AGREEMENT AND PLAN OF MERGER dated as of October 2, 2007 by and between FIRST DEFIANCE FINANCIAL CORP. and PAVILION BANCORP, INC.
Exhibit
2
AGREEMENT
AND PLAN OF MERGER
dated
as of
October
2, 2007
by
and between
and
PAVILION
BANCORP, INC.
Exhibit
2
TABLE
OF CONTENTS
Page
|
||
ARTICLE
ONE -- THE MERGER
|
1
|
|
1.01.
|
Corporate
Merger
|
1
|
1.02.
|
Effective
Time
|
1
|
1.03.
|
Governing
Documents of the Surviving Corporation
|
1
|
1.04.
|
Bank
Merger
|
2
|
1.05.
|
Structure
of Combination
|
2
|
ARTICLE
TWO -- CONVERSION OF SHARES; SURRENDER OF CERTIFICATES
|
2
|
|
2.01.
|
Conversion
of Pavilion Shares
|
2
|
2.02.
|
Exchange
of Pavilion Certificates
|
3
|
2.03.
|
Anti-Dilution
Provisions
|
4
|
2.04.
|
First
Defiance Shares
|
4
|
2.05.
|
Tax
Consequences
|
5
|
ARTICLE
THREE -- REPRESENTATIONS AND WARRANTIES OF PAVILION
|
5
|
|
3.01.
|
Corporate
Status
|
5
|
3.02.
|
Capitalization
of Pavilion
|
6
|
3.03.
|
Capitalization
of Subsidiaries
|
7
|
3.04.
|
Corporate
Proceedings
|
8
|
3.05.
|
Authorization
|
8
|
3.06.
|
Financial
Statements of Pavilion
|
8
|
3.07.
|
SEC
Filings
|
8
|
3.08.
|
Absence
of Undisclosed Liabilities
|
9
|
3.09.
|
Absence
of Changes
|
9
|
3.10.
|
Loans
|
9
|
3.11.
|
Allowance
for Loan Losses
|
9
|
3.12.
|
Reports
and Records
|
10
|
3.13.
|
Taxes
|
10
|
3.14.
|
Property
and Title
|
11
|
3.15.
|
Legal
Proceedings
|
12
|
3.16.
|
Compliance
with Laws and Regulations
|
12
|
3.17.
|
No
Conflict
|
13
|
3.18.
|
Brokers,
Finders and Others
|
13
|
3.19.
|
Employment
Agreements
|
13
|
3.20.
|
Employee
Benefit Plans
|
14
|
3.21.
|
Insurance
|
16
|
3.22.
|
Governmental
and Third-Party Consents and Proceedings
|
16
|
3.23.
|
Contracts
|
16
|
3.24.
|
Environmental
Matters
|
16
|
3.25.
|
Pavilion
Information
|
17
|
3.26.
|
CRA
Compliance
|
17
|
-i-
Exhibit
2
3.27.
|
Ownership
of First Defiance Shares
|
18
|
3.28.
|
Fairness
Opinion
|
18
|
3.29.
|
Real
Property Interest
|
18
|
3.30.
|
Internal
Controls
|
18
|
3.31.
|
Knowledge
|
18
|
ARTICLE
FOUR -- REPRESENTATIONS AND WARRANTIES OF FIRST DEFIANCE
|
18
|
|
4.01.
|
Corporate
Status
|
19
|
4.02.
|
Corporate
Proceedings
|
19
|
4.03.
|
Capitalization
of First Defiance
|
20
|
4.04.
|
Capitalization
of First Federal
|
20
|
4.05.
|
Authorized
and Effective Agreement
|
21
|
4.06.
|
No
Conflict
|
21
|
4.07.
|
SEC
Filings
|
22
|
4.08.
|
Financial
Statements of First Defiance and First Federal
|
22
|
4.09.
|
Brokers,
Finders and Others
|
22
|
4.10.
|
Governmental
and Third-Party Proceedings
|
23
|
4.11.
|
Absence
of Undisclosed Liabilities
|
23
|
4.12.
|
Absence
of Changes
|
23
|
4.13.
|
Legal
Proceedings
|
23
|
4.14.
|
Regulatory
Matters
|
24
|
4.15.
|
Compliance
with Laws and Regulations
|
24
|
4.16.
|
CRA
Compliance
|
24
|
4.17.
|
Loans
|
25
|
4.18.
|
Allowance
for Loan Losses
|
25
|
ARTICLE
FIVE -- FURTHER COVENANTS OF PAVILION
|
25
|
|
5.01.
|
Operation
of Business
|
25
|
5.02.
|
Notification
|
28
|
5.03.
|
Acquisition
Transactions
|
29
|
5.04.
|
Delivery
of Information
|
29
|
5.05.
|
Affiliates
Compliance with the Securities Act
|
29
|
5.06.
|
Voting
Agreement
|
30
|
5.07.
|
Amendment
of Pavilion Stock Options
|
30
|
5.08.
|
Pavilion
Meeting
|
30
|
5.09.
|
Tax
Matters
|
30
|
5.10.
|
Insurance
Coverage
|
31
|
5.11.
|
Supplemental
Assurances
|
31
|
5.12.
|
Subsidiaries
|
31
|
5.13.
|
Environmental
Inspection of Property
|
31
|
5.14.
|
Employee
Benefit Plans
|
32
|
ARTICLE
SIX -- FURTHER COVENANTS OF FIRST DEFIANCE
|
33
|
|
6.01
|
Employees;
Employee Benefits
|
33
|
-ii-
Exhibit
2
6.02.
|
Exchange
Listing
|
34
|
6.03.
|
Notification
|
34
|
6.04.
|
Board
of Directors
|
34
|
6.05.
|
Advisory
Board
|
34
|
6.06.
|
Indemnification
|
35
|
6.07.
|
Delivery
of and Access to Information
|
36
|
6.08.
|
Operation
of Business
|
37
|
ARTICLE
SEVEN -- FURTHER OBLIGATIONS OF THE PARTIES
|
37
|
|
7.01.
|
Cooperative
Action
|
37
|
7.02.
|
Press
Releases
|
37
|
7.03.
|
Proxy/Prospectus;
Registration Statement
|
37
|
7.04.
|
Regulatory
Applications
|
39
|
7.05.
|
Confidentiality
|
39
|
7.06.
|
Non-Solicitation
|
39
|
ARTICLE
EIGHT -- CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
PARTIES
|
40
|
|
8.01.
|
Conditions
to the Obligations of First Defiance
|
40
|
8.02.
|
Conditions
to the Obligations of Pavilion
|
40
|
8.03.
|
Mutual
Conditions
|
41
|
ARTICLE
NINE -- CLOSING
|
42
|
|
9.01.
|
Closing
|
42
|
9.02.
|
Closing
Deliveries Required of First Defiance
|
42
|
9.03.
|
Closing
Deliveries Required of Pavilion
|
43
|
ARTICLE
TEN -- TERMINATION
|
43
|
|
10.01.
|
Termination
|
43
|
10.02.
|
Effect
of Termination
|
46
|
10.03.
|
Termination
Fee
|
46
|
10.04.
|
Force
Majeure
|
46
|
ARTICLE
ELEVEN -- MISCELLANEOUS
|
47
|
|
11.01.
|
Notices
|
47
|
11.02.
|
Counterparts
|
48
|
11.03.
|
Entire
Agreement
|
48
|
11.04.
|
Successors
and Assigns
|
48
|
11.05.
|
Captions
|
48
|
11.06.
|
Governing
Law
|
48
|
11.07.
|
Payment
of Fees and Expenses
|
48
|
11.08.
|
Amendment
|
48
|
11.09.
|
Waiver
|
48
|
-iii-
Exhibit
2
11.10.
|
No
Third-Party Rights
|
49
|
11.11.
|
Severability
|
49
|
11.12.
|
Non-Survival
of Representations, Warranties and Covenants
|
49
|
11.13.
|
Materiality
|
49
|
Exhibit
A:
|
Form
of Voting Agreement
|
-iv-
Exhibit
2
AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER (the “Agreement”), dated as of
October 2, 2007, is made and entered into by and between First Defiance
Financial Corp., an Ohio corporation (“First Defiance”) and
Pavilion Bancorp, Inc., a Michigan corporation
(“Pavilion”).
ARTICLE
ONE
1.01. Corporate
Merger. Upon the terms and subject
to the conditions of this Agreement, at the Effective Time (as defined in
Section 1.02), Pavilion shall merge with and into First Defiance in
accordance with the Ohio General Corporation Law (the “OGCL”)
and the Michigan Business Corporation Act (the
“MBCA”). First Defiance shall be the continuing and
surviving corporation in the Corporate Merger, shall continue to exist under
the
laws of the State of Ohio, and shall be the only one of First Defiance and
Pavilion to continue its separate corporate existence after the Effective
Time. As used in this Agreement, the term “Surviving
Corporation” refers to First Defiance immediately after the Effective
Time. As a result of the Corporate Merger, each of the common shares,
without par value, of Pavilion (the “Pavilion Shares”), which
is issued and outstanding at the Effective Time shall be converted or cancelled
in the manner provided in Article Two.
1.02.
Effective Time.
The Effective
Time of the Corporate Merger shall
be the time on the Closing Date (as defined in Section 9.01) provided in the
certificates of merger to be filed with the Ohio Secretary of State and the
Michigan Department of Labor and Economic Growth.
1.03. Governing
Documents of the Surviving Corporation.
At the Effective Time, the articles
of incorporation and code of
regulations of First Defiance as in effect
Exhibit
2
immediately
prior to the Effective Time shall be the articles of incorporation and code
of
regulations of the Surviving Corporation.
1.04. Bank
Merger. Immediately after the
Corporate Merger, First Defiance shall cause the Bank Merger to be
completed.
1.05. Structure
of Combination. With the
consent of Pavilion, which consent shall not be unreasonably withheld, First
Defiance and First Federal may at any time change the method of effecting the
mergers (including, without limitation, the provisions of this Article One)
if and to the extent First Defiance deems such change to be desirable;
provided, however, that no such change shall (i) alter or change
the amount or composition of the Per Share Merger Consideration (as defined
in
Section 2.01; (ii) be likely to materially delay or jeopardize receipt
of any required regulatory approvals or materially delay or jeopardize the
satisfaction of any conditions to the closing of the Corporate Merger; or (iii)
adversely affect the tax consequences to the Pavilion shareholders as a result
of receiving the Per Share Merger Consideration. Pavilion shall, if
requested by First Defiance, enter into one or more amendments to this Agreement
in order to effect any such change.
ARTICLE
TWO
2.01. Conversion
of Pavilion Shares. At the
Effective Time, by virtue of the Corporate Merger and without any action on
the
part of the holder thereof:
(a) Subject
to Sections 2.02, 2.03, 2.05 and 10.01(h)(2), and except as otherwise provided
by paragraphs (c) and (d) of this Section 2.01 and by Sections 2.04
and 5.14(a), each Pavilion Share issued and outstanding immediately prior to
the
Effective Time shall be converted into the right to receive the
following:
(i) 1.4209
(the “Exchange Ratio”) First Defiance Shares (as defined in
Section 4.03) (the “Per Share Stock Consideration”),
and
(ii) a
cash amount equal to $37.50 (the “Per Share Cash Consideration”
and, together with the Per Share Stock Consideration, the
“Per Share Merger
Consideration”).
(b) No
certificates or scrip representing fractional First Defiance Shares shall be
issued. Each holder of Pavilion Shares who would otherwise be
entitled to receive a fractional First Defiance Share shall receive an amount
of
cash equal to the product obtained by multiplying (i) the fractional First
Defiance Share interest to which such holder (after taking into account all
Pavilion Shares held at the Effective Time by such holder) would otherwise
be
entitled by (ii) $75.00.
(c) Any
Pavilion Shares held by Pavilion or any Pavilion Subsidiaries and any Pavilion
Shares owned directly or indirectly by First Defiance or any subsidiary of
First
Defiance for its own account shall be cancelled and retired at the Effective
Time and no consideration shall be issued in exchange. For purposes
of this Agreement, “subsidiary” has the meaning
-2-
Exhibit
2
ascribed
to such term in Rule 1-02 of Regulation S-X promulgated by the
Securities and Exchange Commission (the “SEC”).
(d) Each
option to acquire Pavilion Shares (each a “Pavilion Stock
Option”) that is outstanding and unexercised seven calendar days prior
to the Effective Time shall be terminated at the Effective Time and each holder
thereof shall be entitled to receive, in lieu of each Pavilion Share that would
otherwise have been issuable upon exercise thereof, an amount in cash equal
to
the positive difference, if any, between $75.00 less the exercise price of
such
Pavilion Stock Option.
