1
Exhibit 2
AGREEMENT AND PLAN OF MERGER
dated as of
December 14, 1998
by and between
SKY FINANCIAL GROUP, INC.
and
FIRST WESTERN BANCORP, INC.
2
TABLE OF CONTENTS
Page
RECITALS ......................................................... 1
ARTICLE I Certain Definitions
1.01 Certain Definitions .................................... 1
ARTICLE II The Merger
2.01 The Parent Merger ...................................... 6
2.02 The Subsidiary Merger .................................. 7
2.03 Effectiveness of Parent Merger ......................... 7
2.04 Effective Date and Effective Time ...................... 7
ARTICLE III Consideration; Exchange Procedures
3.01 Merger Consideration ................................... 8
3.02 Rights as Stockholders, Stock Transfers ................ 8
3.03 Fractional Shares ...................................... 8
3.04 Exchange Procedures .................................... 9
3.05 Anti-Dilution Provisions ............................... 10
3.06 Options ................................................ 10
ARTICLE IV Actions Pending Acquisition
4.01 Forbearances of FWB .................................... 11
4.02 Forbearances of SFG .................................... 13
ARTICLE V Representations and Warranties
5.01 Disclosure Schedules ................................... 14
5.02 Standard ............................................... 14
5.03 Representations and Warranties of FWB .................. 14
5.04 Representations and Warranties of SFG .................. 25
ARTICLE VI Covenants
6.01 Reasonable Best Efforts ................................. 32
6.02 Stockholder Approvals ................................... 33
6.03 Registration Statement .................................. 33
6.04 Press Release ........................................... 34
6.05 Access; Information ..................................... 34
i
3
6.06 Acquisition Proposals.................................... 35
6.07 Affiliate Agreements .................................... 35
6.08 Takeover Laws ........................................... 35
6.09 Certain Policies ........................................ 36
6.10 NASDAQ Listing .......................................... 36
6.11 Regulatory Applications ................................. 36
6.12 Indemnification ......................................... 37
6.13 Opportunity of Employment; Employee Benefits ............ 37
6.14 Notification of Certain Matters ......................... 38
6.15 Dividend Coordination ................................... 38
6.16 SFG Board Representation ................................ 38
6.17 Resulting Bank Board Representation ..................... 38
6.18 Formation of Advisory Board ............................. 38
6.19 Accounting and Tax Treatment ............................ 38
6.20 No Breaches of Representations and Warranties ........... 39
6.21 Consents................................................. 39
6.22 Insurance Coverage ...................................... 39
6.23 Correction of Information ............................... 39
6.24 Confidentiality ......................................... 39
6.25 Supplemental Assurances ................................. 39
6.26 Employment Agreement .................................... 40
ARTICLE VII Conditions to Consummation of the Merger
7.01 Conditions to Each Party's Obligation to Effect the Merger 40
7.02 Conditions to Obligation of FWB.......................... 41
7.03 Conditions to Obligation of SFG.......................... 42
ARTICLE VIII Termination
8.01 Termination.............................................. 43
8.02 Effect of Termination and Abandonment.................... 44
ARTICLE IX Miscellaneous
9.01 Survival................................................. 44
9.02 Waiver; Amendment........................................ 45
9.03 Counterparts............................................. 45
9.04 Governing Law............................................ 45
9.05 Expenses................................................. 45
9.06 Notices.................................................. 45
9.07 Entire Understanding; No Third Party Beneficiaries....... 47
9.08 Interpretation; Effect................................... 47
9.09 Waiver of Jury Trial..................................... 47
ii
4
EXHIBIT A Form of Stock Option Agreement
EXHIBIT B Form of FWB Affiliate Agreement
EXHIBIT C Procedure Regarding Section 8.01(e) of the Agreement
iii
5
AGREEMENT AND PLAN OF MERGER, dated as of December 14, 1998 (this
"Agreement"), is by and between Sky Financial Group, Inc. ("SFG") and First
Western Bancorp, Inc. ("FWB").
RECITALS
A. FWB. FWB is a Pennsylvania corporation, having its principal place
of business in New Castle, Pennsylvania.
B. SFG. SFG is an Ohio corporation, having its principal place of
business in Bowling Green, Ohio.
C. Stock Option Agreement. As an inducement to the willingness of SFG
to continue to pursue the transactions contemplated by this Agreement, FWB
intends to grant to SFG an option pursuant to a stock option agreement, in
substantially the form of Exhibit A.
D. Intentions of the Parties. It is the intention of the parties to
this Agreement that the business combinations contemplated hereby be accounted
for under the "pooling-of-interests" accounting method and that each be treated
as a "reorganization" under Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code").
E. Board Action. The respective Boards of Directors of each of SFG and
FWB have determined that it is in the best interests of their respective
companies and their stockholders to consummate the strategic business
combinations provided for herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 CERTAIN DEFINITIONS. The following terms are used in this
Agreement with the meanings set forth below:
"Acquisition Proposal" means any tender or exchange offer,
proposal for a merger, consolidation or other business combination
involving FWB or any of its Subsidiaries or any proposal or offer to
acquire in any manner a substantial equity interest in, or a
substantial portion of the assets or deposits of, FWB or any of its
Subsidiaries, other than the transactions contemplated by this
Agreement.
"Agreement" means this Agreement, as amended or modified from
time to time in accordance with Section 9.02.
1
6
"Agreement to Merge" has the meaning set forth in Section
2.02.
"Bank" means First Western Bank, National Association, a
wholly-owned subsidiary of FWB.
"BHCA" means the Bank Holding Company Act of 1956, as
amended.
"CBC" means The Citizens Banking Company, an Ohio banking
corporation which is a wholly-owned subsidiary of SFG.
"Code" means the Internal Revenue Code of 1986, as amended.
"Compensation and Benefit Plans" has the meaning set forth in
Section 5.03(m).
"Consultants" has the meaning set forth in Section 5.03(m).
"Costs" has the meaning set forth in Section 6.12(a).
"Directors" has the meaning set forth in Section 5.03(m).
"Disclosure Schedule" has the meaning set forth in Section
5.01.
"Dissenting Shares" means any shares of FWB Common Stock held
by a holder who properly demands and perfects appraisal rights with
respect to such shares in accordance with applicable provisions of the
PBCL.
"DSCP" means the Department of State of the Commonwealth of
Pennsylvania.
"Effective Date" means the date on which the Effective Time
occurs.
"Effective Time" means the effective time of the Merger, as
provided for in Section 2.04.
"Employees" has the meaning set forth in Section 5.03(m).
"Environmental Laws" means all applicable local, state and
federal environmental, health and safety laws and regulations,
including, without limitation, the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation, and
Liability Act, the Clean Water Act, the Federal Clean Air Act, and the
Occupational Safety and Health Act, each as amended, regulations
promulgated thereunder, and state counterparts.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" has the meaning set forth in Section
5.03(m).
2
7
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.04.
"Exchange Fund" has the meaning set forth in Section 3.04.
"Exchange Ratio" has the meaning set forth in Section 3.01.
"FFIEC" means Federal Financial Institutions Examination
Committee.
"FWB" has the meaning set forth in the preamble to this
Agreement.
"FWB Articles" means the Articles of Incorporation of FWB.
"FWB Affiliate" has the meaning set forth in Section 6.07(a).
"FWB Board" means the Board of Directors of FWB.
"FWB By-Laws" means the By-Laws of FWB.
"FWB Common Stock" means the common stock, par value $5.00
per share, of FWB.
"FWB Meeting" has the meaning set forth in Section 6.02.
"FWB Preferred Stock" means the preferred stock, without par
value, of FWB.
"FWB SEC Documents" has the meaning set forth in Section
5.03(g).
"FWB Stock" means FWB Common Stock and FWB Preferred Stock.
"FWB Stock Option" has the meaning set forth in Section 3.06.
"FWB Stock Plans" means the option plans and agreements of
FWB and its Subsidiaries pursuant to which rights to purchase FWB
Common Stock are outstanding immediately prior to the Effective Time
pursuant to the Incentive Stock Option Plan for Key Officers and the
Equity Compensation Plan for Non-Employee Directors of First Western
Bancorp, Inc. and First Western Bank, National Association.
"Governmental Authority" means any court, administrative
agency or commission or other federal, state or local governmental
authority or instrumentality.
"Indemnified Party" has the meaning set forth in Section
6.12(a).
"IRS" has the meaning set forth in Section 5.03(m).
3
8
The term "knowledge" means, with respect to a party hereto,
actual knowledge of any officer of that party with the title of not
less than a senior vice president and that party's in-house counsel,
if any.
"Lien" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Material Adverse Effect" means, with respect to SFG or FWB,
any effect that (i) is material and adverse to the financial position,
results of operations or business of SFG and its Subsidiaries taken as
a whole, or FWB and its Subsidiaries taken as a whole, respectively,
or (ii) would materially impair the ability of either SFG or FWB to
perform its obligations under this Agreement or otherwise materially
threaten or materially impede the consummation of the Merger and the
other transactions contemplated by this Agreement; provided, however,
that Material Adverse Effect shall not be deemed to include the impact
of (a) changes in banking and similar laws of general applicability or
interpretations thereof by courts or governmental authorities or other
changes affecting depository institutions generally, including changes
in general economic conditions and changes in prevailing interest and
deposit rates, (b) any modifications or changes to valuation policies
and practices in connection with the Merger or restructuring charges
taken in connection with the Merger, in each case in accordance with
generally accepted accounting principles, (c) changes resulting from
expenses (such as legal, accounting and investment bankers' fees)
incurred in connection with this Agreement or the transactions
contemplated herein, and (d) actions or omissions of a party which
have been waived in accordance with Section 9.02 hereof.
"Merger" collectively refers to the Parent Merger and the
Subsidiary Merger, as set forth in Section 2.01 and Section 2.02,
respectively.
"Merger Consideration" has the meaning set forth in Section
2.01.
"NASDAQ" means The NASDAQ Stock Market, Inc.'s National
Market System.
"New Certificate" has the meaning set forth in Section 3.04.
"NASD" means The National Association of Securities Dealers.
"OCC" means The Office of the Comptroller of the Currency.
"OGCL" means the Ohio General Corporation Law.
"Old Certificate" has the meaning set forth in Section 3.04.
"OSS " means the Office of the Secretary of State of the
State of Ohio.
"PBGC" means the Pension Benefit Guaranty Corporation.
4
9
"PBCL" means the Pennsylvania Business Corporation Law of
1988, as amended.
"PDB" means the Pennsylvania Department of Banking.
"Parent Merger" has the meaning set forth in Section 2.01.
"Person" means any individual, bank, corporation,
partnership, association, joint-stock company, business trust or
unincorporated organization.
"Pension Plan" has the meaning set forth in Section 5.03(m).
"Previously Disclosed" by a party shall mean information set
forth in its Disclosure Schedule.
"Proxy/Prospectus" has the meaning set forth in Section 6.03.
"Proxy Statement" has the meaning set forth in Section 6.03.
"Registration Statement" has the meaning set forth in Section
6.03.
"Regulatory Authority" has the meaning set forth in Section
5.03(i).
"Replacement Option" has the meaning set forth in Section
3.06.
"Representatives" means, with respect to any Person, such
Person's directors, officers, employees, legal or financial advisors
or any representatives of such legal or financial advisors.
"Resulting Bank" has the meaning set forth in Section 2.02.
"Rights" means, with respect to any Person, securities or
obligations convertible into or exercisable or exchangeable for, or
giving any person any right to subscribe for or acquire, or any
options, calls or commitments relating to, or any stock appreciation
right or other instrument the value of which is determined in whole or
in part by reference to the market price or value of, shares of
capital stock of such person.
"SEC" means the Securities and Exchange Commission.
"SFG" has the meaning set forth in the preamble to this
Agreement.
"SFG Articles" means the Articles of Incorporation of SFG, as
amended.
"SFG Board" means the Board of Directors of SFG.
"SFG Code" means the Code of Regulations of SFG, as amended.
5
10
"SFG Common Stock" means the common stock, without par value,
of SFG.
"SFG Meeting" has the meaning set forth in Section 6.02.
"SFG SEC Documents" has the meaning set forth in Section
5.04(g).
"SFG Stock" means the SFG Common Stock and SFG serial
preferred stock.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"Stock Option Agreement" has the meaning set forth in Recital
C.
"Subsidiary" and "Significant Subsidiary" have the meanings
ascribed to them in Rule 1-02 of Regulation S-X of the SEC.
"Surviving Corporation" has the meaning set forth in Section
2.01.
"Takeover Laws" has the meaning set forth in Section 5.03
(o).
"Tax" and "Taxes" means all federal, state, local or foreign
taxes, charges, fees, levies or other assessments, however
denominated, including, without limitation, all net income, gross
income, gains, gross receipts, sales, use, ad valorem, goods and
services, capital, production, transfer, franchise, windfall profits,
license, withholding, payroll, employment, disability, employer
health, excise, estimated, severance, stamp, occupation, property,
environmental, unemployment or other taxes, custom duties, fees,
assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts
imposed by any taxing authority whether arising before, on or after
the Effective Date.
"Tax Returns" means any return, amended return or other
report (including elections, declarations, disclosures, schedules,
estimates and information returns) required to be filed with respect
to any Tax.
"Treasury Stock" shall mean shares of FWB Stock held by FWB
or any of its Subsidiaries or by SFG or any of its Subsidiaries, in
each case other than in a fiduciary capacity or as a result of debts
previously contracted in good faith.
ARTICLE II
THE MERGER
2.01 THE PARENT MERGER. At the Effective Time, FWB shall merge with
and into SFG (the "Parent Merger"), the separate corporate existence of FWB
shall cease and SFG shall
6
11
survive and continue to exist as an Ohio corporation (SFG, as the surviving
corporation in the Parent Merger, sometimes being referred to herein as the
"Surviving Corporation"). SFG may at any time prior to the Effective Time
change the method of effecting the Merger (including, without limitation, the
provisions of this Article II) if and to the extent it deems such change to be
necessary, appropriate or desirable; provided, however, that no such change
shall (i) alter or change the amount or kind of consideration to be issued to
holders of FWB Stock as provided for in this Agreement (the "Merger
Consideration"), (ii) adversely affect the tax treatment of FWB's stockholders
as a result of receiving the Merger Consideration or the Merger qualifying for
"pooling-of-interests" accounting treatment or (iii) materially impede or delay
consummation of the transactions contemplated by this Agreement.
2.02 THE SUBSIDIARY MERGER. At the time specified by CBC in its
certificate of merger filed with the OSS (which shall not be earlier than the
Effective Time), Bank shall merge with and into CBC (the "Subsidiary Merger")
pursuant to an agreement to merge (the "Agreement to Merge") to be executed by
Bank and CBC and filed with the OSS, the OCC and the PBD, as required. Upon
consummation of the Subsidiary Merger, the separate corporate existence of Bank
shall cease and CBC shall survive and continue to exist as a state banking
corporation (CBC, as the resulting bank in the Subsidiary Merger, sometimes
being referred to herein as the "Resulting Bank"). (The Parent Merger and the
Subsidiary Merger shall sometimes collectively be referred to as the "Merger".)
2.03 EFFECTIVENESS OF PARENT MERGER. Subject to the satisfaction or
waiver of the conditions set forth in Article VII, the Parent Merger shall
become effective upon the occurrence of the filing in the office of the OSS of
a certificate of merger and in the office of the DSCP of articles of merger in
accordance with Section 1701.81 of the OGCL and Section 1928 of the PBCL,
respectively, or such later date and time as may be set forth in such filings.
The Parent Merger shall have the effects prescribed in the OGCL.
2.04 EFFECTIVE DATE AND EFFECTIVE TIME. Effective Date and Effective
Time . Subject to the satisfaction or waiver of the conditions set forth in
Article VII, the parties shall cause the effective date of the Parent Merger
(the "Effective Date") to occur on (i) the third business day to occur after
the last of the conditions set forth in Article VII shall have been satisfied
or waived in accordance with the terms of this Agreement (or, at the election
of SFG, on the last business day of the month in which such third business day
occurs or, if such third business day occurs within the last three business
days of such month, on the last business day of the succeeding month; provided,
no such election shall cause the Effective Date to fall after the date
specified in Section 8.01(c) hereof or after the date or dates on which any
Regulatory Authority approval or any extension thereof expires, or (ii) such
other date to which the parties may agree in writing. The time on the Effective
Date when the Parent Merger shall become effective is referred to as the
"Effective Time."
7
12
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.01 MERGER CONSIDERATION. Subject to the provisions of this
Agreement, at the Effective Time, automatically by virtue of the Parent Merger
and without any action on the part of any Person:
(a) OUTSTANDING FWB COMMON STOCK AND FWB RIGHTS. Each share, excluding
Treasury Stock and Dissenting Shares, of FWB Common Stock issued and
outstanding immediately prior to the Effective Time shall become and be
converted into 1.211 shares of SFG Common Stock (the "Exchange Ratio"). The
Exchange Ratio shall be subject to adjustment as set forth in Section 3.05. One
preferred share purchase right issuable pursuant to the Shareholder Rights
Agreement dated as of July 21, 1998 between SFG and The Citizens Banking
Company or any other purchase right issued in substitution thereof (the "SFG
Rights") shall be issued together with and shall attach to each share of SFG
Common Stock issued pursuant to this Section 3.01(a).
(b) TREASURY SHARES. Each share of FWB Common Stock held as Treasury
Stock immediately prior to the Effective Time shall be canceled and retired at
the Effective Time and no consideration shall be issued in exchange therefor.
(c) OUTSTANDING SFG STOCK. Each share of SFG Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and unaffected by the Parent Merger.
3.02 RIGHTS AS STOCKHOLDERS; STOCK TRANSFERS. At the Effective Time,
holders of FWB Common Stock shall cease to be, and shall have no rights as,
stockholders of FWB, other than to receive any dividend or other distribution
with respect to such FWB Common Stock with a record date occurring prior to the
Effective Time and the consideration provided under this Article III, and
appraisal rights in the case of Dissenting Shares. After the Effective Time,
there shall be no transfers on the stock transfer books of FWB or the Surviving
Corporation of any shares of FWB Stock.
3.03 FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of SFG Common Stock and no certificates or scrip therefor, or
other evidence of ownership thereof, will be issued in the Parent Merger;
instead, SFG shall pay to each holder of FWB Common Stock who would otherwise
be entitled to a fractional share of SFG Common Stock (after taking into
account all Old Certificates delivered by such holder) an amount in cash
(without interest) determined by multiplying such fractional share of SFG
Common Stock to which the holder would be entitled by the last sale price of
SFG Common Stock, as reported by the NASDAQ (as reported in The Wall Street
Journal or, if not reported therein, in another authoritative source), for the
NASDAQ trading day immediately preceding the Effective Date.
