The SEC allows Farmers to incorporate certain information into this document by reference to other information that has been filed with the
SEC. This means that Farmers can disclose important business and financial information to you by referring you to another document filed separately with the SEC. The information that Farmers incorporates by reference is deemed to be part of this
proxy statement/prospectus, except for any information that is superseded by information in this document. The documents that are incorporated by reference contain important information about Farmers and you should read this document together with
any other documents incorporated by reference in this document.
This document incorporates by reference the following documents that have previously been filed with the SEC by Farmers (File
No. 001-35296):
In addition, Farmers is incorporating by reference
any documents it may file under Section 13 (a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, after the date of this document and prior to the date of each companys special meeting of shareholders.
Farmers files annual, quarterly and special reports, proxy statements and other business and
financial information with the SEC. You may obtain the information incorporated by reference and any other materials Farmers files with the SEC without charge by following the instructions in the section entitled
WHERE YOU CAN FIND MORE
INFORMATION
in the forepart of this document.
Farmers has not authorized anyone to give any information or make any
representation about the Merger or its company that is different from, or in addition to, that contained in this document or in any of the materials that have been incorporated into this document. Therefore, if anyone does give you information of
this sort, you should not rely on it. If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this document or the solicitation of proxies is unlawful, or if you
are a person to whom it is unlawful to direct these types of activities, then the offer presented in this document does not extend to you. The information contained in this document speaks only as of the date of this document unless the information
specifically indicates that another date applies.
1701.85 Dissenting shareholders compliance with section fair cash value of shares.
(A) (1) A shareholder of a domestic corporation is entitled to relief as a dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this section.
(2) If the proposal must be submitted to the
shareholders of the corporation involved, the dissenting shareholder shall be a record holder of the shares of the corporation as to which the dissenting shareholder seeks relief as of the date fixed for the determination of shareholders entitled to
notice of a meeting of the shareholders at which the proposal is to be submitted, and such shares shall not have been voted in favor of the proposal.
(3) Not later than 20 days before the date of the meeting at which the proposal will be submitted to the shareholders, the corporation may
notify the corporations shareholders that relief under this section is available. The notice shall include or be accompanied by all of the following:
(b) A statement that the proposal can give rise to rights under this section if the proposal is approved by the required vote of the
shareholders;
(c) A statement that the shareholder will be eligible as a dissenting shareholder under this section only if the
shareholder delivers to the corporation a written demand with the information provided for in division (A)(4) of this section before the vote on the proposal will be taken at the meeting of the shareholders and the shareholder does not vote in favor
of the proposal.
(4) If the corporation delivers notice to its shareholders as provided in division (A)(3) of this section, a shareholder
electing to be eligible as a dissenting shareholder under this section shall deliver to the corporation before the vote on the proposal is taken a written demand for payment of the fair cash value of the shares as to which the shareholder seeks
relief. The demand for payment shall include the shareholders address, the number and class of such shares, and the amount claimed by the shareholder as the fair cash value of the shares.
(5) If the corporation does not notify the corporations shareholders pursuant to division (A)(3) of this section, not later than ten
days after the date on which the vote on the proposal was taken at the meeting of the shareholders, the dissenting shareholder shall deliver to the corporation a written demand for payment to the dissenting shareholder of the fair cash value of the
shares as to which the dissenting shareholder seeks relief, which demand shall state the dissenting shareholders address, the number and class of such shares, and the amount claimed by the dissenting shareholder as the fair cash value of the
shares.
(6) If a signatory, designated and approved by the dissenting shareholder, executes the demand, then at any time after receiving
the demand, the corporation may make a written request that the dissenting shareholder provide evidence of the signatorys authority. The shareholder shall provide the evidence within a reasonable time but not sooner than 20 days after the
dissenting shareholder has received the corporations written request for evidence.
(7) The dissenting shareholder entitled to
relief under division (A)(3) of section 1701.84 of the Revised Code in the case of a merger pursuant to section 1701.80 of the Revised Code and a dissenting shareholder entitled to relief under division (A) (5) of section 1701.84 of the
Revised Code in the case of a merger pursuant
to section 1701.801 of the Revised Code shall be a record holder of the shares of the corporation as to which the dissenting shareholder seeks relief as of the date on which the agreement of
merger was adopted by the directors of that corporation. Within 20 days after the dissenting shareholder has been sent the notice provided in section 1701.80 or 1701.801 of the Revised Code, the dissenting shareholder shall deliver to the
corporation a written demand for payment with the same information as that provided for in division (A)(4) of this section.
(8) In the
case of a merger or consolidation, a demand served on the constituent corporation involved constitutes service on the surviving or the new entity, whether the demand is served before, on, or after the effective date of the merger or consolidation.
In the case of a conversion, a demand served on the converting corporation constitutes service on the converted entity, whether the demand is served before, on, or after the effective date of the conversion.
(9) If the corporation sends to the dissenting shareholder, at the address specified in the dissenting shareholders demand, a request
for the certificates representing the shares as to which the dissenting shareholder seeks relief, the dissenting shareholder, within 15 days from the date of the sending of such request, shall deliver to the corporation the certificates requested so
that the corporation may endorse on them a legend to the effect that demand for the fair cash value of such shares has been made. The corporation promptly shall return the endorsed certificates to the dissenting shareholder. A dissenting
shareholders failure to deliver the certificates terminates the dissenting shareholders rights as a dissenting shareholder, at the option of the corporation, exercised by written notice sent to the dissenting shareholder within 20 days
after the lapse of the
15-day
period, unless a court for good cause shown otherwise directs. If shares represented by a certificate on which such a legend has been endorsed are transferred, each new
certificate issued for them shall bear a similar legend, together with the name of the original dissenting holder of the shares. Upon receiving a demand for payment from a dissenting shareholder who is the record holder of uncertificated securities,
the corporation shall make an appropriate notation of the demand for payment in its shareholder records. If uncertificated shares for which payment has been demanded are to be transferred, any new certificate issued for the shares shall bear the
legend required for certificated securities as provided in this paragraph. A transferee of the shares so endorsed, or of uncertificated securities where such notation has been made, acquires only the rights in the corporation as the original
dissenting holder of such shares had immediately after the service of a demand for payment of the fair cash value of the shares. A request under this paragraph by the corporation is not an admission by the corporation that the shareholder is
entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to an agreement on the fair cash value per
share of the shares as to which the dissenting shareholder seeks relief, the dissenting shareholder or the corporation, which in case of a merger or consolidation may be the surviving or new entity, or in the case of a conversion may be the
converted entity, within three months after the service of the demand by the dissenting shareholder, may file a complaint in the court of common pleas of the county in which the principal office of the corporation that issued the shares is located
or was located when the proposal was adopted by the shareholders of the corporation, or, if the proposal was not required to be submitted to the shareholders, was approved by the directors. Other dissenting shareholders, within that three-month
period, may join as plaintiffs or may be joined as defendants in any such proceeding, and any two or more such proceedings may be consolidated. The complaint shall contain a brief statement of the facts, including the vote and the facts entitling
the dissenting shareholder to the relief demanded. No answer to a complaint is required. Upon the filing of a complaint, the court, on motion of the petitioner, shall enter an order fixing a date for a hearing on the complaint and requiring that a
copy of the complaint and a notice of the filing and of the date for hearing be given to the respondent or defendant in the manner in which summons is required to be served or substituted service is required to be made in other cases. On the day
fixed for the hearing on the complaint or any adjournment of it, the court shall determine from the complaint and from evidence submitted by either party whether the dissenting shareholder is entitled to be paid the fair cash value of any shares
and, if so, the number and class of such shares. If the court finds that the dissenting shareholder is so entitled, the court may appoint one or more persons as appraisers to receive evidence and to recommend a decision on the amount of the fair
cash value. The appraisers have power and authority specified in the order of their appointment. The court thereupon shall make a finding as to the fair
cash value of a share and shall render judgment against the corporation for the payment of it, with interest at a rate and from a date as the court considers equitable. The costs of the
proceeding, including reasonable compensation to the appraisers to be fixed by the court, shall be assessed or apportioned as the court considers equitable. The proceeding is a special proceeding and final orders in it may be vacated, modified, or
reversed on appeal pursuant to the Rules of Appellate Procedure and, to the extent not in conflict with those rules, Chapter 2505 of the Revised Code. If, during the pendency of any proceeding instituted under this section, a suit or proceeding is
or has been instituted to enjoin or otherwise to prevent the carrying out of the action as to which the shareholder has dissented, the proceeding instituted under this section shall be stayed until the final determination of the other suit or
proceeding. Unless any provision in division (D) of this section is applicable, the fair cash value of the shares that is agreed upon by the parties or fixed under this section shall be paid within 30 days after the date of final determination
of such value under this division, the effective date of the amendment to the articles, or the consummation of the other action involved, whichever occurs last. Upon the occurrence of the last such event, payment shall be made immediately to a
holder of uncertificated securities entitled to payment. In the case of holders of shares represented by certificates, payment shall be made only upon and simultaneously with the surrender to the corporation of the certificates representing the
shares for which the payment is made.
(C) (1) If the proposal was required to be submitted to the shareholders of the corporation, fair cash value
as to those shareholders shall be determined as of the day prior to the day on which the vote by the shareholders was taken and, in the case of a merger pursuant to section 1701.80 or 1701.801 of the Revised Code, fair cash value as to shareholders
of a constituent subsidiary corporation shall be determined as of the day before the adoption of the agreement of merger by the directors of the particular subsidiary corporation. The fair cash value of a share for the purposes of this section is
the amount that a willing seller who is under no compulsion to sell would be willing to accept and that a willing buyer who is under no compulsion to purchase would be willing to pay, but in no event shall the fair cash value of a share exceed the
amount specified in the demand of the particular shareholder. In computing fair cash value, both of the following shall be excluded:
(a)
Any appreciation or depreciation in market value resulting from the proposal submitted to the directors or to the shareholders;
(b) Any
premium associated with control of the corporation, or any discount for lack of marketability or minority status.
(2) For the purposes of
this section, the fair cash value of a share that was listed on a national securities exchange at any of the following times shall be the closing sale price on the national securities exchange as of the applicable date provided in division (C)(1) of
this section:
(b) Immediately before the filing of an amendment to the articles of incorporation as described in division (A) of section 1701.74 of the
Revised Code;
(c) Immediately before the time of the vote described in division (A)(1)(b) of section 1701.76 of the Revised Code.
(D)(1) The right and obligation of a dissenting shareholder to receive fair cash value and to sell such shares as to which the dissenting shareholder seeks
relief, and the right and obligation of the corporation to purchase such shares and to pay the fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this section, unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally enjoined or prevented from
carrying it out, or the shareholders rescind their adoption of the action involved;
(c) The dissenting shareholder withdraws the
dissenting shareholders demand, with the consent of the corporation by its directors;
(d) The corporation and the dissenting
shareholder have not come to an agreement as to the fair cash value per share, and neither the shareholder nor the corporation has filed or joined in a complaint under division (B) of this section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the merger, consolidation, or conversion has become effective and the surviving,
new, or converted entity is not a corporation, action required to be taken by the directors of the corporation shall be taken by the partners of a surviving, new, or converted partnership or the comparable representatives of any other surviving,
new, or converted entity.
(E) From the time of the dissenting shareholders giving of the demand until either the termination of the rights and
obligations arising from it or the purchase of the shares by the corporation, all other rights accruing from such shares, including voting and dividend or distribution rights, are suspended. If during the suspension, any dividend or distribution is
paid in money upon shares of such class or any dividend, distribution, or interest is paid in money upon any securities issued in extinguishment of or in substitution for such shares, an amount equal to the dividend, distribution, or interest which,
except for the suspension, would have been payable upon such shares or securities, shall be paid to the holder of record as a credit upon the fair cash value of the shares. If the right to receive fair cash value is terminated other than by the
purchase of the shares by the corporation, all rights of the holder shall be restored and all distributions which, except for the suspension, would have been made shall be made to the holder of record of the shares at the time of termination.
A. The Boards of Directors of Company and Purchaser have determined that it is in the best interests of their respective companies and their
shareholders to consummate the strategic business combination transaction provided for in this Agreement in which Company will, on the terms and subject to the conditions set forth in this Agreement, merge with and into Merger Sub (the
Merger
), with Merger Sub as the surviving entity in the Merger (sometimes referred to in such capacity as the
Surviving Company
).
B. The parties intend the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the
Code
), and intend for this Agreement to constitute a plan of reorganization within the meaning of Treasury Regulations Section
1.368-2(g)
for
purposes of Sections 354 and 361 of the Code.
C. The parties desire to make certain representations, warranties and agreements in
connection with the Merger and also to prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual
covenants, representations, warranties and agreements contained in this Agreement, the parties agree as follows:
THE MERGER
1.1
The
Merger
. (a) Subject to the terms and conditions of this Agreement, in accordance with the Ohio General Corporation Law (the
OGCL
), at the Effective Time, Company shall merge with and into Merger Sub. Merger Sub shall be
the Surviving Company in the Merger and shall continue its existence under the laws of the State of Ohio. As of the Effective Time, the separate corporate existence of Company shall cease.
(b) Purchaser may at any time change the method of effecting the combination of Company and Purchaser, including by providing for the merger
of Company with and into Purchaser;
provided
,
however
, that no such change shall (i) alter or change the amount or kind of the Merger Consideration provided for in this Agreement, (ii)
adversely affect the tax
consequences of the Merger to shareholders of Company or the tax treatment of either party pursuant to this Agreement, (iii) materially impede or delay consummation of the transactions contemplated by this Agreement, (iv) require Company
to mail a revised Proxy Statement if such change is made prior to obtaining the Company Shareholder Approval, or require further approval of Companys shareholders if such change is made after obtaining the Company Shareholder Approval; or
(v) cause any of Companys representations and warranties contained in Article III to be deemed inaccurate or breached by reason of such change of method.
1.2
Effective Time
. The Merger shall become effective as of the date and time specified in the certificate of merger (the
Certificate of Merger
) filed with the Ohio Secretary of State. The term
Effective Time
shall be the date and time when the Merger becomes effective as set forth in the Certificate of Merger.
1.3
Effects of the Merger
. At and after the Effective Time, the Merger shall have the effects set forth in Sections 1701.82 and 1705.39
of the OGCL.
B - 1
1.4
Conversion of
Shares
. At the Effective Time, by virtue of the Merger and
without any action on the part of Purchaser, Merger Sub, Company or the holder of any of the following securities:
(a) All common shares,
without par value, of Company (the
Company Common Shares
), issued and outstanding immediately prior to the Effective Time that are owned directly by Company (other than Company Common Shares held in trust accounts, managed
accounts, mutual funds and the like, or otherwise held in a fiduciary or agency capacity, that are beneficially owned (within the meaning of Rule
13d-3
of the Exchange Act) by third parties (any such shares,
Trust Account Shares
) and other than Company Common Shares held, directly or indirectly, by Company in respect of a debt previously contracted (any such shares,
DPC Shares
)) shall be cancelled and shall cease to
exist, and no Merger Consideration and/or cash in lieu of fractional shares shall be delivered in exchange therefor.
(b) Subject to
Sections 1.4(c), (e) and (f), each Company Common Share, but excluding Company Common Shares owned directly by Company or Purchaser (other than Trust Account Shares or DPC Shares) and Dissenting Shares, shall be converted, in the case of the Company
Common Shares, at the election of the holder thereof in accordance with the procedures set forth in Article II, into the right to receive the following (the
Merger Consideration
), without interest:
(i) for each Company Common Share with respect to which an election to receive cash has been effectively made and not revoked
or lost pursuant to Section 2.3 (a
Cash Election
), cash in an amount equal to the Cash Value per Company Share (as hereinafter defined) (the
Cash Consideration
) (such shares collectively,
Cash
Election Shares
); or
(ii) for each Company Common Share with respect to which an election to receive stock has
been effectively made and not revoked or lost pursuant to Section 2.3 (a
Stock Election
), such number of common shares, without par value, of Purchaser (the Purchaser Common Shares)
determined by
multiplying by the Final Exchange Ratio (as hereinafter defined) (the
Stock Consideration
) (such shares collectively,
Stock Election Shares
); or
(iii) for each Company Common Share other than shares as to which a Cash Election or a Stock Election has been effectively made
and not revoked or lost pursuant to Section 2.3 (collectively, the
Non-Election
Shares
), the right to receive from Purchaser such Cash Consideration or Stock Consideration as is
determined in accordance with Section 1.4(g).
(c) Not later than April 30, 2017, Company shall deliver to Purchaser a schedule
setting forth Companys Adjusted Shareholders Equity (as hereinafter defined) at March 31, 2017 (the
Initial Merger Consideration Schedule
). The Initial Merger Consideration Schedule will be certified by
Companys President, and the information contained therein will be consistent with the information provided by Company in any of its regulatory filings. The Initial Merger Consideration Schedule will be substantially in the form set forth in
Exhibit B attached hereto, and will include (i) the
Maximum Value
(determined by multiplying the Adjusted Shareholders Equity by 1.25, (ii) the
Minimum Value
(determined by multiplying the
Adjusted Shareholders Equity by 1.15, (iii) the
Cash Value per Company Share
(determined by dividing the Maximum Value by 10,000, rounded to four decimal places), and (iv) the
Initial Exchange Ratio
(determined by dividing the Cash Value per Company Share by $13.3055, the twenty (20) trading day volume weighted average closing price of a Purchaser Common Share ending on February 10, 2017 (
Initial VWAP
), rounded to
four decimal places). For purposes of this Agreement:
Adjusted Shareholders Equity
means the Companys consolidated shareholders equity prepared in accordance with GAAP (as hereinafter defined) as of
March 31, 2017, plus the product of (x) the gross proceeds to be received by Company in connection with the MWG Disposition, and (y) a tax adjustment factor of 0.65; and the
MWG Disposition
means the sale by Company
of the entirety of its ownership interests in Lifetime Financial Advisors LLC, d.b.a. Monitor Wealth Group pursuant to Section 7.2(e). For the sake of clarity, Monitor Wealth Group is the registered trade name of Lifetime Financial
Advisors, LLC, and Lifetime Financial Advisors, LLC, and its assignees, shall not be permitted to continue in business under such name following the MWG Disposition.
B - 2
(d) On the day before the Closing Date, the parties will prepare an updated Merger Consideration
Schedule substantially in the form set forth in Exhibit C attached hereto (the
Final Merger Consideration Schedule
) to ensure that the aggregate Merger Consideration does not exceed the Maximum Value and is not less
than the Minimum Value based on the Final VWAP as determined by the following formula: (i) Initial Exchange Ratio x 8,500 x Final VWAP, plus (ii) Cash Value per Company Share x 1,500. If the aggregate Merger Consideration as so determined
is either (i) not less than the Minimum Value, or (ii) not more than the Maximum Value, there will no adjustment to the Initial Exchange Ratio and the Initial Exchange Ratio will be considered the Final Exchange Ratio (as hereinafter
defined). If the aggregate Merger Consideration is less than the Minimum Value, the Initial Exchange Ratio will be adjusted upward to the extent necessary for the aggregate Merger Consideration to equal the Minimum Value; if the aggregate Merger
Consideration is greater than the Maximum Value, the Initial Exchange Ratio will be adjusted downward to the extent necessary for the Merger Consideration to equal the Maximum Value (in either event, the
Final Exchange Ratio
). For
purposes of this Agreement,
Final VWAP
means the twenty (20) trading day volume weighted average closing price of a Purchaser Common Share ending on the penultimate trading day preceding the Closing Date, rounded to four
decimal places.
(e) All of the Company Common Shares converted into the right to receive the Merger Consideration pursuant to this
Article I shall no longer be outstanding and shall automatically be cancelled and shall cease to exist as of the Effective Time, and each certificate previously representing any such Company Common Share (each, a
Certificate
) and
each
non-certificated
Company Common Share represented by book-entry (
Book-Entry Shares
) shall thereafter represent only the right to receive the Merger Consideration and/or cash in lieu of
fractional shares into which the Company Common Shares represented by such Certificate have been converted pursuant to this Section 1.4 and Section 2.3(m), as well as any dividends to which holders of Company Common Shares become entitled in
accordance with Section 2.3(j).
(f) If, between the date of this Agreement and the Effective Time, the outstanding Purchaser Common
Shares or Company Common Shares shall have been increased, decreased, changed into or exchanged for a different number or kind of shares or securities as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, or other similar change in capitalization, an appropriate and proportionate adjustment shall be made to the Exchange Ratio and the Cash Consideration, as applicable.
(g)
(i)
Notwithstanding any other provision contained in this Agreement, the total number of Company Common Shares to be converted into Stock Consideration pursuant to Section 1.4(b) (the
Stock Conversion Number
) shall be equal to the
product obtained by multiplying (x) the number of Company Common Shares outstanding immediately prior to the Effective Time, by (y) 0.85 (the
Stock Proportion Number
). All of the other Company Common Shares (except for
Company Common Shares owned directly by Company or Purchaser (other than Trust Account Shares and DPC Shares) and Dissenting Shares) shall be converted into Cash Consideration.
(ii) Within five business days after the Closing Date, Purchaser shall cause the Exchange Agent to effect the allocation among
holders of Company Common Shares of rights to receive the Cash Consideration and the Stock Consideration as follows:
|
(1)
|
If the aggregate number of Company Common Shares with respect to which Stock Elections shall have been made (the
Stock Election Number
) exceeds the Stock Conversion Number, then all Cash Election
Shares and all
Non-Election
Shares of each holder thereof shall be converted into the right to receive the Cash Consideration, and Stock Election Shares of each holder thereof will be converted into the right
to receive the Stock Consideration in respect of that number of Stock Election Shares equal to the product obtained by multiplying (x) the number of Stock Election Shares held by such holder by (y) a fraction, the numerator of which is the
Stock Conversion Number and the denominator of which is the Stock Election Number, with the remaining number of such holders Stock Election Shares being converted into the right to receive the Cash Consideration; and
|
B - 3
|
(2)
|
If the Stock Election Number is less than the Stock Conversion Number (the amount by which the Stock Conversion Number exceeds the Stock Election Number being referred to herein as the
Shortfall
Number
), then all Stock Election Shares shall be converted into the right to receive the Stock Consideration and the
Non-Election
Shares and Cash Election Shares shall be treated in the following
manner:
|
(A) If the Shortfall Number is less than or equal to the number of
Non-Election
Shares, then all Cash Election Shares shall be converted into the right to receive the Cash Consideration and the
Non-Election
Shares of each holder thereof
shall convert into the right to receive the Stock Consideration in respect of that number of
Non-Election
Shares equal to the product obtained by multiplying (x) the number of
Non-Election
Shares held by such holder by (y) a fraction, the numerator of which is the Shortfall Number and the denominator of which is the total number of
Non-Election
Shares, with the remaining number of such holders
Non-Election
Shares being converted into the right to receive the Cash Consideration; or
(B) If the Shortfall Number exceeds the number of
Non-Election
Shares, then all
Non-Election
Shares shall be converted into the right to receive the Stock Consideration and Cash Election Shares of each holder thereof shall convert into the right to receive the Stock Consideration in respect of
that number of Cash Election Shares equal to the product obtained by multiplying (x) the number of Cash Election Shares held by such holder by (y) a fraction, the numerator of which is the amount by which (1) the Shortfall Number
exceeds (2) the total number of
Non-Election
Shares and the denominator of which is the total number of Cash Election Shares, with the remaining number of such holders Cash Election Shares being
converted into the right to receive the Cash Consideration.
1.5
Articles of Organization and Operating Agreement of the Surviving
Company
. The articles of organization and operating agreement of the Surviving Company shall be the articles of organization and operating agreement of Merger Sub as in effect immediately prior to the Effective Time, until duly amended in
accordance with the terms thereof and applicable Law.
1.6
Managers and Officers
. The managers of Merger Sub immediately prior to
the Effective Time shall be the managers of the Surviving Company and shall hold office until their respective successors are duly appointed, or their earlier death, resignation or removal. The officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Company and shall hold office until their respective successors are duly appointed and qualified, or their earlier death, resignation or removal.
