<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 22, 2005
BY AND BETWEEN
IBT BANCORP, INC.
AND
THE FARWELL STATE SAVINGS BANK
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TABLE OF CONTENTS
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ARTICLE I - CERTAIN
DEFINITIONS............................................
1
1.1. Certain
Definitions................................................
1
ARTICLE II - THE
MERGER....................................................
6
2.1.
Merger.............................................................
6
2.2. Closing; Effective
Time............................................ 6
2.3. Articles of
Incorporation and Bylaws...............................
7
2.4. Directors and Officers
of Surviving Corporation.................... 7
2.5. Effects of the
Merger.............................................. 7
2.6. Tax
Consequences...................................................
7
2.7. Possible Alternative
Structures.................................... 7
ARTICLE III - CONVERSION OF
SHARES......................................... 7
3.1. Conversion of FSSB
Common Stock; Merger Consideration.............. 7
3.2. Procedures for Exchange
of FSSB Common Stock....................... 9
3.3. Reservation of
Shares.............................................. 11
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
OF FSSB........................ 11
4.1. Representations and
Warranties of FSSB............................. 11
ARTICLE V - REPRESENTATIONS AND WARRANTIES
OF IBT.......................... 24
5.1. Representations and
Warranties of IBT.............................. 24
ARTICLE VI - COVENANTS OF
FSSB............................................. 33
6.1. Conduct of
Business................................................
33
6.2. Current
Information................................................
36
6.3. Access to Properties
and Records................................... 37
6.4. Financial and Other
Statements..................................... 37
6.5. Maintenance of
Insurance........................................... 37
6.6. Disclosure
Supplements.............................................
38
6.7. Consents and Approvals
of Third Parties............................ 38
6.8. All Reasonable
Efforts............................................. 38
6.9. Failure to Fulfill
Conditions...................................... 38
6.10. No
Solicitation...................................................
38
6.11. Sarbanes-Oxley
Certification of Financial Statements.............. 39
6.12 FSSB Audit for
2005............................................... 39
ARTICLE VII - COVENANTS OF
IBT............................................. 39
7.1. Conduct of
Business................................................
39
7.2. Disclosure
Supplements.............................................
40
7.3. Consents and Approvals
of Third Parties............................ 40
7.4. All Reasonable
Efforts............................................. 40
7.5. Failure to Fulfill
Conditions...................................... 40
7.6. Employee
Benefits..................................................
40
7.7. Access to Properties
and Records................................... 40
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7.8. Financial and Other
Statements..................................... 41
7.9. Directors and Officers
Indemnification; Insurance.................. 41
ARTICLE VIII - REGULATORY AND OTHER
MATTERS................................ 42
8.1. Meetings of
Shareholders...........................................
42
8.2. Proxy
Statement--Prospectus; Merger Registration Statement.........
43
8.3. Regulatory
Approvals...............................................
44
8.4.
Affiliates.........................................................
44
8.5. Employment
Agreement...............................................
44
8.6. Post-Closing
Operations............................................ 44
ARTICLE IX - CLOSING
CONDITIONS............................................ 45
9.1. Conditions to Each
Party's Obligations Under This Agreement........ 45
9.2. Conditions to the
Obligations of IBT under this Agreement.......... 46
9.3. Conditions to the
Obligations of FSSB under this Agreement......... 46
ARTICLE X - THE
CLOSING....................................................
47
10.1. Time and
Place....................................................
47
10.2. Deliveries at the
Closing......................................... 47
ARTICLE XI - TERMINATION, AMENDMENT AND
WAIVER............................. 47
11.1.
Termination.......................................................
47
11.2. Effect of
Termination.............................................
49
11.3. Amendment, Extension
and Waiver................................... 49
ARTICLE XII -
MISCELLANEOUS................................................
50
12.1.
Confidentiality...................................................
50
12.2. Public
Announcements..............................................
50
12.3.
Survival..........................................................
51
12.4.
Notices...........................................................
51
12.5. Parties in
Interest...............................................
51
12.6. Complete
Agreement................................................
51
12.7.
Counterparts......................................................
52
12.8.
Severability......................................................
52
12.9. Governing
Law.....................................................
52
12.10.
Interpretation...................................................
52
12.11. Specific
Performance.............................................
52
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<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement
and Plan of Merger is dated as of December 22, 2005 (the
"Agreement"), by and between IBT Bancorp,
Inc., a Michigan financial services
holding company ("IBT") and The Farwell
State Savings Bank, a Michigan chartered
commercial bank ("FSSB").
WHEREAS, the
Board of Directors of each of IBT and FSSB (i) has determined
that this Agreement and the business
combination and related transactions
contemplated hereby are in the best
interests of their respective companies and
shareholders and (ii) has determined that
this Agreement and the transactions
contemplated hereby are consistent with and
in furtherance of their respective
business strategies, and (iii) has approved
this Agreement at meetings of each
of such Boards of Directors;
WHEREAS, in
accordance with the terms of this Agreement, a to be formed,
wholly-owned subsidiary of IBT will merge
with and into FSSB (the "Merger").
Concurrently, shareholders of FSSB shall
exchange their shares of FSSB for
shares of IBT and cash;
WHEREAS, the
parties currently intend that the Merger shall qualify as a
reorganization within the meaning of
Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"); and
WHEREAS, the
parties desire to make certain representations, warranties and
agreements in connection with the business
transactions described in this
Agreement and to prescribe certain
conditions thereto.
NOW, THEREFORE,
in consideration of the mutual covenants, representations,
warranties and agreements herein contained,
and of other good and valuable
consideration, the receipt and sufficiency
of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I - CERTAIN DEFINITIONS
1.1. Certain
Definitions. As used in this Agreement, the following terms
have the following meanings (unless the
context otherwise requires, references
to articles and sections refer to articles
and sections of this Agreement).
"Affiliate"
means any Person who directly, or indirectly, through one or
more intermediaries, controls, or is
controlled by, or is under common control
with, such Person and, without limiting the
generality of the foregoing,
includes any executive officer or director
of such Person and any Affiliate of
such executive officer or director.
"Agreement"
means this agreement, and any amendment hereto.
"Bank Regulator"
shall mean any Federal or state banking regulator,
including but not limited to the FDIC, the
Bureau and the FRB, which regulates
Isabella Bank and Trust, Farmers State Bank
of Breckenridge or FSSB, or IBT or
subsidiaries, as the case may be.
1
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"Bureau" shall
mean the Office of Financial and Insurance Services of the
State of Michigan.
"Certificate"
shall mean a certificate evidencing shares of FSSB Common
Stock.
"Closing" shall
have the meaning set forth in Section 2.2.
"Closing Date"
shall have the meaning set forth in Section 2.2.
"COBRA" shall
mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"Code" shall
mean the Internal Revenue Code of 1986, as amended.
"Confidentiality
Agreements" shall mean the confidentiality agreements
referred to in Section 12.1 of this
Agreement.
"Dissenting
Shareholder" shall have the meaning set forth in Section
3.1(d).
"Dissenting
Shares" shall have the meaning set forth in Section 3.1(d).
"Effective Time"
shall mean the date and time specified pursuant to Section
2.2 hereof as the effective time of the
Merger.
"Environmental
Laws" means any applicable Federal, state or local law,
statute, ordinance, rule, regulation, code,
license, permit, authorization,
approval, consent, order, judgment, decree,
injunction or agreement with any
governmental entity relating to (1) the
protection, preservation or restoration
of the environment (including, without
limitation, air, water vapor, surface
water, groundwater, drinking water supply,
surface soil, subsurface soil, plant
and animal life or any other natural
resource) and/or (2) the use, storage,
recycling, treatment, generation,
transportation, processing, handling,
labeling, production, release or disposal
of Materials of Environmental Concern.
The term Environmental Law includes without
limitation (a) the comprehensive
Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C.
Section 9601, et seq.; the resource
Conservation and Recovery Act, as amended,
42 U.S.C. Section 901, et seq.; the Clean
Air Act, as amended, 42 U.S.C. Section
7401, et seq.; the Federal Water Pollution
Control Act, as amended, 33 U.S.C.
Section 1251, et seq.; the Toxic Substances
Control Act, as amended, 15 U.S.C.
Section 2601, et seq.; the Emergency
Planning and Community Right to Know Act,
42 U.S.C. Section 11001, et seq.; the Safe
Drinking Water Act, 42 U.S.C. Section
300f, et seq.; and all comparable state and
local laws, and (b) any common law
(including without limitation common law
that may impose strict liability) that
may impose liability or obligations for
injuries or damages due to the presence
of or exposure to any Materials of
Environmental Concern.
"ERISA" shall
mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act"
shall mean the Securities Exchange Act of 1934, as amended.
2
<PAGE>
"Exchange Agent"
shall mean Isabella Bank and Trust, or such other bank or
trust company or other agent designated by
IBT, and reasonably acceptable to
FSSB, which shall act as agent for IBT in
connection with the exchanging
Certificates for the Merger
Consideration.
"Exchange Fund"
shall have the meaning set forth in Section 3.2(a).
"Exchange Ratio"
shall mean the number of shares IBT Common Stock and cash
into which a share of FSSB Common Stock
shall be converted which shall be equal
to the amount (rounded to the nearest one
thousandth) as set forth below:
3.0382 shares of IBT Common Stock plus $29.00 in cash for each
share
of FSSB Common Stock; said per share cash to be reduced by the
amount
any 2005
cash dividends paid by FSSB exceed $11.00 per share and
increased by the amount any cash dividends paid by IBT exceed $.70
per
share during 2005.
