EXHIBIT A
WARRANT AGREEMENT
THIS WARRANT AGREEMENT is made as of January 12, 2005, by and between
Xxxxxx Financial Corporation, a Pennsylvania corporation ("Xxxxxx") and SVB
Financial Services, Inc., a New Jersey corporation ("Somerset").
W I T N E S S E T H:
WHEREAS, Xxxxxx and Somerset have entered into an Agreement and Plan of
Merger, dated January 11, 2005 (the "Merger Agreement"); and
WHEREAS, in connection with Xxxxxx'x entry into the Merger Agreement and in
consideration of such entry, SOMERSET has agreed to issue to Xxxxxx, on the
terms and conditions set forth herein, a warrant entitling Xxxxxx to purchase up
to an aggregate of 1,008,775 shares of Somerset's common stock, $2.09 par value
(the "Common Stock");
NOW, THEREFORE, in consideration of the execution of the Merger Agreement
and the premises herein contained, and intending to be legally bound, Xxxxxx and
Somerset agree as follows:
1. Issuance of Warrant. Concurrently with the execution this Agreement,
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Somerset shall issue to Xxxxxx a warrant in the form attached as Exhibit A
hereto (the "Warrant", which term as used herein shall include any warrant or
warrants issued upon transfer or exchange of the original Warrant) to purchase
up to 1,008,775 shares of Common Stock, subject to adjustment as provided in
this Agreement and in the Warrant. The Warrant shall be exercisable at a
purchase price of $22.00 per share, subject to adjustment as provided in the
Warrant (the "Exercise Price"). So long as the Warrant is outstanding and
unexercised, Somerset shall at all times maintain and reserve, free from
preemptive rights, such number of authorized but unissued shares of Common Stock
as may be necessary so that the Warrant may be exercised, without any additional
authorization of Common Stock, after giving effect to all other options,
warrants, convertible securities and other rights to acquire shares of Common
Stock. Somerset represents and warrants that it has duly authorized the
execution and delivery of the Warrant and this Agreement and the issuance of
Common Stock upon exercise of the Warrant. Somerset covenants that the shares of
Common Stock issuable upon exercise of the Warrant shall be, when so issued,
duly authorized, validly issued, fully paid and nonassessable and subject to no
preemptive rights. The Warrant and the shares of Common Stock to be issued upon
exercise of the Warrant are hereinafter collectively referred to, from time to
time, as the "Securities." So long as the Warrant is owned by Xxxxxx, the
Warrant will in no event be exercised for more than that number of shares of
Common Stock equal to 1,008,775 (subject to adjustment as provided in the
Warrant) less the number of shares of Common Stock at the time owned by Xxxxxx.
2. Assignment, Transfer, or Exercise of Warrant. Xxxxxx will not sell,
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assign, transfer or exercise the Warrant, in whole or in part, without the prior
written consent of Somerset except upon or after the occurrence of any of the
following: (i) a breach of any representation, warranty, or covenant set forth
in the Merger Agreement by Somerset which would permit a
termination of the Merger Agreement by Xxxxxx pursuant to Section 8.1(b)(i)
thereof following: (A) the occurrence of an event described in subparagraphs
(iii) or (iv) below or (B) an offer or filing described in subparagraph (v)
below; (ii) the failure of Somerset's shareholders to approve the Merger
Agreement at a meeting called for such purpose if at the time of such meeting
there has been an announcement by any Person (other than Xxxxxx) of an offer or
proposal to acquire 25% or more of the Common Stock (before giving effect to any
exercise of the Warrant), or to acquire, merge or consolidate with Somerset, or
to purchase all or substantially all of Somerset's assets (including, without
limitation, any shares of any subsidiary of Somerset or all or substantially all
of any such subsidiary's assets) and, within ten business days after such
announcement, the Board of Directors of Somerset either fails to recommend
against acceptance of such offer by Somerset's shareholders or takes no position
with respect thereto; (iii) the acquisition by any Person of Beneficial
Ownership of 25% or more of the Common Stock (before giving effect to any
exercise of the Warrant); (iv) any Person (other than Xxxxxx) shall have
commenced a tender or exchange offer, or shall have filed an application with an
appropriate bank regulatory authority with respect to a publicly announced
offer, to purchase or acquire securities of Somerset such that, upon
consummation of such offer, such Person would have Beneficial Ownership of 25%
or more of the Common Stock (before giving effect to any exercise of the
Warrant) and, within 12 months from such offer or filing, such person
consummates an acquisition described in subparagraph (iii) above; (v) Somerset
shall have entered into an agreement, letter of intent, or other understanding
with any Person (other than Xxxxxx) providing for such Person (A) to acquire,
merge, consolidate or enter into a statutory share exchange with Somerset or to
purchase all or substantially all of Somerset's assets (including without
limitation any shares of any subsidiary of Somerset or all or substantially all
of any such subsidiary's assets), or (B) to negotiate with Somerset with respect
to any of the events or transactions mentioned in the preceding clause (A); or
(vi) termination, or attempted termination, of the Merger Agreement by Somerset
under Section 8.1(c)(iii) of the Merger Agreement. As used in this Paragraph 2,
the terms "Beneficial Ownership" and "Person" shall have the respective meanings
set forth in Paragraph 7(f). The Warrant shall terminate in accordance with its
terms.
