EX-2.1 AGREEMENT AND PLAN OF MERGER By and Between Omega Financial Corporation and Sun Bancorp, Inc.Agreement and Plan of Merger |
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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
By and Between
Omega Financial Corporation
and
Sun Bancorp, Inc.
Dated April 20, 2004
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of April 20, 2004 is entered into by and between Omega Financial Corporation (“Omega” or the “Surviving Corporation” as the context may require), a corporation organized and existing under the laws of Pennsylvania, which is registered as a bank holding company and whose principal offices are located at 366 Walker Drive, State College, Pennsylvania 16804, and Sun Bancorp, Inc. (“Sun”), a corporation organized and existing under the laws of the Commonwealth of Pennsylvania, which is registered as a financial holding company and whose principal offices are located at 155 North 15 th Street, Lewisburg, Pennsylvania, 17837.
Omega and Sun are sometimes referred to herein as the “Parties.”
RECITALS
A. The Board of Directors of Sun deems it desirable and in the best interests of Sun and its shareholders that Sun be merged with and into Omega (which would survive the merger as the Surviving Corporation) on the terms and subject to the conditions set forth in this Agreement and in the manner provided in this Agreement.B. The Board of Directors of Omega deems it desirable and in the best interests of Omega and its shareholders that Sun be merged with and into Omega on the terms and subject to the conditions set forth in this Agreement and in the manner provided in this Agreement.C. Pursuant to this Agreement, each share of Sun Common Stock outstanding at the Effective Time will be converted into either (i) cash in the amount of $23.25, or (ii) 0.664 shares of Omega Common Stock. Holders of Sun Common Stock will be entitled to elect their preference with respect to each share of Sun Common Stock held by them, subject to pro rata allocation, such that 20% of Sun Common Stock shall be paid in cash, and 80% of Sun Common Stock will be in the form of Omega Common Stock, including the effect of cash paid in lieu of fractional shares of Omega Common Stock, if any.D. As an inducement and condition to Omega entering into this Agreement, each director and executive officer of Sun is agreeing to vote all shares of Sun Common Stock owned by them in favor of the transactions contemplated by this Agreement at the meeting of Sun Shareholders at which this Agreement is considered pursuant to a voting agreement in the form attached hereto as Exhibit A (“Voting Agreement”).E. The Parties desire to make certain representations, warranties and agreements in connection with the Merger and also to prescribe certain conditions to the Merger, all as set forth herein.
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DEFINITIONS
Except as otherwise provided herein, as used in this Agreement, the following terms shall have the indicated meanings (which shall be applicable to both the singular and plural forms of the terms defined).
“Acquisition Proposal” means a proposed tender offer, written agreement, understanding or other proposal of any nature pursuant to which any Person or group, other than Omega or any Omega Subsidiary, would directly or indirectly (i) acquire or participate in a merger, share exchange, consolidation or any other business combination involving Sun or any Sun Subsidiary; (ii) acquire the right to vote 10% or more of the outstanding voting securities of Sun or any Sun Subsidiary; (iii) acquire 25% or more of the assets or earning power of Sun or of any Sun Subsidiary; or (iv) acquire in excess of 10% of any class of capital stock of Sun or any Sun Subsidiary.
“Acquisition Transaction” means any of the following events:
(i) the acquisition by any Person, other than Omega or any Omega Subsidiary, alone or together with such Person’s Affiliates or any group, of beneficial ownership of 10% or more of the outstanding shares of Sun Common Stock or the right to vote 10% or more of the outstanding voting securities of Sun or any Sun Subsidiary (for purposes of this Subsection (i), the terms “group” and “beneficial ownership” shall be as defined in Section 13(d) of the Exchange Act and regulations promulgated thereunder and as interpreted thereunder);(ii) a merger, consolidation, share exchange, business combination or any other similar transaction involving Sun or any Sun Subsidiary; or(iii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 25% or more of the assets or earning power of the Sun or any Sun Subsidiary, in a single transaction or series of transactions.“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. For the purposes of this definition, “control” means, when used with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract, or otherwise, and the terms “controlling” and “controlled” have correlative meanings.
“Aggregate Consideration” shall mean the amount that is equal to the sum of (i) the number of Cash Election Shares multiplied by the Cash Merger Consideration, plus (ii) the number of Stock Election Shares multiplied by the dollar amount of the Stock Merger Consideration, determined based upon the Determination Price. The Aggregate Consideration shall be determined after all adjustments and pro rations required to be made under this Agreement.
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“Aggregate Shares” shall mean the number of shares of Sun Common Stock issued and outstanding on the Closing Date, excluding shares for which no consideration is payable as described in Section 2.2(a).
“Applicable Law” means any statute, law, code, rule, or regulation, or any judgment, order, ordinance, writ, injunction, or decree of, any Governmental Authority to which a specified Person or its property or activities is subject.
“Balance Sheet Date” means December 31, 2003.
“Banking Approvals” means (a) the approval of the application filed with the FDIC under the Bank Merger Act and (b) any other approvals and/or Consents required to be obtained from or made to or with the Banking Department, the FDIC, the FRB or the OCC.
“Banking Department” means the Pennsylvania Department of Banking.
“Cash Election” means the election by a Sun Shareholder to receive the Cash Merger Consideration for such Shareholder’s shares of Sun Common Stock.
“Cash Election Shares” means shares of Sun Common Stock as to which a Cash Election has been made.
“Cash Merger Consideration” means $23.25.
“Charter Documents” means, with respect to a particular Person that is not an individual, such Person’s articles or certificate of incorporation or formation, organization certificate, bylaws and any other similar governing documents, all as may be amended or amended and restated from time to time.
“Closing” means consummation of the Merger.
“Closing Date” means the date of the Closing, which shall be on the eighth business day after the last condition precedent pursuant to this Agreement has been fulfilled or waived (including the expiration of any applicable waiting period) or such other date upon which the Parties may mutually agree.
“Code” means the Internal Revenue Code of 1986, as amended.
“Consent” means any consent, non-objection after notice to, approval or authorization of, notice to, or designation, registration, declaration or filing with, any Person.
“Determination Date” means the day which is eight business days before the Closing Date.
“Determination Price” means the mean average market price of Omega Common Stock for the twenty trading days immediately preceding the Determination Date. In calculating the average market price of Omega Common Stock, the market price on any trading day for which there are trades reported on the NASDAQ National Market shall be the last quoted trading price
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on that day, and the market price on any trading day for which no trades have been reported on the NASDAQ National Market shall be the average of the high bid and low asked prices on that day as reported by NASDAQ.
“Effective Time” shall be the close of business on the date on which the Merger is consummated by the filing of Articles of Merger with the Secretary of State of the Commonwealth of Pennsylvania.
“Election Form” shall mean the form mutually prepared by Omega and Sun which shall be distributed to the Sun Shareholders and by which the Sun Shareholders can indicate their election to receive the Cash Merger Consideration or the Stock Merger Consideration.
“Election Deadline” means 4:00 p.m. eastern standard time on the business day immediately preceding the date of the meeting of Sun Shareholders to approve the transactions contemplated by this Agreement, or such other date as may be mutually agreed upon by Omega and Sun.
“Environmental Laws” mean all federal, state and local laws, including statutes, regulations, ordinances, codes, rules and other governmental restrictions, standards and requirements relating to the discharge of air pollutants, water pollutants or process waste water or substances, as now or at any time hereafter in effect, including, but not limited to, the Federal Solid Waste Disposal Act, the Federal Hazardous Materials Transportation Act, the Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of 1976, the Federal Comprehensive Environmental Responsibility Cleanup and Liability Act of 1980, as amended (“CERCLA”), regulations of the Environmental Protection Agency, regulations of the Nuclear Regulatory Agency, regulations of the Occupational Safety and Health Administration, and any so-called “Superfund” or “Superlien” Laws.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated from time to time thereunder.
