EXHIBIT 2
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF
JANUARY 8, 2004
BY AND BETWEEN
SECOND BANCORP, INCORPORATED
AND
SKY FINANCIAL GROUP, INC.
TABLE OF CONTENTS
PAGE
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ARTICLE I Certain Definitions........................................................................1
1.01 Certain Definitions............................................................................1
ARTICLE II The Merger.................................................................................6
2.01 The Parent Merger..............................................................................6
2.02 The Subsidiary Merger..........................................................................6
2.03 Effectiveness of the Parent Merger.............................................................7
2.04 Effective Date and Effective Time..............................................................7
ARTICLE III Consideration; Exchange Procedures.........................................................7
3.01 Merger Consideration...........................................................................7
3.02 Rights as Shareholders; Stock Transfers........................................................8
3.03 Fractional Shares..............................................................................8
3.04 Exchange Procedures............................................................................8
3.05 Anti-Dilution Provisions.......................................................................9
3.06 Options........................................................................................9
3.07 Performance Shares............................................................................10
ARTICLE IV Actions Pending Acquisition...............................................................10
4.01 Forbearances of SBI...........................................................................10
4.02 Forbearances of Sky...........................................................................12
ARTICLE V Representations and Warranties............................................................13
5.01 Disclosure Schedules..........................................................................13
5.02 Standard......................................................................................14
5.03 Representations and Warranties of SBI.........................................................14
5.04 Representations and Warranties of Sky.........................................................27
ARTICLE VI Covenants.................................................................................32
6.01 Reasonable Best Efforts.......................................................................32
6.02 Shareholder Approval..........................................................................32
6.03 Registration Statement........................................................................33
6.04 Press Releases................................................................................34
6.05 Access; Confidentiality.......................................................................34
6.06 Acquisition Proposals.........................................................................35
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TABLE OF CONTENTS
(continued)
PAGE
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6.07 Affiliate Agreements..........................................................................35
6.08 Takeover Laws.................................................................................35
6.09 Certain Policies..............................................................................36
6.10 NASDAQ Listing or Notification................................................................36
6.11 Regulatory Applications.......................................................................36
6.12 Indemnification...............................................................................37
6.13 Opportunity of Employment; Employee Benefits..................................................37
6.14 Notification of Certain Matters...............................................................39
6.15 Dividend Coordination.........................................................................39
6.16 Tax Matters...................................................................................39
6.17 No Breaches of Representations and Warranties.................................................39
6.18 Consents......................................................................................39
6.19 Insurance Coverage............................................................................39
6.20 Correction of Information.....................................................................40
6.21 Supplemental Assurances.......................................................................40
6.22 Regulatory Matters............................................................................40
6.23 Election of Sky Board Member..................................................................40
6.24 Liquidity Ratio...............................................................................40
ARTICLE VII Conditions to Consummation of the Merger..................................................41
7.01 Conditions to Each Party's Obligation to Effect the Merger....................................41
7.02 Conditions to Obligation of SBI...............................................................42
7.03 Conditions to Obligation of Sky...............................................................42
ARTICLE VIII Termination...............................................................................43
8.01 Termination...................................................................................43
8.02 Effect of Termination and Abandonment; Enforcement of Agreement...............................46
8.03 Termination Fee...............................................................................46
8.04 Force Majeure.................................................................................46
ARTICLE IX Miscellaneous.............................................................................47
9.01 Survival......................................................................................47
9.02 Waiver; Amendment.............................................................................47
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PAGE
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9.03 Counterparts..................................................................................47
9.04 Governing Law.................................................................................47
9.05 Expenses......................................................................................47
9.06 Notices.......................................................................................47
9.07 Entire Understanding; No Third Party Beneficiaries............................................48
9.08 Interpretation; Effect........................................................................48
9.09 Waiver of Jury Trial..........................................................................48
Exhibit A Form of SBI Affiliate Agreement
Exhibit B Peer Group Commercial Financial Institutions for Index pursuant to Section 8.01(e)
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This AGREEMENT AND PLAN OF MERGER, dated as of January 8, 2004 (this
"Agreement"), is by and between Second Bancorp, Incorporated ("SBI") and Sky
Financial Group, Inc. ("Sky").
RECITALS
A. SBI. SBI is a financial holding company and an Ohio corporation,
having its principal place of business in Warren, Ohio.
B. Sky. Sky is a financial holding company and an Ohio corporation,
having its principal place of business in Bowling Green, Ohio.
C. Intentions of the Parties. It is the intention of the parties to
this Agreement that the business combinations contemplated hereby be treated as
a "reorganization" under Section 368(a) of the Internal Revenue Code of 1986, as
amended.
D. Board Action. The respective Boards of Directors of each of Sky and
SBI have determined that it is in the best interests of their respective
companies and their shareholders to consummate the strategic business
combinations provided for herein.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants, representations, warranties and agreements contained herein,
intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
Certain Definitions
1.01 Certain Definitions. The following terms are used in this
Agreement with the meanings set forth below:
"Acquisition Proposal" means any tender or exchange offer for more than
9.9% of the equity securities of SBI or Bank, any proposal for a merger,
consolidation or other business combination involving SBI or Bank, or any
proposal or offer to acquire in any manner more than a 9.9% equity interest in,
or all or substantially all of the assets or deposits of, SBI or Bank, other
than the transactions contemplated by this Agreement.
"Agreement" means this Agreement, as amended or modified from time to
time in accordance with Section 9.02.
"Agreement to Merge" has the meaning set forth in Section 2.02.
"Bank" means Second National Bank, a national bank that is a
wholly-owned subsidiary of SBI.
"Code" means the Internal Revenue Code of 1986, as amended.
"Compensation and Benefit Plans" has the meaning set forth in Section
5.03(m)(i).
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"Consultants" has the meaning set forth in Section 5.03(m)(i).
"Directors" has the meaning set forth in Section 5.03(m)(i).
"Disclosure Schedule" has the meaning set forth in Section 5.01.
"Dissenting Shares" means SBI Shares with respect to which rights
pursuant to Section 1701.85 of the OGCL have been properly exercised.
"Effective Date" means the date on which the Effective Time occurs, as
provided for in Section 2.04.
"Effective Time" means the effective time of the Merger, as provided
for in Section 2.04.
"Employees" has the meaning set forth in Section 5.03(m)(i). All
references herein to "employees of SBI" or "SBI employees" shall be deemed to
mean employees of SBI and its Subsidiaries.
"Environmental Laws" means all applicable local, state and federal
environmental, health and safety laws and regulations, including, without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Clean Water Act, the
Federal Clean Air Act, and the Occupational Safety and Health Act, each as
amended, regulations promulgated thereunder, and state counterparts.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 5.03(m)(iii).
"ERISA Affiliate Plan" has the meaning set forth in Section
5.03(m)(iii).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.04.
"Exchange Fund" has the meaning set forth in Section 3.04.
"Exchange Ratio" has the meaning set forth in Section 3.01.
"Fairness Opinion" has the meaning set forth in Section 7.01(f).
"FDIA" has the meaning set forth in Section 5.03(cc).
"FDIC" means the Federal Deposit Insurance Corporation.
"Fill Offer" has the meaning set forth in Section 8.01(e).
"Fill Option" has the meaning set forth in Section 8.01(e).
"FRB" shall mean the Federal Reserve Board.
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"GAAP" shall mean generally accepted accounting principles as adopted
for U.S. accounting principles, practices and methods.
"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"Indemnified Party" has the meaning set forth in Section 6.12(a).
"Information" has the meaning set forth in Section 6.05(b).
"IRS" has the meaning set forth in Section 5.03(m)(ii).
The term "knowledge" means, with respect to a party hereto, actual
knowledge of any officer of that party with the title of not less than a senior
vice president, or that party's in-house counsel, if any, or any director of
either party owning greater than ten percent (10%) of such party's outstanding
common shares.
"Lien" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Material Adverse Effect" means, with respect to Sky or SBI, any effect
that (i) is material and adverse to the financial position, results of
operations or business of Sky and its Subsidiaries taken as a whole, or SBI and
its Subsidiaries taken as a whole, respectively, or (ii) would materially impair
the ability of either Sky or SBI to perform its obligations under this Agreement
or otherwise materially threaten or materially impede the consummation of the
Merger and the other transactions contemplated by this Agreement; provided,
however, that Material Adverse Effect shall not be deemed to include the impact
of (a) changes in banking and similar laws of general applicability or
interpretations thereof by courts or governmental authorities or other changes
affecting depository institutions generally, including changes in general
economic conditions and changes in prevailing interest and deposit rates, (b)
any modifications or changes to valuation policies and practices in connection
with the Merger or restructuring charges taken in connection with the Merger, in
each case in accordance with GAAP (c) changes resulting from expenses (such as
legal, accounting and investment bankers' fees) incurred in connection with this
Agreement or the transactions contemplated herein, and (d) actions or omissions
of a party that have been waived in accordance with Section 9.02 hereof.
"Merger" collectively refers to the Parent Merger and the Subsidiary
Merger, as set forth in Section 2.01 and Section 2.02, respectively.
"Merger Consideration" has the meaning set forth in Section 2.01.
"NASD" means The National Association of Securities Dealers.
"NASDAQ" means The NASDAQ Stock Market, Inc.'s National Market System.
"New Certificates" has the meaning set forth in Section 3.04.
"OCC" means the Office of the Comptroller of the Currency.
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"ODFI" means the Ohio Department of Commerce, Division of Financial
Institutions.
"OGCL" means the Ohio General Corporation Law.
"Old Certificates" has the meaning set forth in Section 3.04.
"OSS" means the Office of the Secretary of State of the State of Ohio.
"Parent Merger" has the meaning set forth in Section 2.01.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" has the meaning set forth in Section 5.03(m)(ii).
"Person" means any individual, bank, corporation, partnership,
association, joint-stock company, business trust or unincorporated organization.
"Previously Disclosed" by a party shall mean information set forth in
its Disclosure Schedule. Disclosure of any information, agreement, or other item
in a party's Disclosure Schedule referenced by a particular Section in this
Agreement shall, should the existence of such information, agreement, or other
item or its contents be relevant to any other Section, be deemed to be disclosed
with respect to that Section whether or not an explicit cross-reference appears
in the Disclosure Schedule.
"Proxy Statement/Prospectus" has the meaning set forth in Section
6.03(a).
"Proxy Statement" has the meaning set forth in Section 6.03(a).
"Registration Statement" has the meaning set forth in Section 6.03(a).
"Regulatory Authority" shall mean any federal or state governmental
agency or authority charged with the supervision or regulation of financial
institutions (or their holding companies) or issuers of securities or engaged in
the issuance of deposits (including, without limitation, the OCC, ODFI, FRB and
the FDIC) or the supervision or regulation of it or any of its subsidiaries.
"Related Party Transaction" shall mean those transactions described in
Item 401 in Regulation S-K promulgated under the federal securities laws.
"Retention Bonus Agreement" has the meaning set forth in Section
4.01(d).
"Rights" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person any
right to subscribe for or acquire, or any options, calls or commitments relating
to, or any stock appreciation right or other instrument the value of which is
determined in whole or in part by reference to the market price or value of,
shares of capital stock of such person.
"SBI" has the meaning set forth in the preamble to this Agreement.
"SBI Affiliate" has the meaning set forth in Section 6.07.
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"SBI Articles" means the Amended and Restated Articles of
Incorporation, as amended, of SBI.
"SBI Board" means the Board of Directors of SBI.
"SBI Code" means the Code of Regulations of SBI.
"SBI Financial Statements" has the meaning set forth in Section
5.03(q)(vii).
"SBI Meeting" has the meaning set forth in Section 6.02.
"SBI Off Balance Sheet Transaction" has the meaning set forth in
Section 5.03(u).
"SBI SEC Documents" has the meaning set forth in Section 5.03(g).
"SBI Shares" means the common shares, without par value, of SBI.
"SBI Stock Option" has the meaning set forth in Section 3.06.
"SBI Stock Plan" means the option plans and agreements of SBI and its
Subsidiaries pursuant to which rights to purchase SBI Shares are outstanding
immediately prior to the Effective Time pursuant to the SBI Incentive Stock
Option Plan, the Amended SBI 1998 Non-Qualified Stock Option Plan and the 2003
Equity Ownership Plan of SBI.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Sky Articles" means the Amended and Restated Articles of Incorporation
of Sky, as amended.
"Sky Bank" means Sky Bank, an Ohio banking corporation that is a
wholly-owned subsidiary of Sky.
"Sky Board" means the Board of Directors of Sky.
"Sky Code" means the Amended and Restated Code of Regulations of Sky.
"Sky Common Shares" means the common shares, without par value, of Sky.
"Sky Off Balance Sheet Transaction" has the meaning set forth in
Section 5.04(q).
"Sky Preferred Shares" means the serial preferred stock, par value
$10.00 per share, of Sky.
"Sky SEC Documents" has the meaning set forth in Section 5.04(g)(i).
"Sky Shares" means the Sky Common Shares and Sky Preferred Shares.
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"Subsidiary" and "Significant Subsidiary" have the meanings ascribed to
them in Rule 1-02 of Regulation S-X of the SEC.
"Subsidiary Merger" has the meaning set forth in Section 2.02.
"Surviving Corporation" has the meaning set forth in Section 2.01.
"Takeover Laws" has the meaning set forth in Section 5.03(o).
"Tax" and "Taxes" means all federal, state, local or foreign taxes,
charges, fees, levies or other assessments, however denominated, including,
without limitation, all net income, gross income, gains, gross receipts, sales,
use, ad valorem, goods and services, capital, production, transfer, franchise,
windfall profits, license, withholding, payroll, employment, disability,
employer health, excise, estimated, severance, stamp, occupation, property,
environmental, unemployment or other taxes, custom duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority whether
arising before, on or after the Effective Date.
"Tax Returns" means any return, amended return or other report
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be filed with respect to any Tax.
"Treasury Stock" shall mean SBI Shares held by SBI or any of its
Subsidiaries or by Sky or any of its Subsidiaries, in each case other than in a
fiduciary capacity or as a result of debts previously contracted in good faith.
ARTICLE II
The Merger
2.01 The Parent Merger. At the Effective Time, (i) SBI shall be merged
with and into Sky (the "Parent Merger"), and (ii) the separate corporate
existence of SBI shall cease and Sky shall survive and continue to exist as an
Ohio corporation (Sky, as the surviving corporation in the Parent Merger,
sometimes being referred to herein as the "Surviving Corporation"). The Sky
Articles, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation, and the Sky Code, as in
effect immediately prior to the Effective Time, shall be the Code of Regulations
of the Surviving Corporation. Sky may at any time prior to the Effective Time
change the method of effecting the Merger (including, without limitation, the
provisions of this Article II) if and to the extent it deems such change to be
necessary, appropriate or desirable; provided, however, that no such change
shall (i) alter or change the amount or kind of consideration to be issued to
holders of SBI Shares as provided for in Article III of this Agreement (subject
to adjustment as provided in Sections 3.05 and 8.01(e)) (the "Merger
Consideration"), (ii) adversely affect the tax treatment of SBI's shareholders
as a result of receiving the Merger Consideration, or (iii) materially impede or
delay consummation of the transactions contemplated by this Agreement.
2.02 The Subsidiary Merger. At the time determined by Sky and specified
by Sky Bank in its Certificate of Merger filed with the OSS (which shall not be
earlier than the Effective Time), Bank shall merge with and into Sky Bank (the
"Subsidiary Merger") pursuant to an
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agreement to merge (the "Agreement to Merge") to be executed by Bank and Sky
Bank and filed with the OSS, as required. Sky, in its discretion, shall
determine which banking entity shall survive following the consummation of the
Subsidiary Merger; however, it is anticipated that the separate corporate
existence of Bank shall cease and Sky Bank shall survive and continue to exist
as a state banking corporation. (The Parent Merger and the Subsidiary Merger
shall sometimes collectively be referred to as the "Merger".)