1.7
The Bank Merger
. As soon as practicable after the execution of this Agreement, Company and Purchaser shall cause The Monitor Bank
(the
Company Bank
) and The Farmers National Bank of Canfield (
Purchaser Bank
), respectively, to enter into a bank merger agreement, the form of which is attached to this Agreement as Exhibit A (the
Bank Merger Agreement
), and which provides for the merger of Company Bank with and into Purchaser Bank (the
Bank Merger
), in accordance with applicable Laws and the terms of the Bank Merger Agreement and as soon
as practicable after consummation of the Merger. The Bank Merger Agreement provides that the directors of Purchaser Bank (
Purchaser Bank Board
) immediately prior to the Bank Merger shall be the directors of Purchaser Bank upon
consummation of the Bank Merger.
1.8
Effect on Purchaser Common S
hares
. Each Purchaser Common Share outstanding immediately
prior to the Effective Time will remain outstanding.
B - 4
ARTICLE II
DELIVERY OF MERGER CONSIDERATION
2.1
Exchange Agent
. Prior to the Effective Time, Purchaser shall appoint Computershare Investor Services pursuant to an agreement (the
Exchange Agent Agreement
) to act as exchange agent (the
Exchange Agent
) hereunder.
2.2
Delivery of Merger Consideration
. At or prior to the Effective Time, Purchaser and Merger Sub shall (a) authorize the Exchange Agent to deliver an aggregate number of Purchaser Common Shares equal to the aggregate Merger Consideration
payable in Purchaser Common Shares and (b) deposit, or cause to be deposited with, the Exchange Agent, an amount in cash equal to the aggregate Cash Consideration and, to the extent then determinable, any cash payable in lieu of fractional
shares pursuant to Section 2.3(m) (the
Exchange Fund
).
2.3
Election and Exchange Procedures
.
Each holder of record of Company Common Shares (other than Company Common Shares owned directly by Company or Purchaser (other than Trust
Account Shares or DPC Shares) and Dissenting Shares), whose Company Common Shares were converted into the right to receive the Merger Consideration pursuant to Section 1.4 at the Effective Time and any cash in lieu of fractional Purchaser
Common Shares (
Holder
) shall have the right, subject to the limitations set forth in this Article II, to submit an election in accordance with the following procedures:
(a) Each Holder may specify in a request made in accordance with the provisions of this Section 2.3 (an
Election
) (x) the number of whole Company Common Shares owned by such Holder with respect to which such Holder desires to make a Stock Election and (y) the number of whole Company Common Shares owned by such Holder
with respect to which such Holder desires to make a Cash Election.
(b) Purchaser shall prepare a form reasonably acceptable to Company
(the
Form of Election
) which shall be mailed to Companys shareholders entitled to vote at Company Shareholders Meeting so as to permit Companys shareholders to exercise their right to make an Election prior to
the Election Deadline.
(c) Purchaser shall make the Form of Election initially available at the time that the Proxy Statement is made
available to the shareholders of Company, to such shareholders, and shall use all reasonable efforts to make available as promptly as possible a Form of Election to any shareholder of Company who requests such Form of Election following the initial
mailing of the Forms of Election and prior to the Election Deadline. In no event shall the Form of Election be made available less than twenty (20) days prior to the Election Deadline.
(d) Any Election shall have been made properly only if the Exchange Agent shall have received, by 5:00 p.m. local time in the city in
which the principal office of such Exchange Agent is located, on the date of the Election Deadline, a Form of Election properly completed and signed and accompanied by Certificates or evidence of Book-Entry Shares to which such Form of Election
relates or by an appropriate customary guarantee of delivery of such Certificates or evidence of Book-Entry Shares, as set forth in such Form of Election, from a member of any registered national securities exchange or a commercial bank or trust
company in the United States; provided, that such Certificates or evidence of Book-Entry Shares are in fact delivered to the Exchange Agent by the time required in such guarantee of delivery. Failure to deliver Company Common Shares covered by such
a guarantee of delivery within the time set forth on such guarantee shall be deemed to invalidate any otherwise properly made Election, unless otherwise determined by Purchaser, in its sole discretion. As used herein,
Election
Deadline
means 5:00 p.m. on the date that is the day prior to the date of Company Shareholders Meeting, as may be extended by agreement of the Company and Purchaser. Company and Purchaser shall cooperate to issue a press release
reasonably satisfactory to each of them announcing the date of the Election Deadline not more than fifteen (15) business days before, and at least five (5) business days prior to, the Election Deadline.
B - 5
(e) Any Company shareholder may, at any time prior to the Election Deadline, change or revoke his
or her Election by written notice received by the Exchange Agent prior to the Election Deadline accompanied by a properly completed and signed, revised Form of Election. If Purchaser shall determine in its reasonable discretion that any Election is
not properly made with respect to any Company Common Shares, such Election shall be deemed to be not in effect, and the Company Common Shares covered by such Election shall, for purposes hereof, be deemed to be
Non-Election
Shares, unless a proper Election is thereafter timely made.
(f) Any Company
shareholder may, at any time prior to the Election Deadline, revoke his or her Election by written notice received by the Exchange Agent prior to the Election Deadline or by withdrawal prior to the Election Deadline of his or her Certificates or
evidence of Book-Entry Shares, or of the guarantee of delivery of such Certificates, previously deposited with the Exchange Agent. All Elections shall be revoked automatically if the Exchange Agent is notified in writing by Purchaser or Company that
this Agreement has been terminated in accordance with Article VIII.
(g) Purchaser, in the exercise of its reasonable discretion, shall
have the right to make all determinations, not inconsistent with the terms of this Agreement, governing (i) the validity of the Forms of Election and compliance by any Holder with the Election procedures set forth herein, (ii) the manner
and extent to which Elections are to be taken into account in making the determinations prescribed by Section 2.3, (iii) the issuance and delivery of certificates representing Stock Consideration into which Company Common Shares are converted
in the Merger and (iv) the method of payment of cash for Company Common Shares converted into the right to receive the Cash Consideration and cash in lieu of fractional Purchaser Common Shares where the holder of the applicable Certificate has
no right to receive whole Purchaser Common Shares.
(h) As soon as reasonably practicable after the Effective Time, the Exchange Agent
shall mail to each Holder who theretofore has not submitted such Holders Certificates or evidence of Book-Entry Shares (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to
Certificate(s) or evidence of Book-Entry Shares shall pass, only upon delivery of Certificate(s) or evidence of Book-Entry Shares (or affidavits of loss in lieu of such Certificates) to the Exchange Agent and shall be substantially in such form and
have such other provisions as shall be prescribed by the Exchange Agent Agreement (the
Letter of Transmittal
)) and (ii) instructions for use in surrendering Certificate(s) or evidence of Book-Entry Shares in exchange for the
Merger Consideration, any cash in lieu of fractional shares of Purchaser Common Shares to be issued or paid in consideration therefor and any dividends or distributions to which such holder is entitled pursuant to Section 2.3(j).
(i) Upon surrender to the Exchange Agent of its Certificate(s) or Book-Entry Shares, accompanied by a properly completed Letter of
Transmittal, a holder of Company Common Shares will be entitled to receive promptly after the Effective Time the Merger Consideration, determined as provided in Section 1.4. Until so surrendered, each such Certificate or Book-Entry Shares shall
represent after the Effective Time, for all purposes, only the right to receive, without interest, the applicable Merger Consideration and any cash in lieu of fractional Purchaser Common Shares to be issued or paid in consideration therefor upon
surrender of such Certificate or Book-Entry Shares in accordance with, and any dividends or distributions to which such holder is entitled pursuant to, this Article II.
(j) No dividends or other distributions with respect to Purchaser Common Shares shall be paid to the holder of any unsurrendered Certificate
or Book-Entry Shares with respect to the Purchaser Common Shares represented thereby, in each case unless and until the surrender of such Certificate or Book-Entry Shares in accordance with this Article II. Subject to the effect of applicable
abandoned property, escheat or similar Laws, following surrender of any such Certificate or Book-Entry Shares in accordance with this Article II, the record holder thereof shall be entitled to receive, without interest, (i) the amount of
dividends or other distributions with a record date after the Effective Time theretofore payable with respect to the whole number of Purchaser Common Shares represented by such Certificate or Book-Entry Shares and paid prior to such surrender date,
and/or (ii) at the appropriate payment date, the amount of dividends or other distributions payable with respect to the whole
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number of Purchaser Common Shares represented by such Certificate or Book-Entry Shares with a record date after the Effective Time (but before such surrender date) and with a payment date
subsequent to the issuance of the Purchaser Common Shares issuable with respect to such Certificate or Book-Entry Shares.
(k) In the
event of a transfer of ownership of a Certificate or Book-Entry Shares representing Company Common Shares that is not registered in the stock transfer records of Company, the Merger Consideration (including cash in lieu of fractional Purchaser
Common Shares) shall be issued or paid in exchange therefor to a Person other than the Person in whose name the Certificate or Book-Entry Shares so surrendered is registered if the Certificate or Book-Entry Shares formerly representing such Company
Common Shares shall be properly endorsed or otherwise be in proper form for transfer and the Person requesting such payment or issuance shall pay any transfer or other similar taxes required by reason of the payment or issuance to a Person other
than the registered holder of the Certificate or Book-Entry Shares, or establish to the reasonable satisfaction of Purchaser that the tax has been paid or is not applicable. The Exchange Agent (or, subsequent to the earlier of (x) the
one-year
anniversary of the Effective Time and (y) the expiration or termination of the Exchange Agent Agreement, Purchaser) shall be entitled to deduct and withhold from any amounts otherwise payable pursuant
to this Agreement to any holder of Company Common Shares such amounts as the Exchange Agent or Purchaser, as the case may be, is required to deduct and withhold under the Code, or any provision of state, local or foreign tax Law, with respect to the
making of such payment. To the extent the amounts are so withheld by the Exchange Agent or Purchaser, as the case may be, and paid over to the appropriate Governmental Entity, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of Company Common Shares in respect of whom such deduction and withholding was made by the Exchange Agent or Purchaser, as the case may be.
(l) After the Effective Time, there shall be no transfers on the share transfer books of Company of the Company Common Shares that were issued
and outstanding immediately prior to the Effective Time other than to settle transfers of Company Common Shares that occurred prior to the Effective Time. If, after the Effective Time, Certificates or Book-Entry Shares representing such shares are
presented for transfer to the Exchange Agent, they shall be cancelled and exchanged for the applicable Merger Consideration and any cash in lieu of fractional Purchaser Common Shares to be issued or paid in consideration therefor in accordance with
the procedures set forth in this Article II.
(m) Notwithstanding anything to the contrary contained in this Agreement, no fractional
Purchaser Common Shares shall be issued upon the surrender of Certificates for exchange, no dividend or distribution with respect to Purchaser Common Shares shall be payable on or with respect to any fractional share, and such fractional share
interests shall not entitle the owner thereof to vote or to any other rights of a shareholder of Purchaser. In lieu of the issuance of any such fractional share, Purchaser shall pay to each former shareholder of Company who otherwise would be
entitled to receive such fractional share an amount in cash (rounded to the nearest cent) determined by multiplying (i) the volume-weighted average, rounded to the nearest one tenth of a cent, of the closing sale prices of Purchaser Common
Shares based on information reported by the Nasdaq (as reported by
The Wall Street Journal
or, if not reported thereby, any other authoritative source reasonably selected by Purchaser) for the five (5) trading days ending on the
penultimate trading day preceding the Effective Time (the
Purchaser Closing Price
)
by (ii) the fraction of a share (after taking into account all Company Common Shares held by such holder at the Effective Time and
rounded to the nearest thousandth when expressed in decimal form) of Purchaser Common Shares to which such holder would otherwise be entitled to receive pursuant to Section 1.4.
(n) Any portion of the Exchange Fund that remains unclaimed by the shareholders of Company as of the one year anniversary of the Effective
Time may be paid to Purchaser. In such event, any former shareholders of Company who have not theretofore complied with this Article II shall thereafter look only to Purchaser with respect to the Merger Consideration, any cash in lieu of any
fractional shares and any unpaid dividends and distributions on the Purchaser Common Shares deliverable in respect of each Company Common Share such shareholder holds as determined pursuant to this Agreement, in each case, without any interest
thereon.
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Notwithstanding the foregoing, none of Purchaser, the Surviving Company, the Exchange Agent or any other Person shall be liable to any former holder of Company Common Shares for any amount
delivered in good faith to a public official pursuant to applicable abandoned property, escheat or similar Laws.
(o) In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and the posting by such Person of a bond in such amount as Exchange Agent may
determine is reasonably necessary as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the applicable Merger
Consideration deliverable in respect thereof in accordance with the terms of this Agreement and requirements of this Article II.
(p)
Anything contained in this Agreement or elsewhere to the contrary notwithstanding, if any holder of Company Common Shares dissents from the Merger pursuant to, and properly follows such other procedures as may be required by, Section 1701.85 of
the OGCL and is thereby entitled to appraisal rights thereunder (a
Dissenting Shareholder
), then any Company Common Shares held by such Dissenting Shareholder (
Dissenting Shares
) shall be extinguished but shall
not be converted into the right to receive Merger Consideration. Instead, such Dissenting Shares shall be entitled only to such rights (and shall have such obligations) as are provided in Section 1701.85 of the OGCL. Company shall give
Purchaser prompt notice upon receipt by Company of any such demands for payment of the fair value of such Company Common Shares, any withdrawals of such notice and any other instruments provided pursuant to applicable law. Notwithstanding the above,
in the event that a Dissenting Shareholder subsequently withdraws a demand for payment, fails to comply fully with the requirements of the OGCL, or otherwise fails to establish the right of such shareholder to be paid the value of such holders
shares under the OGCL, such Dissenting Shares shall be deemed to be converted into the right to receive, with respect to Company Common Shares the Cash Consideration and/or the Stock Consideration, as determined by Purchaser in its sole discretion.
Company shall not, except with the prior written consent of Purchaser, voluntarily make any payment with respect to, or settle or offer to settle, any such demand for payment, or waive any failure to timely deliver a written demand for appraisal or
the taking of any other action by such Dissenting Shareholder as may be necessary to perfect appraisal rights under the OGCL. Company shall give Purchaser the opportunity to participate in and direct all negotiations and proceedings with respect to
any such demands. Any payments made in respect of Dissenting Shares shall be made by the Surviving Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as Previously Disclosed, Company hereby represents and warrants to Purchaser as follows:
3.1
Corporate Organization
.
(a) Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Ohio. Company has the
requisite corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted and is duly licensed or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except as has not had and would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect on Company. Company is duly registered as a bank holding company under the Bank Holding Company Act of 1956 (
BHC Act
).
(b) True, complete and correct copies of the Articles of Incorporation of Company (the
Company Articles
) and the [Code of
Regulations of Company, as amended] (the
Company Code
), as in effect as of the date of this Agreement, have been made available to Purchaser prior to the date hereof.
B - 8
(c) Company has Previously Disclosed a list of all its Subsidiaries. Each Subsidiary of Company
(i) is duly organized and validly existing and in good standing under the laws of its jurisdiction of organization, (ii) has the requisite corporate (or similar) power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted and (iii) except as has not had and would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on Company, is duly licensed or qualified to do
business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary. As used in this Agreement, the term
Subsidiary
, when used with respect to either party, shall mean a corporation, association or other business entity of which the entity in question either (i) owns or controls 50% or more of the outstanding equity securities
either directly or through an unbroken chain of entities as to each of which 50% or more of the outstanding equity securities is owned directly or indirectly by its parent (
provided
, there shall not be included any such entity the equity
securities of which are owned or controlled in a fiduciary capacity), (ii) in the case of partnerships, serves as a general partner, (iii) in the case of a limited liability company, serves as a managing member, or (iv) otherwise has
the ability to elect a majority of the directors, trustees or managing members thereof. The deposit accounts of each of Companys Subsidiaries that is an insured depository institution are insured by the Federal Deposit Insurance Corporation
(the
FDIC
) through the Deposit Insurance Fund to the fullest extent permitted by Law, and all premiums and assessments required to be paid in connection therewith have been paid when due. The articles of incorporation, code of
regulations and similar governing documents of each Significant Subsidiary (as defined in Rule
1-02
of Regulation
S-X
promulgated under the Exchange Act) of Company,
copies of which have been made available to Purchaser, are true, complete and correct copies of such documents as in full force and effect as of the date of this Agreement. Company has also Previously Disclosed a list of all Persons with respect to
which Company or its Subsidiaries own 5% or more of any class of capital stock or other equity interest, other than equity interests held in a fiduciary capacity, which list shall set forth the amount and form of ownership of Company or its
applicable Subsidiary in each such Affiliate.
3.2
Capitalization
.
(a) The authorized capital stock of Company consists of 12,000 Company Common Shares, of which, as of even date herewith (the
Company
Capitalization Date
), 10,000 shares were issued and outstanding (the
Capitalization Date Outstanding Share Count
). As of the Company Capitalization Date, no shares of Company Common Shares were reserved for issuance. All
of the issued and outstanding Company Common Shares have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. As of the date of this Agreement, no bonds, debentures, notes or other indebtedness
having the right to vote on any matters on which shareholders of Company may vote (
Voting Debt
) are issued or outstanding. As of the date of this Agreement, Company does not have and is not bound by any outstanding subscriptions,
options, warrants, calls, rights, commitments or agreements of any character calling for the purchase or issuance of, or the payment of, any amount based on, any Company Common Shares or Voting Debt or any other equity securities of Company or any
securities representing the right to purchase or otherwise receive any Company Common Shares or Voting Debt or other equity securities of Company (
Equity Rights
).
(b) As of the Company Capitalization Date, there are no contractual obligations of Company or any of its Subsidiaries (i) to repurchase,
redeem or otherwise acquire any shares of capital stock of Company or any equity security of Company or its Subsidiaries or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity
security of Company or its Subsidiaries or (ii) to register Company Common Shares or other securities under the Securities Act of 1933, as amended (the
Securities Act
). As of the Company Capitalization Date, there are no
Company stock options outstanding. There are no voting trusts, shareholder agreements, proxies or other agreements in effect that are binding on Company or with respect to which Company has Knowledge with respect to the voting or transfer of any
Company Common Shares or Voting Debt, other equity securities of Company or Equity Rights.
(c) There are no equity-based awards
outstanding. Since the Company Capitalization Date through the date hereof, Company has not (i) issued or repurchased any Company Common Shares or Voting Debt or other equity
B - 9
securities of Company or Equity Rights or (ii) issued or awarded any options, stock appreciation rights, restricted shares, restricted stock units, deferred equity units, awards based on or
related to the value of Company capital stock or any other equity-based awards. Company has not issued any Company Stock Options under any Company Stock Plan or otherwise with an exercise price that is less than the fair market value of
the underlying shares on the date of grant, as determined for financial accounting purposes under GAAP. Since December 31, 2016, except as specifically permitted or required by this Agreement or as Previously Disclosed, neither Company nor any
of its Subsidiaries has (A) accelerated the vesting of or lapsing of restrictions with respect to any stock-based compensation awards or long-term incentive compensation awards, (B) with respect to executive officers of Company or its
Subsidiaries, entered into or amended any employment, severance, change of control or similar agreement (including any agreement providing for the reimbursement of excise taxes under Section 4999 of the Code) or (C) adopted or amended any
material Company Benefit Plan.
(d) All of the issued and outstanding shares of capital stock or other equity ownership interests of each
Subsidiary of Company are owned by Company, directly or indirectly, free and clear of any liens, pledges, charges, claims and security interests and similar encumbrances (
Liens
), and all of such shares or equity ownership
interests are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. No Subsidiary of Company has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of capital stock or any other equity security of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity
security of such Subsidiary.
3.3
Authority; No Violation
.
(a) Company has full corporate power and authority to execute and deliver this Agreement and, subject to the receipt of the Regulatory
Approvals and the Company Shareholder Approval, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly adopted and
approved by the members of the Board of Directors of Company by a unanimous vote of a quorum of members participating in such vote. The Board of Directors of Company has determined that the Merger, on the terms and conditions set forth in this
Agreement, is in the best interests of Company and its shareholders and has directed that this Agreement and the transactions contemplated hereby be submitted to Companys shareholders for approval at a duly held Company Shareholders
Meeting and has adopted a resolution to the foregoing effect. Except for the approval of this Agreement and the transactions contemplated hereby by the affirmative vote of at least a majority of all the votes entitled to be cast by holders of
Company Common Shares, no other corporate proceedings on the part of Company are necessary to approve this Agreement, or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Company
and (assuming due authorization, execution and delivery by Purchaser and Merger Sub) constitutes the valid and binding obligations of Company, enforceable against Company in accordance with its terms (except as may be limited by bankruptcy,
insolvency, fraudulent transfer, moratorium, reorganization or similar laws of general applicability relating to or affecting the rights of creditors generally and subject to general principles of equity (the
Bankruptcy and Equity
Exception
)).
(b) Except as Previously Disclosed, neither the execution and delivery of this Agreement by Company, nor the
consummation by Company of the transactions contemplated hereby, nor compliance by Company with any of the terms or provisions of this Agreement, will (i) violate any provision of the Company Articles or the Company Code or (ii) assuming
that the consents, approvals and filings referred to in Section 3.4 are duly obtained and/or made, (A) violate any Law, judgment, order, injunction or decree applicable to Company, any of its Subsidiaries or any of their respective
properties or assets or (B) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event that, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of Company or any of its Subsidiaries under,
any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, franchise, permit, agreement,
B - 10
by-law
or other instrument or obligation to which Company or any of its Subsidiaries is a party or by which any of them or any of their respective
properties or assets is bound except, with respect to clause (ii), any such violation, conflict, breach, default, termination, cancellation, acceleration or creation as has not had and would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on Company.
3.4
Consents and Approvals
. Except for (i) filings of applications
and notices with, and receipt of consents, authorizations, approvals, exemptions or
non-objections
from, the Securities and Exchange Commission (the
SEC
), state securities authorities,
applicable securities, commodities and futures exchanges, and other industry self-regulatory organizations (each, an
SRO
), (ii) the filing of any other required applications, filings or notices with the Board of Governors of
the Federal Reserve System (the
Federal Reserve
), the United States Office of the Comptroller of the Currency (the
OCC
), any foreign, federal or state banking, other regulatory, self-regulatory or enforcement
authorities or any courts, administrative agencies or commissions or other governmental authorities or instrumentalities (each of the bodies set forth in clauses (i) and (ii), a
Governmental Entity
) and approval of or
non-objection
to such applications, filings and notices (taken together with the items listed in clause (i), the
Regulatory Approvals
), (iii) the filing with the SEC of a proxy statement
in definitive form relating to the Company Shareholders Meetings (the
Proxy Statement
) and of a registration statement on
Form S-4
(or such other applicable form) (the
Form
S-4
) in which the Proxy Statement will be included as a prospectus, and declaration of effectiveness of the
Form S-4,
(iv) the filing of the Certificate of Merger with the Ohio Secretary of State, and (v) 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 Purchaser Common Shares pursuant to this Agreement and approval of listing of such Purchaser Common Shares on the Nasdaq, no consents or approvals of or filings or registrations with any Governmental Entity are necessary in
connection with the consummation by Company of the Merger or the Bank Merger and the other transactions contemplated by this Agreement. No consents or approvals of or filings or registrations with any Governmental Entity are necessary in connection
with the execution and delivery by Company of this Agreement.
3.5
Reports
. Except as has not had and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on Company, Company and each of its Subsidiaries have timely filed all reports, proxy statements and other materials, together with any amendments required to be made with
respect thereto, that they were required to file since December 31, 2010 with (i) the Federal Reserve, (ii) the FDIC, (iii) the OCC, (iv) any state banking or other state regulatory authority, (iv) the SEC, (v) any
foreign regulatory authority and (vi) any applicable industry SRO (collectively,
Regulatory Agencies
) and with each other applicable Governmental Entity, and all other reports and statements required to be filed by them since
December 31, 2011, including any report or statement required to be filed pursuant to any applicable Laws, and all such reports, registration statements, proxy statements, other materials and amendments have complied in all material respects
with all legal requirements relating thereto, and Company and its Subsidiaries have paid all fees and assessments due and payable in connection therewith.
