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EXHIBIT 2.1
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AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
BY AND AMONG
HORIZON BANCORP,
an Indiana Corporation
HORIZON ACQUISITION CORP.,
an Indiana Corporation
ALLIANCE FINANCIAL CORPORATION,
a Michigan Corporation
HORIZON BANK, NATIONAL ASSOCIATION,
a National Banking Association
AND
ALLIANCE BANKING COMPANY,
a Michigan State-Chartered Commercial Bank
FEBRUARY 24, 2005
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TABLE OF CONTENTS
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Page
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ARTICLE 1. TERMS OF THE
MERGERS...........................................................
2
Section 1.1 Terms of the
Bank Merger....................................................
2
Section 1.2 Effect of the
Bank Merger...................................................
2
Section 1.3 Conversion of
Shares: The Bank Merger.......................................
3
Section 1.4 Terms of the
Holding Company Merger.........................................
3
Section 1.5 Effect of the
Holding Company Merger........................................
3
Section 1.6 Conversion and
Exchange of Shares: The Holding Company Merger..............
4
Section 1.7 Alliance Stock
Options......................................................
4
Section 1.8 Terms of the
Third Merger...................................................
4
Section 1.9 Effect of the
Third Merger..................................................
4
Section 1.10 Conversion and
Exchange of Shares: The Third Merger........................
5
Section 1.11 Reservation of
Right to Revise Structure...................................
5
Section 1.12 Exchange
Procedures........................................................
5
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF
ALLIANCE..................................... 6
Section 2.1 Organization and
Capital Stock..............................................
7
Section 2.2 Authorization;
No Defaults..................................................
7
Section 2.3
Subsidiaries................................................................
8
Section 2.4 Financial
Information.......................................................
8
Section 2.5 Absence of
Changes..........................................................
9
Section 2.6 Agreements with
Banking Authorities.........................................
9
Section 2.7 Tax
Matters.................................................................
9
Section 2.8
Litigation..................................................................
10
Section 2.9 Employment
Agreements.......................................................
10
Section 2.10
Reports....................................................................
10
Section 2.11 Investment
Portfolio.......................................................
11
Section 2.12 Loan
Portfolio.............................................................
11
Section 2.13 Employee
Matters and ERISA.................................................
12
Section 2.14 Title to
Properties; Insurance.............................................
13
Section 2.15 Environmental
Matters......................................................
14
Section 2.16 Compliance with
Americans with Disabilities Act............................
15
Section 2.17 Compliance with
Law........................................................
15
Section 2.18
Brokerage..................................................................
15
Section 2.19 Material
Contracts.........................................................
15
Section 2.20 No Undisclosed
Liabilities.................................................
16
Section 2.21 Delivery of
Documents......................................................
16
Section 2.22 Interim
Events.............................................................
16
Section 2.23 Books and
Records..........................................................
16
Section 2.24 Deposit
Insurance..........................................................
16
Section 2.25 No Regulatory
Filings......................................................
16
Section 2.26 Statements True
and Correct................................................
16
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF
HORIZON...................................... 17
Section 3.1
Organization................................................................
17
Section 3.2
Authorization...............................................................
17
Section 3.3 Financial
Information.......................................................
18
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Section 3.4
Reports.....................................................................
18
Section 3.5 Agreements with
Banking Authorities.........................................
18
Section 3.6 Compliance with
Law.........................................................
18
ARTICLE 4. AGREEMENTS OF
ALLIANCE.........................................................
19
Section 4.1 Conduct of
Business.........................................................
19
Section 4.2
Breaches....................................................................
22
Section 4.3 Submission to
Shareholders..................................................
22
Section 4.4 Consummation of
Agreement; Regulatory Approvals.............................
22
Section 4.5 Environmental
Reports.......................................................
22
Section 4.6 Access to
Information.......................................................
23
Section 4.7 Press
Release...............................................................
23
Section 4.8 Acquisition
Proposals.......................................................
24
Section 4.9 Title Insurance
and Surveys.................................................
24
Section 4.10 Conforming
Accounting and Reserve Policies; Restructuring Expenses.........
25
Section 4.11 Consolidated
Shareholders' Equity..........................................
26
Section 4.12 Attendance of
Standing Committee Meetings..................................
27
Section 4.13 Cooperation on
Conversion of Systems.......................................
27
Section 4.14 Disposition of
Alliance Bank 401(k) Plan...................................
27
Section 4.15 Section 125
Plan...........................................................
28
Section 4.16 Other Welfare
Benefit Plans................................................
28
ARTICLE 5. AGREEMENTS OF
HORIZON..........................................................
28
Section 5.1 Regulatory
Approvals........................................................
28
Section 5.2
Breaches....................................................................
28
Section 5.3 Consummation of
Agreement...................................................
28
Section 5.4 Director and
Officer Indemnification........................................
29
Section 5.5 Employee
Benefits...........................................................
29
Section 5.6
Severance...................................................................
29
Section 5.7 Employee
Transition Plan....................................................
30
Section 5.8 Southwest
Michigan Advisory Board...........................................
30
Section 5.9 Merger and
Termination of Benefit Plans.....................................
30
Section 5.10 Further
Matters............................................................
31
ARTICLE 6. CONDITIONS PRECEDENT TO
MERGERS................................................
31
Section 6.1 Conditions of
Horizon's Obligations.........................................
31
Section 6.2 Conditions of
Alliance's Obligation.........................................
33
ARTICLE 7. TERMINATION OR
ABANDONMENT.....................................................
34
Section 7.1 Mutual
Agreement............................................................
34
Section 7.2 Breach of
Representations or Agreements.....................................
34
Section 7.3 Environmental
Reports.......................................................
34
Section 7.4 Failure of
Conditions.......................................................
34
Section 7.5 Approval
Denied.............................................................
34
Section 7.6 Shareholder
Approval Denial.................................................
34
Section 7.7 Lapse of
Time...............................................................
34
Section 7.8 Failure to
Recommend........................................................
34
Section 7.9 Acceptance of
Superior Proposal.............................................
35
Section 7.10 Effect of
Termination and Abandonment......................................
35
Section 7.11 Liquidated
Damages.........................................................
35
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ARTICLE 8. THE CLOSING OF THE BANK MERGER AND
HOLDING COMPANY MERGER...................... 36
Section 8.1 The
Closing.................................................................
36
Section 8.2 The Closing
Date............................................................
36
Section 8.3 Actions at
Closing..........................................................
36
ARTICLE 9. GENERAL
PROVISIONS.............................................................
38
Section 9.1 Confidential
Information....................................................
38
Section 9.2 Return of
Documents.........................................................
38
Section 9.3
Notices.....................................................................
38
Section 9.4 Nonsurvival of
Representations and Agreements...............................
39
Section 9.5 Entire
Agreement............................................................
39
Section 9.6 Headings and
Captions.......................................................
39
Section 9.7 Waiver,
Amendment or
Modification...........................................
39
Section 9.8 Rules of
Construction.......................................................
40
Section 9.9
Counterparts................................................................
40
Section 9.10 Successors and
Assigns.....................................................
40
Section 9.11 Governing Law;
Assignment..................................................
40
Section 9.12 No Third Party
Beneficiaries...............................................
40
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APPENDICES
Appendix A
Holding Company Merger Agreement
EXHIBITS
Exhibit 1.7
Agreement to Convert Options
Exhibit 4.3
Agreement of Directors of Alliance Concerning
Agreement of Merger
Exhibit 5.6
Termination and Release Agreement
Exhibit 6.1(i)
Alliance Legal Opinion
Exhibit 6.2(g)
Horizon Legal Opinion
SCHEDULES
Schedule 2.1(d) Lost Stock
Affidavits
Schedule 2.6
Agreements with Banking Authorities
Schedule 2.7(a) Tax
Matters
Schedule 2.8
Litigation
Schedule 2.9
Employee Matters
Schedule 2.12(b) Problem
Loans
Schedule 2.12(c) Loan Losses
Schedule 2.12(d) Loan
Participations
Schedule 2.13(b) Employment
Laws
Schedule 2.13(c) Employee Benefit
Plans
Schedule 2.14
Title to Properties; Insurance
Schedule 2.19
Material Contracts
Schedule 2.20 Undisclosed
Liabilities
Schedule 2.22
Interim Events
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AGREEMENT OF MERGER
AND
PLAN OF REORGANIZATION
THIS
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION (this "AGREEMENT"),
is
made February 24, 2005 by and among HORIZON
BANCORP, an Indiana corporation
("HORIZON"), HORIZON ACQUISITION CORP., an
Indiana corporation ("HORIZON
ACQUISITION CORP."), ALLIANCE FINANCIAL
CORPORATION, a Michigan corporation
("ALLIANCE"), HORIZON BANK, NATIONAL
ASSOCIATION, a national banking association
("HORIZON BANK"), and ALLIANCE BANKING
COMPANY, a Michigan state-chartered
commercial bank ("ALLIANCE BANK").