2.03 Effectiveness of the Parent Merger. Subject to the satisfaction or
waiver of the conditions set forth in Article VII, the Parent Merger shall
become effective upon the occurrence of the filing in the office of the OSS of a
certificate of merger in accordance with Section 1701.81 of the OGCL, or such
later date and time as may be set forth in such filing.
2.04 Effective Date and Effective Time. Subject to the satisfaction or
waiver of the conditions set forth in Article VII, Sky shall cause the effective
date of the Parent Merger (the "Effective Date") to occur (i) as soon as
reasonably practicable after the last of the conditions set forth in Article VII
shall have been satisfied or waived in accordance with the terms of this
Agreement (but in no event later than the last business day in the month
immediately following the month in which all waiting periods under Regulatory
Authority approval or any extension thereof have expired); or (ii) on such other
date to which the parties may agree in writing; provided, however, that the
Effective Date shall not fall after the date specified in Section 8.01(c) hereof
or after the date or dates on which any Regulatory Authority approval or any
extension thereof expires. The time on the Effective Date when the Parent Merger
shall become effective is referred to as the "Effective Time."
ARTICLE III
Consideration; Exchange Procedures
3.01 Merger Consideration. Subject to the provisions of this Agreement,
at the Effective Time, automatically by virtue of the Parent Merger and without
any action on the part of any Person:
(a) Outstanding SBI Shares. Each SBI Share, excluding Treasury
Stock and Dissenting Shares, issued and outstanding immediately prior
to the Effective Time shall become and be converted into one and
twenty-six one hundredths (1.26) of a Sky Common Share (the "Exchange
Ratio"). The Exchange Ratio shall be subject to adjustment as set forth
in Sections 3.05, 8.01(b) and 8.01(e).
(b) Treasury Shares. Each SBI Share held as Treasury Stock and
each SBI Share held by Sky immediately prior to the Effective Time
shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
(c) Dissenting Shares. Dissenting Shares shall not be
exchanged for Sky Common Shares but rather shall be entitled to the
rights set forth in Sections 1701.84 and 1701.85 of the OGCL.
Notwithstanding any other provision of this Agreement, any Dissenting
Shares shall not, after the Effective Time, be entitled to vote for any
purpose or receive any dividends or other distributions (except
dividends or other distributions payable to shareholders of record of
SBI at a date which is prior to the Effective Date)
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and shall be entitled only to such rights as are afforded in respect of
Dissenting Shares pursuant to the OGCL.
(d) Outstanding Sky Common Shares. Each Sky Common Share
issued and outstanding immediately prior to the Effective Time shall
remain issued and outstanding and unaffected by the Merger.
3.02 Rights as Shareholders; Stock Transfers. At the Effective Time,
holders of SBI Shares shall cease to be, and shall have no rights as,
shareholders of SBI, other than to receive any dividend or other distribution
with respect to such SBI Shares with a record date occurring prior to the
Effective Time and the consideration provided under this Article III, and the
appraisal rights in the case of Dissenting Shares. After the Effective Time,
there shall be no transfers on the stock transfer books of SBI or the Surviving
Corporation of any SBI Shares.
3.03 Fractional Shares. Notwithstanding any other provision hereof, no
fractional Sky Common Shares and no certificates or scrip therefor, or other
evidence of ownership thereof, will be issued in the Merger; instead, Sky shall
pay to each holder of SBI Shares who would otherwise be entitled to a fractional
Sky Common Share (after taking into account all Old Certificates delivered by
such holder) an amount in cash (without interest) determined by multiplying such
fractional Sky Common Share to which the holder would be entitled by the average
closing price of Sky Common Shares (as reported by the NASDAQ, as reported in
The Wall Street Journal or, if not reported therein, in another authoritative
source) for the ten (10) trading days immediately preceding the Effective Date.
3.04 Exchange Procedures.
(a) At or prior to the Effective Time, Sky shall deposit, or
shall cause to be deposited, with The Bank of New York (in such
capacity, the "Exchange Agent"), for the benefit of the holders of
certificates formerly representing SBI Shares ("Old Certificates"), for
exchange in accordance with this Article III, certificates representing
the Sky Common Shares ("New Certificates") and an estimated amount of
cash (such cash and New Certificates, together with any dividends or
distributions having a record date occurring on or after the Effective
Date with respect thereto (without any interest on any such cash,
dividends or distributions), being hereinafter referred to as the
"Exchange Fund") to be paid pursuant to this Article III in exchange
for outstanding SBI Shares.
(b) As promptly as practicable after the Effective Date, Sky
shall send or cause to be sent to each former holder of record of SBI
Shares immediately prior to the Effective Time transmittal materials
for use in exchanging such shareholder's Old Certificates for the
consideration set forth in this Article III. Sky shall cause the New
Certificates into which shares of a shareholder's SBI Shares are
converted on the Effective Date and/or any check in respect of any
fractional share interests or dividends or distributions which such
person shall be entitled to receive to be delivered to such shareholder
upon delivery to the Exchange Agent of Old Certificates representing
such SBI Shares (or an indemnity affidavit reasonably satisfactory to
Sky and the Exchange Agent, if any of such certificates are lost,
stolen or destroyed) owned by such shareholder together with a duly
completed and executed letter of transmittal. No interest will be paid
on any such cash to be paid in lieu of fractional share interests or in
respect of dividends
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or distributions that any such person shall be entitled to receive
pursuant to this Article III upon such delivery.
(c) Notwithstanding the foregoing, neither the Exchange Agent,
if any, nor any party hereto shall be liable to any former holder of
SBI Shares for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(d) No dividends or other distributions with respect to Sky
Common Shares with a record date occurring on or after the Effective
Date shall be paid to the holder of any unsurrendered Old Certificate
representing SBI Shares converted in the Merger into the right to
receive such Sky Common Shares until the holder thereof shall be
entitled to receive New Certificates in exchange therefor in accordance
with the procedures set forth in this Section 3.04. After becoming so
entitled in accordance with this Section 3.04, the record holder
thereof also shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofor had
become payable with respect to Sky Common Shares such holder had the
right to receive upon surrender of the Old Certificates.
(e) Any portion of the Exchange Fund that remains unclaimed by
the shareholders of SBI for six months after the Effective Time shall
be paid to Sky. Any shareholders of SBI who have not theretofore
complied with this Article III shall thereafter look only to Sky for
payment of the Sky Common Shares, cash in lieu of any fractional shares
and unpaid dividends and distributions on Sky Common Shares deliverable
in respect of each SBI Share such shareholder holds as determined
pursuant to this Agreement, in each case, without any interest thereon.
3.05 Anti-Dilution Provisions. In the event Sky changes (or establishes
a record date for changing) the number of Sky Common Shares issued and
outstanding between the date hereof and the Effective Date as a result of a
stock split, stock dividend, recapitalization, reclassification, split up,
combination, exchange of shares, readjustment or similar transaction with
respect to the outstanding Sky Common Shares and the record date therefor shall
be prior to the Effective Date, the Exchange Ratio shall be proportionately
adjusted.
3.06 Options. There are currently outstanding options to purchase
685,700 SBI Shares under the SBI Stock Plan (each, a "SBI Stock Option"). Each
SBI Stock Option that is outstanding and unexercised immediately prior to the
Effective Time, whether or not then vested and exercisable, shall be terminated
immediately prior to the Effective Time and each grantee thereof shall be
entitled to receive, in lieu of the SBI Shares that would otherwise have been
issuable upon exercise thereof, an amount in cash computed by multiplying (a)
the excess, if any, of (i) the closing price of Sky Common Shares on the trading
day immediately preceding the Effective Date multiplied by the Exchange Ratio
over (ii) the exercise price of such SBI Stock Option by (b) the number of SBI
Shares subject to the SBI Stock Option. SBI shall use commercially reasonable
efforts to take or cause to be taken all action necessary to obtain a written
consent from each holder of a SBI Stock Option to permit such termination
effective at the Effective Date. SBI may elect to pay immediately prior to the
Effective Time to each holder of a SBI option from whom a written consent has
been obtained pursuant to the preceding sentence the aggregate amount to which
such holder is entitled pursuant to this Section 3.06.
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3.07 Performance Shares. SBI has Previously Disclosed that three of its
executive employees are entitled to receive a total of 22,000 SBI Shares under
performance stock award agreements. Each of these performance stock award
agreements shall be terminated immediately prior to the Effective Time and each
of the three executive employees shall be entitled to receive, in lieu of the
SBI Shares that would have been issuable thereunder, an amount in cash computed
by multiplying (a) the closing price of Sky Common Shares on the trading day
immediately preceding the Effective Date multiplied by the Exchange Ratio by (b)
the number of SBI Shares subject to the performance stock award agreement.
ARTICLE IV
Actions Pending Acquisition
4.01 Forbearances of SBI. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement and/or disclosed on
SBI's Disclosure Schedule, without the prior written consent of Sky, which
consent shall not be unreasonably withheld, SBI will not, and will cause each of
its Subsidiaries not to:
(a) Ordinary Course. Conduct the business of SBI and its
Subsidiaries other than in the ordinary and usual course or fail to use
reasonable efforts to preserve intact their business organizations and
assets and maintain their rights, franchises and existing relations
with customers, suppliers, employees and business associates, or
voluntarily take any action which, at the time taken, is reasonably
likely to have a Material Adverse Effect.
(b) Capital Stock. Other than pursuant to Rights Previously
Disclosed and outstanding on the date hereof, (i) issue, sell or
otherwise permit to become outstanding, or authorize the creation of,
any additional SBI Shares or any Rights, (ii) enter into any agreement
with respect to the foregoing, or (iii) permit any additional SBI
Shares to become subject to new grants of employee or director stock
options, other Rights or similar stock-based employee rights.
(c) Dividends, Etc. (i) Make, declare, pay or set aside for
payment any dividend, other than (A) quarterly cash dividends on SBI
Shares in an amount not to exceed the per share amount declared and
paid in its most recent quarterly cash dividend, with record and
payment dates consistent with past practice, and (B) dividends from
wholly owned Subsidiaries to SBI, or (ii) directly or indirectly
adjust, split, combine, redeem, reclassify, purchase or otherwise
acquire, any shares of its capital stock.
(d) Compensation; Employment Agreements; Etc. Enter into or
amend or renew any employment, consulting, severance, change of control
or similar agreements or arrangements with any current or former
director, officer or employee of SBI or its Subsidiaries, or grant any
salary or wage increase or increase any employee benefit (including
incentive or bonus payments), except (i) for normal individual
increases in compensation to employees in the ordinary course of
business consistent with past practice, (ii) for retention bonus
agreements (to be entered into only by the Chief Executive Officer who
shall give Sky notice of the agreement immediately following
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thereof), providing bonus payments not to exceed $250,000.00 in the
aggregate (collectively the "Retention Bonus Agreement"); provided,
however, that any retention payments by Sky shall be reduced by the
amounts payable under the Retention Bonus Agreements, (iii) for other
changes that are required by applicable law, and (iv) to satisfy
Previously Disclosed contractual obligations existing as of the date
hereof.
(e) Benefit Plans. Enter into, establish, adopt or amend
(except (i) as may be required by applicable law, (ii) to satisfy
Previously Disclosed contractual obligations existing as of the date
hereof or (iii) the regular annual renewal of insurance contracts) any
pension, retirement, stock option, stock purchase, savings, profit
sharing, deferred compensation, severance, change of control,
consulting, bonus, group insurance or other employee benefit, incentive
or welfare contract, plan or arrangement, or any trust agreement (or
similar arrangement) related thereto, in respect of any current or
former director, officer or employee of SBI or its Subsidiaries, or
take any action to accelerate the vesting or exercisability of stock
options, restricted stock or other compensation or benefits payable
thereunder.
(f) Dispositions. Except as described in SBI's Disclosure
Schedule, sell, transfer, mortgage, encumber or otherwise dispose of or
discontinue any of its assets, deposits, business or properties except
in the ordinary course of business.
(g) Acquisitions. Acquire (other than by way of foreclosures
or acquisitions of control in a bona fide fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in each case
in the ordinary and usual course of business consistent with past
practice) all or any portion of, the assets, business, deposits or
properties of any other entity or acquire mortgage servicing rights
except in connection with existing correspondent lending relationships
in the ordinary course of business consistent with past practice.
(h) Governing Documents. Amend the SBI Articles, SBI Code or
the Articles of Incorporation or Code of Regulations (or similar
governing documents) of any of SBI's Subsidiaries.
(i) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be
required by GAAP.
(j) Contracts. Except in the ordinary course of business
consistent with past practice, enter into or terminate any material
contract (as defined in Section 5.03(k)) or amend or modify in any
material respect any of its existing material contracts.
(k) Claims. Except in the ordinary course of business
consistent with past practice, settle any claim, action or proceeding,
except for any claim, action or proceeding that does not involve
precedent for other material claims, actions or proceedings and that
involve solely money damages in an amount, individually or in the
aggregate for all such settlements, that is immaterial to SBI and its
Subsidiaries, taken as a whole.
(l) Adverse Actions. (a) Take any action while knowing that
such action would, or is reasonably likely to, prevent or impede the
Merger from qualifying as a
11
reorganization within the meaning of Section 368(a) of the Code; or (b)
knowingly take any action that is intended or is reasonably likely to
result in (i) any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect at any
time at or prior to the Effective Time, (ii) any of the conditions to
the Merger set forth in Article VII not being satisfied or (iii) a
material violation of any provision of this Agreement except, in each
case, as may be required by applicable law or regulation.
(m) Risk Management. Except pursuant to applicable law or
regulation, (i) implement or adopt any material change in its interest
rate risk management and other risk management policies, procedures or
practices; (ii) fail to follow in any material respect its existing
policies or practices with respect to managing its exposure to interest
rate and other risk; or (iii) fail to use commercially reasonable means
to avoid any material increase in its aggregate exposure to interest
rate risk.
(n) Extensions of Credit; Indebtedness. (i) Extend credit,
including new loans, renewals, extensions on an unsecured basis to any
Person, together in the aggregate over $250,000, (ii) extend credit for
new loans on a secured basis to any Person in the aggregate over
$1,000,000, (iii) extend credit for renewals or extensions on a secured
basis to any Person in the aggregate over $2,000,000, or (iv) incur any
indebtedness for borrowed money with final maturities beyond three
years, or (v) extend credit, including new loans, renewals, extensions
of residential mortgage loans to any Person, together in the aggregate
over $500,000.
(o) Related Party Transactions. Enter into any Related Party
Transaction that is not in compliance with Regulation O promulgated by
the FRB, including, but not limited to, any such transactions involving
any director or officer of SBI, any nominee for election as director of
SBI, any security holder of SBI, and any member of the immediate family
of any of the foregoing persons living in the same household as such
person.
(p) New Hires. Extend an offer of employment to any person for
employment (full or part time) at SBI or any of its Subsidiaries
including, but not limited to, brokers in the wholesale mortgage group.
(q) Treasury Functions. (i) Enter into any derivative or hedge
contracts which extend past September 30, 2004; (ii) purchase any
additional corporate or municipal bonds, (iii) purchase or acquire
brokered certificates of deposit with maturity dates greater than three
years, or (iv) purchase or acquire mortgage backed securities or
collateralized mortgage obligations with weighted average maturity
dates greater than five years.
(r) Commitments. Agree or commit to do any of the foregoing.
4.02 Forbearances of Sky. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement, without the prior
written consent of SBI, which consent will not be unreasonably withheld, Sky
will not, and will cause each of its Subsidiaries not to:
(a) Ordinary Course. Conduct the business of Sky and its
Subsidiaries other than in the ordinary and usual course or fail to use
reasonable efforts to preserve intact
12
their business organizations and assets (other than as Previously
Disclosed) and maintain their rights, franchises and existing relations
with customers, suppliers, employees and business associates, or
voluntarily take any action that, at the time taken, is reasonably
likely to have a Material Adverse Effect.