3.6
Financial Statements
.
(a) Company has furnished to Purchaser the unaudited consolidated financial statements of Company, consisting of consolidated balance sheets
as of December 31, 2014, 2015 and 2016, and the related consolidated statements of operations, comprehensive income, changes in shareholders equity and cash flows for each of the three years ended December 31, 2014, 2015 and 2016
(collectively, all of such unaudited consolidated financial statements are referred to as the
Financial Statements
). The Financial Statements have been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis (GAAP) during the periods involved (except as may be indicated in the notes thereto and for normal
year-end
adjustments) and present fairly, in all material
respects, the consolidated financial condition, earnings and cash flows of Company for the periods then ended. As of the date hereof, the books and records of Purchaser and its Subsidiaries have been maintained in all material respects in accordance
with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions.
B - 11
(b) Neither Company nor any of its Subsidiaries has incurred any liability or obligation of any
nature whatsoever (whether absolute, accrued, contingent, determined, determinable or otherwise and whether due or to become due), except for (i) those liabilities that are reflected or reserved against on Financial Statements or disclosed in a
footnote thereto, (ii) liabilities incurred in the ordinary course of business consistent in nature and amount with past practice since December 31, 2016, (iii) liabilities which are not material individually or in the aggregate,
(iv) in connection with this Agreement and the transactions contemplated hereby or (v) as Previously Disclosed.
3.7
Brokers Fees
. Neither Company nor any of its Subsidiaries nor any of their respective officers, directors, employees or agents has utilized any broker or finder or incurred any liability for any brokers fees, commissions or
finders fees in connection with the Merger or any other transactions contemplated by this Agreement; provided, however, that Company has, as described further in Section 3.13 hereinbelow, engaged ProBank Austin as its financial advisor in
connection with the Merger.
3.8
Absence of Changes
. Except as Previously Disclosed, since December 31, 2016, (i) Company and
its Subsidiaries have not undertaken any of the actions prohibited by Section 5.2 had such Section been in effect at all times since such date, (ii) Company and its Subsidiaries have conducted their business only in the ordinary course of
business consistent with past practice, and (iii) no event or events have occurred that have had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Company. As used in this Agreement,
the term
Material Adverse Effect
means, with respect to any party, a material adverse effect on (i) the financial condition, results of operations or business of such party and its Subsidiaries taken as a whole
(
provided
,
however
, that, with respect to this clause (i), a Material Adverse Effect shall not be deemed to include effects resulting from (A) changes after the date hereof in applicable GAAP or regulatory accounting
requirement, or the enforcement, implementation or interpretation thereof, (B) changes after the date hereof in Laws of general applicability to companies in the industries in which such party and its Subsidiaries operate, (C) changes
after the date hereof in global, national or regional political conditions or general economic or market conditions (including changes in prevailing interest rates, credit availability and liquidity, currency exchange rates, and price levels or
trading volumes in the United States or foreign securities markets) affecting other companies in the industries in which such party and its Subsidiaries operate, (D) failure, in and of itself, to meet earnings projections, but not including any
underlying causes thereof, (E) the public disclosure of this Agreement and compliance with this Agreement, (F) any outbreak or escalation of hostilities, declared or undeclared acts of war or terrorism, (G) the announcement, pendency
or completion of the transactions contemplated by this Agreement, including losses or threatened losses of employees, customers, suppliers, distributors or other having relationships with Company or its Subsidiaries or (G) actions or omissions
taken with the prior written consent of the other party to this Agreement except, with respect to clauses (A), (B), (C) and (F), to the extent that the effects of such change are disproportionately adverse to the financial condition, results of
operations or business of such party and its Subsidiaries, taken as a whole, as compared to other companies in the industry in which such party and its Subsidiaries operate) or (ii) the ability of such party to timely consummate the
transactions contemplated by this Agreement.
3.9
Compliance with Applicable Law
.
(a) Company and each of its Subsidiaries hold, and since December 31, 2012 have at all times held, all licenses, franchises, permits and
authorizations which are necessary for the lawful conduct of their respective businesses and ownership of their respective properties, rights and assets under and pursuant to applicable Law (and have paid all fees and assessments due and payable in
connection therewith), except where the failure to hold such license, franchise, permit or authorization or to pay such fees or assessments has not had and would not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on Company, and, to the Knowledge of Company, no suspension or cancellation of any such necessary license, franchise, permit or authorization is threatened in writing. Except as Previously Disclosed, Company and each of its
Subsidiaries have complied in all material respects with, and are not in default or violation in any material respect of, (i) any applicable Law, including all Laws related to data protection or privacy, the USA PATRIOT Act, the Bank
B - 12
Secrecy Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, the
Fair Debt Collection Practices Act, the Electronic Fund Transfer Act and any other Law relating to discriminatory lending, financing or leasing practices, money laundering prevention, Sections 23A and 23B of the Federal Reserve Act, and when and if
applicable the Sarbanes Oxley Act, and all Laws relating to broker dealers, investment advisors and insurance brokers, and (ii) any posted or internal privacy policies relating to data protection or privacy, including the protection of personal
information, and neither Company nor any of its Subsidiaries has received since December 31, 2012 written notice of any, and to Companys Knowledge there are no, material defaults or material violations of any applicable Law. For purposes
of this Agreement,
Law
shall mean any federal, state or local law, statute, ordinance, rule, regulation, order, or undertaking to or agreement with any Governmental Entity.
(b) Company and each of its Subsidiaries has properly administered all accounts for which it acts as a fiduciary, including accounts for which
it serves as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the governing documents and applicable Law, except where the failure to so administer such accounts has
not had and would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on Company. None of Company, any of its Subsidiaries, or any director, officer or employee of Company or of any of its Subsidiaries,
has committed any breach of trust or fiduciary duty with respect to any such fiduciary account that has had and would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on Company, and, except as has not had
and would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on Company, the accountings for each such fiduciary account are true and correct and accurately reflect the assets of such fiduciary account.
3.10
State Takeover Laws
. The Board of Directors of Company has approved this Agreement and the transactions contemplated hereby
by a unanimous vote of a quorum of members of the Board of Directors participating in such vote and as required to render inapplicable to such agreement and such transactions any applicable provisions of any takeover Laws under the OGCL, including
any moratorium, control share, takeover, affiliated transaction, interested stockholder or similar provisions under the OGCL or the Company Articles (collectively, the
Takeover
Laws
). No fair price Law is applicable to this Agreement and the transactions contemplated hereby.
3.11
Company
Benefit Plans
.
(a) Section 3.11(a) of the Company Disclosure Schedule lists all employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (
ERISA
)), whether or not subject to ERISA, and all bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation,
retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, and all retention, bonus, employment, termination, severance or other contracts or agreements to which Company or any Subsidiary
or any of their respective ERISA Affiliates (as hereinafter defined) is a party, currently maintains, contributes to or sponsors for the benefit of any current or former employee, officer, director or independent contractor of Company or any
Subsidiary or any of their respective ERISA Affiliates or for which Company or any Subsidiary could otherwise have any current or future material liability or material obligations (all such plans, programs, arrangements, contracts or agreements,
whether or not listed in Section 3.11(a) of the Company Disclosure Schedule, collectively, the
Company Benefit Plans
).
(b) Company has made available to Purchaser true, correct and complete copies of the following (as applicable): (i) the written document
evidencing each Company Benefit Plan or, with respect to any such plan that is not in writing, a written description of the material terms thereof, and all amendments, modifications or material supplements to any Company Benefit Plan, (ii) the
annual report (Form 5500), if any, filed with the U.S. Internal Revenue Service (
IRS
) for the last two plan years, (iii) the most recently received IRS determination letter, if any, relating to a Company Benefit Plan,
(iv) the most recently prepared actuarial report or financial
B - 13
statement, if any, relating to a Company Benefit Plan, (v) the most recent summary plan description, if any, for such Company Benefit Plan (or other descriptions of such Company Benefit Plan
provided to employees) and all modifications thereto, (vi) all material correspondence with the Department of Labor or the IRS; (vii) the most recent nondiscrimination tests performed under ERISA and the Code, (viii) all contracts
with third-party administrators, compensation consultants and other service providers that related to a Company Benefit Plan, and (ix) any related trust agreements, insurance contracts or documents of any other funding arrangements relating to
a Company Benefit Plan. Except as specifically provided in the foregoing documents delivered or made available to Purchaser, there are no amendments to any Company Benefit Plans that have been adopted or approved nor has Company or any of its
Subsidiaries undertaken to make any such amendments or to adopt or approve any new Company Benefit Plans. No Company Benefit Plan is maintained outside the jurisdiction of the United States, or covers any employee residing or working outside of the
United States.
(c) Except as Previously Disclosed, each Company Benefit Plan has been established, operated and administered in all
material respects in accordance with its terms and the requirements of all applicable Laws, including ERISA and the Code. During the six years preceding the date of this Agreement, neither Company nor any of its Subsidiaries has taken any action to
take corrective action or make a filing under any voluntary correction program of the IRS, Department of Labor or any other Governmental Entity with respect to any Company Benefit Plan, and to Companys Knowledge no plan defect exists that
would qualify for correction under any such program.
(d) Except as has been Previously Disclosed, each Company Benefit Plan that is a
nonqualified deferred compensation plan as defined in Section 409A(d)(1) of the Code (a
Nonqualified Deferred Compensation Plan
) and any award thereunder, in each case that is subject to Section 409A of the Code, has
(i) been maintained and operated in good faith compliance with Section 409A of the Code and IRS Notice
2005-1,
(ii) not been materially modified (within the meaning of Notice
2005-1),
and (iii) been in documentary and operational compliance with a reasonable interpretation of Section 409A of the Code. No assets set aside for the payment of benefits under any Nonqualified Deferred
Compensation Plan are held outside of the United States, except to the extent that substantially all of the services to which such benefits are attributable have been performed in the jurisdiction in which such assets are held.
(e) Section 3.11(e) of the Company Disclosure Schedule identifies each Company Benefit Plan that is intended to be qualified under Section
401(a) of the Code (the
Qualified Plans
). The IRS has issued a favorable determination letter with respect to each Qualified Plan and the related trust has not been revoked (nor has revocation been threatened), and to
Companys Knowledge no circumstances or events have occurred that would reasonably be expected to adversely affect the qualified status of any Qualified Plan or the related trust or increase the costs relating thereto. No trust funding any Plan
is intended to meet the requirements of Code Section 501(c)(9).
(f) None of Company and its Subsidiaries nor any of their respective
ERISA Affiliates has, at any time during the last six years, contributed to or been obligated to contribute to any plan that is (i) subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code or (ii) a
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA (a
Multiemployer Plan
) or a plan that has two or more contributing sponsors at least two of whom are not under common control, within the meaning of
Section 4063 of ERISA (a
Multiple Employer Plan
); and none of Company and its Subsidiaries nor any of their respective ERISA Affiliates has incurred any liability to a Multiemployer Plan or Multiple Employer Plan as a result
of a complete or partial withdrawal (as those terms are defined in Part I of Subtitle E of Title IV of ERISA) from such Multiemployer Plan or Multiple Employer Plan.
(g) Except as Previously Disclosed, neither Company nor any of its Subsidiaries sponsors, has sponsored or has any obligation with respect to
any employee benefit plan that provides for any post-employment or post-retirement health or medical or life insurance benefits for retired, former or current employees or beneficiaries or dependents thereof, except as required by Section 4980B of
the Code. Company and each of its Subsidiaries have
B - 14
reserved the right to amend, terminate or modify at any time all plans or arrangements providing for retiree health or medical or life insurance coverage, and no representations or commitments,
whether or not written, have been made that would limit Companys or such Subsidiarys right to amend, terminate or modify any such benefits.
(h) All contributions required to be made to any Company Benefit Plan by applicable Law or by any plan document or other contractual
undertaking, and all premiums due or payable with respect to insurance policies funding any Company Benefit Plan, for any period through the date hereof, have been timely made or paid in full or, to the extent not required to be made or paid on or
before the date hereof, have been fully reflected on the books and records of Company.
(i) Except as Previously Disclosed, neither the
execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in conjunction with any other event) result in, cause the vesting, exercisability or delivery of, or increase in the amount
or value of, any payment, right or other benefit to any employee, officer, director or other service provider of Company or any of its Subsidiaries, or result in any limitation on the right of Company or any of its Subsidiaries to amend, merge,
terminate or receive a reversion of assets from any Company Benefit Plan or related trust. Without limiting the generality of the foregoing, no amount paid or payable (whether in cash, in property, or in the form of benefits) by Company or any of
its Subsidiaries in connection with the transactions contemplated hereby (either solely as a result thereof or as a result of such transactions in conjunction with any other event) will be an excess parachute payment within the meaning
of Section 280G of the Code. No Company Benefit Plan provides for the
gross-up
or reimbursement of Taxes under Section 4999 or 409A of the Code, or otherwise.
(j) There does not now exist, nor do any circumstances exist that could result in, any Controlled Group Liability (as hereinafter defined)
that would be a material liability of Company, its Subsidiaries or any of their ERISA Affiliates following the Closing. Without limiting the generality of the foregoing, neither Company nor any of its ERISA Affiliates has engaged in any transaction
described in Section 4069 or Section 4204 or 4212 of ERISA.
(k) None of Company and its Subsidiaries nor any of their
respective ERISA Affiliates nor any Person now or previously employed by Company, including any fiduciary, has engaged in any prohibited transaction (as defined in Section 4975 of the Code or Section 406 of ERISA), which could
subject any of the Company Benefit Plans or their related trusts, Company, any of its Subsidiaries, any of their respective ERISA Affiliates or any Person that Company or any of its Subsidiaries has an obligation to indemnify, to any material tax or
penalty imposed under Section 4975 of the Code or Section 502 of ERISA.
(l) There are no pending or, to Companys
Knowledge, threatened claims (other than claims for benefits in the ordinary course), lawsuits or arbitrations which have been asserted or instituted, and, to Companys Knowledge, no set of circumstances exists which may reasonably give rise to
a claim or lawsuit, against the Company Benefit Plans, any fiduciaries thereof with respect to their duties to the Company Benefits Plans or the assets of any of the trusts under any of the Company Benefit Plans which could reasonably be expected to
result in any material liability of Company or any of its Subsidiaries to the Pension Benefit Guaranty Corporation, the Department of Treasury, the Department of Labor, any Multiemployer Plan, a Multiple Employer Plan, any participant in a Company
Benefit Plan, or any other party.
(m) Each individual who renders services to Company or any of its Subsidiaries who is classified by
Company or such Subsidiary, as applicable, as having the status of an independent contractor or other
non-employee
status for any purpose (including for purposes of taxation and tax reporting and under Company
Benefit Plans) is properly so characterized.
(n) No deduction of any amount payable pursuant to the terms of any Company Benefit Plan has
been disallowed or is subject to disallowance under Section 162(m) of the Code.
B - 15
(o)
Definitions
.
(i)
Controlled Group Liability
means any and all liabilities (i) under Title IV of ERISA,
(ii) under Section 302 of ERISA, (iii) under Sections 412, 430 and 4971 of the Code, (iv) as a result of a failure to comply with the continuation coverage requirements of Section 601 et seq. of ERISA and Section 4980B of
the Code, and (v) under corresponding or similar provisions of foreign Laws.
(ii)
ERISA Affiliate
means, with respect to any entity, trade or business, any other entity, trade or business that is, or was at the relevant time, a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that
includes or included the first entity, trade or business, or that is, or was at the relevant time, a member of the same controlled group as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.
3.12
Approvals
. As of the date of this Agreement, to Companys Knowledge, there is no reason why all regulatory approvals from any
Governmental Entity required for the consummation of the transactions contemplated by this Agreement should not be obtained on a timely basis.
3.13
Opinion
. The Board of Directors of Company has received the opinion of ProBank Austin, to the effect that, as of the date of such
opinion, and based upon and subject to the factors and assumptions set forth therein, the Merger Consideration is fair from a financial point of view to the holders of Company Common Shares.
3.14
Loan
Put-Backs
. Company has Previously Disclosed to Purchaser all claims for repurchases
by Company or any of its Subsidiaries of home mortgage loans that were sold to third parties by Company or its Subsidiaries during the past five years that are outstanding or currently threatened in writing, and Company has no reason to believe that
it may be required to repurchase any material dollar volume of home mortgage loans sold to third parties by Company or its Subsidiaries. None of the agreements pursuant to which Company or any of its Subsidiaries has sold Loans or pools of Loans or
participations in Loans contains any obligation to repurchase such Loans or interests therein solely on account of a payment default by the obligor on any such Loan.
3.15
Legal Proceedings
.
(a) Except as Previously Disclosed, there is no suit, action, investigation, claim, proceeding or review pending, or to Companys
Knowledge, threatened against or affecting it or any of its Subsidiaries or any of the current or former directors or executive officers of it or any of its Subsidiaries (and it is not aware of any basis for any such suit, action, investigation,
claim, proceeding or review) (i) that involves a Governmental Entity, or (ii) that, individually or in the aggregate, is (A) material to it and its Subsidiaries, taken as a whole, or is reasonably likely to result in a material
restriction on its or any of its Subsidiaries businesses or, after the Effective Time, the business of Purchaser, Surviving Company or any of their affiliates, or (B) reasonably likely to materially prevent or delay it from performing its
obligations under, or consummating the transactions contemplated by, this Agreement. There is no injunction, order, award, judgment, settlement, decree or regulatory restriction imposed upon or entered into by Company, any of its Subsidiaries or the
assets of it or any of its Subsidiaries (or that, upon consummation of the Merger, would apply to Purchaser or any of its affiliates) that is or could reasonably be expected to be material to Company or any of its Subsidiaries.
(b) Since December 31, 2012, (i) there have been no subpoenas, written demands, or document requests received by Company, any of its
Subsidiaries or any affiliate of Company or any of its Subsidiaries from any Governmental Entity, except such as are received by Company or any of its Subsidiaries or any affiliate of Company or any of its Subsidiaries in the ordinary course of
business consistent with past practice or as are not, individually or in the aggregate, material to Company and its Subsidiaries taken as a whole, and (ii) no Governmental Entity has requested that Company or any of its Subsidiaries enter into
a settlement negotiation or tolling agreement with respect to any matter related to any such subpoena, written demand, or document request.
B - 16
Except as Previously Disclosed, neither Company nor any of its Subsidiaries is subject to any
cease-and-desist
or
other order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by,
or has been ordered to pay any civil money penalty by, or has been since December 31, 2012, a recipient of any supervisory letter from, or since December 31, 2012, has adopted any policies, procedures or board resolutions at the request or
suggestion of any Governmental Entity that currently restricts the conduct of its business or that relates to its capital adequacy, its ability to pay dividends, its credit or risk management policies, its management or its business, other than
those of general application that apply to similarly situated bank holding companies or their Subsidiaries (each item in this sentence, whether or not set forth in the Company Disclosure Schedule, a
Regulatory Agreement
), nor has
Company or any of its Subsidiaries been advised in writing since December 31, 2012 by any Governmental Entity that it is considering issuing, initiating, ordering, or requesting any such Regulatory Agreement.
3.16
Material Contracts
.
(a) Except as Previously Disclosed, neither Company nor any of its Subsidiaries is a party to, bound by or subject to any agreement, contract,
arrangement, commitment or understanding (whether written or oral) (each, whether or not Previously Disclosed, a
Material Contract
): (i) that is a material contract within the meaning of Item 601(b)(10) of the
SECs Regulation
S-K;
(ii) any employment, severance, termination, consulting, or retirement Contract providing for aggregate payments to any Person in any calendar year in excess of $50,000,
(iii) any Contract relating to the borrowing of money by Company or any of its Subsidiaries or the guarantee by Company or any of its Subsidiaries of any such obligation (other than Contracts evidencing deposit liabilities, purchases of federal
funds and Federal Home Loan Bank advances of depository institution Subsidiaries and ordinary course trade payables not past due) in excess of $100,000, (iv) any Contract that contains any
non-competition
or
non-solicitation
arrangements or other arrangements or obligations that purport to limit or restrict in any respect the ability of Company or its affiliates (including, following consummation of the
transactions contemplated hereby, Purchaser or any of its affiliates) to solicit customers or the manner in which, or the localities in which, all or any portion of the business of Company and its affiliates (including, following consummation
of the transactions contemplated hereby, Purchaser or any of its affiliates) is or could be conducted, (v) any Contract not terminable by Company, without penalty or other incremental expense in excess of $25,000, with less than 90 days
notice relating to the purchase or sale of any goods or services by Company or any of its Subsidiaries (other than Contracts entered into in the ordinary course of business consistent with past practice and involving payments under any individual
Contract not in excess of $25,000 or involving Loans, borrowings or guarantees originated or purchased by Company or any of its Subsidiaries in the ordinary course of business consistent with past practice), (vi) any Contract not terminable by
Company without penalty or other incremental expense in excess of $25,000, with less than 90 days notice which obligates Company or any of its affiliates (or, following the consummation of the Merger, Purchaser or any of its affiliates) to
conduct business with any third party on an exclusive or preferential basis, (vii) any Contract not terminable by Company without penalty or other incremental expense in excess of $25,000, with less than 90 days notice which requires
referrals of business or requires Company or any of its Subsidiaries to make available investment opportunities to any Person on a priority or exclusive basis, (viii) any Contract not terminable by Company without penalty or other incremental
expense in excess of $25,000, with less than 90 days notice which grants any right of first refusal, right of first offer or similar right with respect to any material assets, rights or properties of Company or any of its Subsidiaries,
(ix) any Contract which limits the payment of dividends by Company or any of its Subsidiaries, (x) any Contract pursuant to which Company or any of its Subsidiaries has agreed with any third parties to become a member of, manage or control
a joint venture, partnership, limited liability company or other similar entity, (xi) any Contract pursuant to which Company or any of its Subsidiaries has agreed with any third party to a change of control transaction such as an acquisition,
divestiture or merger and which contains representations, covenants, indemnities or other obligations (including indemnification,
earn-out
or other contingent obligations) that are still in effect,
(xii) any Contract which relates to any material Intellectual Property of or used by Company or any of its Subsidiaries, (xiii) any Contract between Company or any of its Subsidiaries, on the one hand, and (a) any officer or director
of Company or any of its Subsidiaries, or (b) to the Knowledge of
B - 17
Company, any affiliate or family member of any such officer or director or (c) any other affiliate of Company, on the other hand, except those of a type available to employees of Company
generally, or (xiv) any Contract that provides for payments to be made by Company or any of its Subsidiaries upon a change in control thereof or a termination of such Contract in excess of $50,000. For purposes of this Agreement,
Person
shall mean any individual, bank, corporation, partnership, limited liability company, association, joint venture or other organization, whether an incorporated or unincorporated organization, or Governmental Entity.
(b) Each Material Contract is a valid and legally binding agreement of Company or one of its Subsidiaries, as applicable, and, to
Companys Knowledge, the counterparty or counterparties thereto, is enforceable in accordance with its terms (subject to the Bankruptcy and Equity Exception) and is in full force and effect. Company and each of its Subsidiaries has duly
performed all material obligations required to be performed by it prior to the date hereof under each Material Contract, neither Company nor any of its Subsidiaries, and, to Companys Knowledge, any counterparty or counterparties, is in
material breach or violation of any provision of any Material Contract, and no event or condition exists that constitutes, after notice or lapse of time or both, will constitute, a breach, violation or default on the part of Company or any of its
Subsidiaries under any such Material Contract or provide any party thereto with the right to terminate such Material Contract. Company has provided true and complete copies of each Material Contract to Purchaser prior to the date hereof.
