6.3(c) hereof (the "Closing
Date"),the expiration of any applicable waiting periods, (ii) the approval of the Merger by the shareholders of GCFC, or (iii) at the offices of IBT in Mt. Pleasant, Michigan, unless another time,such other date or place is agreed to in writingtime upon which IBT and GCFC mutually agree (the “Closing”). The Merger shall be effected by the parties hereto.
1.3 Effectsfiling of a certificate of merger with the Department of Labor and Economic Growth of the Merger.
(a) Atstate of Michigan (the “Department”) on the Effective Time, (i)day of the separate existenceClosing (the “Closing Date”), in accordance with the MBCA. The “Effective Time” means the date and time upon which the certificate of FSB shall
cease and FSB shall be mergedmerger is filed with and into IBT, (ii) the Department, or as otherwise stated in the certificate of merger, in accordance with the MBCA.
2.3. Articles of Incorporation and Bylaws; Name. The Articles of Incorporation and Bylaws of IBT as in effect immediately prior to the Effective Time shall be the Articles of Incorporation and Bylaws of the Surviving Corporation, until dulythereafter amended as provided therein and by applicable law. The name of the Surviving Corporation shall be IBT Bancorp, Inc.
2.4. Directors and Officers of Surviving Corporation. Subject to Section 8.7, the board of directors of the Surviving Corporation shall consist of the incumbent directors of IBT immediately preceding the Effective Time, each to hold office in accordance with applicable law,the Articles of Incorporation and (iii)Bylaws of the By-lawsSurviving Corporation. At the Effective Time, Isabella shall establish by resolution of IBT,its board of directors a regional board to preserve the institutional knowledge of GCB immediately before the Merger and to provide advice to the Isabella Board of Directors about business and operations, community and customer needs in the market area, regional economic conditions and such other advisory responsibilities as in effectdetermined by the Isabella board of directors. The members of the initial regional board shall consist of all incumbent members of the GCB board of directors immediately preceding the Effective Time. Regional board member compensation shall be the same as that provided by GCB prior to the Effective Time shall be the
By-lawsprovided, however, that Isabella may conduct periodic reviews of director compensation to assess reasonableness and consistency. The officers of the Surviving Corporation until amendedat the Effective Time shall be as set forth in accordance with
applicable law.
(b) As used in this Agreement,Exhibit A.
2.5. Effects of the term "Constituent Corporations"
shall mean IBT and FSB and the term "Surviving Corporation" shall mean IBT.
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(c)Merger.willshall have the effects as set forth in Sections 701 through 774Chapter Seven of the MBCA.
1.4 Materiality. As used in this Agreement, (i) any reference to any
event, change or effect being "material"MBCA with respect to the merger of domestic corporations.
2.6. Tax Consequences. It is intended that the Merger shall constitute a reorganization within the meaning of Section 368(a) of the Code and that this Agreement shall constitute a “plan of reorganization” as that term is used in Sections 354 and 361 of the Code. From and after the date of this Agreement and until the Closing, each party hereto shall use its reasonable best efforts to cause the Merger to qualify, and will not knowingly take any entity means an
event, changeaction, cause any action to be taken, fail to take any action or effectcause any action to fail to be taken which is material in relationaction or failure to act could prevent the financial
condition, properties, assets, liabilities, business or operations of such
entity and its Subsidiaries takenMerger from qualifying as a whole and (ii)reorganization under Section 368(a) of the term "material adverse
effect" means, with respectCode other than is contemplated by this Agreement. Following the Closing, neither IBT nor GCFC nor any of their Affiliates shall knowingly take any action, cause any action to FSB, IBTbe taken, fail to take any action or cause any action to fail to be taken, which action or failure to act could cause the Merger to fail to qualify as a reorganization under Section 368(a) of the Code.
2.7. Additional Actions. At any time after the Effective Time, the Surviving Corporation may determine that deeds, assignments or assurances or any other acts are necessary or desirable to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation its rights, title or interest in, to or under any of the rights, properties or assets of GCFC acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the case mayMerger, or to otherwise carry out the purposes of this Agreement. GCFC grants to the Surviving Corporation an irrevocable power of attorney to execute and deliver all such deeds, assignments and assurances and to do all acts necessary, proper or convenient to accomplish this purpose. This irrevocable power of attorney shall
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only be a materialoperative following the Effective Time and at such time, the officers and directors of the Surviving Corporation shall be fully authorized in the name of GCFC to take any and all such actions contemplated by this Agreement.
2.8. Possible Alternative Structures. Notwithstanding anything to the contrary contained in this Agreement and subject to the satisfaction of the conditions set forth in Article IX, prior to the Effective Time, IBT shall be entitled to revise the structure of the Merger described in Section 2.1 hereofand/or the Subsidiary Merger provided that (i) there are no adverse effect on the business, assets, results of
operationsFederal or financial condition of such party and its Subsidiaries takenstate income tax consequences to GCFC shareholders as a wholeresult of the modification; (ii) the consideration to be paid to the holders of GCFC Common Stock under this Agreement is not thereby changed in kind or onvalue (or the abilitycomposition thereof), or reduced in amount; and (iii) such modification will not delay materially or jeopardize receipt of any required Regulatory Approvals or other consents and approvals relating to the consummation of the Mergerand/or the Subsidiary Merger. The parties hereto agree to appropriately amend this Agreement and any related documents in order to reflect any such party to perform its obligations hereunder or to
consummate the transactions contemplated hereby; it being understood that a
material adverse effect on any party shall not include a change with respect to
such party resulting from any change in law, rule or regulation or generally
accepted accounting principles which impairs both FSB and IBT in a substantially
similar manner.
revised structure.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;III — CONVERSION AND EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock.
(a) Conversion.GCFC SHARES
3.1. Conversion of GCFC Common Stock; Merger Consideration. At the Effective Time, by virtue of the Merger and without any action on the part of IBT, GCFC or the holderholders of any of the shares of FSB's common
stock no par value ("FSB Common Stock"), subject to Section 2.2(e), each
issued and outstanding share of FSB'sGCFC Common Stock, the Merger shall be converted into
validly issued, fully paid and nonassessable shares of IBT common stock, no
par value ("effected in accordance with the following terms:
(a) IBT Common Stock"). The number of sharesStock. Each share of IBT Common Stock exchanged for shares of FSB Common Stock (the "Exchange Rate") shall be
calculated in accordance with Section 2.1(b). All such shares of FSB Common
Stock shall no longer bethat is issued and outstanding and shall automatically be canceled
and retired and shall cease to exist. Each FSB shareholder's certificate or
certificates previously representing shares of FSB Common Stock (each a
"Certificate") shall be aggregated (if a single shareholder holds more than
one Certificate) and exchanged for a certificate representing whole shares
of IBT Common Stock and cash in lieu of any fractional share issued in
consideration therefor upon the surrender of such Certificate or
Certificates in accordance with Section 2.2, without any interest thereon.
Subject to Section 4.1, in the event that, subsequent to the date of this
Agreement butimmediately prior to the Effective Time shall remain issued and outstanding following the outstanding shares of IBTEffective Time and shall be unchanged by the Merger.
(b) GCFC Common Stock shall have been increased, decreased, changed into or
exchanged for a different number or kind of shares or securities through a
reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split, or other similar change in IBT's
capitalization, or exchanged or converted into shares or securities of
another corporation, then an appropriate and proportionate adjustment shallto be made to the Exchange Rate.
(b) Conversion Rate. The Exchange Rate for purposes hereof shall be
2.1362 shares of IBT Common Stock for each outstanding share of FSB Common
Stock, based on 408,237 shares of FSB Common Stock outstanding and
2,966,973 shares of IBT Common Stock outstanding. Calculations will be
rounded to three decimal places. Any fractional share will be paid in cash
in accordance with Section 2.2(e).
(c) Cancellation of IBT-Owned Stock.Cancelled. All shares of FSBGCFC Common Stock
that are owned by IBT or any direct or indirect wholly owned Subsidiarysubsidiary of IBT or of GCFC immediately prior to the Effective Time, other than shares of common stock held directly or indirectly in trust accounts, managed accounts and the like or otherwise held in a fiduciary capacity that are beneficially owned by third parties, ("trust account
shares") shall be canceled and retired and shall cease to exist, and no
stock of IBT or other considerationthe certificates for such shares shall be deliveredcanceled as promptly as practicable thereafter, and no payment or distribution shall be made in exchangeconsideration therefor. All
(c) GCFC Common Stock. Except as set forth above, each share of GCFC Common Stock issued and outstanding immediately prior to the Effective Time (other than Dissenting Shares) shall become and be converted into, as provided in and subject to the limitations set forth in this Agreement, the right to receive shares of IBT Common Stock thatand cash based on the Exchange Ratio (the “Merger Consideration”).
(d) Dissenting Shares. Each outstanding share of GCFC Common Stock the holder of which has perfected his right to dissent under the MBCA and has not effectively withdrawn or lost such right as of the Effective Time (the “Dissenting Shares”) shall not be converted into or represent a right to receive the Merger Consideration hereunder, and the holder thereof shall be entitled only to such rights as are ownedgranted by FSB (other than
trust account shares)the MBCA. GCFC shall become authorized but unissuedgive IBT prompt notice upon receipt by GCFC of any such demand for payment of the fair value of such shares of GCFC Common Stock and of withdrawals of such demands and any other instruments provided pursuant to applicable law (any shareholder duly making such demand being hereinafter called a “Dissenting Shareholder”), and IBT shall have the right to participate in all negotiations and proceedings with respect to any such demand for payment, or waive any failure to timely deliver a written demand for appraisal or the taking of any other action by such Dissenting Shareholder as may be necessary to perfect dissenters rights under the MBCA. Any payments made with respect to Dissenting Shares shall be made by the Surviving Corporation.
(e) Former Dissenting Shares. If any Dissenting Shareholder shall effectively withdraw or lose (through failure to perfect or otherwise) his right to payment as a Dissenting Shareholder at or prior to the Effective Time, such holder’s shares of GCFC Common Stock shall be converted into a right to receive the Merger Consideration in accordance with the applicable provisions of this Agreement.
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(f) Cancellation. At the Effective Time, shares of GCFC Common Stock shall automatically be canceled and shall no longer be outstanding, and shall be converted into the right to receive the Merger Consideration.
(g) Fractional Shares. Notwithstanding anything to the contrary contained herein, no certificates or script representing fractional shares of IBT Common Stock shall be issued upon the surrender and exchange of Certificates, no dividend or distribution with respect to IBT Common Stock shall be payable on or with respect to any fractional share interest, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a shareholder of IBT. A-3
95
(d) Shareholders' RightIn lieu of Dissent. Anythe issuance of any such fractional share, IBT shall pay to each former holder of shares of FSB'sGCFC Common Stock who does not vote in favor of the Merger at the meeting of
shareholders of FSB and has given notice in writing to the presiding
officer prior to the Merger vote that he or she intends to demand payment
for his or her shares of FSB Common Stock if the Merger is effectuated,
shallotherwise would be entitled to receive the valuea fractional share of the FSBIBT Common Stock, an amount in cash, rounded to the nearest cent and without interest, equal to the product of (i) the fraction of a share to which such holder would otherwise have been entitled and (ii) $44.00. For purposes of determining any fractional share interest, all shares of GCFC Common Stock owned by a GCFC shareholder shall be combined so held by
him or her in accordance with Sections 761 through 774as to calculate the maximum number of the MBCA.
2.2whole shares of IBT Common Stock issuable to such GCFC Shareholder.
3.2. Procedures for Exchange of Certificates.
GCFC Common Stock.
(a) Exchange Agent. As ofIBT to Make Merger Consideration Available. No later than the Effective Time,Closing Date, IBT shall deposit, or shall cause to be deposited, in an account with Isabella Bank and Trust or such other bank or trust company acceptable to
the parties (the "Exchange Agent"),Exchange Agent for the benefit of the holders of shares of FSBGCFC Common Stock, for exchange in accordance with this Section 3.2, certificates dated the Effective Time representing the shares of IBT Common Stock and an amount of cash sufficient to pay the aggregate amount of cash in lieu of
fractional sharespayable pursuant to this Article III (such cash and certificates for shares of IBT Common Stock, together with any dividends or distributions with respect thereto (without any interest thereon) being hereinafter referred to as the "Exchange Fund"“Exchange Fund”).
(b) Exchange of Certificates. IBT shall take any steps necessary to be issued pursuant
to Section 2.1 and paid pursuant to Section 2.2(b) in exchange for
outstanding shares of FSB Common Stock.
(b)cause the Exchange Procedures. On the nextAgent, within five (5) business daydays after the Effective Time, IBT shall cause the Exchange Agent to mail to each holder of record
of a Certificate or Certificates, (i) a form letter of transmittal which shall
specify that delivery shall be effective, and risk of loss and title to the
Certificate(s) shall pass, only upon delivery of the Certificate(s)for return to the Exchange Agent and shall be in such form and have such other provisions as
IBT and FSB may reasonably specify and (ii) instructions for use in effecting the surrender of the Certificate(s)Certificates in exchange for a certificate
representing sharesthe Merger Consideration. The letter of IBT Common Stocktransmittal shall be in customary form and cash in lieushall specify that delivery shall be effected, and risk of a fractional
share.loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent. Upon proper surrender of a shareholder's Certificate or Certificates for exchange and cancellation to the Exchange Agent, together with sucha properly completed letter of transmittal, duly executed, the holder of such Certificate(s)Certificate shall be entitled to receive in exchange therefor (1) a certificate representingtherefore the number of whole shares of IBT Common Stock and (2) a check representing the
amount of cash in lieu of a fractional share, if any, and unpaid dividends
and distributions, if any,Merger Consideration to which such holder has the rightof GCFC Common Stock shall have become entitled pursuant to receive in
respect of the Certificate(s) surrendered,Section 3.1(c) and 3.1(g) hereof, and the Certificate(s)Certificate so surrendered shall forthwith be canceled.cancelled. No interest will be paid or accrued on theany cash in lieu of fractional shares andpayable hereunder or any unpaid dividends and distributions, if any, payable to holders of Certificates. In
(c) Rights of Certificate Holders After the eventEffective Time. After the Effective Time, the holders of the Certificates shall have no rights (excluding dissenter’s rights of those shareholders properly exercising dissenter’s rights) with respect to the shares of GCFC Common Stock formerly represented by those Certificates except to surrender those Certificates in exchange for the Merger Consideration as provided in this Agreement. No dividends or other distributions declared after the Effective Time with respect to IBT Common Stock shall be paid to the holder of any Certificate until the holder thereof shall surrender such Certificate in accordance with this Section 3.2. After the surrender of a transfer of ownership of FSB Common Stock which is not registeredCertificate in accordance with this Section 3.2, the transfer records of FSB, a Certificate representingrecord holder thereof shall be entitled to receive any dividends or other distributions, without any interest thereon, that become payable after the proper number ofEffective Time with respect to the shares of IBT Common Stock together with a checkthat are part of the Merger Consideration for the cash toshares of GCFC Common Stock represented by the surrendered Certificate.
(d) Surrender by Persons Other than Record Holders. If the Person surrendering a Certificate and signing the accompanying letter of transmittal is not the record holder thereof, then it shall be paid
in lieua condition of any fractional share, may be issuedthe payment of the Merger Consideration that: (i) such Certificate is properly endorsed to such a transferee ifPerson or is accompanied by appropriate stock powers, in either case signed exactly as the name of the record holder appears on such Certificate, representingand is otherwise in proper form for transfer, or is accompanied by appropriate evidence of the authority of the Person surrendering such FSB Common Stock is presentedCertificate and signing the letter of transmittal to do so on behalf of the record holder; and (ii) the person requesting such exchange shall pay to the Exchange Agent accompaniedin advance any transfer or other taxes required by all documents requiredreason of the payment to evidence and effect such
transfer and to evidence that any applicable stock transfer taxes have been
paid.
(c) Distributions with Respect to Unexchanged Shares; Voting. The
Exchange Agent shall receive and hold, for distribution without interest toa Person other than the first recordregistered holder of the certificateCertificate surrendered, or certificates representing
shares
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required for any other reason, or shall establish to the satisfaction of FSB Common Stock, all dividends and other distributions paid on
shares of IBT Common Stock held in the Exchange Agent's name as agent.
HoldersAgent that such tax has been paid or is not payable.
(e) Closing of unsurrendered Certificates shall not be entitled to voteTransfer Books. From and after
the Effective Time at any meeting of IBT shareholders until they have
exchanged their Certificates.
(d) Transfers. After the Effective Time, there shall be no transfers on the stock transfer books of FSBGCFC of the shares of FSBGCFC Common Stock whichthat were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates representing such shares are presented for transfer to the Surviving Corporation,Exchange Agent, they shall be canceled and exchanged for the shares of IBT Common StockMerger Consideration and cashcanceled as provided in lieu of fractional shares, if any, deliverable in respect thereof
pursuant to this Agreement.Section 3.2. Certificates surrendered for exchange by any person constituting an "affiliate"“Affiliate” of FSBGCFC for purposes of Rule 145 under the Securities Act of 1933, as amended (the "Securities Act"), shall not be exchanged until IBT has received a written agreement from such person as provided in Section 5.6.
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(e) Fractional Shares. No fractional shares8.4.
(f) Return of Exchange Fund. At any time following the twelve (12) month period after the Effective Time, IBT Common Stock shall be issued pursuant hereto. In lieu ofentitled to require the issuance ofExchange Agent to deliver to it any fractional share,
cash adjustments will be paid to holders in respect of any fractional share
of IBT Common Stock that would otherwise be issuable, and the amount of
such cash adjustment shall be equal to such fractional proportion of the
Trading Value of a share of IBT Common Stock. For purposes of calculating
fractional shares, a holder of FSB Common Stock with more than one
Certificate shall receive cash only for the fractional share remaining
after aggregating all of his or her FSB Common Stock to be exchanged.
(f) Termination of Exchange Fund. Any portionportions of the Exchange Fund which has been made available to the Exchange Agent and not disbursed to holders of Certificates (including, the proceeds of any investments thereofwithout limitation, all interest and any IBT Common
Stock) that remains unclaimedother income received by the shareholdersExchange Agent in respect of FSB for twelve months
after the Effective Timeall funds made available to it), and thereafter such holders shall be paidentitled to IBT. Any shareholders of FSB who
have not theretofore complied with this Article II shall thereafter look
only to IBT for payment(subject to abandoned property, escheat and other similar laws) with respect to any Merger Consideration that may be payable upon due surrender of their shares of IBT Common Stock, cash in lieu
of fractional shares and unpaid dividends and distributions on the IBT
Common Stock deliverable without any interest thereon.Certificates held by them. Notwithstanding the foregoing, neither IBT nor the Exchange Agent nor any other person shall be liable to any former holder of shares of FSB Common Stocka Certificate for any amount properlyMerger Consideration delivered in respect of such Certificate to a public official pursuant to applicableany abandoned property, escheat or other similar laws.
law.
(g) Lost, Stolen or Destroyed Shares.Certificates. In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by the Exchange Agent,IBT, the posting by such person of a bond in such amount as IBT may reasonably direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration deliverable in respect thereof.
(h) Withholding. IBT or the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement or the transactions contemplated hereby to any holder of GCFC Common Stock such amounts as IBT (or any Affiliate thereof) or the Exchange Agent are required to deduct and withhold with respect to the making of such payment under the Code, or any applicable provision of U.S. Federal, state, local ornon-U.S. tax law. To the extent that such amounts are properly withheld by IBT or the Exchange Agent, such withheld amounts will be treated for all purposes of this Agreement as having been paid to the holder of the GCFC Common Stock in respect of whom such deduction and withholding were made and shall be delivered to the applicable taxing authorities.
3.3. Adjustments. The Exchange Ratio described in Section 1.1 shall be adjusted in the manner provided in this Section 3.3 upon the occurrence of any of the following events:
(a) Changes in Number of Outstanding Shares. If either GCFC or IBT changes (or establishes a record date for changing) the number of shares of IBT Common Stock or the number of shares of GCFC Common Stock, issued and cash in lieuoutstanding as of fractionalthe date of this Agreement, as a result of a stock dividend, stock split, recapitalization or similar transaction with respect to such issued and outstanding shares, deliverable in respect thereofand the record date for such transaction is after the date of this Agreement and prior to the Effective Time, then the Exchange Ratio shall be appropriately and proportionately adjusted as such that the actual aggregate consideration to be paid by IBT to holders of shares of GCFC Common Stock pursuant to Section 3.1 above would be the same as would have been paid if the Effective Time had been the close of business on the date of this Agreement.
(b) Authorized Issuances. Notwithstanding any other provisions of this section, no adjustment shall be made in the event of the issuance of additional shares of IBT Common Stock pursuant to the IBT dividend reinvestment plan or upon the grant or sale of shares or rights to receive shares to, or for, the account of IBT’s directors or employees pursuant to any deferred stock compensation, employee stock purchase and other compensation or benefit plans of IBT.
(c) Changes in Capital. Subject only to making any adjustment provided above in related computations prescribed in this section, nothing contained in this Agreement shall preclude IBT from amending its
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Articles of Incorporation to change its capital structure or from issuing additional shares of IBT Common Stock, preferred stock, shares of other capital stock or securities that are convertible into shares of capital stock.
(d) Increase in Outstanding Shares of GCFC Common Stock. If at the Effective Time the number of shares of GCFC Common Stock outstanding is greater than 773,103 for any reason whatsoever (whether or not such increase constitutes a breach of this Agreement), then the Exchange Ratio shall be adjusted by multiplying it by a fraction (a) the numerator of which shall be 773,103, and (b) the denominator of which shall be the total number of shares of GCFC Common Stock outstanding as of the Effective Time.
(e) No Adjustment for GCFC Transaction Expenses. The foregoing notwithstanding, in no event shall the Exchange Ratio be adjusted for GCFC’s expenses associated with the Merger transaction, including but not limited to investment banking fees, legal fees, accounting fees and any change of control agreement payments related to the Merger transaction.
3.4. Reservation of Shares. IBT shall reserve for issuance a sufficient number of shares of IBT Common Stock for the purpose of issuing such shares to GCFC shareholders in accordance with this Article III.
3.5. GCFC Stock Options. GCFC shall take all action reasonably necessary so that, on or before the Closing Date, each holder of a stock option (the AGCFC Stock Options@) heretofore granted under the Greenville Community Financial Corporation Stock Compensation Plan shall exercise such GCFC Stock Option in accordance with its terms (including exercise whereby the option holder pays the exercise price through a reduction in the number of shares issuable upon exercise based on a fair market value of the GCFC shares of $44 per share); provided however, any GCFC Stock Options that are not exercised by the option holder on or before the Closing Date shall be cancelled and extinguished for no consideration as of the Effective Time.
ARTICLE IIIIV — REPRESENTATIONS AND WARRANTIES 3.1 OF GCFC
4.1. Representations and Warranties of FSB. FSBGCFC. GCFC represents and warrants to IBT that the statements contained in this Article IV are correct as follows:
of the date of this Agreement, except as set forth in the GCFC Disclosure Schedule delivered by GCFC to IBT on the date hereof, and except as to any representation or warranty which specifically relates to an earlier date. GCFC has made a good faith effort to ensure that the disclosure on each schedule of the GCFC Disclosure Schedule corresponds to the section referenced herein. However, for purposes of the GCFC Disclosure Schedule, any item disclosed on any schedule therein is deemed to be fully disclosed with respect to all schedules under which such item may be relevant as and to the extent that it is reasonably apparent that such item applies to such other schedule.
(a) Organization, Standing and Power. FSB
(i) GCFC is a corporation duly organized, validly existing and in good standing under the laws of the state of Michigan. GCFC has all requisite corporate power and authority to own, operate and lease its properties and assets and to carry on its business as it is now being conducted and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary. GCFC is a bank holding company duly registered under the Bank Holding Company Act of 1956, as amended (the "BHC
Act"). Farmers State Bank of Breckenridgeamended.
(ii) GCB is a wholly-owned subsidiary of FSBGCFC and a state bank organized under the laws of the State of Michigan.
Each of FSB and its Subsidiaries is a corporation or stateMichigan chartered commercial bank duly organized, validly existing and in good standing under the laws of its
jurisdictionthe state of incorporation,Michigan. GCB has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conductedconducted. The deposits of GCB are insured by the FDIC to the fullest extent permitted by law, and all premiums and assessments required to be paid in connection therewith have been paid by GCB when due.
(iii) GCFC Disclosure Schedule 4.1(a)(iii) sets forth each GCFC Subsidiary. Each GCFC Subsidiary (other than GCB) is a corporation or limited liability company duly qualifiedorganized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization.
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(iv) The respective books of account, minute books, stock record books and other records of GCFC and each GCFC Subsidiary are complete and correct in all material respects, represent bona fide transactions and have been maintained in accordance with sound business practices, including the maintenance of an adequate internal control system. The corporate minute books of GCFC and the GCFC Subsidiaries contain accurate and adequate records of all corporate actions actually taken by their shareholders, board of directors and committees of the board of directors in all material respects. Since January 1, 2003, the minutes of each meeting (or corporate action without a meeting) of any such shareholders, boards or committees have been duly prepared and are contained in such minute books. All such minute books and related exhibits or attachments for all meetings since January 1, 2003, have been made available for IBT’s review prior to do business
in each jurisdiction in which the failuredate of this Agreement without material omission or redaction (other than with respect to do so would have a material
adverse effect on FSB. FSBthe minutes relating to the Merger or recent and similarly proposed transactions).
(v) Prior to the date of this Agreement, GCFC has furnished to IBT, true and correct copies of itsthe articles of incorporation or charter and its Subsidiaries'bylaws of GCFC and each GCFC Subsidiary. GCFC Disclosure Schedule 4.1(a)(v) sets forth any and all current noncompliance with GCFC’s articles of incorporation and by-laws, as amended.
bylaws. Such noncompliance has not, and will not have, a Material Adverse Effect on GCFC.
(vi) Neither GCFC nor any GCFC Subsidiary is, directly or indirectly, a party to or bound by any joint venture, partnership, limited partnership, limited liability company or strategic alliance agreement or arrangement with or through any unaffiliated person providing for their joint or cooperative development, marketing, referrals or sales of banking, securities, insurance or other financial products or services or their joint investment in and management of any active business enterprise.
(b) Capital Structure.
(i) As of the date hereof, theThe authorized capital stock of FSB
consistedGCFC consists of 600,000One Million (1,000,000) shares of FSBGCFC Common Stock, and 408,237of which 773,103 shares of
FSB Common Stock were outstanding. The maximum number of shares of FSB
Common Stock that would beare outstanding, as of the Effective Time if all
options, warrants, conversion rights and other rights with respect
thereto were exercised is 408,237. All outstanding shares of FSB Common
Stock are validly issued, fully paid and nonassessable and free of preemptive rights. GCFC has no outstanding options, warrants or other rights which are convertible into shares of GCFC Common Stock, except as disclosed on GCFC Disclosure Schedule 4.1(b)(i). Except for shares issued pursuant to the exercise of existing options disclosed in GCFC Disclosure Schedule 4.1(b)(i), after the date of this Agreement, the number of issued and outstanding shares of GCFC Common Stock is not subject to change prior to the Effective Time. Neither GCFC nor any preemptive rights.
(ii) AsGCFC Subsidiary has or is bound by any Rights of any character relating to the purchase, sale or issuance or voting of, or right to receive dividends or other distributions on any shares of GCFC Common Stock, or any other security of GCFC or any securities representing the right to vote, purchase or otherwise receive any shares of GCFC Common Stock or any other security of GCFC, other than shares issuable under the GCFC Stock Benefit Plans. GCFC Disclosure Schedule 4.1(b)(i) sets forth: the name of each holder of an award granted under any GCFC Stock Benefit Plan, identifying the nature, number of shares, grant and vesting dates of the date hereof, FSBaward.
(ii) Except for the GCFC Subsidiaries and as set forth in GCFC Disclosure Schedule 4.1(b)(ii), GCFC does not havepossess, directly or indirectly, any material equity interest in any corporate entity, except for equity interests held in the investment portfolios of GCB or any other GCFC Subsidiary, equity interests held by GCB in a fiduciary capacity, and equity interests held in connection with the lending activities of GCB. GCFC owns each of its outstanding shares of capital stock of each GCFC Subsidiary free and clear of all liens, security interests, pledges, charges, encumbrances, agreements and restrictions of any kind or nature.
(iii) Except as set forth on GCFC Disclosure Schedule 4.1(b)(iii), to GCFC’s Knowledge, no Person is the beneficial owner (as defined in Section 13(d) of the Exchange Act) of 5% or more of the outstanding shares of GCFC Common Stock.
(iv) No bonds, debentures, notes or other indebtedness the holders of which havehaving the right to vote (or convertible into or exercisable for securities
having the right to vote) with the shareholders of FSB on any matter
("Voting Debt").
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(iii) As of the date of this Agreement, except as set forth in
Section 3.1(b)(iii) of the disclosure schedule of FSB (the "FSB
Disclosure Schedule") delivered to IBT prior to the execution of this
Agreementmatters on which GCFC’s shareholders may vote has been issued by GCFC and except for this Agreement, FSB does not have outstanding
any options, warrants, calls, rights, commitments or agreements of any
character to which FSB or any of its Subsidiaries is a party or is bound
obligating FSB or any of its Subsidiaries to issue, deliver or sell
additional shares of capital stock or any Voting Debt of FSB or of any
of its Subsidiaries or obligating FSB or any of its Subsidiaries to
grant, extend or enter into any such options, warrant, call, right,
commitment or agreement. From and after the Effective Time, there will
be no option, warrant, call, right or agreement obligating FSB or any of
its Subsidiaries to issue, deliver or sell any shares of capital stock
or any Voting Debt of FSB or any of its Subsidiaries, or obligating FSB
or any of its Subsidiaries to grant, extend or enter into any such
option, warrant, call, right or agreement. As of the date hereof, except
as set forth in Section 3.1(b)(iii) of the FSB Disclosure Schedule,
there are no outstanding contractual obligations of FSB or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of FSB or any of its Subsidiaries.
(iv) Since December 31, 1999, neither FSB nor any of its
Subsidiaries have (A) issued or permitted to be issued any shares of
capital stock, or securities exercisable for or convertible into shares
of capital stock of FSB or any of its Subsidiaries; (B) repurchased,
redeemed or otherwise acquired, directly or indirectly through one or
more FSB Subsidiaries, any shares of capital stock of FSB or any of its
Subsidiaries (other than the acquisition of trust account shares) except
in connection with internal reorganizations, consolidations,
liquidations or mergers and in connection with the items set forth in
Section 3.1(b)(iv) of the FSB Disclosure Schedule; or (C) in the case of
FSB, declared, set aside, made or paid to the shareholders of FSB
dividends or other distributions on the outstanding shares of capital
stock of FSB, other than regular semi-annual cash dividends on the FSB
Common Stock at a rate not in excess of the regular semi-annual cash
dividends most recently declared by FSB prior to the date of this
Agreement.
outstanding.
(c) Authority.
(i) FSBGCFC has all requisitefull corporate power and authority to enter
intoexecute and deliver this Agreement and, subject to the receipt of the Regulatory Approvals described in Section 8.3 and the approval of this Agreement by the
GCFC’s
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shareholders, of FSB, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by GCFC and the consummationcompletion by GCFC of the transactiontransactions contemplated hereby, up to and including the Merger, have been duly authorizedand validly approved by all
necessary corporate action on the partBoard of FSBDirectors of GCFC. This Agreement has been duly and validly executed and delivered by GCFC, and subject to approval by the shareholders of FSB. This Agreement has been duly executedGCFC and delivered
by FSB andreceipt of the Regulatory Approvals described in Section 8.3 hereof, constitutes athe valid and binding obligationobligations of FSBGCFC, enforceable against GCFC in accordance with its terms, except as enforcement may be limited by
general principles of equity, whether applied in a court of law or a
court of equity, andsubject to applicable bankruptcy, insolvency and similar laws affecting creditors'creditors’ rights generally, and remedies generally.
subject, as to enforceability, to general principles of equity.
(ii) GCB has full corporate power and authority to execute, deliver and perform its obligations under the Bank Merger Agreement and to consummate the Subsidiary Merger and the transactions contemplated thereby. The execution and delivery of thisthe Bank Merger Agreement and the consummation of the transactions contemplated thereby will be duly and validly approved by the Board of Directors of GCB and approved by the sole shareholder of GCB. No other corporate proceedings on the part of GCB will be necessary to consummate the transactions contemplated by the Bank Merger Agreement. The Bank Merger Agreement has been duly and validly executed and delivered by GCB and (assuming due authorization, execution and delivery by Isabella) constitutes a valid and binding obligation of GCB, enforceable against GCB in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, and subject, as to enforceability, to general principles of equity.