8
13
3.04 EXCHANGE PROCEDURES. (a) At or prior to the Effective Time, SFG
shall deposit, or shall cause to be deposited, with Bank of New York (in such
capacity, the "Exchange Agent"), for the benefit of the holders of certificates
formerly representing shares of FWB Common Stock ("Old Certificates"), for
exchange in accordance with this Article III, certificates representing the
shares of SFG Common Stock ("New Certificates") and an estimated amount of cash
(such cash and New Certificates, together with any dividends or distributions
with a record date occurring on or after the Effective Date with respect
thereto (without any interest on any such cash, dividends or distributions),
being hereinafter referred to as the "Exchange Fund") to be paid pursuant to
this Article III in exchange for outstanding shares of FWB Common Stock.
(b) As promptly as practicable after the Effective Date, SFG shall
send or cause to be sent to each former holder of record of shares of FWB
Common Stock immediately prior to the Effective Time transmittal materials for
use in exchanging such stockholder's Old Certificates for the consideration set
forth in this Article III. SFG shall cause the New Certificates into which
shares of a stockholder's FWB Common Stock are converted on the Effective Date
and/or any check in respect of any fractional share interests or dividends or
distributions which such person shall be entitled to receive to be delivered to
such stockholder upon delivery to the Exchange Agent of Old Certificates
representing such shares of FWB Common Stock (or an indemnity affidavit
reasonably satisfactory to SFG and the Exchange Agent, if any of such
certificates are lost, stolen or destroyed) owned by such stockholder. No
interest will be paid on any such cash to be paid in lieu of fractional share
interests or in respect of dividends or distributions which any such person
shall be entitled to receive pursuant to this Article III upon such delivery.
(c) Notwithstanding the foregoing, neither the Exchange Agent, if any,
nor any party hereto shall be liable to any former holder of FWB Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(d) No dividends or other distributions with respect to SFG Common
Stock with a record date occurring on or after the Effective Date shall be paid
to the holder of any unsurrendered Old Certificate representing shares of FWB
Common Stock converted in the Parent Merger into the right to receive shares of
such SFG Common Stock until the holder thereof shall be entitled to receive New
Certificates in exchange therefor in accordance with the procedures set forth
in this Section 3.04. After becoming so entitled in accordance with this
Section 3.04, the record holder thereof also shall be entitled to receive any
such dividends or other distributions, without any interest thereon, which
theretofor had become payable with respect to shares of SFG Common Stock such
holder had the right to receive upon surrender of the Old Certificates.
(e) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of FWB for six months after the Effective Time shall be paid to
SFG. Any stockholders of FWB who have not theretofor complied with this Article
III shall thereafter look only to SFG for payment of the shares of SFG Common
Stock, cash in lieu of any fractional shares and unpaid dividends and
distributions on SFG Common Stock deliverable in respect of each share of FWB
Common Stock such stockholder holds as determined pursuant to this Agreement,
in each case, without any interest thereon.
9
14
3.05 ANTI-DILUTION PROVISIONS. In the event SFG changes (or
establishes a record date for changing) the number of shares of SFG Common
Stock issued and outstanding between the date hereof and the Effective Date as
a result of a stock split, stock dividend, recapitalization, reclassification,
split up, combination, exchange of shares, readjustment or similar transaction
with respect to the outstanding SFG Common Stock and the record date therefor
shall be prior to the Effective Date, the Exchange Ratio shall be
proportionately adjusted.
3.06 OPTIONS. (a) At the Effective Time, each outstanding option to
purchase shares of FWB Common Stock under the FWB Stock Plans (each, a "FWB
Stock Option"), whether vested or unvested, shall be converted into an option
to acquire, on the same terms and conditions as were applicable under such FWB
Stock Option, the number of shares of SFG Common Stock equal to (i) the number
of shares of FWB Common Stock subject to the FWB Stock Option, multiplied by
(ii) the Exchange Ratio (such product rounded to the nearest whole number) (a
"Replacement Option"), at an exercise price per share (rounded to the nearest
whole cent) equal to (y) the aggregate exercise price for the shares of FWB
Common Stock which were purchasable pursuant to such FWB Stock Option divided
by (z) the number of full shares of SFG Common Stock subject to such
Replacement Option in accordance with the foregoing. Notwithstanding the
foregoing, each FWB Stock Option which is intended to be an "incentive stock
option" (as defined in Section 422 of the Code) shall be adjusted in accordance
with the requirements of Section 424 of the Code. At or prior to the Effective
Time, FWB shall use its best efforts, including using its best efforts to
obtain any necessary consents from optionees, with respect to the FWB Stock
Plans to permit the replacement of the outstanding FWB Stock Options by SFG
pursuant to this Section and to permit SFG to assume the FWB Stock Plans. FWB
shall further take all action necessary to amend the FWB Stock Plans to
eliminate automatic grants or awards thereunder following the Effective Time.
At the Effective Time, SFG shall assume the FWB Stock Plans; provided, that
such assumption shall be only in respect of the Replacement Options and that
SFG shall have no obligation with respect to any awards under the FWB Stock
Plans other than the Replacement Options and shall have no obligation to make
any additional grants or awards under such assumed FWB Stock Plans.
(b) At all times after the Effective Time, SFG shall reserve for
issuance such number of shares of SFG Common Stock as necessary so as to permit
the exercise of the Replacement Options in the manner contemplated by this
Agreement and the instruments pursuant to which the corresponding FWB Stock
Options were granted. SFG shall make all filings required under federal and
state securities laws no later than the Effective Time so as to permit the
exercise of such options and the sale of the shares received by the optionee
upon such exercise at and after the Effective Time and SFG shall continue to
make such filings thereafter as may be necessary to permit the continued
exercise of options and subsequent sale of such shares.
10
15
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01 FOREBEARANCES OF FWB. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement and/or disclosed on
the Disclosure Schedule, without the prior written consent of SFG, FWB will
not, and will cause each of its Subsidiaries not to:
(a) Ordinary Course. Conduct the business of FWB and its Subsidiaries
other than in the ordinary and usual course or fail to use reasonable efforts
to preserve intact their business organizations and assets and maintain their
rights, franchises and existing relations with customers, suppliers, employees
and business associates, or voluntarily take any action which, at the time
taken, is reasonably likely to have an adverse affect upon FWB's ability to
perform any of its material obligations under this Agreement.
(b) Capital Stock. Other than pursuant to Rights Previously Disclosed
and outstanding on the date hereof and options for up to 60,000 shares of FWB
Common Stock to be issuable under FWB's Stock Plans, (i) issue, sell or
otherwise permit to become outstanding, or authorize the creation of, any
additional shares of FWB Stock or any Rights, (ii) enter into any agreement
with respect to the foregoing, or (iii) permit any additional shares of FWB
Stock to become subject to new grants of employee or director stock options,
other Rights or similar stock-based employee rights.
(c) Dividends, Etc. (i) Make, declare, pay or set aside for payment
any dividend, other than (A) quarterly cash dividends on FWB Stock in an amount
not to exceed the per share amount declared and paid in its most recent
quarterly cash dividend, with record and payment dates as indicated in Section
6.15 hereof, and (B) dividends from wholly owned Subsidiaries to FWB, or (ii)
directly or indirectly adjust, split, combine, redeem, reclassify, purchase or
otherwise acquire, any shares of its capital stock.
(d) Compensation; Employment Agreements; Etc. Enter into or amend or
renew any employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of FWB or its Subsidiaries
(other than the normal extension of the four existing change of control
agreements with senior management), or grant any salary or wage increase or
increase any employee benefit, (including incentive or bonus payments) except
(i) for normal individual increases in compensation to employees in the
ordinary course of business consistent with past practice, (ii) for other
changes that are required by applicable law, (iii) to satisfy Previously
Disclosed contractual obligations existing as of the date hereof, or (iv) for
grants of awards to newly hired employees consistent with past practice. FWB
shall have available, to facilitate retention of FWB employees, a bonus pool of
up to $1 million for key employees of FWB for use or commitment prior to the
Closing Date, it being understood and agreed that the designation of such
employees and the amount of the bonus payable to each of them shall be subject
to the prior reasonable approval of SFG.
11
16
(e) Benefit Plans. Enter into, establish, adopt or amend ((i) except
for a proposed amendment regarding early retirement under the existing defined
contribution plan which in any event will not materially increase FWB's funding
obligation thereunder, (ii) as may be required by applicable law, (iii) to
satisfy Previously Disclosed contractual obligations existing as of the date
hereof or (iv) the regular annual renewal of insurance contracts) any pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement (or
similar arrangement) related thereto, in respect of any director, officer or
employee of FWB or its Subsidiaries, or take any action to accelerate the
vesting or exercisability of stock options, restricted stock or other
compensation or benefits payable thereunder.
(f) Dispositions. Sell, transfer, mortgage, encumber or otherwise
dispose of or discontinue any of its assets, deposits, business or properties
except in the ordinary course of business.
(g) Acquisitions. Acquire (other than by way of foreclosures or
acquisitions of control in a bona fide fiduciary capacity or in satisfaction of
debts previously contracted in good faith, in each case in the ordinary and
usual course of business consistent with past practice) all or any portion of,
the assets, business, deposits or properties of any other entity.
(h) Governing Documents. Amend the FWB Articles, FWB By-Laws or the
articles of incorporation or by-laws (or similar governing documents) of any of
FWB's Subsidiaries, except for immaterial by-law amendments Previously
Disclosed to SFG.
(i) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be required by
generally accepted accounting principles.
(j) Contracts. Except in the ordinary course of business consistent
with past practice, enter into or terminate any material contract (as defined
in Section 5.03(k)) or amend or modify in any material respect any of its
existing material contracts, except for a proposed contract with ▇▇▇▇▇▇▇▇ &
Islay for trust accounting services.
(k) Claims. Except in the ordinary course of business consistent with
past practice, settle any claim, action or proceeding, except for any claim,
action or proceeding which does not involve precedent for other material
claims, actions or proceedings and which involve solely money damages in an
amount, individually or in the aggregate for all such settlements, that is not
material to FWB and its Subsidiaries, taken as a whole.
(l) Adverse Actions. (a) Take any action while knowing that such
action would, or is reasonably likely to, prevent or impede the Merger from
qualifying (i) for "pooling-of-interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368(a) of the Code; or (b)
knowingly take any action that is intended or is reasonably likely to result in
(i) any of its representations and warranties set forth in this Agreement being
or becoming untrue in any material respect at any time at or prior to the
Effective Time, (ii) any of the conditions to the
12
17
Merger set forth in Article VII not being satisfied or (iii) a material
violation of any provision of this Agreement except, in each case, as may be
required by applicable law or regulation.
(m) Risk Management. Except pursuant to applicable law or regulation,
(i) implement or adopt any material change in its interest rate risk management
and other risk management policies, procedures or practices; (ii) fail to
follow its existing policies or practices with respect to managing its exposure
to interest rate and other risk; or (iii) fail to use commercially reasonable
means to avoid any material increase in its aggregate exposure to interest rate
risk.
(n) Indebtedness. Incur any indebtedness for borrowed money other than
in the ordinary course of business.
(o) Commitments. Agree or commit to do any of the foregoing.
4.02 FORBEARANCES OF SFG. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement, without the prior
written consent of FWB, SFG will not, and will cause each of its Subsidiaries
not to:
(a) Ordinary Course. Conduct the business of SFG and its Subsidiaries
other than in the ordinary and usual course or fail to use reasonable efforts
to preserve intact their business organizations and assets and maintain their
rights, franchises and existing relations with customers, suppliers, employees
and business associates, or voluntarily take any action which, at the time
taken, is reasonably likely to have an adverse affect upon SFG's ability to
perform any of its material obligations under this Agreement.
(b) Preservation. Fail to use reasonable efforts to preserve intact in
any material respect their business organizations and assets and maintain their
rights, franchises and existing relations with customers, suppliers, employees
and business associates.
(c) Extraordinary Dividends. Make, declare, pay or set aside for
payment any dividend other than normal quarterly dividends in accordance with
past practice.
(d) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be required by
generally accepted accounting principles.
(e) Claims. Except in the ordinary course of business consistent with
past practice, settle any claim, action or proceeding, except for any claim,
action or proceeding which does not involve precedent for other material
claims, actions or proceedings and which involve solely money damages in an
amount, individually or in the aggregate for all such settlements, that is not
material to SFG and its Subsidiaries, taken as a whole.
(f) Adverse Actions. (a) Take any action while knowing that such
action would, or is reasonably likely to, prevent or impede the Merger from
qualifying (i) for "pooling-of-interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368(a) of the
13
18
Code; or (b) knowingly take any action that is intended or is reasonably likely
to result in (i) any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time at or
prior to the Effective Time, (ii) any of the conditions to the Merger set forth
in Article VII not being satisfied or (iii) a material violation of any
provision of this Agreement except, in each case, as may be required by
applicable law or regulation; provided, however, that nothing contained herein
shall limit the ability of SFG to exercise its rights under the Stock Option
Agreement.
(g) Risk Management. Except pursuant to applicable law or regulation,
(i) fail to follow its existing policies or practices with respect to managing
its exposure to interest rate and other risk, or (ii) fail to use commercially
reasonable means to avoid any material increase in its aggregate exposure to
interest rate risk.
(h) Commitments. Agree or commit to do any of the foregoing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 DISCLOSURE SCHEDULES. On or prior to the date hereof, SFG has
delivered to FWB a schedule and FWB has delivered to SFG a schedule
(respectively, its "Disclosure Schedule") setting forth, among other things,
items, the disclosure of which are necessary or appropriate either in response
to an express disclosure requirement contained in a provision hereof or as an
exception to one or more representations or warranties contained in Section
5.03 or 5.04 or to one or more of its respective covenants contained in Article
IV and Article VI; provided, that (a) no such item is required to be set forth
in a Disclosure Schedule as an exception to a representation or warranty if its
absence would not be reasonably likely to result in the related representation
or warranty being deemed untrue or incorrect under the standard established by
Section 5.02, and (b) the mere inclusion of an item in a Disclosure Schedule as
an exception to a representation or warranty shall not be deemed an admission
by a party that such item represents a material exception or fact, event or
circumstance or that such item is reasonably likely to have or result in a
Material Adverse Effect on the party making the representation. FWB's
representations, warranties and covenants contained in this Agreement shall not
be deemed to be untrue, incorrect or to have been breached as a result of
effects on FWB arising solely from actions taken in compliance with a written
request of SFG.
5.02 STANDARD. No representation or warranty of FWB or SFG contained
in Section 5.03 or 5.04 shall be deemed untrue or incorrect, and no party
hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, circumstance or event, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
contained in Section 5.03 or 5.04 has had, or is reasonably likely to have, a
Material Adverse Effect.
14
19
5.03 REPRESENTATIONS AND WARRANTIES OF FWB. Subject to Sections 5.01
and 5.02 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, FWB hereby represents
and warrants to SFG:
(a) ORGANIZATION, STANDING AND AUTHORITY. FWB is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and any foreign jurisdictions where its ownership
or leasing of property or assets or the conduct of its business requires it to
be so qualified. FWB is registered as a bank holding company under the BHCA.
Bank is a national banking association duly organized, validly existing and in
good standing under the laws of the United States of America. Bank is duly
qualified to do business and is in good standing in the Commonwealth of
Pennsylvania and any foreign jurisdictions where its ownership or leasing of
property or assets or the conduct of its business requires it to be so
qualified.
(b) CAPITAL STRUCTURE OF FWB. As of November 30, 1998, the authorized
capital stock of FWB consisted solely of 20,000,000 shares of FWB Common Stock,
of which 11,863,813 shares were outstanding as of November 30, 1998 (of which
685,273 shares are held as Treasury Stock and 42,858 shares are unallocated
shares held in FWB's Employee Stock Ownership Plan ("ESOP")) and 4,000,000
shares of FWB Preferred Stock, of which none were outstanding as of November
30, 1998. The outstanding shares of FWB Common Stock have been duly authorized,
are validly issued and outstanding, fully paid and nonassessable, and are not
subject to any preemptive rights (and were not issued in violation of any
preemptive rights). As of November 30, 1998, except as Previously Disclosed in
its Disclosure Schedule, (i) there were no shares of FWB Common Stock
authorized and reserved for issuance, (ii) FWB did not have any Rights issued
or outstanding with respect to FWB Common Stock, and (iii) FWB did not have any
commitment to authorize, issue or sell any FWB Common Stock or Rights, except
pursuant to this Agreement and the Stock Option Agreement. The number of shares
of FWB Common Stock which were issuable and reserved for issuance upon exercise
of FWB Stock Options as of November 30, 1998 were Previously Disclosed in FWB's
Disclosure Schedule.
(c) SUBSIDIARIES. (i)(A) FWB has Previously Disclosed a list of all of
its Subsidiaries together with the jurisdiction of organization of each such
Subsidiary, (B) except as Previously Disclosed, it owns, directly or
indirectly, all the issued and outstanding equity securities of each of its
Subsidiaries, (C) except as Previously Disclosed, no equity securities of any
of its Subsidiaries are or may become required to be issued (other than to it
or its wholly-owned Subsidiaries) by reason of any Right or otherwise, (D)
except as Previously Disclosed, there are no contracts, commitments,
understandings or arrangements by which any of such Subsidiaries is or may be
bound to sell or otherwise transfer any equity securities of any such
Subsidiaries (other than to it or its wholly-owned Subsidiaries), (E) except as
Previously Disclosed, there are no contracts, commitments, understandings, or
arrangements relating to its rights to vote or to dispose of such securities
and (F) except as Previously Disclosed, all the equity securities of each
Subsidiary held by FWB or its Subsidiaries are fully paid and nonassessable
(except pursuant to 12 U.S.C. Section 55) and are owned by FWB or its
Subsidiaries free and clear of any Liens.
15
20
(ii) FWB does not own beneficially, directly or indirectly,
any equity securities or similar interests of any Person, or any interest in a
partnership or joint venture of any kind, other than its Subsidiaries.
(iii) Each of FWB's Subsidiaries has been duly organized and
is validly existing in good standing under the laws of the jurisdiction of its
organization, and is duly qualified to do business and in good standing in the
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified.
(d) CORPORATE POWER; AUTHORIZED AND EFFECTIVE AGREEMENT. Each of FWB
and its Subsidiaries has full corporate power and authority to carry on its
business as it is now being conducted and to own all its properties and assets;
FWB has the corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the Stock Option Agreement; and Bank has
the corporate power and authority to consummate the Subsidiary Merger and the
Agreement to Merge in accordance with the terms of this Agreement.
(e) CORPORATE AUTHORITY. Subject to receipt of the requisite adoption
of this Agreement by the holders of a majority of the outstanding shares of FWB
Common Stock entitled to vote thereon (which is the only stockholder vote
required thereon), this Agreement, the Stock Option Agreement and the
transactions contemplated hereby and thereby have been authorized by all
necessary corporate action of FWB and the FWB Board prior to the date hereof.
The Agreement to Merge, when executed by Bank, shall have been approved by the
Board of Directors of Bank and by the FWB Board, as the sole stockholder of
Bank. This Agreement is a valid and legally binding obligation of FWB,
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles). The FWB Board has
received the written opinion of Sandler ▇'▇▇▇▇▇ & Partners, L.P. to the effect
that as of the date hereof the consideration to be received by the holders of
FWB Common Stock in the Parent Merger is fair to the holders of FWB Common
Stock from a financial point of view.