3.17
Environmental Matters
. Except as has not had and would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on Company and its Subsidiaries, and to the Knowledge of Company, (i) Company and its Subsidiaries have complied with all applicable Laws relating to: (a) the protection or restoration of the environment, health,
safety or natural resources; (b) the handling, use, presence, disposal, release or threatened release of, or exposure to, any hazardous substance; and (c) noise, odor, wetlands, indoor air, pollution, contamination or any injury or threat
of injury to persons or property involving any hazardous substance (
Environmental Laws
); (ii) there are no proceedings, claims, actions, or investigations of any kind, pending or threatened in writing, by any Person, court,
agency, or other Governmental Entity or any arbitral body, against Company or its Subsidiaries relating to any Environmental Law and there is no reasonable basis for any such proceeding, claim, action or investigation; (iii) there are no
agreements, orders, judgments, indemnities or decrees by or with Company or its Subsidiaries, and any Person, court, regulatory agency or other Governmental Entity, that could impose any liabilities or obligations under or in respect of any
Environmental Law; (iv) there are, and have been, no hazardous substances or other environmental conditions at any property under circumstances which could reasonably be expected to result in liability to or claims against Company or its
Subsidiaries relating to any Environmental Law; and (v) there are no reasonably anticipated future events, conditions, circumstances, practices, plans, or legal requirements that could give rise to obligations or liabilities to Company and its
Subsidiaries under any Environmental Law.
3.18
Taxes
. Company and each of its Subsidiaries (i) have prepared in good faith
and duly and timely filed (taking into account any extension of time within which to file) all material Tax Returns (as defined below) required to be filed by them and all such filed Tax Returns are complete and accurate in all material respects;
and (ii) have timely paid all material Taxes (as defined below) that are required to have been paid or that Company or any of its Subsidiaries are obligated to have withheld from amounts owing to any employee, creditor or third party and to
have paid, except with respect to matters contested in good faith and for which adequate reserves have been established and reflected on the financial statements of Company or its Subsidiaries. None of the material Tax Returns pertaining to Company
or any of its Subsidiaries are currently under any audit, suit, proceeding, examination or assessment by the IRS or the relevant state, local or foreign Tax authority and neither Company nor any of its Subsidiaries has received written notice from
any Tax authority that an audit, suit, proceeding, examination or assessment in respect of such Tax Returns or matters pertaining to Taxes is pending or threatened. Company has not received written notice of any material deficiencies asserted or
assessments made against Company or any of its Subsidiaries that have not been paid or resolved in full. Company has not received any notice of any claim against Company or any of its Subsidiaries by any Tax authority in a jurisdiction where Company
or such Subsidiary does not file Tax Returns that Company or such Subsidiary is or may be subject to taxation by that jurisdiction. No Liens for Taxes exist with respect to any of the assets of
B - 18
Company or any of its Subsidiaries, except for Liens for Taxes not yet due and payable. Neither Company nor any of its Subsidiaries has entered into, or obtained, as applicable, any material
closing agreements, private letter rulings, technical advice memoranda or similar agreement or rulings with any Tax authority, nor have any been issued by any Tax authority, in each case that have any continuing effect. None of Company or any of its
Subsidiaries have been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Each of Company and its
Subsidiaries have disclosed on its federal income Tax Returns all positions taken therein that could reasonably be expected to give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code.
Neither Company nor any of its Subsidiaries (A) has ever been a member of an affiliated, combined, consolidated or unitary Tax group for purposes of filing any Tax Return, other than a group of which Company was the common parent, (B) has
any liability for a material amount of Taxes of any Person (other than Company or any of its Subsidiaries) 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 or (C) is a party to or bound by any Tax sharing or allocation agreement or has any other current contractual obligation to indemnify any other Person with respect to Taxes (other
than such an agreement or arrangement exclusively between or among Company and its Subsidiaries). Neither Company nor any of its Subsidiaries has participated in any listed transactions within the meaning of Treasury Regulations Section
1.6011-4(b)(2).
Neither Company nor any of its Subsidiaries has been a distributing corporation or controlled corporation in any distribution occurring during the last 30 months that was
purported or intended to be governed by Section 355 of the Code (or any similar provision of state, local or foreign Law). Neither Company nor any of its Subsidiaries is the beneficiary of any extension of time within which to file any material
Tax Return (other than extensions to file Tax Returns obtained in the ordinary course of business). As used in this Agreement, (i) the term
Tax
(including, with correlative meaning, the term
Taxes
) includes
all United States federal, state, local and foreign income, profits, franchise, gross receipts, environmental, customs duty, capital stock, severance, stamp, payroll, sales, employment, unemployment, disability, use, property, withholding, excise,
production, value added, occupancy and other taxes, duties or like assessments of any nature whatsoever, together with all interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and
additions, and (ii) the term
Tax Return
includes all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns) supplied or required to be supplied to a Tax authority
relating to Taxes.
3.19
Reorganization
. Company has not taken or agreed to take any action, and is not aware of any fact or
circumstance, that would prevent or impede, or could reasonably be expected to prevent or impede, the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
3.20
Intellectual Property
. Except as has not had and would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on Company and its Subsidiaries, or as otherwise Previously Disclosed:
(a) Each of Company and its Subsidiaries,
to its Knowledge (A) owns (beneficially, and of record where applicable), free and clear of all Liens, other than
non-exclusive
licenses entered into in the ordinary course of business consistent with
past practice, all right, title and interest in and to its respective Owned Intellectual Property, and (B) has valid and sufficient rights and licenses to all of the Licensed Intellectual Property. To the Knowledge of Company, the Owned
Intellectual Property is subsisting, valid and enforceable. To the Knowledge of Company, the Owned Intellectual Property and the Licensed Intellectual Property constitute all Intellectual Property used in or necessary for the operation of the
respective businesses of Company and each of its Subsidiaries as presently conducted. To Companys Knowledge, each of Company and its Subsidiaries has sufficient rights to use all Intellectual Property used in its respective business as
presently conducted.
(b) To Companys Knowledge, the operation of Company and each of its Subsidiaries respective businesses
as presently conducted does not infringe, misappropriate or otherwise violate the Intellectual Property rights of any third Person, and since December 31, 2012, no Person has asserted in writing that Company or any of its
B - 19
Subsidiaries has materially infringed, misappropriated or otherwise violated any third Persons Intellectual Property rights. To Companys Knowledge, no third Person has infringed,
misappropriated or otherwise violated any of Companys or any of its Subsidiarys rights in the Owned Intellectual Property.
(c) Company and each of its Subsidiaries has taken reasonable measures to protect (A) their rights in their respective Owned Intellectual
Property and (B) the confidentiality of all Trade Secrets that are owned, used or held by Company or any of its Subsidiaries, and to Companys Knowledge, such Trade Secrets have not been used, disclosed to or discovered by any Person
except pursuant to appropriate
non-disclosure
agreements which have not been breached. To Companys Knowledge, no Person has gained unauthorized access to Companys or its Subsidiaries IT
Assets.
(d) Companys and each of its Subsidiaries respective IT Assets operate and perform in all material respects as
reasonably required by Company and each of its Subsidiaries in connection with their respective businesses and have not materially malfunctioned or failed within the past two years. To Companys Knowledge, Company and each of its Subsidiaries
has implemented reasonable backup, security and disaster recovery technology and procedures consistent with industry practices. To Companys Knowledge, Company and each of its Subsidiaries is compliant with their own privacy policies and
commitments to their respective customers, consumers and employees, concerning data protection and the privacy and security of personal data and the nonpublic personal information of their respective customers, consumers and employees.
(e) For purposes of this Agreement,
(i)
Intellectual Property
means any and all: (i) trademarks, service marks, brand names, collective
marks, Internet domain names, logos, symbols, trade dress, trade names, business names, corporate names, slogans, designs and other indicia of origin, together with all translations, adaptations, derivations and combinations thereof, all
applications, registrations and renewals for the foregoing, and all goodwill associated therewith and symbolized thereby (
Trademarks
); (ii) patents and patentable inventions (whether or not reduced to practice), all improvements
thereto, and all invention disclosures and applications therefor, together with all divisions, continuations,
continuations-in-part,
revisions, renewals, extensions,
reexaminations and reissues in connection therewith; (iii) confidential proprietary business information, trade secrets and
know-how,
including processes, schematics, business and other methods,
technologies, techniques, protocols, formulae, drawings, prototypes, models, designs, unpatentable discoveries and inventions (
Trade Secrets
); (iv) copyrights in published and unpublished works of authorship (including databases
and other compilations of information), and all registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof; and (v) other intellectual property rights.
(ii)
IT Assets
means, with respect to any Person, the computers, computer software, firmware, middleware,
servers, workstations, routers, hubs, switches, data, data communications lines, and all other information technology equipment, and all associated documentation owned by such Person or such Persons Subsidiaries.
(iii)
Licensed Intellectual Property
means the Intellectual Property owned by third Persons that is used in
or necessary for the operation of the respective businesses of Company or Purchaser, as the case may be, and each of its respective Subsidiaries as presently conducted.
(iv)
Owned Intellectual Property
means Intellectual Property owned or purported to be owned by Company or
Purchaser, as the case may be, or any of its respective Subsidiaries.
3.21
Properties
. Company or one of its Subsidiaries, except
as Previously Disclosed, (a) has good and, as to real property, marketable title to all the material properties and assets reflected in either the latest unaudited balance sheet or latest interim balance sheet included in the Financial
Statements as being owned by Company or one of its Subsidiaries or acquired after the date thereof (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business consistent with past practice) (the
Owned Properties
), free and
B - 20
clear of all Liens of any nature whatsoever, except (i) statutory Liens securing payments not yet due or which are contested in good faith and for which adequate reserves have been taken,
(ii) Liens for real property Taxes not yet due and payable, (iii) easements, rights of way, and other similar encumbrances that do not materially affect the use of the properties or assets subject thereto or affected thereby or otherwise
materially impair business operations at such properties and (iv) such imperfections or irregularities of title or Liens as do not materially affect the use of the properties or assets subject thereto or affected thereby or otherwise materially
impair business operations at such properties (collectively,
Permitted Encumbrances
), and (b) is the lessee of all leasehold estates reflected in either the Financial Statements or acquired after the date thereof (except for
leases that have expired by their terms since the date thereof) (collectively with the Owned Properties, the
Real Property
), free and clear of all Liens of any nature whatsoever, except for Permitted Encumbrances, and is in
possession of the properties purported to be leased thereunder, and each such lease is valid without default thereunder by the lessee or, to the Knowledge of Company, the lessor. There are no pending or, to the Knowledge of Company, threatened (in
writing) condemnation proceedings against the Real Property.
3.22
Insurance
. Company and its Subsidiaries are insured with
reputable insurers against such risks and in such amounts as the management of Company reasonably has determined to be prudent and consistent with industry practice. Company and its Subsidiaries are in compliance in all material respects with their
insurance policies and are not in default under any of the terms thereof. Each such policy is outstanding and in full force and effect and, except for policies insuring against potential liabilities of officers, directors and employees of Company
and its Subsidiaries, Company or the relevant Subsidiary thereof is the sole beneficiary of such policies, and all premiums and other payments due under any such policy have been paid, and all claims thereunder have been filed in due and timely
fashion.
3.23
Accounting and Internal Controls
.
(a) The records, systems, controls, data and information of Company and its Subsidiaries are recorded, stored, maintained and operated under
means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Company or its Subsidiaries or accountants (including all means of access thereto and
therefrom), except for any
non-exclusive
ownership and
non-direct
control that would not reasonably be expected to have a material adverse effect on the system of
internal accounting controls described in the following sentence.
(b) Since December 31, 2012 (A) except as Previously Disclosed,
neither Company nor any of its Subsidiaries nor, to Companys Knowledge, any director, officer, auditor, accountant or representative of it or any of its Subsidiaries has received or otherwise had or obtained Knowledge of any material
complaint, allegation, assertion or written claim regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of Company or any of its
Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or written claim that Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and
(B) no attorney representing Company or any of its Subsidiaries, whether or not employed by it or any of its Subsidiaries, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation by it or
any of its officers or directors to its Board of Directors or any committee thereof or to any of its directors or officers.
3.24
Derivatives
. All interest rate swaps, caps, floors, option agreements, futures and forward contracts and other similar derivative transactions and risk management arrangements, whether entered into for the account of Company or for the
account of a customer of the Company Bank, were entered into in the ordinary course of business and in all material respects in accordance with applicable rules, regulations and policies of the applicable regulatory authority and with counterparties
believed to be financially responsible at the time and are legal, valid and binding obligations of Company or Company Bank enforceable in accordance with their terms, subject to the Bankruptcy and Equity Exception, and are in full force and effect.
Company and Company Bank have duly performed in all material respects all of their material obligations thereunder to the extent that such
B - 21
obligations to perform have accrued, and, to Companys Knowledge, there are no material breaches, violations or defaults or allegations or assertions of such by any party thereunder.
3.25
Labor
. (i) Neither Company nor any of its Subsidiaries is or since December 31, 2012, has been a party to any collective
bargaining agreement, labor union contract, or trade union agreement (each a
Collective Bargaining Agreement
); (ii) no employee is represented by a labor organization for purposes of collective bargaining with respect to Company
or any of its Subsidiaries; (iii) to the Knowledge of Company, as of the date hereof, there are no activities or proceedings of any labor or trade union to organize any employees of Company or any of its Subsidiaries; (iv) no Collective
Bargaining Agreement is being negotiated by Company or any of its Subsidiaries; (v) as of the date hereof, there is no strike, lockout, slowdown, or work stoppage against Company or any of its Subsidiaries pending or, to the Knowledge of
Company, threatened, that may interfere in any material respect with the respective business activities of Company or any of its Subsidiaries; (vi) to the Knowledge of Company, there is no pending charge or complaint against Company or any of
its Subsidiaries by the National Labor Relations Board or any comparable Governmental Entity and (vii) Company and its Subsidiaries have complied with all Laws regarding employment and employment practices, terms and conditions of employment
and wages and hours and other Laws in respect of any reduction in force, including notice, information and consultation requirements.
3.26
Loans; Loan Matters
.
(a) As of most recent quarter end, neither Company nor any of its Subsidiaries is a party to any written or oral (i) loan agreement, note
or borrowing arrangement (including leases, credit enhancements, commitments, guarantees and interest-bearing assets) (collectively,
Loans
), (x) the unpaid principal balance of which exceeds $50,000, and under the terms of
which the obligor was 90 days or more delinquent in payment of principal or interest or (y) to the Knowledge of Company, the unpaid principal balance of which exceeds $50,000 and which the obligor is in material default of any other provision
under such Loan (for purposes of this clause (y), the failure of a borrower to deliver financial and other data on a timely basis to Company as required by the relevant loan agreement shall not be deemed a material default), or (ii) Loan with
any director, executive officer or five percent or greater shareholder of Company or any of its Subsidiaries, or to the Knowledge of Company, any Person controlling, controlled by or under common control with any of the foregoing.
Section 3.26(a) of the Company Disclosure Schedule sets forth (i) all of the Loans in original principal amount in excess of $50,000 of Company or any of its Subsidiaries that as of most recent quarter end, were classified (whether
regulatory or internal) as Other Loans Specially Mentioned, Special Mention, Substandard, Doubtful, Loss, Classified, Criticized, Credit Risk Assets,
Concerned Loans, Watch List or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan as of such date and the identity of the borrower thereunder, (ii) by
category of Loan (i.e., commercial, consumer, etc.), all of the other Loans of Company and its Subsidiaries that as of most recent quarter end, were classified as such, together with the aggregate principal amount of and accrued and unpaid interest
on such Loans by category and (iii) each asset of Company that as of most recent quarter end, was classified as Other Real Estate Owned and the book value thereof as of such date.
(b) Each Loan currently outstanding (i) is evidenced by notes, agreements or other evidences of indebtedness that are, in all material
respects, true, genuine and what they purport to be, (ii) to the extent secured, has been secured by valid Liens which have been perfected and (iii) to Companys Knowledge, is a legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms (subject to the Bankruptcy and Equity Exception). The notes or other credit or security documents with respect to each such outstanding Loan were in compliance with all applicable Laws at the time of
origination or purchase by Company or its Subsidiaries and are complete and correct in all material respects. Each outstanding Loan (including Loans held for resale to investors) was solicited and originated, and is and has been administered and,
where applicable, serviced, and the relevant Loan files are being maintained in all material respects in accordance with the relevant notes or other credit or security documents, Companys written underwriting standards (and, in the case of
Loans held for resale to investors, the underwriting standards, if any, of the applicable investors) and with the requirements under all applicable Laws.
B - 22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB
Except as Previously Disclosed, Purchaser and Merger Sub hereby jointly and severally represent and warrant to Company as follows:
4.1
Corporate Organization
. Purchaser is a corporation duly formed, validly existing and in good standing under the laws of the State
of Ohio. Merger Sub is a limited liability company duly organized and in full force and effect under the laws of the State of Ohio. Purchaser has the requisite corporate power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and is and will be duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned
or leased by it makes such licensing or qualification necessary. Purchaser is duly registered as a bank holding company under the BHC Act.
4.2
Capitalization
. The authorized capital stock of Purchaser consists of 35,000,000 Purchaser Common Shares of Purchaser Common Stock,
of which, as of March 6, 2017 (the
Purchaser Capitalization Date
), 27,066,593 were issued and outstanding. As of the Purchaser Capitalization Date, no Purchaser Common Shares were authorized for issuance upon exercise of
options issued pursuant to employee and director stock plans of Purchaser or a Subsidiary of Purchaser in effect as of the date of this Agreement (the
Purchaser Stock Plans
). All of the issued and outstanding Purchaser Common
Shares have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. As of the date of this Agreement, no Voting Debt of Purchaser is
issued or outstanding. As of the Purchaser Capitalization Date, except pursuant to this Agreement and the Purchaser Stock Plans, Purchaser does not have and is not bound by any outstanding subscriptions, options, warrants, calls, rights, commitments
or agreements of any character calling for the purchase or issuance of any Purchaser Common Shares, Voting Debt of Purchaser or any other equity securities of Purchaser or any securities representing the right to purchase or otherwise receive any
Purchaser Common Shares or Voting Debt of Purchaser or other equity securities of Purchaser. The Purchaser Common Shares to be issued pursuant to the Merger have been reserved for issuance, and when issued, will be duly authorized and validly issued
and, at the Effective Time, all such shares will be fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof.
4.3
Authority; No Violation
.
(a) Purchaser has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated
hereby. Merger Sub has the full limited liability company power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly, validly and unanimously adopted and approved by the Board of Directors of Purchaser and the managers and members of Merger Sub to the extent required by applicable Law. This Agreement has been duly
and validly executed and delivered by Purchaser and Merger Sub and (assuming due authorization, execution and delivery by Company) constitutes the valid and binding obligation of Purchaser and Merger Sub, enforceable against Purchaser and Merger Sub
in accordance with its terms (subject to the Bankruptcy and Equity Exception).
(b) Neither the execution and delivery of this Agreement
by Purchaser or Merger Sub, nor the consummation by Purchaser or Merger Sub of the transactions contemplated hereby, nor compliance by Purchaser or Merger Sub with any of the terms or provisions of this Agreement, will (i) violate any provision
of the articles of incorporation or code of regulations of Purchaser or the articles of organization or operating agreement of Merger Sub, or (ii) assuming that the consents, approvals and filings referred to in Section 4.4 are duly
obtained and/or made, (A) violate any other Law, judgment, order, injunction or decree applicable to Purchaser, any of its Subsidiaries or any of their respective properties or assets or (B) violate, conflict with, result
B - 23
in a breach of any provision of or the loss of any benefit under, constitute a default (or an event that, with notice or lapse of time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of Purchaser or any of its Subsidiaries under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Purchaser or any of its Subsidiaries is a party or by which any of them or any of their
respective properties or assets is bound except, with respect to clause (ii), any such violation, conflict, breach, default, termination, cancellation, acceleration or creation as has not had and would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on Purchaser.
4.4
Consents and Approvals
. Except for (i) the Regulatory
Approvals, (ii) the filing with the SEC of the Proxy Statement and the filing and declaration of effectiveness of the Form
S-4,
(iii) the filing of the Certificate of Merger with the Ohio Secretary of
State, and (iv) 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 Purchaser Common Shares pursuant to this Agreement and
approval of listing of such Purchaser Common Shares on the Nasdaq, no consents or approvals of or filings or registrations with any Governmental Entity are necessary in connection with the execution and delivery by Purchaser of this Agreement or
with the consummation by Purchaser of the Merger or by Purchaser Bank of the Bank Merger and the other transactions contemplated by this Agreement. No consents or approvals of or filings or registrations with any Governmental Entity are necessary in
connection with the execution and delivery by Purchaser of this Agreement.
4.5
Reports
.
(a) Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on
Purchaser, Purchaser and each of its Subsidiaries have timely filed all reports, registration statements, proxy statements and other materials, together with any amendments required to be made with respect thereto, that they were required to file
since December 31, 2011 with the Regulatory Agencies and each other applicable Governmental Entity, and all other reports and statements required to be filed by them since December 31, 2011, including any report or statement required to be
filed pursuant to any applicable Laws, and all such reports, registration statements, proxy statements, other materials and amendments have complied in all material respects with all legal requirements relating thereto, and have paid all fees and
assessments due and payable in connection therewith.
(b) An accurate and complete copy of each final registration statement, prospectus,
report, schedule and definitive proxy statement filed with or furnished to the SEC by Purchaser pursuant to the Securities Act or the Exchange Act (the
Purchaser SEC Reports
) since December 31, 2011 is publicly available. All
Purchaser SEC Reports, at the time of filing, complied, and all Purchaser SEC Reports required to be filed prior to the Effective Time will comply, in all material respects with applicable Law and included and will include all exhibits required to
be filed under applicable Law. None of such documents, when filed or as amended, contained any untrue statement of a material fact or omitted to state 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. None of Purchasers Subsidiaries is required to file periodic reports with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.
4.6
Financial Statements
.
(a) The financial statements of Purchaser and its Subsidiaries included (or incorporated by reference) in Purchasers SEC Reports
(including the related notes, where applicable) have been prepared in accordance with GAAP during the periods involved (except as may be indicated in the notes thereto and for normal
year-end
adjustments) and
present fairly, in all material respects, the consolidated financial condition, earnings and cash flows of Purchaser for the periods then ended. As of the date hereof, the books and records of Purchaser and its Subsidiaries have been maintained in
all material respects in accordance with GAAP and any other applicable
B - 24
legal and accounting requirements and reflect only actual transactions. As of the date hereof, Crowe Horwath LLP has not resigned (or informed Purchaser that indicated it intends to resign) or
been dismissed as independent public accountants of Purchaser as a result of or in connection with any disagreements with Purchaser on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.
(b) Neither Purchaser nor any of its Subsidiaries has incurred any material liability or obligation of any nature whatsoever (whether
absolute, accrued, contingent, determined, determinable or otherwise and whether due or to become due), except for (i) those liabilities that are reflected or reserved against on the consolidated balance sheet of Purchaser included in its
Quarterly Report on Form
10-Q
for the fiscal quarter ended most recent quarter end (including any notes thereto), (ii) liabilities incurred in the ordinary course of business consistent in nature and
amount with past practice since most recent quarter end or (iii) in connection with this Agreement and the transactions contemplated hereby.
4.7
Broker
s Fees
. Neither Purchaser nor any of its Subsidiaries nor any of their respective officers or directors
have employed any broker or finder or incurred any liability for any brokers fees, commissions or finders fees in connection with the Merger or related transactions contemplated by this Agreement, other than to Boenning &
Scattergood, Inc.
4.8
Compliance with Applicable Law
. Purchaser and each of its Subsidiaries hold, and have at all times since
December 31, 2011 held, all licenses, franchises, permits and authorizations which are necessary for the lawful conduct of their respective businesses and ownership of their respective properties, rights and assets under and pursuant to
applicable Law (and have paid all fees and assessments due and payable in connection therewith), except where the failure to hold such license, franchise, permit or authorization or to pay such fees or assessments has not had and would not
reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on Purchaser and, to Purchasers Knowledge, no suspension or cancellation of any such necessary license, franchise, permit or authorization has, prior
to the date hereof, been threatened in writing. Purchaser and each of its Subsidiaries have complied in all material respects with, and are not in default or violation in any material respect of, any applicable Law relating to Purchaser or any of
its Subsidiaries.