(iii) Neither the execution and delivery of this Agreement by GCFC or the Bank Merger Agreement by GCB, nor the consummation by GCFC or GCB, as the case may be, of the transactions contemplated hereby or thereby, nor compliance by GCFC or GCB, as the case may be, with any of the terms or provisions hereof or thereof, will not(i) violate any provision of the Articles of Incorporation or Bylaws of GCFC or the Charter, bylaws or similar governing documents of any GCFC Subsidiary, or (ii) assuming that the consents and approvals referred to herein are duly obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to GCFC or any GCFC Subsidiary, or any of their respective properties or assets, or (y) violate, conflict with, or result in a breach of any violationprovision of or the loss of any benefit under, constitute a default (with or without(or an event which, with notice or lapse of time, or both)both, would constitute a default) under, result in the termination of or give rise to a right of termination or cancellation under, accelerate the performance required by, result in the obligation to sell or acceleration of any obligation or the loss
of a material benefit under orresult in the creation of aany lien, pledge, security interest, charge or other encumbrance on assets (any such conflict,
violation, default, right, loss or creation being referred to herein as
a "Violation") pursuant to,upon any provision of the Articlesrespective properties or assets of Incorporation (the "FSB Articles")GCFC or By-lawsany GCFC Subsidiary under, any of FSB,the terms, conditions or the articlesprovisions of incorporation, by-lawsany note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other governing document of Farmers State Bank
of Breckenridgeinstrument or obligation to which GCFC or any otherGCFC Subsidiary of FSBis a party, or except as disclosed
in writing in Section 3.1(c)(ii) of the FSB Disclosure Schedule and
subject to obtaining or making the consents, approvals, orders,
registrations, declarations and filings referred to in paragraph (iii)
below, be or result in any Violation pursuant to any loan or credit
agreement, note, mortgage, indenture, lease, FSB Benefit Plan or other
agreement, obligation, instrument, permit, franchise, license, judgment,
order, statute, law, rule or regulation applicable to FSB, Farmers
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State Bank of Breckenridgeby which they or any other Subsidiary of FSB or their respective properties or assets which Violations wouldmay be bound or affected.
(d) Call Reports. The following reports (including all related schedules, notes and exhibits) were prepared and filed in conformity with applicable regulatory requirements and were correct and complete in all material respects when filed:
(i) The consolidated reports of condition and income of GCB (including any amendments) as of and for each of the aggregate
have a material adverse effect on FSB.
(iii) No consent, approval, order or authorizationfiscal years ended December 31, 2006, 2005 and 2004 and as of or
registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign (each a "Governmental Entity"), is required by or
with respect to FSB, Farmers State Bank of Breckenridge or any other
Subsidiary of FSB in connectionand for the fiscal quarter ended June 30, 2007, as filed with the executionFDIC; and delivery
(ii) The FR Y-9C (including any amendments) for GCFC as of this
Agreement by FSB or the consummation by FSBand for each of the transactions
contemplated hereby, the failure of which to obtain or make would in the
aggregate have a material adverse effect on FSB or on its ability to
perform its obligations hereunder, except for (A) the filing of an
applicationfiscal years ended December 31, 2006, 2005 and notice2004, as filed with the BoardFRB.
All of Governors of the Federal
Reserve System (the"Federal Reserve") under the BHC Act, and approval of
same, (B) the filing with the Securities and Exchange Commission (the
"SEC") of anysuch reports required proxy statement relatingto be filed prior to the meeting of FSB
shareholders toEffective Time by GCFCand/or GCB will be heldprepared and filed in connectionconformity with this Agreementapplicable regulatory requirements applied consistently throughout their respective periods (except as otherwise noted in such reports) and the
transactions contemplated hereby (the "Proxy Statement"), (C) the filing
of the Certificate of Merger with the State of Michigan,will be correct and (D) the
filing of an application/notice with the State of Michigan Financial
Institutions Bureau.
(d) Compliance with Banking Regulations. FSB and its Subsidiaries have
(1) continuously complied withcomplete in all material federal and state banking laws
and regulations, including all required filings, except for minor
compliance matters, which do not, in the aggregate, have a material adverse
effect on FSB; (2) timely filed using complete and accurate information,
all documents required by Federal Reserve Regulation Y, all call reports,
all documents required for Federal Deposit Insurance, all documents
required by the Michigan Financial Institutions Bureau, and all other
required filings, except for minor filing omissions or inaccuracies which
do not, in the aggregate, have a material adverse effect on FSB; and, (3)
have cooperated in all regulatory audits without concealing any material
information.
respects when filed.
(e) Information Supplied. None of the information supplied or to be supplied by FSBGCFC or its Subsidiariesany GCFC Subsidiary for inclusion or incorporation by reference in (i) the Registration Statement onForm S-4 to be filed with the SEC by IBT in connection with the issuance of shares of IBT Common Stock in the Merger (including the Proxy Statement and prospectus constituting a part thereof, the "S-4"“Merger Registration Statement”) will, at the time the S-4Merger Registration Statement becomes effective under the Securities Act, contain any untrue statement of a
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material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) the Proxy Statement — Prospectus and any amendment or supplement thereto will, at the date of mailing to FSBGCFC shareholders and at the time of the meeting of shareholders of FSBGCFC to be held in connection with the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. The Proxy Statement — Prospectus (except for such portions thereof that relate only to IBT) will comply in all material respects with the provisions of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations thereunder, and the S-4Merger Registration Statement (except for such portions thereof that relate only to IBT) will comply in all material respects with the provisions of the Securities Act and the rules and regulations thereunder.
(f) ComplianceConsents. Except for the Regulatory Approvals referred to in Section 8.3 hereof and compliance with Applicable Laws. FSBany conditions contained therein, and its Subsidiaries hold all
permits, licenses, variances, exemptions, orders andthe approval of this Agreement by the requisite vote of the shareholders of GCFC, no consents, waivers or approvals of, allor filings or registrations with, any Governmental Entities whichEntity or Bank Regulator are necessary, and, to GCFC’s Knowledge, no consents, waivers or approvals of, or filings or registrations with, any other third parties are necessary, in connection with the execution and delivery of this Agreement by GCFC and the Subsidiary Merger Agreement by GCB, and the completion by GCFC of the Merger and the completion of the Subsidiary Merger by GCB. To GCFC’s Knowledge, (i) it has not received notice as of the date hereof that any Bank Regulator intends to disapprove or object to the completion of the transactions contemplated by this Agreement or the Subsidiary Merger Agreement, and (ii) there is no reason to expect that all Regulatory Approvals required for the operationconsummation of the businesstransactions contemplated by this Agreement or the Subsidiary Merger Agreement will not be received.
(g) Financial Statements.
(i) GCFC has previously made available to IBT the GCFC Financial Statements. Except as disclosed in GCFC Disclosure Schedule 4.1(g)(i), the GCFC Financial Statements have been prepared in accordance with GAAP, and (including the related notes where applicable) fairly present in each case in all material respects (subject to the case of FSBthe unaudited interim statements to normal year-end adjustments) the consolidated financial position, results of operations and itscash flows of GCFC and the GCFC Subsidiaries (the "FSB Permits"),on a consolidated basis as of and for the respective periods ending on the dates thereof, in accordance with GAAP during the periods involved, except permits, licenses,
variances, exemptions, ordersas indicated in the notes thereto.
(ii) At the date of each balance sheet included in the GCFC Financial Statements, GCFC nor any GCFC Subsidiary had any liability, obligation or approvalsloss contingency of any nature (whether absolute, accrued, contingent or otherwise) of a type required to be reflected in such GCFC Financial Statements or in the footnotes thereto which were not fully reflected or reserved against therein or fully disclosed in a footnote thereto, except for liabilities, obligations and loss contingencies which the failure to hold
wouldwere not material individually or in the aggregate haveor which are incurred in the ordinary course of business, consistent with past practice, and except for liabilities, obligations and loss contingencies which are within the subject matter of a specific representation and warranty herein and subject, in the case of any unaudited statements, to normal, recurring audit adjustments and the absence of footnotes.
(h) Taxes. GCFC and the GCFC Subsidiaries that are at least 80% owned by GCFC are members of the same Affiliated group within the meaning of Code Section 1504(a). GCFC has duly filed all federal, state and material adverse effectlocal tax returns required to be filed by or with respect to GCFC and each GCFC Subsidiary on FSB. FSBor prior to the Closing Date, taking into account any extensions (all such returns, to GCFC’s Knowledge, being accurate and its Subsidiaries are in compliancecorrect in all material respects
withrespects) and has duly paid or made provisions for the termspayment of all material federal, state and local taxes which have been incurred by or are due or claimed to be due from GCFC and any GCFC Subsidiary by any taxing authority or pursuant to any written tax sharing agreement on or prior to the FSB Permits and all applicable laws and regulations,
except for possible violationsClosing Date other than taxes or other charges which individually or in the aggregate,
would not have a material adverse effect on FSB. Except as set forth in
Section 3.1(f) of the FSB Disclosure Schedule, the businesses of FSB and
its Subsidiaries(i) are not delinquent, (ii) are being conductedcontested in violation of any law,
ordinance, regulation, order, writ, rulegood faith, or decree of any Governmental
Entity, except for possible violations which individually or in the
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aggregate would(iii) have not have a material adverse effect on FSB.yet been fully determined. As of the date of this Agreement, neither GCFC nor any GCFC Subsidiary has received notice of, and to the knowledge of FSB,GCFC’s Knowledge there is no investigations by any
Governmental Entityaudit examination, deficiency assessment, tax investigation or refund litigation with respect to FSBany taxes of GCFC or any of its Subsidiaries is
pending or threatened, other than investigations listedGCFC Subsidiary, and no claim has been made by any authority in Section 3.1(f)
of the FSB Disclosure Schedule.
(g) Litigation. FSB has furnished IBT copies of (i) all attorney
responses to the request of the independent auditors for FSB with respect
to loss contingencies as of December 31, 1999, and (ii) a written list of
legal and regulatory proceedings filed and served against FSBjurisdiction where GCFC or any FSBGCFC Subsidiary since said date. Except as set forth in Section 3.1(g) of the
FSB Disclosure Schedule and except for any broad or national litigationdo not file tax returns that does not name FSB, and that affects all financial institutions
generally, there is no suit, action or proceeding pending that has been
served upon FSB or, to the knowledge of FSB, threatened against or
affecting FSBGCFC or any ofsuch GCFC Subsidiary is subject to taxation in that jurisdiction. GCFC and its GCFC Subsidiaries nor is there any judgment,
decree, injunction,have not executed an
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extension or orderwaiver of any Governmental Entitystatute of limitations on the assessment or arbitrator
outstanding against FSB orcollection of any of its Subsidiaries.
(h) Taxes. FSBmaterial tax due that is currently in effect. GCFC and each of its GCFC Subsidiaries have filed all tax returns
required to be filed by any of them, which tax returns are true, correcthas withheld and complete in all material respects, and have paid all taxes required to be paid as shown on such returns. Except as set forth in Section 3.1(h) of
the FSB Disclosure Schedule, no deficiencies for any taxes have been proposed, assertedwithheld and paid in connection with amounts paid or assessed against FSBowing to any employee, independent contractor, creditor, shareholder or any of its Subsidiaries.
Except with respect to claims for refund, the Federal income tax returns of
FSBother third party, and GCFC and each of its GCFC Subsidiaries, consolidated in such returns have been
examinedto GCFC’s Knowledge, has timely complied with all applicable information reporting requirements under Part III, Subchapter A of Chapter 61 of the Code and similar applicable state and local information reporting requirements.
(i) Events Since January 1, 2007. Neither GCFC nor any GCFC Subsidiary has, since January 1, 2007:
(i) Other than as contemplated by and settled with the United States Internal Revenue Service
(the "IRS"), or the statute of limitations has expired (and no waiver
extending the statute of limitations has been requested or granted), for
all taxable years ending on or before December 31, 1995. For the purpose of this Agreement, (1) the term "tax" (including, with correlative meaning,
the terms "taxes" and "taxable"), includes all Federal, state, local and
foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy and other taxes,
duties or assessments of any nature whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts; and (2) the
term "tax return" includes all returns and reports (including elections,
declarations, disclosures, schedules, estimates and information returns)
required to be supplied to a tax authority relating to taxes.
(i) Certain Agreements. Exceptexcept as set forthcontained in Section 3.1(i) of the
FSBGCFC Disclosure Schedule as of4.1(i)(i), conducted its business other than in the date of this Agreement, neither FSB nor
any of its Subsidiaries is a partyordinary course or incurred or become subject to any oralliability or written (i) consulting
agreement (other than data processing, software programming and licensing
contracts entered intoobligation, except liabilities incurred in the ordinary course of business)business and except for any single liability that does not terminable
on 90 daysexceed $50,000 or less notice,for the aggregate of any group of related liabilities that do not exceed $100,000.
(ii) Experienced or, to GCFC’s Knowledge, been threatened by any union, guild or collective bargaining
agreement, (ii) agreement with any executive officerstrike, work stoppage, organizational effort or other key employee
of FSB or any of its Subsidiaries the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of a
transaction involving FSB or any Subsidiary of the nature contemplated by
this Agreement, (iii) agreement with respect to any executive officer of
FSB or any Subsidiary of FSB providing any term of employment or
compensation guarantee extending for a period longer than three (3) years,
or (iv) agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any
of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement.
(j) Benefit Plans.
(i) Section 3.1(j)(i) of the FSB Disclosure Schedule lists each
employee benefit plan, whether the plan be written or oral, (including,
without limitation, any "employee benefit plan," as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and any plan for retirees that provides medical insurance or
other form of benefit described in Section 3(1) of ERISA) (all the
foregoing being herein called "Benefit Plans"), maintained or
contributed to by FSB, Farmers State Bank of Breckenridgeorganized labor trouble or any other Subsidiary of FSB (the "FSB Benefit Plans"). For each FSB Benefit Plan,
FSB has made
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available to IBT a true and correct copy of (A) the most recent annual
report (Form 5500) filed with the IRS, (B) such FSB Benefit Plan, (C)
each trust agreement relating to such FSB Benefit Plan, (D) the most
recent summary plan description for each FSB Benefit Plan for which a
summary plan description is required, (E) the most recent actuarial
reportevent or valuation relating to a FSB Benefit Plan subject to Title IV
of ERISA, and (F) the most recent determination letter issued by the IRS
with respect to any FSB Benefit Plan qualified under Section 401(a) of
the Code.
(ii) The current value of the assets of each of the FSB Benefit
Plans subject to Title IV of ERISA exceeds that plan's "Benefit
Liabilities," as that term is defined in Section 4001(a)(16) of ERISA,
when determined under actuarial factors that would apply if that plan
terminated in accordance with all applicable legal requirements.
(iii) Except as set forth in Section 3.1(j)(iii) of the FSB
Disclosure Schedule, to the best knowledge of FSB and its Subsidiaries,
each of the FSB Benefit Plans has been administered in compliance with
its terms in all material respects and is in compliance in all material
respects with the applicable provisions of ERISA (including, but not
limited to, the funding and prohibited transactions provisions thereof),
the Code and other applicable laws.
(iv) There has been no reportable event within the meaning of
Section 4043(b) of ERISA (for which a waiver did not apply) or any
accumulated funding deficiency (whether or not waived) within the
meaning of Section 412 of the Code with respect to any FSB Benefit Plan.
(v) All contributions to the FSB Benefit Plans required thereunder
have been made or provided for.
(vi) Since September 2, 1974, no contributions have been made by
FSB, Farmers State Bank of Breckenridge or any Subsidiary of FSB to any
"Multiemployer Plan," as such term is defined in Section 3(37) of ERISA.
(vii) To the best knowledge of FSB and Farmers State Bank of
Breckenridge, each of the FSB Benefit Plans which is intended to be a
qualified plan within the meaning of Section 401(a) of the Code is so
qualified, and FSB is not awarecondition of any fact or circumstances which would
adversely affect the qualified status of any such plan.
(viii) With respect to the FSB Benefit Plans, individually and in
the aggregate, no event has occurred and, to the knowledge of FSB or
Farmers State Bank of Breckenridge, there exists no condition or set of
circumstances in connection with which FSB or any of its Subsidiaries
could be subject to any liabilitysimilar character that is reasonably likely to have a
material adverse effect on FSB (except liability for benefits claims and
funding obligations payable in the ordinary course) under ERISA, the
Code or any other applicable law.
(k) Subsidiaries. Section 3.1(k) of the FSB Disclosure Schedule sets
forth all of the subsidiaries of FSB as of the date of this Agreement (each
a "Subsidiary" and together the "Subsidiaries") and indicates for each such
Subsidiary, as of such date, the jurisdiction of organization. FSB owns,
either directly or indirectly, all shares of the outstanding capital stock
of each such Subsidiary, except as otherwise set forth in Section 3.1(k) of
the FSB disclosure schedule. Each of FSB's Subsidiaries that is a bank (as
defined in the BHC Act) is an "insured bank" as defined in the FDIA and
applicable regulations thereunder. All of the shares of capital stock of
each of the Subsidiaries held by FSB or by another Subsidiary of FSB are
fully paid and nonassessable and are owned by FSB or a Subsidiary of FSB
free and clear of any material claim, lien or encumbrance.
(l) Agreements with Bank Regulators. Except as previously disclosed in
writing, neither FSB nor any of its Subsidiaries is a party to any written
agreement or memorandum of understanding with, or a party to any commitment
letter or similar undertaking to, or is subject to any order or directive
by, or is a recipient of any extraordinary supervisory letter from, or has
adopted any board resolutions at the request of, Federal or state
Governmental Entities charged with the supervision or regulation of
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101
banks or bank holding companies or engaged in the insurance of bank
deposits ("Bank Regulators"), nor has FSB been advised by any Bank
Regulator that it is contemplating issuing or requesting any such order,
directive, written agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter, board resolutions or similar
undertaking.
(m) Absence of Certain Changes or Events. Since December 31, 1999, and
except as set forth in Section 3.1(m) of the FSB Disclosure Schedule, FSB
and its Subsidiaries have not incurred any material liability, except in
the ordinary course of their business consistent with their past practices,
nor has there been any change, or any event involving a prospective change,
in the business, financial condition or result of operations of FSB or any
of its Subsidiaries which has had or is reasonably likely to have a Material Adverse Effect on GCFC.
(iii) Discharged or satisfied any lien or encumbrance or paid any obligation or liability other than those shown on GCFC’s Financial Statements as of December 31, 2006, or incurred after that date, other than in the ordinary course of business, except for any single lien, encumbrance, liability or obligation that does not exceed $50,000 or for the aggregate of any group of related liens, encumbrances, liabilities and obligations that do not in the aggregate exceed $100,000.
(iv) Mortgaged, pledged or subjected to lien, charge or other encumbrance any of its assets or sold or transferred any such assets, except in the ordinary course of business, except for any single mortgage, pledge, lien, charge and encumbrance for indebtedness that does not exceed $100,000 or for the aggregate of any group of mortgages, pledges, liens, charges and encumbrances for indebtedness that do not in the aggregate exceed $200,000.
(v) Made or permitted any amendment or early termination of any contract, agreement or understanding to which it is a party and that is material adverse effectto the financial condition, income, expenses, business, properties or operations of GCFC or the GCFC Subsidiaries, except as may be expressly provided in this Agreement.
(vi) Experienced any damage, destruction or loss (whether or not covered by insurance) individually or in the aggregate that has had or is reasonably likely to have a Material Adverse Effect on FSBGCFC.
(vii) Made any change in accounting methods or practices of GCFC or the GCFC Subsidiaries, except as required by applicable Governmental Entity or by GAAP.
(viii) Made any write-down in excess of $50,000 of any of its assets which were reflected in GCFC’s Financial Statements which write-downs have not been reflected in subsequent GCFC Financial Statements.
(ix) Made any increase in the salary schedule, compensation rate, fee or commission of GCFC’s or the GCFC Subsidiaries’ employees, officers or directors or any declaration, commitment or obligation of any kind for the payment by GCFC or the GCFC Subsidiaries of a bonus or other additional salary, compensation, fee or commission to any person, except for increases made in the ordinary course of business and consistent with past practices.
(x) Waived or released any material right or claim of GCFC or the GCFC Subsidiaries in excess of $10,000 except in the ordinary course of business (including, but not limited to, loan or lease collection actions).
(j) Material Contracts; Leases; Defaults.
(i) Except as set forth in GCFC Disclosure Schedule 4.1(j)(i), neither GCFC nor any GCFC Subsidiary is a party to or subject to: (i) any employment, consulting or severance contract with any past or present officer, director or employee of GCFC or any GCFC Subsidiary, except for “at will” arrangements; (ii) any plan or
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contract providing for bonuses, pensions, options, deferred compensation, retirement payments, profit sharing or similar arrangements for or with any past or present officers, directors or employees of GCFC or any GCFC Subsidiary; (iii) any collective bargaining agreement with any labor union relating to employees of GCFC or any GCFC Subsidiary; (iv) any agreement (other than this Agreement) which by its terms limits the payment of dividends by GCFC or any GCFC Subsidiary; (v) any instrument evidencing or related to material indebtedness for borrowed money whether directly or indirectly, by way of notes payable, including trust preferred obligations, purchase money obligations, conditional sale, lease purchase, guaranty or otherwise, in respect of which GCFC or any GCFC Subsidiary is an obligor to any person, which instrument evidences or relates to indebtedness other than deposits, repurchase agreements, bankers’ acceptances, and “treasury tax and loan” accounts established in the ordinary course of business and transactions in “federal funds” or which contains financial covenants or other restrictions (other than those relating to the payment of principal and interest when due) which would be applicable on or after the Closing Date to IBT; (vi) any other agreement, written or oral, that obligates GCFC or any GCFC Subsidiary for the payment of more than $50,000 annually; or (vii) any agreement (other than this Agreement), contract, arrangement, commitment or understanding (whether written or oral) that restricts or limits in any material way the conduct of business by GCFC or any GCFC Subsidiary (it being understood that any non-compete or similar provision shall be deemed material).
(ii) Each real estate lease that will require the consent of the lessor or its agent or the assignment to Surviving Corporation as a result of changesthe Merger by virtue of the terms of any such lease, is listed in banking lawsGCFC Disclosure Schedule 4.1(j)(ii) identifying the section of the lease that contains such prohibition or regulationsrestriction. Subject to any consents that may be required as a result of general applicabilitythe transactions contemplated by this Agreement, to GCFC’s Knowledge, neither GCFC nor any GCFC Subsidiary is in default in any material respect under any material contract, agreement, commitment, arrangement, lease, insurance policy or interpretations
thereof).
(n) Environmental Matters.other instrument to which it is a party, by which its assets, business, or operations may be bound or affected, or under which it or its assets, business, or operations receive benefits, and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default.
(iii) Except as described in GCFC Disclosure Schedule 4.1(j)(iii), all data processing contracts of GCFC or the GCFC Subsidiaries are cancelable by GCFC or the GCFC Subsidiaries on or before the Effective Time without cost, penalty or further obligation.
(iv) True and correct copies of agreements, contracts, arrangements and instruments referred to in Section 4.1(j)(i), 4.1(j)(ii) and 4.1(j)(iii) have been made available to IBT on or before the date hereof, are listed on GCFC Disclosure Schedule 4.1(j)(i), 4.1(j)(ii) and 4.1(j)(iii) and are in full force and effect on the date hereof. Except as set forth in GCFC Disclosure Schedule 4.1(j)(iv), no plan, contract, employment agreement, termination agreement, or similar agreement or arrangement to which GCFC or any GCFC Subsidiary is a party or under which GCFC or any GCFC Subsidiary may be liable contains provisions which permit an employee or independent contractor to terminate it without cause and continue to accrue future benefits thereunder. Except as set forth in GCFC Disclosure Schedule 4.1(j)(iv), no such agreement, plan, contract, or arrangement (x) provides for acceleration in the vesting of benefits or payments due thereunder upon the occurrence of a change in ownership or control of GCFC or any GCFC Subsidiary; or (y) requires GCFC or any GCFC Subsidiary to provide a benefit in the form of GCFC Common Stock or determined by reference to the value of GCFC Common Stock.
(v) There is no other agreement, contract, loan, mortgage, deed of trust, lease, commitment, indenture, note or other instrument under which (a) a consent or approval is required, (b) a prohibited assignment by operation of law could occur, (c) a waiver or loss of any right could occur, or (d) acceleration of any obligation could occur, in each case as a result of the execution and delivery of this Agreement, or the change of control or merger of GCFC or any GCFC Subsidiary or the liquidation of GCFC upon consummation of the Merger where any of the following: (w) the failure to obtain such consent or approval, (x) the violation of the prohibition against assignment, (y) the waiver or loss of any material right, or (z) the acceleration of any
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obligation could materially interfere with the ordinary course of business by GCFC or any GCFC Subsidiary (or IBT or any IBT Subsidiaries as their successors) or have a Material Adverse Effect on GCFC.
(k) Ownership of Property; Insurance Coverage.
(i) GCFC and each GCFC Subsidiary has good and, as to real property, marketable title to all material assets and properties owned by GCFC or any GCFC Subsidiary in the conduct of its businesses, whether such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the balance sheet contained in the most recent GCFC Financial Statements or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of in the ordinary course of business, since the date of such balance sheet), subject to no material encumbrances, liens, mortgages, security interests or pledges, except (i) those items which secure liabilities for public or statutory obligations or any discount with, borrowing from or other obligations to FHLB, inter-bank credit facilities or any transaction by GCB or GCFC acting in a fiduciary capacity, and (ii) statutory liens for amounts not yet delinquent or which are being contested in good faith. GCFC and each GCFC Subsidiary, as lessee, have the right under valid and existing leases of real and personal properties used by GCFC and each GCFC Subsidiary in the conduct of their businesses to occupy or use all such properties as presently occupied and used by each of them. Such existing leases and commitments to lease constitute or will constitute operating leases for both tax and financial accounting purposes and the lease expense and minimum rental commitments with respect to such leases and lease commitments are as disclosed in all material respects in the notes to the GCFC Financial Statements.
(ii) GCFC and each GCFC Subsidiary currently maintain insurance considered by each of them to be customary and adequate for their respective operations. Neither GCFC nor any GCFC Subsidiary has received notice from any insurance carrier that (i) such insurance will be canceled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs with respect to such policies of insurance will be substantially increased. There are presently no material claims pending under such policies of insurance and no notices of material claims have been given by GCFC, or any GCFC Subsidiary under such policies. All such insurance is valid and enforceable and in full force and effect, and within the last three (3) years GCFC and each GCFC Subsidiary has received each type of insurance coverage for which it has applied and during such periods has not been denied indemnification for any material claims submitted under any of its insurance policies. GCFC Disclosure Schedule 4.1(k) (ii) identifies all policies of insurance maintained by GCFC and each GCFC Subsidiary.
(l) Legal Proceedings.
(i) Except as set forth in GCFC Disclosure Schedule 4.1(l), neither GCFC nor any GCFC Subsidiary is a party to any, and there are no pending or, to GCFC’s Knowledge, threatened legal, administrative, arbitration or other proceeding, claim,proceedings, claims (whether asserted or action that has been served on FSBunasserted), actions or governmental investigations or inquiries of any nature seeking(i) against GCFC or any GCFC Subsidiary, (ii) to impose,which GCFC or thatany GCFC Subsidiary’s assets are or may be subject, (iii) challenging the validity or propriety of any of the transactions contemplated by this Agreement, or (iv) which could resultadversely affect the ability of GCFC or any GCFC Subsidiary to perform under this Agreement, except for any proceeding, claim, action, investigation or inquiry referred to in clauses (i) and (ii) which, individually or in the imposition of, on FSBaggregate, would not be reasonably expected to have a Material Adverse Effect.
(ii) There is no action, suit, proceeding, claim, arbitration or any FSB Subsidiary, any liability relatinginvestigation pending or to the releaseKnowledge of hazardous
substances as definedGCFC threatened, by any person, including without limitation any Governmental Entity, against any director, officer, employee, trustee, agent or other person who may be entitled to receive indemnification or reimbursement of any claim, loss or expense under any agreement, contract or arrangement providing for corporate indemnification or reimbursement of any such person from GCFC.
(m) Compliance With Applicable Law.
(i) To GCFC’s Knowledge, each of GCFC and each GCFC Subsidiary is in compliance in all material respects with all applicable federal, state, local stateand foreign statutes, laws, regulations, ordinances, rules, judgments, orders or federal environmental
statute, regulation or ordinancedecrees applicable to it, its properties, assets and deposits, its business, and its conduct of business and its relationship with its employees and customers, including, without limitation, the Comprehensive Environmental Response,USA
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PATRIOT Act, the Bank Secrecy Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act of 1977 (“CRA”), the Home Mortgage Disclosure Act, and all other applicable fair lending laws and other laws relating to discriminatory business practices and neither GCFC nor any GCFC Subsidiary has received any written notice to the contrary.
(ii) Each of GCFC and each GCFC Subsidiary has all material permits, licenses, authorizations orders and approvals of, and has timely made all filings, applications and registrations with, all Bank Regulators that are required in order to permit it to own or lease its properties and to conduct its business as presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and, to GCFC’s Knowledge, no suspension or cancellation of any such permit, license, certificate, order or approval is threatened or will result from the consummation of the transactions contemplated by this Agreement, subject to obtaining the Regulatory Approvals set forth in Section 8.3.
(iii) For the period beginning January 1, 2004, neither GCFC nor any GCFC Subsidiary has received any notification or, to GCFC’s Knowledge, any other communication from any Bank Regulator (i) asserting that GCFC or any GCFC Subsidiary is not in material compliance with any of the statutes, regulations or ordinances which such Bank Regulator enforces; (ii) threatening to revoke any license, franchise, permit or governmental authorization which is material to GCFC or any GCFC Subsidiary; (iii) requiring or threatening to require GCFC or any GCFC Subsidiary, or indicating that GCFC or any GCFC Subsidiary may be required, to enter into a cease and desist order, agreement or memorandum of understanding or any other agreement with any federal or state governmental agency or authority which is charged with the supervision or regulation of banks or engages in the insurance of bank deposits restricting or limiting, or purporting to restrict or limit, in any material respect the operations of GCFC or any GCFC Subsidiary, including without limitation any restriction on the payment of dividends; or (iv) directing, restricting or limiting, or purporting to direct, restrict or limit, in any manner the operations of GCFC or any GCFC Subsidiary (any such notice, communication, memorandum, agreement or order described in this sentence is hereinafter referred to as a “Regulatory Agreement”). Neither GCFC nor any GCFC Subsidiary has consented to or entered into any Regulatory Agreement that is currently in effect. The most recent regulatory rating given to GCB as to compliance with the CRA is “Satisfactory” or better.
(iv) Prior to the date of this Agreement, GCFC has furnished to IBT copies of all federal and state banking regulatory examination reports, management reports and related correspondence issued about and to GCFC and any GCFC Subsidiary for the fiscal years 2004 through 2007 (collectively referred to as the “Reports”). The Reports are true and complete in all respects, and that no other examination report, management report, correspondence, or other notice regarding the Reports has been communicated to GCFC or any GCFC Subsidiary by any federal or state banking regulator and not provided to IBT.
(n) Employee Benefit Plans.
(i) GCFC Disclosure Schedule 4.1(n)(i) includes a descriptive list of all existing bonus, incentive, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock, stock option, stock appreciation, phantom stock, severance, welfare benefit plans, fringe benefit plans, employment, severance and change in control agreements and all other material benefit practices, policies and arrangements maintained by GCFC or any GCFC Subsidiary in which any employee or former employee, consultant or former consultant or director or former director of GCFC or any GCFC Subsidiary participates or to which any such employee, consultant or director is a party or is otherwise entitled to receive benefits (the “Compensation and Benefit Plans”). Except as set forth in GCFC Disclosure Schedule 4.1(n)(i), neither GCFC nor any of its Subsidiaries has any commitment to create any additional Compensation and LiabilityBenefit Plan or to materially modify, change or renew any existing Compensation and Benefit Plan (any modification or change that increases the cost of such plans would be deemed material), except as required to maintain the qualified status thereof. GCFC has made available to IBT true and correct copies of the Compensation and Benefit Plans. There are no outstanding unvested or unexercised awards under any GCFC benefit plans and there are no awards available for issuance under any such plan.
