Exhibit 2.2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made and entered
into as of August 2, 2006, by and among COMMUNITY BANK SYSTEM, INC., a Delaware
corporation ("CBSI"), SENECA ACQUISITION CORP., a New York corporation ("Merger
Sub"), and ONB Corporation, a New York corporation ("ONBC").
WHEREAS, CBSI is a bank holding company, the principal banking
subsidiary of which is Community Bank, N.A., a national banking association
("Community Bank");
WHEREAS, Merger Sub is a newly formed, wholly-owned subsidiary of
CBSI;
WHEREAS, ONBC is a bank holding company, the banking subsidiary of
which is Ontario National Bank, a national banking association ("ONB");
WHEREAS, the respective Boards of Directors of CBSI, Merger Sub and
ONBC have each determined that it is in the best interests of their respective
shareholders for CBSI to acquire ONBC through the merger (the "Merger") of
Merger Sub with and into ONBC, upon the terms and subject to the conditions set
forth herein;
WHEREAS, immediately following the consummation of the Merger, a
subsequent merger is contemplated (the "Short-Form Merger") of the Surviving
Corporation (as defined below) with and into CBSI, upon the terms and subject to
the conditions set forth herein;
WHEREAS, immediately following the consummation of the Merger and
the Short-Form Merger, it is contemplated that ONB, which shall become a
wholly-owned subsidiary of CBSI as a result of the Merger and the Short-Form
Merger, shall merge (the "Bank Merger") with and into Community Bank, with
Community Bank continuing as the surviving bank (the "Continuing Bank"),
pursuant to a plan of merger;
WHEREAS, it is the current intention of CBSI to operate, after the
consummation of the Bank Merger, the existing business of ONB as additional
branches of Community Bank;
WHEREAS, in furtherance of such acquisition, the respective Boards
of Directors of CBSI, Merger Sub and ONBC have each approved this Agreement and
the Merger in accordance with the General Corporation Law of the State of
Delaware (the "DGCL") and the Business Corporation Law of the State of New York
(the "NYBCL") and upon the terms and conditions set forth herein;
WHEREAS, upon the consummation and effectiveness of the Merger, all
of the issued and outstanding shares of common stock, par value $1.00 per share,
of ONBC ("ONBC Common Stock"), other than the Dissenting Shares (as defined
below), shall be converted into the right to receive cash, without interest, as
provided in Article II of this Agreement;
1
WHEREAS, concurrently with the execution of this Agreement, and as a
condition and inducement to CBSI's willingness to enter into this Agreement,
each executive officer and director of ONBC set forth on Schedule 1 hereto is
entering into a Voting Agreement (collectively, the "Voting Agreements"),
substantially in the form attached hereto as Exhibit A;
WHEREAS, it is the intention of the parties that the Merger be
treated, for federal income tax purposes, as an acquisition of all of the
outstanding capital stock of ONBC by CBSI for Merger Consideration (as defined
below);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, representations, and agreements herein contained, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
"Advisory Board" is defined in Section 5.13 hereof.
"Agreement" is defined in the preamble hereof.
"Bank Examinations" is defined in Section 3.30 hereof.
"Bank Holding Company Act" shall mean the Bank Holding Company Act
of 1956, as amended.
"Bank Merger" is defined in the preamble of this Agreement.
"CBSI" is defined in the preamble of this Agreement.
"CBSI Common Stock" shall mean common stock, par value $1.00 per
share, of CBSI.
"CBSI Plan" is defined in Section 5.10(a) hereof.
"CERCLA" is defined in Section 3.20 hereof.
"Closing Date" shall mean the date specified pursuant to Section 5.9
hereof as the date on which the parties hereto shall close the transactions
contemplated herein.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" or "SEC" shall mean the Securities and Exchange
Commission.
"Community Bank" is defined in the preamble of this Agreement.
"Continuing Bank" is defined in the preamble of this Agreement.
2
"CRA" is defined in Section 3.29 hereof.
"DGCL" is defined in the preamble of this Agreement.
"Dissenting Shares" is defined in Section 2.4 hereof.
"Effective Time" is defined in Section 2.1(b) hereof.
"Environmental Law" shall mean any federal, state, local or foreign
law (including any common law), statute, code, ordinance, rule, regulation or
other requirement relating to the environment, natural resources or public or
employee health and safety, and includes, but not limited to, CERCLA, the
Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801 et seq., as amended,
the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., as
amended, the Clean Water Act, 33 U.S.C. ss. 2601 et seq., as amended, the Toxic
Substances Control Act, 15 U.S.C. ss. 6901 et seq., as amended, the Federal
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. ss. 136 et seq., as
amended, the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq., as amended,
and the Occupational Safety and Health Act, 29 U.S.C. ss. 6901 et seq., as
amended.
"Environmental Costs and Liabilities" shall mean any and all losses,
liabilities, obligations, damages, fines, penalties, judgments, actions, claims,
costs and expenses (including, without limitation, fees, disbursements and
expenses of legal counsel, experts, engineers and consultants and the costs of
investigation and feasibility studies and remedial activities) arising from or
under any Environmental Law or order or contract with any governmental authority
or any other Person.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" is defined in Section 3.13(a) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" is defined in Section 2.5 hereof.
"FDIA" shall mean the Federal Deposit Insurance Act.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System.
"Hazardous Materials" shall mean any petroleum or petroleum
products, radioactive materials, asbestos containing materials, radon gas, PCBs
and any other hazardous or toxic substance, material or waste which is or
becomes regulated under, or defined as a "hazardous substance," "pollutant,"
"contaminant," "toxic chemical," "hazardous materials," "toxic substance" or
"hazardous chemical" under any Environmental Law.
3
"Indemnified Parties" is defined in Section 5.11(c) hereof.
"Intellectual Property" means domestic and foreign letters patent,
patents, patent applications, patent licenses, software licensed or owned,
know-how licenses, trade names, common law and other trademarks, service marks,
licenses of trademarks, trade names and/or service marks, trademark
registrations and applications, service ▇▇▇▇ registrations and applications and
copyright registrations and applications.
"Interested Party Transactions" is defined in Section 3.25 hereof.
"IRS" means the Internal Revenue Service.
"Material Adverse Effect" shall mean, with respect to any party, a
material adverse effect on the business, results of operations or financial
condition of such party and its Subsidiaries, taken as a whole, or a material
adverse effect on such party's ability to consummate the transactions
contemplated hereby; provided, however, that in determining whether a Material
Adverse Effect has occurred there shall be excluded any effect on the affected
party the primary cause of which is (i) any change in banking or similar laws,
rules or regulations of general applicability or interpretations thereof by
courts or governmental authorities, (ii) any change in generally accepted
accounting principles or regulatory accounting requirements applicable to banks
or their holding companies generally, (iii) general changes in conditions,
including interest rates, in the banking industry or in the global or United
States economy or financial markets, with respect to clause (i), (ii) or (iii),
to the extent that such a change does not materially affect the referenced party
to a materially different extent than other similarly situated banking
organizations, and (iv) any action or omission of the referenced party or any of
its Subsidiaries taken with the prior written consent of the other party to this
Agreement in contemplation of the Merger.
"Maximum Amount" is defined in Section 5.10(c)(3) hereof.
"Merger" is defined in the preamble of this Agreement.
"Merger Consideration" is defined in Section 2.2(a) hereof.
"NYBCL" is defined in the preamble of this Agreement.
"NYSE" shall mean the New York Stock Exchange.
"OCC" shall mean the Office of the Comptroller of Currency.
"ONB" is defined in the preamble of this Agreement.
"ONBC" is defined in the preamble of this Agreement.
"ONBC Common Stock" is defined in the preamble of this Agreement.
"ONBC Plan" is defined in Section 3.13(a) hereof.
4
"ONBC Shareholders' Meeting" shall mean the special meeting of the
shareholders of ONBC to be called for the purpose of approving this Agreement
and the transactions contemplated thereby.
"ONBC Financial Statements" shall mean (i) the unaudited
consolidated statements of condition of ONBC as of March 31, 2006 and the
related unaudited consolidated statements of income, cash flows and changes in
shareholders' equity (including related notes, if any) for the three months
ended March 31, 2006; (ii) the audited consolidated statements of condition of
ONBC as of December 31, 2005 and 2004 and the related consolidated statements of
income, cash flows and changes in shareholders' equity (including related notes,
if any) for each of the three years ended December 31, 2005, 2004 and 2003, and
(iii) the consolidated statements of condition of ONBC and related consolidated
statements of income, cash flows and changes in shareholders' equity (including
related notes, if any) as of dates or with respect to periods ending subsequent
to March 31, 2006.
"PBGC" is defined in Section 3.13 hereof.
"Person" shall mean an individual, corporation, partnership, bank,
limited liability company, trust, association, unincorporated organization,
other entity or group (as defined in Section 13(d)(3) of the Exchange Act).
"Previously Disclosed" shall mean disclosed prior to the execution
hereof in a letter dated of even date herewith from the party making such
disclosure and delivered to the other party prior to the execution hereof. Any
information disclosed by one party to the other for any purpose hereunder shall
be deemed to be disclosed for all purposes hereunder provided that the relevance
of the disclosed information to the representations or warranties in question is
reasonably apparent. The inclusion of any matter in such letter shall not be
deemed an admission or otherwise to imply that any such matter is material for
purposes of this Agreement. With respect to CBSI, "Previously Disclosed" shall
also mean disclosed or reflected in an SEC Document filed with the SEC
subsequent to January 1, 2005 and prior to the date hereof.
"Proxy Statement" shall mean the proxy statement, together with any
amendments or supplements thereto, and related materials sent to the
shareholders of ONBC to solicit their votes in connection with this Agreement
and the Merger.
"Related Party" is defined in Section 3.25 hereof.
"Rights" shall mean warrants, options, rights, convertible
securities and other arrangements or commitments which obligate an entity to
issue or dispose of any of its capital stock, and stock appreciation rights,
performance units and other similar stock-based rights whether they obligate the
issuer thereof to issue stock or other securities or to pay cash.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall mean all reports and registration statements
filed, or required to be filed, by a party hereto pursuant to the Securities
Laws.
"Securities Act" shall mean the Securities Act of 1933, as amended.
5
"Securities Laws" shall mean the Securities Act; the Exchange Act;
the Investment Company Act of 1940, as amended; the Investment Advisers Act of
1940, as amended; the Trust Indenture Act of 1939, as amended; and the rules and
regulations of the Commission promulgated thereunder.
"Short-Form Merger" is defined in the preamble of this Agreement.
"Superior Proposal" is defined in Section 5.12 hereof.
"Subsidiary" shall mean with respect to any party, any Person which
is consolidated with such party for financial reporting purposes; provided,
however, that "Subsidiary" shall not include any subsidiary trust formed for the
purpose of issuing trust preferred or similar securities.
"Surviving Corporation" is defined in Section 2.1(a) hereof.
"Takeover Laws" is defined in Section 5.11 hereof.
"Takeover Proposal" is defined in Section 5.12 hereof.
"Taxes" shall mean all taxes, however denominated, including any
interest, penalties, criminal sanctions or additions to tax (including, without
limitation, any underpayment penalties for insufficient estimated tax payments)
or other additional amounts that may become payable in respect thereof (or in
respect of a failure to file any Tax Return when and as required), imposed by
any federal, state, local or foreign government or any agency or political
subdivision of any such government, which taxes shall include, without limiting
the generality of the foregoing, all income taxes, payroll and employment taxes,
withholding taxes (including withholding taxes in connection with amounts paid
or owing to any employee, independent contractor, creditor, stockholder or other
person or entity), unemployment insurance taxes, social security (or similar)
taxes, sales and use taxes, excise taxes, franchise taxes, gross receipts taxes,
occupation taxes, real and personal property taxes, stamp taxes, value added
taxes, transfer taxes, profits or windfall profits taxes, licenses in the nature
of taxes, estimated taxes, severance taxes, duties (custom and others), workers'
compensation taxes, premium taxes, environmental taxes (including taxes under
Section 59A of the Code), payroll taxes, registration taxes, alternative or
add-on minimum taxes, estimated taxes, and such other fees, assessments, charges
or obligations of the same or of a similar nature that are in effect, a tax,
whether or not called a tax.
"Tax Returns" shall mean all returns, reports, estimates,
information statements or other written submissions, and any schedules or
attachments thereto, required or permitted to be filed pursuant to the statutes,
rules and regulations of any federal, state, local or foreign government Tax
authority, including but not limited to, original returns and filings, amended
returns, claims for refunds, information returns and accounting method change
requests.
"Transaction Documents" shall mean, collectively, the Voting
Agreements, any instruments to effect the Bank Merger and the Short-Form Merger,
and certificates and other documents contemplated thereby or by this Agreement.
"USA Patriot Act" is defined in Section 3.29 hereof.
6
"Voting Agreement" is defined in the preamble of this Agreement.
For purposes of this Agreement, the terms "ONBC," "ONB," "CBSI,"
"Community Bank" and "Subsidiary" include all of the respective predecessors
thereof (including without limitation, any previously acquired Person).
ARTICLE II
THE MERGER
2.1. The Merger.
(a) At the Effective Time, and upon the terms and subject to the
conditions of this Agreement, Merger Sub shall be merged with and into ONBC, the
separate existence of Merger Sub shall cease and ONBC shall continue as the
surviving corporation and wholly-owned subsidiary of CBSI. ONBC as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation."