4.9
Legal Proceedings
. (a) Except as has not had and would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on Purchaser, none of Purchaser or any of its Subsidiaries is a party to any, and there are no pending or, to Purchasers Knowledge, threatened, material legal, administrative, arbitral or other
material suits, actions, investigations, claims, proceedings or reviews of any nature against Purchaser or any of its Subsidiaries.
(b)
There is no injunction, order, award, judgment, settlement, decree or regulatory restriction (other than those of general application that apply to similarly situated banks or their Subsidiaries) imposed upon Purchaser or any of its Subsidiaries
that is or could reasonably be expected to be material to Purchaser or any of its Subsidiaries.
(c) There is no suit, action,
investigation, claim, proceeding or review pending, or to Purchasers Knowledge, threatened against or affecting it or any of its Subsidiaries (and it is not aware of any basis for any such suit, action, investigation, claim, proceeding or
review) that, individually or in the aggregate, is reasonably likely to materially prevent or delay it from performing its obligations under, or consummating the transactions contemplated by, this Agreement.
4.10
Absence of Changes
. Since December 31, 2016, no event or events have occurred that have had or would reasonably be expected
to have, either individually or in the aggregate, a Material Adverse Effect on Purchaser.
4.11
Taxes
. Purchaser and each of its
Subsidiaries (i) have prepared in good faith and duly and timely filed (taking into account any extension of time within which to file) all material Tax Returns (as defined
B - 25
below) required to be filed by them and all such filed Tax Returns are complete and accurate in all material respects; and (ii) have timely paid all material Taxes (as defined below) that
are required to have been paid or that Purchaser or any of its Subsidiaries are obligated to have withheld from amounts owning to any employee, creditor or third party and to have paid, except with respect to matters consented in good faith and for
which adequate reserves have been established and reflected on the financial statements of Purchaser or its Subsidiaries. None of the material Tax Returns pertaining to Purchaser or any of its Subsidiaries are currently under any audit, suit,
proceeding, examination or assessment by the IRS or the relevant state, local or foreign Tax authority and neither Purchaser or any of its Subsidiaries has received written notice from any Tax authority that an audit, suit, proceeding, examination
or assessment in respect of such Tax Returns or matters pertaining to Taxes is pending or threatened. No material assessment in respect of such Tax Returns or matters pertaining to Tax Returns or matters pertaining to Taxes is pending or threatened.
No material deficiencies have been asserted or assessments made against Purchaser or any of its Subsidiaries by any Tax authority in a jurisdiction where Purchaser or such Subsidiary does not file Tax Returns that Purchaser or such Subsidiary is or
may be subject to taxation by that jurisdiction. No liens for Taxes exist with respect to any of the assets of Purchaser or any of its Subsidiaries, except for liens for Taxes not yet due and payable. Neither Purchaser nor any of its Subsidiaries
has entered into, or obtained, as applicable, any material closing agreement, private letter ruling, technical advice memoranda or similar agreement or rulings with any Tax authority, nor have any been issued by any Tax authority, in each case that
have any continuing effect. Each of Purchaser and its Subsidiaries have disclosed on its federal income Tax Returns all positions taken therein that could reasonably be expected to give rise to a substantial understatement of federal income Tax
within the meaning of Section 6662 of the Code. Neither Purchaser nor any of its Subsidiaries (A) has ever been a member of an affiliated, combined, consolidated or unitary Tax group for purposes of filing any Tax Return, other than a
group of which Purchaser was the common parent, (B) has any 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 or (C) is a party to or bound by any Tax sharing or allocation agreement or has any other current contractual obligation to indemnify any other Person with respect to Taxes (other than such agreement or arrangement exclusively
between or among Purchaser and its Subsidiaries). Neither Purchaser nor any of its Subsidiaries has participated in any listed transactions within the meaning of Treasury Regulations Section
1.6011-4(b)(2).
Neither Purchaser nor any of its Subsidiaries has been a distributing corporation or controlled corporation in any distribution occurring during the last 30 months that
was purported or intended to be governed by Section 355 of the Code (or any similar provision of state, local or foreign Law). Neither Purchaser nor any of its Subsidiaries is the beneficiary of any extension of time within which or file any
material Tax Return (other than extensions to file Tax Returns obtained in the ordinary course of business).
4.12
Approvals
. As of
the date of this Agreement, Purchaser knows of no reason why all regulatory approvals from any Governmental Entity required for the consummation of the transactions contemplated by this Agreement should not be obtained on a timely basis.
4.13
Reorganization
.
(a) Purchaser has not taken or agreed to take any action, and is not aware of any fact or circumstance, that would prevent or impede, or could
reasonably be expected to prevent or impede, the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(b) Merger Sub is an entity that is disregarded as an entity separate from Purchaser for federal Tax purposes and, as such, is a
disregarded entity as defined in Treasury Regulations
1.368-2(b)(1)(i)(A).
4.14
Intellectual Property
. Except as has not had and would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on Purchaser and its Subsidiaries:
(a) Each of Purchaser and its Subsidiaries, to Purchasers Knowledge (A) owns (beneficially, and of record where applicable), free
and clear of all Liens, other than
non-exclusive
licenses entered into in the ordinary course of business consistent with past practice, all right, title and interest in and to its respective Owned
B - 26
Intellectual Property, and (B) has valid and sufficient rights and licenses to all of the Licensed Intellectual Property. To Purchasers Knowledge, the Owned Intellectual Property is
subsisting, valid and enforceable. To Purchasers Knowledge, the Owned Intellectual Property and the Licensed Intellectual Property constitute all Intellectual Property used in or necessary for the operation of the respective businesses of
Purchaser and each of its Subsidiaries as presently conducted. To Purchasers Knowledge, each of Purchaser and its Subsidiaries has sufficient rights to use all Intellectual Property used in its respective business as presently conducted.
(b) To Purchasers Knowledge, the operation of Purchaser and each of its Subsidiaries respective businesses as presently conducted
does not infringe, misappropriate or otherwise violate the Intellectual Property rights of any third Person, and since December 31, 2011, no Person has asserted in writing that Purchaser or any of its Subsidiaries has materially infringed,
misappropriated or otherwise violated any third Persons Intellectual Property rights. To Purchasers Knowledge, no third Person has infringed, misappropriated or otherwise violated any of Purchasers or any of its Subsidiarys
rights in the Owned Intellectual Property.
(c) Purchaser and each of its Subsidiaries has taken reasonable measures to protect
(A) their rights in their respective Owned Intellectual Property and (B) the confidentiality of all Trade Secrets that are owned, used or held by Purchaser or any of its Subsidiaries, and to Purchasers Knowledge, such Trade Secrets
have not been used, disclosed to or discovered by any Person except pursuant to appropriate
non-disclosure
agreements which have not been breached. To Purchasers Knowledge, no Person has gained
unauthorized access to Purchasers or its Subsidiaries IT Assets.
(d) Purchasers and each of its Subsidiaries
respective IT Assets operate and perform in all material respects as reasonably required by Purchaser and each of its Subsidiaries in connection with their respective businesses and have not materially malfunctioned or failed within the past two
years. To Purchasers Knowledge, Purchaser and each of its Subsidiaries has implemented reasonable backup, security and disaster recovery technology and procedures consistent with industry practices. To Purchasers Knowledge, Purchaser and
each of its Subsidiaries is compliant with their own privacy policies and commitments to their respective customers, consumers and employees, concerning data protection and the privacy and security of personal data and the nonpublic personal
information of their respective customers, consumers and employees.
4.15
Properties
. Either Purchaser or one of its Subsidiaries
(a) has good and, as to real property, marketable title to all the material properties and assets reflected in either the latest audited balance sheet or latest interim balance sheet included in the Financial Statements as being owned by either
Purchaser or one of its Subsidiaries or acquired after the date thereof (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business consistent with past practice) (the
Owned Properties
), free and clear of all Liens of any nature whatsoever, except (i) statutory Liens securing payments not yet due or which are being contested in good faith for which adequate reserves have been taken,
(ii) Liens for real property Taxes not yet due and payable, (iii) easements, rights of way, and other similar encumbrances that do not materially affect the use of the properties or assets subject thereto or affected thereby or otherwise
materially impair business operations at such properties and (iv) such imperfections or irregularities of title or Liens as do not materially affect the use of the properties or assets subject thereto or affected thereby or otherwise materially
impair business operations at such properties (collectively,
Permitted Encumbrances
), and (b) is the lessee of all leasehold estates reflected in either the Financial Statements or acquired after the date thereof (except for
leases that have expired by their terms since the date thereof) (collectively with the Owned Properties, the
Real Property
), free and clear of all Liens of any nature whatsoever, except for Permitted Encumbrances, and is in
possession of the properties purported to be leased thereunder, and each such lease is valid without default thereunder by the lessee or, to Purchasers Knowledge, the lessor. There are no pending or, to Purchasers Knowledge, threatened
(in writing) condemnation proceedings against the Real Property.
4.16
Insurance
. Purchaser and its Subsidiaries are insured with
reputable insurers against such risks and in such amounts as the management of Purchaser reasonably has determined to be prudent and consistent with industry practice. Purchaser and its Subsidiaries are in compliance in all material respects with
their insurance
B - 27
policies and are not in default under any of the terms thereof. Each such policy is outstanding and in full force and effect and, except for policies insuring against potential liabilities of
officers, directors and employees of Purchaser and its Subsidiaries, Purchaser or the relevant Subsidiary thereof is the sole beneficiary of such policies, and all premiums and other payments due under any such policy have been paid, and all claims
thereunder have been filed in due and timely fashion.
4.17
Accounting and Internal Controls
.
(a) The records, systems, controls, data and information of Purchaser and its Subsidiaries are recorded, stored, maintained and operated under
means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Purchaser or its Subsidiaries or accountants (including all means of access thereto and
therefrom), except for any
non-exclusive
ownership and
non-direct
control that would not reasonably be expected to have a material adverse effect on the system of
internal accounting controls described in the following sentence. Purchaser and its Subsidiaries have devised and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial
reporting and the preparation of financial statements in accordance with GAAP. Purchaser has designed and implemented disclosure controls and procedures (within the meaning of Rules
13a-15(e)
and
15d-15(e)
of the Exchange Act) to ensure that material information relating to Purchaser and its Subsidiaries is made known to its management by others within those entities as appropriate to allow timely decisions
regarding required disclosure and to allow it to make certifications that would be required by the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act, if applicable.
(b) Purchasers management completed an assessment of the effectiveness of its internal control over financial reporting in compliance
with the requirements of Section 404 of the Sarbanes-Oxley Act for the years ended December 31, 2014 and 2015, and such assessments concluded that such controls were effective. Purchaser has previously disclosed, based on its most recent
evaluation prior to the date hereof, to its auditors and the audit committee of its Board of Directors, and has described in Section 4.17(b) of the Purchaser Disclosure Schedule: (A) any significant deficiencies and material weaknesses in the
design or operation of internal controls over financial reporting and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in its internal controls over financial reporting.
(c) Since December 31, 2011 (A) neither Purchaser nor any of its Subsidiaries nor, to Purchasers Knowledge, any director, officer,
auditor, accountant or representative of it or any of its Subsidiaries has received or otherwise had or obtained Knowledge of any material complaint, allegation, assertion or written claim regarding the accounting or auditing practices, procedures,
methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of Purchaser or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation,
assertion or written claim that Purchaser or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and (B) no attorney representing Purchaser or any of its Subsidiaries, whether or not employed by it or any of
its Subsidiaries, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation by it or any of its officers or directors to its Board of Directors or any committee thereof or to any of its directors
or officers.
4.18
Ownership of Company Common Shares
. As of the date hereof, neither Purchaser nor any of its affiliates,
(i) beneficially owns, directly or indirectly, any Company Common Shares, (ii) is a party to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of, any Company Common Shares,
(iii) is not now, nor at any time within the last three years has been, an interested shareholder, as such term is defined in Section 1704.01 of the OGCL, or (iv) is a Related Person, as such term is defined in
Article SEVENTH of the Company Articles.
4.19
Opinion
. The Board of Directors of Purchaser has received the opinion of
Boenning & Scattergood, Inc., to the effect that, as of the date of such opinion, based upon and subject to the factors and assumptions set forth therein, the Merger Consideration is fair from a financial point of view to Purchaser.
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4.20
Available Funds
. Purchaser has cash and, immediately prior to the Effective Time,
Merger Sub will have cash, sufficient to pay or cause to be deposited into the Exchange Fund the aggregate amount of cash as required pursuant to Section 2.2.
ARTICLE V
COVENANTS
RELATING TO CONDUCT OF BUSINESS
5.1
Conduct of Businesses Prior to the Effective Time
. During the period from the date of this
Agreement to the Effective Time, (a) each of Company and Purchaser shall, and shall cause each of its respective Subsidiaries to, (i) conduct its business in the ordinary course consistent with past practice in all material respects and
(ii) use commercially reasonable efforts to maintain and preserve intact its business organization and advantageous business relationships, and (b) each of Company and Purchaser shall, and shall cause each of its respective Subsidiaries
to, take no action that is intended to or would reasonably be expected to adversely affect or materially delay the ability of either Company or Purchaser to perform its covenants and agreements under this Agreement or to consummate the transactions
contemplated hereby.
5.2
Company Forbearances
. Except as otherwise specifically permitted or required by this Agreement, during
the period from the date of this Agreement to the Effective Time, Company shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of Purchaser (which consent shall not be unreasonably withheld or delayed):
(a) (i) Issue, sell or otherwise permit to become outstanding, or dispose of or encumber or pledge, or authorize or propose the creation of,
any additional common shares or other equity interest, Voting Debt or Equity Rights, or (ii) grant, award or issue any Company stock options, restricted units, stock appreciation rights, restricted stock, awards based on the value of
Companys capital stock or other equity-based award with respect to shares of the Company Common Shares under any of the Company Benefit Plans or otherwise.
(b) (i) Make, declare, pay or set aside for payment any dividend on or in respect of, or declare or make any distribution on any shares of its
stock (other than regular semi-annual dividends not exceeding $1.00 per Company Common Share and dividends from its wholly-owned Subsidiaries to it, or (ii) directly or indirectly adjust, split, combine, redeem, reclassify, purchase or
otherwise acquire, any shares of its stock.
(c) Amend the terms of, waive any rights under, terminate, knowingly violate the terms of, or
enter into, (i) any contract or other binding obligation other than in the ordinary course of business consistent with past practice or (ii) any contract or other binding obligation of the sort specified in Section 3.16(a)(iv), (vi),
(vii), (viii), (ix), (x), (xiii) or (xiv).
(d) Sell, transfer, mortgage, encumber, license, let lapse, cancel, abandon or otherwise
dispose of or discontinue any of its assets, deposits, business or properties, except for the MWG Disposition and any sales, transfers, mortgages, encumbrances, licenses, lapses, cancellations, abandonments or other dispositions or discontinuances
in the ordinary course of business consistent with past practice and in a transaction that, together with other such transactions, is not material to it and its Subsidiaries, taken as a whole.
(e) Acquire (other than by way of foreclosures or acquisitions of control in a fiduciary or similar capacity or in satisfaction of debts
previously contracted in good faith, in each case in the ordinary course of business consistent with past practice) all or any portion of the assets, business, deposits or properties of any other entity.
(f) Amend the Company Articles or the Company Regulations, or similar governing documents of any of its Significant Subsidiaries.
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(g) Implement or adopt any change in its accounting principles, practices or methods, other than
as may be required by GAAP or applicable regulatory accounting requirements or any Regulatory Agency responsible for regulating Company.
(h) Except as required under applicable Law or the terms of any Company Benefit Plan existing as of the date hereof (i) increase in any
manner the compensation, severance or benefits of any of the current or former directors, officers, employees, consultants, independent contractors or other service providers of Company or its Subsidiaries (collectively,
Employees
), other than increases in base salary to Employees in the ordinary course consistent with past practice, which shall not exceed 1.5% in the aggregate or 3% for any individual to Employees (in each case, on an annualized
basis), (ii) other than the payment of incentive compensation to Employees in the ordinary course consistent with past practice and financial statement accruals
,
pay or award, or commit to pay or award, any bonuses or incentive compensation,
(iii) become a party to, establish, amend, alter prior interpretations of, commence participation in, terminate or commit itself to the adoption of any stock option plan or other stock-based compensation plan, compensation, severance, pension,
retirement, profit-sharing, welfare benefit, or other employee benefit plan or agreement or employment agreement with or for the benefit of any Employee (or newly hired Employee), (iv) cause the funding of any rabbi trust or similar arrangement or
take any action to fund or in any other way secure the payment of compensation or benefits under any Company Benefit Plan, (v) change any actuarial assumptions used to calculate funding obligations with respect to any Company Benefit Plan or
change the manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by GAAP or applicable Law, or (vi) hire or terminate without cause the employment of any Employee
who has (in the case of Employees to be terminated) or would have (in the case of Employees to be hired) target total compensation (base salary, target cash incentive and target equity) of $75,000 or more.
(i) Take, or omit to take, any action that would, or could reasonably be expected to, prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code, or, except as may be required by applicable Law imposed by any Governmental Entity, (i) take any action that would reasonably be expected to prevent, materially
impede or materially delay the consummation of the transactions contemplated by this Agreement, or (ii) take, or knowingly fail to take, any action that is reasonably likely to result in any of the conditions to the Merger set forth in
Article VII not being satisfied.
(j) Incur or guarantee any indebtedness for borrowed money other than in the ordinary course of
business consistent with past practice.
(k) Enter into any new line of business or materially change its lending, investment,
underwriting, risk and asset liability management and other banking and operating policies, except as required by Law or requested by a Regulatory Agency.
(l) Other than in consultation with Purchaser, make any material change to (i) its investment securities portfolio, derivatives portfolio
or its interest rate exposure, through purchases, sales or otherwise, or (ii) the manner in which the portfolio is classified or reported, except as required by Law or requested by a Regulatory Agency.
(m) Settle any action, suit, claim or proceeding against it, except for an action, suit, claim or proceeding that is settled in an amount and
for consideration not in excess of $25,000 individually (or $100,000 in the aggregate for all such actions, suits, claims) and that would not (i) impose any restriction on the business of it or its Subsidiaries or (ii) create precedent for
claims that is reasonably likely to be material to it or its Subsidiaries.
(n) Make application for the opening, relocation or closing of
any, or open, relocate or close any, branch office, loan production office or other significant office or operations facility.
(o) Make
or incur any capital expenditure in excess of $25,000 individually or $100,000 in the aggregate, except for Previously Disclosed binding commitments existing on the date hereof.
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(p) Issue any communication of a general nature to its employees or customers without the prior
approval of Purchaser (which will not be unreasonably delayed or withheld), except for communications in the ordinary course of business that do not relate to the Merger or other transactions contemplated hereby.
(q) Make or change any material Tax elections, change or consent to any change in it or its Subsidiaries method of accounting for Tax
purposes (except as required by applicable Tax Law), enter into any structured transaction outside of its regular course of business, settle or compromise any material Tax liability, claim or assessment, enter into any closing agreement, waive or
extend any statute of limitations with respect to a material amount of Taxes, surrender any right to claim a refund for a material amount of Taxes, or file any material amended Tax Return.
(r) Except (i) for Loans or legally binding commitments for Loans that have previously been approved by Company prior to the date of this
Agreement, make or acquire any Loan or issue a commitment (or renew or extend an existing commitment) for any Loan, or amend or modify in any material respect any existing Loan, that would result in total credit exposure to the applicable borrower
(and its affiliates) in excess of $200,000, (ii) with respect to amendments or modifications that have previously been approved by Company prior to the date of this Agreement, amend or modify in any material respect any existing Loan rated
special mention or below by Company with total credit exposure in excess of $200,000 or (iii) with respect to any such actions that have previously been approved by Company prior to the date of this Agreement, modify or amend any
Loan in a manner that would result in any additional extension of credit, principal forgiveness, or effect any uncompensated release of collateral, i.e., at a value below the fair market value thereof as determined by Company, in each case in excess
of $300,000.
(s) Agree to take, make any commitment to take, or adopt any resolutions of its Board of Directors in support of, any of the
actions prohibited by this Section 5.2.
5.3
Purchaser Forbearances
. Except as expressly permitted by this Agreement or with
the prior written consent of Company (which shall not be unreasonably withheld or delayed), during the period from the date of this Agreement to the Effective Time, Purchaser shall not, and shall not permit any of its Subsidiaries to:
(a) Take, or omit to take, any action that would, or could reasonably be expected to, prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code, or, except as may be required by applicable Law imposed by any Governmental Entity, (i) take any action that would reasonably be expected to prevent, materially impede
or materially delay the consummation of the transactions contemplated by this Agreement, or (ii) take, or knowingly fail to take, any action that is reasonably likely to result in any of the conditions to the Merger set forth in Article VII not
being satisfied.
(b) Agree to take, make any commitment to take, or adopt any resolutions of its Board of Directors in support of, any of
the actions prohibited by this Section 5.3.
(c) Make or change any material Tax elections, change or consent to any change in it or
its Subsidiaries method of accounting for Tax purposes (except as required by applicable Tax Law), enter into any structured transaction outside of its regular course of business, settle or compromise any material Tax liability, claim or
assessment, enter into any closing agreement, waive or extend any statute of limitations with respect to a material amount of Taxes, surrender any right to claim a refund for a material amount of Taxes, or file any material amended Tax Return.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1
Regulatory Matters
.
(a) Purchaser shall promptly prepare and file with the SEC, and Company shall cooperate in the preparation of, the Form
S-4,
in which the Proxy Statement will be included as a prospectus. Purchaser shall use its commercially reasonable efforts to have the Form
S-4
declared effective under the
Securities Act as promptly as practicable after such filing, and Company shall thereafter mail or deliver the Proxy Statement to Company shareholders. Purchaser shall also use its commercially reasonable efforts to obtain all necessary state
securities Law or Blue Sky permits and approvals required to carry out the transactions contemplated by this Agreement, and Company shall furnish all information concerning Company and the holders of Company Common Shares as may be
reasonably requested in connection with any such action.
(b) The parties shall cooperate with each other and use their respective
commercially reasonable efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, to obtain as promptly as practicable all permits, consents, approvals and authorizations of all
third parties and Governmental Entities that are necessary or advisable to consummate the transactions contemplated by this Agreement (including the Merger and the Bank Merger), and to comply with the terms and conditions of all such permits,
consents, approvals and authorizations of all such third parties or Governmental Entities. Company and Purchaser shall have the right to review in advance, and, to the extent practicable, each will consult the other on, in each case subject to
applicable Laws, all the information relating to Company or Purchaser, as the case may be, and any of their respective Subsidiaries, that appear in any filing made with, or written materials submitted to, any third party or any Governmental Entity
in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the parties shall act reasonably and as promptly as practicable. The parties shall consult with each other with respect to the obtaining
of all permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated by this Agreement and each party will keep the other apprised of the status of
matters relating to completion of the transactions contemplated by this Agreement. Each party shall consult with the other in advance of any meeting or conference with any Governmental Entity and to the extent permitted by such Governmental Entity,
give the other party and/or its counsel the opportunity to attend and participate in such meetings and conferences. Notwithstanding anything contained herein to the contrary, in no event shall the foregoing or any other provision of this Agreement
require Purchaser or Company to take or commit to take any actions in connection with obtaining such consents, approvals and authorizations, or agree to or suffer any condition or restriction on Purchaser, Company or the Surviving Corporation in
connection therewith, that would or could reasonably be expected to have a material adverse effect (measured on a scale relative to Company) on Purchaser or Company.
