<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
PRINCETON NATIONAL BANCORP, INC.,
SOMONAUK ACQUISITION, INC.
AND
SOMONAUK FSB BANCORP, INC.
FEBRUARY 22, 2005
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S>
<C>
<C>
ARTICLE 1
Definitions..............................................................
1
Section 1.1
Definitions...........................................................
1
Section 1.2 Principles of
Construction............................................
7
ARTICLE 2 The
Merger...............................................................
9
Section 2.1 The
Merger............................................................
9
Section 2.2 Effective Time;
Closing............................................... 9
Section 2.3 Effects of
Merger.....................................................
9
Section 2.4 Certificate of
Incorporation..........................................
10
Section 2.5
Bylaws................................................................
10
Section 2.6 Board of Directors and
Officers....................................... 10
Section 2.7 Princeton's Deliveries
at Closing..................................... 10
Section 2.8 SBI's Deliveries at
Closing........................................... 12
Section 2.9 Bank
Merger...........................................................
13
Section 2.10 Alternative
Structure.................................................
13
Section 2.11 Absence of
Control....................................................
14
ARTICLE 3 Conversion of Securities in
the Merger................................... 14
Section 3.1 Manner of
Merger......................................................
14
Section 3.2 Adjustment of Per
Share Purchase Price................................ 14
Section 3.3 Rights as
Stockholders; Stock Transfers...............................
15
Section 3.4 Fractional
Shares.....................................................
15
Section 3.5 Exchange
Procedures...................................................
15
Section 3.6 Anti-Dilution
Provisions..............................................
17
Section 3.7 Dissenting
Shares.....................................................
17
ARTICLE 4 Representations and
Warranties of SBI.................................... 18
Section 4.1 SBI
Organization......................................................
18
Section 4.2 SBI Subsidiary
Organization...........................................
18
Section 4.3 Authorization;
Enforceability.........................................
18
Section 4.4 No
Conflict...........................................................
19
Section 4.5 SBI
Capitalization....................................................
19
Section 4.6 SBI Subsidiary
Capitalization.........................................
20
Section 4.7 Financial Statements
and Reports...................................... 20
Section 4.8 Books and
Records.....................................................
21
Section 4.9 Title to
Properties...................................................
21
Section 4.10 Condition and Sufficiency of
Assets................................... 22
Section 4.11 Loans; Allowance for Loan
and Lease Losses............................ 22
</TABLE>
i
<PAGE>
<TABLE>
<S>
<C>
<C>
Section 4.12 Undisclosed Liabilities;
Adverse Changes.............................. 23
Section 4.13
Taxes.................................................................
23
Section 4.14 Compliance with
ERISA................................................. 23
Section 4.15 Compliance with Legal
Requirements.................................... 24
Section 4.16 Legal Proceedings;
Orders............................................. 24
Section 4.17 Absence of Certain Changes
and Events................................. 25
Section 4.18 Properties, Contracts and
Employee Benefit Plans...................... 27
Section 4.19 No
Defaults...........................................................
30
Section 4.20
Insurance.............................................................
30
Section 4.21 Compliance with
Environmental Laws.................................... 30
Section 4.22 Regulatory
Filings....................................................
31
Section 4.23 Fiduciary
Accounts....................................................
31
Section 4.24 Indemnification
Claims................................................ 31
Section 4.25 Insider
Interests.....................................................
31
Section 4.26 Brokerage
Commissions.................................................
32
Section 4.27 Approval
Delays.......................................................
32
Section 4.28 Code Sections 280G and
4999........................................... 32
Section 4.29
Disclosure............................................................
32
ARTICLE 5 Representations and
Warranties of Princeton and Acquisition Company...... 32
Section 5.1 Princeton
Organization................................................
32
Section 5.2 Princeton Subsidiary
Organization..................................... 33
Section 5.3 Authorization;
Enforceability.........................................
33
Section 5.4 No
Conflict...........................................................
33
Section 5.5 Princeton
Capitalization..............................................
34
Section 5.6 Princeton Subsidiary
Capitalization................................... 34
Section 5.7 Financial Statements
and Reports...................................... 35
Section 5.8 Undisclosed
Liabilities; Adverse Changes..............................
35
Section 5.9 Compliance With Legal
Requirements.................................... 35
Section 5.10 Legal Proceedings;
Orders............................................. 36
Section 5.11 Brokerage
Commissions.................................................
36
Section 5.12 Approval
Delays.......................................................
36
Section 5.13
Disclosure............................................................
36
Section 5.14 Financial
Resources...................................................
36
Section 5.15 Loans; Allowance for Loans
and Lease Losses........................... 36
Section 5.16 Undisclosed Liabilities;
Adverse Changes.............................. 37
Section 5.17
Taxes.................................................................
37
Section 5.18 Compliance with
ERISA................................................. 37
Section 5.19 Compliance with
Environmental Laws.................................... 38
ARTICLE 6 SBI's
Covenants..........................................................
38
Section 6.1 Access and
Investigation..............................................
38
Section 6.2 Operation of SBI and
SBI Subsidiaries................................. 40
</TABLE>
ii
<PAGE>
<TABLE>
<S>
<C>
<C>
Section 6.3 Negative
Covenant.....................................................
41
Section 6.4 Subsequent SBI
Financial Statements...................................
41
Section 6.5 Title to Real
Estate..................................................
42
Section 6.6
Surveys...............................................................
42
Section 6.7 Environmental
Investigation...........................................
42
Section 6.8 Advice of
Changes.....................................................
43
Section 6.9 Other
Offers..........................................................
43
Section 6.10 Voting
Agreement......................................................
44
Section 6.11 Non-Competition
Agreement............................................. 44
Section 6.12 Stockholders'
Meeting.................................................
44
Section 6.13 Information Provided to
Princeton..................................... 44
Section 6.14 Amendment or Termination of
Employee Benefit Plans.................... 45
Section 6.15 Data and Item Processing
Agreements................................... 45
Section 6.16 Tax
Matters...........................................................
45
Section 6.17 Employment
Agreements.................................................
45
Section 6.18 Accounting and Other
Adjustments...................................... 45
Section 6.19 Special
Bonus.........................................................
45
ARTICLE 7 Princeton's
Covenants....................................................
46
Section 7.1 Access and
Investigation..............................................
46
Section 7.2 Subsequent Princeton
Statements; Securities Reports................... 47
Section 7.3 Advice of
Changes.....................................................
47
Section 7.4 Information Provided
to SBI........................................... 47
Section 7.5 Indemnification;
Director and Officer Insurance....................... 48
Section 7.6 Employee
Benefits.....................................................
48
Section 7.7 Authorization and
Reservation of Princeton Common Stock............... 48
Section 7.8 Negative
Covenants....................................................
48
Section 7.9 Board
Seat............................................................
48
ARTICLE 8 Covenants of All
Parties.................................................
49
Section 8.1 Regulatory
Approvals..................................................
49
Section 8.2 SEC
Registration......................................................
49
Section 8.3 Necessary
Approvals...................................................
50
Section 8.4 Customer and Employee
Relationships................................... 50
Section 8.5
Publicity.............................................................
50
Section 8.6 Best Efforts;
Cooperation.............................................
50
ARTICLE 9 Conditions Precedent to
Obligations of Princeton......................... 51
Section 9.1 Accuracy of
Representations and Warranties............................
51
Section 9.2 SBI's
Performance.....................................................
51
Section 9.3 Documents
Satisfactory................................................
51
Section 9.4 Corporate
Approval....................................................
51
</TABLE>
iii
<PAGE>
<TABLE>
<S>
<C>
<C>
Section 9.5 No
Proceedings.......................................................
51
Section 9.6 Absence of
Material Adverse Changes..................................
52
Section 9.7 Consents and
Approvals...............................................
52
Section 9.8 No
Prohibition.......................................................
52
Section 9.9 Registration
Statement...............................................
52
Section 9.10 Dissenting
Shares....................................................
52
Section 9.11 Employment
Agreements................................................
52
Section 9.12 Allowance for Loan and
Lease Losses.................................. 52
Section 9.13 SBI
Capitalization...................................................
52
Section 9.14 SBI Transaction
Expenses............................................. 52
ARTICLE 10 Conditions Precedent to the
Obligations of SBI.......................... 53
Section 10.1 Accuracy of
Representations and Warranties...........................
53
Section 10.2 Princeton's
Performance..............................................
53
Section 10.3 Documents
Satisfactory...............................................
53
Section 10.4 Corporate
Approval...................................................
53
Section 10.5 No
Proceedings.......................................................
53
Section 10.6 Absence of Material
Adverse Changes.................................. 53
Section 10.7 Consents and
Approvals...............................................
