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EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 7, 2000
BETWEEN
IBT BANCORP, INC.
AND
FSB BANCORP, INC.
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TABLE OF CONTENTS
ARTICLE I.........................................................................................................1
THE MERGER...............................................................................................1
1.1 Effective Time of the Merger...........................................................1
1.2 Closing................................................................................2
1.3 Effects of the Merger..................................................................2
1.4 Materiality............................................................................2
ARTICLE II........................................................................................................3
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES........................................................................3
2.1 Effect on Capital Stock................................................................3
2.2 Exchange of Certificates...............................................................4
ARTICLE III.......................................................................................................6
REPRESENTATIONS AND WARRANTIES...........................................................................6
3.1 Representations and Warranties of FSB..................................................6
3.2 Representations and Warranties of IBT.................................................15
ARTICLE IV.......................................................................................................21
COVENANTS RELATING TO CONDUCT OF BUSINESS...............................................................21
4.1 Covenants of FSB......................................................................21
4.2 Covenants of FSB and IBT..............................................................24
ARTICLE V........................................................................................................25
ADDITIONAL AGREEMENTS...................................................................................25
5.1 Regulatory Matters....................................................................25
5.2 Letter of Accountants.................................................................26
5.3 Access to Information.................................................................26
5.4 Shareholder Meeting...................................................................26
5.5 Legal Conditions to Merger............................................................26
5.6 Affiliates............................................................................27
5.7 Employee Benefit Plans................................................................27
5.8 Expenses..............................................................................27
5.9 Additional Agreements; Best Efforts...................................................27
5.10 Employment Agreement..................................................................28
5.11 Governance............................................................................28
5.12 Post-Closing Operations...............................................................28
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ARTICLE VI.......................................................................................................29
CONDITIONS PRECEDENT....................................................................................29
6.1 Conditions to Each Party's Obligation to Effect the Merger............................29
6.2 Conditions to Obligations of IBT......................................................30
6.3 Conditions to Obligations of FSB......................................................31
ARTICLE VII......................................................................................................32
TERMINATION AND AMENDMENT...............................................................................32
7.1 Termination...........................................................................32
7.2 Effect of Termination.................................................................33
7.3 Amendment.............................................................................33
7.4 Extension; Waiver.....................................................................33
ARTICLE VIII.....................................................................................................34
GENERAL PROVISIONS......................................................................................34
8.1 Nonsurvival of Representations, Warranties and Agreements.............................34
8.2 Notices...............................................................................34
8.3 Interpretation........................................................................35
8.4 Counterparts..........................................................................35
8.5 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership...................35
8.6 Governing Law.........................................................................35
8.7 Enforcement of Agreement..............................................................35
8.8 Severability..........................................................................36
8.9 Publicity.............................................................................36
8.10 Assignment............................................................................36
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 7, 2000 (the
"Agreement"), by and between IBT Bancorp, Inc., a Michigan bank holding company
("IBT") and FSB Bancorp, Inc., a Michigan bank holding company ("FSB").
WHEREAS, the Boards of Directors of IBT and FSB have approved,
and deem it advisable and in the best interests of their respective companies
and their shareholders to consummate the business combination transaction
provided for herein in which FSB will, subject to the terms and conditions set
forth herein, merge with and into IBT (the "Merger");
WHEREAS, IBT and FSB desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
WHEREAS, for Federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization under the provisions of Section 368
of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, for accounting purposes, it is intended that the
Merger shall be accounted for as a "pooling of interests"; and
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
1.1 Effective Time of the Merger. Subject to the provisions of
this Agreement, a certificate of merger (the "Certificate of Merger") shall be
duly prepared, executed and acknowledged by the Surviving Corporation (as
defined in Section 1.3(b)) and thereafter delivered for filing to the Department
of Consumer and Industry Services, Corporation Securities and Land Development
Bureau of the State of Michigan, as provided in the Michigan Business
Corporation Act (the "MBCA"), as soon as practicable on or after the Closing
Date (as defined in Section 1.2). The Merger shall become effective upon the
filing of the Certificate of Merger with the Department of Consumer and Industry
Services, Corporation Securities and Land Development Bureau of the State of
Michigan or at such time thereafter as IBT and FSB may agree in writing to
provide in the Certificate of Merger (the "Effective Time").
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1.2 Closing. Subject to the terms and conditions hereof, the
closing of the Merger (the "Closing") will take place at 5:00 p.m. on a date to
be specified by the parties, which shall be the fifth business day after the
satisfaction or waiver (subject to applicable law) of the latest to occur of the
conditions set forth in Section 6.1, 6.2(c) and 6.3(c) hereof (the "Closing
Date"), at the offices of IBT in Mt. Pleasant, Michigan, unless another time,
date or place is agreed to in writing by the parties hereto.
1.3 Effects of the Merger.
(a) At the Effective Time, (i) the separate existence
of FSB shall cease and FSB shall be merged with and into IBT, (ii) the Articles
of Incorporation of IBT, as in effect immediately prior to the Effective Time
shall be the Articles of Incorporation of the Surviving Corporation until duly
amended in accordance with applicable law, and (iii) the Bylaws of IBT, as in
effect immediately prior to the Effective Time shall be the By-laws of the
Surviving Corporation until amended in accordance with applicable law.
(b) As used in this Agreement, the term "Constituent
Corporations" shall mean IBT and FSB and the term "Surviving Corporation" shall
mean IBT.
(c) At and after the Effective Time, the Merger will
have the effects set forth in Sections 701 through 774 of the MBCA.
1.4 Materiality. As used in this Agreement, (i) any reference
to any event, change or effect being "material" with respect to any entity means
an event, change or effect which is material in relation to the financial
condition, properties, assets, liabilities, business or operations of such
entity and its Subsidiaries taken as a whole and (ii) the term "material adverse
effect" means, with respect to FSB, IBT or the Surviving Corporation, as the
case may be, a material adverse effect on the business, assets, results of
operations or financial condition of such party and its Subsidiaries taken as a
whole or on the ability of such party to perform its obligations hereunder or to
consummate the transactions contemplated hereby; it being understood that a
material adverse effect on any party shall not include a change with respect to
such party resulting from any change in law, rule or regulation or generally
accepted accounting principles which impairs both FSB and IBT in a substantially
similar manner.
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ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock.
(a) Conversion. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
FSB's common stock no par value ("FSB Common Stock"), subject to Section 2.2(e),
each issued and outstanding share of FSB's Common Stock shall be converted into
validly issued, fully paid and nonassessable shares of IBT common stock, no par
value ("IBT Common Stock"). The number of shares of IBT Common Stock exchanged
for shares of FSB Common Stock (the "Exchange Rate") shall be calculated in
accordance with Section 2.1(b). All such shares of FSB Common Stock shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist. Each FSB shareholder's certificate or certificates previously
representing shares of FSB Common Stock (each a "Certificate") shall be
aggregated (if a single shareholder holds more than one Certificate) and
exchanged for a certificate representing whole shares of IBT Common Stock and
cash in lieu of any fractional share issued in consideration therefor upon the
surrender of such Certificate or Certificates in accordance with Section 2.2,
without any interest thereon. Subject to Section 4.1, in the event that,
subsequent to the date of this Agreement but prior to the Effective Time, the
outstanding shares of IBT Common Stock shall have been increased, decreased,
changed into or exchanged for a different number or kind of shares or securities
through a reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, or other similar change in IBT's
capitalization, or exchanged or converted into shares or securities of another
corporation, then an appropriate and proportionate adjustment shall be made to
the Exchange Rate.
(b) Conversion Rate. The Exchange Rate for purposes
hereof shall be 2.1362 shares of IBT Common Stock for each outstanding share of
FSB Common Stock, based on 408,237 shares of FSB Common Stock outstanding and
2,966,973 shares of IBT Common Stock outstanding. Calculations will be rounded
to three decimal places. Any fractional share will be paid in cash in accordance
with Section 2.2(e).
(c) Cancellation of IBT-Owned Stock. All shares of
FSB Common Stock that are owned by IBT or any direct or indirect wholly owned
Subsidiary of IBT, other than shares of common stock held directly or indirectly
in trust accounts, managed accounts and the like or otherwise held in a
fiduciary capacity that are beneficially owned by third parties ("trust account
shares") shall be canceled and retired and shall cease to exist and no stock of
IBT or other consideration shall be delivered in exchange therefor. All shares
of IBT Common Stock that are owned by FSB (other than trust account shares)
shall become authorized but unissued shares of IBT.
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(d) Shareholders' Right of Dissent. Any holder of
shares of FSB's Common Stock who does not vote in favor of the Merger at the
meeting of shareholders of FSB and has given notice in writing to the presiding
officer prior to the Merger vote that he or she intends to demand payment for
his or her shares of FSB Common Stock if the Merger is effectuated, shall be
entitled to receive the value of the FSB Common Stock so held by him or her in
accordance with Sections 761 through 774 of the MBCA.
2.2 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, IBT
shall deposit with ▇▇▇▇▇▇▇▇ Bank and Trust or such other bank or trust company
acceptable to the parties (the "Exchange Agent"), for the benefit of the holders
of shares of FSB Common Stock, certificates dated the Effective Time
representing the shares of IBT Common Stock and the cash in lieu of fractional
shares (such cash and certificates for shares of IBT Common Stock together with
any dividends or distributions with respect thereto, being hereinafter referred
to as the "Exchange Fund") to be issued pursuant to Section 2.1 and paid
pursuant to Section 2.2(b) in exchange for outstanding shares of FSB Common
Stock.