(f) REGULATORY FILINGS; NO DEFAULTS. (i) No consents or approvals of,
or filings or registrations with, any Governmental Authority or with any third
party are required to be made or obtained by FWB or any of its Subsidiaries in
connection with the execution, delivery or performance by FWB of this Agreement
or the Stock Option Agreement or to consummate the Merger except for (A)
filings of applications, notices and the Agreement to Merge, as applicable,
with federal and state banking authorities, (B) filings with the SEC and state
securities authorities, and (C) the filing of the certificate of merger with
the OSS and the articles of merger with the DSCP pursuant to the OGCL and the
PBCL. As of the date hereof, FWB is not aware of any reason why the approvals
set forth in Section 7.01(b) will not be received without the imposition of a
condition, restriction or requirement of the type described in Section 7.01(b).
(ii) Subject to receipt of the regulatory and stockholder
approvals referred to above and expiration of related regulatory waiting
periods, and required filings under federal and
16
21
state securities laws, the execution, delivery and performance of this
Agreement and the Stock Option Agreement and the consummation of the
transactions contemplated hereby and thereby do not and will not (A) constitute
a breach or violation of, or a default under, or give rise to any Lien, any
acceleration of remedies or any right of termination under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of FWB or of any of its Subsidiaries or to
which FWB or any of its Subsidiaries or properties is subject or bound, (B)
constitute a breach or violation of, or a default under, the FWB Articles or
the FWB By-Laws, or (C) require any consent or approval under any such law,
rule, regulation, judgment, decree, order, governmental permit or license,
agreement, indenture or instrument.
(g) FINANCIAL REPORTS AND SEC DOCUMENTS; MATERIAL ADVERSE EFFECT. (i)
FWB's Annual Reports on Form 10-K for the fiscal years ended December 31, 1995,
1996 and 1997 and all other reports, registration statements, definitive proxy
statements or information statements filed or to be filed by it or any of its
Subsidiaries subsequent to December 31, 1997 under the Securities Act, or under
Section 13, 14 or 15(d) of the Exchange Act, in the form filed or to be filed
(collectively, "FWB SEC Documents") with the SEC, as of the date filed, (A)
complied or will comply in all material respects with the applicable
requirements under the Securities Act or the Exchange Act, as the case may be,
and (B) did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading; and each of the balance sheets or statements of
condition contained in or incorporated by reference into any such SEC Document
(including the related notes and schedules thereto) fairly presents, or will
fairly present, the financial position of FWB and its Subsidiaries as of its
date, and each of the statements of income and changes in stockholders' equity
and cash flows or equivalent statements in such FWB SEC Documents (including
any related notes and schedules thereto) fairly presents, or will fairly
present, the results of operations, changes in stockholders' equity and cash
flows, as the case may be, of FWB and its Subsidiaries for the periods to which
they relate, in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except in each
case as may be noted therein, subject to normal year-end audit adjustments and
the absence of footnotes in the case of unaudited statements.
(ii) Since December 31, 1997, FWB and its Subsidiaries have
not incurred any material liability not disclosed in FWB's SEC Documents, other
than in the ordinary course of business consistent with past practice.
(iii) Since December 31, 1997, except as disclosed in the FWB
SEC Documents, (A) FWB and its Subsidiaries have conducted their respective
businesses in the ordinary and usual course consistent with past practice
(excluding matters related to this Agreement and the transactions contemplated
hereby) and (B) no event has occurred or circumstance arisen that, individually
or taken together with all other facts, circumstances and events (described in
any paragraph of Section 5.03 or otherwise), is reasonably likely to have a
Material Adverse Effect with respect to FWB.
17
22
(h) LITIGATION. No litigation, claim or other proceeding before any
court or governmental agency is pending against FWB or any of its Subsidiaries
and, to FWB's knowledge, no such litigation, claim or other proceeding has been
threatened.
(i) REGULATORY MATTERS.
(i) Neither FWB nor any of its Subsidiaries or properties is
a party to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or similar
submission to, or extraordinary supervisory letter from, any federal or state
governmental agency or authority charged with the supervision or regulation of
financial institutions (or their holding companies) or issuers of securities or
engaged in the insurance of deposits (including, without limitation, the Office
of the Comptroller of the Currency, the Federal Reserve System and the FDIC) or
the supervision or regulation of it or any of its Subsidiaries (collectively,
the "Regulatory Authorities").
(ii) Neither it nor any of its Subsidiaries has been advised
by any Regulatory Authority that such Regulatory Authority is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of understanding,
commitment letter, supervisory letter or similar submission.
(j) COMPLIANCE WITH LAWS. Each of FWB and its Subsidiaries:
(i) is in compliance with all applicable federal, state,
local and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees conducting such
businesses, including, without limitation, the Equal Credit Opportunity Act,
the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage
Disclosure Act and all other applicable fair lending laws and other laws
relating to discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations with,
all Governmental Authorities that are required in order to permit them to own
or lease their properties and to conduct their businesses as presently
conducted; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to FWB's knowledge, no suspension
or cancellation of any of them is threatened; and
(iii) has received, since December 31, 1997, no notification
or communication from any Governmental Authority (A) asserting that FWB or any
of its Subsidiaries is not in compliance with any of the statutes, regulations,
or ordinances which such Governmental Authority enforces or (B) threatening to
revoke any license, franchise, permit, or governmental authorization (nor, to
FWB's knowledge, do any grounds for any of the foregoing exist).
(k) MATERIAL CONTRACTS; DEFAULTS. Except for this Agreement, the Stock
Option Agreement, those agreements and other documents filed as exhibits to the
FWB SEC Documents, neither it nor any of its Subsidiaries is a party to, bound
by or subject to any
18
23
agreement, contract, arrangement, commitment or understanding (whether written
or oral) (i) that is a "material contract" within the meaning of Item
601(b)(10) of the SEC's Regulation S-K or (ii) that restricts or limits in any
way the conduct of business by it or any of its Subsidiaries (including without
limitation a non-compete or similar provision). Neither it nor any of its
Subsidiaries is in default under any contract, agreement, commitment,
arrangement, lease, insurance policy or other instrument to which it is a
party, by which its respective assets, business, or operations may be bound or
affected in any way, or under which it or its respective assets, business, or
operations receive benefits, and there has not occurred any event that, with
the lapse of time or the giving of notice or both, would constitute such a
default.
(l) NO BROKERS. No action has been taken by FWB that would give rise
to any valid claim against any party hereto for a brokerage commission,
finder's fee or other like payment with respect to the transactions
contemplated by this Agreement, except for a fee to be paid to Sandler ▇'▇▇▇▇▇
& Partners, L.P.
(m) EMPLOYEE BENEFIT PLANS. (i) Section 5.03(m)(i) of FWB's Disclosure
Schedule contains a complete and accurate list of all existing bonus,
incentive, deferred compensation, pension, retirement, profit-sharing, thrift,
savings, employee stock ownership, stock bonus, stock purchase, restricted
stock, stock option, severance, welfare and fringe benefit plans, employment or
severance agreements and all similar practices, policies and arrangements
maintained or contributed to by FWB or any of its Subsidiaries and in which any
employee or former employee (the "Employees"), consultant or former consultant
(the "Consultants") or director or former director (the "Directors") of FWB or
any of its Subsidiaries participates or to which any such Employees,
Consultants or Directors are a party (the "Compensation and Benefit Plans").
Neither FWB nor any of its Subsidiaries has any commitment to create any
additional Compensation and Benefit Plan or to modify or change any existing
Compensation and Benefit Plan, except as otherwise contemplated by Section
4.01(e) of this Agreement.
(ii) Each Compensation and Benefit Plan has been operated and
administered in all material respects in accordance with its terms and with
applicable law, including, but not limited to, ERISA, the Code, the Securities
Act, the Exchange Act, the Age Discrimination in Employment Act, or any
regulations or rules promulgated thereunder, and all filings, disclosures and
notices required by ERISA, the Code, the Securities Act, the Exchange Act, the
Age Discrimination in Employment Act and any other applicable law have been
timely made. Each Compensation and Benefit Plan which is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA (a "Pension Plan")
and which is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter (including a determination that the
related trust under such Compensation and Benefit Plan is exempt from tax under
Section 501(a) of the Code) from the Internal Revenue Service ("IRS"), and FWB
is not aware of any circumstances likely to result in revocation of any such
favorable determination letter. There is no material pending or, to the
knowledge of FWB, threatened legal action, suit or claim relating to the
Compensation and Benefit Plans other than routine claims for benefits
thereunder. Neither FWB nor any of its Subsidiaries has engaged in a
transaction, or omitted to take any action, with respect to any Compensation
and Benefit Plan that would reasonably be expected to subject FWB or any of its
Subsidiaries to a tax or penalty imposed by either Section
19
24
4975 of the Code or Section 502 of ERISA, assuming for purposes of Section 4975
of the Code that the taxable period of any such transaction expired as of the
date hereof.
(iii) No liability (other than for payment of premiums to the
PBGC which have been made or will be made on a timely basis) under Title IV of
ERISA has been or is expected to be incurred by FWB or any of its Subsidiaries
with respect to any ongoing, frozen or terminated "single-employer plan,"
within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or any single-employer plan of any entity (an "ERISA
Affiliate") which is considered one employer with FWB under Section 4001(a)(14)
of ERISA or Section 414(b) or (c) of the Code (an "ERISA Affiliate Plan"). None
of FWB, any of its Subsidiaries or any ERISA Affiliate has contributed, or has
been obligated to contribute, to a multiemployer plan under Subtitle E of Title
IV of ERISA at any time since September 26, 1980. No notice of a "reportable
event", within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived, has been required to be filed for
any Compensation and Benefit Plan or by any ERISA Affiliate Plan within the
12-month period ending on the date hereof, and no such notice will be required
to be filed as a result of the transactions contemplated by this Agreement. The
PBGC has not instituted proceedings to terminate any Pension Plan or ERISA
Affiliate Plan and, to FWB's knowledge, no condition exists that presents a
material risk that such proceedings will be instituted. To the knowledge of
FWB, there is no pending investigation or enforcement action by the PBGC, the
Department of Labor (the "DOL") or IRS or any other governmental agency with
respect to any Compensation and Benefit Plan. Under each Pension Plan and ERISA
Affiliate Plan, as of the date of the most recent actuarial valuation performed
prior to the date of this Agreement, the actuarially determined present value
of all "benefit liabilities", within the meaning of Section 4001(a)(16) of
ERISA (as determined on the basis of the actuarial assumptions contained in
such actuarial valuation of such Pension Plan or ERISA Affiliate Plan), did not
exceed the then current value of the assets of such Pension Plan or ERISA
Affiliate Plan and since such date there has been neither an adverse change in
the financial condition of such Pension Plan or ERISA Affiliate Plan nor any
amendment or other change to such Pension Plan or ERISA Affiliate Plan that
would increase the amount of benefits thereunder which reasonably could be
expected to change such result.
(iv) All contributions required to be made under the terms of
any Compensation and Benefit Plan or ERISA Affiliate Plan or any employee
benefit arrangements under any collective bargaining agreement to which FWB or
any of its Subsidiaries is a party have been timely made or have been reflected
on FWB's financial statements. Neither any Pension Plan nor any ERISA Affiliate
Plan has an "accumulated funding deficiency" (whether or not waived) within the
meaning of Section 412 of the Code or Section 302 of ERISA and all required
payments to the PBGC with respect to each Pension Plan or ERISA Affiliate Plan
have been made on or before their due dates. None of FWB, any of its
Subsidiaries or any ERISA Affiliate (x) has provided, or would reasonably be
expected to be required to provide, security to any Pension Plan or to any
ERISA Affiliate Plan pursuant to Section 401(a)(29) of the Code, and (y) has
taken any action, or omitted to take any action, that has resulted, or would
reasonably be expected to result, in the imposition of a lien under Section
412(n) of the Code or pursuant to ERISA.
20
25
(v) Neither FWB nor any of its Subsidiaries has any
obligations to provide retiree health and life insurance or other retiree death
benefits under any Compensation and Benefit Plan, other than benefits mandated
by Section 4980B of the Code. There has been no communication to Employees by
FWB or any of its Subsidiaries that would reasonably be expected to promise or
guarantee such Employees retiree health or life insurance or other retiree
death benefits on a permanent basis.
(vi) FWB and its Subsidiaries do not maintain any
Compensation and Benefit Plans covering foreign Employees.
(vii) With respect to each Compensation and Benefit Plan, if
applicable, FWB has provided or made available to SFG, true and complete copies
of existing: (A) Compensation and Benefit Plan documents and amendments
thereto; (B) trust instruments and insurance contracts; (C) two most recent
Forms 5500 filed with the IRS; (D) most recent actuarial report and financial
statement; (E) the most recent summary plan description; (F) forms filed with
the PBGC within the past year (other than for premium payments); (G) most
recent determination letter issued by the IRS; (H) any Form 5310 or Form 5330
filed within the past year with the IRS; and (I) most recent nondiscrimination
tests performed under ERISA and the Code (including 401(k) and 401(m) tests).
(viii) Except as disclosed on Section 5.03(m)(viii) of FWB's
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement would not, directly or indirectly (including, without limitation, as
a result of any termination of employment prior to or following the Effective
Time) reasonably be expected to (A) entitle any Employee, Consultant or
Director to any payment (including severance pay or similar compensation) or
any increase in compensation, (B) result in the vesting or acceleration of any
benefits under any Compensation and Benefit Plan or (C) result in any material
increase in benefits payable under any Compensation and Benefit Plan.
(ix) Except as disclosed on Section 5.03(m)(ix) of FWB's
Disclosure Schedule, neither FWB nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which would not
reasonably be expected to be deductible as a result of the limitations under
Section 162(m) of the Code and the regulations issued thereunder.
(x) Except as disclosed on Section 5.03(m)(x) of FWB's
Disclosure Schedule, as a result, directly or indirectly, of the transactions
contemplated by this Agreement (including, without limitation, as a result of
any termination of employment prior to or following the Effective Time), none
of SFG, FWB or the Surviving Corporation, or any of their respective
Subsidiaries will be obligated to make a payment that would be characterized as
an "excess parachute payment" to an individual who is a "disqualified
individual" (as such terms are defined in Section 280G of the Code) of FWB on a
consolidated basis, without regard to whether such payment is reasonable
compensation for personal services performed or to be performed in the future.
21
26
(n) LABOR MATTERS. Neither FWB nor any of its Subsidiaries is a party
to or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is FWB
or any of its Subsidiaries the subject of a proceeding asserting that it or any
such Subsidiary has committed an unfair labor practice (within the meaning of
the National Labor Relations Act) or seeking to compel FWB or any such
Subsidiary to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other labor dispute involving it or any
of its Subsidiaries pending or, to FWB's knowledge, threatened, nor is FWB
aware of any activity involving its or any of its Subsidiaries' employees
seeking to certify a collective bargaining unit or engaging in other
organizational activity.
(o) TAKEOVER LAWS. FWB has taken all action required to be taken by it
in order to exempt this Agreement, the Stock Option Agreement and the
transactions contemplated hereby and thereby from, and this Agreement, the
Stock Option Agreement and the transactions contemplated hereby and thereby are
exempt from, the requirements of any "moratorium", "control share", "fair
price", "affiliate transaction", "business combination" or other antitakeover
laws and regulations of any state (collectively, "Takeover Laws") applicable to
it, including, without limitation, the Commonwealth of Pennsylvania, and
including, without limitation, Subchapters D (Section 2538), E, F, G, H, I and
J of Chapter 25 of the PBCL.
(p) ENVIRONMENTAL MATTERS. To FWB's knowledge, neither the conduct nor
operation of FWB or its Subsidiaries nor any condition of any property
presently or previously owned, leased or operated by any of them (including,
without limitation, in a fiduciary or agency capacity), or on which any of them
holds a Lien, violates or violated Environmental Laws and to FWB's knowledge,
no condition has existed or event has occurred with respect to any of them or
any such property that, with notice or the passage of time, or both, is
reasonably likely to result in liability under Environmental Laws. To FWB's
knowledge, neither FWB nor any of its Subsidiaries has received any notice from
any person or entity that FWB or its Subsidiaries or the operation or condition
of any property ever owned, leased, operated, or held as collateral or in a
fiduciary capacity by any of them are or were in violation of or otherwise are
alleged to have liability under any Environmental Law, including, but not
limited to, responsibility (or potential responsibility) for the cleanup or
other remediation of any pollutants, contaminants, or hazardous or toxic
wastes, substances or materials at, on, beneath, or originating from any such
property.
(q) TAX MATTERS. (i) All Tax Returns that are required to be filed by
or with respect to FWB and its Subsidiaries have been duly filed, (ii) all
Taxes shown to be due on the Tax Returns referred to in clause (i) have been
paid in full, (iii) the Tax Returns referred to in clause (i) have been
examined by the Internal Revenue Service or the appropriate state, local or
foreign taxing authority or the period for assessment of the Taxes in respect
of which such Tax Returns were required to be filed has expired, (iv) all
deficiencies asserted or assessments made as a result of such examinations have
been paid in full, (v) no issues that have been raised by the relevant taxing
authority in connection with the examination of any of the Tax Returns referred
to in clause (i) are currently pending, and (vi) no waivers of statutes of
limitation have been given by or requested with respect to any Taxes of FWB or
its Subsidiaries. FWB has made or
22
27
will make available to SFG true and correct copies of the United States federal
income Tax Returns filed by FWB and its Subsidiaries for each of the three most
recent fiscal years ended on or before December 31, 1997. Neither FWB nor any
of its Subsidiaries has any liability with respect to income, franchise or
similar Taxes that accrued on or before the end of the most recent period
covered by FWB's SEC Documents filed prior to the date hereof in excess of the
amounts accrued with respect thereto that are reflected in the financial
statements included in FWB's SEC Documents filed on or prior to the date
hereof. As of the date hereof, neither FWB nor any of its Subsidiaries has any
reason to believe that any conditions exist that might prevent or impede the
Parent Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
(ii) No Tax is required to be withheld pursuant to Section
1445 of the Code as a result of the transfer contemplated by this Agreement.
(iii) FWB and its Subsidiaries will not be liable for any
taxes as a result of any Covered Transaction.
(r) RISK MANAGEMENT INSTRUMENTS. All material interest rate swaps,
caps, floors, option agreements, futures and forward contracts and other
similar risk management arrangements, whether entered into for FWB's own
account, or for the account of one or more of FWB's Subsidiaries or their
customers (all of which are listed on FWB's Disclosure Schedule), were entered
into (i) in accordance with prudent business practices and all applicable laws,
rules, regulations and regulatory policies and (ii) with counterparties
believed to be financially responsible at the time; and each of them
constitutes the valid and legally binding obligation of FWB or one of its
Subsidiaries, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles), and is in full force and effect. Neither FWB nor its Subsidiaries,
nor to FWB's knowledge any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement.
(s) BOOKS AND RECORDS. The books and records of FWB and its
Subsidiaries have been fully, properly and accurately maintained in all
material respects, have been maintained in accordance with sound business
practices and the requirements of Section 13(b)(2) of the Securities Exchange
Act of 1934, as amended, and there are no material inaccuracies or
discrepancies of any kind contained or reflected therein and they fairly
reflect the substance of events and transactions included therein.