"FDIC" shall
mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FRB" shall mean
the Board of Governors of the Federal Reserve System or
any successor thereto.
"FSSB" shall
mean The Farwell State Savings Bank, with its principal
offices located at 399 West Main Street,
Farwell, Michigan, 48622.
"FSSB Common
Stock" shall mean the common stock, par value $10.00 per
share, of FSSB.
"FSSB Disclosure
Schedule" shall mean a written disclosure schedule
delivered by FSSB to IBT specifically
referring to the appropriate section of
this Agreement.
"FSSB Financial
Statements" shall mean (i) the audited statements of
financial condition (including related
notes and schedules, if any) of FSSB as
of December 31, 2004, 2003 and 2002 and the
statements of income, changes in
shareholders' equity and cash flows
(including related notes and schedules, if
any) of FSSB for each of the three years
ended December 31, 2004, 2003 and 2002,
as set forth in FSSB's annual report for
the year ended December 31, 2004 and
(ii) the unaudited interim consolidated
financial statements of FSSB as of the
end of the three-month period ended March
31, 2005, six-month period ended June
30, 2005, and nine-month period ended
September 30, 2005.
"FSSB
Shareholders Meeting" shall have the meaning set forth in
Section
8.1.
"FSSB Stock
Benefit Plans" shall mean any and all stock-based benefit plans
and amendments thereto of FSSB.
3
<PAGE>
"FSSB
Subsidiary" means any corporation or entity, 50% or more of the
equity interest of which is owned, either
directly or indirectly, by FSSB,
except any corporation or entity the equity
interest of which is held in the
ordinary course of the lending activities
of FSSB.
"GAAP" shall
mean accounting principles generally accepted in the United
States of America.
"Governmental
Entity" shall mean any Federal or state court, administrative
agency or commission or other governmental
authority or instrumentality.
"IBT" shall mean
IBT Bancorp, Inc., a Michigan corporation, with its
principal executive offices located at 200
East Broadway Street, Mt. Pleasant,
Michigan, 48858.
"IBT Common
Stock" shall mean the common stock, no par value per share, of
IBT.
"IBT Disclosure
Schedule" shall mean a written disclosure schedule
delivered by IBT to FSSB specifically
referring to the appropriate section of
this Agreement.
"IBT Financial
Statements" shall mean the (i) the audited consolidated
statements of financial condition
(including related notes and schedules) of IBT
as of December 31, 2004, 2003 and 2002 and
the consolidated statements of
income, changes in shareholders' equity and
cash flows (including related notes
and schedules, if any) of IBT for each of
the three years ended December 31,
2004, 2003 and 2002, as set forth in IBT's
annual report for the year ended
December 31, 2004, and (ii) the unaudited
interim consolidated financial
statement of IBT as of the end of the
three-month period ended March 31, 2005,
six-month period ended June 30, 2005, and
nine-month period ended September 30,
2005 as filed by IBT in its Securities
Documents.
"IBT Stock
Benefit Plans" shall mean any and all stock-based benefit plans
and amendments thereto of IBT.
"IBT Subsidiary"
means any corporation or entity, 50% or more of the equity
interest of which is owned, either directly
or indirectly, by IBT, Isabella Bank
and Trust or Farmers State Bank of
Breckenridge, except any corporation or
entity, the equity interest of which is
held in the ordinary course of the
lending activities of Isabella Bank and
Trust or Farmers State Bank of
Breckenridge.
"IRS" shall mean
the United States Internal Revenue Service.
"Knowledge" as
used with respect to a Person (including references to such
person being aware of a particular matter)
means those facts that are known by
the current executive officers and
directors of such Person, and includes any
and all facts, matters or circumstances set
forth in any written notice from any
Bank Regulator or any other material
written notice received by such executive
officer or director of that Person.
"Loan Property"
shall have the meaning set forth in Section 4.1(o).
4
<PAGE>
"Material
Adverse Effect" shall mean, with respect to IBT or FSSB,
respectively, any effect that (i) is
material and adverse to the financial
condition, results of operations or
business of IBT and its Subsidiaries taken
as a whole, or FSSB and its Subsidiaries
taken as a whole, respectively, or (ii)
does or would materially impair the ability
of either FSSB, on the one hand, or
IBT, on the other hand, to perform its
obligations under this Agreement or
otherwise materially threaten or materially
impede the consummation of the
transactions contemplated by this
Agreement; provided that "Material Adverse
Effect" shall not be deemed to include the
impact of (a) changes in laws and
regulations affecting banks generally or
interpretations thereof by courts or
governmental agencies, (b) changes in GAAP
or regulatory accounting principles
generally applicable to financial
institutions and their holding companies, (c)
actions and omissions of a party hereto (or
any of its Subsidiaries) taken with
the prior written consent of the other
party, (d) compliance with this Agreement
on the business, financial condition or
results of operations of the parties and
their respective Subsidiaries, including
the expenses incurred by the parties
hereto in consummating the transactions
contemplated by this Agreement
(consistent with the information included
in the Disclosure Schedules) and (e)
any change in the value of the securities
portfolio of IBT or FSSB,
respectively, whether held as available for
sale or held to maturity, resulting
from a change in interest rates value of
the securities portfolio of IBT or
FSSB, respectively, whether held as
available for sale or held to maturity,
resulting from a change in interest rates
generally.
"Materials of
Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and
petroleum products, and any other
materials regulated under Environmental
Laws.
"MBCA" shall
mean the Michigan Business Corporation Act, as amended.
"Merger" shall
mean the merger of a to be formed wholly-owned subsidiary of
IBT with and into FSSB pursuant to the
terms hereof.
"Merger
Consideration" shall mean the IBT Common Stock and cash, to be
paid
by IBT for each share of FSSB Common Stock,
as set forth in Section 3.1.
"Merger
Registration Statement" shall mean the registration statement,
together with all amendments, filed with
the SEC under the Securities Act for
the purpose of registering shares of IBT
Common Stock to be offered to holders
of FSSB Common Stock in connection with the
Merger.
"Michigan
Banking Law" shall mean the Michigan Banking Code of 1999, as
amended, and the rules and regulations
promulgated thereunder, as amended, as
administered by the Bureau.
"Participation
Facility" shall have the meaning set forth in Section
4.1(o).
"PBGC" shall
mean the Pension Benefit Guaranty Corporation or any successor
thereto.
"Pension Plan"
shall have the meaning set forth in Section 4.1(m).
5
<PAGE>
"Person" shall
mean any individual, corporation, limited liability company,
partnership, joint venture, association,
trust "group" (as that term is defined
under the Exchange Act) or entity.
"Proxy Statement
- Prospectus" shall have the meaning set forth in Section
8.2.
"Regulatory
Agreement" shall have the meaning set forth in Section 4.1(l).
"Regulatory
Approvals" means the approval of any Bank Regulator that is
necessary in connection with the
consummation of the Merger and the related
transactions contemplated by this
Agreement.
"Rights" shall
mean warrants, options, rights, convertible securities,
stock appreciation rights and other
arrangements or commitments which obligate
an entity to issue or dispose of any of its
capital stock or other ownership
interests or which provide for compensation
based on the equity appreciation of
its capital stock.
"SEC" shall mean
the Securities and Exchange Commission or any successor
thereto.
"Securities Act"
shall mean the Securities Act of 1933, as amended.
"Securities
Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all
similar documents filed pursuant to
the Securities Laws.
"Securities
Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended;
the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of
1939, as amended, and the rules and
regulations of the SEC promulgated
thereunder.
"Significant
Subsidiary" shall have the meaning set forth in Rule 1-02 of
Regulation S-X of the SEC.
"Surviving
Corporation" shall have the meaning set forth in Section 2.1
hereof.
"Termination
Date" shall mean June 30, 2006.
Other terms used
herein are defined in the preamble and elsewhere in this
Agreement.
ARTICLE II - THE MERGER
2.1. Merger.
Subject to the terms and conditions of this Agreement, at the
Effective Time, a to be formed wholly-owned
subsidiary of IBT shall merge with
FSSB, with FSSB as the resulting or
surviving corporation (the "Surviving
Corporation"). As part of the Merger, each
share of FSSB Common Stock shall be
converted into the right to receive the
Merger Consideration pursuant to the
terms of Article III hereof.
6
<PAGE>
2.2. Closing;
Effective Time. Subject to the satisfaction or waiver of all
conditions to closing contained in Article
IX hereof, the Closing shall occur no
later than five (5) business days following
the latest to occur of (i) the
receipt of all required Regulatory
Approvals, and the expiration of any
applicable waiting periods, (ii) the
approval of the Merger by the shareholders
of FSSB, or (iii) at such other date or
time upon which IBT and FSSB mutually
agree (the "Closing"). The Merger shall be
effected by the filing of a
certificate of merger with the Bureau on
the day of the Closing (the "Closing
Date"), in accordance with Michigan Banking
Law. The "Effective Time" means the
date and time upon which the certificate of
merger is filed with the Bureau, or
as otherwise stated in the certificate of
merger, in accordance with Michigan
Banking Law.
2.3. Articles of
Incorporation and Bylaws. The Articles of Incorporation
and Bylaws of FSSB as in effect immediately
prior to the Effective Time shall be
the Articles of Incorporation and Bylaws of
the Surviving Corporation, until
thereafter amended as provided therein and
by applicable law.
