AGREEMENT AND PLAN OF
MERGER
THIS AGREEMENT AND
PLAN OF MERGER (hereinafter referred to as the
“AGREEMENT”), made and entered into this 15th day of
November, 2006, by and between Middlefield Banc Corp., an Ohio
corporation (hereinafter referred to as “MBCN”), and
Emerald Bank, an Ohio state-chartered savings bank (hereinafter
referred to as “EMERALD”);
WHEREAS, the
authorized capital of MBCN consists of 10,000,000 common shares, no
par value, 1,345,654 of which are issued and
outstanding;
WHEREAS, the
authorized capital of EMERALD consists of 10,000,000 common shares,
no par value, 732,689 of which are issued and outstanding and held
of record by approximately 100 shareholders, and 47,623 of which
are subject to outstanding options (hereinafter referred to as the
“OUTSTANDING OPTIONS”) granted pursuant to the Emerald
Bank 2003 Stock Option Plan (hereinafter referred to as the
“2003 PLAN”); and
WHEREAS, the
Boards of Directors of MBCN and EMERALD have determined that the
merger of EMERALD with and into a wholly-owned subsidiary of MBCN
to be formed as an interim bank under Ohio law (hereinafter
referred to as “MERGERCO”) is in the best interests of
each of the companies and their shareholders;
NOW THEREFORE, in
consideration of the premises and the mutual covenants and
agreements hereinafter set forth, MBCN and EMERALD, each intending
to be legally bound, hereby agree as follows:
Section 1.01. Merger of Mergerco and Emerald .
In accordance with the terms and subject to the conditions of this
AGREEMENT and Titles 11 and 17 of the Ohio Revised Code
(hereinafter referred to as the “ORC”), EMERALD shall
merge with and into MERGERCO at the EFFECTIVE TIME (hereinafter
defined) and MERGERCO shall be the continuing, surviving and
resulting corporation in the merger (hereinafter referred to as the
“SURVIVING CORPORATION”).
Section 1.02. Surviving Corporation . The name
of the SURVIVING CORPORATION in the merger of EMERALD with and into
MERGERCO (hereinafter referred to as the “MERGER”)
shall be “Emerald Bank.” The Articles of Incorporation
and Regulations of MERGERCO in existence at the EFFECTIVE TIME
(hereinafter defined) shall be and remain the Articles of
Incorporation and Regulations of the SURVIVING CORPORATION after
the EFFECTIVE TIME and until such Articles of Incorporation and
Regulations may be further amended as provided by applicable law.
The principal place of business of the SURVIVING CORPORATION shall
be Dublin, Ohio. The directors and officers of MERGERCO in
existence
at the
EFFECTIVE TIME shall be and remain the directors and officers of
the SURVIVING CORPORATION.
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(a)
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The
closing of the transactions contemplated by this AGREEMENT
(hereinafter referred to as the “CLOSING”) shall take
place at a time and on a date mutually determined by MBCN and
EMERALD within thirty (30) days after the satisfaction or
waiver of the last of the conditions set forth in ARTICLE SEVEN of
this AGREEMENT to be satisfied or waived.
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(b)
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On
the day of the CLOSING, MBCN and EMERALD shall cause a Certificate
of Merger in respect of the MERGER, substantially in the form
attached hereto as Exhibit 1.03, to be executed and filed with
the Superintendent of the Ohio Division of Financial Institutions
(hereinafter referred to as the “DIVISION”) in
accordance with the applicable provisions of the Ohio General
Corporation Law and the Ohio statutes applicable to mergers of
financial institutions. The MERGER shall become effective at
11:59 P.M. on the date of the filing of the Certificate of
Merger by the DIVISION with the Ohio Secretary of State pursuant to
ORC 1115.11(F) (herein referred to as the “EFFECTIVE
TIME”).
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Section 1.04. Effect of the Merger . At the
EFFECTIVE TIME, the title to all assets, real estate, and other
property owned by EMERALD shall vest in the SURVIVING CORPORATION
as provided in ORC Sections 1115.11 and 1701.82, as amended,
without reversion or impairment. At the EFFECTIVE TIME, all
liabilities of EMERALD shall be assumed by the SURVIVING
CORPORATION.
Section 1.05. Reservation of Right to Revise
Structure . At MBCN’s election, the MERGER may
alternatively be structured so that (a) EMERALD is merged with
and into any other direct or indirect wholly-owned subsidiary of
MBCN, or (b) any direct or indirect wholly-owned subsidiary of
MBCN is merged with and into EMERALD; provided, however, that no
such change shall (i) alter or change the amount or kind of
the MERGER CONSIDERATION (as defined in Section 2.01(a)) or
adversely affect the tax treatment of the holders of EMERALD common
shares or EMERALD stock options; (ii) prevent MBCN and EMERALD from
obtaining the opinion of Ryan Beck & Co., Inc. (hereinafter
referred to as “RYAN BECK”), referred to in
Section 7.01(d) of this AGREEMENT; or (iii) materially
impede or delay consummation of the transactions contemplated by
this AGREEMENT. In the event MBCN elects to restructure the MERGER,
the parties shall execute an appropriate amendment of this
AGREEMENT to account for the revised structure.
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CONVERSION AND CANCELLATION
OF
SHARES IN THE MERGER
Section 2.01. Consideration .
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(a)
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Except for EMERALD common shares
held by EMERALD as treasury stock, held directly or indirectly by
MBCN (other than shares held in a fiduciary capacity or in
satisfaction of a debt previously contracted, if any), or for which
dissenters’ rights are properly exercised and perfected under
the applicable provision of the ORC, each EMERALD common share
outstanding immediately before the EFFECTIVE TIME shall at the
EFFECTIVE TIME become and be converted into the right to receive in
accordance with this ARTICLE TWO the following, subject to the
terms and upon the conditions of this AGREEMENT:
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(i)
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Cash in an amount equal to the
quotient of the PURCHASE PRICE (as such amount is determined and
adjusted in accordance with Section 2.02 of this AGREEMENT),
divided by the number of EMERALD common shares outstanding at the
EFFECTIVE TIME (hereinafter referred to as the “CASH
CONSIDERATION”);
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(ii)
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The
number of MBCN common shares equal to the quotient (hereinafter
referred to as the “EXCHANGE RATIO”) of the CASH
CONSIDERATION, divided by the average of the closing prices
reported in the Pink Sheets for MBCN common shares over the period
of the twenty (20) most recent trading days on which trades in
MBCN common shares actually occur before the third business day
prior to the EFFECTIVE TIME (hereinafter referred to as the
“MBCN AVERAGE STOCK PRICE”), subject to possible
anti-dilution adjustment under section 2.07 of this AGREEMENT
(hereinafter referred to as the “STOCK CONSIDERATION”);
or
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(iii)
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A
combination of the CASH CONSIDERATION and the STOCK
CONSIDERATION.