(t) INSURANCE. FWB's Disclosure Schedule sets forth all of the
insurance policies, binders, or bonds maintained by FWB or its Subsidiaries.
FWB and its Subsidiaries are insured with reputable insurers against such risks
and in such amounts as the management of FWB reasonably has determined to be
prudent in accordance with industry practices. All such insurance policies are
in full force and effect; FWB and its Subsidiaries are not in material default
thereunder; and all claims thereunder have been filed in due and timely
fashion.
23
28
(u) ACCOUNTING TREATMENT. As of the date hereof, it is aware of no
reason why the Merger will fail to qualify for "pooling-of-interests"
accounting treatment.
(v) DISCLOSURE. The representations and warranties contained in this
Section 5.03 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 5.03 not misleading.
(w) YEAR 2000. Neither FWB nor any of its Subsidiaries has received,
or has reason to believe that it will receive, a rating of less than
"satisfactory" on any Office of the Comptroller of the Currency or other
Regulatory Authority Year 2000 Report of Examination. FWB has disclosed to SFG
a complete and accurate copy of its plan, including an estimate of the
anticipated associated costs, for addressing the issues set forth in the
statements of the FFIEC dated May 5, 1997, entitled "Year 2000 Project
Management Awareness," and December 17, 1997, entitled "Safety and Soundness
Guidelines Concerning the Year 2000 Business Risk," as such issues affect it
and its Subsidiaries and such plan is in material compliance with the schedule
set for in the FFIEC statements.
(x) MATERIAL ADVERSE CHANGE. FWB has not, on a consolidated basis,
suffered a change in its business, financial condition or results of operations
since December 31, 1997, except as disclosed in the FWB SEC Documents, that has
had a Material Adverse Effect on FWB.
(y) ABSENCE OF UNDISCLOSED LIABILITIES. Neither FWB nor any of its
Subsidiaries has any liability (contingent or otherwise) that is material to
FWB on a consolidated basis, or that, when combined with all liabilities as to
similar matters would be material to FWB on a consolidated basis, except as
disclosed in the FWB Financial Statements.
(z) PROPERTIES. FWB and its Subsidiaries have good and marketable
title, free and clear of all liens, encumbrances, charges, defaults or
equitable interests to all of the properties and assets, real and personal,
reflected on the FWB Financial Statements as being owned by FWB as of December
31, 1997 or acquired after such date, except (i) statutory liens for amounts
not yet due and payable, (ii) pledges to secure deposits and other liens
incurred in the ordinary course of banking business, (iii) such imperfections
of title, easements, encumbrances, liens, charges, defaults or equitable
interests, if any, as do not affect the use of properties or assets subject
thereto or affected thereby or otherwise materially impair business operations
at such properties, (iv) dispositions and encumbrances in the ordinary course
of business, and (v) liens on properties acquired in foreclosure or on account
of debts previously contracted. All leases pursuant to which FWB or any of its
Subsidiaries, as lessee, leases real or personal property (except for leases
that have expired by their terms or that FWB or any such Subsidiary has agreed
to terminate since the date hereof) are valid without default thereunder by the
lessee or, to FWB's knowledge, the lessor.
(aa) LOANS. Each loan reflected as an asset in the FWB financial
statements as of December 31, 1997 and each balance sheet date subsequent
thereto, other than loans the unpaid balance of which does not exceed $1
million in the aggregate, (i) is evidenced by notes,
24
29
agreements or other evidences of indebtedness which are true, genuine and what
they purport to be, (ii) to the extent secured, has been secured by valid liens
and security interest which have been perfected, and (iii) is the legal, valid
and binding obligation of the obligor named therein, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles. Except as Previously Disclosed, as of
December 31, 1997, Bank is not a party to a loan, including any loan guaranty,
with any director, executive officer or 5% shareholder of FWB or any of its
Subsidiaries or any person, corporation or enterprise controlling, controlled
by or under common control with any of the foregoing. All loans and extensions
of credit that have been made by Bank and that are subject either to Section
22(b) of the Federal Reserve Act, as amended, or to 12 C.F.R. sec. 563.43,
comply therewith.
(bb) ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses
reflected on the FWB Financial Statements, as of their respective dates, is
adequate in all material respects under the requirements of generally accepted
accounting principles to provide for reasonably anticipated losses on
outstanding loans.
(cc) REPURCHASE AGREEMENTS. With respect to all agreements pursuant to
which FWB or any of its Subsidiaries has purchased securities subject to an
agreement to resell, if any, FWB or such Subsidiary, as the case may be, has a
valid, perfected first lien or security interest in or evidence of ownership in
book entry form of the government securities or other collateral securing the
repurchase agreement, and the value of such collateral equals or exceeds the
amount of the debt secured thereby.
(dd) DEPOSIT INSURANCE. The deposits of Bank are insured by the FDIC
in accordance with The Federal Deposit Insurance Act ("FDIA"), and Bank has
paid all assessments and filed all reports required by the FDIA.
5.04 REPRESENTATIONS AND WARRANTIES OF SFG. Subject to Sections 5.01
and 5.02 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, SFG hereby represents
and warrants to FWB as follows :
(a) ORGANIZATION, STANDING AND AUTHORITY. SFG is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio. SFG is duly qualified to do business and is in good standing in the State
of Ohio and any foreign jurisdictions where its ownership or leasing of
property or assets or the conduct of its business requires it to be so
qualified. SFG is registered as a bank holding company under the BHCA. CBC is a
state banking association duly organized, validly existing and in good standing
under the laws of the State of Ohio. CBC is duly qualified to do business and
is in good standing in the State of Ohio and any foreign jurisdictions where
its ownership or leasing of property or assets or the conduct of its business
requires it to be so qualified.
(b) SFG STOCK. (i) As of November 30, 1998, the authorized capital
stock of SFG consists of 160,000,000 shares, of which 150,000,000 shares are
SFG Common Stock, of which 45,095,083 shares were outstanding as of November
30, 1998, and 10,000,000 shares are SFG
25
30
serial preferred stock, par value $10.00 per share, of which no shares are
outstanding as of November 30, 1998. As of November 30, 1998, except as set
forth in its Disclosure Schedule, SFG does not have any Rights issued or
outstanding with respect to SFG Common Stock and SFG does not have any
commitment to authorize, issue or sell any SFG Common Stock or Rights, except
pursuant to this Agreement. The outstanding shares of SFG Common Stock have
been duly authorized and are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights).
(ii) The shares of SFG Common Stock to be issued in exchange
for shares of FWB Common Stock in the Parent Merger, when issued in accordance
with the terms of this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable and subject to no preemptive rights.
(c) SUBSIDIARIES. SFG has Previously Disclosed a list of all its
Subsidiaries together with the jurisdiction or organization of each Subsidiary.
Each of SFG's Subsidiaries has been duly organized and is validly existing in
good standing under the laws of the jurisdiction of its organization, and is
duly qualified to do business and is in good standing in the jurisdictions
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and it owns, directly or indirectly, all the
issued and outstanding equity securities of each of its Significant
Subsidiaries.
(d) CORPORATE POWER. Each of SFG and its Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and SFG has the corporate
power and authority to execute, deliver and perform its obligations under this
Agreement and the Stock Option Agreement and to consummate the transactions
contemplated hereby and thereby.
(e) CORPORATE AUTHORITY; AUTHORIZED AND EFFECTIVE AGREEMENT. Subject
in the case of this Agreement to receipt of the requisite adoption of this
Agreement (including the Parent Plan of Merger) by the holders of a majority of
the outstanding shares of SFG Common Stock entitled to vote thereon, this
Agreement, the Stock Option Agreement and the transactions contemplated hereby
and thereby have been authorized by all necessary corporate action of SFG and
the SFG Board prior to the date hereof and no stockholder approval is required
on the part of SFG. The Agreement to Merge, when executed by CBC, shall have
been approved by the Board of Directors of CBC and by the SFG Board, as the
sole stockholder of CBC. This Agreement is a valid and legally binding
agreement of SFG, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors rights or by general equity
principles).
(f) REGULATORY APPROVALS; NO DEFAULTS. (i) No consents or approvals
of, or filings or registrations with, any Governmental Authority or with any
third party are required to be made or obtained by SFG or any of its
Subsidiaries in connection with the execution, delivery or performance by SFG
of this Agreement or to consummate the Merger except for (A) the filing of
applications, notices, or the Agreement to Merge, as applicable, with the
federal and state
26
31
banking authorities; (B) the filing and declaration of effectiveness of the
Registration Statement; (C) the filing of the certificate of merger with the
OSS and the PSS pursuant to the OGCL and the PBCL; (D) such filings as are
required to be made or approvals as are required to be obtained under the
securities or "Blue Sky" laws of various states in connection with the issuance
of SFG Common Stock in the Parent Merger; and (E) receipt of the approvals set
forth in Section 7.01(b). As of the date hereof, SFG is not aware of any reason
why the approvals set forth in Section 7.01(b) will not be received without the
imposition of a condition, restriction or requirement of the type described in
Section 7.01(b).
(ii) Subject to the satisfaction of the requirements referred
to in the preceding paragraph and expiration of the related waiting periods,
and required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (A) constitute a breach or
violation of, or a default under, or give rise to any Lien, any acceleration of
remedies or any right of termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of SFG or of any of its Subsidiaries or to which SFG or
any of its Subsidiaries or properties is subject or bound, (B) constitute a
breach or violation of, or a default under, the articles of incorporation or
Code of Regulations (or similar governing documents) of SFG or any of its
Subsidiaries, or (C) require any consent or approval under any such law, rule,
regulation, judgment, decree, order, governmental permit or license, agreement,
indenture or instrument.
(g) FINANCIAL REPORTS AND SEC DOCUMENTS; MATERIAL ADVERSE EFFECT. (i)
SFG's supplemental consolidated financial statements as of December 31, 1997
and 1996 and for each of the three years in the period ended December 31, 1997,
as filed with the SEC on SFG's Current Report on Form 8-K dated October 15,
1998 (which include the financial statements of Mid Am, Inc., Citizens
Bancshares, Inc., Century Financial Corporation and Unibank), copies of which
have been delivered to FWB, and all other reports, registration statements,
definitive proxy statements or other statements filed or to be filed by it or
any of its Subsidiaries with the SEC subsequent to December 31, 1997 under the
Securities Act, or under Section 13, 14 or 15(d) of the Exchange Act, in the
form filed or to be filed (collectively, "SFG SEC Documents") as of the date
filed, (A) complied or will comply in all material respects with the applicable
requirements under the Securities Act or the Exchange Act, as the case may be,
and (B) did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading; and each of the balance sheets or statements of
condition contained in or incorporated by reference into any such SFG SEC
Document (including the related notes and schedules thereto) fairly presents,
or will fairly present, the financial position of SFG and its Subsidiaries as
of its date, and each of the statements of income or results of operations and
changes in stockholders' equity and cash flows or equivalent statements in such
SFG SEC Documents (including any related notes and schedules thereto) fairly
presents, or will fairly present, the results of operations, changes in
shareholders' equity and cash flows, as the case may be, of SFG and its
Subsidiaries for the periods to which they relate, in each case in accordance
with generally accepted accounting principles consistently
27
32
applied during the periods involved, except in each case as may be noted
therein, subject to normal year-end audit adjustments in the case of unaudited
statements.
(ii) The Ohio Bank and the Unibank financial statements as of
December 31, 1997 and 1996 and for each of the three years in the period ended
December 31, 1997, copies of which have been delivered to FWB, (A) complied or
will comply in all material respects with generally accepted accounting
principles, and (B) did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(iii) Each of Mid Am Inc.'s ("Mid Am") and Citizens
Bancshares, Inc.'s ("Citizens") Annual Reports on Form 10-K for the fiscal
years ended December 31, 1995, 1996 and 1997 and all other reports,
registration statements, definitive proxy statements or information statements
filed or to be filed by either of them or any of their respective Subsidiaries
subsequent to December 31, 1997 under the Securities Act, or under Section 13,
14 or 15(d) of the Exchange Act, in the form filed or to be filed
(collectively, "the Mid Am/Citizens SEC Documents") with the SEC, as of the
date filed, (A) complied or will comply in all material respects with the
applicable requirements under the Securities Act or the Exchange Act, as the
case may be, and (B) did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and each of the balance sheets or
statements of condition contained in or incorporated by reference into any such
SEC Document (including the related notes and schedules thereto) fairly
presents, or will fairly present, the financial position of each of Mid Am and
Citizens, respectively, and their respective Subsidiaries as of its date, and
each of the statements of income and changes in stockholders' equity and cash
flows or equivalent statements in such Mid Am/Citizens SEC Documents (including
any Mid Am/Citizens related notes and schedules thereto) fairly presents, or
will fairly present, the results of operations, changes in stockholders' equity
and cash flows, as the case may be, of each of Mid Am and Citizens,
respectively, and their respective Subsidiaries for the periods to which they
relate, in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except in each
case as may be noted therein, subject to normal year-end audit adjustments and
the absence of footnotes in the case of unaudited statements.
(iv) To SFG's knowledge (without any independent
investigation), Century Financial Corporation's Annual Reports on Form 10-K for
the fiscal years ended December 31, 1995, 1996 and 1997 and all other reports,
registration statements, definitive proxy statements or information statements
filed or to be filed by it or any of its Subsidiaries subsequent to December
31, 1997 under the Securities Act, or under Section 13, 14 or 15(d) of the
Exchange Act, in the form filed or to be filed (collectively, "Century SEC
Documents") with the SEC, as of the date filed, (A) complied or will comply in
all material respects with the applicable requirements under the Securities Act
or the Exchange Act, as the case may be, and (B) did not and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were
28
33
made, not misleading; and each of the balance sheets or statements of condition
contained in or incorporated by reference into any such Century SEC Document
(including the related notes and schedules thereto) fairly presents, or will
fairly present, the financial position of Century and its Subsidiaries as of
its date, and each of the statements of income and changes in stockholders'
equity and cash flows or equivalent statements in such Century SEC Documents
(including any related notes and schedules thereto) fairly presents, or will
fairly present, the results of operations, changes in stockholders' equity and
cash flows, as the case may be, of Century and its Subsidiaries for the periods
to which they relate, in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved, except
in each case as may be noted therein, subject to normal year-end audit
adjustments and the absence of footnotes in the case of unaudited statements.
(v) Since December 31, 1997, no event has occurred or
circumstance arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of Section 5.04 or
otherwise), is reasonably likely to have a Material Adverse Effect with respect
to SFG, except as disclosed in the SFG, Mid Am/Bancshares and Century SEC
Documents.
(h) LITIGATION; REGULATORY ACTION. (i) No litigation, claim or other
proceeding before any court or governmental agency is pending against SFG or
any of its Subsidiaries and, to the best of SFG's knowledge, no such
litigation, claim or other proceeding has been threatened.
(ii) Neither SFG nor any of its Subsidiaries or properties is
a party to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or similar
submission to, or extraordinary supervisory letter from a Regulatory Authority,
nor has SFG or any of its Subsidiaries been advised by a Regulatory Authority
that such agency is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding, commitment letter, supervisory letter or similar
submission.
(i) COMPLIANCE WITH LAWS. Each of SFG and its Subsidiaries:
(i) is in compliance with all applicable federal, state,
local and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees conducting such
businesses, including, without limitation, the Equal Credit Opportunity Act,
the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage
Disclosure Act and all other applicable fair lending laws and other laws
relating to discriminatory business practices; and
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations with,
all Governmental Authorities that are required in order to permit them to
conduct their businesses substantially as presently conducted; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect and, to the best of its knowledge, no suspension or
cancellation of any of them is threatened; and
29
34
(iii) has received, since December 31, 1996, no notification or
communication from any Governmental Authority (A) asserting that SFG or any of
its Subsidiaries is not in compliance with any of the statutes, regulations, or
ordinances which such Governmental Authority enforces or (B) threatening to
revoke any license, franchise, permit, or governmental authorization (nor, to
SFG's knowledge, do any grounds for any of the foregoing exist).
(j) BROKERAGE AND FINDER'S FEES. Except for fees payable to its
financial advisor, McDonald Investments, Inc. ("McDonald"), SFG has not
employed any broker, finder, or agent, or agreed to pay or incurred any
brokerage fee, finder's fee, commission or other similar form of compensation
in connection with this Agreement or the transactions contemplated hereby.
(k) TAKEOVER LAWS. SFG has taken all action required to be taken by it
in order to exempt this Agreement, the Stock Option Agreement and the
transactions contemplated hereby and thereby from, and this Agreement, the
Stock Option Agreement and the transactions contemplated hereby and thereby are
exempt from, the requirements of any Takeover Laws applicable to SFG.
(l) ENVIRONMENTAL MATTERS. To SFG's knowledge, neither the conduct nor
operation of SFG or its Subsidiaries nor any condition of any property
presently or previously owned, leased or operated by any of them (including,
without limitation, in a fiduciary or agency capacity), or on which any of them
holds a Lien, violated Environmental Laws and to SFG's knowledge no condition
has existed or event has occurred with respect to any of them or any such
property that, with notice or the passage of time, or both, is reasonably
likely to result in liability under Environmental Laws. To SFG's knowledge,
neither SFG nor any of its Subsidiaries has received any notice from any person
or entity that SFG or its Subsidiaries or the operation or condition of any
property ever owned, leased, operated, or held as collateral or in a fiduciary
capacity by any of them are or were in violation of or otherwise are alleged to
have liability under any Environmental Law, including, but not limited to,
responsibility (or potential responsibility) for the cleanup or other
remediation of any pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on, beneath, or originating from any such property.
(m) TAX MATTERS. (i) All Tax Returns that are required to be filed by
or with respect to SFG and its Subsidiaries have been duly filed, (ii) all
Taxes shown to be due on the Tax Returns referred to in clause (i) have been
paid in full, (iii) the Tax Returns referred to in clause (i) have been
examined by the Internal Revenue Service or the appropriate state, local or
foreign taxing authority or the period for assessment of the Taxes in respect
of which such Tax Returns were required to be filed has expired, (iv) all
deficiencies asserted or assessments made as a result of such examinations have
been paid in full, (v) no issues that have been raised by the relevant taxing
authority in connection with the examination of any of the Tax Returns referred
to in clause (i) are currently pending, and (vi) no waivers of statutes of
limitation have been given by or requested with respect to any Taxes of SFG or
its Subsidiaries. Neither SFG nor any of its Subsidiaries has any liability
with respect to income, franchise or similar Taxes that accrued on or before
the end of the most recent period covered by SFG's SEC Documents filed prior to
the date hereof in excess of the amounts accrued with respect thereto that are
reflected in
30
35
the financial statements included in SFG's SEC Documents filed on or prior to
the date hereof. As of the date hereof, SFG has no reason to believe that any
conditions exist that might prevent or impede the Parent Merger from qualifying
as a reorganization with the meaning of Section 368(a) of the Code.