54
Section 10.8 No
Prohibitions......................................................
54
Section 10.9 Registration
Statement...............................................
54
Section 10.10 Fairness
Opinion.....................................................
54
ARTICLE 11
Termination.............................................................
54
Section 11.1 Reasons for
Termination and Abandonment..............................
54
Section 11.2 Effect of
Termination................................................
55
Section 11.3
Expenses.............................................................
55
Section 11.4 SBI Termination
Payment.............................................. 55
Section 11.5 Princeton Termination
Payment........................................ 56
ARTICLE 12
Miscellaneous...........................................................
56
Section 12.1 Governing
Law........................................................
56
Section 12.2 Assignments,
Successors and No Third Party Rights....................
56
Section 12.3
Waiver...............................................................
57
Section 12.4
Notices..............................................................
57
Section 12.5 Entire
Agreement.....................................................
58
Section 12.6
Modification.........................................................
58
Section 12.7
Severability.........................................................
59
Section 12.8 Further
Assurances...................................................
59
Section 12.9
Survival.............................................................
59
Section 12.10 Counterparts;
Facsimiles.............................................
59
Section 12.11 Jurisdiction and Service of
Process.................................. 59
</TABLE>
iv
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
A Form of Legal
Opinion of Counsel to Princeton
B Form of Legal
Opinion of Counsel to SBI
C Form of Exchange
Agent Agreement
D Form of Voting
Agreement
E Form of
Non-Competition Agreement
F-1 Form of Duffy Employment
Agreement
F-2 Form of Butterfield
Employment Agreement
F-3 Form of Grandgeorge
Employment Agreement
F-4 Form of Lee Employment
Agreement
</TABLE>
SCHEDULE INDEX
<TABLE>
<S> <C>
SBI SCHEDULES
4.1 SBI Organization
4.2 SBI Subsidiary
Organization
4.4 No Conflict
4.5 SBI Capitalization
4.6 SBI Subsidiary
Capitalization
4.7 Financial Statements
and Reports
4.9 Title to
Properties
4.11 Loans; Allowance for Loan
and Lease Losses
4.12 Undisclosed Liabilities;
Adverse Changes
4.14 Compliance with ERISA
4.15 Compliance with Legal
Requirements
4.16 Legal Proceedings;
Orders
4.17 Absence of Certain Changes
and Events
4.18 Properties, Contracts and
Employee Benefit Plans
4.19 No Defaults
4.20 Insurance
4.21 Compliance with
Environmental Laws
4.25 Insider Interests
4.26 Brokerage Commissions
4.28 Code Sections 280G and
4999
PRINCETON SCHEDULES
5.4 No Conflict
5.5 Princeton
Capitalization
5.8 Undisclosed
Liabilities; Adverse Changes
5.9 Compliance With Legal
Requirements
5.11 Brokerage Commissions
5.15 Loans; Allowance for Loan
and Lease Losses
5.16 Undisclosed Liabilities;
Adverse Changes
5.19 Compliance with
Environmental Laws
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT
AND PLAN OF MERGER (this "AGREEMENT") is entered into as of
February 22, 2005 (the "AGREEMENT DATE"),
among PRINCETON NATIONAL BANCORP,
INC., a Delaware corporation ("PRINCETON"),
SOMONAUK FSB BANCORP, INC., a
Delaware corporation ("SBI"), and SOMONAUK
ACQUISITION, INC., a Delaware
corporation ("ACQUISITION COMPANY").
RECITALS
A. The parties
to this Agreement desire to effect a reorganization whereby
Princeton desires to acquire control of SBI
through the merger (the "MERGER") of
Acquisition Company with and into SBI with
SBI being the surviving corporation
in the Merger (the "SURVIVING
CORPORATION").
B. Pursuant to
the terms of this Agreement, each outstanding share of the
common stock of SBI, $10.00 par value per
share ("SBI COMMON STOCK"), shall be
converted at the effective time of the
Merger into the right to receive a
combination of: (i) shares of common stock
of Princeton, $5.00 par value per
share ("PRINCETON COMMON STOCK"); and (ii)
cash, all in the amounts set forth in
this Agreement.
C. The parties
desire to make certain representations, warranties and
agreements in connection with the Merger
and also agree to certain prescribed
conditions to the Merger.
AGREEMENTS
In consideration
of the foregoing premises and the following mutual
promises, covenants and agreements, the
parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1
DEFINITIONS. In
addition to those terms defined throughout
this Agreement, the following terms, when
used herein, shall have the following
meanings.
(a) "ADJUSTED STOCKHOLDERS' EQUITY" means the consolidated
tangible
stockholders' equity of SBI, calculated in
accordance with GAAP and reflecting,
among other things, the accrued income and
expenses of SBI for all periods
ending on or prior to the Determination
Date, and the recognition of or accrual
for all expenses paid or incurred or
projected to be paid or incurred by SBI or
any SBI Subsidiary in connection with this
Agreement and the Contemplated
Transactions including, but not limited to,
the SBI Transaction Expenses, but
adjusted to exclude:
<PAGE>
(i) any realized gains or losses resulting from sales of
investment securities effected between
December 31, 2004, and the Closing Date
(as defined below);
(ii) any adjustments made in accordance with Statement of
Financial Accounting Standard No. 115;
and
(iii) any expenses incurred or accounting or other adjustments
made pursuant to Sections 2.9 or 6.18 of
this Agreement.
SBI's Adjusted Stockholders' Equity shall
be calculated by SBI's independent
auditors, in consultation with Princeton's
independent auditors, as of the close
of business on the Determination Date using
reasonable estimates of revenues and
expenses where actual amounts are not
available. For purposes of this
calculation, SBI shall assume a tax rate of
34% with respect to costs which can
be expensed in 2005 for tax purposes. Such
calculation shall be subject to
verification and approval prior to the
Closing (as defined below) by an auditor
selected by Princeton, which approval shall
not be unreasonably withheld.
(b) "AFFILIATE" means with respect to:
(i) a particular individual: (A) each other member of such
individual's Family; (B) any Person that is
directly or indirectly controlled by
such individual or one or more members of
such individual's Family; (C) any
Person in which such individual or members
of such individual's Family hold
(individually or in the aggregate) a
Material Interest; and (D) any Person with
respect to which such individual or one or
more members of such individual's
Family serves as a director, officer,
partner, executor or trustee (or in a
similar capacity); and
(ii) a specified Person other than an individual: (A) any
Person
that directly or indirectly controls, is
directly or indirectly controlled by,
or is directly or indirectly under common
control with such specified Person;
(B) any Person that holds a Material
Interest in such specified Person; (C) each
Person that serves as a director, officer,
partner, executor or trustee of such
specified Person (or in a similar
capacity); (D) any Person in which such
specified Person holds a Material Interest;
(E) any Person with respect to which
such specified Person serves as a general
partner or a trustee (or in a similar
capacity); and (F) any Affiliate of any
individual described in clause (B) or
(C) of this subsection (ii).
(c)
"BANK" means Farmers State Bank of Somonauk, a state chartered
commercial bank organized and existing
under the laws of the State of Illinois
with its main office located in Somonauk,
Illinois, and a wholly-owned
subsidiary of SBI.
(d) "BEST EFFORTS" means the efforts that a prudent Person desirous
of
achieving a result would use in similar
circumstances to ensure that such result
is achieved as expeditiously as possible,
provided, however, that an obligation
to use Best Efforts under this Agreement
does not require the Person subject to
that obligation to take actions that would
result in a materially adverse change
in the benefits to such Person of this
Agreement and the Contemplated
Transactions.
2
<PAGE>
(e) "BREACH" means with respect to a representation, warranty,
covenant, obligation or other provision of
this Agreement or any instrument
delivered pursuant to this Agreement: (i)
any inaccuracy in or breach of, or any
failure to perform or comply with, such
representation, warranty, covenant,
obligation or other provision; or (ii) any
claim (by any Person) or other
occurrence or circumstance that is or was
inconsistent with such representation,
warranty, covenant, obligation or other
provision, and the term "Breach" means
any such inaccuracy, breach, failure,
claim, occurrence or circumstance.
(f) "BUSINESS DAY" means any day on which the trading of stock
occurs
on the over-the-counter-bulletin-board.
(g) "CALL REPORTS" means the quarterly reports of income and
condition
filed by the Bank with Regulatory
Authorities.
(h) "CITIZENS BANK" means Citizens First National Bank, a
national
banking association organized and existing
under the laws of the United States
with its main office located in Princeton,
Illinois, and a wholly-owned
subsidiary of Princeton.
(i) "CODE" means the Internal Revenue Code of 1986, as amended.