(b) As promptly as practicable after the satisfaction or waiver of
the conditions set forth in Article VI, the parties shall cause the Merger to be
consummated by filing articles of merger as contemplated by the NYBCL, together
with any required related documents, with the Department of State of the State
of New York, in such form as required by, and executed in accordance with, the
relevant provisions of the NYBCL (the time of such filing, or the time specified
in such filing as the effective time for the Merger, as applicable, being the
"Effective Time").
2.2. Merger Consideration.
(a) ONBC Common Stock. At the Effective Time, by virtue of the
Merger and without any further action by the parties, each share of ONBC Common
Stock issued and outstanding immediately prior to the Effective Time (other than
shares to be cancelled pursuant to Section 2.2(b) and Dissenting Shares, if any)
shall be cancelled and shall be converted automatically into the right to
receive $210 in cash, without interest, per share (the "Merger Consideration").
(b) Treasury Shares and Shares Held by CBSI. Each share of ONBC
Common Stock held in treasury by ONBC or owned by any Subsidiary of ONBC, CBSI
or any Subsidiary of CBSI (in each case other than shares held directly or
indirectly in trust accounts, managed accounts and the like or otherwise held in
a fiduciary capacity for the benefit of third parties), shall be cancelled
without any consideration and no payment or distribution shall be made with
respect thereto.
(c) Merger Sub Common Stock. Each share of common stock of Merger
Sub outstanding immediately prior to the Effective Time shall remain unchanged
and shall constitute the common stock of the Surviving Corporation.
7
(d) Adjustments to Merger Consideration. If, subsequent to the date
of this Agreement but prior to the Effective Time, the outstanding shares of
ONBC Common Stock shall be increased, decreased, changed into or exchanged for a
different number of shares, in each case by reason of any stock split,
recapitalization, or reclassification or other similar change, the Merger
Consideration shall be adjusted proportionately.
2.3. Effect of Merger.
Upon the Effective Time of the Merger:
(a) The certificate of incorporation and bylaws of Merger Sub, each
as in effect immediately prior to the Effective Time, shall be the certificate
of incorporation and bylaws, respectively, of the Surviving Corporation, in each
case until amended in accordance with the NYBCL.
(b) All respective assets, rights, franchises, and interest of ONBC
and Merger Sub in and to every type of property shall be vested in the Surviving
Corporation by virtue of the Merger without any deed or other transfer; and the
Surviving Corporation, without any order or other action on the part of any
court or otherwise, shall hold and enjoy all rights of property, franchises and
interest, in the same manner and to the same extent as such rights, franchises
and interests were held and enjoyed by ONBC and Merger Sub immediately prior to
the Effective Time.
(c) The Surviving Corporation shall be liable for all of the
liabilities of ONBC and Merger Sub and shall be bound by and subject to all of
the obligations and contracts of ONBC and Merger Sub. All rights of creditors
and obligees and all liens on property of ONBC and Merger Sub shall be preserved
and unimpaired.
(d) The directors and officers of Merger Sub immediately prior to
the Effective Time shall be the directors and officers, respectively, of the
Surviving Corporation.
2.4. Dissenting Shares. Notwithstanding any other provision
contained in this Agreement, no shares of ONBC Common Stock that are issued and
outstanding as of the Effective Time and that are held by a shareholder who has
properly exercised his or her appraisal rights (such shares being collectively
referred to herein as "Dissenting Shares") under the NYBCL shall be converted
into the right to receive the Merger Consideration as provided in Section 2.2(a)
unless and until the holder shall have failed to perfect, or shall have
effectively withdrawn or lost, such holder's right to dissent from the Merger
under the NYBCL and to receive such consideration as may be determined to be due
with respect to such Dissenting Shares pursuant to and subject to the
requirements of the NYBCL. If any holder of Dissenting Shares shall have so
failed to perfect or effectively withdrawn or lost such holder's right to
dissent from the Merger, each of such holder's shares of ONBC Common Stock shall
thereupon no longer be deemed Dissenting Shares and deemed to have become, as of
the Effective Time, the right to receive the Merger Consideration pursuant to
Section 2.2(a). ONBC shall give CBSI (a) prompt notice of any demands for
appraisal, attempted withdrawals of such demands and any other instruments
received by ONBC relating to shareholders' rights of appraisal, and (b) the
opportunity to direct all negotiations and proceedings with respect to any
demands for appraisal
8
under the NYBCL. ONBC shall not, except with the prior written consent of CBSI,
voluntarily make any payment with respect to any demands for appraisal of any
capital stock of ONBC or agree to do so, or offer to settle or settle any such
demands or approve any withdrawals of any such demands.
2.5. Procedure to Exchange Shares.
(a) Immediately prior to the Effective Time, CBSI shall cause to be
deposited with American Stock Transfer & Trust Company or another financial
institution experienced in serving as an exchange agent (the "Exchange Agent"),
for exchange in accordance with this Article II, cash, by wire transfer of
immediately available funds, into which the outstanding shares of ONBC Common
Stock shall be converted pursuant to this Agreement. As soon as reasonably
practicable after the Effective Time, CBSI shall use its commercially reasonable
efforts to cause the Exchange Agent to mail to all holders of record of ONBC
Common Stock, excluding any holders of Dissenting Shares, letters of transmittal
specifying the procedures for delivery of such holders' certificates formerly
representing ONBC Common Stock to the Exchange Agent in exchange for the Merger
Consideration payable pursuant to this Article II. As soon as reasonably
practicable, after surrender to the Exchange Agent of the certificates of ONBC
Common Stock in accordance with the instructions of the letter of transmittal,
CBSI shall cause the Exchange Agent to distribute to each former holder of
shares of ONBC Common Stock a check for the Merger Consideration that such
holder is entitled to receive pursuant to this Agreement. In no event shall the
holder of any such surrendered certificates be entitled to receive interest on
any cash to be received in the Merger. If any certificate surrendered for
exchange is to be issued in a name other than that in which the surrendered
certificate is issued, the certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and the Person requesting such
exchange shall affix any required stock transfer tax stamps to the certificate
or provide funds for their purchase or establish to the satisfaction of the
Exchange Agent that such taxes are not payable.
(b) At any time following the expiration of twelve (12) months
following the Effective Time, CBSI shall be entitled to direct the Exchange
Agent to deliver to it any funds which had been deposited with the Exchange
Agent and not disbursed to holders of the ONBC Common Stock (including, without
limitation, all interest and other earnings on such funds), and thereafter such
holders shall be entitled to look to CBSI only as general creditors thereof with
respect to any Merger Consideration that may be payable upon due surrender of
their certificates, a letter of transmittal and other related documents to the
Exchange Agent or CBSI, until at such time as such undisbursed cash is delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
(c) At the Effective Time, the stock transfer books of ONBC shall be
closed and no transfer of ONBC Common Stock shall thereafter be made or
recognized. If, after the Effective Time, certificates representing such shares
are presented for transfer, they shall be cancelled and exchanged for the Merger
Consideration as provided in this Section.
(d) In the event any certificate shall have been lost, stolen,
destroyed or mutilated, upon the making of an affidavit of that fact by the
Person claiming such certificate to be lost, stolen, destroyed or mutilated and,
if required by CBSI, the making of an indemnity
9
agreement in a form reasonably requested by CBSI and/or the posting by such
Person of a bond in such amount as CBSI may reasonably direct as indemnity
against any claim that may be made against it with respect to such certificate,
the Exchange Agent will issue in exchange for such lost, stolen, destroyed or
mutilated certificate the Merger Consideration deliverable in respect thereof
pursuant to this Agreement.
(e) None of CBSI, Merger Sub or the Surviving Corporation shall be
liable to any holder of shares of ONBC Common Stock for any dividends or other
distributions with respect thereto, or any Merger Consideration payable in
respect thereof, delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ONBC
Except as Previously Disclosed, ONBC hereby represents and warrants
to CBSI and Merger Sub as follows:
3.1. Capital Structure of ONBC. The authorized capital stock of ONBC
consists solely of 200,000 shares of ONBC Common Stock, of which 74,615 shares
are issued and outstanding. 385 shares of ONBC Common Stock are held in
treasury. There are no outstanding options, warrants, agreements, arrangements,
commitments or any similar rights in existence for the purchase of or issuance
of, or which encumber in any way, ONBC Common Stock or any equity interest in
any Subsidiary of ONBC. All outstanding shares of ONBC Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable. None of
the shares of ONBC's capital stock has been issued in violation of the
preemptive rights of any Person.
3.2. Organization, Standing and Authority of ONBC. Each of ONBC and
its Subsidiaries is a duly organized corporation, validly existing and in good
standing under the laws of its incorporation with full corporate power and
authority to own, lease and operate the properties it purports to own, lease or
operate and to carry on its business as now conducted. Each of ONBC and its
Subsidiaries is duly licensed or qualified to do business in the states of the
United States and foreign jurisdictions where its ownership or leasing of
property or the conduct of its business requires such qualification. ONBC is a
registered bank holding company under the Bank Holding CompanyAct. True, correct
and complete copies of the articles of incorporation and bylaws of ONBC and each
of its Subsidiaries, as in effect on the date hereof, have been Previously
Disclosed to CBSI.
3.3. Ownership of ONBC Subsidiaries; Capital Structure of ONBC
Subsidiaries. A true and complete list of all of ONBC's Subsidiaries, together
with the jurisdiction of incorporation of each Subsidiary and the percentage of
each Subsidiary's outstanding capital stock or other equity interest owned by
ONBC or another subsidiary of ONBC, has been Previously Disclosed. Except as
Previously Disclosed, ONBC does not, directly or indirectly, own any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any Person.
10
3.4. Authorized and Effective Agreement.
(a) ONBC has all requisite corporate power and authority to enter
into and perform all of its obligations under this Agreement and each of the
Transaction Documents to which it is a party. The execution and delivery of this
Agreement and each such Transaction Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
ONBC, except for the affirmative vote by the holders of two-thirds of all
outstanding shares of ONBC Common Stock entitled to vote thereon (and no greater
voting requirement is applicable by reason of Section 10 of the certificate of
incorporation of ONBC), which is the only shareholder vote required to approve
the Merger pursuant to ONBC 's certificate of incorporation and bylaws and the
NYBCL. The Board of Directors of ONBC has approved and adopted this Agreement
and the Merger, and directed that this Agreement be submitted to ONBC 's
shareholders for approval at a special meeting to be held in accordance with
this Agreement. The Board of Directors of ONBC has unanimously recommended that
the shareholders of ONBC approve this Agreement and the Merger.
(b) This Agreement and each Transaction Document to which ONBC is a
party have been duly executed and delivered by ONBC and, assuming the accuracy
of the representation contained in Section 4.2(b) hereof, this Agreement
constitutes the legal, valid and binding obligations of ONBC, enforceable
against ONBC in accordance with its terms, except that such enforceability may
be subject to bankruptcy, insolvency and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(c) Neither the execution and delivery by ONBC of this Agreement or
any Transaction Document to which it is a party, nor consummation of the
transactions contemplated hereby or thereby, nor compliance by ONBC with any of
the provisions hereof or thereof shall (i) conflict with or result in a breach
of any provision of the certificate of incorporation or bylaws of ONBC, (ii)
assuming the consents and approvals contemplated by Section 5.3 hereof and the
consents and approvals which are Previously Disclosed are duly obtained,
constitute or result in a breach of any term, condition or provision of, or
constitute a default under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of ONBC or any of its
Subsidiaries pursuant to, any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which ONBC or any of its
Subsidiaries is a party, or (iii) assuming the consents and approvals
contemplated by Section 5.3 hereof and the consents and approvals which are
Previously Disclosed are duly obtained, conflict with or violate any law, order,
writ, injunction, decree, statute, rule or regulation applicable to ONBC or any
of its Subsidiaries or their respective assets.
(d) Other than as contemplated by Section 5.3 hereof, no consent,
approval or authorization of, or declaration, notice, filing or registration
with, any governmental or regulatory authority, or any other Person, is required
to be made or obtained by ONBC on or prior to the Closing Date in connection
with the execution, delivery and performance of this Agreement or any of the
Transaction Documents to which it is a party or the consummation of the
transactions contemplated hereby or thereby. As of the date hereof, ONBC is not
aware of any reason that the condition set forth in Section 6.1(b) of this
Agreement would not be satisfied.
11
3.5. Regulatory Filings. Each of ONBC and its Subsidiaries has filed
all reports required by statute or regulation to be filed with any federal or
state bank regulatory agency, and such reports were prepared in accordance with
the applicable statutes, regulations and instructions in existence as of the
date of filing of such reports in all material respects.
3.6. Financial Statements; Books and Records; Minute Books. ONBC has
Previously Disclosed true and complete copies of the ONBC Financial Statements
to CBSI, and ONBC shall deliver to CBSI promptly upon preparation true and
complete copies of any ONBC Financial Statements relating to any period
subsequent to March 31, 2006. The ONBC Financial Statements fairly present, and
the ONBC Financial Statements furnished by ONBC in respect of any period
subsequent to March 31, 2006 will fairly present when so furnished, the
consolidated financial position of ONBC as of the dates indicated and the
consolidated income, changes in shareholders' equity and cash flows of ONBC and
its consolidated Subsidiaries for the periods then ended and each such financial
statement has been or will be, as the case may be, prepared in conformity with
generally accepted accounting principles applicable to financial institutions
applied on a consistent basis, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount, and may not contain
certain related notes as may be required by generally accepted accounting
principles. The books and records of ONBC and each of its Subsidiaries fairly
reflect in all material respects the transactions to which it is a party or by
which its properties are subject or bound. Such books and records have been
properly kept and maintained and are in compliance with all applicable legal and
accounting requirements in all material respects. The minute books of ONBC and
each of its Subsidiaries contain records which are accurate in all material
respects of all corporate actions of its shareholders and Board of Directors
(including committees of its Board of Directors).