(ii) Except as disclosed in GCFC Disclosure Schedule 4.1(n)(ii), each Compensation and Benefit Plan has been operated and administered in all material respects in accordance with its terms and with applicable
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law, including, but not limited to, ERISA, the Code, the Securities Act, the Exchange Act, the Age Discrimination in Employment Act, COBRA, the Health Insurance Portability and Accountability Act and any regulations or rules promulgated thereunder, and all material filings, disclosures and notices required by ERISA, the Code, the Securities Act, the Exchange Act, the Age Discrimination in Employment Act and any other applicable law have been timely made or any interest, fines, penalties or other impositions for late filings have been paid in full. Each Compensation and Benefit Plan which is an “employee pension benefit plan” within the meaning of 1980, as amended ("CERCLA"Section 3(2) of ERISA (a “Pension Plan”), and which is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS, and GCFC is not aware of any circumstances which are reasonably likely to result in revocation of any such favorable determination letter. There is no material pending or, to the bestKnowledge of FSB's knowledge,GCFC, threatened against FSBaction, suit or claim relating to any FSBof the Compensation and Benefit Plans (other than routine claims for benefits). Neither GCFC nor any GCFC Subsidiary the result of which has hadengaged in a transaction, or couldomitted to take any action, with respect to any Compensation and Benefit Plan that would reasonably be expected to subject GCFC or any GCFC Subsidiary to an unpaid tax or penalty imposed by either Section 4975 of the Code or Section 502 of ERISA.
(iii) All contributions required to be made under the terms of any Compensation and Benefit Plan or any employee benefit arrangements to which GCFC or any GCFC Subsidiary is a party or a sponsor have a material adverse effect upon FSBbeen timely made, and FSB'sall anticipated contributions and funding obligations are accrued on GCFC’s consolidated financial statements to the extent required by GAAP. GCFC or GCFC Subsidiaries takenhave expensed and accrued as a whole; toliability the bestpresent value of FSB's knowledge there
is no reasonable basisfuture benefits under each applicable Compensation and Benefit Plan for any such proceeding, claim or action; and to the
best of FSB's knowledge neither FSBfinancial reporting purposes as required by GAAP.
(iv) Neither GCFC nor any FSBGCFC Subsidiary is subjecthas any obligations to provide retiree health, life insurance, disability insurance, or other retiree death benefits under any agreement, order, judgment,Compensation and Benefit Plan, other than benefits mandated by Section 4980B of the Code. Except as set forth in GCFC Disclosure Schedule 4.1(n)(iv), there has been no communication to employees by GCFC or decree byany GCFC Subsidiary that would reasonably be expected to promise or withguarantee such employees retiree health, life insurance, disability insurance, or other retiree death benefits.
(v) Except as set forth in GCFC Disclosure Schedule 4.1(n)(v), GCFC and GCFC Subsidiaries do not maintain any court,
governmental authority or third party imposing any such environmental
liability. FSB has provided IBT with copies of all environmental
assessments, reports, studiesCompensation and other related informationBenefit Plans covering employees who are not United States residents.
(vi) Except as set forth in its
possessionGCFC Disclosure Schedule 4.1(n)(vi), with respect to each bank facilityCompensation and each nonresidential OREO
property.
(o) Approvals. FSB knowsBenefit Plan, if applicable, GCFC has provided or made available to IBT copies of no reason why all Requisite Regulatory
Approvalsthe: (A) trust instruments and insurance contracts, (B) two (2) most recent Forms 5500 filed with the IRS, (C) two (2) most recent actuarial reports and financial statements; (D) most recent summary plan description, (E) most recent determination letter issued by the IRS; (F) any Form 5310 or Form 5330 filed with the IRS within the last two years, and (G) most recent nondiscrimination tests performed under ERISA and the Code (including 401(k) and 401(m) tests), if applicable.
(vii) Except as set forth in GCFC Disclosure Schedule 4.1(n)(vii), the consummation of the Merger will not, directly or indirectly (including, without limitation, as a result of any termination of employment or service at any time prior to or following the Effective Time) (A) entitle any employee, consultant or director to any payment or benefit (including severance pay, change in control benefit, or similar compensation) or any increase in compensation, (B) result in the vesting or acceleration of any benefits under any Compensation and Benefit Plan or (C) result in any material increase in benefits payable under any Compensation and Benefit Plan.
(viii) Neither GCFC nor any GCFC Subsidiary maintains any compensation plans, programs or arrangements under which any payment is reasonably likely to become non-deductible, in whole or in part, for tax reporting purposes as a result of the limitations under Section 162(m) of the Code and the regulations issued thereunder.
(ix) To the Knowledge of GCFC, the consummation of the Merger will not, directly or indirectly (including without limitation, as a result of any termination of employment or service at any time prior to or following the Effective Time), entitle any current or former employee, director or independent contractor of
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GCFC or any GCFC Subsidiary to any actual or deemed payment (or benefit) which could constitute a “parachute payment” (as such term is defined in Section 6.1(b)) should not be obtained without the
imposition of any condition or restriction280G of the type referred toCode).
(x) Except as disclosed in Section 6.1(f).
(p) Brokers and Finders. Except for the retention by FSBGCFC Disclosure Schedule 4.1(n)(x), there are no stock options, stock appreciation or similar rights, earned dividends or dividend equivalents, or shares of Austin
Associates, Inc., none of FSB's orrestricted stock, outstanding under any of its Subsidiaries'the Compensation and Benefit Plans or otherwise as of the date hereof and none will be granted, awarded, or credited after the date hereof.
(o) Brokers, Finders and Financial Advisors. Neither GCFC nor any GCFC Subsidiary, nor any of their respective officers, directors, officersemployees or employeesagents, has employed any broker, or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or similar paymentsadvisor other than Donnelly Penman & Partners in connection with the transactions contemplated by this Agreement, or incurred any liability or commitment for any fees or commissions to any such person other than Donnelly Penman & Partners in connection with the transactions contemplated by this Agreement.
(p) Real Property. With respect to each parcel of real property owned, legally or beneficially, by GCFC or any GCFC Subsidiary (“GCFC’s Real Property”) and also with respect to each parcel of real property leased by GCFC or any GCFC Subsidiary (“GCFC’s Leased Real Property”), all of which are listed on the GCFC Disclosure Schedule 4.1(p); to GCFC’s Knowledge:
(i) None of GCFC, the GCFC Subsidiaries, GCFC’s Real Property, or GCFC’s Leased Real Property is in material violation of any applicable zoning regulation, building restriction, restrictive covenant, ordinance or other law, order, regulation or requirement.
(ii) All buildings and improvements to GCFC’s Real Property and GCFC’s Leased Real Property are in good condition (normal wear and tear excepted), are structurally sound and are not in need of material repairs, are fit for their intended purposes, and are adequately serviced by all utilities necessary for the effective operation of business as presently conducted at that location.
(iii) None of GCFC’s Real Property or GCFC’s Leased Real Property is the subject of any pending condemnation action. To GCFC’s Knowledge, there is no proposal under active consideration by any public or governmental authority or entity to acquire GCFC’s Real Property or GCFC’s Leased Real Property for any governmental purpose.
(iv) There is no pending or to GCFC’s Knowledge proposed special assessment affecting or which may affect GCFC’s Real Property or GCFC’s Leased Real Property.
(q) LaborDuties as Fiduciary. To the knowledge of GCFC, GCB has performed all of its duties in any capacity as trustee, executor, administrator, registrar, guardian, custodian, escrow agent, receiver or other fiduciary in a fashion that complies in all material respects with all applicable laws, regulations, orders, agreements, wills, instruments and common law standards. GCB has not received notice of any claim, allegation or complaint from any person that GCB failed to perform these fiduciary duties in a manner that complies in all material respects with all applicable laws, regulations, orders, agreements, wills, instruments and common law standards, except for notices involving matters that have been resolved and any cost of such resolution is reflected in GCFC’s Financial Statements.
(r) Environmental Matters.
(i) Except as may be set forth in Section 3.1(q) of the FSBGCFC Disclosure Schedule neither FSB nor4.1(r) and any Phase I Environmental Report identified therein, with respect to GCFC and each GCFC Subsidiary:
(A) each of itsGCFC and the GCFC Subsidiaries and, to GCFC’s Knowledge, the Participation Facilities and Loan Properties are, and have been, in substantial compliance with, and are not liable under, any Environmental Laws;
(B) GCFC has received no notice that there is a partyany suit, claim, action, demand, executive or administrative order, directive, investigation or proceeding pending and, to or bound by,GCFC’s Knowledge, no such action is threatened, before any collective bargaining agreement, contractcourt, governmental agency or other agreement or understanding with a labor union or labor organization, nor isforum against it or any of itsthe GCFC Subsidiaries or any Participation Facility (x) for alleged noncompliance (including by any predecessor) with, or liability under, any Environmental Law or (y) relating to the subjectpresence of or release into the
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environment of any material proceeding
asserting that itMaterials of Environmental Concern, whether or any Subsidiary has committed an unfair labor practicenot occurring at or seeking to compel it to bargain with any labor organization as to wageson a site owned, leased or conditions of employment nor is there any strike or other labor dispute
involvingoperated by it or any of itsthe GCFC Subsidiaries or any Participation Facility;
(C) GCFC has received no notice that there is any suit, claim, action, demand, executive or administrative order, directive, investigation or proceeding pending and, to GCFC’s Knowledge no such action is threatened, before any court, governmental agency or other forum relating to its knowledge,
threatened.
(r)or against any Loan Portfolio. Section 3.1(r)Property (or GCFC or any of the FSBGCFC Subsidiaries in respect of such Loan Property) (x) relating to alleged noncompliance (including by any predecessor) with, or liability under, any Environmental Law or (y) relating to the presence of or release into the environment of any Materials of Environmental Concern, whether or not occurring at or on a site owned, leased or operated by a Loan Property;
(D) to GCFC’s Knowledge, the properties currently owned or operated by GCFC or any GCFC Subsidiary (including, without limitation, soil, groundwater or surface water on, or under the properties, and buildings thereon) are not contaminated with and do not otherwise contain any Materials of Environmental Concern other than as permitted under applicable Environmental Law;
(E) neither GCFC nor any GCFC Subsidiary has received any written notice, demand letter, executive or administrative order, directive or request for information from any federal, state, local or foreign governmental entity or any third party indicating that it may be in violation of, or liable under, any Environmental Law;
(F) to GCFC’s Knowledge, there are no underground storage tanks on, in or under any properties owned or operated by GCFC or any of the GCFC Subsidiaries or any Participation Facility, and to GCFC’s Knowledge, no underground storage tanks have been closed or removed from any properties owned or operated by GCFC or any of the GCFC Subsidiaries or any Participation Facility; and
(G) to GCFC’s Knowledge, during the period of (s) GCFC’s or any of the GCFC Subsidiaries’ ownership or operation of any of their respective current properties or (t) GCFC’s or any of the GCFC Subsidiaries’ participation in the management of any Participation Facility, there has been no contamination by or release of Materials of Environmental Concerns in, on, under or affecting such properties that could reasonably be expected to result in material liability under the Environmental Laws. To GCFC’s Knowledge, prior to the period of (x) GCFC’s or any of the GCFC Subsidiaries’ ownership or operation of any of their respective current properties or (y) GCFC’s or any of the GCFC Subsidiaries’ participation in the management of any Participation Facility, there was no contamination by or release of Materials of Environmental Concern in, on, under or affecting such properties that could reasonably be expected to result in material liability under the Environmental Laws.
(ii) “Loan Property” means any property in which the applicable party (or a subsidiary of it) holds a security interest, and, where required by the context, includes the owner or operator of such property, but only with respect to such property. “Participation Facility” means any facility in which the applicable party (or a subsidiary of it) participates in the management (including all property held as trustee or in any other fiduciary capacity) and, where required by the context, includes the owner or operator of such property, but only with respect to such property.
(s) Fairness Opinion. GCFC’s Board of Directors has received an oral opinion of Donnelly Penman & Partners in its capacity as GCFC’s financial advisor, substantially to the effect that the consideration to be received by the holders of the GCFC Common Stock in the Merger is fair to the holders of GCFC Common Stock from a financial point of view.
(t) Loan Portfolio.
(i) To GCFC’s Knowledge, the allowance for loan losses reflected in the notes to GCFC’s audited consolidated statement of financial condition at December 31, 2006 was, and the allowance for loan losses shown in the notes to the GCFC’s audited consolidated financial statements for periods ending after December 31, 2006 were, or will be, adequate, as of the dates thereof, under GAAP.
(ii) GCFC Disclosure Schedule completely4.1(t)(ii) sets forth a listing, as of the most recently available date, by account, of: (A) each borrower, customer or other party which has notified GCFC or any GCFC Subsidiary
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during the past twelve months of, or has asserted against GCFC or any GCFC Subsidiary, in each case in writing, any “lender liability” or similar claim, and, accurately liststo the Knowledge of GCFC, each borrower, customer or other party which has given GCFC or any GCFC Subsidiary any oral notification of, or orally asserted to or against GCFC or any GCFC Subsidiary, any such claim; and (B) all loans in excess of Farmers State Bank$15,000, (1) that are contractually past due 90 days or more in the payment of Breckenridge in forceprincipaland/or interest, (2) that are on non-accrual status, (3) that as of the date of this Agreement (the "Loans")are classified as “Other Loans Specifically Mentioned”, “Special Mention”, “Substandard”, “Doubtful”, “Loss”, “Classified”, “Criticized”, “Watch list” or words of similar import, together with the principal amount of and as toaccrued and unpaid interest on each Loan accurately describes: (i)such loan and the natureidentity of the loan (i.e.,
whether consumer, commercial obligor thereunder, (4) where the interest rate terms have been reducedand/or participation), (ii) whether the maturity dates have been extended subsequent to the agreement under which the loan is
current or in default more than 30 days, and if in default more than 30
days, FSB's estimate of the likelihood of recovery, (iii) whether any
federal or state regulatory agency has listed the loan as an adversely
classified asset in any report, examination or other document providedwas originally created due to FSB, and (iv) whether to the knowledge of FSB the borrower has asserted or
threatened to assert any lender liability claims resulting from the Loans.
FSB warrants that each Loan is legally enforceable under its terms. FSB
makes no warrantyconcerns regarding the credit quality of any Loan or the adequacy
of collateral securing any Loan.
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102
(s) Insurance. FSB and each FSB Subsidiary is presently insured, and
during each of the past five calendar years (or during such lesser period
of time as FSB has owned such FSB Subsidiary) has been insured, for
reasonable amounts with financially sound and reputable insurance companies
against such risks as companies engaged in a similar business would,borrower’s ability to pay in accordance with good business practice, customarily be insured and has
maintained all insurance required by applicable law and regulation.
(t) FSB Financial Statements. The consolidated balance sheets of FSB
and FSB's Subsidiaries as of December 31, 1999 and 1998 and related
consolidated statements of income, comprehensive income, changessuch initial terms, or (5) where a specific reserve allocation exists in shareholders' equity and cash flows for the three years ended December 31,
1999,connection therewith, together with an aggregate total of all such loans that would otherwise be disclosed pursuant to (B)(1)-(5) above except the amount involved is $15,000 or less; and (C) all other assets classified by GCFC or any GCFC Subsidiary as real estate acquired through foreclosure or in lieu of foreclosure, including in-substance foreclosures, and all other assets currently held that were acquired through foreclosure or in lieu of foreclosure.
(iii) All loans receivable (including discounts) and accrued interest entered on the books of GCFC and the GCFC Subsidiaries arose out of bona fide arm’s-length transactions, were made for good and valuable consideration in the ordinary course of GCFC’s or the appropriate GCFC Subsidiary’s respective business, and the notes thereto, certified by Andrews Hooper & Pavlik
P.L.C. (collectively,or other evidences of indebtedness with respect to such loans (including discounts) are true and genuine and are what they purport to be, except as set forth in GCFC Disclosure Schedule 4.1(t)(iii). To the "FSB Financial Statements") have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis and present fairlyKnowledge of GCFC, the consolidated financial position of
FSB and FSB's Subsidiaries at the datesloans, discounts and the consolidated resultsaccrued interest reflected on the books of operationsGCFC and cash flows of FSB and FSB'sthe GCFC Subsidiaries for the periods
stated therein.
(u) Properties and Leases. Exceptare subject to no defenses, set-offs or counterclaims (including, without limitation, those afforded by usury ortruth-in-lending laws), except as may be reflectedprovided by bankruptcy, insolvency or similar laws affecting creditors’ rights generally or by general principles of equity. Except as set forth in GCFC Disclosure Schedule 4.1(t)(iii), all such loans are owned by GCFC or the FSB
Financial Statements and except for any lien for current taxes not yet
delinquent, FSB and each FSBappropriate GCFC Subsidiary have good title free and clear of any material liens, claims, charges, options, encumbrances or similar
restrictions to allliens.
(iv) The notes and other evidences of indebtedness evidencing the real and personal property reflected in FSB's
consolidated balance sheet as of December 31, 1999loans described above, and all realpledges, mortgages, deeds of trust and personal property acquired sinceother collateral documents or security instruments relating thereto are, in all material respects, valid, true and genuine, and what they purport to be.
(u) Related Party Transactions. Except as set forth in GCFC Disclosure Schedule 4.1(u), neither GCFC nor any GCFC Subsidiary is a party to any transaction (including any loan or other credit accommodation) with any Affiliate of GCFC or any GCFC Subsidiary. All such date, except such real and personal
property as has been disposed oftransactions (a) were made in the ordinary course of business. All
leasesbusiness, (b) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other Persons, and (c) did not involve more than the normal risk of real property and allcollectibility or present other leases materialunfavorable features. No loan or credit accommodation to FSBany Affiliate of GCFC or any FSBGCFC Subsidiary is presently in default or, during the three (3) year period prior to the date of this Agreement, has been in default or has been restructured, modified or extended except for rate or other modifications pursuant to which FSB or such FSB Subsidiary, as lessee, leases
real or personal property, which leases are described in Section 3.1(u) of
the FSB Disclosure Schedule, are valid and effective in accordance with
their respective terms, and thereGCFC’s loan modification policy that is not, underapplicable to all Persons. Neither GCFC nor any such lease, any
material existing default by FSB or such FSB Subsidiary or any event which,
with notice or lapse of time or both, would constitute such a material
default. Substantially all FSB's and each FSB Subsidiary's buildings and
equipment in regular use have been well maintained and are in good and
serviceable condition, reasonable wear and tear excepted.
(v) Material Interests of Certain Persons. Except as set forth in
Section 3.1(v) of the FSB Disclosure Schedule, to the best knowledge of FSB
no officer or director of FSB or any FSB Subsidiary, or any "associate" (as
such term is defined in Rule 14a-1 under the Exchange Act) of any such
officer or director, has any interest in any material contract or property
(real or personal), tangible or intangible, used in or pertaining to the
business of FSB or any FSB Subsidiary.
Section 3.1(v) of the FSB Disclosure Schedule sets forth a correct and
complete list of any loan from FSB or any FSB Subsidiary to any present
officer, director, employee or any associate or related interest of any
such person which was required under Regulation O of the Federal Reserve
Board to be approved by or reported to FSB's or such FSB Subsidiary's Board
of Directors.
(w) Administration of Trust Accounts. FSB and each FSBGCFC Subsidiary has properly administered in all respects materialbeen notified that principal and which could reasonably
be excepted to be material to the financial condition of FSB and the FSB
Subsidiaries taken as a whole, all accounts for which it acts as a
fiduciary, including but not limited to accounts for which it serves as a
trustee, agent, custodian, personal representative, guardian, conservator
or investment advisor, in accordance with the terms of the governing
documents and applicable state and federal law and regulation and common
law. Neither FSB, any FSB Subsidiary, nor any director, officer or employee
of FSB or any FSB Subsidiary has committed any breach of trustinterest with respect to any such fiduciary account whichloan or other accommodation will not be paid when due or that the loan grade classification accorded such loan or credit accommodation by GCFC is material to or could reasonably be
expected to be material toinappropriate.
(v) Deposits. Except as disclosed in GCFC Disclosure Schedule 4.1(v), none of the financial conditiondeposits of FSB and the FSB
Subsidiaries takenGCB is a “brokered deposit” as a whole, and the accountings for each such fiduciary
account are true and correctdefined in all material respects and accurately
reflect the assets of such fiduciary account.
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(x) 12 C.F.R. Section 337.6(a)(2).
(w) Required Shareholder Approval.Vote. The affirmative vote of a majority inof the GCFC board of directors and of the issued and outstanding shares and qualifiedof GCFC Common Stock is required on behalf of GCFC to vote of FSB is sufficient to approve
the Merger and this Agreement and the transactions contemplated hereby
pursuantMerger under GCFC’s Articles of Incorporation and the MBCA.
(x) Intellectual Property. GCFC and each GCFC Subsidiary owns or, to GCFC’s Knowledge, possesses valid and binding licenses and other rights to use all patents, copyrights, trade secrets, trade names, servicemarks and trademarks used in their business, each without payment, and neither GCFC nor any GCFC Subsidiary has received any notice of conflict with respect thereto that asserts the rights of others. GCFC and each GCFC
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Subsidiary have performed all the obligations required to be performed, and are not in default in any respect, under any contract, agreement, arrangement or commitment relating to any of the foregoing.
(y) Policies and Procedures. Since January 1, 2007, GCFC and each GCFC Subsidiary have complied in all material respects with the policies and procedures as formally adopted and disclosed to IBT as applicable to the MBCAperiods when those policies and pursuantprocedures were in effect except where the failure to the articles and bylawscomply would not be reasonably likely to have a Material Adverse Effect on GCFC.
(z) Reorganization. GCFC has no Knowledge of FSB.
(y) Accounting Matters. Neither FSB nor any of its Subsidiaries or
affiliates has taken or agreed to take any action that would prevent IBT
from accounting for the business combination to be effected byreason why the Merger would fail to qualify as a "poolingreorganization under Section 368(a) of interests."
3.2 the Code.
ARTICLE V — REPRESENTATIONS AND WARRANTIES OF IBT
5.1. Representations and Warranties of IBT. IBT represents and warrants to FSBGCFC that the statements contained in this Article V are correct as follows:
of the date of this Agreement, except as set forth in the IBT Disclosure Schedule delivered by IBT to GCFC on the date hereof, and except as to any representation or warranty which specifically relates to an earlier date. IBT has made a good faith effort to ensure that the disclosure on each schedule of the IBT Disclosure Schedule corresponds to the section referenced herein. However, for purposes of the IBT Disclosure Schedule, any item disclosed on any schedule therein is deemed to be fully disclosed with respect to all schedules under which such item may be relevant as and to the extent that it is reasonably apparent that such item applies to such other schedule.
(a) Organization, Standing and Power.Power.
(i) IBT is a bankcorporation duly organized, validly existing and in good standing under the laws of the state of Michigan. IBT has all requisite corporate power and authority to own, operate and lease its properties and assets and to carry on its business as it is now being conducted and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary. IBT is a financial services holding company duly registered under the BHC Act and has filed application with the Federal
Reserve Board to become a FinancialBank Holding Company under the
Gramm-Leach-Bliley Act of 1999. Each1956, as amended.
(ii) Isabella is a wholly-owned subsidiary of IBT and its Subsidiaries is a corporation or stateMichigan chartered bank duly organized, validly existing and in good standing under the laws of its jurisdictionthe state of incorporation or
organization,Michigan. Isabella has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conductedconducted. The deposits of Isabella are insured by the FDIC to the fullest extent permitted by law, and all premiums and assessments required to be paid in connection therewith have been paid by Isabella when due.
(iii) IBT Disclosure Schedule 5.1(a)(iii) sets forth each IBT Subsidiary. Each IBT Subsidiary (other than Isabella) is a corporation or limited liability company duly qualifiedorganized, validly existing and in good standing to do business in eachunder the laws of its jurisdiction in which the failure to do so would have a material adverse
effect on IBT.
of incorporation or organization.
(b) Capital Structure. As of the date hereof, the
(i) The authorized capital stock of IBT consistedconsists of 4,000,000Ten Million (10,000,000) shares of IBT Common Stock, of which 6,325,773 shares are outstanding, validly issued, fully paid and 2,966,973nonassessable and free of preemptive rights. Neither IBT nor any IBT Subsidiary has or is bound by any Rights of any character relating to the purchase, sale or issuance or voting of, or right to receive dividends or other distributions on any shares of IBT Common Stock, wereor any other security of IBT or any securities representing the right to vote, purchase or otherwise receive any shares of IBT Common Stock or any other security of IBT, other than shares issuable under the IBT Stock Benefit Plans.
(ii) Except as set forth in IBT Disclosure Schedule 5.1(b)(ii), or as is set forth in the IBT proxy statement for its annual meeting held in 2007, to IBT’s Knowledge, no Person is the beneficial owner (as defined in Section 13(d) of the Exchange Act) of 5% or more of the outstanding shares of IBT Common Stock.
(iii) No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which IBT’s shareholders may vote has been issued by IBT and are outstanding.
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(c) Authority.
(i) IBT has all requisitefull corporate power and authority to enter
intoexecute and deliver this Agreement and, subject to receipt of the required Regulatory Approvals described in Section 8.3, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by IBT and the completion by IBT of the transactions contemplated hereby, up to and including the Merger, have been duly and validly approved by the Board of Directors of IBT. This Agreement has been duly and validly executed and delivered by IBT, and subject to the receipt of the Regulatory Approvals described in Section 8.3 hereof constitutes athe valid and binding obligationobligations of IBT, enforceable against IBT in accordance with its terms, except as enforcement may be limited by
general principles of equity, whether applied in a court of law or a
court of equity, andsubject to applicable bankruptcy, insolvency and similar laws affecting creditors'creditors’ rights generally, and remedies generally.
subject, as to enforceability, to general principles of equity.
(ii) Isabella has full corporate power and authority to execute, deliver and perform its obligations under the Bank Merger Agreement and to consummate the Subsidiary Merger and the transactions contemplated thereby. The execution and delivery of thisthe Bank Merger Agreement and the consummation of the transactions contemplated thereby will be duly and validly approved by the Board of Directors of Isabella and approved by the sole shareholder of Isabella. No other corporate proceedings on the part of Isabella will be necessary to consummate the transactions contemplated by the Bank Merger Agreement. The Bank Merger Agreement has been duly and validly executed and delivered by Isabella and (assuming due authorization, execution and delivery by GCB) constitutes a valid and binding obligation of Isabella, enforceable against Isabella in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, and subject, as to enforceability, to general principles of equity.
(iii) Neither the execution and delivery of this Agreement by IBT or the Bank Merger Agreement by Isabella, nor the consummation by IBT or Isabella, as the case may be, of the transactions contemplated hereby or thereby, nor compliance by IBT or Isabella, as the case may be, with any of the terms or provisions hereof or thereof, will not conflict
with or result in any Violation pursuant to(i) violate any provision of the IBT
Articles of Incorporation or By-laws, or the articles of incorporation,
by-laws or other governing document of any other SubsidiaryBylaws of IBT or except as disclosed in writing in Section 3.2(c)the Charter, bylaws or similar governing documents of any IBT Subsidiary, or (ii) of the disclosure
schedule of IBT (the "IBT Disclosure Schedule") and subject to obtaining
or makingassuming that the consents approvals, orders, registrations, declarations
and filingsapprovals referred to in paragraph (iii) below, be or result inherein are duly obtained, (x) violate any Violation pursuant to any loan or credit agreement, note, mortgage,
indenture, lease, IBT Benefit Plan or other agreement, obligation,
instrument, permit, franchise, license,statute, code, ordinance, rule, regulation, judgment, order, statute, law,
rulewrit, decree or regulationinjunction applicable to IBT or any IBT Subsidiary, or any of IBT or their respective properties or assets, or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, Violationswith notice or lapse of time, or both, would constitute a default) under, result in the aggregate
have a material adverse effect on IBT.
(iii) No consent, approval, order or authorizationtermination of or registration, declarationa right of termination or filingcancellation under, accelerate the performance required by, result in the obligation to sell or result in the creation of any lien, pledge, security interest, charge or other encumbrance upon any of the respective properties or assets of IBT or any IBT Subsidiary under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which IBT or any IBT Subsidiary is a party, or by which they or any of their respective properties or assets may be bound or affected.
(d) Consents. Except for the Regulatory Approvals referred to in Section 8.3 hereof and compliance with any conditions contained therein, and the approval of this Agreement by the requisite vote of the shareholders of GCFC, no consents, waivers or approvals of, or filings or registrations with, any Governmental Entity is
required by or Bank Regulator are necessary, and, to IBT’s Knowledge, no consents, waivers or approvals of, or filings or registrations with, respect to IBT or any Subsidiary of IBTother third parties are necessary, in connection with the execution and delivery of this Agreement by IBT and the Subsidiary Merger Agreement by Isabella, and the completion by IBT of the Merger and the completion of the Subsidiary Merger by Isabella. To IBT’s Knowledge, (i) it has not received notice as of the date hereof that any Bank Regulator intends to disapprove or object to the completion of the transactions contemplated by this Agreement or the Subsidiary Merger Agreement, and (ii) there is no reason to expect that all Regulatory Approvals required for the consummation of the transactions contemplated by this Agreement or the Subsidiary Merger Agreement will not be received.
(e) Financial Statements.
(i) IBT has previously made available to GCFC the IBT Financial Statements. Except as disclosed in IBT Disclosure Schedule 5.1(e)(i), the IBT Financial Statements have been prepared in accordance with GAAP, and (including the related notes where applicable) fairly present in each case in all material respects (subject in
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the case of the unaudited interim statements to normal year-end adjustments) the consolidated financial position, results of operations and cash flows of IBT and the IBT Subsidiaries on a consolidated basis as of and for the respective periods ending on the dates thereof, in accordance with GAAP during the periods involved, except as indicated in the notes thereto, or in the case of unaudited statements, as permitted byForm 10-Q.
(ii) At the date of each balance sheet included in the IBT Financial Statements, IBT nor any IBT Subsidiary had any liability, obligation or loss contingency of any nature (whether absolute, accrued, contingent or otherwise) of a type required to be reflected in such IBT Financial Statements or in the footnotes thereto which were not fully reflected or reserved against therein or fully disclosed in a footnote thereto, except for liabilities, obligations and loss contingencies which were not material individually or in the aggregate or which are incurred in the ordinary course of business, consistent with past practice, and except for liabilities, obligations and loss contingencies which are within the subject matter of a specific representation and warranty herein and subject, in the case of any unaudited statements, to normal, recurring audit adjustments and the absence of footnotes.
(f) Taxes. IBT and the IBT Subsidiaries that are at least 80% owned by IBT are members of the same Affiliated group within the meaning of Code Section 1504(a). IBT has duly filed all federal, state and material local tax returns required to be filed by or with respect to IBT and each IBT Subsidiary on or prior to the Closing Date, taking into account any extensions (all such returns, to IBT’s Knowledge, being accurate and correct in all material respects) and has duly paid or made provisions for the payment of all material federal, state and local taxes which have been incurred by or are due or claimed to be due from IBT and any IBT Subsidiary by any taxing authority or pursuant to any written tax sharing agreement on or prior to the Closing Date other than taxes or other charges which (i) are not delinquent, (ii) are being contested in good faith, or (iii) have not yet been fully determined. As of the date of this Agreement, neither IBT nor any IBT Subsidiary has received notice of, and to IBT’s Knowledge, there is no audit examination, deficiency assessment, tax investigation or refund litigation with respect to any taxes of IBT or any IBT Subsidiary, and no claim has been made by any authority in a jurisdiction where IBT or any IBT Subsidiary do not file tax returns that IBT or any such IBT Subsidiary is subject to taxation in that jurisdiction. IBT and its IBT Subsidiaries have not executed an extension or waiver of any statute of limitations on the assessment or collection of any material tax due that is currently in effect. IBT and each of its IBT Subsidiaries has withheld and paid all taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, shareholder or other third party, and IBT and each of its IBT Subsidiaries, to IBT’s Knowledge, has timely complied with all applicable information reporting requirements under Part III, Subchapter A of Chapter 61 of the Code and similar applicable state and local information reporting requirements.
(g) No Material Adverse Effect. Except as disclosed in IBT’s Securities Documents filed on or prior to the date hereof, IBT and the IBT Subsidiaries, taken as a whole, have not suffered any Material Adverse Effect since January 1, 2007, and to IBT’s Knowledge, no event has occurred or circumstance arisen since that date which, in the aggregate, has had or is reasonably likely to have a Material Adverse Effect on IBT and the IBT Subsidiaries, taken as a whole.
(h) Ownership of Property; Insurance Coverage.