(j) "CONTEMPLATED TRANSACTIONS" means all of the transactions
contemplated by this Agreement, including:
(i) the Merger; (ii) the performance
by Princeton, Acquisition Company and SBI
of their respective covenants and
obligations under this Agreement; (iii)
Princeton's acquisition of control of
SBI and, indirectly, the Bank; (iv)
Princeton's issuance of registered shares of
Princeton Common Stock and payment of cash
in exchange for shares of SBI Common
Stock; and (v) the Bank Merger (as
hereinafter defined), if applicable.
(k) "CONTRACT" means any agreement, contract, obligation, promise
or
understanding (whether written or oral and
whether express or implied) that is
legally binding: (i) under which a Person
has or may acquire any rights; (ii)
under which such Person has or may become
subject to any obligation or
liability; or (iii) by which such Person or
any of the assets owned or used by
such Person is or may become bound.
(l) "CRA" means the Community Reinvestment Act, as amended.
(m) "DETERMINATION DATE" means the close of business on the
last
Business Day preceding the Closing
Date.
(n) "DFPR" means the Illinois Department of Financial and
Professional
Regulation.
(o) "DGCL" means the Delaware General Corporation Law, as
amended.
(p) "ERISA" means the Employee Retirement Income Security Act of
1974,
as amended.
3
<PAGE>
(q) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as
amended.
(r) "FAMILY" means with respect to an individual: (i) the
individual;
(ii) the individual's spouse and former
spouses; (iii) any other natural person
who is related to the individual or the
individual's spouse within the second
degree; and (iv) any other natural person
who resides with such individual.
(s) "FDIC" means the Federal Deposit Insurance Corporation.
(t) "FEDERAL RESERVE" means the Board of Governors of the
Federal
Reserve System.
(u) "GAAP" means generally accepted accounting principles in
the
United States consistent with those used in
the preparation of the most recent
audited consolidated financial statements
of Princeton or SBI, as the case may
be.
(v) "KNOWLEDGE" with respect to:
(i) an individual means that such person will be deemed to have
"Knowledge" of a particular fact or other
matter if: (A) such individual is
actually aware of such fact or other
matter; or (B) a prudent individual could
be expected to discover or otherwise become
aware of such fact or other matter
in the course of conducting a reasonably
comprehensive investigation concerning
the existence of such fact or other matter;
and
(ii) a Person (other than an individual) means that such Person
will be deemed to have "Knowledge" of a
particular fact or other matter if any
individual who is serving, or who has
served in the past twelve (12) months as a
director, outside advisor, officer,
manager, partner, executor or trustee of
such Person (or in any similar capacity)
has Knowledge of such fact or other
matter.
(w) "LEGAL REQUIREMENT" means any federal, state, local,
municipal,
foreign, international, multinational or
other Order, constitution, law,
ordinance, regulation, rule, policy
statement, directive, statute or treaty.
(x) "MATERIAL ADVERSE EFFECT" with respect to a Person (other than
an
individual) means, a material adverse
effect (whether or not required to be
accrued or disclosed under Statement of
Financial Accounting Standards No. 5):
(i) on the condition (financial or
otherwise), properties, assets, liabilities,
businesses or results of operations of such
Person; or (ii) on the ability of
such Person to perform its obligations
under this Agreement on a timely basis,
but not including the effect of any change
of any Legal Requirement or economic
event affecting financial institutions
generally.
(y) "MATERIAL INTEREST" means the direct or indirect beneficial
ownership (as currently defined in Rule
13d-3 under the Exchange Act) of voting
securities or other voting interests
representing at least ten percent (10%) of
the outstanding voting power of a
4
<PAGE>
Person or equity securities or other equity
interests representing at least ten
percent (10%) of the outstanding equity
securities or equity interests in a
Person.
(z) "NBA" means National Bank Act.
(aa) "OCC" means the Office of the Comptroller of the Currency.
(bb) "OLD CERTIFICATES" means certificates formerly
representing
shares of SBI Common Stock.
(cc) "ORDER" means any award, decision, injunction, judgment,
order,
ruling, extraordinary supervisory letter,
policy statement, memorandum of
understanding, resolution, agreement,
directive, subpoena or verdict entered,
issued, made, rendered or required by any
court, administrative or other
governmental agency, including any
Regulatory Authority, or by any arbitrator.
(dd) "ORDINARY COURSE OF BUSINESS" means any action taken by a
Person
only if such action:
(i) is
consistent with the past practices of such Person and is
taken in the ordinary course of the normal
day-to-day operations of such Person;
(ii) is not required to be authorized by the board of directors
of such Person (or by any Person or group
of Persons exercising similar
authority), other than loan approvals for
customers of a financial institution;
and
(iii) is similar in nature and magnitude to actions customarily
taken, without any authorization by the
board of directors (or by any Person or
group of Persons exercising similar
authority), other than loan approvals for
customers of a financial institution, in
the ordinary course of the normal
day-to-day operations of other Persons that
are in the same line of business as
such Person.
(ee) "PER SHARE CASH CONSIDERATION" means Seven Hundred
Eighty-Two
Dollars and Seventy-Six Cents ($782.76),
subject, however, to possible
adjustment as provided in Section 3.2 of
this Agreement.
(ff) "PER SHARE STOCK CONSIDERATION" means 6.6923 shares of
Princeton
Common Stock.
(gg) "PERSON" means any individual, corporation (including any
non-profit corporation), general or limited
partnership, limited liability
company, joint venture, estate, trust,
association, organization, labor union or
other entity or Regulatory Authority.
(hh) "PRINCETON SEC DOCUMENTS" means the annual, quarterly and
other
reports, schedules, forms, statements and
other documents (including exhibits
and all other information incorporated
therein) filed by Princeton with the SEC.
5
<PAGE>
(ii) "PRINCETON SUBSIDIARY" means any Subsidiary of Princeton.
(jj) "PROCEEDING" means any action, arbitration, audit,
hearing,
investigation, litigation or suit (whether
civil, criminal, administrative,
investigative or informal) commenced,
brought, conducted or heard by or before,
or otherwise involving, any judicial or
governmental authority, including a
Regulatory Authority, or arbitrator.
(kk) "PROXY STATEMENT" means the proxy statement-prospectus to be
used
by SBI in connection with the solicitation
by its board of directors of proxies
for use at the meeting of its stockholders
to be convened for the purpose of
voting on this Agreement and the Merger,
pursuant to Section 6.12 of this
Agreement.
(ll) "REGULATORY AUTHORITY" means any federal, state or local
governmental body, agency, court or
authority that, under applicable Legal
Requirements: (i) has supervisory,
judicial, administrative, police,
enforcement, taxing or other power or
authority over SBI, Princeton or any of
their respective Subsidiaries; (ii) is
required to approve, or give its consent
to the Contemplated Transactions; or (iii)
with which a filing must be made in
connection therewith, including, in any
case, the Federal Reserve and the OCC.
(mm) "REPRESENTATIVE" means with respect to a particular Person,
any
director, officer, manager, employee,
agent, consultant, advisor or other
representative of such Person, including
legal counsel, accountants and
financial advisors.
(nn) "SBI STOCKHOLDER" means a holder of record of SBI Common
Stock.
(oo) "SBI SUBSIDIARY" means any Subsidiary of SBI.
(pp) "SBI TRANSACTION EXPENSES" means: (i) all transaction costs
of
SBI necessary to consummate the
Contemplated Transactions; (ii) the aggregate
fees and expenses of attorneys,
accountants, consultants, financial advisors and
other professional advisors incurred by SBI
in connection with this Agreement
and the Contemplated Transactions; (iii)
the costs of preparing, printing and
mailing the Proxy Statement to SBI
Stockholders and obtaining the approval of
SBI Stockholders of the Contemplated
Transactions; (iv) all amounts paid or
payable to any director, officer or
employee of SBI or any SBI Subsidiary under
any Contract or plan as a result of the
Contemplated Transactions; (iv) any
Remediation Costs (as defined in Section
6.7 of this Agreement), (v) the amount
of the Sick Leave Accrual (as defined in
Section 6.2(1) of this Agreement), (vi)
the cost of Special Bonus; and (vii) all
other non-payroll related costs and
expenses in each case incurred or to be
incurred by SBI or any SBI Subsidiary
through the Effective Time in connection
with this Agreement and the
Contemplated Transactions.
(qq) "SEC" means the Securities and Exchange Commission.
(rr) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
6
<PAGE>
(ss) "SPECIAL BONUS" shall have the meaning given such term in
Section
6.19 of this Agreement.