(a) As
soon as practicable after the Effective Time, First Defiance shall cause the
exchange agent of First Defiance (the “Exchange Agent”) to mail
to each holder of record of Pavilion Shares (i) a form letter of transmittal
and
instructions for use in surrendering for exchange the certificates evidencing
the Pavilion Shares (“Pavilion Certificates”) that will have
been cancelled and extinguished as a result of the Corporate
Merger. The letter of transmittal shall specify that the risk of loss
and title to the Pavilion Certificates shall pass only upon delivery of such
certificates as specified in the letter of transmittal.
(b) Upon
surrender of a Pavilion Certificate for cancellation, together with a properly
completed letter of transmittal, the holder of such Pavilion Certificate shall
be entitled to receive in exchange therefor a certificate representing the
number of whole First Defiance Shares and/or the amount of cash into which
the
aggregate number of Pavilion Shares previously represented by such surrendered
Pavilion Certificate shall have been converted pursuant to this Agreement,
and
the Pavilion Certificate so surrendered shall thereafter be
cancelled. All payments made upon the surrender of Pavilion
Certificates pursuant to this Article Two shall be deemed to have been made
in
full satisfaction of all rights pertaining to the shares evidenced by such
Pavilion Certificates, provided that such payments have been made in accordance
with this Agreement.
(c) If
any Pavilion Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Pavilion
Certificate to be lost, stolen or destroyed and, if required by the Exchange
Agent or First Defiance in its sole discretion, the posting by such person
of a
bond in such amount as the Exchange Agent may require, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Pavilion Certificate the
cash and First Defiance Shares deliverable in respect thereof.
(d) None
of First Defiance, Pavilion, the Exchange Agent or the Surviving Corporation
shall be liable to any former holder of Pavilion Shares for any payment of
the
Per Share Merger Consideration, any cash in lieu of a fractional First Defiance
Share interest or any dividends or distributions with respect to First Defiance
Shares delivered to a public official if required by any applicable abandoned
property, escheat or similar law.
(e) No
dividends or other distributions declared after the Effective Time with respect
to First Defiance Shares and payable to the holders of record thereof after
the
Effective
-3-
Exhibit
2
Time
shall be paid to the holder of any unsurrendered Pavilion Certificate until
it
is surrendered by the holder thereof. Subject to the effect, if any,
of applicable law, after the subsequent surrender and exchange of a Pavilion
Certificate, the record holder thereof shall be entitled to receive any
dividends or other distributions, without any interest thereon, which became
payable after the Effective Time with respect to the First Defiance Shares
issued in exchange for such Pavilion Certificate.
(f) After
the Effective Time, there shall be no further registration or transfer of
Pavilion Shares on the stock transfer books of Pavilion. In the event
that, after the Effective Time, Pavilion Certificates are presented for
transfer, they shall be cancelled and exchanged as provided in this Article
Two.
(g) First
Defiance or the Exchange Agent shall be entitled to deduct and withhold from
the
Per Share Merger Consideration such amounts as First Defiance or the Exchange
Agent is required to deduct and withhold with respect to the making of such
payment under the Internal Revenue Code of 1986, as amended (the
“Code”), or any other provision of domestic or foreign tax law
(whether national, federal, state, provincial, local or
otherwise). To the extent that amounts are so withheld and paid over
to the appropriate taxing authority by First Defiance or the Exchange Agent,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Pavilion Certificates.
(h) First
Defiance may from time to time waive one or more of the rights provided to
it in
this Article Two to withhold certain payments, deliveries and distributions;
and
no such waiver shall constitute a waiver of its rights thereafter to withhold
any such payment, delivery or distribution in the case of any
person.
-4-
Exhibit
2
(a) For
federal income tax purposes, the Corporate Merger is intended to constitute
a
reorganization within the meaning of Section 368(a) of the Code. The
parties hereby adopt this Agreement as a “plan of reorganization” within the
meaning of Treasury Department regulation sections 1.368-2(g) and
1.368-3(a).
(b) Notwithstanding
anything in this Agreement to the contrary, to preserve the status of the
Corporate Merger as a tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Code, if the aggregate value of the First Defiance Shares
to
be issued in connection with the Corporate Merger (excluding the value of
fractional shares for which cash is to be paid pursuant to Section 2.01(b))
based upon the closing price of the First Defiance Shares as reported on The
Nasdaq Stock Market (“Nasdaq”) on the trading day immediately
preceding the Closing Date (the “Aggregate Share
Consideration”) would be less than 40% of the sum of the Aggregate Cash
Consideration (defined below) and the Aggregate Share Consideration, then First
Defiance may, in its sole discretion, increase the Exchange Ratio so that the
aggregate value of the First Defiance Shares to be issued in connection with
the
Corporate Merger is equal to 40% of the sum of the Aggregate Share Consideration
and the Aggregate Cash Consideration. For purposes of this Agreement,
the term “Aggregate Cash Consideration” shall mean the sum of
(i) the aggregate cash consideration to be paid in exchange for Pavilion Shares
and (ii) the aggregate cash consideration to be paid in lieu of fractional
First
Defiance Shares pursuant to Section 2.01(b).
ARTICLE
THREE
Except
as
set forth on a disclosure schedule prepared by Pavilion (the “Pavilion
Disclosure Schedule”), Pavilion represents and warrants to First
Defiance that each of the following statements is true and
accurate:
3.01. Corporate
Status.
(a) Pavilion
is a Michigan corporation and a bank holding company registered under the Bank
Holding Company Act of 1956, as amended (“BHCA”), and regulated
by the Board of Governors of the Federal Reserve System (“Federal
Reserve”). Pavilion is duly organized, validly existing and
in good standing under the laws of the State of Michigan and has the full
corporate power and authority to own its property, to carry on its business
as
presently conducted, and to enter into and, subject to the required approval
of
this Agreement by the Pavilion shareholders and the obtaining of appropriate
approvals of Governmental Authorities (as defined below) and Regulatory
Authorities (as defined below), perform its obligations under this Agreement
and
consummate the transactions contemplated by this Agreement. Pavilion
is not qualified to do business in any other jurisdiction or required to be
so
qualified to do business in any other jurisdiction except where the failure
to
be so qualified individually or in the aggregate would not reasonably be
expected to have a material adverse effect on Pavilion and the Subsidiaries
(as
defined below) on a consolidated basis. Pavilion has provided to
First Defiance
-5-
Exhibit
2
true
and
complete copies of the articles of incorporation and bylaws of Pavilion, in
each
case as amended to the date of this Agreement.
(b) Lenawee
is a Michigan bank and is regulated by the Michigan Office of Financial and
Insurance Services (“OFIS”), the Federal Reserve and the
Federal Deposit Insurance Corporation
(“FDIC”). Lenawee is duly organized, validly
existing and in good standing under the laws of the State of Michigan and has
full power and authority, corporate or otherwise, to own its property and to
carry on its business as presently conducted. Lenawee is not
qualified to do business in any other jurisdiction or required to be qualified
to do business in any other jurisdiction, except where the failure to be so
qualified individually or in the aggregate would not reasonably be expected
to
have a material adverse effect on Pavilion and the Subsidiaries on a
consolidated basis. Pavilion has provided to First Defiance and First
Federal true and complete copies of the articles of incorporation and bylaws
of
Lenawee, in each case as amended to the date of this Agreement.
(c) Each
of Pavilion Financial Services, Inc. and Pavilion Mortgage Company (i) is a
Michigan corporation, duly organized, validly existing and in good standing
under the laws of the State of Michigan, (ii) has the full corporate power
and authority to own its property and to carry on its business as presently
conducted, (iii) is not qualified to do business in any other jurisdiction
or required to be so qualified to do business in any other jurisdiction except
where the failure to be so qualified individually or in the aggregate would
not
reasonably be expected to have a material adverse effect on Pavilion on a
consolidated basis, and (iv) is wholly owned by Lenawee. Pavilion has
provided to First Defiance true and complete copies of the articles of
incorporation and bylaws of each of Pavilion Financial Services, Inc. and
Pavilion Mortgage Company, as amended to the date of this
Agreement.
(d) Lenawee,
Pavilion Financial Services, Inc. and Pavilion Mortgage Company (collectively,
the “ Subsidiaries”) are the only direct or indirect
subsidiaries of Pavilion.
(e) Except
as disclosed in Section 3.01(e) of the Pavilion Disclosure Schedule, none of
Pavilion nor any of its Subsidiaries beneficially owns 10% or more of the stock
or other ownership interests in any other entity or venture. Section
3.01(e) of the Pavilion Disclosure Schedule contains a detailed description
of
the percentage of ownership held, type of entity or venture, state of
incorporation, description of business and copy of each of the incorporation
or
other governing documents of such entity or venture, if any.
3.02. Capitalization
of Pavilion.
(a) The
authorized capital stock of Pavilion consists only of 3,000,000 Pavilion Shares,
of which 725,864 are issued and outstanding. All outstanding Pavilion
Shares have been duly authorized and are validly issued, fully paid and
non-assessable, and were not issued in violation of the preemptive rights of
any
person. All outstanding Pavilion Shares issued have been issued in
compliance in all material respects with all applicable federal and state
securities laws.
-6-
Exhibit
2
(b) Except
as disclosed in Section 3.02(b) of the Pavilion Disclosure Schedule, as of
the
date of this Agreement, there are no options, warrants, calls, rights,
commitments or agreements of any character to which Pavilion is a party or
by
which it is bound, obligating Pavilion to issue, deliver or sell, or cause
to be
issued, delivered or sold, any additional Pavilion Shares or obligating Pavilion
to grant, extend or enter into any such option, warrant, call, right, commitment
or agreement. Except as disclosed in Section 3.02(b) of the Pavilion
Disclosure Schedule, there are no outstanding contractual obligations of
Pavilion to repurchase, redeem or otherwise acquire any Pavilion
Shares.
(c) Except
as disclosed in Section 3.02(c) of the Pavilion Disclosure Schedule, since
June 30, 2007, Pavilion has not (A) issued or permitted to be issued
any Pavilion Shares, or securities exercisable for or convertible into Pavilion
Shares; (B) repurchased, redeemed or otherwise acquired, directly or
indirectly, any Pavilion Shares; or (C) declared, set aside, made or paid
to the shareholders of Pavilion dividends or other distributions on the
outstanding Pavilion Shares.
(d) No
bonds, debentures, notes or other indebtedness of Pavilion having the right
to
vote on any matters on which Pavilion shareholders may vote are issued or
outstanding.
(a) The
authorized capital of Lenawee consists solely of 182,174 shares of common stock,
$10.00 par value per share. All of the issued and outstanding shares
of Lenawee are held by Pavilion.
(b) All
shares of the Subsidiaries have been duly authorized and are validly issued,
fully paid and non-assessable, were not issued in violation of the preemptive
rights of any person, and have been issued in compliance in all material
respects with all applicable federal and state securities laws.
(c) As
of the date of this Agreement, there are no options, warrants, calls, rights,
commitments or agreements of any character to which any Subsidiary is a party
or
by which it is bound, obligating a Subsidiary to issue, deliver or sell, or
cause to be issued, delivered or sold, any additional shares of a Subsidiary
or
obligating the Subsidiary to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. As of the date of this
Agreement, there are no outstanding contractual obligations of a Subsidiary
to
repurchase, redeem or otherwise acquire any shares of a Subsidiary.
(d) No
Subsidiary has issued or permitted to be issued any shares of such Subsidiary,
or securities exercisable for or convertible into shares of such Subsidiary,
other than shares issued to its parent corporation.
(e) No
bonds, debentures, notes or other indebtedness of a Subsidiary having the right
to vote on any matters on which the Subsidiary shareholders may vote are issued
or outstanding.
-7-
Exhibit
2
(a) This
Agreement (i) has been duly executed and delivered by Pavilion and (ii) has
been
approved by the board of directors of Pavilion.
(b) Subject
to the approval of this Agreement by the holders of at least a majority of
the
issued and outstanding Pavilion Shares at a meeting of the Pavilion shareholders
(the “Pavilion Meeting”) and to the receipt of all requisite
regulatory approvals, Pavilion has all requisite corporate power and authority
to enter into this Agreement and to perform all of its obligations
hereunder.
-8-
Exhibit
2
order
to
make the statements therein, in light of the circumstances under which they
were
made, not misleading.
-9-
Exhibit
2
by
them
under the rules and regulations of the OFIS, the Federal Reserve and the FDIC,
except where the failure to file such reports or maintain such records
individually or in the aggregate would not reasonably be expected to have a
material adverse effect on Pavilion on a consolidated basis. All such
documents and reports complied in all material respects with applicable
requirements of law and rules and regulations in effect at the time such
documents and reports were filed and contained in all material respects the
information required to be stated therein. None of such documents or
reports, when filed, 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.