(i) IBT and each IBT Subsidiary has good and, as to real property, marketable title to all material assets and properties owned by IBT or any IBT Subsidiary in the conduct of its businesses, whether such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the balance sheet contained in the most recent IBT Financial Statements or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of in the ordinary course of business, since the date of such balance sheet), subject to no material encumbrances, liens, mortgages, security interests or pledges, except (i) those items which secure liabilities for public or statutory obligations or any discount with, borrowing from or other obligations to FHLB, inter-bank credit facilities or any transaction by Isabella or IBT acting in a fiduciary capacity, and (ii) statutory liens for amounts not yet delinquent or which are being contested in good faith. IBT and each IBT Subsidiary, as lessee, have the caseright under valid and existing leases of real and personal properties used by IBT and each IBT Subsidiary in the conduct of their businesses to occupy or use all such properties as presently occupied and used by each of them. Such existing leases and commitments to lease constitute or will constitute operating leases for both tax and financial accounting
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purposes and the lease expense and minimum rental commitments with respect to such leases and lease commitments are as disclosed in all material respects in the notes to the IBT Financial Statements.
(ii) IBT and each IBT Subsidiary currently maintain insurance considered by each of them to be customary and adequate for their respective operations. Neither IBT nor any IBT Subsidiary has received notice from any insurance carrier that (i) such insurance will be canceled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs with respect to such policies of insurance will be substantially increased. There are presently no material claims pending under such policies of insurance and no notices of material claims have been given by IBT, or any IBT Subsidiary under such policies. All such insurance is valid and enforceable and in full force and effect, and within the last three (3) years IBT and each IBT Subsidiary has received each type of insurance coverage for which it has applied and during such periods has not been denied indemnification for any material claims submitted under any of its insurance policies. IBT Disclosure Schedule 5.1(h) (ii) identifies all policies of insurance maintained by IBT and each IBT Subsidiary.
(i) Legal Proceedings. Except as set forth in IBT Disclosure Schedule 5.1(i), neither IBT nor any IBT Subsidiary is a party to any, and there are no pending or, to IBT’s Knowledge, threatened legal, administrative, arbitration or other proceedings, claims (whether asserted or unasserted), actions or governmental investigations or inquiries of any nature (i) against IBT or any IBT Subsidiary, (ii) to which IBT or any IBT Subsidiary’s assets are or may be subject, (iii) challenging the validity or propriety of any of the transactions contemplated hereby,by this Agreement, or (iv) which could adversely affect the failureability of IBT or any IBT Subsidiary to perform under this Agreement, except for any proceeding, claim, action, investigation or inquiry referred to in clauses (i) and (ii) which, to obtainindividually or
make would in the aggregate, would not be reasonably expected to have a Material Adverse Effect.
(j) Compliance with Applicable Law.
(i) To IBT’s Knowledge, each of IBT and each IBT Subsidiary is in compliance in all material adverserespects with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable to it, its properties, assets and deposits, its business, and its conduct of business and its relationship with its employees and customers, including, without limitation, the USA PATRIOT Act, the Bank Secrecy Act, the Equal Credit Opportunity Act, the Fair Housing Act, the CRA, the Home Mortgage Disclosure Act, and all other applicable fair lending laws and other laws relating to discriminatory business practices and neither IBT nor any IBT Subsidiary has received any written notice to the contrary.
(ii) Each of IBT and each IBT Subsidiary has all material permits, licenses, authorizations, orders and approvals of, and has timely made all filings, applications and registrations with, all Bank Regulators that are required in order to permit it to own or lease its properties and to conduct its business as presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect onand, to IBT’s Knowledge, no suspension or cancellation of any such permit, license, certificate, order or approval is threatened or will result from the consummation of the transactions contemplated by this Agreement, subject to obtaining the Regulatory Approvals set forth in Section 8.3.
(iii) For the period beginning January 1, 2004, neither IBT nor any IBT Subsidiary has received any notification or, to IBT’s Knowledge, any other communication from any Bank Regulator (i) asserting that IBT or on
its abilityany IBT Subsidiary is not in material compliance with any of the statutes, regulations or ordinances which such Bank Regulator enforces; (ii) threatening to perform its obligations hereunder, except for (A) the
filingrevoke any license, franchise, permit or governmental authorization which is material to IBT or any IBT Subsidiary; (iii) requiring or threatening to require IBT or any IBT Subsidiary, or indicating that IBT or any IBT Subsidiary may be required, to enter into a cease and desist order, agreement or memorandum of applications and noticesunderstanding or any other agreement with any federal or state governmental agency or authority which is charged with the Federal Reserve undersupervision or regulation of banks or engages in the BHC Act, and approvalinsurance of same, (B)bank deposits restricting or limiting, or purporting to restrict or limit, in any material respect the filingoperations of IBT or any IBT Subsidiary, including without limitation any restriction on the payment of dividends; or (iv) directing, restricting or limiting, or purporting to direct, restrict or limit, in any manner the operations of IBT or any IBT Subsidiary (any such notice, communication, memorandum, agreement or order described in this sentence is hereinafter referred to as a “Regulatory Agreement”). Neither IBT nor any IBT Subsidiary has consented to or entered into any Regulatory Agreement that is currently in effect. The most recent regulatory rating given to Isabella as to compliance with the SEC of the Proxy
Statement and the S-4, (C) such filings and approvals as are required to
be madeCRA is “Satisfactory” or obtained under the securities or "Blue Sky" laws of various
states in connection with the issuancebetter.
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(k) IBT Common Stock. The shares of IBT Common Stock contemplated
byto be issued pursuant to this Agreement, (D)when issued in accordance with the filingterms of this Agreement, will be duly authorized, validly issued, fully paid and non-assessable and subject to no preemptive rights.
(l) Securities Documents. IBT has made available to GCFC copies of its (i) annual reports onForm 10-K for the years ended December 31, 2006, 2005 and 2004, (ii) quarterly reports onForm 10-Q for the quarters ended March 31, 2007 and June 30, 2007, and (iii) proxy materials used for its meetings of shareholders held in 2007, 2006 and 2005. Such reports and proxy materials complied, at the time filed with the SEC, in all material respects, with the Securities Laws.
(m) Reorganization. IBT has no Knowledge of any reason why the Merger would fail to qualify as a reorganization under Section 368(a) of the A-12
104
Certificate of Merger with the State of Michigan, and (E) the filing of
an application/notice with the State of Michigan Financial Institutions
Bureau.
(d) Compliance with Banking Regulations. IBT and its Subsidiaries have
(1) continuously complied with all material federal and state banking laws
and regulations, including all required filings, except for minor
compliance matters, which do not, in the aggregate, have a material adverse
effect on IBT; (2) timely filed using complete and accurate information,
all documents required by Federal Reserve Regulation Y, all call reports,
all documents required for Federal Deposit Insurance, all documents
required by the Michigan Financial Institutions Bureau, and all other
required filings, except for minor filing omissions or inaccuracies which
do not, in the aggregate, have a material adverse effect on IBT; and, (3)
have cooperated in all regulatory audits without concealing any material
information.
(e) Code.
(n) Information Supplied.Supplied. None of the information supplied or to be supplied by IBT or its Subsidiariesany IBT Subsidiary for inclusion or incorporation by reference in (i) the S-4Merger Registration Statement will, at the time the S-4Merger Registration Statement becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (ii) the Proxy StatementStatement-Prospectus and any amendment or supplement thereto will, at the date of mailing to FSBGCFC shareholders and at the time of the meeting of shareholders of FSBGCFC to be held in connection with the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. The Proxy StatementStatement-Prospectus (except for such portions thereof that relate only to FSB)GCFC) will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder, and the S-4Merger Registration Statement (except for such portions thereof that relate only to FSB)GCFC) will comply in all material respects with the provisions of the Securities Act and the rules and regulations thereunder.
(f) Compliance With Applicable Laws. IBT and its Subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals
(o) Required Vote. Only the affirmative vote of all
Governmental Entities which are necessary for the operationa majority of the businessesIBT board of directors is required on behalf of IBT to approve this Agreement and its Subsidiaries (the "IBT Permits"), except forthe Merger under IBT’s Articles of Incorporation and the MBCA.
(p) Merger Consideration. As of the Closing Date and subject to Article IX, IBT Permits the failurewill have authorized shares of which to hold would not, individually orIBT Common Stock and cash in the aggregate have a material adverse effect on IBT. IBT and its Subsidiaries
are in compliance in all material respectsamount of the Merger Consideration available for deposit with the termsExchange Agent.
(q) Pro Forma Capital Requirements. Isabella is, and on a pro forma basis giving effect to the transactions contemplated by this Agreement and any financing or capital injection contemplated by IBT, will be “adequately capitalized” as defined for purposes of the IBT
Permits and all applicable laws and regulations, except for possible
violations which, individually or in the aggregate, would not have a
material adverse effect on IBT. Except as set forth on Section 3.2(f) of
the IBT Disclosure Schedule, the businesses of IBT and its Subsidiaries are
not being conducted in violation of any law, ordinance, regulation, order,
writ, rule or decree of any Governmental Entity, except for possible
violations which, individually or in the aggregate, would not have a
material adverse effect on IBT. As of the date of this Agreement, no
investigation by any Governmental Entity with respect to IBT, or any of its
Subsidiaries is pending or threatened, other than, in each case, those the
outcome of which, as far as reasonably can be foreseen, will not have a
material adverse effect on IBT.
(g) Litigation. Except as set forth in Section 3.2(g) of the IBT
Disclosure Schedule and except for any broad or national litigation that
does not name IBT, and that affects all financial institutions generally,
there is no suit, action or proceeding pending or, to the knowledge of IBT,
threatened against or affecting IBT or any of its Subsidiaries, nor is
there any judgment, decree, injunction, or order of any Governmental Entity
or arbitrator outstanding against IBT or any of its Subsidiaries.
(h) Taxes. IBT and each of its Subsidiaries have filed all tax returns
required to be filed by any of them, which tax returns are true, correct
and complete in all material respects, and have paid all taxes required to
be paid as shown on such returns. Except as set forth in Section 3.2(h) of
the IBT Disclosure Schedule, no deficiencies for any taxes have been
proposed, asserted or assessed against IBT or any of its Subsidiaries.
Except with respect to claims for refund, the Federal income tax returns of
IBT and each of its Subsidiaries consolidated in such returns have been
examined by and settled with the IRS, or the statute of limitations has
expired (and no waiver extending the statute of limitations has been
requested or granted), for all taxable years ending on or before
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December 31, 1995. For the purpose of this Agreement, (1) the term "tax"
(including, with correlative meaning, the terms "taxes" and "taxable"),
includes all Federal, state, local and foreign income, profits, franchise,
gross receipts, payroll, sales, employment, use, property, withholding,
excise, occupancy and other taxes, duties or assessments of any nature
whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts; and (2) the term "tax return" includes all
returns and reports (including elections, declarations, disclosures,
schedules, estimates and information returns) required to be supplied to a
tax authority relating to taxes.
(i) Benefit Plans.
(i) Section 3.2(i)(i) of the IBT Disclosure Schedule lists each
employee benefit plan, whether the plan be written or oral, (including,
without limitation, any "employee benefit plan," as defined in Section
3(3) of ERISA and any plan for retirees that provides medical insurance
or other form of benefit described in Section 3(1) of ERISA) (all the
foregoing being herein called "Benefit Plans"), maintained or
contributed to by IBT or any other Subsidiary of IBT (the "IBT Benefit
Plans"). For each Benefit Plan, IBT has made available to FSB a true and
correct copy of (A) the most recent annual report (Form 5500) filed with
the IRS, (B) such IBT Benefit Plan, (C) each trust agreement relating to
such IBT Benefit Plan, (D) the most recent summary plan description for
each IBT Benefit Plan for which a summary plan description is required,
(E) the most recent actuarial report or valuation relating to a IBT
Benefit Plan subject to Title IV of ERISA, and (F) the most recent
determination letter issued by the IRS with respect to any IBT Benefit
Plan qualified under Section 401(a) of the Code.
(ii) The current value of the assets of each of the IBT Benefit
Plans subject to Title IV of ERISA exceeds that plan's "Benefit
Liabilities," as that term is defined in Section 4001(a)(16) of ERISA,
when determined under actuarial factors that would apply if that plan
terminated in accordance with all applicable legal requirements.
(iii) Except as set forth in Section 3.2(i)(iii) of the IBT
Disclosure Schedule, to the best knowledge of IBT and its Subsidiaries,
each of the IBT Benefit Plans has been administered in compliance with
its terms in all material respects and is in compliance in all material
respects with the applicable provisions of ERISA (including, but not
limited to, the funding and prohibited transactions provisions thereof),
the Code and other applicable laws.
(iv) There has been no reportable event within the meaning of
Section 4043(b) of ERISA (for which a waiver did not apply) or any
accumulated funding deficiency (whether or not waived) within the
meaning of Section 412 of the Code with respect to any IBT Benefit Plan.
(v) All contributions to the IBT Benefit Plans required thereunder
have been made or provided for.
(vi) Since September 2, 1974, no contributions have been made by
IBT or any Subsidiary of IBT to any "Multiemployer Plan," as such term
is defined in Section 3(37) of ERISA.
(vii) To the best knowledge of IBT, each of the IBT Benefit Plans
which is intended to be a qualified plan within the meaning of Section
401(a) of the Code is so qualified, and IBT is not aware of any fact or
circumstances which would adversely affect the qualified status of any
such plan.
(viii) With respect to the IBT Benefit Plans, individually and in
the aggregate, no event has occurred and, to the knowledge of IBT, there
exists no condition or set of circumstances in connection with which IBT
or any of its Subsidiaries could be subject to any liability that is
reasonably likely to have a material adverse effect on IBT (except
liability for benefits claims and funding obligations payable in the
ordinary course) under ERISA, the Code or any other applicable law.
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(j) Subsidiaries. Section 3.2(j) of the IBT Disclosure Schedule sets
forth all of the Subsidiaries of IBT as of the date of this Agreement (each
a "Subsidiary" and together the "Subsidiaries") and indicates for each such
Subsidiary, as of such date, the jurisdiction of organization. IBT owns,
either directly or indirectly, all shares of the outstanding capital stock
of each such Subsidiary. Each of IBT's Subsidiaries that is a bank (as
defined in the BHC Act) is an "insured bank" as defined in the FDIADeposit Insurance Act and applicable regulations thereunder. All of the shares of capital stock of
each of the Subsidiaries held by IBT or by another Subsidiary of IBT are
fully paidregulations.
(r) Brokers, Finders and nonassessable and are owned by IBT or a Subsidiary of IBT
free and clear of any material claim, lien or encumbrance.
(k) Agreements with Bank Regulators. Except as previously disclosed in
writing, neither IBT nor any of its Subsidiaries is a party to any written
agreement or memorandum of understanding with, or a party to any commitment
letter or similar undertaking to, or is subject to any order or directive
by, or is a recipient of any extraordinary supervisory letter from, or has
adopted any board resolutions at the request of Bank Regulators, nor has
IBT been advised by any Bank Regulator that it is contemplating issuing or
requesting any such order, directive, written agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter, board
resolutions or similar undertaking.
(l) Absence of Certain Changes or Events. Since December 31, 1999, and
except as set forth in Section 3.2(l) of the IBT Disclosure Schedule, IBT
and its Subsidiaries have not incurred any material liability, except in
the ordinary course of their business consistent with their past practices,
nor has there been any change, or any event involving a prospective change,
in the business, financial condition or result of operations of IBT or any
of its Subsidiaries which has had, or is reasonably likely to have, a
material adverse effect on IBT (other than as a result of changes in
banking laws or regulations of general applicability or interpretations
thereof)Financial Advisors.
(m) Capital Stock. At the Effective Time, IBT's Common Stock issued
pursuant to the Merger will be duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights.
(n) Environmental Matters. There is no legal, administrative, or other
proceeding, claim, or action of any nature seeking to impose, or that could
result in the imposition of, on IBT or any IBT Subsidiary, any liability
relating to the release of hazardous substances as defined under any local,
state or federal environmental statute, regulation or ordinance including,
without limitation, CERCLA, pending or to the best of IBT's knowledge,
threatened against IBT or any IBT Subsidiary the result of which has had or
could reasonably be expected to have a material adverse effect upon IBT and
IBT's Subsidiaries taken as a whole; to the best of IBT's knowledge there
is no reasonable basis for any such proceeding, claim or action; and to the
best of IBT's knowledge neither Neither IBT nor any IBT Subsidiary, is subject to
any agreement, order, judgment, or decree by or with any court,
governmental authority or third party imposing any such environmental
liability.
(o) Approvals. IBT knows of no reason why all Requisite Regulatory
Approvals (as defined in Section 6.1(b)) should not be obtained without the
imposition of any condition or restriction of the type referred to in
Section 6.1(f).
(p) Brokers and Finders. Except for the retention by IBT of Austin
Associates, Inc., none of IBT's or any of its Subsidiaries' nor any of their respective officers, directors, officersemployees or employeesagents, has employed any broker, or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or similar paymentsadvisor other than Austin Associates, LLC in connection with the transactions contemplated by this Agreement.
(q) IBT Financial Statements. The consolidated balance sheets of IBT
and IBT's Subsidiaries as of December 31, 1999 and 1998 and related
consolidated statements of income, changesAgreement, or incurred any liability or commitment for any fees or commissions to any such person other than Austin Associates, LLC in shareholders' equity and
comprehensive income, and cash flows for the three years ended December 31,
1999, togetherconnection with the notes thereto, certifiedtransactions contemplated by Rehmann Robson P.C. and
included in IBT's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 (the "IBT 10-K") as filed with the SEC, and the unaudited
consolidated balance sheetsthis Agreement.
ARTICLE VI — COVENANTS OF GCFC
6.1. Conduct of IBT and its
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Subsidiaries as of September 30, 1999 and the related unaudited
consolidated statements of income, changes in shareholders' equity and
comprehensive income, and cash flows for the nine (9) months then ended
included in IBT's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1999, as filed with the SEC (collectively, the "IBT
Financial Statements"), have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis and present
fairly (subject, in the case of financial statements for interim periods,
to normal recurring adjustments) the consolidated financial position of IBT
and its Subsidiaries at the dates and the consolidated results of
operations, changes in financial position and cash flows of IBT and its
Subsidiaries for the periods stated therein.
(r) Properties and Leases. Except as may be reflected in the IBT
Financial Statements and except for any lien for current taxes not yet
delinquent, IBT and each IBT Subsidiary has good title free and clear of
any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property reflected in IBT's
consolidated balance sheet as of September 30, 1999 included in IBT's
Quarterly Report on Form 10-Q for the period then ended, and all real and
personal property acquired since such date, except such real and personal
property as has been disposed of in the ordinary course of business. All
leases of real property and all other leases material to IBT or any IBT
Subsidiary pursuant to which IBT or such IBT Subsidiary, as lessee, leases
real or personal property, are valid and effective in accordance with their
respective terms, and there is not, under any such lease, any material
existing default by IBT or such IBT Subsidiary or any event which, with
notice or lapse of time or both, would constitute such a material default.
Substantially all IBT's and each IBT Subsidiary's buildings and equipment
in regular use have been well maintained and are in good and serviceable
condition, reasonable wear and tear excepted.
(s) Accounting Matters. Neither IBT nor any of its Subsidiaries or
affiliates, has taken or agreed to take any action that would prevent IBT
from accounting for the business combination to be effected by the Merger
as a "pooling of interests"Business
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1
(a) Affirmative Covenants of FSB.. During the period from the date of this Agreement and continuing untilto the Effective Time, FSB agrees as to itselfexcept with the written consent of IBT, GCFC will, and will cause each GCFC Subsidiary to: operate its Subsidiaries that, except as expressly contemplated or permitted by this
Agreement, or to the extent that IBT shall otherwise consent in writing:
(a) Ordinary Course. FSB and its Subsidiaries shall carry on their
respective businessesbusiness only in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted andof business; use all reasonable efforts to preserve intact their presentits business organizations,organization and assets and maintain theirits rights and franchisesfranchises; and preserve their relationships with
customers, suppliersvoluntarily take no action which would: (i) adversely affect the ability of the parties to obtain the Regulatory Approvals or materially increase the period of time necessary to obtain such approvals, or (ii) adversely affect its ability to perform its covenants and others having business dealings with themagreements under this Agreement.
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(b) Negative Covenants. GCFC agrees that from the date of this Agreement to the end their goodwillEffective Time, except as otherwise specifically permitted or required by this Agreement, or consented to by IBT in writing, it will not, and ongoing businesses shallit will cause each of the GCFC Subsidiaries not be impairedto:
(i) change or waive any provision of its Articles of Incorporation or Bylaws, except as required by law;
(ii) change the number of authorized or issued shares of its capital stock, or issue or grant any Right or agreement of any character relating to its authorized or issued capital stock or any securities convertible into shares of such stock, make any grant or award under any GCFC Stock Benefit Plan, or split, combine or reclassify any shares of capital stock, or declare, set aside or pay any dividend or other distribution in respect of capital stock other than dividends issued consistent with the past practice of GCFC, or redeem or otherwise acquire any shares of capital stock;
(iii) enter into, amend in any material respect. FSB shall not, nor shall permitrespect or terminate any material contract or agreement (including without limitation any settlement agreement with respect to litigation) except in the ordinary course of business;
(iv) make application for the opening or closing of any, or open or close any, branch or automated banking facility, except as required by any Bank Regulator;
(v) except as agreed to or incurred prior to the date of this Agreement, grant or agree to pay any bonus, severance or termination to, or enter into, renew or amend any employment agreement, severance agreementand/or supplemental executive agreement with, or increase in any manner the compensation or fringe benefits of, any of its Subsidiariesdirectors, officers or employees except that GCFC may (A) authorize compensation increases including bonuses to (i)officers in the ordinary course of business not to exceed $10,000 in the aggregate, after the execution of this Agreement through December 31, 2007, and (B) hire at-will, non-officer employees to fill vacancies that may from time to time arise in the ordinary course of business;
(vi) enter into or, except as may be required by law, materially modify any pension, retirement, stock option, stock purchase, stock appreciation right, stock grant, savings, profit sharing, deferred compensation, supplemental retirement, consulting, bonus, group insurance or other employee benefit, incentive or welfare contract, plan or arrangement, or any trust agreement related thereto, in respect of any of its directors, officers or employees; or make any contributions to any defined contribution or defined benefit plan other than regularly scheduled contributions consistent with past practice;
(vii) merge or consolidate GCFC or any GCFC Subsidiary with any other corporation; sell or lease all or any substantial portion of the assets or business of GCFC or any GCFC Subsidiary; make any acquisition of all or any substantial portion of the business or assets of any other Person other than in connection with foreclosures, settlements in lieu of foreclosure, troubled loan or debt restructuring, or the collection of any loan or credit arrangement between GCFC, or any GCFC Subsidiary, and any other Person; enter into a purchase and assumption transaction with respect to deposits and liabilities; permit the revocation or surrender by any GCFC Subsidiary of its certificate of authority to maintain, or file an application for the relocation of, any existing branch office, or file an application for a certificate of authority to establish a new branch office;
(viii) sell or otherwise dispose of the capital stock of GCFC or sell or otherwise dispose of any asset of GCFC or of any GCFC Subsidiary other than in the ordinary course of business consistent with past practice; except for transactions with the FHLB, subject any asset of GCFC or of any GCFC Subsidiary to a lien, pledge, security interest or other encumbrance (other than in connection with deposits, repurchase agreements, bankers acceptances, “treasury tax and loan” accounts established in the ordinary course of business and transactions in “federal funds” and the satisfaction of legal requirements in the exercise of trust powers) other than in the ordinary course of business consistent with past practice; incur any indebtedness for borrowed money (or guarantee any indebtedness for borrowed money), except in the ordinary course of business consistent with past practice;
(ix) take any action which would result in any of the representations and warranties of GCFC set forth in this Agreement becoming untrue as of any date after the date hereof or in any of the conditions set forth in Article IX hereof not being satisfied, except in each case as may be required by applicable law;
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(x) change any method, practice or principle of accounting, except as may be required from time to time by GAAP (without regard to any optional early adoption date) or any Bank Regulator responsible for regulating GCFC or any GCFC Subsidiary;
(xi) waive, release, grant or transfer any material rights of value or modify or change in any material respect any existing material agreement or indebtedness to which GCFC or any GCFC Subsidiary is a party, other than in the ordinary course of business, consistent with past practice;
(xii) purchase any equity securities, or purchase any security for its investment portfolio inconsistent with GCFC’s or any GCFC Subsidiary’s current investment policy;
(xiii) except for commitments issued prior to the date of this Agreement which have not yet expired and which have been disclosed on the GCFC Disclosure Schedule 6.1(b)(xiii), and the renewal of existing lines of credit, make any new loan or other credit facility commitment (including without limitation, lines of credit and letters of credit) in an amount in excess of $1,000,000 for a commercial real estate loan, $500,000 for a construction loan, $250,000 for a commercial business loan, or in excess of $500,000 for a residential loan, except that if IBT does not object within 24 hours after confirmation of receipt of notification from GCFC of an intent to originate a loan in excess of the amounts set forth in this paragraph, consent shall be deemed to have been given by IBT. Notwithstanding Section 12.4, notice under this Section 6.1(b)(xiii) may also be provided by facsimile or electronic mail;
(xiv) enter into, renew, extend or modify any other transaction (other than a deposit transaction) with any Affiliates other than pursuant to GCFC’s existing insider loan policy;
(xv) enter into any new material linefutures contract, option, interest rate caps, interest rate floors, interest rate exchange agreement or other agreement or take any other action for purposes of hedging the exposure of its interest-earning assets and interest-bearing liabilities to changes in market rates of interest except in the ordinary course of business (ii) increase or
decrease the current number of their directors, except as consistent with FSB's current Boardpast practice;
(xvi) except for the execution of Directors' retirement policy, (iii)this Agreement, and actions taken or which will be taken in accordance with this Agreement and performance thereunder, take any action that would give rise to a right of payment to any individual under any employment agreement;
(xvii) make any change itsin policies in existence on the date of this Agreement with regard to: the extension of credit, or its Subsidiaries lending, investment, the establishment of reserves with respect to the possible loss thereon or the charge off of losses incurred thereon; investments; asset/liability management andmanagement; or other material banking policies in any material respect except as may be required by changes in applicable law or regulations, by a Bank Regulator, or in the discretion of the GCFC board of directors, consistent with prudent banking practice, in which is materialcase GCFC shall give prior notice to such party;
or (iv) incur or commitIBT;
(xviii) except for the execution of this Agreement, and the transactions contemplated herein, take any action that would give rise to an acceleration of the right to payment to any individual under any GCFC Compensation and Benefit Plan;
(xix) except as set forth in GCFC Disclosure Schedule 6.1(b)(xix), make any capital expenditures or any obligations or
liabilities in connection therewithexcess of $25,000 individually and in the aggregate, other than capitalpursuant to binding commitments existing on the date hereof and other than expenditures and
obligationsnecessary to maintain existing assets in good repair;
(xx) purchase or otherwise acquire, or sell or otherwise dispose of, any assets or incur any liabilities incurred or committed toother than in the ordinary course of business consistent with past practices and policies and other than the items shownsale or disposal or worn, surplus or replaced equipment;
(xxi) sell any participation interest in Section
4.1(a)any loan (other than sales of the FSB Disclosure Schedule.
(b) Dividends; Changes in Stock. FSB shall not, nor shall permit any
of its Subsidiariesloans secured by one- to nor shall propose to (i) declare or pay any
dividends on or make other distributions in respectfour-family real estate that are consistent with past practice) unless IBT has been given prior notice of any of its capital
stock, except for (A) the declaration and payment of regular semi-annual
cash dividends by FSB in any amount not in excess of $0.75 per share of FSB
Common Stock with usual record and payment dates for such dividends in
accordance with FSB's past dividend practice, provided further,
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however, that FSB shareholders shall be entitled to a dividend on FSB
Common Stock or IBT Common Stock, but not both, in the calendar quarter in
which the Closing shall occur, and (B) dividends or distributions by a
wholly owned Subsidiary of FSB; (ii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
its capital stock; or (iii) repurchase, redeem or otherwise acquire, or
permit any Subsidiary to purchase or otherwise acquire (other than as agent
for shareholders reinvesting dividends pursuant to any dividend
reinvestment plan and except for the acquisition of trust account shares),
any shares of FSB's capital stock or any securities convertible into or
exercisable for any shares of its capital stock.
(c) Issuance of Securities. Except as set forth on Section 4.1(c) of
the FSB Disclosure Schedule, FSB shall not, nor shall it permit any of its
Subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any
class, any Voting Debt or any securities convertible into or exercisable
for, or any rights, warrants or options to acquire, any such shares or
Voting Debt,loan participation being sold;
(xxii) undertake or enter into any agreement with respect to any of the
foregoing, other than issuance by a wholly owned Subsidiary of its capital
stock to its parent, except that FSB may issue shares of FSB Common Stock
upon the exercise of outstanding stock options as described in Section
4.1(c) of the FSB Disclosure Schedule.
(d) No Solicitations. Except as the Board of Directors of FSB deems
necessary, on the advice of outside counsel, in the exercise of its
fiduciary obligations under applicable law; and provided, however, that
nothing contained in this Section 4.1(d) shall restrict or prohibit any
disclosure by FSB that is required, on the advice of outside counsel, (i)
in any document to be filed with a regulatory authority after the date of
this Agreement or (ii) in any document or statement otherwise required
under applicable law, FSB shall not permit any of its Subsidiaries to, nor
shall authorize or permit any of its officers, directors or employees or
any investment banker, financial advisor, attorney, accountantlease, contract or other representative or agent retained by it or any ofcommitment for its Subsidiaries to,
solicit or encourage (including by way of furnishing nonpublic
information), or take any other action to facilitate, any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to
lead to, any takeover proposal (as defined below), or agree or endorse any
takeover proposal, or participate in any discussions or negotiations, or
provide third parties with any nonpublic information, relating to any such
inquiry or proposal. FSB shall promptly advise IBT orally and in writing of
any such inquiries or proposals, including all of the material terms
thereof. As used in this Agreement, "takeover proposal" shall mean any
tender or exchange offer, proposal for a merger, consolidation or other
business combination involving FSB or any Subsidiary of FSB or any proposal
or offer to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets of FSB or any Subsidiary of FSB other
than the transactions contemplated or permitted by this Agreement
(including, without limitation, Section 4.1(f) hereof).
(e) No Acquisitions. FSB shall not, nor shall permit any of its
Subsidiaries to, acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or division thereof or otherwise
acquire or agree to acquire any assets in each case; provided, however,
that the foregoing shall not prohibit (i) internal reorganization,
consolidations or dissolutions involving only existing Subsidiaries as
permitted or directed by this Agreement, (ii) foreclosures and other
acquisitions related to previously contracted debt, in each case in the
ordinary course of business, or (iii) acquisitions of financial assets and
merchant banking activities, in each case in the ordinary course of
business.
(f) No Dispositions. Other than dispositions permitted or required by
this Agreement, dispositions described in Section 4.1(f) of the FSB
Disclosure Schedule or dispositions in the ordinary course of business
consistent with past practices, FSB shall not, nor shall permit any of its
Subsidiaries to, sell, lease, encumber or otherwise dispose of, or agree to
sell, lease, encumber or otherwise dispose of, any of its assets (including
capital stock of Subsidiaries).
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(g) Indebtedness. Other than in the ordinary course of business
consistent with past practice, FSB shall not, nor shall permit any of its
Subsidiaries to incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise as an accommodation become responsible for
the obligations of any other individual, corporation or other entity, or
make any loan or advanceaccount, other than in the ordinarynormal course of business
consistent with past practice.
(h) Benefit Plans. Except as set forthbanking business;
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(xxiii) pay, discharge, settle or compromise any claim, action, litigation, arbitration or proceeding in Section 4.1(h)an amount exceeding $10,000;
(xxiv) except to reelect persons who are then incumbent officers and directors at annual meetings, not (A) increase the number of directors, (B) elect or appoint any person to an executive office, or (C) hire any person to perform the FSB
Disclosure Schedule, FSB agrees as to itself and its Subsidiaries that it
will not, without the prior written consentservices of IBT, (i) enter into, adopt,
amend (except as may be required by law)an executive officer; or terminate any FSB Benefit Plan,
as the case may be, or any other employee benefit plan or any agreement,
arrangement, plan or policy between FSB and one or more of its directors or
officers, (ii) make any contributions to any FSB Benefit Plan except as
required by the terms of such plan in effect as of the date hereof, (iii)
except for normal increases in the ordinary course of business consistent
with past practice that in the aggregate do not result in a material
increase in benefits or compensation expense to FSB, increase in any manner
the compensation or fringe benefits of any director, officer, or employee
or pay any benefit not required by any plan or arrangement as in effect as
of the date hereof (including, without limitation, the granting of stock
options, stock appreciation rights, restricted stock, restricted stock
units or performance units or shares) or enter into any contract,
agreement, commitment or arrangement
(xxv) agree to do any of the foregoing, or (iv)
enter into or renew any contract, agreement, commitment or arrangement
providing for the payment of any director, officer or employee of such
party of compensation or benefits contingent, or the terms of which are
materially altered, upon the occurrence of any of the transactions
contemplated by this Agreement.