3.7. Material Adverse Change. ONBC has not, on a consolidated basis,
suffered any change in its financial condition, results of operations, prospects
or business since December 31, 2005, which, individually or in the aggregate
with any other such changes, could reasonably be expected to constitute a
Material Adverse Effect with respect to ONBC.
3.8. Absence of Undisclosed Liabilities. Neither ONBC nor any of its
Subsidiaries has any liability (contingent or otherwise) that is material to
ONBC on a consolidated basis, or that, when combined with all similar
liabilities, would be material to ONBC on a consolidated basis, except as
disclosed in the consolidated balance sheet at March 31, 2006 included in the
ONBC Financial Statements and except for liabilities incurred in the ordinary
course of business consistent with past practice since March 31, 2006.
3.9. Absence of Certain Changes. Since March 31, 2006, except as
Previously Disclosed, neither ONBC nor any of its Subsidiaries has:
(a) suffered any material damage, destruction or loss of physical
property or assets (whether or not covered by insurance);
(b) issued, sold or otherwise disposed of any of its capital stock;
12
(c) incurred or agreed to incur any material indebtedness for
borrowed money, other than in the ordinary course of business consistent with
past practice;
(d) made or obligated itself to make any capital expenditure in
excess of $25,000, individually or in the aggregate;
(e) waived any material right, except in the ordinary course of
business consistent with past practice;
(f) sold, transferred or otherwise disposed of any assets, or
canceled, or agreed to cancel, any material debts or claims, in each case, other
than in the ordinary course of business consistent with past practice;
(g) mortgaged, pledged or subjected to any charge, lien, claim or
encumbrance any of its material properties or assets, other than in the ordinary
course of business;
(h) declared, set aside or paid any dividend (whether in cash,
property or stock) with respect to any of its capital stock, or redeemed,
purchased or otherwise acquired any of its capital stock;
(i) increased the salaries, bonuses or other compensation of any of
its directors, officers, employees or agents, or adopted or increased any
benefits under any insurance, pension or other employee benefit plan, payment or
arrangement made to, for or with any such director, officer, employee or agent,
other than as Previously Disclosed;
(j) made or permitted any amendment or termination of any material
contract, agreement or license to which it is a party, other than in the
ordinary course of business consistent with past practice;
(k) made any material change in its accounting methods or practices
with respect to its financial condition, properties, business or operations;
(l) repaid any outstanding loans, other than repayments in the
ordinary course of business;
(m) entered into any other material transaction not in the ordinary
course of business;
(n) become aware of the need to make additional specific provisions
for reserves for loan losses which would have a Material Adverse Effect on ONBC;
(o) hired any new employees other than to fill vacancies in the
ordinary course of business;
(p) entered into any real estate or equipment lease, requiring
aggregate rental payments in excess of $25,000; or
13
(q) agreed to or otherwise become obligated to do any of the
foregoing.
3.10. Properties. ONBC and its Subsidiaries have good and marketable
title free and clear of all liens, encumbrances, charges, defaults or equitable
interests to all of their properties and assets, real and personal, except (i)
liens for Taxes not yet due and payable, (ii) pledges to secure deposits and
other liens incurred in the ordinary course of banking business as reflected in
the books and records of ONBC, (iii) such imperfections of title, easements and
encumbrances, if any, as are not material in character, amount or extent and
(iv) dispositions and encumbrances for adequate consideration in the ordinary
course of business consistent with past practice. All leases pursuant to which
ONBC or any of its Subsidiaries, as lessee, leases real and personal property
which, individually or in the aggregate, are material to the business of ONBC on
a consolidated basis are, to ONBC's knowledge, valid and enforceable against the
lessor in accordance with their respective terms. All tangible property used in
the business of ONBC is in good condition, reasonable wear and tear excepted,
and is usable in the ordinary course of business consistent with ONBC's past
practices.
3.11. Loans.
(a) Each loan reflected as an asset in the ONBC Financial Statements
(i) is evidenced by notes, agreements or other evidences of indebtedness which
are true, genuine and what they purport to be, and such documents comply in all
material respects with all applicable laws, rules and regulations, (ii) to the
extent secured, has been secured by valid liens and security interests which
have been perfected, and (iii) is the legal, valid and binding obligation of the
obligor named therein, enforceable in accordance with its terms, except that the
enforceability thereof may be subject to bankruptcy, insolvency, fraudulent
conveyance and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles, and (iv) was solicited,
originated and existed, and will exist at the Effective Time, in material
compliance with all applicable loan policies of ONBC and ONB. The information
(including electronic information and information contained on tapes and
computer disks) with respect to all loans of ONB and its Subsidiaries furnished
to CBSI by ONBC is, as of the respective dates indicated therein, true and
complete in all material respects.
(b) The allowance for loan losses reflected on the ONBC Financial
Statements, as of their respective dates, is consistent with the requirements of
generally accepted accounting principles to provide for reasonably anticipated
losses with respect to the loan portfolio of ONBC and its Subsidiaries based
upon information available at the time. ONBC has made available to CBSI true,
correct and complete (to the extent in its possession) information concerning
its asset quality, including without limitation, delinquency reports and
information concerning non-performing/non-accrual loans and loans classified as
substandard or lower.
3.12. Tax Matters.
(a) ONBC and each of its Subsidiaries have timely filed federal
income tax returns for each year through December 31, 2005 and has timely filed,
or caused to be filed, all other Tax Returns required to be filed with respect
to ONBC or any of its Subsidiaries. All Taxes due by or on behalf of ONBC or any
of its Subsidiaries have been paid or adequate reserves have been established on
the ONBC Financial Statements for the payment of such
14
Taxes. Neither ONBC nor any of its Subsidiaries will have any liability for any
such Taxes in excess of the amounts so paid or reserves or accruals so
established.
(b) All Tax Returns filed by ONBC and each of its Subsidiaries are
complete and accurate in all material respects. Neither ONBC nor any of its
Subsidiaries is delinquent in the payment of any material Tax, and none of them
has requested any extension of time within which to file any Tax Returns which
have not since been filed. No material audit examination, deficiency,
adjustment, refund claim or litigation with respect to Tax Returns, paid Taxes,
unpaid Taxes or Tax attributes of ONBC or any of its Subsidiaries has been
proposed, asserted or assessed (tentatively or otherwise). There are currently
no agreements in effect with respect to ONBC or any of its Subsidiaries to
extend the period of limitations for the assessment or collection of any Tax.
(c) Neither the transactions contemplated hereby nor the termination
of the employment of any employees of ONBC prior to or following consummation of
the transactions contemplated hereby will result in ONBC or any of its
Subsidiaries (or any successor thereof) making or being required to make any
"excess parachute payment" as that term is defined in Section 280G of the Code.
(d) Neither ONBC nor any of its Subsidiaries is a party to any
agreement providing for the allocation or sharing of, or indemnification for,
Taxes.
(e) Except as Previously Disclosed, neither ONBC nor any of its
Subsidiaries is required to include in income any adjustment in any taxable
period ending after the date hereof pursuant to Section 481(a) of the Code.
(f) Neither ONBC nor any of its Subsidiaries has executed or entered
into any written agreement with any Tax authority conceding or agreeing to any
treatment of Taxes or Tax attributes, including, without limitation, an Internal
Revenue Service Form 870 or Form 870-AD, closing agreement or special closing
agreement, affecting ONBC or any of its Subsidiaries pursuant to Section 7121 of
the Code or any predecessor provision thereof or any similar provision of state,
local or foreign law, which agreement would have a material impact on the
calculation of the Taxes of CBSI or any of its Subsidiaries after the Effective
Time.
3.13. Employee Benefit Plans. (a) Each ONBC Plan is listed on
Schedule 3.13(a) or has been Previously Disclosed. For purposes of this Section
3.13, the term "ONBC Plan" means each bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance pay, medical, life or
other insurance, profit-sharing, or pension plan, program, agreement or
arrangement, and each other employee benefit plan, program, agreement or
arrangement, sponsored, maintained or contributed to or required to be
contributed to by ONBC or by any trade or business, whether or not incorporated,
that together with ONBC would be deemed a "single employer" under Section 414 of
the Code (an "ERISA Affiliate") for the benefit of any employee or director or
former employee or former director of ONBC or any ERISA Affiliate of ONBC.
(b) With respect to each of the ONBC Plans, ONBC has made available
to CBSI true and complete copies of each of the following documents: (a) the
ONBC Plan and
15
related documents (including all amendments thereto); (b) the most recent annual
reports, financial statements, and actuarial reports, if any; (c) an estimate of
the termination liability under Title IV of ERISA for the Ontario National Bank
Retirement Plan, calculated as of January 1, 2006 by Harbridge Consulting Group,
LLC; (d)the most recent summary plan description, together with each summary of
material modifications, required under ERISA with respect to such ONBC Plan and
all material communications relating to each such ONBC Plan; and (e) the most
recent determination letter or opinion letter received from the IRS with respect
to each ONBC Plan that is intended to be qualified under the Code and all
material communications to or from the IRS or any other governmental or
regulatory agency or authority relating to each ONBC Plan.
(c) Neither ONBC nor, to the knowledge of ONBC, any ERISA Affiliate
of ONBC, nor any of the ONBC Plans, nor, to the knowledge of ONBC, any trust
created thereunder, nor any trustee, fiduciary or administrator thereof, nor any
party in interest with respect thereto, has engaged in a non-exempt prohibited
transaction (within the meaning of Section 406 of ERISA and Section 4975 of the
Code) in connection with which ONBC or any ERISA Affiliate of ONBC could
reasonably be expected to, either directly or indirectly, incur any material
liability or material cost to ONBC or any ERISA Affiliate of ONBC.
(d) Except as Previously Disclosed, full payment has been made, or
will be made in accordance with Section 404(a)(6) of the Code, of all amounts
that ONBC or any ERISA Affiliate of ONBC is required to pay under Section 412 of
the Code or under the terms of the ONBC Plans.
(e) No ONBC Plan subject to Section 412 of the Code had an
"accumulated funding deficiency" within the meaning of Section 412(a) of the
Code as of the end of the most recent plan year, taking into account
contributions that have been made or will be made after the end of that plan
year and within the time required by the Code. No reportable event under Section
4043 of ERISA has occurred with respect to any ONBC Plan other than any
reportable event occurring by reason of the transactions contemplated by this
Agreement or a reportable event for which the requirement of notice to the PBGC
has been waived.
(f) None of the ONBC Plans is a "multiemployer pension plan," as
such term is defined in Section 3(37) of ERISA, a "multiple employer welfare
arrangement," as such term is defined in Section 3(40) of ERISA, or a single
employer plan that has two or more contributing sponsors, at least two of whom
are not under common control, within the meaning of Section 4064(a) of ERISA.
(g) A favorable determination letter or opinion letter has been
issued by the Internal Revenue Service with respect to each of the ONBC Plans
that is intended to be "qualified" within the meaning of Section 401(a) of the
Code to the effect that such plan is so qualified and, to the knowledge of ONBC,
no condition exists that could adversely affect the qualified status of any such
ONBC Plan. Each of the ONBC Plans that is intended to satisfy the requirements
of Section 125 or 501(c)(9) of the Code satisfies such requirements in all
material respects. Each of the ONBC Plans has been operated and administered in
all material respects in accordance with its terms and applicable laws,
including but not limited to ERISA and the Code.
16
(h) There are no actions, suits or claims pending, or, to the
knowledge of ONBC, threatened or anticipated (other than routine claims for
benefits) against any ONBC Plan, any ONBC Plan fiduciary, the assets of any ONBC
Plan or against ONBC or any ERISA Affiliate of ONBC with respect to any ONBC
Plan. There is no judgment, decree, injunction, rule or order of any court,
governmental body, commission, agency or arbitrator outstanding against or in
favor of any ONBC Plan or any fiduciary thereof, other than rules of general
applicability. There are no pending or, to the knowledge of ONBC, threatened
audits, examinations or investigations by any governmental body, commission or
agency involving any ONBC Plan.
(i) Except as Previously Disclosed, the consummation of the
transactions contemplated by this Agreement will not result in, and is not a
precondition to, (i) any current or former employee or director of ONBC or any
ERISA Affiliate of ONBC becoming entitled to severance pay, unemployment
compensation or any similar payment, (ii) any acceleration in the time of
payment or vesting, or increase in the amount, of any compensation due to any
such current or former employee or director, or (iii) any renewal or extension
of the term of any agreement regarding compensation for any such current or
former employee or director.
(j) The ONBC Plans have been maintained (and all obligations
required to be performed have been performed), in all material respects, in
accordance with their terms and with all applicable provisions of ERISA, the
Code and other applicable laws. Participation in each ONBC Plan has been made
available to all individuals who, pursuant to the terms of such ONBC Plan, are
entitled to participate.