WITNESSETH:
WHEREAS,
Horizon is a corporation duly organized and existing under the
laws of the State of Indiana and a
registered bank holding company under the
Bank Holding Company Act of 1956, as
amended, holding one hundred percent (100%)
of the issued and outstanding shares of
common stock of each of Horizon
Acquisition Corp. and Horizon Bank, both
with their principal places of business
in Michigan City, Indiana; and
WHEREAS,
Alliance is a corporation duly organized and existing under the
laws of the State of Michigan and a
registered bank holding company under the
Bank Holding Company Act of 1956, as
amended, holding one hundred percent (100%)
of the issued and outstanding shares of
common stock of Alliance Bank, with its
principal place of business in New Buffalo,
Michigan; and
WHEREAS,
Horizon Bank is a national banking association duly organized
and
existing under the laws of the United
States of America with its principal
banking office located in Michigan City,
Indiana; and
WHEREAS,
Alliance Bank is a banking institution duly organized and
existing under the laws of the State of
Michigan with its principal banking
office in New Buffalo, Michigan; and
WHEREAS,
Horizon Acquisition Corp. is a newly formed Indiana corporation
(and wholly-owned subsidiary of Horizon)
formed for the sole purpose of merging
with and into Alliance; and
WHEREAS,
it is the desire of Alliance, Horizon, Horizon Acquisition
Corp.,
Horizon Bank, and Alliance Bank to effect a
transaction whereby Horizon
Acquisition Corp. will be merged with and
into Alliance and concurrently
therewith Alliance Bank will be merged with
and into Horizon Bank. After these
mergers, Alliance will be merged with and
into Horizon; and
WHEREAS,
the Boards of Directors of Alliance, Horizon, Horizon
Acquisition
Corp., Horizon Bank and Alliance Bank,
respectively, have approved this
Agreement and authorized its execution.
NOW,
THEREFORE, in consideration of the premises and the mutual terms
and
provisions set forth in this Agreement, the
parties agree as follows:
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
PAGE 1
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ARTICLE 1. TERMS OF THE MERGERS
Section
1.1 TERMS OF THE BANK MERGER. Subject to the terms and
provisions
of this Agreement, the National Bank Act,
the Bank Merger Act and the Michigan
Banking Code of 1999, as amended, (the
"MICHIGAN BANKING CODE"), Alliance Bank
shall be merged, simultaneously with the
Holding Company Merger (as defined
below), with and into Horizon Bank. Horizon
Bank shall be the "CONTINUING BANK"
and shall continue its corporate existence
under the laws of the United States
of America, pursuant to the provisions of
the National Bank Act and particularly
Section 215a of Title 12 of the United
States Code, as amended, and as provided
under Sections 487.13701 and 487.13702 of
the Michigan Banking Code (hereinafter
such merger shall be referred to as the
"BANK MERGER").
Section
1.2 EFFECT OF THE BANK MERGER.
(a) GENERAL DESCRIPTION. Upon the effectiveness of the Bank
Merger,
the
separate existence of Alliance Bank shall cease and the
Continuing
Bank shall
possess all of the rights, privileges, immunities, powers and
franchises
and shall be subject to all of the duties and liabilities of
Alliance
Bank existing immediately prior to the effectiveness of the
Bank
Merger,
and the Continuing Bank shall continue to be a bank organized
and
existing
under the laws of the United States of America and shall
continue
to be a
wholly-owned subsidiary of Horizon.
(b) NAME AND OFFICES. The name of the Continuing Bank shall
continue
to be
"Horizon Bank, National Association." Its principal banking
office
shall
continue to be located at 515 Franklin Street, Michigan City,
Indiana
46360. All branches of Alliance Bank shall become legally
established branches of the Continuing Bank.
(c) BOARD OF DIRECTORS. The Board of the Directors of the
Continuing
Bank shall
consist of the same individuals that served as the Board of
Directors
of Horizon Bank immediately prior to the effective date of the
Bank
Merger, until such time as their successors have been elected
and
have been
qualified.
(d) OFFICERS. The Officers of the Continuing Bank shall consist
of
the same
individuals that served as the Officers of Horizon Bank
immediately prior to the effective date of the Bank Merger, until
such
time as
their successors have been elected and have been qualified.
(e) ARTICLES OF ASSOCIATION AND BYLAWS. The Articles of
Association
and Bylaws
of Horizon Bank in effect immediately prior to the
effectiveness of the Bank Merger shall be and remain the Articles
of
Association and Bylaws of the Continuing Bank without change, until
the
same shall
be amended or replaced as therein provided.
(f) ASSETS, LIABILITIES, AND OBLIGATIONS. All assets and all
rights,
franchises
and interests of Horizon Bank and Alliance Bank, respectively,
in and to
every type of property, all debts due on whatever account and
all choses
in action shall be taken and be deemed transferred to and vest
in the
Continuing Bank by virtue of the Bank Merger without any order
or
other
action on the part of any court or otherwise, and the
Continuing
Bank shall
be responsible for all liabilities and obligations of Horizon
Bank and
Alliance Bank, respectively, by virtue of the Bank Merger, all
with the
effect provided in 12 U.S.C. Section 215a and Section 487.13703
of the
Michigan Banking Code.
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
PAGE 2
<PAGE>
Section
1.3 CONVERSION OF SHARES: THE BANK MERGER. All of the 36,091
outstanding shares of common stock of
Alliance Bank, par value $10.00 per share,
shall be cancelled for no additional
consideration in connection with the Bank
Merger. Horizon shall continue to own all
the issued and outstanding common
stock of the Continuing Bank, with the
effect that the Bank Merger will not
change the shares of issued and outstanding
stock of Horizon Bank.
Section
1.4 TERMS OF THE HOLDING COMPANY MERGER. Subject to the terms
and
conditions of this Agreement, the Merger
Agreement attached hereto as Appendix A
(the "HOLDING COMPANY MERGER AGREEMENT"),
the Michigan Business Corporation Act
of 1972, as amended ("MBCA"), and the
Indiana Business Corporation Law ("IBCL")
Horizon Acquisition Corp. shall merge,
simultaneously with the Bank Merger, with
and into, Alliance, which shall be the
"CONTINUING COMPANY" and shall continue
its corporate existence under the laws of
the State of Michigan pursuant to the
provisions of and with the effect provided
in the MBCA and the IBCL (hereinafter
such merger is referred to as the "HOLDING
COMPANY MERGER"). The Bank Merger and
the Holding Company Merger shall hereafter
collectively be referred to as the
"MERGERS".
Section
1.5 EFFECT OF THE HOLDING COMPANY MERGER.
(a) GENERAL DESCRIPTION. Upon the effectiveness of the Holding
Company
Merger, the separate existence of Horizon Acquisition Corp.
shall
cease and
the Continuing Company shall possess all of the rights,
privileges, immunities, powers and franchises and shall be subject
to all
of the
duties and liabilities of Alliance and Horizon Acquisition
Corp.
existing
immediately prior to the effectiveness of the Holding Company
Merger,
and the Continuing Company shall continue to be a corporation
organized
and existing under the laws of the State of Michigan.
(b) NAME AND OFFICES. The name of the Continuing Company shall
continue
to be "Alliance Financial Corporation," but its principal
office
shall
continue to be located at 500 West Buffalo Street, New Buffalo,
Michigan
49117.
(c) BOARD OF DIRECTORS. The Board of the Directors of the
Continuing
Company
shall consist of the Board of Directors of Horizon Acquisition
Corp.
immediately prior to the effective date of the Holding Company
Merger,
until such time as their successors have been elected and have
been
qualified.
(d) OFFICERS. The Officers of the Continuing Company shall
consist
of the
Officers of Horizon Acquisition Corp. immediately prior to the
effective
date of the Holding Company Merger, until such time as their
successors
have been elected and have been qualified.
(e) ARTICLES OF INCORPORATION AND BYLAWS. The Articles of
Incorporation and Bylaws of Alliance in effect immediately prior to
the
effectiveness of the Holding Company Merger shall be and remain
the
Articles
of Incorporation and Bylaws of the Continuing Company without
change,
until the same shall be amended or replaced as therein
provided.