(c) Each of Purchaser and Company shall, upon request, furnish to the other all information concerning itself, its Subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably necessary or advisable in connection with the Proxy Statement, the Form
S-4
or any other statement, filing, notice or application made by
or on behalf of Purchaser, Company or any of their respective Subsidiaries to any Governmental Entity in connection with the Merger, the Bank Merger and the other transactions contemplated by this Agreement. Each of Purchaser and Company agrees, as
to itself and its Subsidiaries, that none of the information supplied or to be supplied by it for inclusion or incorporation by reference in (i) the Form
S-4
will, at the time the Form
S-4
and each amendment or supplement thereto, if any, becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and (ii) the Proxy Statement and any amendment or supplement thereto will, at the date of mailing to shareholders and at the time of the Company Shareholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (ii) the Proxy Statement and any
B - 32
amendment or supplement thereto will, at the date of mailing to shareholders and at the time of the Company Shareholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which such statement was made, not misleading. Each of Purchaser and Company further agrees that if it becomes
aware that any information furnished by it would cause any of the statements in the Form
S-4
or the Proxy Statement to be false or misleading with respect to any material fact, or to omit to state any material
fact required to be stated therein or necessary to make the statements therein not false or misleading, to promptly inform the other party thereof and to take appropriate steps to correct the Form
S-4
or the
Proxy Statement.
(d) Each of Purchaser and Company shall promptly advise the other upon receiving any communication from any Governmental
Entity the consent or approval of which is required for consummation of the transactions contemplated by this Agreement that causes such party to believe that there is a reasonable likelihood that any Requisite Regulatory Approval will not be
obtained or that the receipt of any such approval may be materially delayed.
6.2
Access to Information
.
(a) Upon reasonable notice and subject to applicable Laws, Company shall, and shall cause each of its Subsidiaries to, afford to the officers,
employees, accountants, counsel, advisors, agents and other representatives of Purchaser, reasonable access, during normal business hours during the period prior to the Effective Time, to all its properties, books, contracts, commitments and
records, and, during such period, Company shall, and shall cause its Subsidiaries to, make available to Purchaser (i) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant
to the requirements of federal securities Laws or federal or state banking or insurance Laws (other than reports or documents that Company is not permitted to disclose under applicable Law); (ii) all other information concerning its business,
properties and personnel as Purchaser may reasonably request, including periodic updates of the information provided in Section 3.26. Upon the reasonable request of Company, Purchaser shall furnish such reasonable information about it and its
business as is relevant to Company and its shareholders in connection with the transactions contemplated by this Agreement. Neither Company nor Purchaser, nor any of their Subsidiaries shall be required to provide access to or to disclose
information where such access or disclosure would jeopardize the attorney-client privilege of such party or its Subsidiaries or contravene any Law, judgment, decree, fiduciary duty or binding agreement entered into prior to the date of this
Agreement. The parties shall make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply.
(b) All nonpublic information and materials provided pursuant to this Agreement shall be subject to the provisions of the confidentiality
obligations reflected by the letter of intent entered into between Purchaser and Company as of February 13, 2017 (the
Confidentiality Agreement
).
(c) No investigation by a party hereto or its representatives shall affect or be deemed to modify or waive any representations, warranties or
covenants of the other party set forth in this Agreement.
6.3
Shareholder Approval
. The Board of Directors of Company has resolved
to recommend to Companys shareholders that they approve this Agreement and will submit to its shareholders this Agreement and any other matters required to be approved by its shareholders in order to carry out the intentions of this Agreement.
In furtherance of that obligation, Company will take, in accordance with applicable Law and the Company Articles and the Company Code, all action necessary to convene a meeting of its shareholders (
Company Shareholders
Meeting
), as promptly as practicable after Purchaser has obtained the SECs declaration of effectiveness of the Form
S-4,
to consider and vote upon approval of this Agreement. Company agrees
that its obligations pursuant to this Section 6.3 shall not be affected by the commencement, public proposal, public disclosure or communication to Company of any Acquisition Proposal or Change in the Company Recommendation. Subject to the
provisions of Section 6.7, Company shall, through its Board of Directors, recommend to its shareholders the approval and adoption of this Agreement (the
Company
Recommendation
), and shall use its best efforts to obtain
the
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affirmative vote of (i) the holders of not less than a majority of the issued and outstanding Company Common Shares and (ii) the holders of not less than a majority of the issued and
outstanding Company Common Shares who are not officers, directors or affiliates of the Company (collectively, the
Company Shareholder Approval
). Notwithstanding any Change in the Company Recommendation, this Agreement shall be
submitted to the shareholders of Company at the Company Shareholders Meeting for the purpose of obtaining the Company Shareholder Approval and nothing contained herein shall be deemed to relieve Company of such obligation so long as Purchaser
has obtained the SECs declaration of effectiveness of the Form
S-4;
provided
,
however
, that if the Board of Directors of Company shall have effected a Change in the Company Recommendation
permitted hereunder, then the Board of Directors of Company shall submit this Agreement to Companys shareholders without the recommendation of the Agreement (although the resolutions adopting this Agreement as of the date hereof may not be
rescinded or amended), in which event the Board of Directors of Company may communicate the basis for its lack of a recommendation to Companys shareholders in the Proxy Statement or an appropriate amendment or supplement thereto to the extent
required by applicable Law;
provided
that, for the avoidance of doubt, Company may not take any action under this sentence unless it has complied with the provisions of Section 6.7. In addition to the foregoing, neither Company nor
its Board of Directors of Company shall recommend to its shareholders or submit to the vote of its shareholders any Acquisition Proposal other than the Merger. Except as set forth in Section 6.7, neither the Board of Directors of Company nor
any committee thereof shall withdraw, qualify or modify, or propose publicly to withdraw, qualify or modify, in a manner adverse to Purchaser, the Company Recommendation or take any action, or make any public statement, filing or release
inconsistent with the Company Recommendation (any of the foregoing being a
Change in the Company Recommendation
).
6.4
Nasdaq Listing
; Reservation of Purchaser Common Shares
.
(a) Purchaser shall cause the Purchaser Common Shares to be issued
in the Merger to have been authorized for listing on the Nasdaq, subject to official notice of issuance, prior to the Effective Time.
(b)
Purchaser agrees at all times from the date of this Agreement to reserve a sufficient number of Purchaser Common Shares to fulfill its obligations under this Agreement, including payment of the Merger Consideration.
6.5
Employee Matters
.
(a) As soon as administratively practicable after the Effective Time, Purchaser shall take all reasonable action so that employees of Company
and its Subsidiaries shall be entitled to participate in each Purchaser Benefit Plan of general applicability with the exception of any plan frozen to new participants (collectively, the
Purchaser Eligible Plans
) to the same
extent as similarly-situated employees of Purchaser and its Subsidiaries, it being understood that inclusion of the employees of Company and its Subsidiaries in the Purchaser Eligible Plans may occur at different times with respect to different
plans, provided that coverage shall be continued under corresponding Company Benefit Plans until such employees are permitted to participate in the Purchaser Eligible Plans and provided further, however, that nothing contained in this Agreement
shall require Purchaser or any of its Subsidiaries to make any grants to any former employee of Company under any discretionary equity compensation plan of Purchaser or to provide the same level of (or any) employer contributions or other benefit
subsidies as Company or its Subsidiaries. Purchaser shall cause each Purchaser Eligible Plan in which employees of Company and its Subsidiaries are eligible to participate, to recognize, for purposes of determining eligibility to participate in, and
vesting of, benefits under the Purchaser Eligible Plans, the service of such employees with Company and its Subsidiaries to the same extent as such service was credited for such purpose by Company or its Subsidiaries, and, solely for purposes of
Purchasers vacation programs, for purposes of determining the benefit amount, provided, however, that such service shall not be recognized to the extent that such recognition would result in a duplication of benefits. Except for the commitment
to continue those Company Benefit Plans that correspond to Purchaser Eligible Plans until employees of Company and its Subsidiaries are included in such Purchaser Eligible Plans, nothing in this Agreement shall limit the ability of Purchaser to
amend or terminate any of the Company Benefit Plans in accordance with and to the extent permitted by their terms at any time permitted by such terms.
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(b) At and following the Effective Time, and except as otherwise provided in Section 6.5(e),
Purchaser shall honor, and the Surviving Company shall continue to be obligated to perform, in accordance with their terms, all benefit obligations to, and contractual rights of, current and former employees of Company and its Subsidiaries and
current and former directors of Company and its Subsidiaries existing as of the Effective Date under any Company Benefit Plan, including any employment, change in control and severance agreements listed on Section 3.11(a) of the Company Disclosure
Schedule to the extent each such agreement is not superseded by a subsequent agreement between Purchaser and such employee. Any years of service recognized for purposes of this Section 6.5 will be taken into account under the terms of any
generally applicable severance policy of Purchaser or its Subsidiaries.
(c) At such time as employees of Company and its
Subsidiaries become eligible to participate in a medical, dental or health plan of Purchaser or its Subsidiaries, Purchaser shall, to the extent reasonably practicable and available from its insurers, cause each such plan to (i) waive any
preexisting condition limitations to the extent such conditions are covered under the applicable medical, health or dental plans of Purchaser and (ii) waive any waiting period limitation or evidence of insurability requirement that would
otherwise be applicable to such employee or dependent on or after the Effective Time to the extent such employee or dependent had satisfied any similar limitation or requirement under an analogous Company Benefit Plan prior to the Effective Time.
(d) Immediately prior to the Effective Time, Company shall, at the written request of Purchaser, freeze or terminate each Company Benefit
Plan as is requested by Purchaser. Prior to the Effective Time, Company shall take appropriate corrective action, acceptable to Purchaser with regard to any plan deficit described in Section 3.11(c) of the Company Disclosure Schedule.
(e) Without limiting the generality of Section 9.10, the provisions of this Section 6.5 are solely for the benefit of the parties to
this Agreement, and no current or former Employee or any other individual associated therewith shall be regarded for any purpose as a third-party beneficiary of this Agreement. In no event shall the terms of this Agreement be deemed to
(i) establish, amend, or modify any Company Benefit Plan or any employee benefit plan as defined in Section 3(3) of ERISA, or any other benefit plan, program, agreement or arrangement maintained or sponsored by Purchaser,
Company or any of their respective affiliates; (ii) alter or limit the ability of Purchaser or any of its Subsidiaries (including, after the Closing Date, Company and its Subsidiaries) to amend, modify or terminate any Company Benefit Plan,
employment agreement or any other benefit or employment plan, program, agreement or arrangement after the Closing Date; or (iii) to confer upon any current or former Employee, any right to employment or continued employment or continued service
with Purchaser or any of its Subsidiaries (including, following the Closing Date, Company and its Subsidiaries), or constitute or create an employment or other agreement with any Employee.
(f) Any employee of Company who is not subject to a written employment or separation agreement and whose employment is terminated at or within
six months following the Effective Time, whether because such employees position is eliminated or such employee is not offered or retained in comparable employment (a
Covered Employee
), will be entitled to a severance
payment equal to two (2) weeks of such employees current base pay for each full year of such employees service with Company, with a minimum benefit of four (4) weeks pay and a maximum benefit of
twenty-six
(26) weeks pay. This severance payment will be in lieu of participation by a Covered Employee in Purchasers severance plan as in effect from time to time after the Effective Time. For the
avoidance of doubt, for the purposes of determining the level of severance benefits, each Covered Employee shall be credited for service with Company only as provided in this Section 6.5.
6.6
Indemnification; Directors
and Officers
Insurance
.
(a) From and after the Effective Time, the Surviving Company shall indemnify and hold harmless, to the full extent provided under the Company
Articles and the Company Regulations (including advancement of expenses as incurred) to the extent permitted under applicable Law including specifically 12 C.F.R. Part 359, each present and former director and officer (determined as of the Effective
Time) of Company and its
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Subsidiaries (in each case, when acting in such capacity) (collectively, the
Indemnified Parties
) against any costs or expenses (including reasonable attorneys fees),
judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or
occurring at or prior to the Effective Time, whether asserted before or after the Effective Time, including the transactions contemplated by this Agreement;
provided
that the Indemnified Party to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such Indemnified Party is not entitled to indemnification.
(b)
Subject to the following sentence, for a period of six years following the Effective Time, Purchaser will use its commercially reasonable efforts to provide directors and officers liability insurance that serves to reimburse the present
and former officers and directors of Company or any of its Subsidiaries (determined as of the Effective Time) with respect to claims against such directors and officers arising from facts or events occurring at or before the Effective Time
(including the transactions contemplated by this Agreement), which insurance will contain at least the same coverage and amounts, and contain terms and conditions no less advantageous to the Indemnified Party as that coverage currently provided by
Company;
provided
that in no event shall Purchaser be required to expend, on an annual basis, an amount in excess of 150% of the annual premiums paid as of the date hereof by Company for any such insurance (the
Premium
Cap
);
provided
,
further
, that if any such annual expense at any time would exceed the Premium Cap, then Purchaser will cause to be maintained policies of insurance which provide the maximum coverage available at an annual
premium equal to the Premium Cap. At the option of Purchaser, in consultation with Company, prior to the Effective Time and in lieu of the foregoing, Purchaser or Company may purchase a tail policy for directors and officers liability
insurance on the terms described in the prior sentence (including subject to the Premium Cap) and fully pay for such policy prior to the Effective Time.
(c) Any Indemnified Party wishing to claim indemnification under Section 6.6(a), upon learning of any claim, action, suit, proceeding or
investigation described above, will promptly notify Purchaser;
provided
that failure to so notify will not affect the obligations of Purchaser under Section 6.6(a) unless and to the extent that Purchaser is actually prejudiced as a
consequence.
(d) The provisions of this Section 6.6 shall survive the Effective Time and are intended to be for the benefit of, and
shall be enforceable by, each Indemnified Party and his or her heirs and representatives. If Purchaser or any of its successors or assigns shall consolidate with or merge into any other entity and shall not be the continuing or surviving entity of
such consolidation or merger or shall transfer all or substantially all of its assets to any other entity, then and in each case, proper provision shall be made so that the successors and assigns of Purchaser shall assume the obligations set forth
in this Section 6.6.
6.7
No Solicitation
.
(a) Except as set forth in Section 6.7(b), none of Company nor any of its Subsidiaries shall, and each of them shall cause its respective
officers, directors, employees, agents, investment bankers, financial advisors, attorneys, accountants and other retained representatives (each a
Representative
) not to, directly or indirectly (i) solicit, initiate,
encourage, knowingly facilitate (including by way of providing information) or induce any inquiry, proposal or offer with respect to, or the making or completion of, any Acquisition Proposal, or any inquiry, proposal or offer that is reasonably
likely to lead to any Acquisition Proposal, (ii) enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any Person or group (as such term is defined in Section 13(d) under the
Exchange Act) any confidential or nonpublic information with respect to or in connection with, an Acquisition Proposal, (iii) take any other action to knowingly facilitate any inquiries or the making of any proposal that constitutes or may
reasonably be expected to lead to an Acquisition Proposal, (iv) approve, endorse or recommend, or propose to approve, endorse or recommend any Acquisition Proposal or any agreement related thereto, (v) enter into any agreement
contemplating or otherwise relating to any Acquisition Transaction or Acquisition Proposal (other than any confidentiality agreement required by Section 6.7(b)), (vi) enter into any agreement or agreement in principle requiring, directly or
indirectly, Company to
B - 36
abandon, terminate or fail to consummate the transactions contemplated hereby or breach its obligations hereunder, or (vii) propose or agree to do any of the foregoing.
(b) Notwithstanding anything to the contrary in Section 6.7(a), if Company or any of its Representatives receives an unsolicited bona fide
written Acquisition Proposal by any Person or group (as such term is defined in Section 13(d) under the Exchange Act) that did not result from or arise in connection with a breach of this Section 6.7 at any time prior to the Company
Shareholders Meeting that the Board of Directors of Company has determined, in its good faith judgment (after consultation with Companys financial advisors and outside legal counsel) to constitute or to be reasonably likely to result in
a Superior Proposal, Company and its Representatives may take any action described in Section 6.7(a)(ii) above to the extent that the Board of Directors of Company has determined, in its good faith judgment (after consultation with Companys
outside legal counsel), that the failure to take such action would cause it to violate its fiduciary duties under applicable Law;
provided
, that, prior to taking any such action, Company has obtained from such Person or group (as
such term is defined in Section 13(d) under the Exchange Act) an executed confidentiality agreement containing terms substantially similar to, and no less favorable to Company than, the terms of the Confidentiality Agreement.
(c) As promptly as practicable (but in no event more than 24 hours) following receipt of any Acquisition Proposal or any request for nonpublic
information or inquiry that would reasonably be expected to lead to any Acquisition Proposal, Company shall advise Purchaser in writing of the receipt of any Acquisition Proposal, request or inquiry and the terms and conditions of such Acquisition
Proposal, request or inquiry, shall promptly provide to Purchaser a copy of the Acquisition Proposal, request or inquiry (including the identity of the Person or group (as such term is defined in Section 13(d) under the Exchange Act)
making the Acquisition Proposal) and shall keep Purchaser promptly apprised of any related developments, discussions and negotiations (including providing Purchaser with a copy of all material documentation and correspondence relating thereto) on a
current basis. Company agrees that it shall immediately provide to Purchaser any information concerning Company that may be provided (pursuant to Section 6.7(b)) to any other Person or group (as such term is defined in Section 13(d)
under the Exchange Act) in connection with any Acquisition Proposal which has not previously been provided to Purchaser.
(d)
Notwithstanding anything herein to the contrary, at any time prior to the Company Shareholders Meeting, the Board of Directors of Company may withdraw its recommendation of the Merger Agreement, thereby resulting in a Change in the Company
Recommendation, if and only if (x) from and after the date hereof, Company has complied with Sections 6.3 and 6.7, and (y) the Board of Directors of Company has determined in good faith, after consultation with outside counsel, that the
taking of such action is reasonably necessary in order for the Board of Directors of Company to comply with fiduciary duties under applicable Law;
provided
, that the Board of Directors of Company may not effect a Change in the Company
Recommendation unless:
(1) Company shall have received an unsolicited bona fide written Acquisition Proposal and the Board
of Directors of Company shall have concluded in good faith (after consultation with Companys financial advisors and outside legal counsel) that such Acquisition Proposal is a Superior Proposal, after taking into account any amendment or
modification to this Agreement agreed to or proposed by Purchaser;
(2) Company shall have provided prior written notice to
Purchaser at least five (5) Business Days in advance (the
Notice Period
) of taking such action, which notice shall advise Purchaser that the Board of Directors of Company has received a Superior Proposal, specify the material
terms and conditions of such Superior Proposal (including the identity of the Person or group (as such term is defined in Section 13(d) under the Exchange Act) making the Superior Proposal);
(3) during the Notice Period, Company shall, and shall cause its financial advisors and outside counsel to, negotiate with
Purchaser in good faith (to the extent Purchaser desires to so negotiate) to make such adjustments in the terms and conditions of this Agreement so that such Superior Proposal ceases to constitute a Superior Proposal; and
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(4) the Board of Directors of Company shall have concluded in good faith (after
consultation with Companys financial advisors and outside legal counsel) that, after considering the results of such negotiations and giving effect to any proposals, amendments or modifications offered or agreed to by Purchaser, if any, that
such Acquisition Proposal continues to constitute a Superior Proposal.
If during the Notice Period any revisions are made to the Superior Proposal and
such revisions are material, Company shall deliver a new written notice to Purchaser and shall again comply with the requirements of this Section 6.7(d) with respect to such new written notice, except that the new Notice Period shall be two
(2) Business Days. In the event the Board of Directors of Company does not make the determination referred to in clause (4) of this paragraph and thereafter seeks to effect a Change in the Company Recommendation, the procedures referred to
above shall apply anew and shall also apply to any subsequent Change in the Company Recommendation.
(e) Company and its Subsidiaries
shall, and shall cause their respective Representatives to, (i) immediately cease and cause to be terminated any and all existing activities, discussions or negotiations with any Persons conducted heretofore with respect to any Acquisition
Proposal; (ii) request the prompt return or destruction of all confidential information previously furnished in connection therewith; and (iii) not terminate, waive, amend, release or modify any provision of any confidentiality or
standstill agreement relating to any Acquisition Proposal to which it or Company or any of its Subsidiaries or Representative is a party, and enforce the provisions of any such agreement.
(f) Nothing contained in this Agreement shall prevent Company or its Board of Directors from making any disclosure to Company shareholders if
Companys Board of Directors (after consultation with outside counsel) concludes that its failure to do so would cause it to violate its fiduciary duties under applicable Law;
provided
, that this Section 6.7(f) will in no way eliminate
or modify the effect that any action taken pursuant hereto would otherwise have under this Agreement.
(g) As used in this Agreement:
(i)
Superior Proposal
means any bona fide written Acquisition Proposal with respect to which the
Board of Directors of Company determines in its good faith judgment to be more favorable to Company than the Merger, and to be reasonably capable of being consummated on the terms proposed, after (i) receiving the advice of outside counsel and
ProBank Austin and (ii) taking into account all material relevant factors (including the likelihood of consummation of such transaction on the terms set forth therein; any proposed changes to this Agreement that may be proposed by Purchaser in
response to such Acquisition Proposal (whether or not during the Notice Period); and all material legal (with the advice of outside counsel), financial (including the financing terms of any such proposal), regulatory and other aspects of such
proposal (including any expense reimbursement provisions and conditions to closing));
provided
, that for purposes of the definition of Superior Proposal, the references to 15% and 85% in the definitions of
Acquisition Proposal and Acquisition Transaction shall be deemed to be references to 50%; and
(ii)
Acquisition Proposal
means any proposal, offer, inquiry, or indication of interest (whether binding or
non-binding,
and whether communicated to Company or publicly announced to
Companys shareholders) by any Person or group (as such term is defined in Section 13(d) under the Exchange Act) (in each case other than Purchaser or any of its affiliates) relating to an Acquisition Transaction involving Company
or any of its present or future consolidated Subsidiaries, or any combination of such Subsidiaries; and
(iii)
Acquisition Transaction
means any transaction or series of related transactions (other than the transactions contemplated by this Agreement) involving: (i) any acquisition (whether direct or indirect, including by way of
merger, share exchange, consolidation, business combination or other similar transaction) or purchase from Company by any Person or group (as such term is defined in Section 13(d) under the Exchange Act), other than Purchaser or any of
its affiliates, of 15% or more in interest of the total outstanding voting securities of Company or any of its Subsidiaries (measured by voting power), or any
B - 38
tender offer or exchange offer that if consummated would result in any Person or group (as such term is defined in Section 13(d) under the Exchange Act), other than Purchaser or any
of its affiliates, beneficially owning 15% or more in interest of the total outstanding voting securities of Company or any of its Subsidiaries (measured by voting power), or any merger, consolidation, share exchange, business combination or similar
transaction involving Company pursuant to which the shareholders of Company immediately preceding such transaction would hold less than 85% of the equity interests in the surviving or resulting entity of such transaction (or, if applicable, the
ultimate parent thereof) (measured by voting power); (ii) any sale or lease or exchange, transfer, license, acquisition or disposition of a business, deposits or assets that constitute 15% or more of the consolidated assets, business, revenues,
net income, assets or deposits of Company; or (iii) any liquidation or dissolution of Company or any of its Subsidiaries.
6.8
Takeover Laws
. No party will take any action that would cause the transactions contemplated by this Agreement, to be subject to requirements imposed by any Takeover Law and each of them will take all necessary steps within its control to
exempt (or ensure the continued exemption of) those transactions from, or if necessary challenge the validity or applicability of, any applicable Takeover Law, as now or hereafter in effect.
6.9
Financial Statements and Other Current Information
. As soon as reasonably practicable after they become available, but in no event
more than 15 days after the end of each calendar month ending after the date hereof, Company will furnish to Purchaser (a) consolidated financial statements (including balance sheets, statements of operations and stockholders equity) of
Company or any of its Subsidiaries (to the extent available) as of and for such month then ended, (b) internal management reports showing actual financial performance against plan and previous period, and (c) to the extent permitted by
applicable Law, any reports provided to Companys Board of Directors or any committee thereof relating to the financial performance and risk management of Company or any of its Subsidiaries.