“Exchange Agent” means such bank, trust company, transfer agent or other entity selected by Omega, with the consent of Sun, not to be unreasonably withheld.
“Expenses” means all reasonable in amount and reasonably incurred out-of-pocket expenses (including all reasonable fees and reasonable expenses of counsel, accountants, investment bankers, experts and consultants to the applicable Party and its Affiliates) incurred by or on behalf of a Party to this Agreement in connection with this Agreement or the transactions contemplated by this Agreement.
“FDIC” means the Federal Deposit Insurance Corporation.
“FRB” means the Board of Governors of the Federal Reserve System.
“GAAP” means generally accepted accounting principles, as in effect at the relevant date.
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“Governmental Approvals” means all Consents of Governmental Authorities that are necessary so that the consummation of the Merger and the other transactions contemplated hereby will be in compliance with Applicable Law, other than the Banking Approvals.
“Governmental Authority” shall mean any court or tribunal in any domestic jurisdiction or any federal, state, municipal or local government or other domestic governmental body, agency, authority, department, commission, board, bureau, instrumentality, arbitrator or arbitral body, including, without limitation, the Banking Department, the FDIC, the FRB and the OCC.
“Intellectual Property” means (i) trademarks, service marks, trade names, Internet domain names, designs, logos, slogans, and general intangibles of like nature, together with all goodwill, registrations and applications related to the foregoing; (ii) patents and industrial designs (including any continuations, divisionals, continuations-in-part, renewals, reissues, and applications for any of the foregoing); (iii) copyrights (including any registrations and applications for any of the foregoing); (iv) Software; and (v) technology, trade secrets and other confidential information, know-how, proprietary processes, formulae, algorithms, models, and methodologies.
“knowledge” or “aware” or any term of similar import means, (i) with respect to Sun, the actual knowledge of each director and officer of Sun or any Sun Subsidiary after all due and reasonable inquiry, and (ii) with respect to Omega, the actual knowledge of each director and officer of Omega or any Omega Subsidiary after all due and reasonable inquiry.
“Material Adverse Effect” shall mean, with respect to a Party, an effect that is material and adverse to (a) the assets, properties, business, future prospects, financial condition or results of operations of such Party and its Subsidiaries, taken as a whole; provided , however , that, for purposes of this clause (a), a Material Adverse Effect shall not be deemed to include (i) any change in the value of the respective investment and loan portfolios of either Party resulting from a change in interest rates generally within the banking industry, (ii) any change occurring after the date of this Agreement in any Applicable Law or in GAAP, which change affects banking institutions generally, including any changes affecting the Bank Insurance Fund, (iii) changes in general economic (except in the context of determining a Material Adverse Effect for purposes of asset quality), legal, regulatory or political conditions affecting banking institutions generally, (iv) actions or omissions of a Party (or any of its Subsidiaries) taken pursuant to the terms of this Agreement with the prior written consent of the other Party in contemplation of the transactions contemplated hereby; or (b) the ability of such Party to consummate the transactions contemplated hereby .
“Merger” means the merger of Sun with and into Omega, with Omega surviving the merger.
“NASDAQ Bank Index” means the NASDAQ Bank Index as currently published by the Nasdaq Stock Market, Inc., or, if not then published, a comparable index as mutually agreed upon by Omega and Sun.
“Non-Election” means the failure of a Sun Shareholder to indicate a preference as to the form of Per Share Merger Consideration to be received for its shares of Sun Common Stock.
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“Non-Electing Shares” means outstanding shares of Sun Common Stock, as to which there is a Non-Election.
“OCC” means the Office of Comptroller of the Currency, an agency of the United States Department of the Treasury.
“Omega Bank” means Omega Bank N.A.
“Omega Benefit Plans” means (i) each pension, profit sharing, stock bonus, thrift, savings, employee stock ownership or other plan, program or arrangement, which constitutes an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA, which is maintained by Omega or any Omega Subsidiary or to which Omega or any Omega Subsidiary contribute, or are obligated to contribute, for the benefit of any current or former employee, officer, director, consultant or agent; and (ii) every other retirement or deferred compensation plan, bonus or incentive compensation plan or arrangement, stock option plan, stock purchase plan, severance or vacation pay arrangement, or other fringe benefit plan, program, agreement or arrangement through which Omega or any Omega Subsidiary provide benefits for or on behalf of any current or former employee, officer, director, consultant or agent, and, with respect to each such plan, the amounts contributed but not yet paid to participants or beneficiaries thereunder, and the amount of any contribution deficiencies with respect thereto.
“Omega Common Stock” means the common stock of Omega, $5.00 par value.
“Omega Financial Statements” means the audited financial statements of Omega for the years ended December 31, 2003, 2002 and 2001, together with all notes to such financial statements, as included in Omega’s annual report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2003.
“Omega Schedule” means the schedule of exceptions and other information prepared by Omega and delivered to Sun as described in the introductory paragraph of Article 4.
“Omega Subsidiaries” means Omega Bank and the other Subsidiaries of Omega referenced in Section 4.1(c).
“PBCL” means Pennsylvania Business Corporation Law.
“Person” means an individual, partnership (general or limited), corporation, joint venture, business trust, limited liability company, cooperative association or other form of business organization, trust, estate or any other entity.
“Per Share Merger Consideration” means either the Cash Merger Consideration or Stock Merger Consideration.
“Proceeding” means any proceeding, action, claim, suit, arbitration, mediation, investigation or inquiry by or before any Governmental Authority.
“Prospectus/Proxy” means the combined prospectus and proxy statement constituting the prospectus for the issuance of the Omega Common Stock as the Stock Merger Consideration
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pursuant to this Agreement and also constituting the proxy statement sent to the shareholders of Omega and Sun to solicit their votes on the approval of the Merger, as the same is included in the Registration Statement, as declared effective by the SEC, together with any supplement or amendment thereto included as part of any post-effective amendment.
“Registration Statement” means the Securities Act registration statement on Form S-4 as filed with the SEC in order to register the offering of the Omega Common Stock constituting the offering of the aggregate Stock Merger Consideration, together with all filed amendments to such registration statement.
“SEC” means the United States Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated from time to time thereunder.
“Securities Laws” means the Securities Act and the Exchange Act.
“Sentry Plans” means the Sentry Trust Company 1997 Stock Incentive Plan, as amended, and the Sentry Trust Company 1999 Stock Incentive Plan assumed by Sun in connection with the acquisition of Sentry Trust Company pursuant to that certain Agreement and Plan of Reorganization dated as of April 23, 2003, as amended, by and among Sun, Sun Interim Trust Company (In Organization), Sentry Trust Company and Patriot Federal Credit Union.
“Shareholder Materials” means a letter of transmittal, an instruction sheet and a return mailing envelope sent or made available to Sun Shareholders who have not duly submitted the certificates for shares of Sun Common Stock by the Election Deadline.
“Shares” means the shares of Omega Common Stock issued, or to be issued, to Sun Shareholders as consideration for the Merger pursuant to this Agreement.
“Software” means computer programs, whether in source code or object code form (including any and all software implementation of algorithms, models and methodologies), databases and compilations (including any and all data and collections of data), and all documentation (including user manuals and training materials) related to the foregoing.
“Stock Election” means the election by a Sun Shareholder to receive the Stock Merger Consideration for such Shareholder’s shares of Sun Common Stock.
“Stock Election Shares” means shares of Sun Common Stock as to which a Stock Election has been made.
