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Exhibit 2
AGREEMENT AND PLAN OF MERGER
dated as of
June 6, 1999
by and between
SKY FINANCIAL GROUP, INC.
and
MAHONING NATIONAL BANCORP, INC.
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TABLE OF CONTENTS
PAGE
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RECITALS..................................................................... 1
ARTICLE I Certain Definitions
1.01 Certain Definitions................................................. 1
ARTICLE II The Merger
2.01 The Parent Merger................................................... 6
2.02 The Subsidiary Merger............................................... 6
2.03 Effectiveness of Parent Merger...................................... 7
2.04 Effective Date and Effective Time................................... 7
ARTICLE III Consideration; Exchange Procedures
3.01 Merger Consideration................................................ 7
3.02 Rights as Shareholders, Stock Transfers............................. 8
3.03 Fractional Shares................................................... 8
3.04 Exchange Procedures................................................. 8
3.05 Anti-Dilution Provisions............................................ 9
ARTICLE IV Actions Pending Acquisition
4.01 Forbearances of MNB................................................. 9
4.02 Forbearances of SFG................................................. 12
ARTICLE V Representations and Warranties
5.01 Disclosure Schedules................................................ 13
5.02 Standard............................................................ 13
5.03 Representations and Warranties of MNB............................... 14
5.04 Representations and Warranties of SFG............................... 24
ARTICLE VI Covenants
6.01 Reasonable Best Efforts............................................. 30
6.02 Carry on Business in Normal Manner.................................. 30
6.03 Shareholder Approval................................................ 30
6.04 Registration Statement.............................................. 30
6.05 Press Releases...................................................... 31
6.06 Access; Information................................................. 32
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6.07 Acquisition Proposals............................................... 32
6.08 Affiliate Agreements................................................ 33
6.09 Takeover Laws....................................................... 33
6.10 Certain Policies.................................................... 33
6.11 NASDAQ Listing...................................................... 33
6.12 Regulatory Applications............................................. 33
6.13 Indemnification..................................................... 34
6.14 Opportunity of Employment; Employee Benefits........................ 35
6.15 Notification of Certain Matters..................................... 35
6.16 Dividend Coordination............................................... 36
6.17 Board Representation................................................ 36
6.18 Accounting and Tax Treatment........................................ 36
6.19 No Breaches of Representations and Warranties....................... 36
6.20 Consents............................................................ 36
6.21 Insurance Coverage.................................................. 36
6.22 Correction of Information........................................... 36
6.23 Confidentiality..................................................... 36
6.24 Supplemental Assurances............................................. 37
6.25 SFG Acquisition Proposal............................................ 37
6.26 Post-Retirement Benefits............................................ 37
ARTICLE VII Conditions to Consummation of the Merger
7.01 Conditions to Each Party's Obligation to Effect the Merger.......... 38
7.02 Conditions to Obligation of MNB..................................... 38
7.03 Conditions to Obligation of SFG..................................... 40
ARTICLE VIII Termination
8.01 Termination......................................................... 40
8.02 Effect of Termination and Abandonment; Enforcement of Agreement..... 42
ARTICLE IX Miscellaneous
9.01 Survival............................................................ 42
9.02 Waiver; Amendment................................................... 42
9.03 Counterparts........................................................ 42
9.04 Governing Law....................................................... 42
9.05 Expenses............................................................ 42
9.06 Notices............................................................. 42
9.07 Entire Understanding; No Third Party Beneficiaries.................. 43
9.08 Interpretation; Effect.............................................. 44
9.09 Waiver of Jury Trial................................................ 44
9.10 Successors and Assigns.............................................. 44
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EXHIBIT A.........Form of Stock Option Agreement
EXHIBIT B.........Form of MNB Affiliate Agreement
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AGREEMENT AND PLAN OF MERGER, dated as of June 6, 1999 (this
"Agreement"), is by and between Sky Financial Group, Inc. ("SFG") and Mahoning
National Bancorp, Inc. ("MNB").
RECITALS
A. MNB. MNB is an Ohio corporation, having its principal place of
business in Youngstown, Ohio.
B. SFG. SFG is an Ohio corporation, having its principal place of
business in Bowling Green, Ohio.
C. Stock Option Agreement. As an inducement to the willingness of SFG
to continue to pursue the transactions contemplated by this Agreement, MNB
intends to grant to SFG an option pursuant to a stock option agreement, in
substantially the form of Exhibit A.
D. Intentions of the Parties. It is the intention of the parties to
this Agreement that the business combinations contemplated hereby be accounted
for under the "pooling-of-interests" accounting method and that each be treated
as a "reorganization" under Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code").
E. Board Action. The respective Boards of Directors of each of SFG and
MNB have determined that it is in the best interests of their respective
companies and their shareholders to consummate the strategic business
combinations provided for herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 CERTAIN DEFINITIONS. The following terms are used in this
Agreement with the meanings set forth below:
"Acquisition Proposal" means any tender or exchange offer, proposal
for a merger, consolidation or other business combination involving MNB or
any of its Subsidiaries or any proposal or offer to acquire in any manner
a substantial equity interest in, or a substantial portion of the assets
or deposits of, MNB or any of its Subsidiaries, other than the
transactions contemplated by this Agreement.
"Agreement" means this Agreement, as amended or modified from time to
time in accordance with Section 9.02.
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"Agreement to Merge" has the meaning set forth in Section 2.02.
"Average NMS Closing Price" has the meaning set forth in
Section 8.01(e).
"Bank" means The Mahoning National Bank of Youngstown, a wholly-owned
subsidiary of MNB.
"BHCA" means the Bank Holding Company Act of 1956, as amended.
"CBC" means The Citizens Banking Company, an Ohio banking corporation
which is a wholly-owned subsidiary of SFG.
"Code" means the Internal Revenue Code of 1986, as amended.
"Compensation and Benefit Plans" has the meaning set forth in Section
5.03(m).
"Consultants" has the meaning set forth in Section 5.03(m).
"Costs" has the meaning set forth in Section 6.13(a).
"Directors" has the meaning set forth in Section 5.03(m).
"Disclosure Schedule" has the meaning set forth in Section 5.01.
"Dissenting Shares" means any shares of MNB Common Stock held by a
holder who properly demands and perfects appraisal rights with respect to
such shares in accordance with applicable provisions of the OGCL.
"Effective Date" means the date on which the Effective Time occurs.
"Effective Time" means the effective time of the Merger, as provided
for in Section 2.04.
"Employees" has the meaning set forth in Section 5.03(m).
"Environmental Laws" means all applicable local, state and federal
environmental, health and safety laws and regulations, including, without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Clean Water
Act, the Federal Clean Air Act, and the Occupational Safety and Health
Act, each as amended, regulations promulgated thereunder, and state
counterparts.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 5.03(m).
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"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.04.
"Exchange Fund" has the meaning set forth in Section 3.04.
"Exchange Ratio" has the meaning set forth in Section 3.01.
"FFIEC" means Federal Financial Institutions Examination Committee.
"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"Indemnified Party" has the meaning set forth in Section 6.13(a).
"IRS" has the meaning set forth in Section 5.03(m).
The term "knowledge" means, with respect to a party hereto, actual
knowledge of any officer of that party with the title of not less than a
senior vice president and that party's in-house counsel, if any.
"Lien" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Material Adverse Effect" means, with respect to SFG or MNB, any
effect that (i) is material and adverse to the financial position, results
of operations or business of SFG and its Subsidiaries taken as a whole, or
MNB and its Subsidiaries taken as a whole, respectively, or (ii) would
materially impair the ability of either SFG or MNB to perform its
obligations under this Agreement or otherwise materially threaten or
materially impede the consummation of the Merger and the other
transactions contemplated by this Agreement; provided, however, that
Material Adverse Effect shall not be deemed to include the impact of (a)
changes in banking and similar laws of general applicability or
interpretations thereof by courts or governmental authorities or other
changes affecting depository institutions generally, including changes in
general economic conditions and changes in prevailing interest and deposit
rates, (b) any modifications or changes to valuation policies and
practices in connection with the Merger or restructuring charges taken in
connection with the Merger, in each case in accordance with generally
accepted accounting principles, (c) changes resulting from expenses (such
as legal, accounting and investment bankers' fees) incurred in connection
with this Agreement or the transactions contemplated herein, and (d)
actions or omissions of a party which have been waived in accordance with
Section 9.02 hereof.
"Merger" collectively refers to the Parent Merger and the Subsidiary
Merger, as set forth in Section 2.01 and Section 2.02, respectively.
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"Merger Consideration" has the meaning set forth in Section 2.01.
"MNB" has the meaning set forth in the preamble to this Agreement.
"MNB Articles" means the Articles of Incorporation of MNB.
"MNB Affiliate" has the meaning set forth in Section 6.08(a).
"MNB Board" means the Board of Directors of MNB.
"MNB Code" means the Code of Regulations of MNB.
"MNB Common Stock" means the common stock, stated value $1.00 per
share, of MNB.
"MNB Meeting" has the meaning set forth in Section 6.03.
"MNB SEC Documents" has the meaning set forth in Section 5.03(g).
"MNB Stock" means MNB Common Stock.
"NASDAQ" means The NASDAQ Stock Market, Inc.'s National Market System.
"New Certificate" has the meaning set forth in Section 3.04.
"NASD" means The National Association of Securities Dealers.
"OCC" means The Office of the Comptroller of the Currency.
"OGCL" means the Ohio General Corporation Law.
"Old Certificate" has the meaning set forth in Section 3.04.
"OSS" means the Office of the Secretary of State of the State of Ohio.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Parent Merger" has the meaning set forth in Section 2.01.
"Person" means any individual, bank, corporation, partnership,
association, joint-stock company, business trust or unincorporated
organization.
"Pension Plan" has the meaning set forth in Section 5.03(m).
"Previously Disclosed" by a party shall mean information set forth in
its Disclosure Schedule.
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"Proxy/Prospectus" has the meaning set forth in Section 6.04.
"Proxy Statement" has the meaning set forth in Section 6.04.
"Registration Statement" has the meaning set forth in Section 6.04.
"Regulatory Authority" has the meaning set forth in Section 5.03(i).
"Representatives" means, with respect to any Person, such Person's
directors, officers, employees, legal or financial advisors or any
representatives of such legal or financial advisors.
"Resulting Bank" has the meaning set forth in Section 2.02.
"Rights" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person
any right to subscribe for or acquire, or any options, calls or commitments
relating to, or any stock appreciation right or other instrument the value
of which is determined in whole or in part by reference to the market price
or value of, shares of capital stock of such person.
"SEC" means the Securities and Exchange Commission.
"SFG" has the meaning set forth in the preamble to this Agreement.
"SFG Articles" means the Articles of Incorporation of SFG, as amended.
"SFG Board" means the Board of Directors of SFG.
"SFG Code" means the Code of Regulations of SFG, as amended.
"SFG Common Stock" means the common stock, without par value, of SFG.
"SFG SEC Documents" has the meaning set forth in Section 5.04(g).
"SFG Stock" means the SFG Common Stock and SFG serial preferred stock.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Stock Option Agreement" has the meaning set forth in Recital C.
"Subsidiary" and "Significant Subsidiary" have the meanings ascribed
to them in Rule 1-02 of Regulation S-X of the SEC.
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"Surviving Corporation" has the meaning set forth in Section 2.01.
"Takeover Laws" has the meaning set forth in Section 5.03 (o).
"Tax" and "Taxes" means all federal, state, local or foreign taxes,
charges, fees, levies or other assessments, however denominated,
including, without limitation, all net income, gross income, gains, gross
receipts, sales, use, ad valorem, goods and services, capital, production,
transfer, franchise, windfall profits, license, withholding, payroll,
employment, disability, employer health, excise, estimated, severance,
stamp, occupation, property, environmental, unemployment or other taxes,
custom duties, fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority whether arising before,
on or after the Effective Date.
"Tax Returns" means any return, amended return or other report
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be filed with respect to any Tax.
"Treasury Stock" shall mean shares of MNB Stock held by MNB or any of
its Subsidiaries or by SFG or any of its Subsidiaries, in each case other
than in a fiduciary capacity or as a result of debts previously contracted
in good faith.
ARTICLE II
THE MERGER
2.01 THE PARENT MERGER. At the Effective Time, MNB shall merge with
and into SFG (the "Parent Merger"), the separate corporate existence of MNB
shall cease and SFG shall survive and continue to exist as an Ohio corporation
(SFG, as the surviving corporation in the Parent Merger, sometimes being
referred to herein as the "Surviving Corporation"). SFG may at any time prior
to the Effective Time change the method of effecting the Merger (including,
without limitation, the provisions of this Article II) if and to the extent it
deems such change to be necessary, appropriate or desirable; provided, however,
that no such change shall (i) alter or change the amount or kind of
consideration to be issued to holders of MNB Stock as provided for in this
Agreement (the "Merger Consideration"), (ii) adversely affect the tax treatment
of MNB's shareholders as a result of receiving the Merger Consideration or the
Merger qualifying for "pooling-of-interests" accounting treatment or (iii)
materially impede or delay consummation of the transactions contemplated by
this Agreement.
2.02 THE SUBSIDIARY MERGER. At the time specified by CBC in its
certificate of merger filed with the OSS (which shall not be earlier than the
Effective Time and is anticipated to be on or about January 31, 2000), Bank
shall merge with and into CBC (the "Subsidiary Merger") pursuant to an
agreement to merge (the "Agreement to Merge") to be executed by Bank and CBC
and filed with the OSS and the OCC, as required. Upon consummation of the
Subsidiary Merger, the separate corporate existence of Bank shall cease and CBC
shall survive
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and continue to exist as a state banking corporation (CBC, as the resulting bank
in the Subsidiary Merger, sometimes being referred to herein as the "Resulting
Bank"). (The Parent Merger and the Subsidiary Merger shall sometimes
collectively be referred to as the "Merger".)
2.03 EFFECTIVENESS OF PARENT MERGER. Subject to the satisfaction or
waiver of the conditions set forth in Article VII, the Parent Merger shall
become effective upon the occurrence of the filing in the office of the OSS of
a certificate of merger in accordance with Section 1701.81 of the OGCL or such
later date and time as may be set forth in such filings. The Parent Merger
shall have the effects prescribed in the OGCL.
2.04 EFFECTIVE DATE AND EFFECTIVE TIME. Subject to the satisfaction or
waiver of the conditions set forth in Article VII, the parties shall cause the
effective date of the Parent Merger (the "Effective Date") to occur on (i) the
third business day to occur after the last of the conditions set forth in
Article VII shall have been satisfied or waived in accordance with the terms of
this Agreement (or, at the election of SFG, on the last business day of the
month in which such third business day occurs or, if such third business day
occurs within the last three business days of such month, on the last business
day of the succeeding month; provided, no such election shall cause the
Effective Date to fall after the date specified in Section 8.01(c) hereof or
after the date or dates on which any Regulatory Authority approval or any
extension thereof expires, or (ii) such other date to which the parties may
agree in writing. The time on the Effective Date when the Parent Merger shall
become effective is referred to as the "Effective Time."
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.01 MERGER CONSIDERATION. Subject to the provisions of this
Agreement, at the Effective Time, automatically by virtue of the Parent Merger
and without any action on the part of any Person:
(a) OUTSTANDING MNB COMMON STOCK AND MNB RIGHTS. Each share, excluding
Treasury Stock and Dissenting Shares, of MNB Common Stock issued and
outstanding immediately prior to the Effective Time shall become and be
converted into 1.66 shares of SFG Common Stock (the "Exchange Ratio"). The
Exchange Ratio shall be subject to adjustment as set forth in Section 3.05. One
preferred share purchase right issuable pursuant to the Shareholder Rights
Agreement dated as of July 21, 1998 between SFG and CBC or any other purchase
right issued in substitution thereof (the "SFG Rights") shall be issued
together with and shall attach to each share of SFG Common Stock issued
pursuant to this Section 3.01(a).
(b) TREASURY SHARES; MNB COMMON STOCK OWNED BY SFG. Each share of MNB
Common Stock held as Treasury Stock and each share of MNB Common Stock held by
SFG immediately prior to the Effective Time shall be canceled and retired at
the Effective Time and no consideration shall be issued in exchange therefor.
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(c) OUTSTANDING SFG STOCK. Each share of SFG Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and unaffected by the Parent Merger.
3.02 RIGHTS AS SHAREHOLDERS; STOCK TRANSFERS. At the Effective Time,
holders of MNB Common Stock shall cease to be, and shall have no rights as,
shareholders of MNB, other than to receive any dividend or other distribution
with respect to such MNB Common Stock with a record date occurring prior to the
Effective Time and the consideration provided under this Article III, and
appraisal rights in the case of Dissenting Shares. After the Effective Time,
there shall be no transfers on the stock transfer books of MNB or the Surviving
Corporation of any shares of MNB Stock.
3.03 FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of SFG Common Stock and no certificates or scrip therefor, or
other evidence of ownership thereof, will be issued in the Parent Merger;
instead, SFG shall pay to each holder of MNB Common Stock who would otherwise
be entitled to a fractional share of SFG Common Stock (after taking into
account all Old Certificates delivered by such holder) an amount in cash
(without interest) determined by multiplying such fractional share of SFG
Common Stock to which the holder would be entitled by the Average NMS Closing
Price of SFG Common Stock.