(b) Exchange Procedures. On the next business day
after the Effective Time, IBT shall cause the Exchange Agent to mail to each
holder of record of a Certificate or Certificates (i) a letter of transmittal
which shall specify that delivery shall be effective, and risk of loss and title
to the Certificate(s) shall pass, only upon delivery of the Certificate(s) to
the Exchange Agent and shall be in such form and have such other provisions as
IBT and FSB may reasonably specify and (ii) instructions for use in effecting
the surrender of the Certificate(s) in exchange for a certificate representing
shares of IBT Common Stock and cash in lieu of a fractional share. Upon
surrender of a shareholder's Certificate or Certificates for cancellation to the
Exchange Agent together with such letter of transmittal, duly executed, the
holder of such Certificate(s) shall be entitled to receive in exchange therefor
(1) a certificate representing the number of whole shares of IBT Common Stock
and (2) a check representing the amount of cash in lieu of a fractional share,
if any, and unpaid dividends and distributions, if any, which such holder has
the right to receive in respect of the Certificate(s) surrendered, and the
Certificate(s) so surrendered shall forthwith be cancelled. No interest will be
paid or accrued on the cash in lieu of fractional shares and unpaid dividends
and distributions, if any, payable to holders of Certificates. In the event of a
transfer of ownership of FSB Common Stock which is not registered in the
transfer records of FSB, a Certificate representing the proper number of shares
of IBT Common Stock, together with a check for the cash to be paid in lieu of
any fractional share, may be issued to such a transferee if the Certificate
representing such FSB Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid.
(c) Distributions with Respect to Unexchanged Shares;
Voting. The Exchange Agent shall receive and hold, for distribution without
interest to the first record
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holder of the certificate or certificates representing shares of FSB Common
Stock, all dividends and other distributions paid on shares of IBT Common Stock
held in the Exchange Agent's name as agent. Holders of unsurrendered
Certificates shall not be entitled to vote after the Effective Time at any
meeting of IBT shareholders until they have exchanged their Certificates.
(d) Transfers. After the Effective Time, there shall
be no transfers on the stock transfer books of FSB of the shares of FSB Common
Stock which were outstanding immediately prior to the Effective Time. If after
the Effective Time, Certificates are presented to the Surviving Corporation,
they shall be canceled and exchanged for the shares of IBT Common Stock and cash
in lieu of fractional shares, if any, deliverable in respect thereof pursuant to
this Agreement. Certificates surrendered for exchange by any person constituting
an "affiliate" of FSB for purposes of Rule 145 under the Securities Act of 1933,
as amended (the "Securities Act"), shall not be exchanged until IBT has received
a written agreement from such person as provided in Section 5.6.
(e) Fractional Shares. No fractional shares of IBT
Common Stock shall be issued pursuant hereto. In lieu of the issuance of any
fractional share, cash adjustments will be paid to holders in respect of any
fractional share of IBT Common Stock that would otherwise be issuable, and the
amount of such cash adjustment shall be equal to such fractional proportion of
the Trading Value of a share of IBT Common Stock. For purposes of calculating
fractional shares, a holder of FSB Common Stock with more than one Certificate
shall receive cash only for the fractional share remaining after aggregating all
of his or her FSB Common Stock to be exchanged.
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund (including the proceeds of any investments thereof and any IBT
Common Stock) that remains unclaimed by the shareholders of FSB for twelve
months after the Effective Time shall be paid to IBT. Any shareholders of FSB
who have not theretofore complied with this Article II shall thereafter look
only to IBT for payment of their shares of IBT Common Stock, cash in lieu of
fractional shares and unpaid dividends and distributions on the IBT Common Stock
deliverable without any interest thereon. Notwithstanding the foregoing, IBT,
the Exchange Agent nor any other person shall be liable to any former holder of
shares of FSB Common Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(g) Lost or Destroyed Shares. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by the Exchange Agent, the posting by such
person of a bond in such amount as IBT may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the shares
of IBT
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Common Stock and cash in lieu of fractional shares deliverable in respect
thereof pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of FSB. FSB represents and
warrants to IBT as follows:
(a) Organization, Standing and Power. FSB is a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended (the "BHC Act"). Farmers State Bank of Breckenridge is a wholly-owned
subsidiary of FSB and a state bank organized under the laws of the State of
Michigan. Each of FSB and its Subsidiaries is a corporation or state bank duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and is duly qualified and in good standing to do business in each
jurisdiction in which the failure to do so would have a material adverse effect
on FSB. FSB has furnished IBT true and correct copies of its and its
Subsidiaries' articles of incorporation and by-laws, as amended.
(b) Capital Structure.
(i) As of the date hereof, the authorized
capital stock of FSB consisted of 600,000 shares of FSB Common Stock, and
408,237 shares of FSB Common Stock were outstanding. The maximum number of
shares of FSB Common Stock that would be outstanding as of the Effective Time if
all options, warrants, conversion rights and other rights with respect thereto
were exercised is 408,237. All outstanding shares of FSB Common Stock are
validly issued, fully paid and nonassessable and not subject to any preemptive
rights.
(ii) As of the date hereof, FSB does not have
outstanding any bonds, debentures, notes or other indebtedness the holders of
which have the right to vote (or convertible into or exercisable for securities
having the right to vote) with the shareholders of FSB on any matter ("Voting
Debt").
(iii) As of the date of this Agreement, except
as set forth in Section 3.1(b)(iii) of the disclosure schedule of FSB (the "FSB
Disclosure Schedule") delivered to IBT prior to the execution of this Agreement
and except for this Agreement, FSB does not have outstanding any options,
warrants, calls, rights, commitments or agreements of any character to which FSB
or any of its Subsidiaries is a party or is bound obligating FSB or any of its
Subsidiaries to issue, deliver or sell additional shares of capital stock or any
Voting Debt of FSB or of any of its Subsidiaries or obligating FSB or any of its
Subsidiaries to grant,
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extend or enter into any such options, warrant, call, right, commitment or
agreement. From and after the Effective Time, there will be no option, warrant,
call, right or agreement obligating FSB or any of its Subsidiaries to issue,
deliver or sell any shares of capital stock or any Voting Debt of FSB or any of
its Subsidiaries, or obligating FSB or any of its Subsidiaries to grant, extend
or enter into any such option, warrant, call, right or agreement. As of the date
hereof, except as set forth in Section 3.1(b)(iii) of the FSB Disclosure
Schedule, there are no outstanding contractual obligations of FSB or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of FSB or any of its Subsidiaries.
(iv) Since December 31, 1999, neither FSB nor
any of its Subsidiaries have (A) issued or permitted to be issued any shares of
capital stock, or securities exercisable for or convertible into shares of
capital stock of FSB or any of its Subsidiaries; (B) repurchased, redeemed or
otherwise acquired, directly or indirectly through one or more FSB Subsidiaries,
any shares of capital stock of FSB or any of its Subsidiaries (other than the
acquisition of trust account shares) except in connection with internal
reorganizations, consolidations, liquidations or mergers and in connection with
the items set forth in Section 3.1(b)(iv) of the FSB Disclosure Schedule; or (C)
in the case of FSB, declared, set aside, made or paid to the shareholders of FSB
dividends or other distributions on the outstanding shares of capital stock of
FSB, other than regular semi-annual cash dividends on the FSB Common Stock at a
rate not in excess of the regular semi-annual cash dividends most recently
declared by FSB prior to the date of this Agreement.
(c) Authority.
(i) FSB has all requisite corporate power and
authority to enter into this Agreement and, subject to approval of this
Agreement by the shareholders of FSB, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transaction contemplated hereby have been duly authorized by
all necessary corporate action on the part of FSB subject to approval by the
shareholders of FSB. This Agreement has been duly executed and delivered by FSB
and constitutes a valid and binding obligation of FSB enforceable in accordance
with its terms except as enforcement may be limited by general principles of
equity, whether applied in a court of law or a court of equity, and bankruptcy,
insolvency and similar laws, affecting creditors' rights and remedies generally.
(ii) The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
conflict with or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or the loss of a material benefit
under or the creation of a lien, pledge, security interest, charge or other
encumbrance on assets (any such conflict, violation, default, right, loss or
creation being referred to herein as a "Violation") pursuant to, any provision
of the Articles of Incorporation (the "FSB Articles") or By-laws of FSB, or the
articles of incorporation, by-laws or other governing
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document of Farmers State Bank of Breckenridge or any other Subsidiary of FSB
or, except as disclosed in writing in Section 3.1(c)(ii) of the FSB Disclosure
Schedule and subject to obtaining or making the consents, approvals, orders,
registrations, declarations and filings referred to in paragraph (iii) below, be
or result in any Violation pursuant to any loan or credit agreement, note,
mortgage, indenture, lease, FSB Benefit Plan or other agreement, obligation,
instrument, permit, franchise, license, judgment, order, statute, law, rule or
regulation applicable to FSB, Farmers State Bank of Breckenridge or any other
Subsidiary of FSB or their respective properties or assets which Violations
would in the aggregate have a material adverse effect on FSB.
(iii) No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (each a "Governmental Entity"), is required
by or with respect to FSB, Farmers State Bank of Breckenridge or any other
Subsidiary of FSB in connection with the execution and delivery of this
Agreement by FSB or the consummation by FSB of the transactions contemplated
hereby, the failure of which to obtain or make would in the aggregate have a
material adverse effect on FSB or on its ability to perform its obligations
hereunder, except for (A) the filing of an application and notice with the Board
of Governors of the Federal Reserve System (the "Federal Reserve") under the BHC
Act, and approval of same, (B) the filing with the Securities and Exchange
Commission (the "SEC") of any required proxy statement relating to the meeting
of FSB shareholders to be held in connection with this Agreement and the
transactions contemplated hereby (the "Proxy Statement"), (C) the filing of the
Certificate of Merger with the State of Michigan, and (D) the filing of an
application/notice with the State of Michigan Financial Institutions Bureau.
(d) Compliance with Banking Regulations. FSB and its
Subsidiaries have (1) continuously complied with all material federal and state
banking laws and regulations, including all required filings, except for minor
compliance matters, which do not, in the aggregate, have a material adverse
effect on FSB; (2) timely filed using complete and accurate information, all
documents required by Federal Reserve Regulation Y, all call reports, all
documents required for Federal Deposit Insurance, all documents required by the
Michigan Financial Institutions Bureau, and all other required filings, except
for minor filing omissions or inaccuracies which do not, in the aggregate, have
a material adverse effect on FSB; and, (3) have cooperated in all regulatory
audits without concealing any material information.