“Stock Merger Consideration” means 0.664 shares of Omega Common Stock.
“Subsidiary” means, with respect to a Person, a corporation, partnership, limited liability company or other business entity in which such Person owns, directly or indirectly, 50% or more of any class of equity securities or a comparable percentage equity ownership interest.
“SunBank” means SunBank, a Pennsylvania state-chartered bank.
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“Sun Common Stock” means the common stock of Sun, no par value.
“Sun Financial Statements” means the audited financial statements of Sun for the years ended December 31, 2003, 2002 and 2001, together with all notes to such financial statements, as included in Sun’s annual report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2003.
“Sun Intellectual Property” means the Intellectual Property used in or held for use in the conduct of the business of Sun or any Sun Subsidiary.
“Sun Real Property” means the real property owned, leased, rented, occupied or operated by Sun or any Sun Subsidiary.
“Sun Schedule” means the schedule of exceptions and other information prepared by Sun and delivered to Omega as described in the introductory paragraph of Article 3.
“Sun Stock Options” mean options or other rights to purchase shares of Sun Common Stock granted pursuant to (i) Sun’s 1998 Stock Incentive Plan, 1998 Employee Stock Purchase Plan or 1998 Independent Directors Stock Option Plan, each as approved by shareholders of Sun on April 23, 1998 or (ii) the Sentry Plans.
“Sun Shareholder” means a record holder of one or more shares of Sun Common Stock.
“Sun Subsidiaries” means SunBank and any other Subsidiaries of Sun, including, without limitation, the Subsidiaries identified on Section 3.1(c) to the Sun Schedule.
“Superior Proposal” means an unsolicited, bona fide proposal to enter into an Acquisition Transaction that the board of directors of Sun determines in its good faith business judgment (after consultation with its financial advisors and legal counsel) (i) would result in a transaction that is more favorable to its shareholders, from a financial point of view, and its other stakeholders than the transactions contemplated by this Agreement, (ii) that the Person proposing such Acquisition Transaction is reasonably likely to have or obtain, any necessary funds or customary commitments to provide any funds necessary to consummate such Acquisition Proposal, and (iii) that any Consents required in order to consummate such Acquisition Transaction are reasonably likely to be obtained; provided , however , that, for the purposes of this definition, the term “Acquisition Transaction” shall have the meaning ascribed to it herein except that the references therein to 10% and 25% shall be deemed to be a reference to 50%.
“Tax” means any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.
“Tax Return” means any returns, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
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NOW THEREFORE, in consideration of the foregoing premises and the mutual representations, warranties, covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
ARTICLE 1TERMS OF THE MERGER1.1 The Merger . Subject to the satisfaction (or lawful waiver) of each of the conditions to the obligations of each Party specified herein, at the Effective Time, Sun shall be merged with and into Omega, which latter corporation shall survive the Merger and is referred to herein in such capacity as the “Surviving Corporation.” The Merger shall have the effects set forth here and the provisions of the PBCL relating to mergers of corporate entities.(a) Effects of the Merger . At the Effective Time, the separate existence of Sun shall cease, and Omega, as the Surviving Corporation, shall thereupon and thereafter possess all of the assets, rights, privileges, appointments, powers, licenses, permits and franchises of the two merged corporations, whether of a public or a private nature, and shall be subject to all of the liabilities, restrictions, disabilities and duties of Sun. The Merger is intended to be treated by the Parties as a reorganization within the meaning of Section 368(a) of the Code.(b) Transfer of Assets . At the Effective Time, all rights, assets, licenses, permits, franchises and interests of Sun in and to every type of property, whether real, personal, or mixed, whether tangible or intangible, and choses in action shall be deemed to be vested in Omega as the Surviving Corporation by virtue of the Merger becoming effective and without any deed or other instrument or act of transfer whatsoever.(c) Assumption of Liabilities . At the Effective Time, the Surviving Corporation shall become and be liable for all debts, liabilities, obligations and contracts of Sun whether the same shall be matured or unmatured; whether accrued, absolute, contingent or otherwise; and whether or not reflected or reserved against in the balance sheets, other financial statements, books of account or records of Sun.1.2 Articles of Incorporation , Bylaws, Directors, Officers and Name of the Surviving Corporation .(a) Articles of Incorporation . At and after the Effective Time, the Articles of Incorporation of Omega, as in effect immediately prior to the Effective Time, shall continue to be the Articles of Incorporation of Omega as the Surviving Corporation, unless and until amended thereafter as provided by Applicable Law and the terms of such Articles of Incorporation.(b) Bylaws . At and after the Effective Time, the Bylaws of Omega, as in effect immediately prior to the Effective Time, shall continue to be the Bylaws of Omega as the Surviving Corporation, unless and until amended or repealed as provided by Applicable Law, the Articles of Incorporation of Omega and such Bylaws.
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(c) Directors and Officers . The directors and officers of Omega in office immediately prior to the Effective Time shall continue to be directors and officers of the Surviving Corporation, to hold office as provided in the Articles of Incorporation and Bylaws of the Surviving Corporation, unless and until their successors shall have been elected or appointed and shall have qualified or until they shall have been removed in the manner provided in said Articles of Incorporation and Bylaws; provided , however , that the Board of Directors of Omega shall appoint, as of the Effective Time, three directors of Sun, as mutually agreed by Sun and Omega, as directors of Omega (each, a “Sun Director”). Each Sun Director shall be appointed to one of the three classes of directors of the Omega Board of Directors and shall serve the remaining term of the class to which such Sun Director was appointed. The Omega Board of Directors shall recommend, subject to its fiduciary duties, the nomination of each Sun Director for election, by the shareholders of Omega, for one additional term of three years after such Sun Director’s initial term expires. If one or more Sun Director is unable or unwilling to serve as a member of Omega’s Board of Directors, such person shall be replaced by another person mutually selected by Omega and Sun who was a director of Sun immediately prior to the Effective Time.(d) SunBank Board of Directors; SunBank Advisory Board; Omega Bank Board of Directors .(i) For a period of two years following the Effective Time, Omega shall offer the current directors of SunBank either seats on the SunBank Board of Directors if SunBank has not been merged with Omega Bank or any other Omega Subsidiary or, in the event that SunBank is merged with Omega Bank or any other Omega Subsidiary, seats on a to-be-formed Advisory Board of SunBank (the “Advisory Board”) which shall, in either case, address and deal with issues in the market area served by SunBank. For a period of one year following the Effective Time, the members of the SunBank Board of Directors or the Advisory Board, as applicable, will receive board fees (excluding any stock option grants) for each meeting actually attended equal to the fees for each meeting attended payable to the members of the SunBank Board of Directors immediately prior to the Effective Time. Omega shall have the right to appoint one or more representatives to seats on the SunBank Board of Directors and, if formed, the Advisory Board, and/or to send one or representatives to attend meetings thereof. After the Effective Time, the Board of Directors of SunBank and, if formed, the Advisory Board, shall give Omega at least five (5) days notice of the date, time and place of all meetings thereof.
(ii) In the event that SunBank is merged with Omega Bank or any other Omega Subsidiary within two years of the Effective Time, the Board of Directors of the entity surviving such merger (“Surviving Bank”) shall appoint Robert J. McCormack (provided that he is then employed as an executive officer of either Omega or Omega Bank) and three other directors of SunBank (each, a “SunBank Director”), as mutually agreed by Omega and the directors of SunBank immediately prior to the effectiveness of such merger, to serve on the Board of Directors of Surviving Bank until the next election of directors of Surviving Bank. The Board of Directors of Surviving Bank shall recommend, subject to its fiduciary duties, the nomination of each SunBank Director for election as a director of Surviving Bank for three additional terms of one year each after such SunBank Director’s initial term expires. If one or more SunBank Director is unable or unwilling to serve as a member of Surviving Bank’s Board of Directors, such person shall be replaced by another person who was a director of SunBank
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immediately prior to the Effective Time, as mutually selected by Omega and the directors of SunBank immediately prior to the effectiveness of the merger of SunBank with Omega Bank (or any other Omega Subsidiary). All directors described in this Section 1.2(d)(ii) shall be entitled to the same fees and benefits as other directors of Surviving Bank, but no director of Surviving Bank shall be entitled to receive any directors fees while an employee of Surviving Bank.