(f) ASSETS, LIABILITIES, AND OBLIGATIONS. All assets and all
rights,
franchises
and interests of Horizon Acquisition Corp. and Alliance,
respectively, in and to every type of property, all debts due on
whatever
account
and all choses in action shall be taken and be deemed
transferred
to and
vest in the Continuing Company by virtue of the
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
PAGE 3
<PAGE>
Holding
Company Merger without any order or other action on the part of
any court
or otherwise, and the Continuing Company shall be responsible
for all
liabilities and obligations of Horizon Acquisition Corp. and
Alliance,
respectively, by virtue of the Holding Company Merger, all with
the effect
provided in IC 23-1-40-6 of the IBCL and Section 450.1735 of
the
MBCA.
Section
1.6 CONVERSION AND EXCHANGE OF SHARES: THE HOLDING COMPANY
MERGER.
At the Effective Time (as defined in
Section 8.2 hereof) of the Holding Company
Merger, all of the issued and outstanding
shares of common stock, $1.00 par
value, of Alliance (the "ALLIANCE COMMON
STOCK") by virtue of the Holding
Company Merger and without any action on
the part of the holders thereof, shall
be converted into the right to receive
$11,502,258 in the aggregate in cash
which will equal $38.00 per share if there
are 302,691 shares of common stock
issued and outstanding at that time (the
"MERGER CONSIDERATION").
Section
1.7 ALLIANCE STOCK OPTIONS. All 15,960 outstanding options to
purchase Alliance Common Stock ("ALLIANCE
STOCK OPTIONS"), without any act on
the part of any holder thereof, shall be
converted into the right to receive
from Horizon, at the Effective Time, an
amount in cash equal to $38.00 minus the
per share exercise price for each share of
Alliance Common Stock subject to an
Alliance Stock Option; provided, however,
that there shall be withheld from such
cash payment any taxes required to be
withheld by applicable law. Each holder of
an Alliance Stock Option shall agree to the
treatment of their options in the
manner contemplated by this Section within
thirty (30) days after the date of
this Agreement by executing and delivering
to Alliance an agreement in the same
form as Exhibit 1.7 attached hereto. Each
Alliance Stock Option shall be
cancelled and cease to exist by virtue of
such payment. Execution by every
holder of Alliance Stock Options shall not
be a condition precedent to
consummation of the transactions
contemplated herein, but shall only be a
condition to the holder of such options
receiving the payment noted in this
Section 1.7.
Section
1.8 TERMS OF THE THIRD MERGER. Subject to the terms and
conditions
of this Agreement, the MBCA and the IBCL
and as soon as reasonably practicable
after the Effective Time of the Mergers,
the Continuing Company shall merge,
with and into Horizon, which shall be the
"SURVIVING COMPANY" and shall continue
its corporate existence under the laws of
the State of Indiana pursuant to the
provisions of and with the effect provided
in the MBCA and the IBCL (hereinafter
such merger is referred to as the "THIRD
MERGER").
Section
1.9 EFFECT OF THE THIRD MERGER.
(a) GENERAL DESCRIPTION. Upon the effectiveness of the Third
Merger,
the
separate existence of the Continuing Company shall cease and
Horizon
shall
possess all of the rights, privileges, immunities, powers and
franchises
and shall be subject to all of the duties and liabilities of
the
Continuing Company and Horizon existing immediately prior to
the
effectiveness of the Third Merger, and Horizon shall continue to be
a
corporation organized and existing under the laws of the State of
Indiana.
(b) NAME AND OFFICES. The name of the Surviving Company shall
continue
to be "Horizon Bancorp." Its principal office shall continue to
be located
at 515 Franklin Street, Michigan City, Indiana 46360.
(c) BOARD OF DIRECTORS. The Board of the Directors of the
Surviving
Company
shall consist of the same individuals that served as the Board
of
Directors
of
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
PAGE 4
<PAGE>
Horizon
immediately prior to the effective date of the Third Merger,
until
such time
as their successors have been elected and have been qualified.
(d) OFFICERS. The Officers of the Surviving Company shall consist
of
the same
individuals that served as the Officers of Horizon immediately
prior to
the effective date of the Third Merger, until such time as
their
successors
have been elected and have been qualified.
(e) ARTICLES OF INCORPORATION AND BYLAWS. The Articles of
Incorporation and Bylaws of Horizon in effect immediately prior to
the
effectiveness of the Third Merger shall be and remain the Articles
of
Incorporation and Bylaws of the Surviving Company without change,
until
the same
shall be amended or replaced as therein provided.
(f) ASSETS, LIABILITIES, AND OBLIGATIONS. All assets and all
rights,
franchises
and interests of Horizon and the Continuing Company,
respectively, in and to every type of property, all debts due on
whatever
account
and all choses in action shall be taken and be deemed
transferred
to and
vest in the Surviving Company by virtue of the Third Merger
without
any order
or other action on the part of any court or otherwise, and the
Surviving
Company shall be responsible for all liabilities and
obligations
of Horizon
and the Continuing Company, respectively, by virtue of the
Third
Merger, all with the effect provided in IC 23-1-40-6 of the IBCL
and
Section
450.1735 of the MBCA.
Section
1.10 CONVERSION AND EXCHANGE OF SHARES: THE THIRD MERGER. At
the
closing of the Third Merger, each common
share of the Continuing Company issued
and outstanding immediately prior to the
closing, by virtue of the Third Merger
and without any action on the part of the
holders thereof, shall be cancelled
for no additional consideration and all
certificates shall be surrendered to the
Surviving Company.
Section
1.11 RESERVATION OF RIGHT TO REVISE STRUCTURE. At Horizon's
election, any of the mergers may
alternatively be structured so that (a)
Alliance and/or Alliance Bank is merged
with and into any other direct or
indirect wholly-owned subsidiary of Horizon
or (b) any direct or indirect
wholly-owned subsidiary of Horizon is
merged with and into Alliance or Alliance
Bank; provided, however, that no such
change shall (i) alter or change the
amount or kind of the Merger Consideration
payable in the Holding Company Merger
or the treatment of the holders of Alliance
Common Stock, or (ii) materially
impede or delay consummation of the
transactions contemplated by this Agreement.
In the event of such an election, the
parties agree to execute an appropriate
amendment to this Agreement in order to
reflect such election.
Section
1.12 EXCHANGE PROCEDURES.
(a) Horizon Trust and Investment Management, N.A. ("HORIZON
TRUST")
shall act
as the Exchange Agent in the Holding Company Merger (the
"EXCHANGE
AGENT"). At the Effective Time, Horizon shall deposit the
Merger
Consideration in a separate account at Horizon Trust (the "EXCHANGE
FUND")
which
shall be used for the sole purpose of making disbursements to
the
Alliance
shareholders in connection with the Holding Company Merger.
(b) Not less than ten (10) days prior to the anticipated
Effective
Time, the
Exchange Agent shall mail to each record holder of any
certificate representing Alliance Common Stock (a "CERTIFICATE")
whose
shares
will be converted into the right to receive the Merger
Consideration a letter of transmittal (which shall specify that
delivery
shall
be
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
PAGE
5
<PAGE>
effected,
and risk of loss and title to the Certificates shall pass, only
upon
proper delivery of the Certificates to the Exchange Agent and
shall
be in such
form and have such other provisions as Horizon may reasonably
specify)
(each such letter, the "MERGER LETTER OF TRANSMITTAL") and
instructions for use in effecting the surrender of the Certificates
in
exchange
for the Merger Consideration.
(c) As soon as reasonably practical, but not more than five (5)
business
days after surrender to the Exchange Agent of a Certificate
(but
not prior
to the Effective Time), together with a Merger Letter of
Transmittal duly executed and any other documents reasonably
required by
the Exchange Agent,
the Exchange Agent shall transmit to the holder of
such
Certificate the Merger Consideration. No interest on the Merger
Consideration issuable upon the surrender of the Certificates shall
be
paid or
accrued for the benefit of holders of Certificates. If the
Merger
Consideration is to be issued to a person other than a person in
whose
name a
surrendered Certificate is registered, it shall be a condition
of
issuance
that the surrendered Certificate shall be properly endorsed or
otherwise
in proper form for transfer and that the person requesting such
issuance
shall pay to the Exchange Agent any required transfer or other
taxes or
establish to the satisfaction of the Exchange Agent that such
tax
has been
paid or is not applicable.
(d) Horizon reserves the right in all cases involving more than
five
hundred
(500) shares of Alliance Common Stock to require that a surety
bond on
terms and in an amount reasonably satisfactory to Horizon be
provided
to Horizon at the expense of the Alliance shareholder in the
event that
such shareholder claims loss of a Certificate and requests that
Horizon
waive the requirement for surrender of such Certificate.
