EXHIBIT 2
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
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AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
BY AND AMONG
FARMERS & MERCHANTS BANCORP, INC.,
an Ohio Corporation
THE FARMERS & MERCHANTS STATE BANK,
an Ohio State-Chartered Commercial Bank
XXXXXXX FINANCIAL CORP,
an Indiana Corporation
AND
XXXXXXX BANK,
an Indiana State-Chartered Commercial Bank
SEPTEMBER 7, 2007
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TABLE OF CONTENTS
Page
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ARTICLE 1. TERMS OF THE MERGER........................................... 1
Section 1.1 Terms of the Bank Merger................................. 1
Section 1.2 Effect of the Bank Merger................................ 2
Section 1.3 Conversion and Exchange of Shares:....................... 2
Section 1.4 Treatment of Transaction as an "Asset Sale" and
Allocation of the Merger Consideration................... 3
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF XXXXXXX AND XXXXXXX BANK.... 3
Section 2.1 Organization and Capital Stock........................... 4
Section 2.2 Authorization; No Defaults............................... 4
Section 2.3 Subsidiaries............................................. 5
Section 2.4 Financial Information.................................... 5
Section 2.5 Absence of Changes....................................... 6
Section 2.6 Agreements with Banking Authorities...................... 6
Section 2.7 Tax Matters.............................................. 6
Section 2.8 Litigation............................................... 7
Section 2.9 Employment Agreements, Supplemental Retirement
Plans, etc............................................... 7
Section 2.10 Reports.................................................. 8
Section 2.11 Investment Portfolio..................................... 8
Section 2.12 Loan Portfolio........................................... 8
Section 2.13 Employee Matters and ERISA............................... 9
Section 2.14 Title to Properties; Insurance........................... 11
Section 2.15 Environmental Matters.................................... 12
Section 2.16 Compliance with Americans with Disabilities Act.......... 12
Section 2.17 Compliance with Law...................................... 13
Section 2.18 Brokerage................................................ 13
Section 2.19 Material Contracts....................................... 13
Section 2.20 No Undisclosed Liabilities............................... 14
Section 2.21 Delivery of Documents.................................... 14
Section 2.22 Interim Events........................................... 14
Section 2.23 Books and Records........................................ 14
Section 2.24 Deposit Insurance........................................ 14
Section 2.25 No Regulatory Filings.................................... 14
Section 2.26 Statements True and Correct.............................. 14
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF F&M AND F&M BANK............ 15
Section 3.1 Organization............................................. 15
Section 3.2 Authorization............................................ 15
Section 3.3 Financial Information.................................... 16
Section 3.4 Reports.................................................. 16
Section 3.5 Compliance with Law...................................... 16
Section 3.6 Financing for the Transaction............................ 16
ARTICLE 4. AGREEMENTS OF XXXXXXX AND XXXXXXX BANK........................ 16
Section 4.1 Conduct of Business...................................... 16
Section 4.2 Breaches................................................. 20
Section 4.3 Submission to Shareholders............................... 20
Section 4.4 Distribution to Xxxxxxx Shareholders..................... 20
Section 4.5 Consummation of Agreement; Regulatory Approvals.......... 20
Section 4.6 Environmental Reports.................................... 20
Section 4.7 Access to Information.................................... 21
Section 4.8 Press Release............................................ 22
Section 4.9 Acquisition Proposals.................................... 22
Section 4.10 Title Insurance and Surveys.............................. 22
Section 4.11 Conforming Accounting and Reserve Policies;
Restructuring Expenses................................... 23
Section 4.12 Cooperation on Conversion of Systems..................... 24
Section 4.13 Disposition of Xxxxxxx Bank 401(k) Plan.................. 24
Section 4.14 Other Welfare Benefit Plans.............................. 25
ARTICLE 5. AGREEMENTS OF F&M AND F&M BANK................................ 25
Section 5.1 Regulatory Approvals..................................... 25
Section 5.2 Breaches................................................. 25
Section 5.3 Consummation of Agreement................................ 25
Section 5.4 Director and Officer Indemnification..................... 25
Section 5.5 Employee Benefits........................................ 26
Section 5.6 Severance................................................ 26
Section 5.7 Employee Transition Plan................................. 27
Section 5.8 Coverage in F&M of Benefit Plans......................... 27
Section 5.9 Further Matters.......................................... 28
ARTICLE 6. CONDITIONS PRECEDENT TO MERGERS............................... 28
Section 6.1 Conditions of F&M's and F&M Bank's Obligations........... 28
Section 6.2 Conditions of Xxxxxxx'x and Xxxxxxx Bank's Obligations... 29
ARTICLE 7. TERMINATION OR ABANDONMENT.................................... 30
Section 7.1 Mutual Agreement......................................... 30
Section 7.2 Breach of Representations or Agreements.................. 30
Section 7.3 Environmental Reports, Title Insurance and Surveys....... 30
Section 7.4 Failure of Conditions.................................... 30
Section 7.5 Approval Denied.......................................... 31
Section 7.6 Shareholder Approval Denial.............................. 31
Section 7.7 Lapse of Time............................................ 31
Section 7.8 Failure to Recommend..................................... 31
Section 7.9 Acceptance of Superior Proposal.......................... 31
Section 7.10 Effect of Termination and Abandonment.................... 31
Section 7.11 Liquidated Damages....................................... 32
ARTICLE 8. THE CLOSING OF THE BANK MERGER................................ 32
Section 8.1 The Closing.............................................. 32
Section 8.2 The Closing Date......................................... 32
Section 8.3 Actions at Closing....................................... 33
ARTICLE 9. GENERAL PROVISIONS............................................ 34
Section 9.1 Confidential Information................................. 34
Section 9.2 Return of Documents...................................... 34
Section 9.3 Notices.................................................. 34
Section 9.4 Survival of Representations and Agreements............... 35
Section 9.5 Entire Agreement......................................... 35
Section 9.6 Headings and Captions.................................... 35
Section 9.7 Waiver, Amendment or Modification........................ 35
Section 9.8 Rules of Construction.................................... 35
Section 9.9 Counterparts............................................. 36
Section 9.10 Successors and Assigns................................... 36
Section 9.11 Governing Law; Assignment................................ 36
Section 9.12 No Third Party Beneficiaries............................. 00
XXXXXXXX
Xxxxxxxx A Bank Merger Agreement
EXHIBITS
Exhibit 4.1 Retained Loan (Confidential)
Exhibit 4.3 Agreement of Directors of Xxxxxxx and Xxxxxxx Bank
Concerning Agreement of Merger
Exhibit 5.6 Termination and Release Agreement
Exhibit 5.6(b) Form of Employment Agreement with Xxxxxxx X. Xxxx
SCHEDULES
Section 2.1(c) Stock Options, Warrants, etc.
Section 2.1(d) Replacement Certificates Issued without Affidavits of Lost
Certificates
Section 2.6 Agreements with Banking Authorities
Section 2.7(a) Tax Matters
Section 2.8 Litigation
Section 2.9 Employment Agreements, Supplemental Retirement Plans
Section 2.12(b) Substandard, Doubtful or Loss Loans
Section 2.12(c) Loan Reserves
Section 2.12(d) Loan Participations
Section 2.13(b) Compliance with Employment Laws; Labor Disputes
Section 2.13(c) Employee List
Section 2.13(d) Employee Benefit Plans
Section 2.13(f) Employee Plan Violations
Section 2.13(k) Parachute Payments
Section 2.13(l) Nonqualified Deferred Compensation Plans
Section 2.14 Title to Properties
Section 2.15(b) Environmental Disclosures
Section 2.16 Compliance with Americans with Disabilities Act
Section 2.19 Material Contracts
Section 2.20 Undisclosed Liabilities
Section 2.22 Interim Events
Section 5.6(b) Retention Agreements
AGREEMENT OF MERGER
AND
PLAN OF REORGANIZATION
THIS AGREEMENT OF MERGER AND PLAN OF REORGANIZATION (this "AGREEMENT"), is
made and entered into as of September 7, 2007 by and among FARMERS & MERCHANTS
BANCORP, INC., an Ohio corporation ("F&M"), XXXXXXX FINANCIAL CORP, an Indiana
corporation ("XXXXXXX"), THE FARMERS & MERCHANTS STATE BANK, an Ohio
state-chartered commercial bank ("F&M BANK"), and XXXXXXX BANK, an Indiana
state-chartered commercial bank ("XXXXXXX BANK").
WITNESSETH:
WHEREAS, F&M is a corporation duly organized and existing under the laws of
the State of Ohio and a registered bank holding company under the Bank Holding
Company Act of 1956, as amended, holding one hundred percent (100%) of the
issued and outstanding shares of common stock of F&M Bank, both with their
principal places of business in Archbold, Ohio; and
WHEREAS, Xxxxxxx is a corporation duly organized and existing under the
laws of the State of Indiana and a registered bank holding company under the
Bank Holding Company Act of 1956, as amended, holding one hundred percent (100%)
of the issued and outstanding shares of common stock of Xxxxxxx Bank, with its
principal place of business in Xxxxxx, Indiana; and
WHEREAS, F&M Bank is a banking institution duly organized and existing
under the laws of the State of Ohio with its principal banking office located in
Archbold, Ohio; and
WHEREAS, Xxxxxxx Bank is a banking institution duly organized and existing
under the laws of the State of Indiana with its principal banking office in
Butler, Indiana; and
WHEREAS, it is the desire of F&M, F&M Bank, Xxxxxxx and Xxxxxxx Bank to
effect a transaction whereby Xxxxxxx Bank will be merged with and into F&M Bank
and Xxxxxxx will remain as a separate corporation after such bank merger; and
WHEREAS, the Boards of Directors of F&M, F&M Bank, Xxxxxxx, and Xxxxxxx
Bank, respectively, have approved this Agreement and authorized its execution.
NOW, THEREFORE, in consideration of the premises and the mutual terms and
provisions set forth in this Agreement, the parties agree as follows:
ARTICLE 1. TERMS OF THE MERGER
Section 1.1 TERMS OF THE BANK MERGER. Subject to the terms and
conditions of this Agreement, the Bank Merger Agreement attached hereto as
Appendix A, Title 11 of the Ohio Revised Code, as amended, (the "OHIO BANKING
CODE"), and Title 28 of the Indiana Code (the "INDIANA BANKING CODE"), Xxxxxxx
Bank shall be merged with and into F&M Bank. F&M Bank shall be the "CONTINUING
BANK" and shall continue its corporate existence as provided under Section
1115.11 of the Ohio Banking Code (hereinafter such merger shall be referred to
as the "BANK MERGER").
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Section 1.2 EFFECT OF THE BANK MERGER.
(a) GENERAL DESCRIPTION. Upon the effectiveness of the Bank Merger,
the separate existence of Xxxxxxx Bank shall cease and the Continuing Bank
shall possess all of the rights, privileges, immunities, powers and
franchises and shall be subject to all of the duties and liabilities of
Xxxxxxx Bank existing immediately prior to the effectiveness of the Bank
Merger, and the Continuing Bank shall continue to be a bank organized and
existing under the laws of the State of Ohio and shall continue to be a
wholly-owned subsidiary of F&M.
(b) NAME AND OFFICES. The name of the Continuing Bank shall continue
to be "The Farmers & Merchants State Bank." Its principal banking office
shall continue to be located at 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxx
00000. All branches of Xxxxxxx Bank shall become legally established
branches of the Continuing Bank.
(c) BOARD OF DIRECTORS. The Board of the Directors of the Continuing
Bank shall consist of the same individuals that served as the Board of
Directors of F&M Bank immediately prior to the effective date of the Bank
Merger, until such time as their successors have been elected and have been
qualified.
(d) OFFICERS. The Officers of the Continuing Bank shall consist of the
same individuals that served as the Officers of F&M Bank immediately prior
to the effective date of the Bank Merger, until such time as their
successors have been elected and have been qualified.
(e) ARTICLES OF INCORPORATION AND CODE OF REGULATIONS. The Articles of
Incorporation and Code of Regulations of F&M Bank in effect immediately
prior to the effectiveness of the Bank Merger shall be and remain the
Articles of Incorporation and Code of Regulations of the Continuing Bank
without change, until the same shall be amended or replaced as therein
provided.
(f) ASSETS, LIABILITIES, AND OBLIGATIONS. All assets and all rights,
franchises and interests of F&M Bank and Xxxxxxx Bank, respectively, in and
to every type of property, all debts due on whatever account and all choses
in action shall be taken and be deemed transferred to and vest in the
Continuing Bank by virtue of the Bank Merger without any order or other
action on the part of any court or otherwise, and the Continuing Bank shall
be responsible for all liabilities and obligations of F&M Bank and Xxxxxxx
Bank, respectively, by virtue of the Bank Merger, all with the effect
provided in Section 1115.11 of the Ohio Banking Code and Section 28-2-17-21
of the Indiana Code.
Section 1.3 CONVERSION AND EXCHANGE OF SHARES: At the Effective Time
(as defined in Section 8.2 hereof) of the Bank Merger, all of the 4,000 issued
and outstanding shares of common stock, $1.00 par value, of Xxxxxxx Bank (the
"XXXXXXX BANK COMMON STOCK"), by virtue of the Bank Merger shall be converted
into the right to receive $10,200,000 in the aggregate in cash (the "MERGER
CONSIDERATION"); provided, however, that such Merger Consideration shall be
increased or decreased, as applicable, by the change in Xxxxxxx Bank's Net
Retained Earnings (as defined below) from June 1, 2007 through the date
immediately prior to the Closing Date (as defined in Section 8.1.) The change in
Net Retained Earnings of Xxxxxxx Bank included in the Merger Consideration shall
be determined by: (i) calculating the net income of Xxxxxxx Bank from June 1,
2007 through the date immediately prior to the Closing Date in
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accordance with GAAP with the agreed upon amount deemed to be the "Net Income"
of Xxxxxxx Bank, and deducting from such Net Income (ii) the amount of dividends
paid from Xxxxxxx Bank to Xxxxxxx for the period June 1, 2007 through the
Closing Date, but excluding from such amount of dividends the Retained Loan (as
defined in Section 4.1 (a)(i) of this Agreement) which will be distributed by
dividend from Xxxxxxx Bank to Xxxxxxx, and further deducting (iii) the amount of
the cumulative-effect adjustment to retained earnings on the date of Closing, if
any, resulting from the application of Financial Accounting Standards Board EITF
06-04 ("FASB EITF 06-04"), whether or not such adjustment is required as of such
date by GAAP, as required by Section 2.9 hereof.
Section 1.4 TREATMENT OF TRANSACTION AS AN "ASSET SALE" AND ALLOCATION
OF THE MERGER CONSIDERATION. The Merger Consideration shall be allocated among
the assets of Xxxxxxx Bank as set forth in a schedule (the "Allocation
Schedule") mutually agreed to by F&M, F&M Bank and Xxxxxxx within thirty (30)
days after the Closing Date; provided that if the parties are not able to
mutually agree to an allocation within sixty (60) days after the Closing Date,
F&M and F&M Bank shall determine an appropriate and reasonable allocation after
consultation with its accountants and the accountants representing Xxxxxxx. Each
of F&M, F&M Bank, Xxxxxxx and Xxxxxxx Bank, as necessary, shall sign and submit
all necessary forms (including Form 8594) to report the transaction contemplated
herein for federal, state and foreign income tax purposes in accordance with the
Allocation Schedule, and shall not take a position for tax purposes inconsistent
therewith. The Merger Consideration shall be allocated as provided by Treasury
Regulation Section 1.1060-1. This Section 1.4 shall survive the Closing Date,
without limitation.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF XXXXXXX AND XXXXXXX BANK
On or prior to the date hereof, Xxxxxxx and Xxxxxxx Bank have delivered to
F&M a schedule (the "DISCLOSURE SCHEDULE") setting forth, among other things,
items, the disclosure of which are necessary or appropriate either in response
to an express disclosure requirement contained in a provision hereof or as an
exception to one or more representations or warranties contained in this Article
2 or to one or more of its covenants contained in Article 4. Xxxxxxx'x and
Xxxxxxx Bank's representations, warranties and covenants contained in this
Agreement shall not be deemed to be untrue, incorrect or to have been breached
as a result of effects on Xxxxxxx or Xxxxxxx Bank arising solely from actions
taken in compliance with a written request from F&M. Xxxxxxx and Xxxxxxx Bank
may update and amend the Disclosure Schedule until the Effective Time; provided
that if such amendment would result in a Material Adverse Change, F&M and F&M
Bank still shall have the rights of termination provided in Section 7.4 and
6.1(a) hereof. When used in this Agreement, and specifically this Article 2,
"knowledge" of Xxxxxxx or Xxxxxxx Bank shall mean the actual knowledge of the
any of the officers or any of the members of the Board of Directors of Xxxxxxx
or Xxxxxxx Bank or knowledge that a reasonable person in the position of such
officer or member of the Board of Directors should have if appropriately
fulfilling their duty to Xxxxxxx or Xxxxxxx Bank when acting in such capacity.
Subject to the foregoing, Xxxxxxx and Xxxxxxx Bank hereby make the
following representations and warranties to F&M:
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Section 2.1 ORGANIZATION AND CAPITAL STOCK.
(a) Xxxxxxx is a corporation duly incorporated and in good standing
under the laws of the State of Indiana, is a registered bank holding
company under the Bank Holding Company Act of 1956, as amended, and has the
corporate power and authority to own all of its property and assets, to
incur all of its liabilities and to carry on its business as now being
conducted.
(b) Xxxxxxx has authorized capital stock of 10,000 shares of common
stock, $1.00 par value per share, 4,000 shares of which are issued and
outstanding and 6,000 of which are authorized but unissued. All of the
issued and outstanding shares of Xxxxxxx common stock are duly and validly
issued and outstanding, fully paid and non-assessable. None of the
outstanding shares of Xxxxxxx common stock has been issued in violation of
any preemptive rights of the current or past shareholders of Xxxxxxx or in
violation of any applicable federal or state securities laws or
regulations.
(c) Except as set forth in Section 2.1(b) there are no shares of
capital stock or other equity securities of Xxxxxxx outstanding and, except
as disclosed in SECTION 2.1(C) OF THE DISCLOSURE SCHEDULE, there are no
outstanding options, warrants, rights to subscribe for, calls, or
commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of
Xxxxxxx or contracts, commitments, understandings or arrangements by which
Xxxxxxx is or may be obligated to issue additional shares of its capital
stock or options, warrants or rights to purchase or acquire any additional
shares of its capital stock.
(d) Except as disclosed in SECTION 2.1(D) OF THE DISCLOSURE SCHEDULE,
each certificate representing shares of Xxxxxxx common stock issued by
Xxxxxxx in replacement of any certificate theretofore issued by it which
was claimed by the record holder thereof to have been lost, stolen or
destroyed was issued by Xxxxxxx only upon receipt of an affidavit of lost
stock certificate which contains an indemnity agreement in favor of
Xxxxxxx.