(e) Information Supplied. None of the information
supplied or to be supplied by FSB or its Subsidiaries for inclusion or
incorporation by reference in (i) the Registration Statement on Form S-4 to be
filed with the SEC by IBT in connection with the issuance of shares of IBT
Common Stock in the Merger (including the Proxy Statement and prospectus
constituting a part thereof, the "S-4") will, at the time the S-4 becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any
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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 FSB shareholders and at the
time of the meeting of shareholders of FSB to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. The Proxy Statement (except for such portions
thereof that relate only to IBT) will comply in all material respects with the
provisions of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations thereunder, and the S-4 (except for such
portions thereof that relate only to IBT) will comply in all material respects
with the provisions of the Securities Act and the rules and regulations
thereunder.
(f) Compliance with Applicable Laws. FSB and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities which are necessary for the operation of
the business of FSB and its Subsidiaries (the "FSB Permits"), except permits,
licenses, variances, exemptions, orders or approvals for which the failure to
hold would not, individually or in the aggregate, have a material adverse effect
on FSB. FSB and its Subsidiaries are in compliance in all material respects with
the terms of the FSB Permits and all applicable laws and regulations, except for
possible violations which, individually or in the aggregate, would not have a
material adverse effect on FSB. Except as set forth in Section 3.1(f) of the FSB
Disclosure Schedule, the businesses of FSB and its Subsidiaries are not being
conducted in violation of any law, ordinance, regulation, order, writ, rule or
decree of any Governmental Entity, except for possible violations which
individually or in the aggregate would not have a material adverse effect on
FSB. As of the date of this Agreement, to the knowledge of FSB, no
investigations by any Governmental Entity with respect to FSB or any of its
Subsidiaries is pending or threatened, other than investigations listed in
Section 3.1(f) of the FSB Disclosure Schedule.
(g) Litigation. FSB has furnished IBT copies of (i)
all attorney responses to the request of the independent auditors for FSB with
respect to loss contingencies as of December 31, 1999, and (ii) a written list
of legal and regulatory proceedings filed and served against FSB or any FSB
Subsidiary since said date. Except as set forth in Section 3.1(g) of the FSB
Disclosure Schedule and except for any broad or national litigation that does
not name FSB, and that affects all financial institutions generally, there is no
suit, action or proceeding pending that has been served upon FSB or, to the
knowledge of FSB, threatened against or affecting FSB or any of its
Subsidiaries, nor is there any judgment, decree, injunction, or order of any
Governmental Entity or arbitrator outstanding against FSB or any of its
Subsidiaries.
(h) Taxes. FSB and each of its Subsidiaries have
filed all tax returns required to be filed by any of them, which tax returns are
true, correct and complete in all material respects, and have paid all taxes
required to be paid as shown on such returns. Except as set forth in Section
3.1(h) of the FSB Disclosure Schedule, no deficiencies for any
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taxes have been proposed, asserted or assessed against FSB or any of its
Subsidiaries. Except with respect to claims for refund, the Federal income tax
returns of FSB and each of its Subsidiaries consolidated in such returns have
been examined by and settled with the United States Internal Revenue Service
(the "IRS"), or the statute of limitations has expired (and no waiver extending
the statute of limitations has been requested or granted), for all taxable years
ending on or before December 31, 1995. For the purpose of this Agreement, (1)
the term "tax" (including, with correlative meaning, the terms "taxes" and
"taxable"), includes all Federal, state, local and foreign income, profits,
franchise, gross receipts, payroll, sales, employment, use, property,
withholding, excise, occupancy and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts; and (2) the term "tax return" includes all returns
and reports (including elections, declarations, disclosures, schedules,
estimates and information returns) required to be supplied to a tax authority
relating to taxes.
(i) Certain Agreements. Except as set forth in
Section 3.1(i) of the FSB Disclosure Schedule, as of the date of this Agreement,
neither FSB nor any of its Subsidiaries is a party to any oral or written (i)
consulting agreement (other than data processing, software programming and
licensing contracts entered into in the ordinary course of business) not
terminable on 90 days or less notice, or any union, guild or collective
bargaining agreement, (ii) agreement with any executive officer or other key
employee of FSB or any of its Subsidiaries the benefits of which are contingent,
or the terms of which are materially altered, upon the occurrence of a
transaction involving FSB or any Subsidiary of the nature contemplated by this
Agreement, (iii) agreement with respect to any executive officer of FSB or any
Subsidiary of FSB providing any term of employment or compensation guarantee
extending for a period longer than three (3) years, or (iv) agreement or plan,
including any stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement.
(j) Benefit Plans.
(i) Section 3.1(j)(i) of the FSB Disclosure
Schedule lists each employee benefit plan, whether the plan be written or oral,
(including, without limitation, any "employee benefit plan," as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and any plan for retirees that provides medical insurance or other
form of benefit described in Section 3(1) of ERISA) (all the foregoing being
herein called "Benefit Plans"), maintained or contributed to by FSB, Farmers
State Bank of Breckenridge or any other Subsidiary of FSB (the "FSB Benefit
Plans"). For each FSB Benefit Plan, FSB has made available to IBT a true and
correct copy of (A) the most recent annual report (Form 5500) filed with the
IRS, (B) such FSB Benefit Plan, (C) each trust agreement relating to such FSB
Benefit Plan, (D) the most recent summary plan description for each FSB Benefit
Plan for which a summary plan description is required, (E) the most recent
actuarial report or valuation relating to a FSB Benefit Plan subject to Title IV
of ERISA, and (F) the
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most recent determination letter issued by the IRS with respect to any FSB
Benefit Plan qualified under Section 401(a) of the Code.
(ii) The current value of the assets of each of
the FSB Benefit Plans subject to Title IV of ERISA exceeds that plan's "Benefit
Liabilities," as that term is defined in Section 4001(a)(16) of ERISA, when
determined under actuarial factors that would apply if that plan terminated in
accordance with all applicable legal requirements.
(iii) Except as set forth in Section 3.1(j)(iii)
of the FSB Disclosure Schedule, to the best knowledge of FSB and its
Subsidiaries, each of the FSB Benefit Plans has been administered in compliance
with its terms in all material respects and is in compliance in all material
respects with the applicable provisions of ERISA (including, but not limited to,
the funding and prohibited transactions provisions thereof), the Code and other
applicable laws.
(iv) There has been no reportable event within
the meaning of Section 4043(b) of ERISA (for which a waiver did not apply) or
any accumulated funding deficiency (whether or not waived) within the meaning of
Section 412 of the Code with respect to any FSB Benefit Plan.
(v) All contributions to the FSB Benefit Plans
required thereunder have been made or provided for.
(vi) Since September 2, 1974, no contributions
have been made by FSB, Farmers State Bank of Breckenridge or any Subsidiary of
FSB to any "Multiemployer Plan," as such term is defined in Section 3(37) of
ERISA.
(vii) To the best knowledge of FSB and Farmers
State Bank of Breckenridge, each of the FSB Benefit Plans which is intended to
be a qualified plan within the meaning of Section 401(a) of the Code is so
qualified, and FSB is not aware of any fact or circumstances which would
adversely affect the qualified status of any such plan.
(viii) With respect to the FSB Benefit Plans,
individually and in the aggregate, no event has occurred and, to the knowledge
of FSB or Farmers State Bank of Breckenridge, there exists no condition or set
of circumstances in connection with which FSB or any of its Subsidiaries could
be subject to any liability that is reasonably likely to have a material adverse
effect on FSB (except liability for benefits claims and funding obligations
payable in the ordinary course) under ERISA, the Code or any other applicable
law.
(k) Subsidiaries. Section 3.1(k) of the FSB
Disclosure Schedule sets forth all of the subsidiaries of FSB as of the date of
this Agreement (each a "Subsidiary" and together the "Subsidiaries") and
indicates for each such Subsidiary, as of such date, the jurisdiction of
organization. FSB owns, either directly or indirectly, all shares of the
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outstanding capital stock of each such Subsidiary, except as otherwise set forth
in Section 3.1(k) of the FSB disclosure schedule. Each of FSB's Subsidiaries
that is a bank (as defined in the BHC Act) is an "insured bank" as defined in
the FDIA and applicable regulations thereunder. All of the shares of capital
stock of each of the Subsidiaries held by FSB or by another Subsidiary of FSB
are fully paid and nonassessable and are owned by FSB or a Subsidiary of FSB
free and clear of any material claim, lien or encumbrance.
(l) Agreements with Bank Regulators. Except as
previously disclosed in writing, neither FSB nor any of its Subsidiaries is a
party to any written agreement or memorandum of understanding with, or a party
to any commitment letter or similar undertaking to, or is subject to any order
or directive by, or is a recipient of any extraordinary supervisory letter from,
or has adopted any board resolutions at the request of, Federal or state
Governmental Entities charged with the supervision or regulation of banks or
bank holding companies or engaged in the insurance of bank deposits ("Bank
Regulators"), nor has FSB been advised by any Bank Regulator that it is
contemplating issuing or requesting any such order, directive, written
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter, board resolutions or similar undertaking.
(m) Absence of Certain Changes or Events. Since
December 31, 1999, and except as set forth in Section 3.1(m) of the FSB
Disclosure Schedule, FSB and its Subsidiaries have not incurred any material
liability, except in the ordinary course of their business consistent with their
past practices, nor has there been any change, or any event involving a
prospective change, in the business, financial condition or result of operations
of FSB or any of its Subsidiaries which has had, or is reasonably likely to
have, a material adverse effect on FSB (other than as a result of changes in
banking laws or regulations of general applicability or interpretations
thereof).