3.04 EXCHANGE PROCEDURES. (a) At or prior to the Effective Time, SFG
shall deposit, or shall cause to be deposited, with The Bank of New York (in
such capacity, the "Exchange Agent"), for the benefit of the holders of
certificates formerly representing shares of MNB Common Stock ("Old
Certificates"), for exchange in accordance with this Article III, certificates
representing the shares of SFG Common Stock ("New Certificates") and an
estimated amount of cash (such cash and New Certificates, together with any
dividends or distributions with a record date occurring on or after the
Effective Date with respect thereto (without any interest on any such cash,
dividends or distributions), being hereinafter referred to as the "Exchange
Fund") to be paid pursuant to this Article III in exchange for outstanding
shares of MNB Common Stock.
(b) As promptly as practicable after the Effective Date, SFG shall
send or cause to be sent to each former holder of record of shares of MNB
Common Stock immediately prior to the Effective Time transmittal materials for
use in exchanging such shareholder's Old Certificates for the consideration set
forth in this Article III. SFG shall cause the New Certificates into which
shares of a shareholder's MNB Common Stock are converted on the Effective Date
and/or any check in respect of any fractional share interests or dividends or
distributions which such person shall be entitled to receive to be delivered to
such shareholder upon delivery to the Exchange Agent of Old Certificates
representing such shares of MNB Common Stock (or an indemnity affidavit
reasonably satisfactory to SFG and the Exchange Agent, if any of such
certificates are lost, stolen or destroyed) owned by such shareholder. No
interest will be paid on any such cash to be paid in lieu of fractional share
interests or in respect of dividends or distributions which any such person
shall be entitled to receive pursuant to this Article III upon such delivery.
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(c) Notwithstanding the foregoing, neither the Exchange Agent, if any,
nor any party hereto shall be liable to any former holder of MNB Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(d) No dividends or other distributions with respect to SFG Common
Stock with a record date occurring on or after the Effective Date shall be paid
to the holder of any unsurrendered Old Certificate representing shares of MNB
Common Stock converted in the Parent Merger into the right to receive shares of
such SFG Common Stock until the holder thereof shall be entitled to receive New
Certificates in exchange therefor in accordance with the procedures set forth
in this Section 3.04. After becoming so entitled in accordance with this
Section 3.04, the record holder thereof also shall be entitled to receive any
such dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to shares of SFG Common Stock such
holder had the right to receive upon surrender of the Old Certificates.
(e) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of MNB for six months after the Effective Time shall be paid to
SFG. Any shareholders of MNB who have not theretofore complied with this
Article III shall thereafter look only to SFG for payment of the shares of SFG
Common Stock, cash in lieu of any fractional shares and unpaid dividends and
distributions on SFG Common Stock deliverable in respect of each share of MNB
Common Stock such shareholder holds as determined pursuant to this Agreement,
in each case, without any interest thereon.
3.05 ANTI-DILUTION PROVISIONS. In the event SFG changes (or
establishes a record date for changing) the number of shares of SFG Common
Stock issued and outstanding between the date hereof and the Effective Date as
a result of a stock split, stock dividend, recapitalization, reclassification,
split up, combination, exchange of shares, readjustment or similar transaction
with respect to the outstanding SFG Common Stock and the record date therefor
shall be prior to the Effective Date, the Exchange Ratio shall be
proportionately adjusted.
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01 FORBEARANCES OF MNB. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement and/or disclosed on
the Disclosure Schedule, without the prior written consent of SFG, MNB will
not, and will cause each of its Subsidiaries not to:
(a) Ordinary Course. Except as otherwise provided in this Section
4.01, conduct the business of MNB and its Subsidiaries other than in the
ordinary and usual course or fail to use reasonable efforts to preserve intact
their business organizations and assets and maintain their rights, franchises
and existing relations with customers, suppliers, employees and business
associates, or voluntarily take any action which, at the time taken, is
reasonably likely to have an adverse effect upon MNB's ability to perform any
of its material obligations under this Agreement.
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(b) Capital Stock. Other than pursuant to Rights Previously Disclosed
and outstanding on the date hereof, (i) issue, sell or otherwise permit to
become outstanding, or authorize the creation of, any additional shares of MNB
Stock or any Rights, (ii) enter into any agreement with respect to the
foregoing, or (iii) permit any additional shares of MNB Stock to become subject
to new grants of employee or director stock options, other Rights or similar
stock-based employee rights.
(c) Dividends, Etc. (i) Make, declare, pay or set aside for payment
any dividend, other than (A) quarterly cash dividends on MNB Stock in an amount
not to exceed the per share amount declared and paid in its most recent
quarterly cash dividend, with record and payment dates as indicated in Section
6.15 hereof, and (B) dividends from wholly owned Subsidiaries to MNB, or (ii)
directly or indirectly adjust, split, combine, redeem, reclassify, purchase or
otherwise acquire, any shares of its capital stock.
(d) Compensation; Employment Agreements; Etc. Enter into or amend or
renew any employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of MNB or its Subsidiaries
(other than the normal extension of the four existing change of control
agreements with senior management), or grant any salary or wage increase or
increase any employee benefit, (including incentive or bonus payments) except
(i) for normal individual increases in compensation to employees in the
ordinary course of business consistent with past practice, (ii) for other
changes that are required by applicable law, (iii) to satisfy Previously
Disclosed contractual obligations existing as of the date hereof, or (iv) for
grants of awards to newly hired employees consistent with past practice.
(e) Benefit Plans. Enter into, establish, adopt or amend any pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement (or
similar arrangement) related thereto, in respect of any director, officer or
employee of MNB or its Subsidiaries, or take any action to accelerate the
vesting or exercisability of stock options, restricted stock or other
compensation or benefits payable thereunder; provided that MNB may (i) take
such actions in order to satisfy either applicable law or Previously Disclosed
contractual obligations existing as of the date hereof or regular annual
renewal of insurance contracts; (ii) establish and fund the grantor trust(s)
that are required pursuant to the Supplemental Executive Retirement Plan for
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, any employment or change-in-control agreements that
currently contain grantor trust funding requirements and that are not cancelled
on or before the Effective Time, and the Executive Phantom Stock Bonus Plan in
the amounts specified in Section 4.01(e) of the Disclosure Schedule; (iii)
enter into agreements in forms acceptable to SFG that cancel MNB's employment
and/or change-in-control protective agreements in consideration of the payments
listed in section 4.01(e) of the Disclosure Schedule; (iv) pay cash bonuses on
the Closing Date in the amounts accrued by MNB as of the Closing Date with
respect to the Executive Annual Compensation Plan as set forth in Section
4.01(e) of the Disclosure Schedule; (v) freeze by adopting a plan amendment
ceasing all benefit accruals and the timely and proper issuance of a notice
pursuant to ERISA Section 204(h) its defined benefit pension plan and terminate
its defined contribution 401k plan at any time before
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the closing, with benefit distributions deferred until the Internal Revenue
Service issues a favorable determination with respect to the terminating plan's
tax-qualified status upon terminations and with MNB and SFG to cooperate in good
faith to apply for such approval and to agree upon associated plan termination
amendments that shall, among other things, provide for the application of all
assets of a terminating plan for its participants, and allow plan participants
not only to receive lump-sum distributions of their benefits, but also to
transfer those benefits to the tax-qualified 401K plan that SFG maintains for
its employees, as well as to elect to receive an annuity (purchased from an
insurance carrier) in settlement of their benefit entitlement under such pension
plan (it being agreed that SFG shall terminate such pension plan as soon as
possible after the Effective Date provided such pension plan is fully funded on
a plan termination basis).
(f) Dispositions. Sell, transfer, mortgage, encumber or otherwise
dispose of or discontinue any of its assets, deposits, business or properties
except in the ordinary course of business.
(g) Acquisitions. Acquire (other than by way of foreclosures or
acquisitions of control in a bona fide fiduciary capacity or in satisfaction of
debts previously contracted in good faith, in each case in the ordinary and
usual course of business consistent with past practice) all or any portion of,
the assets, business, deposits or properties of any other entity.
(h) Governing Documents. Amend the MNB Articles, MNB Code or the
articles of incorporation or code of regulations (or similar governing
documents) of any of MNB's Subsidiaries, except for immaterial code of
regulations amendments Previously Disclosed to SFG.
(i) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be required by
generally accepted accounting principles.
(j) Contracts. Except in the ordinary course of business consistent
with past practice, enter into or terminate any material contract (as defined
in Section 5.03(k)) or amend or modify in any material respect any of its
existing material contracts.
(k) Claims. Except in the ordinary course of business consistent with
past practice, settle any claim, action or proceeding, except for any claim,
action or proceeding which does not involve precedent for other material
claims, actions or proceedings and which involve solely money damages in an
amount, individually or in the aggregate for all such settlements, that is not
material to MNB and its Subsidiaries, taken as a whole.
(l) Adverse Actions. (a) Take any action while knowing that such
action would, or is reasonably likely to, prevent or impede the Merger from
qualifying (i) for "pooling-of-interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368(a) of the Code; or (b)
knowingly take any action that is intended or is reasonably likely to result in
(i) any of its representations and warranties set forth in this Agreement being
or becoming untrue in any material respect at any time at or prior to the
Effective Time, (ii) any of the conditions to the
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Merger set forth in Article VII not being satisfied or (iii) a material
violation of any provision of this Agreement except, in each case, as may be
required by applicable law or regulation.
(m) Risk Management. Except pursuant to applicable law or regulation,
(i) implement or adopt any material change in its interest rate risk management
and other risk management policies, procedures or practices; (ii) fail to
follow its existing policies or practices with respect to managing its exposure
to interest rate and other risk; or (iii) fail to use commercially reasonable
means to avoid any material increase in its aggregate exposure to interest rate
risk.
(n) Indebtedness. Incur any indebtedness for borrowed money other than
in the ordinary course of business.
(o) Commitments. Agree or commit to do any of the foregoing.
4.02 FORBEARANCES OF SFG. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement, without the prior
written consent of MNB, SFG will not, and will cause each of its Subsidiaries
not to:
(a) Ordinary Course. Conduct the business of SFG and its Subsidiaries
other than in the ordinary and usual course or fail to use reasonable efforts
to preserve intact their business organizations and assets and maintain their
rights, franchises and existing relations with customers, suppliers, employees
and business associates, or voluntarily take any action which, at the time
taken, is reasonably likely to have an adverse affect upon SFG's ability to
perform any of its material obligations under this Agreement.
(b) Preservation. Fail to use reasonable efforts to preserve intact in
any material respect their business organizations and assets and maintain their
rights, franchises and existing relations with customers, suppliers, employees
and business associates.
(c) Extraordinary Dividends. Make, declare, pay or set aside for
payment any dividend other than normal quarterly dividends in accordance with
past practice.
(d) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be required by
generally accepted accounting principles.
(e) Claims. Except in the ordinary course of business consistent with
past practice, settle any claim, action or proceeding, except for any claim,
action or proceeding which does not involve precedent for other material
claims, actions or proceedings and which involve solely money damages in an
amount, individually or in the aggregate for all such settlements, that is not
material to SFG and its Subsidiaries, taken as a whole.
(f) Adverse Actions. (a) Take any action while knowing that such
action would, or is reasonably likely to, prevent or impede the Merger from
qualifying (i) for "pooling-of-interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368(a) of the
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Code; or (b) knowingly take any action that is intended or is reasonably likely
to result in (i) any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time at or
prior to the Effective Time, (ii) any of the conditions to the Merger set forth
in Article VII not being satisfied or (iii) a material violation of any
provision of this Agreement except, in each case, as may be required by
applicable law or regulation; provided, however, that nothing contained herein
shall limit the ability of SFG to exercise its rights under the Stock Option
Agreement.
(g) Risk Management. Except pursuant to applicable law or regulation,
(i) fail to follow its existing policies or practices with respect to managing
its exposure to interest rate and other risk, or (ii) fail to use commercially
reasonable means to avoid any material increase in its aggregate exposure to
interest rate risk.
(h) Commitments. Agree or commit to do any of the foregoing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 DISCLOSURE SCHEDULES. On or prior to the date hereof, SFG has
delivered to MNB a schedule and MNB has delivered to SFG a schedule
(respectively, its "Disclosure Schedule") setting forth, among other things,
items, the disclosure of which are necessary or appropriate either in response
to an express disclosure requirement contained in a provision hereof or as an
exception to one or more representations or warranties contained in Section
5.03 or 5.04 or to one or more of its respective covenants contained in Article
IV and Article VI; provided, that (a) no such item is required to be set forth
in a Disclosure Schedule as an exception to a representation or warranty if its
absence would not be reasonably likely to result in the related representation
or warranty being deemed untrue or incorrect under the standard established by
Section 5.02, and (b) the mere inclusion of an item in a Disclosure Schedule as
an exception to a representation or warranty shall not be deemed an admission
by a party that such item represents a material exception or fact, event or
circumstance or that such item is reasonably likely to have or result in a
Material Adverse Effect on the party making the representation. MNB's
representations, warranties and covenants contained in this Agreement shall not
be deemed to be untrue, incorrect or to have been breached as a result of
effects on MNB arising solely from actions taken in compliance with a written
request of SFG.
5.02 STANDARD. No representation or warranty of MNB or SFG contained
in Section 5.03 or 5.04 shall be deemed untrue or incorrect, and no party
hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, circumstance or event, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
contained in Section 5.03 or 5.04 has had, or is reasonably likely to have, a
Material Adverse Effect.
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5.03 REPRESENTATIONS AND WARRANTIES OF MNB. Subject to Sections 5.01
and 5.02 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, MNB hereby represents
and warrants to SFG:
(a) ORGANIZATION, STANDING AND AUTHORITY. MNB is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio and any foreign jurisdictions where its ownership or leasing of property
or assets or the conduct of its business requires it to be so qualified. MNB is
registered as a bank holding company under the BHCA. Bank is a national banking
association duly organized, validly existing and in good standing under the
laws of the United States of America. Bank is duly qualified to do business and
is in good standing in the State of Ohio and any foreign jurisdictions where
its ownership or leasing of property or assets or the conduct of its business
requires it to be so qualified.
(b) CAPITAL STRUCTURE OF MNB. As of May 31, 1999, the authorized
capital stock of MNB consisted solely of 15,000,000 shares of MNB Common Stock,
of which 6,300,000 shares were outstanding. The outstanding shares of MNB
Common Stock have been duly authorized, are validly issued and outstanding,
fully paid and nonassessable, and are not subject to any preemptive rights (and
were not issued in violation of any preemptive rights). As of May 31, 1999,
except as Previously Disclosed in its Disclosure Schedule, (i) there were no
shares of MNB Common Stock authorized and reserved for issuance, (ii) MNB did
not have any Rights issued or outstanding with respect to MNB Common Stock, and
(iii) MNB did not have any commitment to authorize, issue or sell any MNB
Common Stock or Rights, except pursuant to this Agreement and the Stock Option
Agreement.
(c) SUBSIDIARIES. (i)(A) MNB has Previously Disclosed a list of all of
its Subsidiaries together with the jurisdiction of organization of each such
Subsidiary, (B) except as Previously Disclosed, it owns, directly or
indirectly, all the issued and outstanding equity securities of each of its
Subsidiaries, (C) except as Previously Disclosed, no equity securities of any
of its Subsidiaries are or may become required to be issued (other than to it
or its wholly-owned Subsidiaries) by reason of any Right or otherwise, (D)
except as Previously Disclosed, there are no contracts, commitments,
understandings or arrangements by which any of such Subsidiaries is or may be
bound to sell or otherwise transfer any equity securities of any such
Subsidiaries (other than to it or its wholly-owned Subsidiaries), (E) except as
Previously Disclosed, there are no contracts, commitments, understandings, or
arrangements relating to its rights to vote or to dispose of such securities
and (F) except as Previously Disclosed, all the equity securities of each
Subsidiary held by MNB or its Subsidiaries are fully paid and nonassessable
(except pursuant to 12 U.S.C. Section 55) and are owned by MNB or its
Subsidiaries free and clear of any Liens.
(ii) MNB does not own beneficially, directly or indirectly,
any equity securities or similar interests of any Person, or any interest in a
partnership or joint venture of any kind, other than its Subsidiaries.
(iii) Each of MNB's Subsidiaries has been duly organized and
is validly existing in good standing under the laws of the jurisdiction of its
organization, and is duly
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qualified to do business and in good standing in the jurisdictions where its
ownership or leasing of property or the conduct of its business requires it to
be so qualified.
(d) CORPORATE POWER; AUTHORIZED AND EFFECTIVE AGREEMENT. Each of MNB
and its Subsidiaries has full corporate power and authority to carry on its
business as it is now being conducted and to own all its properties and assets;
MNB has the corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the Stock Option Agreement; and Bank has
the corporate power and authority to consummate the Subsidiary Merger and the
Agreement to Merge in accordance with the terms of this Agreement.
(e) CORPORATE AUTHORITY. Subject to receipt of the requisite adoption
of this Agreement by the holders of a majority of the outstanding shares of MNB
Common Stock entitled to vote thereon (which is the only shareholder vote
required thereon), this Agreement, the Stock Option Agreement and the
transactions contemplated hereby and thereby have been authorized by all
necessary corporate action of MNB and the MNB Board prior to the date hereof.