(e) Fees . All directors described in Sections 1.2(c) shall be entitled to the same fees and benefits as other directors of Omega, but no director of Omega shall be entitled to receive any directors fees while an employee of Omega.(f) Name . The name of the Surviving Corporation following the Merger shall be “Omega Financial Corporation.”1.3 Availability of Information . Promptly after the execution by the Parties of this Agreement, each Party shall provide to the other Party, its officers, employees, agents, and representatives, access, on reasonable notice and during customary business hours, to the books, records, properties and facilities of the Party and shall use its best efforts to cause its officers, employees, agents and representatives to cooperate with any of the reviewing Party’s reasonable requests for information.1.4 Anti-dilution Provisions . In the event Omega changes the number of shares of Omega Common Stock issued and outstanding prior to the Effective Time as a result of a stock split, stock dividend, recapitalization or any other distribution to shareholders of Omega, the Stock Merger Consideration shall be proportionately adjusted; provided , however , that no such adjustments shall be made for issuances of Omega Common Stock (a) under any benefit or compensatory plan of Omega or any Omega Subsidiary, or (b) as consideration in connection with an acquisition of a controlling interest in any Person (by merger, business combination or otherwise), or all or a portion of a Person’s business or assets by Omega or any Omega Subsidiary.
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ARTICLE 2DESCRIPTION OF TRANSACTION2.1 Terms of the Merger .(a) Satisfaction of Conditions to Closing . After the transactions contemplated herein have been approved by the shareholders of Omega and Sun and each other condition to the obligations of the Parties hereto, other than those conditions which are to be satisfied by delivery of documents by either Party to the other Party, has been satisfied or, if lawfully permitted, waived by the Party entitled to the benefits thereof, the Closing will be held on the date and at the time of day and place referred to in this Agreement. At the Closing, the Parties shall deliver the certificates, letters and opinions which constitute conditions to effecting the Merger and each Party will provide the other Party with such proof or indication of satisfaction of the conditions to the obligations of such other Party to consummate the Merger as such other Party may reasonably require. If all conditions to the obligations of each Party shall have been satisfied or lawfully waived by the Party entitled to the benefits thereof, the Parties shall, at the Closing, duly execute the Articles of Merger and such other documents as are required to be filed with the Secretary of State of the Commonwealth of Pennsylvania to effect the Merger, and promptly thereafter Sun and Omega shall take all steps necessary or desirable to consummate the Merger in accordance with all Applicable Laws. The Parties shall thereupon take such other and further actions as may be required by Applicable Law or this Agreement to consummate the transactions contemplated herein.(b) Effective Time . Upon the satisfaction of all conditions to Closing set forth herein, the Merger shall become effective on the date and at the time of filing of the Articles of Merger with the Secretary of State of the Commonwealth of Pennsylvania or at such later date and/or time as may be agreed upon by the Parties and set forth in the Articles of Merger so filed.2.2 Conversion of Stock .(a) Consideration . At the Effective Time, each share of Sun Common Stock then issued and outstanding (other than shares held directly or indirectly by Omega, excluding shares held in a fiduciary capacity or in satisfaction of a debt previously contracted) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and represent the right to receive from Omega the Cash Merger Consideration and/or Stock Merger Consideration of Omega constituting the Per Share Merger Consideration; provided , however , that any shares of Sun Common Stock that are owned by any trust created under Sun’s Defined Contribution Plan or any other benefit plan and that have not been contributed or awarded to employees or directors at the Effective Time shall be canceled and no payment therefor shall be made. Omega covenants and agrees to pay the Cash Merger Consideration and the Stock Merger Consideration, as applicable, to Sun Shareholders, subject to the satisfaction of the conditions set forth in this Agreement. As of the Effective Time, each share of the Sun Common Stock held directly or indirectly by Omega, excluding shares held in a fiduciary capacity or in satisfaction of a debt previously contracted, shall be canceled, retired and cease to exist, and no exchange or payment shall be made with respect thereto.
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(b) Cash or Stock Merger Consideration . Each Sun Shareholder shall have the right to elect to receive the Cash Merger Consideration or the Stock Merger Consideration as to each share of Sun Common Stock owned by such shareholder, subject however to the election, allocation, adjustment and proration procedures set forth below.(c) Fractional Shares . Fractional shares of Omega Common Stock shall not be issued and each holder of Sun Common Stock who would otherwise be entitled to receive any such fractional shares (taking into account all share amounts to which such holder is otherwise entitled hereunder) shall receive cash (without interest) in lieu thereof in an amount equal to the fraction of the share of Omega Common Stock to which such holder would otherwise be entitled multiplied by the Determination Price. No Person entitled to receive a fractional share of Omega Common Stock will be entitled to dividends, voting rights or any other rights of a shareholder of Omega with respect to such fractional share.(d) Treatment of Options .(i) At the Effective Time, each holder of an option (collectively, “Sun Options”) to purchase shares of Sun Common Stock that (i) is outstanding at the Effective Time, (ii) has been granted pursuant to Sun’s 1998 Stock Incentive Plan or 1998 Independent Directors Stock Option Plan or the Sentry Plans; and (iii) would otherwise survive the Effective Time shall be entitled to receive, in substitution for such Sun Option, an option to acquire shares of Omega Common Stock on the terms set forth below (each Sun Option as substituted, an “Omega Option”).
(ii) An Omega Option shall be a stock option to acquire shares of Omega Common Stock with the following terms: (i) the number of shares of Omega Common Stock which may be acquired pursuant to such Omega Option shall be equal to the product of the number of shares of Sun Common Stock covered by the corresponding Sun Option multiplied by 0.664, provided that any fractional share of Omega Common Stock resulting from such multiplication shall be rounded down to the nearest whole share; (ii) the exercise price per share of Omega Common Stock issuable upon exercise of the Omega Option shall be equal to the exercise price of the corresponding Sun Option immediately prior to the conversion thereof to an Omega Option, divided by 0.664, provided that such exercise price shall be rounded down to the nearest whole cent; (iii) the duration and other terms of such Omega Option shall be identical to the duration and other terms of the corresponding Sun Option immediately prior to the conversion thereof to an Omega Option, except that all references to Sun shall be deemed to be references to Omega and its affiliates, where the context so requires and shall remain exercisable until the stated expiration date of the corresponding Sun Option; (iv) Omega shall assume such Sun Option, whether vested or not vested, as contemplated by the Code; and (v) to the extent Sun Options qualify as incentive stock options under Section 422 of the Code, the Omega Options exchanged therefor shall also so qualify.
(iii) On or within 15 days after the Effective Time, Omega shall take appropriate action to reserve for issuance and, if not previously registered pursuant to the Securities Act, register the number of shares of Omega Common Stock necessary to satisfy Omega’s obligations with respect to the issuance of Omega Common Stock pursuant to the exercise of Omega Options.