(b) Preservation. Fail to use reasonable efforts to preserve
intact in any material respect their business organizations and assets
and maintain their rights, franchises and existing relations with
customers, suppliers, employees and business associates.
(c) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be
required by GAAP.
(d) Adverse Actions. (a) Take any action while knowing that
such action would, or is reasonably likely to, prevent or impede the
Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code; or (b) knowingly take any action that is
intended or is reasonably likely to result in (i) any of its
representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time at or prior to the
Effective Time, (ii) any of the conditions to the Merger set forth in
Article VII not being satisfied or (iii) a material violation of any
provision of this Agreement except, in each case, as may be required by
applicable law or regulation.
(e) Risk Management. Except pursuant to applicable law or
regulation, (i) fail to follow its existing policies or practices with
respect to managing its exposure to interest rate and other risk, or
(ii) fail to use commercially reasonable means to avoid any material
increase in its aggregate exposure to interest rate risk.
(f) Commitments. Agree or commit to do any of the
foregoing.
ARTICLE V
Representations and Warranties
5.01 Disclosure Schedules. On or prior to the date hereof, Sky has
delivered to SBI a schedule and SBI has delivered to Sky a schedule
(respectively, its "Disclosure Schedule") setting forth, among other things,
items, the disclosure of which are necessary or appropriate either in response
to an express disclosure requirement contained in a provision hereof or as an
exception to one or more representations or warranties contained in Section 5.03
or 5.04 or to one or more of its respective covenants contained in Article IV
and Article VI; provided, however, that (a) no such item is required to be set
forth in a Disclosure Schedule as an exception to a representation or warranty
if its absence would not be reasonably likely to result in the related
representation or warranty being deemed untrue or incorrect under the standard
established by Section 5.02, and (b) the mere inclusion of an item in a
Disclosure Schedule as an exception to a representation or warranty shall not be
deemed an admission by a party that such item represents a material exception or
fact, event or circumstance or that such item is reasonably likely to have or
result in a Material Adverse Effect on the party making the representation.
SBI's representations, warranties and covenants contained in this Agreement
shall not be deemed
13
to be untrue, incorrect or to have been breached as a result of effects on SBI
arising solely from actions taken in compliance with a written request of Sky.
5.02 Standard. No representation or warranty of SBI or Sky contained in
Section 5.03 or 5.04 shall be deemed untrue or incorrect, and no party hereto
shall be deemed to have breached a representation or warranty, as a consequence
of the existence of any fact, event or circumstance unless such fact,
circumstance or event, individually or taken together with all other facts,
events or circumstances inconsistent with any representation or warranty
contained in Section 5.03 or 5.04 has had, or is reasonably likely to have, a
Material Adverse Effect.
5.03 Representations and Warranties of SBI. Subject to Sections 5.01
and 5.02 and except as Previously Disclosed, SBI hereby represents and warrants
to Sky:
(a) Organization, Standing and Authority. SBI is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Ohio and any foreign jurisdictions where its ownership or
leasing of property or assets or the conduct of its business requires
it to be so qualified. SBI is registered as a financial holding company
under the Bank Holding Company Act of 1956, as amended. Bank is a
national banking association that is duly organized, and validly
existing under federal law and with the OCC. Bank is not required to be
qualified to do business in any state or in any foreign jurisdictions
where it owns or leases property or assets or conducts its business.
(b) Capital Structure of SBI. The authorized capital stock of
SBI consists solely of common shares, of which 9,471,371 are
outstanding as of the date hereof. As of the date hereof, 1,520,089
shares of Treasury Stock were held by SBI or otherwise owned by SBI or
its Subsidiaries. The outstanding SBI Shares have been duly authorized,
are validly issued and outstanding, fully paid and nonassessable, and
are not subject to any preemptive rights (and were not issued in
violation of any preemptive rights). As of the date hereof, except
pursuant to this Agreement and the SBI Stock Plan or as Previously
Disclosed (i) there are no SBI Shares authorized and reserved for
issuance, (ii) SBI does not have any Rights issued or outstanding with
respect to SBI Shares, and (iii) SBI does not have any commitment to
authorize, issue or sell any SBI Shares or Rights. The number of SBI
Shares that are issuable and reserved for issuance upon exercise of SBI
Stock Options as of the date hereof is set forth in Section 3.06.
(c) Subsidiaries.
(i) (A) SBI has Previously Disclosed a list of all of
its Subsidiaries together with the jurisdiction of
organization of each such Subsidiary, (B) SBI owns, directly
or indirectly, all the issued and outstanding equity
securities of each of its Subsidiaries, (C) no equity
securities of any of its Subsidiaries are or may become
required to be issued (other than to it or its wholly-owned
Subsidiaries) by reason of any Right or otherwise, (D) there
are no contracts, commitments, understandings or arrangements
by which any of such Subsidiaries is or may be bound to sell
or otherwise transfer any equity securities of any such
Subsidiaries (other than to it or its wholly-owned
Subsidiaries), (E) there are no contracts, commitments,
understandings, or arrangements relating to its rights to
14
vote or to dispose of such securities and (F) all the equity securities
of each Subsidiary held by SBI or its Subsidiaries are fully paid and
nonassessable (except pursuant to 12 U.S.C. Section 55) and are owned
by SBI or its Subsidiaries free and clear of any Liens.
(ii) Except as Previously Disclosed, SBI does not own
beneficially, directly or indirectly, any equity securities or similar
interests of any Person, or any interest in a partnership or joint
venture of any kind, other than its Subsidiaries.
(iii) Each of SBI's Subsidiaries has been duly organized and
is validly existing in good standing under the laws of the jurisdiction
of its organization, and is duly qualified to do business and in good
standing in the jurisdictions where its ownership or leasing of
property or the conduct of its business requires it to be so qualified.
(d) Corporate Power; Authorized and Effective Agreement. Each of SBI
and its Subsidiaries has full corporate power and authority to carry on its
business as it is now being conducted and to own all its properties and assets.
SBI has the corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby and Bank has the power and authority to consummate the Subsidiary Merger
and the Agreement to Merge in accordance with the terms of this Agreement.
(e) Corporate Authority. Subject to the requisite adoption of this
Agreement by the holders of a majority of the outstanding SBI Shares entitled to
vote thereon (which is the only shareholder vote required thereon), this
Agreement and the transactions contemplated hereby have been authorized by all
necessary corporate action of SBI and the SBI Board prior to the date hereof.
The Agreement to Merge, when executed by Bank, shall have been approved by the
Board of Directors of Bank and by the SBI Board, as the sole shareholder of
Bank. This Agreement is a valid and legally binding obligation of SBI,
enforceable against SBI in accordance with its terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles and except to the
extent such enforceability may be limited by laws relating to the safety and
soundness of insured depository institutions as set forth in 12 U.S.C. Section
1818(b) or the appointment of a conservator by the FDIC).
(f) Regulatory Filings; No Defaults.
(i) No consents or approvals of, or filings or registrations
with, any Governmental Authority or with any third party are required
to be made or obtained by SBI or any of its Subsidiaries in connection
with the execution, delivery or performance by SBI of this Agreement or
to consummate the Merger except for (A) filings of applications,
notices and the Agreement to Merge, as applicable, with Regulatory
Authorities (including the consents or non-objections of such
Regulatory Authorities), (B) filings with the SEC and state securities
15
authorities, and (C) the filing of the certificate of merger with the OSS
pursuant to the OGCL. As of the date hereof, SBI has no knowledge of any reason
why the approvals set forth in Section 7.01(b) will not be received without the
imposition of a condition, restriction or requirement of the type described in
Section 7.01(b).
(ii) Except as Previously Disclosed, subject to receipt of the
regulatory and shareholder approvals referred to above, expiration of related
regulatory waiting periods and required filings under federal and state
securities laws, the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby do not and will not (A)
constitute a breach or violation of, or a default under, or give rise to any
Lien, any acceleration of remedies or any right of termination under, any law,
rule or regulation or any judgment, decree, order, governmental permit or
license, or agreement, indenture or instrument of SBI or of any of its
Subsidiaries or to which SBI or any of its Subsidiaries or properties is subject
or bound, (B) constitute a breach or violation of, or a default under, the SBI
Articles or the SBI Code, or (C) require any consent or approval under any such
law, rule, regulation, judgment, decree, order, governmental permit or license,
agreement, indenture or instrument.
(g) Financial Reports and SEC Documents; Material Adverse Effect.
(i) SBI's Annual Reports on Form 10-K for the fiscal years ended
December 31, 2001 and 2002 and all other reports, registration statements,
definitive proxy statements or information statements filed or to be filed by it
or any of its Subsidiaries subsequent to December 31, 2002 under the Securities
Act, or under Section 13, 14, or 15(d) of the Exchange Act, in the form filed or
to be filed, as amended (collectively, "SBI SEC Documents") with the SEC, as of
the date filed or amended, (A) complied or will comply in all material respects
with the applicable requirements under the Securities Act or the Exchange Act,
as the case may be, and (B) did not and will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and each of the consolidated balance
sheets contained in or incorporated by reference into any such SEC Document
(including the related notes and schedules thereto) fairly presents, or will
fairly present, the consolidated financial position of SBI and its Subsidiaries
as of its date, and each of the consolidated statements of income, changes in
shareholders' equity, and cash flows in such SBI SEC Documents (including any
related notes and schedules thereto) fairly presents, or will fairly present,
the consolidated results of operations, changes in shareholders' equity and cash
flows, as the case may be, of SBI and its Subsidiaries for the periods to which
they relate, in each case in accordance with GAAP consistently applied during
the periods involved, except in each case as may be noted therein, subject to
normal year-end audit adjustments and the absence of footnotes in the case of
unaudited statements.
(ii) Except as Previously Disclosed, since December 31, 2002, SBI and
its Subsidiaries have not incurred any material liability not disclosed in the
SBI SEC Documents.
16
(iii) Since December 31, 2002, except as disclosed in the SBI
SEC Documents or as Previously Disclosed, (A) SBI and its Subsidiaries
have conducted their respective businesses in the ordinary and usual
course consistent with past practice (excluding matters related to this
Agreement and the transactions contemplated hereby) and (B) no event
has occurred or circumstance arisen that, individually or taken
together with all other facts, circumstances and events (described in
any paragraph of Section 5.03 or otherwise), is reasonably likely to
have a Material Adverse Effect with respect to SBI.
(h) Litigation. Except as Previously Disclosed, and subject to routine
benefit claims pursuant to Plans disclosed under Section 5.03(m), no material
litigation, claim or other proceeding before any court or governmental agency is
pending against SBI or any of its Subsidiaries and, to SBI's knowledge, no such
litigation, claim or other proceeding has been threatened.
(i) Regulatory Matters.
(i) Except as Previously Disclosed, neither SBI nor any of its
Subsidiaries or properties is a party to or is subject to any order,
decree, agreement, memorandum of understanding or similar arrangement
with, or a commitment letter or similar submission to, or extraordinary
supervisory letter from any Regulatory Authorities.
(ii) Neither it nor any of its Subsidiaries has been advised
by any Regulatory Authority that such Regulatory Authority is
contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree,
agreement, memorandum of understanding, commitment letter, supervisory
letter or similar submission.
(j) Compliance with Laws. Each of SBI and its Subsidiaries:
(i) is in compliance with all applicable federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees conducting
such businesses, including, without limitation, the Equal Credit
Opportunity Act, the Fair Housing Act, the Community Reinvestment Act,
the Home Mortgage Disclosure Act and all other applicable fair lending
laws and other laws relating to discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Regulatory Authorities and Governmental Authorities that are
required in order to permit them to own or lease their properties and
to conduct their businesses as presently conducted; all such permits,
licenses, certificates of authority, orders and approvals are in full
force and effect and, to SBI's knowledge, no suspension or cancellation
of any of them is threatened; and
(iii) has received, since December 31, 2002, no notification
or communication from any Regulatory Authority or Governmental
Authority (A)
17
asserting that SBI or any of its Subsidiaries is not in compliance with
any of the statutes, regulations, or ordinances that such Regulatory
Authority or Governmental Authority enforces or (B) threatening to
revoke any license, franchise, permit, or governmental authorization
(nor, to SBI's knowledge, do any grounds for any of the foregoing
exist).
(k) Material Contracts; Defaults. Except for this Agreement and those
agreements and other documents filed as exhibits to the SBI SEC Documents, or
except as Previously Disclosed, neither SBI nor any of its Subsidiaries is a
party to, bound by or subject to any agreement, contract, arrangement,
commitment or understanding (whether written or oral) (i) that is a "material
contract" within the meaning of Item 601(b)(10) of the SEC's Regulation S-K or
(ii) that restricts or limits in any way the conduct of business by it or any of
its Subsidiaries (including without limitation a non-compete or similar
provision). Neither it nor any of its Subsidiaries is in default under any
contract, agreement, commitment, arrangement, lease, insurance policy or other
instrument to which it is a party, by which its respective assets, business, or
operations may be bound or affected in any way, or under which it or its
respective assets, business, or operations receive benefits, and there has not
occurred any event that, with the lapse of time or the giving of notice or both,
would constitute such a default.
(l) No Brokers. Except for the Previously Disclosed fees payable to
Sandler ▇'▇▇▇▇▇ & Partners, L.P., no action has been taken by SBI that would
give rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the transactions
contemplated by this Agreement.
(m) Employee Benefit Plans.
(i) Section 5.03(m)(i) of SBI's Disclosure Schedule contains a
complete and accurate list of all existing bonus, incentive, deferred
compensation, pension, retirement, profit-sharing, thrift, savings,
employee stock ownership, stock bonus, stock purchase, restricted
stock, stock option, severance, welfare and fringe benefit plans,
employment agreements, consulting agreements, change-in-control
agreements, or severance agreements and all similar practices, policies
and arrangements maintained or contributed to by SBI or any of its
Subsidiaries and in which any employee or former employee (the
"Employees"), consultant or former consultant (the "Consultants") or
director or former director (the "Directors") of SBI or any of its
Subsidiaries participates or to which any such Employees, Consultants
or Directors are a party (the "Compensation and Benefit Plans") other
than programs within Department of Labor Reg. Section 2510.3-1(b).
Neither SBI nor any of its Subsidiaries has any commitment to create
any additional Compensation and Benefit Plan or to modify or change any
existing Compensation and Benefit Plan, except as otherwise
contemplated by Section 4.01(e) of this Agreement or as required by
applicable law.
(ii) Each Compensation and Benefit Plan has been operated and
administered in all material respects in accordance with its terms and
applicable law, including, but not limited to, ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment
Act, or any regulations or
18
rules promulgated thereunder, and all filings, disclosures and notices required
by ERISA, the Code, the Securities Act, the Exchange Act, the Age Discrimination
in Employment Act and any other applicable law have been or will be timely made.
Each Compensation and Benefit Plan that is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA (a "Pension Plan") and that is
intended to be qualified under Section 401(a) of the Code has received (or has
applied for or will timely apply for) a favorable determination letter
(including a determination that the related trust under such Compensation and
Benefit Plan is exempt from tax under Section 501(a) of the Code) from the
Internal Revenue Service ("IRS"), and SBI is not aware of any circumstances
likely to result in revocation of any such favorable determination letter. There
is no material pending or, to the knowledge of SBI, threatened legal action,
suit or claim relating to the Compensation and Benefit Plans other than routine
claims for benefits thereunder. Neither SBI nor any of its Subsidiaries has
engaged in a transaction, or omitted to take any action, with respect to any
Compensation and Benefit Plan that would reasonably be expected to subject SBI
or any of its Subsidiaries to a tax or penalty imposed by either Section 4975 of
the Code or Section 502 of ERISA, assuming for purposes of Section 4975 of the
Code that the taxable period of any such transaction expired as of the date
hereof.