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The
CASH CONSIDERATION and the STOCK CONSIDERATION are sometimes
referred to herein together as the “MERGER
CONSIDERATION.”
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(b)
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Each EMERALD common share that is
held by EMERALD as treasury stock immediately before the EFFECTIVE
TIME or that is held directly or indirectly by MBCN immediately
before the EFFECTIVE TIME (other than shares held in a fiduciary
capacity or in satisfaction of a debt previously contracted) shall
be canceled and retired as a result of the MERGER and shall cease
to exist and no exchange or payment shall be made
therefor.
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(c)
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Issued and outstanding shares of
MERGERCO shall remain issued and outstanding after the EFFECTIVE
TIME and shall be and constitute the issued and outstanding shares
of
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the
SURVIVING CORPORATION. The issued and outstanding shares of MBCN
before the EFFECTIVE TIME shall remain issued and outstanding after
the EFFECTIVE TIME.
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Section 2.02. Purchase Price; Adjustments to Purchase
Price .
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(a)
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Subject to adjustment under this
Section 2.02, the “PURCHASE PRICE” shall equal the
sum of (i) $7,326,890, plus (ii) the aggregate amounts
received by EMERALD upon the exercise before the EFFECTIVE TIME of
any OUTSTANDING OPTIONS.
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(b)
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Unless waived by MBCN under
Section 8.06 of this AGREEMENT, if, as of the last day of the
month immediately before the month in which the CLOSING occurs
(hereinafter referred to as the “COMPUTATION DATE”),
the EMERALD SHAREHOLDERS’ EQUITY (hereinafter defined) is
less than $5,300,000 , the PURCHASE PRICE shall be reduced
dollar-for-dollar by the difference between $5,300,000, less the
EMERALD SHAREHOLDERS’ EQUITY as of the COMPUTATION DATE.
EMERALD SHAREHOLDERS’ EQUITY shall be determined by
EMERALD’s independent public accounting firm in accordance
with subparagraph (c) of this Section 2.02.
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(c)
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For
purposes of this AGREEMENT, EMERALD SHAREHOLDERS’ EQUITY
shall be determined based upon EMERALD’s balance sheet as of
the COMPUTATION DATE. The balance sheet shall be prepared in
accordance with generally accepted accounting principles as
applicable to interim financial statements and consistently
applied, provided, however, that the following items shall be added
to the value of the assets set forth on such balance
sheet:
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(i)
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Legal fees incurred by EMERALD in
connection with the MERGER in an amount up to $180,000;
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(ii)
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Investment banking fees payable to
RYAN BECK in an amount up to $175,000;
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(iii)
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Accounting fees in an amount up to
$23,000 for the retention of accounting personnel or services by
EMERALD;
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(iv)
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Retention payments of $145,000
contemplated by Section 6.11(c);
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(v)
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Increases in EMERALD’s
allowance for loan losses relating solely to new loan production
after the date of this AGREEMENT in the amount of 1% of the
difference between the aggregate dollar amount of new loans made
between the date of this AGREEMENT and the EFFECTIVE TIME, less the
aggregate amount of loans paid off in full or paid down between
such dates;
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(vi)
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Costs and expenses incurred by
EMERALD at the direction of MBCN; and
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(vii)
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Any
compensation charge resulting from the acceleration of vesting of
the OUTSTANDING OPTIONS pursuant to Section 6.15 of this
AGREEMENT.
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The
application of the adjustments to the EMERALD SHAREHOLDERS’
EQUITY as contemplated in clauses (i) through (v) is
illustrated by the example which is attached hereto as Exhibit
2.02(c) and which shall be used solely to demonstrate the
adjustment method specified by this section 2.02(c).
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Section 2.03. Fractional Shares . No fractional
MBCN common share and no certificates or scrip therefor shall be
issued in the MERGER. Instead, MBCN shall pay to each holder of
EMERALD common shares who otherwise would be entitled to a
fractional MBCN common share an amount in cash (without interest)
equal to the sum of the fraction of the MBCN common share,
multiplied by the MBCN AVERAGE STOCK PRICE.
Section 2.04. Election Procedures .
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(a)
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An
election form and letter of transmittal in such form as EMERALD and
MBCN shall mutually agree (hereinafter referred to as the
“ELECTION FORM”) shall be mailed to each holder of
EMERALD common shares, along with the PROXY STATEMENT/PROSPECTUS
(as defined in Section 6.02 of this AGREEMENT) and related
proxy materials for the special shareholders’ meeting at
which the MERGER will be submitted to a vote of EMERALD’s
shareholders. The shareholders of EMERALD entitled to receive the
ELECTION FORM shall be those shareholders of record as of the
record date fixed for the special shareholders’ meeting at
which the MERGER will be submitted to a vote of EMERALD’s
shareholders. EMERALD and MBCN shall also establish a deadline for
receipt of such ELECTION FORMS (hereinafter referred to as the
“ELECTION DEADLINE”), which deadline shall be the close
of business on the date of the special shareholders’ meeting
at which the MERGER will be submitted to a vote of EMERALD’s
shareholders, unless MBCN elects to establish a later ELECTION
DEADLINE not later than the close of business on the last day that
EMERALD shareholders are permitted to give notice of their exercise
of statutory dissenters’ rights. MBCN shall also use
commercially reasonable efforts to provide the ELECTION FORM to
shareholders of record who become record shareholders after the
record date and before the ELECTION DEADLINE.
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(b)
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Each ELECTION FORM shall entitle the
holder of EMERALD common shares (i) to elect to receive the
CASH CONSIDERATION for all of such holder’s shares
(hereinafter referred to as a “CASH ELECTION”),
(ii) to elect to receive the STOCK CONSIDERATION for all of
such holder’s shares (hereinafter referred to as a
“STOCK ELECTION”), (iii) to elect to receive the
CASH CONSIDERATION with respect to some of such holder’s
shares and the STOCK CONSIDERATION with respect to such
holder’s remaining shares (hereinafter referred to as a
“MIXED ELECTION”), or (iv) to indicate that such
holder has no preference concerning the receipt of the CASH
CONSIDERATION or the STOCK CONSIDERATION (hereinafter referred to
as a “NON-ELECTION”). EMERALD common shares for which
the CASH CONSIDERATION is elected pursuant to a CASH ELECTION or a
MIXED ELECTION are referred to herein as “CASH ELECTION
SHARES.” EMERALD common shares for which the STOCK
CONSIDERATION is elected pursuant to a STOCK ELECTION or a MIXED
ELECTION are referred to herein as “STOCK ELECTION
SHARES.”
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EMERALD common shares for which the
NON-ELECTION is the made, and EMERALD common shares for which no
election is made by the holder by the ELECTION DEADLINE (excluding
DISSENTING SHARES, as defined in Section 2.10 of this
AGREEMENT) are referred to herein as “NON-ELECTION
SHARES.”