(k) No ONBC Plan fiduciary has any liability (under ERISA Section
502(l) or otherwise) for breach of fiduciary duty for which ONBC or any ERISA
Affiliate of ONBC is liable, or for any other failure to act or comply in
connection with the administration or investment of the assets of any ONBC Plan
that would cause material liability for which the ONBC or any ERISA Affiliate of
ONBC is liable. Nothing has occurred, and nothing is anticipated to occur, that
would be a breach of fiduciary responsibility by any fiduciary of any ONBC Plan
that would cause material liability for which ONBC or any ERISA Affiliate of
ONBC is or would be liable.
(l) Except as set forth on Schedule 3.13(l), none of the ONBC Plans
provides for post-employment welfare benefits other than (i) a governmental plan
to which contributions are mandatory, such as Social Security or Medicare, (ii)
any ONBC Plan for which the sole post-employment benefit is required under COBRA
or similar laws of any state within the United States, or (iii) where all
liabilities under such ONBC Plan are fully the obligation of an insurer or other
person unaffiliated with ONBC or any Subsidiary or ERISA Affiliate of ONBC.
(m) There are no contracts, plans, agreements or arrangements
covering any current or former employee, director, contractor or other service
provider that, individually or collectively, have resulted in or could give rise
to (i) the payment of any amount that would not be deductible pursuant to the
terms of Section 280G of the Code, or (ii) the payment of any excise tax
pursuant to Section 409A of the Code.
17
(n) Neither ONBC nor any Subsidiary or ERISA Affiliate of ONBC, nor
the PBGC has terminated any plan that is subject to Title IV of ERISA, nor has
ONBC, or any Subsidiary or ERISA Affiliate of ONBC incurred any outstanding
liability under Section 4062 of ERISA to the PBGC or to a trustee appointed
under Section 4042 of ERISA. All premiums due the PBGC with respect to plans
that are subject to Title IV of ERISA have been timely paid.
(o) No stock or other security issued by ONBC or any of its
Subsidiaries or ERISA Affiliates forms or has formed a part of the assets of any
ONBC Plan.
(p) Any individual who performs, or has performed, services for ONBC
or any of its Subsidiaries or ERISA Affiliates and who is not, or has not been,
treated as an employee of ONBC or any Subsidiary or ERISA Affiliate for federal
income tax purposes is not, and was not, an employee for such purposes.
3.14. Material Contracts.
(a) Except as set forth in Schedule 3.14, neither ONBC nor any of
its Subsidiaries is a party to, or is bound by, (i) any material agreement or
contract or similar arrangement or commitment (any contract or commitment which
could reasonably be expected to involve expenditures or receipt by ONBC or any
of its Subsidiaries in excess of $25,000 in the aggregate shall be deemed
material for these purposes) whether or not made in the ordinary course of
business (other than loans or loan commitments and funding transactions in the
ordinary course of business consistent with past practice of ONB) or any
agreement restricting the nature or geographic scope of its business activities
in any material respect, (ii) any agreement, indenture or other instrument
relating to the borrowing of money by ONBC or any of its Subsidiaries or the
guarantee by ONBC of any of its Subsidiaries of any such obligation, other than
instruments relating to transactions entered into in the ordinary course of
business consistent with past practice, (iii) any agreement, arrangement or
commitment relating to either the employment of a consultant who was a director
or executive officer or the employment, election, retention in office or
severance of any present or former director or officer, (iv) any contract,
agreement or understanding with a labor union or (v) any contract, arrangement
or understanding concerning the ownership, transfer or voting of any capital
stock of ONBC or any of its Subsidiaries, in each case whether written or oral.
(b) Neither ONBC nor any of its Subsidiaries is in default under any
material agreement, commitment, arrangement, lease, insurance policy or other
instrument (any contract or commitment which could reasonably be expected to
involve expenditures or receipt by ONBC or any of its Subsidiaries in excess of
$25,000 in the aggregate shall be deemed material for these purposes) whether
entered into in the ordinary course of business or otherwise and whether written
or oral, and there has not occurred any event that, with the lapse of time or
giving of notice or both, would constitute such a default.
3.15. Legal Proceedings. Except as Previously Disclosed, there are
no actions, suits or proceedings instituted, pending or, to the knowledge of
ONBC, threatened against ONBC or any of its Subsidiaries or against any asset,
interest or right of ONBC or any of its Subsidiaries. There are no actual or, to
the knowledge of ONBC, threatened actions, suits or proceedings which present a
claim to restrain or prohibit the transactions contemplated herein or
18
to impose any material liability or restrictions in connection therewith. There
are no actions, suits or proceedings instituted, pending or, to the knowledge of
ONBC, threatened against any present or former director or officer of ONBC or
any of its Subsidiaries, that would reasonably be expected to give rise to a
claim for indemnification.
3.16. Compliance with Laws. ONBC and each of its Subsidiaries is in
compliance with all statutes and regulations applicable to the conduct of its
business, and neither ONBC nor any of its Subsidiaries has received notification
from any agency or department of federal, state or local government (i)
asserting a violation of any such statute or regulation, (ii) threatening to
revoke any license, franchise, permit or government authorization or (iii) in
any way restricting or limiting its operations. Except as Previously Disclosed,
neither ONBC nor any of its Subsidiaries is subject to any regulatory or
supervisory cease and desist order, agreement, directive, memorandum of
understanding or commitment, or has received any communication contemplating any
of the foregoing.
3.17. Labor Matters. With respect to their employees, neither ONBC
nor its Subsidiaries is a party to any collective bargaining or other similar
agreement with any labor organization, group or association or has engaged in
any unfair labor practice. Since January 1, 2003, neither ONBC nor its
Subsidiaries has experienced any attempt by organized labor or its
representatives to make ONBC or any of its Subsidiaries conform to demands of
organized labor relating to their employees or to enter into a binding agreement
with organized labor that would cover the employees of ONBC or any of its
Subsidiaries. To the knowledge of ONBC, there is no unfair labor practice charge
or other complaint by any employee or former employee of ONBC or any of its
Subsidiaries against any of them pending before any court, arbitrator or
governmental agency arising out of ONBC 's or such Subsidiary's activities or
such employee's employment with ONBC or such Subsidiary. There is no strike,
work stoppage or labor disturbance pending or, to the knowledge of ONBC,
threatened against ONBC or any of its Subsidiaries, and neither ONBC nor any of
its Subsidiaries has experienced any such strike, stoppage or disturbance since
January 1, 2003.
3.18. Brokers and Finders; Fairness Opinion. Neither ONBC nor any of
its Subsidiaries, nor any of their respective officers, directors or employees,
has engaged any broker, finder or financial advisor or become obligated to or
incurred any liability for any fees or commissions in connection with the
transactions contemplated herein, except for the firm of Sandler ▇'▇▇▇▇▇ &
Partners, L.P. to provide financial advice with respect to the transaction
provided for in this Agreement. ONBC has Previously Disclosed to CBSI a complete
and correct copy of all agreements between ONBC or any of its Subsidiaries and
Sandler ▇'▇▇▇▇▇ & Partners, L.P., pursuant to which such firm would be entitled
to any payment relating to the transactions contemplated hereunder. The Board of
Directors of ONBC has received the opinion of its financial advisor, Sandler
▇'▇▇▇▇▇ & Partners, L.P. to the effect that the Merger Consideration is fair,
from a financial point of view, to the holders of ONBC Common Stock as of the
date of this Agreement.
3.19. Insurance. Each of ONBC and its Subsidiaries currently
maintains insurance in amounts reasonably adequate for their operations. Neither
ONBC nor any of its Subsidiaries has received any notice of a material premium
increase over current rates or cancellation with respect to any of their
insurance policies or bonds, and within the last three
19
years, neither ONBC nor any of its Subsidiaries has been refused any insurance
coverage sought or applied for, and neither ONBC nor any of its Subsidiaries has
any reason to believe that existing insurance coverage cannot be renewed as and
when the same shall expire, upon terms and conditions as favorable as those
presently in effect. ONBC has Previously Disclosed a list of all outstanding
claims as of the date hereof by ONBC or any of its Subsidiaries under any
insurance policy. The deposits of ONB are insured by the FDIC in accordance with
the FDIA, and ONB has paid all assessments and filed all reports required by the
FDIA. No proceedings for the revocation or termination of such deposit insurance
are pending or, to the knowledge of ONBC, threatened.
3.20. Environmental Liability.
(a) During the period that ONBC or any of its Subsidiaries has
owned, leased or operated any properties or facilities, neither it nor any other
Person has disposed, released, or participated in or authorized the release or
threatened release of Hazardous Materials on, from or under such properties or
facilities. There is not now nor has there ever been any presence, disposal,
release or threatened release of Hazardous Materials on, from or under any of
such properties or facilities, which may have occurred prior to ONBC having
taken possession of any of such properties or facilities. For the purposes of
this Agreement, the terms "disposal," "release," and "threatened release" shall
have the definitions assigned thereto by the Comprehensive Environmental
Response Compensation and Liability Act of 1980, 42 U. S.C. ss. 9601 et seq., as
amended ("CERCLA").
(b) The operations of ONBC or any of its Subsidiaries, and
properties that ONBC or any of its Subsidiaries owns or leases, are in
compliance with Environmental Law. During the time that ONBC or any of its
Subsidiaries has owned or leased its properties and facilities, neither ONBC or
any of its Subsidiaries nor, to the knowledge of ONBC, any third party has used,
generated, manufactured or stored on, under or about such properties or
facilities or transported or arranged for disposal to or from such properties or
facilities, any Hazardous Materials in violation of applicable Environmental
Law.
(c) During the time that ONBC or any of its Subsidiaries has owned
or leased its properties and facilities, there has been no litigation brought
or, to the knowledge ONBC, threatened against ONBC or any of its Subsidiaries
by, or any settlement reached by ONBC or any of its Subsidiaries with, any
Person alleging the presence, disposal, release or threatened release of any
Hazardous Materials, on from or under any of such properties or facilities.
(d) There are no facts, circumstances or conditions relating to the
properties and facilities owned or leased by ONBC or any of its Subsidiaries
known to ONBC which are reasonably likely to give rise to a claim under any
Environmental Law or to any material Environmental Costs and Liabilities.
3.21. Discharge of Fiduciary Obligations. ONBC and each of its
Subsidiaries have properly administered and discharged all obligations relating
to funds and accounts for which each of them acts as a fiduciary or agent,
including but not limited to accounts for which it serves as a trustee, agent,
custodian, personal representative, guardian, conservator or investment advisor,
in accordance with the terms of the governing documents and applicable state and
20
federal law and regulation and common law. Neither ONBC nor any of its
Subsidiaries, nor any of their respective directors, officers or employees
acting on behalf of ONBC or any of its Subsidiaries, has committed any breach of
trust with respect to any fund or fiduciary or agency account, and the
accountings for all funds and accounts are true and correct and accurately
reflect the assets of such fund account.
3.22. Intellectual Property. Each of ONBC and its Subsidiaries owns
the entire right, title and interest in and to, or has valid licenses with
respect to, all of the Intellectual Property necessary in all material respects
to conduct their respective businesses and operations as presently conducted.
The ownership, licensing or use of Intellectual Property by ONBC or any of its
Subsidiaries does not conflict with, infringe, misappropriate or otherwise
violate the Intellectual Property rights of any other Person. None of such
Intellectual Property is subject to any outstanding order, decree, judgment,
stipulation, settlement, lien, charge, encumbrance or attachment. Except as
Previously Disclosed, upon consummation of the transactions contemplated by this
Agreement, the Surviving Corporation and Continuing Bank will be entitled to
continue to use all such Intellectual Property without the payment of any fees,
licenses or other payments.
3.23. Certain Information. When the Proxy Statement (or any
supplement or amendment thereto) is first mailed to the shareholders of ONBC,
and at all times subsequent thereto up to and including the time of the ONBC
Shareholders' Meeting, such Proxy Statement and all amendments or supplements
thereto, with respect to all information set forth or incorporated by reference
therein furnished by ONBC relating to ONBC or any of its Subsidiaries, shall 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 contained
therein, in the light of the circumstances under which they were made, not
misleading. All information concerning ONBC and its Subsidiaries and their
respective directors, officers, and shareholders included (or submitted for
inclusion) in any application and furnished by it pursuant to Sections 5.2 or
5.3 of this Agreement shall be true, correct and complete.
3.24. Risk Management Instruments. All interest rate swaps, caps,
floors, option agreements, futures and forward contracts and other similar risk
management arrangements to which ONBC or any of its Subsidiaries is a party,
whether entered into for ONBC's own account, or for the account of one or more
of such Subsidiaries 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 parties reasonably believed to be financially
responsible; and each of them constitutes the valid and legally binding
obligation of ONBC or such Subsidiary, enforceable in accordance with its terms
(except that enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
equity principles), and neither ONBC nor any of its Subsidiaries nor to ONBC's
knowledge, any other party thereto, is in breach of any of its obligations under
any such agreement or arrangement. ONBC has previously made available to CBSI
all of such agreements and arrangements that are in effect as of the date of
this Agreement.
3.25. Interested Party Transactions. Except as Previously Disclosed,
no Related Party (as defined below) has been directly or indirectly a party to
any contract or other arrangement (whether written or oral) with ONBC or any of
its Subsidiaries pertaining to
21
deposits, loans, services (other than as an employee), products, goods or
supplies, rental of real or personal property, or otherwise requiring payments,
provided from or to ONBC (collectively, the "Interested Party Transactions").