2.4. Directors
and Officers of Surviving Corporation. The board directors
of the Surviving Corporation shall consist
of the directors of FSSB in office
immediately prior to the Effective Time and
one (1) director to be designated by
IBT, each to hold office in accordance with
the Articles of Incorporation and
Bylaws of the Surviving Corporation. Board
member compensation of the Surviving
Corporation shall not change as a result of
the Merger; however, IBT shall
conduct periodic reviews of director
compensation to assess reasonableness and
consistency. The officers of FSSB
immediately prior to the Effective Time shall
be the initial officers of Surviving
Corporation in each case until their
respective successors are duly elected or
appointed and qualified.
2.5. Effects of
the Merger. At and after the Effective Time, the Merger
shall have the effects as set forth in the
Michigan Banking Law.
2.6. Tax
Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of
Section 368(a) of the Code and that this
Agreement shall constitute a "plan of
reorganization" as that term is used in
Sections 354 and 361 of the Code. From and
after the date of this Agreement and
until the Closing, each party hereto shall
use its reasonable best efforts to
cause the Merger to qualify, and will not
knowingly take any action, cause any
action to be taken, fail to take any action
or cause any action to fail to be
taken which action or failure to act could
prevent the Merger from qualifying as
a reorganization under Section 368(a) of
the Code other than is contemplated by
this Agreement. Following the Closing,
neither IBT nor FSSB nor any of their
Affiliates shall knowingly take any action,
cause any action to be taken, fail
to take any action or cause any action to
fail to be taken, which action or
failure to act could cause the Merger to
fail to qualify as a reorganization
under Section 368(a) of the Code.
2.7. Possible
Alternative Structures. Notwithstanding anything to the
contrary contained in this Agreement and
subject to the satisfaction of the
conditions set forth in Article IX, prior
to the Effective Time, IBT shall, with
the consent of FSSB, which will not be
unreasonably withheld, be entitled to
revise the structure of the Merger
described in Section 2.1
7
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hereof provided that (i) there are no
adverse Federal or state income tax
consequences to FSSB shareholders as a
result of the modification; (ii) the
consideration to be paid to the holders of
FSSB Common Stock under this
Agreement is not thereby changed in kind or
value (or the relative mix thereof),
or reduced in amount; and (iii) such
modification will not delay materially or
jeopardize receipt of any required
Regulatory Approvals or other consents and
approvals relating to the consummation of
the Merger. The parties hereto agree
to appropriately amend this Agreement and
any related documents in order to
reflect any such revised structure.
ARTICLE III - CONVERSION OF SHARES
3.1. Conversion
of FSSB Common Stock; Merger Consideration. At the
Effective Time, by virtue of the Merger and
without any action on the part of
IBT, FSSB or the holders of any of the
shares of FSSB Common Stock, the Merger
shall be effected in accordance with the
following terms:
(a) Each share of IBT Common Stock that is issued and
outstanding
immediately prior to the Effective Time
shall remain issued and outstanding
following the Effective Time and shall be
unchanged by the Merger.
(b) All shares of FSSB Common Stock held in the treasury of FSSB
and
each share of FSSB Common Stock owned by
IBT or any direct or indirect wholly
owned subsidiary of IBT or of FSSB
immediately prior to the Effective Time,
shall cease to exist, and the certificates
for such shares shall be canceled as
promptly as practicable thereafter, and no
payment or distribution shall be made
in consideration therefor.
(c) Except as set forth above, each share of FSSB Common Stock
issued
and outstanding immediately prior to the
Effective Time (other than Dissenting
Shares) shall become and be converted into,
as provided in and subject to the
limitations set forth in this Agreement,
the right to receive shares of IBT
Common Stock and cash based on the Exchange
Ratio (the "Merger Consideration").
(d) Each outstanding share of FSSB Common Stock the holder of
which
has perfected his right to dissent under
Michigan Banking Law and has not
effectively withdrawn or lost such right as
of the Effective Time (the
"Dissenting Shares") shall not be converted
into or represent a right to receive
the Merger Consideration hereunder, and the
holder thereof shall be entitled
only to such rights as are granted by
Michigan Banking Law. FSSB shall give IBT
prompt notice upon receipt by FSSB of any
such demands for payment of the fair
value of such shares of FSSB Common Stock
and of withdrawals of such demands and
any other instruments provided pursuant to
applicable law (any shareholder duly
making such demand being hereinafter called
a "Dissenting Shareholder"), and IBT
shall have the right to participate in all
negotiations and proceedings with
respect to any such demand for payment, or
waive any failure to timely deliver a
written demand for appraisal or the taking
of any other action by such
Dissenting Shareholder as may be necessary
to perfect appraisal rights under
Michigan Banking Law. Any payments made in
respect to Dissenting Shares shall be
made by the Surviving Corporation.
8
<PAGE>
(e) If any Dissenting Shareholder shall effectively withdraw or
lose
(through failure to perfect or otherwise)
his right to such payment at or prior
to the Effective Time, such holder's share
of FSSB Common Stock shall be
converted into a right to receive the
Merger Consideration in accordance with
the applicable provisions of this
Agreement.
(f) After the Effective Time, shares of FSSB Common Stock shall
no
longer be outstanding and shall
automatically be canceled and shall cease to
exist, and shall thereafter by operation of
this section be converted into the
right to receive the Merger
Consideration.
(g) Notwithstanding anything to the contrary contained herein,
no
certificates or script representing
fractional shares of IBT Common Stock shall
be issued upon the surrender and exchange
of Certificates, no dividend or
distribution with respect to IBT Common
Stock shall be payable on or with
respect to any fractional share interest,
and such fractional share interests
shall not entitle the owner thereof to vote
or to any other rights of a
shareholder of IBT. In lieu of the issuance
of any such fractional share, IBT
shall pay to each former holder of FSSB
Common Stock who otherwise would be
entitled to receive a fractional share of
IBT Common Stock, an amount in cash,
rounded to the nearest cent and without
interest, equal to the product of (i)
the fraction of a share to which such
holder would otherwise have been entitled
and (ii) $42.00. For purposes of
determining any fractional share interest, all
shares of FSSB Common Stock owned by a FSSB
shareholder shall be combined so as
to calculate the maximum number of whole
shares of IBT Common Stock issuable to
such FSSB Shareholder.
(h) In the event that, subsequent to the date of this Agreement
but
prior to the Effective Time, the
outstanding shares of IBT Common Stock and/or
FSSB Common Stock shall have been
increased, decreased, changed into or
exchanged for a different number or kind of
shares or securities through a
reorganization, recapitalization,
reclassification, stock dividend, stock split,
reverse stock split, or other similar
change in capitalization, or exchanged or
converted into shares or securities of
another corporation, then an appropriate,
equitable and proportionate adjustment
shall be made to the Exchange Ratio.
3.2. Procedures
for Exchange of FSSB Common Stock.
(a) IBT to Make Merger Consideration Available. No later than
the
Closing Date, IBT shall deposit, or shall
cause to be deposited, in an account
with the Exchange Agent for the benefit of
the holders of FSSB Common Stock, for
exchange in accordance with this Section
3.2, certificates representing the
shares of IBT Common Stock and an aggregate
amount of cash sufficient to pay the
aggregate amount of cash payable pursuant
to this Article III (such cash and
certificates for shares of IBT Common
Stock, together with any dividends or
distributions with respect thereto (without
any interest thereon) being
hereinafter referred to as the "Exchange
Fund").
(b) Exchange of Certificates. IBT shall take any steps necessary
to
cause the Exchange Agent, within five (5)
business days after the Effective
Time, to mail to each holder of a
Certificate or Certificates, a form letter of
transmittal for return to the Exchange
Agent and instructions for use in
effecting the surrender of the Certificates
in exchange for the Merger
Consideration. The letter of transmittal
shall be in customary form and shall
specify that
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<PAGE>
delivery shall be effected, and risk of
loss and title to the Certificates shall
pass, only upon delivery of the
Certificates to the Exchange Agent. Upon proper
surrender of a Certificate for exchange and
cancellation to the Exchange Agent,
together with a properly completed letter
of transmittal, duly executed, the
holder of such Certificate shall be
entitled to receive in exchange therefore
the Merger Consideration to which such
holder of FSSB Common Stock shall have
become entitled pursuant to Section 3.1(c)
and 3.1(g) hereof, and the
Certificate so surrendered shall forthwith
be cancelled. No interest will be
paid or accrued on any cash payable
hereunder or any unpaid dividends and
distributions, if any, payable to holders
of Certificates.
(c) Rights of Certificate Holders After the Effective Time. The
holder
of a Certificate that prior to the Merger
represented issued and outstanding
FSSB Common Stock shall have no rights
(excluding dissenter's rights of those
shareholders properly exercising
dissenter's rights), after the Effective Time,
with respect to such FSSB Common Stock
except to surrender the Certificate in
exchange for the Merger Consideration as
provided in this Agreement. No
dividends or other distributions declared
after the Effective Time with respect
to IBT Common Stock or interest with
respect to cash, shall be paid to the
holder of any unsurrendered Certificate
until the holder thereof shall surrender
such Certificate in accordance with this
Section 3.2. After the surrender of a
Certificate in accordance with this Section
3.2, the record holder thereof shall
be entitled to receive any such dividends
or other distributions, without any
interest thereon, which theretofore had
become payable with respect to shares of
IBT Common Stock represented by such
Certificate.