(iii) No liability (other than for payment of premiums to the PBGC that
have been made or will be made on a timely basis) under Title IV of ERISA has
been or is expected to be incurred by SBI or any of its Subsidiaries with
respect to any ongoing, frozen or terminated "single-employer plan," within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any
of them, or any single-employer plan of any entity (an "ERISA Affiliate") that
is considered one employer with SBI under Section 4001(a)(14) of ERISA or
Section 414(b) or (c) of the Code (an "ERISA Affiliate Plan"). None of SBI, any
of its Subsidiaries nor any ERISA Affiliate has contributed, or has been
obligated to contribute, to a multiemployer plan under Subtitle E of Title IV of
ERISA at any time since September 26, 1980. No notice of a "reportable event",
within the meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed for any
Compensation and Benefit Plan or by any ERISA Affiliate Plan within the 12-month
period ending on the date hereof, and no such notice will be required to be
filed as a result of the transactions contemplated by this Agreement. The PBGC
has not instituted proceedings to terminate any Pension Plan or ERISA Affiliate
Plan and, to SBI's knowledge, no condition exists that presents a material risk
that such proceedings will be instituted. To the knowledge of SBI, there is no
pending investigation or enforcement action by the PBGC, the Department of Labor
or IRS or any other governmental agency with respect to any Compensation and
Benefit Plan. Under each Pension Plan and ERISA Affiliate Plan that is a
"defined benefit plan" within the meaning of ERISA Section 3(35), as of the date
of the most recent actuarial valuation performed prior to the date of this
Agreement, the actuarially determined present value of all "benefit
liabilities", within the meaning of Section 4001(a)(16) of ERISA (as determined
on the basis of the actuarial assumptions contained in such actuarial valuation
of such Pension
19
Plan or ERISA Affiliate Plan), did not exceed the then current value of the
assets of such Pension Plan or ERISA Affiliate Plan and since such date there
has been neither an adverse change in the financial condition of such Pension
Plan or ERISA Affiliate Plan nor any amendment or other change to such Pension
Plan or ERISA Affiliate Plan that would increase the amount of benefits
thereunder that reasonably could be expected to change such result.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan or ERISA Affiliate Plan have been timely made in
cash or have been reflected on SBI's Financial Statements (as defined in Section
5.03(q)(vii) below) as of December 31, 2002. Neither any Pension Plan nor any
ERISA Affiliate Plan has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of ERISA
and all required payments to the PBGC with respect to each Pension Plan or ERISA
Affiliate Plan have been made on or before their due dates. None of SBI, any of
its Subsidiaries nor any ERISA Affiliate (x) has provided, or would reasonably
be expected to be required to provide, security to any Pension Plan or to any
ERISA Affiliate Plan pursuant to Section 401(a)(29) of the Code, and (y) has
taken any action, or omitted to take any action, that has resulted, or would
reasonably be expected to result, in the imposition of a lien under Section
412(n) of the Code or pursuant to ERISA.
(v) Except as disclosed on Section 5.03(m)(v) of SBI's Disclosure
Schedule, neither SBI nor any of its Subsidiaries has any obligations to provide
retiree health and life insurance or other retiree death benefits under any
Compensation and Benefit Plan, other than benefits mandated by Section 4980B of
the Code. There has been no communication to Employees by SBI or any of its
Subsidiaries that would reasonably be expected to promise or guarantee such
Employees retiree health or life insurance or other retiree death benefits on a
permanent basis.
(vi) SBI and its Subsidiaries do not maintain any Compensation and
Benefit Plans covering foreign Employees.
(vii) With respect to each Compensation and Benefit Plan, if
applicable, SBI has provided or made available to Sky, true and complete copies
of existing: (A) Compensation and Benefit Plan documents and amendments thereto;
(B) trust instruments and insurance contracts; (C) two most recent Forms 5500
filed with the IRS; (D) most recent actuarial report and financial statement;
(E) the most recent summary plan description; (F) forms filed with the PBGC
within the past year (other than for premium payments); (G) most recent
determination letter issued by the IRS; (H) any Form 5310 or Form 5330 filed
within the past year with the IRS; (I) most recent nondiscrimination tests
performed under ERISA and the Code (including 401(k) and 401(m) tests); and (J)
all "top hat" filings with the Department of Labor.
(viii) Except as disclosed on Section 5.03(m)(viii) of SBI's Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
would not, directly or indirectly (including, without limitation, as a result of
any
20
termination of employment prior to or following the Effective Time)
reasonably be expected to (A) entitle any Employee, Consultant or
Director to any payment (including severance pay or similar
compensation) or any increase in compensation, (B) result in the
vesting or acceleration of any benefits under any Compensation and
Benefit Plan or (C) result in any material increase in benefits payable
under any Compensation and Benefit Plan.
(ix) Except as disclosed on Section 5.03(m)(ix) of SBI's
Disclosure Schedule, neither SBI nor any of its Subsidiaries maintains
any compensation plans, programs or arrangements the payments under
which would not reasonably be expected to be deductible as a result of
the limitations under Section 162(m) of the Code and the regulations
issued thereunder.
(x) Except as disclosed on Section 5.03(m)(x) of SBI's
Disclosure Schedule, as a result, directly or indirectly, of the
transactions contemplated by this Agreement (including, without
limitation, as a result of any termination of employment prior to or
following the Effective Time), none of Sky, SBI or the Surviving
Corporation, or any of their respective Subsidiaries will be obligated
to make a payment that would be characterized as an "excess parachute
payment" to an individual who is a "disqualified individual" (as such
terms are defined in Section 280G of the Code or any corresponding
provision of state, local or foreign Tax law) of SBI on a consolidated
basis, without regard to whether such payment is reasonable
compensation for personal services performed or to be performed in the
future.
(n) Labor Matters. Neither SBI nor any of its Subsidiaries is a party
to or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is SBI
or any of its Subsidiaries the subject of a proceeding asserting that it or any
such Subsidiary has committed an unfair labor practice (within the meaning of
the National Labor Relations Act) or seeking to compel SBI or any such
Subsidiary to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other labor dispute involving it or any
of its Subsidiaries pending or, to SBI's knowledge, threatened, nor does SBI
have any knowledge of any activity involving its or any of its Subsidiaries'
employees seeking to certify a collective bargaining unit or engaging in other
organizational activity.
(o) Takeover Laws. Assuming Sky is not an "interested shareholder" as
that term is defined under Section 1704.01(C)(8) of the OGCL as of the date
hereof, and will not be prior to the SBI Board approval of those certain voting
agreements, SBI has taken all action required to be taken by it in order to
exempt this Agreement and the transactions contemplated hereby from, and this
Agreement and the transactions contemplated hereby are exempt from, the
requirements of any "moratorium," "control share," "fair price," "affiliate
transaction," "business combination" or other anti-takeover laws and regulations
of any state (collectively, "Takeover Laws") applicable to it.
(p) Environmental Matters. To SBI's knowledge, neither the conduct nor
operation of SBI or its Subsidiaries nor any condition of any property presently
or
21
previously owned, leased or operated by any of them (including, without
limitation, in a fiduciary or agency capacity), or on which any of them holds a
Lien, violates or violated Environmental Laws and to SBI's knowledge, no
condition has existed or event has occurred with respect to any of them or any
such property that, with notice or the passage of time, or both, is reasonably
likely to result in liability under Environmental Laws. To SBI's knowledge,
neither SBI nor any of its Subsidiaries has received any notice from any person
or entity that SBI or its Subsidiaries or the operation or condition of any
property ever owned, leased, operated, or held as collateral or in a fiduciary
capacity by any of them are or were in violation of or otherwise are alleged to
have liability under any Environmental Law, including, but not limited to,
responsibility (or potential responsibility) for the cleanup or other
remediation of any pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on, beneath, or originating from any such property.
(q) Tax Matters.
Except as disclosed on Section 5.03(q) of SBI's Disclosure
Schedule:
(i) SBI and each of its Subsidiaries have filed all Tax
Returns that they were required to file under applicable laws and
regulations. All such Tax Returns were correct and complete in all
respects and have been prepared in substantial compliance with all
applicable laws and regulations. All Taxes due and owing by SBI or any
of its Subsidiaries (whether or not shown on any Tax Return) have been
paid. Neither SBI nor any of its Subsidiaries currently is the
beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction
where SBI or any of its Subsidiaries does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction. There are no
Liens for Taxes (other than Taxes not yet due and payable) upon any of
the assets of SBI or any of its subsidiaries.
(ii) SBI and each of its Subsidiaries have withheld and paid
all Taxes required to have been withheld and paid in connection with
any amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
(iii) The earliest taxable period of SBI and its Subsidiaries
for which the statute of limitations is still open is calendar year
2000. No director or officer (or employee responsible for Tax matters)
of SBI or any of its Subsidiaries expects any authority to assess any
additional Taxes for any period for which Tax Returns have been filed.
No foreign, federal, state, or local tax audits or administrative or
judicial Tax proceedings are pending or being conducted with respect to
SBI or any of its Subsidiaries. Neither SBI nor any of its Subsidiaries
has received from any foreign, federal, state or local taxing authority
(including jurisdictions where SBI or its Subsidiaries have not filed
Tax Returns) any (i) notice indicating an intent to open an audit or
other review, (ii) request for information related to Tax matters, or
(iii) notice of deficiency or proposed adjustment for any amount of Tax
proposed, asserted, or assessed by any taxing authority against SBI or
any of its Subsidiaries. The Disclosure Schedule lists all
22
federal, state, local, and foreign income Tax Returns filed with respect to any
of SBI or its Subsidiaries for taxable periods for which the statute of
limitations is still open, indicates those Tax Returns that have been audited,
and indicates those Tax Returns that currently are the subject of audit. SBI has
made available to Sky correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed against or
agreed to by SBI or any of its Subsidiaries filed or received since December 31,
2001.
(iv) Neither SBI nor any of its Subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(v) Neither SBI nor any of its Subsidiaries has filed a consent under
Code Section 341(f) concerning collapsible corporations. SBI and each of its
Subsidiaries have disclosed on their federal income Tax Returns all positions
taken therein that could give rise to a substantial understatement of federal
income Tax within the meaning of Code Section 6662. Neither SBI nor any of its
Subsidiaries is a party to or bound by any Tax allocation or sharing agreement.
Neither SBI nor any of its Subsidiaries (A) has been a member of an affiliated
group filing a consolidated federal income Tax Return (other than a group the
common parent of which was SBI) or (B) has any liability for the Taxes of any
Person (other than SBI or any of its Subsidiaries) under Reg. 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vi) Section 5.03(q) of SBI's Disclosure Schedule sets forth the
following information with respect to SBI and each of its Subsidiaries (A) the
amount of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax credit, or excess charitable contribution allocable
to SBI and each Subsidiary; (B) the amount of any deferred gain or loss
allocable to SBI and each Subsidiary arising out of any intercompany
transaction; and (C) all material Tax elections that have been made by SBI or
any of its Subsidiaries.
(vii) The unpaid Taxes of SBI and its Subsidiaries (A) did not, as of
the most recent fiscal month end, exceed the reserve for Tax liability (not
including any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the most
recent financial statements of SBI and its Subsidiaries (other than in any notes
thereto) included in the SBI SEC Documents filed on or prior to the date hereof
(the "SBI Financial Statements") and (B) will not exceed that reserve as of the
Effective Date. Since the date of SBI's Financial Statements, neither SBI nor
any of its Subsidiaries has incurred any liability for Taxes arising from
extraordinary gains or losses, as that term is used in GAAP, outside the
ordinary course of their business consistent with past custom and practice.
(viii) Neither SBI nor any of its Subsidiaries is a party to any "Gain
Recognition Agreements" as such term is used in the Treasury Regulations
promulgated under Section 367 of the Code. Neither SBI nor any of its
23
Subsidiaries will be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Effective Date as a result
of any: (A) change in method of accounting for a taxable period ending
on or prior to the Effective Date; (B) "closing agreement" as described
in Code Section 7121 (or any corresponding or similar provision of
state, local or foreign income Tax law) executed on or prior to the
Effective Date; (C) intercompany transactions or any excess loss
account described in Treasury Regulations under Code Section 1502 (or
any corresponding or similar provision of state, local or foreign
income Tax law); (D) installment sale or open transaction disposition
made on or prior to the Effective Date; or (E) prepaid amount received
on or prior to the Effective Date.
(ix) Neither SBI nor any of its Subsidiaries has distributed
stock of another Person, or has had its stock distributed by another
Person, in a transaction that was purported or intended to be governed
in whole or in part by Code Section 355 or Section 361.
(x) There are no joint ventures, partnerships, limited
liability companies, or other arrangements or contracts to which SBI or
any of its Subsidiaries is a party that could be treated as a
partnership for federal income Tax purposes.
(xi) As of the date hereof, neither SBI nor any of its
Subsidiaries has any reason to believe that any conditions exist that
might prevent or impede the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
(r) Risk Management Instruments. All material interest rate swaps,
caps, floors, option agreements, futures and forward contracts and other similar
risk management arrangements, whether entered into for SBI's own account, or for
the account of one or more of SBI's Subsidiaries or their customers (all of
which are listed on SBI's Disclosure Schedule), were entered into (i) in
accordance with prudent business practices and all applicable laws, rules,
regulations and regulatory policies and (ii) with counterparties believed to be
financially responsible at the time; and each of them constitutes the valid and
legally binding obligation of SBI or one of its Subsidiaries, enforceable in
accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles), and is in full force and effect. Neither SBI
nor its Subsidiaries, nor to SBI's knowledge any other party thereto, is in
breach of any of its obligations under any such agreement or arrangement.
(s) Books and Records. The books and records of SBI and its
Subsidiaries have been fully, properly and accurately maintained in all material
respects, have been maintained in accordance with sound business practices and
the requirements of Section 13(b)(2) of the Exchange Act, and there are no
material inaccuracies or discrepancies of any kind contained or reflected
therein and they fairly reflect the substance of events and transactions
included therein.
24
(t) Insurance. SBI's Disclosure Schedule sets forth all of the
insurance policies, binders, or bonds maintained by SBI or its Subsidiaries. SBI
and its Subsidiaries are insured with reputable insurers against such risks and
in such amounts as the management of SBI reasonably has determined to be prudent
in accordance with industry practices. All such insurance policies are in full
force and effect; SBI and its Subsidiaries are not in material default
thereunder; and all claims thereunder have been filed in due and timely fashion.
(u) SBI Off Balance Sheet Transactions. Section 5.03(u) of SBI's
Disclosure Schedule sets forth a true and complete list of all affiliated SBI
entities, including without limitation all special purpose entities, limited
purpose entities and qualified special purpose entities, in which SBI or any of
its Subsidiaries or any officer or director of SBI or any of its Subsidiaries
has an economic or management interest. Section 5.03(u) of SBI's Disclosure
Schedule also sets forth a true and complete list of all transactions,
arrangements, and other relationships between or among any such SBI affiliated
entity, on the one hand, and SBI, any of its Subsidiaries, and any officer or
director of SBI or any of its Subsidiaries, on the other hand, that are not
reflected in the consolidated financial statements of SBI (each, a "SBI Off
Balance Sheet Transaction"), along with the following information with respect
to each such SBI Off Balance Sheet Transaction: (i) the business purpose,
activities, and economic substance; (ii) the key terms and conditions; (iii) the
potential risk to SBI or any of its Subsidiaries; (iv) the amount of any
guarantee, line of credit, standby letter of credit or commitment, or any other
type of arrangement, that could require SBI or any of its Subsidiaries to fund
any obligations under any such transaction; and (v) any other information that
could have a Material Adverse Effect on SBI or any of its Subsidiaries.
(v) Disclosure. Subject to the standard set forth in Section 5.02, the
representations and warranties contained in this Section 5.03 do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements and information contained in this Section 5.03
not misleading.
(w) Material Adverse Change. SBI has not, on a consolidated basis,
suffered a change in its business, financial condition or results of operations
since December 31, 2001, except as disclosed in the SBI SEC Documents or as
Previously Disclosed, that has had a Material Adverse Effect on SBI.