3. Registration Rights. If, at any time within two years after the Warrant
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may be exercised or sold, Somerset shall receive a written request therefor from
Xxxxxx, Somerset shall prepare and file a shelf registration statement (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), covering the Warrant (provided that no such registration
shall be required with respect to the Warrant following the termination of the
Warrant in accordance with its terms) and/or the Common Stock issued or issuable
upon exercise of the Warrant (the "Securities"), and shall use its best efforts
to cause the Registration Statement to become effective and remain current for
such period not in excess of 180 days from the day such registration statement
first becomes effective as may be reasonably necessary to affect such sale or
other disposition. Without the prior written consent of Xxxxxx, neither Somerset
nor any other holder of securities of Somerset may include such securities in
the Registration Statement.
4. Duties of Somerset upon Registration. If and whenever Somerset is
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required by the provisions of Paragraph 3 of this Agreement to effect the
registration of any of the Securities under the Securities Act, Somerset shall:
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(a) prepare and file with the Securities and Exchange Commission (the
"SEC") such amendments to the Registration Statement and supplements to the
prospectus contained therein as may be necessary to keep the Registration
Statement effective and current;
(b) furnish to Xxxxxx and to the underwriters of the Securities being
registered such reasonable number of copies of the Registration Statement,
the preliminary prospectus and final prospectus contained therein, and such
other documents as Xxxxxx or such underwriters may reasonably request in
order to facilitate the public offering of the Securities;
(c) use its best efforts to register or qualify the Securities covered
by the Registration Statement under the state securities or blue sky laws
of such jurisdictions as Xxxxxx or such underwriters may reasonably
request;
(d) notify Xxxxxx, promptly after Somerset shall receive notice
thereof, of the time when the Registration Statement has become effective
or any supplement or amendment to any prospectus forming a part of the
Registration Statement has been filed;
(e) notify Xxxxxx promptly of any request by the SEC for the amending
or supplementing of the Registration Statement or the prospectus contained
therein, or for additional information;
(f) prepare and file with the SEC, promptly upon the request of
Xxxxxx, any amendments or supplements to the Registration Statement or the
prospectus contained therein which, in the opinion of counsel for Xxxxxx,
are required under the Securities Act or the rules and regulations
promulgated by the SEC thereunder in connection with the public offering of
the Securities;
(g) prepare and promptly file with the SEC such amendments of or
supplements to the Registration Statement or the prospectus contained
therein as may be necessary to correct any statements or omissions if, at
the time when a prospectus relating to such Securities is required to be
delivered under the Securities Act, any event shall have occurred as the
result of which such prospectus as then in effect would include an untrue
statement of a material fact or would omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(h) advise Xxxxxx, promptly after Somerset shall receive notice or
obtain knowledge of the issuance of any stop order by the SEC suspending
the effectiveness of the Registration Statement, or the initiation or
threatening of any proceeding for that purpose, and promptly use its best
efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued; and
(i) at the request of Xxxxxx, furnish on the date or dates provided
for in the underwriting agreement: (i) an opinion or opinions of counsel
for Somerset for the purposes of such registration, addressed to the
underwriters and to Xxxxxx, covering such matters as such underwriters and
Xxxxxx may reasonably request and as are customarily
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covered by issuer's counsel at that time; and (ii) a letter or letters from
the independent accountants for Somerset, addressed to the underwriters and
to Xxxxxx, covering such matters as such underwriters or Xxxxxx may
reasonably request, in which letters such accountants shall state (without
limiting the generality of the foregoing) that they are independent
accountants within the meaning of the Securities Act and that, in the
opinion of such accountants, the financial statements and other financial
data of Somerset included in the Registration Statement or any amendment or
supplement thereto comply in all material respects with the applicable
accounting requirements of the Securities Act.