(n) Environmental Matters. There is no legal,
administrative, or other proceeding, claim, or action that has been served on
FSB of any nature seeking to impose, or that could result in the imposition of,
on FSB or any FSB Subsidiary, any liability relating to the release of hazardous
substances as defined under any local, state or federal environmental statute,
regulation or ordinance including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), pending or to the best of FSB's knowledge, threatened against FSB or
any FSB Subsidiary the result of which has had or could reasonably be expected
to have a material adverse effect upon FSB and FSB's Subsidiaries taken as a
whole; to the best of FSB's knowledge there is no reasonable basis for any such
proceeding, claim or action; and to the best of FSB's knowledge neither FSB nor
any FSB Subsidiary is subject to any agreement, order, judgment, or decree by or
with any court, governmental authority or third party imposing any such
environmental liability. FSB has provided IBT with copies of all environmental
assessments, reports, studies and other related information in its possession
with respect to each bank facility and each nonresidential OREO property.
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(o) Approvals. FSB knows of no reason why all
Requisite Regulatory Approvals (as defined in Section 6.1(b)) should not be
obtained without the imposition of any condition or restriction of the type
referred to in Section 6.1(f).
(p) Brokers and Finders. Except for the retention by
FSB of Austin Associates, Inc., none of FSB's or any of its Subsidiaries' nor
any of their respective directors, officers or employees has employed any broker
or finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or similar payments in connection with the transactions
contemplated by this Agreement.
(q) Labor Matters. Except as set forth in Section
3.1(q) of the FSB Disclosure Schedule, neither FSB nor any of its Subsidiaries
is a party to, or bound by, any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization, nor
is it or any of its Subsidiaries the subject of any material proceeding
asserting that it or any Subsidiary has committed an unfair labor practice or
seeking to compel it 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 its knowledge,
threatened.
(r) Loan Portfolio. Section 3.1(r) of the FSB
Disclosure Schedule completely and accurately lists all loans of Farmers State
Bank of Breckenridge in force as of the date of this Agreement (the "Loans"),
and as to each Loan accurately describes: (i) the nature of the loan (i.e.,
whether consumer, commercial or participation), (ii) whether the loan is current
or in default more than 30 days, and if in default more than 30 days, FSB's
estimate of the likelihood of recovery, (iii) whether any federal or state
regulatory agency has listed the loan as an adversely classified asset in any
report, examination or other document provided to FSB, and (iv) whether to the
knowledge of FSB the borrower has asserted or threatened to assert any lender
liability claims resulting from the Loans. FSB warrants that each Loan is
legally enforceable under its terms. FSB makes no warranty regarding the credit
quality of any Loan or the adequacy of collateral securing any Loan.
(s) Insurance. FSB and each FSB Subsidiary is
presently insured, and during each of the past five calendar years (or during
such lesser period of time as FSB has owned such FSB Subsidiary) has been
insured, for reasonable amounts with financially sound and reputable insurance
companies against such risks as companies engaged in a similar business would,
in accordance with good business practice, customarily be insured and has
maintained all insurance required by applicable law and regulation.
(t) FSB Financial Statements. The consolidated
balance sheets of FSB and FSB's Subsidiaries as of December 31, 1999 and 1998
and related consolidated statements of income, comprehensive income, changes in
shareholders' equity and cash flows for the three years ended December 31, 1999,
together with the notes thereto, certified by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.L.C.
(collectively, the "FSB Financial Statements") have been
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prepared in accordance with generally accepted accounting principles applied on
a consistent basis and present fairly the consolidated financial position of FSB
and FSB's Subsidiaries at the dates and the consolidated results of operations
and cash flows of FSB and FSB's Subsidiaries for the periods stated therein.
(u) Properties and Leases. Except as may be reflected
in the FSB Financial Statements and except for any lien for current taxes not
yet delinquent, FSB and each FSB Subsidiary have good title free and clear of
any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property reflected in FSB's
consolidated balance sheet as of December 31, 1999 and all real and personal
property acquired since such date, except such real and personal property as has
been disposed of in the ordinary course of business. All leases of real property
and all other leases material to FSB or any FSB Subsidiary pursuant to which FSB
or such FSB Subsidiary, as lessee, leases real or personal property, which
leases are described in Section 3.1(u) of the FSB Disclosure Schedule, are valid
and effective in accordance with their respective terms, and there is not, under
any such lease, any material existing default by FSB or such FSB Subsidiary or
any event which, with notice or lapse of time or both, would constitute such a
material default. Substantially all FSB's and each FSB Subsidiary's buildings
and equipment in regular use have been well maintained and are in good and
serviceable condition, reasonable wear and tear excepted.
(v) Material Interests of Certain Persons. Except as
set forth in Section 3.1(v) of the FSB Disclosure Schedule, to the best
knowledge of FSB no officer or director of FSB or any FSB Subsidiary, or any
"associate" (as such term is defined in Rule 14a-1 under the Exchange Act) of
any such officer or director, has any interest in any material contract or
property (real or personal), tangible or intangible, used in or pertaining to
the business of FSB or any FSB Subsidiary.
Section 3.1(v) of the FSB Disclosure Schedule sets
forth a correct and complete list of any loan from FSB or any FSB Subsidiary to
any present officer, director, employee or any associate or related interest of
any such person which was required under Regulation O of the Federal Reserve
Board to be approved by or reported to FSB's or such FSB Subsidiary's Board of
Directors.
(w) Administration of Trust Accounts. FSB and each
FSB Subsidiary has properly administered in all respects material and which
could reasonably be excepted to be material to the financial condition of FSB
and the FSB Subsidiaries taken as a whole, all accounts for which it acts as a
fiduciary, including but not limited to accounts for which it serves as a
trustee, agent, custodian, personal representative, guardian, conservator or
investment advisor, in accordance with the terms of the governing documents and
applicable state and federal law and regulation and common law. Neither FSB, any
FSB Subsidiary, nor any director, officer or employee of FSB or any FSB
Subsidiary has committed any breach of trust with respect to any such fiduciary
account which is material to or could reasonably be
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expected to be material to the financial condition of FSB and the FSB
Subsidiaries taken as a whole, and the accountings for each such fiduciary
account are true and correct in all material respects and accurately reflect the
assets of such fiduciary account.
(x) Required Shareholder Approval. The affirmative
vote of a majority in outstanding shares and qualified to vote of FSB is
sufficient to approve the Merger and this Agreement and the transactions
contemplated hereby pursuant to the MBCA and pursuant to the articles and bylaws
of FSB.
(y) Accounting Matters. Neither FSB nor any of its
Subsidiaries or affiliates has taken or agreed to take any action that would
prevent IBT from accounting for the business combination to be effected by the
Merger as a "pooling of interests."
3.2 Representations and Warranties of IBT. IBT represents and
warrants to FSB as follows:
(a) Organization Standing and Power. IBT is a bank
holding company registered under the BHC Act and has filed application with the
Federal Reserve Board to become a Financial Holding Company under the
▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act of 1999. Each of IBT and its Subsidiaries is a
corporation or state bank duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization, has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted and is duly qualified and in good
standing to do business in each jurisdiction in which the failure to do so would
have a material adverse effect on IBT.
(b) Capital Structure. As of the date hereof, the
authorized capital stock of IBT consisted of 4,000,000 shares of IBT Common
Stock, and 2,966,973 shares of IBT Common Stock were outstanding.
(c) Authority.
(i) IBT has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by IBT
and constitutes a valid and binding obligation of IBT, enforceable in accordance
with its terms, except as enforcement may be limited by general principles of
equity, whether applied in a court of law or a court of equity, and bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
(ii) The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
conflict with or result in any Violation pursuant to any provision of the IBT
Articles of Incorporation or By-laws, or the articles of incorporation, by-laws
or other governing document of any other Subsidiary of IBT, or, except as
disclosed in writing in Section 3.2(c)(ii) of the disclosure schedule of IBT
(the
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"IBT Disclosure Schedule") and subject to obtaining or making the consents,
approvals, orders, registrations, declarations and filings referred to in
paragraph (iii) below, be or result in any Violation pursuant to any loan or
credit agreement, note, mortgage, indenture, lease, IBT Benefit Plan or other
agreement, obligation, instrument, permit, franchise, license, judgment, order,
statute, law, rule or regulation applicable to IBT or any Subsidiary of IBT or
their respective properties or assets which Violations would in the aggregate
have a material adverse effect on IBT.
(iii) No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to IBT or any Subsidiary of IBT in
connection with the execution and delivery of this Agreement by IBT or the
consummation by IBT or any Subsidiary of IBT, as the case may be, of the
transactions contemplated hereby, the failure of which to obtain or make would
in the aggregate have a material adverse effect on IBT or on its ability to
perform its obligations hereunder, except for (A) the filing of applications and
notices with the Federal Reserve under the BHC Act, and approval of same, (B)
the filing with the SEC of the Proxy Statement and the S-4, (C) such filings and
approvals as are required to be made or obtained under the securities or "Blue
Sky" laws of various states in connection with the issuance of IBT Common Stock
contemplated by this Agreement, (D) the filing of the Certificate of Merger with
the State of Michigan, and (E) the filing of an application/notice with the
State of Michigan Financial Institutions Bureau.
(d) Compliance with Banking Regulations. IBT and
its Subsidiaries have (1) continuously complied with all material federal and
state banking laws and regulations, including all required filings, except for
minor compliance matters, which do not, in the aggregate, have a material
adverse effect on IBT; (2) timely filed using complete and accurate information,
all documents required by Federal Reserve Regulation Y, all call reports, all
documents required for Federal Deposit Insurance, all documents required by the
Michigan Financial Institutions Bureau, and all other required filings, except
for minor filing omissions or inaccuracies which do not, in the aggregate, have
a material adverse effect on IBT; and, (3) have cooperated in all regulatory
audits without concealing any material information.