(n) BOOKS AND RECORDS. The books and records of SFG and its
Subsidiaries have been fully, properly and accurately maintained in all
material respects, have been maintained in accordance with sound business
practices and the requirements of Section 13(b)(2) of the Securities and
Exchange Act of 1934, as amended, and there are no material inaccuracies or
discrepancies of any kind contained or reflected therein, and they fairly
present the substance of events and transactions included therein.
(o) INSURANCE. SFG's Disclosure Schedule sets forth all of the
insurance policies, binders, or bonds maintained by SFG or its Subsidiaries.
SFG and its Subsidiaries are insured with reputable insurers against such risks
and in such amounts as the management of SFG reasonably has determined to be
prudent in accordance with industry practices. All such insurance policies are
in full force and effect; SFG and its Subsidiaries are not in material default
thereunder; and all claims thereunder have been filed in due and timely
fashion.
(p) ACCOUNTING TREATMENT. As of the date hereof, SFG is aware of no
reason why the Merger will fail to qualify for "pooling-of-interests"
accounting treatment and is aware of no reason why any other merger of SFG
consummated within the prior two years will fail to so qualify.
(q) CONTRACTS. Neither SFG nor any of its Subsidiaries is in default
under any contract, agreement, commitment, arrangement, lease, insurance policy
or other instrument to which it is a party, by which its respective assets,
business, or operations may be bound or affected in any way, or under which it
or its respective assets, business, or operations receive benefits, and there
has not occurred any event that, with the lapse of time or the giving of notice
or both, would constitute such a default.
(r) DISCLOSURE. The representations and warranties contained in this
Section 5.04 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 5.04 not misleading.
(s) RISK MANAGEMENT INSTRUMENTS. All material interest rate swaps,
caps, floors, option agreements, futures and forward contracts and other
similar risk management arrangements, whether entered into for SFG's own
account, or for the account of one or more of its Subsidiaries or their
customers, were entered into (i) in accordance with prudent business practices
and all applicable laws, rules, regulations and regulatory policies and with
counterparties believed to be financially responsible at the time; and each of
them constitutes the valid and legally binding obligation of SFG or one of its
Subsidiaries, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles), and is in full force and effect.
31
36
Neither SFG nor its Subsidiaries, nor to SFG's knowledge any other party
thereto, is in breach of any of its obligations under any such agreement or
arrangement in any material respect.
(t) YEAR 2000. Neither SFG nor any of its Subsidiaries has received,
or has reason to believe that it will receive, a rating of less than
"satisfactory" on any Year 2000 Report of Examination of any Regulatory
Authority. SFG has disclosed to FWB a complete and accurate copy of its plan,
including an estimate of the anticipated associated costs, for addressing the
issues set forth in the statements of the FFIEC dated May 5, 1997, entitled
"Year 2000 Project Management Awareness," and December 17, 1997, entitled
"Safety and Soundness Guidelines Concerning the Year 2000 Business Risk," as
such issues affect it and its Subsidiaries, and such plan is in material
compliance with the schedule set forth in the FFIEC statements.
(u) MATERIAL ADVERSE CHANGE. SFG has not, on a consolidated basis,
suffered a change in its business, financial condition or results of operations
since December 31, 1997 that has had a Material Adverse Effect on SFG, except
as described in the SFG, Mid/Am Bancshares and Century SEC Documents.
(v) LOANS. Each loan reflected as an asset in the SFG financial
statements as of December 31, 1997 and each balance sheet date subsequent
thereto, other than loans the unpaid balance of which does not exceed $1
million in the aggregate, (i) is evidenced by notes, agreements or other
evidences of indebtedness which are true, genuine and what they purport to be,
(ii) to the extent secured, has been secured by valid liens and security
interest which have been perfected, and (iii) is the legal, valid and binding
obligation of the obligor named therein, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws
of general applicability relating to or affecting creditors' rights and to
general equity principles. Except as Previously Disclosed, as of December 31,
1997, CBC is not a party to a loan, including any loan guaranty, with any
director, executive officer or 5% shareholder of SFG or any of its Subsidiaries
or any person, corporation or enterprise controlling, controlled by or under
common control with any of the foregoing. All loans and extensions of credit
that have been made by Bank and that are subject either to Section 22(b) of the
Federal Reserve Act, as amended, or to 12 C.F.R. sec. 563.43, comply therewith.
(w) ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses reflected
on the SFG Financial Statements, as of their respective dates, is adequate in
all material respects under the requirements of generally accepted accounting
principles to provide for reasonably anticipated losses on outstanding loans.
(x) REPURCHASE AGREEMENTS. With respect to all agreements pursuant to
which SFG or any of its Subsidiaries has purchased securities subject to an
agreement to resell, if any, SFG or such Subsidiary, as the case may be, has a
valid, perfected first lien or security interest in or evidence of ownership in
book entry form of the government securities or other collateral securing the
repurchase agreement, and the value of such collateral equals or exceeds the
amount of the debt secured thereby.
32
37
(y) DEPOSIT INSURANCE. The deposits of CBC are insured by the FDIC in
accordance with the FDIA, and CBC has paid all assessments and filed all
reports required by the FDIA.
ARTICLE VI
COVENANTS
6.01 REASONABLE BEST EFFORTS. Subject to the terms and conditions of
this Agreement, each of FWB and SFG agrees to use their reasonable best efforts
in good faith to take, or cause to be taken, all actions, and to do, or cause
to be done, all things necessary, proper or desirable, or advisable under
applicable laws, so as to permit consummation of the Merger as promptly as
practicable and otherwise to enable consummation of the transactions
contemplated hereby and shall cooperate fully with the other party hereto to
that end.
6.02 STOCKHOLDER APPROVALS. FWB agrees to take, in accordance with
applicable law and the FWB Articles and FWB By-Laws, all action necessary to
convene an appropriate meeting of its stockholders to consider and vote upon
the adoption of this Agreement and any other matters required to be approved or
adopted by FWB's stockholders for consummation of the Parent Merger (including
any adjournment or postponement, the "FWB Meeting"), as promptly as practicable
after the Registration Statement is declared effective. The FWB Board shall
recommend that its stockholders adopt this Agreement at the FWB Meeting unless
otherwise necessary under the applicable fiduciary duties of the FWB Board, as
determined by the FWB Board in good faith after consultation with and based
upon advice of independent legal counsel. SFG agrees to take, in accordance
with applicable law, the SFG Articles and SFG Code, all action necessary to
convene an appropriate meeting of its stockholders to consider and vote upon
the adoption of this Agreement and any other matters required to be approved or
adopted by SFG's stockholders for consummation of the Parent Merger (including
any adjournment or postponement, the "SFG Meeting"), as promptly as practicable
after the Registration Statement is declared effective. The SFG Board shall
recommend that its stockholders adopt this Agreement at the SFG Meeting unless
otherwise necessary under the applicable fiduciary duties of the SFG Board, as
determined by the SFG Board in good faith after consultation with and based
upon advice of independent legal counsel.
6.03 REGISTRATION STATEMENT. (a) SFG agrees to prepare pursuant to all
applicable laws, rules and regulations a registration statement on Form S-4
(the "Registration Statement") to be filed by SFG with the SEC in connection
with the issuance of SFG Common Stock in the Parent Merger (including the proxy
statement and prospectus and other proxy solicitation materials of FWB
constituting a part thereof (the "Proxy Statement") and all related documents).
FWB agrees to cooperate, and to cause its Subsidiaries to cooperate, with SFG,
its counsel and its accountants, in preparation of the Registration Statement
and the Proxy Statement; and provided that FWB and its Subsidiaries have
cooperated as required above, SFG agrees to file the Proxy Statement and the
Registration Statement (together, the "Proxy/Prospectus") with the SEC as
promptly as reasonably practicable. Each of FWB and SFG agrees to use all
reasonable efforts to cause the Proxy/Prospectus to be declared effective under
the Securities Act as promptly as reasonably practicable after filing thereof.
SFG also agrees to use all reasonable
33
38
efforts to obtain, prior to the effective date of the Registration Statement,
all necessary state securities law or "Blue Sky" permits and approvals required
to carry out the transactions contemplated by this Agreement. FWB agrees to
furnish to SFG all information concerning FWB, its Subsidiaries, officers,
directors and stockholders as may be reasonably requested in connection with
the foregoing.
(b) Each of FWB and SFG agrees, as to itself and its Subsidiaries,
that none of the information supplied or to be supplied by it for inclusion or
incorporation by reference in (i) the Registration Statement will, at the time
the Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (ii) the Proxy
Statement and any amendment or supplement thereto will, at the date of mailing
to the FWB stockholders and at the time of the FWB Meeting, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading or any statement which, in the light of the circumstances under
which such statement is made, will be false or misleading with respect to any
material fact, or which will omit to state any material fact necessary in order
to make the statements therein not false or misleading or necessary to correct
any statement in any earlier statement in the Proxy Statement or any amendment
or supplement thereto. Each of FWB and SFG further agrees that if it shall
become aware prior to the Effective Date of any information furnished by it
that would cause any of the statements in the Proxy Statement to be false or
misleading with respect to any material fact, or to omit to state any material
fact necessary to make the statements therein not false or misleading, to
promptly inform the other party thereof and to take the necessary steps to
correct the Proxy Statement.
(c) SFG agrees to advise FWB, promptly after SFG receives notice
thereof, of the time when the Registration Statement has become effective or
any supplement or amendment has been filed, of the issuance of any stop order
or the suspension of the qualification of SFG Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.
6.04 PRESS RELEASES. Each of FWB and SFG agrees that it will not,
without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby, except as otherwise required by applicable law or
regulation or NASDAQ rules.
6.05 ACCESS; INFORMATION. (a) Each of FWB and SFG agrees that upon
reasonable notice and subject to applicable laws relating to the exchange of
information, it shall afford the other party and the other party's officers,
employees, counsel, accountants and other authorized representatives, such
access during normal business hours throughout the period prior to the
Effective Time to the books, records (including, without limitation, tax
returns and work papers of independent auditors), properties, personnel and to
such other information as any party may reasonably request and, during such
period, it shall furnish promptly to such other party (i) a
34
39
copy of each material report, schedule and other document filed by it pursuant
to federal or state securities or banking laws, and (ii) all other information
concerning the business, properties and personnel of it as the other may
reasonably request.
(b) Each agrees that it will not, and will cause its representatives
not to, use any information obtained pursuant to this Section 6.05 (as well as
any other information obtained prior to the date hereof in connection with the
entering into of this Agreement) for any purpose unrelated to the consummation
of the transactions contemplated by this Agreement. Subject to the requirements
of law, each party will keep confidential, and will cause its representatives
to keep confidential, all information and documents obtained pursuant to this
Section 6.05 (as well as any other information obtained prior to the date
hereof in connection with the entering into of this Agreement) unless such
information (i) was already known to such party, (ii) becomes available to such
party from other sources not known by such party to be bound by a
confidentiality obligation, (iii) is disclosed with the prior written approval
of the party to which such information pertains or (iv) is or becomes readily
ascertainable from published information or trade sources. In the event that
this Agreement is terminated or the transactions contemplated by this Agreement
shall otherwise fail to be consummated, each party shall promptly cause all
copies of documents or extracts thereof containing information and data as to
another party hereto to be returned to the party which furnished the same. No
investigation by either party of the business and affairs of the other shall
affect or be deemed to modify or waive any representation, warranty, covenant
or agreement in this Agreement, or the conditions to either party's obligation
to consummate the transactions contemplated by this Agreement.
(c) During the period from the date of this Agreement to the Effective
Time, each party shall promptly furnish the other with copies of all monthly
and other interim financial statements produced in the ordinary course of
business as the same shall become available.
6.06 ACQUISITION PROPOSALS. FWB agrees that it shall not, and shall
cause its Subsidiaries and its and its Subsidiaries' officers, directors,
agents, advisors and affiliates not to, solicit or encourage inquiries or
proposals with respect to, or engage in any negotiations concerning, or provide
any confidential information to, or have any discussions with, any person
relating to, any Acquisition Proposal, subject to the extent that the FWB Board
determines in good faith, after consultations with independent legal counsel
that it is required by its fiduciary duties to do so. It shall immediately
cease and cause to be terminated any activities, discussions or negotiations
conducted prior to the date of this Agreement with any parties other than SFG
with respect to any of the foregoing and shall use its reasonable best efforts
to enforce any confidentiality or similar agreement relating to an Acquisition
Proposal. FWB shall promptly (within 24 hours) advise SFG following the receipt
by FWB of any Acquisition Proposal and the substance thereof (including the
identity of the person making such Acquisition Proposal), and advise SFG of any
material developments with respect to such Acquisition Proposal immediately
upon the occurrence thereof.
6.07 AFFILIATE AGREEMENTS. (a) Not later than the 15th day prior to
the mailing of the Proxy Statement, FWB shall deliver to SFG a schedule of each
person that, to the best of its knowledge, is or is reasonably likely to be, as
of the date of the FWB Meeting, deemed to be an
35
40
"affiliate" of FWB (each, a "FWB Affiliate") as that term is used in Rule 145
under the Securities Act or SEC Accounting Series Releases 130 and 135. FWB
shall use its reasonable best efforts to cause each person who may be deemed to
be a FWB Affiliate to execute and deliver to FWB on or before the date of
mailing of the Proxy Statement an agreement in the form attached hereto as
Exhibit B.
6.08 TAKEOVER LAWS. No party hereto shall take any action that would
cause the transactions contemplated by this Agreement or the Stock Option
Agreement to be subject to requirements imposed by any Takeover Law and each of
them shall take all necessary steps within its control to exempt (or ensure the
continued exemption of) the transactions contemplated by this Agreement from,
or if necessary challenge the validity or applicability of, any applicable
Takeover Law, as now or hereafter in effect.
6.09 CERTAIN POLICIES. Prior to the Effective Date, FWB shall,
consistent with generally accepted accounting principles and on a basis
mutually satisfactory to it and SFG, modify and change its loan, litigation and
real estate valuation policies and practices (including loan classifications
and levels of reserves) so as to be applied on a basis that is consistent with
that of SFG; provided, however, that FWB shall not be obligated to take any
such action pursuant to this Section 6.09 unless and until SFG acknowledges
that all conditions to its obligation to consummate the Merger have been
satisfied and certifies to FWB that SFG's representations and warranties,
subject to Section 5.02, are true and correct as of such date and that SFG is
otherwise material in compliance with this Agreement. FWB's representations,
warranties and covenants contained in this Agreement shall not be deemed to be
untrue or breached in any respect for any purpose as a consequence of any
modifications or changes undertaken solely on account of this Section 6.09.
6.10. NASDAQ LISTING. SFG shall file a listing application, or a
NASDAQ Notification Form for Change in the Number of Shares Outstanding, as
required by NASDAQ, with respect to the shares of SFG Common Stock to be issued
to the holders of FWB Common Stock in the Merger.
6.11 REGULATORY APPLICATIONS. (a) SFG and FWB and their respective
Subsidiaries shall cooperate and use their respective reasonable best efforts
to prepare all documentation, to timely effect all filings and to obtain all
permits, consents, approvals and authorizations of all third parties and
Governmental Authorities necessary to consummate the transactions contemplated
by this Agreement. Each of SFG and FWB shall have the right to review in
advance, and to the extent practicable each will consult with the other, in
each case subject to applicable laws relating to the exchange of information,
with respect to, and shall be provided in advance so as to reasonably exercise
its right to review in advance, all material written information submitted to
any third party or any Governmental Authority in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto agrees to act reasonably and as promptly as
practicable. Each party hereto agrees that it will consult with the other party
hereto with respect to the obtaining of all material permits, consents,
approvals and authorizations of all third parties and Governmental Authorities
necessary or advisable to consummate the transactions contemplated by this
Agreement and each
36
41
party will keep the other party apprised of the status of material matters
relating to completion of the transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other party with
all information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice or application made by or on behalf of
such other party or any of its Subsidiaries to any third party or Governmental
Authority.
6.12 INDEMNIFICATION. (a) Following the Effective Date, SFG shall
indemnify, defend and hold harmless the present directors, officers and
employees of FWB and its Subsidiaries (each, an "Indemnified Party") against
all costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of actions or
omissions occurring on or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement) to the fullest
extent that FWB is permitted to indemnify (and advance expenses to) its
directors, officers, and employees under the laws of the State of Pennsylvania,
the FWB Articles and the FWB By-Laws as in effect on the date hereof; provided
that any determination required to be made with respect to whether an
officer's, director's or employee's conduct complies with the standards set
forth under Pennsylvania law, the FWB Articles and the FWB By-Laws shall be
made by independent counsel (which shall not be counsel that provides material
services to SFG) selected by SFG and reasonably acceptable to such officer,
director or employee.
(b) For a period of three years from the Effective Time, SFG shall use
its reasonable best efforts to provide that portion of director's and officer's
liability insurance that serves to reimburse the present and former officers
and directors of FWB or any of its Subsidiaries (determined as of the Effective
Time) (as opposed to FWB) with respect to claims against such directors and
officers arising from facts or events which occurred before the Effective Time,
on terms no less favorable than those in effect on the date hereof; PROVIDED,
HOWEVER, that SFG may substitute therefor policies providing at least
comparable coverage containing terms and conditions no less favorable than
those in effect on the date hereof; and provided, further, that officers and
directors of FWB or any Subsidiary may be required to make application and
provide customary representations and warranties to SFG's insurance carrier for
the purpose of obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification under
Section 6.12(a), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify SFG thereof; provided that
the failure so to notify shall not affect the obligations of SFG under Section
6.12(a) unless and to the extent that SFG is actually prejudiced as a result of
such failure.
(d) If SFG or any of its successors or assigns shall consolidate with
or merge into any other entity and shall not be the continuing or surviving
entity of such consolidation or merger or shall transfer all or substantially
all of its assets to any entity, then and in each case, proper
37
42
provision shall be made so that the successors and assigns of SFG shall assume
the obligations set forth in this Section 6.12.
6.13 OPPORTUNITY OF EMPLOYMENT; EMPLOYEE BENEFITS. The existing
employees of FWB shall have the opportunity to continue as employees of SFG or
one of its Subsidiaries, on the Closing Date; subject, however, to the right of
SFG and its Subsidiaries to terminate any such employees either (i) for "cause"
or (ii) pursuant to the procedures set forth in the SFG Workforce Redesign
Process previously disclosed to FWB. It is understood and agreed that nothing
in this Section 6.13 or elsewhere in this Agreement shall be deemed to be a
contract of employment or be construed to give said employees any rights other
than as employees at will under applicable law and said employees shall not be
deemed to be third-party beneficiaries of this provision. From and after the
Effective Time, FWB employees shall continue to participate in the FWB employee
benefit plans in effect at the Effective Time unless and until SFG, in its sole
discretion, shall determine that FWB employees shall, subject to applicable
eligibility requirements, participate in employee benefit plans of SFG and that
all or some of the FWB plans shall be terminated or merged into certain
employee benefit plans of SFG. Notwithstanding the foregoing, each FWB employee
shall be credited with years of FWB (or predecessor) service for purposes of
eligibility and vesting in the employee benefit plans of SFG.
