AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

dated as of

June 30, 2009

by and between

NB&T FINANCIAL GROUP, INC.

and

COMMUNITY NATIONAL CORPORATION

TABLE OF CONTENTS

 

 

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EXHIBIT A      Form of Voting Agreement

 

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AGREEMENT AND PLAN OF MERGER , dated as of June 30, 2009 (hereinafter referred to as this “ Agreement ”), by and between NB&T Financial Group, Inc., an Ohio corporation (hereinafter referred to as “ NB&T ”), and Community National Corporation, an Ohio corporation (hereinafter referred to as “ CNC ”);

WITNESSETH

WHEREAS , NB&T is a registered bank holding company and owns all of the outstanding shares of The National Bank and Trust Company, a national bank (hereinafter referred to as “ NB&T Bank ”);

WHEREAS , CNC is a registered bank holding company and owns all of the outstanding shares of Community National Bank, a national bank (hereinafter referred to as “ CNC Bank ”);

WHEREAS , the Boards of Directors of NB&T and CNC believe that the merger of CNC with and into NB&T, followed by the merger of CNC Bank with and into NB&T Bank, each in accordance with the terms and subject to the conditions of this Agreement, would be in the best interests of the shareholders of NB&T and CNC; and

WHEREAS , the Boards of Directors of NB&T and CNC have each unanimously approved this Agreement and the transactions contemplated hereby;

NOW, THEREFORE , in consideration of the premises and of the mutual covenants, representations, warranties and agreements contained herein, NB&T and CNC, intending to be legally bound, hereby agree as follows:

ARTICLE I

Certain Definitions

1.01 Certain Definitions . The following terms are used in this Agreement with the meanings set forth below:

“ Accumulated Other Comprehensive Income ” means income reported on the CNC Consolidated Balance Sheet within Stockholders’ Equity according to Statement of Financial Accounting Standards No. 130 “Reporting Comprehensive Income.”

“ Acquisition Proposal ” has the meaning set forth in Section 6.06(a).

“ Adjusted Per Share Cash Consideration ” has the meaning set forth in Section 3.01(c).

“ Adjusted Per Share Stock Consideration ” has the meaning set forth in Section 3.01(c).

“ Affiliate ” means, with respect to any Person, another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person.

“ Aggregate Cash Consideration ” has the meaning set forth in Section 3.01(b)(i).

“ Aggregate Stock Consideration ” has the meaning set forth in Section 3.01(b)(ii).

“ Agreement ” means this Agreement, as amended or modified from time to time in accordance with Section 9.02.

“ Agreement to Merge ” has the meaning set forth in Section 2.02.

“ Associate ” has the meaning set forth in Rule 12b-2 under the Exchange Act.

“ BHCA ” means the Bank Holding Company Act of 1956, as amended.

“ Cash Election Shares ” has the meaning set forth in Section 3.03(b).

“ Closing Consolidated Book Value ” has the meaning set forth in Section 3.01(c).

“ CNC ” has the meaning set forth in the preamble to this Agreement.

“ CNC 401(k) Plan ” has the meaning set forth in Section 6.10(c).

“ CNC Articles ” means the Articles of Incorporation of CNC, as amended.

“ CNC Bank ” has the meaning set forth in the preamble to this Agreement.

“ CNC Board ” means the Board of Directors of CNC.

“ CNC Code ” means the Code of Regulations of CNC, as amended.

“ CNC Common Shares ” means the shares of common stock, without par value, of CNC.

“ CNC’s Financial Statements ” has the meaning set forth in Section 5.03(g)(i).

“ CNC Group ” has the meaning set forth in Section 5.03(q)(vii).

“ CNC Meeting ” has the meaning set forth in Section 6.02.

“ CNC Shareholder Adoption ” has the meaning set forth in Section 5.03(d).

“ COBRA ” means the Consolidated Omnibus Budget Reconciliation Act of 1986.

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Compensation and Benefit Plans ” has the meaning set forth in Section 5.03(m)(i).

“ Consultants ” has the meaning set forth in Section 5.03(m)(i).

“ D&O Policy ” has the meaning set forth in Section 6.20(b).

 

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“ Determination Letter ” has the meaning set forth in Section 6.10(c).

“ Directors ” has the meaning set forth in Section 5.03(m)(i).

“ Disclosure Schedule ” has the meaning set forth in Section 5.01.