For purposes hereof, the term "Related Party" shall mean a 5%-or-greater
shareholder of ONBC, a director or officer of ONBC or any of its Subsidiaries,
or any member of such person's family or any corporation, partnership, limited
liability company, other business entity or trust in which such person or any
member of such person's family has greater than a ten percent (10%) interest, or
of which such person or any member of such person's family is an officer,
director, partner, member or trustee. Each Interested Party Transaction that is
an arrangement to make a loan to the applicable Related Party, or is a deposit
or other investment by the applicable Related Party, was an "arms'-length"
transaction approved pursuant to the normal underwriting standards, and upon the
normal commercial terms and conditions, that are applicable to ONBC's
unaffiliated customers.
3.26. Takeover Statutes Not Applicable; No Rights Agreement. The
Board of Directors of ONBC has taken all actions (if applicable) so that the
restrictions contained in Section 912 of the NYBCL applicable to a "business
combination" (as defined therein) will not apply to the execution or delivery of
this Agreement or any Transaction Document to which ONBC is a party, or to the
consummation of the Merger or the other transactions contemplated hereby or
thereby. ONBC has no shareholder rights agreement or plan or other similar plan,
agreement or arrangement.
3.27. Investment Securities. Except for pledges to secure public and
trust deposits, Federal Reserve borrowings, repurchase agreements and reverse
repurchase agreements entered into in "arms'-length" transactions pursuant to
normal commercial terms and conditions and other pledges required by law, none
of the investments reflected in the ONBC Financial Statements, and none of the
material investments made by ONBC or any of its Subsidiaries since December 31,
2005, is subject to any restriction (contractual, statutory or otherwise) that
would materially impair the ability of the entity holding such investment freely
to dispose of such investment at any time.
3.28. Capitalization. Except as Previously Disclosed to CBSI, ONBC
and ONB are "adequately capitalized" as such term is defined in the rules and
regulations promulgated by the Federal Reserve Board and the FDIC.
3.29. CRA, Anti-Money Laundering and Customer Information Security.
Neither ONBC nor ONB is aware of, has been advised of, or has reason to believe
that any facts or circumstances exist which would cause ONB: (i) to be deemed
not to be in satisfactory compliance in any material respect with the Community
Reinvestment Act of 1977, as amended (the "CRA") and the regulations promulgated
thereunder, or to be assigned a rating for CRA purposes by federal or state bank
regulators of lower than "satisfactory," or (ii) to be deemed to be operating in
violation in any material respect of the federal Bank Secrecy Act, as amended
and its implementing regulations (31 CFR part 103), the USA Patriot Act of 2001,
Public Law 107-56 (the "USA Patriot Act") and the regulations promulgated
thereunder, any order issued with respect to anti-money laundering by the U.S.
Treasury's Office of Foreign Assets Control, or any other applicable anti-money
laundering statute, rule or regulation; or (iii) to be deemed not to be in
satisfactory compliance in any material respect with the privacy of customer
information requirements contained in Title V of the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act of
1999 and
22
regulations promulgated thereunder as well as the provisions of the Information
Security Program adopted by ONB pursuant to 12 CFR Part 364. Furthermore, the
Board of Directors of ONB has adopted, and ONB has implemented, an anti-money
laundering program that meets the requirements in all material respects of
Section 352 of the USA Patriot Act and the regulations thereunder.
3.30. Agreements with and Examination by Banking Authorities. Except
as Previously Disclosed, neither ONBC nor any of its Subsidiaries is a party to
any commitment, letter (other than letters addressed to regulated depository
institutions generally), written agreement, memorandum of understanding, order
to cease and desist with, is subject to any order or directive specifically
naming or referring to ONBC or any of its Subsidiaries by, has been required to
adopt any board resolution by, any federal or state governmental entity charged
with the supervision or regulation of banks or bank holding companies or engaged
in the insurance of bank deposits which is currently in effect and restricts
materially the conduct of its business, or in any manner relates to its capital
adequacy, loan loss allowances or reserves, ability to perform its obligations
hereunder, and neither ONBC nor any of its Subsidiaries has received written
notification from any such federal or state governmental entity that any such
Person may be required to enter into, or otherwise be subject to, any such
commitment, letter, written agreement, memorandum of understanding or cease and
desist order. Except as Previously Disclosed, neither ONBC nor any of its
Subsidiaries has been informed by any bank regulator that it is contemplating
issuing or requesting any such order, directive, agreement, memorandum of
understanding, commitment letter or similar submission. Except as Previously
Disclosed, neither ONBC nor any of its Subsidiaries is a party to any agreement
or arrangement entered into in connection with the consummation of a federally
assisted acquisition of a depository institution pursuant to which ONBC or any
of its Subsidiaries is entitled to receive financial assistance or
indemnification from any governmental agency. Except for normal periodic
examinations (the "Bank Examinations") conducted by the Federal Reserve Board,
the FDIC or the OCC in the regular course of the business of ONBC and its
Subsidiaries, since January 1, 2003, no bank regulator has initiated any
proceeding or, to the knowledge of ONBC, investigation into the business or
operations of the ONBC or any of its Subsidiaries. ONBC and its Subsidiaries
have addressed and responded to, or are addressing, any material violations,
criticisms or exceptions by any bank regulator with respect to any Bank
Examination.
3.31. Ownership of CBSI Common Stock. Neither ONBC nor any of its
affiliates or associates beneficially owns in the aggregate three percent (3%)
or more of the outstanding shares of CBSI Common Stock or, to the knowledge of
ONBC, has acquired shares of CBSI Common Stock which were at any time in the
past two years beneficially owned by an "Interested Shareholder" (as defined
below) if such acquisition occurred other than pursuant to a public offering
within the meaning of the Securities Act, in each case such that ONBC would be
deemed an "Interested Shareholder" under CBSI's certificate of incorporation.
3.32. Internal Controls. Neither ONBC's nor any of its Subsidiaries'
records, systems, controls data or information are recorded, stored, maintained,
operated or otherwise wholly or partly dependent on or held by any means
(including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and therefrom)
are not under their exclusive ownership and direct control, except as would not
reasonably be expected to have a material adverse effect on the system of
internal accounting
23
controls described in the next sentence. ONBC and its Subsidiaries have devised
and maintain a system of internal accounting controls sufficient to provide
reasonable assurances regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles.
3.33. Disclosure. None of the representations and warranties of ONBC
contained in this Agreement or any of the Transaction Documents to which it is a
party, taken as a whole, contains or will contain any untrue statement of a
material fact, or omits to state any material fact required to be stated or
necessary to make any such information or document, in light of the
circumstances, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CBSI AND MERGER SUB
Except as Previously Disclosed, CBSI and Merger Sub hereby represent
and warrant to ONBC as follows:
4.1. Organization, Standing and Authority of CBSI and Merger Sub.
Each of CBSI and Merger Sub is a duly organized corporation or bank, validly
existing and in good standing under the laws of its incorporation with full
corporate power and authority to own, lease and operate the properties it
purports to own, lease or operate and to carry on its business as now conducted,
except where the failure to be in good standing or to have such power or
authority would not have a Material Adverse Effect on CBSI. CBSI is a registered
bank holding company under the Bank Holding Company Act. CBSI is duly licensed
or qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification or licensing, except where failure to be so
licensed or qualified would not have a Material Adverse Effect on CBSI.
4.2. Authorized and Effective Agreement.
(a) Each of CBSI and Merger Sub has all requisite corporate power
and authority to enter into and perform all of its obligations under this
Agreement and each of the Transaction Documents to which it is a party. The
execution and delivery of this Agreement and each such Transaction Agreement and
the consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action in respect thereof
on the part of CBSI and Merger Sub, as the case may be.
(b) This Agreement and each Transaction Document to which CBSI or
Merger Sub is a party have been duly executed and delivered by CBSI or Merger
Sub, respectively, and assuming the accuracy of the representation contained in
Section 3.4(b) hereof, this Agreement and each Transaction Document to which
CBSI or Merger Sub is a party constitutes the legal, valid and binding
obligations of CBSI or Merger Sub, as the case may be, enforceable against such
party in accordance with its terms, except that such enforceability may
24
be subject to bankruptcy, insolvency and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(c) Neither the execution and delivery by CBSI or Merger Sub of this
Agreement or any Transaction Document to which it is a party, nor consummation
of the transactions contemplated hereby or thereby, nor compliance by CBSI or
Merger Sub with any of the provisions hereof or thereof shall (i) assuming the
accuracy of the representation contained in Section 3.31 hereof, conflict with
or result in a breach of any provision of the articles or certificate of
incorporation or bylaws of CBSI or Merger Sub, (ii) assuming the consents and
approvals contemplated by Section 5.3 hereof and the consents and approvals
which are Previously Disclosed are duly obtained, constitute or result in a
breach of any term, condition or provision of, or constitute a default under, or
give rise to any right of termination, cancellation or acceleration with respect
to, or result in the creation of any lien, charge or encumbrance upon any
property or asset of CBSI or Merger Sub pursuant to, any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to which CBSI or
Merger Sub is a party, or (iii) assuming the consents and approvals contemplated
by Section 5.3 hereof and the consents and approvals which are Previously
Disclosed are duly obtained, conflict with or violate any law, order, writ,
injunction, decree, statute, rule or regulation applicable to CBSI or Merger Sub
or their respective assets; except, in case of clauses (ii) and (iii) above, for
any such breach, default, right, lien, charge, encumbrances, violation or
conflict which, individually or in the aggregate, would not have a Material
Adverse Effect on CBSI.
(d) Other than as contemplated by Section 5.3 hereof and the
consents and approvals which are Previously Disclosed, no consent, approval or
authorization of, or declaration, notice, filing or registration with, any
governmental or regulatory authority, or any other Person, is required to be
made or obtained by CBSI or Merger Sub on or prior to the Closing Date in
connection with the execution, delivery and performance of this Agreement or any
of the Transaction Documents to which it is a party or the consummation of the
transactions contemplated hereby or thereby. As of the date hereof, neither CBSI
nor Merger Sub is aware of any reason that the condition set forth in Section
6.1(b) of this Agreement would not be satisfied.
4.3. Regulatory Filings. Each of CBSI and its Subsidiaries has filed
all reports required by statute or regulation to be filed with any federal or
state bank regulatory agency, except where the failure to so file would not have
a Material Adverse Effect on CBSI, and such reports were prepared in accordance
with the applicable statutes, regulations and instructions in existence as of
the date of filing of such reports in all material respects.
4.4. Legal Proceedings. Except as Previously Disclosed, there are no
actions, suits or proceedings instituted, pending or, to the knowledge of CBSI,
threatened against CBSI or any of its Subsidiaries or against any asset,
interest or right of CBSI or any of its Subsidiaries that, if decided against
CBSI or any of its Subsidiaries, would, individually or in the aggregate, have a
Material Adverse Effect on CBSI. There are no actual or threatened actions,
suits or proceedings which present a claim to restrain or prohibit the
transactions contemplated herein or to impose any material liability or
restrictions in connection therewith.
4.5. Certain Information. When the Proxy Statement (or any
supplement or amendment thereto) is first mailed to the shareholders of ONBC,
and at all times subsequent
25
thereto up to and including the time of the ONBC Shareholders' Meeting, such
Proxy Statement and all amendments or supplements thereto, with respect to all
information set forth or incorporated by reference therein furnished by CBSI and
relating to CBSI or any of its Subsidiaries, shall 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 contained therein, in the
light of the circumstances under which they were made, not misleading. All
information concerning CBSI and its directors, officers, and shareholders
included (or submitted for inclusion) in any application and furnished by it
pursuant to Sections 5.2 or 5.3 of this Agreement shall be true, correct and
complete in all material respects.
4.6. Financial Resources. CBSI has, or will have prior to the
Effective Time, sufficient cash funds to pay the aggregate Merger Consideration.
4.7. Compliance with Laws. CBSI and each of its Subsidiaries
conducts its business in compliance with all statutes and regulations applicable
to the conduct of its business in all material respects, and neither CBSI nor
any of its Subsidiaries has received notification from any agency or department
of federal, state or local government (i) asserting a violation of any such
statute or regulation, (ii) threatening to revoke any license, franchise, permit
or government authorization or (iii) in any way restricting or limiting its
operations. Neither CBSI nor any of its Subsidiaries is subject to any
regulatory or supervisory cease and desist order, agreement, directive,
memorandum of understanding or commitment, or has received any communication
contemplating any of the foregoing.
4.8. CRA, Anti-Money Laundering and Customer Information Security.
Neither CBSI nor Community Bank is aware of, has been advised of, or has reason
to believe that any facts or circumstances exist which would cause CBSI or
Community Bank: (i) to be deemed not to be in satisfactory compliance in any
material respect with the CRA and the regulations promulgated thereunder, or to
be assigned a rating for CRA purposes by federal or state bank regulators of
lower than "satisfactory;" or (ii) to be deemed to be operating in violation in
any material respect of the federal Bank Secrecy Act, as amended and its
implementing regulations (31 CFR part 103), the USA Patriot Act and the
regulations promulgated thereunder, any order issued with respect to anti-money
laundering by the U.S. Treasury's Office of Foreign Assets Control, or any other
applicable anti-money laundering statute, rule or regulation; or (iii) to be
deemed not to be in satisfactory compliance in any material respect with the
privacy of customer information requirements contained in Title V of the
▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act of 1999 and regulations promulgated thereunder.