(e) Information Supplied. None of the information
supplied or to be supplied by IBT or its Subsidiaries for inclusion or
incorporation by reference in (i) the S-4 will, at the time the S-4 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 FSB shareholders and at the time of the meeting of shareholders of FSB to be
held in connection with the Merger, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. The Proxy
Statement (except for such portions thereof that relate only to FSB) will comply
in all material
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respects with the provisions of the Exchange Act and the rules and regulations
thereunder, and the S-4 (except for such portions thereof that relate only to
FSB) will comply in all material respects with the provisions of the Securities
Act and the rules and regulations thereunder.
(f) Compliance With Applicable Laws. IBT and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities which are necessary for the operation of
the businesses of IBT and its Subsidiaries (the "IBT Permits"), except for IBT
Permits the failure of which to hold would not, individually or in the
aggregate, have a material adverse effect on IBT. IBT and its Subsidiaries are
in compliance in all material respects with the terms of the IBT Permits and all
applicable laws and regulations, except for possible violations which,
individually or in the aggregate, would not have a material adverse effect on
IBT. Except as set forth on Section 3.2(f) of the IBT Disclosure Schedule, the
businesses of IBT and its Subsidiaries are not being conducted in violation of
any law, ordinance, regulation, order, writ, rule or decree of any Governmental
Entity, except for possible violations which, individually or in the aggregate,
would not have a material adverse effect on IBT. As of the date of this
Agreement, no investigation by any Governmental Entity with respect to IBT, or
any of its Subsidiaries is pending or threatened, other than, in each case,
those the outcome of which, as far as reasonably can be foreseen, will not have
a material adverse effect on IBT.
(g) Litigation. Except as set forth in Section
3.2(g) of the IBT Disclosure Schedule and except for any broad or national
litigation that does not name IBT, and that affects all financial institutions
generally, there is no suit, action or proceeding pending or, to the knowledge
of IBT, threatened against or affecting IBT or any of its Subsidiaries, nor is
there any judgment, decree, injunction, or order of any Governmental Entity or
arbitrator outstanding against IBT or any of its Subsidiaries.
(h) Taxes. IBT and each of its Subsidiaries have
filed all tax returns required to be filed by any of them, which tax returns are
true, correct and complete in all material respects, and have paid all taxes
required to be paid as shown on such returns. Except as set forth in Section
3.2(h) of the IBT Disclosure Schedule, no deficiencies for any taxes have been
proposed, asserted or assessed against IBT or any of its Subsidiaries. Except
with respect to claims for refund, the Federal income tax returns of IBT and
each of its Subsidiaries consolidated in such returns have been examined by and
settled with the IRS, or the statute of limitations has expired (and no waiver
extending the statute of limitations has been requested or granted), for all
taxable years ending on or before December 31, 1995. For the purpose of this
Agreement, (1) the term "tax" (including, with correlative meaning, the terms
"taxes" and "taxable"), includes all Federal, state, local and foreign income,
profits, franchise, gross receipts, payroll, sales, employment, use, property,
withholding, excise, occupancy and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts; and (2) the term "tax return" includes all returns
and reports (including elections, declarations, disclosures,
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schedules, estimates and information returns) required to be supplied to a tax
authority relating to taxes.
(i) Benefit Plans.
(i) Section 3.2(i)(i) of the IBT
Disclosure Schedule lists each employee benefit plan, whether the plan be
written or oral, (including, without limitation, any "employee benefit plan," as
defined in Section 3(3) of ERISA and any plan for retirees that provides medical
insurance or other form of benefit described in Section 3(1) of ERISA) (all the
foregoing being herein called "Benefit Plans"), maintained or contributed to by
IBT or any other Subsidiary of IBT (the "IBT Benefit Plans"). For each Benefit
Plan, IBT has made available to FSB a true and correct copy of (A) the most
recent annual report (Form 5500) filed with the IRS, (B) such IBT Benefit Plan,
(C) each trust agreement relating to such IBT Benefit Plan, (D) the most recent
summary plan description for each IBT Benefit Plan for which a summary plan
description is required, (E) the most recent actuarial report or valuation
relating to a IBT Benefit Plan subject to Title IV of ERISA, and (F) the most
recent determination letter issued by the IRS with respect to any IBT Benefit
Plan qualified under Section 401(a) of the Code.
(ii) The current value of the assets of
each of the IBT Benefit Plans subject to Title IV of ERISA exceeds that plan's
"Benefit Liabilities," as that term is defined in Section 4001(a)(16) of ERISA,
when determined under actuarial factors that would apply if that plan terminated
in accordance with all applicable legal requirements.
(iii) Except as set forth in Section
3.2(i)(iii) of the IBT Disclosure Schedule, to the best knowledge of IBT and its
Subsidiaries, each of the IBT Benefit Plans has been administered in compliance
with its terms in all material respects and is in compliance in all material
respects with the applicable provisions of ERISA (including, but not limited to,
the funding and prohibited transactions provisions thereof), the Code and other
applicable laws.
(iv) There has been no reportable event
within the meaning of Section 4043(b) of ERISA (for which a waiver did not
apply) or any accumulated funding deficiency (whether or not waived) within the
meaning of Section 412 of the Code with respect to any IBT Benefit Plan.
(v) All contributions to the IBT Benefit
Plans required thereunder have been made or provided for.
(vi) Since September 2, 1974, no
contributions have been made by IBT or any Subsidiary of IBT to any
"Multiemployer Plan," as such term is defined in Section 3(37) of ERISA.
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(vii) To the best knowledge of IBT, each
of the IBT Benefit Plans which is intended to be a qualified plan within the
meaning of Section 401(a) of the Code is so qualified, and IBT is not aware of
any fact or circumstances which would adversely affect the qualified status of
any such plan.
(viii) With respect to the IBT Benefit
Plans, individually and in the aggregate, no event has occurred and, to the
knowledge of IBT, there exists no condition or set of circumstances in
connection with which IBT or any of its Subsidiaries could be subject to any
liability that is reasonably likely to have a material adverse effect on IBT
(except liability for benefits claims and funding obligations payable in the
ordinary course) under ERISA, the Code or any other applicable law.
(j) Subsidiaries. Section 3.2(j) of the IBT
Disclosure Schedule sets forth all of the Subsidiaries of IBT as of the date of
this Agreement (each a "Subsidiary" and together the "Subsidiaries") and
indicates for each such Subsidiary, as of such date, the jurisdiction of
organization. IBT owns, either directly or indirectly, all shares of the
outstanding capital stock of each such Subsidiary. Each of IBT's Subsidiaries
that is a bank (as defined in the BHC Act) is an "insured bank" as defined in
the FDIA and applicable regulations thereunder. All of the shares of capital
stock of each of the Subsidiaries held by IBT or by another Subsidiary of IBT
are fully paid and nonassessable and are owned by IBT or a Subsidiary of IBT
free and clear of any material claim, lien or encumbrance.
(k) Agreements with Bank Regulators. Except as
previously disclosed in writing, neither IBT nor any of its Subsidiaries is a
party to any written agreement or memorandum of understanding with, or a party
to any commitment letter or similar undertaking to, or is subject to any order
or directive by, or is a recipient of any extraordinary supervisory letter from,
or has adopted any board resolutions at the request of Bank Regulators, nor has
IBT been advised by any Bank Regulator that it is contemplating issuing or
requesting any such order, directive, written agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter, board
resolutions or similar undertaking.
(l) Absence of Certain Changes or Events. Since
December 31, 1999, and except as set forth in Section 3.2(l) of the IBT
Disclosure Schedule, IBT and its Subsidiaries have not incurred any material
liability, except in the ordinary course of their business consistent with their
past practices, nor has there been any change, or any event involving a
prospective change, in the business, financial condition or result of operations
of IBT or any of its Subsidiaries which has had, or is reasonably likely to
have, a material adverse effect on IBT (other than as a result of changes in
banking laws or regulations of general applicability or interpretations
thereof).
(m) Capital Stock. At the Effective Time, IBT's
Common Stock issued pursuant to the Merger will be duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
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(n) Environmental Matters. There is no legal,
administrative, or other proceeding, claim, or action of any nature seeking to
impose, or that could result in the imposition of, on IBT or any IBT Subsidiary,
any liability relating to the release of hazardous substances as defined under
any local, state or federal environmental statute, regulation or ordinance
including, without limitation, CERCLA, pending or to the best of IBT's
knowledge, threatened against IBT or any IBT Subsidiary the result of which has
had or could reasonably be expected to have a material adverse effect upon IBT
and IBT's Subsidiaries taken as a whole; to the best of IBT's knowledge there is
no reasonable basis for any such proceeding, claim or action; and to the best of
IBT's knowledge neither IBT nor any IBT Subsidiary is subject to any agreement,
order, judgment, or decree by or with any court, governmental authority or third
party imposing any such environmental liability.
(o) Approvals. IBT knows of no reason why all
Requisite Regulatory Approvals (as defined in Section 6.1(b)) should not be
obtained without the imposition of any condition or restriction of the type
referred to in Section 6.1(f).
(p) Brokers and Finders. Except for the retention
by IBT of Austin Associates, Inc., none of IBT's or any of its Subsidiaries' nor
any of their respective directors, officers or employees has employed any broker
or finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or similar payments in connection with the transactions
contemplated by this Agreement.
(q) IBT Financial Statements. The consolidated
balance sheets of IBT and IBT's Subsidiaries as of December 31, 1999 and 1998
and related consolidated statements of income, changes in shareholders' equity
and comprehensive income, and cash flows for the three years ended December 31,
1999, together with the notes thereto, certified by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ P.C. and
included in IBT's Annual Report on Form 10-K for the fiscal year ended December
31, 1998 (the "IBT 10-K") as filed with the SEC, and the unaudited consolidated
balance sheets of IBT and its Subsidiaries as of September 30, 1999 and the
related unaudited consolidated statements of income, changes in shareholders'
equity and comprehensive income, and cash flows for the nine (9) months then
ended included in IBT's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1999, as filed with the SEC (collectively, the "IBT
Financial Statements"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis and present fairly (subject,
in the case of financial statements for interim periods, to normal recurring
adjustments) the consolidated financial position of IBT and its Subsidiaries at
the dates and the consolidated results of operations, changes in financial
position and cash flows of IBT and its Subsidiaries for the periods stated
therein.
