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