(a) Pavilion
and the Subsidiaries have timely filed (after consideration of applicable
extensions) all returns, amended returns, statements, reports and forms
(including, without limitation, elections, declarations, disclosures, schedules,
estimates and information returns) (collectively, the “Tax
Returns”) with respect to all federal, state, local and foreign taxes,
charges, fees, levies or other assessments, however denominated, including,
without limitation, all net income, gross income, gross receipts, gains,
premium, sales, use, ad valorem, goods and services, capital, production,
disability, employer health, estimated, unemployment, transfer, franchise,
profits, withholding, payroll, employment, excise, severance, stamp, occupancy,
license, lease, environmental, customs, duties, property, windfall profits
and
all other taxes, custom duties, fees, assessments or charges of any kind
whatsoever (including, without limitation, any interest, penalties or additions
to tax with respect thereto) and any transferee liability in respect of any
such
items (individually a “Tax,” and collectively,
“Taxes”) required to be filed with the appropriate
tax
authority. Such Tax Returns were true, correct and complete in all
material respects. Pavilion and the Subsidiaries have paid and
discharged all Taxes due (whether reflected on such Tax Returns or otherwise),
other than such Taxes that are adequately accrued as shown on the Pavilion
Financial Statements or have arisen in the ordinary course of business since
the
Pavilion Balance Sheet Date.
(b) Neither
Pavilion nor any Subsidiary has knowledge of, or has received any notice from
the Internal Revenue Service (the “IRS”) or any other taxing
agency or authority, domestic or foreign, of the assertion against Pavilion
or
any of the Subsidiaries of any deficiency or claim for additional
Taxes. No federal, state, local, or foreign Tax audits or
administrative or judicial Tax proceedings are pending or being conducted with
respect to Pavilion or any of the Subsidiaries and, to the knowledge of
Pavilion, no such audit or proceeding is threatened. No extension of
time within which to file any Tax Return (for a period with respect to which
the
statute of limitations has not expired) has been filed, or has been requested
or
granted. There are no unexpired waivers by Pavilion or any of the
Subsidiaries of any statute of limitations with respect to Taxes. The
accruals and reserves for Taxes reflected in the Pavilion Financial Statements
are adequate in all material respects for the periods
covered. Pavilion and the Subsidiaries have withheld or collected and
paid over to the appropriate Governmental Authorities or are properly holding
for such payment all Taxes required by law to be withheld or
collected. There are no liens for Taxes upon the assets of Pavilion
or any of the Subsidiaries, other than liens for current Taxes not yet due
and
payable. Neither Pavilion nor any of the
-10-
Exhibit
2
Subsidiaries
has agreed to make, or is required to make, any adjustment under Section 481(a)
of the Code.
(c) Except
as set forth in Section 3.13(c) of the Pavilion Disclosure Schedule, neither
Pavilion nor any of the Subsidiaries is a party to any agreement, contract,
arrangement or plan that has resulted, or could result, individually or in
the
aggregate, in the payment of “excess parachute payments” within the meaning of
Section 280G of the Code.
(d) Neither
Pavilion nor any of the Subsidiaries (i) has ever been a member of an
affiliated group of corporations, within the meaning of Section 1504 of the
Code, other than an affiliated group of which Pavilion is or was the common
parent corporation, or (ii) has any liability for the Taxes of any other
person or entity under Treasury Department Regulation Section 1.1502-6 (or
any
similar provision of state, local or foreign law), as a transferee or successor,
by contract or otherwise.
(e) No
Tax is required to be withheld pursuant to Section 1445 of the Code as a result
of the transactions contemplated by this Agreement.
(f) As
of the date hereof, Pavilion has no reason to believe that any conditions exist
that might prevent or impede the Corporate Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(a) Section
3.14(a) of the Pavilion Disclosure Schedule identifies all real property, and
any leasehold interest in real property, owned or held by Pavilion or any of
the
Subsidiaries (collectively, the “Pavilion Real
Properties”). Copies of all leases of Pavilion Real
Properties have been provided to First Defiance. Such leasehold
interests have not been assigned or subleased. All Pavilion Real
Properties which are owned by Pavilion or any of the Subsidiaries are free
and
clear of all mortgages, liens, security interests, defects, encumbrances,
easements, restrictions, reservations, conditions, covenants, agreements,
encroachments, rights of way and zoning laws, except (i) those set forth in
Section 3.14(a) of the Pavilion Disclosure Schedule; (ii) easements,
restrictions, reservations, conditions, covenants, rights of way, zoning laws
and other defects and irregularities in title and encumbrances which do not
materially impair the use thereof for the purposes for which they are held;
and
(iii) liens for current Taxes not yet due and payable.
(b) Pavilion
and the Subsidiaries own, and are in rightful possession of, and have good
title
to, all of the other assets indicated in the Pavilion Financial Statements
as
being owned by Pavilion or the Subsidiaries, free and clear of any charge,
mortgage, pledge, security interest, hypothecation, restriction, claim, option,
lien, encumbrance or interest of any persons whatsoever except those assets
disposed of in the ordinary course of business consistent with past
practices.
(c) The
assets of Pavilion on a consolidated basis are adequate to continue to conduct
the businesses of Pavilion and the Subsidiaries as such businesses are presently
being conducted.
-11-
Exhibit
2
(a) None
of Pavilion, any of the Subsidiaries nor their respective properties is a party
to or subject to any order, judgment, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or similar
submission to, or extraordinary supervisory letter from, any court or federal
or
state governmental agency or authority, including any such agency or authority
charged with the supervision or regulation of financial institutions (or their
holding companies) or issuers of securities (including, without limitation,
the
OFIS, Federal Reserve, the FDIC, and the SEC) or the supervision or regulation
of Pavilion or any of the Subsidiaries (collectively, the “Regulatory
Authorities”). Neither Pavilion nor any of the Subsidiaries
has been advised by any Regulatory Authority that such Regulatory Authority
is
contemplating issuing or requesting (or is considering the appropriateness
of
issuing or requesting) any new or additional order, judgment, decree, agreement,
memorandum of understanding, commitment letter, supervisory letter or similar
submission.
(b) Each
of Pavilion and the Subsidiaries has been in compliance with all applicable
federal, state, local and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders or decrees applicable thereto or to the employees
conducting such business, including, without limitation, the Equal Credit
Opportunity Act, as amended, the Fair Housing Act, as amended, the Federal
Community Reinvestment Act, as amended, the Home Mortgage Disclosure Act, as
amended, the Bank Secrecy Act, as amended, the USA Patriot Act, and all other
applicable fair lending laws and other laws relating to discriminatory business
practices, except for failures to be in compliance which, individually or in
the
aggregate, have not had or would not reasonably be expected to have a material
adverse effect on Pavilion on a consolidated basis.
(c) Each
of Pavilion and the Subsidiaries has all permits, licenses, authorizations,
orders and approvals of, and has made all filings, applications and
registrations with, each Regulatory Authority and administrative agency or
commission or other federal, state or local government authority or
instrumentality (each, a “Governmental Authority”) that is
required in order to permit it to own or lease its properties and to conduct
its
business as presently conducted, except where the failure to obtain any of
the
foregoing or to make any such filing, application or registration has not had
or
would not reasonably be expected to have a material adverse effect on Pavilion
on a consolidated basis; and all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and no suspension
or cancellation of any of them has been threatened in writing.
(d) The
savings accounts and deposits of Lenawee are insured up to applicable limits
by
the FDIC in accordance with the Federal Deposit Insurance Act, and Lenawee
has
paid all assessments and filed all reports required by the Federal Deposit
Insurance Act and BHCA.
-12-
Exhibit
2
-13-
Exhibit
2
(a) Section
3.20(a) of the Pavilion Disclosure Schedule contains a complete and accurate
list of all bonus, incentive, deferred compensation, pension (including, without
limitation, Pension Plans defined below), retirement, profit-sharing, thrift,
savings, employee stock ownership, stock bonus, stock purchase, restricted
stock, stock option, severance, welfare (including, without limitation, “welfare
plans” within the meaning of Section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”)), fringe benefit
plans, employment or severance agreements and all similar practices, policies
and arrangements maintained or contributed to (currently or within the last
six
years) by (i) Pavilion or Lenawee and in which any employee or former employee
(the “Employees”), consultant or former consultant (the
“Consultants”), officer or former officer (the
“Officers”), or director or former
director (the
“Directors”) of Pavilion or any of the Subsidiaries
participates or to which any such Employees, Consultants, Officers or Directors
are parties or (ii) any ERISA Affiliate (as defined below) (collectively, the
“Compensation and Benefit Plans”). Neither Pavilion
nor any of the Subsidiaries has any commitment to create any additional
Compensation and Benefit Plan or to modify or change any existing Compensation
and Benefit Plan, except to the extent required by law.
(b) Each
Compensation and Benefit Plan has been operated and administered substantially
in accordance with its terms and with applicable law, including, but not limited
to, ERISA, the Code, the Securities Act of 1933, as amended (the
“Securities Act”), the Exchange Act, the Age Discrimination in
Employment Act, or any regulations or rules promulgated thereunder, and all
filings, disclosures and notices required by ERISA, the Code, the Securities
Act, the Exchange Act, the Age Discrimination in Employment Act and any other
applicable law have been timely made. Each Compensation and Benefit
Plan (whether an individually designed or prototype plan) that is an “employee
pension benefit plan” (as defined in Section 3(2) of ERISA) and which is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the IRS. Neither Pavilion nor
Lenawee has received notice from the IRS, and Pavilion does not have knowledge
of any circumstances likely to result in the revocation by the IRS, of the
plan’s favorable determination letter. There is no material pending
or, to the knowledge of Pavilion, threatened, legal action, suit or claim
relating to the Compensation and Benefit Plans other than routine claims for
benefits thereunder. Neither Pavilion nor any of the Subsidiaries has
engaged in a transaction, or omitted to take any action, with respect to any
Compensation and Benefit Plan that would reasonably be expected to subject
Pavilion or any of the Subsidiaries to a tax or penalty imposed by either
Section 4975 of the Code or Section 502 of ERISA, assuming for purposes of
Section 4975 of the Code that the taxable period of any such transaction expired
as of the date hereof.
(c) None
of Pavilion or any of the Subsidiaries, or any entity which is considered one
employer with Pavilion or Lenawee under Section 4001(a)(14) of ERISA or
Section 414(b), (c) or (m) of the Code (an “ERISA Affiliate”), (i) has
ever sponsored, maintained or been obligated to contribute to any Pension Plan
subject to either Title IV of ERISA or the funding requirements of Section
412
of the Code; or (ii) has contributed, or has been obligated to contribute,
to a
multiemployer plan under Subtitle E of Title IV of ERISA (as defined in ERISA
Sections 3(37)(A) and 4001(a)(3)) at any time since September 26,
1980. There is no pending
-14-
Exhibit
2
investigation
or enforcement action by the PBGC, the Department of Labor, the IRS or any
other
Governmental Authority with respect to any Compensation and Benefit
Plan.
(d) All
contributions required to be made under the terms of any Compensation and
Benefit Plan or ERISA Affiliate plan or any employee benefit arrangements under
any collective bargaining agreement to which Pavilion or any of the Subsidiaries
is a party have been timely made or have been reflected on the Pavilion
Financial Statements.
(e) Except
as set forth in Section 3.20(e) of the Pavilion Disclosure Schedule, neither
Pavilion nor any of the Subsidiaries has any obligations to provide retiree
health and retiree life insurance or other retiree death benefits under any
Compensation and Benefit Plan, other than benefits mandated by
Section 4980B of the Code.
(f) Pavilion
and any of the Subsidiaries do not maintain any foreign Compensation and Benefit
Plans.
(g) With
respect to each Compensation and Benefit Plan, if applicable, Pavilion or
Lenawee has provided to First Defiance, true and complete copies
of: (i) Compensation and Benefit Plan documents and all
subsequent amendments thereto; (ii) trust instruments and insurance
contracts and all subsequent amendments thereto; (iii) the most recent
annual returns (Forms 5500) and financial statements; (iv) the most recent
summary plan descriptions and all subsequent summaries of material
modifications; (v) the most recent determination letter issued by the IRS
with respect to each Compensation and Benefit Plan that is intended to comply
with Code § 401(a); and (vi) any Form 5310, Form 5310A, Form 5300 or
Form 5330 filed with the IRS within the twelve months ending immediately
before the date hereof.
(h) Except
as disclosed in Section 3.20(h) of the Pavilion Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement would not,
directly or indirectly (including, without limitation, as a result of any
termination of employment prior to or following the Effective Time), reasonably
be expected to (i) except as provided in Section 6.01(d) of this Agreement,
entitle any Employee, Officer, Consultant or Director to any payment (including
severance pay or similar compensation) or any increase in compensation,
(ii) result in the vesting or acceleration of any benefits under any
Compensation and Benefit Plan or (iii) result in any material increase in
benefits payable under any Compensation and Benefit Plan.
-15-
Exhibit
2
Disclosure
Schedule, no consent, approval, authorization of, notice to, or registration
with, any court, Governmental Authority, Regulatory Authority, borrower or
any
other third party is required to be made or obtained by Pavilion or any of
the
Subsidiaries in connection with the execution, delivery or performance by
Pavilion of this Agreement or the consummation by Pavilion of the transactions
contemplated hereby.