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(e) Calculation Schedule . The calculations of the respective amounts of cash and Omega Common Stock payable and issuable pursuant to the terms of this Agreement shall be calculated by the Exchange Agent and approved by Omega and Sun as soon as practicable and no later than the Effective Time.2.3 Election and Allocation Procedures .(a) Election by Sun Shareholders . Subject to and in accordance with the allocation and election procedures set forth herein, each Sun Shareholder shall, prior to the Election Deadline, specify (i) the number of whole shares of Sun Common Stock held by such Shareholder as to which such Shareholder shall desire to receive the Cash Merger Consideration, and (ii) the number of whole shares of Sun Common Stock held by such Shareholder as to which such Shareholder shall desire to receive the Stock Merger Consideration.(b) Allocation of Cash and Stock . Notwithstanding anything herein to the contrary, and after taking into consideration cash paid in lieu of fractional shares, and after excluding shares for which no consideration is payable as described in Section 2.2(a), 80% of the outstanding Sun Common Stock shall be exchanged for Omega Common Stock and all remaining outstanding Sun Common Stock shall be converted into the right to receive cash. Such result shall be accomplished through the following adjustments to the elections made by Sun Shareholders, and by giving due consideration to cash payments for fractional shares:(1) If the number of Cash Election Shares is in excess of 20% of the Aggregate Shares, then (i) Non-Electing Shares shall be deemed to be Stock Election Shares, and (ii)(A) Cash Election Shares of each Sun Shareholder who made the Cash Election shall be reduced pro rata by multiplying the number of Cash Election Shares of such Sun Shareholder by a fraction, the numerator of which is the number of shares of Sun Common Stock equal to 20% of the Aggregate Shares, and the denominator of which is the aggregate number of Cash Election Shares of all Sun Shareholders, and (B) the shares of such Sun Shareholder representing the difference between such Sun Shareholder’s initial Cash Election Shares and such Sun Shareholder’s reduced Cash Election Shares pursuant to clause (A) shall be converted into and be deemed to be Stock Election Shares.(2) If the number of Stock Election Shares is in excess of 80% of the Aggregate Shares, then (i) Non-Electing Shares shall be deemed to be Cash Election Shares and (ii) (A) Stock Election Shares of each Sun Shareholder shall be reduced pro rata by multiplying the number of Stock Election Shares of such Sun Shareholder by a fraction, the numerator of which is the number of shares of Sun Common Stock equal to 80% of the Aggregate Shares and the denominator of which is the aggregate number of Stock Election Shares of all Sun Shareholders, and (B) the shares of such Sun Shareholder representing the difference between such Sun Shareholder’s initial Stock Election Shares and such Sun Shareholder’s reduced Stock Election Shares pursuant to clause (A) shall be converted into and be deemed to be Cash Election Shares.(3) If the number of Cash Election Shares is less than 20% of the Aggregate Shares and the number of Stock Election Shares is less than 80% of the Aggregate Shares, then (i) there shall be no adjustment to the elections made by electing Sun Shareholders,
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and (ii) Non-Electing Shares of each Sun Shareholder shall be treated as Stock Elections Shares and/or as Cash Election Shares in proportion to the respective amounts by which the Cash Election Shares and the Stock Election Shares are less than the 20% and 80% limits, respectively.(c) Receipt of Payment . After taking into account the foregoing adjustment provisions, each Cash Election Share (including those deemed to be Cash Election Shares) shall receive in the Merger the Cash Merger Consideration pursuant to Section 2.5 and each Stock Election Share (including those deemed to be Stock Election Shares) shall receive in the Merger the Stock Merger Consideration (and cash in lieu of fractional shares) pursuant to Section 2.5.2.4 Election Procedures .(a) The Election Form shall be distributed to each Sun Shareholder at such time as Sun and Omega shall determine and shall specify the Election Deadline.(b) Elections shall be made by Sun Shareholders by mailing to the Exchange Agent a completed Election Form. To be effective, an Election Form must be properly completed, signed and submitted to the Exchange Agent accompanied by certificates representing the shares of Sun Common Stock as to which the election is being made (or by an appropriate guaranty of delivery by a commercial bank or trust company in the United States or a member of a registered national security exchange or the National Association of Securities Dealers, Inc.), or by evidence that such certificates have been lost, stolen or destroyed accompanied by such security or indemnity as shall reasonably be requested by Omega. An Election Form and accompanying share certificates must be received by the Exchange Agent by the close of business on the Election Deadline. An election may be changed or revoked but only by written notice received by the Exchange Agent prior to the Election Deadline including, in the case of a change, a properly completed revised Election Form.(c) Omega, or the Exchange Agent if so designated by Omega, shall determine in the reasonable exercise of discretion, whether the Election Forms have been properly completed, signed and submitted or changed or revoked and may disregard immaterial defects in Election Forms. Omega or the Exchange Agent, as applicable, will notify the applicable Sun Shareholders of any defect in an Election Form by regular United States mail or such other method of notice which can reasonably be expected to be at least as prompt as notice by regular United States mail.(d) For the purposes hereof, a Sun Shareholder who does not submit an effective Election Form to the Exchange Agent prior to the Election Deadline shall be deemed to have made a Non-Election.(e) In the event that this Agreement is terminated pursuant to the provisions hereof and any certificates for shares have been transmitted to the Exchange Agent pursuant to the provisions hereof, Omega and Sun shall cause the Exchange Agent to return such certificates to the Person submitting the same promptly after such termination.
15 2.5 Mechanics of Payment of Consideration .(a) Payment of the Merger Consideration . Omega shall deposit with the Exchange Agent sufficient certificates representing Omega Common Stock and sufficient cash to enable the Exchange Agent to distribute the Aggregate Consideration as determined pursuant to this Agreement. Within three business days after the Effective Time, the Exchange Agent shall distribute, to all Sun Shareholders who have properly submitted Election Forms together with their share certificates or proper proofs with respect to lost certificates, the Cash Merger Consideration and the Stock Merger Consideration to which each such Sun Shareholder is entitled. Within five business days after receiving properly completed Shareholder Materials, as set forth in Section 2.5(b), from any Sun Shareholder who made a Non-Election, the Exchange Agent shall likewise distribute to such Sun Shareholder the Cash Merger Consideration or Stock Merger Consideration, or a combination of both, which such Sun Shareholder is entitled to receive pursuant to this Agreement.(b) Submission Procedures for Non-Electing Shares . Within five business days after the Effective Time, the Exchange Agent shall send the Shareholder Materials to each Sun Shareholder who has made a Non-Election. All Shareholder Materials shall be sent by first class United States mail to such Sun Shareholders at the addresses set forth on the official shareholder records of Sun. Omega shall also make appropriate provisions with the Exchange Agent to enable Sun Shareholders to obtain the Shareholder Materials from, and to deliver the certificates formerly representing shares of Sun Common Stock to, the Exchange Agent in person, commencing on or not later than the second business day following the Effective Time. Upon receipt of the appropriate Shareholder Materials, together with the certificates formerly evidencing and representing all of the shares of Sun Common Stock which were validly held of record by such Sun Shareholder, the Exchange Agent shall take prompt action to process such certificates formerly evidencing and representing shares of Sun Common Stock received by it (including the prompt return of any defective submissions with instructions as to those actions which may be necessary to remedy any defects) and to mail to the Sun Shareholders in exchange for the certificate(s) surrendered by them, the consideration to be issued or paid for such Sun Shareholder’s shares pursuant to the terms hereof.