Furthermore, the Board of Directors of CBSI has adopted, and CBSI has
implemented, an anti-money laundering program that meets the requirements in all
material respects of Section 352 of the USA Patriot Act and the regulations
thereunder.
4.9. Agreements with and Examination by Banking Authorities. Neither
CBSI nor any of its Subsidiaries is a party to any commitment, letter (other
than letters addressed to regulated depository institutions generally), written
agreement, memorandum of understanding, order to cease and desist with, is
subject to any order or directive specifically naming or referring to CBSI or
any of its Subsidiaries by, has been required to adopt any board resolution by,
any federal or state governmental entity charged with the supervision or
regulation of banks or bank holding companies or engaged in the insurance of
bank deposits which is currently in effect and
26
restricts materially the conduct of its business, or in any manner relates to
its capital adequacy, loan loss allowances or reserves, ability to perform its
obligations hereunder, and neither CBSI nor any of its Subsidiaries has received
written notification from any such federal or state governmental entity that any
such Person may be required to enter into, or otherwise be subject to, any such
commitment, letter, written agreement, memorandum of understanding or cease and
desist order. Neither CBSI nor any of its Subsidiaries has been informed by any
bank regulator that it is contemplating issuing or requesting any such order,
directive, agreement, memorandum of understanding, commitment letter or similar
submission. Neither CBSI nor any of its Subsidiaries is a party to any agreement
or arrangement entered into in connection with the consummation of a federally
assisted acquisition of a depository institution pursuant to which CBSI or any
of its Subsidiaries is entitled to receive financial assistance or
indemnification from any governmental agency. Except for Bank Examinations since
January 1, 2003, no bank regulator has initiated any proceeding or, to the
knowledge of CBSI, investigation into the business or operations of the CBSI or
any of its Subsidiaries.
ARTICLE V
COVENANTS
5.1. ONBC Shareholders' Meeting. ONBC shall call and give notice of
the ONBC Shareholders' Meeting as promptly as practicable for the purpose of
voting upon the approval of this Agreement, and ONBC shall use all reasonable
efforts to hold the ONBC Shareholders' Meeting as soon as practicable
thereafter, subject to the applicable notice requirements under the NYBCL.
Subject to the fiduciary duties of the Board of Directors of ONBC, as determined
after consultation with outside counsel and financial advisors, (i) the Board of
Directors of ONBC shall recommend that the shareholders vote in favor of the
approval of this Agreement, and (ii) ONBC shall solicit from its shareholders
proxies in favor of approval of this Agreement and shall take all other action
necessary or desirable to secure the vote of shareholders to obtain such
approval. Notwithstanding any withdrawal, modification or change in any
recommendation of the Board of Directors of ONBC, to the fullest extent
permitted by law, ONBC agrees to hold the ONBC Shareholders' Meeting within the
time period specified above unless this Agreement is terminated in accordance
with its terms.
5.2. ONBC Proxy Statement. As promptly as practicable after the date
hereof, ONBC shall prepare, and CBSI shall cooperate in the preparation of, the
Proxy Statement to be mailed to the shareholders of ONBC in connection with
obtaining their approval of this Agreement. ONBC shall provide CBSI and its
counsel a reasonable opportunity for review and comment on the Proxy Statement.
5.3. Applications. As promptly as practicable after the date hereof,
and after a reasonable opportunity for review by the other party and its
counsel, CBSI, Merger Sub and ONBC shall submit any requisite applications for
prior approval of, and notices with respect to, the transactions contemplated
herein to the OCC and the Federal Reserve Board, and each of the parties hereto
shall, and shall cause its Subsidiaries to, submit any applications, notices or
other filings to any other state or federal government agency, department or
body, the approval of which is required or desirable for consummation of the
Merger, the Short-Form Merger or the Bank Merger. ONBC, on one hand, and CBSI
and Merger Sub, on the other hand, each
27
represents and warrants to the other that all information concerning it and its
directors, officers, shareholders and Subsidiaries included (or submitted for
inclusion) in any such application and furnished by it shall be true, correct
and complete in all material respects. Each party agrees to consult with the
other parties with respect to obtaining all necessary approvals and consents and
each will keep the other apprised of the status of matters relating to such
approvals and consents.
5.4. Best Efforts.
(a) Subject to the terms and conditions of this Agreement, each of
the parties hereto will use reasonable best efforts in good faith to (i) furnish
such information as may be required or desirable in connection with the
preparation of the documents referred to in Sections 5.2 and 5.3 above, and (ii)
take or cause to be taken all action necessary or desirable on its part so as to
permit consummation of the Merger, the Short-Form Merger and the Bank Merger at
the earliest possible date, including, without limitation, (1) obtaining the
consent or approval of any Person whose consent or approval is required for
consummation of the transactions contemplated hereby, provided that ONBC shall
not agree to make any payments or modifications to agreements in connection
therewith without the prior written consent of CBSI, and (2) requesting the
delivery of appropriate opinions, consents and letters from its counsel and
independent auditors. Subject to the terms and conditions of this Agreement, no
party hereto shall take or fail to take, or cause or permit its Subsidiaries to
take or fail to take, or to the best of its ability permit to be taken or
omitted to be taken by any third party, any action that would substantially
impair the prospects of completing the Merger, the Short-Form Merger or the Bank
Merger pursuant to this Agreement, or that would materially delay such
completion.
(b) Each party hereto shall give prompt notice to the other party of
(i) the occurrence, or failure to occur, of any event which occurrence or
failure would be reasonably likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate at any time from the date
hereof to the Closing Date such that the condition set forth in Section 6.2(a)
or 6.3(a), as applicable, would not be met if such failure to be true or
accurate were to occur or be continuing on the Closing Date, and (ii) any
material failure of any party to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder, and each party
shall use all reasonable best efforts in good faith to remedy such failure.
(c) From the date of this Agreement through the Effective Time, to
the extent permitted by law, ONBC shall cause ONB to provide such assistance to
Community Bank as is reasonably necessary for Community Bank to prepare for the
conversion and transfer in connection with the Bank Merger all information
concerning the loans, deposits and other assets and liabilities of ONB into
Community Bank's own data processing system, with a view to facilitating the
integration of Community Bank's and ONB's systems and otherwise combining
Community Bank's and ONB's operations upon consummation of the Bank Merger. Such
assistance shall include providing Community Bank with computer file
instructions with respect to the information in its data processing system
regarding the assets and liabilities of ONB, together with operational
procedures designed to implement the transfer of such information to Community
Bank, provided that the confidentiality of customer information shall be
preserved and no such information shall be transferred until the Effective Time.
After execution of this
28
Agreement, ONB and Community Bank shall each designate an individual to serve as
liaison concerning the transfer of data processing information and other similar
operational matters.
(d) Each party shall provide, and shall request its auditors to
provide, the other party with such historical financial information regarding it
(and related audit reports and consents) as the other party may reasonably
request for disclosure purposes under the Securities Laws.
5.5. Investigation and Confidentiality. Each of the parties hereto
will keep the other advised of all material developments relevant to its and its
Subsidiaries' businesses and to consummation of the transactions contemplated
herein. Each of the parties hereto may make or cause to be made such
investigation of the financial and legal condition of the other as such party
reasonably deems necessary or advisable in connection with the transactions
contemplated herein, provided, however, that such investigation shall be
reasonably related to such transactions and the party conducting such
investigation shall use its reasonable best efforts to minimize any disruptions
to the operations of the other party. Each of the parties hereto agrees to
furnish the other and the other's advisors with such financial data and other
information with respect to its business and properties as such other party
shall from time to time reasonably request. No investigation pursuant to this
Section 5.5 or otherwise shall affect or be deemed to modify any representation
or warranty made by, or the conditions to the obligations to consummate the
Merger of, any party hereto. Each party hereto shall hold all information
furnished by the other party or any of such party's Subsidiaries or
representatives pursuant to this Agreement in confidence and in accordance with
the confidentiality agreement dated April 10, 2006, between ONBC and CBSI (the
"Confidentiality Agreement").
5.6. Press Releases and Other Public Disclosures. ONBC and CBSI
shall agree with each other as to the form and substance of any press release
related to this Agreement or the transactions contemplated hereby, and shall
consult and agree with each other as to the form and substance of other public
disclosures related thereto, including without limitation, any communications
with securities market professionals and investors, provided, however, that
nothing contained herein shall prohibit any party, following notification to the
other party, from making any disclosure which is required by applicable law or
NYSE rules.
5.7. Actions Pending the Merger.
(a) Prior to the Closing Date, and except as otherwise provided for
by this Agreement or consented to or approved in writing by the other party
hereto, each of CBSI and ONBC shall, and shall cause each of its Subsidiaries
to, use its reasonable best efforts to preserve its properties, business and
relationships with customers, employees and other persons.
(b) Except with the prior written consent of CBSI (which consent
will not be unreasonably withheld) or as expressly permitted by this Agreement,
ONBC shall not, and shall not permit any of its Subsidiaries to:
(1) carry on its business other than in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, or
incur an obligation in excess
29
of $25,000 in the aggregate or which requires performance over more than one
year (other than loans and investments booked in the usual, regular and ordinary
course of business);
(2) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock or earnings, other than dividends
of $0.95 per share of ONBC Common Stock on each of October 1, 2006 and January
1, 2007, subject in each case to the approval of ONBC's Board of Directors and
any applicable regulatory requirements;
(3) issue any shares of its capital stock or permit any
treasury shares to become outstanding; redeem, purchase or otherwise acquire any
shares of its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock;
(4) incur any additional debt obligation or other obligation
for borrowed money other than in the ordinary course of business consistent with
past practice;
(5) issue, grant or authorize any Rights (or amend or modify
the terms or exercisability of any outstanding Rights) or effect any
recapitalization, reclassification, stock dividend, stock split or like change
in capitalization, or redeem, repurchase or otherwise acquire any shares of its
capital stock;
(6) amend or otherwise change its certificate of incorporation
or articles of association or bylaws; impose, or suffer the imposition, on any
share of capital stock of ONBC of any lien, charge or encumbrance;
(7) merge or consolidate with, or acquire control over, any
Person or create any Subsidiary;
(8) waive or release any material right or cancel or
compromise any material debt or claim other than in the ordinary course of
business consistent with past practice with prior notice to CBSI;
(9) sell, liquidate, pledge or encumber or dispose of, or
acquire any, assets with a value in excess of $25,000 (other than assets
acquired in foreclosure, in lieu of foreclosure or other legal proceedings
relating to collateral for loans in each case in the ordinary course of business
consistent with past practice); make any capital expenditure in excess of
$25,000 in the aggregate; or establish new branches or other similar facilities,
close existing branches or similar facilities or enter into or modify any leases
or other contracts relating thereto;
(10) other than as Previously Disclosed, increase the rate of
compensation of, pay or agree to pay any bonus to, or provide any additional
employee benefit or incentive (including without limitation, any "change of
control" or severance payment) to, any of its directors, officers or employees
except as required by law or contractual obligation in effect as of the date
hereof; or become party to, adopt, terminate, amend, or commit itself to, any
pension, retirement, profit sharing or welfare benefit plan or agreement or
employment agreement, other than in the ordinary course of business consistent
with past practice or except as required by existing plans or agreements; or
accelerate the vesting of any deferred compensation;
30
(11) change its lending, investment, asset/liability
management or other material banking policies in any material respect except as
may be required by changes in applicable law, or as required by the OCC;
(12) engage or enter into any new Interested Party
Transactions, or modify, extend or renew any existing Interested Party
Transactions other than renewal of loans or credit facilities in the ordinary
course of business consistent with past practice, on terms and conditions
substantially identical to the terms being renewed;
(13) change its methods of accounting in effect at December
31, 2005, except as required by changes in generally accepted accounting
principles concurred in by its independent certified public accountants, or
change any of its methods of reporting income, deductions or other items for
federal income tax purposes from those employed in the preparation of its
federal income tax returns for the fiscal year ended December 31, 2005, except
as required by applicable law;
(14) take any action that would result in any of its
representations or warranties in this Agreement being or becoming untrue in any
material respects at any time prior to the Effective Time, or in any of the
conditions to the Merger set forth in Article VI not being satisfied, except as
may be required by law; or
(15) agree to do any of the foregoing or take any other action
which would in any manner interfere with, impede, delay, or make more costly the
consummation of the transactions contemplated hereby.
(c) CBSI shall not, except with the prior written consent of ONBC
(which consent shall not unreasonably be withheld) or as expressly permitted by
this Agreement, carry on its business other than in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted;
provided, however, that nothing herein shall be construed to prevent CBSI from
acquiring or agreeing to acquire any Person, by merging or consolidating with,
by purchasing an equity interest in or a portion of the assets of, or by any
other manner, such Person or taking actions reasonably related thereto, so long
as such transaction would not materially delay or prevent the consummation of
the transactions contemplated by this Agreement.