Section 2.2 AUTHORIZATION; NO DEFAULTS.
(a) The Boards of Directors of Xxxxxxx and Xxxxxxx Bank has each, by
all appropriate action, approved this Agreement and the Bank Merger and has
authorized the execution of this Agreement on its behalf by its duly
authorized officers and the performance, respectively, by Xxxxxxx and
Xxxxxxx Bank of its obligations hereunder.
(b) Nothing in the Articles of Incorporation or Bylaws of Xxxxxxx or
Xxxxxxx Bank, as amended, or in any agreement, instrument, decree,
proceeding, law or regulation (except as specifically referred to in or
contemplated by this Agreement) by or to which Xxxxxxx or Xxxxxxx Bank is
bound or subject, would prohibit either Xxxxxxx or Xxxxxxx Bank from
entering into and consummating, or would be violated or breached by
Xxxxxxx'x or Xxxxxxx Bank's consummation of, this Agreement and the
transactions contemplated herein and the Mergers on the terms and
conditions herein contained.
(c) This Agreement has been duly and validly executed and delivered by
Xxxxxxx and Xxxxxxx Bank and constitutes a legal, valid and binding
obligation of Xxxxxxx and Xxxxxxx Bank, enforceable against Xxxxxxx and
Xxxxxxx Bank in accordance with its terms, and, except for the approval by
Xxxxxxx, as the sole shareholder of Xxxxxxx Bank,
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and Xxxxxxx'x shareholders, no other corporate acts or proceedings are
required to be taken by Xxxxxxx or Xxxxxxx Bank to authorize the execution,
delivery and performance of this Agreement.
(d) Xxxxxxx or Xxxxxxx Bank is not, and will not be by reason of the
consummation of the transactions contemplated herein, in default under or
in violation of any provision of, nor will the consummation of the
transactions contemplated herein afford any party a right to accelerate any
indebtedness under, Xxxxxxx'x or Xxxxxxx Bank's Articles of Incorporation
or Bylaws, any promissory note, indenture or other evidence of indebtedness
or security therefor, or any lease, contract, or other commitment or
agreement to which Xxxxxxx or Xxxxxxx Bank is a party or by which Xxxxxxx
or Xxxxxxx Bank or their property is bound.
(e) Except for the requisite approvals of and filings with the Board
of Governors of the Federal Reserve System and its delegates (the "FRB"),
the Federal Deposit Insurance Corporation ("FDIC"), the Ohio Division of
Financial Institutions ("ODFI"), the Indiana Department of Financial
Institutions ("IDFI"), the Ohio Secretary of State and the Indiana
Secretary of State, no notice to, filing with, authorization by, or consent
or approval of, any federal or state regulatory authority is necessary for
the execution and delivery of this Agreement or the consummation of the
Mergers by Xxxxxxx and Xxxxxxx Bank.
Section 2.3 SUBSIDIARIES. Xxxxxxx Bank is duly organized and validly
existing under the laws of the State of Indiana and has the corporate power to
own its properties and assets, to incur its liabilities and to carry on its
business as now being conducted. Xxxxxxx owns of record and beneficially free
and clear of all liens and encumbrances all of the 4,000 outstanding shares of
the capital stock of Xxxxxxx Bank. Xxxxxxx has no other direct or indirect
subsidiaries. There are no options, warrants or rights outstanding to acquire
any capital stock of Xxxxxxx Bank and no person or entity has any other right to
purchase or acquire any unissued shares of stock of Xxxxxxx Bank, nor does
Xxxxxxx Bank have any obligation of any nature with respect to its unissued
shares of stock. Except for the ownership of readily marketable securities,
Federal Home Loan Bank, Federal Reserve Bank or Independent Bankers Bank stock,
neither Xxxxxxx nor Xxxxxxx Bank is a party to any partnership or joint venture
or owns an equity interest in any other business or enterprise.
Section 2.4 FINANCIAL INFORMATION. The audited consolidated balance
sheets of Xxxxxxx and Xxxxxxx Bank as of December 31, 2006 and 2005, and the
related consolidated statements of income, changes in equity capital, and cash
flows, for the three years ended December 31, 2006, together with the notes
thereto; and the quarterly Reports of Condition and Income of Xxxxxxx Bank as
filed with the FDIC for the quarter ended June 30, 2007, (the "XXXXXXX BANK
REPORTS"); all of which have been previously furnished by Xxxxxxx to F&M
(collectively the "XXXXXXX FINANCIAL STATEMENTS"), together with all subsequent
financial statements filed with the FDIC prior to the Effective Date, shall have
been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis (except as disclosed therein and except
for regulatory reporting differences required with respect to Xxxxxxx Bank's
Reports) and fairly present the consolidated financial position and the
consolidated results of operations, changes in shareholders' equity and cash
flows of Xxxxxxx and Xxxxxxx Bank in all material respects as of the dates and
for the periods indicated (subject, in the case of interim financial statements,
to normal recurring year-end adjustments, none of which are
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material). Xxxxxxx and Xxxxxxx Bank each does not have any material liability,
fixed or contingent, except to the extent set forth in the Xxxxxxx Financial
Statements or incurred in the ordinary course of business since the date of the
most recent Xxxxxxx Financial Statement.
Section 2.5 ABSENCE OF CHANGES. Since December 31, 2006, there has not
been any Material Adverse Change with respect to Xxxxxxx or Xxxxxxx Bank. For
purposes of this Agreement, "MATERIAL ADVERSE CHANGE" means, with respect to
Xxxxxxx or Xxxxxxx Bank, any change that (a) is both material and adverse to the
financial position, results of operations, business or future prospects of
Xxxxxxx or Xxxxxxx Bank, other than (i) the effects of any change attributable
to or resulting from changes in economic conditions, laws, regulations or
accounting guidelines (GAAP or otherwise) applicable to depository institutions
generally, or in general, levels of interest rates, (ii) payments associated
with the Bank Merger, (iii) charges required under Section 4.11 hereof, or (iv)
actions or omissions of either Xxxxxxx or Xxxxxxx Bank taken with the prior
informed written consent of F&M in contemplation of the transactions
contemplated by this Agreement; or (b) would materially impair the ability of
either Xxxxxxx or Xxxxxxx Bank to perform its obligations under this Agreement
or otherwise materially threaten or materially impede the consummation of the
Bank Merger and the other transactions contemplated by this Agreement.
Section 2.6 AGREEMENTS WITH BANKING AUTHORITIES. Except as otherwise
disclosed in SECTION 2.6 OF THE DISCLOSURE SCHEDULE, neither Xxxxxxx nor Xxxxxxx
Bank is subject (or has been subject during the last five (5) years) to any
order (other than orders applicable to banks generally) or is a party (or has
been a party during the last five (5) years) to any agreement, memorandum of
understanding or voluntary board resolution with any federal or state agency
charged with the supervision or regulation of banks or bank holding companies,
including without limitation the IDFI, the FDIC and the FRB.
Section 2.7 TAX MATTERS.
(a) Xxxxxxx and Xxxxxxx Bank have each filed with the appropriate
governmental agencies all federal, state and local income, franchise,
excise, income tax withholding, payroll, sales, use, real and personal
property, information and other tax returns and reports required to be
filed by it and has paid all taxes required to be paid by it and has
withheld and remitted all amounts required to be withheld or remitted
on or before their due date. Except as set forth in SECTION 2.7(A) OF
THE DISCLOSURE SCHEDULE, neither Xxxxxxx nor Xxxxxxx Bank is (i)
delinquent in the payment of any taxes or withheld amounts shown on
such returns or reports or on any assessments received by it for such
taxes or withheld amounts; (ii) aware of any pending or threatened
examination for income, payroll or excise taxes for any year by the
Internal Revenue Service (the "IRS") or taxes of any type by any state
or local tax agency; (iii) subject to any agreement extending the
period for assessment, payment or collection of any federal, state, or
local tax; or (iv) a party to any action or proceeding with, nor has
any claim been asserted against it by, any court, administrative
agency or commission or other federal, state or local governmental
authority or instrumentality ("GOVERNMENTAL AUTHORITY") for assessment
or collection of taxes.
(b) Xxxxxxx, effective for its tax year beginning January 1,
1997, properly elected under Section 1362 of the Code to be treated as
an S Corporation for federal
6
income tax purposes and that election has remained in effect for all
taxable years of Xxxxxxx beginning on and after January 1, 1997. At
all times since January 1, 1997, Xxxxxxx has satisfied the eligibility
requirements for an S Corporation set forth in Section 1361 of the
Code and applicable Treasury Regulations. The S Corporation election
of Xxxxxxx has not been revoked and no event has occurred with respect
to Xxxxxxx or its shareholders that would constitute the basis for the
termination of the S Corporation election of Xxxxxxx.
(c) At all times since January 1, 1997, Xxxxxxx Bank has been a
wholly owned subsidiary of Xxxxxxx. Effective for the tax year
beginning January 1, 1997, Xxxxxxx properly elected under Section
1361(b)(3)(B)(ii) of the Code ("Q-SUB ELECTION") to treat Xxxxxxx Bank
as a qualified subchapter "S" subsidiary as defined in Section
1361(b)(3)(B) ("Q-SUB"). At all times since January 1, 1997, Xxxxxxx
Bank has satisfied the requirements to be treated as a Q-Sub and the
Q-Sub Election of Xxxxxxx related to Xxxxxxx Bank has not been revoked
and no event has occurred that would constitute the basis for the
termination of the Q-Sub Election for Xxxxxxx Bank.
(d) None of the tax returns of Xxxxxxx or Xxxxxxx Bank has been
audited by the IRS or any state tax agency for any period since
December 31, 2001. Neither Xxxxxxx nor Xxxxxxx Bank is the subject of
any threatened action or proceeding by any Governmental Authority for
assessment or collection of taxes.
(e) The reserve for taxes in the unaudited financial statements
of Xxxxxxx Bank for the quarter ended June 30, 2007, is, in the
opinion of management, adequate to cover all of the tax liabilities of
Xxxxxxx and Xxxxxxx Bank (including, without limitation, income taxes
and franchise fees) as of such date in accordance with GAAP.
(f) Xxxxxxx has not filed any consolidated federal income tax
return with an "affiliated group" (within the meaning of Section 1505
of the Internal Revenue Code of 1986, as amended) (the "CODE") where
Xxxxxxx was not the common parent of the group. Neither Xxxxxxx nor
Xxxxxxx Bank is, or has been, a party to any tax allocation agreement
or arrangement pursuant to which it has any contingent or outstanding
liability to anyone other than Xxxxxxx or Xxxxxxx Bank.
(g) Xxxxxxx has adequately disclosed in all of its federal income
tax returns all positions taken therein that could give rise to a
substantial understatement of federal income tax and has reasonable
basis for the treatment of each such position, all within the meaning
of Section 6662 of the Code.
Section 2.8 LITIGATION. Except as set forth in SECTION 2.8 OF THE
DISCLOSURE SCHEDULE and except for foreclosure and other collection proceedings
commenced in the ordinary course of business by Xxxxxxx Bank with respect to
loans in default with respect to which no counter claims have been asserted
against Xxxxxxx Bank, there is no litigation, claim or other proceeding pending
or threatened before any judicial, administrative or regulatory agency or
tribunal against or involving Xxxxxxx or Xxxxxxx Bank, or to which any of the
properties of Xxxxxxx or Xxxxxxx Bank is subject.
Section 2.9 EMPLOYMENT AGREEMENTS, SUPPLEMENTAL RETIREMENT PLANS, ETC.
Except as set forth in SECTION 2.9 OF THE DISCLOSURE SCHEDULE, neither Xxxxxxx
nor Xxxxxxx Bank is a party
7
to or bound by any written or oral contract for the employment, retention,
engagement, or severance of any current or former officer, employee, member of
the board of directors, agent, consultant or other person or entity, including
but not limited to any supplemental retirement plan agreements, endorsement
method split dollar plan agreements and similar agreements. As of the date of
the execution of this Agreement and the date of Closing, all expenses and
liabilities regarding such agreements, including any amounts due or to become
due as a result of the execution of this Agreement (other than the RAs defined
in Section 5.6(b) hereof), have been, or will be prior to Closing, properly
accounted for and accrued for in the Xxxxxxx Financial Statements. In making
this representation, Xxxxxxx expressly agrees to give effect to FASB EITF 06-04,
adopted through a cumulative-effect adjustment to retained earnings on the date
of Closing, whether or not such is as of such date required by GAAP.
Section 2.10 REPORTS. Since January 1, 2005, Xxxxxxx and Xxxxxxx Bank
have filed all reports, notices and other statements, together with any
amendments required to be made with respect thereto, if any, that they were
required to file with (i) the FRB, (ii) the FDIC, (iii) the IDFI, and (iv) any
other governmental authority with jurisdiction over Xxxxxxx or Xxxxxxx Bank. As
of their respective dates, each of such reports and documents, including the
financial statements, exhibits and schedules thereto, complied in all material
respects with the relevant statutes, rules and regulations enforced or
promulgated by the regulatory authority with which they were filed.
Section 2.11 INVESTMENT PORTFOLIO. All United States Treasury
securities, obligations of other United States Government agencies and
corporations, obligations of States of the United States and their political
subdivisions, and other investment securities classified as "held to maturity"
held by Xxxxxxx and Xxxxxxx Bank, as reflected in the latest balance sheet in
the Xxxxxxx Financial Statements, are carried in the aggregate at no more than
cost adjusted for amortization of premiums and accretion of discounts. All
United States Treasury securities, obligations of other United States Government
agencies and corporations, obligations of States of the United States and their
political subdivisions, and other investment securities classified as "available
for sale" held by Xxxxxxx and Xxxxxxx Bank, as reflected in the latest balance
sheet in the Xxxxxxx Financial Statements, are carried in the aggregate at
market value. Provisions for losses have been made on all such securities which
have had a decline in value deemed "other than temporary" as defined in SEC
Staff Accounting Bulletin No. 59. None of the investments reflected in the
Xxxxxxx Financial Statements as of and for the quarter ended June 30, 2007, and
none of the investments made by Xxxxxxx or Xxxxxxx Bank since June 30, 2007, are
subject to any restriction, whether contractual or statutory, which materially
impairs the ability of Xxxxxxx or Xxxxxxx Bank to dispose freely of such
investment at any time.
Section 2.12 LOAN PORTFOLIO.
(a) All loans shown in the Xxxxxxx Financial Statements at June 30,
2007, or which were entered into after June 30, 2007, but before the
Closing Date, were and will be made in all material respects for good,
valuable and adequate consideration in the ordinary course of the business
of Xxxxxxx Bank, in accordance in all material respects with sound banking
practices, and are not subject to any material defenses, set offs or
counterclaims, including without limitation any such as are afforded by
usury or truth in lending laws, except as may be provided by bankruptcy,
insolvency or similar laws or by general principles of equity. The notes or
other evidences of indebtedness evidencing such loans and all forms of
pledges, mortgages and other collateral documents and
8
security agreements are, and will be, enforceable, valid, true and genuine
and what they purport to be. Xxxxxxx and Xxxxxxx Bank have complied, and
will prior to the Closing Date comply, with all laws and regulations
relating to such loans, Xxxxxxx and Xxxxxxx Bank have not sold, purchased
or entered into any loan participation arrangement except where such
participation is on a pro rata basis according to the respective
contributions of the participants to such loan amount. Xxxxxxx has no
knowledge that any condition of property in which Xxxxxxx Bank has an
interest as collateral to secure a loan violates the Environmental Laws
(defined in Section 2.15(a)) or obligates Xxxxxxx Bank or the owner or
operator of such property to remedy, stabilize, neutralize or otherwise
alter the environmental condition of such property.
(b) Except as set forth in SECTION 2.12(B) OF THE DISCLOSURE SCHEDULE,
as of June 30, 2007, Xxxxxxx Bank had no loan in excess of $10,000 that has
been classified by regulatory examiners or management of Xxxxxxx Bank as
"Substandard," "Doubtful" or "Loss" or in excess of $10,000 that has been
identified by accountants or auditors (internal or external) as having a
significant risk of uncollectability. As of the date hereof, the most
recent loan watch list of Xxxxxxx Bank and a list of all loans in excess of
$10,000 that Xxxxxxx Bank has determined to be ninety (90) days or more
past due with respect to principal or interest payments or has placed on
nonaccrual status are set forth in Section 2.12(b) of the Disclosure
Schedule.
(c) Except as set forth in SECTION 2.12(C) OF THE DISCLOSURE SCHEDULE,
the reserves, the allowance for possible loan and lease losses and the
carrying value for real estate owned which are shown on the Xxxxxxx
Financial Statements are, in the reasonable opinion of management of
Xxxxxxx, adequate in all respects under the requirements of GAAP applied on
a consistent basis to provide for possible losses on items for which
reserves were made, on loans and leases outstanding and real estate owned
as of the respective dates.
(d) Set forth in SECTION 2.12(D) OF THE DISCLOSURE SCHEDULE is a true,
accurate and complete list of all loans in which Xxxxxxx Bank has any
participation interest or which have been made with or through another
financial institution on a recourse basis against Xxxxxxx Bank.
Section 2.13 EMPLOYEE MATTERS AND ERISA.
(a) Neither Xxxxxxx nor Xxxxxxx Bank has entered into any collective
bargaining agreement with any labor organization with respect to any group
of employees of Xxxxxxx or Xxxxxxx Bank, and there is no present effort or
existing proposal to attempt to unionize any group of employees of Xxxxxxx
or Xxxxxxx Bank.
(b) Except as set forth in SECTION 2.13(B) OF THE DISCLOSURE SCHEDULE,
(i) Xxxxxxx and Xxxxxxx Bank are and have been in material compliance with
all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, including, without
limitation, any such laws respecting employment discrimination and
occupational safety and health requirements, and neither Xxxxxxx nor
Xxxxxxx Bank is engaged in any unfair labor practice; (ii) there is no
unfair labor practice complaint against Xxxxxxx or Xxxxxxx Bank pending or
threatened before the National Labor Relations Board; (iii) there is no
labor dispute, strike, slowdown or stoppage actually pending or threatened
against or directly affecting
9
Xxxxxxx or Xxxxxxx Bank; and (iv) neither Xxxxxxx nor Xxxxxxx Bank has
experienced any material work stoppage or other material labor difficulty
during the past five (5) years.
(c) SECTION 2.13(C) OF THE DISCLOSURE SCHEDULE contains a complete and
accurate list of the following information for each employee of Xxxxxxx and
Xxxxxxx Bank: name; job title or department, as applicable; hire date; 2006
bonus paid; and 2006 and 2007 salary.