(a) Except
as set forth in Section 3.24 of the Pavilion Disclosure Schedule, neither the
conduct nor operation of Pavilion or the Subsidiaries nor any condition of
any
property presently or previously owned, leased or operated by any of them
(including, without limitation, in a fiduciary or agency capacity), or to
Pavilion’s knowledge on which any of them holds a lien, violates or violated
Environmental Laws (as defined below) and to Pavilion’s knowledge, no condition
has existed or event has occurred with respect to any of them or any such
property that, with notice or the passage of time, or both, is reasonably likely
to result in liability under Environmental Laws.
(b) To
Pavilion’s knowledge: (i) neither Pavilion nor any of the Subsidiaries has
received any notice from any person or entity that Pavilion or any of the
Subsidiaries or the operation or condition of any property ever owned, leased,
operated, or held as collateral or in a fiduciary capacity by any of them are
or
were in violation of or otherwise alleged to have liability under any
Environmental Law, including, but not limited to, responsibility (or potential
responsibility) for the cleanup or other remediation of any pollutants,
contaminants, or hazardous or toxics wastes, substances or materials at, on,
beneath, or originating from any such property (ii) none of the Pavilion
Real Properties or improvements thereon or any of the real properties in respect
of which Pavilion or any of the Subsidiaries has foreclosed or holds a mortgage
or mortgages (hereinafter referred to as the “Real Estate
Collateral”) or improvements thereon has been used for the treatment,
storage or disposal of Hazardous Substances or has been contaminated by
Hazardous Substances, (iii) none of the business operations of Pavilion or
the Subsidiaries have contaminated lands, waters or other property of others
with Hazardous
-16-
Exhibit
2
Substances,
except routine, office-generated solid waste, or (iv) none of the Pavilion
Real Properties or improvements thereon, or the Real Estate Collateral or
improvements thereon have in the past or presently contain underground storage
tanks, friable asbestos materials or PCB-containing equipment.
For
purposes of this Agreement, (a) “Environmental Law” means all
applicable local, state and federal environmental, health and safety laws and
regulations, including, without limitation, the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (“CERCLA”), the Clean Water
Act, the Federal Clean Air Act, and the Occupational Safety and Health Act,
each
as amended, regulations promulgated thereunder, and state counterparts, and
(b) ”Hazardous Substances” means, at any
time: (i) any “hazardous substance” as defined in §101(14) of CERCLA
or regulations promulgated thereunder; (ii) any “solid waste,” “hazardous
waste,” or “infectious waste,” as such terms are defined in any other
Environmental Law as of the date of this Agreement; and (iii) friable
asbestos, urea-formaldehyde, polychlorinated biphenyls
(“PCBs”), nuclear fuel or material, chemical waste, radioactive
material, explosives, known carcinogens, petroleum products and by-products,
and
other dangerous, toxic or hazardous pollutants, contaminants, chemicals,
materials or substances listed or identified in, or regulated by, any
Environmental Law.
-17-
Exhibit
2
consideration
to be received by the Pavilion shareholders in connection with the Corporate
Merger pursuant to this Agreement is fair, from a financial point of view,
to
the Pavilion shareholders.
ARTICLE
FOUR
First
Defiance hereby represents and warrants to Pavilion that each of the following
statements is true and accurate:
(a) First
Defiance is an Ohio corporation and a unitary savings and loan holding company
registered under the Home Owner’s Loan Act, as amended
(“HOLA”), and regulated by the Office of Thrift Supervision
(“OTS”). First Defiance is in the process of
converting to a bank holding company, which conversion is expected to be
completed in connection with the Corporate Merger. First Defiance is
duly organized, validly existing and in good standing under the laws of the
State of Ohio and has the full corporate power and authority to own its
property, to carry on its business as presently conducted and to enter into
and,
subject to the obtaining of appropriate approvals of Governmental Authorities
and Regulatory Authorities, perform its obligations under this Agreement and
consummate the transactions contemplated by this Agreement, and is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership, leasing
or
operation of its properties makes such qualification or licensing necessary,
other than where the failure to be so organized, existing, qualified or licensed
or in good standing individually or in the aggregate could not reasonably be
expected to have a material adverse effect on First
-18-
Exhibit
2
Defiance. First
Defiance has provided to Pavilion true and complete copies of its articles
of
incorporation and code of regulations, in each case as amended to the date
of
this Agreement.
(b) First
Federal is a federal savings bank and is regulated by the OTS and the
FDIC. First Federal intends to convert to a national bank charter in
connection with the Bank Merger. First Federal is duly organized,
validly existing and in good standing under the laws of the United States of
America and has the full corporate power and authority to own its property
and
to carry on its business as presently conducted. First Federal is not
qualified to do business in any other jurisdiction or required to be qualified
to do business in any other jurisdiction except where the failure to be so
organized, existing, qualified or licensed or in good standing individually
or
in the aggregate could not reasonably be expected to have a material adverse
effect on First Federal. First Defiance has provided to Pavilion true
and complete copies of First Federal’s charter and bylaws, in each case as
amended to the date of this Agreement.
(c) First
Federal Bank of the Midwest, First Defiance Loan Servicing Company, First
Defiance Service Company, and First Insurance & Investments, Inc. are the
only direct or indirect subsidiaries of First Defiance.
(a) The
authorized capital stock of First Defiance consists only of (i) 25,000,000
common shares, $0.01 par value per share (the “First Defiance
Shares”) of which 7,095,240 shares are outstanding, and 4,607,395
shares are held in treasury, and (ii) 5,000,000 preferred shares, $0.01 par
value per share, none of which are outstanding. The outstanding First
Defiance Shares have been duly authorized and are validly issued, fully paid
and
non-assessable, and were not issued in violation of the preemptive rights of
any
person. All First Defiance Shares issued have been issued in
compliance in all material respects with all applicable federal and state
securities laws. As of the date of this Agreement, 423,632 First
Defiance Shares are reserved for issuance upon the exercise of outstanding
stock
options (the “First Defiance Stock Options”) granted under
First Defiance’s stock option plans (the “First Defiance Stock Option
Plans”) and 223,000 First Defiance Shares are available for future
grants of stock options under the First Defiance Stock Option
Plans. As of the date of this Agreement, except for the First
Defiance Stock Options, and the shares issuable to Pavilion’s shareholders
pursuant to this Agreement, First Defiance has no other commitment or obligation
to issue, deliver or sell any First Defiance Shares. As of the date
of this Agreement, there are no bonds, debentures, notes or other indebtedness
of First Defiance, and no securities or other instruments or obligations of
First Defiance, the value of which is in any way based upon or derived from
any
capital or voting stock of First Defiance, having the right to vote (or
convertible into, or exchangeable for,
-19-
Exhibit
2
securities
having the right to vote) on any matters on which shareholders of First Defiance
may vote. Except as set forth above, as of the date of this
Agreement, there are no contracts of any kind to which First Defiance is a
party
or by which First Defiance is bound obligating First Defiance to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of capital
stock of, or other equity or voting interests in, or securities convertible
into, or exchangeable or exercisable for, shares of capital stock of, or other
equity or voting interests in, First Defiance or obligating First Defiance
to
issue, grant, extend or enter into any such security, option, warrant, call,
right or contract other than pursuant to First Defiance Stock Option
Plans. As of the date of this Agreement, there are no outstanding
material contractual obligations of First Defiance to repurchase, redeem or
otherwise acquire any shares of capital stock of, or other equity or voting
interests in, First Defiance.
(b) The
First Defiance Shares to be issued in exchange for Pavilion Shares in the
Corporate Merger, when issued in accordance with the terms of this
Agreement, will be duly authorized, validly issued, fully paid and
non-assessable, will not be subject to any preemptive or other statutory right
of shareholders and will be issued in compliance with applicable United States
federal and state securities laws. The authorized capital stock of
First Defiance is sufficient to issue the Per Share Stock Consideration in
the
Corporate Merger.
(a) The
authorized capital of First Federal consists solely of (i) 5,000,000 shares
of preferred stock, without par value, none of which is issued or outstanding,
and (ii) 20,000,000 shares of common stock, $.01 par value per share, of
which 100 shares are issued and outstanding as of the date of this
Agreement.
(b) All
shares of First Federal have been duly authorized and are validly issued, fully
paid and non-assessable, were not issued in violation of the preemptive rights
of any person, and have been issued in compliance in all material respects
with
all applicable federal and state securities laws.
(c) As
of the date of this Agreement, there are no options, warrants, calls, rights,
commitments or agreements of any character to which First Federal is a party
or
by which it is bound, obligating First Federal to issue, deliver or sell, or
cause to be issued, delivered or sold, any additional shares of First Federal
or
obligating First Federal to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. As of the date of this
Agreement, there are no outstanding contractual obligations of First Federal
to
repurchase, redeem or otherwise acquire any shares of First
Federal.
(d) No
bonds, debentures, notes or other indebtedness of First Federal having the
right
to vote on any matters on which First Federal shareholders may vote are issued
or outstanding.
-20-
Exhibit
2
enforceable
against it in accordance with its terms, except as the same may be limited
by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws relating to or affecting the enforcement of creditors’ rights
generally, by general equitable principles (regardless of whether enforceability
is considered in a proceeding in equity or at law) and by an implied covenant
of
good faith and fair dealing. First Defiance has the right, power,
authority and capacity to execute and deliver this Agreement and, subject to
the
obtaining of appropriate approvals by Governmental Authorities and Regulatory
Authorities and the expiration of applicable regulatory waiting periods, and
required filings under federal and state securities laws, to perform its
obligations under this Agreement.
-21-
Exhibit
2
the
related consolidated statements of income, changes in shareholders’ equity and
cash flows for the three years ended December 31, 2006, including
accompanying notes and the report thereon of Xxxxx Xxxxxx and Company LLC,
and
(b) the unaudited interim consolidated statements of First Defiance, consisting
of consolidated statements of financial condition as of June 30, 2007 (the
“First Defiance Balance Sheet Date”), the related unaudited
consolidated statements of earnings, shareholders’ equity, and cash flows
including the related notes thereto for the three months ended June 30, 2007,
of
First Defiance (collectively, all of such audited and unaudited consolidated
financial statements are referred to as the “First Defiance Financial
Statements”). The First Defiance Financial Statements were
prepared in conformity with GAAP applied on a consistent basis and present
fairly, in all material respects, the consolidated financial condition of First
Defiance at the dates, and the consolidated results of operations and cash
flows
for the periods, stated therein.
-22-
Exhibit
2
breach
of
such agreement, which breach or default would reasonably be expected to have
a
material adverse effect on First Defiance on a consolidated basis.
(a) Each
of First Defiance and First Federal has been in compliance with all applicable
federal, state, local and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders or decrees applicable thereto or to the employees
conducting such business, including, without limitation, the Equal Credit
Opportunity Act, as amended, the Fair Housing Act, as amended, the Federal
Community Reinvestment Act, as amended, the Home Mortgage Disclosure Act, as
amended, the Bank Secrecy Act, as amended, the USA Patriot Act, and all other
applicable fair lending laws and other laws relating to discriminatory business
practices, except for failures to be in compliance which, individually or in
the
aggregate, have not had or would not reasonably be expected to have a material
adverse effect on First Defiance or First Federal.
(b) Each
of First Defiance and First Federal has all permits, licenses, authorizations,
orders and approvals of, and has made all filings, applications and
registrations
-23-
Exhibit
2
with,
each Regulatory Authority and Governmental Authority that is required in order
to permit it to own or lease its properties and to conduct its business as
presently conducted, except where the failure to obtain any of the foregoing
or
to make any such filing, application or registration has not had or would not
reasonably be expected to have a material adverse effect on First Defiance
or
First Federal; and all such permits, licenses, certificates of authority, orders
and approvals are in full force and effect and no suspension or cancellation
of
any of them has been threatened in writing.
(c) The
savings accounts and deposits of First Federal are insured up to applicable
limits by the FDIC in accordance with the Federal Deposit Insurance Act, and
First Federal has paid all assessments and filed all reports required by the
Federal Deposit Insurance Act and HOLA.
-24-
Exhibit
2
ARTICLE
FIVE
(a) Pavilion
will conduct, and will cause the Subsidiaries to conduct, their respective
businesses only in the ordinary and usual course consistent with past practice,
and neither Pavilion nor the Subsidiaries shall take any action that would
be
inconsistent with any representation, warranty or covenant of Pavilion set
forth
in this Agreement or which would cause a breach of any such representation
or
warranty if made at or immediately following such action, except as may be
required by applicable law or regulation.