(x) Absence of Undisclosed Liabilities. Except as Previously Disclosed,
neither SBI nor any of its Subsidiaries has any liability (contingent or
otherwise) that is material to SBI on a consolidated basis, or that, when
combined with all liabilities as to similar matters, would be material to SBI on
a consolidated basis, except as disclosed in the SBI Financial Statements.
(y) Properties. SBI and its Subsidiaries have good and marketable title
(as to real estate), free and clear of all liens, encumbrances, charges,
defaults or equitable interests to all of the properties and assets, real and
personal, reflected on SBI's Financial Statements as being owned by SBI as of
September 30, 2003 or acquired after such date, except (i) statutory liens for
amounts not yet due and payable, (ii) pledges to secure deposits and borrowings
and other liens incurred in the ordinary course of banking
25
business, (iii) such imperfections of title, easements, encumbrances, liens,
charges, defaults or equitable interests, if any, as do not affect the use of
properties or assets subject thereto or affected thereby or otherwise materially
impair business operations at such properties, (iv) dispositions and
encumbrances in the ordinary course of business, and (v) liens on properties
acquired in foreclosure or on account of debts previously contracted. All leases
pursuant to which SBI or any of its Subsidiaries, as lessee, leases real or
personal property (except for leases that have expired by their terms or that
SBI or any such Subsidiary has agreed to terminate since the date hereof) are
valid without default thereunder by the lessee or, to SBI's knowledge, the
lessor.
(z) Loans. Each loan reflected as an asset in SBI's Financial
Statements and each balance sheet date subsequent thereto, other than loans the
unpaid balance of which does not exceed $250,000 in the aggregate, (i) is
evidenced by notes, agreements or other evidences of indebtedness that are true,
genuine and what they purport to be, (ii) to the extent secured, has been
secured by valid liens and security interests that have been perfected, and
(iii) is the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles. Except as
Previously Disclosed, as of September 30, 2003, Bank is not a party to a loan,
including any loan guaranty, with (i) any director, executive officer or 5%
shareholder of SBI or any of its Subsidiaries, (ii) any person who was deemed an
"affiliate" (as defined under the Securities Act) in connection with any entity
acquired by SBI or any of its Subsidiaries (by reason of acquisition of assets,
or via merger, consolidation or otherwise), or (iii) any person, corporation or
enterprise controlling, controlled by or under common control with any of the
foregoing. All loans and extensions of credit that have been made by Bank and
that are subject either to Section 22(g) or (h) of the Federal Reserve Act, as
amended, comply therewith.
(aa) Allowance for Loan Losses. The allowance for loan losses reflected
on SBI's Financial Statements, as of their respective dates, is adequate in all
material respects under the requirements of GAAP to provide for reasonably
anticipated losses on outstanding loans, net of recoveries.
(bb) Repurchase Agreements. With respect to all agreements pursuant to
which SBI or any of its Subsidiaries has purchased securities subject to an
agreement to resell, if any, SBI or such Subsidiary, as the case may be, has a
valid, perfected first lien or security interest in or evidence of ownership in
book entry form of the government securities or other collateral securing the
repurchase agreement, and the value of such collateral equals or exceeds the
amount of the debt secured thereby.
(cc) Deposit Insurance. The deposits of Bank are insured by the FDIC in
accordance with The Federal Deposit Insurance Act ("FDIA"), and Bank has paid
all assessments and filed all reports required by the FDIA.
(dd) Related Party Transactions. Except as Previously Disclosed,
neither SBI nor any of its Subsidiaries has entered into any Related Party
Transaction including, but not limited to, transactions involving any director
or officer of SBI, any nominee for
26
election as director of SBI, any security holder of SBI, and any member
of the immediate family of any of the foregoing persons.
(ee) Board Approval. The SBI Board has approved, for purposes
of Chapter 1704 of the Ohio Interested Shareholder Transactions Law,
this Agreement and those certain voting agreements by and among Sky and
certain SBI shareholders dated as of the date hereof.
5.04 Representations and Warranties of Sky. Subject to Sections 5.01
and 5.02 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, Sky hereby represents
and warrants to SBI as follows:
(a) Organization, Standing and Authority. Sky is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Ohio. Sky is duly qualified to do business and is in good
standing in the State of Ohio and any foreign jurisdictions where its
ownership or leasing of property or assets or the conduct of its
business requires it to be so qualified. Sky is registered as a
financial holding company under the Bank Holding Company Act of 1956,
as amended. Sky Bank is a state banking association duly organized,
validly existing and in good standing under the laws of the State of
Ohio. Sky Bank is duly qualified to do business and is in good standing
in the State of Ohio and any foreign jurisdictions where its ownership
or leasing of property or assets or the conduct of its business
requires it to be so qualified.
(b) Sky Shares.
(i) The authorized capital stock of Sky consists of
160,000,000 shares, of which (A) 150,000,000 shares are Sky
Common Shares, without par value, of which 92,816,641 shares
are outstanding as of the date hereof, and (B) 10,000,000
shares are Sky Preferred Shares, par value $10.00 per share,
of which no shares were outstanding as of the date hereof. As
of the date hereof, except as Previously Disclosed, Sky does
not have any Rights issued or outstanding with respect to Sky
Common Shares and Sky does not have any commitment to
authorize, issue or sell any Sky Common Shares or Rights,
except pursuant to this Agreement. The outstanding Sky Common
Shares have been duly authorized and are validly issued and
outstanding, fully paid and nonassessable, and subject to no
preemptive rights (and were not issued in violation of any
preemptive rights).
(ii) The Sky Common Shares to be issued in exchange
for SBI Shares in the Merger, when issued in accordance with
the terms of this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable and subject to no
preemptive rights (and were not issued in violation of any
preemptive rights). As of the date hereof, there are, and as
of the Effective Time there will be, sufficient authorized and
unissued Sky Common Shares to enable Sky to issue the Merger
Consideration at the Effective Time in connection with the
Parent Merger.
(c) Subsidiaries. Sky has Previously Disclosed a list of all
its Subsidiaries together with the jurisdiction of organization of each
Subsidiary. Each of Sky's Subsidiaries has been duly organized and is
validly existing in good standing under the
27
laws of the jurisdiction of its organization, and is duly qualified to do
business and is in good standing in the jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and, except as Previously Disclosed, Sky owns, directly or indirectly,
all the issued and outstanding equity securities of each of its Significant
Subsidiaries.
(d) Corporate Power. Each of Sky and its Subsidiaries has the corporate
power and authority to carry on its business as it is now being conducted and to
own all its properties and assets. Subject to the receipt of all necessary
governmental approvals, Sky has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby.
(e) Corporate Authority; Authorized and Effective Agreement. This
Agreement and the transactions contemplated hereby have been authorized by all
necessary corporate action of Sky and the Sky Board prior to the date hereof and
no shareholder approval is required on the part of Sky. The Agreement to Merge,
when executed by Sky Bank, shall have been approved by the Board of Directors of
Sky Bank and by the Sky Board, as the sole shareholder of Sky Bank. This
Agreement is a valid and legally binding agreement of Sky, enforceable in
accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors rights
or by general equity principles).
(f) Regulatory Approvals; No Defaults.
(i) No consents or approvals of, or filings or registrations
with, any Governmental Authority or with any third party are required
to be made or obtained by Sky or any of its Subsidiaries in connection
with the execution, delivery or performance by Sky of this Agreement or
to consummate the Merger except for (A) the filing of applications,
notices or the Agreement to Merge, as applicable, with the Regulatory
Authorities; (B) the filing and declaration of effectiveness of the
Registration Statement; (C) the filing of the certificate of merger
with the OSS pursuant to the OGCL; (D) such filings as are required to
be made or approvals as are required to be obtained under the
securities or "Blue Sky" laws of various states in connection with the
issuance of Sky Common Shares in the Merger; and (E) receipt of the
approvals set forth in Section 7.01(b). As of the date hereof, Sky has
no knowledge of any reason why the approvals set forth in Section
7.01(b) will not be received without the imposition of a condition,
restriction or requirement of the type described in Section 7.01(b).
(ii) Subject to the satisfaction of the requirements referred
to in the preceding paragraph and expiration of the related waiting
periods, and required filings under federal and state securities laws,
the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby do not and will
not (A) constitute a breach or violation of, or a default under, or
give rise to any Lien, any acceleration of remedies or any right of
termination under, any law, rule or regulation or any judgment, decree,
order, governmental permit or license, or agreement, indenture or
instrument of Sky or
28
of any of its Subsidiaries or to which Sky or any of its Subsidiaries or
properties is subject or bound, (B) constitute a breach or violation of, or a
default under, the Articles of Incorporation or Code of Regulations (or similar
governing documents) of Sky or any of its Subsidiaries, or (C) require any
consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license, agreement, indenture or instrument.
(g) Financial Reports and SEC Documents; Material Adverse Effect.
(i) Sky's Annual Report on Form 10-K for the fiscal year ended December
31, 2001 and 2002, and all other reports, registration statements, definitive
proxy statements or information statements filed or to be filed by it or any of
its Subsidiaries with the SEC subsequent to December 31, 2002 under the
Securities Act, or under Section 13, 14 or 15(d) of the Exchange Act, in the
form filed or to be filed, as amended (collectively, "Sky SEC Documents") as of
the date filed, or amended, (A) complied or will comply in all material respects
with the applicable requirements under the Securities Act or the Exchange Act,
as the case may be, and (B) did not and will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and each of the balance sheets or
statements of condition contained in or incorporated by reference into any such
Sky SEC Document (including the related notes and schedules thereto) fairly
presents, or will fairly present, the financial position of Sky and its
Subsidiaries as of its date, and each of the statements of income or results of
operations and changes in shareholders' equity and cash flows or equivalent
statements in such Sky SEC Documents (including any related notes and schedules
thereto) fairly presents, or will fairly present, the results of operations,
changes in shareholders' equity and cash flows, as the case may be, of Sky and
its Subsidiaries for the periods to which they relate, in each case in
accordance with GAAP consistently applied during the periods involved, except in
each case as may be noted therein, subject to normal year-end audit adjustments
and the absence of footnotes in the case of unaudited statements.
(ii) Since December 31, 2002, no event has occurred or circumstance
arisen that, individually or taken together with all other facts, circumstances
and events (described in any paragraph of Section 5.04 or otherwise), is
reasonably likely to have a Material Adverse Effect with respect to Sky, except
as disclosed in the Sky SEC Documents.
(h) Litigation; Regulatory Action.
(i) Except as Previously Disclosed, no material litigation, claim or
other proceeding before any court or governmental agency is pending against Sky
or any of its Subsidiaries and, to Sky's knowledge, no such litigation, claim or
other proceeding has been threatened.
29
(ii) Except as Previously Disclosed, neither Sky nor any of
its Subsidiaries or properties is a party to or is subject to any
order, decree, agreement, memorandum of understanding or similar
arrangement with, or a commitment letter or similar submission to, or
extraordinary supervisory letter from a Regulatory Authority, nor has
Sky or any of its Subsidiaries been advised by a Regulatory Authority
that such agency is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such
order, decree, agreement, memorandum of understanding, commitment
letter, supervisory letter or similar submission.
(i) Compliance with Laws. Each of Sky and its Subsidiaries:
(i) is in material compliance with all applicable federal,
state, local and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders or decrees applicable thereto or to the
employees conducting such businesses, including, without limitation,
the Equal Credit Opportunity Act, the Fair Housing Act, the Community
Reinvestment Act, the Home Mortgage Disclosure Act and all other
applicable fair lending laws and other laws relating to discriminatory
business practices;
(ii) has all material permits, licenses, authorizations,
orders and approvals of, and has made all material filings,
applications and registrations with, all Regulatory Authorities and
Governmental Authorities that are required in order to permit them to
conduct their businesses substantially as presently conducted; all such
permits, licenses, certificates of authority, orders and approvals are
in full force and effect and, to its knowledge, no suspension or
cancellation of any of them is threatened; and
(iii) has received, since December 31, 2002, no notification
or communication from any Regulatory Authority or Governmental
Authority (A) asserting that Sky or any of its Subsidiaries is not in
material compliance with any of the statutes, regulations, or
ordinances that such Regulatory Authority or Governmental Authority
enforces or (B) threatening to revoke any license, franchise, permit,
or governmental authorization (nor, to Sky's knowledge, do any grounds
for any of the foregoing exist).
(j) Brokerage and Finder's Fees. Except for the fee payable to Credit
Suisse First Boston, Sky has not employed any broker, finder, or agent, or
agreed to pay or incurred any brokerage fee, finder's fee, commission or other
similar form of compensation in connection with this Agreement or the
transactions contemplated hereby.
(k) Takeover Laws. Sky has taken all action required to be taken by it
in order to exempt this Agreement and the transactions contemplated hereby from,
and this Agreement and the transactions contemplated hereby are exempt from, the
requirements of any Takeover Laws applicable to Sky.
(l) Tax Matters.
30
Except as otherwise disclosed in Section 5.04(l) of Sky's
Disclosure Schedule:
(i) Sky and each of its Subsidiaries have filed
all Tax Returns that they were required to file under
applicable laws and regulations. All such Tax Returns were
correct and complete in all respects and have been prepared in
substantial compliance with all applicable laws and
regulations. All Taxes due and owing by Sky or any of its
Subsidiaries (whether or not shown on any Tax Return) have
been paid. Neither Sky nor any of its Subsidiaries currently
is the beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where Sky or any of its
Subsidiaries does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no Liens
for Taxes (other than Taxes not yet due and payable) upon any
of the assets of Sky or any of its Subsidiaries.
(ii) Sky and each of its Subsidiaries have
withheld and paid all Taxes required to have been withheld and
paid in connection with any amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or
other third party.
(iii) As of the date hereof, neither Sky nor any
of its Subsidiaries has any reason to believe that any
conditions exist that might prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section
368(a) of the Code.
(m) Books and Records. The books and records of Sky and
its Subsidiaries have been fully, properly and accurately maintained in
all material respects, have been maintained in accordance with sound
business practices and the requirements of Section 13(b)(2) of the
Exchange Act, and there are no material inaccuracies or discrepancies
of any kind contained or reflected therein, and they fairly present the
substance of events and transactions included therein.
(n) Disclosure. The representations and warranties
contained in this Section 5.04 do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements and information contained in this Section 5.04 not
misleading.
(o) Material Adverse Change. Sky has not, on a
consolidated basis, suffered a change in its business, financial
condition or results of operations since December 31, 2001 that has had
a Material Adverse Effect on Sky, except as described in the Sky SEC
Documents.
(p) Deposit Insurance. The deposits of Sky Bank are
insured by the FDIC in accordance with the FDIA, and Sky Bank has paid
all assessments and filed all reports required by the FDIA.
(q) Sky Off Balance Sheet Transactions. Section 5.04(q)
of Sky's Disclosure Schedule sets forth a true and complete list of all
affiliated Sky entities, including without limitation all special
purpose entities, limited purpose entities and qualified special
purpose entities, in which Sky or any of its Subsidiaries or any
officer or director of Sky
31
or any of its Subsidiaries has an economic or management interest.
Section 5.04(q) of Sky's Disclosure Schedule also sets forth a true and
complete list of all transactions, arrangements, and other
relationships between or among any such Sky affiliated entity, on the
one hand, and Sky, any of its Subsidiaries and any officer or director
of Sky or any of its Subsidiaries, on the other hand, that are not
reflected in the consolidated financial statements of Sky (each, a "Sky
Off Balance Sheet Transaction"), along with the following information
with respect to each such Sky Off Balance Sheet Transaction: (i) the
business purpose, activities, and economic substance; (ii) the key
terms and conditions; (iii) the potential risk to Sky or any of its
Subsidiaries; (iv) the amount of any guarantee, line of credit, standby
letter of credit or commitment, or any other type of arrangement, that
could require Sky or any of its Subsidiaries to fund any obligations
under any such transaction; and (v) any other information that could
have a Material Adverse Effect on Sky or any of its Subsidiaries.
