HOUSE BILL NO 480
AN ACT TO AUTHORIZE AND APPROVE THE STATE'S PROPOSED SALE OF ITS PREFFERED AND COMMON STOCK IN THE FARMERS BANK OF THE STATE OF DELAWARE, AND TO PROVIDE FOR THE USE OF THE FUNDS FROM SUCH SALE AND TO AMEND TITLE 5 OF THE DELAWARE CODE TO PROVIDE FOR THE CONSIDERATION FOR SHARES IN BANK MERGERS AND TO PROVIDE FOR THE ACQUISITION BY OUT-OF-STATE BANK HOLDING COMPANIES OF STOCK, ASSETS AND INTERESTS IN BANKS LOCATED IN DELAWARE TO WHICH THE STATE HAS PROVIDED FINANCIAL ASSISTANCE RESULTING IN THE STATE OBTAINING STOCK IN THE BANK.
WHEREAS, the State has owned a substantial portion of the outstanding capital stock of the Farmers Bank of the State of Delaware (the "Farmers Bank") since 1808; and
WHEREAS, the State, pursuant to authorization by the 128th General Assembly and the Governor of the State, entered into an agreement dated May 12, 1976 (the "Assistance Agreement"), with the Federal Deposit Insurance Corporation (the "FDIC") and the Farmers Bank to provide financial asistance from the State and the FDIC to Farmers Bank pursuant to which the State acquired 2,000,000 shares of the 6% Voting Cumulative Preferred Stock, par value $10 per share, of Farmers Bank (the "Preferred Stock"); and
WHEREAS, such financial assistance was deemed necessary to protect the welfare, good order and financial well being of the State and the citizens thereof and such assistance has continued to the present at great cost to the public treasury and the citizens of this State; and
WHEREAS, the State presently owns 478,800 shares of the Common Stock, par value $5 per share (the "Common Stock"), and 1,710,000 shares of the Preferred Stock (collectively, the "State Shares"); and
WHEREAS, the 128th General Assembly of the State created the Farmers Bank Commission (the "Commission") to be the trustee for and to exercise the voting power of the State Shares on behalf of the State; and
WHEREAS, the Commission solicited and received proposals to purchase the State Shares, and has carefully considered and reviewed the proposals with the advice of its investment banker and legal counsel; and
WHEREAS, the Commission on behalf of the State entered into a Plan of Acquisition and Agreement on August 6, 1981 (the "Plan"), among the Commission, Farmers Bank and The Girard Company, Philadelphia, Pennsylvania ("Girard"), and to which is attached, as Appendix A, an Agreement of Merger (collectively, the "Acquisition Agreements") providing for the merger of a subsidiary of Girard into Farmers Bank pursuant to which the State and each other holder of Farmers Bank stock will receive $23.25 for each share of Common Stock and $7.85 plus accrued and unpaid dividends for each share of its Preferred Stock held by such stockholder; and
WHEREAS, the Commission has submitted a report (the "Report") to this General Assembly and the Governor recommending the adoption and approval by the Governor and this General Assembly of the Acquisition Agreements; and
WHEREAS, the sale of the State's interest in the Bank will limit future such financial Jeopardy to the public and will recover for the State treasury and the citizens of this State the greatest possible portion of the funds expended in financial assistance to the Farmers Bank; and
WHEREAS, current Federal law prohibits an acquisition of a bank in one state by an out-of-state bank holding company or a subsidiary thereof unless the laws of such state specifically permit such a transaction; and
WHEREAS, the Commission has proposed legislation to the General Assembly with respect to the Acquisition Agreements and the present requirements of Federal law, which legislation may also make Tess costly any such aid to distressed banks which shall in the future be desirable; and
WHEREAS, Farmers Bank on August 3, 1981 pursuant to its Certificate of Incorporation redeemed 90,000 shares of the State's Preferred Stock, the proceeds of which have been set aside to be treated together with the proceeds to the State from the Acquisition Agreements; and
WHEREAS, this General Assembly has concluded that adoption, approval and ratification of the Acquisition Agreements and enactment of this legislation amending the laws of the State is appropriate, reasonable, and in the best interests of the citizens of the State.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE (Two-thirds of all members elected to each House thereof concurring therein):
Section 1. A. The execution by the Farmers Bank Commission (the "Commission") on behalf of the State on August 6, 1981 of the Plan of Acquisition and Agreement among the Commission, The Girard Company, and the Farmers Bank of the State of Delaware ("Farmers Bank") to which is attached on Appendix A an Agreement of Merger (collectively, the "Acquisition Agreements") is hereby ratified, adopted, and approved by the General Assembly in all respects.