“ Dissenting Shares ” means any CNC Common Shares held by a holder who properly demands and perfects dissenters’ rights with respect to such shares in accordance with applicable provisions of the OGCL.

“ Effective Date ” means the date on which the Effective Time occurs.

“ Effective Time ” means the effective time of the Parent Merger, as provided for in Section 2.04.

“ Election Deadline ” has the meaning set forth in Section 3.03(c).

“ Election Form ” has the meaning set forth in Section 3.03(b).

“ Employees ” has the meaning set forth in Section 5.03(m)(i).

“ Environmental Laws ” means all applicable local, state and federal environmental, health and safety laws and regulations, including, without limitation, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Water Act, the Federal Clean Air Act, and the Occupational Safety and Health Act, each as amended, regulations promulgated thereunder, and state counterparts.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ ERISA Affiliate ” has the meaning set forth in Section 5.03(m)(iii).

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

“ Exchange Agent ” has the meaning set forth in Section 3.03(a).

“ Exchange Fund ” has the meaning set forth in Section 3.03(f).

“ FDIA ” means the Federal Deposit Insurance Act.

“ FDIC ” means the Federal Deposit Insurance Corporation.

“ FRB ” means the Board of Governors of the Federal Reserve System.

“ Governmental Authority ” means any court, arbitration panel, administrative agency or commission or other federal, state or local governmental authority or instrumentality (including, without limitation, any Regulatory Authority).

 

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“ Hazardous Materials ” means, collectively, (a) any “hazardous substance” as defined by the Comprehensive Environmental Response, Compensation and Liability Act, as amended, and regulations promulgated thereunder, (b) any “hazardous waste” as defined by the Resource Conservation and Recovery Act, as amended through the date hereof, or regulations promulgated thereunder, and (c) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any applicable federal, state or local law relating to or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material.

“ Information ” has the meaning set forth in Section 6.17.

“ IRS ” has the meaning set forth in Section 5.03(m)(ii).

“ Knowledge ” means, with respect to NB&T, the Knowledge of any officer of NB&T with the title of Chairman, Chief Executive Officer, President or Chief Financial Officer, and, with respect to CNC, the Knowledge of any officer of CNC with the title of Chairman, Chief Executive Officer, President, Chief Financial Officer, Chief Credit Officer or Senior Loan Officer. An officer of NB&T or CNC shall be deemed to have “knowledge” of a particular fact or matter if such officer is actually aware of such fact or matter or a prudent individual would be reasonably expected to discover or otherwise become aware of such fact or matter in the course of conducting a reasonably comprehensive investigation concerning the existence of such fact or matter.

“ Lien ” means any charge, mortgage, pledge, security interest, restriction, claim, lien, or encumbrance.

“ Mandatory Cash Shares ” has the meaning set forth in Section 3.01(a).

“ Material Adverse Effect ” means, with respect to NB&T or CNC, as the context may require, any effect that (i) is or is reasonably likely to be material and adverse to the financial position, results of operations or business of NB&T and its Subsidiaries, taken as a whole, or CNC and its Subsidiaries taken as a whole, respectively, or (ii) would materially impair the ability of either NB&T or CNC 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 Material Adverse Effect shall not be deemed to include the impact of (a) changes in banking and similar laws of general applicability or interpretations thereof by courts or Governmental Authorities or other changes affecting depository institutions generally, including changes in general economic conditions and changes in prevailing interest and deposit rates; (b) changes resulting from expenses (such as legal, accounting and investment bankers’ fees) incurred in connection with this Agreement or the transactions contemplated herein; or (c) actions or omissions of a party which have been waived in accordance with Section 9.02 hereof.

“ Material Contracts ” has the meaning set forth in Section 5.03(k)(ii).

“ Merger ” collectively refers to the Parent Merger and the Subsidiary Merger, as set forth in Section 2.02.

 

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“ NASDAQ ” means The NASDAQ Stock Market, LLC.

“ NB&T ” has the meaning set forth in the preamble to this Agreement.

“ NB&T Articles ” means the Articles of Incorporation of NB&T, as amended.

“ NB&T Bank ” has the meaning set forth in the recitals to this Agreement.

“ NB&T Board ” means the Board of Directors of NB&T.

“ NB&T Code ” means the Code of Regulations of NB&T, as amended.