(e) Any portion of the Exchange Fund that remains unclaimed by
the
shareholders of Alliance for six (6) months after the Effective
Time shall
be
returned to Horizon. Any shareholders of Alliance who have not
theretofore complied with this Section shall thereafter look only
to
Horizon
for payment of the Merger Consideration deliverable in respect
of
each share
of Alliance Common Stock such shareholder holds as determined
pursuant
to this Agreement, in each case, without any interest thereon.
(f) Notwithstanding the foregoing, neither the Exchange Agent
nor
any party
hereto shall be liable to any former holder of Alliance Common
Stock for
any amount properly delivered to a public official pursuant to
applicable
abandoned property, escheat or similar laws.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES
OF ALLIANCE
On or
prior to the date hereof, Alliance has delivered to Horizon a
schedule (the "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 this Article
2 or to one or more of its covenants
contained in Article 4; provided, that the
mere inclusion of an item in the Disclosure
Schedule as a exception to a
representation or warranty shall not be
deemed an admission by Alliance that
such item represents a material exception
or fact, event or circumstance or that
such items is reasonably likely to have or
result in a Material Adverse Effect
on Alliance. Alliance's representations,
warranties and covenants contained in
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
PAGE 6
<PAGE>
this Agreement shall not be deemed to be
untrue, incorrect or to have been
breached as a result of effects on Alliance
arising solely from actions taken in
compliance with a written request from
Horizon.
Subject to
the foregoing, Alliance hereby makes the following
representations and warranties to
Horizon:
Section
2.1 ORGANIZATION AND CAPITAL STOCK.
(a) Alliance is a corporation duly incorporated and in good
standing
under the
laws of the State of Michigan, is a registered bank holding
company
under the Bank Holding Company Act of 1956, as amended, and has
the
corporate power and authority to own all of its property and
assets,
to incur
all of its liabilities and to carry on its business as now
being
conducted.
(b) Alliance has authorized capital stock of 2,000,000 shares
of
common
stock, $1.00 par value per share ("ALLIANCE COMMON STOCK"),
302,691
shares of
which are issued and outstanding and 15,960 of which are
subject
to options
which are currently outstanding (the "ALLIANCE STOCK OPTIONS").
All of the
issued and outstanding shares of Alliance Common Stock are duly
and
validly issued and outstanding, fully paid and non-assessable. None
of
the
outstanding shares of Alliance Common Stock has been issued in
violation
of any preemptive rights of the current or past shareholders of
Alliance
or in violation of any applicable federal or state securities
laws or
regulations. All of the Alliance Stock Options have been duly
and
validly
issued.
(c) Except as set forth in Section 2.1(b) there are no shares
of
capital
stock or other equity securities of Alliance outstanding and no
outstanding options, warrants, rights to subscribe for, calls,
or
commitments of any character whatsoever relating to, or securities
or
rights
convertible into or exchangeable for, shares of the capital
stock
of
Alliance or contracts, commitments, understandings or arrangements
by
which
Alliance is or may be obligated to issue additional shares of
its
capital
stock or options, warrants or rights to purchase or acquire any
additional
shares of its capital stock.
(d) Except as disclosed in Section 2.1(d) of the Disclosure
Schedule,
each certificate representing shares of Alliance Common Stock
issued by
Alliance in replacement of any certificate theretofore issued
by
it which
was claimed by the record holder thereof to have been lost,
stolen or
destroyed was issued by Alliance only upon receipt of an
affidavit
of lost stock certificate which contains an indemnity agreement
in favor
of Alliance.
Section
2.2 AUTHORIZATION; NO DEFAULTS.
(a) The Boards of Directors of Alliance and Alliance Bank has
each,
by all
appropriate action, approved this Agreement and the Mergers and
has
authorized
the execution of this Agreement on its behalf by its duly
authorized
officers and the performance, respectively, by Alliance and
Alliance
Bank of its obligations hereunder.
(b) Nothing in the Articles of Incorporation or Bylaws of
Alliance,
as
amended, in the Charter or Bylaws of Alliance Bank, or in any
agreement,
instrument, decree, proceeding, law or regulation (except as
specifically referred to in or contemplated by this Agreement) by
or to
which
Alliance or Alliance Bank is bound or subject, would prohibit
either
Alliance
or Alliance Bank from entering into and
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
PAGE 7
<PAGE>
consummating, or would be violated or breached by Alliance's or
Alliance
Bank's
consummation of, this Agreement and the transactions
contemplated
herein and
the Mergers on the terms and conditions herein contained.
(c) This Agreement has been duly and validly executed and
delivered
by
Alliance and Alliance Bank and constitutes a legal, valid and
binding
obligation
of Alliance and Alliance Bank, enforceable against Alliance and
Alliance
Bank in accordance with its terms, and, except for the approval
by
Alliance, as the sole shareholder of Alliance Bank, and
Alliance's
shareholders, no other corporate acts or proceedings are required
to be
taken by
Alliance or Alliance Bank to authorize the execution, delivery
and
performance of this Agreement.
(d) Alliance or Alliance Bank is not, and will not be by reason
of
the
consummation of the transactions contemplated herein, in default
under
or in
violation of any provision of, nor will the consummation of the
transactions contemplated herein afford any party a right to
accelerate
any
indebtedness under, Alliance's Articles of Incorporation or Bylaws
or
Alliance
Bank's Articles of Incorporation or Bylaws, any promissory
note,
indenture
or other evidence of indebtedness or security therefor, or any
lease,
contract, or other commitment or agreement to which Alliance or
Alliance
Bank is a party or by which Alliance or Alliance Bank or their
property
is bound.
(e) Except for the requisite approvals of and filings with the
FDIC,
the Board
of Governors of the Federal Reserve System and its delegates
(the
"FRB"), the Office of the Comptroller of the Currency (the
"OCC"),
the
Michigan Office of Financial and Insurance Services ("MOFIS"),
the
Indiana
Secretary of State, and the Michigan Department of Commerce, no
notice to,
filing with, authorization by, or consent or approval of, any
federal or
state regulatory authority is necessary for the execution and
delivery
of this Agreement or the consummation of the Mergers by
Alliance
and
Alliance Bank.
Section
2.3 SUBSIDIARIES. Alliance Bank is duly organized and validly
existing under the laws of the State of
Michigan and has the corporate power to
own its properties and assets, to incur its
liabilities and to carry on its
business as now being conducted. Alliance
owns of record and beneficially free
and clear of all liens and encumbrances all
of the 36,091 outstanding shares of
the capital stock of Alliance Bank.
Alliance has no other direct or indirect
subsidiaries. There are no options,
warrants or rights outstanding to acquire
any capital stock of Alliance Bank, and no
person or entity has any other right
to purchase or acquire any unissued shares
of stock of Alliance Bank, nor does
Alliance Bank have any obligation of any
nature with respect to its unissued
shares of stock. Except for the ownership
of readily marketable securities,
Federal Home Loan Bank or Federal Reserve
Bank stock, neither Alliance nor
Alliance Bank is a party to any partnership
or joint venture or owns an equity
interest in any other business or
enterprise.
Section
2.4 FINANCIAL INFORMATION. The audited consolidated balance
sheets
of Alliance and Alliance Bank as of
December 31, 2002 and 2003, and the related
audited consolidated statements of income,
changes in equity capital, and cash
flows, for the three years ended December
31, 2003, together with the notes
thereto; and the quarterly Reports of
Condition and Income of Alliance Bank as
filed with the Federal Deposit Insurance
Corporation (the "FDIC") for the
quarter ended September 30, 2004, (the
"ALLIANCE BANK REPORTS"); all of which
have been previously furnished by Alliance
to Horizon (collectively the
"ALLIANCE FINANCIAL
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
PAGE 8
<PAGE>
STATEMENTS"), together with all subsequent
financial statements filed with the
FDIC prior to the Effective Date, shall
have been prepared in accordance with
generally accepted accounting principles
("GAAP") applied on a consistent basis
(except as disclosed therein and except for
regulatory reporting differences
required with respect to Alliance Bank's
Reports) and fairly present the
consolidated financial position and the
consolidated results of operations,
changes in shareholders' equity and cash
flows of Alliance and Alliance Bank in
all material respects as of the dates and
for the periods indicated (subject, in
the case of interim financial statements,
to normal recurring year-end
adjustments, none of which are material).
Alliance and Alliance Bank each does
not have any material liability, fixed or
contingent, except to the extent set
forth in the Alliance Financial Statements
or incurred in the ordinary course of
business since the date of the most recent
Alliance Financial Statement.