(d) Except as may be disclosed in SECTION 2.13(D) OF THE DISCLOSURE
SCHEDULE, neither Xxxxxxx nor Xxxxxxx Bank maintains, contributes to or
participates in or has any liability under any employee benefit plans, as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), including any nonqualified employee benefit
plans or deferred compensation, bonus, stock or incentive plans, or other
employee benefit or fringe benefit programs for the benefit of former or
current employees or directors (or their beneficiaries or dependents) of
Xxxxxxx or Xxxxxxx Bank (the "EMPLOYEE BENEFIT PLANS"). Xxxxxxx and Xxxxxxx
Bank have provided to F&M true and complete copies of the following
documents with respect to each Employee Benefit Plan: (i) a written plan
document (or a written description of any Employee Benefit Plan which is
not written) and all related trust agreements, insurance and other
contracts (including policies), summary plan descriptions, summaries of
material modifications, registration statements (including all
attachments), prospectuses and communications distributed to plan
participants, (ii) the three most recent annual reports on Form 5500, with
accompanying schedules and attachments, filed with respect to each Employee
Benefit Plan required to make such a filing, if applicable (iii) the most
recent actuarial valuation for each Employee Benefit Plan subject to Title
IV of ERISA, if applicable, (iv) the most recent favorable determination
letter issued for each Employee Benefit Plan which is intended to be
qualified under Section 401(a) of the Code (and, if an application for such
determination is pending, a copy of the application for such
determination), if applicable, and (v) all correspondence within the last
four years between the IRS and/or the Department of Labor and Xxxxxxx or
Xxxxxxx Bank (or their agents) with respect to any Employee Benefit Plan.
(e) Neither Xxxxxxx nor Xxxxxxx Bank participates in, nor has it in
the past five (5) years participated in or had any obligation to contribute
to any multiemployer plan (within the meaning of Section 3(37) or
4001(a)(3) of ERISA) (a "Multiemployer Plan").
(f) Except as may be disclosed in SECTION 2.13(F) OF THE DISCLOSURE
SCHEDULE, each Employee Benefit Plan is now and always has been operated in
all material respects in accordance with its terms and the requirements of
all applicable Laws including, without limitation, ERISA and the Code. No
claim is pending or threatened with respect to any Employee Benefit Plan
(other than a routine claim for benefits for which plan administrative
review procedures have not been exhausted) for which Xxxxxxx or Xxxxxxx
Bank would be liable after June 30, 2007.
(g) Each Employee Benefit Plan that is intended to be qualified under
Section 401(a) of the Code has timely received a favorable determination
letter from the IRS since January 2002, stating that the Employee Benefit
Plan is so qualified. To the knowledge of Xxxxxxx and Xxxxxxx Bank, no fact
or event has occurred since the date of
10
such determination letter or letters from the IRS to adversely affect the
tax-qualified status of any such Employee Benefit Plan.
(h) There has not been any prohibited transaction (within the meaning
of Section 406 of ERISA or Section 4975 of the Code) with respect to any
Employee Benefit Plan (other than transactions to which a valid Prohibited
Transaction Exemption approved by the Department of Labor applies).
(i) Neither Xxxxxxx nor Xxxxxxx Bank maintains any Employee Benefit
Plan subject to the minimum funding requirements of Section 412 of the
Code. Neither Xxxxxxx nor any of its affiliates has any liability or
knowledge of potential liability as a result of the underfunding of any
Employee Benefit Plan subject to Section 412 of the Code. Neither Xxxxxxx
nor Xxxxxxx Bank has incurred any liability under Title IV of ERISA (other
than liability for premiums to the Pension Benefit Guaranty Corporation
arising in the ordinary course), including, without limitation, any
liability in connection with the termination of an Employee Benefit Plan
subject to Title IV of ERISA.
(j) All filings required by ERISA and the Code as to each Employee
Benefit Plan have been timely filed, including annual reports on Form 5500,
and all notices and disclosures to participants required by either ERISA or
the Code, including all notices required under ERISA Section 601 et seq.
and Code Section 4980B.
(k) Except as described in SECTION 2.13(K) OF THE DISCLOSURE SCHEDULE,
no payment or benefit which will or may be made by Xxxxxxx or Xxxxxxx Bank
to any person who is a "disqualified individual" (as defined in Code
Section 280G and the regulations thereunder) of Xxxxxxx or Xxxxxxx Bank
will be an "excess parachute payment" within the meaning of Section 280G(b)
of the Code.
(l) Except as described in SECTION 2.13(L) OF THE DISCLOSURE SCHEDULE,
neither Xxxxxxx nor Xxxxxxx Bank are parties to any Employee Benefit Plan
or other arrangement that is a "nonqualified deferred compensation plan"
subject to Section 409A of the Code. Each such nonqualified deferred
compensation plan has been administered since January 1, 2005 in good faith
compliance with the requirements of Section 409A of the Code and IRS Notice
2005-1.
Section 2.14 TITLE TO PROPERTIES; INSURANCE. SECTION 2.14 TO THE
DISCLOSURE SCHEDULE sets forth a list of all real property owned or leased by
Xxxxxxx or Xxxxxxx Bank and a reasonable description of the size, use and
location thereof. Except as described in SECTION 2.14 OF THE DISCLOSURE
SCHEDULE, Xxxxxxx and Xxxxxxx Bank have marketable title, insurable at standard
rates, free and clear of all liens, charges and encumbrances (except taxes which
are a lien but not yet payable and liens, charges or encumbrances reflected in
the Xxxxxxx Financial Statements and easements, rights-of-way, and other
restrictions which do not interfere with the current use of such properties,
and, in the case of Other Real Estate Owned, as such real estate is internally
classified on the books of Xxxxxxx or Xxxxxxx Bank, rights of redemption under
applicable law) to all real properties reflected on the Xxxxxxx Financial
Statements as being owned by Xxxxxxx or Xxxxxxx Bank. To the knowledge of
management of Xxxxxxx and Xxxxxxx Bank, all real properties are currently being
used in compliance with all zoning laws, and there are no encroachments or other
violations of law with respect to any such property. All leasehold interests
used by Xxxxxxx and Xxxxxxx Bank in their operations are held pursuant to lease
agreements that are valid and enforceable in accordance with their terms, and no
party to any
11
such lease agreement is currently in default thereunder. No leasehold interest
is subject to any superior mortgage or other lien. To the knowledge of
management of Xxxxxxx and Xxxxxxx Bank, all such properties comply with all
applicable private agreements, zoning requirements and other governmental laws
and regulations relating thereto, and there are no condemnation proceedings
pending or threatened with respect to such properties. Xxxxxxx and Xxxxxxx Bank
have valid title or other ownership rights under licenses to all intangible
personal or intellectual property used by Xxxxxxx or Xxxxxxx Bank in their
respective businesses free and clear of any claim, defense or right of any other
person or entity, subject only to rights of the licensor pursuant to applicable
license agreements, which rights do not materially adversely interfere with the
use or enjoyment of such property. All insurable real and personal properties
owned or held by Xxxxxxx and Xxxxxxx Bank are insured in such amounts, and
against fire and other risks insured against by extended coverage and public
liability insurance, as, in the reasonable opinion of management of Xxxxxxx, is
customary with companies of the same size and in the same business. Section 2.14
of the Disclosure Schedule also contains a listing of all claims made by Xxxxxxx
or Xxxxxxx Bank within the last five (5) years under any insurance policy
involving $5,000 or more for any single claim.
Section 2.15 ENVIRONMENTAL MATTERS.
(a) As used in this Agreement, "ENVIRONMENTAL LAWS" means all local,
state and federal environmental, health and safety laws and regulations in
all jurisdictions in which the parties hereto have done business or owned
property, including, without limitation, the Federal Resource Conservation
and Recovery Act, the Federal Comprehensive Environmental Response,
Compensation and Liability Act, the Federal Clean Water Act, the Federal
Clean Air Act, and the Federal Occupational Safety and Health Act.
(b) To the knowledge of management and the members of the board of
directors of Xxxxxxx and Xxxxxxx Bank, neither the conduct nor operation of
Xxxxxxx or Xxxxxxx Bank nor any condition of any property previously owned
by Xxxxxxx or Xxxxxxx Bank and used in its business operations or the
condition of any property previously owned by Xxxxxxx or Xxxxxxx Bank but
not used in its business operations, violates or violated Environmental
Laws or, except as described in SECTION 2.15(B) OF THE DISCLOSURE SCHEDULE,
contained or contains any underground storage tank, and no condition or
event has occurred with respect to it or any such property that, with
notice or the passage of time, or both, would constitute a violation of
Environmental Laws or obligate Xxxxxxx or Xxxxxxx Bank to remedy,
stabilize, neutralize or otherwise alter the environmental condition of any
such property. Neither Xxxxxxx nor Xxxxxxx Bank has received any notice
from any person or entity that Xxxxxxx or Xxxxxxx Bank or the operation of
any facilities or any property owned by Xxxxxxx or Xxxxxxx Bank is or was
in violation of any Environmental Laws or that Xxxxxxx or Xxxxxxx Bank is
responsible for the cleanup of any pollutants, contaminants, or hazardous
or toxic wastes, substances or materials at, on or beneath any such
property. All permits required of Xxxxxxx or Xxxxxxx Bank for its
operations on any properties owned or leased by it have been obtained and
are listed on SECTION 2.15(B) OF THE DISCLOSURE SCHEDULE. Xxxxxxx and
Xxxxxxx Bank are in compliance with the terms, conditions and provisions of
all such permits.
Section 2.16 COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT. Except
as set provided in SECTION 2.16 OF THE DISCLOSURE SCHEDULE, TO the knowledge of
management of
12
Xxxxxxx and Xxxxxxx Bank are in compliance with all material applicable
provisions of the Americans with Disabilities Act (the "ADA") and no action
under the ADA against Xxxxxxx or Xxxxxxx Bank or any of their properties has
been initiated or has been threatened.
Section 2.17 COMPLIANCE WITH LAW. Xxxxxxx and Xxxxxxx Bank have all
material licenses, franchises, permits and other governmental authorizations
that are legally required to enable them to conduct their respective businesses
as presently conducted and are in compliance with all applicable laws and
regulations or, in the event that they are not in compliance with all applicable
laws and regulations, any such non-compliance will not cause a Material Adverse
Change.
Section 2.18 BROKERAGE. Except for a fee payable to Xxxxxxxxx &
Associates, LLC in connection with it acting as financial adviser and issuing a
fairness opinion to Xxxxxxx, there are no existing claims or agreements for
brokerage commissions, finders' fees, investment banking fees, or similar
compensation in connection with the Mergers payable by Xxxxxxx or Xxxxxxx Bank.
Any such fees and expenses payable to Xxxxxxxxx & Associates, LLC shall be paid
by Xxxxxxx and not by Xxxxxxx Bank.
Section 2.19 MATERIAL CONTRACTS. Except as set forth in SECTION 2.19
OF THE DISCLOSURE SCHEDULE, neither Xxxxxxx nor Xxxxxxx Bank is a party to or
bound by any oral or written:
(a) agreement, security agreement, pledge agreement, contract or
indenture under which it has borrowed or will borrow money or pursuant to
which it has granted any lien on any of its assets (not including federal
funds and money deposited, including without limitation, checking and
savings accounts and certificates of deposit);
(b) guaranty of any obligation for the borrowing of money or
otherwise, excluding endorsements made for collection and guarantees made
in the ordinary course of business and letters of credit issued in the
ordinary course of business;
(c) agreement with any present or former officer, director or
shareholder, including but not limited to, agreements for the payment of
any deferred compensation, (except for deposit or loan agreements entered
into in the ordinary course of business);
(d) any lease or license of personal property (whether tangible or
intangible, including intellectual property and software), whether as
licensor or licensee involving payments or receipts in excess of $5,000;
(e) contract or commitment for the purchase of materials, supplies or
other real or personal property in an amount in excess of $5,000 or for the
performance of services involving an amount in excess of $5,000;
(f) joint venture or partnership agreement or arrangement; or
(g) contract, agreement or other commitment not made in the ordinary
course of business and involving payments or receipts in excess of $5,000.
(h) All of the contracts listed in Section 2.19 of the Disclosure
Schedule (1) are currently in full force and effect, (2) represent due and
valid obligations of the parties thereto, and (3) are enforceable against
each of the parties thereto in accordance with their terms. Neither Xxxxxxx
nor Xxxxxxx Bank is in default with respect to any such
13
contract, and neither Xxxxxxx nor Xxxxxxx Bank is aware of any default by
any other party to any such contract.
Section 2.20 NO UNDISCLOSED LIABILITIES. Xxxxxxx and Xxxxxxx Bank do
not have any liability, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due (and there is no past or present fact,
situation, circumstance, condition or other basis for any present or future
action, suit or proceeding, hearing, charge, complaint, claim or demand against
Xxxxxxx or Xxxxxxx Bank giving rise to any such liability) required in
accordance with GAAP to be reflected on the consolidated balance sheet of
Xxxxxxx or the notes thereto, except (i) for liabilities set forth or reserved
against in the Xxxxxxx Financial Statements, (ii) for normal fluctuations in the
amount of the liabilities referred to in clause (i) above or other liabilities
occurring in the ordinary course of business of Xxxxxxx and Xxxxxxx Bank since
the date of the most recent balance sheet included in the Xxxxxxx Financial
Statements, which such fluctuations in the aggregate are not material to Xxxxxxx
and Xxxxxxx Bank taken as a whole, (iii) liabilities relating to the possible
sale of Xxxxxxx or other transactions contemplated by this Agreement, and (iv)
as may be disclosed in SECTION 2.20 OF THE DISCLOSURE SCHEDULE.
Section 2.21 DELIVERY OF DOCUMENTS. Final and complete copies of each
document, plan or contract listed and described in the Disclosure Schedule have
been provided to F&M. Neither Xxxxxxx nor Xxxxxxx Bank nor any other party
thereto is in default under any such contract and there has not occurred any
event that with the lapse of time or the giving of notice, or both, would
constitute such a default.
Section 2.22 INTERIM EVENTS. Except as provided in SECTION 2.22 OF THE
DISCLOSURE SCHEDULE, since June 30, 2007, neither Xxxxxxx nor Xxxxxxx Bank has
paid or declared any dividend or made any other distribution to shareholders or
taken any action which if taken after the date of this Agreement would require
the prior written consent of F&M pursuant to Section 4.1 hereof.
Section 2.23 BOOKS AND RECORDS. The books and records of Xxxxxxx and
Xxxxxxx Bank have been fully, properly and accurately maintained in all material
respects, there are no material inaccuracies or discrepancies of any kind
contained or reflected therein, and they fairly present the financial position
of Xxxxxxx and Xxxxxxx Bank.
Section 2.24 DEPOSIT INSURANCE. The deposits of Xxxxxxx Bank are
insured by the FDIC up to applicable limits and in accordance with the Federal
Deposit Insurance Act, as amended, and Xxxxxxx Bank has paid or properly
reserved or accrued for all current premiums and assessments with respect to
such deposit insurance, if any.
Section 2.25 NO REGULATORY FILINGS. There are no filings, notices or
submissions required to be made by Xxxxxxx or Xxxxxxx Bank with any regulatory
authority in connection with obtaining approval for the Bank Merger.
Section 2.26 STATEMENTS TRUE AND CORRECT. None of the information
supplied or to be supplied by Xxxxxxx or Xxxxxxx Bank for inclusion in any
documents to be filed with the FRB, FDIC, ODFI, IDFI or any other regulatory
authority in connection with the Merger will, at the respective times such
documents are filed, be false or misleading with respect to any material fact or
omit to state any material fact necessary in order to make the statements
therein not misleading.
14
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF F&M AND F&M BANK
F&M and F&M Bank hereby make the following representations and warranties
to Xxxxxxx:
Section 3.1 ORGANIZATION. F&M is a corporation duly incorporated and
validly existing under the laws of the State of Ohio and is a registered bank
holding company under the Bank Holding Company Act of 1956, as amended, and it
has the corporate power and authority to own all of its property and assets, to
incur all of its liabilities, and to carry on its business as it is now being
conducted. F&M Bank is a commercial bank duly incorporated and validly existing
under the laws of the State of Ohio, and has the corporate power and authority
to own all of its property and assets, to incur all of its liabilities, and to
carry on its business as it is now being conducted.
Section 3.2 AUTHORIZATION.
(a) The Boards of Directors of F&M and F&M Bank have each, by all
appropriate action, approved this Agreement and the Bank Merger and has
authorized the execution of this Agreement on its behalf by its respective
duly authorized officers and the performance, respectively, by F&M and F&M
Bank of its respective obligations hereunder.
(b) Nothing in the Articles of Incorporation or Code of Regulations of
F&M or F&M Bank, or in any agreement, instrument, decree, proceeding, law
or regulation (except as specifically referred to in or contemplated by
this Agreement) by or to which F&M or F&M Bank is bound or subject would
prohibit either of them from entering into and consummating, or would be
violated or breached by either of their consummation of this Agreement and
the transactions contemplated herein on the terms and conditions herein
contained.
(c) This Agreement has been duly and validly executed and delivered by
F&M and F&M Bank and constitutes a legal, valid and binding obligation of
each of them, enforceable against each of them in accordance with its
terms, and no other corporate acts or proceedings are required to be taken
by F&M or F&M Bank to authorize the execution, delivery and performance of
this Agreement.
(d) Neither F&M nor F&M Bank is, and will not be by reason of the
consummation of the transactions contemplated herein be, in default under
or in violation of any provision of, nor will the consummation of the
transactions contemplated herein afford any party a right to accelerate any
indebtedness under, F&M's or F&M Bank's Articles of Incorporation or Code
of Regulations, any promissory note, indenture, or other evidence of
indebtedness or security therefore, or any lease, contract, or other
commitment or agreement to which F&M or F&M Bank is a party or by which
either of them or their property is bound.
(e) Except for the requisite approvals of and filings with the FRB,
the FDIC, the ODFI, the IDFI and the Ohio Secretary of State, no notice to,
filing with, authorization by, or consent or approval of, any federal or
state regulatory authority is necessary for the execution and delivery of
this Agreement or the consummation of the Bank Merger by F&M and F&M Bank.