(r) Risk Management Instruments. All material interest
rate swaps, caps, floors, option agreements, futures and forward
contracts and other similar risk management arrangements, whether
entered into for Sky's own account, or for the account of one or more
of Sky's Subsidiaries (or any entity acquired by Sky) or their
customers, were entered into (i) in accordance with prudent business
practices and all applicable laws, rules, regulations and regulatory
policies and (ii) with counterparties believed to be financially
responsible at the time; and each of them constitutes the valid and
legally binding obligation of Sky or one of its Subsidiaries,
enforceable in accordance with its terms (except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general
equity principles), and is in full force and effect. Neither Sky nor
its Subsidiaries, nor to Sky's knowledge any other party thereto, is in
breach of any of its obligations under any such agreement or
arrangement.
(s) Allowance for Loan Losses. The allowance for loan
losses reflected on Sky's consolidated balance sheet as of September
30, 2003, included in the Sky SEC Documents, is adequate in all
material respects under the requirements of GAAP to provide for
reasonably anticipated losses on outstanding loans, net of recoveries.
ARTICLE VI
Covenants
6.01 Reasonable Best Efforts. Subject to the terms and conditions
of this Agreement, each of SBI and Sky agrees to use its reasonable best efforts
in good faith to take, or cause to be taken, all actions, and to do, or cause to
be done, all things necessary, proper or desirable, or advisable under
applicable laws, so as to permit consummation of the Merger as promptly as
practicable and otherwise to enable consummation of the transactions
contemplated hereby and shall cooperate fully with the other party hereto to
that end.
6.02 Shareholder Approval. SBI agrees to take, in accordance with
applicable law and the SBI Articles and SBI Code, all action necessary to
convene an appropriate meeting of its shareholders to consider and vote upon the
adoption of this Agreement and any other matters
32
required to be approved or adopted by SBI's shareholders for consummation of the
Parent Merger (including any adjournment or postponement, the "SBI Meeting"), as
promptly as practicable after the Registration Statement is declared effective.
The SBI Board shall recommend that SBI's shareholders adopt this Agreement at
the SBI Meeting unless the SBI Board, after consultation with independent legal
counsel, determines in good faith that it would constitute, or could reasonably
be expected to constitute, a breach of its fiduciary duties under applicable
Ohio or federal law and SBI's Articles.
6.03 Registration Statement.
(a) Sky agrees to prepare pursuant to all applicable
laws, rules and regulations a registration statement on Form S-4 (the
"Registration Statement") to be filed by Sky with the SEC in connection
with the issuance of Sky Common Shares in the Merger (including the
proxy statement and prospectus and other proxy solicitation materials
of SBI constituting a part thereof (the "Proxy Statement") and all
related documents). SBI agrees to cooperate, and to cause its
Subsidiaries to cooperate, with Sky, its counsel and its accountants,
in preparation of the Registration Statement and the Proxy Statement;
and provided that SBI and its Subsidiaries have cooperated as required
above, Sky agrees to file the Proxy Statement and the Registration
Statement (together, the "Proxy Statement/Prospectus") with the SEC as
promptly as reasonably practicable. Each of SBI and Sky agrees to use
all reasonable efforts to cause the Proxy Statement/Prospectus to be
declared effective under the Securities Act as promptly as reasonably
practicable after filing thereof. Sky also agrees to use all reasonable
efforts to obtain, prior to the effective date of the Registration
Statement, all necessary state securities law or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by this
Agreement. SBI agrees to furnish to Sky all information concerning SBI,
its Subsidiaries, officers, directors and shareholders as may be
reasonably requested in connection with the foregoing.
(b) Each of SBI and Sky agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied
by it for inclusion or incorporation by reference in (i) the
Registration Statement will, at the time the Registration Statement and
each amendment or supplement thereto, if any, becomes effective under
the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii) the
Proxy Statement and any amendment or supplement thereto will, at the
date of mailing to the SBI shareholders and at the time of the SBI
Meeting, as the case may be, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading or any
statement that, in the light of the circumstances under which such
statement is made, will be false or misleading with respect to any
material fact, or that will omit to state any material fact necessary
in order to make the statements therein not false or misleading or
necessary to correct any statement in any earlier statement in the
Proxy Statement or any amendment or supplement thereto. Each of SBI and
Sky further agrees that if it shall become aware prior to the Effective
Date of any information furnished by it that would cause any of the
statements in the Proxy Statement to be false or misleading with
respect to any material fact, or to omit to state any material fact
necessary to make
33
the statements therein not false or misleading, to promptly inform the
other party thereof and to take the necessary steps to correct the
Proxy Statement.
(c) Sky agrees to advise SBI, promptly after Sky receives
notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, of the
issuance of any stop order or the suspension of the qualification of
Sky Shares for offering or sale in any jurisdiction, of the initiation
or threat of any proceeding for any such purpose, or of any request by
the SEC for the amendment or supplement of the Registration Statement
or for additional information.
6.04 Press Releases. Each of SBI and Sky agrees that it will not,
without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby, except as otherwise required by applicable law or
regulation or NASDAQ rules (in which event it shall give the other party such
concurrent or advance notice thereof as is reasonably possible).
6.05 Access; Confidentiality.
(a) Each party shall, upon reasonable notice and subject
to applicable laws relating to the exchange of information, afford the
other party and its officers, employees, counsel, accountants and other
authorized representatives, such access during normal business hours
throughout the period prior to the Effective Time to the books, records
(including, without limitation, tax returns and work papers of
independent auditors), properties, personnel and to such other
information as such party may reasonably request and, during such
period, it shall furnish promptly to the other party (i) a copy of each
material report, schedule and other document filed by it pursuant to
federal or state securities or banking laws, and (ii) all other
information concerning its business, properties and personnel as the
other party may reasonably request.
(b) Each of SBI and Sky agrees that it will not, and will
cause its representatives not to, use any information obtained pursuant
to this Section 6.05 (as well as any other information obtained prior
to the date hereof in connection with the entering into of this
Agreement) for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement. Except for the use of
information in connection with the Registration Statement described in
Section 6.03 hereof and any other governmental filings required in
order to complete the transactions contemplated by this Agreement, all
information (collectively, the "Information") received by each of SBI
and Sky, pursuant to the terms of this Agreement shall be kept in
strictest confidence; provided that, subsequent to the filing of the
Registration Statement with the SEC, this Section 6.05 shall not apply
to information included in the Registration Statement or to be included
in the Proxy Statement/Prospectus to be sent to the shareholders of SBI
and Sky under Section 6.03. Subject to the requirements of law, each
party will keep confidential, and will cause its representatives to
keep confidential, all Information and documents obtained (as well as
any other Information obtained prior to the date hereof in connection
with the entering into of this Agreement) unless such Information (i)
was already known to the party receiving the information on a
nonconfidential basis prior to the disclosure, (ii) becomes available
to such party from other sources not known by such party to be bound by
a confidentiality obligation, (iii) is disclosed with the prior written
34
approval of the party to which such information pertains or (iv) is or
becomes readily ascertainable from published information or trade
sources. In the event that this Agreement is terminated or the
transactions contemplated by this Agreement shall otherwise fail to be
consummated, each party shall promptly cause all copies of documents or
extracts thereof containing Information and data as to another party
hereto to be returned to the party that furnished the same. No
investigation by either party of the business and affairs of the other
shall affect or be deemed to modify or waive any representation,
warranty, covenant or agreement in this Agreement, or the conditions to
either party's obligation to consummate the transactions contemplated
by this Agreement.
(c) During the period from the date of this Agreement to
the Effective Time, (i) SBI shall promptly furnish Sky with copies of
all monthly and other interim financial statements produced in the
ordinary course of business as the same shall become available, (ii)
Sky shall promptly furnish SBI with copies of all monthly financial
statements produced in the ordinary course of business as the same
shall become available and (iii) SBI shall promptly furnish Sky with
copies of all monthly reports of market and liquidity risks, activities
in investments, brokered certificates of deposit and borrowed funds.
6.06 Acquisition Proposals. SBI agrees that it shall not, and shall
cause its Subsidiaries and its and its Subsidiaries' officers, directors,
agents, advisors and affiliates not to, solicit or encourage inquiries or
proposals with respect to, or engage in any negotiations concerning, or provide
any confidential information to, or have any discussions with, any person
relating to, any Acquisition Proposal, except to the extent that the SBI Board,
after consultation with independent legal counsel, determines in good faith that
the failure to take such action would constitute, or could reasonably be
expected to constitute, a breach of its fiduciary duties under applicable Ohio
or federal law and SBI's Articles. SBI shall immediately cease and cause to be
terminated any activities, discussions or negotiations conducted prior to the
date of this Agreement with any parties other than Sky with respect to any of
the foregoing and shall use its best efforts to enforce any confidentiality or
similar agreement relating to an Acquisition Proposal. SBI shall promptly advise
Sky following the receipt by SBI of any Acquisition Proposal and the substance
thereof (including the identity of the person making such Acquisition Proposal),
and advise Sky of any developments with respect to such Acquisition Proposal
promptly upon the occurrence thereof.
6.07 Affiliate Agreements. Not later than the 15th day prior to the
mailing of the Proxy Statement, SBI shall deliver to Sky a schedule of each
person that, to the best of its knowledge, is or is reasonably likely to be, as
of the date of the SBI Meeting, deemed to be an "affiliate" of SBI (each, a "SBI
Affiliate") as that term is used in Rule 145 under the Securities Act. SBI shall
use its reasonable best efforts to cause each person who may be deemed to be a
SBI Affiliate to execute and deliver to SBI on or before the date of mailing of
the Proxy Statement an agreement in the form attached hereto as Exhibit A.
6.08 Takeover Laws. No party hereto shall take any action that
would cause the transactions contemplated by this Agreement to be subject to
requirements imposed by any Takeover Law and each of them shall take all
necessary steps within its control to exempt (or ensure the continued exemption
of) the transactions contemplated by this Agreement from, or if
35
necessary challenge the validity or applicability of, any applicable Takeover
Law, as now or hereafter in effect.
6.09 Certain Policies. Prior to the Effective Date, SBI shall,
consistent with GAAP and on a basis mutually satisfactory to it and Sky, modify
and change its loan policies and practices and review and consider litigation
and real estate valuation policies and practices (including loan classifications
and levels of reserves) as well as other management and operating policies and
practices so as to be applied on a basis that is consistent with that of Sky;
provided, however, that SBI shall not be obligated to take any such action
pursuant to this Section 6.09 earlier than 30 days prior to the Effective Date,
and unless and until Sky acknowledges that all conditions to the obligations of
Sky to consummate the Parent Merger have been satisfied and certifies to SBI
that Sky's representations and warranties, subject to Section 5.02, are true and
correct as of such date and that Sky is otherwise materially in compliance with
this Agreement. SBI's representations, warranties and covenants contained in
this Agreement shall not be deemed to be untrue or breached in any respect for
any purpose as a consequence of any modifications or changes undertaken solely
on account of this Section 6.09.
6.10 NASDAQ Listing or Notification. As required by NASDAQ, prior
to the Effective Date, Sky shall file a NASDAQ Notification Form for Listing of
Additional Shares and/or Change in the Number of Shares Outstanding, with
respect to the shares of Sky Common Shares to be issued to the holders of SBI
Shares in the Merger.
6.11 Regulatory Applications.
(a) Sky and SBI and their respective Subsidiaries shall
cooperate and use their respective reasonable best efforts to prepare,
within 45 days of the execution of this Agreement, all documentation
and requests for regulatory approval, to timely effect all filings and
to obtain all permits, consents, approvals and authorizations of all
third parties and Governmental Authorities and Regulatory Authorities
necessary to consummate the transactions contemplated by this
Agreement. Each of Sky and SBI shall have the right to review in
advance, and to the extent practicable each will consult with the
other, in each case subject to applicable laws relating to the exchange
of information, with respect to, and shall be provided in advance so as
to reasonably exercise its right to review in advance, all material
written information submitted to any third party or any Governmental
Authority or Regulatory Authority in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each
of the parties hereto agrees to act reasonably and as promptly as
practicable. Each party hereto agrees that it will consult with the
other party hereto with respect to the obtaining of all material
permits, consents, approvals and authorizations of all third parties
and Governmental Authorities or Regulatory Authorities necessary or
advisable to consummate the transactions contemplated by this Agreement
and each party will keep the other party apprised of the status of
material matters relating to completion of the transactions
contemplated hereby.
(b) Each party agrees, upon request, to furnish the other
party with all information concerning itself, its Subsidiaries,
directors, officers and shareholders and such other matters as may be
reasonably necessary or advisable in connection with any
36
filing, notice or application made by or on behalf of such other party
or any of its Subsidiaries to any third party, Governmental Authority
or Regulatory Authority.
6.12 Indemnification.
(a) Following the Effective Date, Sky shall indemnify,
defend and hold harmless the present and former directors, officers and
employees of SBI and its Subsidiaries (each, an "Indemnified Party")
against all costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities incurred in
connection with any claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative, arising out
of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement) to the fullest extent that SBI is permitted to indemnify
(and advance expenses to) its directors, officers, and employees under
the laws of the State of Ohio, the SBI Articles or the SBI Code as in
effect on the date hereof; provided that any determination required to
be made with respect to whether an officer's, director's or employee's
conduct complies with the standards set forth under Ohio law, the SBI
Articles or the SBI Code shall be made by independent counsel (which
shall not be counsel that provides material services to Sky) selected
by Sky and reasonably acceptable to such officer, director or employee.
(b) For a period of three (3) years from the Effective
Time, Sky shall use its reasonable best efforts to provide that portion
of directors' and officers' liability insurance that serves to
reimburse the present and former officers and directors of SBI or any
of its Subsidiaries (determined as of the Effective Time) (as opposed
to SBI) with respect to claims against such directors and officers
arising from facts or events that occurred before the Effective Time;
provided, however, that in no event shall Sky be required to expend
more than 125% of the current amount expended by SBI to maintain or
procure such directors' and officers' insurance.
(c) Any Indemnified Party wishing to claim
indemnification under Section 6.12(a), upon learning of any claim,
action, suit, proceeding or investigation described above, shall
promptly notify Sky thereof; provided that the failure so to notify
shall not affect the obligations of Sky under Section 6.12(a) unless
and to the extent that Sky is actually prejudiced as a result of such
failure.
(d) If Sky or any of its successors or assigns shall
consolidate with or merge into any other entity and shall not be the
continuing or surviving entity of such consolidation or merger or shall
transfer all or substantially all of its assets to any entity, then and
in each case, proper provision shall be made so that the successors and
assigns of Sky shall assume the obligations set forth in this Section
6.12.
6.13 Opportunity of Employment; Employee Benefits.
(a) Sky will make a good faith effort to provide the
existing employees of SBI with the opportunity to continue as employees
on the Effective Date, subject, however, to the right of Sky and its
Subsidiaries, and the Bank, to terminate any such employees (i) for
cause; or (ii) pursuant to procedures set forth in the Sky workforce
redesign process;
37
or (iii) pursuant to the implementation of Sky's regional banking
template; or (iv) to eliminate the redundancy of employment positions.