6.14 NOTIFICATION OF CERTAIN MATTERS. Each of FWB and SFG shall give
prompt notice to the other of any fact, event or circumstance known to it that
(i) is reasonably likely, individually or taken together with all other facts,
events and circumstances known to it, to result in any Material Adverse Effect
with respect to it or (ii) would cause or constitute a material breach of any
of its representations, warranties, covenants or agreements contained herein.
6.15 DIVIDEND COORDINATION.. It is agreed by the parties hereto that
they will cooperate to assure that as a result of the Parent Merger, during any
applicable period, there shall not be a payment of both a SFG and a FWB
dividend. The parties further agree that if the Effective Closing Date is at
the end of a fiscal quarter, then they will cooperate to assure that the FWB
shareholders receive the dividend, if any, declared by FWB rather than the
dividend for that period, if any, declared by SFG. FWB intends to change its
existing dividend payment policy such that for 1999 its dividends shall be
declared with record and payment dates the same as SFG's. To accomplish this
program, FWB shall declare a dividend equal to 2/3's of what its normal
dividend for its fiscal dividend quarter ended January 31, 1999 would have
been, which dividend shall be payable January 4, 1999 to shareholders of record
on December 24, 1998. In no event will the selection of the Effective Date
cause the stockholders of FWB to lose a quarterly or a portion of a quarterly
dividend.
6.16 SFG BOARD REPRESENTATION. SFG shall cause its Executive Committee
to nominate for election ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ to the SFG
Board and ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇ to the Executive Committee, which nominees shall be
recommended by FWB and selected by SFG in its discretion. Additional matters
regarding future representation are as set forth in a letter dated of even date
herewith from SFG.
38
43
6.17 RESULTING BANK BOARD OF DIRECTORS. Following the consummation of
the Subsidiary Merger, it is contemplated that six (6) members of the FWB Board
of Directors will be selected by SFG to serve as directors of the Resulting
Bank to be recommended by FWB and to be selected by SFG in its reasonable
discretion.
6.18 FORMATION OF ADVISORY BOARD. Following the consummation of the
Subsidiary Merger, the members of the FWB Board of Directors who do not become
members of the Resulting Bank's Board of Directors shall be given the
opportunity to serve on an advisory board to the Resulting Bank.
6.19 ACCOUNTING AND TAX TREATMENT. Each of SFG and FWB agrees not to
take any actions subsequent to the date of this Agreement that would adversely
affect the ability to treat the Merger as a "pooling-of-interests" in
accordance with GAAP or FWB or the shareholders of FWB to characterize the
Merger as a tax-free reorganization under Section 368(a) of the IRC, and each
of SFG and FWB agrees to take such action as may be reasonably required, if
such action may be reasonably taken to reverse the impact of any past actions
which would adversely impact the ability of SFG or FWB (as the case may be) to
treat the Merger as a "pooling-of-interests" for accounting purposes or for the
Merger to be characterized as a tax-free reorganization under Section 368(a) of
the IRC.
6.20 NO BREACHES OF REPRESENTATIONS AND WARRANTIES. Between the date
of this Agreement and the Effective Time, without the written consent of the
other party, each of SFG and FWB will not do any act or suffer any omission of
any nature whatsoever which would cause any of the representations or
warranties made in Article III of this Agreement to become untrue or incorrect
in any material respect.
6.21 CONSENTS. Each of SFG and FWB shall use its best efforts to
obtain any required consents to the transactions contemplated by this
Agreement.
6.22 INSURANCE COVERAGE. FWB shall cause the policies of insurance
listed in the Disclosure Schedule to remain in effect between the date of this
Agreement and the Closing Date.
6.23 CORRECTION OF INFORMATION. Each of SFG and FWB shall promptly
correct and supplement any information furnished under this Agreement so that
such information shall be correct and complete in all material respects at all
times, and shall include all facts necessary to make such information correct
and complete in all material respects at all times.
6.24 CONFIDENTIALITY. Except for the use of information in connection
with the Registration Statement described in Section 7.1 hereof and any other
governmental filings required in order to complete the transactions
contemplated by this Agreement, all information (collectively, the
"Information") received by each of FWB and SFG, pursuant to the terms of this
Agreement shall be kept in strictest confidence; provided that, subsequent to
the filing of the Registration Statement with the Securities and Exchange
Commission, this Section 6.24 shall not apply to information included in the
Registration Statement or to be included in the official
39
44
proxy/prospectus to be sent to the shareholders of FWB and SFG under Section
6.03. FWB and SFG agree that the Information will be used only for the purpose
of completing the transactions contemplated by this Agreement. FWB and SFG
agree to hold the Information in strictest confidence and shall not use, and
shall not disclose directly or indirectly any of such Information except when,
after and to the extent such Information (i) is or becomes generally available
to the public other than through the failure of FWB or SFG to fulfill its
obligations hereunder, (ii) was already known to the party receiving the
Information on a nonconfidential basis prior to the disclosure or (iii) is
subsequently disclosed to the party receiving the Information on a
nonconfidential basis by a third party having no obligation of confidentiality
to the party disclosing the Information. It is agreed and understood that the
obligations of FWB and SFG contained in this Section 6.24 shall survive the
Closing. In the event the transactions contemplated by this Agreement are not
consummated, FWB and SFG agree to return all copies of the Information provided
to the other promptly.
6.25 SUPPLEMENTAL ASSURANCES. (a) On the date the Registration
Statement becomes effective and on the Effective Date, FWB shall deliver to SFG
a certificate signed by its principal executive officer and its principal
financial officer to the effect, to such officers' knowledge, that the
information contained in the Registration Statement relating to the business
and financial condition and affairs of FWB, does not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
(b) On the date the Registration Statement becomes effective and on
the Effective Date, SFG shall deliver to FWB a certificate signed by its chief
executive officer and its chief financial officer to the effect, to such
officers' knowledge, that the Registration Statement (other than the
information contained therein relating to the business and financial condition
and affairs of FWB) does not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
6.26 EMPLOYMENT AGREEMENT. As a result of the Parent Merger, ▇▇▇▇▇▇ ▇.
▇'▇▇▇▇▇, Chief Executive Officer of FWB, shall be entitled to payment under an
existing change in control agreement. Immediately thereafter, SFG shall enter
into a new 10-year employment agreement at a base compensation of $275,000 per
year plus a 50% incentive compensation opportunity under SFG's incentive
compensation plan and an appropriate amount of stock options for the new
position on terms and conditions mutually satisfactory to SFG and the said
Chief Executive Officer.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each of SFG and FWB to consummate the Merger is
subject to the fulfillment or written waiver by SFG and FWB prior to the
Effective Time of each of the following conditions:
40
45
(a) STOCKHOLDER APPROVALS. This Agreement (including the Parent Plan
of Merger) shall have been duly adopted by the requisite vote of the
stockholders of SFG and FWB.
(b) REGULATORY APPROVALS. All regulatory approvals required to
consummate the transactions contemplated hereby shall have been obtained and
shall remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired and no such approvals shall contain (i) any
conditions, restrictions or requirements which the SFG Board reasonably
determines would either before or after the Effective Time have a Material
Adverse Effect on SFG and its Subsidiaries taken as a whole after giving effect
to the consummation of the Merger, or (ii) any conditions, restrictions or
requirements that are not customary and usual for approvals of such type and
which the SFG Board reasonably determines would either before or after the
Effective Date be unduly burdensome.
(c) NO INJUNCTION. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and prohibits consummation of the
transactions contemplated by this Agreement.
(d) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC.
(e) BLUE SKY APPROVALS. All permits and other authorizations under
state securities laws necessary to consummate the transactions contemplated
hereby and to issue the shares of SFG Common Stock to be issued in the Parent
Merger shall have been received and be in full force and effect.
(f) ACCOUNTING TREATMENT. SFG shall have received from ▇▇▇▇▇, ▇▇▇▇▇▇
and Company, LLP, SFG's independent auditors, a letter, dated the date of or
shortly prior to each of the mailing date of the Proxy Statement and the
Effective Date, stating its opinion that the Merger shall qualify for
pooling-of-interests accounting treatment.
7.02 CONDITIONS TO OBLIGATION OF FWB. The obligation of FWB to
consummate the Merger is also subject to the fulfillment or written waiver by
FWB prior to the Effective Time of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of SFG set forth in this Agreement shall be true and correct, subject to
Section 5.02, as of the date of this Agreement and as of the Effective Date as
though made on and as of the Effective Date (except that representations and
warranties that by their terms speak as of the date of this Agreement or some
other date shall be true and correct as of such date), and FWB shall have
received a certificate, dated the Effective Date, signed on behalf of SFG by
the Chief Executive Officer and the Chief Financial Officer of SFG to such
effect.
41
46
(b) PERFORMANCE OF OBLIGATIONS OF SFG. SFG shall have performed in all
material respects all obligations required to be performed by them under this
Agreement at or prior to the Effective Time, and FWB shall have received a
certificate, dated the Effective Date, signed on behalf of SFG by the Chief
Executive Officer and the Chief Financial Officer of SFG to such effect.
(c) TAX OPINION. FWB shall have received an opinion of counsel to SFG,
dated the Effective Date, to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, (i) the Parent
Merger constitutes a "reorganization" within the meaning of Section 368 of the
Code and (ii) no gain or loss will be recognized by stockholders of FWB who
receive shares of SFG Common Stock in exchange for shares of FWB Common Stock,
and cash in lieu of fractional share interests, other than the gain or loss to
be recognized as to cash received in lieu of fractional share interests. In
rendering its opinion, counsel to SFG's independent auditors may require and
rely upon representations contained in letters from FWB and SFG.
(d) OPINION OF SFG'S COUNSEL. FWB shall have received an opinion of
Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., counsel to SFG, dated the Effective Date, to
the effect that, on the basis of the facts, representations and assumptions set
forth in the opinion, (i) SFG is a corporation duly organized and in good
standing under the laws of the State of Ohio, (ii) this Agreement has been duly
executed by SFG and constitutes the binding obligation of SFG, enforceable in
accordance with its terms against SFG, except as the same may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and
other similar laws relating to or affecting the enforcement of creditors'
rights generally, by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law) and by an
implied covenant of good faith and fair dealing and (iii) that, assuming
approval of SFG's stockholders, the SFG Common Stock to be issued as Merger
Consideration, when issued, shall be duly authorized, fully paid and
non-assessable, and (iv) that upon the filing of the certificate of merger with
the OSS, and the articles of merger with DSCP, the Parent Merger shall become
effective.
(e) FAIRNESS OPINION. FWB shall have received a fairness opinion from
Sandler ▇'▇▇▇▇▇ & Partners, L.P., financial advisor to FWB, dated as of a date
reasonably proximate to the date of the Proxy Statement, stating that the
Merger Consideration is fair to the stockholders of FWB from a financial point
of view.
7.03 CONDITIONS TO OBLIGATION OF SFG. The obligation of SFG to
consummate the Merger is also subject to the fulfillment or written waiver by
SFG prior to the Effective Time of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of FWB set forth in this Agreement shall be true and correct, subject to
Section 5.02, as of the date of this Agreement and as of the Effective Date as
though made on and as of the Effective Date (except that representations and
warranties that by their terms speak as of the date of this Agreement or some
other date shall be true and correct as of such date) and SFG shall have
received a
42
47
certificate, dated the Effective Date, signed on behalf of FWB by the Chief
Executive Officer and the Chief Financial Officer of FWB to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF FWB. FWB shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Effective Time, and SFG shall have received a
certificate, dated the Effective Date, signed on behalf of FWB by the Chief
Executive Officer and the Chief Financial Officer of FWB to such effect.
(c) OPINION OF FWB'S COUNSEL. SFG shall have received an opinion of
▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, LLP counsel to FWB, dated the Effective Date, to the
effect that, on the basis of the facts, representations and assumptions set
forth in the opinion, (i) FWB is a corporation duly organized and in good
standing under the laws of the Commonwealth of Pennsylvania, (ii) this
Agreement has been duly executed by FWB and constitutes a binding obligation on
FWB, enforceable in accordance with its terms against FWB, except as the same
may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, and other similar laws relating to or affecting the
enforcement of creditors' rights generally, by general equitable principles
(regardless of whether enforceability is considered in a proceeding in equity
or at law) and by an implied covenant of good faith and fair dealing and (iii)
that, assuming approval of FWB's stockholders, upon the filing of the
certificate of merger with the OSS and the articles of merger with the DSCP,
the Parent Merger shall become effective.
(d) AFFILIATE AGREEMENTS. SFG shall have received the agreements
referred to in Section 6.07 from each affiliate of FWB.
(e) FAIRNESS OPINION. SFG shall have received a fairness opinion from
McDonald, dated as of a date reasonably proximate to the date of the Proxy
Statement, stating that the Merger Consideration is fair to the stockholders of
SFG from a financial point of view.
ARTICLE VIII
TERMINATION
8.01 TERMINATION. This Agreement may be terminated, and the
Acquisition may be abandoned:
(a) MUTUAL CONSENT. At any time prior to the Effective Time, by the
mutual consent of SFG and FWB, if the Board of Directors of each so determines
by vote of a majority of the members of its entire Board.
(b) BREACH. At any time prior to the Effective Time, by SFG or FWB, if
its Board of Directors so determines by vote of a majority of the members of
its entire Board, in the event of either: (i) a breach by the other party of
any representation or warranty contained herein (subject to the standard set
forth in Section 5.02), which breach cannot be or has not been cured within 30
43
48
days after the giving of written notice to the breaching party of such breach;
or (ii) a breach by the other party of any of the covenants or agreements
contained herein, which breach cannot be or has not been cured within 30 days
after the giving of written notice to the breaching party of such breach,
provided that such breach (whether under (i) or (ii)) would be reasonably
likely, individually or in the aggregate with other breaches, to result in a
Material Adverse Effect.
(c) DELAY. At any time prior to the Effective Time, by SFG or FWB, if
its Board of Directors so determines by vote of a majority of the members of
its entire Board, in the event that the Parent Merger is not consummated by
September 30, 1999, except to the extent that the failure of the Parent Merger
then to be consummated arises out of or results from the knowing action or
inaction of the party seeking to terminate pursuant to this Section 8.01(c).
(d) NO APPROVAL. By FWB or SFG, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, in the
event (i) the approval of any Governmental Authority required for consummation
of the Merger and the other transactions contemplated by this Agreement shall
have been denied by final nonappealable action of such Governmental Authority;
(ii) the FWB stockholders fail to adopt this Agreement at the FWB Meeting; or
(iii) any of the closing conditions have not been met as required by Article
VII hereof.
(e) SFG COMMON STOCK. By FWB in accordance with the procedures set
forth in Exhibit C hereto if its Board of Directors so determines by a vote of
the majority of its entire Board of Directors in the event the Average NMS
Closing Price (as defined below) of SFG Common Stock is (i) lower than $25.00
AND (ii) is more than ten percent (10%) lower than the average of the NMS
Closing Prices of an index of selected, publicly traded, peer group commercial
financial institutions set forth on Exhibit C hereto, unless SFG determines to
issue additional Merger Consideration such that the condition set forth in (i)
above will no longer exist. For purposes of this Section 8.01(e), the term "NMS
Closing Price" shall mean the price per share of the last sale of SFG Common
Stock reported on the NASDAQ National Market System at the close of the trading
day by the National Association of Securities Dealers, Inc. The term "Average
NMS Closing Price" shall mean the arithmetic mean of the NMS Closing Prices for
the ten (10) trading days immediately preceding the fifth (5th) trading day
prior to the receipt of final federal regulatory approval of the Merger.
(f) DUE DILIGENCE. By SFG, if after SFG conducts its due diligence
inquiry of FWB for up to thirty days following the date hereof, the SFG Board
determines in good faith, within fifteen days thereafter, that the due
diligence inquiry has revealed one or more matters that (I) are inconsistent
with any of the representations and warranties of FWB and which have had,
constitute or are reasonably likely to have a Material Adverse Effect on FWB,
or (ii) in the reasonable judgment of the SFG Board either (A) is of such
significance as to constitute or have or be reasonably likely to have a
Material Adverse Effect on FWB, or (B) deviates materially and adversely from
the financial statements for the fiscal year ended December 31, 1997 of FWB.
(g) DUE DILIGENCE. By FWB, if after FWB conducts its due diligence
inquiry of SFG for up to thirty days following the date hereof, the FWB Board
determines in good faith, within
44
49
fifteen days thereafter, that the due diligence inquiry has revealed one or
more matters that (i) are inconsistent with any of the representations and
warranties of SFG and which have had, constitute or are reasonably likely to
have a Material Adverse Effect on SFG, or (ii) in the reasonable judgment of
the FWB Board either (A) is of such significance as to constitute or have or be
reasonably likely to have a Material Adverse Effect on SFG, or (B) deviates
materially and adversely from the financial statements for the fiscal year
ended December 31, 1997 of SFG.
(h) FAILURE TO EXECUTE AND DELIVER STOCK OPTION AGREEMENT. By SFG, if
at any time prior to the close of business, Eastern Standard Time on December
15, 1998, FWB shall not have executed and delivered the Stock Option Agreement
to SFG.
8.02 EFFECT OF TERMINATION AND ABANDONMENT, ENFORCEMENT OF AGREEMENT..
In the event of termination of this Agreement and the abandonment of the Merger
pursuant to this Article VIII, no party to this Agreement shall have any
liability or further obligation to any other party hereunder except (i) as set
forth in Section 9.01 and (ii) that termination will not relieve a breaching
party from liability for any willful breach of this Agreement giving rise to
such termination. Notwithstanding anything contained herein to the contrary,
the parties hereto agree that irreparable damage will occur in the event that a
party breaches any of its obligations, duties, covenants and agreements
contained herein. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches or threatened breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States or any state having jurisdiction,
this being in addition to any other remedy to which they are entitled by law or
in equity.
ARTICLE IX
MISCELLANEOUS
9.01 SURVIVAL. No representations, warranties, agreements and
covenants contained in this Agreement shall survive the Effective Time (other
than Sections 6.12, 6.13, 6.16, and 6.17 and this Article IX which shall
survive the Effective Time) or the termination of this Agreement if this
Agreement is terminated prior to the Effective Time (other than Sections
6.03(b), 6.04, 6.05(b), 8.02, and this Article IX which shall survive such
termination).
9.02 WAIVER; AMENDMENT. Prior to the Effective Time, any provision of
this Agreement may be (i) waived by the party benefited by the provision, or
(ii) amended or modified at any time, by an agreement in writing between the
parties hereto executed in the same manner as this Agreement, except that after
the FWB Meeting, this Agreement may not be amended if it would violate the PBCL
or the federal securities laws.
9.03 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
45
50
9.04 GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Ohio applicable to
contracts made and to be performed entirely within such State (except to the
extent that mandatory provisions of Federal law are applicable).
9.05 EXPENSES. Each party hereto will bear all expenses incurred by it
in connection with this Agreement and the transactions contemplated hereby,
except that printing and mailing expenses shall be shared equally between FWB
and SFG. All fees to be paid to Regulatory Authorities and the SEC in
connection with the transactions contemplated by this Agreement shall be borne
by SFG.