5.8. Certain Policies. Prior to the Effective Time, but only after
the satisfaction of the condition set forth in Section 6.1(b) hereof (other than
with respect to any regulatory notices and filings which are to be given or made
on or after the Closing Date) and the receipt of the shareholder approval
contemplated by Section 5.1 hereof, (i) ONBC shall, consistent with generally
accepted accounting principles and on a basis mutually satisfactory to it and
CBSI, modify and change its loan, litigation and real estate valuation policies
and practices (including loan classifications and levels of reserves) so as to
be applied on a basis that is consistent with that of CBSI, and (ii) ONBC and
CBSI shall review the adequacy of reserves for loan losses currently established
by ONBC and, if deemed warranted by both parties under generally accepted
accounting principles, ONBC shall make mutually acceptable changes to such
reserves. From the date hereof until the Effective Time, ONBC shall cooperate
with CBSI in mutually agreed actions designed to improve the short and long-term
profitability of ONBC and
31
eliminate or reduce any potential earnings per share dilution of CBSI upon
consummation of the Merger.
5.9. Closing. The transactions contemplated by this Agreement shall
be consummated at a closing to be held at the offices of the law firm of Bond,
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, PLLC, One Lincoln Center, Syracuse, New York on the first
business day, or other mutually agreeable time, following satisfaction or waiver
of the conditions to consummation of the Merger set forth in Article VI hereof.
5.10. Employee Benefits; Indemnification.
(a) The current employees of ONBC or any of its Subsidiaries who
continue as employees of CBSI or its Subsidiaries after the Effective Time shall
be given credit for past service with ONBC for purposes of determining
eligibility for and vesting of employee benefits (but not for pension benefit
accrual purposes) under all welfare and retirement programs maintained by CBSI
or its Subsidiaries (collectively, the "CBSI Plans") in which such employees
participate following the Merger. In the event that the employment of any
current employee of ONBC or any of its Subsidiaries shall be terminated without
cause after the Effective Time, such employees shall be entitled to receive
benefits under CBSI's severance plan (without duplication, however, with any
payment under any severance or separation plan, program, agreement or
arrangement maintained or provided by ONBC or any of its Subsidiaries) in
accordance with its terms.
(b) Prior to the Effective Time, ONBC shall take all actions that
may reasonably be requested by CBSI in writing upon advance notice of not less
than 90 days with respect to (i) causing one or more ONBC Plans to terminate as
of the Effective Time or for benefit accrual and entitlements to cease as of the
Effective Time, (ii) causing the continuation on and after the Effective Time of
any contract, arrangement or insurance policy relating to any ONBC Plan for such
period as may be requested by CBSI, or (iii) cooperating with CBSI to facilitate
the merger of any ONBC Plan into any CBSI Plan as of or following the Effective
Time. Each ONBC Plan that is not terminated or amended pursuant to clause (i)
above, or merged into a CBSI Plan pursuant to clause (iii) above, shall be
assumed by CBSI to the extent permitted by the terms of the ONBC Plan; provided
that, to the extent necessary, each ONBC Plan shall be amended, effective prior
to the Effective Time, to provide that ONBC and its successors shall have the
right to amend and/or terminate each such plan at any time, including any time
on or after the Effective Time.
(c) CBSI or the Merger Sub shall provide COBRA continuation
coverage, to the extent required by the Code, to any qualified beneficiary who
(i) is receiving COBRA continuation coverage as of the Effective Time, or (ii)
experiences a qualifying event (as such term is defined in the Code and
implementing regulations) as a result of the Merger.
(d) (1) In the event of any threatened or actual claim, action,
suit, proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, proceeding or
investigation in which any person (the "Indemnified Party") who is now, or has
been at any time prior to the date of this Agreement, or who becomes prior to
the Effective Time, a director or officer of ONBC is, or is threatened to be,
32
made a party based in whole or in part on, or arising in whole or in part out
of, or pertaining to (i) the fact that he is or was a director, officer or
employee of ONBC or any of its Subsidiaries, or (ii) this Agreement or any of
the transactions contemplated hereby, whether in any case asserted or arising
before or after the Effective Time, the parties hereto agree to cooperate and
use their best efforts to defend against and respond thereto. For a period of
six years after the Effective Time, CBSI shall indemnify and hold harmless, to
the fullest extent permitted by law, each such Indemnified Party against any
losses, claims, damages, liabilities, costs, expenses (including reasonable
attorney's fees and expenses in advance of the final disposition of any claim,
suit, proceeding or investigation to each Indemnified Party to the fullest
extent permitted by the DGCL upon receipt of any undertaking required by the
DGCL), judgments, fines and amounts paid in settlement in connection with any
such threatened or actual claim, action, suit, proceeding or investigation, and
in the event of any such threatened or actual claim, action, suit, proceeding or
investigation (whether asserted or arising before or after the Effective Time),
the Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with CBSI; provided, however, that (1) CBSI shall have the right to
assume the defense thereof and upon such assumption CBSI shall not be liable to
any Indemnified Party for any legal expenses of other counsel or any other
expenses subsequently incurred by any Indemnified Party in connection with the
defense thereof, except that if CBSI elects not to assume such defense or
counsel for the Indemnified Parties reasonably advises the Indemnified Parties
that there are issues which raise conflicts of interest between CBSI and the
Indemnified Parties, the Indemnified Parties may retain counsel reasonably
satisfactory to them after notification, and CBSI shall pay the reasonable fees
and expenses of such counsel for the Indemnified Parties, (2) CBSI shall be
obligated pursuant to this paragraph to pay for only one firm of counsel for all
Indemnified Parties, (3) CBSI shall not be liable for any settlement effected
without its prior written consent, and (4) CBSI shall have no obligation
hereunder to any Indemnified Party when and if a court of competent jurisdiction
shall ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. Any Indemnified Party
wishing to claim indemnification under this Section 5.10(d), upon becoming aware
of any such claim, action, suit, proceeding or investigation, shall promptly
notify CBSI thereof, provided that the failure of any Indemnified Party to so
notify CBSI shall relieve it of its obligations to indemnify hereunder to the
extent that such failure materially prejudices CBSI.
(2) CBSI agrees that all rights to indemnification and all
limitations on liability existing in favor of the directors, officers and
employees of ONBC and any of its Subsidiaries as provided in their respective
certificates of incorporation, bylaws or similar governing documents as in
effect as of the date of this Agreement with respect to matters occurring prior
to the Effective Time shall survive the Merger, and shall continue in full force
and effect, and shall be honored by such entities or their respective successors
as if they were the indemnifying party thereunder, without any amendment
thereto, for a period of six years from the Effective Time.
(3) CBSI will use its reasonable best efforts directly or
indirectly to cause the persons who served as directors or officers of ONBC on
or before the Effective Time to be covered by ONBC's existing directors' and
officers' liability insurance policy (provided that CBSI may substitute therefor
policies of at least the same coverage and amounts containing
33
terms and conditions which are not less advantageous than such policy) but in no
event shall any insured person be entitled under this Section to insurance
coverage more favorable than that provided to him or her in such capacities as
of the date hereof with respect to acts or omissions resulting from their
service as such on or prior to the Effective Time. Such insurance coverage shall
commence at the Effective Time and will be provided for a period of no less than
six years after the Effective Time; provided, however, that in no event shall
CBSI be required to expend annually more than 200% of the current amount (the
"Maximum Amount") expended by ONBC per year to maintain or procure insurance
coverage pursuant hereto, and if such coverage cannot be maintained or procured
for the Maximum Amount, then CBSI shall be required only to procure or maintain
such coverage, if any, that can be purchased with the Maximum Amount. ONBC
agrees to renew any such existing insurance or to purchase any "discovery
period" insurance provided for thereunder at CBSI's request.
5.11. Takeover Laws. No party hereto shall take any action that
would cause the transactions contemplated by this Agreement or any of the
Transaction Documents to be subject to the 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) all such transactions from, or if
necessary challenge the validity or applicability of, any applicable Takeover
Law, as now or hereafter in effect. For purposes of this Section, "Takeover Law"
shall mean any legal requirement related to mergers, business combinations, sale
of control, affiliate transactions, or antitrust laws or regulations which is
applicable to the transactions contemplated by this Agreement.
5.12. No Solicitation.
(a) Subject to Section 5.12(b) hereof, from and after the date of
this Agreement until the earlier of the Closing or the termination of this
Agreement in accordance with its terms, neither ONBC nor any Person acting on
behalf of ONBC shall, directly or indirectly, (a) solicit, initiate or respond
to discussions or engage in negotiations with any Person (whether such
negotiations are initiated by ONBC or otherwise) or take any other action
intended or designed to facilitate the efforts of any Person, other than CBSI,
relating to the possible acquisition, recapitalization or other business
combination involving ONBC or any of its Subsidiaries (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise) or any material
portion of its capital stock or assets (with any such efforts by any such
Person, including a firm proposal to make such an acquisition, to be referred to
as "Takeover Proposal"), (b) provide non-public information with respect to ONBC
or any of its Subsidiaries to any Person, other than CBSI and its professional
advisors or ONBC's professional advisors, or (c) enter into an agreement, or a
letter of intent or term sheet, with any Person, other than CBSI, providing for
a possible Takeover Proposal. If ONBC receives any offer or proposal relating to
a Takeover Proposal, ONBC shall promptly (but in any event within 24 hours of
receipt) notify CBSI thereof, including information as to the identity of the
party making any such offer or proposal and the specific terms of such offer or
proposal, as the case may be.
(b) (i) Notwithstanding anything to the contrary contained in
Section 5.12(a), prior to the Closing or the termination of this Agreement in
accordance with its terms, ONBC may, to the extent the Board of Directors of
ONBC determines, in good faith, after consultation with outside legal counsel,
that the Board's fiduciary duties require it to do so,
34
participate in discussions or negotiations with, and, subject to the
requirements of Section 5.12(c), furnish non-public information, and afford
access to the properties, books or records of ONBC or any of its Subsidiaries to
any Person after such Person has delivered to ONBC in writing, an unsolicited
bona fide Takeover Proposal with respect to ONBC or any of its Subsidiaries
(which has not been withdrawn) which the Board of Directors of ONBC in its good
faith judgment determines, after reasonable inquiry and consultation with its
financial advisor (i) would be reasonably likely to result in a transaction more
favorable than that contemplated by this Agreement to the shareholders of ONBC
(which judgment must be reasonable), and (ii) that the Person making such
Takeover Proposal is financially capable of consummating such Takeover Proposal
or that the financing necessary to consummate such Takeover Proposal, to the
extent required, is then committed or is capable of being obtained by such
Person (a "Superior Proposal"). In addition, notwithstanding the provisions of
Section 5.12(a) above, in connection with a submitted, written bona fide
Takeover Proposal or potential Takeover Proposal, ONBC shall refer any third
party to this Section 5.12 or make a copy of this Section 5.12 available to such
third party.
(ii) In the event ONBC or any of its Subsidiaries receives a
Superior Proposal, nothing contained in this Agreement (but subject to the terms
of this Section 5.12(b)) will prevent the Board of Directors of ONBC from
recommending such Superior Proposal to the shareholders of ONBC, if the Board
determines, in good faith, after consultation with outside legal counsel, that
such action is required by its fiduciary duties; in such case, the Board of
Directors of ONBC may withdraw, modify or refrain from making its
recommendations set forth in the relevant sections in this Agreement; provided,
however, that ONBC shall (A) provide CBSI notice of any meeting of the Board of
Directors of ONBC at which such Board of Directors is reasonably expected to
consider a Superior Proposal at the same time that notice thereof is given to
the Board of Directors, (B) not recommend to its shareholders a Superior
Proposal for a period of not less than the greater of two full business days and
48 hours after CBSI's receipt of a copy of such Superior Proposal and the
identity of the third party, and (C) not enter into a definitive agreement
relating to such Superior Proposal unless CBSI fails to match the terms of the
Superior Proposal within the greater of two full business days and 48 hours
after CBSI's receipt of a copy of such Superior Proposal and the identity of the
third party; and provided, further, that unless this Agreement is terminated
pursuant to Article VII, nothing contained in this Section 5.12(b) shall limit
ONBC's obligation to hold and convene a special meeting of its shareholders
(regardless of whether the recommendation of the Board of Directors of ONBC
shall have been withdrawn, modified or not yet made) or to provide the
shareholders of ONBC with material information relating to such meeting.
(c) Notwithstanding anything to the contrary herein, neither ONBC
nor any of its Subsidiaries shall provide any non-public information to a third
party unless: (x) ONBC provides such non-public information pursuant to a
nondisclosure agreement with terms regarding the protection of oral or written
confidential information at least as restrictive as such terms in the
confidentiality agreement heretofore entered into by the parties hereto; and (y)
such non-public information has been previously delivered or made available to
CBSI.
5.13. Advisory Board. If requested by CBSI, ONBC shall use its
commercially reasonable efforts to assist CBSI in recruiting members of a
regional advisory board (the "Advisory Board") to be established by CBSI after
the Effective Time, 5.17. the purpose and function
35
of which shall be to advise Community Bank on deposit, lending and financial
services activities in ONB's former market area and to insure a smooth
transition of business relationships in connection with the Merger and the
continued development of business relationships throughout such market area. The
composition of, and the terms of participation on, the Advisory Board (including
compensation therefor, frequency and location of meetings, etc.) shall be as
determined by CBSI in its sole discretion.