“ NB&T Common Shares ” means the common shares, no par value, of NB&T.

“ NB&T SEC Documents ” has the meaning set forth in Section 5.04(f).

“ Net Insurance Payment ” has the meaning set forth in Section 3.01(d).

“ No Election Shares ” has the meaning set forth in Section 3.03(b).

“ OCC ” means the Office of the Comptroller of the Currency.

“ OGCL ” means the Ohio General Corporation Law.

“ Old Certificate ” has the meaning set forth in Section 3.03(b).

“ OSS ” means the Office of the Secretary of State of the State of Ohio.

“ Parent Merger ” has the meaning set forth in Section 2.01(a).

“ PBGC ” means the Pension Benefit Guaranty Corporation.

“ Per Share Cash Consideration ” has the meaning set forth in Section 3.01(a)(ii).

“ Per Share Insurance Payment ” has the meaning set forth in Section 3.01(d).

“ Per Share Stock Consideration ” has the meaning set forth in Section 3.01(a)(i).

“ Person ” means any individual, bank, corporation, partnership, association, joint-stock company, business trust or unincorporated organization.

“ Pension Plan ” has the meaning set forth in Section 5.03(m)(ii).

“ Previously Disclosed ” by a party shall mean information set forth in its Disclosure Schedule.

“ Proxy Statement/Prospectus ” has the meaning set forth in Section 6.03(a).

“ Reallocated Cash Shares ” has the meaning set forth in Section 3.03(d)(i)(2).

 

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“ Reallocated Stock Shares ” has the meaning set forth in Section 3.03(d)(ii)(2).

“ Registration Statement ” has the meaning set forth in Section 6.03(a).

“ Regulatory Authorities ” has the meaning set forth in Section 5.03(i)(i).

“ Regulatory Orders ” has the meaning set forth in Section 5.03(i)(i).

“ Representatives ” means, with respect to any Person, such Person’s directors, officers, employees, legal or financial advisors or any representatives of such legal or financial advisors.

“ Resulting Bank ” has the meaning set forth in Section 2.02.

“ Rights ” means, with respect to any Person, securities or obligations convertible into or exercisable or exchangeable for, or giving any person any right to subscribe for or acquire, or any options, calls or commitments relating to, or any stock appreciation right or other instrument the value of which is determined in whole or in part by reference to the market price or value of, shares of capital stock of such person.

“ Rule 145 Affiliates ” has the meaning set forth in Section 6.21.

“ SEC ” means the Securities and Exchange Commission.

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

“ Stock Election Shares ” has the meaning set forth in Section 3.03(b).

“ Subsidiary ” and “ Significant Subsidiary ” have the meanings ascribed to them in Rule 1-02 of Regulation S-X of the SEC.

“ Surviving Corporation ” has the meaning set forth in Section 2.01(a).

“ Takeover Laws ” has the meaning set forth in Section 5.03(o).

“ Tax ” and “ Taxes ” means all federal, state, local or foreign taxes, charges, fees, levies or other assessments, however denominated, including, without limitation, all net income, gross income, commercial activity, gains, gross receipts, sales, use, ad valorem, goods and services, capital, production, transfer, franchise, windfall profits, license, withholding, payroll, employment, disability, employer health, excise, estimated, severance, stamp, occupation, property, environmental, unemployment and all 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 whether arising before, on or after the Effective Date and any transferee liability in respect of any such items.

 

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“ Tax Returns ” means any return, amended return, statement, form, claim for refund or other report (including elections, declarations, disclosures, schedules, estimates and information returns) with respect to any Tax, including any amendments thereof.

“ Treasury Shares ” means CNC Common Shares held by CNC or any of its Subsidiaries or by NB&T or any of its Subsidiaries, in each case other than in a fiduciary capacity or as a result of debts previously contracted in good faith.

“ Voting Agreement ” means the Voting Agreement in the form attached hereto as Exhibit A entered into as of the date hereof by and among NB&T and certain shareholders of CNC.