(tt) "SUBSIDIARY" means with respect to any Person (the "OWNER"),
any
corporation or other Person of which
securities or other interests having the
power to elect a majority of that
corporation's or other Person's board of
directors or similar governing body, or
otherwise having the power to direct the
business and policies of that corporation
or other Person (other than securities
or other interests having such power only
upon the happening of a contingency
that has not occurred) are held by the
Owner or one or more of its Subsidiaries.
(uu) "TAX" means any tax (including any income tax, capital gains
tax,
value added tax, sales tax, property tax,
gift tax or estate tax), levy,
assessment, tariff, duty (including any
customs duty), deficiency or other fee,
and any related charge or amount (including
any fine, penalty, interest or
addition to tax), imposed, assessed or
collected by or under the authority of
any Regulatory Authority or payable
pursuant to any tax sharing agreement or any
other Contract relating to the sharing or
payment of any such tax, levy,
assessment, tariff, duty, deficiency or
fee.
(vv) "TAX RETURN" means any return (including any information
return),
report, statement, schedule, notice, form
or other document or information filed
with or submitted to, or required to be
filed with or submitted to, any
Regulatory Authority in connection with the
determination, assessment,
collection or payment of any Tax or in
connection with the administration,
implementation, or enforcement of or
compliance with any Legal Requirement
relating to any Tax.
(ww) "THREATENED" means a claim, Proceeding, dispute, action or
other
matter for which any demand or statement
has been made (orally or in writing) or
any notice has been given (orally or in
writing), or if any other event has
occurred or any other circumstances exist,
that would lead a prudent Person to
conclude that such a claim, Proceeding,
dispute, action or other matter is
likely to be asserted, commenced, taken or
otherwise pursued in the future.
SECTION 1.2
PRINCIPLES OF CONSTRUCTION.
(a) In this Agreement, unless otherwise stated or the context
otherwise requires, the following uses
apply:
(i) actions permitted under this Agreement may be taken at any
time and from time to time in the actor's
reasonable discretion;
(ii) references to a statute shall refer to the statute and any
successor statute, and to all regulations
promulgated under or implementing the
statute or its successor, as in effect at
the relevant time;
7
<PAGE>
(iii) in computing periods from a specified date to a later
specified date, the words "FROM" and
"COMMENCING ON" (and the like) mean "FROM
AND INCLUDING," and the words "TO," "UNTIL"
and "ENDING ON" (and the like) mean
"TO, BUT EXCLUDING";
(iv) references to a governmental or quasi-governmental agency,
authority or instrumentality shall also
refer to a regulatory body that succeeds
to the functions of the agency, authority
or instrumentality;
(v) indications of time of day mean Princeton, Illinois time;
(vi) "INCLUDING" means "INCLUDING, BUT NOT LIMITED TO";
(vii) all references to sections, schedules and exhibits are to
sections, schedules and exhibits in or to
this Agreement unless otherwise
specified;
(viii) all words used in this Agreement will be construed to be
of such gender or number as the
circumstances and context require;
(ix) the captions and headings of articles, sections, schedules
and exhibits appearing in or attached to
this Agreement have been inserted
solely for convenience of reference and
shall not be considered a part of this
Agreement nor shall any of them affect the
meaning or interpretation of this
Agreement or any of its provisions; and
(x) any reference to a document or set of documents in this
Agreement, and the rights and obligations
of the parties under any such
documents, shall mean such document or
documents as amended from time to time,
and any and all modifications, extensions,
renewals, substitutions or
replacements thereof.
(b) The schedules of each of SBI and Princeton referred to in
this
Agreement (the "SBI SCHEDULES" and the
"PRINCETON SCHEDULES," respectively, and
collectively the "SCHEDULES") shall consist
of the agreements and other
documentation described and referred to in
this Agreement with respect to such
party, which Schedules were delivered by
each of SBI and Princeton to the other
before the date of this Agreement. Any item
or matter disclosed on any Schedule
shall be deemed to be disclosed for all
purposes on all other Schedules, to the
extent that it should have been disclosed
on such other Schedule, to the extent
that sufficient details are set forth so
that the purpose for which disclosure
is made is reasonably clear. In the event
of any inconsistency between the
statements in the body of this Agreement
and those in the Schedules (other than
an exception expressly set forth as such in
the Schedules), the statements in
the body of this Agreement will
control.
(c) All accounting terms not specifically defined herein shall
be
construed in accordance with GAAP.
(d) With regard to each and every term and condition of this
Agreement
and any and all agreements and instruments
subject to the terms hereof, the
parties hereto understand and agree that
the same have or has been mutually
negotiated, prepared and
8
<PAGE>
drafted, and that if at any time the
parties hereto desire or are required to
interpret or construe any such term or
condition or any agreement or instrument
subject hereto, no consideration shall be
given to the issue of which party
hereto actually prepared, drafted or
requested any term or condition of this
Agreement or any agreement or instrument
subject hereto.
ARTICLE 2
THE MERGER
SECTION 2.1 THE
MERGER. Provided that
this Agreement shall not have been
terminated in accordance with its express
terms, upon the terms and subject to
the conditions of this Agreement and in
accordance with the applicable
provisions of the DGCL at the Effective
Time (as defined below), Acquisition
Company shall be merged with and into SBI
pursuant to the provisions of, and
with the effects provided in, the DGCL, the
separate corporate existence of
Acquisition Company shall cease and SBI
will be the Surviving Corporation. As a
result of the Merger, each share of SBI
Common Stock issued and outstanding
immediately prior to the Effective Time,
other than Dissenting Shares (as
defined below), will be converted into the
right to receive the Merger
Consideration as provided in Article 3 of
this Agreement.
SECTION 2.2
EFFECTIVE TIME; CLOSING.
(a) Provided that this Agreement shall not have been terminated
in
accordance with its express terms, the
closing of the Merger (the "CLOSING")
shall occur through the mail or at a place
that is mutually acceptable to
Princeton and SBI, or if they fail to
agree, at the offices of Howard & Howard
Attorneys, P.C., located at One Technology
Plaza, Suite 600, 211 Fulton Street,
Peoria, Illinois 61602, at 10:00 a.m. on
July 31, 2005, or, if the following
conditions have not then been satisfied, on
such later date which is ten (10)
Business Days after the end of the calendar
month in which all of the following
conditions are satisfied: (i) the receipt
of the last required regulatory
approval of the Merger and the expiration
of the last requisite waiting period;
and (ii) the satisfaction or waiver in
writing of all of the conditions provided
for in Articles 9 and 10 of this Agreement;
whichever is later, or at such other
time as SBI and Princeton may agree in
writing (the "CLOSING DATE"). Subject to
the provisions of Article 11 of this
Agreement, failure to consummate the Merger
on the date and time and at the place
determined pursuant to this Section will
not result in the termination of this
Agreement and will not relieve any party
of any obligation under this Agreement.
(b) The parties hereto agree to file appropriate certificate of
merger, as contemplated by the DGCL, with
the Secretary of State of the State of
Delaware. The Merger shall be effective on
the Closing Date and at the time
stated in the certificate of merger filed
with the Secretary of State of the
State of Delaware (the "EFFECTIVE
TIME").
SECTION 2.3
EFFECTS OF MERGER. At
the Effective Time, the effect of the
Merger shall be as provided in the DGCL.
Without limiting the generality of the
foregoing, at the Effective Time, all the
property, rights, privileges, powers
and franchises of Acquisition Company and
SBI shall be vested in the Surviving
Corporation, and all debts, liabilities and
duties of
9
<PAGE>
Acquisition Company and SBI shall become
the debts, liabilities and duties of
the Surviving Corporation.
SECTION 2.4
CERTIFICATE OF INCORPORATION. At the Effective Time, the
certificate of incorporation of SBI, as in
effect immediately prior to the
Effective Time, shall be the certificate of
incorporation of the Surviving
Corporation until thereafter amended in
accordance with applicable law.
SECTION 2.5
BYLAWS. At the
Effective Time, the bylaws of SBI, as in effect
immediately prior to the Effective Time,
shall be the bylaws of the Surviving
Corporation until thereafter amended in
accordance with applicable law.
SECTION 2.6
BOARD OF DIRECTORS AND OFFICERS. From and after the Effective
Time, until duly changed in compliance with
applicable law and the articles of
incorporation and bylaws of the Surviving
Corporation, the board of directors
and officers of the Surviving Corporation
shall be the board of directors and
officers of Acquisition Company in place
immediately prior to the Effective
Time.