15
Section 3.3 FINANCIAL INFORMATION. The audited consolidated balance
sheets of F&M and its subsidiaries as of December 31, 2006 and 2005 and related
consolidated statements of income, changes in shareholders' equity and cash
flows for the three years ended December 31, 2006, together with the notes
thereto included in F&M's most recent 10-K as filed with Securities and Exchange
Commission (the "SEC"), and the unaudited consolidated balance sheet and the
related unaudited consolidated statement of income, changes in shareholders'
equity and cash flows of F&M and its subsidiaries for the period ended June 30,
2007 included in F&M's Quarterly Report on Form 10-Q as filed with the SEC
(collectively, the "F&M FINANCIAL STATEMENTS"), all of which have been
previously furnished by F&M to Xxxxxxx, together with all subsequent financial
statements and reports prepared prior to the Effective Date, shall have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis (except as disclosed therein) and fairly present the
consolidated financial position and the consolidated results of operations,
changes in shareholders' equity and cash flows of F&M and its consolidated
subsidiaries as of the dates and for the periods indicated (subject, in the case
of interim financial statements, to normal recurring year-end adjustments, none
of which will be material). F&M and its subsidiaries each does not have any
material liability, fixed or contingent, except as set forth in the F&M
Financial Statements or incurred in the ordinary course of business since the
date of the most recent F&M Financial Statement.
Section 3.4 REPORTS. Since January 1, 2005 F&M and F&M Bank have filed
all reports, notices and other statements, together with any amendments required
to be made with respect thereto, that it was required to file with (i) the SEC,
(ii) the FRB, (iii) the FDIC, (iv) the ODFI or (v) any other governmental
authority with jurisdiction over F&M or F&M Bank. As of their respective dates,
each of such reports and documents, as amended, including the financial
statements, exhibits and schedules thereto, complied in all material respects
with the relevant statutes, rules and regulations enforced or promulgated by the
regulatory authority with which they were filed, and did not contain any untrue
statement of a material fact or omit to state any 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.
Section 3.5 COMPLIANCE WITH LAW. Each of F&M and F&M Bank has all
licenses, franchises, permits and other governmental authorizations that are
legally required to enable them to conduct their respective businesses as
presently conducted and are in compliance in all material respects with all
applicable laws and regulations.
Section 3.6 FINANCING FOR THE TRANSACTION. F&M and F&M Bank,
collectively, have sufficient internal financial resources to allow them to
perform their obligations under this Agreement and do not intend to seek any
outside funding to assist in consummation of the transactions contemplated
hereunder. F&M and F&M Bank believe that they will be, immediately following the
Bank Merger, in material compliance with all applicable capital regulations of
federal banking agencies having jurisdiction over F&M and F&M Bank.
ARTICLE 4. AGREEMENTS OF XXXXXXX AND XXXXXXX BANK
Section 4.1 CONDUCT OF BUSINESS.
(a) Xxxxxxx and Xxxxxxx Bank shall continue to carry on its business
and the discharge or incurrence of its obligations and liabilities only in
the ordinary course of business as heretofore conducted and, by way of
amplification and not limitation with
16
respect to such obligation, Xxxxxxx and Xxxxxxx Bank will not, without the
prior written consent of F&M, which consent will not be unreasonably
withheld:
(i) DIVIDENDS. Neither Xxxxxxx nor Xxxxxxx Bank shall declare or
pay any dividend or make any other distribution to shareholders,
whether in cash, stock or other property; provided that Xxxxxxx Bank
may pay to Xxxxxxx and Xxxxxxx may in turn pay to its shareholders
cash dividends in an amount that do not exceed the Net Earnings of
Xxxxxxx Bank from June 1, 2007 through the day immediately prior to
the Closing Date, and, provided further, that immediately prior to the
Effective Time Xxxxxxx Bank may pay as a dividend to Xxxxxxx the note
and all security documents related to the loan listed on Confidential
Exhibit 4.1 (the "RETAINED LOAN"); or
(ii) ISSUANCES OF STOCK. Issue any common or other capital stock
or any options, warrants or other rights to subscribe for or purchase
common or any other capital stock or any securities convertible into
or exchangeable for any capital stock or permit any additional shares
of Xxxxxxx common stock or capital stock of Xxxxxxx Bank to become
subject to grants of employee or director stock options, restricted
stock grants, or similar stock-based employee or director rights; or
(iii) REDEMPTIONS OF STOCK. Directly or indirectly redeem,
purchase or otherwise acquire (except for shares acquired in
satisfaction of a debt previously contracted) any of their own common
or any other capital stock or form a new subsidiary; or
(iv) REORGANIZATIONS. Effect a split, reverse split,
reclassification, or other similar change in or of any common or other
capital stock or otherwise reorganize or recapitalize; or
(v) AMENDMENTS TO ORGANIZATIONAL DOCUMENTS. Change their Articles
of Incorporation or Bylaws; or
(vi) WAGES AND BENEFIT PLANS. Except in the ordinary course of
business consistent with past practices and except as contemplated by
this Agreement (including severance payments anticipated to be paid by
F&M as described in Section 5.6 hereof), pay or agree to pay,
conditionally or otherwise, any additional compensation (including
bonuses) or severance benefit or otherwise make any changes with
respect to the fees or compensation payable or to become payable to
management consultants, directors, officers or salaried employees or,
except as required by law and except as contemplated by Section 4.14
of this Agreement, adopt or make any change in any Employee Benefit
Plan or other arrangement (including any agreement for
indemnification) or payment made to, for or with any of such
consultants, directors, officers or employees, provided that Xxxxxxx
Bank may pay prorata bonuses to its employees through the date
immediately prior to the Closing Date so long as such bonuses are
properly accrued for on the Xxxxxxx Financial Statements at the
Xxxxxxx Bank level; or
(vii) INDEBTEDNESS. Except in the ordinary course of business
(including creation of deposit liabilities, enter into repurchase
agreements, purchases or sales of federal funds, and sales of
certificates of deposit), borrow or agree to borrow
17
any material amount of funds or directly or indirectly guarantee or
agree to guarantee any material obligations of others except pursuant
to outstanding letters of credit; or
(viii) INVESTMENTS. Purchase or otherwise acquire any investment
security for their own account that exceeds $100,000 individually or
$250,000 in the aggregate or purchase or otherwise acquire any
security other than U.S. treasury or other governmental obligations or
asset-backed securities issued or guaranteed by United States
governmental or other governmental agencies, in either case having an
average remaining life of three (3) years or less, or sell any
investment security owned by them other than sales made in the
ordinary course of business as previously conducted during the past
three (3) years and in accordance with applicable law and regulations
or engage in any activity that would be inconsistent with the
classification of investment securities as either "held to maturity"
or "available for sale;" or
(ix) CONTRACTS. Enter into, terminate or amend any agreement,
contract or commitment out of the ordinary course of business which
involves an amount of $5,000 individually or $10,000 in the aggregate
or enter into any agreement which has a term greater than one (1) year
regardless of the amount of payments; or
(x) LIENS. Place on any of their assets or properties any
mortgage, pledge, lien, charge, or other encumbrance; or
(xi) CANCELLATION OF DEBTS. Except in the ordinary course of
business in connection with loan repayments, cancel, release or
compromise any indebtedness in excess of $25,000 owing to Xxxxxxx or
Xxxxxxx Bank or any claims which Xxxxxxx or Xxxxxxx Bank may possess,
or voluntarily waive any material rights with respect thereto; or
(xii) SALE OF ASSETS. Sell or otherwise dispose of any real
property or any amount of any personal property in excess of $5,000
other than properties acquired in foreclosure or otherwise in the
ordinary course of collection of indebtedness to Xxxxxxx or Xxxxxxx
Bank; or
(xiii) ACQUISITION OF ASSETS. Acquire any assets of any other
person by any means or foreclose upon or otherwise take title to or
possession or control of, any real property without first obtaining a
Phase One environmental report thereon, prepared by a reliable and
qualified person or firm reasonably acceptable to F&M, which indicates
that the property is free of pollutants, contaminants or hazardous or
toxic waste materials; provided, however, that neither Xxxxxxx nor
Xxxxxxx Bank shall be required to obtain such a report with respect to
single family, non-agricultural residential property of one acre or
less to be foreclosed upon unless Xxxxxxx knows or has reason to
believe that such property might contain such materials or otherwise
might be contaminated; or
(xiv) BREACHES. Commit any act or fail to do any act which will
cause a material breach of any agreement, contract or commitment; or
18
(xv) VIOLATIONS OF LAW. Violate any law, statute, rule,
governmental regulation or order, which violation might cause a
Material Adverse Change to their business, financial condition, or
earnings; or
(xvi) SETTLEMENT OF CLAIMS. Settle any litigation or claim
against them without the prior consent of F&M unless settlement does
not require Xxxxxxx or Xxxxxxx Bank to pay any monies, incur any
obligation or admit any wrongdoing or liability; or
(xvii) ACCOUNTING CHANGES. Implement or adopt any change in the
accounting principles, practices or methods used by Xxxxxxx and
Xxxxxxx Bank, other than as may be required by GAAP, as concurred with
by F&M's independent auditors, or as required by Section 4.11 hereof.
(xviii) RISK MANAGEMENT. Except as required by applicable law or
regulation: (1) implement or adopt any material change in its interest
rate risk management and hedging policies, procedures or practices;
(2) fail to follow its existing policies or practices with respect to
managing its exposure to interest rate risk; or (3) fail to use
commercially reasonable means to avoid any material increase in its
aggregate exposure to interest rate risk.
(xix) LOANS. Make (1) any new commercial loan in excess of
$200,000, (2) any new single family, residential mortgage loan or home
equity loan with a loan to value in excess of 80% or make any other
new single family, residential mortgage loan or home equity line of
credit in excess of $300,000, or (3) any new consumer loan in excess
of $100,000.
(xx) ADVERSE ACTIONS. (1) Take any action reasonably likely to
prevent or impede the Bank Merger; or (2) take any action that is
intended or is reasonably likely to result in (A) any of its
representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time at or prior to the
Effective Time, (B) any of the conditions to the Bank Merger set forth
in Article 6 not being satisfied, or (C) a material breach of any
provision of this Agreement; except, in each case, as may be required
by applicable law.
(xxi) INTEREST RATES. Increase or decrease the rate of interest
paid by Xxxxxxx Bank on any deposit product, including without
limitation on certificates of deposit, except in a manner and pursuant
to policies consistent with past practices.
(xxii) COMMITMENTS. Agree or commit to do, or enter into any
contract regarding, anything that would be precluded by this Section
without first obtaining F&M's consent.
(xxiii) LOAN LOSS RESERVE. Take any action that would change
Xxxxxxx Bank's loan loss reserves which is not in compliance with
Xxxxxxx Bank's past practices consistently applied and in compliance
with GAAP.
(b) Neither Xxxxxxx nor Xxxxxxx Bank shall, without the prior written
consent of F&M, engage in any transaction or take any action that would
render untrue in any material respect any of the representations and
warranties of Xxxxxxx or Xxxxxxx Bank
19
contained in Article 2 hereof if such representations and warranties were
given as of the date of such transaction or action.
(c) Xxxxxxx shall promptly notify F&M in writing of the occurrence of
any matter or event known to and involving Xxxxxxx or Xxxxxxx Bank that is
materially adverse to the business, operations, properties, assets or
condition (financial or otherwise) of Xxxxxxx or Xxxxxxx Bank taken as a
whole.
Section 4.2 BREACHES. Xxxxxxx shall, in the event it has knowledge of
the occurrence of any event or condition which would cause or constitute a
breach (or would have caused or constituted a breach had such event occurred or
been known prior to the date of this Agreement) of any of its representations or
agreements contained or referred to in this Agreement, give prompt notice
thereof to F&M and use its best efforts to prevent or promptly remedy the same.
Section 4.3 SUBMISSION TO SHAREHOLDERS. Xxxxxxx shall cause to be duly
called and held, on a date mutually selected by F&M and Xxxxxxx, a special
meeting of the shareholders of Xxxxxxx (the "SHAREHOLDERS' MEETING") for
submission of this Agreement for approval by such shareholders as required by
the IBCL. In connection with the Shareholders' Meeting, (i) Xxxxxxx shall mail
(or otherwise provide) to its shareholders in a proxy statement to be prepared
by Xxxxxxx and its counsel with the assistance of F&M and its counsel all
necessary information to enable the shareholders to make a fully informed
decision about this Agreement, and (ii) the Board of Directors of Xxxxxxx shall
(subject to compliance with its fiduciary duties as advised by counsel)
recommend to its shareholders the approval of this Agreement and use its best
efforts to obtain such shareholder approval. Additionally, each director of
Xxxxxxx agrees to vote any shares of Xxxxxxx common stock he or she owns in
favor of this Agreement and the Bank Merger pursuant to the agreement attached
hereto as Exhibit 4.3 and make the additional covenants set forth therein.
Section 4.4 DISTRIBUTION TO XXXXXXX SHAREHOLDERS. Subsequent to the
Bank Merger and the payment of the Merger Consideration to Xxxxxxx, Xxxxxxx
shall, within one (1) year after the Effective Time, distribute to its
shareholders substantially all of the Merger Consideration. The parties
acknowledge that Xxxxxxx shall continue to retain and attempt to collect the
Retained Loan listed on Confidential Exhibit 4.1, the proceeds for which will be
distributed by Xxxxxxx to its shareholders upon collection.
Section 4.5 CONSUMMATION OF AGREEMENT; REGULATORY APPROVALS. Xxxxxxx
and Xxxxxxx Bank shall use their best efforts to perform and fulfill all
conditions and obligations on their part to be performed or fulfilled under this
Agreement and to effect the Mergers in accordance with the terms and provisions
hereof. Xxxxxxx shall furnish to F&M in a timely manner all information, data
and documents in the possession of Xxxxxxx and Xxxxxxx Bank requested by F&M as
may be required to obtain any necessary regulatory or other approvals of the
Mergers and shall otherwise cooperate fully with F&M to carry out the purpose
and intent of this Agreement.
Section 4.6 ENVIRONMENTAL REPORTS. Xxxxxxx has no knowledge of any
Phase One environmental investigations having been conducted, nor is there any
other environmental information in its possession in regard to any real property
owned by Xxxxxxx or Xxxxxxx Bank, including any OREO property. F&M shall have
the right, at its own cost, for sixty (60) days after the date of this
Agreement, to obtain a report of a Phase One environmental investigation
20
on all real property owned or leased by Xxxxxxx or Xxxxxxx Bank (including Other
Real Estate Owned) as of the date of this Agreement or acquired or leased
thereafter, except that Xxxxxxx shall provide F&M with any reports prepared
pursuant to Section 4.1(a)(xiii). If required by the Phase One investigation in
F&M's reasonable opinion, F&M may, at its own cost, obtain a Phase Two
investigation on properties requiring such additional study. F&M shall have ten
(10) business days from the receipt of any such investigation report to notify
Xxxxxxx in writing of any material environmental concerns. Within forty-five
(45) days of the delivery of such notification, F&M shall obtain an estimate or
indication as described below regarding the cost of taking remedial and
corrective actions or the inability to make such an estimate. Should the cost of
taking all remedial and corrective actions and measures (i) required by
applicable law, or (ii) recommended or suggested by such report or reports and
prudent in light of the findings of such report, in the aggregate, exceed the
sum of $50,000, as reasonably estimated by an environmental expert promptly
retained for such purpose by F&M and reasonably acceptable to Xxxxxxx, or if the
cost of such actions and measures cannot be so reasonably estimated by such
expert with any reasonable degree of certainty, then within ten (10) days after
receipt of such cost estimate or notice that a cost cannot be reasonably
estimated F&M shall provide notice to Xxxxxxx of its intent to terminate the
Merger pursuant to Section 7.3 hereof. Xxxxxxx shall have ten (10) days after
receipt of such notice of proposed termination to cure any such environmental
defect or to initiate the necessary remedial action to cure such defect, which
remedial action must be completed within sixty (60) days after the commencement
of such remedial action. If Xxxxxxx either fails to cure such defect within such
ten (10) day period or fails to give notice within such ten (10) day period of
its intent to remedy the defect and to then remedy the defect within such sixty
(60) day period, then F&M shall have the right pursuant to Section 7.3 hereof,
for a period of ten (10) business days following the failure of Xxxxxxx to
provide such notice or to so remedy such defect, as the case may be, to
terminate this Agreement by providing written notice to Xxxxxxx within such ten
(10)-day period.
Section 4.7 ACCESS TO INFORMATION. Xxxxxxx shall permit F&M reasonable
access, in a manner which will avoid undue disruption or interference with
Xxxxxxx'x normal operations, to Xxxxxxx'x and Xxxxxxx Bank's properties and
shall disclose and make available to F&M all books, documents, papers and
records relating to Xxxxxxx'x and Xxxxxxx Bank's assets, stock, ownership,
properties, operations, obligations and liabilities, including, but not limited
to, all books of account (including general ledgers), tax records, minute books
of directors' and shareholders' meetings, organizational documents, material
contracts and agreements, loan files, filings with any regulatory authority,
litigation files, plans affecting employees, monthly director meeting board
packages and any other business activities in which F&M may have a reasonable
and legitimate interest in light of the transactions contemplated by this
Agreement. During the period from the date of this Agreement to the Effective
Time, Xxxxxxx will cause one or more of Xxxxxxx'x designated representatives to
confer on a regular basis with the Chief Executive Officer of F&M Bank, or any
other person designated in a written notice given to Xxxxxxx by F&M pursuant to
this Agreement, to report the general status of the ongoing operations of
Xxxxxxx and Xxxxxxx Bank. Xxxxxxx and Xxxxxxx Bank will promptly notify F&M of
any material change in the normal course of the operation of its business or
properties and of any regulatory complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or the institution
or the threat of significant litigation involving Xxxxxxx or Xxxxxxx Bank and
will keep F&M fully informed of such events. F&M will hold any such
21
information which is nonpublic in confidence in accordance with the provisions
of Section 9.1 and Section 9.2 hereof.
Section 4.8 PRESS RELEASE. Each of Xxxxxxx and F&M agrees that it will
not, without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby (except for any release or statement that, in the written
opinion of outside counsel to such party, is required by law or regulation and
as to which such party has used its best efforts to discuss with the other party
in advance, provided that such release or statement has not been caused by, or
is not the result of, a previous disclosure by or at the direction of such party
or any of its representatives that was not permitted by this Agreement).
Section 4.9 ACQUISITION PROPOSALS. Xxxxxxx and Xxxxxxx Bank each agree
that it shall not, and shall cause its officers, directors, agents, advisors and
affiliates not to, solicit or encourage inquiries or proposals with respect to,
or engage in any negotiations concerning, or provide any confidential
information to, or have any discussions with, any person relating to, any tender
or exchange offer, proposal for a merger, consolidation or other business
combination involving Xxxxxxx or Xxxxxxx Bank, respectively, or any proposal or
offer to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets, deposits or loans of, Xxxxxxx or Xxxxxxx
Bank, other than the transactions contemplated by this Agreement (any of the
foregoing, an "ACQUISITION PROPOSAL"); provided however, that if Xxxxxxx or
Xxxxxxx Bank is not otherwise in violation of this Section, the Xxxxxxx or
Xxxxxxx Bank Board of Directors may provide information to, and may engage in
such negotiations or discussions with, a person with respect to an Acquisition
Proposal, directly or through representatives, if the Xxxxxxx or Xxxxxxx Bank
Board of Directors, after consulting with and considering the advice of its
financial advisor, if any, and its outside counsel, determines in good faith
that its failure to engage in any such negotiations or discussions could
reasonably be deemed to constitute a failure to discharge properly the fiduciary
duties of such directors in accordance with Indiana law. Prior to taking Board
action, Xxxxxxx shall promptly (within 24 hours) advise F&M following the
receipt by it of any Acquisition Proposal and shall provide F&M with (i) the
substance of the Acquisition Proposal (including the identity of the person
making such Acquisition Proposal and a copy of such Acquisition Proposal), and
(ii) a summary of the advice provided to it by its financial advisor and
counsel. Xxxxxxx shall also advise F&M of any other developments with respect to
such Acquisition Proposal immediately upon the occurrence thereof.