(d) Surrender by Persons Other than Record Holders. If the
Person
surrendering a Certificate and signing the
accompanying letter of transmittal is
not the record holder thereof, then it
shall be a condition of the payment of
the Merger Consideration that: (i) such
Certificate is properly endorsed to such
Person or is accompanied by appropriate
stock powers, in either case signed
exactly as the name of the record holder
appears on such Certificate, and is
otherwise in proper form for transfer, or
is accompanied by appropriate evidence
of the authority of the Person surrendering
such Certificate and signing the
letter of transmittal to do so on behalf of
the record holder; and (ii) the
person requesting such exchange shall pay
to the Exchange Agent in advance any
transfer or other taxes required by reason
of the payment to a Person other than
the registered holder of the Certificate
surrendered, or required for any other
reason, or shall establish to the
satisfaction of the Exchange Agent that such
tax has been paid or is not payable.
(e) Closing of Transfer Books. From and after the Effective
Time,
there shall be no transfers on the stock
transfer books of FSSB of the FSSB
Common Stock that were outstanding
immediately prior to the Effective Time. If,
after the Effective Time, Certificates
representing such shares are presented
for transfer to the Exchange Agent, they
shall be exchanged for the Merger
Consideration and canceled as provided in
this Section 3.2. Certificates
surrendered for exchange by any person
constituting an "affiliate" of FSSB for
purposes of Rule 145 under the Securities
Act, shall not be exchanged until IBT
has received a written agreement from such
person as provided in Section 8.4.
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<PAGE>
(f) Return of Exchange Fund. At any time following the twelve
(12)
month period after the Effective Time, IBT
shall be entitled to require the
Exchange Agent to deliver to it any
portions of the Exchange Fund which has been
made available to the Exchange Agent and
not disbursed to holders of
Certificates (including, without
limitation, all interest and other income
received by the Exchange Agent in respect
of all funds made available to it),
and thereafter such holders shall be
entitled to look to IBT (subject to
abandoned property, escheat and other
similar laws) with respect to any Merger
Consideration that may be payable upon due
surrender of the Certificates held by
them. Notwithstanding the foregoing,
neither IBT nor the Exchange Agent shall be
liable to any holder of a Certificate for
any Merger Consideration delivered in
respect of such Certificate to a public
official pursuant to any abandoned
property, escheat or other similar law.
(g) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or
destroyed, upon the making of an
affidavit of that fact by the person
claiming such Certificate to be lost,
stolen or destroyed and, if required by
IBT, the posting by such person of a
bond in such amount as IBT may reasonably
direct as indemnity against any claim
that may be made against it with respect to
such Certificate, the Exchange Agent
will issue in exchange for such lost,
stolen or destroyed Certificate, the
Merger Consideration deliverable in respect
thereof.
(h) Withholding. IBT or the Exchange Agent will be entitled to
deduct
and withhold from the consideration
otherwise payable pursuant to this Agreement
or the transactions contemplated hereby to
any holder of FSSB Common Stock such
amounts as IBT (or any Affiliate thereof)
or the Exchange Agent are required to
deduct and withhold with respect to the
making of such payment under the Code,
or any applicable provision of U.S.
Federal, state, local or non-U.S. tax law.
To the extent that such amounts are
properly withheld by IBT or the Exchange
Agent, such withheld amounts will be
treated for all purposes of this Agreement
as having been paid to the holder of the
FSSB Common Stock in respect of whom
such deduction and withholding were made by
IBT or the Exchange Agent and such
amounts shall be delivered to the
applicable taxing authorities.
3.3. Reservation
of Shares. IBT shall reserve for issuance a sufficient
number of shares of IBT Common Stock for
the purpose of issuing shares of IBT
Common Stock to the FSSB shareholders in
accordance with this Article III.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF FSSB
4.1.
Representations and Warranties of FSSB. FSSB represents and
warrants
to IBT that the statements contained in
this Article IV are correct as of the
date of this Agreement, except as set forth
in the FSSB Disclosure Schedule
delivered by FSSB to IBT on the date
hereof, and except as to any representation
or warranty which specifically relates to
an earlier date. FSSB has made a good
faith effort to ensure that the disclosure
on each schedule of the FSSB
Disclosure Schedule corresponds to the
section referenced herein. However, for
purposes of the FSSB Disclosure Schedule,
any item disclosed on any schedule
therein is deemed to be
11
<PAGE>
fully disclosed with respect to all
schedules under which such item may be
relevant as and to the extent that it is
reasonably apparent that such item
applies to such other schedule.
(a) Organization, Standing and Power.
(i) FSSB is a Michigan chartered commercial bank duly
organized,
validly existing and in good standing under
the laws of the State of Michigan.
FSSB has all requisite power and authority
to own, lease and operate its
properties and to carry on its business as
now being conducted. The deposits of
FSSB are insured by the FDIC to the fullest
extent permitted by law, and all
premiums and assessments required to be
paid in connection therewith have been
paid by FSSB when due.
(ii) FSSB Disclosure Schedule 4.1(a)(ii) sets forth each FSSB
Subsidiary. Each FSSB Subsidiary is a
corporation, limited liability company or
other legal entity duly organized, validly
existing and in good standing under
the laws of its jurisdiction of
incorporation or organization.
(iii) The respective minute books of FSSB and each FSSB
Subsidiary accurately records, in all
material respects, all material corporate
actions of the respective shareholders and
boards of directors (including
committees) since January 1, 2003.
(iv) Prior to the date of this Agreement, FSSB has made
available
to IBT, true and correct copies of the
articles of incorporation or charter and
bylaws of FSSB and each FSSB Subsidiary.
FSSB Disclosure Schedule 4.1(a)(iv)
sets forth any and all current
noncompliance with FSSB's charter and bylaws.
Such noncompliance has not, and will not
have, a Material Adverse Effect on
FSSB.
(b) Capital Structure.
(i) The authorized capital stock of FSSB consists of 262,500
shares of FSSB Common Stock, of which
262,500 shares are outstanding, validly
issued, fully paid and nonassessable
(except for assessments by the Bureau
pursuant to Section 3807 of the Michigan
Banking Code of 1999) and free of
preemptive rights. There are no shares of
FSSB Common Stock held by FSSB as
treasury stock. FSSB has no outstanding
options, warrants or other rights which
are convertible into shares of FSSB Common
Stock, except as disclosed on FSSB
Disclosure Schedule 4.1(b)(i). Neither FSSB
nor any FSSB Subsidiary has or is
bound by any Rights of any character
relating to the purchase, sale or issuance
or voting of, or right to receive dividends
or other distributions on any shares
of FSSB Common Stock, or any other security
of FSSB or any securities
representing the right to vote, purchase or
otherwise receive any shares of FSSB
Common Stock or any other security of FSSB,
other than shares issuable under the
FSSB Stock Benefit Plans. FSSB Disclosure
Schedule 4.1(b)(i) sets forth: the
name of each holder of an award granted
under any FSSB Stock Benefit Plan,
identifying the nature, number of shares,
grant and vesting dates of the award.
(ii) Except for the FSSB Subsidiaries and as set forth in FSSB
Disclosure Schedule 4.1(b)(ii), FSSB does
not possess, directly or indirectly,
any material equity interest in any
12
<PAGE>
corporate entity, except for equity
interests held in the investment portfolios
of FSSB or any FSSB Subsidiary, equity
interests held by FSSB in a fiduciary
capacity, and equity interests held in
connection with the lending activities of
FSSB. FSSB owns each of its outstanding
shares of capital stock of each FSSB
Subsidiary free and clear of all liens,
security interests, pledges, charges,
encumbrances, agreements and restrictions
of any kind or nature.
(iii) To FSSB's Knowledge, except as set forth on FSSB
Disclosure
Schedule 4.1(b)(iii), no Person is the
beneficial owner (as defined in Section
13(d) of the Exchange Act) of 5% or more of
the outstanding shares of FSSB
Common Stock.
(iv) No bonds, debentures, notes or other indebtedness having
the
right to vote on any matters on which
FSSB's shareholders may vote has been
issued by FSSB and are outstanding.
(c) Authority.
(i) FSSB has full corporate power and authority to execute and
deliver this Agreement and, subject to the
receipt of the Regulatory Approvals
described in Section 8.3 and the approval
of this Agreement by FSSB's
shareholders, to consummate the
transactions contemplated hereby. The execution
and delivery of this Agreement by FSSB and
the completion by FSSB of the
transactions contemplated hereby, up to and
including the Merger, have been duly
and validly approved by the Board of
Directors of FSSB. This Agreement has been
duly and validly executed and delivered by
FSSB, and subject to approval by the
shareholders of FSSB and receipt of the
Regulatory Approvals, constitutes the
valid and binding obligation of FSSB,
enforceable against FSSB in accordance
with its terms, subject to applicable
bankruptcy, insolvency and similar laws
affecting creditors' rights generally, and
subject, as to enforceability, to
general principles of equity.
(ii) (A) The execution and delivery of this Agreement by FSSB,
(B) subject to receipt of Regulatory
Approvals, and FSSB's and IBT's compliance
with any conditions contained therein, and
subject to the receipt of the
approval of the shareholders of FSSB, the
consummation of the transactions
contemplated hereby, and (C) compliance by
FSSB with any of the terms or
provisions hereof will not (i) conflict
with or result in a breach of any
provision of the Articles of Incorporation
or Bylaws of FSSB or any FSSB
Subsidiary; (ii) violate any statute, code,
ordinance, rule, regulation,
judgment, order, writ, decree or injunction
applicable to FSSB or any FSSB
Subsidiary or any of their respective
properties or assets; or (iii) except as
set forth in FSSB Disclosure Schedule
4.1(c)(ii), violate, conflict with, result
in a breach of any provisions of,
constitute a default (or an event which, with
notice or lapse of time, or both, would
constitute a default), under, result in
the termination of, accelerate the
performance required by, or result in a right
of termination or acceleration or the
creation of any lien, security interest,
charge or other encumbrance upon any of the
properties or assets of FSSB or any
FSSB Subsidiary under any of the terms,
conditions or provisions of any note,
bond, mortgage, indenture, deed of trust,
license, lease, agreement or other
investment or obligation to which FSSB or
any FSSB Subsidiary is a party, or by
which they or any of their respective
properties or assets may be bound or
affected, except for such violations,
conflicts, breaches or defaults under
clause (ii) or (iii) hereof which,
either
13
<PAGE>
individually or in the aggregate, will not
have a Material Adverse Effect on
FSSB and the FSSB Subsidiaries taken as a
whole.