Section
2.5 ABSENCE OF CHANGES. Since September 30, 2004, there has not
been any Material Adverse Change with
respect to Alliance or Alliance Bank. For
purposes of this Agreement, "MATERIAL
ADVERSE CHANGE" means, with respect to
Alliance or Alliance Bank, any change that
(a) is both material and adverse to
the financial position, results of
operations, business or future prospects of
Alliance or Alliance Bank, other than (i)
the effects of any change attributable
to or resulting from changes in economic
conditions, laws, regulations or
accounting guidelines (GAAP or otherwise)
applicable to depository institutions
generally, or in general, levels of
interest rates, (ii) payments associated
with the Holding Company Merger or the Bank
Merger, (iii) charges required under
Section 4.10 hereof, or (iv) actions or
omissions of either Alliance or Alliance
Bank taken with the prior informed written
consent of Horizon in contemplation
of the transactions contemplated by this
Agreement; or (b) would materially
impair the ability of either Alliance or
Alliance Bank to perform its
obligations under this Agreement or
otherwise materially threaten or materially
impede the consummation of the Holding
Company Merger or the Bank Merger and the
other transactions contemplated by this
Agreement.
Section
2.6 AGREEMENTS WITH BANKING AUTHORITIES. Except as otherwise
disclosed in Section 2.6 of the Disclosure
Schedule, neither Alliance nor
Alliance Bank is subject (or has been
subject during the last five (5) years) to
any order (other than orders applicable to
banks generally) or is a party (or
has been a party during the last five (5)
years) to any agreement or memorandum
of understanding with any federal or state
agency charged with the supervision
or regulation of banks or bank holding
companies, including without limitation
the MOFIS, the FDIC and the FRB.
Section
2.7 TAX MATTERS.
(a) Alliance and Alliance Bank have each filed with the
appropriate
governmental agencies all federal, state and local income,
franchise,
excise,
sales, use, real and personal property and other tax returns
and
reports
required to be filed by it and has paid all taxes required to
be
paid by it
on or before their due date. Except as set forth in Section
2.7(a) of
the Disclosure Schedule, neither Alliance nor Alliance Bank is
(i)
delinquent in the payment of any taxes shown on such returns or
reports or
on any assessments received by it for such taxes; (ii) aware of
any
pending or threatened examination for income taxes for any year by
the
Internal
Revenue Service (the "IRS") or any state tax agency; (iii)
subject to
any agreement extending the period for assessment, payment or
collection
of any federal or state tax; or (iv) a party to any action or
proceeding
with, nor has any claim been asserted against it by, any court,
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
PAGE 9
<PAGE>
administrative agency or commission or other federal, state or
local
governmental authority or instrumentality ("GOVERNMENTAL
AUTHORITY") for
assessment
or collection of taxes.
(b) None of the tax returns of Alliance or Alliance Bank has
been
audited by
the IRS or any state tax agency for any period since December
31, 2001.
Neither Alliance nor Alliance Bank is the subject of any
threatened
action or proceeding by any Governmental Authority for
assessment or
collection of taxes.
(c) The reserve for taxes in the unaudited financial statements
of
Alliance
for the quarter ended September 30, 2004, is, in the opinion of
management, adequate to cover all of the tax liabilities of
Alliance and
Alliance
Bank (including, without limitation, income taxes and franchise
fees) as
of such date in accordance with GAAP.
(d) Alliance has not filed any consolidated federal income tax
return
with an "affiliated group" (within the meaning of Section 1505
of
the
Internal Revenue Code of 1986, as amended) (the "CODE") where
Alliance
was not
the common parent of the group. Neither Alliance nor Alliance
Bank
is, or has
been, a party to any tax allocation agreement or arrangement
pursuant
to which it has any contingent or outstanding liability to
anyone
other than
Alliance or Alliance Bank.
(e) Alliance has disclosed in all of its federal income tax
returns
all
positions taken therein that could give rise to a substantial
understatement of federal income tax within the meaning of Section
6662 of
the
Code.
(f) Alliance has never elected under Section 1362 of the Code
(or
under any
analogous or similar provision of state or local law in any
jurisdiction where Alliance files its tax returns) to be treated as
an "S"
Corporation for state or federal tax purposes.
Section
2.8 LITIGATION. Except as set forth in Section 2.8 of the
Disclosure Schedule and except for
foreclosure and other collection proceedings
commenced in the ordinary course of
business by Alliance Bank with respect to
loans in default with respect to which no
counter claims have been asserted
against Alliance Bank, there is no
litigation, claim or other proceeding pending
or threatened before any judicial,
administrative or regulatory agency or
tribunal against or involving Alliance or
Alliance Bank, or to which any of the
properties of Alliance or Alliance Bank is
subject.
Section
2.9 EMPLOYMENT AGREEMENTS. Except as set forth in Section 2.9
of
the Disclosure Schedule, neither Alliance
nor Alliance Bank is a party to or
bound by any written contract for the
employment, retention, engagement, or
severance of any officer, employee, agent,
consultant or other person or entity
which, by its terms, is not terminable by
Alliance or Alliance Bank on thirty
(30) days' written notice or less without
the payment of any amount by reason of
such termination. Section 2.9 of the
Disclosure Schedule also contains a list of
all current employees of Alliance and
Alliance Bank with their annual
compensation, employment start date,
current employment status, employee benefit
plan elections and such other information
as Horizon may reasonably require.
Section
2.10 REPORTS. Since January 1, 2003, Alliance and Alliance Bank
have filed all reports, notices and other
statements, together with any
amendments required to be made with respect
thereto, if any, that they were
required to file with (i) the FRB, (ii) the
FDIC, (iii) the MOFIS, and (iv) any
other governmental authority with
jurisdiction over Alliance or Alliance
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
PAGE 10
<PAGE>
Bank. As of their respective dates, each of
such reports and documents,
including the financial statements,
exhibits and schedules thereto, complied in
all material respects with the relevant
statutes, rules and regulations enforced
or promulgated by the regulatory authority
with which they were filed.
Section
2.11 INVESTMENT PORTFOLIO. All United States Treasury
securities,
obligations of other United States
Government agencies and corporations,
obligations of States of the United States
and their political subdivisions, and
other investment securities classified as
"held to maturity" held by Alliance
and Alliance Bank, as reflected in the
latest balance sheet in the Alliance
Financial Statements, are carried in the
aggregate at no more than cost adjusted
for amortization of premiums and accretion
of discounts. All United States
Treasury securities, obligations of other
United States Government agencies and
corporations, obligations of States of the
United States and their political
subdivisions, and other investment
securities classified as "available for sale"
held by Alliance and Alliance Bank, as
reflected in the latest balance sheet in
the Alliance Financial Statements, are
carried in the aggregate at market value.
Provisions for losses have been made on all
such securities which have had a
decline in value deemed "other than
temporary" as defined in SEC Staff
Accounting Bulletin No. 59. None of the
investments reflected in the Alliance
Financial Statements as of and for the
quarter ended September 30, 2004, and
none of the investments made by Alliance or
Alliance Bank since September 30,
2004, are subject to any restriction,
whether contractual or statutory, which
materially impairs the ability of Alliance
or Alliance Bank to dispose freely of
such investment at any time.
Section
2.12 LOAN PORTFOLIO.
(a) All loans shown in the Alliance Financial Statements at
September
30, 2004, or which were entered into after September 30, 2004,
but before
the Closing Date, were and will be made in all material
respects
for good, valuable and adequate consideration in the ordinary
course of
the business of Alliance Bank, in accordance in all material
respects
with sound banking practices, and are not subject to any
material
defenses,
set offs or counterclaims, including without limitation any
such
as are
afforded by usury or truth in lending laws, except as may be
provided
by bankruptcy, insolvency or similar laws or by general
principles
of equity. The notes or other evidences of indebtedness
evidencing
such loans and all forms of pledges, mortgages and other
collateral
documents and security agreements are, and will be,
enforceable, valid, true and genuine and what they purport to be.
Alliance
and
Alliance Bank have complied, and will prior to the Closing Date
comply,
with all laws and regulations relating to such loans, Alliance
and
Alliance
Bank have not sold, purchased or entered into any loan
participation arrangement except where such participation is on a
pro rata
basis
according to the respective contributions of the participants
to
such loan
amount. Alliance has no knowledge that any condition of
property
in which
Alliance Bank has an interest as collateral to secure a loan
violates
the Environmental Laws (defined in Section 2.15(a)) or
obligates
Alliance
Bank or the owner or operator of such property to remedy,
stabilize,
neutralize or otherwise alter the environmental condition of
such
property.