SECTION 2.7
PRINCETON'S DELIVERIES AT CLOSING. At the Closing, Princeton
shall deliver or cause to be delivered the
following items to or on behalf of
SBI:
(a) a good standing certificate for Princeton issued by each of
the
Secretary of State of the State of Delaware
and the Secretary of State of the
State of Illinois and dated in each case
not more than fifteen (15) Business
Days prior to the Closing Date;
(b) a copy of the certificate of incorporation of Princeton
certified
not more than fifteen (15) Business Days
prior to the Closing Date by the
Secretary of State of the State of
Delaware;
(c) a certificate of the Secretary or any Assistant Secretary
of
Princeton dated the Closing Date certifying
a copy of the bylaws of Princeton;
(d) copies of resolutions of the board of directors of
Princeton
approving this Agreement and the
consummation of the Contemplated Transactions,
certified as of the Closing Date by the
Secretary or any Assistant Secretary of
Princeton;
(e)
copies of resolutions of the board of directors and the sole
stockholder of Acquisition Company
approving this Agreement and the consummation
of the Contemplated Transactions, certified
as of the Closing Date by the
Secretary or any Assistant Secretary of
Acquisition Company;
(f) a good standing certificate for Acquisition Company issued by
the
Secretary of State of the State of
Delaware, and dated not more than fifteen
(15) Business Days prior to the Closing
Date;
10
<PAGE>
(g) a copy of the certificate of incorporation of Acquisition
Company
certified not more than fifteen (15)
Business Days prior to the Closing Date by
the Secretary of State of the State of
Delaware;
(h) a certificate of the Secretary or any Assistant Secretary
of
Acquisition Company dated the Closing Date
certifying a copy of the bylaws of
Acquisition Company;
(i) a certificate executed by the President or any Vice President
of
Acquisition Company, dated the Closing
Date, stating that: (i) all of the
representations and warranties of
Acquisition Company set forth in this
Agreement, as the same may have been
updated pursuant to Section 7.3 of this
Agreement, are true and correct in all
material respects with the same force and
effect as if all of such representations
and warranties were made at the Closing
Date, provided, however, that to the extent
such representations and warranties
expressly relate to an earlier date, such
representations shall be true and
correct in all material respects on and as
of such earlier date, and provided
further, that to the extent that
representations and warranties are made in this
Agreement subject to a standard of
materiality or Knowledge, such
representations and warranties shall be
true and correct in all respects; and
(ii) Acquisition Company has performed or
complied in all material respects with
all of the covenants and obligations to be
performed or complied with by it
under the terms of this Agreement on or
prior to the Closing Date, provided,
however, that to the extent performance and
compliance with such covenants and
obligations are subject in this Agreement
to a standard of materiality,
Acquisition Company shall have performed
and complied in all respects with such
covenants and obligations;
(j) a certificate executed by the Chief Executive Officer or
Senior
Vice President, and by the Secretary or any
Assistant Secretary of Princeton,
dated the Closing Date, stating that: (i)
all of the representations and
warranties of Princeton set forth in this
Agreement, as the same may have been
updated pursuant to Section 7.3 of this
Agreement, are true and correct in all
material respects with the same force and
effect as if all of such
representations and warranties were made at
the Closing Date, provided, however,
that to the extent such representations and
warranties expressly relate to an
earlier date, such representations shall be
true and correct in all material
respects on and as of such earlier date,
and provided further, that to the
extent that representations and warranties
are made in this Agreement subject to
a standard of materiality or Knowledge,
such representations and warranties
shall be true and correct in all respects;
and (ii) Princeton has performed or
complied in all material respects with all
of the covenants and obligations to
be performed or complied with by it under
the terms of this Agreement on or
prior to the Closing Date, provided,
however, that to the extent performance and
compliance with such covenants and
obligations are subject in this Agreement to
a standard of materiality, Princeton shall
have performed and complied in all
respects with such covenants and
obligations;
(k) a legal opinion of Princeton's counsel dated the Closing Date
in
the form attached as EXHIBIT A; and
(l) such other documents as SBI may reasonably request.
11
<PAGE>
All of such items shall be reasonably
satisfactory in form and substance to SBI
and its counsel.
SECTION 2.8
SBI'S DELIVERIES AT CLOSING. At the Closing, SBI shall
deliver
or cause to be delivered the following
items to Princeton:
(a) a good standing certificate for SBI issued by each of the
Secretary of State of the State of Delaware
and the Secretary of State of the
State of Illinois dated not more than
fifteen (15) Business Days prior to the
Closing Date;
(b) a copy of the certificate of incorporation of SBI certified
not
more than fifteen (15) Business Days prior
to the Closing Date by the Secretary
of State of the State of Delaware;
(c) a certificate of the Secretary or any Assistant Secretary of
SBI
dated the Closing Date certifying a copy of
the bylaws of SBI;
(d) copies of resolutions of the board of directors and SBI
Stockholders authorizing and approving this
Agreement and the consummation of
the Contemplated Transactions certified as
of the Closing Date by the Secretary
or any Assistant Secretary of SBI;
(e) a good standing certificate for the Bank issued by the DFPR
and
dated not more than fifteen (15) Business
Days prior to the Closing Date;
(f) a copy of the charter of the Bank certified by the DFPR and
dated
not more than fifteen (15) Business Days
prior to the Closing Date;
(g) a certificate of the Secretary of the Bank dated the Closing
Date
certifying a copy of the bylaws of the Bank
and stating that there have been no
further amendments to the charter of the
Bank delivered pursuant to the
immediately preceding paragraph of this
Section;
(h) a certificate executed by the Chief Executive Officer or
Executive
Vice President, and by the Secretary or any
Assistant Secretary of SBI, dated
the Closing Date, stating that: (i) all of
the representations and warranties of
SBI set forth in this Agreement, as the
same may have been updated pursuant to
Section 6.8 of this Agreement, are true and
correct in all material respects
with the same force and effect as if all of
such representations and warranties
were made at the Closing Date, provided,
however, that to the extent such
representations and warranties expressly
relate to an earlier date, such
representations shall be true and correct
in all material respects on and as of
such earlier date, and provided further,
that to the extent that representations
and warranties are made in this Agreement
subject to a standard of materiality
or Knowledge, such representations and
warranties shall be true and correct in
all respects; and (ii) SBI has performed or
complied in all material respects
with all of the covenants and obligations
to be performed or complied with by it
under the terms of this Agreement on or
prior to the Closing Date, provided,
however, that to the extent performance and
compliance with such covenants and
obligations are subject in this Agreement
to a standard
12
<PAGE>
of materiality, SBI shall have performed
and complied in all respects with such
covenants and obligations;
(i) a list of all SBI Stockholders as of the Determination
Date,
certified by the Secretary or any Assistant
Secretary of SBI;
(j) owner's title insurance policies issued by Chicago Title
Insurance
Company or such other title insurance
company as is reasonably acceptable to
Princeton in accordance with the title
commitments delivered by SBI to Princeton
in accordance with Section 6.5 of this
Agreement, and in each case, in policy
amounts at least equal to the book value of
the property covered by such
policies, as shown on the books and records
of SBI or the Bank;
(k) a legal opinion of SBI's counsel dated the Closing Date in
the
form attached as EXHIBIT B;
(l) a certificate of each of SBI's legal counsel, accountants
and
financial advisor or investment banker, if
any, representing that all of their
respective fees and expenses relating to
the Contemplated Transactions incurred
by SBI prior to and including the Effective
Time have been paid in full;
(m) evidence that the Special Bonus, if any, has been paid as
contemplated by Section 6.19 of this
Agreement;
(n) a resignation from each of the directors and executive officers
of
SBI from such individual's position as a
director and/or an officer of SBI; and
(o) such other documents as Princeton may reasonably request.
All of such items shall be reasonably
satisfactory in form and substance to
Princeton and its counsel.
SECTION 2.9 BANK
MERGER. The parties
contemplate, without making it
mandatory, that after the Merger has become
effective, but on the same day when
the Merger becomes effective, the Bank will
be merged with and into Citizens
Bank, with Citizens Bank being the
surviving association (such merger of the
Bank into Citizens Bank being hereinafter
called the "Bank Merger"). Princeton
and SBI agree to cooperate and to take such
steps as may be necessary to obtain
all requisite regulatory, corporate and
other approvals to effect the Bank
Merger, subject and subsequent to the
consummation of, and to be effective
concurrently with, the Merger or at such
time thereafter, all as determined by
Princeton in its sole discretion.
SECTION 2.10
ALTERNATIVE STRUCTURE.