B. All other acts, decisions, and resolutions of the Commisson in connection with and related to the Agreements and the Commission's actions with respect to the exchange under the Acquisition Agreements of the 478,800 shares of the Common Stock, par value $5 per share, of Farmers Bank and 1,710,000 shares of the 6% voting Cumulative Preferred Stock, par value $10 per share, of Farmers Bank (collectively, the "State Shares") and all other actions of the Commission in connection with the sale of the State Shares are hereby ratified, adopted, and approved by the General Assembly in all respects.
C. The Commission, as trustees for the State Shares on behalf of the State, is hereby authorized and directed to do all things necessary to carry forward the intent and purpose of the Acquisition Agreements in accordance with their terms, and, on the effective date of the merger provided for in the Acquisition Agreements to surrender in exchange for the amount of cash to be received therefor under the Acquisition Agreements the certificates representing the State Shares, duly executed in blank by the custodian of the State Shares, and to fulfill such other conditions and obligations as may be provided for in the Acquisition Agreements. The Commission is authorized, in its discretion, prior to the effective date of the merger provided for in the Acquisition Agreements to agree to a purchase, redemption or other acquisition by Farmers Bank of the Preferred Stock owned by the State on the terms contained in the Acquisition Agreements.
Section 2. Amend Title 29 of the Delaware Code by adding a new section to be designated §2716 to read as follows:
"§2716. Proceeds of Sale of Farmers Bank Stock
The State Treasurer shall deposit all proceeds from the State owned preferred or common stock of Farmers Bank of the State of Delaware which have been paid or are payable to the State as well as any dividents on such stock, or interest on such proceeds, paid or payable to the State in connection with such proceeds in a special fund or funds. The money in any such special fund may (a) be Invested, or otherwise applied, to meet debt service on outstanding obligations of the State to which the State has pledged its faith and credit; or (b) be applied to the cost of capital projects authorized by authorization acts in lieu of the issuance of obligations authorized thereby; and (c) costs incidental to either of the foregoing: provided, however, that the portion of the proceeds of the sale which represents the proceeds from the sale of common stock held in the Public School Fund shall be applied exclusively to the support of public schools by investing or otherwise applying the proceeds to meet debt service or outstanding obligations of the State issued to finance public school projects to which the State has pledged its faith and credit or by applying the proceeds to the cost of capital projects authorized by authorization acts for public school purposes in lieu of the issuance of obligations authorized thereby. The issuing officers as defined in §7401 of Title 29 shall determine the manner in which the proceeds shall be applied consistent with the provisions of this Section."
Section 3. Amend Title 5 of the Delaware Code by changing the heading of Chapter 8 to read "Acquisition of Stock and Assets of, and Interest in, Banks Located in the State of Delaware by Out-Of-State Bank Holding Companies" and by redesignating the existing Chapter 8 as Subchapter 1 of Chapter 8 entitled "Acquisition of Stock in New Banks in Delaware."
Section 4. Amend new Subchapter 1 of Chapter 8 of Title 5 of the Delaware Code by deleting the word "chapter" wherever such word appears in said new subchapter and substituting in lieu thereof the word "subchapter."
Section 5. Amend Section 803 of Title 5 of the Delaware Code by deleting the word "herein" in the first sentence of said section and substituting in lieu thereof the words "in this chapter."
Section 6. Amend Chapter 8 of Title 5 of the Delaware Code by adding a new subchapter to said chapter as follows:
"SUBCHAPTER II. Acquisition of Stock and Assets of, and Interests in, Banks to Which the State has Provided Financial Assistance and Obtained an Ownership Interest.
As used in this subchapter:
(a) 'State assisted bank' means a bank which the State has, in order to relieve financial distress determined to exist by the State Bank Commissioner, assisted by means of a grant, loan, asset purchase or deposit made pursuant to a plan or agreement if (i) the State owns an equity interest in the bank which the State obtained pursuant to the plan or agreement and (ii) such equity interest together with any equity interest previously obtained and still held by the State aggregates not less than 25% of the voting rights of all holders of stock or other voting rights.
(b) 'Bank' means a bank or trust company existing under the laws of the State of Delaware, or a national banking association existing under the National Bank Act, as amended (12 U.S.C. 521, et seq.), whose main office is in this State.
(c) 'Out-of-state bank holding company' means an out-of-state bank holding company as defined in 5801(b) of this Title.
(d) 'Subsidiary' means a subsidiary as defined in §801(f) of this Title.
§822. Purpose and Findings
The purpose of this subchapter is to permit the acquistion by an out-of-state bank holding company, or a subsidiary thereof, of any voting shares of, interest in, or all or substantially all of the assets of, a State assisted bank, notwithstanding any other provision of State law. The General Assembly of the State of Delaware hereby finds that it is in the interest of the State that the State have the ability to divest its interest in a State assisted bank to an out-of-state bank holding company, and that such ability does not exist unless legislation of the State, as presently required under 53(d) of the Federal Bank Holding Company Act of 1958, as amended (12 U.S.C. §1842(d)), permits out-of-state bank holding companies, or their subsidiaries, to acquire a State assisted bank.