(d) Information Supplied. None of the information supplied or to
be
supplied by FSSB or any FSSB Subsidiary for
inclusion or incorporation by
reference in (i) the Registration Statement
on Form S-4 to be filed with the SEC
by IBT in connection with the issuance of
shares of IBT Common Stock in the
Merger (including the Proxy Statement and
prospectus constituting a part
thereof, the "S-4") will, at the time the
S-4 becomes effective under the
Securities Act, contain any untrue
statement of a material fact or omit to state
any material fact required to be stated
therein or necessary to make the
statements therein not misleading, and (ii)
the Proxy Statement - Prospectus and
any amendment or supplement thereto will,
at the date of mailing to FSSB
shareholders and at the time of the meeting
of shareholders of FSSB to be held
in connection with the Merger, contain any
untrue statement of a material fact
or omit to state any material fact required
to be stated therein or necessary in
order to make the statements therein not
misleading. The Proxy Statement -
Prospectus (except for such portions
thereof that relate only to IBT) will
comply in all material respects with the
provisions of the Exchange Act and the
rules and regulations thereunder, and the
S-4 (except for such portions thereof
that relate only to IBT) will comply in all
material respects with the
provisions of the Securities Act and the
rules and regulations thereunder.
(e) Consents. Except for the Regulatory Approvals referred to
in
Section 8.3 hereof and consents set forth
in FSSB Disclosure Schedule 4.1(e) and
compliance with any conditions contained
therein, and the approval of this
Agreement by the requisite vote of the
shareholders of FSSB, no consents,
waivers or approvals of, or filings or
registrations with, any Governmental
Entity or Bank Regulator are necessary,
and, to FSSB's Knowledge, no consents,
waivers or approvals of, or filings or
registrations with, any other third
parties are necessary, in connection with
the execution and delivery of this
Agreement by FSSB, and the completion by
FSSB of the Merger. To FSSB's
knowledge, (i) it has not received notice
as of the date hereof that any Bank
Regulator intends to disapprove or object
to the completion of the transactions
contemplated by this Agreement, and (ii)
there is no reason to expect that all
Regulatory Approvals required for the
consummation of the transactions
contemplated by this Agreement will not be
received.
(f) Financial Statements.
(i) FSSB has previously made available to IBT the FSSB
Financial
Statements. Except as disclosed in FSSB
Disclosure Schedule 4.1(f)(i), the FSSB
Financial Statements have been prepared in
accordance with GAAP, and (including
the related notes where applicable) fairly
present in each case in all material
respects (subject to the case of the
unaudited interim statements to normal
year-end adjustments) the consolidated
financial position, results of operations
and cash flows of FSSB and the FSSB
Subsidiaries on a consolidated basis as of
and for the respective periods ending on
the dates thereof, in accordance with
GAAP during the periods involved, except as
indicated in the notes thereto.
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<PAGE>
(ii) Except as disclosed in FSSB Disclosure Schedule
4.1(f)(ii),
at the date of each balance sheet included
in the FSSB Financial Statements,
FSSB did not have any liability, obligation
or loss contingency of any nature
(whether absolute, accrued, contingent or
otherwise) of a type required to be
reflected in such FSSB Financial Statements
or in the footnotes thereto which
were not fully reflected or reserved
against therein or fully disclosed in a
footnote thereto, except for liabilities,
obligations and loss contingencies
which were not material individually or in
the aggregate or which are incurred
in the ordinary course of business,
consistent with past practice, and except
for liabilities, obligations and loss
contingencies which are within the subject
matter of a specific representation and
warranty herein and subject, in the case
of any unaudited statements, to normal,
recurring audit adjustments and the
absence of footnotes.
(g) Taxes. Except as set forth in FSSB Disclosure Schedule
4.1(g),
FSSB and the FSSB Subsidiaries that are at
least 80% owned by FSSB are members
of the same affiliated group within the
meaning of Code Section 1504(a) and (A)
FSSB has duly filed all federal, state and
material local tax returns required
to be filed by or with respect to FSSB and
each Significant Subsidiary of FSSB
on or prior to the Closing Date, taking
into account any extensions (all such
returns, to FSSB's Knowledge, being
accurate and correct in all material
respects) and has duly paid or made
provisions for the payment of all material
federal, state and local taxes which have
been incurred by or are due or claimed
to be due from FSSB and any Significant
Subsidiary of FSSB by any taxing
authority or pursuant to any written tax
sharing agreement on or prior to the
Closing Date other than taxes or other
charges which (i) are not delinquent,
(ii) are being contested in good faith, or
(iii) have not yet been fully
determined, (B) as of the date of this
Agreement, FSSB has received no written
notice of, and to FSSB's Knowledge there is
no audit examination, deficiency
assessment, tax investigation or refund
litigation with respect to any taxes of
FSSB or any of its Significant
Subsidiaries, and no claim has been made by any
authority in a jurisdiction where FSSB or
any of its Significant Subsidiaries do
not file tax returns that FSSB or any such
Significant Subsidiary is subject to
taxation in that jurisdiction and (C) FSSB
and its Significant Subsidiaries have
not executed an extension or waiver of any
statute of limitations on the
assessment or collection of any material
tax due that is currently in effect.
FSSB and each of its Significant
Subsidiaries has withheld and paid all taxes
required to have been withheld and paid in
connection with amounts paid or owing
to any employee, independent contractor,
creditor, shareholder or other third
party, and FSSB and each of its Significant
Subsidiaries, to FSSB's Knowledge,
has timely complied with all applicable
information reporting requirements under
Part III, Subchapter A of Chapter 61 of the
Code and similar applicable state
and local information reporting
requirements.
(h) No Material Adverse Effect. Except as disclosed in FSSB
Disclosure
Schedule 4.1(h), FSSB and the FSSB
Subsidiaries, taken as a whole, have not
suffered any Material Adverse Effect since
December 31, 2004, and, to FSSB's
Knowledge, no event has occurred or
circumstance arisen since that date which,
in the aggregate, has had or is reasonably
likely to have a Material Adverse
Effect on FSSB and the FSSB Subsidiaries,
taken as a whole.
(i) Material Contracts; Leases; Defaults.
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<PAGE>
(i) Except as set forth in FSSB Disclosure Schedule 4.1(i)(i),
neither FSSB nor any FSSB Subsidiary is a
party to or subject to: (i) any
employment, consulting or severance
contract with any past or present officer,
director or employee of FSSB or any FSSB
Subsidiary, except for "at will"
arrangements; (ii) any plan or contract
providing for bonuses, pensions,
options, deferred compensation, retirement
payments, profit sharing or similar
material arrangements for or with any past
or present officers, directors or
employees of FSSB or any FSSB Subsidiary;
(iii) any collective bargaining
agreement with any labor union relating to
employees of FSSB or any FSSB
Subsidiary; (iv) any agreement (other than
this Agreement) which by its terms
limits the payment of dividends by FSSB or
any FSSB Subsidiary; (v) any
instrument evidencing or related to
material indebtedness for borrowed money
whether directly or indirectly, by way of
purchase money obligation, conditional
sale, lease purchase, guaranty or
otherwise, in respect of which FSSB or any
FSSB Subsidiary is an obligor to any
person, which instrument evidences or
relates to indebtedness other than
deposits, repurchase agreements, bankers'
acceptances, and "treasury tax and loan"
accounts established in the ordinary
course of business and transactions in
"federal funds" or which contains
financial covenants or other restrictions
(other than those relating to the
payment of principal and interest when due)
which would be applicable on or
after the Closing Date to IBT or any IBT
Subsidiary; (vi) any other agreement,
written or oral, that obligates FSSB or any
FSSB Subsidiary for the payment of
more than $50,000 annually; or (vii) any
agreement (other than this Agreement),
contract, arrangement, commitment or
understanding (whether written or oral)
that restricts or limits in any material
way the conduct of business by FSSB or
any FSSB Subsidiary (it being understood
that any non-compete or similar
provision shall be deemed material).
(ii) Each real estate lease that will require the consent of
the
lessor or its agent or the assignment to
IBT as a result of the Merger by virtue
of the terms of any such lease, is listed
in FSSB Disclosure Schedule 4.1(i)(ii)
identifying the section of the lease that
contains such prohibition or
restriction. Subject to any consents that
may be required as a result of the
transactions contemplated by this
Agreement, to its Knowledge, neither FSSB nor
any FSSB Subsidiary is in default in any
material respect under any material
contract, agreement, commitment,
arrangement, lease, insurance policy or other
instrument to which it is a party, by which
its assets, business, or operations
may be bound or affected, or under which it
or its 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.