Notwithstanding anything contained
herein to the contrary, upon receipt of
SBI's prior written consent (which
consent shall not be unreasonably
withheld), Princeton may specify, for any
reasonable business, tax or regulatory
purpose, that, before the special meeting
of stockholders of SBI held pursuant to
Section 6.12 of this Agreement,
Princeton and SBI shall enter into
transactions other than those described in
13
<PAGE>
this Agreement to effect the purposes of
this Agreement, including the merger of
SBI with any Affiliate of Princeton, and
the parties to this Agreement shall
take all action necessary and appropriate
to effect, or cause to be effected,
such transactions; provided, however, that
no such proposed change on the
structure of the transactions contemplated
in this Agreement shall delay the
Closing Date (if such a date has already
been firmly established) by more than
thirty (30) Business Days or adversely
affect the economic benefits, the form of
consideration or the tax effect of the
Merger at the Effective Time to the
holders of SBI Common Stock.
SECTION 2.11
ABSENCE OF CONTROL.
Subject to any specific provisions of
this Agreement, it is the intent of the
parties to this Agreement that neither
Princeton nor SBI by reason of this
Agreement shall be deemed (until
consummation of the Contemplated
Transactions) to control, directly or
indirectly, the other party or any of its
respective Subsidiaries and shall not
exercise, or be deemed to exercise,
directly or indirectly, a controlling
influence over the management or policies
of such other party or any of its
respective Subsidiaries.
ARTICLE 3
CONVERSION OF SECURITIES IN THE MERGER
SECTION 3.1
MANNER OF MERGER.
Subject to the provisions of this Agreement,
at the Effective Time, automatically by
virtue of the Merger and without any
action on the part of any Person:
(a) Each share of Acquisition Company common stock issued and
outstanding immediately prior to the
Effective Time shall be converted into one
validly issued, fully paid and
non-assessable share of common stock of the
Surviving Corporation; and
(b) Each share of SBI Common Stock (other than shares held by SBI
or
any SBI Subsidiary, except for shares held
by any of them in a fiduciary
capacity, and Dissenting Shares) shall be
converted into the right to receive
the Per Share Cash Consideration and the
Per Share Stock Consideration. The Per
Share Cash Consideration that may be paid,
on an aggregate basis, to SBI
Stockholders is referred to herein as the
"CASH CONSIDERATION," and the Per
Share Stock Consideration that may be paid,
on an aggregate basis, to SBI
Stockholders is referred to herein as the
"STOCK CONSIDERATION." The Cash
Consideration and the Stock Consideration
are referred to herein collectively as
the "MERGER CONSIDERATION"; and
(c) Each share of SBI Common Stock held as treasury stock
immediately
prior to the Effective Time shall be
cancelled and retired at the Effective Time
and no consideration shall be issued in
exchange therefor.
SECTION 3.2
ADJUSTMENT OF PER SHARE PURCHASE PRICE. Notwithstanding
anything contained herein to the contrary,
the Per Share Cash Consideration
shall be adjusted upward or downward to
equal:
14
<PAGE>
(a) $39,606,000 less,
(b) the difference between $23,800,000 and the Adjusted
Stockholders'
Equity divided by,
(c) 50,598
or graphically represented as follows:
$39,606,000 - ($23,800,000 - Adjusted
Stockholders' Equity)
-----------------------------------------------------------
50,598
provided, however, in no event shall the
Per Share Cash Consideration be
adjusted upward to exceed Seven Hundred
Ninety Dollars and Fifty-Four Cents
($790.54).
SECTION 3.3
RIGHTS AS STOCKHOLDERS; STOCK TRANSFERS. At the Effective
Time, holders of SBI Common Stock shall
cease to be, and shall have no rights
as, stockholders of SBI, other than to
receive the Merger Consideration. After
the Effective Time, there shall be no
transfers on the stock transfer books of
SBI or the Surviving Corporation of shares
of SBI Common Stock.
SECTION 3.4
FRACTIONAL SHARES.
Notwithstanding any other provision hereof,
no fractional shares of Princeton Common
Stock and no certificates or scrip
therefore, or other evidence of ownership
thereof, will be issued in the Merger;
instead, Princeton shall pay to each holder
of SBI Common Stock who would
otherwise be entitled to a fractional share
of Princeton Common Stock (after
taking into account all Old Certificates
registered in the name of such holder)
an amount in cash (without interest)
determined by multiplying such fraction by
Twenty-Nine Dollars and Fifty-Three Cents
($29.53).
SECTION 3.5
EXCHANGE PROCEDURES.
(a) As soon as is reasonably practicable, but in no event later
than
five (5) Business Days after the Closing
Date, Citizens Bank, in its capacity as
exchange agent for the parties to this
Agreement (the "EXCHANGE AGENT"), the
Exchange Agent shall mail to each holder of
record of SBI Common Stock,
instructions for use in effecting the
surrender of the certificates representing
such SBI Common Stock (the "OLD
CERTIFICATES") in exchange for the Merger
Consideration (the "TRANSMITTAL LETTER").
Upon proper surrender to the Exchange
Agent of an Old Certificate for exchange
and cancellation, together with such
properly completed and duly executed
Transmittal Letter, the holder of such Old
Certificates shall be entitled to receive
in exchange therefor: (i) a new
certificate representing that number of
whole shares of Princeton Common Stock
that such holder has the right to receive
pursuant to this Article; (ii) a check
representing the amount of Cash
Consideration that such holder is entitled to
receive pursuant to this Article; and (iii)
a check representing the amount of
any cash in lieu of fractional shares that
such holder has the right to receive
in respect of the Old Certificates
surrendered pursuant to the provisions of
this Article, and the Old Certificates so
surrendered shall forthwith be
cancelled.
15
<PAGE>
(b) Princeton shall deposit with the Exchange Agent for the benefit
of
holders of Old Certificates: (i) cash or
immediately available funds equal to
the aggregate Cash Consideration; and (ii)
certificates representing the shares
of Princeton Common Stock to be issued as
Stock Consideration (the "EXCHANGE
FUND"). The Exchange Fund shall be held by
the Exchange Agent for the benefit of
SBI Stockholders pursuant to the terms of
an Exchange Agent Agreement in the
form of EXHIBIT C. After the Closing Date,
Princeton shall make additional
deposits to the Exchange Fund, and the
Exchange Agent may return certificates or
funds held by the Exchange Agent, as may be
necessary for the completion of the
exchange of Old Certificates for the Merger
Consideration in accordance with
this Article. All fees, costs and expenses
of the Exchange Agent shall be borne
solely by Princeton.
(c) Neither the Exchange Agent nor any party hereto shall be liable
to
any former SBI Stockholder for any amount
properly delivered to a public
official pursuant to applicable abandoned
property, escheat or similar laws.
(d) No dividends or other distributions with respect to
Princeton
Common Stock with a record date occurring
after the Effective Time shall be paid
to the holder of any unsurrendered Old
Certificate representing shares of SBI
Common Stock converted in the Merger into
the right to receive shares of
Princeton Common Stock until the holder of
such unsurrendered Old Certificate
shall be entitled to receive a new
certificate representing shares of Princeton
Common Stock in exchange therefor in
accordance with the procedures set forth in
this Section. After becoming so entitled in
accordance with this Section, the
record holder thereof also shall be
entitled to receive any such dividends or
other distributions by the Exchange Agent,
without any interest thereon, which
theretofore had become payable with respect
to shares of Princeton Common Stock
such holder had the right to receive upon
surrender of the Old Certificates.
(e) Any portion of the Merger Consideration that remains unclaimed
by
the SBI Stockholders on the six (6) month
anniversary of the Effective Time
shall be paid to Princeton to be held for
the benefit of holders of
unsurrendered Old Certificates. Any SBI
Stockholders who have not theretofore
complied with this Article shall thereafter
look only to Princeton for payment
of the Merger Consideration, cash in lieu
of any fractional shares and unpaid
dividends and distributions on Princeton
Common Stock deliverable in respect of
each share of SBI Common Stock such
stockholder holds as determined pursuant to
this Agreement, in each case without any
interest thereon.
(f) If a certificate representing shares of Princeton Common Stock
or
a check representing Cash Consideration is
to be issued in a name other than
that in which the Old Certificate
surrendered in exchange therefor is
registered, it shall be a condition of the
issuance thereof that the Old
Certificate so surrendered shall be
properly endorsed, accompanied by all
documents required to evidence and effect
such transfer and otherwise in proper
form for transfer and that the Person
requesting such exchange shall pay to
Princeton any transfer or other taxes
required by reason of the issuance of a
certificate representing shares of
Princeton Common Stock or a check
representing Cash Consideration in any name
other than that of the registered
holder of the Old Certificate surrendered,
or otherwise
16
<PAGE>
required, or shall establish to the
satisfaction of Princeton that such tax has
been paid or is not payable.
SECTION 3.6
ANTI-DILUTION PROVISIONS.