§823. Authorized Acquisitions
Pursuant to the present requirement of §1842(d) of Title 12 of the United States Code and notwithstanding any other provision of State law, any out-of-state bank holding company, or any subsidiary thereof, may acquire pursuant to this subchapter, and it and any successor thereto by merger, consolidation or other corporate reorganization may retain and hold, voting shares of, interest in, or all or substantially all of the assets of a State assisted bank and any successor thereto. Such acquisition, retention and holding of voting shares of, interest in, or all or substantially all of the assets of a State assisted bank shall not be construed to limit in any manner the franchise powers or privileges of such bank to conduct its business; provided, however, that this section does not authorize: (a) The establishment in this State of branch offices of a banking subsidiary of an out-of-state bank holding company making an acquisition pursuant to this section if such banking subsidiary does not have its principal place of business in this State; or (b) The acquisition by a bank acquired pursuant to this section of a bank engaged in business in this State (other than one organized under subchapter I of this chapter) by merger, consolidation or purchase of all or substantially all of its assets, or more than 10% of its voting shares. The limitation in (a) of this subsection applies at any time when the combined effect of Federal and State law is to prohibit such establishment in this State of branch offices by a bank controlled by an out-of-state bank holding company and the limitation In (b) of this subsection applies at any time when the combined effect of Federal and State law is to prohibit the acquisition in the manner described in (b) above of a bank engaged in business in this State by a bank controlled by an out-of-state bank holding company.
§824. Application for Approval of Acquisition
(a) An out-of-state bank holding company or subsidiary thereof proposing an acquisition pursuant to §823 of this subchapter shall file an application with the Commissioner for approval to make such acquisition either pursuant to §751 or §§781 et seq. of Title 5, as the case may be, if applicable.
(b) If not application under §751 or §§781 et seq. of Title 5 is required for such acquisition, then an application under this subsection shall be 711ed-with the Commissioner for his consent to the acquisition. Such application shall contain such information as the Commissioner may require by regulation. Such application shall designate a resident of this State as applicant's agent for the service of any paper, notice or legal process upon the applicant in connection with matters arising out of this subchapter. The Commissioner may shorten or modify the normal application procedures required for any acquisition authorized by this subchapter where the circumstances involving the State assisted bank indicate that delay in approviong the acquisition may be detrimental to such bank.
(c) In determining whether to approve an acquisition by an out-of-state bank holding company or any subsidiary thereof pursuant to this subchapter, the Commissioner shall consider:
(1) The financial and managerial resources of the out-of-state bank holding company or its subsidiary;
(2) The future prospects of the out-of-state bank holding company and the State assisted bank or its subsidiary whose assets, interest in or shares it will acquire;
(3) The financial history of the out-of-state bank holding company or its subsidiary;
(4) Whether such acquisition or holding may result in undue concentration of resources or substantial lessening of competition in this state;
(5) The convenience and needs of the public of this State; and
(6) Whether such acquisition or holding will strengthen the financial condition of the State assisted bank.
§825. Required Reports
An out-of-state bank holding company that directly or indirectly through any subsidiary acquires, retains and holds voting stock of a bank pursuant to this subchapter shall file with the Commissioner either: (a) copies of all regular and periodic reports which such bank holding company is required to file under §§13 or 15 (d) of the Securities Exchange Act of 1934, as amended, but excluding any protions not available to the public, or (b) in the case of a bank holding company which is not required to file such reports, such periodic reports as the Commissioner may require by regulation.
§827. Rules, Regulations and Orders
The Commissioner may adopt rules and regulations and issue orders under this chapter for the following purposes:
(a) To prescribe information or forms required in connection with an application pursuant to §824;
(b) To establish procedures in connection with approvals pursuant to §824 and the filing of required reports pursuant to §825.
If any provision of this Act or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions or applications of the Act which can be given effect without the invalid provision or application, and to that end the provisions of this Act are declared to be severable."
Section 7. Amend §784(a)(3) of Title 5 of the Delaware Code by inserting at the end thereof prior to the semicolon the following:
"and, if any shares of any of the merging banks are not to be converted solely into shares or other securities of the resulting state bank, the cash, property, rights or securities of any other bank or corporation which the holders of such shares are to receive in exchange for, or upon conversion of such shares and the surrender of the certificates evidencing them, which cash, property, rights or securities of any other bank or corporation may be in addition to or in lieu of shares of other securities of the resulting state bank and such other details or provisions as are deemed desirable, including, without limiting the generality of the foregoing, a provision for the payment of cash in lieu of the issuance or recognition of fractional shares, interest or rights, or for any other arrangement with respect thereto consistent with the provisions of §155 of Title 8."
Section 8. This Act shall become effective upon its adoption.
Approved October 9, 1981.