(c) Rights Appurtenant to Certificates Lost Certificates . After the Effective Time and until properly surrendered to the Exchange Agent, each outstanding certificate or certificates which formerly evidenced and represented Sun Common Stock shall be deemed for all purposes to represent and evidence only the right to receive the aggregate Cash Merger Consideration or aggregate Stock Merger Consideration into which such Sun Common Stock was converted. The aggregate Cash Merger Consideration or aggregate Stock Merger Consideration shall not be paid to the record holder of any Sun Common Stock until the certificate therefor is surrendered in the manner required. Each Sun Shareholder will be responsible for all federal, state and local taxes which may be incurred by him or her on account of his or her receipt of the consideration to be paid in the Merger. A Sun Shareholder whose certificate(s) have been lost or destroyed may nevertheless, subject to the provisions of this Article, receive the aggregate Cash Merger Consideration or aggregate Stock Merger Consideration to which such Sun Shareholder is entitled, provided that such Sun Shareholder must first deliver to Omega or to the Exchange Agent: (i) a sworn statement certifying such loss or destruction and specifying the circumstances thereof, and (ii) a lost instrument bond in form satisfactory to Omega and the Exchange Agent which has been duly executed by a corporate surety satisfactory to Omega and the Exchange Agent, indemnifying the Surviving Corporation,16
Omega, the Exchange Agent (and their respective successors) to their satisfaction against any loss or expense which any of them may incur as a result of such lost or destroyed certificates being presented. Any costs or expenses which may arise from such replacement procedure, including the premium on the lost instrument bond, shall be paid by the Sun Shareholder.(d) Stock Transfer Books . At the Effective Time, the stock transfer books of Sun shall be closed and no transfer of shares of Sun Common Stock shall be made thereafter.(e) Right to Receive Dividends on Omega Common Stock . Each Sun Shareholder who is entitled to receive the Stock Merger Consideration shall be entitled, to the same extent as other holders of Omega Common Stock, to payments of dividends, if any, on Omega Common Stock if the record date for such dividend is on or after the Closing Date; provided , however , that such dividends shall be paid, without interest, only after the Sun Shareholder submits his or her certificate for Sun Common Stock pursuant to Sections 2.4(b) or 2.5(b) or complies with the requirements of Section 2.5(c) with respect to lost stock certificates. All dividends not paid on the dividend payment date pursuant to this Section shall be paid by Omega to the Exchange Agent, which shall remit them to the applicable shareholder upon satisfaction of the conditions set forth in this Section 2.5(e).2.6 Time and Place of Closing . Unless this Agreement shall have been terminated and the transactions herein contemplated shall have been abandoned pursuant to Section 8.1, and subject to the satisfaction or waiver of the conditions set forth in Article 7, the Closing will take place at 10:00 a.m. on the Closing Date, at Omega’s corporate offices in State College, Pennsylvania, unless another date, time or place is agreed to in writing by the parties hereto.2.7 Voting Agreements . As a material inducement for Omega entering into this Agreement, simultaneously with the execution of this Agreement by the Parties, each director and executive officer of Sun shall enter into a Voting Agreement.2.8 Reservation of Shares . Omega agrees that, prior to the Effective Time, it will take appropriate action to reserve a sufficient number of authorized but unissued shares of Omega Common Stock to be issued as Stock Merger Consideration in accordance with this Agreement.2.9 Certain Actions Relating to Rule 16b-3 . Prior to the Effective Time, Omega and Sun shall take all such steps as may be required to cause any dispositions of shares of Sun Common Stock (including derivative securities with respect to such shares) resulting from the transactions contemplated by Article 2 of this Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Sun to be exempt under Rule 16b-3 promulgated under the Exchange Act.ARTICLE 3REPRESENTATIONS AND WARRANTIES OF SUNExcept as otherwise disclosed in one or more schedules numbered to correspond to the following Sections of Article 3, and delivered concurrently with this Agreement, both as of the date hereof and as of the Effective Time, Sun hereby represents and warrants to Omega as follows:
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3.1 Organization and Qualification of Sun and Sun Subsidiaries .(a) Sun is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania and (i) has all requisite corporate power and authority to own, operate and lease its properties and assets and to carry on its business as it is currently being conducted; (ii) is in good standing and is duly qualified and licensed to conduct business in each jurisdiction where the character of its properties owned or held under lease or the nature of its business is such that a failure to be so qualified or licensed would have, individually or in the aggregate, a Material Adverse Effect; and (iii) is a financial holding company under the regulations of the FRB.(b) SunBank is a Pennsylvania state-chartered, non-member bank, duly organized, validly existing and in good standing under the laws of the appropriate jurisdiction in which it was organized and engages only in activities (and holds properties and assets only of the types) permitted by the laws of the Commonwealth of Pennsylvania, the United States, the rules and regulations promulgated by the Banking Department and the FDIC for insured depository institutions. SunBank’s deposit accounts are insured by the Bank Insurance Fund or Savings Association Insurance Fund as administered by the FDIC to the fullest extent permitted under Applicable Law, and all premiums and assessments required to be paid in connection therewith have been paid when due. SunBank is the sole banking Subsidiary of Sun.(c) Section 3.1(c) of the Sun Schedule specifically identifies each Subsidiary of Sun and its jurisdiction of formation. Each Sun Subsidiary (other than SunBank) is duly organized, validly existing and in good standing under the laws of the appropriate jurisdiction in which it is incorporated or organized and (i) has all requisite corporate power and authority to own, operate and lease its properties and assets and to carry on its business as it is currently being conducted; and (ii) is in good standing and is duly qualified and licensed to conduct business in each jurisdiction where the character of its properties owned or held under lease or the nature of its business is such that a failure to be so qualified or licensed would have, individually or in the aggregate, a Material Adverse Effect.3.2 Authorization, Execution and Delivery; Agreement Not in Breach .(a) Sun has all requisite corporate power and authority to execute and deliver this Agreement and, subject to the approval of Sun Shareholders and the Banking Approvals, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the proposed transactions have been duly authorized by the requisite vote of Sun’s Board of Directors and no other corporate proceedings of the part of Sun or any Sun Subsidiary are necessary to authorize the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for the approval of the holders of Sun Common Stock entitled to vote thereon. This Agreement and all other agreements and instruments herein contemplated to be executed by Sun have been (or upon execution will have been) duly executed and delivered by Sun and constitute (or upon execution will constitute) legal, valid and enforceable obligations of Sun, subject, as to enforceability, to applicable bankruptcy, insolvency, receivership, conservatorship, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and to the application of equitable principles.