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(c)
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An
election shall be considered to have been validly made by a holder
of EMERALD common shares only if, on or before 5:00 p.m., local
time, on the ELECTION DEADLINE, MBCN or the EXCHANGE AGENT (as
defined below), as applicable, shall have received an ELECTION FORM
properly completed and executed by such holder, accompanied by
either (i) one or more certificates (a
“CERTIFICATE”) representing the EMERALD common shares
as to which such election is being made, duly endorsed in blank or
otherwise in form acceptable for transfer on the books of EMERALD,
or containing an appropriate guaranty of delivery in the form
customarily used in transactions of this nature from a member of a
national securities exchange or a member of the National
Association of Securities Dealers, Inc., or a commercial bank or
trust company in the United States, or (ii) with respect to a
CERTIFICATE that has been lost, stolen, or destroyed, the affidavit
and, if required, bond required under Section 2.06(g) of this
AGREEMENT. Subject to the terms of this AGREEMENT and the ELECTION
FORM, MBCN shall have reasonable discretion to determine whether
any election, revocation, or change has been properly or timely
made and to disregard immaterial defects in any ELECTION FORM. Any
good faith decisions of MBCN regarding such matters shall be
binding and conclusive.
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(d)
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A
holder of EMERALD common shares that is a bank, trust company,
security broker-dealer or other recognized nominee, may submit one
or more ELECTION FORMS for the persons for whom it holds shares as
nominee provided that such bank, trust company, security
broker-dealer or nominee certifies to the satisfaction of EMERALD
and MBCN the names of the persons for whom it is so holding shares
(hereinafter referred to as the “BENEFICIAL OWNERS”).
In such case, each BENEFICIAL OWNER for whom an ELECTION FORM is
submitted shall be treated as a separate owner for purposes of the
election procedure and allocation of shares set forth in this
ARTICLE TWO.
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(e)
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Any
holder of EMERALD common shares may at any time before the ELECTION
DEADLINE withdraw such holder’s election and either
(i) submit a new ELECTION FORM in accordance with the
procedures in this Section 2.04 or (ii) withdraw the
CERTIFICATE or CERTIFICATES for EMERALD common shares deposited
therewith by providing written notice that is received by MBCN or
the EXCHANGE AGENT, as applicable, by 5:00 p.m., local time, on the
business day prior to the ELECTION DEADLINE. ELECTIONS may be
similarly revoked if this AGREEMENT is terminated.
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Section 2.05. Allocation and Proration
Procedures .
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(a)
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Notwithstanding any other contrary
provision contained in this AGREEMENT, 50% of the total number of
EMERALD common shares outstanding at the EFFECTIVE TIME
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(hereinafter referred to as the
“STOCK CONVERSION NUMBER”) shall be converted into the
STOCK CONSIDERATION and the remaining outstanding EMERALD common
shares shall be converted into the CASH CONSIDERATION (hereinafter
referred to as the “CASH CONVERSION
NUMBER”).
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(b)
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Within five (5) business days
after the EFFECTIVE TIME, MBCN shall allocate among the holders of
EMERALD common shares the right to receive the CASH CONSIDERATION
and the STOCK CONSIDERATION and to distribute such consideration.
In making such allocation, MBCN shall first convert the
NON-ELECTION SHARES into STOCK ELECTION SHARES and/or CASH ELECTION
SHARES (with such conversion made on a pro rata basis among the
holders of NON-ELECTION SHARES based upon the number of each such
holder’s total NON-ELECTION SHARES) in order to satisfy, to
the greatest extent possible, the mix of CASH CONSIDERATION and
STOCK CONSIDERATION required by Section 2.05(a). If, following
the conversion of all NON-ELECTION SHARES, the number of STOCK
ELECTION SHARES does not equal the STOCK CONVERSION NUMBER, then
the STOCK ELECTION SHARES and CASH ELECTION SHARES shall be
reallocated as follows:
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(i)
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If
the number of STOCK ELECTION SHARES is less than the STOCK
CONVERSION NUMBER, then MBCN shall eliminate from the CASH ELECTION
SHARES (excluding the DISSENTING SHARES), on a pro rata basis in
relation to the total number of CASH ELECTION SHARES, and shall add
to the STOCK ELECTION SHARES, such number of EMERALD common shares
as may be necessary so that the number of STOCK ELECTION SHARES
equals the STOCK CONVERSION NUMBER; or
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(ii)
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If
the number of STOCK ELECTION SHARES is greater than the STOCK
CONVERSION NUMBER, then MBCN shall eliminate from the STOCK
ELECTION SHARES, on a pro rata basis in relation to the total
number of STOCK ELECTION SHARES, and shall add to the CASH ELECTION
SHARES, such number of EMERALD common shares as may be necessary so
that the number of STOCK ELECTION SHARES equals the STOCK
CONVERSION NUMBER.
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Notice shall be provided promptly to
each holder of EMERALD common shares whose shares are reallocated
pursuant to this Section 2.05. After applying the allocation
and proration procedures set forth in this Section 2.05,
(I) all of the STOCK ELECTION SHARES shall be converted into
the right to receive the STOCK CONSIDERATION and (II) all of
the CASH ELECTION SHARES shall be converted into the right to
receive the CASH CONSIDERATION.
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Section 2.06. Exchange Procedures .
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(a)
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Distributions by MBCN of the MERGER
CONSIDERATION shall be made in accordance with Sections 2.04 and
2.05 of this AGREEMENT. At and after the
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EFFECTIVE TIME, each CERTIFICATE
shall represent the right to receive the MERGER CONSIDERATION in
accordance with the terms of this AGREEMENT only, or in the case of
shares for which dissenters’ rights are properly exercised
and perfected, such rights as the dissenter may have under the
applicable provisions of the Ohio General Corporation Law governing
dissenters’ rights.
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(b)
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At
or before the EFFECTIVE TIME, MBCN shall reserve a sufficient
number of MBCN common shares to be issued as part of the MERGER
CONSIDERATION and shall deposit with The Middlefield Banking
Company (hereinafter referred to as “MBC”) an estimated
amount of cash to be issued as part of the MERGER
CONSIDERATION.
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(c)
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MBCN shall cause a certificate
representing that number of whole MBCN common shares that each
holder of EMERALD common shares has the right to receive under
Sections 2.04 and 2.05 of this AGREEMENT, if any, and a check
in the amount of any cash that such holder has the right to receive
under Sections 2.04 and 2.05, if any, including any cash in
lieu of fractional shares, or dividends or distributions the
shareholder is entitled to receive, to be delivered to the
shareholder upon delivery (if not previously delivered) to MBCN of
the CERTIFICATES (or bond or other indemnity satisfactory to MBCN
if any of such certificates are lost, stolen or destroyed) owned by
the shareholder. No interest will be paid on any MERGER
CONSIDERATION.