(r) Properties and Leases. Except as may be
reflected in the IBT Financial Statements and except for any lien for current
taxes not yet delinquent, IBT and each IBT Subsidiary has good title free and
clear of any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property reflected in IBT's
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consolidated balance sheet as of September 30, 1999 included in IBT's Quarterly
Report on Form 10-Q for the period then ended, and all real and personal
property acquired since such date, except such real and personal property as has
been disposed of in the ordinary course of business. All leases of real property
and all other leases material to IBT or any IBT Subsidiary pursuant to which IBT
or such IBT Subsidiary, as lessee, leases real or personal property, are valid
and effective in accordance with their respective terms, and there is not, under
any such lease, any material existing default by IBT or such IBT Subsidiary or
any event which, with notice or lapse of time or both, would constitute such a
material default. Substantially all IBT's and each IBT Subsidiary's buildings
and equipment in regular use have been well maintained and are in good and
serviceable condition, reasonable wear and tear excepted.
(s) Accounting Matters. Neither IBT nor any of its
Subsidiaries or affiliates, has taken or agreed to take any action that would
prevent IBT from accounting for the business combination to be effected by the
Merger as a "pooling of interests".
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of FSB. During the period from the date of
this Agreement and continuing until the Effective Time, FSB agrees as to itself
and its Subsidiaries that, except as expressly contemplated or permitted by this
Agreement, or to the extent that IBT shall otherwise consent in writing:
(a) Ordinary Course. FSB and its Subsidiaries shall
carry on their respective businesses in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted and use all reasonable
efforts to preserve intact their present business organizations, maintain their
rights and franchises and preserve their relationships with customers, suppliers
and others having business dealings with them to the end their goodwill and
ongoing businesses shall not be impaired in any material respect. FSB shall not,
nor shall permit any of its Subsidiaries to (i) enter into any new material line
of business, (ii) increase or decrease the current number of their directors,
except as consistent with FSB's current Board of Directors' retirement policy,
(iii) change its or its Subsidiaries lending, investment, liability management
and other material banking policies in any respect which is material to such
party; or (iv) incur or commit to any capital expenditures or any obligations or
liabilities in connection therewith other than capital expenditures and
obligations or liabilities incurred or committed to in the ordinary course of
business consistent with past practices and the items shown in Section 4.1(a) of
the FSB Disclosure Schedule.
(b) Dividends; Changes in Stock. FSB shall not, nor
shall permit any of its Subsidiaries to, nor shall propose to (i) declare or pay
any dividends on or make other distributions in respect of any of its capital
stock, except for (A) the declaration and
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payment of regular semi-annual cash dividends by FSB in any amount not in excess
of $0.75 per share of FSB Common Stock with usual record and payment dates for
such dividends in accordance with FSB's past dividend practice, provided
further, however, that FSB shareholders shall be entitled to a dividend on FSB
Common Stock or IBT Common Stock, but not both, in the calendar quarter in which
the Closing shall occur, and (B) dividends or distributions by a wholly owned
Subsidiary of FSB; (ii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock; or (iii)
repurchase, redeem or otherwise acquire, or permit any Subsidiary to purchase or
otherwise acquire (other than as agent for shareholders reinvesting dividends
pursuant to any dividend reinvestment plan and except for the acquisition of
trust account shares), any shares of FSB's capital stock or any securities
convertible into or exercisable for any shares of its capital stock.
(c) Issuance of Securities. Except as set forth on
Section 4.1(c) of the FSB Disclosure Schedule, FSB shall not, nor shall it
permit any of its Subsidiaries to, issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock of
any class, any Voting Debt or any securities convertible into or exercisable
for, or any rights, warrants or options to acquire, any such shares or Voting
Debt, or enter into any agreement with respect to any of the foregoing, other
than issuance by a wholly owned Subsidiary of its capital stock to its parent,
except that FSB may issue shares of FSB Common Stock upon the exercise of
outstanding stock options as described in Section 4.1(c) of the FSB Disclosure
Schedule.
(d) No Solicitations. Except as the Board of
Directors of FSB deems necessary, on the advice of outside counsel, in the
exercise of its fiduciary obligations under applicable law; and provided,
however, that nothing contained in this Section 4.1(d) shall restrict or
prohibit any disclosure by FSB that is required, on the advice of outside
counsel, (i) in any document to be filed with a regulatory authority after the
date of this Agreement or (ii) in any document or statement otherwise required
under applicable law, FSB shall not permit any of its Subsidiaries to, nor shall
authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative or agent retained by it or any of its Subsidiaries to, solicit or
encourage (including by way of furnishing nonpublic information), or take any
other action to facilitate, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any takeover proposal (as
defined below), or agree or endorse any takeover proposal, or participate in any
discussions or negotiations, or provide third parties with any nonpublic
information, relating to any such inquiry or proposal. FSB shall promptly advise
IBT orally and in writing of any such inquiries or proposals, including all of
the material terms thereof. As used in this Agreement, "takeover proposal" shall
mean any tender or exchange offer, proposal for a merger, consolidation or other
business combination involving FSB or any Subsidiary of FSB or any proposal or
offer to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets of FSB or any Subsidiary of FSB other than
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the transactions contemplated or permitted by this Agreement (including, without
limitation, Section 4.1(f) hereof).
(e) No Acquisitions. FSB shall not, nor shall
permit any of its Subsidiaries to, acquire or agree to acquire, by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or division thereof or otherwise
acquire or agree to acquire any assets in each case; provided, however, that the
foregoing shall not prohibit (i) internal reorganization, consolidations or
dissolutions involving only existing Subsidiaries as permitted or directed by
this Agreement, (ii) foreclosures and other acquisitions related to previously
contracted debt, in each case in the ordinary course of business, or (iii)
acquisitions of financial assets and merchant banking activities, in each case
in the ordinary course of business.
(f) No Dispositions. Other than dispositions
permitted or required by this Agreement, dispositions described in Section
4.1(f) of the FSB Disclosure Schedule or dispositions in the ordinary course of
business consistent with past practices, FSB shall not, nor shall permit any of
its Subsidiaries to, sell, lease, encumber or otherwise dispose of, or agree to
sell, lease, encumber or otherwise dispose of, any of its assets (including
capital stock of Subsidiaries).
(g) Indebtedness. Other than in the ordinary course
of business consistent with past practice, FSB shall not, nor shall permit any
of its Subsidiaries to incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity, or make any
loan or advance other than in the ordinary course of business consistent with
past practice.
(h) Benefit Plans. Except as set forth in Section
4.1(h) of the FSB Disclosure Schedule, FSB agrees as to itself and its
Subsidiaries that it will not, without the prior written consent of IBT, (i)
enter into, adopt, amend (except as may be required by law) or terminate any FSB
Benefit Plan, as the case may be, or any other employee benefit plan or any
agreement, arrangement, plan or policy between FSB and one or more of its
directors or officers, (ii) make any contributions to any FSB Benefit Plan
except as required by the terms of such plan in effect as of the date hereof,
(iii) except for normal increases in the ordinary course of business consistent
with past practice that in the aggregate do not result in a material increase in
benefits or compensation expense to FSB, increase in any manner the compensation
or fringe benefits of any director, officer, or employee or pay any benefit not
required by any plan or arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock options, stock
appreciation rights, restricted stock, restricted stock units or performance
units or shares) or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing, or (iv) enter into or renew any
contract, agreement, commitment or arrangement providing for the payment of any
director, officer or employee of
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such party of compensation or benefits contingent, or the terms of which are
materially altered, upon the occurrence of any of the transactions contemplated
by this Agreement.
(i) Insurance. FSB and its subsidiaries shall
maintain the insurance coverage referenced in Section 3.1(s) through the
Effective Time.
4.2 Covenants of FSB and IBT. During the period from the
date of this Agreement and continuing until the Effective Time, FSB and IBT
agree as to themselves and their Subsidiaries that, except as expressly
contemplated or permitted by this Agreement, or to the extent that the parties
shall otherwise consent in writing:
(a) Governing Documents. Except in accordance with
this Agreement, no party shall amend or propose publicly to amend, or shall
permit any of its Subsidiaries to amend, the articles of incorporation, by-laws
or other governing document of such party in any way adverse to IBT, the holders
of IBT Common Stock or IBT's ability to consummate the transactions contemplated
hereby. Notwithstanding the foregoing, IBT shall be permitted to amend its
articles of incorporation to increase its authorized common stock to 10.0
million shares.
(b) Other Actions. No party shall, or shall permit
any of its Subsidiaries to, take any action that is intended to result in any of
its representations and warranties set forth in this Agreement being or becoming
untrue in any material respect, or in any of the conditions to the Merger set
forth in Article VI not being satisfied or in a violation of any provision of
this Agreement, or (unless such action is required by applicable law or sound
banking practice) which would adversely affect the ability of any of them to
obtain any of the Requisite Regulatory Approvals (as defined in Section 6.1(b))
without imposition of a condition or restriction of the type referred to in
Section 6.1(f) hereof except, in every case, as may be required by applicable
law.
(c) Advice of Changes; Government Filings. Each
party shall promptly advise the other orally and in writing of any change or
event having, or which could cause or constitute a material breach of any of the
representations, warranties or covenants of such party contained herein. IBT and
FSB shall file all reports required to be filed by each of them with the SEC
between the date of this Agreement and the Effective Time and shall deliver to
the other party copies of all such reports promptly after the same are filed.
IBT, FSB and each Subsidiary of IBT or FSB that is a bank shall file all call
reports with the appropriate Bank Regulators and all other reports, applications
and other documents required to be filed with the appropriate Bank Regulators
between the date hereof and the Effective Time and shall make available to the
other party copies of all such reports promptly after the same are filed.