The Agreement to Merge, when executed by Bank, shall have been approved by the
Board of Directors of Bank and by the MNB Board, as the sole shareholder of
Bank. This Agreement is a valid and legally binding obligation of MNB,
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles). The MNB Board has
received the written opinion of ▇▇▇▇▇▇▇▇▇ Associates, Inc. to the effect that
as of the date hereof the consideration to be received by the holders of MNB
Common Stock in the Parent Merger is fair to the holders of MNB Common Stock
from a financial point of view.
(f) REGULATORY FILINGS; NO DEFAULTS. (i) No consents or approvals of,
or filings or registrations with, any Governmental Authority or with any third
party are required to be made or obtained by MNB or any of its Subsidiaries in
connection with the execution, delivery or performance by MNB of this Agreement
or the Stock Option Agreement or to consummate the Merger except for (A)
filings of applications, notices and the Agreement to Merge, as applicable,
with and the approval of certain federal and state banking authorities, (B)
filings with the SEC and state securities authorities, and (C) the filing of
the certificate of merger with the OSS pursuant to the OGCL. As of the date
hereof, MNB is not aware of any reason why the approvals set forth in Section
7.01(b) will not be received without the imposition of a condition, restriction
or requirement of the type described in Section 7.01(b).
(ii) Subject to receipt of the regulatory and shareholder
approvals referred to above and expiration of related regulatory waiting
periods, and required filings under federal and state securities laws, the
execution, delivery and performance of this Agreement and the Stock Option
Agreement and the consummation of the transactions contemplated hereby and
thereby do not and will not (A) constitute a breach or violation of, or a
default under, or give rise to any Lien, any acceleration of remedies or any
right of termination under, any law, rule or regulation or any judgment,
decree, order, governmental permit or license, or agreement, indenture or
instrument of MNB or of any of its Subsidiaries or to which MNB or any of its
Subsidiaries or properties is subject or bound, (B) constitute a breach or
violation of, or a default under, the
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MNB Articles or the MNB Code, or (C) require any consent or approval under any
such law, rule, regulation, judgment, decree, order, governmental permit or
license, agreement, indenture or instrument.
(g) FINANCIAL REPORTS AND SEC DOCUMENTS; MATERIAL ADVERSE EFFECT. (i)
MNB's Annual Reports on Form 10-K for the fiscal years ended December 31, 1996,
1997 and 1998, Quarterly Report on Form 10-Q for the quarter ended March 31,
1999 and all other reports, registration statements, definitive proxy
statements or information statements filed or to be filed by it or any of its
Subsidiaries subsequent to March 31, 1999 under the Securities Act, or under
Section 13, 14 or 15(d) of the Exchange Act, in the form filed or to be filed
(collectively, "MNB SEC Documents") with the SEC, as of the date filed, copies
of which have been delivered or will be delivered to SFG, (A) complied or will
comply in all material respects with the applicable requirements under the
Securities Act or the Exchange Act, as the case may be, and (B) did not and
will not contain any untrue statement of a material fact or 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; and each of the balance sheets or statements of condition contained
in or incorporated by reference into any such SEC Document (including the
related notes and schedules thereto) fairly presents, or will fairly present,
the financial position of MNB and its Subsidiaries as of its date, and each of
the statements of income and changes in shareholders' equity and cash flows or
equivalent statements in such MNB SEC Documents (including any related notes
and schedules thereto) fairly presents, or will fairly present, the results of
operations, changes in shareholders' equity and cash flows, as the case may be,
of MNB and its Subsidiaries for the periods to which they relate, in each case
in accordance with generally accepted accounting principles consistently
applied during the periods involved, except in each case as may be noted
therein, subject to normal year-end audit adjustments and the absence of
footnotes in the case of unaudited statements.
(ii) Since March 31, 1999, MNB and its Subsidiaries have not
incurred any material liability not disclosed in MNB's SEC Documents, other
than in the ordinary course of business consistent with past practice.
(iii) Since March 31, 1999, except as disclosed in the MNB
SEC Documents, (A) MNB and its Subsidiaries have conducted their respective
businesses in the ordinary and usual course consistent with past practice
(excluding matters related to this Agreement and the transactions contemplated
hereby) and (B) no event has occurred or circumstance arisen that, individually
or taken together with all other facts, circumstances and events (described in
any paragraph of Section 5.03 or otherwise), is reasonably likely to have a
Material Adverse Effect with respect to MNB.
(h) LITIGATION. No litigation, claim or other proceeding before any
court or governmental agency is pending against MNB or any of its Subsidiaries
and, to MNB's knowledge, no such litigation, claim or other proceeding has been
threatened.
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(i) REGULATORY MATTERS.
(i) Neither MNB nor any of its Subsidiaries or properties is
a party to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or similar
submission to, or extraordinary supervisory letter from, any federal or state
governmental agency or authority charged with the supervision or regulation of
financial institutions (or their holding companies) or issuers of securities or
engaged in the insurance of deposits (including, without limitation, the Office
of the Comptroller of the Currency, the Federal Reserve System and the FDIC) or
the supervision or regulation of it or any of its Subsidiaries (collectively,
the "Regulatory Authorities").
(ii) Neither it nor any of its Subsidiaries has been advised
by any Regulatory Authority that such Regulatory Authority is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of understanding,
commitment letter, supervisory letter or similar submission.
(j) COMPLIANCE WITH LAWS. Each of MNB and its Subsidiaries:
(i) is in compliance with all applicable federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable thereto or to the employees conducting such businesses,
including, without limitation, the Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act
and all other applicable fair lending laws and other laws relating to
discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to own or
lease their properties and to conduct their businesses as presently conducted;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect and, to MNB's knowledge, no suspension or cancellation
of any of them is threatened; and
(iii) has received, since March 31, 1999, no notification or
communication from any Governmental Authority (A) asserting that MNB or any of
its Subsidiaries is not in compliance with any of the statutes, regulations, or
ordinances which such Governmental Authority enforces or (B) threatening to
revoke any license, franchise, permit, or governmental authorization (nor, to
MNB's knowledge, do any grounds for any of the foregoing exist).
(k) MATERIAL CONTRACTS; DEFAULTS. Except for this Agreement, the Stock
Option Agreement, those agreements and other documents filed as exhibits to the
MNB SEC Documents, neither it nor any of its Subsidiaries is a party to, bound
by or subject to any agreement, contract, arrangement, commitment or
understanding (whether written or oral) (i) that is a "material contract"
within the meaning of Item 601(b)(10) of the SEC's Regulation S-K or (ii) that
restricts or limits in any way the conduct of business by it or any of its
Subsidiaries (including without limitation a non-compete or similar provision).
Neither it nor any of its
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Subsidiaries is in default under any contract, agreement, commitment,
arrangement, lease, insurance policy or other instrument to which it is a party,
by which its respective assets, business, or operations may be bound or affected
in any way, or under which it or its respective assets, business, or operations
receive benefits, and there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a default.
(l) NO BROKERS. Except for the engagement of ▇▇▇▇▇▇▇▇▇ Associates,
Inc., no action has been taken by MNB that would give rise to any valid claim
against any party hereto for a brokerage commission, finder's fee or other like
payment with respect to the transactions contemplated by this Agreement.
(m) EMPLOYEE BENEFIT PLANS. (i) Section 5.03(m)(i) of MNB's Disclosure
Schedule contains a complete and accurate list of all bonus, incentive,
deferred compensation, pension (including, without limitation, Pension Plans),
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option, severance, welfare
(including, without limitation, "welfare plans" within the meaning of Section
3(1) of ERISA), fringe benefit plans, employment or severance agreements and
all similar practices, policies and arrangements maintained or contributed to
(currently or within the last six years) by (a) MNB or any of its Subsidiaries
and in which any employee or former employee (the "Employees"), consultant or
former consultant (the "Consultants") officer or former officer (the
"Officers"), or director or former director (the "Directors") of MNB or any of
its Subsidiaries participates or to which any such Employees, Consultants,
Officers or Directors either participate or are a party or (b) any ERISA
Affiliate (collectively, the "Compensation and Benefit Plans"). Neither MNB nor
any of its Subsidiaries has any commitment to create any additional
Compensation and Benefit Plan or to modify or change any existing Compensation
and Benefit Plan, except as otherwise contemplated by Section 4.01(e) of this
Agreement.
(ii) Each Compensation and Benefit Plan has been operated and
administered in all material respects in accordance with its terms and with
applicable law, including, but not limited to, ERISA, the Code, the Securities
Act, the Exchange Act, the Age Discrimination in Employment Act, or any
regulations or rules promulgated thereunder, and all filings, disclosures and
notices required by ERISA, the Code, the Securities Act, the Exchange Act, the
Age Discrimination in Employment Act and any other applicable law have been
timely made. Each Compensation and Benefit Plan which is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA (a "Pension Plan")
and which is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter (including a determination that the
related trust under such Compensation and Benefit Plan is exempt from tax under
Section 501(a) of the Code) from the Internal Revenue Service ("IRS"), and MNB
is not aware of any circumstances likely to result in revocation of any such
favorable determination letter. There is no material pending or, to the
knowledge of MNB, threatened legal action, suit or claim relating to the
Compensation and Benefit Plans other than routine claims for benefits
thereunder. Neither MNB nor any of its Subsidiaries has engaged in a
transaction, or omitted to take any action, with respect to any Compensation
and Benefit Plan that would reasonably be expected to subject MNB or any of its
Subsidiaries to a tax or penalty imposed by either Section
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4975 of the Code or Section 502 of ERISA, assuming for purposes of Section 4975
of the Code that the taxable period of any such transaction expired as of the
date hereof.
(iii) No liability (other than for payment of premiums to the
PBGC which have been made or will be made on a timely basis) under Title IV of
ERISA has been or is expected to be incurred by MNB or any of its Subsidiaries
with respect to any ongoing, frozen or terminated "single-employer plan,"
within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or any single-employer plan of any entity (an "ERISA
Affiliate") which is considered one employer with MNB under Section 4001(a)(14)
of ERISA or Section 414(b) or (c) of the Code (an "ERISA Affiliate Plan"). None
of MNB, any of its Subsidiaries or any ERISA Affiliate has contributed, or has
been obligated to contribute, to a multiemployer plan under Subtitle E of Title
IV of ERISA (as defined in ERISA Sections 3(37)(A) and 4001(a)(3)) at any time
since September 26, 1980. No notice of a "reportable event", within the meaning
of Section 4043 of ERISA for which the 30-day reporting requirement has not
been waived, has been required to be filed for any Compensation and Benefit
Plan or by any ERISA Affiliate Plan within the 12-month period ending on the
date hereof, and no such notice will be required to be filed as a result of the
transactions contemplated by this Agreement. The PBGC has not instituted
proceedings to terminate any Pension Plan or ERISA Affiliate Plan and, to MNB's
knowledge, no condition exists that presents a material risk that such
proceedings will be instituted. To the knowledge of MNB, there is no pending
investigation or enforcement action by the PBGC, the Department of Labor (the
"DOL") or IRS or any other governmental agency with respect to any Compensation
and Benefit Plan. Under each Pension Plan and ERISA Affiliate Plan, as of the
date of the most recent actuarial valuation performed prior to the date of this
Agreement, the actuarially determined present value of all "benefit
liabilities", within the meaning of Section 4001(a)(16) of ERISA (as determined
on the basis of the actuarial assumptions contained in such actuarial valuation
of such Pension Plan or ERISA Affiliate Plan), did not exceed the then current
value of the assets of such Pension Plan or ERISA Affiliate Plan and since such
date there has been neither an adverse change in the financial condition of
such Pension Plan or ERISA Affiliate Plan nor any amendment or other change to
such Pension Plan or ERISA Affiliate Plan that would increase the amount of
benefits thereunder which reasonably could be expected to change such result.
(iv) All contributions required to be made under the terms of
any Compensation and Benefit Plan or ERISA Affiliate Plan or any employee
benefit arrangements under any collective bargaining agreement to which MNB or
any of its Subsidiaries is a party have been timely made or have been reflected
on MNB's financial statements. Neither any Pension Plan nor any ERISA Affiliate
Plan has an "accumulated funding deficiency" (whether or not waived) within the
meaning of Section 412 of the Code or Section 302 of ERISA and all required
payments to the PBGC with respect to each Pension Plan or ERISA Affiliate Plan
have been made on or before their due dates. None of MNB, any of its
Subsidiaries or any ERISA Affiliate (x) has provided, or would reasonably be
expected to be required to provide, security to any Pension Plan or to any
ERISA Affiliate Plan pursuant to Section 401(a)(29) of the Code, and (y) has
taken any action, or omitted to take any action, that has resulted, or would
reasonably be expected to result, in the imposition of a lien under Section
412(n) of the Code or pursuant to ERISA.
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(v) Except as disclosed in Section 5.03(m)(v) of MNB's
Disclosure Schedule, neither MNB nor any of its Subsidiaries has any
obligations to provide retiree health and life insurance or other retiree death
benefits under any Compensation and Benefit Plan, other than benefits mandated
by Section 4980B of the Code. Except as disclosed in Section 5.03(m)(v) of
MNB's Disclosure Schedule, there has been no communication to Employees by MNB
or any of its Subsidiaries that would reasonably be expected to promise or
guarantee such Employees retiree health or life insurance or other retiree
death benefits on a permanent basis.
(vi) MNB and its Subsidiaries do not maintain any
Compensation and Benefit Plans covering foreign Employees.
(vii) With respect to each Compensation and Benefit Plan, if
applicable, MNB has provided or made available to SFG, true and complete copies
of existing: (A) Compensation and Benefit Plan documents and amendments
thereto; (B) trust instruments and insurance contracts; (C) two most recent
Forms 5500 filed with the IRS; (D) most recent actuarial report and financial
statement; (E) the most recent summary plan description; (F) forms filed with
the PBGC within the past year (other than for premium payments); (G) most
recent determination letter issued by the IRS; (H) any Form 5310, Form 5310A,
Form 5300, or Form 5330 filed within the past year with the IRS; and (I) most
recent nondiscrimination tests performed under ERISA and the Code (including
401(k) and 401(m) tests).
(viii) Except as disclosed on Section 5.03(m)(viii) of MNB's
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement would not, directly or indirectly (including, without limitation, as
a result of any termination of employment prior to or following the Effective
Time) reasonably be expected to (A) entitle any Employee, Consultant or
Director to any payment (including severance pay or similar compensation) or
any increase in compensation, (B) result in the vesting or acceleration of any
benefits under any Compensation and Benefit Plan or (C) result in any material
increase in benefits payable under any Compensation and Benefit Plan.
(ix) Except as disclosed on Section 5.03(m)(ix) of MNB's
Disclosure Schedule, neither MNB nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which would not
reasonably be expected to be deductible as a result of the limitations under
Section 162(m) of the Code and the regulations issued thereunder.
(x) Except as disclosed on Section 5.03(m)(x) of MNB's
Disclosure Schedule, as a result, directly or indirectly, of the transactions
contemplated by this Agreement (including, without limitation, as a result of
any termination of employment prior to or following the Effective Time), none
of SFG, MNB or the Surviving Corporation, or any of their respective
Subsidiaries will be obligated to make a payment that would be characterized as
an "excess parachute payment" to an individual who is a "disqualified
individual" (as such terms are defined in Section 280G of the Code) of MNB on a
consolidated basis, without regard to whether such
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payment is reasonable compensation for personal services performed or to be
performed in the future.
(n) LABOR MATTERS. Neither MNB nor any of its Subsidiaries is a party
to or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is MNB
or any of its Subsidiaries the subject of a proceeding asserting that it or any
such Subsidiary has committed an unfair labor practice (within the meaning of
the National Labor Relations Act) or seeking to compel MNB or any such
Subsidiary to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other labor dispute involving it or any
of its Subsidiaries pending or, to MNB's knowledge, threatened, nor is MNB
aware of any activity involving its or any of its Subsidiaries' employees
seeking to certify a collective bargaining unit or engaging in other
organizational activity.
(o) TAKEOVER LAWS. MNB has taken all action required to be taken by it
in order to exempt this Agreement, the Stock Option Agreement and the
transactions contemplated hereby and thereby from, and this Agreement, the
Stock Option Agreement and the transactions contemplated hereby and thereby are
exempt from, the requirements of any "moratorium", "control share", "fair
price", "affiliate transaction", "business combination" or other antitakeover
laws and regulations of any state (collectively, "Takeover Laws") applicable to
it, including, without limitation, the State of Ohio.
(p) ENVIRONMENTAL MATTERS. To MNB's knowledge, neither the conduct nor
operation of MNB or its Subsidiaries nor any condition of any property
presently or previously owned, leased or operated by any of them (including,
without limitation, in a fiduciary or agency capacity), or on which any of them
holds a Lien, violates or violated Environmental Laws and to MNB's knowledge,
no condition has existed or event has occurred with respect to any of them or
any such property that, with notice or the passage of time, or both, is
reasonably likely to result in liability under Environmental Laws. To MNB's
knowledge, neither MNB nor any of its Subsidiaries has received any notice from
any person or entity that MNB or its Subsidiaries or the operation or condition
of any property ever owned, leased, operated, or held as collateral or in a
fiduciary capacity by any of them are or were in violation of or otherwise are
alleged to have liability under any Environmental Law, including, but not
limited to, responsibility (or potential responsibility) for the cleanup or
other remediation of any pollutants, contaminants, or hazardous or toxic
wastes, substances or materials at, on, beneath, or originating from any such
property.