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(d)
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No
dividends or other distributions on MBCN common shares with a
record date occurring after the EFFECTIVE TIME shall be paid to the
holder of any unsurrendered CERTIFICATE until the holder thereof
surrenders such CERTIFICATE in accordance with this
Section 2.06 or provides an affidavit and, if required, a bond
in accordance with subparagraph (g) of this Section 2.06.
After becoming entitled in accordance with this Section 2.06,
the record holder also shall be entitled to receive any such
dividends or other distributions, without interest, that had become
payable for MBCN common shares the holder had the right to receive
upon surrender of the CERTIFICATE.
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(e)
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The
stock transfer books of EMERALD shall be closed immediately upon
the EFFECTIVE TIME. From and after the EFFECTIVE TIME there shall
be no transfers on the stock transfer records of EMERALD of any
EMERALD common shares. If, after the EFFECTIVE TIME, CERTIFICATES
are presented to MBCN, they shall be canceled and exchanged for the
MERGER CONSIDERATION deliverable under this AGREEMENT in accordance
with the procedures set forth in this Section 2.06.
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(f)
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If
any dispute arises concerning the ownership of the EMERALD common
shares represented by any CERTIFICATE, MBCN shall be entitled to
deposit any MERGER CONSIDERATION payable with respect to such
EMERALD common shares in escrow with an independent third party.
MBCN shall thereafter have no liability for any claims relating
thereto.
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(g)
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If
any CERTIFICATES are lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the CERTIFICATE to
be lost, stolen, or destroyed and, if required by MBCN, the posting
by the person of a bond or other indemnity satisfactory
to
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MBCN in such amount as MBCN may
reasonably direct as indemnity against any claim that may be made
against it for the CERTIFICATE, MBCN shall issue in exchange for
the lost, stolen, or destroyed CERTIFICATE the MERGER CONSIDERATION
under Section 2.04.
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(h)
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Notwithstanding the foregoing,
neither the EXCHANGE AGENT (as defined in Section 2.08) nor
any party hereto shall be liable to any former holder of EMERALD
common shares for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or
similar laws.
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Section 2.07. Anti-Dilution Adjustments . If,
before the EFFECTIVE TIME, MBCN changes (or establishes a record
date that is before the EFFECTIVE TIME for changing) the number of
MBCN common shares issued and outstanding by a stock split, stock
dividend, recapitalization, reclassification, split up,
combination, exchange of shares, readjustment or similar
transaction with respect to the outstanding MBCN common shares, the
STOCK CONSIDERATION shall be adjusted so that EMERALD shareholders
receive, in the aggregate, the same percentage of outstanding MBCN
common shares at the EFFECTIVE TIME that would have been received
had such transaction not occurred.
Section 2.08. Exchange Agent . On or before the
date that the Registration Statement (as defined in
Section 6.02) is declared effective by the Securities Exchange
Commission (hereinafter referred to as the “SEC”), MBCN
shall either appoint an agent for purposes of mailing and receiving
the ELECTION FORMS, tabulating the results, and distributing the
MERGER CONSIDERATION pursuant to the terms and conditions of this
AGREEMENT or elect to perform such functions itself (in either
case, hereinafter referred to as the “EXCHANGE
AGENT”).
Section 2.09. Outstanding Options in the Merger
. At the EFFECTIVE TIME and as a result of the MERGER, each
holder of an unexercised OUTSTANDING OPTION immediately before the
EFFECTIVE TIME shall have each such OUTSTANDING OPTION converted
into an option to purchase common shares of MBCN (hereinafter
referred to as a “MBCN OPTION”) on the following terms
and subject to the following conditions:
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(a)
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Each OUTSTANDING OPTION shall be
converted to an MBCN OPTION based upon the EXCHANGE
RATIO;
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(b)
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The
exercise price of the MBCN OPTION into which each OUTSTANDING
OPTION is converted shall equal the quotient of the exercise price
of the OUTSTANDING OPTION, divided by the EXCHANGE RATIO, rounded
up if necessary to the nearest one-hundredth of a dollar;
and
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(c)
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The
number of MBCN common shares subject to the MBCN OPTION of such
holder shall equal the product of the number of EMERALD common
shares subject to the OUTSTANDING OPTION, multiplied by the
EXCHANGE RATIO, rounded down if necessary to the nearest whole
share.
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Section 2.10. Dissenting Shares .
Notwithstanding anything in this AGREEMENT to the contrary, the
EMERALD common shares which are outstanding immediately before the
EFFECTIVE TIME and which are held by shareholders who shall
(a) have delivered to EMERALD a written demand for payment of
the fair value of such shares in the manner provided in ORC
Section 1701.85(A)(2), (b) not have voted such shares in
favor of this AGREEMENT, and (c) have otherwise complied fully
with all of the requirements of ORC Sections 1701.84 and
1701.85, shall not be converted into or be exchangeable for the
right to receive the MERGER CONSIDERATION; provided, however, that
(i) each of such shares (hereinafter referred to as the
“DISSENTING SHARES”) shall nevertheless be cancelled
and extinguished and (ii) the holder of such DISSENTING SHARES
shall be entitled to such rights as provided for the provisions of
ORC Sections 1701.84 and 1701.85.
REPRESENTATIONS AND WARRANTIES OF
EMERALD
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(a)
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On
or before the date hereof, EMERALD delivered to MBCN a schedule
(hereinafter referred to as the “EMERALD DISCLOSURE
SCHEDULE”) setting forth, among other things, items the
disclosure of which is necessary or appropriate either in response
to an express disclosure requirement contained in a provision
hereof or as an exception to one or more representations or
warranties contained in this ARTICLE THREE or to one or more of its
covenants contained in ARTICLE FIVE, regardless of whether the
provision explicitly refers to disclosure schedule exceptions;
provided, however, that the mere inclusion of an item in the
EMERALD DISCLOSURE SCHEDULE as an exception to a representation or
warranty shall not be deemed an admission by EMERALD that the item
is a material exception or fact, event, or circumstance or that the
item is reasonably likely to result in a MATERIAL ADVERSE EFFECT
(as defined below).