6.10
Notification of Certain Matters
. Company and Purchaser will give prompt notice to the other of any fact, event or circumstance
known to it that (a) individually or taken together with all other facts, events and circumstances known to it, has had or is reasonably likely to result in any Material Adverse Effect with respect to it or (b) would cause or constitute a
material breach of any of its representations, warranties, covenants or agreements contained herein that reasonably could be expected to give rise, individually or in the aggregate, to the failure of a condition in Article VII.
6.11
Shareholder Litigation
. Company shall give Purchaser prompt notice of any shareholder litigation against Company and/or its
directors or affiliates relating to the transactions contemplated by this Agreement and shall give Purchaser the opportunity to participate at its own expense in the defense or settlement of any such litigation. In addition, no such settlement shall
be agreed to without Purchasers prior written consent (such consent not to be unreasonably withheld or delayed).
6.12
Transition
. Commencing following the date hereof, and in all cases subject to applicable Law, Company shall, and shall cause its Subsidiaries to, cooperate with Purchaser and its Subsidiaries to facilitate the integration of the parties and
their respective businesses effective as of the Closing Date or such later date as may be determined by Purchaser. Without limiting the generality of the foregoing, from the date hereof through the Closing Date and consistent with the performance of
their
day-to-day
operations and the continuous operation of Company and its Subsidiaries in the ordinary course of business, Company shall cause the employees, officers
and representatives of Company and its Subsidiaries to use their commercially reasonable efforts to provide support, including support from its outside contractors and vendors, as well as data and records access, take actions and assist Purchaser in
performing all tasks, including conversion planning, assisting in any required divestiture, equipment installation and training, the provision of customer communications and notices (including joint communications and notices relating to anticipated
account changes, branch closures, divestiture and/or systems conversion, it being agreed that any notices of branch closures need not be provided more than 90 days in advance of the anticipated Closing Date), and other matters reasonably required to
result in a successful transition and integration at the Closing or such later date as may be determined by Purchaser.
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6.13
Tax Representation Letters.
Officers of Purchaser and Company shall execute and
deliver to Vorys, Sater, Seymour and Pease LLP, tax counsel to Purchaser, and Critchfield, Critchfield & Johnston, Ltd., tax counsel to Company, Tax Representation Letters substantially in the form agreed to by the parties and
such law firms at such time or times as may be reasonably requested by such law firms, including at the time the Proxy Statement and Form
S-4
filed with the SEC and at the Effective Time, in connection with
such tax counsels delivery of opinions pursuant to Section 7.2(c) and Section 7.3(c) of this Agreement.
6.14
Continuity of
Interest.
Notwithstanding anything in this Agreement to the contrary, if either of the tax opinions referred to in Section 7.2(c) or 7.3(c) cannot be rendered (as reasonably determined by Vorys, Sater, Seymour and Pease LLP or Critchfield,
Critchfield & Johnston, Ltd., respectively) as a result of the Merger potentially failing to satisfy the continuity of interest requirements under applicable federal income tax principles relating to reorganizations under
Section 368(a) of the Code, then Purchaser shall increase the Stock Consideration (applying the closing price of shares of the Purchaser Common Shares on the last trading day prior to the Closing Date), and decreasing the Cash Consideration, to the
minimum extent necessary to enable the relevant tax opinion to be rendered.
ARTICLE VII
CONDITIONS PRECEDENT
7.1
Conditions to Each Party
s Obligation to Effect the Merger
. The respective obligations of the parties to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions:
(a)
Shareholder Approval
. This Agreement, on substantially the terms and conditions set forth in this Agreement, shall have
received the Company Shareholder Approval.
(b)
Amendment of Company Articles
. The Company Articles shall have been amended to
eliminate the right of first refusal provisions set forth in ARTICLE FOURTH of the Company Articles in accordance with the applicable provisions of the OGCL and the Company Articles.
(c)
Stock Exchange Listing
. The shares of Purchaser Common Stock to be issued to the holders of Company Common Shares upon consummation
of the Merger shall have been authorized for listing on the Nasdaq, subject to official notice of issuance.
(d)
Form
S-4
. The Form
S-4
shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Form
S-4
shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC.
(e)
No Injunctions or Restraints; Illegality
. No order, injunction or decree issued by any court or agency of competent jurisdiction or
other Law preventing or making illegal the consummation of the Merger or any of the other transactions contemplated by this Agreement shall be in effect.
(f)
Regulatory Approvals
. (i) All regulatory approvals from the Federal Reserve, the OCC and, if applicable, the FDIC, and
(ii) any other regulatory approvals required to consummate the transactions contemplated by this Agreement, including the Merger and (unless otherwise determined by Purchaser) the Bank Merger, shall have been obtained and shall remain in full
force and effect and all statutory waiting periods in respect thereof shall have expired (all such approvals and the expiration of all such waiting periods referred to in clauses (i) or (ii), the
Requisite Regulatory
Approvals
).
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7.2
Conditions to Obligations of Purchaser and Merger Sub
. The obligation of Purchaser and
Merger Sub to effect the Merger is also subject to the satisfaction, or waiver by Purchaser, at or prior to the Effective Time, of the following conditions:
(a)
Representations and Warranties
. The representations and warranties of Company set forth in this Agreement shall be true and correct
as of the date of this Agreement and as of the Effective Time as though made on and as of the Effective Time (except that representations and warranties that by their terms speak specifically as of the date of this Agreement or another date shall be
true and correct as of such date);
provided
,
however
, that no representation or warranty of Company (other than the representations and warranties set forth in (i) Sections 3.2(a), 3.3(b), which shall be true and correct except to
a
de minimis
extent (relative to Section 3.2(a) taken as a whole or Section 3.2(b) take as a whole), (ii) Sections 3.2(c), 3.3(a), 3.3(b)(i) and 3.7, which shall be true and correct in all material respects, and (iii) Sections 3.8(iii)
and Section 3.10, which shall be true and correct in all respects) shall be deemed untrue or incorrect for purposes hereunder or under Section 8.1 as a consequence of the existence of any fact, event or circumstance inconsistent with such
representation or warranty, unless such fact, event or circumstance, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty of Company, has had or would reasonably be expected to
result in a Material Adverse Effect on Company;
provided
,
further
, that for purposes of determining whether a representation or warranty is true and correct for purposes of this Section 7.2(a) or Section 8.1 (other than in the
immediately preceding parenthetical), any qualification or exception for, or reference to, materiality (including the terms material, materially, in all material respects, Material Adverse Effect or
similar terms or phrases) in any such representation or warranty shall be disregarded; and Purchaser shall have received a certificate signed on behalf of Company by its President to the foregoing effect.
(b)
Performance of Obligations of Company
. Company shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time; and Purchaser shall have received a certificate signed on behalf of Company by its President to such effect.
(c)
Tax Opinion
. Purchaser shall have received an opinion of Vorys, Sater, Seymour and Pease LLP, dated the Closing Date, to the effect
that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, Vorys, Sater, Seymour and Pease LLP will be entitled to receive and rely upon the Tax Representation
Letters.
(d)
Regulatory Conditions
. There shall not be any action taken or determination made, or any Law enacted, entered,
enforced or deemed applicable to the transactions contemplated by this Agreement, including the Merger and the Bank Merger, by any Governmental Entity, in connection with the grant of a Requisite Regulatory Approval or otherwise, which imposes any
restriction, requirement or condition that, individually or in the aggregate, would, after the Effective Time, restrict or burden Purchaser or Surviving Company or any of their respective affiliates in connection with the transactions contemplated
by this Agreement or with respect to the business or operations of Purchaser or Surviving Company that would have a material adverse effect on Purchaser, Surviving Company or any of their respective affiliates, in each case measured on a scale
relative to Company.
(e)
MWG Disposition
. Company shall have entered into a definitive agreement for the MWG Disposition not later
than March 31, 2017, setting a fixed price for such disposition effective as of such date to be used in the calculation of the Companys Adjusted Shareholders Equity. The MWG Disposition shall have occurred prior to the Closing Date.
(f)
Retention of Certain Officers
. Purchaser and Joseph Wachtel and Diane Shriver, respectively, shall have mutually agreed upon
the terms and conditions under which Mr. Wachtel and Ms. Shriver will continue employment with Purchaser or Purchaser Bank, as the case may be, for a period of six months following the Closing Date (as described in Section 9.1
hereinbelow) with compensation and benefits generally consistent with their respective current compensation and benefits.
B - 41
(g)
FIRPTA Affidavit
. Company shall have delivered to Purchaser an affidavit, under
penalties of perjury, stating that Company is not and has not been a United States real property holding corporation, dated as of the Closing Date and in form and substance required under Treasury Regulations Section
1.897-2(h).
7.3
Conditions to Obligations of Company
. The obligation of Company to effect
the Merger is also subject to the satisfaction or waiver by Company at or prior to the Effective Time of the following conditions:
(a)
Representations and Warranties
. The representations and warranties of Purchaser and Merger Sub set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Effective Time as though made on and as of the
Effective Time (except that representations and warranties that by their terms speak specifically as of the date of this Agreement or another date shall be true and correct as of such date);
provided
,
however
, that no representation or
warranty of Purchaser (other than the representations and warranties set forth in (i) Section 4.3(a) and 4.3(b)(i), which shall be true and correct in all material respects, and (ii) Section 4.10 and 4.18, which shall be true and correct
in all respects) shall be deemed untrue or incorrect for purposes hereunder or under Section 8.1 as a consequence of the existence of any fact, event or circumstance inconsistent with such representation or warranty, unless such fact, event or
circumstance, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty of Purchaser, has had or would reasonably be expected to result in a Material Adverse Effect on Purchaser;
provided
,
further
, that for purposes of determining whether a representation or warranty is true and correct for purposes of this Section 7.3(a) or Section 8.1 (other than in the immediately preceding parenthetical), any
qualification or exception for, or reference to, materiality (including the terms material, materially, in all material respects, Material Adverse Effect or similar terms or phrases) in any such
representation or warranty shall be disregarded; and Company shall have received a certificate signed on behalf of Purchaser by the Chief Executive Officer or Chief Financial Officer of Purchaser to the foregoing effect.
(b)
Performance of Obligations of Purchaser and Merger Sub
. Purchaser and Merger Sub, as the case may be, shall have performed in all
material respects all obligations required to be performed by either of them under this Agreement at or prior to the Effective Time, and Company shall have received a certificate signed on behalf of Purchaser and Merger Sub by the Chief Executive
Officer or the Chief Financial Officer of Purchaser to such effect.
(c)
Tax Opinion
. Company shall have received an opinion of
Critchfield, Critchfield & Johnston, Ltd., dated the Closing Date, to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, Critchfield,
Critchfield & Johnston, Ltd. will be entitled to receive and rely upon the Tax Representation Letters.
(d)
Payment of Merger
Consideration
. Purchaser shall have caused Merger Sub to deliver the Exchange Fund to the Exchange Agent on or before the Closing Date and the Exchange Agent shall provide Company with a certificate evidencing such delivery.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1
Termination
. This Agreement may be terminated at any time prior to the Effective Time, whether before or after the Company
Shareholder Approval:
(a) by mutual consent of Company and Purchaser in a written instrument authorized by the Boards of Directors of
Company and Purchaser;
(b) by either Company or Purchaser, if any Governmental Entity that must grant a Requisite Regulatory Approval has
denied approval of the Merger and such denial has become final and nonappealable or any
B - 42
Governmental Entity of competent jurisdiction shall have issued a final and nonappealable order, injunction or decree permanently enjoining or otherwise prohibiting or making illegal the
consummation of the transactions contemplated by this Agreement;
(c) by either Company or Purchaser, if the Merger shall not have been
consummated on or before the first anniversary of the date of this Agreement unless the failure of the Closing to occur by such date shall be due to the failure of the party seeking to terminate this Agreement to perform or observe the covenants and
agreements of such party set forth in this Agreement;
(d) by either Company or Purchaser (
provided
that the terminating party is
not then in material breach of any representation, warranty, covenant or other agreement contained herein), if there shall have been a breach of any of the representations or warranties, or any failure to perform in all material respects any of the
covenants or agreements, set forth in this Agreement on the part of Company, in the case of a termination by Purchaser, or on the part of Purchaser, in the case of a termination by Company, which breach, either individually or in the aggregate with
other breaches by such party, would result in, if occurring or continuing on the Closing Date, the failure of the conditions set forth in Section 7.2(a)-(c) or 7.3(a)-(c), as the case may be, and which is not cured within 30 days following written
notice to the party committing such breach or by its nature or timing cannot be cured within such time period;
(e) by Purchaser, if
(i) at any time prior to the Effective Time, the Board of Directors of Company has (A) failed to recommend to the shareholders of Company that they give the Company Shareholder Approval; (B) effected a Change in the Company
Recommendation, including by publicly approving, endorsing or recommending, or publicly proposing to approve, endorse or recommend, any Acquisition Proposal (other than this Agreement), whether or not permitted by the terms hereof, or resolved to do
the same, or (C) materially breached its obligations under Section 6.3 or 6.7 hereof; or (ii) a tender offer or exchange offer for 15% or more of the outstanding shares of Company Common Shares is commenced (other than by Purchaser or
a Subsidiary thereof), and the Board of Directors of Company recommends that the shareholders of Company tender their shares in such tender or exchange offer or otherwise fails to recommend that such shareholders reject such tender offer or exchange
offer within the ten (10) business day period specified in Rule
14e-2(a)
under the Exchange Act; or
(f) by Company, if at any time prior to the Effective Time, the Purchaser has materially breached its obligations under Section 6.1 or
6.4 hereof.
(g) by Purchaser or Company, if the approval of Companys shareholders required by Section 7.1(a) shall not have been
obtained at a duly held Company Shareholders Meeting (including any adjournment or postponement thereof.
The party desiring to terminate this
Agreement pursuant to clause (b), (c), (d), (e), (f) or (g) of this Section 8.1 shall give written notice of such termination to the other party in accordance with Section 9.3, specifying the provision or provisions hereof pursuant to
which such termination is effected.
8.2
Effect of Termination
. In the event of termination of this Agreement by either Company or
Purchaser as provided in Section 8.1, this Agreement shall forthwith become void and have no effect, and none of Company, Purchaser, any of their respective affiliates or any of the officers or directors of any of them shall have any liability
of any nature whatsoever under this Agreement, or in connection with the transactions contemplated by this Agreement, except that (i) Sections 6.2(b), 8.2, 8.3, 9.2, 9.3, 9.4, 9.5, 9.6, 9.7, 9.8, 9.9, 9.10 and 9.11 shall survive any termination
of this Agreement, and (ii) neither Company nor Purchaser shall be relieved or released from any liabilities or damages arising out of its Willful Breach of any provision of this Agreement. For purposes of this Agreement,
Willful
Breach
means a material breach that is a consequence of an act undertaken by the breaching party with the actual knowledge that the taking of the act would, or would reasonably be expected to, cause a breach of this Agreement.
B - 43
8.3
Fees and Expenses
.
(a) All fees and expenses incurred in connection with the Merger, this Agreement, and the transactions contemplated by this Agreement shall be
paid by the party incurring such fees or expenses, whether or not the Merger is consummated.
(b) Notwithstanding the foregoing, if:
(i) (A) Either Company or Purchaser terminates this Agreement pursuant to 8.1(c) (without the Company Shareholder Approval
having been obtained), Purchaser terminates pursuant to Section 8.1(d) (as a result of a Willful Breach by Company), or either Company or Purchaser terminates this Agreement pursuant to Section 8.1(f), and (B) prior to termination, there has
been publicly announced an Acquisition Proposal or any Person or group (as such term is defined in Section 13(d) under the Exchange Act) shall have communicated to Company or its shareholders an Acquisition Proposal (whether or not
conditional), or an intention (whether or not conditional) to make an Acquisition Proposal, and (C) within twelve months of such termination Company shall either (1) consummate an Acquisition Transaction or (2) enter into any
definitive agreement relating to any Acquisition Transaction (but not including any confidentiality agreement required by Section 6.7(b) (an
Acquisition Agreement
)) with respect to an Acquisition Transaction or Acquisition
Proposal, whether or not such Acquisition Transaction or Acquisition Proposal is subsequently consummated (but changing, in the case of (1) and (2), the references to the 15% and 85% amounts in the definition of Acquisition Transaction and
Acquisition Proposal to 50%); or
(ii) Purchaser terminates this Agreement pursuant to Section 8.1(e); then Company
shall pay to Purchaser an amount equal to $300,000.00; provided, however, that if Company terminates this Agreement pursuant to Section 8.1(f) then Purchaser shall pay to Company an amount equal to $100,000.00 (in either case, the
Termination Fee
). If the Termination Fee shall be payable pursuant to subsection (b)(i) of this Section 8.3, the Termination Fee shall be paid in
same-day
funds at or prior to the
earlier of the date of consummation of such Acquisition Transaction or the date of execution of an Acquisition Agreement with respect to such Acquisition Transaction or Acquisition Proposal. If the Termination Fee shall be payable pursuant to
subsection (b)(ii) of this Section 8.3, the Termination Fee shall be paid in
same-day
funds immediately upon delivery of the written notice of termination required by Section 8.1.
(c) The Parties acknowledge that the agreements contained in paragraph (b) of this Section 8.3 are an integral part of the
transactions contemplated by this Agreement, and that without these agreements, they would not enter into this Agreement; accordingly, if any party fails to pay promptly any fee payable by it pursuant to this Section 8.3, then such party shall
pay to the
non-breaching
party, the
non-breaching
partys costs and expenses (including attorneys fees, costs and expenses) in connection with collecting such
fee, together with interest on the amount of the fee at the prime rate of Citibank, N.A. from the date such payment was due under this Agreement until the date of payment.
8.4
Amendment
. This Agreement may be amended by the parties, by action taken or authorized by their respective Boards of Directors, at
any time before or after the Company Shareholder Approval;
provided
,
however
, that after the approval of Company shareholders, there may not be, without further approval of such shareholders who have already provided their approval,
any amendment of this Agreement that requires further approval under applicable Law. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties.
8.5
Extension; Waiver
. At any time prior to the Effective Time, the parties, by action taken or authorized by their respective Boards
of Directors, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other party, (b) waive any inaccuracies in the representations and warranties contained in this
Agreement or (c) waive compliance with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in a written instrument signed on
behalf of such party, but such extension or waiver or failure to
B - 44
insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.
ARTICLE IX
GENERAL
PROVISIONS
9.1
Closing
. On the terms and subject to conditions set forth in this Agreement, the closing of the Merger (the
Closing
) shall take place at 10:00 a.m., local prevailing time, at the Akron offices of Vorys, Sater, Seymour and Pease LLP, counsel to Purchaser, on a date to be specified by the parties (the
Closing Date
).
9.2
Nonsurvival of Representations, Warranties and Agreements
. None of the representations, warranties, covenants and agreements
set forth in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, except for Section 6.6 and for those other covenants and agreements contained in this Agreement that by their terms apply or
are to be performed in whole or in part after the Effective Time.
9.3
Notices
. All notices and other communications in connection
with this Agreement shall be in writing and shall be deemed given if delivered personally, sent via facsimile (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with
confirmation) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
Monitor Bancorp, Inc.
13210 State Route 226
Big
Prairie, OH 44611
Attention: Joseph M. Wachtel
Facsimile: (330)
496-3701
with a copy (which shall not constitute notice) to:
Critchfield, Critchfield & Johnston, Ltd.
225 North Market Street
Wooster,
OH 44691
Attention: Christopher J. Pycraft
Facsimile: (330)
263-9278
Farmers National Banc Corp.
20 S. Broad St.
Canfield, OH
44406
Attention: Kevin J. Helmick
Facsimile: (330)
533-0451
with a copy (which shall not constitute notice) to:
Vorys, Sater, Seymour and Pease LLP
106 South Main Street, Suite 1100
Akron, Ohio 44308
Attention: J.
Bret Treier
Facsimile: (330)
208-1066
B - 45
9.4
Interpretation
. When a reference is made in this Agreement to Articles, Sections,
Exhibits or Schedules, such reference shall be to an Article or Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever the words include, includes or including are used in this Agreement, they shall be deemed to be followed by the words without
limitation. As used in this Agreement, the term Knowledge with respect to Company means the actual knowledge after reasonable inquiry of any of Companys officers listed on Section 9.4 of the Company Disclosure Schedule
and with respect to Purchaser, means the actual knowledge after reasonable inquiry of any of Purchasers officers listed on Section 9.4 of the Purchaser Disclosure Schedule. When a reference is made in this Agreement to an affiliate of a
Person, the term affiliate means those other Persons that, directly or indirectly, control, are controlled by, or are under common control with, such Person. All schedules and exhibits hereto shall be deemed part of this Agreement and
included in any reference to this Agreement. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party hereto. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.
9.5
Counterparts
. This Agreement may be executed in two or more counterparts (including by facsimile or other electronic means), all of
which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other party, it being understood that each party need not sign the same counterpart.
9.6
Entire Agreement
. This Agreement (including the documents and the instruments referred to in this Agreement), together with the
Confidentiality Agreement, constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter of this Agreement, other than the Confidentiality
Agreement.
9.7
Governing Law; Jurisdiction
. This Agreement shall be governed by and construed in accordance with the laws of the
State of Ohio applicable to contracts made and performed entirely within such state, without giving effect to its principles of conflicts of laws. The parties hereto agree that any suit, action or proceeding brought by either party to enforce any
provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought exclusively in any federal or state court located in Mahoning County, Ohio (which the parties
expressly agree shall exclusively be the federal court for the Northern District of Ohio, or in the event (but only in the event) that such court does not have jurisdiction over such dispute, any court sitting in Mahoning County, Ohio). Each of the
parties hereto submits to the exclusive jurisdiction of such court in any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of, or in connection with, this Agreement or the transactions contemplated
hereby and hereby irrevocably waives the benefit of jurisdiction derived from present or future domicile or otherwise in such suit, action or proceeding. Each party hereto irrevocably waives, to the fullest extent permitted by law, any objection
that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
9.8
Waiver of Jury Trial
. Each party hereto acknowledges and agrees that any controversy that may arise under this Agreement is likely
to involve complicated and difficult issues, and therefore each party hereby irrevocably and unconditionally waives any right such party may have to a trial by jury in respect of any litigation, directly or indirectly, arising out of, or relating
to, this Agreement, or the transactions contemplated by this Agreement. Each party certifies and acknowledges that (a) no representative, agent or attorney of any other
B - 46
party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver, (b) each party understands and has
considered the implications of this waiver, (c) each party makes this waiver voluntarily, and (d) each party has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this
Section 9.8.
9.9
Publicity
. Neither Company nor Purchaser shall, and neither Company nor Purchaser shall permit any of its
Subsidiaries to, issue or cause the publication of any press release or other public announcement with respect to, or otherwise make any public statement, or, except as otherwise specifically provided in this Agreement, any disclosure of nonpublic
information to a third party, concerning, the transactions contemplated by this Agreement without the prior consent (which shall not be unreasonably withheld or delayed) of Purchaser, in the case of a proposed announcement, statement or disclosure
by Company, or Company, in the case of a proposed announcement, statement or disclosure by Purchaser;
provided
,
however
, that either party may, without the prior consent of the other party (but after prior consultation with the other
party to the extent practicable under the circumstances) issue or cause the publication of any press release or other public announcement to the extent required by Law.
9.10
Assignment; Third-Party Beneficiaries
. Neither this Agreement nor any of the rights, interests or obligations under this Agreement
shall be assigned by either of the parties (whether by operation of law or otherwise) without the prior written consent of the other party (which shall not be unreasonably withheld or delayed). Any purported assignment in contravention hereof shall
be null and void. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of and be enforceable by each of the parties and their respective successors and assigns. Except for the provisions Section 6.6,
which is intended to benefit each Indemnified Party and his or her heirs and representatives, this Agreement (including the documents and instruments referred to in this Agreement) is not intended to and does not confer upon any Person other than
the parties hereto any rights or remedies under this Agreement.