(q) TAX MATTERS. (i) All Tax Returns that are required to be filed by
or with respect to MNB and its Subsidiaries have been duly filed, (ii) all
Taxes shown to be due on the Tax Returns referred to in clause (i) have been
paid in full, (iii) except for the MNB 1992 federal income tax return, the Tax
Returns referred to in clause (i) have not been examined by the Internal
Revenue Service or the appropriate state, local or foreign taxing authority,
(iv) except for Tax Returns for fiscal years ended on or after December 31,
1995, the period for assessment of the Taxes in respect of which such Tax
Returns were required to be filed has expired, (v) all deficiencies asserted or
assessments made as a result of such examinations have been paid in full, (vi)
no issues that have been raised by the relevant taxing authority in connection
with the
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examination of any of the Tax Returns referred to in clause (i) are currently
pending, and (vii) no waivers of statutes of limitation have been given by or
requested with respect to any Taxes of MNB or its Subsidiaries. MNB has made or
will make available to SFG true and correct copies of the United States federal
income Tax Returns filed by MNB and its Subsidiaries for each of the three most
recent fiscal years ended on or before December 31, 1998. Neither MNB nor any of
its Subsidiaries has any liability with respect to income, franchise or similar
Taxes that accrued on or before the end of the most recent period covered by
MNB's SEC Documents filed prior to the date hereof in excess of the amounts
accrued with respect thereto that are reflected in the financial statements
included in MNB's SEC Documents filed on or prior to the date hereof. As of the
date hereof, neither MNB nor any of its Subsidiaries has any reason to believe
that any conditions exist that might prevent or impede the Parent Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(ii) No Tax is required to be withheld pursuant to Section
1445 of the Code as a result of the transfer contemplated by this Agreement.
(iii) MNB and its Subsidiaries will not be liable for any
taxes as a result of any Covered Transaction.
(r) RISK MANAGEMENT INSTRUMENTS. All material interest rate swaps,
caps, floors, option agreements, futures and forward contracts and other
similar risk management arrangements, whether entered into for MNB's own
account, or for the account of one or more of MNB's Subsidiaries or their
customers (all of which are listed on MNB's Disclosure Schedule), were entered
into (i) in accordance with prudent business practices and all applicable laws,
rules, regulations and regulatory policies and (ii) with counterparties
believed to be financially responsible at the time; and each of them
constitutes the valid and legally binding obligation of MNB or one of its
Subsidiaries, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles), and is in full force and effect. Neither MNB nor its Subsidiaries,
nor to MNB's knowledge any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement.
(s) BOOKS AND RECORDS. The books and records of MNB and its
Subsidiaries have been fully, properly and accurately maintained in all
material respects, have been maintained in accordance with sound business
practices and the requirements of Section 13(b)(2) of the Securities Exchange
Act of 1934, as amended, and there are no material inaccuracies or
discrepancies of any kind contained or reflected therein and they fairly
reflect the substance of events and transactions included therein.
(t) INSURANCE. MNB's Disclosure Schedule sets forth all of the
insurance policies, binders, or bonds maintained by MNB or its Subsidiaries.
MNB and its Subsidiaries are insured with reputable insurers against such risks
and in such amounts as the management of MNB reasonably has determined to be
prudent in accordance with industry practices. All such
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insurance policies are in full force and effect; MNB and its Subsidiaries are
not in material default thereunder; and all claims thereunder have been filed in
due and timely fashion.
(u) ACCOUNTING TREATMENT. As of the date hereof, it is aware of no
reason why the Merger will fail to qualify for "pooling-of-interests"
accounting treatment.
(v) DISCLOSURE. The representations and warranties contained in this
Section 5.03 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 5.03 not misleading.
(w) YEAR 2000. Neither MNB nor any of its Subsidiaries has received,
or has reason to believe that it will receive, a written rating of less than
"satisfactory" on any Office of the Comptroller of the Currency or other
Regulatory Authority Year 2000 Report of Examination. MNB has disclosed to SFG
a complete and accurate copy of its plan, including an estimate of the
anticipated associated costs, for addressing the issues set forth in the
statements of the FFIEC dated May 5, 1997, entitled "Year 2000 Project
Management Awareness," and December 17, 1997, entitled "Safety and Soundness
Guidelines Concerning the Year 2000 Business Risk," as such issues affect it
and its Subsidiaries and such plan is in material compliance with the schedule
set for in the FFIEC statements.
(x) MATERIAL ADVERSE CHANGE. MNB has not, on a consolidated basis,
suffered a change in its business, financial condition or results of operations
since March 31, 1999 that has had a Material Adverse Effect on MNB.
(y) ABSENCE OF UNDISCLOSED LIABILITIES. Neither MNB nor any of its
Subsidiaries has any liability (contingent or otherwise) that is material to
MNB on a consolidated basis, or that, when combined with all liabilities as to
similar matters would be material to MNB on a consolidated basis, except as
disclosed in the MNB SEC Documents.
(z) PROPERTIES. MNB and its Subsidiaries have good and marketable
title, free and clear of all liens, encumbrances, charges, defaults or
equitable interests to all of the properties and assets, real and personal,
reflected in the MNB SEC Documents as being owned by MNB as of March 31, 1999
or acquired after such date, except (i) statutory liens for amounts not yet due
and payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of banking business, (iii) such imperfections of title,
easements, encumbrances, liens, charges, defaults or equitable interests, if
any, as do not affect the use of properties or assets subject thereto or
affected thereby or otherwise materially impair business operations at such
properties, (iv) dispositions and encumbrances in the ordinary course of
business, and (v) liens on properties acquired in foreclosure or on account of
debts previously contracted. All leases pursuant to which MNB or any of its
Subsidiaries, as lessee, leases real or personal property (except for leases
that have expired by their terms or that MNB or any such Subsidiary has agreed
to terminate since the date hereof) are valid without default thereunder by the
lessee or, to MNB's knowledge, the lessor.
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(aa) LOANS. Each loan reflected as an asset in the MNB SEC Documents
as of December 31, 1998 and each balance sheet date subsequent thereto, other
than loans the unpaid balance of which does not exceed $500,000 in the
aggregate, (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and what they purport to be, (ii) to the
extent secured, has been secured by valid liens and security interest which
have been perfected, and (iii) is the legal, valid and binding obligation of
the obligor named therein, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles. Except as Previously Disclosed, as of December 31, 1998, Bank is
not a party to a loan, including any loan guaranty, with any director,
executive officer or 5% shareholder of MNB or any of its Subsidiaries or any
person, corporation or enterprise controlling, controlled by or under common
control with any of the foregoing. All loans and extensions of credit that have
been made by Bank and that are subject either to Section 22(b) of the Federal
Reserve Act, as amended, or to 12 C.F.R. sec. 563.43, comply therewith.
(bb) ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses
reflected in the MNB SEC Documents, as of their respective dates, is adequate
in all material respects under the requirements of generally accepted
accounting principles to provide for reasonably anticipated losses on
outstanding loans.
(cc) REPURCHASE AGREEMENTS. With respect to all agreements pursuant to
which MNB or any of its Subsidiaries has purchased securities subject to an
agreement to resell, if any, MNB or such Subsidiary, as the case may be, has a
valid, perfected first lien or security interest in or evidence of ownership in
book entry form of the government securities or other collateral securing the
repurchase agreement, and the value of such collateral equals or exceeds the
amount of the debt secured thereby.
(dd) DEPOSIT INSURANCE. The deposits of Bank are insured by the FDIC in
accordance with The Federal Deposit Insurance Act ("FDIA"), and Bank has paid
all assessments and filed all reports required by the FDIA.
5.04 REPRESENTATIONS AND WARRANTIES OF SFG. Subject to Sections 5.01
and 5.02 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, SFG hereby represents
and warrants to MNB as follows :
(a) ORGANIZATION, STANDING AND AUTHORITY. SFG is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio. SFG is duly qualified to do business and is in good standing in the State
of Ohio and any foreign jurisdictions where its ownership or leasing of
property or assets or the conduct of its business requires it to be so
qualified. SFG is registered as a bank holding company under the BHCA. CBC (CBC
to be renamed Sky Bank effective June 8, 1999) is a state banking association
duly organized, validly existing and in good standing under the laws of the
State of Ohio. CBC is duly qualified to do business and is in good standing in
the State of Ohio and any foreign jurisdictions where its ownership or leasing
of property or assets or the conduct of its business requires it to be so
qualified.
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(b) SFG STOCK. (i) As of May 31, 1999, the authorized capital stock of
SFG consists of 160,000,000 shares, of which 150,000,000 shares are SFG Common
Stock, of which 45,219,863 shares were outstanding and 10,000,000 shares are
SFG serial preferred stock, par value $10.00 per share, of which no shares were
outstanding. As of May 31, 1999, except as set forth in its Disclosure
Schedule, SFG does not have any Rights issued or outstanding with respect to
SFG Common Stock and SFG does not have any commitment to authorize, issue or
sell any SFG Common Stock or Rights, except pursuant to this Agreement. The
outstanding shares of SFG Common Stock have been duly authorized and are
validly issued and outstanding, fully paid and nonassessable, and subject to no
preemptive rights (and were not issued in violation of any preemptive rights).
(ii) The shares of SFG Common Stock to be issued in exchange
for shares of MNB Common Stock in the Parent Merger, when issued in accordance
with the terms of this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable and subject to no preemptive rights.
(c) SUBSIDIARIES. SFG has Previously Disclosed a list of all its
Subsidiaries together with the jurisdiction or organization of each Subsidiary.
Each of SFG's Subsidiaries has been duly organized and is validly existing in
good standing under the laws of the jurisdiction of its organization, and is
duly qualified to do business and is in good standing in the jurisdictions
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and it owns, directly or indirectly, all the
issued and outstanding equity securities of each of its Significant
Subsidiaries.
(d) CORPORATE POWER. Each of SFG and its Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and SFG has the corporate
power and authority to execute, deliver and perform its obligations under this
Agreement and the Stock Option Agreement and to consummate the transactions
contemplated hereby and thereby.
(e) CORPORATE AUTHORITY; AUTHORIZED AND EFFECTIVE AGREEMENT. This
Agreement, the Stock Option Agreement and the transactions contemplated hereby
and thereby have been authorized by all necessary corporate action of SFG and
the SFG Board prior to the date hereof and no shareholder approval is required
on the part of SFG. The Agreement to Merge, when executed by CBC, shall have
been approved by the Board of Directors of CBC and by the SFG Board, as the
sole shareholder of CBC. This Agreement is a valid and legally binding
agreement of SFG, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors rights or by general equity
principles).
(f) REGULATORY APPROVALS; NO DEFAULTS. (i) No consents or approvals
of, or filings or registrations with, any Governmental Authority or with any
third party are required to be made or obtained by SFG or any of its
Subsidiaries in connection with the execution, delivery or
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performance by SFG of this Agreement or to consummate the Merger except for (A)
the filing of applications, notices, or the Agreement to Merge, as applicable,
with and the approval of certain federal and state banking authorities; (B) the
filing and declaration of effectiveness of the Registration Statement; (C) the
filing of the certificate of merger with the OSS pursuant to the OGCL; (D) such
filings as are required to be made or approvals as are required to be obtained
under the securities or "Blue Sky" laws of various states in connection with the
issuance of SFG Common Stock in the Parent Merger; and (E) receipt of the
approvals set forth in Section 7.01(b). As of the date hereof, SFG is not aware
of any reason why the approvals set forth in Section 7.01(b) will not be
received without the imposition of a condition, restriction or requirement of
the type described in Section 7.01(b).
(ii) Subject to the satisfaction of the requirements referred
to in the preceding paragraph and expiration of the related waiting periods,
and required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (A) constitute a breach or
violation of, or a default under, or give rise to any Lien, any acceleration of
remedies or any right of termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of SFG or of any of its Subsidiaries or to which SFG or
any of its Subsidiaries or properties is subject or bound, (B) constitute a
breach or violation of, or a default under, the articles of incorporation or
Code of Regulations (or similar governing documents) of SFG or any of its
Subsidiaries, or (C) require any consent or approval under any such law, rule,
regulation, judgment, decree, order, governmental permit or license, agreement,
indenture or instrument.
(g) FINANCIAL REPORTS AND SEC DOCUMENTS; MATERIAL ADVERSE EFFECT. (i)
SFG's Annual Report on Form 10-K for the fiscal year ended December 31, 1998,
SFG's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 and
all other reports, registration statements, definitive proxy statements or
other statements filed or to be filed by it or any of its Subsidiaries with the
SEC subsequent to March 31, 1999 under the Securities Act, or under Section 13,
14 or 15(d) of the Exchange Act, in the form filed or to be filed
(collectively, "SFG SEC Documents") as of the date filed, (A) complied or will
comply in all material respects with the applicable requirements under the
Securities Act or the Exchange Act, as the case may be, and (B) did not and
will not contain any untrue statement of a material fact or 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; and each of the balance sheets or statements of condition contained
in or incorporated by reference into any such SFG SEC Document (including the
related notes and schedules thereto) fairly presents, or will fairly present,
the financial position of SFG and its Subsidiaries as of its date, and each of
the statements of income or results of operations and changes in shareholders'
equity and cash flows or equivalent statements in such SFG SEC Documents
(including any related notes and schedules thereto) fairly presents, or will
fairly present, the results of operations, changes in shareholders' equity and
cash flows, as the case may be, of SFG and its Subsidiaries for the periods to
which they relate, in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved, except
in each case as may be noted therein, subject to
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normal year-end audit adjustments and the absence of footnotes in the case of
unaudited statements.
(ii) Since March 31, 1999, no event has occurred or
circumstance arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of Section 5.04 or
otherwise), is reasonably likely to have a Material Adverse Effect with respect
to SFG.
(h) LITIGATION; REGULATORY ACTION. (i) No litigation, claim or other
proceeding before any court or governmental agency is pending against SFG or
any of its Subsidiaries and, to the best of SFG's knowledge, no such
litigation, claim or other proceeding has been threatened.
(ii) Neither SFG nor any of its Subsidiaries or properties is
a party to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or similar
submission to, or extraordinary supervisory letter from a Regulatory Authority,
nor has SFG or any of its Subsidiaries been advised by a Regulatory Authority
that such agency is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding, commitment letter, supervisory letter or similar
submission.
(i) COMPLIANCE WITH LAWS. Each of SFG and its Subsidiaries:
(i) is in compliance with all applicable federal, state,
local and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees conducting such
businesses, including, without limitation, the Equal Credit Opportunity Act,
the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage
Disclosure Act and all other applicable fair lending laws and other laws
relating to discriminatory business practices; and
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations with,
all Governmental Authorities that are required in order to permit them to
conduct their businesses substantially as presently conducted; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect and, to the best of its knowledge, no suspension or
cancellation of any of them is threatened; and
. (iii) has received, since March 31, 1999, no notification or
communication from any Governmental Authority (A) asserting that SFG or any of
its Subsidiaries is not in compliance with any of the statutes, regulations, or
ordinances which such Governmental Authority enforces or (B) threatening to
revoke any license, franchise, permit, or governmental authorization (nor, to
SFG's knowledge, do any grounds for any of the foregoing exist).
(j) BROKERAGE AND FINDER'S FEES. Except for fees payable to its
financial advisor, Sandler ▇'▇▇▇▇▇ & Partners, L.P., SFG has not employed any
broker, finder, or agent, or agreed to
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pay or incurred any brokerage fee, finder's fee, commission or other similar
form of compensation in connection with this Agreement or the transactions
contemplated hereby.
(k) TAKEOVER LAWS. SFG has taken all action required to be taken by it
in order to exempt this Agreement, the Stock Option Agreement and the
transactions contemplated hereby and thereby from, and this Agreement, the
Stock Option Agreement and the transactions contemplated hereby and thereby are
exempt from, the requirements of any Takeover Laws applicable to SFG.
(l) ENVIRONMENTAL MATTERS. To SFG's knowledge, neither the conduct nor
operation of SFG or its Subsidiaries nor any condition of any property
presently or previously owned, leased or operated by any of them (including,
without limitation, in a fiduciary or agency capacity), or on which any of them
holds a Lien, violates or violated Environmental Laws and to SFG's knowledge,
no condition has existed or event has occurred with respect to any of them or
any such property that, with notice or the passage of time, or both, is
reasonably likely to result in liability under Environmental Laws. To SFG's
knowledge, neither SFG nor any of its Subsidiaries has received any notice from
any person or entity that SFG or its Subsidiaries or the operation or condition
of any property ever owned, leased, operated, or held as collateral or in a
fiduciary capacity by any of them are or were in violation of or otherwise are
alleged to have liability under any Environmental Law, including, but not
limited to, responsibility (or potential responsibility) for the cleanup or
other remediation of any pollutants, contaminants, or hazardous or toxic
wastes, substances or materials at, on, beneath, or originating from any such
property.
(m) INSURANCE. SFG has previously disclosed to MNB all of the
insurance policies, binders, or bonds maintained by SFG or its Subsidiaries.
SFG and its Subsidiaries are insured with reputable insurers against such risks
and in such amounts as the management of SFG reasonably has determined to be
prudent in accordance with industry practices. All such insurance policies are
in full force and effect; SFG and its Subsidiaries are not in material default
thereunder; and all claims thereunder have been filed in due and timely
fashion.