ARTICLE VI
CONDITIONS PRECEDENT
6.1. Conditions Precedent to Obligations of CBSI and ONBC. The
respective obligations of the parties to effect the Merger and to consummate the
other transactions contemplated by this Agreement and the Transaction Documents
shall be subject to satisfaction or waiver of the following conditions at or
prior to the Closing Date:
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and each of the other Transaction
Documents (including, without limitation, the Bank Merger) and consummation of
the transactions contemplated hereby and thereby, including without limitation
the shareholder approval contemplated by Section 5.1 hereof, shall have been
duly and validly taken;
(b) The parties hereto shall have received all regulatory approvals
required or mutually deemed necessary in connection with the transactions
contemplated by this Agreement or any of the other Transaction Documents
(including, without limitation, the Bank Merger), all notice periods and waiting
periods required after the granting of any such approvals shall have passed and
all conditions contained in any such approval required to have been satisfied
prior to consummation of such transactions shall have been satisfied; and
(c) There shall not have been instituted, pending or threatened in
writing any action or proceeding by any governmental authority or administrative
agency or in a court of competent jurisdiction, nor shall there be in any effect
any judgment, order, decree or injunction of any governmental authority,
administrative agency or court of competent jurisdiction, or any other legal
restraint, preventing or seeking to prevent the consummation of the transactions
contemplated by this Agreement.
6.2. Conditions Precedent to Obligations of ONBC. The obligations of
ONBC to effect the Merger and to consummate the other transactions contemplated
by this Agreement and the Transaction Documents shall be subject to satisfaction
of the following additional conditions at or prior to the Closing Date unless
waived by ONBC pursuant to Section 7.5 hereof:
(a) The representations and warranties of CBSI and Merger Sub set
forth in Article IV hereof shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date (or, in the case of any representation and warranty which
specifically relates to an earlier date, as of such earlier date), except as
otherwise contemplated by this Agreement or consented to in writing by
36
ONBC; provided, however, that (i) in determining whether or not the condition
contained in this paragraph (a) is satisfied, no effect shall be given to any
qualifications or exceptions in any such representation or warranty relating to
materiality or Material Adverse Effect, but (ii) the condition contained in this
paragraph (a) shall be deemed to be satisfied unless the failure of such
representations and warranties to be so true and correct constitute,
individually or in the aggregate, a material adverse effect on CBSI and Merger
Sub's ability to consummate the transactions contemplated by this Agreement and
the other Transaction Documents;
(b) CBSI and Merger Sub shall have in all material respects
performed all obligations and complied with all covenants required by this
Agreement to be performed or complied with at or prior to the Closing Date;
(c) Each of CBSI and Merger Sub shall have delivered to ONBC a
certificate, dated the Closing Date and signed by its President and Chief
Executive Officer, to the effect that the conditions set forth in paragraphs (a)
and (b) of this Section have been satisfied; and
(d) ONBC shall have received a written certification signed by an
authorized officer of the Exchange Agent confirming that the Exchange Agent
holds in its possession cash or other immediately available funds sufficient to
satisfy the requisite payment of the aggregate Merger Consideration under this
Agreement.
6.3. Conditions Precedent to Obligations of CBSI and Merger Sub.
The obligations of CBSI and Merger Sub to effect the Merger and to
consummate the other transactions contemplated by this Agreement and the
Transaction Documents shall be subject to satisfaction of the following
additional conditions at or prior to the Closing Date, unless waived by CBSI
pursuant to Section 7.5 hereof:
(a) The representations and warranties of ONBC set forth in Article
III hereof shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date (or, in the case of any representation and warranty which
specifically relates to an earlier date, as of such earlier date), except as
otherwise contemplated by this Agreement or consented to in writing by CBSI;
provided, however, that (i) in determining whether or not the condition
contained in this paragraph (a) is satisfied, no effect shall be given to any
qualifications or exceptions in any such representation or warranty relating to
materiality or Material Adverse Effect but (ii) the condition contained in this
paragraph (a) shall be deemed to be satisfied unless the failure of such
representations and warranties to be so true and correct constitute,
individually or in the aggregate, a Material Adverse Effect on ONBC;
(b) ONBC shall have in all material respects performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with at or prior to the Closing Date;
(c) ONBC shall have delivered to CBSI a certificate, dated the
Closing Date and signed by its President and Chief Executive Officer, to the
effect that the conditions set forth in paragraphs (a) and (b) of this Section
have been satisfied;
37
(d) Dissenters' rights shall not have been exercised with respect to
more than eight percent (8%) of the outstanding shares of ONBC Common Stock; and
(e) To the extent that any material, lease, license, loan, financing
agreement or other contract or agreement to which ONBC or any of its
Subsidiaries is a party requires the consent of or waiver from the other party
thereto as a result of the transactions contemplated by this Agreement, such
consent or waiver shall have been obtained.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1. Termination. This Agreement may be terminated at any time prior
to the Effective Time, either before or after approval by the shareholders of
ONBC:
(a) by the mutual written consent duly authorized by the respective
Boards of Directors of the parties hereto;
(b) by CBSI in writing, if ONBC has, or by ONBC in writing, if CBSI
has, breached (i) any covenant or agreement contained herein or (ii) any
representation or warranty contained herein, and in either case if (x) to the
extent that such breach is curable, such breach has not been cured within 30
days after the date on which written notice thereof is given to the breaching
party and (y) such breach would entitle the non-breaching party not to
consummate the transactions contemplated hereby under Article VI hereof;
(c) by any party hereto in writing, if the applications for prior
approval referred to in Section 5.3 hereof have been finally denied, and the
time period for appeals and requests for reconsideration has expired, or if any
governmental entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the Merger, the
Short-Form Merger or the Bank Merger;
(d) by any party hereto in writing, if the shareholders of ONBC do
not approve this Agreement and the transactions contemplated hereby at the
annual or special meeting duly called for that purpose;
(e) by any party hereto in writing, if the Merger shall not have
been consummated by the close of business on March 1, 2007, unless the failure
to so consummate by such date shall be principally due to the failure of the
party seeking to terminate this Agreement to perform or observe the covenants
and agreements set forth herein;
(f) by CBSI, if (i) the Board of Directors of ONBC shall withdraw,
modify or change its approval or recommendation of this Agreement or the
transactions contemplated thereby in a manner adverse to CBSI, or ONBC shall
have failed to include in the Proxy Statement the recommendation of its Board of
Directors in favor of the approval of this Agreement or the transactions
contemplated thereby; (ii) following its receipt of a Takeover Proposal or the
public announcement of a Takeover Proposal, ONBC shall fail to timely comply
with the covenants contained in Section 5.1; (iii) the Board of Directors of
ONBC shall have
38
recommended to the shareholders of ONBC a Superior Proposal, or ONBC shall have
executed a letter of intent, a definitive agreement or similar document with
respect to a Superior Proposal; (iv) a tender offer or exchange offer for 25% or
more of the outstanding shares of ONBC Common Stock is commenced and ONBC shall
not have sent to its shareholders, within 10 business days after the
commencement of such tender or exchange offer, a statement that the Board of
Directors of ONBC recommends rejection of such tender or exchange offer; (v) a
Takeover Proposal (other than a tender or exchange offer covered by clause (iv)
of this Section 7.1(f)) with respect to ONBC is publicly announced and, upon
CBSI's request, ONBC fails to issue a press release announcing its opposition to
such Takeover Proposal within three (3) business days after such request; or
(vi) the Board of Directors of ONBC shall have resolved to take any action
described in clauses (i) and (iii) of this Section 7.1(f); or
(g) by ONBC, if the Board of Directors of ONBC shall have
recommended to the shareholders of ONBC a Superior Proposal, or ONBC shall have
executed a letter of intent, a definitive agreement or similar document with
respect to a Superior Proposal, in each case in accordance with Section 5.12,
provided that ONBC has complied with all provisions thereof.
7.2. Effect of Termination. In the event this Agreement is
terminated pursuant to Section 7.1 hereof, this Agreement shall become void and
have no effect, except that (i) the provisions relating to confidentiality and
break-up fees and expenses set forth in Sections 5.5 and 7.3 hereof,
respectively, shall survive any such termination and (ii) a termination pursuant
to Section 7.1 shall not relieve the breaching party from liability for any
willful breach of such covenant or agreement or representation or warranty
giving rise to such termination.
7.3. Fees and Expenses.
(a) Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not such
transactions are consummated.
(b) In the event that this Agreement is terminated (i) by CBSI
pursuant to Section 7.1(b) (but only on account of a willful or knowing and
material breach of a representation, warranty or covenant of ONBC) or Section
7.1(f), (ii) by ONBC pursuant to Section 7.1(g), or (iii) by either party
pursuant to Section 7.1(d) after a Takeover Proposal from a third party is
received by ONBC or made public or otherwise communicated to its shareholders
(unless CBSI is then in breach of its representations, warranties or covenants
contained in this Agreement such that conditions set forth in Section 6.2(a) or
(b) would not be satisfied, and ONBC shall have duly given written notice to
that effect prior to such termination), then in each case (without duplication)
ONBC shall pay in immediately available funds to an account designated by CBSI,
no later than three (3) business days after the date of such termination, all
out-of-pocket costs and expenses (including limitation, professional fees of
legal counsel, financial advisors and accountants, and their expenses) actually
incurred by CBSI and its Subsidiaries in connection with the transactions
contemplated by this Agreement, such costs and expenses not to exceed SEVENTY
FIVE THOUSAND DOLLARS ($75,000) in the aggregate. In the event this Agreement is
terminated under the circumstances described in the preceding sentence, and
either (x) ONBC or any of its Subsidiaries shall have consummated a transaction
with a third party with respect to a Takeover Proposal within one year of the
termination of this
39
Agreement, or (y) within such one-year period, any third party Person
consummates a tender or exchange offer for 25% or more of the outstanding ONBC
Common Stock, then, in addition to the amounts required under the preceding
sentence, ONBC shall pay in immediately available funds to an account designated
by CBSI, no later than three (3) business days after the date of the applicable
triggering event, a fee equal to SEVEN HUNDRED FIFTY THOUSAND DOLLARS
($750,000), as liquidated damages and not as a penalty.
7.4. Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants in this Agreement or in any instrument
delivered pursuant hereto shall expire on, and be terminated and extinguished
at, the Effective Time other than covenants that by their terms are to survive
or be performed after the Effective Time; provided, that no such
representations, warranties or covenants shall be deemed to be terminated or
extinguished so as to deprive CBSI, Merger Sub or ONBC (or any director, officer
or controlling person thereof) of any defense in law or equity which otherwise
would be available against the claims of any Person, including, without
limitation, any shareholder or former shareholder of either CBSI, Merger Sub or
ONBC, the aforesaid representations, warranties and covenants being material
inducements to the consummation by CBSI, Merger Sub and ONBC of the transactions
contemplated herein.
7.5. Waiver. Except where not permitted by law, CBSI, Merger Sub or
ONBC, by written instrument signed by an executive officer of such party, may at
any time (whether before or after approval of this Agreement by the shareholders
of ONBC) extend the time for the performance of any of the obligations or other
acts of the other party, and may waive (i) any inaccuracies of such other party
in the representations or warranties contained in this Agreement or any document
delivered pursuant hereto, (ii) compliance with any of the covenants,
undertakings or agreements of such other party, or satisfaction of any of the
conditions precedent to its obligations, contained herein or (iii) the
performance by such other party of any of its obligations set out herein or
therein. No failure or delay on the part of any party hereto in the exercise of
any right hereunder shall impair such right or be construed as a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right.
7.6. Amendment or Supplement. This Agreement may be amended or
supplemented at any time prior to the Effective Time only by mutual agreement of
the parties hereto evidenced by a written instrument signed by such parties;
provided, however, that, after approval of this Agreement by the shareholders of
ONBC, no amendment may be made which by law requires further approval by such
shareholders without obtaining such further approval.
ARTICLE VIII
MISCELLANEOUS
8.1. Entire Agreement. This Agreement and the Transaction Documents
contain the entire agreement between the parties with respect to the
transactions contemplated hereunder and supersede all prior arrangements or
understandings with respect thereto, written or oral, other than documents
referred to herein. The terms and conditions of this Agreement shall
40
inure to the benefit of and be binding upon the parties hereto and thereto and
their respective successors. Except as specifically set forth herein, nothing in
this Agreement, expressed or implied, is intended to confer upon any party,
other than the parties hereto and thereto, and their respective successors, any
rights, remedies, obligations or liabilities.
8.2. No Assignment. No party hereto may assign any of its rights or
obligations under this Agreement to any other Person.
8.3. Alternative Structure. Notwithstanding any provision of this
Agreement to the contrary, CBSI may, with the written consent of ONBC, which
consent shall not be unreasonably withheld or delayed, elect, subject to the
filing of all necessary applications and the receipt of all required regulatory
approvals, to modify the structure of the acquisition of ONBC set forth herein,
provided, that (i) the consideration to be paid to the holders of the ONBC
Common Stock is not thereby changed in kind or reduced in amount as a result of
such modification and (ii) such modification will not materially delay or
jeopardize the consummation of the transactions contemplated by the Agreement.
8.4. Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by facsimile transmission or overnight express or by
registered or certified mail, postage prepaid, addressed as follows:
If to ONBC:
ONB Corporation
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President and Chief Executive Officer
With a required copy (which shall not constitute notice hereunder) to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to CBSI:
Community Bank System, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President and Chief Executive Officer
41
With a required copy (which shall not constitute notice hereunder) to:
Bond, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, PLLC
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
8.5. Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
8.6. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
8.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and entirely to be performed within such jurisdiction, except to
the extent federal law may be applicable.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
42
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have caused this Agreement to be executed by their duly authorized
officers, all as of the day and year first above written.
COMMUNITY BANK SYSTEM, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
SENECA ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
ONB CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: President and Chief Executive Officer
43