(i) Insurance. FSB and its subsidiaries shall maintain the insurance
coverage referenced inforegoing.
6.2. Current Information.
(a) Subject to Section 3.1(s) through the Effective Time.
4.2 Covenants of FSB and IBT. During12.1 hereof, during the period from the date of this Agreement and continuing untilto the Effective Time, FSBGCFC will cause one or more of its representatives to confer with representatives of IBT or a designated IBT Subsidiary and report the general status of its ongoing operations at such times as IBT agree as to
themselvesor a designated IBT Subsidiary may reasonably request. GCFC will promptly notify IBT of any material change in the normal course of its business or in the operation of its properties and, their Subsidiaries that, except as expressly contemplated or
permitted by this Agreement, or to the extent that the parties shall otherwise
consent in writing:
(a) Governing Documents. Except in accordance with this Agreement, no
party shall amend or propose publicly to amend, or shall permit any of its
Subsidiaries to amend, the articles of incorporation, by-laws or other
governing document of such party in any way adverse to IBT, the holders of
IBT Common Stock or IBT's ability to consummate the transactions
contemplated hereby. Notwithstanding the foregoing, IBT shall be permitted
to amend its articles of incorporation to increase its authorized common
stock to 10.0 million shares.
(b) Other Actions. No party shall, or shall permit any of its
Subsidiaries to, take any action that is intended to result in any of its
representations and warranties set forth in this Agreement being or
becoming untrue in any material respect, or in any of the conditions to the
Merger set forth in Article VI not being satisfied or in a violation of any
provision of this Agreement, or (unless such action is required by applicable law, or sound banking practice) which would adversely affect the
ability of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), or the institution or the threat of themmaterial litigation involving GCFC or any GCFC Subsidiary.
(b) Subject to obtain anySection 12.1 hereof, GCFC shall provide IBT, within thirty (30) days after the end of each month, a written list of (i) nonperforming assets (the term “nonperforming assets” for purposes of this subsection, means loans that are “troubled debt restructuring” as defined in Statement of Financial Accounting Standards No. 15, “Accounting by Debtors and Creditors for Troubled Debt Restructuring,”), (ii) loans on nonaccrual, (iii) real estate owned, (iv) all loans ninety (90) days or more past due as of the Requisite Regulatory Approvals
(as defined in Section 6.1(b)) without impositionend of such month, and (v) impaired loans. On a condition or
restrictionmonthly basis, GCFC shall provide IBT with a schedule of all loan approvals, which schedule shall indicate the loan amount, loan type and other material features of the type referred to in Section 6.1(f) hereof except, in
every case, as may be required by applicable law.
loan.
(c) Advice of Changes; Government Filings. Each partyGCFC shall promptly advise the other orally and in writinginform IBT upon receiving notice of any changelegal, administrative, arbitration or event having,other proceedings, demands, notices, audits or which could causeinvestigations (by any federal, state or constitutelocal commission, agency or board) relating to the alleged liability of GCFC or any GCFC Subsidiary.
6.3. Access to Properties and Records. Subject to Section 12.1 hereof, GCFC shall permit IBT or a material breach of anydesignated IBT Subsidiary access upon reasonable notice to its properties and those of the representations, warranties or covenants of such party contained herein.
IBT and FSB shall file all reports required to be filed by each of them
with the SEC between the date of this Agreement and the Effective TimeGCFC Subsidiaries, and shall deliver to the other party copies of all such reports promptly after
the same are filed. IBT, FSBdisclose and each Subsidiary of IBT or FSB that is a
bank shall file all call reports with the appropriate Bank Regulators and
all other reports, applications and other documents required to be filed
with the appropriate Bank Regulators between the date hereof and the
Effective
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Time and shall make available to the other party copies of all such reports
promptly after the same are filed.
(d) Pooling and Tax-Free Reorganization Treatment. Neither IBT nor FSB
shall take or cause to be taken any action, whether before or after the
Effective Time, which would disqualify the Merger as a "pooling of
interests" for accounting purposes or the Merger as a "reorganization"
within the meaning of Section 368(a) of the Code.
(e) Accounting Methods. Neitherdesignated IBT nor FSB shall change its methods
of accounting in effect at December 31, 1999, except as required by changes
in generally accepted accounting principles as concurred to by such party's
independent auditors.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Regulatory Matters.
(a) IBT has primary responsibility for the preparation and filing with
the SEC of the Proxy Statement. IBT, with the assistance of FSB, shall
promptly prepare and file with the SEC the S-4, in which the Proxy
Statement will be included. IBT and FSB shall use all reasonable efforts to
have the S-4 declared effective under the Securities Act as promptly as
practicable after such filing, and thereafter mail the Proxy StatementSubsidiary to the shareholdersextent permitted by applicable law during normal business hours all of FSB. IBTits books, papers and FSB shall use their best effortsrecords relating to obtainthe assets, properties, operations, obligations and liabilities, including, but not limited to, all necessary state securities law or "Blue Sky" permits and approvals
required to carry outbooks of account (including the general ledger), tax records, minute books of directors’ (other than minutes that discuss any of the transactions contemplated by this Agreement or any other subject matter GCFC reasonably determines should be treated as confidential or privileged) and FSBshareholders’ meetings, organizational documents, bylaws, material contracts and agreements, filings with any regulatory authority, litigation files (to the extent not resulting in waiver of attorney-client privilege), plans affecting employees, and any other business activities or prospects in which IBT may have a reasonable interest. GCFC shall provide and shall request its auditors to provide IBT with such historical financial information regarding it (and related audit reports and consents) as IBT may request for securities disclosure purposes. GCFC and each GCFC Subsidiary shall permit, upon reasonable notice, IBT at its own expense to cause a “phase I environmental audit” and a “phase II environmental audit” to be performed at any physical location owned or occupied by GCFC or any GCFC Subsidiary. IBT shall indemnify and hold harmless GCFC for any claim, suit, liability, cost, expense or damages whatsoever arising out of or related to such environmental audits or any other inspection or due diligence activity conducted on GCFC’s premises.
6.4. Financial and Other Statements.
(a) Promptly upon receipt thereof, GCFC will furnish to IBT all information concerning FSBcopies of each annual, interim or special audit of the books of GCFC and the holdersGCFC Subsidiaries made by its independent accountants and copies of FSB Common Stock as may be reasonably requestedall internal control reports submitted to GCFC by such accountants in connection with each annual, interim or special audit of the books of GCFC and the GCFC Subsidiaries made by such accountants.
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(b) Promptly after a GCFC board meeting but no later than thirty (30) days after the end of each month, GCFC will deliver to IBT a consolidated balance sheet and a consolidated statement of operations, without related notes, for such month prepared in accordance with current financial reporting practices.
(c) GCFC will advise IBT promptly of the receipt of any examination report of any Bank Regulator with respect to the condition or activities of GCFC or any of the GCFC Subsidiaries.
(d) With reasonable promptness, GCFC will furnish to IBT such action.
(b) The parties heretoadditional financial data that GCFC possesses and as IBT may reasonably request, including without limitation, detailed monthly financial statements and loan reports.
6.5. Maintenance of Insurance. GCFC shall cooperatemaintain and cause the GCFC Subsidiaries to maintain, insurance in such amounts as are reasonable to cover such risks as are customary in relation to the character and location of its properties and the nature of its business.
6.6. Disclosure Supplements. From time to time prior to the Effective Time, GCFC will promptly supplement or amend the GCFC Disclosure Schedule delivered in connection herewith with respect to any matter hereafter arising which, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in such GCFC Disclosure Schedule or which is necessary to correct any information in such GCFC Disclosure Schedule which has been rendered inaccurate thereby.
6.7. Consents and Approvals of Third Parties. GCFC shall use all commercially reasonable efforts, and shall cause each other andGCFC Subsidiary to use their
bestall commercially reasonable efforts, to promptly prepare and file all necessary documentation, to
effect all necessary application, notices, petitions, filings and other
documents, and to obtain as promptlysoon as practicable all necessary permits,
consents and authorizationsapprovals of all third parties and Governmental Entitiesany other Persons necessary or advisable to consummatedesirable for the consummation of the transactions contemplated by this Agreement. FSB and IBT shall have the right to review in advance, and
6.8. All Reasonable Efforts. Subject to the extent practicable each will consult the other on, subject to
applicable laws relating to the exchange of information, all the
information relating to FSB or IBT, as the case may be,terms and any of their
respective Subsidiaries, which appear in any filing made with, or written
materials submitted to, any third party or any Governmental Entity in
connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, each of the parties hereto shall act
reasonablyconditions herein provided, GCFC and as promptly as practicable. The parties heretoGCB agree that
they will consult with each other with respect to the obtaining of all
permits, consents, approvals and authorizations by this Agreement and each
party will keep the other appraised of the status of matters relating to
completion of the transactions contemplated herein.
(c) FSB and IBT shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers
and shareholders and other such matters as may be reasonably necessary or
advisable in connection with the Proxy Statement, the S-4 or any other
statement, filing, notice or application made by or on behalf of FSB, IBT
or any of their respective Subsidiaries to any Governmental Entity in
connection with the Merger and the other transactions contemplated by this
Agreement.
(d) FSB and IBT shall promptly furnish each other with copies of
written communications received by FSB or IBT, as the case may be, or any
of their respective Subsidiaries, Affiliates or Associates (as such items
are defined in Rule 12b-2 under the Exchange Act as in effect on the date
hereof) from, or delivered by any of the foregoing to, any Governmental
Entity in respect of the transactions contemplated hereby.
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5.2 Letter of Accountants. FSB shall use its best efforts to cause to be
delivered to IBT a letter of Andrews Hooper & Pavlik P.L.C., FSB's independent
auditor in substantially the form shown on Exhibit 5.2 dated (i) the date of
which the Form S-4 shall become effective and (ii) the business day prior to the
Effective Time, and addressed to IBT.
5.3 Access to Information. Upon reasonable notice and subject to
applicable laws relating to the exchange of information, FSB shall (and cause
each of its Subsidiaries to) afford to the officers, employees, accountants,
counsel and other representatives of IBT, access during normal business hours
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments and records and, during such period, FSB shall (and shall
cause each of its Subsidiaries to) make available to IBT (a) a copy of each
report, schedule, registration statement and other document filed or received by
it during such period pursuant to the requirements of federal or state
securities laws or federal or state banking laws (other than reports or
documents which FSB is not permitted to disclose under applicable law) and (b)
all other information concerning its business, properties and personnel as IBT
may reasonably request. IBT will hold all such information in confidence to the
extent required by, and in accordance with, the provisions of the
confidentiality agreement dated February 17, 2000, between IBT and FSB. No
investigation by IBT shall affect the representations and warranties of FSB set
forth herein.
5.4 Shareholder Meeting. FSB shall take all steps necessary to duly call,
give notice of, convene and hold a meeting of its shareholders to be held as
soon as is reasonably practicable after the date on which the S-4 becomes
effective for the purpose of voting upon the approval of this Agreement. FSB
will, through its Board of Directors, subject to their respective fiduciary
obligations as determined by the Board of Directors after consultation with
outside counsel, recommend to its shareholders approval of such matters.
5.5 Legal Conditions to Merger. IBT and FSB shall, and shall cause its
Subsidiaries to use their bestall commercially reasonable efforts (i) to take, or cause to be taken, all actions necessary to comply promptly with all legal requirements which may be
imposed on such party or its Subsidiaries with respect to the Merger and,
subject to the conditions set forth in Article VI hereof to consummate the
transactions contemplated by this Agreement, and (ii) to obtain (and to
cooperate with the other party to obtain) any consent, order or approval of, or
any exemption by any Governmental Entity and any other public or private third
party which is required to be obtained or made by such party or any of its
Subsidiaries in connection with the Merger, and the transactions contemplated by
this Agreement.
5.6 Affiliates. FSB shall use its best efforts to cause each director,
executive officer and other person who is an "affiliate" (for purposes of Rule
145 under the Securities Act and for purposes of qualifying for "pooling of
interests" treatment) of FSB to deliver to IBT, as soon as practicable after the
date hereof, and prior to the date of the FSB shareholders meeting called to
approve this Agreement: a written agreement, substantially in the form of
Exhibit 5.6, providing that such person will not sell, pledge, transfer or
otherwise dispose of any shares of FSB Common Stock held by such "affiliate" and
the shares of IBT Common Stock to be received by such "affiliate" in the Merger:
(1) except in compliance with the applicable provisions of the Securities Act
and the rules and regulations thereunder, and (2) during the period commencing
30 days prior to the Merger and ending at the time of the publication of
financial results covering at least 30 days of combined operations of FSB and
IBT.
5.7 Employee Benefit Plans.
(a) Except as otherwise provided in Sections 4.1(h) hereof, IBT and
FSB agree that, the IBT Benefit Plans in effect at the date of this
Agreement shall be adopted by FSB's Subsidiaries for their employees
following the Merger.
(b) In the case of FSB Benefit Plans under which the employees'
interests are based upon FSB Common Stock, IBT and FSB agree that such
interests shall be based on IBT Common Stock in accordance with the terms
of the FSB Benefit Plans and in an equitable manner.
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5.8 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement, and the transactions
contemplated hereby shall be paid by the party incurring such expense, except as
may be permitted by Section 7.2 and except that expenses incurred in connection
with printing and mailing the Proxy Statement and the Form S-4 shall be shared
equally by IBT and FSB.
5.9 Additional Agreements; Best Efforts. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use its best
efforts to take all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement and the Subsidiary Merger Agreement, except to the extent that such action, in the good faith determination of the board of directors of GCFC or GCB, as the case may be, after consultation with legal counsel, may result in a breach of fiduciary duty by said board of directors.
6.9. Failure to Fulfill Conditions. In the event that GCFC determines that a condition to its obligation to complete the Merger cannot be fulfilled and that it will not waive that condition, it will promptly notify IBT.
6.10. No Solicitation. From and after the date hereof until the termination of this Agreement, neither GCFC, nor any GCFC Subsidiary, nor any of their respective officers, directors, employees, representatives, agents and Affiliates (including, without limitation, any investment banker, attorney or accountant retained by GCFC or any of the GCFC Subsidiaries), will, directly or indirectly, initiate, solicit or knowingly encourage (including by way of furnishing non-public information or assistance) any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal (as defined below), or enter into or maintain or continue discussions or negotiate with any Person in furtherance of such inquiries or to obtain an Acquisition Proposal or agree to or endorse any Acquisition Proposal, or authorize or permit any of its officers, directors, or employees or any of its Subsidiaries or any investment banker, financial advisor, attorney, accountant or other representative retained by any of its Subsidiaries to take any such action, and GCFC shall notify IBT orally (within one business day) and in writing (as promptly as practicable) of all of the relevant details relating to all inquiries and proposals which it or any of its Subsidiaries or any such officer, director or employee, or, to GCFC’s Knowledge, investment banker, financial advisor, attorney, accountant or other representative of GCFC may receive relating to any of such matters, provided, however, that nothing contained in this Section 6.10 shall prohibit the Board of Directors of GCFC from (i) complying with its disclosure obligations under federal or state law; or (ii) furnishing information to, or entering into discussions or negotiations with, any person or entity that makes an unsolicited Acquisition Proposal, if, and only to the extent that, (A) the Board of Directors of GCFC determines in good faith (after consultation with its financial and legal advisors), taking into account all legal, financial and regulatory aspects of the proposal and the Person making the proposal, that such proposal, if consummated, is reasonably likely to result in a transaction more favorable to GCFC’s shareholders from a financial point of view than the Merger; (B) the Board of Directors of GCFC determines in good faith (after consultation with its financial and legal
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advisors) that the failure to furnish information to or enter into discussions with such Person would likely cause the Board of Directors to breach its fiduciary duties to shareholders under applicable law (such proposal that satisfies clause (A) and (B) being referred to herein as a “Superior Proposal”); and (C) GCFC promptly notifies IBT of such inquiries, proposals or offers received by, any such information requested from, or any such discussions or negotiations sought to be initiated or continued with GCFC or any of its representatives indicating, in connection with such notice, the name of such Person and the material terms and conditions of any inquiries, proposals or offers, and receives from such Person an executed confidentiality agreement in form and substance identical in all material respects to the confidentiality agreements that GCFC and IBT entered into. For purposes of this Agreement, “Acquisition Proposal” shall mean any proposal or offer as to any of the following (other than the transactions contemplated hereunder) involving GCFC or any of its Subsidiaries: (i) any merger, consolidation, share exchange, business combination, or other similar transactions; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 10% or more of the assets of GCFC and the GCFC Subsidiaries, taken as a whole, in a single transaction or series of transactions; (iii) any sale or tender offer or exchange offer for 10% or more of the outstanding shares of capital stock of GCFC or the filing of a registration statement under the Securities Act in connection therewith; or (iv) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.
ARTICLE VII — COVENANTS OF IBT
7.1. Financial and Other Statements.
(a) Promptly upon receipt thereof, IBT shall furnish to GCFC copies of each annual, interim or special audit of the books of IBT and the IBT Subsidiaries made by its independent accountants and copies of all internal control reports submitted to IBT by such accountants in connection with each annual, interim or special audit of the books of IBT and the IBT Subsidiaries made by such accountants.
(b) Promptly after an IBT board meeting but no later than thirty (30) days after the end of each month, IBT shall deliver to GCFC a consolidated balance sheet and a consolidated statement of operations, without related notes, for such month prepared in accordance with current financial reporting practices.
(c) IBT will advise GCFC promptly of the receipt of any examination report of any Bank Regulator with respect to the condition or activities of IBT or any of the IBT Subsidiaries.
(d) With reasonable promptness, IBT shall furnish to GCFC such additional financial data that IBT possesses and as GCFC may reasonably request, including without limitation, cooperating fullydetailed monthly financial statements and loan reports.
7.2. Disclosure Supplements. From time to time prior to the Effective Time, IBT will promptly supplement or amend the IBT Disclosure Schedule delivered in connection herewith with respect to any matter hereafter arising which, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in such IBT Disclosure Schedule or which is necessary to correct any information in such IBT Disclosure Schedule which has been rendered inaccurate thereby.
7.3. Consents and Approvals of Third Parties. IBT shall use all commercially reasonable efforts and shall cause each IBT Subsidiary to use all commercially reasonable efforts to obtain as soon as practicable all consents and approvals of any other party hereto,Persons necessary or desirable for the consummation of the transactions contemplated by this Agreement.
7.4. All Reasonable Efforts. Subject to the terms and conditions herein provided, IBT and Isabella agree to use all commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement and the Subsidiary Merger Agreement, except to the extent that such action, in the good faith determination of the board of directors of IBT or Isabella, as the case may be, after consultation with legal counsel, may result in a breach of fiduciary duty by said board of directors.
7.5. Failure to Fulfill Conditions. In the event that IBT determines that a condition to its obligation to complete the Merger cannot be fulfilled and that it will not waive that condition, it will promptly notify GCFC.
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7.6. Employee Benefits. IBT shall, from and after the Effective Time until January 1, 2009, continue the defined contribution plan of GCFC in effect immediately preceding the Effective Time. No later than January 1, 2009, or as required by ERISA, IBT shall cause the employee defined contribution plans of IBT to be adopted by Isabella for all GCFC employees who were employed as of the Effective Time (the “Former GCFC Employees”). All Former GCFC Employees who become participants in an IBT employee pension benefit plan covered under ERISA shall, for purposes of determining eligibility for and for any applicable vesting periods of such employee benefits only (and not for benefit accrual purposes) be given credit for meeting eligibility and vesting requirements in such plans for service as an employee of GCFC or any predecessor thereto prior to the Effective Time. This Agreement shall not be construed to limit the ability of IBT or the IBT Subsidiary to terminate the employment of any employee or to review employee pension benefits programs from time to time and to make such changes as it may deem appropriate. IBT shall, from and after the Effective Time, continue in effect any material welfare benefit plan, life insurance, group health plan or disability plan in which the employees of GCFC participated immediately prior to the Effective Time (or an arrangement providing substantially similar benefits). IBT and the other party heretoIBT Subsidiary shall not take any action which would adversely affect the employees of GCFC participation in or materially reduce any benefits under any such plan or arrangement. Nothing contained in this subsection shall limit IBT or any IBT Subsidiary’s right to amend or terminate any plan or arrangement to conform such plan or arrangement to statutory or regulatory requirements applicable to such plan or arrangement.
7.7. Directors and Officers Indemnification; Insurance.
(a) From and after the Effective Time through the third anniversary of the Effective Time, IBT and the IBT Subsidiaries (collectively the “Indemnifying Party”) shall indemnify and hold harmless each present and former director, officer and employee of GCFC, determined as of the Effective Time (the “Indemnified Parties”) against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any appropriate informationclaim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, arising in whole or in part out of or pertaining to the fact that he or she was a director, officer, employee, fiduciary or agent of GCFC or any GCFC Subsidiary or is or was serving at the request of GCFC or any GCFC Subsidiary as a director, officer, employee, fiduciary or agent of another corporation, partnership, joint venture, trust or other enterprise, including without limitation matters related to the negotiation, execution and making all necessary filingsperformance of this Agreement or the consummation of the Merger, to the fullest extent which indemnification is permitted under the applicable provisions of the MBCA or the Michigan Banking Law, as applicable, as in effect on the date hereof or in the event any subsequent amendment thereto expands the permissible scope of indemnification, then as amended.
(b) Any Indemnified Party wishing to claim indemnification under this Section 7.7 hereof, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify the Indemnifying Party, but the failure to so notify shall not relieve the Indemnifying Party of any liability it may have to such Indemnified Party if such failure does not actually prejudice the Indemnifying Party. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) the Indemnifying Party shall have the right to assume the defense thereof and the Indemnifying Party shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the Requisite Regulatory Approvals. Indefense thereof, except that if the Indemnifying Party elects not to assume such defense or counsel for the Indemnified Parties advises that there are issues which raise conflicts of interest between the Indemnifying Party and the Indemnified Parties, the Indemnified Parties may retain counsel which is reasonably satisfactory to the Indemnifying Party, and the Indemnifying Party shall pay, promptly as statements therefore are received, the reasonable fees and expenses of such counsel for the Indemnified Parties (which may not exceed one firm in any jurisdiction), (ii) the Indemnified Parties will cooperate in the defense of any such matter, (iii) the Indemnifying Party shall not be liable for any settlement effected without its prior written consent, and (iv) the Indemnifying Party shall have no obligation hereunder in the event that a federal or state banking agency or a court of competent jurisdiction shall determine that indemnification of an Indemnified Party in the manner contemplated hereby is prohibited by applicable laws and regulations.
(c) If IBT or any of its successors or assigns shall consolidate with or merge into any other entity and shall not be the continuing or surviving entity of such consolidation or merger or shall transfer all or substantially all of its
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assets to any other entity, then and in each case, at any timeproper provisions shall be made so that the successors and assigns of IBT or the surviving company shall assume the obligations set forth in this Section 7.7 hereof prior to or simultaneously with the consummation of such transaction.
ARTICLE VIII — REGULATORY AND OTHER MATTERS
8.1. Meetings of Shareholders. GCFC will (i) as promptly as practicable after the Effective
Time any further actionMerger Registration Statement is declared effective by the SEC, take all steps necessary to duly call, give notice of, convene and hold a meeting of its shareholders for the purpose of considering this Agreement and the Merger, and for such other purposes as may be, in GCFC’s reasonable judgment, necessary or desirable (the “GCFC Shareholders Meeting”), (ii) in connection with the solicitation of proxies with respect to the GCFC Shareholders Meeting, have its Board of Directors recommend approval of this Agreement to the GCFC Shareholders unless the Board of Directors shall have determined that such recommendation would violate its fiduciary duties under applicable law; and (iii) cooperate and consult with IBT with respect to each of the foregoing matters.
8.2. Proxy Statement — Prospectus; Merger Registration Statement.
(a) For the purposes (x) of registering IBT Common Stock to be offered to holders of GCFC Common Stock in connection with the Merger with the SEC under the Securities Act and (y) of holding the GCFC Shareholders Meeting, IBT shall draft and prepare, and GCFC shall cooperate in the preparation of, the Merger Registration Statement, including a proxy statement and prospectus satisfying all applicable requirements of applicable banking laws, and of the Securities Act and the Exchange Act, and the rules and regulations thereunder (such proxy statement/prospectus in the form mailed by GCFC to the GCFC shareholders, together with any and all amendments or supplements thereto, being herein referred to as the “Proxy Statement-Prospectus”). IBT shall provide GCFC and its counsel with appropriate opportunity to review and comment on the Proxy Statement-Prospectus prior to the time it is initially filed with the SEC or any amendments are filed with the SEC. IBT shall file the Merger Registration Statement, including the Proxy Statement-Prospectus, with the SEC. Each of IBT and GCFC shall use their best efforts to have the Merger Registration Statement declared effective under the Securities Act as promptly as practicable after such filing, and GCFC shall thereafter promptly mail the Proxy Statement-Prospectus to its shareholders. IBT shall also use its best efforts to obtain all necessary state securities law or “Blue Sky” permits and approvals required to carry out the transactions contemplated by this Agreement, and GCFC shall furnish all information concerning GCFC and the holders of GCFC Common Stock as may be reasonably requested in connection with any such action.
(b) Each party acknowledges that time is of the essence in connection with the preparation and filing of the Merger Registration Statement. IBT shall advise GCFC promptly after IBT receives notice of the time when the Merger Registration Statement has become effective or any supplement or amendment has been filed, of the issuance of any stop order or the suspension of the qualifications of the shares of IBT Common Stock issuable pursuant to the Merger Registration Statement, or the initiation or threat of any proceeding for any such purpose, or of any request by the SEC for the amendment or supplement of the Merger Registration Statement, or for additional information, and IBT shall provide GCFC with as many copies of such Merger Registration Statement and all amendments thereto promptly upon the filing thereof as GCFC may reasonably request.
(c) GCFC and IBT shall promptly notify the other party if at any time it becomes aware that the Proxy Statement-Prospectus or the Merger Registration Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. In such event, GCFC shall cooperate with IBT in the preparation of a supplement or amendment to such Proxy Statement-Prospectus that corrects such misstatement or omission, and IBT shall file an amended Merger Registration Statement with the SEC, and each of GCFC and IBT shall mail an amended Proxy Statement-Prospectus to GCFC’s shareholders.
8.3. Regulatory Approvals. Each of GCFC, GCB, IBT and Isabella will cooperate and use their respective reasonable best efforts to promptly prepare and, within 30 days after the date hereof or as soon thereafter as practicable, file all necessary documentation to obtain all necessary permits, consents, waivers, approvals and authorizations of the FRB, FDIC and OFIS and any other third parties and governmental bodies necessary to
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consummate the transactions contemplated by this Agreement and the Subsidiary Merger Agreement. GCFC and IBT shall furnish each other and each other’s counsel with all information concerning themselves, their Subsidiaries, directors, officers and shareholders and such other matters as may be necessary or advisable in connection with any application, petition or other statement made by or on behalf of GCFC, GCB, IBT or Isabella to any Bank Regulator or Governmental Entity in connection with the Merger or Subsidiary Merger and the other transactions contemplated by this Agreement and the Subsidiary Merger Agreement. Each party acknowledges that time is of the essence in connection with the preparation and filing of the documentation referred to above. GCFC shall have the right to review in advance all characterizations of the information relating to GCFC and any of its Subsidiaries which appear in any filing made in connection with the transactions contemplated by this Agreement or the Subsidiary Merger Agreement with any Governmental Entity.
8.4. Affiliates. GCFC shall use all reasonable efforts to cause each director, executive officer and other person who is an “affiliate” (for purposes of Rule 145 under the Securities Act) of GCFC to deliver to IBT, as soon as practicable after the date of this Agreement, and at least thirty (30) days prior to the date of the GCFC Shareholders Meeting, a written agreement, in the form of Exhibit B hereto, providing that such person will not sell, pledge, transfer or otherwise dispose of any shares of IBT Common Stock to vestbe received by such “affiliate” as a result of the Merger otherwise than in compliance with the applicable provisions of the Securities Act and the rules and regulations thereunder.
8.5. Amended and Re-Stated Management Continuity Agreements. IBT, as the Surviving Corporation, with full title to all
properties, assets, rights, approvals, immunities and franchises of either of
the Constituent Corporations, the proper officers and directors of each party to
this Agreement shall take all such necessary action.
5.10 Employment Agreement. Asagrees that as of the Closing Date, Farmers Stateit shall assume and perform the Amended and Re-Stated Management Continuity Agreements set forth in GCFC Disclosure Schedule 8.5, in the same manner and to the same extent that GCFC would be required to perform said agreements if the Merger had not taken place.
8.6. Post-Closing Operations. (a) At and after the Closing Date, IBT and GCFC agree that all banking offices of GCB will remain open.
8.7. Board Matters. As of the Effective Time, IBT will appoint Ted Kortes as a member of the Board of Directors of IBT to serve until the earlier of his attainment of age 70 or the date of the 2010 annual shareholders meeting of IBT.
8.8. Execution and Authorization of Bank Merger Agreement. On the date of Breckenridgethis Agreement, (a) IBT shall enter into a three year employment agreement with its current
Presidenthave (i) caused the Board of Directors of Isabella to approve the Bank Merger Agreement, (ii) caused Isabella to execute and deliver the Bank Merger Agreement, and (iii) approved the Bank Merger Agreement as the sole shareholder of Isabella, and (b) GCFC shall have (i) caused the Board of Directors of GCB to approve the Bank Merger Agreement, (ii) caused GCB to execute and deliver the Bank Merger Agreement, and (iii) approved the Bank Merger Agreement as the sole shareholder of GCB. The Bank Merger Agreement shall be substantially in the form attached hereto as Exhibit 5.10.
5.11 Governance. AtC.
8.9. Put Rights. GCFC Shareholders who receive IBT Common Stock pursuant to the Effective Time:
(a)Merger (the “Merger Shares”) shall have certain put rights as set forth in the Put Agreement which is attached hereto as Exhibit G.
ARTICLE IX — CLOSING CONDITIONS
9.1. Conditions to Each Party’s Obligations Under This Agreement. The boardrespective obligations of directors of the Surviving Corporationeach party under this Agreement shall be expanded by two (2) members, with said positionssubject to be initially filled by
designees appointed,the fulfillment at or prior to the Effective Time,Closing Date of the following conditions, none of which may be waived:
(a) Shareholder Approval. This Agreement and the transactions contemplated hereby shall have been approved by the FSB boardrequisite vote of directors, with the consentshareholders of IBT.
GCFC.
(b) The Farmers State BankInjunctions. None of Breckenridge board of directors shall
consist of its existing members plus two (2) members to be designated by
IBT.
(c) The Isabella Bank and Trust board of directors shall consist of
its existing members, plus one (1) member to be designated by FSB.
(d) The president of Farmers State Bank of Breckenridgethe parties hereto shall be appointedsubject to any order, decree or injunction of a vice presidentcourt or agency of IBT.
5.12 Post-Closing Operations. Atcompetent jurisdiction, and afterno statute, rule or regulation shall have been enacted, entered, promulgated, interpreted, applied or enforced by any Governmental Entity or Bank Regulator, that enjoins or prohibits the Closing Date:
(a) The Farmers State Bankconsummation of Breckenridgethe transactions contemplated by this Agreement or the Subsidiary Merger Agreement.
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(c) Regulatory Approvals. All required Regulatory Approvals shall have been obtained and shall remain a
state-chartered commercial bank.
(b) The namesin full force and effect and all waiting periods relating thereto shall have expired; and no such Regulatory Approval shall include any term, condition or requirement, excluding standard conditions that are normally imposed by the regulatory authorities in bank holding company merger transactions and bank mergers, that would, in the good faith reasonable judgment of IBT, Farmers State Bank of Breckenridge and Isabella
Bank and Trust shall not change as a result of the Merger. In the future, the Board of Directors of IBT, will considermaterially and adversely affect the possibility of a name
change which is less geographically restrictive.