Section 4.10 TITLE INSURANCE AND SURVEYS.
(a) Xxxxxxx has delivered to F&M copies of the deeds, the most recent
owner's title insurance policies, if any, and the surveys, if any,
currently in Xxxxxxx'x possession for each parcel of real estate owned by
Xxxxxxx or Xxxxxxx Bank and described in Section 2.14 of the Disclosure
Schedule. F&M shall be entitled, at its own cost and within sixty (60) days
of the date hereof, to obtain new commitments for, and policies of title
insurance or surveys in respect of, any real property owned or leased by
Xxxxxxx or Xxxxxxx Bank.
(b) Within fifteen (15) days after the F&M's receipt of such surveys
and title commitments, F&M shall notify Xxxxxxx of any objections to any
exceptions, conditions or other matters contained in or set forth in any
survey or title commitment other than Standard Permitted Exceptions (the
"UNPERMITTED EXCEPTIONS"). The term "STANDARD
22
PERMITTED EXCEPTIONS" shall include (i) liens for real estate taxes and
assessments not yet delinquent; and (ii) utility, access and other
easements, rights of way, restrictions and exceptions existing on the real
estate owned or leased by Xxxxxxx or Xxxxxxx Bank as shown in the title
commitments, none of which impair such real property for the use and
business being conducted thereon. Within ten (10) days after receipt of
such written notice of Unpermitted Exceptions from F&M, Xxxxxxx shall
commence using its best efforts to cure any such Unpermitted Exceptions to
the satisfaction of F&M prior to the Closing. If Xxxxxxx agrees to cure the
Unpermitted Exceptions but is unable to cure the Unpermitted Exceptions to
the reasonable satisfaction of F&M prior to the Closing, F&M may either:
(i) waive the uncured Unpermitted Exceptions and close the transactions
contemplated by this Agreement; or (ii) terminate this Agreement, in which
event this Agreement shall be terminated, and neither party shall have any
further obligation or liability to the other party hereunder.
Section 4.11 CONFORMING ACCOUNTING AND RESERVE POLICIES; RESTRUCTURING
EXPENSES.
(a) Notwithstanding that Xxxxxxx believes that it and Xxxxxxx Bank
have established all reserves and taken all provisions for possible loan
losses required by GAAP and applicable laws, rules and regulations, Xxxxxxx
recognizes that F&M may have adopted different loan, accrual and reserve
policies (including loan classifications and levels of reserves for
possible loan losses). From and after the date of this Agreement to the
Effective Time, F&M and Xxxxxxx shall consult and cooperate with each other
with respect to conforming, based upon such consultation, as specified in
each case in writing to Xxxxxxx by F&M, and subject to the conditions in
Section 4.11(d) below and as hereinafter provided, the loan, accrual and
reserve policies of Xxxxxxx and Xxxxxxx Bank to those policies of F&M and
F&M Bank.
(b) In addition, from and after the date of this Agreement to the
Effective Time, Xxxxxxx and F&M shall consult and cooperate with each other
with respect to determining, as specified in a written notice from F&M to
Xxxxxxx, based upon such consultation, subject to the conditions in Section
4.11(d) below and as hereinafter provided, appropriate and reasonable
accruals, reserves and charges to establish and take in respect of
severance costs and other appropriate and reasonable charges and accounting
adjustments taking into account the parties' business plans following the
Bank Merger.
(c) Xxxxxxx and F&M shall consult and cooperate with each other with
respect to determining, as specified in a written notice from F&M to
Xxxxxxx, based upon such consultation, subject to the conditions in Section
4.11(d) below and as hereinafter provided, the amount and the timing for
recognizing for financial accounting purposes the expenses of the Bank
Merger to be incurred in connection with the Bank Merger.
(d) Subject to applicable laws, Xxxxxxx and Xxxxxxx Bank shall (i)
establish and take such reserves and accruals at such time as F&M shall
reasonably request to conform Xxxxxxx Bank's loan, accrual and reserve
policies to F&M Bank's policies, and (ii) establish and take such accruals,
reserves and charges in order to implement such policies and to recognize
for financial accounting purposes such expenses of the Bank Merger and
restructuring charges related to or to be incurred in connection with the
Bank Merger at
23
such times as are reasonably requested by F&M and/or F&M Bank, but in no
event prior to five (5) business days before the Effective Date; provided,
however, that on the date such reserves, accruals and charges are to be
taken, F&M and F&M Bank shall certify to Xxxxxxx that all conditions to
F&M's and F&M Bank's obligation to consummate the Bank Merger set forth in
Section 6.1 hereof (other than the delivery of certificates and other
instruments and documents to be delivered at the Closing or otherwise to be
dated at the Effective Time, the delivery of which shall continue to be
conditions to F&M's and F&M Bank's obligation to consummate the Bank
Merger) have been satisfied or waived; and provided, further, that Xxxxxxx
shall not be required to take any such action that is not consistent with
GAAP and regulatory accounting principles.
(e) No reserves, accruals or charges taken in accordance with this
Section may be a basis to assert a violation of a breach of a
representation, warranty or covenant of Xxxxxxx or Xxxxxxx Bank herein and
no such actions shall result in a change in the Merger Consideration to be
paid to Xxxxxxx pursuant to Section 1.3 hereof.
Section 4.12 COOPERATION ON CONVERSION OF SYSTEMS. Xxxxxxx and Xxxxxxx
Bank agree to commence immediately after the date of this Agreement (and
continue until Closing or completed) using their respective best efforts to
ensure an orderly transfer of information, processes, systems and data to F&M
Bank and to otherwise assist F&M Bank in facilitating the conversion of all of
Xxxxxxx'x and Xxxxxxx Bank's systems into, or to conform with, F&M's and F&M
Bank's systems; so that, as of the Effective Time, the systems of Xxxxxxx and
Xxxxxxx Bank are readily convertible to F&M's and F&M Bank's systems to the
fullest extent possible without actually converting them prior to the Effective
Time. The parties acknowledge that such conversion shall not actually occur
until after the Effective Time. F&M shall be responsible for all third party
costs related to such conversion and any overtime costs of employees of Xxxxxxx
Bank in connection with training such employees on such F&M Bank systems. The
Parties acknowledge that F&M Bank intends to send materials to customers of
Xxxxxxx Bank within approximately 60 days of the date hereof introducing F&M
Bank and its products and services to such customers. F&M and F&M agree that
they shall not, without the prior consent of Xxxxxxx, send checks, payment
books, ATM cards or other similar materials intending to alter the relationship
that Xxxxxxx Bank has with its customers after Closing until all necessary
regulatory approvals have been obtained and the Merger has been approved by the
Xxxxxxx shareholders, and further agree that such materials shall be sent only
in preparation for Closing of the transaction.
Section 4.13 DISPOSITION OF XXXXXXX BANK 401(K) PLAN. Xxxxxxx Bank
maintains the Xxxxxxx Bank 401(k) Plan ("XXXXXXX BANK 401(K) PLAN"). Xxxxxxx
Bank shall make contributions to the Xxxxxxx Bank 401(k) Plan between the date
hereof and the Closing Date consistent with the terms of the Xxxxxxx Bank 401(k)
Plan and past practices.
Prior to Effective Time, the Xxxxxxx Bank Board of Directors will adopt
resolutions acceptable to F&M Bank and its employee benefits counsel providing
for the "freeze" and termination of the Xxxxxxx Bank 401(k) Plan effective as of
the last business day preceding the Effective Time ("TERMINATION DATE"), subject
to the consummation of the Bank Merger, so that (i) no participant in the
Xxxxxxx Bank 401(k) Plan will accrue additional benefits under the Xxxxxxx Bank
401(k) Plan after the Termination Date; (ii) no current or future employee of
Xxxxxxx Bank or Xxxxxxx, who is not already enrolled as a participant in the
Xxxxxxx Bank 401(k) Plan on the Termination Date, will become a participant in
the Xxxxxxx Bank 401(k) Plan after
24
the Termination Date; (iii) the accrued benefits and account balances of all
participants in the Xxxxxxx Bank 401(k) Plan which were not previously 100
percent vested will become 100 percent vested on the Termination Date. All
contributions due to the Xxxxxxx Bank 401(k) Plan for any periods prior to the
Termination Date, and not yet paid on the Termination Date, including any
remaining contributions for the 2006 plan year, will be contributed by Xxxxxxx
Bank as soon as administratively feasible following the Termination Date. Such
resolutions will remain in effect through and including the Effective Time of
the Bank Merger. F&M shall receive from Xxxxxxx Bank evidence that the directors
of Xxxxxxx Bank have adopted such resolutions prior to the Closing Date.
Section 4.14 OTHER WELFARE BENEFIT PLANS. From the date of this
Agreement until the Effective Time, Xxxxxxx Bank shall continue to maintain and
fund all premiums for all welfare benefit plans sponsored by Xxxxxxx Bank,
including any and all group health and dental plans, life insurance plans, and
short or long term disability plans including, but not limited to, benefits,
insurance premiums and administrative fees, attributable to claims incurred on
or prior to the Effective Time. If F&M Bank decides that it wants to terminate
the Xxxxxxx welfare benefit plans at or shortly after the Effective Time and
thereafter to cover continuing employees under its own welfare benefit plans,
Xxxxxxx Bank shall take such action in respect of the Xxxxxxx welfare benefit
plans prior to the Effective Time as F&M Bank reasonably may request so that it
will be able to effect such termination and transfer of coverage in a prompt and
efficient manner.
ARTICLE 5. AGREEMENTS OF F&M AND F&M BANK
Section 5.1 REGULATORY APPROVALS. F&M and F&M Bank shall use their
respective reasonable best efforts to promptly file all regulatory applications
required in order to consummate the Bank Merger, including the necessary
applications for the prior approval of the FRB, the FDIC, the ODFI and the IDFI.
F&M and F&M Bank shall keep Xxxxxxx reasonably informed as to the status of such
applications and provide Xxxxxxx copies of the nonconfidential portions of such
applications and supplementally filed materials concurrent with or immediately
after their filing and provide copies of all nonconfidential correspondence
regarding the applications received from the FRB, FDIC, ODFI and IDFI.
Section 5.2 BREACHES. F&M and F&M Bank shall, in the event it has
knowledge of the occurrence of any event or condition which would cause or
constitute a breach (or would have caused or constituted a breach had such event
occurred or been known prior to the date of this Agreement) of any of their
respective representations or agreements contained or referred to in this
Agreement, give prompt notice thereof to Xxxxxxx and use its best efforts to
prevent or promptly remedy the same.
Section 5.3 CONSUMMATION OF AGREEMENT. F&M and F&M Bank shall use
their reasonable best efforts to perform and fulfill all conditions and
obligations on its part to be performed or fulfilled under this Agreement and to
effect the Mergers in accordance with the terms and conditions of this
Agreement.
Section 5.4 DIRECTOR AND OFFICER INDEMNIFICATION.
(a) For a period of six (6) years following the Effective Time, F&M
and F&M Bank shall indemnify, defend and hold harmless the present and
former officers, directors and employees of Xxxxxxx and Xxxxxxx Bank (each
an "Indemnified Party") against costs
25
or expenses (including reasonable attorneys' fees) judgments, fines,
losses, claims, damages or liabilities (collectively "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative, arising out of
actions or omissions occurring on or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement) to the fullest extent that Xxxxxxx or Xxxxxxx Bank is required
to indemnify (and advance expenses to) its directors, officers and
employees under the laws of the State of Indiana and the Xxxxxxx and
Xxxxxxx Bank Articles of Incorporation and Bylaws as in effect on the date
hereof.
(b) F&M shall cause the persons serving as officers or directors of
Xxxxxxx or Xxxxxxx Bank to be covered for a period from the Effective Time
until one (1) year after the Effective Time by the directors' and officers'
liability insurance policy currently maintained by Xxxxxxx and Xxxxxxx Bank
with respect to acts or omissions occurring prior to the Effective Time,
the cost for which shall be borne by F&M.
(c) Any Indemnified Party wishing to claim indemnification under this
Section 5.4, upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify F&M and F&M Bank
thereof, provided that the failure so to notify shall not effect the
obligations of F&M and F&M Bank hereunder unless and to the extent that F&M
is actually prejudiced as a result of such failure.
Section 5.5 EMPLOYEE BENEFITS. Upon the Closing Date, it is intended
that the employees of Xxxxxxx Bank who are not terminated shall become employees
of F&M Bank (or an affiliate) as of the Effective Time; provided, nothing herein
shall be interpreted as creating a contractual or other right to continued
employment of an employee subsequent to the Closing Date. It is the intent of
F&M and F&M Bank that, after the Effective Time, the employees of Xxxxxxx Bank
who are not terminated will be added to the F&M Bank employee benefit plans.
Section 5.6 SEVERANCE.
(a) Those employees, other than those employees covered by RAs (as
defined in Section 5.6(b) below), of Xxxxxxx Bank as of the Effective Time
(a) who are still employed by Xxxxxxx Bank and who F&M Bank or its
affiliates elect not to employ after the Effective Time or who are
terminated other than for cause within six (6) months after the Effective
Date, and (b) who sign and deliver a termination and release agreement in
the form attached hereto as Exhibit 5.6 in a timely manner after such
termination of employment, shall be entitled to severance pay equal to one
(1) week of pay, at their rate of pay in effect at the time of termination,
for each full year of continuous service with Xxxxxxx or Xxxxxxx Bank, with
a maximum of twenty-six (26) weeks. Such employees will have the option of:
(i) receiving their severance in a lump-sum payment, or (ii) receiving
their severance bi-weekly through F&M Bank's standard payroll process.
Furthermore, any terminated employees shall be entitled to continuation
coverage under Xxxxxxx Bank's group health plan and/or F&M Bank's group
health plans as required by COBRA. Nothing in this Section shall be deemed
to limit or modify F&M's or F&M Bank's at will employment policy.
(b) It has been represented to F&M that Xxxxxxx and/or Xxxxxxx Bank
have entered into Retention Agreements ("RAs") with certain of the officers
of Xxxxxxx Bank
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identified in SECTION 5.6(B) OF THE DISCLOSURE SCHEDULE, copies of which
RAs also are included in such Section 5.6(b) of the Disclosure Schedule.
The RAs provide for payment to such officers upon the consummation of the
Bank Merger, subject to termination of their employment, other than for
"just cause" by F&M, F&M Bank or the employee. F&M and F&M Bank, as a
result of the Bank Merger, will become successor to any rights, duties and
obligations of Xxxxxxx and Xxxxxxx Bank under the RAs. F&M and F&M Bank
agree to, and shall have the right hereunder to, discuss the future
employment relationship of the officers that are party to such RAs with
each of them from the date hereof through and after the Effective Time. A
condition to the obligation of closing of F&M and F&M Bank will be that Xx.
Xxxxxxx X. Xxxx, currently President of Xxxxxxx Bank, and a party to an RA
agrees to terminate his RA and enter into a new employment agreement with
F&M Bank in the form of Exhibit 5.6(b) attached hereto. It is understood
that the position to be provided to Xx. Xxxx will not be identical to his
current position, but will provide significant duties and responsibilities.
Section 5.7 EMPLOYEE TRANSITION PLAN. Non-critical positions which
become open with F&M or its affiliates in the ordinary course of F&M's business
prior to Closing will be communicated periodically to Xxxxxxx after the date of
this Agreement, and Xxxxxxx employees will be given an opportunity to apply for
such positions. If F&M or an affiliate elects to hire a Xxxxxxx employee to fill
an open position, such employee shall not become an employee of F&M until the
Closing, and F&M will use its best efforts to hold such positions open until the
Closing.
Section 5.8 COVERAGE IN F&M OF BENEFIT PLANS.
(a) As of, or as soon as administratively possible following the
Effective Time, F&M and its affiliates will enroll those employees of
Xxxxxxx Bank who continue as employees of F&M Bank or any affiliate after
the Effective Time, subject to (b) through (c) hereof, in substantially the
same employee welfare benefit plans on substantially the same terms and
conditions as F&M and the F&M affiliates offer to other similarly situated
employees. Until such time as such employees of Xxxxxxx Bank become covered
by the F&M group health, life and disability insurance benefit plans, they
shall remain covered by the corresponding Xxxxxxx Bank benefit plans, which
F&M and the F&M affiliates shall assume and maintain as successor employers
to the extent such plans are not terminated as of the Closing Date.
(b) From and after the Effective Time, those employees of Xxxxxxx Bank
who become employees of F&M Bank shall be enrolled as participants in the
F&M Bank 401(k) Plan and other benefit plans as adopted by F&M and/or F&M
Bank (collectively herein the "F&M Plans"), and shall receive credit, for
eligibility and vesting purposes, for the service of such employees with
Xxxxxxx Bank prior to the Effective Time as if such service were with F&M
Bank. Furthermore, if the Effective Date is not an "Entry Date" under the
F&M Plans, F&M will take reasonable efforts to amend such plans shall be
amended to provide a special entry date for Xxxxxxx Bank employees who
continue as employees of F&M Bank as of the Effective Time.
(c) Neither the terms of this Section nor the provision of any
employee benefits by F&M or any of the F&M affiliates to employees of
Xxxxxxx Bank or any of its affiliates shall: (i) create any employment
contract, agreement or understanding with or employment rights for, or
constitute a commitment or obligation of employment to, any
27
of the officers or employees of Xxxxxxx; or (ii) prohibit or restrict F&M
or the F&M affiliates, whether before or after the Effective Time, from
changing, amending or terminating any employee benefits provided to its
employees from time to time.
Section 5.9 FURTHER MATTERS. Neither F&M nor F&M Bank shall, without
the prior written consent of Xxxxxxx, engage in any transaction or take any
action that would render untrue in any material respect any of the
representations and warranties of F&M and F&M Bank contained in Article 3 hereof
if such representations and warranties were given as of the date of such
transaction or action. F&M shall promptly notify Xxxxxxx in writing of the
occurrence of any matter or event known to and involving F&M or any of its
subsidiaries that is materially adverse to the business, operations, properties,
assets, or condition (financial or otherwise) of F&M or its subsidiaries taken
as a whole.