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(b) The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, and the fulfillment of the terms hereof will not result in a material violation or material breach of any of the terms or provisions of, or constitute a material default under (or an event which, with the passage of time or the giving of notice, or both, would constitute such a default under), or conflict with, or permit the acceleration of, any material obligation under, any mortgage, lease, covenant, agreement, indenture or other instrument to which Sun or any Sun Subsidiary is a party or by which any of them or their respective properties or assets is bound, the Charter Documents of Sun or any Sun Subsidiary; or any judgment, decree, order, regulatory letter of understanding or award of any Governmental Authority by which Sun or any Sun Subsidiary, or their respective properties or assets, is bound, or any material Consent, permit, concession, grant, franchise, license, law, statute, ordinance, rule or regulation applicable to Sun or any Sun Subsidiary or the properties or assets of any of them; or result in the creation of any material lien, claim, security interest, encumbrance, charge, restriction or right of any third party of any kind whatsoever upon the properties or assets of Sun or any Sun Subsidiary; except that the approval of Sun Shareholders and the Banking Approvals must be obtained in order for Sun to consummate the Merger.3.3 No Legal Bar . Neither Sun nor any Sun Subsidiary is a party to, or subject to or bound by, any agreement, judgment, order, letter of understanding, writ, prohibition, injunction or decree of any Governmental Authority, or any Applicable Law which would prevent the execution of this Agreement by Sun, the delivery hereof to Omega or the consummation of the transactions contemplated hereby (except for such laws as require that the approval of Sun Shareholders and the Banking Approvals be obtained), and no Proceeding is pending against Sun or any Sun Subsidiary in which the validity of this Agreement, any of the transactions contemplated hereby or any action which has been taken by either of the Parties in connection herewith, or, in connection with any of the transactions contemplated hereby, is at issue.3.4 Consents and Approvals . Except for (a) the Banking Approvals, (b) the filing with the SEC and declaration of effectiveness by the SEC of the Registration Statement, (c) the approval of this Agreement by the requisite vote of the shareholders of Omega and Sun, (d) the approval of the listing of Omega Common Stock to be issued in the Merger on the NASDAQ National Market, (e) such filings and approvals as are required to be made or obtained under the securities or “Blue Sky” laws of various states in connection with the issuance of the shares of Omega Common Stock pursuant to this Agreement and (f) such Consents as may be set forth in Section 3.4 of the Sun Schedule, no Consents of any Governmental Authority or any other third Person are necessary in connection with the execution and delivery by Sun of this Agreement or the consummation by Sun of the Merger and the other transactions contemplated hereby, except where the failure to obtain such Consents would not reasonably be expected to have a Material Adverse Effect.3.5 Licenses, Franchises and Permits . Sun and each Sun Subsidiary holds all licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses, except where the failure to hold such licenses, franchises, permits and authorizations would not reasonably be expected to have a Material Adverse Effect. All of such licenses, franchises, permits and authorizations are in full force and effect and are transferable to a successor to Sun or any Sun Subsidiary in connection with or subsequent to the Closing of the transactions contemplated herein without any Consent, other than the Banking Approvals,
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subject to the legal right and authority of such successor to engage in the activities licensed, franchised, permitted or authorized thereby and except where the failure of such licenses, franchises, permits and authorizations to be in full force and effect and transferable to a successor to Sun or a Sun Subsidiary would not reasonably be expected to have a Material Adverse Effect. Neither Sun nor any Sun Subsidiary has received notice of any Proceeding for the suspension or revocation of any such license, franchise, permit, or authorization and no such Proceeding is pending or, to Sun’s knowledge, has been threatened by any Governmental Authority.3.6 Charter Documents . Sun has provided to Omega true, correct and complete copies of the Charter Documents of Sun and each Sun Subsidiary.3.7 Sun Financial Statements . Except as disclosed on Section 3.7 of the Sun Schedule, the consolidated statements of financial condition contained in the Sun Financial Statements fairly present the consolidated financial condition of Sun and the Sun Subsidiaries as of the respective dates set forth therein, and the related consolidated statements of operations, changes in shareholders’ equity and cash flows in the Sun Financial Statements fairly present the results of the consolidated operations, changes in shareholders’ equity and cash flows of Sun and the Sun Subsidiaries for the respective periods or as of the respective dates set forth therein, in each case in conformity with GAAP consistently applied, it being understood that Sun’s interim financial statements are not audited, not prepared with related notes and are subject to normal year-end adjustments.3.8 Absence of Certain Changes . Except as disclosed on Section 3.8 of the Sun Schedule and provided for or contemplated in this Agreement, since the Balance Sheet Date there has not been:(a) any material transaction by Sun or any Sun Subsidiary other than in the ordinary course of business and in conformity with past practice;(b) a change in the business, property, assets (including loan portfolios), liabilities (whether absolute, accrued, contingent or otherwise), operations, liquidity, income, condition or net worth of Sun or any Sun Subsidiary that has had, or would reasonably be expected to have, a Material Adverse Effect;(c) any damage, destruction or loss, whether or not covered by insurance, which has had or may have a Material Adverse Effect;(d) any acquisition or disposition by Sun or any Sun Subsidiary of any property or asset, whether real or personal, having a fair market value, singularly or in the aggregate, in an amount greater than $100,000, other than acquisitions or dispositions made in the ordinary course of business;(e) any mortgage, pledge or subjection to lien, charge or encumbrance of any kind on any of the respective properties or assets of Sun or any Sun Subsidiary, except to secure extensions of credit in the ordinary course of business and in conformity with past practice (pledges of and liens on assets to secure Federal Home Loan Bank or Federal Reserve Bank
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advances being deemed both in the ordinary course of business and consistent with past practice);
(f) any amendment, modification or termination of any contract or agreement (other than contracts or agreements related to loans made by SunBank) in excess of $75,000, relating to Sun or any Sun Subsidiary, or to which any Sun or any Sun Subsidiary is a party, which would reasonably be expected to have a Material Adverse Effect;(g) any increase in, or commitment to increase, the compensation payable or to become payable to any officer, director, employee or agent of Sun or any Sun Subsidiary, or any bonus payment, stock option award, restricted stock award or similar arrangement made to or with any of such officers, directors, employees or agents, other than routine increases made in the ordinary course of business and consistent with past practice and not exceeding the lesser of five percent (5%) per annum or $15,000 for any of them individually;(h) any incurring of, assumption of, or taking of, by Sun or any Sun Subsidiary, any property subject to, any liability in excess of $75,000, except for liabilities incurred or assumed or property taken subsequent to the Balance Sheet Date in the ordinary course of business and in conformity with past practice; or(i) any material alteration in the manner of keeping the books, accounts or records of Sun or any Sun Subsidiary, or in the accounting policies or practices therein reflected.3.9 Deposits . None of the SunBank deposits (consisting of certificates of deposit, savings accounts, NOW accounts, money market accounts and checking accounts), is a brokered deposit.3.10 Properties . Section 3.10 of the Sun Schedule contains a true and complete list of all material Sun Real Property. Except as adequately reserved against in the Sun Financial Statements or disposed of since the Balance Sheet Date in the ordinary course of business, Sun and each Sun Subsidiary has good and marketable title, free and clear of all material liens, encumbrances, charges, defaults, or equities of whatever character to all of the material properties and assets, real or personal, reflected in the Sun Financial Statements as being owned by Sun or any Sun Subsidiary as of the dates thereof. All buildings, and all fixtures, equipment, and other property and assets that are material to the business of Sun and the Sun Subsidiaries on a consolidated basis, held under leases or subleases by Sun or any Sun Subsidiary, are held under valid instruments enforceable in accordance with their respective terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other laws affecting the enforcement of creditors’ rights generally, or by equitable principles), and neither Sun nor any Sun Subsidiary nor, to Sun’s knowledge, any other party thereto is in material breach or material default thereunder.3.11 Intellectual Property . Section 3.11 of the Sun Schedule contains a true and complete list of all material Sun Intellectual Property. Either Sun or one of the Sun Subsidiaries own or have a valid license to use all Sun Intellectual Property, free and clear of all liens, encumbrances, royalty or other payment obligations (except for royalties or payments with respect to off-the-shelf Software at standard commercial rates). Sun Intellectual Property