(a) If Princeton issues additional shares of Princeton Common
Stock
(other than as provided below) or declares
a stock dividend, stock split,
reverse split or other general
distribution, reclassification or
recapitalization of Princeton Common Stock
and the record date for such stock
dividend, stock split, distribution,
reclassification or recapitalization occurs
at any time after the Agreement Date and
prior to the Effective Time, then the
number of shares of Princeton Common Stock
distributable to SBI Stockholders
shall be equitably adjusted as necessary to
give effect to the change in
Princeton capitalization. Notwithstanding
the foregoing, no adjustment shall be
made in such number of shares of Princeton
Common Stock distributable: (x) in
the event of the issuance of additional
shares of Princeton Common Stock
pursuant to the grant or sale of shares to,
or for the account of, employees of
Princeton pursuant to Princeton's stock
option, qualified and non-qualified
retirement and dividend reinvestment plans;
or (y) in the event of the issuance
of additional shares of Princeton Common
Stock or other securities pursuant to a
public offering, private placement or an
acquisition of one or more banks,
corporations or business assets for
consideration which the board of directors,
or a duly authorized committee of the board
of directors, of Princeton in its
reasonable business judgment determines to
be fair and reasonable.
(b) Subject only to making any adjustments and related
computations
prescribed by this Section, nothing
contained in this Agreement is intended to
preclude Princeton from amending its
certificate of incorporation to change its
capital structure or from issuing
additional shares of Princeton Common Stock,
preferred stock, shares of other capital
stock or securities that are
convertible into shares of capital
stock.
SECTION 3.7
DISSENTING SHARES.
Notwithstanding anything to the contrary
contained in this Agreement, to the extent
appraisal rights are available to
stockholders of SBI pursuant to the
provisions of any applicable Legal
Requirements, including the DGCL, any
shares of SBI Common Stock held by a
Person who objects to the Merger, whose
shares were not voted in favor of the
Merger and who complies with and satisfies
all of the provisions of the
applicable Legal Requirements concerning
the rights of such Person to dissent
from the Merger and to require appraisal of
such Person's shares and who has not
withdrawn such objection or waived such
rights prior to the Effective Time
(collectively with respect to all such SBI
stockholders, the "DISSENTING
SHARES"), shall not be converted pursuant
to the provisions of this Article, but
shall become the right to receive such
consideration as may be determined to be
due to the holder of such Dissenting Shares
pursuant to the applicable Legal
Requirements, including, if applicable, any
costs determined to be payable by
SBI to the holders of Dissenting Shares
pursuant to an order of any court
pursuant to any applicable Legal
Requirements; provided, however, that each
Dissenting Share held by a Person at the
Effective Time who shall, after the
Effective Time, withdraw the demand for
appraisal or lose the right of
appraisal, in either case pursuant to
applicable Legal Requirements shall be
deemed to have been converted, as of
the
17
<PAGE>
Effective Time, into the right to receive
the Merger Consideration as is
determined in accordance with this
Article.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SBI
SBI hereby
represents and warrants to Princeton that the following are
true
and correct as of the Agreement Date, and
will be true and correct as of the
Effective Time:
SECTION 4.1 SBI
ORGANIZATION. SBI: (a)
is a corporation duly organized,
validly existing and in good standing under
the laws of the State of Delaware
and is also qualified to do business and is
in good standing in the State of
Illinois and in each other jurisdiction in
which the nature of the business
conducted or the properties or assets owned
or leased by it makes such
qualification necessary; (b) is registered
with the Federal Reserve as a bank
holding company under the federal Bank
Holding Company Act of 1956, as amended
(the "BHCA"); and (c) has full power and
authority, corporate and otherwise, to
operate as a bank holding company and to
own, operate and lease its properties
as presently owned, operated and leased,
and to carry on its business as it is
now being conducted. Copies of the
certificate of incorporation and bylaws of
SBI and all amendments thereto are set
forth in SCHEDULE 4.1 and are complete
and correct. SBI has no Subsidiaries other
than the Bank and as set forth in
SCHEDULE 4.1.
SECTION 4.2 SBI
SUBSIDIARY ORGANIZATION. The Bank is an Illinois
chartered
commercial bank duly organized, validly
existing and in good standing under the
laws of the State of Illinois. Each other
SBI Subsidiary is duly organized,
validly existing and in good standing in
its state or jurisdiction of
organization. Each SBI Subsidiary has full
power and authority, corporate and
otherwise, to own, operate and lease its
properties as presently owned, operated
and leased, and to carry on its business as
it is now being conducted, and is
duly qualified to do business and is in
good standing in each jurisdiction in
which the nature of the business conducted
or the properties or assets owned or
leased by it makes such qualification
necessary. Copies of the charter and
bylaws (or similar organizational
documents) of each SBI Subsidiary and all
amendments thereto are set forth in
SCHEDULE 4.2 and are complete and correct.
SECTION 4.3
AUTHORIZATION; ENFORCEABILITY.
(a) SBI has the requisite corporate power and authority to enter
into
and perform its obligations under this
Agreement. The execution, delivery and
performance of this Agreement by SBI, and
the consummation by it of its
obligations under this Agreement, have been
authorized by all necessary
corporate action, subject to stockholder
approval, and this Agreement
constitutes a legal, valid and binding
obligation of SBI enforceable in
accordance with its terms, except as such
enforcement may be limited by
bankruptcy, insolvency, reorganization or
other laws affecting creditors' rights
generally and subject to general principles
of equity.
18
<PAGE>
(b) Except for ordinary corporate requirements, no "business
combination," "moratorium," "control share"
or other state anti-takeover statute
or regulation or any provisions contained
in the certificate or articles of
incorporation or bylaws or similar
organizational documents of SBI or any SBI
Subsidiary: (i) prohibits or restricts
SBI's ability to perform its obligations
under this Agreement, or its ability to
consummate the Contemplated
Transactions; (ii) would have the effect of
invalidating or voiding this
Agreement, or any provision hereof; or
(iii) would subject Princeton to any
material impediment or condition in
connection with the exercise of any of its
rights under this Agreement. The board of
directors of SBI has unanimously
approved the execution of, and performance
by SBI of its obligations under, this
Agreement.
SECTION 4.4 NO
CONFLICT. Except as
set forth in SCHEDULE 4.4, neither the
execution nor delivery of this Agreement
nor the consummation or performance of
any of the Contemplated Transactions will,
directly or indirectly (with or
without notice or lapse of time): (a)
contravene, conflict with or result in a
violation of any provision of the
certificate or articles of incorporation or
bylaws (or similar organizational
documents), each as in effect on the Agreement
Date, or any currently effective resolution
adopted by the board of directors or
stockholders of SBI or any SBI Subsidiary;
(b) contravene, conflict with or
result in a violation of, or give any
Regulatory Authority or other Person the
valid and enforceable right to challenge
any of the Contemplated Transactions or
to exercise any remedy or obtain any relief
under, any Legal Requirement or any
Order to which SBI or any SBI Subsidiary,
or any of their respective assets that
are owned or used by them, may be subject,
except for any contravention,
conflict or violation that is permissible
by virtue of obtaining the regulatory
approvals necessitated by the Contemplated
Transactions, including any such
approvals under the BHCA, the Federal
Deposit Insurance Act, as amended (the
"FDIA"), the Securities Act, the Exchange
Act, the DGCL and the Illinois Banking
Act (the "IBA"); (c) contravene, conflict
with or result in a violation or
breach of any provision of, or give any
Person the right to declare a default or
exercise any remedy under, or to accelerate
the maturity or performance of, or
to cancel, terminate or modify any material
Contract to which SBI or any SBI
Subsidiary is a party or by which any of
their respective assets is bound; or
(d) result in the creation of any lien,
charge or encumbrance upon or with
respect to any of the assets owned or used
by SBI or any SBI Subsidiary. Except
for the approvals referred to in Section
8.1 and the requisite approval of its
stockholders, neither SBI nor any SBI
Subsidiary is or will be required to give
any notice to or obtain any consent from
any Person in connection with the
execution and delivery of this Agreement or
the consummation or performance of
any of the Contemplated Transactions.
SECTION 4.5 SBI
CAPITALIZATION.
(a) The authorized capital stock of SBI consists, and
immediately
prior to the Effective Time will consist,
exclusively of 150,000 shares of SBI
Common Stock, $10.00 par value per share,
of which 50,598 shares are, and
immediately prior to the Effective Time
will be, duly authorized, validly issued
and outstanding and fully paid and
non-assessable, and 13,402 shares are held by
SBI as treasury shares. SBI acknowledges
that the Merger Consideration was
determined based upon the accuracy of the
representations and warranties made in
this Section with respect to the number of
outstanding shares of SBI Common
Stock
19
<PAGE>
and the absence of any options or other
rights to purchase additional shares of
SBI Common Stock, and acknowledges that any
Breach of such representations and
warranties shall be deemed to have a
Material Adverse Effect on SBI for purposes
of this Agreement.