(b) Notwithstanding
the foregoing, neither Pavilion nor the Subsidiaries will:
(i) sell,
transfer, mortgage, pledge or subject to any lien or otherwise encumber any
of
the assets of Pavilion or the Subsidiaries, tangible or intangible, which are
material, individually or in the aggregate, to Pavilion on a consolidated basis,
except for loans sold in the ordinary course of business consistent with past
practices;
(ii) make
any capital expenditures which individually exceed $10,000 or in the aggregate
exceed $50,000;
(iii) become
bound by, enter into, or perform any contract, commitment or transaction that
would be reasonably likely to (A) have a material adverse effect on
Pavilion on a consolidated basis, (B) impair in any material respect the ability
of Pavilion or any of the Subsidiaries to perform its obligations under this
Agreement or (C) prevent or materially delay the consummation of the
transactions contemplated by this Agreement;
(iv) declare,
pay or set aside for payment any dividends or make any distributions on Pavilion
shares other than regular quarterly dividends to be paid in a manner consistent
with its historical dividend payment practices;
(v) purchase,
redeem, retire or otherwise acquire any Pavilion Shares, except for the
redemption of Pavilion Shares held in the Pavilion 401(k) Plan in accordance
with the plan’s terms and applicable law;
(vi) issue
any Pavilion Shares, except (A) upon the valid exercise of any outstanding
Pavilion Stock Option, (B) pursuant to the Pavilion Bancorp, Inc. Employee
Stock Purchase Plan, (C) in the form of matching contributions made to the
Pavilion 401(k) Plan consistent with past practices, or (D) pursuant
to the Pavilion Bancorp, Inc. Dividend Reinvestment and Stock Purchase Plan,
or
grant any option or right to acquire any of its capital shares;
-25-
Exhibit
2
(vii) amend
or propose to amend any of the governing documents of Pavilion or any the
Subsidiaries;
(viii) reorganize
or acquire all or any portion of the assets, business, deposits or properties
of
any other entity other than in the ordinary and usual course of business
consistent with past practice (A) by way of foreclosures or (B) by acquisitions
of control in a bona fide fiduciary capacity or in satisfaction of debts
previously contracted in good faith;
(ix) enter into,
establish, adopt or amend any pension, retirement, stock option, stock purchase,
savings, profit-sharing, deferred compensation, consulting, bonus, group
insurance or other employee benefit, incentive or welfare contract, plan or
arrangement, or any trust agreement (or similar arrangement) related thereto,
in
respect of any Director, Officer or Employee of Pavilion or Lenawee, or take
any
action (other than execution and performance of this Agreement) to accelerate
the vesting or exercisability of stock options, restricted stock or other
compensation or benefits payable thereunder; provided, however, that Pavilion
or
Lenawee may take such actions in order to satisfy either applicable law or
contractual obligations, including those arising under its benefit plans,
existing as of the date hereof and disclosed in Section 3.20 of the Pavilion
Disclosure Schedule, or regular annual renewals of insurance
contracts;
(x) announce
or pay any general wage or salary increase or bonus except for normal increases
not exceeding 3.5% in the aggregate for Employees made in the ordinary course
of
business, consistent with past practices, or enter into or amend or renew any
employment, consulting, severance or similar agreements or arrangements with
any
Officer, Director or Employee of Pavilion or Lenawee, except for changes that
are required by applicable law, provided that this subsection shall not limit
or
prevent Pavilion or any Subsidiary from paying out year-end bonuses in
accordance with the cash bonus plans set forth in Section 3.20 of the Pavilion
Disclosure Schedule;
(xi) except
in the ordinary course of business and consistent with past practices, borrow
or
agree to borrow any funds, including but not limited to repurchase transactions,
or indirectly guarantee or agree to guarantee any obligations of
others;
(xii) implement
or adopt any change in its accounting principles, practices or methods, other
than as may be required by GAAP;
(xiii)
make or change any Tax election or Tax accounting method, file any
amended Tax Return, settle any Tax claim or assessment or consent to the
extension or waiver of any statute of limitations with respect to
Taxes;
(xiv) originate
or issue a commitment to originate any loan or note in a principal amount of
$250,000 or more or on an aggregate basis to one borrower of $500,000 or more,
except for loans originated for sale in compliance with Xxxxxx Xxx, Xxxxxxx
Mac,
or Federal Home Loan Bank of Indianapolis guidelines, or modify, renew, or
release any collateral on any existing loan the outstanding balance of which,
including principal, interest and fees, is $250,000 or more;
-26-
Exhibit
2
(xv) establish
any new lending programs or make any changes in its policies concerning which
persons may approve loans;
(xvi) enter
into any securities transactions or purchase or otherwise acquire any investment
security other than U.S. Government and U.S. agency obligations;
(xvii) increase
or decrease the rate of interest paid on time deposits or certificates of
deposits, except in a manner and pursuant to policies consistent with past
practices in relation to rates prevailing in Lenawee’s market;
(xviii) foreclose
upon or otherwise take title to or possession or control of any real property
without first obtaining a Phase I Environmental Report thereon which indicates
an absence of a “recognized environmental condition;” provided, however, that
Lenawee shall not be required to obtain such a report with respect to
single-family, non-agriculture residential property of one acre or less to
be
foreclosed upon unless it has reason to believe such property may contain any
such pollutants, contaminants, waste materials including asbestos or petroleum
products;
(xix) purchase
or otherwise acquire any interest in a loan held by a third party;
(xx) open
any new branches or loan production offices or close any branches or loan
production offices in existence on the date of this Agreement;
(xxi)
increase the number of directors currently serving as of the
date of this Agreement on Pavilion or Lenawee’s Board of Directors;
(xxii) become
bound by or enter into any contract related to the provision of advisory or
consulting services to Pavilion or any Subsidiary, except (A) in connection
with the transactions contemplated by this Agreement and (B) for customary
legal and accounting engagements; or
(xxiii) enter
into any agreement to do any of the foregoing.
(c) Pavilion
and each of the Subsidiaries shall use their commercially reasonable efforts
to
maintain and keep their respective properties and facilities in their present
condition and working order, ordinary wear and tear excepted.
(d) Pavilion
and each of the Subsidiaries shall perform all of their obligations under all
agreements relating to or affecting their respective properties, rights and
businesses.
(e) Pavilion
and each of the Subsidiaries shall use their commercially reasonable efforts
to
maintain and preserve their respective business organizations intact, to retain
present key Employees and to maintain the respective relationships of customers,
suppliers and others having business relationships with them.
-27-
Exhibit
2
(f) Pavilion
and the Subsidiaries shall afford to First Defiance and to its officers,
employees, investment bankers, attorneys, accountants and other advisors and
representatives reasonable and prompt access during normal business hours during
the period prior to the Effective Time or the termination of this Agreement
to
all their respective properties, assets, books, contracts, commitments,
directors, officers, employees, attorneys, accountants, auditors, other advisors
and representatives and records and, during such period, Pavilion and the
Subsidiaries shall make available to First Defiance upon reasonable request
(i)
a copy of each report, schedule, form, statement and other document filed or
received by it during such period pursuant to the requirements of domestic
or
foreign (whether national, federal, state, provincial, local or otherwise)
laws
and (ii) all other information concerning its business, properties and personnel
as First Defiance may reasonably request (including the financial and Tax work
papers of independent auditors and financial consultants), provided that First
Defiance shall not unreasonably interfere with the business operations of
Pavilion or Lenawee and Pavilion may, in its discretion, limit the access of
First Defiance to the employees, consultants or advisors of Pavilion whose
work
product Pavilion reasonably wishes to keep confidential.
-28-
Exhibit
2
if,
and
to the extent that, the Board of Directors of Pavilion (as constituted as of
the
date of this Agreement, except for any director resignations after the date
of
this Agreement which would not require disclosure pursuant to Item 5.02(a)
of
Form 8-K) reasonably determines in good faith after consultation with Pavilion’s
Financial Advisor and upon written advice of counsel to Pavilion that failure
to
consider such Acquisition Transaction could reasonably be expected to constitute
a breach of its fiduciary duties to the shareholders of Pavilion; provided,
however, that Pavilion shall give First Defiance prompt notice of any such
proposal of an Acquisition Transaction and keep First Defiance promptly informed
regarding the substance thereof and the response of the Board of Directors
of
Pavilion thereto.
5.08
Pavilion
Meeting. Pavilion shall
establish a record date for, duly call, give notice of, convene and, no later
than 45 days after the effectiveness of the Registration Statement, hold the
Pavilion Meeting unless otherwise agreed to by First Defiance and
Pavilion. The Board of Directors shall recommend to its shareholders
that they approve this Agreement, and shall include such recommendation in
the
Proxy/Prospectus, unless the Board of Directors determines in good faith after
consultation with Pavilion’s Financial Advisor and upon written advice of
counsel to Pavilion that such a recommendation could reasonably be expected
to
constitute a breach of the Board of Directors’ fiduciary duties to the
shareholders of Pavilion.
-29-
Exhibit
2
(a) Without
the prior written consent of First Defiance, neither Pavilion nor any of its
Subsidiaries shall make or change any election, change an annual accounting
period, adopt or change any accounting method, file any amended Tax Return,
enter into any closing agreement, settle any Tax claim or assessment relating
to
Pavilion or any of its Subsidiaries, surrender any right to claim a refund
of
Taxes, consent to any extension or waiver of the limitation period applicable
to
any tax claim or assessment relating to Pavilion or any of its Subsidiaries,
or
take any other similar action relating to the filing of any Tax Return or the
payment of any Tax, or offer or agree to do any of the foregoing or surrender
its rights to do any of the foregoing.
(b) Pavilion
and its Subsidiaries shall (i) prepare and file or cause to be prepared and
filed in a timely manner consistent with past practice all Tax Returns that
are
required to be filed (with extensions) on or before the Closing Date, and (ii)
pay any Tax shown, or required to be shown, on any such Tax Return.
(c) Except
as otherwise set forth herein, each of First Defiance and Pavilion agrees not
to
take any actions subsequent to the date of this Agreement that would adversely
affect the ability of Pavilion and its shareholders to characterize the
Corporate Merger as a tax-free reorganization under Section 368(a) of the Code,
and each of First Defiance and Pavilion agrees to take such action as may be
reasonably required, if such action may be reasonably taken, to reverse the
impact of past actions which would adversely impact the ability of the Corporate
Merger to be characterized as a tax-free reorganization under Section 368(a)
of
the Code.
(a) On
the date the Registration Statement becomes effective and on the Closing Date,
Pavilion shall deliver to First Defiance a certificate signed by its principal
executive officer and its principal financial officer to the effect, to such
officers’ knowledge, that the information contained in the Registration
Statement relating to the business and financial condition and affairs of
Pavilion, does not 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.
(b) On
the date the Registration Statement becomes effective and on the Closing Date,
First Defiance shall deliver to Pavilion a certificate signed by its chief
executive officer and its chief financial officer to the effect, to such
officers’ knowledge, that the Registration Statement (other than the information
contained therein relating to the business and financial condition and affairs
of Pavilion) does not contain any untrue statement of a material
-30-
Exhibit
2
fact
or
omit to state any material fact required to be stated therein or necessary
to
make the statements therein not misleading.
(a) Prior
to the Closing Date, but after the receipt of the last to be obtained of the
approval of this Agreement at the Pavilion Meeting and requisite approvals
of
any Government Authorities, and Regulatory Authorities, the board of directors
of Pavilion shall adopt a resolution approving the termination of the Pavilion
401(k) Plan effective as of a date prior to the Closing
Date. Following the adoption of the resolution, Pavilion shall (i)
amend the Pavilion 401(k) Plan to provide for distributions in cash only as
permitted by Section 411(d)(6)(C) of the Code, (ii) begin the process of
requesting from the IRS a determination that the termination of the Pavilion
401(k) Plan is in compliance with Section 401(a) of the Code (the
"Determination Letter"), and (iii) prior to the Closing Date,
repurchase any Pavilion Shares owned by the Pavilion 401(k) Plan in exchange
for
cash in the amount of $75.00 per share. Following the receipt of the
Determination Letter, Pavilion shall distribute benefits under the Pavilion
401(k) Plan to plan participants. First Defiance agrees to take all
steps necessary or appropriate to accept roll-overs of benefits from the
Pavilion 401(k) Plan to the First Defiance 401(k) plan for Continuing
Employees.
(b) Prior
to the Closing Date, but after the receipt of the last to be obtained of the
approval of this Agreement at the Pavilion Meeting and requisite approvals
of
any Government a Authorities and Regulatory Authorities, the board of directors
of Pavilion shall adopt a resolution freezing the accrual of benefits under
the
Pavilion Defined Benefit Plan as of a date that is not later than the Closing
Date and approving the termination of the plan as of a date
-31-
Exhibit
2
that
is
not later than 120 days after the date the resolution is
adopted. Subsequent to the adoption of the resolution, Pavilion shall
(i) begin the process of terminating the plan in a "standard termination" with
the Pension Benefit Guaranty Corporation, and (ii) request a Determination
Letter from the IRS regarding the Pavilion Defined Benefit
Plan. After obtaining such approvals, Pavilion shall begin the
process of distributing benefits from the plan to plan
participants. First Defiance agrees to take all steps necessary or
appropriate to accept roll-overs of benefits from the Pavilion Defined Benefit
Plan to the First Defiance 401(k) plan for Continuing Employees.