Prior to the Effective Time, pursuant to and in accordance with
specific directions from Sky, SBI agrees to issue, and cause the Bank
to issue, Worker Adjustment and Retraining Act notices (so-called WARN
notices) to employees of SBI and the Bank who Sky determines will not
be employed on or after the Effective Time pursuant to the employment
termination provisions of the foregoing sentence; provided, however,
that any such WARN notices shall be (aa) for employment terminations on
or after the Effective Time, and (bb) given to affected employees at
least sixty (60) days in advance of their termination dates. It is
understood and agreed that nothing in this Section 6.13 or elsewhere in
this Agreement shall be deemed to be a contract of employment or be
construed to give said employees any rights other than as employees at
will under applicable law and said employees shall not be deemed to be
third-party beneficiaries of this provision. Each existing SBI employee
who is terminated by SBI (with Sky's prior written consent) or Sky or
one of their Subsidiaries (which shall include the Bank commencing on
the Effective Date) at any time until the end of the first whole year
following the Effective Date shall be entitled to all benefits payable
by Sky in accordance with Sky's standard severance policy for employees
(excluding any retention payments thereunder), with credit for years of
SBI service (including years of service with SBI's predecessors,
including any entities merged into SBI or Bank with respect to which
service no prior severance payments were made to such employees) and
reduced (but not below zero) by any amounts payable to such employees
under SBI's severance compensation program; and Sky also shall pay each
such terminated employee for all unused vacation time based upon each
such terminated employee's years of service as of the date of
termination of employment, up to maximum of one year's vacation time.
(b) From and after the Effective Time, SBI employees
shall continue to participate in the SBI employee benefit plans in
effect at the Effective Time unless and until Sky, in its sole
discretion, shall determine that SBI employees shall, subject to
applicable eligibility requirements, participate in employee benefit
plans of Sky, and that all or some of the SBI plans shall be frozen,
terminated or merged into certain employee benefit plans of Sky. SBI
employees continuing to be employed by Sky shall receive credit for
service at SBI for eligibility and vesting purposes under Sky's
employee benefit plans (but not for benefit calculation purposes),
except as otherwise required by law or regulation. Any employees
terminated by Sky shall be entitled to elect so-called "COBRA" in
accordance with, and subject to, the provisions of Code Section
4980B(f). Each SBI employee shall be credited with years of SBI service
(including years of service with SBI's predecessors, to the same extent
that SBI credited such service, including any entities merged into SBI
or Bank) for purposes of eligibility and vesting in the employee
benefit plans of Sky, and shall not be subject to any exclusion or
penalty for pre-existing conditions that were covered under SBI's
welfare plans immediately prior to the Effective Date, or to any
waiting period relating to such coverage. If, after the Effective Date,
Sky adopts a new plan or program for its employees or executives, then
to the extent its employees or executives receive past service credits
for any reason, Sky shall credit similarly-situated employees and
executives of SBI with equivalent credit for service with SBI or its
predecessors (including any entities merged into SBI or Bank), to the
same extent that SBI credited service with its predecessors.
(c) The covenants of this Section 6.13 shall survive the
Merger.
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6.14 Notification of Certain Matters. Each of SBI and Sky shall
give prompt notice to the other of any fact, event or circumstance known to it
that (i) is reasonably likely, individually or taken together with all other
facts, events and circumstances known to it, to result in any Material Adverse
Effect with respect to it or (ii) would cause or constitute a material breach of
any of its representations, warranties, covenants or agreements contained
herein.
6.15 Dividend Coordination. It is agreed by the parties hereto that
they will cooperate to assure that as a result of the Parent Merger, during any
applicable period, there shall not be a payment of both a Sky and a SBI dividend
for SBI shareholders and, in no event, will the selection of the Effective Date
cause the SBI shareholders to lose a quarterly dividend to which they are
otherwise entitled.
6.16 Tax Matters.
(i) Without the prior written consent of Sky,
neither SBI nor any of its Subsidiaries shall make or change
any election, change an annual accounting period, adopt or
change any accounting method, file any amended Tax Return,
enter into any closing agreement, settle any Tax claim or
assessment relating to SBI or any of its Subsidiaries,
surrender any right to claim a refund of Taxes, consent to any
extension or waiver of the limitation period applicable to any
Tax claim or assessment relating to SBI or any of its
Subsidiaries, or take any other similar action relating to the
filing of any Tax Return or the payment of any Tax, if such
election, adoption, change, amendment, agreement, settlement,
surrender, consent or other action would have the effect of
increasing the Tax liability of SBI or any of its Subsidiaries
for any period ending after the Effective Date or decreasing
any Tax attribute of SBI or any of its Subsidiaries existing
on the Effective Date.
(ii) Each of Sky and SBI agrees not to take any
actions subsequent to the date if this Agreement that would
adversely affect the ability of SBI and its shareholders to
characterize the Merger as a tax-free reorganization under
Section 368(a) of the Code, and each of Sky and SBI agrees to
take such action as may be reasonably required, if such action
may be reasonably taken to reverse the impact of past actions
which would adversely impact the ability of the Merger to be
characterized as a tax-free reorganization under Section
368(a) of the Code.
6.17 No Breaches of Representations and Warranties. Between the
ate of this Agreement and the Effective Time, without the written consent of
the other party, each of Sky and SBI will not do any act or suffer any omission
of any nature whatsoever that would cause any of the representations or
warranties made in Article V of this Agreement to become untrue or incorrect in
any material respect.
6.18 Consents. Each of Sky and SBI shall use its reasonable best
efforts to obtain any required consents to the transactions contemplated by this
Agreement.
6.19 Insurance Coverage. SBI shall cause the policies of insurance
listed in the Disclosure Schedule to remain in effect between the date of this
Agreement and the Effective Date.
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6.20 Correction of Information. Each of Sky and SBI shall promptly
correct and supplement any information furnished under this Agreement so that
such information shall be correct and complete in all material respects at all
times, and shall include all facts necessary to make such information correct
and complete in all material respects at all times; provided that no such
corrections or supplementations by either party shall be deemed to either (i)
amend any of the representations or warranties contained herein by, or the
Disclosure Schedule of, that party or (ii) impair the right of either party to
declare the other party to be in breach of any of its representations or
warranties for purposes of Section 8.01(b) of this Agreement.
6.21 Supplemental Assurances.
(a) On the date the Registration Statement becomes
effective and on the Effective Date, SBI shall deliver to Sky a
certificate signed by its principal executive officer and its principal
financial officer to the effect, to such officers' knowledge, that the
information contained in the Registration Statement relating to the
business and financial condition and affairs of SBI, does not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading.
(b) On the date the Registration Statement becomes
effective and on the Effective Date, Sky shall deliver to SBI a
certificate signed by its chief executive officer and its chief
financial officer to the effect, to such officers' knowledge, that the
Registration Statement (other than the information contained therein
relating to the business and financial condition and affairs of SBI)
does not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
6.22 Regulatory Matters. Sky, SBI and each of their Subsidiaries
shall cooperate and each of them agrees to use its reasonable best efforts to
remediate any order, decree, agreement, memorandum of understanding or similar
agreement by SBI or any of its Subsidiaries with, or a commitment letter, board
resolution or similar submission by SBI or any of its Subsidiaries to, or
supervisory letter from any Regulatory Authority to SBI or any of its
Subsidiaries, to the satisfaction of such Regulatory Authority.
6.23 Election of Sky Board Member. Sky shall select and propose to
the Nominating Committee of the Sky Board one member of either the existing SBI
Board or the Board of Directors of Bank. At the Effective Time, the director
selected and nominated pursuant to this Section 6.23 shall be elected or
appointed to fill a vacancy on the Sky Board.
6.24 Liquidity Ratio. From the date hereof until the Effective
Time, SBI shall maintain a Liquidity Ratio equal to or greater than 4.3%. As
used herein, Liquidity Ratio shall mean (i) the sum of cash and due from banks,
Federal Funds sold, unencumbered securities issued by the U.S. government and
any government-sponsored enterprises, divided by (ii) the difference between
total liabilities and liabilities secured by pledged investments.
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ARTICLE VII
Conditions to Consummation of the Merger
7.01 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each of Sky and SBI to consummate the Merger is
subject to the fulfillment or written waiver by Sky and SBI prior to the
Effective Time of each of the following conditions:
(a) Shareholder Approval. This Agreement shall have been
duly adopted by the requisite vote of SBI's shareholders.
(b) Regulatory Approvals. All regulatory approvals
required to consummate the transactions contemplated hereby shall have
been obtained and shall remain in full force and effect and all
statutory waiting periods in respect thereof shall have expired and no
such approvals shall contain, other than divestitures or dispositions
required to satisfy antitrust requirements, (i) any conditions,
restrictions or requirements that the Sky Board reasonably determines
would either before or after the Effective Time have or will have a
Material Adverse Effect on Sky and its Subsidiaries taken as a whole
after giving effect to the consummation of the Merger, or (ii) any
conditions, restrictions or requirements that are not customary and
usual for approvals of such type and that the Sky Board reasonably
determines would either before or after the Effective Date be unduly
burdensome.
(c) No Injunction. No Regulatory Authority or
Governmental Authority of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and prohibits consummation
of the transactions contemplated by this Agreement.
(d) Registration Statement. The Registration Statement
shall have become effective under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
(e) Blue Sky Approvals. All permits and other
authorizations under state securities laws necessary to consummate the
transactions contemplated hereby and to issue the Sky Common Shares to
be issued in the Merger shall have been received and be in full force
and effect.
(f) Fairness Opinion. SBI shall have received a fairness
opinion from Sandler ▇'▇▇▇▇▇ & Partners, L.P., financial advisor to
SBI, dated as of a date reasonably proximate to the date of the Proxy
Statement, stating that the Merger Consideration is fair to the
shareholders of SBI from a financial point of view (the "Fairness
Opinion").
(g) SBI Indenture Agreement. Sky shall have entered into
an assumption agreement or supplemental indenture with Wilmington Trust
Company, as trustee, under the indenture dated as of September 28, 2001
pertaining to the SBI 9.00% subordinated debentures due 2031.
41
7.02 Conditions to Obligation of SBI. The obligation of SBI to
consummate the Merger is also subject to the fulfillment or written waiver by
SBI prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations
and warranties of Sky set forth in this Agreement shall be true and
correct, subject to Section 5.02, as of the date of this Agreement and
as of the Effective Date as though made on and as of the Effective Date
(except that representations and warranties that by their terms speak
as of the date of this Agreement or some other date shall be true and
correct as of such date), and SBI shall have received a certificate,
dated the Effective Date, signed on behalf of Sky by the Chief
Executive Officer and the Chief Financial Officer of Sky to such
effect.
(b) Performance of Obligations of Sky. Sky shall have
performed in all material respects all obligations required to be
performed by Sky under this Agreement at or prior to the Effective
Time, and SBI shall have received a certificate, dated the Effective
Date, signed on behalf of Sky by the Chief Executive Officer and the
Chief Financial Officer of Sky to such effect.
(c) Tax Opinion. SBI shall have received an opinion of
Vorys, Sater, Seymour, and ▇▇▇▇▇, LLP, dated the Effective Date, to the
effect that, on the basis of facts, representations and assumptions set
forth in such opinion, (i) the Parent Merger constitutes a
"reorganization" within the meaning of Section 368(a) of the Code and
(ii) no gain or loss will be recognized by shareholders of SBI who
receive Sky Common Shares in exchange for SBI Shares, other than the
gain or loss to be recognized as to cash received in lieu of fractional
share interests. In rendering its opinion, such counsel may require and
rely upon representations contained in letters from SBI and Sky.
(d) Director's and Officer's Liability Insurance. Sky
shall have purchased the director's and officer's liability insurance
required by Section 6.12(b) of this Agreement.
7.03 Conditions to Obligation of Sky. The obligation of Sky to
consummate the Merger is also subject to the fulfillment or written waiver by
Sky prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations
and warranties of SBI set forth in this Agreement shall be true and
correct, subject to Section 5.02, as of the date of this Agreement and
as of the Effective Date as though made on and as of the Effective Date
(except that representations and warranties that by their terms speak
as of the date of this Agreement or some other date shall be true and
correct as of such date), and Sky shall have received a certificate,
dated the Effective Date, signed on behalf of SBI by the Chief
Executive Officer and the Chief Financial Officer of SBI to such
effect.
(b) Performance of Obligations of SBI. SBI shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time,
and Sky shall have received a certificate, dated the Effective Date,
signed on behalf of SBI by the Chief Executive Officer and the Chief
Financial Officer of SBI to such effect.
42
(c) Affiliate Agreements. Sky shall have received the
agreements referred to in Section 6.07 from each SBI Affiliate.
(d) Tax Opinion. Sky shall have received an opinion of
Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., dated the Effective Date, in form and
in substance reasonably acceptable to it, to the effect that, on the
basis of the facts, representations and assumptions set forth in such
opinion, (i) the Parent Merger constitutes a "reorganization" within
the meaning of Section 368(a) of the Code. In rendering its opinion,
such counsel may require and rely upon representations contained in
letters from SBI and Sky.
(e) Management Severance Agreements; Performance Stock
Award Agreements; Noncompetition, Nonsolicitation, and Confidentiality
Agreements; and Employment Agreements. All of the following shall have
occurred: (i) all of the Management Severance Agreements between SBI
and SBI's executive employees shall have been amended or terminated in
a manner acceptable to Sky; (ii) all of the Performance Stock Award
Agreements between SBI and SBI's executive employees shall have been
terminated or amended in a manner acceptable to Sky to permit the
payments provided in Section 3.07; (iii) all of SBI's executive
employees shall have executed noncompetition, nonsolicitation and
confidentiality agreements in forms acceptable to Sky; and (iv)
executive employees of SBI specified by Sky shall have executed
employment agreements in forms acceptable to Sky.
ARTICLE VIII
Termination
8.01 Termination. This Agreement may be terminated, and the
Acquisition may be abandoned:
(a) Mutual Consent. At any time prior to the Effective
Time, by the mutual consent of Sky and SBI, if the Board of Directors
of each so determines by vote of a majority of the members of its
entire Board.
(b) Breach. At any time prior to the Effective Time, by
Sky or SBI, if its Board of Directors so determines by vote of a
majority of the members of its entire Board, in the event of either:
(i) a breach by the other party of any representation or warranty
contained herein (subject to the standard set forth in Section 5.02),
which breach cannot be or has not been cured within 30 days after the
giving of written notice to the breaching party of such breach; or (ii)
a breach by the other party of any of the covenants or agreements
contained herein, which breach cannot be or has not been cured within
30 days after the giving of written notice to the breaching party of
such breach, provided that such breach (whether under (i) or (ii))
would be reasonably likely, individually or in the aggregate with other
breaches, to result in a Material Adverse Effect. In the event of a
breach by SBI of any representation, warranty, covenant or agreement
contained herein, which breach cannot be or has not been cured within
30 days after giving written notice to SBI of such breach pursuant to
this Section 8.01(b) and which breach would otherwise give Sky the
right to terminate this Agreement under this Section 8.01(b), Sky, at
its option, in lieu of terminating this Agreement pursuant to this
43
Section 8.01(b), may agree to an adjustment of the Exchange Ratio by an
amount that is mutually acceptable to the Sky Board and the SBI Board.
(c) Delay. At any time prior to the Effective Time, by
Sky or SBI, if its Board of Directors so determines by vote of a
majority of the members of its entire Board, in the event that the
Merger is not consummated by September 30, 2004, except to the extent
that the failure of the Merger then to be consummated arises out of or
results from the knowing action or inaction of the party seeking to
terminate pursuant to this Section 8.01(c).
(d) No Approval. By SBI or Sky, if its Board of Directors
so determines by a vote of a majority of the members of its entire
Board, in the event (i) the approval of any Governmental Authority or
any of the Regulatory Authorities required for consummation of the
Merger and the other transactions contemplated by this Agreement shall
have been denied by final nonappealable action of such Governmental
Authority or Regulatory Authority; (ii) the SBI shareholders fail to
adopt this Agreement at the SBI Meeting; or (iii) any of the conditions
precedent to the obligations of the other party to consummate the
transactions contemplated hereby cannot be satisfied or fulfilled prior
to the planned Effective Date set pursuant to Section 2.04 of this
Agreement.
(e) Sky Common Shares. By SBI, in the event that:
(i) the Average NMS Closing Price (as defined
below) of Sky Common Shares is less than $20.98; and ---
(ii) (A) the number obtained by dividing the
Average NMS Closing Price of Sky Common Shares by $26.23 is
less than (B) the number obtained by dividing the Final Index
Price (as defined below) by the Initial Index Price (as
defined below) and then multiplying the quotient in this
clause (B) by .80.