(d) Pooling and Tax-Free Reorganization Treatment.
Neither IBT nor FSB shall take or cause to be taken any action, whether before
or after the Effective Time,
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which would disqualify the Merger as a "pooling of interests" for accounting
purposes or the Merger as a "reorganization" within the meaning of Section
368(a) of the Code.
(e) Accounting Methods. Neither IBT nor FSB shall
change its methods of accounting in effect at December 31, 1999, except as
required by changes in generally accepted accounting principles as concurred to
by such party's independent auditors.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Regulatory Matters.
(a) IBT has primary responsibility for the
preparation and filing with the SEC of the Proxy Statement. IBT, with the
assistance of FSB, shall promptly prepare and file with the SEC the S-4, in
which the Proxy Statement will be included. IBT and FSB shall use all reasonable
efforts to have the S-4 declared effective under the Securities Act as promptly
as practicable after such filing, and thereafter mail the Proxy Statement to the
shareholders of FSB. IBT and FSB shall use their best efforts to obtain all
necessary state securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement, and FSB shall furnish
to IBT all information concerning FSB and the holders of FSB Common Stock as may
be reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each
other and use their best efforts to promptly prepare and file all necessary
documentation, to effect all necessary application, notices, petitions, filings
and other documents, and to obtain as promptly as practicable all necessary
permits, consents, and authorizations of all third parties and Governmental
Entities necessary or advisable to consummate the transactions contemplated by
this Agreement. FSB and IBT shall have the right to review in advance, and to
the extent practicable each will consult the other on, subject to applicable
laws relating to the exchange of information, all the information relating to
FSB or IBT, as the case may be, and any of their respective Subsidiaries, which
appear in any filing made with, or written materials submitted to, any third
party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations by this
Agreement and each party will keep the other appraised of the status of matters
relating to completion of the transactions contemplated herein.
(c) FSB and IBT shall, upon request, furnish each
other with all information concerning themselves, their Subsidiaries, directors,
officers and shareholders and
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other such matters as may be reasonably necessary or advisable in connection
with the Proxy Statement, the S-4 or any other statement, filing, notice or
application made by or on behalf of FSB, IBT or any of their respective
Subsidiaries to any Governmental Entity in connection with the Merger and the
other transactions contemplated by this Agreement.
(d) FSB and IBT shall promptly furnish each other
with copies of written communications received by FSB or IBT, as the case may
be, or any of their respective Subsidiaries, Affiliates or Associates (as such
items are defined in Rule 12b-2 under the Exchange Act as in effect on the date
hereof) from, or delivered by any of the foregoing to, any Governmental Entity
in respect of the transactions contemplated hereby.
5.2 Letter of Accountants. FSB shall use its best efforts to
cause to be delivered to IBT a letter of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.L.C., FSB's
independent auditor in substantially the form shown on Exhibit 5.2 dated (i) the
date of which the Form S-4 shall become effective and (ii) the business day
prior to the Effective Time, and addressed to IBT.
5.3 Access to Information. Upon reasonable notice and
subject to applicable laws relating to the exchange of information, FSB shall
(and cause each of its Subsidiaries to) afford to the officers, employees,
accountants, counsel and other representatives of IBT, access during normal
business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and, during such period,
FSB shall (and shall cause each of its Subsidiaries to) make available to IBT
(a) a copy of each report, schedule, registration statement and other document
filed or received by it during such period pursuant to the requirements of
federal or state securities laws or federal or state banking laws (other than
reports or documents which FSB is not permitted to disclose under applicable
law) and (b) all other information concerning its business, properties and
personnel as IBT may reasonably request. IBT will hold all such information in
confidence to the extent required by, and in accordance with, the provisions of
the confidentiality agreement dated February 17, 2000, between IBT and FSB. No
investigation by IBT shall affect the representations and warranties of FSB set
forth herein.
5.4 Shareholder Meeting. FSB shall take all steps necessary
to duly call, give notice of, convene and hold a meeting of its shareholders to
be held as soon as is reasonably practicable after the date on which the S-4
becomes effective for the purpose of voting upon the approval of this Agreement.
FSB will, through its Board of Directors, subject to their respective fiduciary
obligations as determined by the Board of Directors after consultation with
outside counsel, recommend to its shareholders approval of such matters.
5.5 Legal Conditions to Merger. IBT and FSB shall, and shall
cause its Subsidiaries to, use their best efforts (i) to take, or cause to be
taken, all actions necessary to comply promptly with all legal requirements
which may be imposed on such party or its Subsidiaries with respect to the
Merger and, subject to the conditions set forth in Article VI hereof to
consummate the transactions contemplated by this Agreement, and (ii) to obtain
(and
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to cooperate with the other party to obtain) any consent, order or approval of,
or any exemption by any Governmental Entity and any other public or private
third party which is required to be obtained or made by such party or any of its
Subsidiaries in connection with the Merger, and the transactions contemplated by
this Agreement.
5.6 Affiliates. FSB shall use its best efforts to cause each
director, executive officer and other person who is an "affiliate" (for purposes
of Rule 145 under the Securities Act and for purposes of qualifying for "pooling
of interests" treatment) of FSB to deliver to IBT, as soon as practicable after
the date hereof, and prior to the date of the FSB shareholders meeting called to
approve this Agreement: a written agreement, substantially in the form of
Exhibit 5.6, providing that such person will not sell, pledge, transfer or
otherwise dispose of any shares of FSB Common Stock held by such "affiliate" and
the shares of IBT Common Stock to be received by such "affiliate" in the Merger:
(1) except in compliance with the applicable provisions of the Securities Act
and the rules and regulations thereunder, and (2) during the period commencing
30 days prior to the Merger and ending at the time of the publication of
financial results covering at least 30 days of combined operations of FSB and
IBT.
5.7 Employee Benefit Plans.
(a) Except as otherwise provided in Sections 4.1(h)
hereof, IBT and FSB agree that, the IBT Benefit Plans in effect at the date of
this Agreement shall be adopted by FSB's Subsidiaries for their employees
following the Merger.
(b) In the case of FSB Benefit Plans under which
the employees' interests are based upon FSB Common Stock, IBT and FSB agree that
such interests shall be based on IBT Common Stock in accordance with the terms
of the FSB Benefit Plans and in an equitable manner.
5.8 Expenses. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement, and the
transactions contemplated hereby shall be paid by the party incurring such
expense, except as may be permitted by Section 7.2 and except that expenses
incurred in connection with printing and mailing the Proxy Statement and the
Form S-4 shall be shared equally by IBT and FSB.
5.9 Additional Agreements; Best Efforts. Subject to the
terms and conditions of this Agreement, each of the parties hereto agrees to use
its best efforts to take all action and to do all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including, without limitation,
cooperating fully with the other party hereto, providing the other party hereto
with any appropriate information and making all necessary filings in connection
with the Requisite Regulatory Approvals. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, or to vest the
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Surviving Corporation with full title to all properties, assets, rights,
approvals, immunities and franchises of either of the Constituent Corporations,
the proper officers and directors of each party to this Agreement shall take all
such necessary action.
5.10 Employment Agreement. As of the Closing Date, Farmers
State Bank of Breckenridge shall enter into a three year employment agreement
with its current President in the form attached hereto as Exhibit 5.10.
5.11 Governance. At the Effective Time:
(a) The board of directors of the Surviving
Corporation shall be expanded by two (2) members, with said positions to be
initially filled by designees appointed, prior to the Effective Time, by the FSB
board of directors, with the consent of IBT.
(b) The Farmers State Bank of Breckenridge board of
directors shall consist of its existing members plus two (2) members to be
designated by IBT.
(c) The ▇▇▇▇▇▇▇▇ Bank and Trust board of directors
shall consist of its existing members, plus one (1) member to be designated by
FSB.
(d) The president of Farmers State Bank of
Breckenridge shall be appointed a vice president of IBT.
5.12 Post-Closing Operations. At and after the Closing Date:
(a) The Farmers State Bank of Breckenridge shall
remain a state-chartered commercial bank.
(b) The names of IBT, Farmers State Bank of
Breckenridge and ▇▇▇▇▇▇▇▇ Bank and Trust shall not change as a result of the
Merger. In the future, the Board of Directors of IBT will consider the
possibility of a name change which is less geographically restrictive.
(c) All banking offices of Farmers State Bank of
Breckenridge will remain open.
(d) There will be no layoffs at Farmers State Bank
of Breckenridge as a result of the Merger. Any reduction in staffing levels
shall be accomplished through attrition.
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ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction prior to the Effective Time of the following
conditions:
(a) Shareholder Approval. This Agreement shall have
been approved and adopted by the affirmative vote of a majority of the
outstanding shares of FSB Common Stock entitled to vote thereon.
(b) Other Approvals. Other than the filing provided
for by Section 1.1 all consents, orders or approvals of, or declarations or
filings with, and all expirations of waiting periods imposed by, any
Governmental Entity (collectively, the "Requisite Regulatory Approvals") which
are prescribed by law as necessary for the consummation of the Merger and the
other transactions contemplated hereby other than immaterial consents shall have
been filed, occurred or been obtained and all such Requisite Regulatory
Approvals shall be in full force and effect.
(c) S-4. The S-4 shall have become effective under
the Securities Act and no stop order suspending the effectiveness of the S-4
shall have been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
(d) No Injunctions or Restraints; Illegality. No
order, injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the Merger or any of the transactions
contemplated hereby shall be in effect, nor shall any proceeding by any
Governmental Entity seeking any such Injunction be pending. No statute, rule,
regulation, order, inunction or decree shall have been enacted, entered, or
enforced by any Governmental Entity which prohibits, restricts or makes illegal
consummation of the Merger.
(e) Financial Statements. FSB shall prepare or have
prepared, file, and submit to IBT all annual and quarterly audited and
management prepared financial statements for any periods ending at least 30 days
before the Effective Time, each prepared in accordance with GAAP principles.