5. Expenses of Registration. With respect to the registration requested
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pursuant to Paragraph 3 of this Agreement, (a) Somerset shall bear all
registration, filing and NASD fees, printing and engraving expenses, fees and
disbursements of its counsel and accountants and all legal fees and
disbursements and other expenses of Somerset to comply with state securities or
blue sky laws of any jurisdictions in which the Securities to be offered are to
be registered or qualified; and (b) Xxxxxx shall bear all fees and disbursements
of its counsel and accountants, underwriting discounts and commissions, transfer
taxes for Xxxxxx and any other expenses incurred by Xxxxxx.
6. Indemnification. In connection with any Registration Statement or any
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amendment or supplement thereto:
(a) Somerset shall indemnify and hold harmless Xxxxxx, any underwriter
(as defined in the Securities Act) for Xxxxxx, and each person, if any, who
controls Xxxxxx or such underwriter (within the meaning of the Securities
Act) from and against any and all loss, damage, liability, cost or expense
to which Xxxxxx or any such underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such loss,
damage, liability, cost or expense arises out of or is caused by any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any prospectus or preliminary prospectus contained
therein or any amendment or supplement thereto, or arises out of or is
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that Somerset will not be liable
in any such case to the extent that any such loss, damage, liability, cost
or expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with
information furnished by Xxxxxx, such underwriter or such controlling
person in writing specifically for use in the preparation thereof.
(b) Xxxxxx shall indemnify and hold harmless Somerset, any underwriter
(as defined in the Securities Act), and each person, if any, who controls
Somerset or such underwriter (within the meaning of the Securities Act)
from and against any and all loss, damage, liability, cost or expense to
which Somerset or any such underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such loss,
damage, liability, cost or expense arises out of or is caused by any untrue
or alleged untrue statement of any material fact contained in the
Registration Statement, any prospectus or preliminary prospectus contained
therein or any amendment or supplement thereto, or arises out of or is
based upon the omission or the alleged omission to state
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therein a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances in which they
were made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was so made in reliance upon and in conformity with
written information furnished by Xxxxxx specifically for use in the
preparation thereof.
(c) Promptly after receipt by any party which is entitled to be
indemnified, pursuant to the provisions of subparagraph (a) or (b) of this
Paragraph 6, of any claim in writing or of notice of the commencement of
any action involving the subject matter of the foregoing indemnity
provisions, such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party pursuant to the provisions of
subparagraph (a) or (b) of this Paragraph 6, promptly notify the
indemnifying party of the receipt of such claim or notice of the
commencement of such action, but the omission to so notify the indemnifying
party will not relieve it from any liability which it may otherwise have to
any indemnified party hereunder. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to
participate in and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; provided, however, that if
the defendants in any action include both the indemnified party or parties
and the indemnifying party and there is a conflict of interest which would
prevent counsel for the indemnifying party from also representing any
indemnified party, such indemnified party shall have the right to select
separate counsel to participate in the defense of such indemnified party.
After notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party, pursuant to the provisions of
subparagraph (a) or (b) of this Paragraph 6, for any legal or other
expenses subsequently incurred by such indemnified party in connection with
the defense thereof, other than reasonable costs of investigation, unless
(i) such indemnified party shall have employed separate counsel in
accordance with the provisions of the preceding sentence, (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable
time after the notice of the commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party.