(c) If
requested by First Defiance, prior to the Closing Date, but after the receipt
of
the last to be obtained of the approval of this Agreement at the Pavilion
Meeting and requisite approvals of any Government Authorities and Regulatory
Authorities, Pavilion shall terminate its policy pertaining to “banked” paid
time off and shall compensate employees who have accumulated paid time off
to
the extent payment is required by applicable law or by the policy set forth
in
Pavilion’s employee manual as of the date of this Agreement.
(d) Prior
to the Closing Date, but after the receipt of the last to be obtained of the
approval of this Agreement at the Pavilion Meeting and requisite approvals
of
any Government Authorities, and Regulatory Authorities, the board of directors
of Pavilion shall adopt a resolution approving the termination of the Pavilion
Employee Stock Purchase Plan.
ARTICLE
SIX
6.01 Employees; Employee
Benefits.
(a) First
Defiance or First Federal shall provide Continuing Employees (as defined in
Section 6.01(b)) with compensation and benefits that are substantially similar
to the compensation and benefits provided to similarly situated employees of
First Federal (as of the date any such compensation or benefit is
provided). This Agreement shall not be construed to limit the ability
of First Defiance to terminate the employment of any employee or review employee
benefits programs from time to time and to make such changes as First Defiance
deems appropriate.
(b) All
employees of Pavilion or Lenawee as of the date of this Agreement who are
actively employed by Pavilion or Lenawee as of the Effective Time shall be
at
will employees of First Defiance or First Federal (“Continuing
Employees”). Continuing Employees will be eligible to
participate in First Defiance’s benefit plans on the earliest date permitted by
such plan, with full credit for years of service with Pavilion or any Subsidiary
for the purpose of eligibility and vesting (but not for the purpose of accrual
of benefits or allocation of employer contributions).
(c) First
Defiance shall (i) cause any and all pre-existing condition limitations (to
the extent such limitations did not apply to a pre-existing condition under
Pavilion’s equivalent plan) and eligibility waiting periods under group health
plans to be waived with respect to each Continuing Employee and his or her
eligible dependents, (ii) take all necessary
-32-
Exhibit
2
and
appropriate steps to ensure that each Continuing Employee does not suffer a
lapse in health, dental, vision, life or long-term disability plan coverage
in
connection with the transactions described in this Agreement,
(iii) recognize medical or other health expenses incurred by any Continuing
Employee in the year that includes the Effective Time for purposes of any
applicable deductible and annual out-of-pocket expense requirements under any
such health, dental, or vision plan of First Defiance or any of its subsidiaries
for each Continuing Employee who submits documentation reasonably acceptable
to
First Defiance that demonstrates such medical or other health expenses were
incurred and qualified toward the deductible of the Pavilion health care
plans.
(d) First
Defiance shall pay to each employee of Pavilion or any Subsidiary that is not
covered by a written employment or severance agreement and either (i) not
offered continued employment by First Defiance or First Federal after the
Effective Time, or (ii) is a Continuing Employee whose employment is
terminated by First Defiance or any of its subsidiaries, without cause, within
30 days following the Effective Time, a severance payment equal to one week
of his or her then current base salary multiplied by the number of total
completed years of service with Pavilion and/or any Subsidiary; provided,
however, that the minimum severance payment shall equal four weeks of his or
her
base salary and the maximum severance payment shall not exceed 26 weeks of
his
or her base salary.
(e) First
Defiance expressly assumes and agrees to discharge all obligations of Pavilion
and Lenawee pursuant to the Employment Agreements listed on the Pavilion
Disclosure Schedule. This Section 6.01(d) is for the
benefit of each person who is a party to any such Employment Agreement and
shall
be enforceable by each such person.
-33-
Exhibit
2
(a) To
the fullest extent permitted by applicable law, from and after the Effective
Time, First Defiance shall indemnify, defend, and hold harmless, and provide
advancement of expenses to, any individual who is now, or has been at any time
prior to the Effective Time, a director or officer of Pavilion or any Subsidiary
or who is or was serving at the request of Pavilion or any Subsidiary as a
director or officer of another person (each, an "Indemnified
Person") against all losses, claims, damages, costs, expenses
(including fees and expenses of counsel), fines, penalties, liabilities, or
judgments or amounts that are paid in settlement of or in connection with any
threatened or actual claim, action, suit, proceeding, or investigation, whether
civil, criminal, or administrative (each, a "Claim") based
in whole or in part on or arising in whole or in part out of the fact that
such
person is or was a director or officer of Pavilion or any Subsidiary or served
at the request of Pavilion or any Subsidiary as an officer or director of
another person and pertaining to any matter existing or occurring, or any acts
or omissions occurring, at or prior to the Effective Time, whether asserted
or
claimed prior to, at, or after, the Effective Time (including matters, acts,
or
omissions occurring in connection with the approval of this Agreement and the
consummation of the transactions contemplated by this Agreement) or taken
at the request of or with the consent of First Defiance. All rights to
indemnification and exculpation from liabilities for acts or omissions occurring
at or prior to the Effective Time now existing in favor of any Indemnified
Person as provided in the articles of incorporation or bylaws of Pavilion shall
survive the Corporate Merger and the Bank Merger and shall continue in full
force and effect in accordance with their terms, it being understood that
nothing in this sentence shall require any amendment to the articles of
incorporation or code of regulations of First Defiance.
(b) As
a condition to receiving the indemnification described in
Section 6.06(a) above, the Indemnified Person shall assign to First
Defiance, by separate writing, all right, title and interest in and to the
proceeds of the Indemnified Person's applicable insurance
-34-
Exhibit
2
coverage,
if any, including insurance maintained or provided by First Defiance or Pavilion
or any of the Subsidiaries to the extent of such indemnity. No person
shall be entitled to such indemnification with respect to a claim (i) if
such person fails to reasonably cooperate in the defense and investigation
of
such claim as to which indemnification may be made, or (ii) made by such
person against First Defiance, its subsidiaries, Pavilion or any of the
Subsidiaries arising out of or in connection with this Agreement, the
transactions contemplated hereby or the conduct of the business of First
Defiance, its subsidiaries, Pavilion or any of the Subsidiaries, except to
the
extent specifically set forth in Section 6.06(a) above.
(c) First
Defiance shall cause the persons currently serving or having served as an
officer or director of Pavilion or any Subsidiary immediately prior to the
Effective Time to be covered for a period of at least five years from and after
the Effective Time by the directors' and officers' liability insurance policy
or
policies maintained by First Defiance (the "Current
Coverage") with respect to acts or omissions occurring prior to
the Effective Time that were committed by such officers and directors in their
capacity as such (including matters, acts, or omissions occurring in connection
with the approval of this Agreement and the consummation of the transactions
described in this Agreement). First Defiance may substitute, for such Current
Coverage, (a) coverage under policies maintained by First Defiance that
offer comparable or better coverage and amounts, and that contain terms and
conditions that are not less advantageous than pursuant to such Current
Coverage, and (b) an undertaking by First Defiance to maintain such
alternative coverage for the remaining period of the five year period provided
for by this Section 6.06(c). In no event shall First Defiance be required
to expend more than 150% of the annual amount expended by Pavilion and Lenawee
for 2007 to maintain or procure the coverage described in this
Section 6.06(c) (such limitation referred to as the "Insurance
Amount"), provided that First Defiance shall obtain as much comparable
insurance as is available for the Insurance Amount. If First Defiance
does not advise Pavilion in writing prior to the receipt of the last of the
approvals referenced in Section 3.04(b) of this Agreement, that it has procured
the coverage required by this Section 6.06(c) (and, if applicable,
made the undertakings required by this Section 6.06(c)), Pavilion shall be
permitted, in lieu of receiving the foregoing insurance coverage, to procure
tail coverage for past acts and omissions for a single premium amount not in
excess of the Insurance Amount.
(d) This
Section 6.06 is for the benefit of each Indemnified Person and shall
be enforceable by each such Indemnified Person.
(e) If
First Defiance or any of its successors or assigns shall consolidate with or
merge into any other person and shall not be the continuing or surviving entity
of such consolidation or merger or transfer all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provisions shall be made so that the successors and assigns of First Defiance
or
surviving entity, as the case may be, shall assume all of the obligations of
First Defiance set forth in this Section 6.06.
(a) Upon
request by Pavilion, First Defiance shall furnish to Pavilion promptly after
receipt of such request, a copy of the following: (i) any reports, proxy
statements
-35-
Exhibit
2
or
other
communications by First Defiance to its shareholders, (ii) any press
releases relating to any transactions and (iii) any filings made with the
SEC.
(b) First
Defiance and its subsidiaries shall afford to Pavilion and to its officers,
employees, investment bankers, attorneys, accountants and other advisors and
representatives reasonable and prompt access during normal business hours during
the period prior to the Effective Time or the termination of this Agreement
to
all their respective properties, assets, books, contracts, commitments,
directors, officers, employees, attorneys, accountants, auditors, other advisors
and representatives and records and, during such period, First Defiance and
its
subsidiaries shall make available to Pavilion upon reasonable request (i) a
copy of each report, schedule, form, statement and other document filed or
received by it during such period pursuant to the requirements of domestic
or
foreign (whether national, federal, state, provincial, local or otherwise)
laws
and (ii) all other information concerning its business, properties and
personnel as Pavilion may reasonably request, provided that Pavilion shall
not
unreasonably interfere with the business operations of First Defiance or First
Federal and either First Defiance or First Federal may, in its discretion,
limit
the access of Pavilion to the employees of First Defiance or First Federal
whose
work product First Defiance or First Federal wishes to keep
confidential.
ARTICLE
SEVEN
7.01. Cooperative
Action. Subject to the
terms and conditions of this Agreement, each of Pavilion and First Defiance
agrees to use its best efforts to satisfy all of the conditions to this
Agreement and to cause the consummation of the transactions described in this
Agreement, and to take, or cause to be taken, all further actions and execute
all additional documents, agreements and instruments which may be reasonably
required, in the opinion of counsel for Pavilion (“Pavilion’s
Counsel”) and counsel for First Defiance (“First Defiance’s
Counsel”), to satisfy all legal requirements of the States of Ohio and
Michigan and of the United States, so that this Agreement and the transactions
contemplated hereby will become effective as promptly as
practicable.
-36-
Exhibit
2
announcement
may be required by law or Nasdaq rules to be made before such consent can be
obtained.
(a) As
promptly as reasonably practical following the date hereof, Pavilion and First
Defiance shall prepare mutually acceptable proxy and prospectus material that
will constitute the proxy statement/prospectus (including all amendments or
supplements thereto, the “Proxy/Prospectus”) relating to the
matters to be submitted to the Pavilion shareholders for the Pavilion Meeting,
and First Defiance shall file with the SEC a registration statement with respect
to the issuance of First Defiance Shares in the Corporate Merger (such
registration statement, which shall include the Proxy/Prospectus and all
amendments or supplements thereto, the “Registration
Statement”). Each of Pavilion and First Defiance agrees to
use all commercially reasonable efforts to cause the Registration Statement
to
be declared effective under the Securities Act as promptly as reasonably
practicable after the filing thereof. First Defiance also agrees to
use all reasonable efforts to obtain, prior to the effective date of the
Registration Statement, all necessary state securities law or “Blue Sky” permits
and approvals required to carry out the transactions contemplated by this
Agreement. Pavilion agrees to promptly furnish to First Defiance all
information concerning Pavilion, the Subsidiaries and the Officers, Directors
and shareholders of Pavilion as First Defiance reasonably may request in
connection with the foregoing. Each of Pavilion and First Defiance
shall promptly notify the other upon the receipt of any comments from the SEC
or
its staff or any request from the SEC or its staff for amendments or supplements
to the Registration Statement and shall promptly provide the other with copies
of all correspondence between it and its representatives, on the one hand,
and
the SEC and its staff, on the other hand. Notwithstanding the
foregoing, prior to filing the Registration Statement (or any amendment or
supplement thereto), mailing the Proxy/Prospectus (or any amendment or
supplement thereto), or responding to any comments of the SEC with respect
thereto, each of Pavilion and First Defiance, as the case may be, (i) shall
provide the other party with a reasonable opportunity to review and comment
on
such document or response, (ii) shall include in such document or response
all
comments reasonably proposed by such other party, and (iii) shall not file
or
mail such document or respond to the SEC prior to receiving such other’s
approval, which approval shall not be unreasonably withheld or
delayed.