9.06 NOTICES. All notices, requests and other communications hereunder
to a party shall be in writing and shall be deemed given if personally
delivered, telecopied (with confirmation) or mailed by registered or certified
mail (return receipt requested) to such party at its address set forth below or
such other address as such party may specify by notice to the parties hereto.
If to FWB, to:
First Western Bancorp, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, Chairman and CEO
With a copy to:
First Western Bancorp, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, General Counsel
With a copy to:
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: J. ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, Esq.
If to SFG, to:
SFG Group, Inc.
▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President and COO
46
51
With a copy to:
SFG Group, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, General Counsel
With a copy to:
Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P. to:
▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: M. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
9.07 ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This
Agreement, any separate agreement entered into by the parties on even date
herewith, and any Stock Option Agreement entered into represent the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and thereby and this Agreement supersedes any and all other
oral or written agreements heretofore made (other than any such separate
agreement or Stock Option Agreement). Nothing in this Agreement, whether
express or implied, is intended to confer upon any person, other than the
parties hereto or their respective successors, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
9.08 INTERPRETATION; EFFECT. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference shall be to a
Section of, or Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and are not part of this Agreement. Whenever the
words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
9.09 WAIVER OF JURY TRIAL. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any legal proceeding
arising out of or related to this Agreement or the transactions contemplated
hereby.
* * *
[the rest of this page has been intentionally left blank]
47
52
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
FIRST WESTERN BANCORP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
___________________________
Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Title: Chairman and CEO
SKY FINANCIAL GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
____________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and COO
48
53
EXHIBIT A
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT ("Agreement"), effective as of this
____ day of December, 1998, by and between Sky Financial Group, Inc., an Ohio
corporation ("Grantee"); and First Western Bancorp, Inc., a Pennsylvania
corporation ("Grantor");
WITNESSETH:
A. Grantor and Grantee have entered into an Agreement and Plan of
Merger dated as of December 14, 1998 (the "Merger Agreement"), providing for
their affiliation with one another.
B. As further inducement for the parties to consummate the transactions
contemplated by the Merger Agreement, Grantor wishes to grant Grantee the Option
described herein.
C. The Board of Directors of Grantor has approved the grant of the
Option and the Merger Agreement prior to the date hereof.
NOW, THEREFORE, the parties agree as follows:
1. Definitions.
Capitalized terms not defined herein shall have the meanings set forth
in the Merger Agreement.
"Applicable Price" shall mean the highest of (i) the highest price
per share of Grantor Common Stock paid for any such share by the person or
groups described in the definition of a Repurchase Event, (ii) the price per
share of Grantor Common Stock received by holders of Grantor Common Stock in
connection with any merger or other business combination transaction which is a
Purchase Event, or (iii) the highest closing sales price per share of Grantor
Common Stock quoted on the National Association of Securities Dealers Automated
Quotations National Market System ("NASDAQ/NMS") (or if Grantor Common Stock is
not quoted on NASDAQ/NMS, the highest bid price per share as quoted on the
principal trading market or securities exchange on which such shares are traded
as reported by a recognized source chosen by a Grantee) during the 60 business
days preceding the Request Date; provided, however, that in the event of a sale
of less than all of Grantor's assets, the Applicable Price shall be the sum of
the price paid in such sale for such assets and the current market value of the
remaining assets of Grantor as determined by a nationally recognized investment
banking firm selected by Grantee, divided by the number of shares of Grantor
Common Stock outstanding at the time of such sale. If the consideration to be
offered, paid or received pursuant to either of the foregoing clauses (i) or
(ii) shall be other than in cash, the value of such consideration shall be
determined in good faith by an independent nationally recognized investment
banking firm selected by Grantee and reasonably acceptable to Grantor, which
determination shall be conclusive for all purposes of this Agreement.
"Bank" shall mean a financial institution subsidiary of a party.
54
"Burdensome Condition" shall mean, in connection with the grant of
a requisite regulatory approval or otherwise, imposition by a governmental
entity of any condition or restriction upon the party or one of its Subsidiaries
(as defined herein) which would reasonably be expected to either (i) have a
material adverse effect after the effective time of the Merger Agreement on the
present or prospective consolidated financial condition, business or operating
results of the party, or (ii) prevent the parties from realizing the major
portion of the economic benefits of the transactions contemplated by the Merger
Agreement that they currently anticipate obtaining.
"Commission" shall mean the Securities and Exchange Commission.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Grantee" shall mean Sky Financial Group, Inc.
"Grantor" shall mean First Western Bancorp, Inc.
"Grantor Common Stock" shall mean the respective shares of common
stock of the same class for which First Western Bancorp, Inc. is granting an
Option under this Agreement.
"Merger Agreement" shall mean the definitive agreement executed by
Sky Financial Group, Inc. and First Western Bancorp, Inc. pursuant to which the
parties hereto intend to affiliate.
"Option" shall mean the option granted by First Western Bancorp,
Inc. to Sky Financial Group, Inc. under this Agreement.
"Person" shall have the meanings specified in Sections 3(a)(9) and
13(d)(3) of the Exchange Act.
"Purchase Event" shall mean any of the following events or
transactions occurring after the date of this Agreement with respect to the
Grantor:
(i) the Grantor or any of its Subsidiaries (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC") (each hereinafter individually referred to as a
"Subsidiary" and collectively, as the "Subsidiaries")), without having received
the Grantee's prior written consent, shall have entered into an agreement with,
or the Board of Directors of Grantor shall have recommended that the
shareholders of Grantor approve or accept a transaction with any person (x) to
merge or consolidate, or enter into any similar transaction, except as
contemplated by the Merger Agreement, (y) to purchase, lease or otherwise
acquire all or substantially all of the assets of the Grantor or any of its
Subsidiaries, or (z) to purchase or otherwise acquire (including by way of
merger, consolidation, share exchange or any similar transaction) securities
representing 20% or more of the voting power of such Grantor or any of its
Subsidiaries (other than pursuant to this Agreement);
(ii) any person (other than the Grantor or its Bank in a
fiduciary capacity, or Grantee or a Grantee Bank in a fiduciary capacity) shall
have acquired beneficial ownership or the
2
55
right to acquire beneficial ownership of 20% or more of the outstanding shares
of such Grantor Common Stock after the date of this Agreement (the term
"beneficial ownership" for purposes of this Agreement having the meaning
assigned thereto in Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder);
(iii) Grantor shall have willfully breached this Agreement in
any material respect, which breach shall not have been cured within fifteen (15)
days after notice thereof is given by Grantor to Grantee;
(iv) any person other than Grantee shall have made a bona fide
Takeover Proposal to the Grantor by public announcement or written communication
that is or becomes the subject of public disclosure, and following such bona
fide Takeover Proposal, the shareholders of the Grantor vote not to adopt the
Merger Agreement;
(v) Grantor shall have breached the Merger Agreement following
a bona fide Takeover Proposal to such Grantor or any of its Subsidiaries, which
breach would entitle a Grantee to terminate the Merger Agreement and such breach
shall not have been cured prior to the Notice Date (as defined below);
(vi) the shareholders of Grantor shall have voted and failed
to approve the Merger Agreement and the Merger at a meeting which has been held
for that purpose or any adjournment or postponement thereof, or such meeting
shall not have been held in violation of the Merger Agreement or shall have been
canceled prior to termination of the Merger Agreement if, prior to such meeting
(or if such meeting shall not have been held or shall have been canceled, prior
to such termination), it shall have been publicly announced that any person
(other than Grantee or any of its Subsidiaries) shall have made, or disclosed an
intention to make, a proposal to engage in an acquisition transaction; or
(vii) the Grantor Board of Directors shall have withdrawn or
modified (or publicly announced its intention to withdraw or modify) in any
manner adverse in any respect to Grantee, its recommendation that the
shareholders of Grantor approve the transactions contemplated by the Merger
Agreement, or Grantor or any Grantor Subsidiary or group of Grantor Subsidiaries
that is, or would on an aggregate basis constitute, a Significant Subsidiary
shall have authorized, recommended, proposed (or publicly announced its
intention to authorize, recommend or propose) an agreement to engage in an
acquisition transaction with any person other than Grantee or a Grantee
Subsidiary.
If more than one of the transactions giving rise to a Purchase
Event under this Agreement is undertaken or effected, then all such transactions
shall be deemed to give rise only to one Purchase Event with respect to the
Option, which Purchase Event shall be deemed continuing for all purposes
hereunder until all such transactions are abandoned.
"Repurchase Event" shall mean if (i) any person (other than the
Grantee or any subsidiary of the Grantee) shall have acquired actual ownership
or control, or any "group" (as such term is defined under the Exchange Act)
shall have been formed which shall have acquired actual
3
56
ownership or control, of 35% or more of the then outstanding shares of Grantor
Common Stock, or (ii) any Purchase Event shall be consummated.
"Takeover Proposal" shall mean any tender or exchange offer,
proposal for a merger, consolidation or other business combination involving
Grantor or any of its Subsidiaries or any proposal or offer to acquire in any
manner 20% or more of the outstanding shares of any class of voting securities,
or 15% or more of the consolidated assets, of the Grantor or any of its
Subsidiaries, other than the transactions contemplated by the Merger Agreement.
If Grantor receives an unsolicited Takeover Proposal, it shall notify Grantee
promptly of the receipt of such Takeover Proposal, it being understood, however,
that the giving of such notice by Grantor shall not be a condition to the right
of Grantee to exercise the Option.
2. Grant of Option.
Subject to the terms and conditions set forth herein, Grantor
hereby grants to Grantee an unconditional, irrevocable Option to purchase up to
19.9% (i.e., 2,269,357 shares as of the date of this Agreement) of Grantor
Common Stock at an exercise price of $28.50 per share payable in cash as
provided in Section 4. In the event the Grantor issues or agrees to issue any
shares of Grantor Common Stock (other than as permitted under the Merger
Agreement at a price less than the exercise price per share set forth in this
section (as adjusted pursuant to Section 6), the exercise price of the Option
shall be such lesser price.
3. Exercise of Option.
(a) Unless the Grantee shall have breached in any material
respect any material covenant, representation or warranty contained in this
Agreement or the Merger Agreement and such breach shall not have been cured, the
Grantee may exercise the Option, in whole or part, at any time or from time to
time if a Purchase Event shall have occurred with respect to the Grantor and be
continuing; provided that to the extent the Option shall not have been
exercised, it shall terminate and be of no further force and effect (i) on the
effective date of the transaction contemplated by the Merger Agreement, or (ii)
upon termination of the Merger Agreement in accordance with the provisions
thereof (other than a termination resulting from a willful breach by the Grantor
of the Merger Agreement or following the occurrence of a Purchase Event, failure
of the Grantor's shareholders to approve the Merger Agreement by the vote
required under applicable law or under the respective Grantor's articles), or
(iii) 12 months after termination of the Merger Agreement due to a willful
breach by the Grantor of the Merger Agreement or, following the occurrence of a
Purchase Event, failure of the Grantor's shareholders to approve the Merger
Agreement by the vote required under applicable law or under the Grantor's
articles. Any exercise of the Option shall be subject to compliance with
applicable provisions of law.
(b) In the event the Grantee wishes to exercise the Option, it
shall send to the Grantor a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise, and (ii) a place and date not earlier
than three (3) business days nor later than 60 business days after the Notice
Date for the closing of such purchase ("Closing Date"). If prior notification to
or approval of any federal or state regulatory agency is required in connection
with such purchase, the Grantee shall promptly file the
4
57
required notice or application for approval and shall expeditiously process the
same and the period of time that otherwise would run pursuant to this section
shall run instead from the date on which any required notification period has
expired or been terminated or any requisite approval has been obtained and any
requisite waiting period shall have passed.
4. Payment and Delivery of Certificates.
(a) At the closing referred to in Section 3, the Grantee shall
pay to the Grantor the aggregate purchase price for the shares of Grantor Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by a wire transfer to a bank account designated by the Grantor. Grantor
shall pay all expenses, and any and all United States federal, state and local
taxes and other charges that may be payable in connection with the preparation,
issue and delivery of stock certificates under this Section 4 in the name of the
Grantee or its assignee, transferee or designee.
(b) At such closing, simultaneously with the delivery of funds
as provided in Section 4(a), the Grantor shall deliver to the Grantee a
certificate or certificates representing the number of shares of Grantor Common
Stock purchased by the Grantee, and the Grantee shall deliver to the Grantor a
letter agreeing that Grantee will not offer to sell or otherwise dispose of such
shares in violation of applicable law or the provisions of this Agreement.
(c) Certificates for Grantor Common Stock delivered at a
closing hereunder shall be endorsed with a restrictive legend which shall read
substantially as follows:
The transfer of the shares represented by this certificate is
subject to certain provisions of a Stock Option Agreement dated
December __, 1998, between the registered holder hereof and
[Grantor] (a copy of which agreement is on file at the principal
office of [Grantor]). A copy of such agreement will be provided to
the holder hereof without charge within five days after receipt by
[Grantor] of a written request therefor. The shares evidenced by
this certificate have not been registered under the Securities Act
of 1933 and may not be sold, pledged, transferred, or hypothecated
except pursuant to an opinion of counsel satisfactory to the
corporation that such transfer is lawful.
The above legend shall be removed or modified as appropriate by
delivery of substitute certificate(s) without such legend if the Grantee shall
have delivered to the Grantor a copy of a letter from the staff of the
Commission, or an opinion of counsel, in form and substance satisfactory to
Grantor, to the effect that such legend is not required for purposes of the
Securities Act of 1933, as amended.
5. Representations.
The Grantor represents, warrants and covenants to the Grantee as
follows:
5
58
(a) Grantor agrees: (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued or treasury
shares of Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Grantor;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act
of 1978, as amended, or any state or other federal banking law, prior approval
of or notice of the Federal Reserve Board or to any state or other federal
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Grantee in preparing such applications or notices and
providing such information to the Federal Reserve Board or such state or other
federal regulatory authority as they may require) in order to permit the Grantee
to exercise the Option and Grantor duly and effectively to issue shares of
Common Stock pursuant thereto; and (iv) promptly to take all action provided
herein to protect the rights of the Grantee against dilution.
(b) The shares to be issued upon due exercise, in whole or in
part, of the Option, when paid for as provided herein, will be duly authorized,
validly issued and fully paid.
(c) Grantor has full corporate power and authority to execute,
deliver and perform this Agreement and all corporate action necessary for
execution, delivery and performance of this Agreement has been duly taken by
such party.
(d) Neither the execution and delivery of this Agreement nor
consummation of the transactions contemplated hereby (assuming all appropriate
shareholder and regulatory approvals) will violate or result in any violation of
or be in conflict with or constitute a default under any term of the articles,
regulations or by-laws of such party or any agreement, instrument, judgment,
decree, statute, rule or order applicable to such party.
6. Adjustment Upon Changes in Capitalization.
The Grantor agrees that, in the event of any change in its Grantor
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, exchanges of shares or the like, the type and
number of shares subject to the Option, and the purchase price per share, as the
case may be, shall be adjusted appropriately. The Grantor agrees that, in the
event that any additional shares of its Grantor Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement), the number of shares of its Grantor Common Stock
subject to the Option shall be adjusted so that, after such issuance, it equals
the same percentage (as that on the date of this Agreement) of the number of
shares of Grantor Common Stock then issued and outstanding without giving effect
to any shares subject to or issued pursuant to the Option. Nothing contained in
this Section 6 shall be deemed to authorize the Grantor to breach any provision
of the Merger Agreement.
6
59
7. Registration Rights.
If requested by the Grantee, the Grantor shall as expeditiously as
possible file a registration statement on a form of general use under the
Securities Act of 1933 if necessary in order to permit the sale or other
disposition of the shares of Grantor Common Stock that have been acquired upon
exercise of the Option in accordance with the intended method of sale or other
disposition requested by the Grantee. The Grantee shall provide all information
reasonably requested by the Grantor for inclusion in any registration statement
to be filed hereunder. The Grantor will use its best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective as may be reasonably necessary to effect such
sales or other dispositions. The first registration effected under this Section
7 shall be at the Grantor's expense, except for underwriting commissions and the
fees and disbursements of the Grantee's counsel attributable to the registration
of such Grantor Common Stock. A second registration may be requested hereunder
at the Grantee's expense. In no event shall Grantor be required to effect more
than two registrations hereunder. The filing of any registration statement
hereunder may be delayed for such period of time as may reasonably be required
to facilitate any public distribution by the Grantor of other Grantor Common
Stock. If requested by the Grantee, in connection with any such registration,
Grantor will become a party to any underwriting agreement relating to the sale
of such shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements in respect of issuers of shares being
sold by a selling shareholder. Upon receiving any request from a Grantee or
permitted assignee thereof under this Section 7, Grantor agrees to send a copy
of the registration statement and prospectus and each amendment to the Grantee
and to any permitted assignee thereof known to Grantor, in each case by promptly
mailing the same, postage prepaid, to the address of record of the persons
entitled to receive such copies.
8. Termination.
This Agreement may be terminated at any time prior to the
effective date of the transaction set forth in the Merger Agreement, by action
taken or authorized by the Board of Directors of the terminating party or
parties, whether before or after approval by the stockholders of the matters
presented in connection with the Merger Agreement:
(a) by mutual consent of Grantee and Grantor;
(b) by either Grantee or Grantor if the Federal Reserve Board
shall have issued an order denying approval of the transaction set forth in the
Merger Agreement or if any governmental entity of competent jurisdiction shall
have issued a final permanent order enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement or the Merger
Agreement, or imposing a Burdensome Condition, and in any such case the time for
appeal or petition for reconsideration of such order shall have expired without
such appeal or petition being granted;
(c) by either Grantee or Grantor if the transactions
contemplated by the Merger Agreement shall not have been consummated on or
before September 30, 1999, unless such date is extended by mutual consent of the
parties hereto;
7
60
(d) by either Grantee or Grantor if no Purchase Event has
occurred and if any approval of their shareholders required for the consummation
of the transactions set forth in the Merger Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a duly called
and held meeting of shareholders or at any adjournment thereof.
(e) by Grantor, if, on or prior to January 31, 1999, Grantor
terminates the Merger Agreement pursuant to the provisions of Section 8.01(g)
thereof; or
(f) by Grantor, if, on or prior to January 31, 1999, Grantee
terminates the Merger Agreement pursuant to the provisions of Section 8.01(f)
thereof.
9. Effect of Termination.
(a) In the event of termination of this Agreement by any
party as provided in Section 8, this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of any party or their
respective officers or directors except (i) Sections 11, 12, 13 and 14 of this
Agreement shall survive the termination and (ii) with respect to any
liabilities or damages incurred or suffered by a party as a result of the
breach by another party of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
(b) If a Purchase Event occurs with respect to the Grantor,
then in such event Grantor shall pay to the Grantee, within five business days
after a termination of this Agreement following such an event, the reasonable
expenses of Grantee incurred in connection with this Agreement and the
transactions set forth in the Merger Agreement, but not more than $75,000.
10. Access to Information.
During the term of this Agreement, each party will afford each of
the other parties full and free access during normal business hours to such
party, its personnel, properties, contracts, books and records, and all other
documents and data.