(c) All banking offices of Farmers State Bank of Breckenridge will
remain open.
(d) There will be no layoffs at Farmers State Bank of Breckenridge as
a resultbusiness, operations, financial condition, property or assets of the Merger. Any reduction in staffing levels shall be
accomplished through attrition.
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ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditionscombined enterprise of GCFC and IBT or GCB and Isabella or otherwise materially impair the value of GCFC and GCB to Each Party's Obligation to Effect the Merger.IBT.
(d) Effectiveness of Merger Registration Statement. The respective obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Effective Time of the following conditions:
(a) Shareholder Approval. This Agreement shall have been approved and
adopted by the affirmative vote of a majority of the outstanding shares of
FSB Common Stock entitled to vote thereon.
(b) Other Approvals. Other than the filing provided for by Section 1.1
all consents, orders or approvals of, or declarations or filings with, and
all expirations of waiting periods imposed by, any Governmental Entity
(collectively, the "Requisite Regulatory Approvals") which are prescribed
by law as necessary for the consummation of the Merger and the other
transactions contemplated hereby other than immaterial consents shall have
been filed, occurred or been obtained and all such Requisite Regulatory
Approvals shall be in full force and effect.
(c) S-4. The S-4Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the S-4Merger Registration Statement shall have been issued, and no proceedings for that purpose shall have been initiated or threatened by the SEC.
(d) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other
legal restraint or prohibition (an "Injunction") preventing the
consummation of the Merger or any of the transactions contemplated hereby
shall be in effect, nor shall any proceeding by any Governmental Entity
seeking any such Injunction be pending. No statute, rule, regulation,
order, inunction or decree
(e) Federal Tax Opinion. GCFC and IBT shall have been enacted, entered, or enforced by
any Governmental Entity which prohibits, restricts or makes illegal
consummationreceived an opinion of the Merger.
(e) Financial Statements. FSB shall prepare or have prepared, file,
and submitFoster, Swift, Collins & Smith, P.C. counsel to IBT all annual(“IBT’s Counsel”), in form and quarterly auditedsubstance reasonably satisfactory to both GCFC and management prepared
financial statements for any periods endingIBT, substantially to the effect that, on the basis of facts, representations and assumptions set forth in such opinion which are consistent with the state of facts existing at least 30 days before the Effective Time, the Merger and the Subsidiary Merger will each preparedbe treated as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, IBT’s Counsel may require and rely upon representations and covenants, including those contained in accordance with GAAP principles.
(f) No Burdensome Condition. There shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicablecertificates of officers of GCFC, IBT and others reasonably satisfactory to such counsel.
9.2. Conditions to the Merger or anyObligations of the transactions contemplated hereby, by
any Governmental Entity which, in connection with the grantIBT under this Agreement. The obligations of a Requisite
Regulatory Approval, imposes any condition or restriction upon IBT FSB, or
any of their Subsidiaries which would so materially adversely impact the
economic or business benefits of the transactions contemplated byunder this Agreement as to render inadvisable, in the reasonable judgment of the Board
of Directors of either IBT or FSB, the consummation of the Merger.
6.2 Conditions to Obligations of IBT. The obligation of IBT to effect the
Merger are alsoshall be further subject to the satisfaction of the conditions set forth in Sections 9.2(a) through 9.2(i) at or waiver by IBT prior to the Effective TimeClosing Date, which shall be waiveable by IBT:
(a) Representations and Warranties. Each of the following conditions:
(a) Representations and Warranties. The representations and warranties of FSBGCFC set forth in this Agreement shall be true and correct in all
material respects as of the date of thethis Agreement and upon the Closing Date with the same effect as though all such representations and warranties had been made at the Closing Date (except to the extent such representations and warranties speak as of an earlier date); and GCFC shall have delivered to IBT a certificate to such effect signed by the Chief Executive Officer and the Chief Financial Officer of GCFC as of the Closing Date as though made onClosing.
(b) Agreements and Covenants. GCFC shall have performed in all material respects all obligations and complied in all material respects with all agreements or covenants to be performed or complied with by it at or prior to the Closing Date, except as otherwise
contemplated by this Agreement,Effective Time, and IBT shall have received a certificate signed on behalf of FSBGCFC by the Chairman and Chief Executive Officer and Chief Financial Officer of GCFC to such effect dated as of the Effective Time.
(c) Permits, Authorizations, Etc. GCFC and the GCFC Subsidiaries shall have obtained any and all material permits, authorizations, consents, waivers, clearances or approvals required to be obtained by it for the lawful consummation of the Merger and the Subsidiary Merger.
(d) Dissenters’ Rights. The holders of no more than 10% of the GCFC Common Stock shall have indicated their intention to seek dissenters’ rights of appraisal.
(e) Legal Opinion. IBT shall have received the opinion of Kreis, Enderle, Callander & Hudgins, P.C., counsel to GCFC, dated the Closing Date, in substantially the form shown on Exhibit D.
(f) Fairness Opinion. IBT shall have received an opinion from Austin Associates, LLC, dated approximately the date of the Proxy Statement-Prospectus to the effect that the terms of the Merger are fair to IBT’s shareholders from a financial point of view as of that date and such opinion shall not have been subsequently withdrawn.
(g) Certificate as to Outstanding Shares. IBT shall have received one or more certificates dated as of the date of the Closing and signed by the Secretary of GCFC on behalf of GCFC, and by the transfer agent for GCFC Common Stock, certifying (a) the total number of shares of capital stock of GCFC issued and outstanding as of the close of business on the day immediately preceding the Closing; and (b) with respect to the Secretary’s certification, the number of shares of GCFC Common Stock, if any, that are issuable on or after that date, all in such form as IBT may reasonably request.
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(h) Sarbanes-Oxley Certification of Financial Statements. The Chief Executive Officer and the Chief Financial Officer of FSBGCFC shall certify the GCFC Financial Statements in the form attached as Exhibit E.
GCFC will furnish IBT with such certificates of its officers or others and such other documents to such effect.
(b) Performanceevidence fulfillment of the conditions set forth in this Section 9.2 as IBT may reasonably request.
9.3. Conditions to the Obligations of FSB. FSB shall have performed in all
materials respects all obligations required to be performed by itGCFC under this Agreement. The obligations of GCFC under this Agreement shall be further subject to the satisfaction of the conditions set forth in Sections 9.3(a) through 9.3(f) at or prior to the Closing Date, which shall be waiveable by GCFC:
(a) Representations and Warranties. Each of the representations and warranties of IBT set forth in this Agreement shall be true and correct as of the date of this Agreement and upon the Closing Date with the same effect as though all such representations and warranties had been made at the Closing Date (except to the extent such representations and warranties speak as of an earlier date); and IBT shall have delivered to GCFC a certificate to such effect signed by the Chief Executive Officer and the Principal Financial Officer of IBT as of the Closing.
(b) Agreements and Covenants. IBT shall have performed in all material respects all obligations and complied in all material respects with all agreements or covenants to be performed or complied with by it at or prior to the Effective Time, and GCFC shall have received a certificate signed on behalf of FSBIBT by the Chairman and Chief Executive Officer and by the ChiefPrincipal Financial Officer of FSBIBT to such effect.
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effect dated as of the Effective Time.
(c) Consents Under Agreements. FSBPermits, Authorizations, Etc. IBT and the IBT Subsidiaries shall have obtained any and all material permits, authorizations, consents, waivers, clearances or approvals required to be obtained by it for the consent or
approval of each person (other than the Governmental Entities referred to
in Section 6.1(b)) whose consent or approval shall be required in order to
permit the succession by the Surviving Corporation pursuant to the Merger
to any obligation, right or interest of FSB's or any Subsidiary of FSB
under any loan or credit agreement, note, mortgage, indenture, lease,
license or other agreement or instrument, except those for which failure to
obtain such consents and approvals would not, in the reasonable opinion of
IBT, individually or in the aggregate, have a material adverse effect on
FSB or upon thelawful consummation of the transaction contemplated hereby.
Merger and the Subsidiary Merger.
(d) Tax Opinion.Payment of Merger Consideration. IBT shall have delivered the Exchange Fund to the Exchange Agent on or before the Closing Date.
(e) Legal Opinion. GCFC shall have received the opinion of Foster, Swift, Collins & Smith, P.C., counsel to IBT, dated the Closing Date, in substantially the form shown on Exhibit 6.2(d)F.
(f) Fairness Opinion. GCFC shall have received an opinion from Donnelly Penman and Partners, dated approximately the date of the Proxy Statement-Prospectus to the effect that the Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a)terms of the Code,Merger are fair to GCFC’s shareholders from a financial point of view as of that date and that IBT and FSB will
each be a party to that reorganization within the meaning of Section 368(b)
of the Code and that shareholders of FSB who exchange their shares of FSB
Common Stock for shares of IBT Common Stock will not recognize gain or
loss, for purposes of federal income tax, except to the extent of cash
received in lieu of fractional shares.
(e) Legal Opinion. IBT shall have received thesuch opinion of Bodman,
Longley & Dahling LLP, counsel to FSB, dated the Closing Date, in
substantially the form shown on Exhibit 6.2(e).
(f) Subsequent Events. Since December 31, 1999, no change shall have
occurred and no circumstances shall exist which has had or might reasonably
be expected to have a material adverse effect on the financial condition,
results of operations, business or prospects of FSB and the FSB
Subsidiaries taken as a whole (other than changes in banking laws or
regulations, or interpretations thereof, that affect the banking industry
generally or changes in the general level of interest rates).
(g) Material Loss. FSB and the FSB Subsidiaries considered as a whole shall not have sustained since December 31, 1999 any material lossbeen subsequently withdrawn.
IBT will furnish GCFC with such certificates of its officers or interference with their business from any civil disturbance or any fire,
explosion, flood orothers and such other calamity, whether or not covered by insurance.
(h) Employment Agreement. The employment agreement between Farmers
State Bank of Breckenridge and its president as required under Section 5.10
hereof shall be in full force and effect.
(i) Pooling of Interests. IBT shall have received a letter from its
independent auditorsdocuments to the effect that the Merger will qualify for
"pooling of interests" accounting treatment.
6.3 Conditions to Obligations of FSB. The obligation of FSB to effect the
Merger is also subject to the satisfaction or waiver by FSB prior to the
Effective Timeevidence fulfillment of the following conditions:
(a) Representations and Warranties. The representations and warranties
of IBTconditions set forth in this AgreementSection 9.3 as GCFC may reasonably request.
ARTICLE X — THE CLOSING
10.1. Time and Place. Subject to the provisions of Articles IX and XI hereof, the Closing of the transactions contemplated hereby shall take place at the offices of IBT, 200 East Broadway, Mt. Pleasant, Michigan, at 10 a.m., or at such other place or time upon which IBT and GCFC mutually agree.
10.2. Deliveries at the Closing. At Closing there shall be truedelivered to IBT and correct in all
material respects as ofGCFC the date of this Agreementcertificates and (except to the
extent such representationsother documents and warranties speak as of an earlier date) as
of the Closing Date as though made on the Closing Date, except as otherwise
contemplated by this Agreement, and FSB shall have received a certificate
signed on behalf of IBT by the Chairman and Chief Executive Officer and by
the Chief Financial Officer of IBT to such effect.
(b) Performance of Obligations of IBT. IBT shall have performed in all
material respects all obligationsinstruments required to be performed by itdelivered at the Closing under this
Agreement atArticle IX hereof. At or prior to the Closing, Date, and FSB shall have received a
certificate signed on behalf of IBT by the Chairman and Chief Executive
Officer and by the Chief Financial Officer of IBT to such effect.
(c) Consents Under Agreements. IBT shall have obtained the consent or
approval of each person (other than the Governmental Entities referred to
in Section 6.1(b)) whose consent or approval shall be required in
connection with the transactions contemplated hereby under any loan or
credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument to which
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IBT or any of its Subsidiaries is a party or is otherwise bound, except
those for which failure to obtain such consents and approvals would not, in
the reasonable opinion of FSB, individually or in the aggregate, have a
material adverse effect on IBT or upon the consummation of the transactions
contemplated hereby.
(d) Legal Opinion. FSB shall have received the opinion of Foster,
Swift, Collins & Smith, P.C., counsel to IBT, dated the Closing Date, in
substantially the form shown on Exhibit 6.3(d).
(e) Tax Opinion. FSB shall have received the opinion of Bodman,
Longley & Dahling LLP, counsel to FSB, dated the Closing Date, in
substantially the form shown on Exhibit 6.3(e) to the effect thatdeliver the Merger will be treated for Federal income tax purposesConsideration as a reorganization
within the meaning ofset forth under Section 368(a) of the Code, and that IBT and FSB will
each be a party to that reorganization within the meaning of Section 368(b)
of the Code and that shareholders of FSB who exchange their shares of FSB
Common Stock for shares of IBT Common Stock will not recognize gain or
loss, for purposes of federal income tax, except to the extent of cash
received in lieu of fractional shares.
(f) Subsequent Events. Since December 31, 1999, no change shall have
occurred and no circumstances shall exist which has had or might reasonably
be expected to have a material adverse effect on the financial conditions,
results of operations, business or prospects of IBT and the IBT
Subsidiaries taken as a whole (other than changes in banking laws or
regulations, or interpretations thereof, that affect the banking industry
generally or changes in the general level of interest rates).
9.3(d) hereof.
ARTICLE VIIXI — TERMINATION, AMENDMENT AND AMENDMENT
7.1 Termination.WAIVER
11.1. Termination. This Agreement may be terminated in writing at any time prior to the Effective Time,Closing Date, whether before or after approval of the Merger by the shareholders of FSB, only inGCFC:
(a) At any time by the following circumstances:
(a) by mutual consentwritten agreement of IBT and FSB in a written instrument, if the
Board of Directors of each so determines by a vote of a majority of the
members of its entire Board;
GCFC;
(b) by eitherBy IBT or FSB if (i) any Requisite Regulatory Approval
shall have been denied or (ii) any Governmental Entity of competent
jurisdiction shall have issued a final nonappealable order enjoining or
otherwise prohibiting the consummation of the transactions contemplated by
this Agreement;
(c) by either IBT or FSB if the Merger shall not have been consummated
on or before December 31, 2000;
(d) by either IBT or FSBGCFC (provided, that the terminating party is not then in material breach of any of its obligations) if any approval of the
shareholders of FSB required for the consummation of the Merger shall not
have been obtained by reason of the failure to obtain the required vote at
a duly held meeting of shareholdersrepresentation, warranty, covenant or at any adjournment or postponement
thereof;
(e) by either IBT or FSBother agreement contained herein) if there shall have been a material
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breach of any of the representations or warranties set forth in this Agreement on the part of the other party;party, which breach by its nature cannot be cured prior to the Closing;Termination Date or (f)shall not have been cured within 30 days after written notice of such breach by eitherthe terminating party to the other party;
(c) By IBT or FSBGCFC (provided, that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a material breach offailure to perform or comply with any of the covenants or agreements set forth in this Agreement on the part of the other party, which breachfailure by its nature cannot be cured prior to the Termination Date or shall not have been cured before closing
or within twenty (20) business30 days following receipt by the breaching
party ofafter written notice of such breach fromfailure by the terminating party to the other party;
(d) By IBT or GCFC, if the Closing shall not have occurred by the Termination Date, or such later date as shall have been agreed to in writing by IBT and GCFC; provided, that no party whichever
occurs first.
7.2 may terminate this Agreement pursuant to this Section 11.1(d) if the failure of the Closing to have occurred on or before said date was due to such party’s material breach of any representation, warranty, covenant or other agreement contained in this Agreement;
(e) By IBT or GCFC, if the shareholders of GCFC shall have voted at the GCFC Shareholders Meeting on the transactions contemplated by this Agreement and such vote shall not have been sufficient to approve such transactions;
(f) By IBT or GCFC, if (i) final action has been taken by a Bank Regulator whose approval is required in connection with this Agreement or the Subsidiary Merger Agreement and the transactions contemplated hereby and thereby, which final action (x) has become unappealable and (y) does not approve this Agreement, the Subsidiary Merger Agreement or the transactions contemplated hereby and thereby, (ii) any Bank Regulator whose approval or non-objection is required in connection with this Agreement or the Subsidiary Merger Agreement and the transactions contemplated hereby and thereby has stated in writing that it will not issue the required approval or nonobjection, or (iii) any court of competent jurisdiction or other governmental authority shall have issued an order, decree, ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger or the Subsidiary Merger and such order, decree, ruling or other action shall have become final and unappealable;
(g) By the Board of Directors of either party (provided, that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) in the event that any of the conditions precedent to the obligations of such party to consummate the Merger cannot be satisfied or fulfilled by the date specified in Section 11.1(d) of this Agreement;
(h) By the Board of Directors of IBT if GCFC has received a Superior Proposal and the Board of Directors of GCFC has entered into an acquisition agreement with respect to the Superior Proposal, terminated this Agreement, withdrawn its recommendation of this Agreement, has failed to make such recommendation or has modified or qualified its recommendation in a manner adverse to IBT;
(i) By the Board of Directors of GCFC if GCFC has received a Superior Proposal and the Board of Directors of GCFC has made a determination to accept such Superior Proposal; provided that GCFC shall not terminate this Agreement pursuant to this Section 11.1(i) and enter into a definitive agreement with respect to the Superior Proposal until the expiration of five (5) Business Days following IBT’s receipt of written notice advising IBT that GCFC has received a Superior Proposal, specifying the material terms and conditions of such Superior Proposal (and including a copy thereof with all accompanying documentation, if in writing) identifying the person making the Superior Proposal and stating whether GCFC intends to enter into a definitive agreement with respect to the Superior Proposal. After providing such notice, GCFC shall provide a reasonable opportunity to IBT during the five Business Day period to make such adjustments in the terms and conditions of this Agreement as would enable GCFC to proceed with the Merger on such adjusted terms.
11.2. Effect of Termination.Termination.
(a) In the event of termination of this Agreement by either IBT or FSB as provided inpursuant to any provision of Section 7.1,11.1, this Agreement shall forthwith become void and have no effectfurther force, except that (i) the provisions of Sections 11.2, 12.1, 12.2,
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12.6, 12.9, 12.10, and any other Section which, by its terms, relates to post-termination rights or obligations, shall survive such termination of this Agreement and remain in full force and effect.
(b) If this Agreement is terminated, expenses and damages of the parties hereto shall be determined as follows:
(i) Except as provided below, whether or not the Merger is consummated, all costs and expenses incurred in connection with A-24
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respectthis Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such expenses.
(ii) In the event of a termination of this Agreement because of a willful breach of any representation, warranty, covenant or agreement contained in this Agreement, the breaching party shall pay to the secondnonbreaching party within one (1) Business Day after demand by the nonbreaching party, liquidated damages in an amount equal to $850,000 (the “Termination Fee”). In addition, GCFC shall pay to IBT within one (1) Business Day after demand by IBT, liquidated damages in an amount equal to the last sentence ofTermination Fee if the Agreement is terminated pursuant to Sections 11.1(h) or (i). The parties acknowledge that the agreements contained in this Section 5.3, and Sections 5.8 and
7.2, and 11.2(b)(ii) no party shall be relieved or released from any liabilities or
damages arising outare an integral part of the willful breachtransactions contemplated by this Agreement, and that without these agreements, the parties would not have entered into this Agreement; accordingly, if a party fails to pay in a timely manner the Termination Fee due pursuant to this Section 11.2(b)(ii) and, in order to obtain such payment, the party due such fee makes a claim that results in a judgment for the amounts set forth in this Section 11.2(b)(ii), the party obligated to pay the Termination Fee shall pay to the other party, in addition to the amount of such judgment, the other party’s reasonable costs and expenses (including reasonable attorneys’ fees and expenses) in connection with such suit, together with interest on the amount set forth in this Section 11.2(b)(ii) atThe Wall Street Journalprime rate in effect on the date such payment was required to be made. Payment of the fees described in this Section 11.2(b)(ii) shall be the exclusive remedy for a termination of this Agreement as specified in this Section 11.2(b)(ii), and shall be in lieu of damages incurred in the event of any provisionsuch termination of this Agreement.
7.3 Amendment. This Agreement, may be amendedand upon payment of such fees the party paying the fees shall have no further obligation to the other party except as described in Section 11.2(a).
11.3. Amendment, Extension and Waiver. Subject to applicable law, at any time prior to the Effective Time (whether before or after approval thereof by the shareholders of GCFC), the parties hereto by action taken or authorized byof their respective Boards of Directors, atmay (a) amend this Agreement, (b) extend the time for the performance of any time
before or after approval of the matters presentedobligations or other acts of any other party hereto, (c) waive any inaccuracies in connectionthe representations and warranties contained herein or in any document delivered pursuant hereto, or (d) waive compliance with any of the Merger
by the shareholders of FSB,agreements or conditions contained herein; provided, however, that after any such approval no
amendment shallof this Agreement and the transactions contemplated hereby by the shareholders of GCFC, there may not be, made which by law requireswithout further approval byof such shareholders, without such further approval.any amendment of this Agreement which reduces the amount or value, or changes the form of, the Merger Consideration to be delivered to GCFC’s shareholders pursuant to this Agreement. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 7.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a writtenan instrument in writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Nonsurvivalparty, but such waiver or failure to insist on strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, Representations, Warranties and Agreements. Noneor estoppel with respect to, any subsequent or other failure. Any termination of this Agreement pursuant to Article XI may only be effected upon a vote of a majority of the entire Board of Directors of the terminating party.
ARTICLE XII — MISCELLANEOUS
12.1. Confidentiality. Except as provided below, IBT and GCFC each agree:
(a) Treatment; Restricted Access. All information furnished to the other party or its Affiliates pursuant to this Agreement shall be treated as strictly confidential and shall not be disclosed to any other person, natural or corporate, except for its employees, attorneys, accountants, regulators, and financial advisers who are reasonably believed to have a need for such information in connection with the Merger.
(b) No Other Use. No party shall make any use, other than related to the Merger, of any information it may come to know as a direct result of a disclosure by the other party, its subsidiaries, directors, officers,
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employees, attorneys, accountants, or advisers or that may come into its possession from any other confidential source during the course of its investigation.
(c) Excepted Information. The provisions of this section shall not preclude the parties or their respective subsidiaries, from using or disclosing information that is readily ascertainable from public information or trade sources, known by it before the commencement of discussions between the parties or subsequently developed by it or its subsidiaries independent of any investigation under this Agreement, received from any other person who is not Affiliates with a party and who is not under any obligation to keep such information confidential, or reasonably required to be included in any filing or application required by any governmental or regulatory agency.
(d) Prohibit Insider Trading. The parties shall each take reasonable steps to assure that any person who receives nonpublic information concerning the Merger or the other party will treat the information confidentially as provided in this section and not directly or indirectly buy or sell, or advise or encourage other persons to buy or sell, GCFC Common Stock or IBT Common Stock until such information is properly disclosed to the public.
12.2. Public Announcements. GCFC and IBT shall cooperate with each other in the development and distribution of all news releases and other public disclosures with respect to this Agreement, and except as may be otherwise required by law, neither GCFC nor IBT shall issue any news release, or other public announcement or communication with respect to this Agreement unless such news release or other public announcement or communication has been mutually agreed upon by the parties hereto.
12.3. Survival. All representations, warranties covenants and agreementscovenants in this Agreement or in any instrument delivered pursuant hereto shall surviveexpire and be terminated and extinguished at the Effective Time, except for those covenants and agreements contained herein which by their terms apply in whole or in part after the Effective Time,
including without limitation, Sections 2.2, 5.7, 5.8, 5.10, 5.11, 8.1, 8.5, 8.6,
8.7 and 8.8.
8.2 Notices.Time.
12.4. Notices. All notices andor other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopies (with
confirmation)by receipted hand delivery or mailed by prepaid registered or certified mail (return receipt requested) to the parties at the following addresses (or ator by recognized overnight courier addressed as follows:
| If to GCFC, to: | Ted Kortes | |
| President and Chief Executive Officer | ||
| Greenville Community Financial Corporation | ||
| 1405 West Washington Street | ||
| Greenville, Michigan 48838 | ||
| With required copies to: | Kreis, Enderle, Callander & Hudgins, P.C. | |
| c/o Robert B. Borsos | ||
| 171 Monroe Avenue, N.W., Suite 900B | ||
| Grand Rapids, Michigan 49503 | ||
| If to IBT, to: | Dennis P. Angner | |
| President and Chief Executive Officer | ||
| IBT Bancorp, Inc. | ||
| 200 East Broadway | ||
| Mt. Pleasant, MI 48858 | ||
| With required copies to: | Foster, Swift, Collins & Smith, P.C. | |
| c/o Matt G. Hrebec, Esq. | ||
| 313 South Washington Square | ||
| Lansing, MI 48933 |
or such other address for a party as shall be specifiedfurnished in writing by like notice):any party, and any such notice or communication shall be deemed to have been given: (a) as of the date delivered by hand; (b) three (3) Business Days after being delivered to the U.S. mail, postage prepaid; or (c) one (1) Business Day after being delivered to the overnight courier.
12.5. Parties in Interest. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto without the prior written consent of
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the other party, and that (except as provided in Article III of this Agreement) nothing in this Agreement is intended to confer upon any other person any rights or remedies under or by reason of this Agreement.
12.6. Complete Agreement. This Agreement, including the Exhibits and Disclosure Schedules hereto and the documents and other writings referred to herein or therein or delivered pursuant hereto, including the Subsidiary Merger Agreement, contains the entire agreement and understanding of the parties with respect to its subject matter. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties other than those expressly set forth herein or therein. This Agreement supersedes all prior agreements and understandings between the parties, both written and oral, with respect to its subject matter.
12.7. Counterparts. This Agreement may be executed in one or more counterparts all of which shall be considered one and the same agreement and each of which shall be deemed an original. Executed counterparts of this Agreement shall be deemed to have been fully delivered and shall become legally binding if and when executed signature pages are received by facsimile or other electronic transmission from a party. If so delivered by facsimile or other electronic transmission, the parties agree to IBT, to:
David W. Hole, President
IBT Bancorp, Inc.
200 East Broadway
Mt. Pleasant, MI 48858
withpromptly send original, manually executed copies to:
Foster, Swift, Collins & Smith, P.C.
c/o Matt G. Hrebec
313 S. Washington Square
Lansing, MI 48933by nationwide overnight delivery service.
12.8. Severability. In the event that any one or more provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, by any court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement and (b) ifthe parties shall use their reasonable efforts to FSB, to:
Herbert C. Wybenga, President
FSB Bancorp, Inc.
316 East Saginaw Street
Breckenridge, MI 48615
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117
with copies to:
Bodman, Longley & Dahling LLP
c/o Lloyd C. Fell
229 Court Street
P.O. Box 405
Cheboygan, MI 49721
8.3 Interpretation.substitute a valid, legal and enforceable provision which, insofar as practical, implements the purposes and intents of this Agreement.
12.9. Governing Law. This Agreement shall be governed by the laws of Michigan, without giving effect to its principles of conflicts of laws.
12.10. Interpretation. When a reference is made in this Agreement to Sections, Exhibitssections or Schedules,exhibits, such reference shall be to a Sectionsection of or Exhibit or Scheduleexhibit to this Agreement unless otherwise indicated. The recitals hereto constitute an integral part of this Agreement. References to sections include subsections, which are part of the related section. The table of contents, index and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include"“include”, "includes"“includes” or "including"“including” are used in this Agreement, they shall be deemed to be followed by the words "without
limitation"“without limitation”. 8.4 Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
8.5 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement (including the documents and the instruments referred
to herein) constitutes the entire agreement and supersedes all prior agreements
(except for the confidentiality agreements between IBT and FSB dated February
17, 2000, which shall remain in full force and effect and survive the executionThe phrases “the date of this Agreement)Agreement”, “the date hereof” and understandings, both written and oral, amongterms of similar import, unless the parties
with respect to the subject matter hereof, and is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder. No
party shall have the right to acquire orcontext otherwise requires, shall be deemed to have acquired shares
of common stock of the other party pursuantrefer to the Merger until consummation
thereof.
8.6 Governing Law: This Agreement shall be governed and construeddate set forth in accordance with the laws of the State of Michigan.
8.7 Enforcement ofRecitals to this Agreement.
12.11. Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any of the provisions ofcontained in this Agreement waswere not performed in accordance with its specific terms or waswere otherwise breached. TheIt is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereofthereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.
8.8 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provisions of
this Agreement is so broad as to be unenforceable, the provisions shall be
interpreted to be only so broad as is enforceable.
8.9 Publicity. Except as otherwise required by law, so long as this
Agreement is in effect, neither IBT nor FSB shall, or shall permit any of its
Subsidiaries to, issue or cause the publication of any press release or other
public announcement with respect to the transactions contemplated by this
Agreement without the consent of the other party, which consent shall not be
unreasonably withheld.
8.10 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
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118
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IN WITNESS WHEREOF, IBTGCFC and FSBIBT have caused this Agreement to be signedexecuted by their respective officers thereunto duly authorized officers as of the date first above
written.
IBT BANCORP, INC.
By: /s/ DAVID W. HOLE
----------------------------------
David W. Hole
Its: set forth above.
Greenville Community Financial Corporation
| By: | /s/ Ted Kortes |
Ted Kortes,
President and CEO
Attest:
/s/ DENNIS P. ANGNER
- ------------------------------------
Name: Chief Executive Officer
Dated: August 21, 2007
IBT Bancorp, Inc.
| By: | /s/ Dennis P. Angner |
Dennis P. Angner,
Title: Executive Vice President
FSB BANCORP, INC.
By: /s/ HERBERT C. WYBENGA
----------------------------------
Herbert C. Wybenga
Its:
President and CEO
Attest:
/s/ MARY ANN BREUER
- ------------------------------------
Name: Mary Ann Breuer
Title: Secretary
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119
Chief Executive Officer
Dated: August 21, 2007
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FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this “First Amendment”) is made and entered into this 24th day of September, 2007, by and between IBT Bancorp, Inc., a Michigan financial services holding company (“IBT”), and Greenville Community Financial Corporation, a Michigan bank holding company (“GCFC”) (sometimes hereinafter collectively referred to as “the parties”).
RECITALS
A. The parties have entered into that certain Agreement and Plan of Merger having an effective date of August 21, 2007 (the “Agreement”) with respect to the merger of GCFC with and into IBT as described with particularity in the Agreement.
B. The parties now desire to modify certain terms and conditions of the Agreement as more particularly provided in this First Amendment.
NOW THEREFORE, in consideration of the mutual covenants and agreements contained in the Agreement and in this First Amendment and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
AGREEMENT
1. Defined Terms. All capitalized terms used herein and not otherwise defined herein shall have the meanings given to them in the Agreement.
2. Revised Exchange Ratio and Merger Consideration. The parties desire to revise the Exchange Ratio and Merger Consideration to provide that in the Merger, GCFC shareholders shall receive a combination of cash and IBT Common Stock in exchange for their GCFC Common Stock instead of receiving solely IBT Common Stock for their GCFC Common Stock. To effect this revision, the parties have agreed to delete the third paragraph of the Preamble, the definitions of “Exchange Ratio” and “Merger Consideration” in Section 1.1, Section 8.9 and Exhibit G, and replace each paragraph with the following provisions:
Deleted:
Third paragraph of the Preamble:
WHEREAS, in accordance with the terms of this Agreement, GCFC will merge with IBT with IBT as the surviving entity (the “Merger”). Concurrently, shareholders of GCFC shall exchange their shares of GCFC for shares of IBT;
Added:
Third paragraph of the Preamble:
WHEREAS, in accordance with the terms of this Agreement, GCFC will merge with IBT with IBT as the surviving entity (the “Merger”). Concurrently, shareholders of GCFC shall exchange their shares of GCFC for a combination of cash and shares of IBT;
Deleted:
Definition of “Exchange Ratio” in Section 1.1:
“Exchange Ratio” shall mean the number of shares of IBT Common Stock into which one (1) share of GCFC Common Stock shall be converted at the Effective Time, which shall be as set forth below:
Subject to Section 3.3, one (1) share of IBT Common Stock for one (1) share of GCFC Common Stock, based on a maximum of 773,103 shares of GCFC Common Stock outstanding.
A-41
Added:
Definition of “Exchange Ratio” in Section 1.1:
“Exchange Ratio” shall mean the number of shares of IBT Common Stock and cash into which one (1) share of GCFC Common Stock shall be converted at the Effective Time, which shall be as set forth below:
Subject to Section 3.3, .6659 of a share of IBT Common Stock and $14.70 of cash for one (1) share of GCFC Common Stock, based on a maximum of 773,103 shares of GCFC Common Stock outstanding.