(iii) True and correct copies of agreements, contracts,
arrangements and instruments referred to in
Section 4.1(i)(i) and 4.1(i)(ii)
have been made available to IBT on or
before the date hereof, are listed on FSSB
Disclosure Schedule 4.1(i)(i) and
4.1(i)(ii) and are in full force and effect on
the date hereof. Except as set forth in
FSSB Disclosure Schedule 4.1(i)(iii), no
plan, contract, employment agreement,
termination agreement, or similar
agreement or arrangement to which FSSB or
any FSSB Subsidiary is a party or
under which FSSB or any FSSB Subsidiary may
be liable contains provisions which
permit an employee or independent
contractor to terminate it without cause and
continue to accrue future benefits
thereunder. Except as set forth in FSSB
Disclosure Schedule 4.1(i)(iii), no such
agreement, plan, contract, or
arrangement (x) provides for acceleration
in the vesting of benefits or payments
due thereunder upon the occurrence of a
change in ownership or control of FSSB
or any FSSB Subsidiary; or (y) requires
FSSB or any FSSB
16
<PAGE>
Subsidiary to provide a benefit in the form
of FSSB Common Stock or determined
by reference to the value of FSSB Common
Stock. FSSB Disclosure Schedule
4.1(i)(iii) sets forth an analysis of FSSB
Pension Plan liability including the
amounts that are funded and unfunded.
(j) Ownership of Property; Insurance Coverage.
(i) FSSB and each FSSB Subsidiary has good and, as to real
property, marketable title to all material
assets and properties owned by FSSB
or each FSSB Subsidiary in the conduct of
its businesses, whether such assets
and properties are real or personal,
tangible or intangible, including assets
and property reflected in the balance sheet
contained in the most recent FSSB
Financial Statements or acquired subsequent
thereto (except to the extent that
such assets and properties have been
disposed of in the ordinary course of
business, since the date of such balance
sheet), subject to no material
encumbrances, liens, mortgages, security
interests or pledges, except (i) those
items which secure liabilities for public
or statutory obligations or any
discount with, borrowing from or other
obligations to FHLB, inter-bank credit
facilities or any transaction by FSSB
acting in a fiduciary capacity, and (ii)
statutory liens for amounts not yet
delinquent or which are being contested in
good faith. FSSB and the FSSB Subsidiaries,
as lessee, have the right under
valid and existing leases of real and
personal properties used by FSSB and the
FSSB Subsidiaries in the conduct of their
businesses to occupy or use all such
properties as presently occupied and used
by each of them. Such existing leases
and commitments to lease constitute or will
constitute operating leases for both
tax and financial accounting purposes and
the lease expense and minimum rental
commitments with respect to such leases and
lease commitments are as disclosed
in all material respects in the notes to
the FSSB Financial Statements.
(ii) FSSB and each Significant Subsidiary of FSSB currently
maintain insurance considered by each of
them to be reasonable for their
respective operations. Neither FSSB nor any
Significant Subsidiary of FSSB has
received notice from any insurance carrier
that (i) such insurance will be
canceled or that coverage thereunder will
be reduced or eliminated, or (ii)
premium costs with respect to such policies
of insurance will be substantially
increased. There are presently no material
claims pending under such policies of
insurance and no notices of material claims
have been given by FSSB or any
Significant Subsidiary of FSSB under such
policies. All such insurance is valid
and enforceable and in full force and
effect, and within the last three (3)
years FSSB and each Significant Subsidiary
of FSSB has received each type of
insurance coverage for which it has applied
and during such periods has not been
denied indemnification for any material
claims submitted under any of its
insurance policies. FSSB Disclosure
Schedule 4.1(j) (ii) identifies all policies
of insurance maintained by FSSB and each
Significant Subsidiary of FSSB.
(k) Legal Proceedings. Except as set forth in FSSB Disclosure
Schedule
4.1(k), neither FSSB nor any FSSB
Subsidiary is a party to any, and there are no
pending or, to FSSB's Knowledge, threatened
legal, administrative, arbitration
or other proceedings, claims (whether
asserted or unasserted), actions or
governmental investigations or inquiries of
any nature (i) against FSSB or any
FSSB Subsidiary, (ii) to which FSSB or any
FSSB Subsidiary's assets are or may
be subject, (iii) challenging the validity
or propriety of any of the
transactions contemplated by this
Agreement, or (iv) which could adversely
affect the ability of FSSB to perform under
this Agreement, except for any
proceeding, claim, action, investigation or
inquiry
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<PAGE>
referred to in clauses (i) and (ii) which,
individually or in the aggregate,
would not be reasonably expected to have a
Material Adverse Effect.
(l)
Compliance With Applicable Law.
(i) Except as set forth in FSSB Disclosure Schedule 4.1(l)(i),
to
FSSB's Knowledge, each of FSSB and each
FSSB Subsidiary is in compliance in all
material respects with all applicable
federal, state, and local statutes, laws,
regulations, ordinances, rules, judgments,
orders or decrees applicable to it,
its properties, assets and deposits, its
business, and its conduct of business
and its relationship with its employees,
including, without limitation, the USA
Patriot Act, the Bank Secrecy Act, the
Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act
of 1977 ("CRA"), the Home Mortgage
Disclosure Act, and all other applicable
fair lending laws and other laws
relating to discriminatory business
practices and neither FSSB nor any FSSB
Subsidiary has received any written notice
to the contrary.
(ii) Each of FSSB and each FSSB Subsidiary has all material
permits, licenses, authorizations orders
and approvals of, and has made all
filings, applications and registrations
with, all Bank Regulators that are
required in order to permit it to own or
lease its properties and to conduct its
business as presently conducted; all such
permits, licenses, certificates of
authority, orders and approvals are in full
force and effect and, to the
Knowledge of FSSB, no suspension or
cancellation of any such permit, license,
certificate, order or approval is
threatened or will result from the
consummation of the transactions
contemplated by this Agreement, subject to
obtaining the approvals set forth in
Section 8.3.
(iii) Except as set forth in FSSB Disclosure Schedule
4.1(l)(iii)
for the period beginning January 1, 2003,
neither FSSB nor any FSSB Subsidiary
has received any written notification or,
to FSSB's Knowledge, any other
communication from any Bank Regulator (i)
asserting that FSSB or any FSSB
Subsidiary is not in material compliance
with any of the statutes, regulations
or ordinances which such Bank Regulator
enforces; (ii) threatening to revoke any
license, franchise, permit or governmental
authorization which is material to
FSSB or any FSSB Subsidiary; (iii)
requiring or threatening to require FSSB or
any FSSB Subsidiary, or indicating that
FSSB or any FSSB Subsidiary may be
required, to enter into a cease and desist
order, agreement or memorandum of
understanding or any other agreement with
any federal or state governmental
agency or authority which is charged with
the supervision or regulation of banks
or engages in the insurance of bank
deposits restricting or limiting, or
purporting to restrict or limit, in any
material respect the operations of FSSB
or any FSSB Subsidiary, including without
limitation any restriction on the
payment of dividends; or (iv) directing,
restricting or limiting, or purporting
to direct, restrict or limit, in any
material manner the operations of FSSB or
any FSSB Subsidiary (any such notice,
communication, memorandum, agreement or
order described in this sentence is
hereinafter referred to as a "Regulatory
Agreement"). Except as set forth in FSSB
Disclosure Schedule 4.1(l)(iii),
neither FSSB nor any FSSB Subsidiary has
consented to or entered into any
Regulatory Agreement that is currently in
effect. Any such Regulatory Agreement
and all correspondence relating thereto is
set forth in FSSB Disclosure Schedule
4.1(l)(iii). The most recent regulatory
rating given to FSSB as to compliance
with the CRA is satisfactory or better.
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<PAGE>
(m) Employee Benefit
Plans.
(i) FSSB Disclosure Schedule 4.1(m)(i) includes a descriptive
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, stock appreciation,
phantom stock, severance, welfare benefit
plans, fringe benefit plans,
employment, severance and change in control
agreements and all other material
benefit practices, policies and
arrangements maintained by FSSB or any FSSB
Subsidiary in which any employee or former
employee, consultant or former
consultant or director or former director
of FSSB or any FSSB Subsidiary
participates or to which any such employee,
consultant or director is a party or
is otherwise entitled to receive benefits
(the "Compensation and Benefit
Plans"). Except as set forth in FSSB
Disclosure Schedule 4.1(m)(i), neither FSSB
nor any of its Subsidiaries has any
commitment to create any additional
Compensation and Benefit Plan or to
materially modify, change or renew any
existing Compensation and Benefit Plan (any
modification or change that
increases the cost of such plans would be
deemed material), except as required
to maintain the qualified status thereof.
FSSB has made available to IBT true
and correct copies of the Compensation and
Benefit Plans. There are no
outstanding unvested or unexercised awards
under any FSSB benefit plans and
there are no awards available for issuance
under any such plan.
(ii)
Except as disclosed in FSSB Disclosure Schedule 4.1(m)(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, COBRA, the Health Insurance
Portability and Accountability Act and any
regulations or rules promulgated
thereunder, and all material 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 or any
interest, fines, penalties or other
impositions for late filings have been paid
in full. 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 from the
IRS, and FSSB is not aware of any
circumstances which are reasonably likely
to result in revocation of any such
favorable determination letter. There is no
material pending or, to the
Knowledge of FSSB, threatened action, suit
or claim relating to any of the
Compensation and Benefit Plans (other than
routine claims for benefits). Neither
FSSB nor any FSSB Subsidiary 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 FSSB or
any FSSB Subsidiary to an unpaid tax
or penalty imposed by either Section 4975
of the Code or Section 502 of ERISA.