11. Confidentiality.
Except as and to the extent required by law, no party will
disclose or use, and will direct its representatives not to disclose or use,
any Confidential Information (as defined below) with respect to the other
parties furnished or to be furnished by such other parties, or their respective
representatives to the party or its representatives at any time or in any
manner other than in connection with its evaluation of the transaction proposed
in this Agreement. For purposes of this section, "Confidential Information"
means any information about the Merger Agreement and this Agreement as well as
any information about a party stamped "confidential" or identified in writing
as such promptly following its disclosure, unless (i) such information is
already known to the party or its representatives or to others not bound by a
duty of confidentiality or such information becomes publicly available through
no fault of the party or its representatives, (b) the use of such information
is necessary in making any filing or obtaining any consent or approval required
for the consummation of the transactions set forth in the Merger Agreement, or
(c) the furnishing or use of such information is
8
61
required by or necessary in connection with legal proceedings. In the event the
transaction contemplated by this Agreement are not consummated, each of the
other parties will promptly return or destroy any Confidential Information in
its possession and certify in writing to the disclosing party that it has done
so.
12. Exclusive Dealing.
Grantor agrees that it shall not, and shall cause its Subsidiaries and
its and its Subsidiaries' officers, directors, agents, advisors and affiliates
not to, solicit or encourage inquiries or proposals with respect to, or engage
in any negotiations concerning, or provide any confidential information to, or
have any discussions with, any person relating to, any acquisition proposal
("Acquisition Proposal"); subject to the extent the Grantor Board of Directors
determines in good faith, after consultations with independent legal counsel
that it is required by its fiduciary duties to do so. It shall immediately
cease and cause to be terminated any activities, discussions or negotiations
conducted prior to the date of this Agreement with any parties other than
Grantee with respect to any of the foregoing and shall use its reasonable best
efforts to enforce any confidentiality or similar agreement relating to an
Acquisition Proposal. Grantor shall promptly (within 24 hours) advise Grantee
following the receipt by Grantor of any Acquisition Proposal and the substance
thereof (including the identity of the person making such Acquisition
Proposal), and advise Grantee of any material developments with respect to such
Acquisition Proposal immediately upon the occurrence thereof.
13. Disclosure.
Except as and to the extent required by law, without the prior
written consent of the other parties, no party will, and each will direct its
representatives not to, make directly or indirectly any public comment,
statement or communication with respect to, or otherwise to disclose or to
permit the disclosure of the existence of discussions regarding, a possible
transaction among the parties or any of the terms, conditions or other aspects
of the transaction proposed in this Agreement. If a party is required by law to
make any such disclosure, it must first provide to the other parties the
content of the proposed disclosure, the reasons that such disclosure is
required by law, and the time and place that the disclosure will be made.
14. Costs.
Except as otherwise expressly agreed, each party will be
responsible for and bear all of its own costs and expenses (including any
broker's or finder's fees and the expenses of its representatives) incurred at
any time in connection with this Agreement and in pursuing or consummating the
Merger Agreement.
15. Severability.
If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected,
impaired or invalidated.
9
62
If for any reason such court or regulatory agency determines that applicable
law will not permit the Grantee to acquire the full number of shares of Grantor
Common Stock provided in Section 2 (as adjusted pursuant to Section 6), it is
the express intention of the Grantor to allow the Grantee to acquire such
lesser number of shares as may be permissible, without any amendment or
modification hereof.
16. Miscellaneous.
(a) Third Parties. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective permitted successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.
(b) Entire Agreement. Except as otherwise expressly provided
herein, this Agreement contains the entire agreement among the parties with
respect to the transactions contemplated hereunder and supersede all prior
arrangements or understandings with respect thereto, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective permitted successors and assigns.
(c) Assignment. Neither of the parties hereto may assign any
of its rights or obligations under this Agreement or the Option created
hereunder to any other person, without the express written consent of the other
parties, except that in the event a Purchase Event shall have occurred and be
continuing, the Grantee may assign in whole or in part its rights and
obligations hereunder; provided, however, that Grantee may not assign its
rights under the Option except in (i) a widely dispersed public distribution,
(ii) a private placement in which no one party acquires the right to purchase
in excess of 2% of the voting shares of the Grantor, (iii) an assignment to a
single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on the Grantee's behalf, or
(iv) any other manner approved by applicable regulatory authorities.
(d) Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
by registered or certified mail, postage prepaid, express service, personal
delivery, telecopy or telefacsimile to the following addresses:
If to FWB, to:
First Western Bancorp, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, President and CEO
10
63
With a copy to:
First Western Bancorp, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, General Counsel
With a copy to:
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: J. ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, Esq.
If to SFG, to:
SFG Group, Inc.
▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President and COO
With a copy to:
SFG Group, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, General Counsel
With a copy to:
Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: M. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
(e) Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but
one agreement.
(f) Specific Performance. The parties agree that damages
would be an inadequate remedy for a breach of the provisions of this Agreement
by any party hereto and that this Agreement may be enforced by a party hereto
through injunctive or other equitable relief.
11
64
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of Pennsylvania applicable to agreements
made and entirely to be performed within such state and such federal laws as
may be applicable.
17. Repurchase at the Option of Grantee.
(a) At the request of the Grantee at any time commencing upon
the first occurrence of a Repurchase Event and ending 12 months immediately
thereafter, Grantor shall repurchase from Grantee (i) the Option and (ii) all
shares of Grantor Common Stock purchased by Grantee pursuant hereto with
respect to which Grantee then has beneficial ownership. The date on which
Grantee exercises its rights under this Section 17 is referred to as the
"Request Date." Such repurchase shall be at an aggregate price (the "Repurchase
Consideration") equal to the sum of:
(i) the aggregate purchase price paid by Grantee for any
shares of Grantor Common Stock acquired pursuant to the Option with respect to
which Grantee then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price
for each share of Grantor Common Stock over (y) the purchase price (subject to
adjustment pursuant to Section 6 hereof, multiplied by the number of shares of
Grantor Common Stock with respect to which the Option has not been exercised;
and
(iii) the excess, if any, of the Applicable Price over
the purchase price (subject to adjustment pursuant to Section 6 hereof paid
(or, in the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred), payable by Grantee for each
share of Grantor Common Stock with respect to which the Option has been
exercised and with respect to which Grantee then has beneficial ownership,
multiplied by the number of such shares.
(b) If Grantee exercises its rights under this section,
Grantor shall, within 10 business days after the Request Date, pay the Grantor
Repurchase Consideration to Grantee in immediately available funds, and
contemporaneously with such payment Grantee shall surrender to Grantor the
Option and the certificates evidencing the shares of Grantor Common Stock
purchased thereunder with respect to which Grantee then has beneficial
ownership, and Grantee shall warrant that it has sole record and beneficial
ownership of such shares and that the same are then free and clear of all
liens, claims, charges and encumbrances of any kind whatsoever. Notwithstanding
the foregoing, to the extent that prior notification to or approval of the
Federal Reserve Board or other regulatory authority is required in connection
with the repayment of all or any portion of the Repurchase Consideration
Grantee shall have the ongoing option to revoke its request for repurchase
pursuant to this section, in whole or in part, or to require that Grantor
deliver from time to time that portion of the Repurchase Consideration that it
is not then so prohibited from paying and promptly file the required notice or
application for approval and expeditiously process the same (and each party
shall cooperate with the other in the filing of any such notice or application
and the obtaining of any such approval). If the Federal Reserve Board or any
other regulatory authority disapproves of any part of Grantor's proposed
repurchase pursuant to the section, Grantor shall promptly give notice of such
fact to Grantee. If the Federal Reserve Board or other agency prohibits the
repurchase in part but not in
12
65
whole, then Grantee shall have the right (i) to revoke the repurchase request,
or (ii) to the extent permitted by the Federal Reserve Board or other agency,
determine whether the purchase should apply to the Option and or Option shares
and to what extent to each, and Grantee shall thereupon have the right to
exercise the Option as to the number of Option shares for which the Option was
exercisable at the Request Date less the sum of the number of shares covered by
the Option in respect of which payment has been made pursuant to this section
and the number of shares covered by the portion of the Option (if any) that has
been repurchased. Grantee shall notify Grantor of its determination under the
preceding sentence within five (5) business days of receipt of notice of
disapproval of the purchase.
Notwithstanding anything herein to the contrary, all of
Grantee's rights under this section shall terminate on the date of termination
of this Option.
13
66
IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement to be effective as of the day and year set forth in the first
paragraph above.
SKY FINANCIAL GROUP, INC.
By:_________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇, President and
Chief Operating Officer
FIRST WESTERN BANCORP, INC.
By:_________________________________
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, President and
Chief Executive Officer
14
67
EXHIBIT B
_____________, 1999
Sky Financial Group, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Gentlemen:
I have been advised that as of the date hereof I may be deemed to be
an "affiliate" of __________________ ("Bancorp"), as that term is defined for
purposes of Paragraphs (c) and (d) of Rule 145 of the Rules and Regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") promulgated under the Securities Act of 1933, as amended (the
"Act").
Pursuant to the terms of the Agreement and Plan of Merger by and
between Sky Financial Group, Inc. ("Sky Financial") and Bancorp dated as of
December ____, 1998 (the "Merger Agreement"), providing for the merger of
Bancorp with and into Sky Financial (the "Merger"), and as a result of the
Merger, I will receive shares of Sky Financial common stock ("Sky Financial
Common Shares") in exchange for shares of common stock of Bancorp ("Bancorp
Stock") owned by me at the Effective Time (as defined and determined pursuant
to the Merger Agreement). This letter is being delivered pursuant to Sections
6.07 and 7.03(d) of the Merger Agreement. I represent and warrant to Sky
Financial that in such event:
A. I will not sell, assign or transfer the Sky Financial Common Shares
which I receive as aforesaid in violation of the Act or the Rules and
Regulations. Moreover, to help insure that the Merger will qualify for
pooling-of-interests accounting treatment, I shall make no sale, transfer, or
other disposition of the Sky Financial Common Shares which I receive as
aforesaid until such time as financial results covering at least thirty (30)
days of post-merger combined operations of Sky Financial and Bancorp have been
published within the meaning of Section 201.01 of the Commission's Codification
of Financial Reporting Policies.
68
Sky Financial Group, Inc.
________________, 1999
B. I have carefully read this letter and the Merger Agreement and have
discussed their requirements and other applicable limitations upon my ability
to sell, transfer or otherwise dispose of the Sky Financial Common Shares, to
the extent I feel necessary, with my counsel or counsel for Bancorp. I
understand that Sky Financial is relying on the representations I am making in
this letter and I hereby agree to hold harmless and indemnify Sky Financial and
its officers and directors from and against any losses, claims, damages,
expenses (including reasonable attorneys' fees), or liabilities ("Losses") to
which Sky Financial or any officer or director of Sky Financial may become
subject under the Act or otherwise as a result of the untruth, breach, or
failure of such representations. Although I have agreed to be bound by and
understand the restrictions set forth in the second sentence of Paragraph A
above, I am under no obligation to hold harmless and indemnify Sky Financial or
its officers and directors from any Losses that may arise from any breach by me
of the restrictions set forth in the second sentence of Paragraph A.
C. I have been advised that the issuance of the Sky Financial Common
Shares issued to me pursuant to the Merger will have been registered with the
Commission under the Act on a Registration Statement on Form S-4. However, I
have also been advised that since I may be deemed to be an affiliate under the
Rules and Regulations at the time the Merger was submitted for a vote of the
shareholders of Bancorp, that the Sky Financial Common Shares must be held by
me indefinitely unless (i) my subsequent distribution of Sky Financial Common
Shares has been registered under the Act; (ii) a sale of the Sky Financial
Common Shares is made in conformity with the volume and other applicable
limitations of a transaction permitted by Rule 145 promulgated by the
Commission under the Act and as to which Sky Financial has received
satisfactory evidence of the compliance and conformity with said Rule, or (iii)
a transaction in which, in the opinion of Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P. (or
other counsel reasonably acceptable to Sky Financial) or in accordance with a
no-action letter from the Commission, some other exemption from registration is
available with respect to any such proposed sale, transfer or other disposition
of the Sky Financial Common Shares. I am also aware of the additional
limitation on transfers of Sky Financial Common Shares set forth in the second
sentence of Paragraph A above.
D. I also understand that stop transfer instructions will be given to
Sky Financial's transfer agent with respect to any Sky Financial Common Shares
which I receive in the Merger and that there will be placed on the certificates
for such Sky Financial Common Shares, a legend stating in substance:
-2-
69
Sky Financial Group, Inc.
________________, 1999
"The shares represented by this certificate have been issued
or transferred to the registered holder as a result of a transaction
to which Rule 145 under the Securities Act of 1933, as amended (the
"Act"), applies. The shares represented by this certificate may not be
sold, transferred or assigned, and the issuer shall not be required to
give effect to any attempted sale, transfer or assignment, except
pursuant to (i) an effective registration statement under the Act,
(ii) a transaction permitted by Rule 145 and as to which the issuer
has received reasonable and satisfactory evidence of compliance with
the provisions of Rule 145, or (iii) a transaction in which, in the
opinion of Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P. or other counsel
satisfactory to the issuer or in accordance with a "no action" letter
from the staff of the Securities and Exchange Commission, such shares
are not required to be registered under the Act."
It is understood and agreed that the legend set forth in Paragraph D
above shall be removed and any stop order instructions with respect thereto
shall be canceled upon receipt of advice from Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
or other counsel satisfactory to Sky Financial that such actions are
appropriate under the then-existing circumstances.
Very truly yours,
_________________________
(Name of Affiliate)
Date: ____________, 1999
PLEASE PRINT YOUR NAME
Accepted this _____ day of ___________, 1999
HERE:________________________
SKY FINANCIAL GROUP INC.
By:_____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Operating Officer
-3-
70
EXHIBIT C
For purposes of determining the applicability of Section 8.01(e) of
the Agreement, the following procedures and definitions shall apply:
1. CONDITIONS. Both of the following conditions must exist in order
for Section 8.01(e) to be triggered:
(i) the Average NMS Closing Price of SFG Common Stock (as
defined in Section 8.01(e)) must be less than $25.00; and
(ii) (A) the number obtained by dividing the Average NMS
Closing Price of SFG Common Stock by $30.75 (the "SFG Ratio") must be
less than (B) the number obtained by dividing the Final Index Price
(as defined below) by the Initial Index Price (as defined below) and
subtracting 0.10 from the quotient in this clause (ii) (B) (the "Index
Ratio").
2. DEFINITIONS. The following terms have the meanings indicated below:
"Final Index Price" means the sum of the Final Prices for each company
comprising the Index Group multiplied by the appropriate weight.
"Final Price," with respect to any company belonging to the Index
Group, means the arithmetic mean of the daily closing sales prices of a share
of common stock of such company, as reported on the consolidated transaction
reporting system for the market or exchange on which such common stock is
principally traded, for the same ten (10) trading days used in calculating the
Average NMS Closing Price of SFG Common Stock (i.e., the valuation date).
"Index Group" means the 23 financial institutions holding companies
listed below, the common stock of all of which shall be publicly traded and as
to which there shall not have been a publicly announced proposal at any time
during the period beginning on the date of the Agreement and ending on the
valuation date for any such company to be acquired. In the event that the
common stock of any such company ceases to be publicly traded or a proposal to
acquire any such company is announced at any time during the period beginning
on the date of this Agreement and ending on the valuation date, such company
will be removed from the Index Group, and the weights attributed to the
remaining companies will be adjusted proportionately for purposes of
determining the Final Index Price and the Initial Index Price. The 23 financial
institution holding companies and the weights attributed to them are as
follows:
71
Index
Ticker Name Weighting
------ ---- ---------
MTB M&T Bank Corp. 11.0%
OK Old Kent Financial Corp. 11.3%
CBSH Commerce Bancshares Inc. 7.5%
ASBC Associated Banc-Corp 6.5%
TCB TCF Financial Corp. 6.3%
PFGI Provident Financial Group Inc. 5.2%
KSTN Keystone Financial Inc. 5.3%
BNK CNB Bancshares, Inc. 4.8%
UMBF UMB Financial Corp. 2.7%
FMER FirstMerit Corp. 5.2%
OLDB Old National Bancorp 4.5%
CFBX Community First Bankshares 2.8%
OV One Valley Bancorp Inc. 3.5%
FULT ▇▇▇▇▇▇ Financial Corp. 4.2%
FMBI First Midwest Bancorp Inc. 3.3%
CBCF Citizens Banking Corp. 2.7%
AMFI AMCORE Financial Inc. 2.0%
UBSI United Bankshares Inc. 3.2%
SUSQ Susquehanna Bancshares Inc. 2.2%
FBAN F.N.B. Corp. 1.4%
FCF First Commonwealth Financial 1.6%
UBAN USBANCORP, Inc. 0.8%
STBA S&T Bancorp, Inc. 2.2%
"Initial Index Price" means the sum of each per share closing price of
the common stock of each company comprising the Index Group multiplied by the
applicable weighting, as such prices are reported on the consolidated
transactions reporting system for the market or exchange on which such common
stock is principally traded, on the trading day immediately preceding the
public announcement of the Agreement.
If SFG or any company belonging to the Index Group declares or effects a stock
dividend, reclassification, recapitalization, split-up, combination, exchange
of shares or similar transaction between the date of the Agreement and the
valuation date, the prices for the common stock of such company will be
appropriately adjusted.
3. PROCEDURES. In the event that both of the conditions specified in
paragraph 1 above are met, the parties agree that for a fifteen (15) day period
commencing on the date the parties determine the conditions have been met, SFG
at its option ("Option") may decide to distribute to FWB stockholders, pursuant
to the Agreement, the number of shares of SFG Common Stock
2
72
necessary for the Exchange Ratio to equal 30.28 divided by the Average NMS
Closing Price of SFG Common Stock. In the event SFG exercises the Option, FWB
shall have no right to terminate this Agreement pursuant to Section 8.01(e). In
the event SFG determines not to exercise the Option, it will so advise FWB in
writing, and thereafter, for a three (3) day period FWB may exercise its right
to terminate this Agreement pursuant to Section 8.01(e).
Prior to making any decision to terminate (or allow the termination
of) the Agreement, the FWB Board would consult with its financial and other
advisors and would consider all financial and other information it deemed
relevant to its decision. It is not possible to know whether such termination
right will be triggered until after the valuation date. The FWB Board has made
no decision as to whether it would exercise its right to terminate the
Agreement if the termination right in Section 8.01(e) is triggered. In
considering whether to exercise its termination right in such situation, the
FWB Board would, consistent with its fiduciary duties, take into account all
relevant facts and circumstances that exist at such time and would consult with
its financial advisors and legal counsel. Approval of the Agreement by the
stockholders of FWB will confer on the FWB Board the power, consistent with its
fiduciary duties, to elect to consummate the Parent Merger in the event the
termination right is triggered without any further action by, or resolicitation
of, the shareholders of FWB. If the FWB Board elects to exercise its
termination right, FWB must give SFG prompt notice of that decision but the FWB
Board may withdraw such notice, at its sole option, at any time.
3