(b) None of the shares of SBI Common Stock have been issued in
violation of any federal or state
securities laws or any other Legal
Requirement. Since December 31, 2003,
except as disclosed in SCHEDULE 4.5, no
shares of SBI capital stock have been
purchased, redeemed or otherwise acquired,
directly or indirectly, by SBI or any SBI
Subsidiary and no dividends or other
distributions payable in any equity
securities of SBI or any SBI Subsidiary have
been declared, set aside, made or paid to
the SBI Stockholders. To the Knowledge
of SBI, none of the shares of authorized
capital stock of SBI are, nor on the
Closing Date will they be, subject to any
claim of right inconsistent with this
Agreement. There are no outstanding
subscriptions, contracts, conversion
privileges, options, warrants, calls or
other rights obligating SBI or any SBI
Subsidiary to issue, sell or otherwise
dispose of, or to purchase, redeem or
otherwise acquire, any shares of capital
stock of SBI or any SBI Subsidiary, SBI
is not a party to any Contract relating to
the issuance, purchase, sale or
transfer of any equity securities or other
securities of SBI. Except for the
Bank Shares, as hereinafter defined, SBI
does not own or have any Contract to
acquire any equity securities or other
securities of any Person or any direct or
indirect equity or ownership interest in
any other business.
SECTION 4.6 SBI
SUBSIDIARY CAPITALIZATION. The authorized capital stock
of
the Bank consists, and immediately prior to
the Effective Time will consist
exclusively of 8,000 shares of common
stock, $100.00 par value per share (the
"BANK SHARES"), all of which shares are,
and immediately prior to the Effective
Time will be, duly authorized, validly
issued and outstanding, fully paid and
nonassessable. SBI is, and will be on the
Closing Date, the record and
beneficial owner of one hundred percent
(100%) of the Bank Shares and all of the
issued and outstanding shares of capital
stock of each other SBI Subsidiary,
free and clear of any lien or encumbrance
whatsoever. The Bank Shares are, and
will be on the Closing Date, freely
transferable and are, and will be on the
Closing Date, subject to no claim except
pursuant to this Agreement. There are
no unexpired or pending preemptive rights
with respect to any shares of capital
stock of any SBI Subsidiary. There are no
outstanding securities of any SBI
Subsidiary that are convertible into or
exchangeable for any shares of such SBI
Subsidiary's capital stock and no SBI
Subsidiary is a party to any Contract
relating to the issuance, sale or transfer
of any equity securities or other
securities of such SBI Subsidiary. Neither
SBI nor any SBI Subsidiary owns or
has any Contract to acquire, any equity
securities or other securities of any
Person or any direct or indirect equity or
ownership interest in any other
business, except as set forth in SCHEDULE
4.6.
SECTION 4.7
FINANCIAL STATEMENTS AND REPORTS. True, correct and complete
copies of the following financial
statements are included in SCHEDULE 4.7:
(a) audited Consolidated Balance Sheets for SBI as of December
31,
2001, 2002 and 2003, and the related
audited Consolidated Statements of
20
<PAGE>
Cash Flows and Consolidated Statements of
Changes in Stockholders' Equity of SBI
for the years ended December 31, 2001, 2002
and 2003;
(b) unaudited Consolidated Balance Sheet for SBI as of September
30,
2004, and the related unaudited
Consolidated Statement of Operations and
Statement of Cash Flows; and
(c) Call Reports for the Bank as of the close of business on
December
31, 2002, 2003 and 2004.
The financial
statements described in clause (a) have been prepared in
conformity with GAAP and comply in all
material respects with all applicable
Legal Requirements. The financial
statements described in clauses (b) and (c)
above have been prepared on a basis
consistent with past accounting practices
and as required by applicable Legal
Requirements and fairly present the
consolidated financial condition and
results of operations at the dates and for
the periods presented. Taken together, the
financial statements described in
clauses (a), (b) and (c) above
(collectively, and including the notes thereto,
the "SBI FINANCIAL Statements") are
complete and correct in all material
respects and fairly and accurately present
the respective financial position,
assets, liabilities and results of
operations of SBI and the Bank as at the
respective dates of, and for the periods
referred to in, the SBI Financial
Statements, subject to normal year-end
non-material audit adjustments in amounts
consistent with past practice in the case
of the unaudited SBI Financial
Statements. The SBI Financial Statements do
not include any material assets or
omit to state any material liabilities,
absolute or contingent, or other facts,
which inclusion or omission would render
the SBI Financial Statements misleading
in any material respect as of the
respective dates and for the periods referred
to in the respective SBI Financial
Statements.
SECTION 4.8
BOOKS AND RECORDS. The
books of account, minute books, stock
record books and other records of SBI and
each SBI Subsidiary are complete and
correct in all material respects and have
been maintained in accordance with
SBI's business practices and all applicable
Legal Requirements, including the
maintenance of any adequate system of
internal controls required by Legal
Requirements. The minute books of SBI and
each SBI Subsidiary contain accurate
and complete records in all material
respects of all meetings held of, and
corporate action taken by, its respective
stockholders, board of directors and
committees of the board of directors. At
the Closing, all of those books and
records will be in the possession of SBI
and the SBI Subsidiaries.
SECTION 4.9
TITLE TO PROPERTIES.
SBI and each SBI Subsidiary has good and
marketable title to all assets and
properties, whether real or personal,
tangible or intangible, that it purports to
own, subject to no valid liens,
mortgages, security interests, encumbrances
or charges of any kind except: (a)
as noted in the most recent SBI Financial
Statement or in SCHEDULE 4.9; (b)
statutory liens for Taxes not yet
delinquent or being contested in good faith by
appropriate Proceedings and for which
appropriate reserves have been established
and reflected on the SBI Financial
Statements; (c) pledges or liens required to
be granted in connection with the
acceptance of government deposits, granted in
connection with repurchase
21
<PAGE>
or reverse repurchase agreements, pursuant
to borrowings from Federal Home Loan
Banks or similar borrowings, or otherwise
incurred in the Ordinary Course of
Business; and (d) minor defects and
irregularities in title and encumbrances
that do not materially impair the use
thereof for the purposes for which they
are held (all of such exceptions in clauses
(a) through (d) are collectively
referred to as "PERMITTED EXCEPTIONS").
Except as set forth in SCHEDULE 4.9, SBI
and each SBI Subsidiary as lessee has the
right under valid and existing leases
to occupy, use, possess and control any and
all of the respective property
leased by it. Except where any failure
would not reasonably be expected to have
a Material Adverse Effect on SBI on a
consolidated basis, all buildings and
structures owned by SBI and each SBI
Subsidiary lie wholly within the boundaries
of the real property owned or validly
leased by it, and do not encroach upon the
property of, or otherwise conflict with the
property rights of, any other
Person.
SECTION 4.10
CONDITION AND SUFFICIENCY OF ASSETS. The buildings,
structures and equipment of SBI and each
SBI Subsidiary are structurally sound,
are in good operating condition and repair,
and are adequate for the uses to
which they are being put, and none of such
buildings, structures or equipment is
in need of maintenance or repairs except
for ordinary, routine maintenance and
repairs that are not material in the
aggregate in nature or in cost. Except
where any failure would not reasonably be
expected to have a Material Adverse
Effect on SBI on a consolidated basis, the
real property, buildings, structures
and equipment owned or leased by SBI and
each SBI Subsidiary are in compliance
with the Americans with Disabilities Act of
1990, as amended, and the
regulations promulgated thereunder, and all
other building and development codes
and other restrictions, including
subdivision regulations, building and
construction regulations, drainage codes,
health, fire and safety laws and
regulations, utility tariffs and
regulations, conservation laws and zoning laws
and ordinances. The assets and properties,
whether real or personal, tangible or
intangible, that SBI or any SBI Subsidiary
purport to own are sufficient for the
continued conduct of the business of SBI
and each SBI Subsidiary after the
Closing in substantially the same manner as
conducted prior to the Closing.
SECTION 4.11
LOANS; ALLOWANCE FOR LOAN AND LEASE LOSSES. Except as set
forth in SCHEDULE 4.11, all loans and loan
commitments extended by any SBI
Subsidiary and any extensions, renewals or
continuations of such loans and loan
commitments (the "SBI LOANS") were made and
have been maintained materially in
accordance with the lending policies of
such SBI Subsidiary in the Ordinary
Course of Business. The SBI Loans are
evidenced by appropriate and sufficient
documentation and constitute valid and
binding obligations to such SBI
Subsidiary enforceable in accordance with
their terms, except as enforceability
may be limited by bankruptcy,