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(b)
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For
the purpose of this AGREEMENT, a “MATERIAL ADVERSE
EFFECT” in respect of EMERALD means any effect that
(i) is material and adverse to the financial position, results
of operations or business of EMERALD, or (ii) would materially
impair the ability of EMERALD to perform its obligations under this
AGREEMENT or otherwise materially threaten or materially impede the
consummation of the MERGER and the other transactions contemplated
by this AGREEMENT; provided, however, that a MATERIAL ADVERSE
EFFECT in respect of EMERALD shall not be deemed to include the
impact of (I) changes in banking and similar laws of general
applicability to banks, savings banks, or their holding companies
or interpretations thereof by courts or governmental authorities,
(II) changes in generally accepted accounting principles or
regulatory accounting requirements applicable to banks, savings
banks, or their holding companies generally, (III) any
modifications or changes to valuation policies and practices in
connection with the MERGER or restructuring charges taken in
connection with the MERGER, in each case in accordance with
generally accepted accounting principles, (IV) effects of any
action taken with the advance written consent of MBCN,
(V) changes in the general level of interest rates (including
the impact on EMERALD’s securities portfolio) or conditions
or circumstances relating to or that affect the United
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States economy, financial, or
securities markets or the banking industry, generally,
(VI) reasonable and customary expenses incurred in connection
with the MERGER and all expenses related to retention arrangements
as provided in Section 6.11(c) of this AGREEMENT and any
benefit or retirement plan disclosed on the EMERALD DISCLOSURE
SCHEDULE, (VII) the impact of the announcement of this
AGREEMENT and the transactions contemplated hereby, and compliance
with this AGREEMENT on the business, financial condition or results
of operations of EMERALD, (VIII) the occurrence of any
military or terrorist attack within the United States or any of its
possessions or offices; and (IX) the continuation of losses
incurred by EMERALD in the operation of its business.
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(c)
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For
the purpose of this AGREEMENT, and in relation to EMERALD,
“knowledge” means the actual knowledge of any officer
or director of EMERALD and any other person having supervisory or
management responsibilities with respect to material aspects of the
operation of the business of EMERALD.
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(d)
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On
the basis of this Section 3.01, EMERALD represents and
warrants to MBCN that each of the statements in the following
Sections of this ARTICLE THREE is true and accurate in all material
respects.
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Section 3.02. Organization and Standing .
EMERALD is a state savings bank organized, validly existing and in
good standing under the laws of Ohio; has the corporate power and
authority to own or hold under lease all of its properties and
assets and to conduct its business and operations as presently
conducted. The deposits in EMERALD are insured up to applicable
limits by the Federal Deposit Insurance Corporation (hereinafter
referred to as the “FDIC”) and EMERALD has paid or
properly reserved or accrued for all current premiums and
assessments for deposit insurance. Except as set forth in
Section 3.02 of the EMERALD DISCLOSURE SCHEDULE, to the
knowledge of EMERALD, EMERALD is in compliance in all material
respects with all applicable local, state or federal laws and
regulations. Except as set forth in section 3.02 of the EMERALD
DISCLOSURE SCHEDULE, EMERALD has no subsidiaries and owns no voting
stock or equity securities of any corporation, partnership,
association, or other entity.
Section 3.03. Qualification . EMERALD is duly
qualified to do business and in good standing in each jurisdiction
in which such qualification is required, except where the failure
to so qualify would not have a MATERIAL ADVERSE EFFECT on
EMERALD.
Section 3.04. Authority .
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(a)
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Subject to the approval of this
AGREEMENT and the transactions contemplated hereby, including the
MERGER, by the EMERALD shareholders, by the DIVISION, by the FDIC
and by the Board of Governors of the Federal Reserve System
(hereinafter referred to as the “FRB”),
(i) EMERALD has all of the requisite corporate power and
authority to enter into this AGREEMENT and to perform all of its
obligations hereunder; (ii) the execution and delivery of this
AGREEMENT and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action
by EMERALD; and (iii) this AGREEMENT is the valid and binding
agreement of
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EMERALD, enforceable against EMERALD
in accordance with its terms, (I) subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and
other laws of general applicability affecting the enforcement of
creditors’ rights generally and the effect of rules of law
governing specific performance, injunctive relief and other
equitable remedies on the enforceability of such documents and
(II) except to the extent such enforceability may be limited
by laws relating to safety and soundness of insured depository
institutions as set forth in 12 U.S.C. § 1818(b) or by the
appointment of a conservator by the FDIC. This AGREEMENT has been
duly executed and delivered by EMERALD. EMERALD has no knowledge of
any reason approval of this AGREEMENT and the transactions
contemplated hereby will not be approved by the Division, the FDIC,
and the FRB in a timely manner and without the imposition of a
condition, restriction, or requirement of the type described in
section 7.01(b).
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(b)
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The
Articles of Incorporation and Constitution of EMERALD require the
adoption of this AGREEMENT and the approval of the transactions
contemplated hereby, including the MERGER, by the affirmative vote
of the holders of a majority of the outstanding shares of EMERALD.
Neither the Articles of Incorporation nor the Constitution of
EMERALD, nor any law or regulation, require any other vote of the
holders of EMERALD shares in respect of this AGREEMENT or the
transactions contemplated hereby.
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Section 3.05. Governing Documents . EMERALD has
made available or shall promptly make available to MBCN true and
accurate copies of its Articles of Incorporation and Constitution
and has granted MBCN access to all records of all meetings and
other corporate actions by the shareholders, Board of Directors and
Committees of the Board of Directors of EMERALD, except records of
meetings related to the process leading to the transactions
contemplated by this AGREEMENT. The minute books of EMERALD
contain, in all material respects, complete and accurate records of
all meetings and other corporate actions of the EMERALD
shareholders, Board of Directors and Committees of the Board of
Directors, except records of meetings related to the process
leading to the transactions contemplated by this
AGREEMENT.
Section 3.06. No Conflicts . Subject to the
approval of this AGREEMENT and the transactions contemplated
hereby, including the MERGER, by the EMERALD shareholders, the
DIVISION, the FDIC and the FRB, and except as set forth in
Section 3.06 of the EMERALD DISCLOSURE SCHEDULE, the execution
and delivery of this AGREEMENT and the consummation of the
transactions contemplated hereby, including the MERGER, will not
(a) conflict with or violate any provision of or result in the
breach of any provision of the Articles of Incorporation or
Constitution of EMERALD; (b) conflict with or violate any
provision of or result in the breach or the acceleration of or
entitle any party to accelerate (whether upon or after the giving
of notice of lapse of time or both) any obligation under, or
otherwise materially affect the terms of, any mortgage, lien,
lease, agreement, license, instrument, order, arbitration award,
judgment or decree to which EMERALD is a party or by which EMERALD
or its property or assets is bound; (c) require the consent of
any party to any agreement or commitment to which EMERALD is a
party or by which EMERALD or its property or assets is bound, the
failure to obtain which could, individually or in the aggregate
with all the other failures to obtain required consents, have a
MATERIAL ADVERSE EFFECT on EMERALD; (d) result in the creation
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imposition of
any lien, charge, pledge, security interest or other encumbrance
upon any property or assets of EMERALD or give rise to any
meritorious cause of action against EMERALD; or (e) violate or
conflict with any applicable law, ordinance, rule or
regulation.