(f) No Burdensome Condition. There shall not be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger or any of the transactions
contemplated hereby, by any Governmental Entity which, in connection with the
grant of a Requisite Regulatory Approval, imposes any condition or restriction
upon IBT, FSB, or any of their Subsidiaries which would so materially adversely
impact the economic or business benefits of the transactions contemplated by
this Agreement
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as to render inadvisable, in the reasonable judgment of the Board of Directors
of either IBT or FSB, the consummation of the Merger.
6.2 Conditions to Obligations of IBT. The obligation of IBT
to effect the Merger are also subject to the satisfaction or waiver by IBT prior
to the Effective Time of the following conditions:
(a) Representations and Warranties. The
representations and warranties of FSB set forth in this Agreement shall be true
and correct in all material respects as of the date of the Agreement and (except
to the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on the Closing Date, except as otherwise
contemplated by this Agreement, and IBT shall have received a certificate signed
on behalf of FSB by the Chairman and Chief Executive Officer and by the Chief
Financial Officer of FSB to such effect.
(b) Performance of Obligations of FSB. FSB shall
have performed in all materials respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and IBT
shall have received a certificate signed on behalf of FSB by the Chairman and
Chief Executive Officer and by the Chief Financial Officer of FSB to such
effect.
(c) Consents Under Agreements. FSB shall have
obtained the consent or approval of each person (other than the Governmental
Entities referred to in Section 6.1(b)) whose consent or approval shall be
required in order to permit the succession by the Surviving Corporation pursuant
to the Merger to any obligation, right or interest of FSB's or any Subsidiary of
FSB under any loan or credit agreement, note, mortgage, indenture, lease,
license or other agreement or instrument, except those for which failure to
obtain such consents and approvals would not, in the reasonable opinion of IBT,
individually or in the aggregate, have a material adverse effect on FSB or upon
the consummation of the transaction contemplated hereby.
(d) Tax Opinion. IBT shall have received the
opinion of Foster, Swift, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇.▇., counsel to IBT, dated the
Closing Date, in substantially the form shown on Exhibit 6.2(d) to the effect
that the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that IBT
and FSB will each be a party to that reorganization within the meaning of
Section 368(b) of the Code and that shareholders of FSB who exchange their
shares of FSB Common Stock for shares of IBT Common Stock will not recognize
gain or loss, for purposes of federal income tax, except to the extent of cash
received in lieu of fractional shares.
(e) Legal Opinion. IBT shall have received the
opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel to FSB, dated the Closing
Date, in substantially the form shown on Exhibit 6.2(e).
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(f) Subsequent Events. Since December 31, 1999, no
change shall have occurred and no circumstances shall exist which has had or
might reasonably be expected to have a material adverse effect on the financial
condition, results of operations, business or prospects of FSB and the FSB
Subsidiaries taken as a whole (other than changes in banking laws or
regulations, or interpretations thereof, that affect the banking industry
generally or changes in the general level of interest rates).
(g) Material Loss. FSB and the FSB Subsidiaries
considered as a whole shall not have sustained since December 31, 1999 any
material loss or interference with their business from any civil disturbance or
any fire, explosion, flood or other calamity, whether or not covered by
insurance.
(h) Employment Agreement. The employment agreement
between Farmers State Bank of Breckenridge and its president as required under
Section 5.10 hereof shall be in full force and effect.
(i) Pooling of Interests. IBT shall have received a
letter from its independent auditors to the effect that the Merger will qualify
for "pooling of interests" accounting treatment.
6.3 Conditions to Obligations of FSB. The obligation of FSB
to effect the Merger is also subject to the satisfaction or waiver by FSB prior
to the Effective Time of the following conditions:
(a) Representations and Warranties. The
representations and warranties of IBT set forth in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on the Closing Date, except as
otherwise contemplated by this Agreement, and FSB shall have received a
certificate signed on behalf of IBT by the Chairman and Chief Executive Officer
and by the Chief Financial Officer of IBT to such effect.
(b) Performance of Obligations of IBT. IBT shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and FSB shall have
received a certificate signed on behalf of IBT by the Chairman and Chief
Executive Officer and by the Chief Financial Officer of IBT to such effect.
(c) Consents Under Agreements. IBT shall have
obtained the consent or approval of each person (other than the Governmental
Entities referred to in Section 6.1(b)) whose consent or approval shall be
required in connection with the transactions contemplated hereby under any loan
or credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument to which IBT or any of its Subsidiaries is a party or is
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otherwise bound, except those for which failure to obtain such consents and
approvals would not, in the reasonable opinion of FSB, individually or in the
aggregate, have a material adverse effect on IBT or upon the consummation of the
transactions contemplated hereby.
(d) Legal Opinion. FSB shall have received the
opinion of Foster, Swift, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇.▇., counsel to IBT, dated the
Closing Date, in substantially the form shown on Exhibit 6.3(d).
(e) Tax Opinion. FSB shall have received the
opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel to FSB, dated the Closing
Date, in substantially the form shown on Exhibit 6.3(e) to the effect that the
Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, and that IBT and FSB will each
be a party to that reorganization within the meaning of Section 368(b) of the
Code and that shareholders of FSB who exchange their shares of FSB Common Stock
for shares of IBT Common Stock will not recognize gain or loss, for purposes of
federal income tax, except to the extent of cash received in lieu of fractional
shares.
(f) Subsequent Events. Since December 31, 1999, no
change shall have occurred and no circumstances shall exist which has had or
might reasonably be expected to have a material adverse effect on the financial
conditions, results of operations, business or prospects of IBT and the IBT
Subsidiaries taken as a whole (other than changes in banking laws or
regulations, or interpretations thereof, that affect the banking industry
generally or changes in the general level of interest rates).
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated in writing
at any time prior to the Effective Time, whether before or after approval of the
Merger by the shareholders of FSB, only in the following circumstances:
(a) by mutual consent of IBT and FSB in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board;
(b) by either IBT or FSB if (i) any Requisite
Regulatory Approval shall have been denied or (ii) any Governmental Entity of
competent jurisdiction shall have issued a final nonappealable order enjoining
or otherwise prohibiting the consummation of the transactions contemplated by
this Agreement;
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(c) by either IBT or FSB if the Merger shall not
have been consummated on or before December 31, 2000;
(d) by either IBT or FSB (provided that the
terminating party is not in material breach of any of its obligations) if any
approval of the shareholders of FSB required for the consummation of the Merger
shall not have been obtained by reason of the failure to obtain the required
vote at a duly held meeting of shareholders or at any adjournment or
postponement thereof;
(e) by either IBT or FSB if there shall have been a
material breach of any of the representations or warranties set forth in this
Agreement on the part of the other party; which breach by its nature cannot be
cured prior to the Closing; or
(f) by either IBT or FSB if there shall have been a
material breach of any of the covenants or agreements set forth in this
Agreement on the part of the other party, which breach shall not have been cured
before closing or within twenty (20) business days following receipt by the
breaching party of written notice of such breach from the other party, whichever
occurs first.
7.2 Effect of Termination. In the event of termination of
this Agreement by either IBT or FSB as provided in Section 7.1, this Agreement
shall forthwith become void and have no effect except (i) with respect to the
second to the last sentence of Section 5.3, and Sections 5.8 and 7.2, and (ii)
no party shall be relieved or released from any liabilities or damages arising
out of the willful breach by the other party of any provision of this Agreement.
7.3 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the shareholders of FSB, provided, however, that after any such
approval, no amendment shall be made which by law requires further approval by
such shareholders, without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
7.4 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Board of Directors, may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
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ARTICLE VIII
GENERAL PROVISIONS
8.1 Nonsurvival of Representations, Warranties and
Agreements. None of the representations, warranties, covenants and agreements in
this Agreement shall survive the Effective Time, except for those covenants and
agreements contained herein which by their terms apply in whole or in part after
the Effective Time, including without limitation, Sections 2.2, 5.7, 5.8, 5.10,
5.11, 8.1, 8.5, 8.6, 8.7 and 8.8.
8.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopies (with confirmation) or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to IBT, to:
▇▇▇▇▇ ▇. Hole, President
IBT Bancorp, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with copies to:
Foster, Swift, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇.▇.
c/o ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and
(b) if to FSB, to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
FSB Bancorp, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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with copies to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
c/o ▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
8.3 Interpretation. 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 shall not affect in any way the meaning or interpretation 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".
8.4 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
8.5 Entire Agreement; No Third Party Beneficiaries; Rights
of Ownership. This Agreement (including the documents and the instruments
referred to herein) constitutes the entire agreement and supersedes all prior
agreements (except for the confidentiality agreements between IBT and FSB dated
February 17, 2000, which shall remain in full force and effect and survive the
execution of this Agreement) and understandings, both written and oral, among
the parties with respect to the subject matter hereof, and is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder. No party shall have the right to acquire or shall be deemed to have
acquired shares of common stock of the other party pursuant to the Merger until
consummation thereof.
8.6 Governing Law: This Agreement shall be governed and
construed in accordance with the laws of the State of Michigan.
8.7 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. The parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
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8.8 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provisions of this Agreement is so broad as to be unenforceable, the
provisions shall be interpreted to be only so broad as is enforceable.
8.9 Publicity. Except as otherwise required by law, so long
as this Agreement is in effect, neither IBT nor FSB shall, or shall permit any
of its Subsidiaries to, issue or cause the publication of any press release or
other public announcement with respect to the transactions contemplated by this
Agreement without the consent of the other party, which consent shall not be
unreasonably withheld.
8.10 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
IN WITNESS WHEREOF, IBT and FSB have caused this Agreement to be signed
by their respective officers thereunto duly authorized as of the date first
above written.
IBT BANCORP, INC.
By: /s/ ▇▇▇▇▇ ▇. Hole
---------------------
Its: President and CEO
--------------------
Attest:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President
FSB BANCORP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------
Its: President and CEO
-----------------------
Attest:
/s/ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
Title: Secretary
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