(d) If recovery is not available under the foregoing indemnification
provisions, for any reason other than as specified therein, any party
entitled to indemnification by the terms thereof shall be entitled to
obtain contribution with respect to its liabilities and expenses, except to
the extent that contribution is not permitted under Section 11(f) of the
Securities Act. In determining the amount of contribution to which the
respective parties are entitled there shall be considered the parties'
relative knowledge and access to information concerning the matter with
respect to which the claim was asserted, the opportunity to correct and/or
prevent any statement or omission, and any other equitable considerations
appropriate under the circumstances. Xxxxxx and Somerset agree that it
would not be equitable if the amount of such contribution were determined
by pro rata or
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per capita allocation even if the underwriters and Xxxxxx as a group were
considered a single entity for such purpose.
7. Redemption and Repurchase Rights.
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(a) From and after the date on which any event described in Paragraph
2 of this Agreement occurs, the Holder as defined in the Warrant (which
shall include a former Holder), who has exercised the Warrant in whole or
in part shall have the right to require Somerset to redeem some or all of
the shares of Common Stock for which the Warrant was exercised at a
redemption price per share (the "Redemption Price") equal to the highest
of: (i) 110% of the Exercise Price, (ii) the highest price paid or agreed
to be paid for any share of Common Stock by an Acquiring Person (as defined
below) during the one year period immediately preceding the date of
redemption, and (iii) in the event of a sale of all or substantially all of
Somerset's assets or all or substantially all of a subsidiary of Somerset's
assets: (x) the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Somerset as determined by a
recognized investment banking firm selected by such Holder, divided by (y)
the number of shares of Common Stock then outstanding. If the price paid
consists in whole or in part of securities or assets other than cash, the
value of such securities or assets shall be their then current market value
as determined by a recognized investment banking firm selected by the
Holder and reasonably acceptable to Somerset.
(b) From and after the date on which any event described in Paragraph
2 of this Agreement occurs, the Holder as defined in the Warrant (which
shall include a former Holder), shall have the right to require Somerset to
repurchase all or any portion of the Warrant at a price (the "Warrant
Repurchase Price") equal to the product obtained by multiplying: (i) the
number of shares of Common Stock represented by the portion of the Warrant
that the Holder is requiring Somerset to repurchase, times (ii) the excess
of the Redemption Price over the Exercise Price.
(c) The Holder's right, pursuant to this Paragraph 7, to require
Somerset to repurchase a portion or all of the Warrant, and/or to require
Somerset to redeem some or all of the shares of Common Stock for which the
Warrant was exercised, shall expire on the close of business on the 60th
day following the occurrence of any event described in Paragraph 2.
(d) The Holder may exercise its right, pursuant to this Paragraph 7,
to require Somerset to repurchase all or a portion of the Warrant, and/or
to require Somerset to redeem some or all of the shares of Common Stock for
which the Warrant was exercised, by surrendering for such purpose to
Somerset, at its principal office within the time period specified in the
preceding subparagraph, the Warrant and/or a certificate or certificates
representing the number of shares to be redeemed accompanied by a written
notice stating that it elects to require Somerset to repurchase the Warrant
or a portion thereof and/or to redeem all or a specified number of such
shares in accordance with the provisions of this Paragraph 7. As promptly
as practicable, and in any event within five business days after the
surrender of the Warrant and/or such certificates and the receipt of such
notice relating thereto, Somerset shall deliver or cause to be delivered to
the Holder:
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(i) the applicable Redemption Price (in immediately available funds) for
the shares of Common Stock which it is not then prohibited under applicable
law or regulation from redeeming, and/or (ii) the applicable Warrant
Repurchase Price, and/or (iii) if the Holder has given Somerset notice that
less than the whole Warrant is to be repurchased and/or less than the full
number of shares of Common Stock evidenced by the surrendered certificate
or certificates are to be redeemed, a new certificate or certificates, of
like tenor, for the number of shares of Common Stock evidenced by such
surrendered certificate or certificates less the number shares of Common
Stock redeemed and/or a new Warrant reflecting the fact that only a portion
of the Warrant was repurchased.