(b) Each
of Pavilion and First Defiance agrees that none of the information to be
supplied by it for inclusion or incorporation by reference in (i) the
Registration Statement will, at the time the Registration Statement and each
amendment or supplement thereto, if any, is filed with the SEC and at the time
the Registration Statement 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/Prospectus and any amendment or supplement
thereto will, as of the date such Proxy/Prospectus is mailed to shareholders
of
Pavilion and up to and including the date of Pavilion Meeting to which such
Proxy/Prospectus relates, contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein in
light of the circumstances under which they were made not
misleading.
-37-
Exhibit
2
(c) Each
of Pavilion and First Defiance agrees to promptly inform the other party thereof
and to take the necessary steps to correct the Registration Statement if it
obtains knowledge prior to the Effective Time of any information furnished
by it
that would cause any of the statements in the Registration Statement to be
false
or misleading with respect to any material fact, or to omit to state any
material fact necessary to make the statements therein not false or
misleading.
(d) First
Defiance agrees to advise Pavilion, promptly after First Defiance receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop
order
or the suspension of the qualification of First Defiance Shares for offering
or
sale in any jurisdiction, of the initiation or threat of any proceeding for
any
such purpose, or of any request by the SEC for the amendment or supplement
of
the Registration Statement or for additional information.
-38-
Exhibit
2
ARTICLE
EIGHT
(a) The
representations and warranties of Pavilion set forth in this Agreement shall
be
true and correct in all material respects as of the date of this Agreement
and
as of the Closing Date as though such representations and warranties were also
made as of the Closing Date, except (i) as expressly contemplated or permitted
by this Agreement, and (ii) that those representations and warranties which
by
their terms speak as of a specific date shall be true and correct as of such
date; and First Defiance shall have received a certificate, dated the Closing
Date, signed by the chief executive officer and the chief financial officer
of
each of Pavilion and Lenawee to such effect.
(b) Pavilion
shall have performed in all material respects all of its covenants and
obligations under this Agreement to be performed by it on or prior to the
Closing Date, including those relating to the Closing and the closing deliveries
required by Section 9.03 of this Agreement, and First Defiance shall have
received a certificate, dated the Closing Date, signed by the chief executive
officer and the chief financial officer of Pavilion to such effect.
(c) Pavilion
shall have obtained the consent or approval of each person (other than
Governmental Authorities and Regulatory Authorities) whose consent or approval
shall be required in connection with the transactions contemplated hereby under
any loan or credit agreement, note, mortgage, indenture, lease, license or
other
agreement or instrument, except those for which failure to obtain such consents
and approvals would not, individually or in the aggregate, have a material
adverse effect, after the Effective Time, on First Defiance on a consolidated
basis.
(a) The
representations and warranties of First Defiance set forth in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though such representations and
warranties were also made as of the Closing Date, except (i) as expressly
contemplated or permitted by this Agreement, and (ii) that
-39-
Exhibit
2
those
representations and warranties which by their terms speak as of a specific
date
shall be true and correct as of such date; and Pavilion shall have received
a
certificate, dated the Closing Date, signed by the chief executive officer
and
the chief financial officer of each of First Defiance and First Federal to
such
effect.
(b) First
Defiance shall have performed in all material respects all of its covenants
and
obligations under this Agreement to be performed by it on or prior to the
Closing Date, including those related to the Closing and the closing deliveries
required by Section 9.02 of this Agreement, and Pavilion shall have received
a
certificate, dated the Closing Date, signed by the chief executive officer
and
the chief financial officer of each of First Defiance and First Federal to
such
effect.
(c) First
Defiance shall have obtained the consent or approval of each person (other
than
Governmental Authorities and Regulatory Authorities) whose consent or approval
shall be required in connection with the transactions contemplated hereby under
any loan or credit agreement, note, mortgage, indenture, lease, license or
other
agreement or instrument, except those for which failure to obtain such consents
and approvals would not, individually or in the aggregate, have a material
adverse effect, after the Effective Time, on First Defiance on a consolidated
basis.
(d) Pavilion
shall have received from Pavilion’s Financial Advisor an opinion, dated as of
the date of the Proxy/Prospectus, to the effect that, as of the date of such
opinion and subject to the qualifications and assumptions contained therein,
the
consideration to be received by the Pavilion shareholders in connection with
the
Corporate Merger pursuant to this Agreement is fair to the Pavilion
shareholders, from a financial point of view.
(e) If
the Aggregate Share Consideration would be less than 40% of the sum of the
Aggregate Share Consideration and the Aggregate Cash Consideration, First
Defiance shall have increased the Exchange Ratio, pursuant to
Section 2.05(b), so that the aggregate value of the First Defiance Shares
to be issued in connection with the Corporate Merger is equal to 40% of the
sum
of the Aggregate Share Consideration and the Aggregate Cash
Consideration.
(a) The
shareholders of Pavilion shall have duly approved this Agreement by the required
vote.
(b) All
approvals of Governmental Authorities and Regulatory Authorities required to
consummate the transactions contemplated by this Agreement shall have been
obtained and shall remain in full force and effect and all statutory waiting
periods in respect thereof shall have expired and no such approvals or statute,
rule or order shall contain, other than divestitures or dispositions required
to
satisfy antitrust requirements, any conditions, restrictions or requirements
that would reasonably be expected to have a material adverse effect after
the
-40-
Exhibit
2
Effective
Time on the present or prospective consolidated financial condition, business
or
operating results of the First Defiance on a consolidated basis.
(c) No
temporary restraining order, preliminary or permanent injunction or other order
issued by a court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Corporate Merger shall be in
effect. No Governmental Authority or Regulatory Authority of
competent jurisdiction shall have enacted, issued, promulgated, enforced, deemed
applicable or entered any statute, rule, regulation, judgment, decree,
injunction or other order prohibiting consummation of the transactions
contemplated by this Agreement or making the Corporate Merger
illegal.
(d) The
Registration Statement shall have become effective under the Securities Act
and
no stop-order or similar restraining order suspending the effectiveness of
the
Registration Statement shall have been issued and no proceeding for that purpose
shall have been initiated by the SEC.
(e) Each
of First Defiance and Pavilion shall have received the written opinion of First
Defiance’s Counsel, dated the Closing Date, to the effect that, on the basis of
facts, representations and assumptions set forth in such opinion, the Corporate
Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a)(1)(A) of the Code. In rendering
its opinion, First Defiance’s Counsel will require and rely upon customary
representations contained in letters from First Defiance and Pavilion that
First
Defiance’s Counsel reasonably deems relevant.
ARTICLE
NINE
9.01. Closing. The
closing of the Corporate Merger pursuant to this Agreement (the
“Closing”) shall take place at a date and time designated by
First Defiance based on the scheduling of the data processing conversion as
soon
as practicable after the satisfaction or waiver of the last of the conditions
to
the Corporate Merger set forth in Article Eight of this Agreement to be
satisfied. Notwithstanding the foregoing, if the Closing has not
occurred within 30 days after the conditions specified in Sections 8.03(a),
8.03(b) and 8.03(d) have been satisfied, then the Closing shall occur on the
date specified by Pavilion upon at least ten Business Days’ (as defined below)
written notice to First Defiance. The date of the Closing is
sometimes herein called the “Closing Date.”
9.02. Closing
Deliveries Required of First
Defiance. At the Closing,
First Defiance and First Federal shall cause all of the following to be
delivered to Pavilion:
(a) The
certificate of First Defiance contemplated by Section 8.02(a) and (b) of this
Agreement.
(b) Copies
of all resolutions adopted by the directors of First Defiance, approving and
adopting this Agreement and authorizing the consummation of the transactions
described herein, accompanied by a certificate of the secretary or assistant
secretary of First Defiance dated as of the Closing Date, and certifying
(i) the date and manner of adoption of each
-41-
Exhibit
2
such
resolution; and (ii) that each such resolution is in full force and effect,
without amendment or repeal, as of the Closing Date.
9.03. Closing
Deliveries Required of
Pavilion. At the Closing,
Pavilion shall cause all of the following to be delivered to First
Defiance:
(a) The
certificate of Pavilion contemplated by Sections 8.01(a) and (b) of this
Agreement.
(b) Copies
of all resolutions adopted by the directors and the shareholders of Pavilion
approving and adopting this Agreement and authorizing the consummation of the
transactions described herein, accompanied by a certificate of the secretary
or
the assistant secretary of Pavilion, as applicable, dated as of the Closing
Date, and certifying (i) the date and manner of the adoption of each such
resolution; and (ii) that each such resolution is in full force and effect,
without amendment or repeal, as of the Closing Date.
(c) A
written agreement from each Rule 145 Affiliate identified by Pavilion pursuant
to Section 5.05 in which such Rule 145 Affiliate confirms that the First
Defiance Shares received by such Rule 145 Affiliate pursuant to the
Corporate Merger will be transferable only in accordance with Rule 145 of
the Securities Act.
(d) A
properly executed statement of Pavilion satisfying the requirements of Treasury
Regulations Section 1.1445-2(c)(3) (and complying with Treasury Regulations
Section 1.897-2(h)) in a form reasonably acceptable to First
Defiance.
ARTICLE
TEN
10.01. Termination. This
Agreement may be terminated, and the Corporate Merger may be abandoned, at
any
time prior to the Effective Time, whether prior to or after this Agreement
has
been adopted by the shareholders of Pavilion:
(a) By
mutual written agreement of Pavilion and First Defiance duly authorized by
action taken by or on behalf of their respective Boards of
Directors;
(b) By
either Pavilion or First Defiance upon written notification to the
non-terminating party:
(i) at
any time after June 30, 2008, if the Corporate Merger shall not have been
consummated on or prior to such date and such failure to consummate the
Corporate Merger is not caused by a breach of this Agreement by the terminating
party;
(ii) if
any event occurs which, in the reasonable opinion of either First Defiance
or
Pavilion, would preclude satisfaction of any of the conditions set forth in
Section 8.03 of this Agreement; or
-42-
Exhibit
2
(iii) if,
in compliance with the provisions of Section 5.03 of this Agreement, Pavilion
executes a definitive agreement in connection with, or closes, an Acquisition
Transaction;
(c) By
Pavilion upon written notice to First Defiance if any event occurs which, in
the
reasonable opinion of Pavilion, would preclude satisfaction of any of the
conditions set forth in Section 8.02 of this Agreement;
(d) By
Pavilion upon written notice to First Defiance if, pursuant to Section 2.05(b),
First Defiance, in its sole discretion, does not increase the Exchange Ratio
to
preserve the status of the Corporate Merger as a tax-free
reorganization;
(e) By
Pavilion if the Board of Directors of Pavilion reasonably determines in good
faith after consultation with Pavilion’s Financial Advisor and upon the written
advice of Pavilion’s counsel, that the failure to agree to or endorse an
Acquisition Transaction and terminate this Agreement could be expected to
constitute a breach of its fiduciary duties to the shareholders of
Pavilion;
(f) By
First Defiance upon written notice to Pavilion if any event occurs which, in
the
reasonable opinion of First Defiance, would preclude satisfaction of any of
the
conditions set forth in Section 8.01 of this Agreement;
(g) By
First Defiance if the cost to perform any environmental remediation activities
set forth in Section 5.13 is expected to exceed $750,000, in the
aggregate.
(h) by
Pavilion at any time during the five calendar day period commencing on the
Determination Date, if both of the following conditions are
satisfied: (i) the Average Closing Price shall be less than
$22.08 and (ii) (A) the quotient obtained by dividing the
Average Closing Price by $26.77 (the “First Defiance Ratio”)
shall be less than (B) the Index Ratio minus 0.175.
Subject
to the following:
(1) Pavilion
must give written notice of its election to terminate this Agreement pursuant
to
this Section 10.01(h) to First Defiance, which notice may be withdrawn at
any time prior to the lapse of the five-day period commencing on the
Determination Date;
(2) during
the five-day period commencing upon First Defiance’s receipt of such notice,
First Defiance shall have the option of paying additional consideration, at
First Defiance’s election, in either the form of First Defiance Shares, cash or
a combination thereof (the “Additional Consideration”) in
compliance with the following sentence. Specifically, First Defiance shall
pay
such Additional Consideration so that the value of the Per Share Stock
Consideration together with the Additional Consideration (whether in cash or
shares) shall be valued at an amount which is no less than the lesser
of: (i) the product of $22.08 multiplied by the Exchange Ratio,
or (ii) the product of the Index Ratio, multiplied by $26.77, multiplied by
the Exchange Ratio; and
-43-
Exhibit
2
(3) the
election contemplated by clause (2) of this Section 10.01(h) shall be made
by
First Defiance giving notice to Pavilion of such election and the form and
amount of the Additional Consideration, whereupon no termination shall be deemed
to have occurred pursuant to this 10.01(h), and this Agreement shall remain
in
effect in accordance with its terms (except as the Per Share Stock Consideration
shall have been so adjusted), and any references in this Agreement to “Per Share
Cash Consideration” or “Per Share Stock Consideration” shall thereafter be
deemed to refer to the adjusted amount pursuant to this
Section 10.01(h).