(n) TAX MATTERS. (i) All Tax Returns that are required to be filed by
or with respect to SFG and its Subsidiaries have been duly filed, (ii) all
Taxes shown to be due on the Tax Returns referred to in clause (i) have been
paid in full, (iii) the Tax Returns referred to in clause (i) have not been
examined by the Internal Revenue Service or the appropriate state, local or
foreign taxing authority, (iv) except for Tax Returns for fiscal years ended on
or after December 31, 1995, the period for assessment of the Taxes in respect
of which such Tax Returns were required to be filed has expired, (v) all
deficiencies asserted or assessments made as a result of such examinations have
been paid in full, (vi) no issues that have been raised by the relevant taxing
authority in connection with the examination of any of the Tax Returns referred
to in clause (i) are currently pending, and (vii) no waivers of statutes of
limitation have been given by or requested with respect to any Taxes of SFG or
its Subsidiaries. Neither SFG nor any of its Subsidiaries has any liability
with respect to income, franchise or similar Taxes that accrued on or before
the end of the most recent period covered by SFG's SEC Documents filed prior to
the date hereof in excess of the amounts accrued with respect thereto that are
reflected in the financial statements included in SFG's SEC Documents filed on
or prior to the date hereof. As
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of the date hereof, SFG has no reason to believe that any conditions exist that
might prevent or impede the Parent Merger from qualifying as a reorganization
with the meaning of Section 368(a) of the Code.
(o) ACCOUNTING TREATMENT. As of the date hereof, SFG is aware of no
reason why the Merger will fail to qualify for "pooling-of-interests"
accounting treatment.
(p) CONTRACTS. Neither SFG nor any of its Subsidiaries is in default
under any contract, agreement, commitment, arrangement, lease, insurance policy
or other instrument to which it is a party, by which its respective assets,
business, or operations may be bound or affected in any way, or under which it
or its respective assets, business, or operations receive benefits, and there
has not occurred any event that, with the lapse of time or the giving of notice
or both, would constitute such a default.
(q) DISCLOSURE. The representations and warranties contained in this
Section 5.04 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 5.04 not misleading.
(r) YEAR 2000. Neither SFG nor any of its Subsidiaries has received,
or has reason to believe that it will receive, a written rating of less than
"satisfactory" on any Year 2000 Report of Examination of any Regulatory
Authority. SFG has disclosed to MNB a complete and accurate copy of its plan,
including an estimate of the anticipated associated costs, for addressing the
issues set forth in the statements of the FFIEC dated May 5, 1997, entitled
"Year 2000 Project Management Awareness," and December 17, 1997, entitled
"Safety and Soundness Guidelines Concerning the Year 2000 Business Risk," as
such issues affect it and its Subsidiaries, and such plan is in material
compliance with the schedule set forth in the FFIEC statements.
(s) MATERIAL ADVERSE CHANGE. SFG has not, on a consolidated basis,
suffered a change in its business, financial condition or results of operations
since March 31, 1999 that has had a Material Adverse Effect on SFG.
(t) ABSENCE OF UNDISCLOSED LIABILITIES. Neither SFG nor any of its
Subsidiaries has any liability (contingent or otherwise) that is material to
SFG on a consolidated basis, or that, when combined with all liabilities as to
similar matters would be material to SFG on a consolidated basis, except as
disclosed in the SFG SEC Documents.
(u) DEPOSIT INSURANCE. The deposits of SFG's bank subsidiaries are
insured by the FDIC in accordance with The Federal Deposit Insurance Act
("FDIA"), and said banks have paid all assessments and filed all reports
required by the FDIA.
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ARTICLE VI
COVENANTS
6.01 REASONABLE BEST EFFORTS. Subject to the terms and conditions of
this Agreement, each of MNB and SFG agrees to use their reasonable best efforts
in good faith to take, or cause to be taken, all actions, and to do, or cause
to be done, all things necessary, proper or desirable, or advisable under
applicable laws, so as to permit consummation of the Merger as promptly as
practicable and otherwise to enable consummation of the transactions
contemplated hereby and shall cooperate fully with the other party hereto to
that end.
6.02 CARRY ON BUSINESS IN NORMAL MANNER. From the date of this
Agreement to the Effective Date, MNB shall carry on its business in
substantially the same manner as heretofore and, without the written consent of
SFG, MNB shall not (a) do any of the things which they represent and warrant
herein have not been done since March 31, 1999 or the date hereof, as the case
may be, except as necessary to carry out this Agreement on the part of MNB; (b)
engage in any transaction which would be inconsistent with any other
representation or warranty of MNB set forth herein or which would cause a
breach of any such representation or warranty if made at or immediately
following such transaction; or (c) engage in any lending activities other than
in the ordinary course of business consistent with past practice. MNB shall
send to SFG via facsimile transmission a copy of all loan presentations made to
MNB's Board at the same time as such presentations are transmitted to said
board, to enable one of SFG's senior loan committee members to review, comment
and make reasonable recommendations to the loan committee with respect to such
loan presentations. MNB shall consult with SFG prior to hiring any full-time
officer, other than replacement employees for positions then existing. MNB will
use its reasonable best efforts to keep its business organizations intact, to
keep available the services of present employees, and to preserve the goodwill
of customers, suppliers, and others having business relations with them.
6.03 SHAREHOLDER APPROVAL. MNB agrees to take, in accordance with
applicable law and the MNB Articles and MNB Code, all action necessary to
convene an appropriate meeting of its shareholders to consider and vote upon
the adoption of this Agreement and any other matters required to be approved or
adopted by MNB's shareholders for consummation of the Parent Merger (including
any adjournment or postponement, the "MNB Meeting"), as promptly as practicable
after the Registration Statement is declared effective. The MNB Board shall
recommend that its shareholders adopt this Agreement at the MNB Meeting unless
otherwise necessary under the applicable fiduciary duties of the MNB Board, as
determined by the MNB Board in good faith after consultation with and based
upon advice of independent legal counsel.
6.04 REGISTRATION STATEMENT. (a) SFG agrees to prepare pursuant to all
applicable laws, rules and regulations a registration statement on Form S-4
(the "Registration Statement") to be filed by SFG with the SEC in connection
with the issuance of SFG Common Stock in the Parent Merger (including the proxy
statement and prospectus and other proxy solicitation materials of MNB
constituting a part thereof (the "Proxy Statement") and all related documents).
MNB agrees to cooperate, and to cause its Subsidiaries to cooperate, with SFG,
its counsel and
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its accountants, in preparation of the Registration Statement and the Proxy
Statement; and provided that MNB and its Subsidiaries have cooperated as
required above, SFG agrees to file the Proxy Statement and the Registration
Statement (together, the "Proxy/Prospectus") with the SEC as promptly as
reasonably practicable. Each of MNB and SFG agrees to use all reasonable efforts
to cause the Proxy/Prospectus to be declared effective under the Securities Act
as promptly as reasonably practicable after filing thereof. SFG also agrees to
use all reasonable efforts to obtain, prior to the effective date of the
Registration Statement, all necessary state securities law or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement. MNB agrees to furnish to SFG all information concerning MNB, its
Subsidiaries, officers, directors and shareholders as may be reasonably
requested in connection with the foregoing.
(b) Each of MNB and SFG agrees, as to itself and its Subsidiaries,
that none of the information supplied or to be supplied by it for inclusion or
incorporation by reference in (i) the Registration Statement will, at the time
the Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (ii) the Proxy
Statement and any amendment or supplement thereto will, at the date of mailing
to the MNB shareholders and at the time of the MNB Meeting, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading or any statement which, in the light of the circumstances under
which such statement is made, will be false or misleading with respect to any
material fact, or which will omit to state any material fact necessary in order
to make the statements therein not false or misleading or necessary to correct
any statement in any earlier statement in the Proxy Statement or any amendment
or supplement thereto. Each of MNB and SFG further agrees that if it shall
become aware prior to the Effective Date of any information furnished by it
that would cause any of the statements in the Proxy Statement to be false or
misleading with respect to any material fact, or to omit to state any material
fact necessary to make the statements therein not false or misleading, to
promptly inform the other party thereof and to take the necessary steps to
correct the Proxy Statement.
(c) SFG agrees to advise MNB, promptly after SFG receives notice
thereof, of the time when the Registration Statement has become effective or
any supplement or amendment has been filed, of the issuance of any stop order
or the suspension of the qualification of SFG Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.
6.05 PRESS RELEASES. Each of MNB and SFG agrees that it will not,
without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby, except as otherwise required by applicable law or
regulation or NASDAQ rules.
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6.06 ACCESS; INFORMATION. (a) Each of MNB and SFG agrees that upon
reasonable notice and subject to applicable laws relating to the exchange of
information, it shall afford the other party and the other party's officers,
employees, counsel, accountants and other authorized representatives, 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 to
such other information as any party may reasonably request and, during such
period, it shall furnish promptly to such other party (i) a copy of each
material report, schedule and other document filed by it pursuant to federal or
state securities or banking laws, and (ii) all other information concerning the
business, properties and personnel of it as the other may reasonably request.
(b) Each agrees that it will not, and will cause its representatives
not to, use any information obtained pursuant to this Section 6.05 (as well as
any other information obtained prior to the date hereof in connection with the
entering into of this Agreement) for any purpose unrelated to the consummation
of the transactions contemplated by this Agreement. Subject to the requirements
of law, each party will keep confidential, and will cause its representatives
to keep confidential, all information and documents obtained pursuant to this
Section 6.05 (as well as any other information obtained prior to the date
hereof in connection with the entering into of this Agreement) unless such
information (i) was already known to such party, (ii) becomes available to such
party from other sources not known by such party to be bound by a
confidentiality obligation, (iii) is disclosed with the prior written approval
of the party to which such information pertains or (iv) is or becomes readily
ascertainable from published information or trade sources. In the event that
this Agreement is terminated or the transactions contemplated by this Agreement
shall otherwise fail to be consummated, each party shall promptly cause all
copies of documents or extracts thereof containing information and data as to
another party hereto to be returned to the party which furnished the same. No
investigation by either party of the business and affairs of the other shall
affect or be deemed to modify or waive any representation, warranty, covenant
or agreement in this Agreement, or the conditions to either party's obligation
to consummate the transactions contemplated by this Agreement.
(c) During the period from the date of this Agreement to the Effective
Time, MNB shall promptly furnish SFG with copies of all monthly and other
interim financial statements produced in the ordinary course of business as the
same shall become available.
6.07 ACQUISITION PROPOSALS. MNB agrees that it shall not, and shall
cause its Subsidiaries and its and its Subsidiaries' officers, directors,
agents, advisors and affiliates not to, solicit or encourage inquiries or
proposals with respect to, or engage in any negotiations concerning, or provide
any confidential information to, or have any discussions with, any person
relating to, any Acquisition Proposal, subject to the extent that the MNB Board
determines in good faith, after consultations with independent legal counsel
that it is required by its fiduciary duties to do so. It shall immediately
cease and cause to be terminated any activities, discussions or negotiations
conducted prior to the date of this Agreement with any parties other than SFG
with respect to any of the foregoing and shall use its reasonable best efforts
to enforce any confidentiality or similar agreement relating to an Acquisition
Proposal. MNB shall promptly (within 24 hours) advise SFG following the receipt
by MNB of any Acquisition Proposal and the
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substance thereof (including the identity of the person making such Acquisition
Proposal), and advise SFG of any material developments with respect to such
Acquisition Proposal immediately upon the occurrence thereof.
6.08 AFFILIATE AGREEMENTS. (a) Not later than the 15th day prior to
the mailing of the Proxy Statement, MNB shall deliver to SFG a schedule of each
person that, to the best of its knowledge, is or is reasonably likely to be, as
of the date of the MNB Meeting, deemed to be an "affiliate" of MNB (each, a
"MNB Affiliate") as that term is used in Rule 145 under the Securities Act or
SEC Accounting Series Releases 130 and 135. MNB shall use its reasonable best
efforts to cause each person who may be deemed to be a MNB Affiliate to execute
and deliver to MNB on or before the date of mailing of the Proxy Statement an
agreement in the form attached hereto as Exhibit B.
6.09 TAKEOVER LAWS. No party hereto shall take any action that would
cause the transactions contemplated by this Agreement or the Stock Option
Agreement to be subject to requirements imposed by any Takeover Law and each of
them shall take all necessary steps within its control to exempt (or ensure the
continued exemption of) the transactions contemplated by this Agreement from,
or if necessary challenge the validity or applicability of, any applicable
Takeover Law, as now or hereafter in effect.
6.10 CERTAIN POLICIES. Prior to the Effective Date, MNB shall,
consistent with generally accepted accounting principles and on a basis
mutually satisfactory to it and SFG, modify and change its loan, litigation and
real estate valuation policies and practices (including loan classifications
and levels of reserves) so as to be applied on a basis that is consistent with
that of SFG; provided, however, that MNB shall not be obligated to take any
such action pursuant to this Section 6.10 unless and until SFG acknowledges
that all conditions to its obligation to consummate the Merger have been
satisfied and certifies to MNB that SFG's representations and warranties,
subject to Section 5.02, are true and correct as of such date and that SFG is
otherwise in material compliance with this Agreement. MNB's representations,
warranties and covenants contained in this Agreement shall not be deemed to be
untrue or breached in any respect for any purpose as a consequence of any
modifications or changes undertaken solely on account of this Section 6.10.
6.11. NASDAQ LISTING. SFG shall file a listing application, or a
NASDAQ Notification Form for Change in the Number of Shares Outstanding, as
required by NASDAQ, with respect to the shares of SFG Common Stock to be issued
to the holders of MNB Common Stock in the Merger.
6.12 REGULATORY APPLICATIONS. (a) SFG and MNB and their respective
Subsidiaries shall cooperate and use their respective reasonable best efforts
to prepare all documentation, to timely effect all filings and to obtain all
permits, consents, approvals and authorizations of all third parties and
Governmental Authorities necessary to consummate the transactions contemplated
by this Agreement. Each of SFG and MNB shall have the right to review in
advance, and to the extent practicable each will consult with the other, in
each case subject to applicable laws relating to the exchange of information,
with respect to, and shall be provided in
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advance so as to reasonably exercise its right to review in advance, all
material written information submitted to any third party or any Governmental
Authority in connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, each of the parties hereto agrees to act
reasonably and as promptly as practicable. Each party hereto agrees that it will
consult with the other party hereto with respect to the obtaining of all
material permits, consents, approvals and authorizations of all third parties
and Governmental Authorities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
party apprised of the status of material matters relating to completion of the
transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other party with
all information concerning itself, its Subsidiaries, directors, officers and
shareholders and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice or application made by or on behalf of
such other party or any of its Subsidiaries to any third party or Governmental
Authority.
6.13 INDEMNIFICATION. (a) Following the Effective Date, SFG shall
indemnify, defend and hold harmless the present directors, officers and
employees of MNB and its Subsidiaries (each, an "Indemnified Party") against
all costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of actions or
omissions occurring on or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement) to the fullest
extent that MNB is permitted to indemnify (and advance expenses to) its
directors, officers, and employees under the laws of the State of Ohio, the MNB
Articles and the MNB Code as in effect on the date hereof; provided that any
determination required to be made with respect to whether an officer's,
director's or employee's conduct complies with the standards set forth under
Ohio law, the MNB Articles and the MNB Code shall be made by independent
counsel (which shall not be counsel that provides material services to SFG)
selected by SFG and reasonably acceptable to such officer, director or
employee.
(b) For a period of three years from the Effective Time, SFG shall use
its reasonable best efforts to provide that portion of director's and officer's
liability insurance that serves to reimburse the present and former officers
and directors of MNB or any of its Subsidiaries (determined as of the Effective
Time) (as opposed to MNB) with respect to claims against such directors and
officers arising from facts or events which occurred before the Effective Time,
on terms no less favorable than those in effect on the date hereof; provided,
however, that SFG may substitute therefor policies providing at least
comparable coverage containing terms and conditions no less favorable than
those in effect on the date hereof; provided, however that in no event shall
SFG be required to extend more than 300 percent of the current amount expended
by MNB (the "Insurance Amount") to maintain or procure such directors and
officers insurance coverage; provided, further that if SFG is unable to
maintain or obtain the insurance called for by this Section 6.13(b), SFG shall
use is reasonable best efforts to obtain as much comparable insurance as is
available for the Insurance Amount; and provided, further, that officers and
directors of MNB or any Subsidiary may be required to make application and
provide customary
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representations and warranties to SFG's insurance carrier for the purpose of
obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification under
Section 6.13(a), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify SFG thereof; provided that
the failure so to notify shall not affect the obligations of SFG under Section
6.13(a) unless and to the extent that SFG is actually prejudiced as a result of
such failure.
(d) If SFG or any of its successors or assigns shall consolidate with
or merge into any other entity and shall not be the continuing or surviving
entity of such consolidation or merger or shall transfer all or substantially
all of its assets to any entity, then and in each case, proper provision shall
be made so that the successors and assigns of SFG shall assume the obligations
set forth in this Section 6.13.