(b) Except as set forth in Section 2.12(b) of the Disclosure
Schedule,
as of September 30, 2004, Alliance Bank had no loan in excess
of
$10,000
that has been classified by regulatory examiners or management
of
Alliance
Bank as "Substandard," "Doubtful" or "Loss" or in excess of
$10,000
that has been identified by accountants or auditors (internal
or
external)
as having a significant risk of uncollectability. As of the
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
PAGE 11
<PAGE>
date
hereof, the most recent loan watch list of Alliance Bank and a
list
of all
loans in excess of $10,000 that Alliance Bank has determined to
be
ninety
(90) days or more past due with respect to principal or
interest
payments
or has placed on nonaccrual status are set forth in Section
2.12(b) of
the Disclosure Schedule.
(c) Except as set forth in Section 2.12(c) of the Disclosure
Schedule,
the reserves, the allowance for possible loan and lease losses
and the
carrying value for real estate owned which are shown on the
Alliance
Financial Statements are, in the opinion of management of
Alliance,
adequate in all respects under the requirements of GAAP applied
on a
consistent basis to provide for possible losses on items for
which
reserves
were made, on loans and leases outstanding and real estate
owned
as of the
respective dates.
(d) Set forth in Section 2.12(d) of the Disclosure Schedule is
a
true,
accurate and complete list of all loans in which Alliance Bank
has
any
participation interest or which have been made with or through
another
financial
institution on a recourse basis against Alliance Bank.
SECTION
2.13 EMPLOYEE MATTERS AND ERISA.
(a) Neither Alliance nor Alliance Bank has entered into any
collective
bargaining agreement with any labor organization with respect
to any
group of employees of Alliance or Alliance Bank, and there is
no
present
effort nor existing proposal to attempt to unionize any group
of
employees
of Alliance or Alliance Bank.
(b) Except as set forth in Section 2.13(b) of the Disclosure
Schedule,
(i) Alliance and Alliance Bank are and have been in compliance
with all
applicable laws respecting employment and employment practices,
terms and
conditions of employment and wages and hours, including,
without
limitation, any such laws respecting employment discrimination
and
occupational safety and health requirements, and neither Alliance
nor
Alliance
Bank is engaged in any unfair labor practice; (ii) there is no
unfair
labor practice complaint against Alliance or Alliance Bank
pending
or
threatened before the National Labor Relations Board; (iii) there
is no
labor
dispute, strike, slowdown or stoppage actually pending or
threatened
against or
directly affecting Alliance or Alliance Bank; and (iv) neither
Alliance
nor Alliance Bank has experienced any material work stoppage or
other
material labor difficulty during the past five (5) years.
(c) Except as may be disclosed in Section 2.13(c) of the
Disclosure
Schedule,
neither Alliance nor Alliance Bank maintains, contributes to or
participates in or has any liability under any employee benefit
plans, as
defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as
amended ("ERISA"), including (without limitation) any
multiemployer plan (as defined in Section 3(37) of ERISA), or
any
nonqualified employee benefit plans or deferred compensation,
bonus, stock
or
incentive plans, or other employee benefit or fringe benefit
programs
for the
benefit of former or current employees or directors (or their
beneficiaries or dependents) of Alliance or Alliance Bank (the
"EMPLOYEE
PLANS").
No present or former employee of Alliance or Alliance Bank has
been
charged with breaching nor has breached a fiduciary duty under any
of
the
Employee Plans. Except as may be disclosed in Section 2.13(c) of
the
Disclosure
Schedule, neither Alliance nor Alliance Bank participates in,
nor has it
in the past five (5) years participated in, nor has it any
present or
future obligation or liability
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
PAGE 12
<PAGE>
under, any
multiemployer plan. Except as may be disclosed in Section
2.13(c) of
the Disclosure Schedule, neither Alliance nor Alliance Bank
maintains,
contributes to, or participates in, any plan that provides
health,
major medical, disability or life insurance benefits to former
employees
or directors of Alliance or Alliance Bank. Alliance has
provided
to Horizon
a true, accurate and complete copy of each written plan or
program
disclosed in the Disclosure Schedule. Alliance has also
provided
to
Horizon, with respect to each such plan or program to the
extent
available
to Alliance, all (i) amendments or supplements thereto, (ii)
summary
plan descriptions, (iii) descriptions of all current
participants
in such
plans and programs and all participants with benefit
entitlements
under such
plans and programs, (iv) contracts relating to plan documents,
(v)
actuarial valuations for any defined benefit plan, (vi) valuations
for
any plan
as of the most recent date, (vii) determination letters from
the
IRS,
(viii) the most recent annual report filed with the IRS, and
(ix)
trust
agreements.
(d) All liabilities of the Employee Plans have been funded on
the
basis of
consistent methods in accordance with sound actuarial
assumptions
and
practices, and no Employee Plan, at the end of any plan year, or
at
September
30, 2004, had or has had an accumulated funding deficiency
(within
the meaning of Section 302 of ERISA or Section 412 of the
Code).
No
actuarial assumptions have been changed since the last written
report
of
actuaries on such Employee Plans. All insurance premiums
(including
premiums
to the Pension Benefit Guaranty Corporation) have been paid in
full,
subject only to normal retrospective adjustments in the
ordinary
course.
Except as may be noted on the Alliance Financial Statements,
Alliance
and Alliance Bank have no contingent or actual liabilities
under
Title IV
of ERISA as of September 30, 2004. No accumulated funding
deficiency
(within the meaning of Section 302 of ERISA or Section 412 of
the Code
has been incurred with respect to any of the Employee Plans,
whether or
not waived, nor does Alliance or any of its affiliates have any
liability
or potential liability as a result of the underfunding of, or
termination of, or withdrawal from, any plan by Alliance or by any
person
which may
be aggregated with Alliance for purposes of Section 412 of the
Code. No
reportable event (as defined in Section 4043 of ERISA) has
occurred
with respect to any of the Employee Plans as to which a notice
would be
required to be filed with the Pension Benefit Guaranty
Corporation. No claim is pending or threatened with respect to
any
Employee
Plan (other than a routine claim for benefits for which plan
administrative review procedures have not been exhausted) for
which
Alliance
or Alliance Bank would be liable after September 30, 2004,
except
as is
reflected on the Alliance Financial Statements. As of September
30,
2004,
Alliance and Alliance Bank had no liability for excise taxes
under
Sections
4971, 4975, 4976, 4977, 4979 or 4980B of the Code or for a fine
under
Section 502 of ERISA with respect to any Employee Plan. All
Employee
Plans have
been operated, administered and maintained in accordance with
the terms
thereof and in compliance with the requirements of all
applicable
laws, including, without limitation, ERISA.
Section
2.14 TITLE TO PROPERTIES; INSURANCE. Section 2.14 to the
Disclosure Schedule sets forth a list of
all real property owned or leased by
Alliance or Alliance Bank and a reasonable
description of the size, use and
location thereof. Except as described in
Section 2.14 of the Disclosure
Schedule, Alliance and Alliance Bank have
marketable title, insurable at
standard rates, free and clear of all
liens, charges and encumbrances (except
taxes which are a lien but not yet payable
and liens, charges or encumbrances
reflected in the Alliance Financial
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
PAGE 13
<PAGE>
Statements and easements, rights-of-way,
and other restrictions which do not
interfere with the current use of such
properties, and, in the case of Other
Real Estate Owned, as such real estate is
internally classified on the books of
Alliance or Alliance Bank, rights of
redemption under applicable law) to all
real properties reflected on the Alliance
Financial Statements as being owned by
Alliance or Alliance Bank. All real
properties are currently being used in
compliance with all zoning laws, and there
are no encroachments or other
violations of law with respect to any such
property. All leasehold interests
used by Alliance and Alliance Bank in their
operations, if any, are held
pursuant to lease agreements that are valid
and enforceable in accordance with
their terms, and no party to any such lease
agreement is currently in default
thereunder. No leasehold interest is
subject to any superior mortgage or other
lien. All such properties comply with all
applicable private agreements, zoning
requirements and other governmental laws
and regulations relating thereto, and
there are no condemnation proceedings
pending or threatened with respect to such
properties. Alliance and Alliance Bank have
valid title or other ownership
rights under licenses to all intangible
personal or intellectual property used
by Alliance or Alliance Bank in their
respective businesses free and clear of
any claim, defense or right of any other
person or entity, subject only to
rights of the licensor pursuant to
applicable license agreements, which rights
do not materially adversely interfere with
the use or enjoyment of such
property. All insurable real and personal
properties owned or held by Alliance
and Alliance Bank are insured in such
amounts, and against fire and other risks
insured against by extended coverage and
public liability insurance, as, in the
opinion of management of Alliance, is
customary with companies of the same size
and in the same business. Section 2.14 of
the Disclosure Schedule also contains
a list of all prior insurance companies and
insurance coverages provided by
those companies for Alliance or Alliance
Bank during the last five (5) years and
a listing of all claims made under any such
policy involving $40,000 or more for
any single claim.