Deleted:
Definition of “Merger Consideration” in Section 1.1:
“Merger Consideration” shall mean the IBT Common Stock (and cash for any fractional share), to be paid by IBT for each share of GCFC Common Stock, as set forth in Section 3.1.
Added:
Definition of “Merger Consideration” in Section 1.1:
“Merger Consideration” shall mean the cash and IBT Common Stock to be paid by IBT for each share of GCFC Common Stock, as set forth in Section 3.1.
Deleted:
Section 8.9 Put Rights:
8.9 Put Rights. GCFC Shareholders who receive IBT Common Stock pursuant to the Merger (the “Merger Shares”) shall have certain put rights as set forth in the Put Agreement which is attached hereto as Exhibit G.
Deleted:
Exhibit G — Put Agreement
3. Entire Agreement. The Agreement, as amended by this First Amendment, embodies the entire understanding between the parties with respect to the subject matter thereof and hereof and can be changed only by an instrument in writing executed by both parties.
4. Conflict of Terms. In the event of a conflict or inconsistency between the terms, covenants, conditions and provisions of the Agreement and those of this First Amendment, the terms, covenants, conditions and provisions of this First Amendment shall control and govern the rights and obligations of the parties.
5. Ratification. Except to the extent amended hereby or inconsistent herewith, all of the terms, covenants, conditions and provisions of the Agreement shall remain in full force and effect, and the parties hereby acknowledge and confirm that the same are in full force and effect.
6. Execution. This First Amendment may be executed in one or more counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. Facsimile or electronic signatures shall be accepted by the parties as originals.
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IN WITNESS WHEREOF, the parties have entered into this First Amendment to be effective as of the day and year first written above.
IBT Bancorp, Inc.
| By: | /s/ Dennis P. Angner |
Dennis P. Angner
President and Chief Executive Officer
Greenville Community Financial Corporation
| By: | /s/ Theodore W. Kortes |
Theodore W. Kortes
President and Chief Executive Officer
A-43
Opinion of Donnelly Penman & Partners
September 20, 2007
Board of Directors
Greenville Community Financial Corporation
1405 West Washington Street
Greenville, MI 48838
Members of the Board of Directors:
You have requested our opinion as to the fairness, from a financial point of view, to the shareholders of Greenville Community Financial Corporation (“GCFC”), holding company for Greenville Community Bank (“Greenville”), of the exchange ratio and per share consideration provided for pursuant to the Agreement and Plan of Merger, dated as of August 21, 2007 (the “Agreement”), and the First Amendment to Agreement and Plan of Merger (the “Amended Agreement”), to which IBT Bancorp, Inc. (“IBT”) will acquire GCFC (the “Merger”). In accordance with the terms of the Agreement, Greenville will contemporaneously merge with and into Isabella Bank and Trust, a wholly-owned subsidiary of IBT. Per the terms of the Amended Agreement, each share of GCFC common stock issued and outstanding immediately prior to the effective time of the Merger shall be converted into the right to receive 0.6659 shares of IBT common stock and $14.70 in cash, for total consideration of $43.50 per share (based on a trading value of $43.25 per share for IBT stock as of September 20, 2007).
Donnelly Penman & Partners (“Donnelly Penman”) is an investment-banking firm of recognized standing. As part of our investment banking services, we are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, private placements and valuations for stock plans, corporate and other purposes. We are acting as financial advisor to GCFC in connection with the Merger and will receive a fee from GCFC for our services pursuant to the terms of our engagement letter with GCFC, dated as of March 1, 2007.
In arriving at its opinion, Donnelly Penman reviewed:
| • | the Agreement and Plan of Merger dated August 21, 2007; | |
| • | the Amendment to the Agreement and Plan of Merger; | |
| • | Independent Auditor’s Report for GCFC for the years ended December 31, 2004, 2005 and 2006 and the management’s unaudited balance sheet and statement of income for the eight months ended August 31, 2006 and August 31, 2007; | |
| • | certain information, including financial forecasts and projections (and the assumptions and bases therefore which were deemed reasonable by management), relating to earnings, assets, liabilities and prospects of GCFC as a stand alone company with the management of GCFC. Donnelly Penman confirmed with management that such forecasts and projections reflected the best currently available estimates and judgments by management; | |
| • | certain publicly-available information for IBT, including each of the Annual Reports to Stockholders and Annual Reports onForm 10-K for the years ended December 31, 2004, 2005 and 2006 and the quarterly reports onForm 10-Q for the quarters ended March 31, 2007 and June 30, 2007; | |
| • | certain information, including financial forecasts and projections (and the assumptions and bases therefore which were deemed reasonable by management), relating to earnings, assets, liabilities and prospects of IBT with the management of IBT. Donnelly Penman confirmed with management that such forecasts and projections reflected the best currently available estimates and judgments by management; | |
| • | the historical stock prices and trading volumes of IBT’s common stock; | |
| • | the terms of acquisitions of banking organizations which Donnelly Penman deemed generally comparable to GCFC; |
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Page 2
Board of Directors
Greenville Community Financial Corporation
September 20, 2007
| • | the amount and timing of the cost savings, income from additional growth, and other expenses and adjustments expected to result from the Merger furnished by senior management of IBT and deemed reasonable by them; | |
| • | the financial condition and operating results of IBT and GCFC compared to the financial conditions and operating results of certain other financial institutions that Donnelly Penman deemed comparable; and | |
| • | such other information, financial studies, analyses and investigations and such other factors that Donnelly Penman deemed relevant for the purposes of its opinion. |
Donnelly Penman also prepared a dividend discount analyses for GFCF on a stand-alone basis and on a combined basis with IBT.
In conducting its review and arriving at its opinion, as contemplated under the terms of its engagement by GCFC, Donnelly Penman, with the consent of IBT and GCFC, relied, without independent investigation, upon the accuracy and completeness of all financial and other information provided to it by IBT and GCFC or upon publicly-available information. Donnelly Penman participated in meetings and telephone conferences with certain members of IBT’s and GCFC’s senior management to discuss IBT’s and GCFC’s past and current business operations, regulatory standing, financial condition and future prospects, including any potential operating efficiencies and synergies that may arise as a result of the Merger. With respect to anticipated transactions costs, purchase accounting adjustments, expected cost savings and other synergies and other information prepared byand/or reviewed with the management of IBT and used in our analyses, IBT’s management confirmed to us that they reflected the best currently available estimates and judgments of management with respect to such information. With respect to anticipated earnings of GCFC and other information prepared byand/or reviewed with the management of GCFC and used by us in our analyses, GCFC’s management confirmed to us that they reflected the best currently available estimates and judgments of management with respect to such information. Donnelly Penman did not undertake any responsibility for the accuracy, completeness or reasonableness of, or any obligation independently to verify, such information. Donnelly Penman further relied upon the assurance of management of IBT and GCFC that they were unaware of any facts that would make the information provided or available to Donnelly Penman incomplete or misleading in any respect. Donnelly Penman did not make any independent evaluations, valuations or appraisals of the assets or liabilities of IBT or GCFC. Donnelly Penman is not an expert in the evaluation of loan portfolios or the allowance for loan losses and did not review any individual credit files of IBT or GCFC and assumed that the aggregate allowances for credit losses for IBT and GCFC were adequate to cover such losses. Donnelly Penman’s opinion was necessarily based upon economic and market conditions and other circumstances as they existed and evaluated by Donnelly Penman on the date of its opinion. Donnelly Penman does not have any obligation to update its opinion, unless requested by GCFC in writing to do so, and Donnelly Penman expressly disclaims any responsibility to do so in the absence of any written request by GCFC.
No limitations were imposed by GCFC on Donnelly Penman on the scope of Donnelly Penman’s investigation or the procedures to be followed by Donnelly Penman in rendering this opinion. The form and amount of the consideration to be paid to GCFC or its shareholders were determined through arms length negotiations between IBT and GCFC.
In our analyses, we have made numerous assumptions with respect to industry performance, business and economic conditions, and other matters, many of which are beyond the control of IBT and GCFC. Any estimates contained in our analyses are not necessarily indicative of future results or value, which may be significantly more or less favorable than such estimates. Estimates of values of companies do not purport to be appraisals or to necessarily reflect the prices at which companies or their securities actually may be sold. No company or merger utilized in our analyses was identical to GCFC, IBT or the proposed merged company. Accordingly, such analyses are not based solely on arithmetic calculations; rather, they involve complex considerations and judgments concerning differences in financial and operating characteristics of the relevant companies, the timing of the relevant mergers and prospective buyer interests, as well as other factors that could affect the public trading markets of IBT or companies to which it is being compared. None of the analyses performed by us was assigned a greater significance than any other.
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Page 3
Board of Directors
Greenville Community Financial Corporation
September 20, 2007
We have been retained by the Board of Directors of GCFC to determine whether the consideration offered to GCFC shareholders as provided for in the Amended Agreement is fair, from a financial point of view, as of this date. This opinion does not constitute a recommendation to any stockholder of GCFC as to how such shareholder should vote at any meeting of the stockholders called to consider and vote upon the Merger. We have also assumed that there has been no material change to our analysis of IBT’s or GCFC’s assets, financial condition, results of operations, business or prospects since the date of the most recent financial statements made available to us.
Donnelly Penman will receive a fee for its services, a substantial portion of which is due upon the consummation of the Merger. Prior to this transaction, Donnelly Penman did not have an investment banking relationship with IBT or GCFC. Donnelly Penman may solicit investment banking business from IBT in the future.
We hereby consent to the reference to our opinion in the prospectus and proxy statement to be issued pursuant to the Agreement and to the inclusion of the foregoing opinion in the prospectus and proxy statement relating to the meeting of stockholders of GCFC. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933 or the rules and regulations of the Securities and Exchange Commission thereunder. Further, we express no view as to the price or trading range for shares of the common stock of IBT following the consummation of the Merger.
Based upon and subject to the foregoing, including the various assumptions and limitations set forth herein, it is our opinion that, as of September 20, 2007, the exchange ratio and related per share cash consideration to be received by GCFC shareholders under the Amended Agreement is fair, from a financial point of view, to the shareholders of GCFC.
Very truly yours,
Donnelly Penman & Partners
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Deal Price Assumptions
| Indication #1(1) | Indication #2(2) | Indication #3(3) | ||||||||||
| ($’s in thousands, except per share data or where indicated) | ||||||||||||
Exchange Ratio: | ||||||||||||
| Greenville Implied Price per Share | $ | 43.25 | $ | 23.42 | $ | 23.13 | ||||||
| IBT Implied Price per Share | $ | 43.25 | $ | 23.42 | $ | 23.13 | ||||||
| Exchange Ratio for Greenville Common Shares | 1.00 | 1.00 | 1.00 | |||||||||
| %Stock | 66.2 | % | 51.5 | % | 51.2 | % | ||||||
Purchase Price Data: | ||||||||||||
| Value received per Greenville Share | $ | 43.25 | $ | 23.42 | $ | 23.13 | ||||||
| 66.59% Greenville Basic Shares Outstanding-Includes All Options | 514,809 | 514,809 | 514,809 | |||||||||
| Aggregate Purchase Price for Common Shares | $ | 22,266 | $ | 12,056 | $ | 11,905 | ||||||
| Plus Cash Received ($14.70 per share) | $ | 11,365 | $ | 11,365 | $ | 11,365 | ||||||
| Aggregate Purchase Price | $ | 33,630 | $ | 23,421 | $ | 23,270 | ||||||
| Cost to Cash Out Options | $ | 0 | $ | 0 | $ | 0 | ||||||
| Aggregate Purchase Price | $ | 33,630 | $ | 23,421 | $ | 23,270 | ||||||
| IBT Shares to be Received per Greenville Share | 0.6659 | 0.6659 | 0.6659 | |||||||||
| IBT Stock Price per share | $ | 43.25 | $ | 23.42 | $ | 23.13 | ||||||
| Stock Consideration per Share | $ | 28.80 | $ | 15.59 | $ | 15.40 | ||||||
| Add: Cash Consideration per Share | $ | 14.70 | $ | 14.70 | $ | 14.70 | ||||||
Total Consideration per Share | $ | 43.50 | $ | 30.29 | $ | 30.10 | ||||||
Resulting Pricing Multiples for Greenville (as of August 31, 2007): | ||||||||||||
| Book Value & Tangible Book Value | $ | 11,837 | $ | 11,837 | $ | 11.837 | ||||||
| Book Value & Tangible Book Value per Share (Fully Diluted) | $ | 15.31 | $ | 15.31 | $ | 15.31 | ||||||
| Latest Twelve Months (“LTM”) Earnings | $ | 902 | $ | 902 | $ | 902 | ||||||
| LTM Earnings per Share (Fully Diluted) | $ | 1.17 | $ | 1.17 | $ | 1.17 | ||||||
| Total Assets | $ | 112,143 | $ | 112,143 | $ | 112,143 | ||||||
| Total Deposits | $ | 93,745 | $ | 93,745 | $ | 93,745 | ||||||
| Core Deposites | $ | 70,601 | $ | 70,601 | $ | 70,601 | ||||||
| Purchase Price / Greenville BV | 2.84 | x | 1.98 | x | 1.97 | x | ||||||
| Purchase Price / LTM Earnings per Share (Fully Diluted) | 37.28 | x | 25.96 | x | 25.79 | x | ||||||
| Purchase Price / Total Assets | 30.0 | % | 20.9 | % | 20.8 | % | ||||||
| Purchase Price / Total Deposits | 35.9 | % | 25.0 | % | 24.8 | % | ||||||
| Premium to Core Deposits | 30.9 | % | 16.4 | % | 16.2 | % | ||||||
Pricing Multiples Based on an 8% Tier One Ratio (removing excess capital): | ||||||||||||
| Book Value @ 8% Tier One Capital Ratio (using average assets from 12/31/06-8/31/07) | $ | 8,800 | $ | 8,800 | $ | 8,800 | ||||||
| “Excess” Capital | 3,037 | 3,037 | 3,037 | |||||||||
| Aggregate Purchase Price for Common Shares | 33,630 | 23,421 | 23,270 | |||||||||
| Less “Excess”Capital | 3,037 | 3,037 | 3,037 | |||||||||
| Purchase Price after Removing “Excess” Capital | $ | 10,593 | $ | 20,383 | $ | 20,233 | ||||||
| Purchase Price after Removing “Excess”Capital /Greenville BV @ 8% Tier One Ratio | 3.48 | x | 2.32 | x | 2.30 | x | ||||||
Shares Calculation (in actual $’s): | ||||||||||||
| New Shares Issued to Greenville | 514,809 | 514,809 | 514,809 | |||||||||
| IBT shares Outstanding (7/13/07)- per 6/30/07 10Q | 6,338,368 | 6,338,368 | 6,338,368 | |||||||||
| Pro Forma Shares Outstanding | 6,853,177 | 6,853,177 | 6,853,177 | |||||||||
| Pro Forma Market Capitalization | $ | 296,399,918 | $ | 160,489,680 | $ | 158,485,457 | ||||||
B-4
| Ownership % | Shares | |||||||
Pro Forma Ownership: | ||||||||
| IBT Shares Outstanding | 92.49 | % | 6,338,368 | |||||
| Greenville New Shares Issued | 7.51 | % | 514,809 | |||||
| Pro Forma Shares Outstanding | 100.00 | % | 6,853,177 | |||||
Footnotes:
| (1) | Based On IBT stock price as of 9/20/2007. |
| (2) | Based on IBT’s stock price as estimated by a discounted dividend analysis. |
| (3) | Based on IBT’s stock price as estimated by the comparable company analysis (average of the indications were used). |
B-5
Contribution Analysis
| IBT | Greenville | Percent Contribution | ||||||||||||||
| 6/30/2007 | 8/31/2007 | IBT | Greenville | |||||||||||||
| ($’s in thousands) | ||||||||||||||||
| Total Assets | $ | 918,265 | $ | 112,143 | 89.1 | % | 10.9 | % | ||||||||
| Total Loans, net | 599,475 | 90,643 | 86.9 | % | 13.1 | % | ||||||||||
| Total Deposits | 724,157 | 93,745 | 88.5 | % | 11.5 | % | ||||||||||
| Core Deposits | 592,244 | 70,601 | 89.3 | % | 10.7 | % | ||||||||||
| Total Equity | 118,790 | 11,837 | 90.9 | % | 9.1 | % | ||||||||||
| 2007E FYE Net Income | 8,500 | 869 | 90.7 | % | 9.3 | % | ||||||||||
| 2008E FYE Net Income | 9,223 | 834 | 91.7 | % | 8.3 | % | ||||||||||
| 2009E FYE Net Income | 10,006 | 1,047 | 90.5 | % | 9.5 | % | ||||||||||
| Shares Outstanding (Proforma Company) | 6,338,368 | 514,809 | 92.5 | % | 7.5 | % | ||||||||||
Average | 90.0 | % | 10.0 | % | ||||||||||||
B-6
Greenville Community Financial Corporation
Valuation Summary
| Valuation Technique: | ||||||||||||||||||||||||
| Deal | Comparable Acquisition | |||||||||||||||||||||||
| Value(1) | DCF | BV | TBV | EPS | Core Dep. | |||||||||||||||||||
Value Indication per Share: | $ | 43.50 | $ | 25.50 | $ | 29.70 | $ | 29.70 | $ | 27.24 | $ | 26.23 | ||||||||||||
| Multiple of LTM Fully Diluted EPS ($1.17) | 37.3 | 21.9 | 25.5 | 25.5 | 23.3 | 22.5 | ||||||||||||||||||
| Multiple of 2007F Fully Diluted EPS ($1.12) | 38.7 | 22.7 | 26.4 | 26.4 | 24.2 | 23.3 | ||||||||||||||||||
| Percentage of LTM Book Value per Share (Fully Diluted) ($15.31) | 284.1 | % | 166.6 | % | 194.0 | % | 194.0 | % | 177.9 | % | 171.3 | % | ||||||||||||
| Percentage of LTM Tangible Book Value per Share (Fully Diluted) ($15.31) | 284.1 | % | 166.6 | % | 194.0 | % | 194.0 | % | 177.9 | % | 171.3 | % | ||||||||||||
Footnote:
| (1) | Value indication per share of $43.50 is comprised of: consideration of 0.6659 shares of IBT (priced at $43.25 as of September 20, 2007) per share of Greenville stock for stock consideration of $28.80 per share; and $14.70 per share in cash consideration. |
B-7
Greenville Community Financial Corporation
Discounted Cash Flow Model
Valuation Date: August 31, 2007
(In $000’s)
Footnotes:
| (1) | The above projections are the representation of Greenville management and have not been compiled, reviewed or examined by Donnelly Penman. | |
| (2) | All dividends are paid at year end. | |
| (3) | Donnelly Penman estimate based the current median multiple of the comparable acquisition analysis. |
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IBT Bancorp, Inc.
Core Deposit Premium Analysis
($’s in 000s, except per share data)
Core Deposit Premium Analysis
($’s in 000s, except per share data)
Source:
| (1) | Based on the 8/31/2007 internal balance sheet. |
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IBT Bancorp. Inc.
Discounted Cash Flow Model
Valuation Date: August 31, 2007
(In $000’s)
Discounted Cash Flow Model
Valuation Date: August 31, 2007
(In $000’s)
Footnotes:
| (1) | The above projections are the representation of IBT management and have not been compiled, reviewed or examined by Donnelly Penman. |
| (2) | Although 2007 full year projections are presented, we removed dividend distributions for the seven months ended July 31, 2007. Future dividends assume no reinvestment by the IBT DRIP. |
| (3) | Donnelly Penman estimate based the current median multiple of the comparable company analysis. |
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IBT Bancorp. Inc./ GCFC Combined
Discounted Cash Flow Model
Vaiuation Date: August 31, 2007
(In $000’s)
Footnotes:
| (1) | The above projections are the representation of IBT management and have not been compiled reviewed or examined by Donnelly Penman. | |
| (2) | Donnelly Penman estimate based the current median multiple of the comparable company analysis. | |
| (3) | Future dividends assume no reinvestment by the IBT DRIP. |
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MICHIGAN BUSINESS CORPORATION ACT (EXCERPT)
Act 284 of 1972
450.1761 DEFINITIONS. [M.S.A. 21.200(761)]
Definitions.
Sec. 761. As used in sections 762 to 774:
(a) "Beneficial shareholder"“Beneficial shareholder” means the person who is a beneficial owner of shares held by a nominee as the record shareholder.
(b) "Corporation"“Corporation” means the issuer of the shares held by a dissenter before the corporate action, or the surviving corporation by merger of that issuer.
(c) "Dissenter"“Dissenter” means a shareholder who is entitled to dissent from corporate action under section 762 and who exercises that right when and in the manner required by sections 764 through 772.
(d) "Fair value"“Fair value”, with respect to a dissenter'sdissenter’s shares, means the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable.
(e) "Interest"“Interest” means interest from the effective date of the corporate action until the date of payment, at the average rate currently paid by the corporation on its principal bank loans or, if none, at a rate that is fair and equitable under all the circumstances.
(f) "Record shareholder"“Record shareholder” means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation.
(g) "Shareholder"“Shareholder” means the record or beneficial shareholder.
HISTORY:
History: 1972, Act 284, Eff. Jan. 1, 1973; --Am.1973 ;— Am. 1988, Act 58, Eff. Apr. 1, 1988; --Am.1988 ;— Am. 1989, Act 121, Eff. Oct. 1, 1989; --Am.1989 ;— Am. 1993, Act 91, Eff. Oct. 1, 1993.
COMPILER'S NOTE:1993
Compiler’s Notes: Section 2 of Act 58 of 1988 provides: "This“This amendatory act shall not apply to any domestic corporation before June 1, 1989, unless the corporation'scorporation’s board of directors adopts a resolution, pursuant to this section, electing to have this act apply to the corporation. The resolution shall specify the date after January 1, 1988 and before June 1, 1989 on which this act will apply to the corporation. The resolution shall be filed with the department of commerce, corporation and securities bureau, on or before the date that the act will apply to the corporation."
”
450.1762 RIGHT OF SHAREHOLDER TO DISSENT AND OBTAIN PAYMENT FOR SHARES.
Right of shareholder to dissent and obtain payment for shares.
Sec. 762. (1) A shareholder is entitled to dissent from, and obtain payment of the fair value of his or her shares in the event of, any of the following corporate actions: (a) Consummation of a plan of merger to which the corporation is a party if shareholder approval is required for the merger by section 703a or 736(5) or the articles of incorporation and the shareholder is entitled to vote on the merger, or the corporation is a subsidiary that is merged with its parent under section 711.
(b) Consummation of a plan of share exchange to which the corporation is a party as the corporation whose shares will be acquired, if the shareholder is entitled to vote on the plan.
(c) Consummation of a sale or exchange of all, or substantially all, of the property of the corporation other than in the usual and regular course of business, if the shareholder is entitled to vote on the sale or exchange, including a sale in dissolution but not including a sale pursuant to court order.
(d) An amendment of the articles of incorporation giving rise to a right to dissent pursuant to section 621.
(e) A transaction giving rise to a right to dissent pursuant to section 754.
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(f) Any corporate action taken pursuant to a shareholder vote to the extent the articles of incorporation, bylaws, or a resolution of the board provides that voting or nonvoting shareholders are entitled to dissent and obtain payment for their shares.
(g) The approval of a control share acquisition giving rise to a right to dissent pursuant to section 799.
(2) Unless otherwise provided in the articles of incorporation, bylaws, or a resolution of the board, a shareholder may not dissent from any of the following: (a) Any corporate action set forth in subsection (1)(a) to (e) as to shares that are listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the national association of securities dealers, on the record date fixed to vote on the corporate action or on the date the resolution of the parent corporation'scorporation’s board is adopted in the case of a merger under section 711 not requiring shareholder vote under section 713.
(b) A transaction described in subsection (1)(a) in which shareholders receive cash or shares that satisfy the requirements of subdivision (a) on the effective date of the merger or any combination thereof.
(c) A transaction described in subsection (1)(b) in which shareholders receive cash or shares that satisfy the requirements of subdivision (a) on the effective date of the share exchange or any combination thereof.
(d) A transaction described in subsection (1)(c) that is conducted pursuant to a plan of dissolution providing for distribution of substantially all of the corporation'scorporation’s net assets to shareholders in accordance with their respective interests within 1 year after the date of closing of the transaction, where the transaction is for cash or shares that satisfy the requirements of subdivision (a) on the date of closing or any combination thereof.
(3) A shareholder entitled to dissent and obtain payment for his or her shares pursuant to subsection (1)(a) to (e) may not challenge the corporate action creating his or her entitlement unless the action is unlawful or fraudulent with respect to the shareholder or the corporation.
(4) A shareholder who exercises his or her right to dissent and seek payment for his or her shares pursuant to subsection (1)(f) may not challenge the corporate action creating his or her entitlement unless the action is unlawful or fraudulent with respect to the shareholder or the corporation.
HISTORY:
History: 1972, Act 284, Eff. Jan. 1, 1973; --Am.1973 ;— Am. 1988, Act 58, Eff. Apr. 1, 1988; --Am.1988 ;— Am. 1989, Act 121, Eff. Oct. 1, 1989; --Am.1989 ;— Am. 1997, Act 118, Imd. Eff. Oct. 24, 1997.
COMPILER'S NOTE:1997
Compiler’s Notes: Section 2 of Act 58 of 1988 provides: "This“This amendatory act shall not apply to any domestic corporation before June 1, 1989, unless the corporation'scorporation’s board of directors adopts a resolution, pursuant to this section, electing to have this act apply to the corporation. The resolution shall specify the date after January 1, 1988 and before June 1, 1989 on which this act will apply to the corporation. The resolution shall be filed with the department of commerce, corporation and securities bureau, on or before the date that the act will apply to the corporation."
”
450.1763 RIGHTS OF PARTIAL DISSENTER; ASSERTION OF DISSENTERS' RIGHTS BY
BENEFICIAL SHAREHOLDER. [M.S.A. 21.200(763)]
Rights of partial dissenter; assertion of dissenters’ rights by beneficial shareholder.
Sec. 763. (1) A record shareholder may assert dissenters'dissenters’ rights as to fewer than all the shares registered in his or her name only if he or she dissents with respect to all shares beneficially owned by any 1 person and notifies the corporation in writing of the name and address of each person on whose behalf he or she asserts dissenters'dissenters’ rights. The rights of a partial dissenter under this subsection are determined as if the shares as to which he or she dissents and his or her other shares were registered in the names of different shareholders.
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(2) A beneficial shareholder may assert dissenters'dissenters’ rights as to shares held on his or her behalf only if all of the following apply: (a) He or she submits to the corporation the record shareholder'sshareholder’s written consent to the dissent not later than the time the beneficial shareholder asserts dissenters'dissenters’ rights.
(b) He or she does so with respect to all shares of which he or she is the beneficial shareholder or over which he or she has power to direct the vote.
HISTORY:
History: 1972, Act 284, Eff. Jan. 1, 1973; --Am.1973 ;— Am. 1989, Act 121, Eff. Oct. 1, 1989.
1989
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450.1764 CORPORATE ACTION CREATING DISSENTERS' RIGHTS; VOTE OF SHAREHOLDERS;
NOTICE. [M.S.A. 21.200(764)]
Corporate action creating dissenters’ rights; vote of shareholders; notice.
Sec. 764. (1) If proposed corporate action creating dissenters'dissenters’ rights under section 762 is submitted to a vote at a shareholders'shareholders’ meeting, the meeting notice must state that shareholders are or may be entitled to assert dissenters'dissenters’ rights under this act and shall be accompanied by a copy of sections 761 to 774.
(2) If corporate action creating dissenters'dissenters’ rights under section 762 is taken without a vote of shareholders, the corporation shall notify in writing all shareholders entitled to assert dissenters'dissenters’ rights that the action was taken and send them the dissenters'dissenters’ notice described in section 766. A shareholder who consents to the corporate action is not entitled to assert dissenters'dissenters’ rights.
HISTORY:
History: 1972, Act 284, Eff. Jan. 1, 1973; --Am.1973 ;— Am. 1989, Act 121, Eff. Oct. 1, 1989; --Am.1989 ;— Am. 1993, Act 91, Eff. Oct. 1, 1993.
1993
450.1765 NOTICE OF INTENT TO DEMAND PAYMENT FOR SHARES. [M.S.A. 21.200(765)]
Notice of intent to demand payment for shares.
Sec. 765. (1) If proposed corporate action creating dissenters'dissenters’ rights under section 762 is submitted to a vote at a shareholders'shareholders’ meeting, a shareholder who wishes to assert dissenters'dissenters’ rights must deliver to the corporation before the vote is taken written notice of his or her intent to demand payment for his or her shares if the proposed action is effectuated and must not vote his or her shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1) is not entitled to payment for his or her shares under this act.
HISTORY:
History: 1972, Act 284, Eff. Jan. 1, 1973; --Am.1973 ;— Am. 1989, Act 121, Eff. Oct. 1, 1989.
1989
450.1766 DISSENTERS' NOTICE; DELIVERY TO SHAREHOLDERS; CONTENTS. [M.S.A.
21.200(766)]
Sec. 766.Dissenters’ notice; delivery to shareholders; contents.
Sec.766. (1) If proposed corporate action creating dissenters'dissenters’ rights under section 762 is authorized at a shareholders'shareholders’ meeting, the corporation shall deliver a written dissenters'dissenters’ notice to all shareholders who satisfied the requirements of section 765.
(2) The dissenters'dissenters’ notice must be sent no later than 10 days after the corporate action was taken, and must provide all of the following: (a) State where the payment demand must be sent and where and when certificates for shares represented by certificates must be deposited.
(b) Inform holders of shares without certificates to what extent transfer of the shares will be restricted after the payment demand is received.
(c) Supply a form for the payment demand that includes the date of the first announcement to news media or to shareholders of the terms of the proposed corporate action and requires that the person asserting dissenters'dissenters’ rights certify whether he or she acquired beneficial ownership of the shares before the date.
(d) Set a date by which the corporation must receive the payment demand, which date may not be fewer than 30 nor more than 60 days after the date the subsection (1) notice is delivered.
HISTORY:
History: 1972, Act 284, Eff. Jan. 1, 1973; --Am.1973 ;— Am. 1989, Act 121, Eff. Oct. 1, 1989.
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1989
450.1767 DUTIES OF SHAREHOLDER SENT DISSENTER'S NOTICE; RETENTION OF RIGHTS;
FAILURE TO DEMAND PAYMENT OR DEPOSIT SHARE CERTIFICATES. [M.S.A. 21.200(767)]
Duties of shareholder sent dissenter’s notice; retention of rights; failure to demand payment or deposit share certificates.
Sec. 767. (1) A shareholder sent a dissenter'sdissenter’s notice described in section 766 must demand payment, certify whether he or she acquired beneficial ownership of the shares before the date required to be set forth in the dissenters'dissenters’ notice pursuant to section 766(2)(c), and deposit his or her certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits his or her share certificates under subsection (1) retains all other rights of a shareholder until these rights are canceled or modified by the taking of the proposed corporate action.
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(3) A shareholder who does not demand payment or deposit his or her share certificates where required, each by the date set in the dissenters'dissenters’ notice, is not entitled to payment for his or her shares under this act.
HISTORY:
History: 1972, Act 284, Eff. Jan. 1, 1973; --Am.1973 ;— Am. 1985, Act 76, Imd. Eff. July 5, 1985; --Am.1985 ;— Am. 1989, Act 121, Eff. Oct. 1, 1989.
1989
450.1768 RESTRICTION ON TRANSFER OF SHARES WITHOUT CERTIFICATES; RETENTION OF
RIGHTS. [M.S.A. 21.200(768)]
Restriction on transfer of shares without certificates; retention of rights.
Sec. 768. (1) The corporation may restrict the transfer of shares without certificates from the date the demand for their payment is received until the proposed corporate action is taken or the restrictions released under section 770.
(2) The person for whom dissenters'dissenters’ rights are asserted as to shares without certificates retains all other rights of a shareholder until these rights are canceled or modified by the taking of the proposed corporate action.
HISTORY:
History: 1972, Act 284, Eff. Jan. 1, 1973; --Am.1973 ;— Am. 1985, Act 76, Imd. Eff. July 5, 1985; --Am.1985 ;— Am. 1989, Act 121, Eff. Oct. 1, 1989.
1989
450.1768a REPEALED.Repealed. 1989, ACTAct 121, EFF. OCT.Eff. Oct. 1, 1989. [M.S.A. 21.200(768a)]
COMPILER'S NOTE:
Compiler’s Notes: The repealed section pertained to referees.