(iii) Except as set forth in FSSB Disclosure Schedule
4.1(m)(iii), no liability, other than PBGC
premiums arising in the ordinary
course of business, has been or is expected
by FSSB or any of its Subsidiaries
to be incurred with respect to any FSSB
Compensation and Benefit Plan which is a
defined benefit plan subject to Title IV of
ERISA ("FSSB Defined Benefit Plan"),
or with respect to any "single-employer
plan" (as defined in Section 4001(a) of
ERISA) currently or formerly maintained by
FSSB or any entity which is
considered one employer with FSSB under
Section 4001(b)(1) of ERISA or Section
414 of the Code (an "ERISA Affiliate")
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<PAGE>
(such plan hereinafter referred to as an
"ERISA Affiliate Plan"). To the
Knowledge of FSSB and any FSSB Subsidiary,
except as set forth in FSSB
Disclosure Schedule 4.1(m)(iii), no FSSB
Defined Benefit Plan had an
"accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether
or not waived, as of the last day of the
end of the most recent plan year ending
prior to the date hereof. Except as set
forth in FSSB Disclosure Schedule
4.1(m)(iii), the fair market value of the
assets of each FSSB Defined Benefit
Plan exceeds the present value of the
benefits guaranteed under Section 4022 of
ERISA under such FSSB Defined Benefit Plan
as of the end of the most recent plan
year with respect to the respective FSSB
Defined Benefit Plan ending prior to
the date hereof, calculated on the basis of
the actuarial assumptions used in
the most recent actuarial valuation for
such FSSB Defined Benefit Plan as of the
date hereof; and no notice of a "reportable
event" (as defined in Section 4043
of ERISA) for which the 30-day reporting
requirement has not been waived has
been required to be filed for any FSSB
Defined Benefit Plan within the 12-month
period ending on the date hereof. Except as
set forth in FSSB Disclosure
Schedule 4.1(m)(iii), neither FSSB nor any
of its Subsidiaries has provided, or
is required to provide, security to any
FSSB Defined Benefit Plan or to any
single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the
Code or 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. To the Knowledge of FSSB, and
except as set forth in FSSB Disclosure
Schedule 4.1(m)(iii), there is no pending
investigation or enforcement action by any
Bank Regulator with respect to any
Compensation and Benefit Plan or any ERISA
Affiliate Plan.
(iv) With respect to any FSSB Defined Benefit Plan that is a
"multiemployer plan" as such term is
defined in Section 3(37) of ERISA, covering
employees of FSSB or any ERISA Affiliate,
(i) neither FSSB nor any ERISA
Affiliate has made or suffered a "complete
withdrawal" or "partial withdrawal,"
as such terms are respectively defined in
Sections 4203 and 4205 of ERISA, (ii)
no event has occurred, and no circumstances
exist, that alone or with the
passage of time present a material risk of
a complete or partial withdrawal, and
(iii) neither FSSB or any ERISA Affiliate
has any contingent liability under
Section 4204 of ERISA and no circumstances
exist that present a material risk
that any such plan will go into
reorganization. FSSB Disclosure Schedule
4.1(m)(iv) lists FSSB's best estimate of
the amount of withdrawal liability that
would be incurred if FSSB and each ERISA
Affiliate were to make a complete
withdrawal from such plan as of the
Effective Time and also states the aggregate
withdrawal liability of FSSB and the ERISA
Affiliates. There are no "unfunded
vested benefits" (within the meaning of
Section 4211 of ERISA) as of the end of
the most recently completed plan year and
as of the date of this Agreement.
(v) All material contributions required to be made under the
terms of any Compensation and Benefit Plan
or ERISA Affiliate Plan or any
employee benefit arrangements to which FSSB
or any FSSB Subsidiary is a party or
a sponsor have been timely made, and all
anticipated contributions and funding
obligations are accrued on FSSB's
consolidated financial statements to the
extent required by GAAP. FSSB or its
Subsidiaries have expensed and accrued as a
liability the present value of future
benefits under each applicable
Compensation and Benefit Plan for financial
reporting purposes as required by
GAAP.
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<PAGE>
(vi) Neither FSSB nor any FSSB Subsidiary has any obligations
to
provide retiree health, life insurance,
disability insurance, or other retiree
death benefits under any Compensation and
Benefit Plan, other than benefits
mandated by Section 4980B of the Code.
Except as set forth in FSSB Disclosure
Schedule 4.1(m)(vi), there has been no
communication to employees by FSSB or any
FSSB Subsidiary that would reasonably be
expected to promise or guarantee such
employees retiree health, life insurance,
disability insurance, or other retiree
death benefits.
(vii) Except as set forth in FSSB Disclosure Schedule
4.1(m)(vii), FSSB and its Subsidiaries do
not maintain any Compensation and
Benefit Plans covering employees who are
not United States residents.
(viii) Except as set forth in FSSB Disclosure Schedule
4.1(m)(viii), with respect to each
Compensation and Benefit Plan, if applicable,
FSSB has provided or made available to IBT
copies of the: (A) trust instruments
and insurance contracts, (B) two (2) most
recent Forms 5500 filed with the IRS,
(C) two (2) most recent actuarial reports
and financial statements; (D) most
recent summary plan description, (E) most
recent determination letter issued by
the IRS; (F) any Form 5310 or Form 5330
filed with the IRS within the last two
years, and (G) most recent
nondiscrimination tests performed under ERISA and the
Code (including 401(k) and 401(m) tests),
if applicable.
(ix) Except as set forth in FSSB Disclosure Schedule
4.1(m)(ix),
the consummation of the Merger will not,
directly or indirectly (including,
without limitation, as a result of any
termination of employment or service at
any time prior to or following the
Effective Time) (A) entitle any employee,
consultant or director to any payment or
benefit (including severance pay,
change in control benefit, 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.
(x) Neither FSSB nor any FSSB Subsidiary maintains any
compensation plans, programs or
arrangements under which any payment is
reasonably likely to become nondeductible,
in whole or in part, for tax
reporting purposes as a result of the
limitations under Section 162(m) of the
Code and the regulations issued
thereunder.
(xi) To the Knowledge of FSSB, the consummation of the Merger
will not, directly or indirectly (including
without limitation, as a result of
any termination of employment or service at
any time prior to or following the
Effective Time), entitle any current or
former employee, director or independent
contractor of FSSB or any FSSB Subsidiary
to any actual or deemed payment (or
benefit) which could constitute a
"parachute payment" (as such term is defined
in Section 280G of the Code).
(xii) There are no stock appreciation or similar rights, earned
dividends or dividend equivalents, or
shares of restricted stock, outstanding
under any of the Compensation and Benefit
Plans or otherwise as of the date
hereof and none will be granted, awarded,
or credited after the date hereof.
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<PAGE>
(n) Brokers, Finders and Financial Advisors. Except as set forth
in
FSSB Disclosure Schedule 4.1(n), neither
FSSB nor any FSSB Subsidiary, nor any
of their respective officers, directors,
employees or agents, has employed any
broker, finder or financial advisor other
than Austin Associates, LLC in
connection with the transactions
contemplated by this Agreement, or incurred any
liability or commitment for any fees or
commissions to any such person other
than Austin Associates, LLC in connection
with the transactions contemplated by
this Agreement.
(o) Environmental Matters.
(i) Except as may be set forth in FSSB Disclosure Schedule
4.1(o)
and any Phase I Environmental Report
identified therein, with respect to FSSB
and each FSSB Subsidiary:
(A) Each of FSSB and the FSSB Subsidiaries and, to FSSB's
Knowledge, the Participation Facilities and
Loan Properties are, and have been,
in substantial compliance with, and are not
liable under, any Environmental
Laws;
(B) FSSB has received no written notice that there is any
suit, claim, action, demand, executive or
administrative order, directive,
investigation or proceeding pending and, to
FSSB's Knowledge, no such action is
threatened, before any court, governmental
agency or other forum against it or
any of the FSSB Subsidiaries or any
Participation Facility (x) for alleged
noncompliance (including by any
predecessor) with, or liability under, any
Environmental Law or (y) relating to the
presence of or release into the
environment of any Materials of
Environmental Concern, whether or not occurring
at or on a site owned, leased or operated
by it or any of the FSSB Subsidiaries
or any Participation Facility;
(C) FSSB has received no notice that there is any suit,
claim, action, demand, executive or
administrative order, directive,
investigation or proceeding pending and, to
FSSB's Knowledge no such action is
threatened, before any court, governmental
agency or other forum relating to or
against any Loan Property (or FSSB or any
of the FSSB Subsidiaries in respect of
such Loan Property) (x) relating to alleged
noncompliance (including by any
predecessor) with, or liability under, any
Environmental Law or (y) relating to
the presence of or release into the
environment of any Materials of
Environmental Concern, whether or not
occurring at or on a site owned, leased or
operated by a Loan Property;
(D) To FSSB's Knowledge, the properties currently owned or
operated by FSSB or any FSSB Subsidiary
(including, without limitation, soil,
groundwater or surface water on, or under
the properties, and buildings thereon)
are not contaminated with and do not
otherwise contain any Materials of
Environmental Concern other than as
permitted under applicable Environmental
Law;
(E) neither FSSB nor any FSSB Subsidiary has received any
written notice, demand letter, executive or
administrative order, directive or
request for information from any federal,
state, local or foreign governmental
entity or any third party indicating that
it may be in violation of, or liable
under, any Environmental Law;
22
<PAGE>
(F) To FSSB's Knowledge, there are no underground storage
tanks on, in or under any properties owned
or operated by FSSB or any of the
FSSB Subsidiaries or any Participation
Facility, and to FSSB's Knowledge, no
underground storage tanks have been closed
or removed from any properties owned
or operated by FSSB or any of the FSSB
Subsidiaries or any Participation
Facility; and
(G) To FSSB's Knowledge, during the period of (s) FSSB's or
any of the FSSB Subsidiaries' ownership or
operation of any of their respective
current properties or (t) FSSB's or any of
the FSSB Subsidiaries' participation
in the management of any Participation
Facility, there has been no contamination
by or release of Materials of Environmental
Concerns in, on, under or affecting
such properties that could reasonably be
expected to result in material
liability under the Environmental Laws. To
FSSB's Knowledge, prior to the period
of (x) FSSB's or any of the FSSB
Subsidiaries' ownership or operation of any of
their respective current properties or (y)
FSSB's or any of the FSSB
Subsidiaries' participation in the
management of any Participation Facility,
there was no contamination by or release of
Materials of Environmental Concern
in, on, under or affecting such properties
that could reasonably be expected to
result in material liability under the
Environmental Laws.