For
purposes of this
Section 10.01(h), the following terms shall have the following
meanings:
“Average
Closing
Price” shall mean the average closing price per share of First Defiance
Shares on the Nasdaq Global Market for the twenty trading days ending on the
last trading date prior to the Determination Date.
“Determination
Date”
shall mean the tenth calendar day preceding the Closing Date (the
tenth day to
be determined by counting the day preceding the Closing Date as the first
day).
“Index
Group” shall
mean the sixteen holding companies listed below (each a “Peer
Company”). In the event that: (i) the common stock of
any Peer Company is no longer publicly traded on the Determination Date; or
(ii) after the Starting Date and prior to the Determination Date, any Peer
Company issues a public announcement of a proposal to be acquired by or to
acquire another company in a transaction with a value exceeding 25% of the
Peer
Company’s market capitalization, such Peer Company shall be removed from the
Index Group, and the weights (which have been determined based upon market
capitalization) shall be redistributed proportionately for purposes of
determining the Index Price. The Peer Companies and the percentage
weighting attributed to each of them are as follows:
Peer
Company
|
Percentage
Weightings
|
Camco
Financial Corporation (CAFI)
|
3.1%
|
CFS
Bancorp, Inc. (CITZ)
|
4.9%
|
Citizens
First Bancorp, Inc. (CTZN)
|
4.7%
|
Dearborn
Bancorp, Inc. (DEAR)
|
3.5%
|
First
Financial Corporation (THFF)
|
13.2%
|
Firstbank
Corporation (FBMI)
|
3.9%
|
German
American Bancorp, Inc. (GABC)
|
4.6%
|
Horizon
Bancorp (HBNC)
|
2.7%
|
Lakeland
Financial Corporation (LKFN)
|
9.3%
|
-44-
Exhibit
2
LNB
Bancorp, Inc. (LNBB)
|
3.4%
|
Macatawa
Bank Corporation (MCBC)
|
7.7%
|
MainSource
Financial Group, Inc. (MSFG)
|
10.8%
|
MBT
Financial Corp. (MBTF)
|
6.2%
|
Mercantile
Bank Corporation (MBWM)
|
5.8%
|
Peoples
Bancorp Inc. (PEBO)
|
9.0%
|
United
Community Financial Corp. (UCFC)
|
7.2%
|
100.0%
|
“Index
Price” shall
mean the weighted average (weighted in accordance with the Index Group’s percent
weighting listed above) of the closing sales prices of the Peer Companies
determined as of the Starting Date or Determination Date, whichever is
applicable, based on the closing price per share (as reported by The Wall
Street Journal) for the twenty trading days ending on the last trading date
prior to the Starting Date or Determination Date, whichever is
applicable.
“Index
Ratio” shall be
the Index Price as determined on the Determination Date divided by the Index
Price as determined on the Starting Date.
“Starting
Date” shall
mean the date of this Agreement.
10.03.
Termination
Fee. In the event
Pavilion executes a definitive agreement in connection with, or closes, an
Acquisition Transaction at any time after this Agreement is terminated pursuant
to Section 10.01(e) until the expiration of twelve months from the date of
such
termination, Pavilion shall pay to First Defiance in immediately available
funds
the sum of $2,000,000 within five calendar days after the earlier of such
execution or closing.
-45-
Exhibit
2
ARTICLE
ELEVEN
If
to
Pavilion, to:
Pavilion
Bancorp, Inc.
000
Xxxx
Xxxxxx Xxxxxx
Xxxxxx,
Xxxxxxxx 00000
Attn: Xxxxxxx
X. XxXxxxx, President and Chief Executive Officer
Fax: 000-000-0000
With
a
copy to:
Xxxxxxxx
Xxxxx, Esq.
Varnum,
Riddering, Xxxxxxx & Xxxxxxx LLP
000
Xxxxxx Xx., XX, Xxxxx 0000
Xxxxx
Xxxxxx, Xxxxxxxx 00000
Fax: 000-000-0000
If
to
First Defiance, to:
000
Xxxxxxx Xxxxxx
Xxxxxxxx,
Xxxx 00000
Attn:
Xxxxxxx X. Small, Chairman, President and Chief Executive Officer
Fax:
(000) 000-0000
With
a
copy to:
Xxxxx
X.
Xxxxx, Esq.
Vorys,
Xxxxx, Xxxxxxx and Xxxxx LLP
Suite
2000, Atrium Two
000
Xxxx
Xxxxxx Xxxxxx
Xxxxxxxxxx,
Xxxx 00000
Fax: (000)
000-0000
Any
party
to this Agreement may, by notice given in accordance with this
Section 11.01, designate a new address for notices, requests, demands and
other communications
-46-
Exhibit
2
to
such
party. As used in this Agreement, “Business Day”
means any day other than a day on which Nasdaq is closed.
11.02.
Counterparts. This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be a duplicate original, but all of which taken together shall be
deemed to constitute a single instrument.
11.06. Governing
Law. This Agreement shall
be governed by, and construed in accordance with, the laws of the State of
Ohio
without giving effect to principles of conflicts or choice of laws (except
to
the extent that mandatory provisions of federal law are
applicable).
11.08.
Amendment. From
time to time and at any time prior to the Effective Time, this Agreement may
be
amended only by an agreement in writing executed in the same manner as this
Agreement, except that after the Pavilion Meeting, this Agreement may not be
amended if it would violate the MBCA.
-47-
Exhibit
2
11.11.
Severability. If
any provision of this Agreement is held invalid or unenforceable by any court
of
competent jurisdiction, the other provisions of this Agreement will remain
in
full force and effect. Any provision of this Agreement held invalid
or unenforceable only in part or degree will remain in full force and effect
to
the extent not held invalid or unenforceable.
11.12.
Non-Survival of Representations, Warranties and
Covenants. The
representations, warranties and covenants of First Defiance and Pavilion set
forth in this Agreement, or in any document delivered pursuant to the terms
hereof or in connection with the transactions contemplated hereby, shall not
survive the Closing and the consummation of the transactions referred to herein,
other than covenants which by their terms are to survive or be performed after
the Effective Time (including, without limitation, those set forth in Article
Two, Article Six, Article Seven and this Article Eleven); except that the
Surviving Corporation and any director, officer or controlling person thereof
may rely on such representations, warranties or covenants in any defense in
law
or equity which otherwise would be available against the claims of any person,
including, without limitation, any shareholder or former shareholder of either
Pavilion or First Defiance.
11.13.
Materiality. As
used in this Agreement, (i) any reference to any event, change, effect,
development, circumstance or occurrence being “material” with
respect to any entity means an event, change, effect, development, circumstance
or occurrence that is or is reasonably likely to be material in relation to
the
financial condition, businesses or results of operations of such entity and
its
subsidiaries taken as a whole, and (ii) the term “material adverse
effect” means, with respect to any entity, an event, change, effect,
development, circumstance or occurrence that, individually or together with
any
other event, change, effect, development, circumstance or occurrence,
(A) has or would be reasonably likely to have a material adverse effect on
the financial condition, businesses, or results of operations of such entity
and
its subsidiaries, taken as a whole, or (B) materially impairs the ability
of such entity to perform its obligations under this Agreement or to consummate
the Corporate Merger and the other transactions contemplated by this
Agreement. Notwithstanding the foregoing, the impact of the following
shall not be included in any determination of materiality or the existence
of a
material adverse effect: (a) changes in GAAP or regulatory accounting
requirements generally applicable to financial institutions and their holding
companies, (b) change in laws, rules or regulations, or interpretations
thereof, (c) actions or omissions of a party (or any of its subsidiaries)
taken with the prior written consent of the other party, (d) changes in
economic conditions generally affecting financial institutions and their holding
companies, and (e) reasonable fees and expenses incurred in connection with
this Agreement and which are incurred or paid without violation of the
representations, warranties or covenants set forth in this
Agreement.
-48-
Exhibit
2
ATTEST:
|
|||
/s/
Xxxx X. Xxxxxxxx
|
By:
|
/s/
Xxxxxxx X. Small
|
|
Xxxx
X. Xxxxxxxx, Secretary
|
Xxxxxxx
X. Small, Chairman of the Board
|
||
ATTEST:
|
PAVILION
BANCORP, INC.
|
||
/s/
Xxxxxx Xxxxxxxx
|
By:
|
/s/
Xxxxxxx XxXxxxx
|
|
Xxxxxx
Xxxxxxxx, Secretary
|
Xxxxxxx
XxXxxxx, President and CEO
|
-49-
Exhibit
2
EXHIBIT
A
Voting
Agreement
THIS
VOTING AGREEMENT (this
“Agreement”) is entered into this _____ day of ________, 2007, between the
undersigned shareholder (the “Shareholder”) of Pavilion Bancorp, Inc., a
Michigan corporation (“Pavilion”), and First Defiance Financial Corp., an Ohio
corporation (“First Defiance”).
A. The
Shareholder owns or has the power to vote, other than in a fiduciary capacity,
_______ common shares, without par value, of Pavilion (together with all other
shares of Pavilion that the Shareholder may subsequently acquire or obtain
the
power to vote, other than in a fiduciary capacity, the “Shares”).
B. Pavilion
has entered into an Agreement and Plan of Merger by and between First Defiance
and Pavilion of even date herewith (the “Merger Agreement”).
C. Under
the terms of the Merger Agreement, Pavilion has agreed to call a meeting of
its
shareholders for the purpose of voting upon the adoption of the Merger Agreement
(together with any adjournments thereof, the “Pavilion Meeting”).
D. The
parties to the Merger Agreement have made it a condition to their entering
into
the Merger Agreement that certain shareholders of Pavilion, including the
Shareholder, agree to vote their shares of Pavilion in favor of the adoption
of
the Merger Agreement.
Accordingly,
the parties hereto agree
as follows:
1. Agreement
to Vote. The Shareholder agrees, subject to Section 2
below, to vote the Shares as follows:
(a) in
favor of the adoption of the Merger Agreement;
(b) against
the approval of any proposal relating to a competing merger or business
combination involving an acquisition of Pavilion or the purchase of all or
a
substantial portion of the assets of Pavilion by any person or entity other
than
First Defiance or an affiliate of First Defiance; and
(c) against
any other transaction which is inconsistent with the obligations of Pavilion
under the Merger Agreement.
-50-
Exhibit
2
2. Limitation
on Voting Power. It is expressly understood and
acknowledged that nothing contained herein is intended to restrict the
Shareholder from voting on any matter, or otherwise from acting, in the
Shareholder’s capacity as a director or officer of Pavilion with respect to any
matter, including but not limited to, the management or operation of
Pavilion.
3. Termination. This
Agreement shall terminate on the earlier of (a) the date on which the Merger
Agreement is terminated in accordance with Article Ten of the Merger Agreement,
(b) the date on which the merger contemplated by the Merger Agreement is
consummated, or (c) the death of the Shareholder.
4. Representations,
Warranties, and Additional Covenants of the Shareholder. The
Shareholder hereby represents and warrants to First Defiance that (a) the
Shareholder has the capacity and all necessary power and authority to vote
the
Shares, and (b) this Agreement constitutes a legal, valid, and binding
obligation of the Shareholder, enforceable in accordance with its terms, except
as may be limited by bankruptcy, insolvency, or similar laws affecting
enforcement of creditors rights generally. The Shareholder further
agrees that, during the term of this Agreement, the Shareholder will not,
without the prior written consent of First Defiance, which consent shall not
be
unreasonably withheld, sell, pledge, or otherwise voluntarily dispose of any
of
the Shares which are owned by the Shareholder or take any other voluntary action
which would have the effect of removing the Shareholder’s power to vote the
Shares or which would be inconsistent with this
Agreement. Notwithstanding the foregoing, the Shareholder may
transfer all or a portion of the Shares to an immediate family member, but
only
if the transferee executes an identical Voting Agreement.
5. Specific
Performance. The undersigned hereby acknowledges that
damages would be an inadequate remedy for any breach of the provisions of this
Agreement and agrees that the obligations of the Shareholder shall be
specifically enforceable and that First Defiance shall be entitled to injunctive
or other equitable relief upon such a breach by the Shareholder. The Shareholder
further agrees to waive any bond in connection with obtaining any such
injunctive or equitable relief. This provision is without prejudice
to any other rights that First Defiance may have against the Shareholder for
any
failure to perform his obligations under this Agreement.
6. Governing
Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Michigan without regard to any of
its
conflict of laws principles.
7. Capitalized
Terms. Capitalized terms used herein without definition shall have
the meanings attributed to such terms in the Merger Agreement.
-51-
Exhibit
2
SHAREHOLDER
|
FIRST
DEFIANCE FINANCIAL
|
|||
CORP.
|
||||
By:
|
||||
Name:
|
||||
Print
Name:
|
Title:
|
-52-