6.14 OPPORTUNITY OF EMPLOYMENT; EMPLOYEE BENEFITS. The existing
employees of MNB shall have the opportunity to continue as employees of SFG or
one of its Subsidiaries, on the Effective Date; subject, however, to the right
of SFG and its Subsidiaries to terminate any such employees either (i) for
"cause" or (ii) pursuant to the procedures set forth in the SFG Workforce
Redesign Process previously disclosed to MNB. It is understood and agreed that
nothing in this Section 6.14 or elsewhere in this Agreement shall be deemed to
be a contract of employment or be construed to give said employees any rights
other than as employees at will under applicable law and said employees shall
not be deemed to be third-party beneficiaries of this provision. From and after
the Effective Time, MNB employees shall continue to participate in the MNB
employee benefit plans in effect at the Effective Time unless and until SFG, in
its sole discretion, shall determine that MNB employees shall, subject to
applicable eligibility requirements, participate in employee benefit plans of
SFG and that all or some of the MNB plans shall be terminated or merged into
certain employee benefit plans of SFG. Notwithstanding the foregoing, each MNB
employee shall be credited with years of MNB (or predecessor) service for
purposes of eligibility and vesting in the employee benefit plans of SFG, and
shall not be subject to any exclusion or penalty for pre-existing conditions
that were covered under MNB's welfare plans immediately prior to the Effective
Date, or to any waiting period relating to such coverage. If, after the
Effective Date, SFG adopts a new plan or program for its employees or
executives, then to the extent its employees or executives receive past service
credits for any reason, SFG shall credit similarly-situated employees and
executives of MNB with equivalent credit for service with MNB or its
predecessors. The foregoing covenants shall survive the Merger, and SFG shall
before the Effective Time adopt resolutions that amend its tax-qualified
retirement plans to provide for MNB service credits referenced herein.
6.15 NOTIFICATION OF CERTAIN MATTERS. Each of MNB and SFG shall give
prompt notice to the other of any fact, event or circumstance known to it that
(i) is reasonably likely, individually or taken together with all other facts,
events and circumstances known to it, to result in any Material Adverse Effect
with respect to it or (ii) would cause or constitute a material breach of any
of its representations, warranties, covenants or agreements contained herein.
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6.16 DIVIDEND COORDINATION. It is agreed by the parties hereto that
they will cooperate to assure that as a result of the Parent Merger, during any
applicable period, there shall not be a payment of both a SFG and a MNB
dividend. The parties further agree that if the Effective Closing Date is at
the end of a fiscal quarter, then they will cooperate to assure that the MNB
shareholders receive the dividend, if any, declared by SFG rather than the
dividend for that period, if any, declared by MNB.
6.17 BOARD REPRESENTATION. SFG shall cause its Executive Committee to
nominate for election GLR to the SFG Board as soon as practicable following the
effective date; and as soon as practicable following the Subsidiary Merger, SFG
shall cause to be elected to the Board of Directors of CBC such nominees as
selected by MNB, as approved by SFG, so as to equal approximately twenty
percent (20%) of the membership of the Board of Directors of CBC.
6.18 ACCOUNTING AND TAX TREATMENT. Each of SFG and MNB agrees not to
take any actions subsequent to the date of this Agreement that would adversely
affect the ability to treat the Merger as a "pooling-of-interests" in
accordance with GAAP or MNB or the shareholders of MNB to characterize the
Merger as a tax-free reorganization under Section 368(a) of the IRC, and each
of SFG and MNB agrees to take such action as may be reasonably required, if
such action may be reasonably taken to reverse the impact of any past actions
which would adversely impact the ability of SFG or MNB (as the case may be) to
treat the Merger as a "pooling-of-interests" for accounting purposes or for the
Merger to be characterized as a tax-free reorganization under Section 368(a) of
the IRC.
6.19 NO BREACHES OF REPRESENTATIONS AND WARRANTIES. Between the date
of this Agreement and the Effective Time, without the written consent of the
other party, each of SFG and MNB will not do any act or suffer any omission of
any nature whatsoever which would cause any of the representations or
warranties made in Article III of this Agreement to become untrue or incorrect
in any material respect.
6.20 CONSENTS. Each of SFG and MNB shall use its best efforts to
obtain any required consents to the transactions contemplated by this
Agreement.
6.21 INSURANCE COVERAGE. MNB shall cause the policies of insurance
listed in the Disclosure Schedule to remain in effect between the date of this
Agreement and the Effective Date.
6.22 CORRECTION OF INFORMATION. Each of SFG and MNB shall promptly
correct and supplement any information furnished under this Agreement so that
such information shall be correct and complete in all material respects at all
times, and shall include all facts necessary to make such information correct
and complete in all material respects at all times.
6.23 CONFIDENTIALITY. Except for the use of information in connection
with the Registration Statement described in Section 7.1 hereof and any other
governmental filings required in order to complete the transactions
contemplated by this Agreement, all information (collectively, the
"Information") received by each of MNB and SFG, pursuant to the terms of this
Agreement
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shall be kept in strictest confidence; provided that, subsequent to the filing
of the Registration Statement with the Securities and Exchange Commission, this
Section 6.23 shall not apply to information included in the Registration
Statement or to be included in the official proxy/prospectus to be sent to the
shareholders of MNB and SFG under Section 6.04. MNB and SFG agree that the
Information will be used only for the purpose of completing the transactions
contemplated by this Agreement. MNB and SFG agree to hold the Information in
strictest confidence and shall not use, and shall not disclose directly or
indirectly any of such Information except when, after and to the extent such
Information (i) is or becomes generally available to the public other than
through the failure of MNB or SFG to fulfill its obligations hereunder, (ii) was
already known to the party receiving the Information on a nonconfidential basis
prior to the disclosure or (iii) is subsequently disclosed to the party
receiving the Information on a nonconfidential basis by a third party having no
obligation of confidentiality to the party disclosing the Information. It is
agreed and understood that the obligations of MNB and SFG contained in this
Section 6.23 shall survive the Closing. In the event the transactions
contemplated by this Agreement are not consummated, MNB and SFG agree to return
all copies of the Information provided to the other promptly.
6.24 SUPPLEMENTAL ASSURANCES. (a) On the date the Registration
Statement becomes effective and on the Effective Date, MNB shall deliver to SFG
a certificate signed by its principal executive officer and its principal
financial officer to the effect, to such officers' knowledge, that the
information contained in the Registration Statement relating to the business
and financial condition and affairs of MNB, does not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
(b) On the date the Registration Statement becomes effective and on
the Effective Date, SFG shall deliver to MNB a certificate signed by its chief
executive officer and its chief financial officer to the effect, to such
officers' knowledge, that the Registration Statement (other than the
information contained therein relating to the business and financial condition
and affairs of MNB) does not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
6.25 SFG ACQUISITION PROPOSAL. In the event SFG receives an
Acquisition Proposal at any time prior to the Effective Time, SFG covenants and
agrees to (i) promptly notify the proposed acquiring party of the existence of
this Agreement and the requirements of Section 9.10 hereof and (ii) subject to
the terms of this Agreement and in cooperation with MNB, use its reasonable
efforts to cause the transactions contemplated by this Agreement to be
consummated.
6.26 POST-RETIREMENT BENEFITS. Certain eligible MNB retirees who are
currently participants in MNB's program of post-retirement health and life
insurance benefits shall, subject to SFG's buy out of such benefits pursuant to
agreements with such retirees, continue to participate in such program.
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ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each of SFG and MNB to consummate the Merger is
subject to the fulfillment or written waiver by SFG and MNB prior to the
Effective Time of each of the following conditions:
(a) SHAREHOLDER APPROVAL. This Agreement (including the Parent Plan of
Merger) shall have been duly adopted by the requisite vote of the shareholders
of MNB.
(b) REGULATORY APPROVALS. All regulatory approvals required to
consummate the transactions contemplated hereby shall have been obtained and
shall remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired and no such approvals shall contain (i) any
conditions, restrictions or requirements which the SFG Board reasonably
determines would either before or after the Effective Time have a Material
Adverse Effect on SFG and its Subsidiaries taken as a whole after giving effect
to the consummation of the Merger, or (ii) any conditions, restrictions or
requirements that are not customary and usual for approvals of such type and
which the SFG Board reasonably determines would either before or after the
Effective Date be unduly burdensome.
(c) NO INJUNCTION. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and prohibits consummation of the
transactions contemplated by this Agreement.
(d) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC.
(e) BLUE SKY APPROVALS. All permits and other authorizations under
state securities laws necessary to consummate the transactions contemplated
hereby and to issue the shares of SFG Common Stock to be issued in the Parent
Merger shall have been received and be in full force and effect.
(f) ACCOUNTING TREATMENT. SFG shall have received from ▇▇▇▇▇, ▇▇▇▇▇▇
and Company, LLP, SFG's independent auditors, a letter, dated the date of or
shortly prior to each of the mailing date of the Proxy Statement and the
Effective Date, stating its opinion that the Merger shall qualify for
pooling-of-interests accounting treatment.
7.02 CONDITIONS TO OBLIGATION OF MNB. The obligation of MNB to
consummate the Merger is also subject to the fulfillment or written waiver by
MNB prior to the Effective Time of each of the following conditions:
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(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of SFG set forth in this Agreement shall be true and correct, subject to
Section 5.02, as of the date of this Agreement and as of the Effective Date as
though made on and as of the Effective Date (except that representations and
warranties that by their terms speak as of the date of this Agreement or some
other date shall be true and correct as of such date), and MNB shall have
received a certificate, dated the Effective Date, signed on behalf of SFG by
the Chief Executive Officer and the Chief Financial Officer of SFG to such
effect.
(b) PERFORMANCE OF OBLIGATIONS OF SFG. SFG shall have performed in all
material respects all obligations required to be performed by them under this
Agreement at or prior to the Effective Time, and MNB shall have received a
certificate, dated the Effective Date, signed on behalf of SFG by the Chief
Executive Officer and the Chief Financial Officer of SFG to such effect.
(c) TAX OPINION. MNB shall have received an opinion of counsel to SFG,
dated the Effective Date, to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, (i) the Parent
Merger constitutes a "reorganization" within the meaning of Section 368 of the
Code and (ii) no gain or loss will be recognized by shareholders of MNB who
receive shares of SFG Common Stock in exchange for shares of MNB Common Stock,
and cash in lieu of fractional share interests, other than the gain or loss to
be recognized as to cash received in lieu of fractional share interests. In
rendering its opinion, counsel to SFG's independent auditors may require and
rely upon representations contained in letters from MNB and SFG.
(d) OPINION OF SFG'S COUNSEL. MNB shall have received an opinion of
Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., counsel to SFG, dated the Effective Date, to
the effect that, on the basis of the facts, representations and assumptions set
forth in the opinion, (i) SFG is a corporation duly organized and in good
standing under the laws of the State of Ohio, (ii) this Agreement has been duly
executed by SFG and constitutes the binding obligation of SFG, enforceable in
accordance with its terms against SFG, except as the same may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and
other similar laws relating to or affecting the enforcement of creditors'
rights generally, by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law) and by an
implied covenant of good faith and fair dealing and (iii) that the SFG Common
Stock to be issued as Merger Consideration, when issued, shall be duly
authorized, fully paid and non-assessable, and (iv) that upon the filing of the
certificate of merger with the OSS, the Parent Merger shall become effective.
(e) FAIRNESS OPINION. MNB shall have received a fairness opinion from
▇▇▇▇▇▇▇▇▇ Associates, Inc., financial advisor to MNB, dated as of a date
reasonably proximate to the date of the Proxy Statement, stating that the
Merger Consideration is fair to the shareholders of MNB from a financial point
of view.
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7.03 CONDITIONS TO OBLIGATION OF SFG. The obligation of SFG to
consummate the Merger is also subject to the fulfillment or written waiver by
SFG prior to the Effective Time of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of MNB set forth in this Agreement shall be true and correct, subject to
Section 5.02, as of the date of this Agreement and as of the Effective Date as
though made on and as of the Effective Date (except that representations and
warranties that by their terms speak as of the date of this Agreement or some
other date shall be true and correct as of such date) and SFG shall have
received a certificate, dated the Effective Date, signed on behalf of MNB by
the Chief Executive Officer and the Chief Financial Officer of MNB to such
effect.
(b) PERFORMANCE OF OBLIGATIONS OF MNB. MNB shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Effective Time, and SFG shall have received a
certificate, dated the Effective Date, signed on behalf of MNB by the Chief
Executive Officer and the Chief Financial Officer of MNB to such effect.
(c) OPINION OF MNB'S COUNSEL. SFG shall have received an opinion of
▇▇▇▇▇▇ & Blank Co., LPA, counsel to MNB, dated the Effective Date, to the
effect that, on the basis of the facts, representations and assumptions set
forth in the opinion, (i) MNB is a corporation duly organized and in good
standing under the laws of the State of Ohio, (ii) this Agreement has been duly
executed by MNB and constitutes a binding obligation on MNB, enforceable in
accordance with its terms against MNB, except as the same may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and
other similar laws relating to or affecting the enforcement of creditors'
rights generally, by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law) and by an
implied covenant of good faith and fair dealing and (iii) that, assuming
approval of MNB's shareholders, upon the filing of the certificate of merger
with the OSS, the Parent Merger shall become effective.
(d) AFFILIATE AGREEMENTS. SFG shall have received the agreements
referred to in Section 6.07 from each affiliate of MNB.
ARTICLE VIII
TERMINATION
8.01 TERMINATION. This Agreement may be terminated, and the
Acquisition may be abandoned:
(a) MUTUAL CONSENT. At any time prior to the Effective Time, by the
mutual consent of SFG and MNB, if the Board of Directors of each so determines
by vote of a majority of the members of its entire Board.
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(b) BREACH. At any time prior to the Effective Time, by SFG or MNB, if
its Board of Directors so determines by vote of a majority of the members of
its entire Board, in the event of either: (i) a breach by the other party of
any representation or warranty contained herein (subject to the standard set
forth in Section 5.02), which breach cannot be or has not been cured within 30
days after the giving of written notice to the breaching party of such breach;
or (ii) a breach by the other party of any of the covenants or agreements
contained herein, which breach cannot be or has not been cured within 30 days
after the giving of written notice to the breaching party of such breach,
provided that such breach (whether under (i) or (ii)) would be reasonably
likely, individually or in the aggregate with other breaches, to result in a
Material Adverse Effect.
(c) DELAY. At any time prior to the Effective Time, by SFG or MNB, if
its Board of Directors so determines by vote of a majority of the members of
its entire Board, in the event that the Parent Merger is not consummated by
March 31, 2000, except to the extent that the failure of the Parent Merger then
to be consummated arises out of or results from the knowing action or inaction
of the party seeking to terminate pursuant to this Section 8.01(c).
(d) NO APPROVAL. By MNB or SFG, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, in the
event (i) the approval of any Governmental Authority required for consummation
of the Merger and the other transactions contemplated by this Agreement shall
have been denied by final nonappealable action of such Governmental Authority;
(ii) the MNB shareholders fail to adopt this Agreement at the MNB Meeting; or
(iii) any of the closing conditions have not been met as required by Article
VII hereof.
(e) SFG COMMON STOCK. If the Average NMS Closing Price (as defined
below) of SFG Common Stock is less than $22.50, then MNB may, at its option,
terminate this Agreement; provided, however, that prior to MNB exercising any
right of termination hereunder, SFG may, at its option, for a period of ten
(10) business days, offer to distribute to MNB shareholders, in connection with
the Merger Consideration, an additional number of shares of SFG Common Stock to
(i) offset the amount by which the Average NMS Closing Price is below $22.50
plus (ii) some additional number of shares of SFG Common Stock (the "Fill
Offer"). Thereafter, for a period of ten (10) business days, MNB shall have the
opportunity to accept or reject the Fill Offer. If MNB rejects the Fill Offer,
MNB may terminate this Agreement in accordance with the provisions hereof. For
purposes of this Section 8.01(e), the term "NMS Closing Price" shall mean the
price per share of the last sale of SFG Common Stock reported on the NASDAQ
National Market System at the close of the trading day by the National
Association of Securities Dealers, Inc. The term "Average NMS Closing Price"
shall mean the arithmetic mean of the NMS Closing Prices for the ten (10)
trading days immediately preceding the fifth (5th) trading day prior to the
consummation of the Merger.
(f) FAILURE TO EXECUTE AND DELIVER STOCK OPTION AGREEMENT. By SFG, if
at any time prior to the close of business, Eastern Standard Time on June 7,
▇▇▇▇, ▇▇▇ shall not have executed and delivered the Stock Option Agreement to
SFG.
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8.02 EFFECT OF TERMINATION AND ABANDONMENT; ENFORCEMENT OF AGREEMENT.
In the event of termination of this Agreement and the abandonment of the Merger
pursuant to this Article VIII, no party to this Agreement shall have any
liability or further obligation to any other party hereunder except (i) as set
forth in Section 9.01 and (ii) that termination will not relieve a breaching
party from liability for any willful breach of this Agreement giving rise to
such termination. Notwithstanding anything contained herein to the contrary,
the parties hereto agree that irreparable damage will occur in the event that a
party breaches any of its obligations, duties, covenants and agreements
contained herein. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches or threatened breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States or any state having jurisdiction,
this being in addition to any other remedy to which they are entitled by law or
in equity.