450.1769 PAYMENT BY CORPORATION TO DISSENTER; ACCOMPANYING DOCUMENTS. [M.S.A.
21.200(769)]
Payment by corporation to dissenter; accompanying documents.
Sec. 769. (1) Except as provided in section 771, within 7 days after the proposed corporate action is taken or a payment demand is received, whichever occurs later, the corporation shall pay each dissenter who complied with section 767 the amount the corporation estimates to be the fair value of his or her shares, plus accrued interest.
(2) The payment must be accompanied by all of the following: (a) The corporation'scorporation’s balance sheet as of the end of a fiscal year ending not more than 16 months before the date of payment, an income statement for that year, a statement of changes in shareholders'shareholders’ equity for that year, and if available the latest interim financial statements.
(b) A statement of the corporation'scorporation’s estimate of the fair value of the shares.
(c) An explanation of how the interest was calculated.
(d) A statement of the dissenter'sdissenter’s right to demand payment under section 772.
HISTORY:
History: 1972, Act 284, Eff. Jan. 1, 1973; --Am.1973 ;— Am. 1989, Act 121, Eff. Oct. 1, 1989; --Am.1989 ;— Am. 1993, Act 91, Eff. Oct. 1, 1993.
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1993
450.1770 RETURN OF DEPOSITED CERTIFICATES AND RELEASE OF TRANSFER RESTRICTIONS;
EFFECT OF CORPORATION TAKING PROPOSED ACTION. [M.S.A. 21.200(770)]
Return of deposited certificates and release of transfer restrictions; effect of corporation taking proposed action.
Sec. 770. (1) If the corporation does not take the proposed action within 60 days after the date set for demanding payment and depositing share certificates, the corporation shall return the deposited certificates and release the transfer restrictions imposed on shares without certificates.
(2) If after returning deposited certificates and releasing transfer restrictions, the corporation takes the proposed action, it must send a new dissenters'dissenters’ notice under section 766 and repeat the payment demand procedure.
HISTORY:
History: 1972, Act 284, Eff. Jan. 1, 1973; --Am.1973 ;— Am. 1989, Act 121, Eff. Oct. 1, 1989.
1989
450.1771 ELECTION TO WITHHOLD PAYMENT FROM DISSENTER; OFFER TO PAY ESTIMATED
FAIR VALUE OF SHARES, PLUS ACCRUED INTEREST; STATEMENTS; EXPLANATION. [M.S.A.
21.200(771)]
Election to withhold payment from dissenter; offer to pay estimated fair value of shares, plus accrued interest; statements; explanation.
Sec. 771. (1) A corporation may elect to withhold payment required by section 769 from a dissenter unless he or she was the beneficial owner of the shares before the date set forth in the dissenters'dissenters’ notice pursuant to section 766(2)(c).
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(2) To the extent the corporation elects to withhold payment under subsection (1), after taking the proposed corporate action, it shall estimate the fair value of the shares, plus accrued interest, and shall offer to pay this amount to each dissenter who shall agree to accept it in full satisfaction of his or her demand. The corporation shall send with its offer a statement of its estimate of the fair value of the shares, an explanation of how the interest was calculated, and a statement of the dissenter'sdissenter’s right to demand payment under section 772.
HISTORY:
History: 1972, Act 284, Eff. Jan. 1, 1973; --Am.1973 ;— Am. 1989, Act 121, Eff. Oct. 1, 1989.
1989
450.1772 DEMAND FOR PAYMENT OF DISSENTER'S ESTIMATE OR REJECTION OF
CORPORATION'S OFFER AND DEMAND FOR PAYMENT OF FAIR VALUE AND INTEREST DUE;
WAIVER. [M.S.A. 21.200(772)]
Demand for payment of dissenter’s estimate or rejection of corporation’s offer and demand for payment of fair value and interest due; waiver.
Sec. 772. (1) A dissenter may notify the corporation in writing of his or her own estimate of the fair value of his or her shares and amount of interest due, and demand payment of his or her estimate, less any payment under section 769, or reject the corporation'scorporation’s offer under section 771 and demand payment of the fair value of his or her shares and interest due, if any 1 of the following applies: (a) The dissenter believes that the amount paid under section 769 or offered under section 771 is less than the fair value of his or her shares or that the interest due is incorrectly calculated.
(b) The corporation fails to make payment under section 769 within 60 days after the date set for demanding payment.
(c) The corporation, having failed to take the proposed action, does not return the deposited certificates or release the transfer restrictions imposed on shares without certificates within 60 days after the date set for demanding payment.
(2) A dissenter waives his or her right to demand payment under this section unless he or she notifies the corporation of his or her demand in writing under subsection (1) within 30 days after the corporation made or offered payment for his or her shares.
HISTORY:
History: Add. 1989, Act 121, Eff. Oct. 1, 1989.
1989
450.1773 PETITIONING COURT TO DETERMINE FAIR VALUE OF SHARES AND ACCRUED
INTEREST; FAILURE OF CORPORATION TO COMMENCE PROCEEDING; VENUE; PARTIES;
SERVICE; JURISDICTION; APPRAISERS; DISCOVERY RIGHTS; JUDGMENT. [M.S.A.
21.200(773)]
Petitioning court to determine fair value of shares and accrued interest; failure of corporation to commence proceeding; venue; parties; service; jurisdiction; appraisers; discovery rights; judgment.
Sec. 773. (1) If a demand for payment under section 772 remains unsettled, the corporation shall commence a proceeding within 60 days after receiving the payment demand and petition the court to determine the fair value of the shares and accrued interest. If the corporation does not commence the B-5
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proceeding within the60-day period, it shall pay each dissenter whose demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the circuit court of the county in which the corporation'scorporation’s principal place of business or registered office is located. If the corporation is a foreign corporation without a registered office or principal place of business in this state, it shall commence the proceeding in the county in this state where the principal place of business or registered office of the domestic corporation whose shares are to be valued was located.
(3) The corporation shall make all dissenters, whether or not residents of this state, whose demands remain unsettled parties to the proceeding as in an action against their shares and all parties shall be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced under subsection (2) is plenary and exclusive. The court may appoint 1 or more persons as appraisers to receive evidence and recommend decision on the question of fair value. The appraisers have the powers described in the order appointing them, or in any amendment to it. The dissenters are entitled to the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding is entitled to judgment for the amount, if any, by which the court finds the fair value of his or her shares, plus interest, exceeds the amount paid by the corporation or for the fair value, plus accrued interest, of his or her after-acquired shares for which the corporation elected to withhold payment under section 771.
HISTORY:
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History: Add. 1989, Act 121, Eff. Oct. 1, 1989.
1989
450.1773a REFEREE; APPOINTMENT; POWERS; COMPENSATION; DUTIES; OBJECTIONS TO
REPORT; APPLICATION TO COURT FOR ACTION; ADOPTION, MODIFICATION, OR RECOMMITMENT
OF REPORT; FURTHER EVIDENCE; JUDGMENT; REVIEW. [M.S.A. 21.200(773a)]
Referee; appointment; powers; compensation; duties; objections to report; application to court for action; adoption, modification, or recommitment of report; further evidence; judgment; review.
Sec. 773a. (1) In a proceeding brought pursuant to section 773, the court may, pursuant to the agreement of the parties, appoint a referee selected by the parties and subject to the approval of the court. The referee may conduct proceedings within the state, or outside the state by stipulation of the parties with the referee'sreferee’s consent, and pursuant to the Michigan court rules. The referee shall have powers that include, but are not limited to, the following: (a) To hear all pretrial motions and submit proposed orders to the court. In ruling on the pretrial motion and proposed orders, the court shall consider only those documents, pleadings, and arguments that were presented to the referee.
(b) To require the production of evidence, including the production of all books, papers, documents, and writings applicable to the proceeding, and to permit entry upon designated land or other property in the possession or control of the corporation.
(c) To rule upon the admissibility of evidence pursuant to the Michigan rules of evidence.
(d) To place witnesses under oath and to examine witnesses.
(e) To provide for the taking of testimony by deposition.
(f) To regulate the course of the proceeding.
(g) To issue subpoenas, when a written request is made by any of the parties, requiring the attendance and testimony of any witness and the production of evidence including books, records, correspondence, and documents in the possession of the witness or under his or her control, at a hearing before the referee or at a deposition convened pursuant to subdivision (e). In case of a refusal to comply with a subpoena, the party on whose behalf the subpoena was issued may file a petition in the court for an order requiring compliance.
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(2) The amount and manner of payment of the referee'sreferee’s compensation shall be determined by agreement between the referee and the parties, subject to the court'scourt’s allocation of compensation between the parties at the end of the proceeding pursuant to equitable principles, notwithstanding section 774.
(3) The referee shall do all of the following: (a) Make a record and reporter'sreporter’s transcript of the proceeding.
(b) Prepare a report, including proposed findings of fact and conclusions of law, and a recommended judgment.
(c) File the report with the court, together with all original exhibits and the reporter'sreporter’s transcript of the proceeding.
(4) Unless the court provides for a longer period, not more than 45 days after being served with notice of the filing of the report described in subsection (3), any party may serve written objections to the report upon the other party. Application to the court for action upon the report and objections to the report shall be made by motion upon notice. The court, after hearing, may adopt the report, may receive further evidence, may modify the report, or may recommit the report to the referee with instructions. Upon adoption of the report, judgment shall be entered in the same manner as if the action had been tried by the court and shall be subject to review in the same manner as any other judgment of the court.
HISTORY:
History: Add. 1989, Act 121, Eff. Oct. 1, 1989.
1989
450.1774 COSTS OF APPRAISAL PROCEEDING. [M.S.A. 21.200(774)]
Costs of appraisal proceeding.
Sec. 774. (1) The court in an appraisal proceeding commenced under section 773 shall determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The court shall assess the costs against the corporation, except that the court may assess costs against all or some of the dissenters, in amounts the court finds equitable, to the extent the court finds the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding payment under section 772.
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(2) The court may also assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable in the following manner: (a) Against the corporation and in favor of any or all dissenters if the court finds the corporation did not substantially comply with the requirements of sections 764 through 772.
(b) Against either the corporation or a dissenter, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this act.
(3) If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated, and that the fees for those services should not be assessed against the corporation, the court may award to those counsel reasonable fees paid out of the amounts awarded the dissenters who were benefitted.
HISTORY:benefited.
History: Add. 1989, Act 121, Eff. Oct. 1, 1989.
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APPENDIX C
OPINION OF AUSTIN ASSOCIATES, INC.
, 2000
Board of Directors
IBT Bancorp, Inc.
200 East Broadway
Mt. Pleasant, MI 48858
and
Board of Directors
FSB Bancorp, Inc.
316 E. Saginaw Street
Breckenridge, MI 48615
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to IBT Bancorp, Inc. ("IBT") and FSB Bancorp, Inc. ("FSB") and their
respective shareholders of the terms of the Agreement and Plan of Merger dated
as of April 7, 2000 ("Agreement") between IBT and FSB. The terms of the
Agreement provide for the acquisition of FSB by IBT (the "Acquisition"). The
Acquisition will be completed through a merger of FSB with and into IBT.
The terms of the Agreement provide for each outstanding share of FSB common
stock to be converted into shares of IBT common stock. The number of shares of
IBT stock into which each FSB share will be converted shall be equal to 2.1362
shares of IBT for each share of FSB. IBT will not issue fractional shares in
connection with the Acquisition; instead, fractional shares shall be settled in
cash.
In carrying out our engagement, we have reviewed and analyzed material
bearing upon the financial and operating condition of IBT and FSB, including but
not limited to the following: (i) the Proxy Statement/Prospectus, (ii) the
Agreement; (iii) the financial statements of IBT and FSB for the period 1995
through March 31, 2000; (iv) certain other publicly available information
regarding IBT and FSB; (v) publicly available information regarding the
performance of certain other companies whose business activities were believed
by Austin Associates to be generally comparable to those of IBT and FSB; (vi)
the financial terms, to the extent publicly available, of certain comparable
transactions; and (vii) such other analysis and information as we deemed
relevant.
In our review and analysis, we relieve upon and assumed the accuracy and
completeness of the financial and other information provided to us or publicly
available, and have not attempted to verify the same. We have made no
independent verification as to the status of individual loans made by IBT or
FSB, and have instead relied upon representations and information concerning
loans of IBT and FSB in the aggregate. In rendering our opinion, we have assumed
that the transaction will be a tax-free reorganization with no material adverse
tax consequences to IBT or FSB, or to FSB shareholders receiving IBT stock. In
addition, we have assumed in the course of obtaining the necessary approvals for
the transaction, no condition will be imposed that will have a material adverse
effect on the contemplated benefits of the transaction to IBT or FSB.
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Based upon our analysis and subject to the qualifications described herein,
we believe that as of the date of this letter the terms of the Agreement are
fair, from a financial point of view, to IBT and FSB and their respective
shareholders.
For our services in rendering this opinion, IBT and FSB will pay us a fee
and indemnify us against certain liabilities.
Austin Associates, Inc.
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APPENDIX D
OPINION OF AUSTIN FINANCIAL SERVICES, INC.
AUSTIN FINANCIAL SERVICES, INC.
May 26, 2000
Board of Directors
FSB Bancorp, Inc.
316 E. Saginaw Street
Breckenridge, Michigan 48615
Members of the Board:
You have requested our opinion, from a financial point of view, as to the
fairness to FSB Bancorp, Inc., Breckenridge, Michigan (hereinafter referred to
as "FSB") and its shareholders of the terms of the executed Agreement and Plan
of Merger ("Agreement"), between IBT Bancorp, Inc., Mount Pleasant, Michigan
(hereinafter referred to as "IBT") and FSB. Under the terms of the Agreement
between FSB and IBT, each share of FSB common stock outstanding immediately
prior to consummation of the reorganization will be cancelled and exchanged for
2.1362 shares of IBT common stock. Any fractional share will be paid in cash
according to the Agreement. The reorganization will result in FSB merging with
and into IBT, the separate corporate existence of FSB shall cease, and IBT shall
continue as the successor corporation. IBT will continue to carry on its banking
business in substantially the same manner as before the reorganization.
Austin Financial Services, Inc., ("AFSI") is a nationally recognized
investment banking firm specializing in the banking and financial services
industry. AFSI is continually engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, private placements and
valuations for estate, corporate and other purposes. AFSI does not contemplate
any future business with FSB and/or IBT arising from this engagement, nor has
its opinion concerning the fairness, from a financial point of view of the terms
of the Agreement been subject to indications of future business with either FSB
or IBT.
In connection with its opinion, AFSI reviewed material bearing upon the
financial operating condition of FSB and IBT including, but not limited to: (1)
the Annual Reports of FSB and IBT for the year 1999; (2) Consolidated Reports of
Condition and Income of FSB and IBT for the years ending 1994-1999; (3)
Consolidated Reports of Condition and Income of FSB and IBT at March 31, 2000;
(4) the Uniform Bank Performance Report of FSB and IBT as of September 30, 1999;
(5) the interest rate schedule for FSB and IBT; (6) FSB's and IBT's estimated
depreciation schedule for the years 2000-2004; (7) other internal financial and
operating information which was provided to AFSI by FSB and IBT; (8) publicly
available information concerning certain other banks/thrifts and bank/thrift
holding companies merger and acquisition transactions; (9) discussed the
foregoing as well as other matters relevant to its inquiry, including the past
and current business operations and acquisitions, results of regulatory
examinations, financial condition, current loan quality and trends, and future
prospects of IBT with certain officers and representatives of IBT; and (10) the
Agreement signed April 7, 2000. AFSI also took into account its assessment of
general economic, market and financial conditions and its experience in other
transactions, as well as its experience in securities valuation and general
knowledge of the banking industry. AFSI's opinion was necessarily based upon
conditions as they existed and could be evaluated on the date of the opinion and
the information available to AFSI through that date.
AFSI relied upon and assumed without the accuracy and completeness of all
of the financial and other information provided to it by FSB and IBT or from
public sources. In particular, AFSI did not make an independent evaluation of
the assets and liabilities of FSB or IBT. Nor did AFSI independently verify the
aggregate allowance for loan loss set forth in the balance sheets of FSB and IBT
at March 31, 2000, and assumed on this date that such allowances complied fully
with applicable law, regulatory policy, and sound banking practice. However,
AFSI did perform the following due diligence of IBT: (1) reviewed any
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pending litigation and solicited management's projected loss related to any
pending litigation; (2) reviewed IBT's "watch" loan list and details involving
the history of the loans contained within it; (3) reviewed IBT's 1999/2000
corporate minute book including board and executive meeting minutes; (4)
reviewed IBT's most recent comprehensive regulatory exam; (5) reviewed any
administrative orders or other regulatory action imposed upon IBT or its
affiliate bank; and (6) posed several questions to IBT's management concerning
matters that could have a material impact on the future value of IBT's common
stock.
In its analyses, AFSI made numerous assumptions with respect to industry
performance, business and economic conditions, and other matters, many of which
are beyond the control of FSB and IBT. Any estimates contained in AFSI's
analyses do not necessarily denote future results since many unforeseen
occurrences could affect or alter such estimates. No financial institution or
transaction utilized in AFSI's analyses was identical to FSB or IBT or the
Agreement. Accordingly, such analyses are not based solely on arithmetic
calculations; rather, they involve complex considerations and judgments by AFSI
concerning differences in financial and operating characteristics of the
relevant financial institutions, the timing of the relevant transactions and
prospective buyer interest, as well as other factors that could affect the
public trading markets of the financial institution or financial institutions to
which they are being compared.
Since neither FSB's or IBT's common stock is publicly traded, it was
paramount that AFSI perform an analysis of both institutions in order to derive
its opinion, from a financial point of view, as to the fairness of the Agreement
to FSB.
The following is a brief description of the analysis of FSB:
Using a discounted future cash flow analysis, AFSI projected FSB's cash
flow from April 1, 2000, through March 31, 2005. The principle behind the
discounted future cash flow analysis is that the worth of a business is equal to
the future expected cash flow discounted at a rate that reflects the riskiness
of the cash flow. Besides determining five years of future cash flows, AFSI also
estimated FSB's residual value as of March 31, 2005. The residual value
represents the value of the institution beyond the explicit forecast period.
This value is based on the cash flow during the year following the final
projected year. The steps involved in determining FSB's value utilizing the
discounted future cash flow analysis included the following: (1) the projected
earnings in excess over the amount necessary to maintain a 6.00% equity capital
to asset ratio were added to book charges such as depreciation less any
projected capital expenditures in order to determine future cash flows; (2) the
future cash flows were then converted to a present value equivalent using a
discount rate of 16.55%, which was determined from the use of the Capital Asset
Pricing Model ("CAPM"); (3) the residual value was then calculated by dividing
the projected cash flows for the year 2005 by the capitalization rate. The
capitalization rate not only includes all aspects of the CAPM but also reflects
the long-term income growth prospects of FSB, as well as specific company risk
factors; (4) the present value equivalent of the projected residual value was
calculated using the 16.55% discount rate; and (5) the present value of the cash
flows and the residual value were added together. The value per share of FSB's
common stock resulting from this analysis was $30.73 (assumes 408,237 current
shares outstanding).
AFSI also determined the fair market value of FSB utilizing the adjusted
book method as an alternative valuation method. The adjusted book value approach
requires a three-step process. First, the book value is determined. This figure
is derived from the March 31, 2000, balance sheet, and it represents the summary
measure of stockholders' claims against the assets, on a historical cost basis.
Second, assets and liabilities are restated to their fair market values. The
adjusted book value calculation considers each major asset and liability account
classification. Finally, additional "off-balance sheet" adjustments are
calculated, if necessary. The value per share of FSB's common stock resulting
from this analysis was $44.30 (assumes 408,237 current shares outstanding).
AFSI accorded an equal weight to each of the values derived from its
analysis in order to arrive at an aggregate value of FSB. The weightings were
based on AFSI's review of the financial position, history and recent performance
of FSB. The sum of the weighted values or $37.52 per share equates to the fair
market value of FSB as of March 31, 2000.
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130
AFSI used the same valuation methods, rates, etc. in analyzing IBT's common
stock as it did with FSB. Assuming 2,985,084 current shares outstanding, the
discounted future cash flow analysis resulted in a value per share of $17.39 and
the adjusted book analysis resulted in a value per share of $19.44. AFSI, as it
did with FSB, applied an equal weighting to the two values. The sum of the
weighted values equaled $18.42 per share, which equates to the fair market value
of IBT as of March 31, 2000.
Based on the exchange rate of the Agreement, a determined fair market value
of $18.42 per share for IBT's common stock, the transactions would result in a
$39.35 per share value for FSB's shareholders. Therefore, the exchange terms of
the Agreement would be favorable, from a financial standpoint, to FSB
shareholders since the transaction would result in a positive margin of $1.83
per share in comparison to the fair market value of IBT as determined by AFSI.
AFSI analyzed certain other mergers and acquisitions that have consummated
over the past fourteen months in Michigan as well as the neighboring states of
Ohio and Wisconsin, which involved target financial institutions with assets
under $700 million. AFSI compared the multiple produced by this reorganization
to the mean multiples for the transactions analyzed. Set forth below are the
mean transaction multiples:
The financial institution acquisition transactions announced for the
three-state area during the past fourteen months included in the above multiples
are:
AFSI's analysis showed that the implied valuations of FSB, applying the
mean transaction multiples described above to FSB's last twelve months earnings
per share and book value per share as of March 31, 2000, were $67.56 per share
and $56.21 per share, respectively. The results produced in this analysis do not
purport to be indicative of actual value or expected value of FSB shares of
common stock.
Summarizing the contractual relationship between FSB and AFSI, the fee in
determining AFSI's opinion is a contractual $17,500 plus out of pocket expenses.
In addition, FSB also has agreed to indemnify AFSI and its officers, directors,
shareholders, employees and agents for all of its time, expenses, and any
liability incurred as a result of AFSI's proposed engagement by means of legal
action, administrative proceedings or threat thereof, unless such action,
pending or threat thereof is caused by AFSI's own unlawful conduct, breach of
duty or negligence during the course of performing AFSI's services.
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131
AFSI, in rendering its opinion, has assumed that the transaction will be a
tax-free reorganization with no material adverse tax consequences to any of the
parties involved. In addition, AFSI has assumed that, in the course of obtaining
the necessary regulatory approvals for the transaction, no condition will be
imposed upon FSB or IBT that will have a materially adverse impact on the
contemplated benefits of the proposed transaction to FSB and IBT and their
shareholders.
Based upon AFSI's analysis and subject to the qualifications described
herein, considering all circumstances known to us and based upon other matters
considered relevant, AFSI believes that as of the date of this letter, the terms
of the Agreement from a financial point of view are fair to FSB and its
shareholders.
On behalf of Austin Financial
Services, Inc.
/s/ DR. DOUGLAS V. AUSTIN
------------------------------------
Dr. Douglas V. Austin
President and CEO
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1989
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PART IIII. INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 561
| Item 20. | Indemnification of Directors and Officers. |
The Articles of Incorporation of IBT provide that its directors and officers are to be indemnified as of right to the fullest extent permitted under the Michigan Business Corporation Act. Under the Michigan Business Corporation Act, authorizesdirectors, officers, employees or agents are entitled to indemnification against expenses (including attorneys’ fees) whenever they successfully defend legal proceedings brought against them by reason of the fact that they hold such a position with the corporation. In addition, with respect to actions not brought by or in the right of the corporation, indemnification is permitted under the Michigan Business Corporation Act for expenses (including attorneys’ fees), judgments, fines, penalties and reasonable settlement if it is determined that the person seeking indemnification acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation or its shareholders and, with respect to criminal proceedings, he or she had no reasonable cause to believe that his or her conduct was unlawful. With respect to actions brought by or in the right of the corporation, indemnification is permitted under the Michigan Business Corporation Act for expenses (including attorneys’ fees) and reasonable settlements, if it is determined that the person seeking indemnification acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation or its shareholders; provided, indemnification is not permitted if the person is found liable to the corporation, unless the court in which the action or suit was brought has determined that indemnification is fair and reasonable in view of all the circumstances of the case.
In addition to the available indemnification, IBT’s Articles of Incorporation, as amended, limit the personal liability of the members of its Board of Directors for monetary damages with respect to claims by IBT or its shareholders resulting from certain negligent acts or omissions.
Under an insurance policy maintained by IBT, the directors and officers of a corporation underIBT are insured within the limits and subject to the limitations of the policy, against certain circumstances against expenses judgments and the like in connection with anthe defense of certain claims, actions, suits or proceedings, and certain liabilities which might be imposed as a result of such claims, action, suitsuits or proceeding. Article IXproceedings, which may be brought against them by reason of being or having been such directors and officers.
| Item 21. | Exhibits and Financial Statements Schedules. |
A. Exhibits. The following exhibits are filed as part of this Registration Statement:
| Exhibit | ||||
Number | ||||
| 2 | .1 | Agreement and Plan of Merger dated August 21, 2007, included as Appendix A to the Proxy Statement-Prospectus included in this Registration Statement. | ||
| 2 | .2 | First Amendment dated September 24, 2007 to Agreement and Plan of Merger included as Appendix A to the Proxy Statement-Prospectus included in this Registration Statement. | ||
| 3 | .1 | Amended Articles of Incorporation, incorporated by reference to IBT’s Annual Report onForm 10-K, filed with the Securities and Exchange Commission March 12, 1991. | ||
| 3 | .2 | Amendment to the Articles of Incorporation, incorporated by reference to IBT’s Annual Report onForm 10-K, filed with the Securities and Exchange Commission March 26, 1994. | ||
| 3 | .3 | Amendment to the Articles of Incorporation, incorporated by reference to IBT’s Annual Report onForm 10-K, filed with the Securities and Exchange Commission March 22, 2000. | ||
| 3 | .4 | Amendment to the Articles of Incorporation, incorporated by reference to IBT’s Annual Report onForm 10-K, filed with the Securities and Exchange Commission March 22, 2000. | ||
| 3 | .5 | Bylaws of IBT incorporated by reference to IBT’s Annual Report onForm 10-K, filed with the Securities and Exchange Commission March 16, 2005. | ||
| 5 | * | Opinion of Foster, Swift, Collins & Smith, P.C. as to the legality of the shares to be issued (including consent). | ||
| 8 | * | Opinion of Foster, Swift, Collins & Smith, P.C. as to Tax Matters (including consent). | ||
| 21 | * | Subsidiaries of IBT Bancorp, Inc. | ||
| 23 | .1 | Consent of Rehmann Robson, P.C., IBT Bancorp, Inc.’s Independent Registered Public Accounting Firm. | ||
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| Exhibit | ||||
Number | ||||
| 23 | .2* | Consent of Foster, Swift, Collins & Smith, P.C., included in Exhibit 5. | ||
| 23 | .3 | Consent of Donnelly Penman & Partners (included in Appendix B to the Proxy Statement-Prospectus included in this Registration Statement.) | ||
| 23 | .4* | Consent of Foster, Swift, Collins & Smith, P.C. regarding its tax opinion, included in Exhibit 8. | ||
| 24 | * | Powers of Attorney. | ||
| 99 | .1 | Form of Proxy for Greenville Community Financial Corporation. | ||
| * | Previously filed withForm S-4 on October 16, 2007. |
B. Financial Statement Schedules.
All schedules for which provision is made inRegulation S-X of the Registrant's ArticlesSecurities and Exchange Commission have been omitted because they either are not required under the related instructions or the required information has been included in the consolidated financial statements of Incorporation provides for broad indemnificationIBT Bancorp, Inc. or notes thereto.
C. Opinion of directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. See Exhibit Index.
(b) Financial Statement Schedules. No financial schedules are requiredAdvisor.
The form of opinion of Donnelly Penman & Partners is included as Appendix B to be filed herewith.
ITEM 22. UNDERTAKINGS.
the Proxy Statement-Prospectus.
| Item 22. | Undertakings. |
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post effectivepost-effective amendment to this registration statement:
(i) To include any prospectus required by sectionSection 10(a)(3) of the Securities Act of 1933.
1933;
(ii) To reflect in the prospectus any facts or events arising after the effective datetime of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low end or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) (sec. 230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price represent no more than 20%a 20 percent change in the maximum aggregate offering price set forth in the "Calculation“Calculation of Registration Fee"Fee” table in the effective registration statement.
statement;
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post effectivepost-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fideoffering thereof.
(3) To remove fromform registration by means of a post effectivepost-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(b)
(4) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant'sregistrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed
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to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c)
(5) The undersigned registrant hereby undertakes to deliver or cause to be delivered with the Proxy Statement-Prospectus, to each person to whom the Proxy Statement-Prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the Proxy Statement-Prospectus and furnished pursuant to and meeting the requirements ofRule 14a-3 orRule 14c-3 under the Securities Exchange Act of 1934.
(6) The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by
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133 any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
(d)
(7) The undersigned registrant undertakes that every prospectus: (i) that is filed pursuant to the paragraph (c) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities subject to Rule 415, willshall be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(e)
(8) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
(f)
(b) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b)4,10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective datetime of the registration statement through the date of responding to the request.
(g)
(c) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statementpre-effective Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the cityCity of Mt. Pleasant, stateState of Michigan, on June 20, 2000.
the 19 day of November, 2007.
IBT BANCORP, INC.
By: /s/ DAVID W. HOLE
----------------------------------
David W. Hole
| By: | /s/ Dennis P. Angner |
Dennis P. Angner,
President and Chief Executive Officer
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this registration statementpre-effective Amendment No. 1 to this Registration Statement has been signed on June 20, 2000below by the following persons in the capacities indicated:
indicated on the dates indicated.
/s/ Dennis P. Angner Dennis P. Angner, | President and Chief Executive Officer | Dated: November 19, 2007 | ||||
/s/ Peggy L. Wheeler Peggy L. Wheeler, | Senior Vice President and Controller (Principal Financial and Accounting | Dated: November 19, 2007 | ||||
* Richard J. Barz, | Director | Dated: November 19, 2007 | ||||
* Sandra L. Caul, | Director | Dated: November 19, 2007 | ||||
* James C. Fabiano, | Director | Dated: November 19, 2007 | ||||
* David W. Hole, | Director | Dated: November 19, 2007 | ||||
* David J. Maness, | Director | Dated: November 19, 2007 | ||||
* W. Joseph Manifold, | Director | Dated: November 19, 2007 | ||||
* W. Michael McGuire, | Director | Dated: November 19, 2007 | ||||
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* Ronald E. Schumacher, | Director | Dated: November 19, 2007 | ||||
* William J. Strickler, | Director | Dated: November 19, 2007 | ||||
* Dale Weburg, | Director | Dated: November 19, 2007 | ||||
| * | Dennis P. Angner hereby executes this Amendment No. 1 to the Registration Statement on behalf of the persons for whom he is attorney-in-fact pursuant to a power of attorney included on the signature page to the Registration Statement on Form S-4 filed by the registrant with the Securities and Exchange Commission on October 16, 2007. |
| By: | /s/ Dennis P. Angner |
Name: Dennis P. Angner
Title: Attorney-in-fact
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EXHIBIT INDEX
| Number | ||||
Exhibit | ||||
| 2 | .1 | Plan of Merger dated August 21, 2007, included as Appendix A to the Proxy Statement-Prospectus included in this Registration Statement. | ||
| 2 | .2 | First Amendment dated September 24, 2007 to Plan of Merger included as Appendix A to the Proxy Statement-Prospectus included in this Registration Statement. | ||
| 5 | * | Opinion of Foster, Swift, Collins & Smith, P.C. as to the legality of the shares to be issued (including consent). | ||
| 8 | * | Opinion of Foster, Swift, Collins & Smith, P.C. as to Tax Matters (including consent). | ||
| 21 | * | Subsidiaries of IBT Bancorp, Inc. | ||
| 23 | .1 | Consent of IBT Bancorp, Inc.’s Independent Registered Public Accounting Firm, Rehmann Robson, P.C. | ||
| 23 | .2* | Consent of Foster, Swift, Collins & Smith, P.C., included in Exhibit 5. | ||
| 23 | .3 | Consent of Donnelly Penman & Partners (included in Appendix B to the Proxy Statement — Prospectus included in this Registration Statement.) | ||
| 23 | .4* | Consent of Foster, Swift, Collins & Smith, P.C. regarding its tax opinion, included in Exhibit 8. | ||
| 24 | * | Powers of Attorney | ||
| 99 | .1 | Form of Proxy for Greenville Community Financial Corporation. | ||
| * | Previously filed withForm S-4 on |
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