ARTICLE 6. CONDITIONS PRECEDENT TO MERGERS
Section 6.1 CONDITIONS OF F&M'S AND F&M BANK'S OBLIGATIONS. F&M's and
F&M Bank's obligations to effect the Bank Merger shall be subject to the
satisfaction (or waiver by F&M or F&M Bank) prior to or on the Closing Date of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by Xxxxxxx and Xxxxxxx Bank in this Agreement shall be true
in all material respects on and as of the Closing Date with the same effect
as though such representations and warranties had been made or given on and
as of the Closing Date.
(b) COVENANTS PERFORMED. Xxxxxxx and Xxxxxxx Bank each shall have
performed and complied in all material respects with all of its obligations
and agreements required to be performed prior to the Closing Date under
this Agreement.
(c) NO ADVERSE ORDERS. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the Bank Merger shall be in effect, nor shall any
proceeding by any bank regulatory authority, governmental agency or other
person seeking any of the foregoing be pending. There shall not be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Bank Merger which makes the
consummation of the Bank Merger illegal.
(d) APPROVALS. All necessary regulatory and third party approvals,
consents, and authorizations required for consummation of this Agreement
and the Bank Merger shall have been obtained and all waiting periods
required by law shall have expired.
(e) ENVIRONMENTAL REPORTS, TITLE INSURANCE AND SURVEYS. F&M shall have
obtained the environmental reports permitted by Section 4.6 and Section
4.1(a)(xiii) hereof and shall not have elected, pursuant to Section 4.6 and
Section 7.3 hereof, to terminate and cancel this Agreement. In addition,
F&M shall have obtained the title commitments and surveys permitted by
Section 4.9 and shall not have elected to terminate and cancel this
Agreement pursuant to Sections 4.9 and 7.3.
(f) OTHER DOCUMENTS. F&M shall have received all documents required to
be received from Xxxxxxx and Xxxxxxx Bank on or prior to the Closing Date,
all in form and substance reasonably satisfactory to F&M.
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(g) FAIRNESS OPINION. Xxxxxxx shall have received the opinion of
Xxxxxxxxx & Associates, LLC or another qualified investment banking firm or
qualified financial expert to the effect that, as of the date of this
Agreement, the transaction set forth herein, including the Bank Merger, was
fair to Xxxxxxx and its shareholders from a financial point of view.
(h) NO MATERIAL ADVERSE CHANGE. There shall not have occurred a
Material Adverse Change to Xxxxxxx or Xxxxxxx Bank since December 31, 2006.
(i) F&M INSURANCE. F&M shall, at its option and expense, have obtained
a tail policy to the liability insurance indemnifying it and all of its
subsidiaries and affiliates from any and all liability which may result
from acts or omissions of Xxxxxxx'x or Xxxxxxx Bank's officers, directors,
employees and agents.
(j) 401(K) PLAN TERMINATION. F&M shall have received evidence that the
directors of Xxxxxxx Bank have adopted resolutions affecting the freezing
and the termination of the Xxxxxxx Bank 401(k) Plan effective as of the
business day preceding the Effective Time of the Bank Merger in accordance
with Section 4.13.
(k) EMPLOYMENT AGREEMENT. F&M Bank shall have entered into an
employment agreement with Xxxxxxx X. Xxxx in the form of Exhibit 5.6(b)
attached hereto, which agreement will specifically acknowledge the
termination of Xx. Xxxx'x RA.
(l) ACCOUNTING FOR SUPPLEMENTAL RETIREMENT AND SIMILAR ARRANGEMENTS.
Xxxxxx & Xxxxx LLP, the independent public accountants utilized by F&M,
shall have consulted with BKD, LLP, the independent public accountants
utilized by Xxxxxxx, and after such consultation, shall have confirmed to
F&M its opinion that all of the agreements and arrangements disclosed in
Section 2.9 of the Disclosure Schedule have been properly accounted and
accrued for in the Xxxxxxx Financial Statements, including giving effect to
FASB EITF 06-04 as of the date of Closing, whether or not such is then
required by GAAP.
Section 6.2 CONDITIONS OF XXXXXXX'X AND XXXXXXX BANK'S OBLIGATIONS.
Xxxxxxx'x and Xxxxxxx Bank's obligations to effect the Bank Merger shall be
subject to the satisfaction (or waiver by Xxxxxxx or Xxxxxxx Bank) prior to or
on the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by F&M and F&M Bank in this Agreement shall be true in all
material respects on and as of the Closing Date with the same effect as
though such representations and warranties had been made or given on and as
of the Closing Date.
(b) COVENANTS PERFORMED. F&M and F&M Bank each shall have performed
and complied in all material respects with all of its obligations and
agreements required to be performed prior to the Closing Date under this
Agreement.
(c) NO ADVERSE ORDERS. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the Bank Merger shall be in effect, nor shall any
proceeding by any bank regulatory authority, other governmental agency or
other person seeking any of the foregoing be pending. There shall not be
any
29
action taken, or any statute, rule, regulation or order enacted, enforced
or deemed applicable to the Bank Merger which makes the consummation of the
Bank Merger illegal.
(d) APPROVALS. All necessary regulatory and third party approvals,
consents, and authorizations required for consummation of the Bank Merger,
including the requisite approval of this Agreement and the Bank Merger by
the shareholders of Xxxxxxx, shall have been obtained and all waiting
periods required by law shall have expired.
(e) OTHER DOCUMENTS. Xxxxxxx shall have received all documents
required to be received from F&M on or prior to the Closing Date, all in
form and substance reasonably satisfactory to Xxxxxxx.
(f) FAIRNESS OPINION. Xxxxxxx shall have received an opinion of
Xxxxxxxxx & Associates, LLC or another qualified investment banking firm or
qualified financial expert to the effect that, as of the date of the
mailing of the proxy statement to the Xxxxxxx shareholders, the Bank Merger
was fair to the shareholders of Xxxxxxx from a financial point of view.
(g) TAX OPINION. Xxxxxxx shall have received an opinion of BKD, LLP or
another qualified professional accounting firm or tax expert selected by
Xxxxxxx to the effect that the Merger will be treated as an asset purchase
transaction for federal and state income tax purposes.
(h) D&O INSURANCE. F&M and/or Xxxxxxx (as the case may be) shall have
in place the director and officer liability insurance contemplated by
Section 5.4.
ARTICLE 7. TERMINATION OR ABANDONMENT
Section 7.1 MUTUAL AGREEMENT. This Agreement may be terminated by the
mutual written agreement of the parties at any time prior to the Closing Date,
regardless of whether shareholder approval of this Agreement and the Bank Merger
by the shareholders of Xxxxxxx shall have been previously obtained.
Section 7.2 BREACH OF REPRESENTATIONS OR AGREEMENTS. In the event that
there is a material breach of any of the representations, warranties or
agreements of F&M, F&M Bank, Xxxxxxx or Xxxxxxx Bank which breach cannot be
cured or is not cured within thirty (30) days after written notice to cure such
breach is given by the non-breaching party, then the non-breaching party,
regardless of whether shareholder approval of this Agreement and the Bank Merger
shall have been previously obtained, may terminate and cancel this Agreement by
providing written notice thereof within ten (10) days after such date or after
such thirty (30) day cure period has expired, as applicable.
Section 7.3 ENVIRONMENTAL REPORTS, TITLE INSURANCE AND SURVEYS. F&M
and F&M Bank may terminate this Agreement to the extent provided by Section 4.6
or 4.9 by giving written notice thereof to Xxxxxxx.
Section 7.4 FAILURE OF CONDITIONS. In the event any of the conditions
to the obligations of either party are not satisfied or waived on or prior to
the Closing Date, then such party may, regardless of whether shareholder
approval of this Agreement and the Bank Merger shall have been previously
obtained, terminate and cancel this Agreement on the Closing Date by delivery of
written notice thereof to the other party on such date.
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Section 7.5 APPROVAL DENIED. If any regulatory application filed
pursuant to Section 4.5 or Section 5.1 hereof should be finally denied or
disapproved by the respective regulatory authority, then this Agreement
thereupon shall be deemed terminated and canceled. However, it is understood
that a request for additional information or undertaking by F&M, F&M Bank or
Xxxxxxx or Xxxxxxx Bank, as a condition for approval, shall not be deemed to be
a denial or disapproval so long as F&M or F&M Bank or Xxxxxxx or Xxxxxxx Bank
diligently provides the requested information or, in its sole discretion,
accepts such undertaking. In the event an application is denied subject to the
right of an appeal, petition for review, or similar such act on the part of F&M,
F&M Bank or Xxxxxxx (hereinafter referred to as the "APPEAL"), then the
application will be deemed denied unless F&M, F&M Bank or Xxxxxxx promptly and
diligently prepares and files such Appeal and continues the appellate process
for purposes of obtaining the necessary approval.
Section 7.6 SHAREHOLDER APPROVAL DENIAL. If this Agreement and
consummation of the Bank Merger is not approved by the shareholders of Xxxxxxx
at the Shareholders' Meeting, then either party may terminate this Agreement by
giving written notice thereof to the other party.
Section 7.7 LAPSE OF TIME. If the Closing Date does not occur on or
prior to March 31, 2008, then this Agreement may be terminated by either party
by giving written notice thereof to the other party.
Section 7.8 FAILURE TO RECOMMEND. By F&M and F&M Bank if (a) upon the
mailing of the proxy statement to the Xxxxxxx shareholders, the Board of
Directors of Xxxxxxx shall not have recommended adoption and approval of this
Agreement to its shareholders, or (b) at any time prior to the receipt of the
approval of the Xxxxxxx shareholders, Xxxxxxx'x Board of Directors shall have
withdrawn such recommendation or modified or changed such recommendation in a
manner adverse to the interests of F&M or F&M Bank (whether in accordance with
Section 4.3 or otherwise).
Section 7.9 ACCEPTANCE OF SUPERIOR PROPOSAL. By Xxxxxxx, if, without
breaching Section 4.9, Xxxxxxx shall enter into a definitive agreement with a
third party providing for an Acquisition Proposal on terms determined in good
faith by the Xxxxxxx Board, after consulting with and considering the advice of
Xxxxxxx'x outside counsel and financial advisor, to constitute a Superior
Proposal; provided, that the right to terminate this Agreement under this
Section shall not be available to Xxxxxxx unless it delivers to F&M and F&M Bank
(a) written notice of Xxxxxxx'x intention to terminate at least five (5) days
prior to termination and (b) simultaneously with such termination, the Fee
referred to in Section 7.11. For purposes of this Section, "SUPERIOR PROPOSAL"
means an Acquisition Proposal made by a third party after the date hereof which,
in the good faith judgment of the Board of Directors of Xxxxxxx receiving the
Acquisition Proposal, taking into account the various legal, financial and
regulatory aspects of the proposal and the person making such proposal, (i) if
accepted, is significantly more likely than not to be consummated, and (ii) if
consummated, is reasonably likely to result in a materially more favorable
transaction than the Bank Merger for Xxxxxxx and its shareholders and other
relevant constituencies.
Section 7.10 EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Agreement and the abandonment of the Bank Merger pursuant to
this Article
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7, no party to this Agreement shall have any liability or further obligation to
any other party hereunder except as set forth in Section 7.11, 9.1 and 9.2.
Section 7.11 LIQUIDATED DAMAGES. If (a) F&M and F&M Bank terminate
this Agreement pursuant to Section 7.8, or (b) Xxxxxxx terminates this Agreement
pursuant to Section 7.9, then, within five (5) business days of such
termination, Xxxxxxx shall pay F&M by wire transfer in immediately available
funds, as agreed upon liquidated damages and not as a penalty and as the sole
and exclusive remedy, $500,000 (the "Xxxxxxx FEE"). If F&M and F&M Bank
unilaterally terminate this Agreement in a manner inconsistent with its rights
and for a reason not provided for in this Agreement, F&M shall, within five (5)
days of request therefore by Xxxxxxx, pay Xxxxxxx by wire transfer in
immediately available funds as agreed upon liquidated damages and not as a
penalty and as the sole and exclusive remedy, $500,000 (the "F&M Fee"). If this
Agreement is terminated solely by reason of the failure of Xxxxxxx to receive
shareholder approval of this Agreement and the Bank Merger, and if, and only if,
an Acquisition Proposal for Xxxxxxx was publicly announced (or otherwise
disseminated to the shareholders of Xxxxxxx), prior to the date that Xxxxxxx'x
shareholders voted against the adoption of this Agreement and the Bank Merger,
and if, within eighteen (18) months after the date of such termination, a Change
in Control of Xxxxxxx is consummated, then Xxxxxxx shall pay the Xxxxxxx Fee to
F&M by wire transfer in immediately available funds upon consummation of such
Change in Control. For purposes of this Section, a "CHANGE IN CONTROL" of
Xxxxxxx shall be deemed to have taken place if: (i) any person or entity,
including a "group" as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, other than Xxxxxxx or Xxxxxxx Bank is or becomes the beneficial
owner, directly or indirectly, of securities representing fifty percent (50%) or
more of the then-issued and outstanding common stock of Xxxxxxx or Xxxxxxx Bank
or the combined voting power of the then-outstanding securities of Xxxxxxx or
Xxxxxxx Bank, whether through a tender offer or otherwise; (ii) there occurs any
consolidation or merger in which Xxxxxxx or Xxxxxxx Bank is not the continuing
or surviving corporation (except for a merger in which the holders of Xxxxxxx or
Xxxxxxx Bank's common stock and/or other voting stock immediately prior to the
merger have the same proportionate ownership of common and/or other voting stock
of the surviving corporation immediately after the merger); (iii) there occurs
any consolidation or merger in which Xxxxxxx or Xxxxxxx Bank is the surviving
corporation but in which shares of its common and/or other voting stock would be
converted into cash or securities of any other corporation or other property or
if its shareholders own less than fifty percent (50%) of the outstanding common
stock immediately after the transaction; or (iv) there occurs any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of Xxxxxxx or Xxxxxxx
Bank. Notwithstanding the foregoing, no Fee shall be required to be paid if F&M
or Xxxxxxx terminates this Agreement solely because of the failure of Xxxxxxx to
obtain the shareholder approval of this Agreement and the actions and
transactions contemplated hereby do not occur solely as a result thereof.
ARTICLE 8. THE CLOSING OF THE BANK MERGER
Section 8.1 THE CLOSING. The closing of the Bank Merger (the
"CLOSING") shall take place at the corporate offices of F&M at 10:00 A.M. on the
Closing Date described in Section 8.2 of this Agreement.
Section 8.2 THE CLOSING DATE. The Closing shall take place on a date
selected by F&M and F&M Bank within thirty (30) days of the date when the final
condition contained in
32
Section 6.1 and Section 6.2 is satisfied or waived by the appropriate party or
on such other date as Xxxxxxx and F&M and F&M Bank may agree (the "CLOSING
DATE"). The Bank Merger shall become effective upon the later to occur of (a)
the filing of a Certificate of Merger with the Ohio Secretary of State and the
Indiana Secretary of State, or (b) the date specified in the Certificates of
Merger (the "EFFECTIVE TIME") on the Closing Date.
Section 8.3 ACTIONS AT CLOSING.
(a) At the Closing, Xxxxxxx and Xxxxxxx Bank shall deliver to F&M and
F&M Bank:
(i) a certificate or certificates signed by the Chief Executive
Officer of Xxxxxxx and Xxxxxxx Bank stating, to the best of his
knowledge and belief, after due inquiry, that (A) each of the
representations and warranties contained in Article 2 hereof is true
and correct in all material respects at the Effective Time with the
same force and effect as if such representations and warranties had
been made at the Effective Time, and (B) Xxxxxxx and Xxxxxxx Bank each
has performed and complied in all material respects, unless waived by
F&M and F&M Bank, with all of its obligations and agreements required
to be performed hereunder prior to the Effective Time;
(ii) certified copies of the resolutions of Xxxxxxx'x Board of
Directors and shareholders, approving and authorizing the execution of
this Agreement, the Bank Merger Agreement, and authorizing the
consummation of the Bank Merger;
(iii) certified copies of the resolutions of Xxxxxxx Bank's Board
of Directors and Xxxxxxx, as the sole shareholder of Xxxxxxx Bank,
approving and authorizing the execution of this Agreement and
authorizing the consummation of the Bank Merger;
(iv) a Certificate of the Indiana Secretary of State, dated a
recent date, stating that Xxxxxxx is validly existing and in good
standing;
(v) Certificates of the IDFI and the FDIC, dated recent dates,
relating to the valid existence and the FDIC insurance of deposits of
Xxxxxxx Bank; and
(vi) a Certificate of Merger executed by the proper parties
thereto reflecting the terms and provisions of this Agreement in
proper form for filing with the Secretaries of State of the States of
Ohio and Indiana in order to cause the Bank Merger to become effective
pursuant to the Ohio Banking Code and the Indiana Banking Code.
(b) At the Closing, F&M and F&M Bank shall deliver to Xxxxxxx:
(i) a Certificate signed by the Chief Executive Officer of F&M
and F&M Bank stating, to the best of his knowledge and belief, after
due inquiry, that (A) each of the representations and warranties
contained in Article 3 is true and correct in all material respects at
the Effective Time with the same force and effect as if such
representations and warranties had been made at the Effective Time and
(B) F&M and F&M Bank each has performed and complied in all material
respects, unless waived by Xxxxxxx, with all of its obligations and
agreements required to be performed hereunder prior to the Effective
Time;
33
(ii) certified copies of the resolutions of F&M's Board of
Directors authorizing the execution of this Agreement, the Bank Merger
Agreement, and the consummation of the Bank Merger;
(iii) certified copies of the resolutions of F&M Bank's Board of
Directors and F&M, as the sole shareholder of F&M Bank, authorizing
the execution of this Agreement and the consummation of the Bank
Merger;
(iv) a Certificate of Merger executed by the proper parties
thereto reflecting the terms and provisions of this Agreement in
proper form for filing with the Secretaries of State of the States of
Ohio and Indiana in order to cause the Bank Merger to become effective
pursuant to the Ohio Banking Code and the Indiana Banking Code.
(c) At and after the Closing, the parties and their representatives
shall execute and/or deliver to one another such other documents and
instruments and take such actions as shall be necessary or appropriate to
consummate the Mergers.