Section
2.15 ENVIRONMENTAL MATTERS.
(a) As used in this Agreement, "ENVIRONMENTAL LAWS" means all
local,
state and
federal environmental, health and safety laws and regulations
in
all
jurisdictions in which the parties hereto have done business or
owned
property,
including, without limitation, the Federal Resource
Conservation
and
Recovery Act, the Federal Comprehensive Environmental Response,
Compensation and Liability Act, the Federal Clean Water Act, the
Federal
Clean Air
Act, and the Federal Occupational Safety and Health Act.
(b) To the knowledge of management of Alliance and Alliance
Bank,
neither
the conduct nor operation of Alliance or Alliance Bank nor any
condition
of any property owned by Alliance or Alliance Bank within the
past ten
(10) years and used in its business operations or the condition
of any
property owned by Alliance or Alliance Bank within the past ten
(10) years
but not used in its business operations, violates or violated
Environmental Laws or contained or contains any underground storage
tank,
and no
condition or event has occurred with respect to it or any such
property
that, with notice or the passage of time, or both, would
constitute
a violation of Environmental Laws or obligate Alliance or
Alliance
Bank to remedy, stabilize, neutralize or otherwise alter the
environmental condition of any such property. Neither Alliance
nor
Alliance
Bank has received any notice from any person or entity that
Alliance
or Alliance Bank or the operation of any facilities or any
property
owned by Alliance or Alliance Bank is or was in violation of
any
Environmental Laws or that Alliance or Alliance Bank is
responsible
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
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<PAGE>
for the
cleanup of any pollutants, contaminants, or hazardous or toxic
wastes,
substances or materials at, on or beneath any such property.
Section
2.16 COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT. Alliance
and
Alliance Bank are in compliance with all
applicable provisions of the Americans
with Disabilities Act (the "ADA") and no
action under the ADA against Alliance
or Alliance Bank or any of their properties
has been initiated or has been
threatened or contemplated.
Section
2.17 COMPLIANCE WITH LAW. Alliance and Alliance Bank have all
licenses, franchises, permits and other
governmental authorizations that are
legally required to enable them to conduct
their respective businesses as
presently conducted and are in compliance
with all applicable laws and
regulations.
Section
2.18 BROKERAGE. Except for a fee payable to Austin Associates,
LLC
in connection with it acting as financial
advisor and issuing a fairness opinion
to Alliance, there are no existing claims
or agreements for brokerage
commissions, finders' fees, investment
banking fees, or similar compensation in
connection with the Mergers payable by
Alliance or Alliance Bank.
Section
2.19 MATERIAL CONTRACTS. Except as set forth in Section 2.19 of
the Disclosure Schedule, neither Alliance
nor Alliance Bank is a party to or
bound by any oral or written:
(a) agreement, security agreement, pledge agreement, contract
or
indenture
under which it has borrowed or will borrow money or pursuant to
which it
has granted any lien on any of its assets (not including
federal
funds and
money deposited, including without limitation, checking and
savings
accounts and certificates of deposit);
(b) guaranty of any obligation for the borrowing of money or
otherwise,
excluding endorsements made for collection and guarantees made
in the
ordinary course of business and letters of credit issued in the
ordinary
course of business;
(c) agreement with any present or former officer, director or
shareholder (except for deposit or loan agreements entered into in
the
ordinary
course of business);
(d) any lease or license of personal property (whether tangible
or
intangible, including intellectual property and software), whether
as
licensor
or licensee involving payments or receipts in excess of
$10,000;
(e) contract or commitment for the purchase of materials,
supplies
or other
real or personal property in an amount in excess of $10,000 or
for the
performance of services involving an amount in excess of
$10,000;
(f) joint venture or partnership agreement or arrangement; or
(g) contract, agreement or other commitment not made in the
ordinary
course of
business and involving payments or receipts in excess of
$10,000.
All of the contracts listed in Section 2.19
of the Disclosure Schedule (1) are
currently in full force and effect, (2)
represent due and valid obligations of
the parties thereto, and (3) are
enforceable against each of the parties thereto
in accordance with their terms. Neither
Alliance nor Alliance Bank is in default
with respect to any such contract, and
neither Alliance nor Alliance Bank is
aware of any default by any other party to
any such contract.
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
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<PAGE>
Section
2.20 NO UNDISCLOSED LIABILITIES. Alliance and Alliance Bank do
not
have any liability, whether asserted or
unasserted, whether absolute or
contingent, whether accrued or unaccrued,
whether liquidated or unliquidated,
and whether due or to become due (and there
is no past or present fact,
situation, circumstance, condition or other
basis for any present or future
action, suit or proceeding, hearing,
charge, complaint, claim or demand against
Alliance or Alliance Bank giving rise to
any such liability) required in
accordance with GAAP to be reflected in an
audited consolidated balance sheet of
Alliance or the notes thereto, except (i)
for liabilities set forth or reserved
against in the Alliance Financial
Statements, (ii) for normal fluctuations in
the amount of the liabilities referred to
in clause (i) above or other
liabilities occurring in the ordinary
course of business of Alliance and
Alliance Bank since the date of the most
recent balance sheet included in the
Alliance Financial Statements, which such
fluctuations in the aggregate are not
material to Alliance and Alliance Bank
taken as a whole, (iii) liabilities
relating to the possible sale of Alliance
or other transactions contemplated by
this Agreement, and (iv) as may be
disclosed in Section 2.20 of the Disclosure
Schedule.
Section
2.21 DELIVERY OF DOCUMENTS. Final and complete copies of each
document, plan or contract listed and
described in the Disclosure Schedule have
been provided to Horizon. Neither Alliance
nor Alliance Bank nor any other party
thereof is in default under any such
contract 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.
Section
2.22 INTERIM EVENTS. Except as provided in Section 2.22 of the
Disclosure Schedule, since September 30,
2004, neither Alliance nor Alliance
Bank has paid or declared any dividend or
made any other distribution to
shareholders or taken any action which if
taken after the date of this Agreement
would require the prior written consent of
Horizon pursuant to Section 4.1
hereof.
Section
2.23 BOOKS AND RECORDS. The books and records of Alliance and
Alliance Bank have been fully, properly and
accurately maintained in all
material respects, there are no material
inaccuracies or discrepancies of any
kind contained or reflected therein, and
they fairly present the financial
position of Alliance and Alliance Bank.
Section
2.24 DEPOSIT INSURANCE. The deposits of Alliance Bank are
insured
by the FDIC up to applicable limits and in
accordance with the Federal Deposit
Insurance Corporation Act, as amended, and
Alliance Bank has paid or properly
reserved or accrued for all current
premiums and assessments with respect to
such deposit insurance, if any.
Section
2.25 NO REGULATORY FILINGS. There are no filings, notices or
submissions required to be made by Alliance
or Alliance Bank with any regulatory
authority in connection with obtaining
approval for either of the Mergers.
Section
2.26 STATEMENTS TRUE AND CORRECT. None of the information
supplied
or to be supplied by Alliance or Alliance
Bank for inclusion in any documents to
be filed with the FRB, OCC, SEC, MOFIS, or
any other regulatory authority in
connection with the Mergers will, at the
respective times such documents are
filed, be false or misleading with respect
to any material fact or omit to state
any material fact necessary in order to
make the statements therein not
misleading.
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
PAGE 16
<PAGE>
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
OF HORIZON
Horizon
hereby makes the following representations and warranties to
Alliance:
Section
3.1 ORGANIZATION. Each of Horizon and Horizon Acquisition Corp.
is
a corporation duly incorporated and validly
existing under the laws of the State
of Indiana, and Horizon is a registered
bank holding company under the Bank
Holding Company Act of 1956, as amended,
and each has the corporate power and
authority to own all of its property and
assets, to incur all of its
liabilities, and to carry on its business
as it is now being conducted. Horizon
Bank is a national bank duly incorporated
and validly existing under the laws of
the United States, and has the corporate
power and authority to own all of its
property and assets, to incur all of its
liabilities, and to carry on its
business as it is now being conducted.
Section
3.2 AUTHORIZATION.
(a) The Boards of Directors of Horizon, Horizon Acquisition
Corp.,
and
Horizon Bank have each, by all appropriate action, approved
this
Agreement
and the Mergers and has authorized the execution of this
Agreement
on its behalf by its respective duly authorized officers and
the
performance, respectively, by Horizon, Horizon Acquisition Corp.,
and
Horizon
Bank of its respective obligations hereunder.