(e) To the extent that Somerset is prohibited under applicable law or
regulation, or as a result of administrative or judicial action, from
repurchasing the Warrant and/or redeeming the Common Stock as to which the
Holder has given notice of repurchase and/or redemption, Somerset shall
immediately so notify the Holder and thereafter deliver or cause to be
delivered, from time to time to the Holder, the portion of the Warrant
Repurchase Price and/or the Redemption Price which it is no longer
prohibited from delivering, within five business days after the date on
which Somerset is no longer so prohibited; provided, however, that to the
extent that Somerset is at the time and after the expiration of 25 months,
so prohibited from delivering the Warrant Repurchase Price and/or the
Redemption Price, in full (and Somerset hereby undertakes to use its best
efforts to obtain all required regulatory and legal approvals as promptly
as practicable), Somerset shall deliver to the Holder a new Warrant
(expiring one year after delivery) evidencing the right of the Holder to
purchase that number of shares of Common Stock representing the portion of
the Warrant which Somerset is then so prohibited from repurchasing, and/or
Somerset shall deliver to the Holder a certificate for the shares of Common
Stock which Somerset is then so prohibited from redeeming, and Somerset
shall have no further obligation to repurchase such new Warrant or redeem
such Common Stock; and provided further, that upon receipt of such notice
and until five days thereafter the Holder may revoke its notice of
repurchase of the Warrant and/or redemption of Common Stock by written
notice to Somerset at its principal office stating that the Holder elects
to revoke its election to exercise its right to require Somerset to
repurchase the Warrant and/or redeem the Common Stock, whereupon Somerset
will promptly redeliver to the Holder the Warrant and/or the certificates
representing shares of Common Stock surrendered to Somerset for purposes of
such repurchase and/or redemption, and Somerset shall have no further
obligation to repurchase such Warrant and/or redeem such Common Stock.
(f) As used in this Agreement the following terms have the meanings
indicated:
(1) "Acquiring Person" shall mean any "Person" (hereinafter
defined) who or which is the "Beneficial Owner" (hereinafter defined)
of 25% or more of the Common Stock;
(2) A "Person" shall mean any individual, firm, corporation or
other entity and shall also include any syndicate or group deemed to
be a "Person" by operation of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended;
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(3) A Person shall be a "Beneficial Owner", and shall have
"Beneficial Ownership," of all securities:
(i) which such Person or any of its Affiliates (as
hereinafter defined) beneficially owns, directly or indirectly;
and
(ii) which such Person or any of its Affiliates or
Associates has (1) the right to acquire (whether such right is
exercisable immediately or only after the passage of time or
otherwise) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (2) the right to
vote pursuant to any proxy, power of attorney, voting trust,
agreement, arrangement or understanding; and
(4) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the regulations
promulgated by the SEC under the Securities and Exchange Act of 1934,
as amended.
8. Remedies. Without limiting the foregoing or any remedies available to
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Xxxxxx, it is specifically acknowledged that Xxxxxx would not have an adequate
remedy at law for any breach of this Warrant Agreement and shall be entitled to
specific performance of Somerset's obligations under, and injunctive relief
against any actual or threatened violation of the obligations of any Person
subject to, this Agreement.
9. Miscellaneous.
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(a) The representations, warranties, and covenants of Somerset set
forth in the Merger Agreement are hereby incorporated by reference in and
made a part of this Agreement, as if set forth in full herein.
(b) This Agreement, the Warrant and the Merger Agreement set forth the
entire understanding and agreement of the parties hereto and supersede any
and all prior agreements, arrangements and understandings, whether written
or oral, relating to the subject matter hereof and thereof. No amendment,
supplement, modification, waiver, or termination of this Agreement shall be
valid and binding unless executed in writing by both parties.
(c) This Agreement shall be deemed to have been made in, and shall be
governed by and interpreted in accordance with the substantive laws of, the
Commonwealth of Pennsylvania.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers as of the day and year first above
written.
XXXXXX FINANCIAL CORPORATION
By: /s/ R. Xxxxx Xxxxx, Jr.
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R. Xxxxx Xxxxx, Jr.
President and Chief Operating Officer
Attest: /s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx, Secretary
SVB FINANCIAL SERVICES, INC.
By: /s/ Xxxxxx Xxxxxxxx
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Xxxxxx Xxxxxxxx
President and Chief Executive Officer
Attest: /s/ Xxxxxxxxx X. Xxxxxxx
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Xxxxxxxxx X. Xxxxxxx
Secretary
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