Section 3.07. Consents . Except as set forth in
Section 3.07 of the EMERALD DISCLOSURE SCHEDULE, no consent,
approval, order or authorization of, or registration, declaration
or filing with, any governmental authority is required by EMERALD
in connection with the execution and delivery of this AGREEMENT by
EMERALD or the consummation by EMERALD of the transactions
contemplated hereby.
Section 3.08. Authorized Capital . The
authorized capital of EMERALD consists of 10,000,000 common shares,
no par value, 732,689 of which are issued and outstanding and held
of record by approximately 100 shareholders as of the date of this
AGREEMENT; 73,268 of which are reserved for issuance under the 2003
PLAN; and 47,623 of which are subject to the OUTSTANDING OPTIONS as
of the date of this AGREEMENT. All of the outstanding common shares
of EMERALD are duly authorized, validly issued, fully paid and
non-assessable; were issued in full compliance with all applicable
laws and regulations; and were not issued in violation of the
preemptive right of any shareholder of EMERALD. EMERALD has no
outstanding class of capital stock other than such common shares.
Except as set forth in Section 3.08 of the EMERALD DISCLOSURE
SCHEDULE, there are no outstanding subscription rights, options,
conversion rights, warrants or other agreements or commitments of
any nature whatsoever (either firm or conditional) obligating
EMERALD (a) to issue, deliver or sell, cause to be issued,
delivered or sold, or restricting EMERALD from selling any
additional EMERALD shares, or (b) to grant, extend or enter
into any such agreement or commitment.
Section 3.09. Financial Statements .
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(a)
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The
statements of financial condition as of December 31, 2005 and
2004, of EMERALD and the related statements of income,
shareholders’ equity and cash flows for each of the years
then ended, examined and reported upon by Crowe, Chizek and
Company, certified public accountants, complete copies of which
have previously been made available to MBCN (hereinafter referred
to as the “EMERALD AUDITED FINANCIALS”), have been
prepared in conformity with generally accepted accounting
principles applied on a consistent basis and fairly present the
consolidated financial position of EMERALD at such dates and the
consolidated results of its operations and cash flows for such
periods.
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(b)
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The
unaudited balance sheet as of September 30, 2006, of EMERALD
and the related unaudited income statement for the nine months then
ended, complete copies of which have previously been made available
to MBCN (hereinafter referred to as the “EMERALD INTERIM
FINANCIALS”), fairly present the financial position of
EMERALD at such date and the results of its operations for such
period and have been prepared in accordance with generally accepted
accounting principles as applicable to interim financial statements
(except for the absence of footnotes) and as applied on a
consistent basis with the EMERALD AUDITED FINANCIALS. All
adjustments which are necessary for a fair statement of the EMERALD
INTERIM FINANCIALS have been made.
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Section 3.10. Conduct of Businesses . Since
September 30, 2006, EMERALD has conducted its businesses only
in the ordinary and usual course, there has been no MATERIAL
ADVERSE EFFECT on the financial condition, assets, liabilities,
obligations, properties, business or prospects of EMERALD and,
except as set forth in the EMERALD AUDITED FINANCIALS, the EMERALD
INTERIM FINANCIALS or Section 3.10 of the EMERALD DISCLOSURE
SCHEDULE, EMERALD has not:
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(a)
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Authorized the creation or issuance
of, issued, sold or disposed of, or created any obligation to
issue, sell or dispose of, any shares, notes, bonds or other
securities (including, without limitation, the grant of any options
under the 2003 PLAN), or any obligation convertible into or
exchangeable for, any of its common shares;
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(b)
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Declared, set aside, paid or made
any dividend or other distributions on its common shares or
directly or indirectly redeemed, purchased or acquired any shares
or entered into any agreement in respect of the
foregoing;
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(c)
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Effected any stock split,
recapitalization, combination, exchange of shares, readjustment or
other reclassification;
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(d)
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Amended its Articles of
Incorporation or Constitution;
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(e)
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Purchased, sold, assigned or
transferred any material patent, trademark, trade name, copyright,
license, franchise, design or other intangible asset or
property;
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(f)
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Except for the acquisition or
disposition in the ordinary course of business of other real estate
owned, acquired or disposed of any real or personal property or
fixed assets constituting a capital investment in excess of $10,000
individually or $25,000 in the aggregate;
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(g)
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Mortgaged, pledged or granted or
suffered to exist any lien or other encumbrance or charge on any
assets or properties, tangible or intangible, except for liens for
taxes not yet due and payable and such other liens, encumbrances or
charges which do not materially adversely affect its financial
position;
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(h)
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Waived any rights of material value
or cancelled any material debts or claims;
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(i)
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Except for borrowings from the
Federal Home Loan Bank of Cincinnati (hereinafter referred to as
the “FHLB of Cincinnati”), incurred any obligation or
liability (absolute or contingent) requiring payments by EMERALD
exceeding $10,000, whether individually or in the aggregate,
including, without limitation, any tax liability, or paid any
material liability or obligation (absolute or contingent) other
than liabilities and obligations incurred in the ordinary course of
business;
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(j)
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Except for salary increases granted
in accordance with past practice, entered into or amended any
employment contract with any of its officers, hired any new
employees except to replace employees whose employment terminated
after the date of this AGREEMENT, increased the compensation
payable to any officer or
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director or any relative of any such
officer or director, or become obligated to increase any such
compensation, adopted or amended in any material respect any
employee benefit plans, severance plan or collective bargaining
agreement or made any awards or distributions under any employee
benefit plans not consistent with past practice or
custom;
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(k)
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Incurred any damage, destruction or
similar loss, not covered by insurance, materially affecting its
businesses or properties;
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(l)
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Acquired any shares or other equity
interest in any corporation, partnership, trust, joint venture or
other entity;
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(m)
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Made any (i) investment (except
investments made in the ordinary course of business) or
(ii) capital expenditure or commitment for any addition to
property, plant or equipment, in either case (clauses i and ii) of
more than $25,000;
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(n)
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Failed to accrue, pay, discharge and
satisfy all debts, liabilities, obligations and expenses incurred
in the regular and ordinary course of business as such debts,
liabilities, obligations, and expenses have become due;
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(o)
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Opened, closed, moved or, in any
material respect, expanded, diminished, renovated, altered, or
changed any of its offices or branches;
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(p)
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Paid or committed to pay any
management or consulting or other similar type of fees;
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(q)
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Failed to maintain EMERALD’s
reserve for loan losses at the greater of $242,000 or 1% of the
total gross loans outstanding, except to the extent inconsistent
with generally accepted accounting principles;
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(r)
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Caused any MATERIAL ADVERSE EFFECT
on the amount or general composition of EMERALD’s deposit
liabilities or loan portfolio;
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(s)
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Agreed, whether in writing or
otherwise, to take any action described in this
Section 3.10.
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Section 3.11. Properties .