(b) Nothing in the Articles of Incorporation or Bylaws of Horizon
or
Horizon
Acquisition Corp., as amended, or in the Articles of
Association
or Bylaws
of Horizon Bank, or in any agreement, instrument, decree,
proceeding, law or regulation (except as specifically referred to
in or
contemplated by this Agreement) by or to which Horizon, Horizon
Acquisition Corp., or Horizon Bank is bound or subject would
prohibit any
of them
from entering into and consummating, or would be violated or
breached
by any of their consummation of this Agreement and the
transactions contemplated herein on the terms and conditions
herein
contained.
(c) This Agreement has been duly and validly executed and
delivered
by
Horizon, Horizon Acquisition Corp., and Horizon Bank and
constitutes a
legal,
valid and binding obligation of each of them, enforceable
against
each of
them in accordance with its terms, and no other corporate acts
or
proceedings are required to be taken by Horizon, Horizon
Acquisition
Corp., or
Horizon Bank to authorize the execution, delivery and
performance of this Agreement.
(d) Neither Horizon, Horizon Acquisition Corp., nor Horizon Bank
is,
and will
not be by reason of the consummation of the transactions
contemplated herein be, in default under or in violation of any
provision
of, nor
will the consummation of the transactions contemplated herein
afford any
party a right to accelerate any indebtedness under, Horizon's
or Horizon
Acquisition Corp's Articles of Incorporation or Bylaws or
Horizon
Bank's Articles of Association or Bylaws, any promissory note,
indenture,
or other evidence of indebtedness or security therefore, or any
lease,
contract, or other commitment or agreement to which Horizon,
Horizon
Acquisition Corp., or Horizon Bank is a party or by which any
of
them or
their property is bound.
(e) Except for the requisite approvals of and filings with the
FDIC,
the FRB,
the OCC, the MOFIS, the Indiana Secretary of State and the
Michigan
Department of Commerce, no notice to, filing with,
authorization
by, or
consent or approval of, any federal or state regulatory
authority
is
necessary for the execution and delivery of this
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
PAGE 17
<PAGE>
Agreement
or the consummation of the Mergers by Horizon, Horizon
Acquisition Corp., and Horizon Bank.
Section
3.3 FINANCIAL INFORMATION. The audited consolidated balance
sheets
of Horizon and its subsidiaries as of
December 31, 2002 and 2003 and related
consolidated statements of income, changes
in shareholders' equity and cash
flows for the three years ended December
31, 2003, together with the notes
thereto, included in Horizon's most recent
10-K, as filed with the SEC, and the
unaudited consolidated balance sheet of
Horizon and its subsidiaries as of
September 30, 2004, and the related
unaudited consolidated statement of income,
changes in shareholders' equity and cash
flows for the period then ended
included in Horizon's Quarterly Report on
Form 10-Q as filed with the SEC
(collectively, the "HORIZON FINANCIAL
STATEMENTS"), all of which have been
previously furnished by Horizon to
Alliance, together with all subsequent
financial statements and reports filed with
the SEC prior to the Effective Date,
shall have been prepared in accordance with
generally accepted accounting
principles applied on a consistent basis
(except as disclosed therein) and
fairly present the consolidated financial
position and the consolidated results
of operations, changes in shareholders'
equity and cash flows of Horizon and its
consolidated subsidiaries as of the dates
and for the periods indicated
(subject, in the case of interim financial
statements, to normal recurring
year-end adjustments, none of which will be
material). Horizon and its
subsidiaries each does not have any
material liability, fixed or contingent,
except as set forth in the Horizon
Financial Statements or incurred in the
ordinary course of business since the date
of the most recent Horizon Financial
Statement.
Section
3.4 REPORTS. Since January 1, 2003 Horizon and Horizon Bank has
filed all reports, notices and other
statements, together with any amendments
required to be made with respect thereto,
that it was required to file with (i)
the SEC, (ii) the FRB, (iii) the OCC, or
(iv) any applicable state securities or
banking authorities, and (v) any other
governmental authority with jurisdiction
over Horizon or Horizon Bank. As of their
respective dates, each of such reports
and documents, as amended, including the
financial statements, exhibits and
schedules thereto, complied in all material
respects with the relevant statutes,
rules and regulations enforced or
promulgated by the regulatory authority with
which they were filed, and did not 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, in light of the circumstances
under which they were made, not
misleading.
Section
3.5 AGREEMENTS WITH BANKING AUTHORITIES. Neither Horizon,
Horizon
Acquisition Corp., nor Horizon Bank is
subject to any order (other than orders
applicable to banks generally) or is a
party to any agreement or memorandum of
understanding with any federal or state
agency charged with the supervision or
regulation of banks or bank holding
companies, including, without limitation,
the FDIC, the OCC, and the FRB.
Section
3.6 COMPLIANCE WITH LAW. Each of Horizon, Horizon Acquisition
Corp., and Horizon Bank has all licenses,
franchises, permits and other
governmental authorizations that are
legally required to enable them to conduct
their respective businesses as presently
conducted and are in compliance in all
material respects with all applicable laws
and regulations.
Section
3.7 FINANCING FOR THE TRANSACTION. Horizon is in the process of
acquiring a portion of the funds to allow
it to perform its obligations under
this Agreement. Horizon is not aware of any
fact or circumstance that will
likely prevent it from being able to
acquire such funds. Assuming the
acquisition of such funds, Horizon
currently believes it will be, immediately
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
PAGE 18
<PAGE>
following the Mergers, in material
compliance with all applicable capital
regulations of federal banking agencies
having jurisdiction over Horizon and
Horizon Bank.
ARTICLE 4. AGREEMENTS OF ALLIANCE
Section
4.1 CONDUCT OF BUSINESS.
(a) Alliance and Alliance Bank shall continue to carry on its
business
and the discharge or incurrence of its obligations and
liabilities only in the ordinary course of business as
heretofore
conducted
and, by way of amplification and not limitation with respect to
such
obligation, Alliance and Alliance Bank will not, without the
prior
written
consent of Horizon, which consent will not be unreasonably
withheld:
(I) DIVIDENDS. Declare or pay any dividend or make any other
distribution to shareholders, whether in cash, stock or other
property; or
(II) ISSUANCES OF STOCK. Issue any common or other capital
stock or any options, warrants or other rights to subscribe for
or
purchase common or any other capital stock or any securities
convertible into or exchangeable for any capital stock or permit
any
additional shares of Alliance Common Stock or capital stock of
Alliance Bank to become subject to grants of employee or
director
stock options, restricted stock grants, or similar stock-based
employee or director rights; or
(III) REDEMPTIONS OF STOCK. Directly or indirectly redeem,
purchase or otherwise acquire (except for shares acquired in
satisfaction of a debt previously contracted) any of their own
common or any other capital stock or form a new subsidiary; or
(IV) REORGANIZATIONS. Effect a split, reverse split,
reclassification, or other similar change in or of any common
or
other capital stock or otherwise reorganize or recapitalize; or
(V) AMENDMENTS TO ORGANIZATIONAL DOCUMENTS. Change their
Articles of Incorporation or Bylaws; or
(VI) WAGES AND BENEFIT PLANS. Except in the ordinary course of
business consistent with past practices and except as
contemplated
by this Agreement (including severance payments anticipated to
be
paid by Horizon as described in Section 5.6 hereof), pay or agree
to
pay, conditionally or otherwise, any additional compensation
(including bonuses) or severance benefit or otherwise make any
changes with respect to the fees or compensation payable or to
become payable to management consultants, directors, officers
or
salaried employees or, except as required by law and except as
contemplated by this Agreement, adopt or make any change in any
Employee Plan or other arrangement (including any agreement for
indemnification) or payment made to, for or with any of such
consultants, directors, officers or employees; or
(VII) INDEBTEDNESS. Except in the ordinary course of business
(including creation of deposit liabilities, enter into
repurchase
agreements, purchases or sales of federal funds, and sales of
certificates of deposit), borrow or agree to borrow
AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION
PAGE 19
<PAGE>
any material amount of funds or directly or indirectly guarantee
or
agree to guarantee any material obligations of others except
pursuant to outstanding letters of credit; or
(VIII) INVESTMENTS. Purchase or otherwise acquire any
investment security for their own account that exceeds $500,000
individually or $1,000,000 in the aggregate or purchase or
otherwise
acquire any security other than U.S. treasury or other
governmental
obligations or asset-backed securities issued or guaranteed by
United States governmental or other governmental agencies, in
either
case having an average remaining life of three (3) years or less,
or
sell any investment security owned by them other than sales made
in
the ordinary course of business as previously conducted during
the
past three (3) years and in accordance with applicable law and
regulations or engage in any activity that would be
inconsistent
with the classification of investment securities as either "held
to
ma