For purposes of this Section 8.01(e), the following terms have
the meanings indicated below:
"Average NMS Closing Price" shall mean the arithmetic
mean of the NMS Closing Prices for the ten trading days immediately
preceding the fifth trading day prior to the receipt of final federal
regulatory approval of the Merger.
"Final Index Price" means the sum of the Final Prices
for each company comprising the Index Group multiplied by the
appropriate weight.
"Final Price," with respect to any company belonging
to the Index Group, means the arithmetic mean of the daily closing
sales prices of a share of common stock of such company, as reported on
the consolidated transaction reporting system for the market or
exchange on which such common stock is principally traded, for the same
ten trading days used in calculating the Average NMS Closing Price of
Sky Common Shares (i.e., the valuation date).
"Index Group" means the 21 financial institution
holding companies listed on Exhibit B attached hereto, the common stock
of all of which shall be publicly
44
traded and as to which there shall not have been a publicly announced
proposal at any time during the period beginning on the date of the
Agreement and ending on the valuation date for any such company to be
acquired. In the event that the common stock of any such company ceases
to be publicly traded or a proposal to acquire any such company is
announced at any time during the period beginning on the date of this
Agreement and ending on the valuation date, such company will be
removed from the Index Group, and the weights attributed to the
remaining companies will be adjusted proportionately for purposes of
determining the Final Index Price and the Initial Index Price. The 21
financial institution holding companies and the weights attributed to
them are listed on Exhibit B attached hereto.
"Initial Index Price" means the sum of each per share
closing price of the common stock of each company comprising the Index
Group multiplied by the applicable weighting, as such prices are
reported on the consolidated transactions reporting system for the
market or exchange on which such common stock is principally traded, on
the trading day immediately preceding the public announcement of the
Agreement.
"NMS Closing Price" shall mean the price per share of
the last sale of Sky Common Shares reported on the NASDAQ National
Market System at the close of the trading day by the NASD.
Prior to SBI exercising its right of termination under this
Section 8.01(e), in the event that both of the conditions specified in
Sections 8.01(e)(i) and (ii) are met, Sky may, at its option (the "Fill
Option"), for a period of ten business days commencing on the date the
parties determine the conditions have been met, offer to distribute to
SBI's shareholders, in connection with the Merger Consideration, the
number of shares of Sky Common Shares necessary for the Exchange Ratio
to equal $26.44 divided by the Average NMS Closing Price of Sky Common
Shares (the "Fill Offer"). Thereafter, for a period of ten business
days, SBI shall have the opportunity to accept or reject the Fill
Offer. If SBI elects to accept the Fill Offer, SBI shall provide
written notice of its acceptance to Sky, whereupon no termination shall
have occurred pursuant to this Section 8.01(e) and this Agreement shall
remain in effect in accordance with its terms, except that the Merger
Consideration shall have been so adjusted and any references in this
Agreement to "Merger Consideration" and "Exchange Ratio" shall
thereafter be deemed to refer to the Merger Consideration and Exchange
Ratio after giving to any adjustment made pursuant to this Section
8.01(e). If SBI rejects the Fill Offer, SBI may terminate this
Agreement in accordance with the provisions hereof. In the event Sky
determines not to exercise the Fill Option, it will so advise SBI in
writing, and thereafter, for a period of three business days SBI may
exercise its right to terminate this Agreement pursuant to this Section
8.01(e).
If Sky or any company belonging to the Index Group declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the date
of the Agreement and the valuation date, the prices for the common
stock of such company will be appropriately adjusted.
(f) Other Transactions. By SBI or by Sky, in the event
that SBI receives an Acquisition Proposal pursuant to Section 6.06
hereof and enters into an agreement with
45
respect to such Acquisition Proposal, subject however, to the payment
by SBI of the termination fee specified in Section 8.03 hereof.
8.02 Effect of Termination and Abandonment; Enforcement of
Agreement. In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article VIII, no party to this Agreement shall have
any liability or further obligation to any other party hereunder except (i) as
set forth in Sections 8.03 and 9.01; and (ii) that termination will not relieve
a breaching party from liability for any breach of this Agreement giving rise to
such termination. Notwithstanding anything contained herein to the contrary, the
parties hereto agree that irreparable damage will occur in the event that a
party breaches any of its obligations, duties, covenants and agreements
contained herein. It is accordingly agreed that the parties shall be entitled to
an injunction or injunctions to prevent breaches or threatened breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement
in any court of the United States or any state having jurisdiction, this being
in addition to any other remedy to which they are entitled by law or in equity.
8.03 Termination Fee. SBI shall pay to Sky a termination fee in the
amount of 4% of the aggregate value of the transaction if:
(a) (x) this Agreement is terminated by Sky pursuant to
Section 8.01(b)(ii) or by Sky or SBI pursuant to Section 8.01(d)(ii);
(y) after the date hereof and prior to any such termination, an
Acquisition Proposal (including an Acquisition Proposal from a party
that has previously made an Acquisition Proposal to SBI) with respect
to SBI was commenced, publicly proposed or publicly disclosed; and (z)
within 18 months after such termination, SBI shall have entered into an
agreement relating to an Acquisition Proposal or any Acquisition
Proposal shall have been consummated; or
(b) after receiving an Acquisition Proposal, the SBI
Board does not take action within the time period set forth in Section
8.01(c) to convene the SBI Meeting and recommend that SBI shareholders
adopt this Agreement; and within 18 months after such receipt, SBI
shall have entered into an agreement relating to an Acquisition
Proposal or any Acquisition Proposal shall have been consummated.
Upon payment of the fee described in this Section 8.03, SBI
shall have no further liability to Sky at law or in equity with respect
to such termination under Section 8.01(b)(ii) or 8.01(d)(ii), or with
respect to this Agreement.
8.04 Force Majeure. Notwithstanding anything to the contrary in
this Agreement, in the event this Agreement is terminated as a result of a
failure of a condition, which failure is due to a natural disaster or other act
of God, or an act of war or terrorism, and provided no party has failed to
observe the material obligations of such party under this Agreement, no party
shall be obligated to pay to the other party to this Agreement any fees or
expenses or otherwise be liable hereunder.
46
ARTICLE IX
Miscellaneous
9.01 Survival. No representations, warranties, agreements and
covenants contained in this Agreement shall survive the Effective Time (other
than Sections 6.05(b), 6.12, 6.13, 6.16 and this Article IX which shall survive
the Effective Time) or the termination of this Agreement if this Agreement is
terminated prior to the Effective Time (other than Sections 6.03(b), 6.04,
6.05(b), 8.02, and this Article IX which shall survive such termination).
9.02 Waiver; Amendment. Prior to the Effective Time, any provision
of this Agreement may be (i) waived by the party benefited by the provision, or
(ii) amended or modified at any time, by an agreement in writing between the
parties hereto executed in the same manner as this Agreement, except that after
the SBI Meeting, this Agreement may not be amended if it would violate Section
1701.78(G) of the OGCL or the federal securities laws.
9.03 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.04 Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Ohio applicable to
contracts made and to be performed entirely within such State (except to the
extent that mandatory provisions of federal law are applicable).
9.05 Expenses. Each party hereto will bear all expenses incurred by
it in connection with this Agreement and the transactions contemplated hereby,
except that printing and mailing expenses shall be shared equally between SBI
and Sky. All fees to be paid to Regulatory Authorities and the SEC in connection
with the transactions contemplated by this Agreement shall be borne by Sky.
9.06 Notices. All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed given if personally
delivered, telecopied (with confirmation) or mailed by registered or certified
mail (return receipt requested) to such party at its address set forth below or
such other address as such party may specify by notice to the parties hereto.
If to SBI, to:
Second Bancorp, Incorporated
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
P. O. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇. ▇. (▇▇▇▇) Blossom
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
47
With a copy to:
Vorys, Sater, Seymour, and ▇▇▇▇▇, L.L.P.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Sky, to:
Sky Financial Group, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: M. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
9.07 Entire Understanding; No Third Party Beneficiaries. This
Agreement and that certain Letter Agreement dated as of November 25, 2003 by and
between SBI and Sky and all schedules and exhibits attached hereto, together
with those certain voting agreements by and between Sky and certain SBI
shareholders (executed copies of which have been delivered to Sky prior to the
execution of this Agreement), represent the entire understanding of the parties
hereto with reference to the transactions contemplated hereby and thereby and
this Agreement supersedes any and all other oral or written agreements
heretofore made (other than any such separate agreement). Except for Sections
3.01, 6.12 and 6.13 hereof, nothing in this Agreement, whether express or
implied, is intended to confer upon any person, other than the parties hereto or
their respective successors, any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
9.08 Interpretation; Effect. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference shall be to a
Section of, or Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and are not part of this Agreement. Whenever the
words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
9.09 Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any legal proceeding
arising out of or related to this Agreement or the transactions contemplated
hereby.
[Signature Page Follows]
48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
Second Bancorp, Incorporated
By: /S/ ▇. ▇. (▇▇▇▇) BLOSSOM
-----------------------------
Name: ▇. ▇. (▇▇▇▇) Blossom
-----------------------------
Title: Chairman, President and
-----------------------------
Chief Executive Officer
-----------------------------
SKY FINANCIAL GROUP, INC.
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
Title: President, Chairman and
-----------------------------
Chief Executive Officer
-----------------------------
S-1
EXHIBIT A
FORM OF SBI AFFILIATE AGREEMENT
_____________, 2004
Sky Financial Group, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be deemed to be an
"affiliate" of Second Bancorp, Incorporated ("SBI"), as that term is defined for
purposes of Paragraphs (c) and (d) of Rule 145 of the Rules and Regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") promulgated under the Securities Act of 1933, as amended (the
"Act").
Pursuant to the terms of the Agreement and Plan of Merger by and
between Sky Financial Group, Inc. ("Sky") and SBI dated as of January 8, 2004
(the "Merger Agreement"), providing for the merger of SBI with and into Sky (the
"Merger"), and as a result of the Merger, I may receive Sky common shares ("Sky
Common Shares") in exchange for SBI common shares ("SBI Common Shares") owned by
me at the Effective Time (as defined and determined pursuant to the Merger
Agreement). This letter is being delivered pursuant to Section 6.07 of the
Merger Agreement. I represent and warrant to Sky that in such event:
A. I will not sell, assign or transfer the Sky Common Shares that
I receive as aforesaid in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
have discussed their requirements and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of the Sky Common Shares, to the
extent I feel necessary, with my counsel or counsel for SBI. I understand that
Sky is relying on the representations I am making in this letter and I hereby
agree to hold harmless and indemnify Sky and its officers and directors from and
against any losses, claims, damages, expenses (including reasonable attorneys'
fees), or liabilities ("Losses") to which Sky or any officer or director of Sky
may become subject under the Act or otherwise as a result of the untruth,
breach, or failure of such representations.
C. I have been advised that the issuance of the Sky Financial
Common Shares issued to me pursuant to the Merger will have been registered with
the Commission under the Act on a Registration Statement on Form S-4. However, I
have also been advised that since I may be deemed to be an affiliate under the
Rules and Regulations at the time the Merger was submitted for a vote of the
shareholders of SBI, that the Sky Common Shares must be held by me indefinitely
unless (i) my subsequent distribution of Sky Common Shares has been registered
A-1
under the Act; (ii) a sale of the Sky Common Shares is made in conformity with
the volume and other applicable limitations of a transaction permitted by Rule
145 promulgated by the Commission under the Act and as to which Sky has received
satisfactory evidence of the compliance and conformity with said Rule, or (iii)
a transaction in which, in the opinion of Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P. (or
other counsel reasonably acceptable to Sky) or in accordance with a no-action
letter from the Commission, some other exemption from registration is available
with respect to any such proposed sale, transfer or other disposition of the Sky
Common Shares.
D. I also understand that stop transfer instructions will be
given to Sky's transfer agent with respect to any Sky Common Shares that I
receive in the Merger and that there will be placed on the certificates for such
Sky Common Shares, a legend stating in substance:
"The shares represented by this certificate have been issued
or transferred to the registered holder as a result of a transaction to
which Rule 145 under the Securities Act of 1933, as amended (the
"Act"), applies. The shares represented by this certificate may not be
sold, transferred or assigned, and the issuer shall not be required to
give effect to any attempted sale, transfer or assignment, except
pursuant to (i) an effective registration statement under the Act, (ii)
a transaction permitted by Rule 145 and as to which the issuer has
received reasonable and satisfactory evidence of compliance with the
provisions of Rule 145, or (iii) a transaction in which, in the opinion
of Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P. or other counsel satisfactory to
the issuer or in accordance with a "no action" letter from the staff of
the Securities and Exchange Commission, such shares are not required to
be registered under the Act."
It is understood and agreed that the legend set forth in Paragraph D
above shall be promptly removed and any stop order instructions with respect
thereto shall be canceled upon receipt of advice from Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
L.L.P., or other counsel satisfactory to Sky, that such actions are appropriate
under the then-existing circumstances. Such advice of Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
L.L.P. shall be given promptly at no cost to such affiliate, upon receipt of
reasonably satisfactory evidence of compliance with Rule 145.
Very truly yours,
Date: , 2004
------------------------- -------------------------------------
(Name of Affiliate)
-------------------------------------
(Please Print Your Name Here)
Accepted this day of , 2004 SKY FINANCIAL GROUP, INC.
---- --------
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
A-2
EXHIBIT B
PEER GROUP COMMERCIAL FINANCIAL INSTITUTIONS FOR
INDEX PURSUANT TO SECTION 8.01(e)
SECD MERGER TERMINATION TRIGGERS
January 8,
2004 Recommended
SECD
Shares Share Market Index
Company Outstanding Price Capitalization Weighting
------- ----------- ----- -------------- ---------
AMCORE Financial, Inc. AMFI 24,941,804 26.72 $666,445,003 1.6433%
Associated Banc-Corp. ASBC 73,276,894 42.99 3,150,173,673 7.7675%
Banknorth Group, Inc. BNK 161,543,225 31.70 5,120,920,233 12.6268%
Citizens Banking Company CBCF 43,227,348 33.44 1,445,522,517 3.5643%
Commerce Bancshares, Inc. CBSH 68,509,807 47.20 3,233,662,890 7.9733%
Community First Bankshares, Inc. CFBX 37,723,391 29.19 1,101,145,783 2.7151%
First Commonwealth Financial Corporation FCF 59,290,575 14.39 853,191,374 2.1037%
First Midwest Bancorp, Inc. FMBI 46,551,000 31.70 1,475,666,700 3.6386%
FirstMerit Corporation FMER 84,565,111 27.35 2,312,855,786 5.7029%
▇▇▇▇▇▇ Financial Corporation FULT 108,561,000 21.47 2,330,804,670 5.7471%
Huntington Bancshares Incorporated HBAN 228,869,936 22.09 5,055,736,886 12.4661%
Old National Bancorp ONB 66,810,450 21.31 1,423,730,690 3.5105%
Park National Corporation PRK 13,769,532 115.39 1,588,866,297 3.9177%
Provident Financial Group, Inc. PFGI 48,884,612 32.22 1,575,062,199 3.8837%
Republic Bancorp, Inc. RBNC 63,169,700 13.88 876,795,436 2.1619%
S&T Bancorp, Inc. STBA 26,483,219 30.39 804,825,025 1.9845%
Susquehanna Bancshares, Inc. SUSQ 39,828,643 25.26 1,006,071,522 2.4807%
TCF Financial Corporation TCB 71,257,471 51.72 3,685,436,400 9.0873%
UMB Financial Corporation UMBF 21,737,284 48.05 1,044,476,496 2.5754%
United Bankshares, Inc. UBSI 41,204,046 30.60 1,260,843,808 3.1089%
WesBanco, Inc. WSBC 19,815,098 27.44 543,726,289 1.3407%
Total $40,555,959,678 100.0000%