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(a)
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A
description of all personal property and fixed assets owned by
EMERALD is set forth in Section 3.11(a) of the EMERALD
DISCLOSURE SCHEDULE (hereinafter referred to as the “PERSONAL
PROPERTY”). All PERSONAL PROPERTY has been maintained in good
working order, ordinary wear and tear excepted. EMERALD owns and
has good title to all of the PERSONAL PROPERTY, free and clear of
any mortgage, lien, pledge, charge, claim, conditional sales or
other agreement, lease, right or encumbrance, except (i) as
set forth in Section 3.11(a) of the EMERALD DISCLOSURE
SCHEDULE, (ii) to the extent stated or reserved against in the
EMERALD AUDITED FINANCIALS, and (iii) such other exceptions
which are not material in character or amount and do not
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materially detract from the value of
or interfere with the use of the properties or assets subject
thereto or affected thereby.
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(b)
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The
documentation (hereinafter referred to as “LOAN
DOCUMENTATION”) governing or relating to the loan and
credit-related assets (hereinafter referred to as the “LOAN
ASSETS”) included within the loan portfolio of EMERALD is
legally sufficient in all material respects for the purposes
intended thereby and creates enforceable rights in favor of EMERALD
in accordance with the terms of such LOAN DOCUMENTATION, subject to
applicable bankruptcy, insolvency, reorganization and moratorium
laws and other laws of general applicability affecting the
enforcement of creditors’ rights generally, and the effect of
rules of law governing specific performance, injunctive relief and
other equitable remedies on the enforceability of such documents.
The LOAN DOCUMENTATION is in compliance with, and each of the loans
included within the loan portfolio of EMERALD has been processed,
closed and administered in conformance with, all applicable federal
consumer protection statutes and regulations, including the Truth
in Lending Act, the Equal Credit Opportunity Act and the Real
Estate Settlement Procedures Act. Except as set forth in
Section 3.11(b) of the EMERALD DISCLOSURE SCHEDULE, to the
knowledge of EMERALD, no debtor under any of the LOAN DOCUMENTATION
has asserted any claim or defense with respect to the subject
matter thereof.
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(c)
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A
description of each parcel of real property owned by EMERALD is set
forth in Section 3.11(c) of the EMERALD DISCLOSURE SCHEDULE
(hereinafter referred to individually as a “PARCEL” and
collectively as the “REAL PROPERTIES”). EMERALD is the
owner of each PARCEL in fee simple and has good and marketable
title to each such PARCEL, free and clear of any liens, claims,
charges, encumbrances or security interests of any kind, except
(i) as set forth in Section 3.11(c) of the EMERALD DISCLOSURE
SCHEDULE, (ii) liens for real estate taxes and assessments not
yet delinquent and (iii) utility, access and other easements,
rights of way, restrictions and imperfections of title which do not
impair the REAL PROPERTIES for the use and business being conducted
thereon.
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(d)
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Except as set forth in
Section 3.11(d) of the EMERALD DISCLOSURE SCHEDULE, no party
leasing any of the REAL PROPERTIES from EMERALD is in material
default with respect to any of its obligations (including payment
obligations) under the governing lease. EMERALD has not received
notification from any governmental entity within the two year
period immediately preceding the date hereof of contemplated
improvements to the REAL PROPERTIES or surrounding area or
community by public authority, the costs of which are to be
assessed as special taxes against the REAL PROPERTIES in the
future.
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(e)
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A
description of all real property leased by EMERALD is set forth in
Section 3.11(e) of the EMERALD DISCLOSURE SCHEDULE
(hereinafter referred to as the “LEASED REAL
PROPERTY”). True and correct copies of all leases in respect
of the LEASED REAL PROPERTY (hereinafter referred to as the
“REAL PROPERTY LEASES”) and all attachments, amendments
and addendums thereto have been made available to MBCN. Except as
set forth in Section 3.11(e) of the EMERALD
DISCLOSURE
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SCHEDULE, the REAL PROPERTY LEASES
create, in accordance with their terms, valid, binding and
assignable leasehold interests of EMERALD in all of the LEASED REAL
PROPERTY, free and clear of all liens, claims, charges,
encumbrances or security interests of any kind. EMERALD has
complied in all material respects with all of the provisions of the
REAL PROPERTY LEASES required on its part to be complied with and
is not in default with respect to any of its obligations (including
payment obligations) under any of the REAL PROPERTY
LEASES.
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(f)
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A
description of all personal property leased by EMERALD is set forth
in Section 3.11(f) of the EMERALD DISCLOSURE SCHEDULE
(hereinafter referred to as the “LEASED PERSONAL
PROPERTY”). True and correct copies of the leases in respect
of the LEASED PERSONAL PROPERTY (hereinafter referred to as the
“PERSONAL PROPERTY LEASES”) and all attachments,
amendments and addendums thereto have been made available to MBCN.
Except as set forth in Section 3.11(f) of the EMERALD
DISCLOSURE SCHEDULE, the PERSONAL PROPERTY LEASES create, in
accordance with their terms, valid, binding and assignable
leasehold interests of EMERALD in all of the LEASED PERSONAL
PROPERTY, free and clear of all liens, claims, charges,
encumbrances or security interests of any kind. EMERALD has
complied in all material respects with all of the provisions under
the PERSONAL PROPERTY LEASES required on its part to be complied
with and is not in default with respect to any of its obligations
(including payment obligations) under any of the PERSONAL PROPERTY
LEASES.
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Section 3.12. Nonperforming Loans . Except as
set forth in Section 3.12 of the EMERALD DISCLOSURE SCHEDULE,
there is no loan which was made by EMERALD and which is reflected
as an asset of EMERALD on the EMERALD AUDITED FINANCIALS that
(a) is ninety (90) days or more delinquent or (b) has
been classified by examiners (regulatory or internal) as
“Substandard,” “Doubtful” or
“Loss.”
Section 3.13. Investments .
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(a)
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Section 3.13(a) of the EMERALD
DISCLOSURE SCHEDULE contains (i) a true, accurate and complete
list of all investments, other than investments in the LOAN ASSETS
and REAL PROPERTIES, owned by EMERALD (hereinafter referred to as
the “INVESTMENTS”) as of the date hereof, the name of
the registered holder thereof, the location of the certificates
therefor or other evidence thereof and any stock powers or other
authority for transfer granted with respect thereto and (ii) a
true, accurate and complete list of the names of each bank or other
depository in which EMERALD has an account or safe deposit box,
including, without limitation, accounts with the FHLB of
Cincinnati, and the names of all persons authorized to draw thereon
or to have access thereto. Except as set forth in
Section 3.13(a) of the EMERALD DISCLOSURE SCHEDULE, the
INVESTMENTS, other than any such investments disposed of in the
ordinary course of business prior to the date hereof, are owned by
EMERALD, free and clear of all liens, pledges, claims, security
interests, encumbrances, charges or restrictions of any kind and
may be freely disposed of by EMERALD at any time. Except as set
forth in Section 3.13(a) of the EMERALD DISCLOSURE SCHEDULE,
EMERALD is not a
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party to and has no interest in any
repurchase agreement, reverse repurchase agreement, collateralized
mortgage obligation or any other derivative security.