ARTICLE IX
MISCELLANEOUS
9.01 SURVIVAL. No representations, warranties, agreements and
covenants contained in this Agreement shall survive the Effective Time (other
than Sections 6.13, 6.14 and 6.17 and this Article IX which shall survive the
Effective Time) or the termination of this Agreement if this Agreement is
terminated prior to the Effective Time (other than Sections 6.04(b), 6.05,
6.06(b), 8.02, and this Article IX which shall survive such termination).
9.02 WAIVER; AMENDMENT. Prior to the Effective Time, any provision of
this Agreement may be (i) waived by the party benefited by the provision, or
(ii) amended or modified at any time, by an agreement in writing between the
parties hereto executed in the same manner as this Agreement, except that after
the MNB Meeting, this Agreement may not be amended if it would violate the OGCL
or the federal securities laws.
9.03 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.04 GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Ohio applicable to
contracts made and to be performed entirely within such State (except to the
extent that mandatory provisions of Federal law are applicable).
9.05 EXPENSES. Each party hereto will bear all expenses incurred by it
in connection with this Agreement and the transactions contemplated hereby,
except that printing and mailing expenses shall be shared equally between MNB
and SFG. All fees to be paid to Regulatory Authorities and the SEC in
connection with the transactions contemplated by this Agreement shall be borne
by SFG.
9.06 NOTICES. All notices, requests and other communications hereunder
to a party shall be in writing and shall be deemed given if personally
delivered, telecopied (with
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confirmation) or mailed by registered or certified mail (return receipt
requested) to such party at its address set forth below or such other address as
such party may specify by notice to the parties hereto.
If to MNB, to:
Mahoning National Bancorp, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman of the Board,
President and Chief Executive Officer
With a copy to:
▇▇▇▇▇▇ & Blank Co., LPA
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
If to SFG, to:
Sky Financial Group, Inc.
▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President and
Chief Operating Officer
With a copy to:
Sky Financial Group, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, General Counsel
With a copy to:
Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: M. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
9.07 ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This
Agreement, any separate agreement entered into by the parties on even date
herewith, and any Stock Option Agreement entered into represent the entire
understanding of the parties hereto with reference to
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the transactions contemplated hereby and thereby and this Agreement supersedes
any and all other oral or written agreements heretofore made (other than any
such separate agreement or Stock Option Agreement). The Disclosure Schedules
shall be deemed to be a part of this Agreement and shall not be amended without
the prior written consent of the other party hereto. Nothing in this Agreement,
whether express or implied, is intended to confer upon any person, other than
the parties hereto or their respective successors, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
9.08 INTERPRETATION; EFFECT. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference shall be to a
Section of, or Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and are not part of this Agreement. Whenever the
words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
9.09 WAIVER OF JURY TRIAL. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any legal proceeding
arising out of or related to this Agreement or the transactions contemplated
hereby.
9.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, including but not limited to, with respect to SFG, any acquiring party
pursuant to Section 6.25 hereof.
* * *
[the rest of this page has been intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in counterparts by their duly authorized officers, all as of the
day and year first above written.
MAHONING NATIONAL BANCORP, INC.
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman of the Board, President
and Chief Executive Officer
SKY FINANCIAL GROUP, INC.
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and
Chief Operating Officer
S-1
50
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT ("Agreement"), effective as of this 7 day
of June, 1999, by and between SKY FINANCIAL GROUP, INC., an Ohio corporation
("Grantee"); and MAHONING NATIONAL BANCORP, INC., an Ohio corporation
("Grantor");
WITNESSETH:
A. Grantor and Grantee have entered into an Agreement and Plan of
Merger dated as of June 6, 1999 (the "Merger Agreement"), providing for their
affiliation with one another.
B. As further inducement for the parties to consummate the
transactions contemplated by the Merger Agreement, Grantor wishes to grant
Grantee the Option described herein.
C. The Board of Directors of Grantor has approved the grant of the
Option and the Merger Agreement prior to the date hereof.
NOW, THEREFORE, the parties agree as follows:
1. Definitions.
Capitalized terms not defined herein shall have the meanings set forth
in the Merger Agreement.
"Applicable Price" shall mean the highest of (i) the highest price
per share of Grantor Common Stock paid for any such share by the person or
groups described in the definition of a Repurchase Event, (ii) the price per
share of Grantor Common Stock received by holders of Grantor Common Stock in
connection with any merger or other business combination transaction which is a
Purchase Event, or (iii) the highest closing sales price per share of Grantor
Common Stock quoted on the National Association of Securities Dealers Automated
Quotations National Market System ("NASDAQ/NMS") (or if Grantor Common Stock is
not quoted on NASDAQ/NMS, the highest bid price per share as quoted on the
principal trading market or securities exchange on which such shares are traded
as reported by a recognized source chosen by a Grantee) during the 60 business
days preceding the Request Date; provided, however, that in the event of a sale
of less than all of Grantor's assets, the Applicable Price shall be the sum of
the price paid in such sale for such assets and the current market value of the
remaining assets of Grantor as determined by a nationally recognized investment
banking firm selected by Grantee, divided by the number of shares of Grantor
Common Stock outstanding at the time of such sale. If the consideration to be
offered, paid or received pursuant to either of the foregoing clauses (i) or
(ii) shall be other than in cash, the value of such consideration shall be
determined in good faith by an independent nationally recognized investment
banking firm selected by Grantee and reasonably acceptable to Grantor, which
determination shall be conclusive for all purposes of this Agreement.
51
"Bank" shall mean a financial institution subsidiary of a party.
"Burdensome Condition" shall mean, in connection with the grant of
a requisite regulatory approval or otherwise, imposition by a governmental
entity of any condition or restriction upon the party or one of its Subsidiaries
(as defined herein) which would reasonably be expected to either (i) have a
material adverse effect after the effective time of the Merger Agreement on the
present or prospective consolidated financial condition, business or operating
results of the party, or (ii) prevent the parties from realizing the major
portion of the economic benefits of the transactions contemplated by the Merger
Agreement that they currently anticipate obtaining.
"Commission" shall mean the Securities and Exchange Commission.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Grantee" shall mean Sky Financial Group, Inc..
"Grantor" shall mean Mahoning National Bancorp, Inc..
"Grantor Common Stock" shall mean the respective shares of common
stock of the same class for which Mahoning National Bancorp, Inc. is granting an
Option under this Agreement.
"Merger Agreement" shall mean the definitive agreement executed by
Sky Financial Group, Inc. and Mahoning National Bancorp, Inc. pursuant to which
the parties hereto intend to affiliate.
"Option" shall mean the option granted by Mahoning National
Bancorp, Inc. to Sky Financial Group, Inc. under this Agreement.
"Person" shall have the meanings specified in Sections 3(a)(9) and
13(d)(3) of the Exchange Act.
"Purchase Event" shall mean any of the following events or
transactions occurring after the date of this Agreement with respect to the
Grantor:
(i) the Grantor or any of its Subsidiaries (as defined in Rule
1-02 of Regulation S-X promulgated by the Securities and Exchange Commission
(the "SEC") (each hereinafter individually referred to as a "Subsidiary" and
collectively, as the "Subsidiaries")), without having received the Grantee's
prior written consent, shall have entered into an agreement with, or the Board
of Directors of Grantor shall have recommended that the shareholders of Grantor
approve or accept a transaction with any person (x) to merge or consolidate, or
enter into any similar transaction, except as contemplated by the Merger
Agreement, (y) to purchase, lease or otherwise acquire all or substantially all
of the assets of the Grantor or any of its Subsidiaries, or (z) to purchase or
otherwise acquire (including by way of merger, consolidation, share exchange or
any
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52
similar transaction) securities representing 20% or more of the voting power of
such Grantor or any of its Subsidiaries (other than pursuant to this Agreement);
(ii) any person (other than the Grantor or its Bank in a
fiduciary capacity, or Grantee or a Grantee Bank in a fiduciary capacity) shall
have acquired beneficial ownership or the right to acquire beneficial ownership
of 20% or more of the outstanding shares of such Grantor Common Stock after the
date of this Agreement (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder);
(iii) Grantor shall have breached this Agreement in any
material respect, which breach shall not have been cured within fifteen (15)
days after notice thereof is given by Grantor to Grantee;
(iv) any person other than Grantee shall have made a bona fide
Takeover Proposal to the Grantor by public announcement or written communication
that is or becomes the subject of public disclosure, and following such bona
fide Takeover Proposal, the shareholders of the Grantor vote not to adopt the
Merger Agreement;
(v) Grantor shall have breached the Merger Agreement following
a bona fide Takeover Proposal to such Grantor or any of its Subsidiaries, which
breach would entitle the Grantee to terminate the Merger Agreement and such
breach shall not have been cured prior to the Notice Date (as defined below);
(vi) the shareholders of Grantor shall have voted and failed
to approve the Merger Agreement and the Merger at a meeting which has been held
for that purpose or any adjournment or postponement thereof, or such meeting
shall not have been held in violation of the Merger Agreement or shall have been
canceled prior to termination of the Merger Agreement if, prior to such meeting
(or if such meeting shall not have been held or shall have been canceled, prior
to such termination), it shall have been publicly announced that any person
(other than Grantee or any of its Subsidiaries) shall have made, or disclosed an
intention to make, a proposal to engage in an acquisition transaction; or
(vii) the Grantor Board of Directors shall have withdrawn or
modified (or publicly announced its intention to withdraw or modify) in any
manner adverse in any respect to Grantee, its recommendation that the
shareholders of Grantor approve the transactions contemplated by the Merger
Agreement, or Grantor or any Grantor Subsidiary or group of Grantor Subsidiaries
that is, or would on an aggregate basis constitute, a Significant Subsidiary
shall have authorized, recommended, proposed (or publicly announced its
intention to authorize, recommend or propose) an agreement to engage in an
acquisition transaction with any person other than Grantee or a Grantee
Subsidiary.
If more than one of the transactions giving rise to a Purchase
Event under this Agreement is undertaken or effected, then all such transactions
shall be deemed to give rise only to one Purchase Event with respect to the
Option, which Purchase Event shall be deemed continuing for all purposes
hereunder until all such transactions are abandoned.
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53
"Repurchase Event" shall mean if (i) any person (other than the
Grantee or any subsidiary of the Grantee) shall have acquired actual ownership
or control, or any "group" (as such term is defined under the Exchange Act)
shall have been formed which shall have acquired actual ownership or control, of
24.9% or more of the then outstanding shares of Grantor Common Stock, or (ii)
any Purchase Event shall be consummated.
"Takeover Proposal" shall mean any tender or exchange offer,
proposal for a merger, consolidation or other business combination involving
Grantor or any of its Subsidiaries or any proposal or offer to acquire in any
manner 20% or more of the outstanding shares of any class of voting securities,
or 15% or more of the consolidated assets, of the Grantor or any of its
Subsidiaries, other than the transactions contemplated by the Merger Agreement.
If Grantor receives an unsolicited Takeover Proposal, it shall notify Grantee
promptly of the receipt of such Takeover Proposal, it being understood, however,
that the giving of such notice by Grantor shall not be a condition to the right
of Grantee to exercise the Option.
2. Grant of Option.
Subject to the terms and conditions set forth herein, Grantor
hereby grants to Grantee an unconditional, irrevocable Option to purchase up to
19.9% (i.e., 1,253,700 shares as of the date of this Agreement) of Grantor
Common Stock at an exercise price of $36.60 per share payable in cash as
provided in Section 4. In the event the Grantor issues or agrees to issue any
shares of Grantor Common Stock (other than as permitted under the Merger
Agreement at a price less than the exercise price per share set forth in this
section (as adjusted pursuant to Section 6), the exercise price of the Option
shall be such lesser price.
3. Exercise of Option.
(a) Unless the Grantee shall have breached in any material
respect any material covenant, representation or warranty contained in this
Agreement or the Merger Agreement and such breach shall not have been cured, the
Grantee may exercise the Option, in whole or part, at any time or from time to
time if a Purchase Event shall have occurred with respect to the Grantor and be
continuing; provided that to the extent the Option shall not have been
exercised, it shall terminate and be of no further force and effect (i) on the
effective date of the transaction contemplated by the Merger Agreement, or (ii)
upon termination of the Merger Agreement in accordance with the provisions
thereof (other than a termination resulting from a breach by the Grantor of the
Merger Agreement or following the occurrence of a Purchase Event, failure of the
Grantor's shareholders to approve the Merger Agreement by the vote required
under applicable law or under the respective Grantor's articles), or (iii) 12
months after termination of the Merger Agreement due to a breach by the Grantor
of the Merger Agreement or, following the occurrence of a Purchase Event,
failure of the Grantor's shareholders to approve the Merger Agreement by the
vote required under applicable law or under the Grantor's articles. Any exercise
of the Option shall be subject to compliance with applicable provisions of law.
(b) In the event the Grantee wishes to exercise the Option, it
shall send to the Grantor a written notice (the date of which being herein
referred to as the "Notice Date")
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54
specifying (i) the total number of shares it will purchase pursuant to such
exercise, and (ii) a place and date not earlier than three (3) business days nor
later than 60 business days after the Notice Date for the closing of such
purchase ("Closing Date"). If prior notification to or approval of any federal
or state regulatory agency is required in connection with such purchase, the
Grantee shall promptly file the required notice or application for approval and
shall expeditiously process the same and the period of time that otherwise would
run pursuant to this section shall run instead from the date on which any
required notification period has expired or been terminated or any requisite
approval has been obtained and any requisite waiting period shall have passed.
4. Payment and Delivery of Certificates.
(a) At the closing referred to in Section 3, the Grantee shall
pay to the Grantor the aggregate purchase price for the shares of Grantor Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by a wire transfer to a bank account designated by the Grantor. Grantor
shall pay all expenses, and any and all United States federal, state and local
taxes and other charges that may be payable in connection with the preparation,
issue and delivery of stock certificates under this Section 4 in the name of the
Grantee or its assignee, transferee or designee.
(b) At such closing, simultaneously with the delivery of funds
as provided in Section 4(a), the Grantor shall deliver to the Grantee a
certificate or certificates representing the number of shares of Grantor Common
Stock purchased by the Grantee, and the Grantee shall deliver to the Grantor a
letter agreeing that Grantee will not offer to sell or otherwise dispose of such
shares in violation of applicable law or the provisions of this Agreement.
(c) Certificates for Grantor Common Stock delivered at a
closing hereunder shall be endorsed with a restrictive legend which shall read
substantially as follows:
The transfer of the shares represented by this certificate is
subject to certain provisions of a Stock Option Agreement
dated June __, 1999, between the registered holder hereof and
[Grantor] (a copy of which agreement is on file at the
principal office of [Grantor]). A copy of such agreement will
be provided to the holder hereof without charge within five
days after receipt by [Grantor] of a written request
therefor. The shares evidenced by this certificate have not
been registered under the Securities Act of 1933, as amended,
and may not be sold, pledged, transferred, or hypothecated
except pursuant to an opinion of counsel satisfactory to the
corporation that such transfer is lawful.
The above legend shall be removed or modified as appropriate
by delivery of substitute certificate(s) without such legend if the Grantee
shall have delivered to the Grantor a copy of a letter from the staff of the
Commission, or an opinion of counsel, in form and substance satisfactory to
Grantor, to the effect that such legend is not required for purposes of the
Securities Act of 1933, as amended.
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5. Representations.
The Grantor represents, warrants and covenants to the Grantee as
follows:
(a) Grantor agrees: (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued or treasury
shares of Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Grantor;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act
of 1978, as amended, or any state or other federal banking law, prior approval
of or notice of the Federal Reserve Board or to any state or other federal
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Grantee in preparing such applications or notices and
providing such information to the Federal Reserve Board or such state or other
federal regulatory authority as they may require) in order to permit the Grantee
to exercise the Option and Grantor duly and effectively to issue shares of
Common Stock pursuant thereto; and (iv) promptly to take all action provided
herein to protect the rights of the Grantee against dilution.
(b) The shares to be issued upon due exercise, in whole or in
part, of the Option, when paid for as provided herein, will be duly authorized,
validly issued and fully paid.
(c) Grantor has full corporate power and authority to execute,
deliver and perform this Agreement and all corporate action necessary for
execution, delivery and performance of this Agreement has been duly taken by
such party.
(d) Neither the execution and delivery of this Agreement nor
consummation of the transactions contemplated hereby (assuming all appropriate
shareholder and regulatory approvals) will violate or result in any violation of
or be in conflict with or constitute a default under any term of the articles,
regulations or by-laws of such party or any agreement, instrument, judgment,
decree, statute, rule or order applicable to such party.
6. Adjustment Upon Changes in Capitalization.
The Grantor agrees that, in the event of any change in its Grantor
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, exchanges of shares or the like, the type and
number of shares subject to the Option, and the purchase price per share, as the
case may be, shall be adjusted appropriately. The Grantor agrees that, in the
event that any additional shares of its Grantor Common Stock are issued or
otherwise become outstanding
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56
after the date of this Agreement (other than pursuant to this Agreement), the
number of shares of its Grantor Common Stock subject to the Option shall be
adjusted so that, after such issuance, it equals the same percentage (as that on
the date of this Agreement) of the number of shares of Grantor Common Stock then
issued and outstanding without giving effect to any shares subject to or issued
pursuant to the Option. Nothing contained in this Section 6 shall be deemed to
authorize the Grantor to breach any provision of the Merger Agreement.