ARTICLE 9. GENERAL PROVISIONS
Section 9.1 CONFIDENTIAL INFORMATION. The parties acknowledge the
confidential and proprietary nature of "INFORMATION" (as hereinafter described)
which has heretofore been exchanged and which will be received from each other
hereunder and agree to hold and keep the same confidential. Such Information
will include any and all financial, technical, commercial, marketing, customer
or other information concerning the business, operations and affairs of a party
that may be provided to the other, irrespective of the form of the
communications, by such party's employees or agents. Such Information shall not
include information which is or becomes generally available to the public other
than as a result of a disclosure by a party or its representatives in violation
of this Agreement. The parties agree that the Information will be used solely
for the purposes contemplated by this Agreement and that such Information will
not be disclosed to any person other than employees and agents of a party who
are directly involved in evaluating the transaction contemplated herein. The
Information shall not be used in any way detrimental to a party, including use
directly or indirectly in the conduct of the party's business or any business or
enterprise in which such party may have an interest, now or in the future, and
whether or not now in competition with such other party.
Section 9.2 RETURN OF DOCUMENTS. Upon termination of this Agreement
without the Bank Merger becoming effective, each party shall deliver to the
other originals and all copies of all Information made available to such party
and will not retain any copies, extracts or other reproductions in whole or in
part of such Information.
Section 9.3 NOTICES. Any notice or other communication hereunder shall
be in writing and shall be deemed to have been given or made (a) on the date of
delivery, in the case of hand delivery, or (b) three (3) business days after
deposit in the United States Registered or Certified Mail, with mailing receipt
postmarked by the Postal Service to show date of mailing, postage prepaid, (c)
on the next business day after deposit with an overnight carrier guaranteeing
next day delivery, or (d) upon actual receipt if transmitted during business
hours by fax (but only if receipt of a legible copy of such transmission is
confirmed by the recipient); addressed (in any case) as follows:
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IF TO F&M OR F&M BANK: WITH A COPY TO:
Farmers & Merchants Bancorp, Inc. Xxxxxxxx, Loop & Xxxxxxxx, LLP
The Farmers & Merchants State Bank 0000 Xxxxxxx Xxxxxx
000 X. Xxxxxxxx Xxxxxx Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000 Xxxxxx, Xxxx 00000-0000
Attn: Xxxx X. Sibenmorgen, Attn: Xxxxxx X. Xxxxx, Esq.
President and Chief Executive Officer Fax: (000) 000-0000
Fax: (000) 000-0000
and
IF TO XXXXXXX OR XXXXXXX BANK: WITH A COPY TO:
Xxxxxxx Financial Corp Beers Mallers Backs & Salin, LLP
Xxxxxxx Bank 000 Xxxx Xxxxx Xxxxxx
000 Xxxxxxxxxx Xx. Xxxx Xxxxx, Xxxxxxx 00000
Xxxxxx, Xxxxxxx 00000 Attn: Xxxxxxx X. Xxxxx, Esq.
Attn: Xxxx X. Xxxxxx, Chairman Fax: (000) 000-0000
Email: xxxxxxx@xxxxxxxxx.xxx
or to such other address as any party may from time to time designate by notice
to the other.
Section 9.4 SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. The
representations, warranties, agreements, and covenants contained in this
Agreement shall survive the Effective Time, for a period of three (3) years.
Section 9.5 ENTIRE AGREEMENT. This Agreement, the Disclosure Schedule
and the other attached Exhibits and Schedules, including Confidential Schedule
4.1, constitutes the entire agreement between the parties and supersedes and
cancels any and all prior discussions, negotiations, undertakings and agreements
between the parties relating to the subject matter hereof.
Section 9.6 HEADINGS AND CAPTIONS. The captions of Articles, Sections
and subsections hereof are for convenience only and shall not control or affect
the meaning or construction of any of the provisions of this Agreement.
Section 9.7 WAIVER, AMENDMENT OR MODIFICATION. The conditions of this
Agreement which may be waived may only be waived by written notice to the other
party waiving such condition. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
at later time to enforce the same. This Agreement may not be amended or modified
except by a written document duly executed by the parties hereto.
Section 9.8 RULES OF CONSTRUCTION. Unless the context otherwise
requires (a) a term used herein has the meaning assigned to it, and (b) an
accounting term not otherwise defined has the meaning assigned to it in
accordance with generally accepted accounting principles.
35
Section 9.9 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
shall be deemed one and the same instrument.
Section 9.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. There shall be no third party beneficiaries hereof. This
Agreement may not be assigned by either of the parties hereto.
Section 9.11 GOVERNING LAW; ASSIGNMENT. This Agreement shall be
governed by the laws of the State of Ohio without respect to conflicts of laws
principles.
Section 9.12 NO THIRD PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any person other than the parties hereto and
their respective successors and permitted assigns, and in no event shall any
employee of Xxxxxxx or Xxxxxxx Bank have any individual rights under this
Agreement.
[SIGNATURES ON THE FOLLOWING PAGE]
36
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
FARMERS & MERCHANTS BANCORP, INC.
By: /s/ Xxxx X. Xxxxxxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxxxxxx
----------------------------------
Title: President & CEO
---------------------------------
THE FARMERS & MERCHANTS STATE BANK
By: /s/ Xxxx X. Xxxxxxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxxxxxx
----------------------------------
Title: President & CEO
---------------------------------
XXXXXXX FINANCIAL CORP
By: /s/ Xxxx X. Xxxxxx
------------------------------------
Name: Xxxx X. Xxxxxx
----------------------------------
Title: Chairman
---------------------------------
AND
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
----------------------------------
Title: Secretary
---------------------------------
XXXXXXX BANK
By: /s/ Xxxxxxx X. Xxxx
------------------------------------
Name: Xxxxxxx X. Xxxx
----------------------------------
Title: President
---------------------------------
37
APPENDIX A
MERGER AGREEMENT
BETWEEN
THE FARMERS & MERCHANTS STATE BANK
(AN OHIO STATE-CHARTERED COMMERCIAL BANK)
AND
XXXXXXX BANK
(AN INDIANA STATE-CHARTERED COMMERCIAL BANK)
SEPTEMBER ____, 2007
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "AGREEMENT") dated as of September ___, 2007,
is entered into by and between THE FARMERS AND MERCHANTS STATE BANK ("F&M
BANK"), an Ohio State-Chartered Commercial Bank and wholly-owned subsidiary of
Farmers & Merchants Bancorp, Inc., an Ohio corporation ("F&M"), and XXXXXXX BANK
("XXXXXXX BANK"), an Indiana state-chartered commercial bank and wholly-owned
subsidiary of XXXXXXX FINANCIAL CORPORATION, an Indiana corporation ("XXXXXXX").
WITNESSETH:
WHEREAS, F&M, Xxxxxxx, F&M Bank and Xxxxxxx Bank have entered into an
Agreement of Merger and Plan of Reorganization dated as of September 7, 2007
(the "AGREEMENT OF MERGER") providing for the merger (the "MERGER") of Xxxxxxx
Bank with and into F&M Bank pursuant to the provisions of the Ohio Banking Code
( the "OBC"), the Indiana Banking Code (the "IBC") and the additional provisions
of applicable state and federal law; and
WHEREAS, the Boards of Directors of F&M Bank and Xxxxxxx Bank have each
adopted resolutions approving this Agreement and the Boards of Directors of F&M
Bank and Xxxxxxx Bank have directed that this Agreement and the Merger
contemplated hereby be submitted to the sole shareholders of F&M Bank and
Xxxxxxx Bank for adoption and approval;
NOW, THEREFORE, the parties hereto, in consideration of amounts to be paid
pursuant to the Agreement of Merger and subject to the terms and conditions of
the Agreement of Merger, agree as follows:
ARTICLE 2. BANK MERGER
Section 2.1 EFFECTIVE TIME OF MERGER. Effective as of the Effective Time,
as defined in the Agreement of Merger (the "EFFECTIVE TIME OF THE MERGER"),
Xxxxxxx Bank shall be merged with and into F&M Bank, and F&M Bank shall be the
surviving institution (the "SURVIVING INSTITUTION").
ARTICLE 3. ARTICLES, CODE OF REGULATIONS, ETC.
Section 3.1 ARTICLES OF INCORPORATION.Section 3.2 At the Effective Time of
the Merger, the Articles of Incorporation of F&M Bank in effect immediately
prior to the Effective Time shall continue to be the Articles of Incorporation
of the Surviving Institution.
Section 3.3 CODE OF REGULATIONS.Section 3.4 At the Effective Time of the
Merger, the Code of Regulations of F&M Bank in effect immediately prior to the
Effective Time of the Merger shall continue to be the Code of Regulations of the
Surviving Institution.
Section 3.5 DIRECTORS AND OFFICERS.Section 3.6 At the Effective Time of the
Merger, the directors of F&M Bank then holding office shall continue to be the
directors of the Surviving Institution, which directors and their residence
addresses are listed on EXHIBIT A attached hereto, and the officers of F&M Bank
then holding office shall continue to be the officers of the Surviving
Institution, in each case subject to the Surviving Institution's Articles of
Incorporation and Code of Regulations and applicable law as to the term and
removal of directors and officers.
MERGER AGREEMENT PAGE 1
Section 3.7 HOME OFFICE.Section 3.8 The home office of F&M Bank located at
000 X. Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxx 00000 shall continue to be the home
office of the Surviving Institution at the Effective Time of the Merger and all
of the branch offices of F&M Bank immediately prior to the Merger shall continue
to be branch offices of the Surviving Institution at the Effective Time of the
Merger. The home office and branch offices of Xxxxxxx Bank immediately prior to
the Merger shall become branch offices of the Surviving Institution at the
Effective Time of the Merger; provided that the branch office of Xxxxxxx Bank
located at 000 Xxxxxxxxxx Xxxxxx, Xx. Xxx, Xxxxxxx 00000 shall not open as a
branch office of the Surviving Bank, but shall be closed in connection with the
Merger. Xxxxxxx and Xxxxxxx Bank shall cooperate fully with F&M and F&M Bank to
allow for such branch closing as of the Effective Time, including posting
appropriate notices at such branch and mailing appropriate notices to the
customers of such branch. Such notices may note that the closing of the St. Xxx
xxxxxx is contingent upon consummation of the Merger transaction.
ARTICLE 4. MANNER OF CONVERTING AND EXCHANGING XXXXXXX BANK STOCK
Section 4.1 CONVERTING AND EXCHANGING SHARES. Subject to the provisions of
this Article 4, the manner of converting and exchanging the outstanding common
shares of F&M Bank and Xxxxxxx Bank at the Effective Time of the Merger shall be
as follows:
(a) Each of the shares of common stock, $500 par value per share
of F&M Bank ("F&M BANK COMMON STOCK"), outstanding immediately prior
to the Effective Time of the Merger shall remain outstanding
immediately after the Effective Time of the Merger.
(b) Each of the 4,000 shares of the common stock, $1.00 par value
per share, of Xxxxxxx Bank (the "XXXXXXX BANK COMMON STOCK")
outstanding immediately prior to the Effective Time of the Merger
shall, at the Effective Time of the Merger, be cancelled without
consideration therefore, other than the Merger Consideration to be
paid to Xxxxxxx pursuant to the terms and conditions of the Agreement
of Merger.
Section 4.2 TRANSFER OF SHARES. After the Effective Time of the Merger,
there shall be no transfers on the stock transfer books of Xxxxxxx Bank or the
Surviving Institution of any shares of Xxxxxxx Bank Common Stock.
ARTICLE 5. MISCELLANEOUS
Section 5.1 EFFECT OF MERGER. From and after the Effective Time of the
Merger, the Surviving Institution shall have all of the rights, privileges,
powers, immunities and franchises (public and private) of each of the
constituent corporations, and all property (real, personal, and mixed), all
debts due on whatever account, and all other choses in action, of each of the
constituent corporations. All interests of or belonging to or due to either of
the constituent corporations shall thereupon be deemed to be transferred to and
vested in the Surviving Institution without act or deed and no title to any real
estate or any interest therein vested in either of the constituent corporations
shall revert or be in any way impaired because of the Merger.
Section 5.2 OBLIGATIONS OF SURVIVING INSTITUTION. From and after the
Effective Time of the Merger, the Surviving Institution shall be responsible for
all obligations of each of the constituent corporations and each claim existing
and each action or proceeding pending by or
MERGER AGREEMENT PAGE 2
against either of the constituent corporations may be prosecuted as if the
Merger had not taken place, and the Surviving Institution may be substituted in
the place of such constituent corporation. No right of any creditor of either
constituent corporation and no lien upon the property of either constituent
corporation shall be impaired by the Merger.
Section 5.3 FURTHER DOCUMENTS. If at any time the Surviving Institution
shall consider or be advised that any further assignments, conveyances or
assurances in law are necessary or desirable to vest, perfect or confirm of
record in the Surviving Institution the title to any property or rights of the
constituent corporations, or otherwise to carry out the provisions hereof, the
persons who were the proper officers and directors of the constituent
corporations immediately prior to the Effective Time of the Merger (or their
successors in office) shall execute and deliver any and all proper deeds,
assignments and assurances in law, and do all things necessary or proper, to
vest, perfect or confirm title to such property or rights in the Surviving
Institution and otherwise to carry out the provisions hereof.
Section 5.4 EFFECT OF TERMINATION. In the event that this Agreement is
terminated pursuant to Article 7 of the Agreement of Merger, the Merger provided
for herein shall be abandoned automatically and without any further act or deed
by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
effective as of the day and year first written above.
THE FARMERS & MERCHANTS STATE BANK XXXXXXX BANK
By: By:
--------------------------------- ------------------------------------
Printed: Printed:
---------------------------- -------------------------------
Title: Title:
------------------------------ ---------------------------------
MERGER AGREEMENT PAGE 3
EXHIBIT A
NAMES AND RESIDENCE ADDRESSES OF DIRECTORS OF
THE FARMERS & MERCHANTS STATE BANK
AS THE SURVIVING BANK OF THE BANK MERGER
Xxxxxx Xxxxxxx
00-000 Xxxxxx Xx X
Xxxxxxxxxx Xxxxxxx, XX 00000
Xxx X. Xxxxxxxxxx
000 Xxxxxxx Xx.
Xxxxxxxx, XX 00000
Xxxxxx X. Xxxxxxxx
0000 Xxxx Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
Xxxxxx X. Xxxx
000 Xxxxx Xxx
Xxxxxxxx, XX 00000
Xxxx X. Xxxxxx
00 Xxx Xxx
Xxxxxxxx, XX 00000
Xxxxxxx X. Xxxx
00 Xxxxxx Xxx.
Xxxxxxxx, XX 00000
Xxxxx X. Xxxx, Xx.
X.X. Xxx 000
Xxxxxxxx, XX 00000
Xxxxx X. Xxxxxx
00000 Xx. Xx. XX
Xxxxxxxx, XX 00000
Xxxxx Xxxxxxxxx
000 X. Xxxx
Xxxxxxxxxx, XX 00000
Xxxxx Xxxxx
000 Xxxxxx Xxxx
Xxxxxxxx, XX 00000
Xxxx X. Xxxxxxxxxxxx
000 Xxxxx Xxx
Xxxxxxxx, XX 00000
Xxxxx Xxxxx
000 Xxx Xxxxx Xx.
Xxxxxxxx, XX 00000
Xxxxxx X. Xxxx
00 Xxx Xxx
Xxxxxxxx, XX 00000
MERGER AGREEMENT PAGE 4
EXHIBIT 4.1
CONFIDENTIAL
RETAINED LOAN
EXHIBIT 4.1 PAGE 1
EXHIBIT 4.3
AGREEMENT OF DIRECTORS OF
XXXXXXX FINANCIAL CORPORATION AND XXXXXXX BANK
CONCERNING AGREEMENT OF MERGER
Each of the undersigned, being all of the Directors of Xxxxxxx Financial
Corp ("XXXXXXX") and Xxxxxxx Bank ("Xxxxxxx Bank"), having voted as such
Director for the approval and adoption by Xxxxxxx and Xxxxxxx Bank of that
certain Agreement of Merger and Plan of Reorganization ("AGREEMENT OF MERGER")
among Xxxxxxx, Xxxxxxx Bank, Farmers & Merchants Bancorp, Inc. ("F&M"), and The
Farmers & Merchants State Bank ("F&M BANK"), and whereby F&M Bank will acquire
all of the issued and outstanding shares of capital stock of Xxxxxxx Bank for
aggregate Merger Consideration of $10,200,000 pursuant to a statutory merger
(the "BANK MERGER"), in consideration of the benefits to be derived from the
consummation of the Bank Merger and in consideration of the mutual agreements
made herein, and in order to induce F&M and F&M Bank to execute and deliver the
Agreement of Merger to Xxxxxxx and Xxxxxxx Bank and to proceed with the
consummation of the Bank Merger and to incur the expenses required in connection
therewith, hereby represents that he/she is not aware of any fact or
circumstance that would make any of the representations or warranties of Xxxxxxx
or Xxxxxxx Bank contained in the Agreement of Merger incorrect in any material
respect and hereby irrevocably covenants and agrees with one another and with
each of the parties to such Agreement of Merger that the undersigned, until such
time as the Bank Merger has been consummated or the Agreement of Merger has been
duly terminated in accordance with the provisions thereof:
(a) will support the consummation of the Bank Merger and, subject to
fulfilling their fiduciary duties as defined in the Agreement of Merger,
will recommend the Agreement of Merger and the Bank Merger for approval and
adoption by the shareholders of Xxxxxxx, and will, as a member of the Board
of Directors of Xxxxxxx, cause Xxxxxxx to vote all shares of Xxxxxxx Bank
in favor of the Bank Merger;
(b) will vote all shares of common stock of Xxxxxxx ("XXXXXXX SHARES")
now or hereafter beneficially owned by him or her, in person or by proxy,
at any meeting of the shareholders of Xxxxxxx or adjournments thereof, in
favor of the approval and adoption of the Agreement of Merger; and
(c) will not transfer any shares of Xxxxxxx Shares, or any right or
option with respect thereto or any interest therein, without first
obtaining from the transferee thereof and furnishing to F&M and F&M Bank a
written agreement of such transferee accepting the applicability of the
agreements herein made and in form and substance acceptable to F&M and F&M
Bank.
The undersigned represents and warrants that he or she (except to the
extent indicated below) is the sole record and beneficial owner of (and has sole
rights to vote and to dispose of) the number of shares of Xxxxxxx Shares
indicated beside his or her signature below.
The undersigned each hereby agrees that, for one (1) year following the
Closing Date, he/she shall not, directly or indirectly, on behalf of themselves
or of anyone other than F&M or
EXHIBIT 4.3 PAGE 1
its affiliates, solicit or attempt to solicit any client or customer of F&M or
any of its affiliates for the purpose of inducing such client or customer to
cease, reduce, restrict or divert its business with F&M or any of its
affiliates. Each of the undersigned hereby agrees to exercise their best efforts
to prevent any of the activities listed in this paragraph from occurring.