9.11
Specific Performance
. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled to seek specific performance of the terms hereof,
this being in addition to any other remedies to which they are entitled at law or equity.
9.12
Disclosure Schedule
. Before entry
into this Agreement, Company delivered to Purchaser a schedule (a
Company Disclosure Schedule
) and Purchaser has delivered to Company a schedule (a
Purchaser Disclosure Schedule
) that sets forth, among other
things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in Article III or
Article IV, as the case may be, or to one or more covenants contained herein;
provided
,
however
, that notwithstanding anything in this Agreement to the contrary, (i) no such item is required to be set forth as an exception to a
representation or warranty if its absence would not result in the related representation or warranty being deemed untrue or incorrect and (ii) the mere inclusion of an item as an exception to a representation or warranty shall not be deemed an
admission that such item represents a material exception or material fact, event or circumstance or that such item has had or would be reasonably likely to have a Material Adverse Effect. For purposes of this Agreement,
Previously
Disclosed
means information set forth by Company or Purchaser, as the case may be, in the applicable paragraph of its Company Disclosure Schedule or Purchaser Disclosure Schedule, respectively, or any other paragraph of its Company
Disclosure Schedule or Purchaser Disclosure Schedule (so long as it is reasonably clear on the face of such disclosure that the disclosure in such other paragraph of its Company Disclosure Schedule or Purchaser Disclosure Schedule is also applicable
to the section of this Agreement in question).
[
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
]
B - 47
IN WITNESS WHEREOF
, the parties have caused this Agreement and Plan of Merger to be executed by their
respective officers thereunto duly authorized as of the date first above written.
|
|
|
|
|
FARMERS NATIONAL BANC CORP.
|
|
|
By:
|
|
/s/ Kevin J. Helmick
|
|
|
Name:
|
|
Kevin J. Helmick
|
|
|
Title:
|
|
President and Chief Executive Officer
|
|
FMNB MERGER SUBSIDIARY II, LLC
|
|
|
By:
|
|
/s/ Kevin J. Helmick
|
|
|
Name:
|
|
Kevin J. Helmick
|
|
|
Title:
|
|
President
|
|
MONITOR BANCORP, INC.
|
|
|
By:
|
|
/s/ Joseph M. Wachtel
|
|
|
Name:
|
|
Joseph M. Wachtel
|
|
|
Title:
|
|
President
|
B - 48
EXHIBIT A
AGREEMENT OF MERGER
This
agreement of merger (this Bank Merger Agreement), dated as of [ , 2017, is by and between The Monitor Bank (Monitor Bank) and The Farmers National Bank of
Canfield (Farmers Bank). All capitalized terms used herein but not defined herein shall have the respective meanings assigned to them in the Agreement and Plan of Merger (the Prior Merger Agreement) dated as of
[ , 2017], between Farmers National Banc Corp. (FMNB), FMNB Merger Subsidiary II, LLC (
Merger Sub
) and Monitor Bancorp, Inc. (Monitor).
WlTNESSETH:
WHEREAS,
Monitor Bank is an Ohio banking association and a wholly owned subsidiary of Monitor, with, as of [ ], 2017, a capital of $[ ],
divided into [ ] shares of common stock, each of $10.00 par value, surplus of $[ ],
and undivided profits, including capital reserves, of $[ ]; and
WHEREAS, Farmers Bank is a
national banking association and a wholly owned subsidiary of FMNB, with, as of [ , 2017, a capital of $[ ], divided into 542,339
shares of common stock, each of $5.00 par value, surplus of $[ ], and undivided profits, including capital reserves, of $[ ]; and
WHEREAS, FMNB, Merger Sub and Monitor have entered into the Prior Merger Agreement, pursuant to which Monitor will merge with and into Merger
Sub (the Prior Merger); and
WHEREAS, Monitor Bank and Farmers Bank desire to merge on the terms and conditions herein
provided immediately following the effective time of the Prior Merger.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto, intending to be legally bound hereby, agree as follows:
1.
The Bank
Merger
. Subject to the terms and conditions of the Prior Merger Agreement and this Bank Merger Agreement, at the Effective Time (as defined in Section 2), Monitor Bank shall merge with and into Farmers Bank (the Bank Merger)
under the laws of the United States and the State of Ohio. Farmers Bank shall be the surviving bank of the Bank Merger (the Surviving Bank).
2.
Effective Time
. The Bank Merger shall become effective on the date, and at the time (the Effective Time), specified in
the Bank Merger approval to be issued by the Office of the Comptroller of the Currency (the OCC).
3.
Charter; Bylaws
.
The Charter and Bylaws of Farmers Bank in effect immediately prior to the Effective Time shall be the Charter and Bylaws of the Surviving Bank, until altered, amended or repealed in accordance with their terms and applicable law.
4.
Name; Offices
. The name of the Surviving Bank shall be The Farmers National Bank of Canfield. The main office of the
Surviving Bank shall be the main office of Farmers Bank immediately prior to the Effective Time.
5.
Directors and Executive
Officers
. Upon consummation of the Bank Merger, (i) the directors of Farmers Bank immediately prior to the Effective Time shall continue as directors of the Surviving Bank, and (ii) the executive officers of Farmers Bank immediately
prior to the Effective Time shall continue as the executive officers of the Surviving Bank. Each of the directors and officers of the Surviving Bank immediately after the Effective Time shall hold office until his or her successor is elected and
qualified in accordance with the charter and bylaws of the Surviving Bank or until his or her earlier death, resignation or removal.
EXA - 1
6.
Effects of the Merger
. Upon consummation of the Bank Merger, and in addition to the
effects set forth at 12 U.S.C. § 215c, the applicable provisions of the regulations of the OCC and other applicable law, (i) all assets of Farmers Bank and Monitor Bank as they exist at the Effective Time, shall pass to and vest in the
Surviving Bank without any conveyance or other transfer; (ii) the Surviving Bank shall be considered the same business and corporate entity as each constituent bank with all the rights, powers and duties of each constituent bank and
(iii) the Surviving Bank shall be responsible for all the liabilities of every kind and description, of each of Farmers Bank and Monitor Bank existing as of the Effective Time, all in accordance with the provisions of The National Bank Act.
7.
Effect on Shares of Stock
.
(a) Each share of Farmers Bank common stock issued and outstanding immediately prior to the Effective Time shall be unchanged and shall remain
issued and outstanding and shall consist of $[ ], divided into 542,339 shares of common stock, each of $5.00, and at the Effective Time, Farmers Bank shall have a surplus of
$[ ], and undivided profits, including capital reserves, which when combined with the capital and surplus will be equal to the combined capital structures of Farmer Bank and Monitor Bank as stated in
the recitals of this Agreement, adjusted however, for normal earning and expense (and if applicable purchase accounting adjustments) from [ ], 2017 until the Effective Time.
(b) At the Effective Time, each share of Monitor Bank capital stock issued and outstanding prior to the Bank Merger shall, by virtue of the
Bank Merger and without any action on the part of the holder thereof, be canceled. Any shares of Monitor Bank capital stock held in the treasury of Monitor Bank immediately prior to the Effective Time shall be retired and canceled.
8.
Procurement of Approvals
. This Bank Merger Agreement shall be subject to the approval of FMNB, as the sole shareholder of Farmers
Bank, and Monitor, as the sole shareholder of Monitor Bank at meetings to be called and held or by consent in lieu thereof in accordance with the applicable provisions of law and their respective organizational documents. Farmers Bank and Monitor
Bank shall proceed expeditiously and cooperate fully in the procurement of any other consents and approvals and in the taking of any other action, and the satisfaction of all other requirements prescribed by law or otherwise necessary for
consummation of the Bank Merger on the terms provided herein, including without limitation the preparation and submission of such applications or other filings for the Bank Merger with the OCC and the Ohio Department of Financial Institutions as may
be required by applicable laws and regulations.
9.
Conditions Precedent
. The obligations of the parties under this Bank Merger
Agreement shall be subject to: (i) the approval of this Bank Merger Agreement by FMNB, as the sole shareholder of Farmers Bank, and Monitor, as the sole shareholder of Monitor Bank, at meetings of shareholders duly called and held or by consent
or consents in lieu thereof, in each case without any exercise of such dissenters rights as may be applicable; (ii) receipt of approval of the Bank Merger from all governmental and banking authorities whose approval is required;
(iii) receipt of any necessary regulatory approval to operate the main office and the branch offices of Monitor Bank as offices of the Surviving Bank and (iv) the consummation of the Prior Merger pursuant to the Prior Merger Agreement at
or before the Effective Time.
10.
Additional Actions
. If, at any time after the Effective Time, the Surviving Bank shall determine
that any further assignments or assurances in law or any other acts are necessary or desirable to (a) vest, perfect or confirm, of record or otherwise, in the Surviving Bank its rights, title or interest in, to or under any of the rights,
properties or assets of Monitor Bank acquired or to be acquired by the Surviving Bank as a result of, or in connection with, the Bank Merger, or (b) otherwise carry out the purposes of this Bank Merger Agreement, Monitor Bank and its proper
officers and directors shall be deemed to have granted to the Surviving Bank an irrevocable power of attorney to (i) execute and deliver all such proper deeds, assignments and assurances in law and to do all acts necessary or proper to vest,
perfect or confirm title to and possession of such rights, properties or assets in the Surviving Bank and (ii) otherwise to carry out the purposes of this Bank Merger Agreement. The
EXA - 2
proper officers and directors of the Surviving Bank are fully authorized in the name of Monitor Bank or otherwise to take any and all such action.
11.
Amendment
. Subject to applicable law, this Bank Merger Agreement may be amended, modified or supplemented only by written agreement
of Farmers Bank and Monitor Bank at any time prior to the Effective Time.
12.
Waiver
. Any of the terms or conditions of this Bank
Merger Agreement may be waived at any time by whichever of the parties hereto is, or the shareholder of which is, entitled to the benefit thereof by action taken by the Board of Directors of such waiving party.
13.
Assignment
. This Bank Merger Agreement may not be assigned by either Farmers Bank or Monitor Bank without the prior written consent
of the other.
14.
Termination
. This Bank Merger Agreement shall terminate upon the termination of the Prior Merger Agreement in
accordance with its terms.
15.
Governing Law
. Except to the extent governed by federal law, this Bank Merger Agreement shall be
governed in all respects, including, but not limited to, validity, interpretation, effect and performance, by the laws of the State of Ohio without regard to the conflicts of law provisions thereof.
16.
Counterparts
. This Bank Merger Agreement may be executed in one or more counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one agreement.
[
Signature Page Follows.
]
EXA - 3
IN WITNESS WHEREOF, each of Farmers Bank and 1st National Community Bank has caused this Bank
Merger Agreement to be executed on its behalf by its duly authorized officers.
|
|
|
THE FARMERS NATIONAL BANK OF CANFIELD
|
|
|
By:
|
|
/s/ Kevin J. Helmick
|
|
|
Name: Kevin J. Helmick
|
|
|
Title: President
|
|
THE MONITOR BANK
|
|
|
By:
|
|
/s/ Joseph M. Wachtel
|
|
|
Name: Joseph M. Wachtel
|
|
|
Title: President
|
EXA - 4
EXHIBIT B
INITIAL MERGER CONSIDERATION SCHEDULE
1
|
|
|
|
|
|
|
|
|
Company Shareholders Equity at March 31, 2017
|
|
|
|
|
|
$
|
6,065,782
|
|
MWG Disposition Gross Proceeds
|
|
$
|
256,000
|
|
|
|
|
|
MWG Disposition Gross Proceeds Adjustment
|
|
|
x.65
|
|
|
$
|
166,400
|
|
|
|
|
|
|
|
|
|
|
Adjusted Shareholders Equity
|
|
|
|
|
|
$
|
6,232,182
|
|
|
|
|
Maximum Value
|
|
$
|
6,232,182 x 1.25
|
|
|
$
|
7,790,228
|
|
Minimum Value
|
|
$
|
6,232,182 x 1.15
|
|
|
$
|
7,167,009
|
|
Cash Value Per Company Share
|
|
$
|
7,790,228/10,000
|
|
|
$
|
779.0228
|
|
Initial Exchange Ratio
|
|
$
|
779.0228/$13.3055
|
|
|
|
58.5489
|
|
1
|
For illustration purposes for this form of Initial Merger Consideration Schedule
, (i) Companys Shareholders Equity at March 31, 2017 is assumed to be $6,065,782, and (ii) the gross
proceeds to be received by Company in connection with the MWG Disposition is assumed to be $256,000.
|
EXB - 1
EXHIBIT C
FINAL MERGER CONSIDERATION SCHEDULE
2
|
|
|
|
|
|
|
|
|
Maximum Value
|
|
$
|
6,232,182 x 1.25
|
|
|
$
|
7,790,228
|
|
Minimum Value
|
|
$
|
6,232,182 x 1.15
|
|
|
$
|
7,167,009
|
|
Calculation of Total Merger Consideration
|
|
|
|
|
|
|
|
|
Initial Exchange Ratio
|
|
|
58.5489
|
|
|
|
|
|
Final VWAP
|
|
x$
|
13.50
|
|
|
|
|
|
Company Common Shares for Stock Election
|
|
x
|
8,500
|
|
|
|
|
|
Aggregate Stock Consideration
|
|
$
|
6,718,486
|
|
|
$
|
6,718,486
|
|
Plus: Aggregate Cash Consideration
|
|
$
|
779.0228x1,500
|
|
|
+$
|
1,168,504
|
|
|
|
|
|
|
|
|
|
|
Total Merger Consideration
|
|
|
|
|
|
$
|
7,886,590
|
|
Maximum Value
|
|
|
|
|
|
$
|
(7,790,228
|
)
|
|
|
|
|
|
|
|
|
|
Excess, requiring reduction in Exchange Ratio
|
|
|
|
|
|
$
|
96,762
|
|
Final Exchange Ratio (as adjusted):
|
|
|
|
|
|
|
|
|
Maximum Value
|
|
$
|
7,790,228
|
|
|
|
|
|
Less: Aggregate Cash Consideration
|
|
$
|
(1,168,504
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Aggregate Stock Consideration
|
|
$
|
6,621,724
|
|
|
|
|
|
Application of Final VWAP
|
|
$
|
6,621,724/8,500/$13.50
|
|
|
|
57.7057
|
|
|
|
|
Maximum Value
|
|
$
|
6,232,182 x 1.25
|
|
|
$
|
7,790,228
|
|
Minimum Value
|
|
$
|
6,232,182 x 1.15
|
|
|
$
|
7,167,009
|
|
Calculation of Total Merger Consideration
|
|
|
|
|
|
|
|
|
Initial Exchange Ratio
|
|
|
58.5489
|
|
|
|
|
|
Final VWAP
|
|
x$
|
12.00
|
|
|
|
|
|
Company Common Shares for Stock Election
|
|
x
|
8,500
|
|
|
|
|
|
Aggregate Stock Consideration
|
|
$
|
5,971,988
|
|
|
$
|
5,971,988
|
|
Plus: Aggregate Cash Consideration
|
|
$
|
779.0228x1,500
|
|
|
+$
|
1,168,504
|
|
|
|
|
|
|
|
|
|
|
Total Merger Consideration
|
|
|
|
|
|
$
|
7,140,492
|
|
Minimum Value
|
|
|
|
|
|
$
|
(7,167,009
|
)
|
|
|
|
|
|
|
|
|
|
Shortfall, requiring increase in Exchange Ratio
|
|
|
|
|
|
$
|
(26,517
|
)
|
Final Exchange Ratio (as adjusted):
|
|
|
|
|
|
|
|
|
Minimum Value
|
|
$
|
7,167,009
|
|
|
|
|
|
Less: Aggregate Cash Consideration
|
|
$
|
(1,168,504
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum Aggregate Stock Consideration
|
|
$
|
5,998,505
|
|
|
|
|
|
Application of Final VWAP
|
|
$
|
5,998,505/8,500/$12.00
|
|
|
|
58.8089
|
|
2
|
For illustration purposes for this form of Final Merger Consideration Schedule
, (i) Companys Shareholders Equity at March 31, 2017 is assumed to be $6,065,782, (ii) the gross proceeds to be
received by Company in connection with the MWG Disposition is assumed to be $256,000, and (iii) the Final VWAP is assumed to be $13.50 and $12.00, respectively.
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EXC - 1
Annex C
Shares of this Corporation may not, and cannot, be sold nor the beneficial ownership thereof in any manner transferred, either in whole or in
part by the registered holder, beneficial owner, his or their creditors or personal representatives or any person whomsoever, unless and until they shall have been offered for sale at the sellers lowest price first to the other owners of this
corporations stock, who shall have fifteen days within which to exercise their option to purchase such shares which shall be apportioned among those desiring to purchase them according to the amount of such stock already held by them.
The seller shall notify the Secretary in writing of his offer to sell a specified number of shares, which offer shall not be revocable. It
shall be the duty of the Secretary to give notice of such intended sale immediately to all registered holders of such stock, noting the time within which the option must be exercised. Those stockholders desiring to purchase such shares, or any part
thereof, shall so notify the Secretary in writing within fifteen days after the receipt by the Secretary of the sellers offer. Within three days after the termination of such fifteen days the Secretary shall inform the seller whether or not
the option has been exercised. If it is exercised, the sale shall be completed as soon as practicable thereafter. If it is not exercised, such seller shall be free to sell his stock to any other person, at no less price than that at which it was
offered to the other stockholders, within three months from the date his offer was received by the Secretary. After such time, however, opportunity must be given again to the other stockholders to exercise their option before another sale is made.
Provided, however, that the seller shall not be obligated to sell to such other stockholders less than all of the shares he offers for
sale; and if the other stockholders do not elect to take all of the shares offered, the seller shall be free to make other sale of the stock offered as hereinbefore provided.
No person shall be entitled to a transfer of shares on the books of the corporation, nor shall such transfer be made, until the foregoing
provisions have been complied with.
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ANNEX D
March 13, 2017
Board of Directors
Monitor Bancorp, Inc.
13210 State Route 226
Big Prairie, OH 44611
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of view, to Monitor Bancorp, Inc. (Company) and its shareholders, of the
terms of the Agreement and Plan of Merger dated as of March 13, 2017 (the Agreement) by and between Farmers National Banc Corp. (Purchaser) and Company. The Agreement provides for merger of Company with and into
Purchaser, with Purchaser being the surviving company. Capitalized terms used herein without definition shall have the meanings given to such terms in the Agreement.
The financial terms of the Agreement provide for the Merger Consideration to be determined as follows:
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(1)
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The Maximum Value of the Merger Consideration shall be determined by multiplying Companys Adjusted Shareholders Equity by 1.25. The Adjusted Shareholders Equity equals Company Shareholders Equity
as of March 31, 2017, plus the after-tax gain on the sale of Lifetime Financial Advisors LLC (d.b.a. Monitor Wealth Group MWG).
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(2)
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The Minimum Value of the Merger Consideration shall be determined by multiplying Companys Adjusted Shareholders Equity by 1.15.
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The Agreement provides for each share of Company common stock to receive, at the election of the holder, either: (i) cash in an amount equal to the
Maximum Value divided by 10,000 (Cash Value per Company Share), which is presently estimated at $779.0228 per share (rounded to four decimal places); or (ii) stock based on the conversion of each Company Common Share into Purchaser
Common Shares based on the Final Exchange Ratio (Stock Consideration). The shareholder election process is subject to proration such that 85 percent of Company Common Shares shall be paid the Stock Consideration and all other Company
Common Shares shall be paid the Cash Consideration.
The Initial Exchange Ratio for the Stock Consideration is estimated at 58.5489, and was determined by
dividing the estimated Cash Value per Share of $779.0228 by $13.3055, which is the twenty (20) trading day volume weighted average closing price (Initial VWAP) of Purchaser ending February 10, 2017.
Article 1.4(d) of the Agreement describes a process that could result in an adjustment to the Initial Exchange Ratio for the Stock Consideration. Based on the
Final VWAP of Purchaser, if the aggregate Merger Consideration is between the Minimum Value and the Maximum Value, there will be no adjustment to the Initial Exchange Ratio and the Initial Exchange Ratio will be the Final Exchange Ratio. If the
aggregate Merger Consideration is less than the Minimum Value, the Initial Exchange Ratio will be adjusted upward so that the aggregate Merger Consideration equals the Minimum Value. If the aggregate Merger Consideration is greater than the Maximum
Value, the Initial Exchange Ratio will be adjusted downward so the aggregate Merger Consideration equals the Maximum Value.
Austin Associates, LLC
(Austin) as part of its investment banking practice is customarily engaged in advising and valuing financial institutions in connection with mergers and acquisitions and other corporate transactions. In connection with the rendering our
opinion set forth herein, we have reviewed among other things:
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(i)
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the Agreement dated as of March 13, 2017;
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(ii)
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certain publicly available financial statements and other historical financial information of Company and Purchaser that we deemed relevant;
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D - 1
Board of Directors
Monitor Bancorp, Inc.
Page
2
March 13, 2017
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(iii)
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certain non-public internal financial and operating data of Company and Purchaser that were prepared and provided to us by the respective management of Company and Purchaser;
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(iv)
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internal financial projections for Purchaser for the year ending December 31, 2017 prepared by management of Purchaser;
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(vi)
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the pro forma financial impact of the Merger on Purchaser, based on assumptions relating to transaction expenses, preliminary purchase accounting adjustments and cost savings as discussed with representatives of
Purchaser;
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(vi)
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publicly reported historical price and trading activity for Purchasers common stock, including an analysis of certain financial and stock market information of Purchaser compared to certain other publicly traded
companies;
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(vii)
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the financial terms of certain recent business combinations in the commercial banking industry, to the extent publicly available;
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(viii)
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the current market environment generally and the banking environment in particular; and,
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(ix)
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such other information, financial studies, analyses and investigations and financial, economic and market criteria as we considered relevant.
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We also discussed with certain members of senior management of Company the business, financial condition, results of operations and prospects of Company,
including certain operating, regulatory and other financial matters.
Management of Company and Purchaser, respectively, have represented that there has
been no material adverse change in their respective companys assets, financial condition, results of operations, business or prospects since the date of the most recent financial statements made available to us. We have assumed in all respects
material to our analysis that Company and Purchaser will remain as going concerns for all periods relevant to our analyses, that all of the representations and warranties contained in the Agreement are true and correct, that each party to the
Agreement will perform all of the covenants required to be performed by such party under the Agreement, and that the conditions precedent in the Agreement are not waived. Finally, we have relied upon the advice Company has received from its legal,
accounting and tax advisors as to all legal, accounting and tax matters relating to the Merger and the other transactions contemplated by the Agreement.
In our review and analysis, we relied upon and assumed the accuracy and completeness of the information provided to us or publicly available, and have not
attempted to verify the same. As part of the due diligence process we made no independent verification as to the status and value of Companys or Purchasers assets, including the value of the loan portfolio and allowance for loan and
lease losses, and have instead relied upon representations and information concerning the value of assets and the adequacy of reserves of both companies in the aggregate. In addition, we have assumed in the course of obtaining the necessary
approvals for the transaction, no condition will be imposed that will have a material adverse effect on the contemplated benefits of the transaction to Company and its shareholders.
This opinion is based on economic and market conditions and other circumstances existing on, and information made available as of, the date hereof. This
opinion is limited to the fairness, from a financial point of view, to Company and its shareholders of the terms of the Agreement, and does not address the underlying business decision by the Board of Directors to pursue the Merger.
D - 2
Board of Directors
Monitor Bancorp, Inc.
Page
3
March 13, 2017
Austin reserves the right to review any public disclosures describing this fairness opinion or its firm. Austin has received a fee for its services in
preparing this fairness opinion. Austins fee is not contingent upon closing of the Merger. In addition, Company agreed to indemnify Austin against certain liabilities.
Based upon our analysis and subject to the qualifications described herein, we believe that as of the date of this letter, the terms of the Agreement are
fair, from a financial point of view, to Company and its shareholders.
Respectfully,
ProBank Austin
D - 3