7. Registration Rights.
If requested by the Grantee, the Grantor shall as expeditiously as
possible file a registration statement on a form of general use under the
Securities Act of 1933 if necessary in order to permit the sale or other
disposition of the shares of Grantor Common Stock that have been acquired upon
exercise of the Option in accordance with the intended method of sale or other
disposition requested by the Grantee. The Grantee shall provide all information
reasonably requested by the Grantor for inclusion in any registration statement
to be filed hereunder. The Grantor will use its best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective as may be reasonably necessary to effect such
sales or other dispositions. The first registration effected under this Section
7 shall be at the Grantor's expense, except for underwriting commissions and the
fees and disbursements of the Grantee's counsel attributable to the registration
of such Grantor Common Stock. A second registration may be requested hereunder
at the Grantee's expense. In no event shall Grantor be required to effect more
than two registrations hereunder. The filing of any registration statement
hereunder may be delayed for such period of time as may reasonably be required
to facilitate any public distribution by the Grantor of other Grantor Common
Stock. If requested by the Grantee, in connection with any such registration,
Grantor will become a party to any underwriting agreement relating to the sale
of such shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements in respect of issuers of shares being
sold by a selling shareholder. Upon receiving any request from a Grantee or
permitted assignee thereof under this Section 7, Grantor agrees to send a copy
of the registration statement and prospectus and each amendment to the Grantee
and to any permitted assignee thereof known to Grantor, in each case by promptly
mailing the same, postage prepaid, to the address of record of the persons
entitled to receive such copies.
8. Termination.
This Agreement may be terminated at any time prior to the
effective date of the transaction set forth in the Merger Agreement, by action
taken or authorized by the Board of Directors of the terminating party or
parties, whether before or after approval by the stockholders of the matters
presented in connection with the Merger Agreement:
(a) by mutual consent of Grantee and Grantor;
(b) by either Grantee or Grantor if the Federal
Reserve Board shall have issued an order denying approval of the transaction set
forth in the Merger Agreement or if any governmental entity of competent
jurisdiction shall have issued a final permanent order
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enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement or the Merger Agreement, or imposing a Burdensome
Condition, and in any such case the time for appeal or petition for
reconsideration of such order shall have expired without such appeal or petition
being granted;
(c) by either Grantee or Grantor if the holding
company merger contemplated by the Merger Agreement shall not have been
consummated on or before March 31, 2000, unless such date is extended by mutual
consent of the parties hereto; or
(d) by either Grantee or Grantor if no Purchase Event
has occurred and if any approval of their shareholders required for the
consummation of the transactions set forth in the Merger Agreement shall not
have been obtained by reason of the failure to obtain the required vote at a
duly called and held meeting of shareholders or at any adjournment thereof.
9. Effect of Termination.
(a) In the event of termination of this Agreement
by any party as provided in Section 8, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of any party or
their respective officers or directors except (i) Sections 11, 12, 13 and 14 of
this Agreement shall survive the termination and (ii) with respect to any
liabilities or damages incurred or suffered by a party as a result of the breach
by another party of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
(b) If a Purchase Event occurs with respect to the
Grantor, then in such event Grantor shall pay to the Grantee, within five
business days after a termination of this Agreement following such an event, the
reasonable expenses of Grantee incurred in connection with this Agreement and
the transactions set forth in the Merger Agreement, but not more than $125,000.
10. Access to Information.
During the term of this Agreement, each party will afford
each of the other parties full and free access during normal business hours to
such party, its personnel, properties, contracts, books and records, and all
other documents and data.
11. Confidentiality.
Except as and to the extent required by law, no party will
disclose or use, and will direct its representatives not to disclose or use, any
Confidential Information (as defined below) with respect to the other parties
furnished or to be furnished by such other parties, or their respective
representatives to the party or its representatives at any time or in any manner
other than in connection with its evaluation of the transaction proposed in this
Agreement. For purposes of this section, "Confidential Information" means any
information about the Merger Agreement and this Agreement as well as any
information about a party stamped "confidential" or identified in writing as
such promptly following its disclosure, unless (i) such information is already
known to the party or its representatives or to others not bound by a duty of
confidentiality or such
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information becomes publicly available through no fault of the party or its
representatives, (b) the use of such information is necessary in making any
filing or obtaining any consent or approval required for the consummation of the
transactions set forth in the Merger Agreement, or (c) the furnishing or use of
such information is required by or necessary in connection with legal
proceedings. In the event the transaction contemplated by this Agreement are not
consummated, each of the other parties will promptly return or destroy any
Confidential Information in its possession and certify in writing to the
disclosing party that it has done so.
12. Exclusive Dealing.
Grantor agrees that it shall not, and shall cause its Subsidiaries and
its and its Subsidiaries' officers, directors, agents, advisors and affiliates
not to, solicit or encourage inquiries or proposals with respect to, or engage
in any negotiations concerning, or provide any confidential information to, or
have any discussions with, any person relating to, any acquisition proposal
("Acquisition Proposal"); subject to the extent the Grantor Board of Directors
determines in good faith, after consultations with independent legal counsel
that it is required by its fiduciary duties to do so. It shall immediately cease
and cause to be terminated any activities, discussions or negotiations conducted
prior to the date of this Agreement with any parties other than Grantee with
respect to any of the foregoing and shall use its reasonable best efforts to
enforce any confidentiality or similar agreement relating to an Acquisition
Proposal. Grantor shall promptly (within 24 hours) advise Grantee following the
receipt by Grantor of any Acquisition Proposal and the substance thereof
(including the identity of the person making such Acquisition Proposal), and
advise Grantee of any material developments with respect to such Acquisition
Proposal immediately upon the occurrence thereof. In the event this Agreement is
terminated by Grantor in accordance with the provisions of Section 8(c) hereof,
it is understood and agreed that this Section 12 shall remain in full force and
effect through June 30, 2000.
13. Disclosure.
Except as and to the extent required by law, without the
prior written consent of the other parties, no party will, and each will direct
its representatives not to, make directly or indirectly any public comment,
statement or communication with respect to, or otherwise to disclose or to
permit the disclosure of the existence of discussions regarding, a possible
transaction among the parties or any of the terms, conditions or other aspects
of the transaction proposed in this Agreement. If a party is required by law to
make any such disclosure, it must first provide to the other parties the content
of the proposed disclosure, the reasons that such disclosure is required by law,
and the time and place that the disclosure will be made.
14. Costs.
Except as otherwise expressly agreed, each party will be
responsible for and bear all of its own costs and expenses (including any
broker's or finder's fees and the expenses of its representatives) incurred at
any time in connection with this Agreement and in pursuing or consummating the
Merger Agreement.
15. Severability.
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If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that applicable law will not permit the Grantee to acquire the full number of
shares of Grantor Common Stock provided in Section 2 (as adjusted pursuant to
Section 6), it is the express intention of the Grantor to allow the Grantee to
acquire such lesser number of shares as may be permissible, without any
amendment or modification hereof.
16. Miscellaneous.
(a) Third Parties. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective permitted successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
(b) Entire Agreement. Except as otherwise
expressly provided herein, this Agreement contains the entire agreement among
the parties with respect to the transactions contemplated hereunder and
supersede all prior arrangements or understandings with respect thereto, written
or oral. The terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective permitted
successors and assigns.
(c) Assignment. Neither of the parties hereto may
assign any of its rights or obligations under this Agreement or the Option
created hereunder to any other person, without the express written consent of
the other parties, except that in the event a Purchase Event shall have occurred
and be continuing, the Grantee may assign in whole or in part its rights and
obligations hereunder; provided, however, that Grantee may not assign its rights
under the Option except in (i) a widely dispersed public distribution, (ii) a
private placement in which no one party acquires the right to purchase in excess
of 2% of the voting shares of the Grantor, (iii) an assignment to a single party
(e.g., a broker or investment banker) for the purpose of conducting a widely
dispersed public distribution on the Grantee's behalf, or (iv) any other manner
approved by applicable regulatory authorities.
(d) Notices. All notices or other communications
which are required or permitted hereunder shall be in writing and sufficient if
delivered by registered or certified mail, postage prepaid, express service,
personal delivery, telecopy or telefacsimile to the following addresses:
If to Mahoning National Bancorp, Inc., to:
Mahoning National Bancorp, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman of the Board,
President and Chief Executive Officer
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60
With a copy to:
▇▇▇▇▇▇ & Blank Co., LPA
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
If to Sky Financial Group, Inc., to:
Sky Financial Group, Inc.
▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President and Chief Operating Officer
With a copy to:
Sky Financial Group, Inc
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, General Counsel
With a copy to:
Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: M. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
(e) Counterparts. This Agreement may be executed in
any number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
(f) Specific Performance. The parties agree that
damages would be an inadequate remedy for a breach of the provisions of this
Agreement by any party hereto and that this Agreement may be enforced by a party
hereto through injunctive or other equitable relief.
(g) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of Ohio applicable to agreements
made and entirely to be performed within such state and such federal laws as may
be applicable.
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61
17. Repurchase at the Option of Grantee.
(a) At the request of the Grantee at any time
commencing upon the first occurrence of a Repurchase Event and ending 12 months
immediately thereafter, Grantor shall repurchase from Grantee (i) the Option and
(ii) all shares of Grantor Common Stock purchased by Grantee pursuant hereto
with respect to which Grantee then has beneficial ownership. The date on which
Grantee exercises its rights under this Section 17 is referred to as the
"Request Date." Such repurchase shall be at an aggregate price (the "Repurchase
Consideration") equal to the sum of:
(i) the aggregate purchase price paid
by Grantee for any shares of Grantor Common Stock acquired pursuant to the
Option with respect to which Grantee then has beneficial ownership;
(ii) the excess, if any, of (x) the
Applicable Price for each share of Grantor Common Stock over (y) the purchase
price (subject to adjustment pursuant to Section 6 hereof, multiplied by the
number of shares of Grantor Common Stock with respect to which the Option has
not been exercised; and
(iii) the excess, if any, of the Applicable
Price over the purchase price (subject to adjustment pursuant to Section 6
hereof paid (or, in the case of Option Shares with respect to which the Option
has been exercised but the Closing Date has not occurred), payable by Grantee
for each share of Grantor Common Stock with respect to which the Option has been
exercised and with respect to which Grantee then has beneficial ownership,
multiplied by the number of such shares.
(b) If Grantee exercises its rights under this
section, Grantor shall, within 10 business days after the Request Date, pay the
Grantor Repurchase Consideration to Grantee in immediately available funds, and
contemporaneously with such payment Grantee shall surrender to Grantor the
Option and the certificates evidencing the shares of Grantor Common Stock
purchased thereunder with respect to which Grantee then has beneficial
ownership, and Grantee shall warrant that it has sole record and beneficial
ownership of such shares and that the same are then free and clear of all liens,
claims, charges and encumbrances of any kind whatsoever. Notwithstanding the
foregoing, to the extent that prior notification to or approval of the Federal
Reserve Board or other regulatory authority is required in connection with the
repayment of all or any portion of the Repurchase Consideration Grantee shall
have the ongoing option to revoke its request for repurchase pursuant to this
section, in whole or in part, or to require that Grantor deliver from time to
time that portion of the Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or application for
approval and expeditiously process the same (and each party shall cooperate with
the other in the filing of any such notice or application and the obtaining of
any such approval). If the Federal Reserve Board or any other regulatory
authority disapproves of any part of Grantor's proposed repurchase pursuant to
the section, Grantor shall promptly give notice of such fact to Grantee. If the
Federal Reserve Board or other agency prohibits the repurchase in part but not
in whole, then Grantee shall have the right (i) to revoke the repurchase
request, or (ii) to the extent permitted by the Federal Reserve Board or other
agency, determine whether the purchase should apply to the Option and or Option
shares and to what extent to each, and Grantee shall thereupon have the right to
exercise the Option as to the
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62
number of Option shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in respect of which
payment has been made pursuant to this section and the number of shares covered
by the portion of the Option (if any) that has been repurchased. Grantee shall
notify Grantor of its determination under the preceding sentence within five (5)
business days of receipt of notice of disapproval of the purchase.
Notwithstanding anything herein to the contrary, all of
Grantee's rights under this section shall terminate on the date of termination
of this Option.
[the rest of this page has been intentionally left blank]
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63
IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement to be effective as of the day and year set forth in the first
paragraph above.
SKY FINANCIAL GROUP, INC.
By______________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇, President and Chief Operating
Officer
MAHONING NATIONAL BANCORP, INC.
By________________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman of the Board,
President and Chief Executive Officer
14
64
EXHIBIT B
_____________, 1999
Sky Financial Group, Inc
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, General Counsel
Gentlemen:
I have been advised that as of the date hereof I may be deemed to
be an "affiliate" of Mahoning National Bancorp, Inc. ("MNB"), as that term is
defined for purposes of Paragraphs (c) and (d) of Rule 145 of the Rules and
Regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") promulgated under the Securities Act of 1933, as
amended (the "Act").
Pursuant to the terms of the Agreement and Plan of Merger by and
between Sky Financial Group, Inc. ("SFG") and MNB dated as of June ____, 1999
(the "Merger Agreement"), providing for the merger of MNB with and into SFG (the
"Merger"), and as a result of the Merger, I will receive shares of SFG common
stock ("SFG Common Shares") in exchange for shares of common stock of MNB ("MNB
Stock") owned by me at the Effective Time (as defined and determined pursuant to
the Merger Agreement). This letter is being delivered pursuant to Sections 6.08
and 7.03(d) of the Merger Agreement. I represent and warrant to SFG that in such
event:
A. I will not sell, assign or transfer the SFG Common Shares which
I receive as aforesaid in violation of the Act or the Rules and Regulations.
Moreover, to help insure that the Merger will qualify for pooling-of-interests
accounting treatment, I shall make no sale, transfer, or other disposition of
the SFG Common Shares which I receive as aforesaid until such time as financial
results covering at least thirty (30) days of post-merger combined operations of
SFG and MNB have been published within the meaning of Section 201.01 of the
Commission's Codification of Financial Reporting Policies.
65
Sky Financial Group, Inc.
________________, 1999
B. I have carefully read this letter and the Merger Agreement and
have discussed their requirements and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of the SFG Common Shares, to the
extent I feel necessary, with my counsel or counsel for MNB. I understand that
SFG is relying on the representations I am making in this letter and I hereby
agree to hold harmless and indemnify SFG and its officers and directors from and
against any losses, claims, damages, expenses (including reasonable attorneys'
fees), or liabilities ("Losses") to which SFG or any officer or director of SFG
may become subject under the Act or otherwise as a result of the untruth,
breach, or failure of such representations. Although I have agreed to be bound
by and understand the restrictions set forth in the second sentence of Paragraph
A above, I am under no obligation to hold harmless and indemnify SFG or its
officers and directors from any Losses that may arise from any breach by me of
the restrictions set forth in the second sentence of Paragraph A.
C. I have been advised that the issuance of the SFG Common Shares
issued to me pursuant to the Merger will have been registered with the
Commission under the Act on a Registration Statement on Form S-4. However, I
have also been advised that since I may be deemed to be an affiliate under the
Rules and Regulations at the time the Merger was submitted for a vote of the
shareholders of MNB, that the SFG Common Shares must be held by me indefinitely
unless (i) my subsequent distribution of SFG Common Shares has been registered
under the Act; (ii) a sale of the SFG Common Shares is made in conformity with
the volume and other applicable limitations of a transaction permitted by Rule
145 promulgated by the Commission under the Act and as to which SFG has received
satisfactory evidence of the compliance and conformity with said Rule, or (iii)
a transaction in which, in the opinion of Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P. (or
other counsel reasonably acceptable to SFG) or in accordance with a no-action
letter from the Commission, some other exemption from registration is available
with respect to any such proposed sale, transfer or other disposition of the SFG
Common Shares. I am also aware of the additional limitation on transfers of SFG
Common Shares set forth in the second sentence of Paragraph A above.
D. I also understand that stop transfer instructions will be given
to SFG's transfer agent with respect to any SFG Common Shares which I receive in
the Merger and that there will be placed on the certificates for such SFG Common
Shares, a legend stating in substance:
-2-
66
Sky Financial Group, Inc.
________________, 1999
"The shares represented by this certificate have been
issued or transferred to the registered holder as a result of a
transaction to which Rule 145 under the Securities Act of 1933, as
amended (the "Act"), applies. The shares represented by this
certificate may not be sold, transferred or assigned, and the
issuer shall not be required to give effect to any attempted sale,
transfer or assignment, except pursuant to (i) an effective
registration statement under the Act, (ii) a transaction permitted
by Rule 145 and as to which the issuer has received reasonable and
satisfactory evidence of compliance with the provisions of Rule
145, or (iii) a transaction in which, in the opinion of Squire,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P. or other counsel satisfactory to the
issuer or in accordance with a "no action" letter from the staff
of the Securities and Exchange Commission, such shares are not
required to be registered under the Act."
It is understood and agreed that the legend set forth in Paragraph
D above shall be removed and any stop order instructions with respect thereto
shall be canceled upon receipt of advice from Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
or other counsel satisfactory to SFG that such actions are appropriate under the
then-existing circumstances.
Very truly yours,
_____________________________________
(Name of Affiliate)
Date: ____________, 1999
PLEASE PRINT YOUR NAME
Accepted this ___ day of _________, 1999
HERE:_________________________
SKY FINANCIAL GROUP, INC.
By:________________________________
Name: _________________________
Title: ________________________
-3-