The undersigned each hereby agrees that, for one (1) year following the
Closing Date, he/she shall not, without the prior written consent of the Chief
Executive Officer of F&M, which consent may be withheld at the sole discretion
of the Chief Executive Officer of F&M at any time, engage or participate in, as
an officer, director, owner, partner, joint venturer, or in a managerial
capacity as an executive employee, independent contractor, or advisor in any
business or enterprise that competes with F&M or any affiliate in an area within
25 miles of any then existing office of F&M or F&M Bank or any affiliate (the
"Restricted Area"), in any Banking Activities. For purposes of this paragraph,
the term "Banking Activities" shall be the banking activities conducted by F&M
and its affiliates, which include commercial, small business, and retail
lending, deposit gathering and general banking services. Nothing in this
paragraph shall prohibit any of the undersigned from continuing to hold any
interest in other financial institutions that the undersigned owned as of the
date hereof or acquiring or holding, for investment purposes only, less than one
percent (1%) of the outstanding securities of any corporation that files
periodic reports pursuant to the Securities Exchange Act of 1934 and that may
compete directly or indirectly with F&M or its affiliates.
Each of the undersigned acknowledges that F&M has purchased through the
Agreement of Merger the trade secrets, confidential information, customer
relationships and other goodwill of Xxxxxxx and Xxxxxxx Bank and that F&M has a
legitimate business interest in protecting those items and the benefits of its
purchase. Each of the undersigned further acknowledges that F&M has a current
and future expectation of business within the geographic areas served by Xxxxxxx
and Xxxxxxx Bank and encompassing the Restricted Area and from the current and
proposed customers of Xxxxxxx and Xxxxxxx Bank and/or F&M and/or their
affiliates and that this Agreement is a reasonable means of protecting the
benefits of F&M's purchase and its other legitimate business interests,
including its trade secrets, confidential information, customer relationships
and other goodwill. Each of the undersigned acknowledges that the term,
geographic area and scope of the covenants set forth in this Agreement are
reasonable, and agrees that the undersigned will not, in any action, suit or
other proceeding, deny the reasonableness of, or assert the unreasonableness of,
the premises, consideration or scope of the covenants set forth herein. Each of
the undersigned agrees that any breach of the covenants contained in this
Agreement will result in irreparable damage to F&M and its affiliates and that
F&M will be entitled to injunctive relief in any court of competent jurisdiction
without the necessity of posting any bond. Each of the undersigned also agrees
that he/she shall be responsible for any damages incurred by F&M or any of its
affiliates due to any breach by him or her of the covenants contained in this
Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meanings given to them in the Agreement of Merger. This Agreement shall
constitute an irrevocable agreement of each of the undersigned, and may be
revoked only upon the mutual agreement of the parties. The agreements contained
in this Agreement will terminate upon any termination of the Agreement of Merger
under Section 7 of the Agreement of Merger.
EXHIBIT 4.3 PAGE 2
This Agreement may be executed in one or more counterparts, each of which
shall constitute one and the same agreement.
EXECUTED AND DELIVERED as of September 7, 2007.
_____________________________________ (__________ SHARES)
_____________________________________
_____________________________________ (__________ SHARES)
_____________________________________
_____________________________________ (__________ SHARES)
_____________________________________
_____________________________________ (__________ SHARES)
_____________________________________
_____________________________________ (__________ SHARES)
_____________________________________
_____________________________________ (__________ SHARES)
_____________________________________
_____________________________________ (__________ SHARES)
_____________________________________
_____________________________________ (__________ SHARES)
_____________________________________
_____________________________________ (__________ SHARES)
_____________________________________
_____________________________________ (__________ SHARES)
_____________________________________
EXHIBIT 4.3 PAGE 3
EXHIBIT 5.6
TERMINATION AND RELEASE AGREEMENT
THIS TERMINATION AND RELEASE AGREEMENT (the "AGREEMENT") is made and
entered into by and between THE FARMERS & MERCHANTS STATE BANK ("F&M BANK") and
________________________________ ("EMPLOYEE") (collectively, the "PARTIES").
The Parties agree as follows:
1. F&M Bank, for itself and its predecessor, Xxxxxxx Bank ("XXXXXXX BANK"),
has made a determination not to retain Employee after ________________, 2007.
2. In consideration of the agreements and promises made by Employee in this
Agreement, F&M Bank shall pay to Employee the sum of $ ___________________, less
usual and customary withholding and deductions. F&M Bank shall have no other
continued liability to Employee for any compensation, bonuses, or benefits of
employment, other than any benefits which accrued and became vested on or before
the effective date of Employee's termination, under any employee medical or
dental benefit plan of F&M Bank or Xxxxxxx Bank, or any employee pension benefit
plan of F&M Bank or Xxxxxxx Bank, but which, under the applicable plan document,
are not payable until after such effective date.
3. Employee specifically agrees that F&M Bank has complied with all of its
notification requirements under COBRA, and F&M Bank confirms Employee may elect
COBRA continuation coverage by timely returning the appropriate election form
and making the necessary premium payment.
4. In consideration of the agreements and promises made by F&M Bank in this
Agreement, Employee hereby RELEASES AND FOREVER DISCHARGES F&M Bank and its
affiliates, and their respective owners, officers, directors, agents, attorneys,
and employees, from any and all claims, demands, liabilities, actions, or causes
of action which Employee had, has, or may have on account of, arising out of, or
related to: (a) Employee's employment with F&M Bank or Xxxxxxx Bank or the
termination of Employee's employment, including, without limitation, any and all
claims, demands, liabilities, actions, or causes of action arising under the
federal Fair Labor Standards Act of 1938, the federal Civil Rights Act of 1964,
the federal Age Discrimination in Employment Act of 1967, the federal Americans
with Disabilities Act of 1990, the common law of the States of Ohio and Indiana,
the laws of the States of Ohio and Indiana governing employment discrimination
and civil rights, any and all other statutes of the States of Ohio and Indiana,
and any and all other federal, state, or local laws; and (b) all other matters
occurring prior to the date of this Agreement.
5. This Agreement is made and entered into solely for the purpose of
terminating Employee's employment with F&M Bank on an amicable and certain basis
and does not in any way constitute, and shall not be construed to constitute, an
admission of liability of any sort on the part of either of the Parties.
6. Employee recognizes and agrees that all non-public information,
documents and records relating to the business of F&M Bank and its affiliates
(the "CONFIDENTIAL INFORMATION") and all other information and property of F&M
Bank and its affiliates, whether or not constituting Confidential Information,
which are obtained, received or created by the Employee is and shall remain the
sole and exclusive property of F&M Bank, shall be held by the
EXHIBIT 5.6 PAGE 1
Employee subject to the custody and control of F&M Bank, and shall be delivered
and surrendered by the Employee to F&M Bank immediately upon termination of the
Employee's employment.
7. Employee agrees and promises that the Employee will not at any time,
whether during Employee's employment by F&M Bank or at any time thereafter,
directly or indirectly, disclose or use, on the Employee's own behalf or on
behalf of any third party, any Confidential Information of F&M Bank or any of
its affiliates.
8. Employee promises and agrees that Employee will not at any time, whether
during the Employee's employment with F&M Bank or at any time thereafter, make
false, disparaging or uncomplimentary remarks about F&M Bank or its employees or
affiliates.
9. Each of the agreements and promises contained in this Agreement shall be
binding upon, and shall inure to the benefit of, the heirs, executors,
administrators, agents, and successors in interest to each of the Parties.
10. This Agreement represents the entire agreement between the Parties, and
fully supersedes any and all prior agreements or understandings between the
Parties pertaining to the subject matter of this Agreement.
11. Each provision and covenant of this Agreement is severable. If any
court or other governmental body of competent jurisdiction shall conclude that
any provision or individual covenant of this Agreement is invalid or
unenforceable, such provision or individual covenant shall be deemed ineffective
to the extent of such unenforceability without invalidating the remaining
provisions and covenants of this Agreement.
12. This Agreement shall be interpreted in accordance with the laws of the
State of Ohio without regard to conflict of law principles.
13. Employee expressly agrees and acknowledges as follows: (1) that
Employee understands the terms and conditions of this Agreement; (2) that
Employee has knowingly and voluntarily entered into this Agreement; (3) that
Employee has been advised in writing to consult an attorney in connection with
reviewing and entering into this Agreement; (4) that Employee has been advised
in writing that Employee may take as long as 21 days to review and consider this
Agreement before signing it; (5) and that this Agreement, when signed by F&M
Bank and Employee, shall be legally binding upon the Parties, as well as upon
their heirs, assigns, executors, administrators, agents, and successors in
interest.
14. Employee may revoke this Agreement by giving written notice to F&M Bank
of such revocation at any time prior to 7 days following the date this Agreement
is signed by the Parties, and this Agreement shall not become effective or
enforceable until the end of such seven day revocation period.
EXHIBIT 5.6 PAGE 2
IN WITNESS WHEREFORE, intending to be legally bound to each and all of the
terms of this Termination and Release Agreement, the Parties hereby execute this
Agreement this ____ day of ___________, 200__.
CAUTION: THE FARMERS & MERCHANTS STATE BANK
READ BEFORE SIGNING
------------------------------------- By:
"Employee" ------------------------------------
Its:
-----------------------------------
EXHIBIT 5.6 PAGE 3
EXHIBIT 5.6(B)
EMPLOYMENT AGREEMENT OF XXXXXXX X. XXXX
EMPLOYMENT AGREEMENT
This Agreement is made this ____ day of________, 200__, by and between The
Farmers & Merchants State Bank (the "Bank"), and Xxxxxxx X. Xxxx (the
"Executive").
WHEREAS, the Bank believes that the future services of the Executive in a
senior executive capacity will be of great value to the Bank;
WHEREAS, the Executive is willing to accept, subject to the terms hereof,
employment with the Bank on a full-time basis for the term of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein set forth, the parties hereto have agreed and do hereby mutually agree as
follows:
1. Term -- Agreement to Serve
The Bank hereby employs the services of Executive commencing as of the date
first written above and ending one year thereafter, which term may be
extended as provided below (the "Employment Term"), subject to the rights
of earlier termination hereinafter set forth, to perform the duties of
Senior Vice President. The Executive hereby accepts such employment in
consideration of the compensation and the other terms and conditions herein
provided, and agrees to serve the Bank well and faithfully and to devote
his best efforts to such employment as long as it shall continue hereunder.
During the period of such employment, the Executive will devote all of his
time and attention -- reasonable vacations, periods of illness and the like
excepted -- to the affairs of the Bank.
2. Base Salary and Supplemental Benefits
As compensation for the services hereunder, the Bank will pay to Executive,
in installments and on dates in accordance with its normal payroll, during
the period of his employment hereunder, a salary at the aggregate rate of
[________________] ($_________) per year ("Base Pay").
In addition the Executive will be eligible to participate in all other
health and welfare benefit plans, incentive compensation and bonus programs
of the Bank as are provided to other senior vice presidents of the Bank in
accordance with the terms of such plans. Executive shall be provided with
four (4) weeks paid vacation annually.
3. Termination of Employment
The employment of the Executive under the terms of this Agreement shall
cease and terminate upon the occurrence of any of the following events.
EXHIBIT 5.6(b) PAGE 1
(a) Expiration of Term
On the last day of the Employment Term. In the event of a termination
pursuant to this subparagraph, the Executive shall be entitled to receive
the amount of Base Pay provided for in paragraph 2 hereof through the last
day of the Employment Term.
(b) Death
On the date of Executive's death. In the event of the termination of
employment by reason of death, Executive shall be entitled to receive the
amount of Base Pay provided for in paragraph 2 hereof through the date of
death.
(c) Termination by the Bank with Cause
For Cause at any time by the Bank. For purposes hereof, the term
"Cause" shall mean: (i) removal by order of a regulatory agency having
jurisdiction over the Bank or the Bank, (ii) dishonesty; (iii)
misappropriation of Bank or customer property, (iv) commission of a felony
or crime of moral turpitude, or (v) the Executive's willful and repeated
failure to perform his duties under this Employment Agreement, which
failure has not been cured within thirty (30) days after the Bank gives
notice thereof to the Executive; it being expressly understood that
negligence or bad judgment shall not constitute "Cause" so long as such
negligent act or omission shall be without intent of personal profit and is
reasonably believed by the Executive to be in or not adverse to the best
interests of the Bank. In the event of a termination for Cause pursuant to
this subparagraph the Executive shall be entitled to receive the amount of
Base Pay provided for in paragraph 2 hereof through the date of termination
of Executive's employment by the Bank.
(d) Disability
Upon receipt by the Executive of written notice from the Bank that the
Executive is unable, by reason of Disability, to continue the proper
performance of his duties hereunder. For purposes of this Agreement, the
Executive's Disability shall mean that the Executive is, by reason of any
medically determinable physical or mental impairment which can be expected
to result in death or can be expected to last for a continuous period of
not less than 12 months, receiving income replacement benefits under
disability insurance policies as provided under paragraph 2 above. In the
event of a termination of employment pursuant to this subparagraph the
Executive shall be entitled to receive the amount of Base Pay provided for
in paragraph 2 hereof through the date of termination of Executive's
employment as determined by the Bank.
(e) Termination by the Bank without Cause
At the election of the Bank, at any time during the term of this
Agreement without Cause. Upon such termination Executive shall be entitled
to receive his Base Pay as compensation, paid at the Bank's normal pay
dates, for the remainder of the Employment
EXHIBIT 5.6(b) PAGE 2
Term of this Agreement. In addition, the Bank shall continue, without any
increase in the cost to Executive over that which he is then incurring, his
participation in all health and welfare benefit plans (including health,
disability and life insurance) to which he was entitled on the date of such
termination for the remainder of the Employment Term.
(f) Voluntary termination by Executive.
Executive may voluntarily terminate his employment with the Bank at
anytime. In the event of Executive's voluntary termination of employment he
shall be entitled to receive the amount of Base Pay provided for in
paragraph 2 hereof through the last day of such employment.
5. Covenant Not to Compete
(a) For a period of one year from the date first written above Executive
agrees that he will not, except on behalf of the Bank or with the
written consent of the Bank,
(i) engage in any business activity, directly or indirectly, on his
own behalf or as a partner, stockholder (except by ownership of
less than 1% of the outstanding stock of a publicly held
corporation), director, trustee, principal, agent, employee,
consultant or otherwise of any person, firm or corporation, which
is competitive with any activity in which the Bank or any parent,
subsidiary or affiliate of the Bank is engaged at the time,
(ii) allow the use of his name by or in connection with any business
which is competitive with an activity in which the Bank or any
parent, subsidiary or affiliate of the Bank is engaged, or
(iii) offer employment to or employ, for himself or on behalf of any
competitor of the Bank or any parent, subsidiary or affiliate
thereof, any person who at any time within the prior one year
shall have been employed by the Bank or any parent, subsidiary or
affiliate of the Bank.
(b) The parties acknowledge that this paragraph 5 is fair and reasonable
under the circumstances. It is the desire and intent of the parties
that the provisions of this paragraph 5 shall be enforced to the
fullest extent permitted by law. Accordingly, if any particular
portion of this paragraph 5 shall be adjudicated to be invalid or
unenforceable, this paragraph 5 shall be deemed amended to:
(i) reform the particular portion to provide for such maximum
restrictions as will be valid and enforceable, or if that is not
possible,
(ii) delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such reformation or deletion to apply only with
respect to the operation of this paragraph 5 in the particular
jurisdiction in which such adjudication is made.
EXHIBIT 5.6(b) PAGE 3
(c) The covenants contained in this paragraph 5 shall be limited to a
twenty-five (25) mile radius of any office of the Bank.
6. Confidential Information
Executive shall not at any time, whether during or after the Employment
Term, in any manner, while employed by the Bank or thereafter, either
directly or indirectly, except in the course of carrying out the Bank's
business or as previously authorized in writing on behalf of the Bank,
disclose or communicate to any person, firm, or corporation, any
information of any kind concerning any matters affecting or relating to the
Bank's business or any of its data, figures, projections, estimates,
customer lists, tax records, personnel histories, and accounting procedures
of the Bank, without regard to whether any or all of such information would
otherwise be deemed confidential or material.
8. Binding Effect
This Agreement shall be binding upon and inure to the benefit of any
successor of the Bank, and any such successor shall be deemed substituted
for the Bank under the terms of this Agreement. As used in this Agreement,
the term "successor" shall include any person, firm, corporation, or other
business entity which, at any time, whether by merger, purchase, or
otherwise, acquires all or substantially all of the assets or business of
the Bank.
9. Entire Agreement
This Agreement contains the entire agreement of the parties hereto
concerning the subject matter hereof, and cancels any and all other oral or
written agreements or understandings between the parties with respect to
the subject matter hereof. The Agreement may not be changed orally, but
only by agreement in writing signed by both parties.
10. Termination of Retention Agreement
Executive is party to a certain Retention Agreement with Xxxxxxx Bank and
Xxxxxxx Financial Corporation dated as of July 1, 2007 (the "Retention
Agreement"). The Bank has, as of this date, acquired Xxxxxxx Bank through
merger. Executive acknowledges that in connection with such merger and as a
requirement for its consummation, Executive has agreed to and does hereby
terminate the Retention Agreement and agrees that none of Xxxxxxx Bank,
Xxxxxxx Financial Corporation, the Bank or Farmers & Merchants Bancorp,
Inc. shall have any further obligation to Executive thereunder. The Bank,
for itself and its predecessors in interest does hereby agree to and does
terminate the Retention Agreement.
EXHIBIT 5.6(b) PAGE 4
11. Arbitration
Subject to the Bank's right to seek injunctive relief under paragraph 5 of
this Agreement, in the event the parties are unable to resolve any issue,
misunderstanding, disagreement or dispute after making a good faith effort
to do so, the parties hereto agree to arbitrate any such issue,
misunderstanding, disagreement or dispute in connection with the terms in
effect in this Agreement in accordance with the Rules of the American
Arbitration Association, before one arbitrator mutually agreeable to the
parties hereto. If after eight weeks they have been unable to agree upon
one arbitrator, then either party may appoint one arbitrator and require
the other party to appoint a second arbitrator. Whereupon, the two
appointed arbitrators shall appoint a third arbitrator mutually agreeable
to the two arbitrators. The arbitration shall occur in Archbold, Ohio, or
such other place as mutually agreed upon. Each party shall bear their own
expenses in connection with such arbitration. Judgment on the award
rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof.
12. Governing Law
This Agreement is executed and delivered in the State of Ohio and is
intended to be interpreted, construed and enforced in accordance with the
laws of such State.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed on
its behalf by the Chairman of its Board of Directors, and the Executive has
signed this Agreement, all as of the date and year first above written.
The Farmers & Merchants State Bank
By:
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Xxxx X. Xxxxxxxxxxxx, President and CEO
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Xxxxxxx X. Xxxx
EXHIBIT 5.6(b) PAGE 5