(ii) "Loan Property" means any property in which the applicable
party (or a Subsidiary of it) holds a
security interest, and, where required by
the context, includes the owner or operator
of such property, but only with
respect to such property. "Participation
Facility" means any facility in which
the applicable party (or a Subsidiary of
it) participates in the management
(including all property held as trustee or
in any other fiduciary capacity) and,
where required by the context, includes the
owner or operator of such property,
but only with respect to such property.
(p) Loan
Portfolio.
(i) To FSSB's Knowledge, the allowance for loan losses
reflected
in the notes to FSSB's audited consolidated
statement of financial condition at
December 31, 2004 was, and the allowance
for loan losses shown in the notes to
the FSSB's unaudited consolidated financial
statements for periods ending after
December 31, 2004 were, or will be,
adequate, as of the dates thereof, under
GAAP.
(ii) FSSB Disclosure Schedule 4.1(p)(ii) sets forth a listing,
as
of the most recently available date, by
account, of: (A) each borrower, customer
or other party which has notified FSSB or
any FSSB Subsidiary during the past
twelve months of, or has asserted against
FSSB or any FSSB Subsidiary, in each
case in writing, any "lender liability" or
similar claim, and, to the Knowledge
of FSSB, each borrower, customer or other
party which has given FSSB or any FSSB
Subsidiary any oral notification of, or
orally asserted to or against FSSB or
any FSSB Subsidiary, any such claim; and
(B) all loans, (1) that are
contractually past due 90 days or more in
the payment of principal and/or
interest, (2) that are on non-accrual
status, (3) that as of the date of this
Agreement are classified as "Other Loans
Specifically Mentioned", "Special
Mention", "Substandard", "Doubtful",
"Loss", "Classified", "Criticized", "Watch
list" or words of similar import, together
with the principal amount of and
accrued and unpaid interest on each such
loan and the identity of the obligor
thereunder, (4) where the interest rate
terms have been reduced and/or the
23
<PAGE>
maturity dates have been extended
subsequent to the agreement under which the
loan was originally created due to concerns
regarding the borrower's ability to
pay in accordance with such initial terms,
or (5) where a specific reserve
allocation exists in connection therewith;
and (C) all other assets classified
by FSSB or any FSSB Subsidiary as real
estate acquired through foreclosure or in
lieu of foreclosure, including in-substance
foreclosures, and all other assets
currently held that were acquired through
foreclosure or in lieu of foreclosure.
(iii) All loans receivable (including discounts) and accrued
interest entered on the books of FSSB and
the FSSB Subsidiaries arose out of
bona fide arm's-length transactions, were
made for good and valuable
consideration in the ordinary course of
FSSB's or the appropriate FSSB
Subsidiary's respective business, and the
notes or other evidences of
indebtedness with respect to such loans
(including discounts) are true and
genuine and are what they purport to be,
except as set forth in FSSB Disclosure
Schedule 4.1(p)(iii). To the Knowledge of
FSSB, the loans, discounts and the
accrued interest reflected on the books of
FSSB and the FSSB Subsidiaries are
subject to no defenses, set-offs or
counterclaims (including, without
limitation, those afforded by usury or
truth-in-lending laws), except as may be
provided by bankruptcy, insolvency or
similar laws affecting creditors' rights
generally or by general principles of
equity. Except as set forth in FSSB
Disclosure Schedule 4.1(p)(iii), all such
loans are owned by FSSB or the
appropriate FSSB Subsidiary free and clear
of any liens.
(iv) The notes and other evidences of indebtedness evidencing
the
loans described above, and all pledges,
mortgages, deeds of trust and other
collateral documents or security
instruments relating thereto are, in all
material respects, valid, true and genuine,
and what they purport to be.
(q) Related Party Transactions. Except as set forth in FSSB
Disclosure
Schedule 4.1(q), neither FSSB nor any FSSB
Subsidiary is a party to any
transaction (including any loan or other
credit accommodation) with any
Affiliate of FSSB or any FSSB Subsidiary.
All such transactions (a) were made in
the ordinary course of business, (b) were
made on substantially the same terms,
including interest rates and collateral, as
those prevailing at the time for
comparable transactions with other Persons,
and (c) did not involve more than
the normal risk of collectibility or
present other unfavorable features. No loan
or credit accommodation to any Affiliate of
FSSB or any FSSB Subsidiary is
presently in default or, during the three
(3) year period prior to the date of
this Agreement, has been in default or has
been restructured, modified or
extended except for rate or other
modifications pursuant to FSSB's loan
modification policy that is applicable to
all Persons. Neither FSSB nor any FSSB
Subsidiary has been notified that principal
and interest with respect to any
such loan or other accommodation will not
be paid when due or that the loan
grade classification accorded such loan or
credit accommodation by FSSB is
inappropriate.
(r) Deposits. Except as disclosed in FSSB Disclosure Schedule
4.1(f),
none of the deposits of FSSB is a "brokered
deposit" as defined in 12 C.F.R.
Section 337.6(a)(2).
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<PAGE>
(s) Required Vote. The affirmative vote of not less than 2/3rds of
the
issued and outstanding shares of FSSB
Common Stock is required to approve this
Agreement and the Merger under FSSB's
Articles of Incorporation and Michigan
law.
(t) Intellectual Property. FSSB and each Significant Subsidiary
of
FSSB owns or, to FSSB's Knowledge,
possesses valid and binding licenses and
other rights to use all patents,
copyrights, trade secrets, trade names,
servicemarks and trademarks used in their
business, each without payment, and
neither FSSB nor any Significant Subsidiary
of FSSB has received any notice of
conflict with respect thereto that asserts
the rights of others. FSSB and each
Significant Subsidiary of FSSB have
performed all the obligations required to be
performed, and are not in default in any
respect, under any contract, agreement,
arrangement or commitment relating to any
of the foregoing.
(u) Administration of Trust Accounts. FSSB and each FSSB
Subsidiary
has properly administered in all material
respects and which could reasonably be
excepted to be material to the financial
condition of FSSB and the FSSB
Subsidiaries taken as a whole, all accounts
for which it acts as a fiduciary,
including but not limited to accounts for
which it serves as a trustee, agent,
custodian, personal representative,
guardian, conservator or investment advisor,
in accordance with the terms of the
governing documents and applicable state and
federal law and regulations and common law.
To the Knowledge of FSSB, neither
FSSB, any FSSB Subsidiary, nor any
director, officer or employee of FSSB or any
FSSB Subsidiary has committed any breach of
trust with respect to any such
fiduciary account which is material to or
could reasonably be expected to be
material to the financial condition of FSSB
and the FSSB Subsidiaries taken as a
whole, and the accountings for each such
fiduciary account are true and correct
in all material respects and accurately
reflect the assets of such fiduciary
account.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF IBT
5.1.
Representations and Warranties of IBT. IBT represents and warrants
to
FSSB that the statements contained in this
Article V are correct as of the date
of this Agreement, except as set forth in
the IBT Disclosure Schedule delivered
by IBT to FSSB on the date hereof. IBT has
made a good faith effort to ensure
that the disclosure on each schedule of the
IBT Disclosure Schedule corresponds
to the section referenced herein. However,
for purposes of the IBT Disclosure
Schedule, any item disclosed on any
schedule therein is deemed to be fully
disclosed with respect to all schedules
under which such item may be relevant as
and to the extent that it is reasonably
apparent that such item applies to such
other schedule.
(a) Organization, Standing and Power.
(i) IBT is a corporation duly organized, validly existing and
in
good standing under the laws of the State
of Michigan, and is duly registered as
a financial services holding company under
the Bank Holding Company Act of 1956,
as amended. IBT has all requisite power and
authority to own, lease and operate
its properties and to carry on its business
as now conducted and is duly
licensed or qualified to do business in the
states of the United States and
foreign jurisdictions where its ownership
or leasing of property or the conduct
of its business requires such
qualification.
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<PAGE>
(ii) Isabella Bank and Trust is a state chartered bank duly
organized, validly existing and in good
standing under the laws of the State of
Michigan. The deposits of Isabella Bank and
Trust are insured by the FDIC to the
fullest extent permitted by law, and all
premiums and assessments required to be
paid in connection therewith have been paid
when due.
(iii) Farmers State Bank of Breckenridge is a state chartered
bank duly organized, validly existing and
in good standing under the laws of the
State of Michigan. The deposits of Farmers
State Bank of Breckenridge are
insured by the FDIC to the fullest extent
permitted by law, and all premiums and
assessments required to be paid in
connection therewith have been paid when due.
(iv) IBT Disclosure Schedule 5.1(a)(iv) sets forth each IBT
Subsidiary. Each IBT Subsidiary (other than
Isabella Bank and Trust and Farmers
State Bank of Breckenridge) is a
corporation or limited liability company duly
organized, validly existing and in good
standing under th