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(b)
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With the exception of equity
interests in the FHLB of Cincinnati, EMERALD does not own of record
or beneficially the outstanding shares of, or any equity interest
in, any corporation or other business entity.
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Section 3.14. Reports and Records . EMERALD has
filed all reports and maintained all records required to be filed
or maintained by it under various rules and regulations of the
State of Ohio and the FDIC. To the knowledge of EMERALD, all such
documents and reports complied in all material respects with
applicable requirements of law and regulations in effect at the
time of filing such documents and contained in all material
respects the information required to be stated therein. The books
and records of EMERALD are complete and correct and accurately
reflect the basis for the financial condition, results of
operations, business, assets and capital of EMERALD set forth in
the EMERALD AUDITED FINANCIALS and the EMERALD INTERIM
FINANCIALS.
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(a)
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Except as set forth in
Section 3.15 of the EMERALD DISCLOSURE SCHEDULE, EMERALD has
duly and timely filed all material federal, state, county and local
income, profits, franchise, excise, sales, customs, property, use,
occupation, withholding, social security and other tax and
information returns and reports (“TAX RETURNS”)
required to have been filed by EMERALD through the date hereof, and
all such TAX RETURNS are and will be true, correct and complete in
all material respects. EMERALD has paid or accrued all material
TAXES (defined below) due or claimed to be due (whether reflected
on such TAX RETURNS or otherwise). EMERALD has no liability for any
material TAXES of any nature whatsoever and there is no basis for
any additional material claims or assessments, other than with
respect to liabilities for TAXES which are reflected in the EMERALD
AUDITED FINANCIALS, the EMERALD INTERIM FINANCIALS or which may
have accrued since September 30, 2006, in the ordinary course
of business. True copies of the federal, state and local income TAX
RETURNS of EMERALD for each of the tax years ended
December 31, 2004 and 2005 have been made available to MBCN.
Except as set forth in Section 3.15 of the EMERALD DISCLOSURE
SCHEDULE, neither the Internal Revenue Service (the
“IRS”) nor any other taxing authority, domestic or
foreign, has asserted, is now asserting or, to the knowledge of
EMERALD, is threatening to assert against EMERALD any deficiency or
claim for additional TAXES. No federal, state, local, or foreign
TAX audits or administrative or judicial TAX proceedings are
pending or being conducted with respect to EMERALD and, to the
knowledge of EMERALD, no such audit or proceeding is threatened.
There are no unexpired waivers by EMERALD of any statute of
limitations with respect to TAXES. The accruals and reserves for
TAXES reflected in the EMERALD AUDITED FINANCIALS and the EMERALD
INTERIM FINANCIALS are adequate for the periods covered. EMERALD
has withheld or collected and paid over to the appropriate taxing
authorities or is properly holding for such payment all TAXES
required by law to be withheld or collected. There are no liens for
TAXES upon the assets of EMERALD, other than liens for current
TAXES not yet due and payable.
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EMERALD has not filed a consent
under Section 341(f) of the Internal Revenue Code of 1986, as
amended (hereinafter referred to as the “CODE”),
concerning collapsible corporations. EMERALD has not agreed to
make, and is not required to make, any adjustment under Section
481(a) of the CODE. EMERALD has never been a member of an
affiliated group of corporations, within the meaning of
Section 1504 of the CODE. EMERALD has no liability for the
TAXES of any other person or entity under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract or
otherwise.
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(b)
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For
purposes of this AGREEMENT, “TAX” or
“TAXES” means (i) all federal, state, local or
foreign taxes, charges, fees, levies or other assessments, however
denominated, including, without limitation, all net income, gross
income, gross receipts, gains, premium, sales, use, ad valorem,
goods and services, capital, production, transfer, franchise,
windfall profits, license, witshholding, payroll, employment,
disability, employer health, excise, estimated, severance, stamp,
occupation, property, environmental, unemployment or other taxes,
custom duties, fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority; and
(ii) any transferee liability in respect of any items
described in clause (i) above.
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Section 3.16. Material Contracts .
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(a)
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Except as set forth in
Section 3.16(a) of the EMERALD DISCLOSURE SCHEDULE, EMERALD is
not a party to or bound by any written or oral (i) contract or
commitment for capital expenditures in excess of $10,000 for any
one project or $20,000 in the aggregate; (ii) contract or
commitment made in the ordinary course of business for the purchase
of materials or supplies or for the performance of services
involving payments to or by EMERALD of an amount exceeding $25,000
in the aggregate or extending for more than six (6) months
from the date hereof; (iii) contract or option for the purchase of
any property, real or personal; (iv) unsecured letter of
credit or indemnity calling for payment, upon the conditions stated
therein, of more than $10,000; (v) guarantee agreement;
(vi) instrument granting any person authority to transact
business on behalf of EMERALD; (vii) contracts or commitments
relating to outstanding loans and/or commitments to make loans
(including unfunded commitments and lines of credit) to any one
person (together with “affiliates” of that person) in
excess of the regulatory limitations on loans to one borrower;
(viii) employment, management, consulting, deferred
compensation, severance or other similar contract with any
director, officer or employee of EMERALD; (ix) note, debenture
or loan agreement pursuant to which EMERALD has incurred
indebtedness, other than deposit liabilities and advances from the
FHLB of Cincinnati; (x) loan participation agreement;
(xi) loan servicing agreement; (xii) contract or
commitment relating to a real estate development project consisting
of the development of more than one single family dwelling;
(xiii) commitment to make any acquisition, development or
construction loan; or (xiv) commitment or agreement to do any
of the foregoing. Contracts set forth in Section 3.16 of the
EMERALD DISCLOSURE SCHEDULE are hereinafter collectively referred
to as the “CONTRACTS.” EMERALD has previously made
available to MBCN all of the CONTRACTS.
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(b)
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EMERALD is not in material default
under any of the contracts or agreements to which it is a party and
no claim of such default by any party has been made or is now
threatened. There does not exist any event which, with notice or
the passing of time or both, would constitute a material default
under, or would excuse performance by any party thereto from, any
contract or agreement to which EMERALD is a party.
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Section 3.17. Insurance . All material
properties and operations of EMERALD are adequately insured for its
benefit under policies of insurance previously provided to MBCN.
The performance by the officers and employees of EMERALD of their
duties is bonded in such amounts and against such risks as are
usually insured against or bonded by entities similarly situated,
under valid and enforceable policies of insurance or bonds issued
by insurers or bonding companies of recognized
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