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constitutes all of the Intellectual Property necessary to carry on the business of Sun and the Sun Subsidiaries as currently conducted, except where the failure to have such property would not reasonably be expected to have a Material Adverse Effect. The Sun Intellectual Property is valid and has not been cancelled, forfeited, expired or abandoned, and neither Sun nor any Sun Subsidiary has received any notice challenging the validity or enforceability of Sun Intellectual Property, other than as would not reasonably be expected to have a Material Adverse Effect. To Sun’s knowledge, the conduct of the business of Sun and the Sun Subsidiaries does not violate, misappropriate or infringe upon the Intellectual Property rights of any third Person. The consummation of the transactions contemplated by this Agreement will not result in the material loss or material impairment of the right of Sun or any Sun Subsidiary to own or use any of the Sun Intellectual Property, and the Surviving Company and its Subsidiaries will have substantially the same rights to own or use the Sun Intellectual Property following the consummation of such transactions as Sun and the Sun Subsidiaries had prior to the consummation of such transactions, except such rights as would not reasonably be expected to have a Material Adverse Effect.3.12 Condition of Fixed Assets and Equipment . Section 3.12 of the Sun Schedule contains a list of all material fixed assets and equipment used in the conduct of the business of Sun and the Sun Subsidiaries as of the Balance Sheet Date. Each such item of fixed assets and equipment having a net book value in excess of $75,000 is, to Sun’s knowledge, in good operating condition and repair, normal wear and tear excepted.3.13 Tax Matters .(a) All federal, state and local Tax Returns required to be filed by or on behalf of Sun or any Sun Subsidiary have been timely filed, or Sun or any applicable Sun Subsidiary has received an appropriate extension therefor. All Tax Returns filed are, and the information contained therein is, complete and accurate in all material respects. All Tax obligations reflected in such returns have been timely paid. Except as described in Section 3.13(a) of the Sun Schedule, neither Sun nor any Sun Subsidiary is currently the beneficiary of any extension of time within which to file any Tax Return. As of the date of this Agreement, there is no audit examination, deficiency, or refund litigation or matter in controversy with respect to any Taxes that might reasonably be expected to result in a determination materially adverse to Sun or any Sun Subsidiary except as fully reserved for in the Sun Financial Statements. All Taxes, interest, additions, and penalties due with respect to completed and settled examinations or concluded litigation have been paid;(b) Neither Sun nor any Sun Subsidiary has executed an extension or waiver of any statute of limitations on the assessment or collection of any Tax due that is currently in effect;(c) Adequate provision for any federal, state or local Taxes due or to become due by Sun or any Sun Subsidiary for all periods through and including December 31, 2003, has been made and is reflected on the December 31, 2003 financial statements included in Sun’s Report on Form 10-K for the period then ending, and has been and will continue to be made with respect to periods ending after December 31, 2003 on a basis consistent with its historic Tax accounting practices and GAAP;
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(d) Deferred taxes of Sun and each Sun Subsidiary have been and will be provided for in accordance with GAAP;(e) Neither the U.S. Internal Revenue Service nor any state, local or other taxing authority is now asserting or threatening to assert against Sun or any Sun Subsidiary any deficiency or claim for additional Taxes, or interest thereon or penalties in connection therewith. All income, payroll, withholding, property, excise, sales, use, franchise and transfer taxes, and all other Taxes, charges, fees, levies or other assessments, imposed upon Sun or any Sun Subsidiary by the United States or by any state, municipality, subdivision or instrumentality of the United States or by any other taxing authority, including all interest, penalties or additions attributable thereto, which are due and payable by Sun or any Sun Subsidiary, either have been paid in full or have been properly accrued and reflected in the Sun Financial Statements;(f) Except as set forth in Section 3.13(f) of the Sun Schedule, neither Sun nor any Sun Subsidiary has made any material payments, is obligated to make any material payments, or is a party to any agreement that under certain circumstances could obligate it to make any material payments that will not be deductible under Section 280G of the Code; and(g) Neither Sun nor any Sun Subsidiary (i) is a party to any Tax allocation or sharing agreement, (ii) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was Sun), or (iii) has any Tax liability for any Person (other than Sun or any Sun Subsidiary) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract, or otherwise.3.14 Litigation . There is no Proceeding pending against Sun or any Sun Subsidiary, or to Sun’s knowledge, threatened against or affecting Sun or any Sun Subsidiary or any of their assets, that may, if decided against Sun or any Sun Subsidiary, have a Material Adverse Effect.3.15 Environmental Matters . To Sun’s knowledge, the Sun Real Property is and has been in compliance with all Environmental Laws, and there are no conditions existing currently which would subject Sun or any Sun Subsidiary to damages, penalties, injunctive relief or cleanup costs under any Environmental Laws or assertions thereof, or which require cleanup, removal, remedial action or other response pursuant to Environmental Laws by Sun or any Sun Subsidiary. Neither Sun nor any Sun Subsidiary is a party to any Proceeding relating to Environmental Laws, nor are any of them (either in their own capacity or as trustee or fiduciary) required to clean up, remove or take remedial or other responsive action due to the disposal, depositing, discharge, leaking or other release of any hazardous substances or materials. None of the Sun Real Property is, nor is Sun or any Sun Subsidiary, subject to any judgment, decree, order or citation related to or arising out of any Environmental Laws. No Consents, permits or licenses are required under Environmental Laws relative to the Sun Real Property. Neither Sun nor any Sun Subsidiary has stored, deposited, treated, recycled, used or disposed of any materials (including, without limitation, asbestos) on, under or at the Sun Real Property (or tanks or other facilities thereon containing such materials), which materials, if known to be present on the Sun Real Property or present in soils or ground water, would require cleanup, removal or some other remedial action under the Environmental Laws.
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3.16 Insurance . Section 3.16 of the Sun Schedule includes a complete list of all insurance policies (other than title insurance policies or insurance policies of which any Sun Subsidiary is a beneficiary incident to the making of individual loans) held by Sun or any Sun Subsidiary. There are no outstanding unresolved claims for losses under any such insurance policies. Sun and the Sun Subsidiaries have paid all amounts due and payable under any insurance policies and guaranties applicable to them and their assets and operations; all such insurance policies and guaranties are in full force and effect; and Sun, the Sun Subsidiaries and all of the Sun Real Estate and other material properties of Sun and the Sun Subsidiaries are insured against fire, casualty, theft, loss, and such other events against which it is customary to insure, all such insurance policies being in amounts that are adequate and are consistent with past practices and experience.3.17 Books and Records . The minute books of Sun and each Sun Subsidiary contain, in all material respects, accurate records of and fairly reflect all actions taken at all meetings and accurately reflect all other corporate action of the shareholders, owners, the boards of directors or other similar governing body, and each committee thereof. The books and records of Sun and each Sun Subsidiary fairly and accurately reflect the transactions to which they are or have been parties or by which their respective properties are subject or bound, and such books and records have been properly kept and maintained.3.18 Capitalization of Sun and the Sun Subsidiaries .(a) The authorized capital stock of Sun consists of 50,000,000 shares of common stock, no par value, 10,000,000 shares of preferred stock, no par value, and no other class of equity security. As of the date of this Agreement, 7,678,867 shares of Sun Common Stock were issued, of which 7,678,867 were outstanding and 0 were held in treasury. As of the date of this Agreement, Sun has not issued any shares of its preferred stock. Section 3.18 of the Sun Schedule sets forth the number of shares of Sun Common Stock authorized for issuance under Sun’s 1998 Stock Incentive Plan, 1998 Independent Directors Stock Option Plan and 1998 Employee Stock Purchase Plan and the Sentry Plans, the number of unawarded shares under each such plan, the number of awarded but unvested shares issued under each such plan and the number of awarded shares that are currently vested under each such plan. All of the outstanding Sun Common Stock is validly issued, fully-paid and nonassessable and has not been issued in violation of any preemptive rights of any Sun Shareholder. There are 468,251 validly issued, outstanding Sun Stock Options, 468,251 shares of which are either currently exercisable or will become exercisable upon or prior to the Merger, and there are no other options, rights, warrants, scrip or similar rights to purchase shares of Sun Common Stock outstanding. Section 3.18 of the Sun Schedule contains a true and complete list of all outstanding stock options and awards under Sun’s 1998 Stock Incentive Plan, 1998 Independent Directors Stock Option Plan and 1998 Employee Stock Purchase Plan and the Sentry Plans, including the name of the optionee, the date of each grant, the expiration date of each grant, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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