ARTICLE II

The Merger

2.01 The Parent Merger .

(a) The Parent Merger . Upon the terms and subject to the conditions of this Agreement, at the Effective Time, CNC shall merge with and into NB&T (the “ Parent Merger ”), NB&T shall survive the Parent Merger and continue to exist as an Ohio corporation (NB&T, as the surviving corporation in the Parent Merger, is sometimes referred to herein as the “ Surviving Corporation ”), and the separate corporate existence of CNC shall cease. At the Effective Time:

(i) The NB&T Articles, as in effect immediately prior to the Effective Time, shall be the articles of incorporation of the Surviving Corporation until amended in accordance with the OGCL;

(ii) The NB&T Code, as in effect immediately prior to the Effective Time, shall be the code of regulations of the Surviving Corporation until amended in accordance with the OGCL; and

(iii) Each individual serving as a director of NB&T immediately prior to the Effective Time shall become a director of the Surviving Corporation for the balance of the term for which such individual was elected and shall serve as such until his or her successor is duly elected and qualified in the manner provided for in the NB&T Articles and the NB&T Code or as otherwise provided by the OGCL or until his or her earlier death, resignation or removal in the manner provided in the NB&T Articles or NB&T Code or as otherwise provided by the OGCL.

(b) Option to Change Method of Merger . NB&T may at any time prior to the Effective Time change the method of effecting the Parent Merger and/or the Subsidiary Merger (including, without limitation, the provisions of this Article II), if and to the extent NB&T deems such change to be necessary, appropriate or desirable; provided , however , that no such change shall:

 

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(i) Alter or change the amount or kind of consideration to which the holders of CNC Common Shares are entitled in accordance with the terms and subject to the conditions of this Agreement;

(ii) Adversely affect the Tax consequences to the CNC shareholders as a result of receiving the consideration in the Merger as set forth in Article III; or

(iii) Materially impede or delay consummation of the transactions contemplated by this Agreement.

Subject to the foregoing, CNC, if requested by NB&T, shall enter into one or more amendments to this Agreement in order to effect any such change.

2.02 The Subsidiary Merger . At the time specified by NB&T Bank in its certificate of merger filed with the OCC (which shall not be earlier than the Effective Time), CNC Bank shall merge with and into NB&T Bank (the “ Subsidiary Merger ”) pursuant to an agreement to merge (the “ Agreement to Merge ”) to be executed by CNC Bank and NB&T Bank and filed with the OCC. Upon the consummation of the Subsidiary Merger, the separate corporate existence of CNC Bank shall cease and NB&T Bank shall survive the Subsidiary Merger and continue to exist as a national bank (NB&T Bank, as the resulting bank in the Subsidiary Merger, is sometimes referred to herein as the “ Resulting Bank ”) and the separate corporate existence of CNC Bank shall cease. (The Parent Merger and the Subsidiary Merger shall sometimes collectively be referred to herein as the “ Merger ”.)

2.03 Effectiveness of Parent Merger . Subject to the satisfaction or waiver of the conditions set forth in Article VII of this Agreement, the Parent Merger shall become effective upon the latest to occur of the following: (a) the filing of a certificate of merger with the OSS; or (b) such later date and time as may be set forth in such certificate of merger. The Parent Merger shall have the effects prescribed in the OGCL.

2.04 Effective Date and Effective Time . Subject to the satisfaction or waiver of the conditions set forth in Article VII of this Agreement, NB&T and CNC shall cause the effective date of the Parent Merger (the “ Effective Date ”) to occur as soon as practicable after the last of the conditions set forth in Article VII shall have been satisfied or waived in accordance with the terms of this Agreement; provided , however , that the Effective Date shall not fall after the date specified in Section 8.01(c) or after the date or dates on which any Regulatory Authority approval or any extension thereof expires. The time on the Effective Date when the Parent Merger shall become effective is referred to herein as the “ Effective Time ”.

ARTICLE III

Merger Consideration; Surrender of Certificates

3.01 Merger Consideration .

At the Effective Time, by virtue of the Parent Merger and without any action on the part of the holder thereof :

 

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(a) Conversion of CNC Common Shares . Subject to Sections 3.03 and 3.04, and except as otherwise provided by paragraphs (b), (c), and (d) of this Section 3.01, each CNC Common Share issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive, at the election of the holder thereof, the following:

(i) 0.761 NB&T Common Shares (the “ Per Share Stock Consideration ”);

(ii) cash in the amount of $11.41(the “ Per Share Cash Consideration ”); or

(iii) a combination of such NB&T Common Shares and cash.

provided, however, that any CNC Common Shares with respect to which the holder thereof holds of record 1,500 or fewer CNC Common Shares of record as of the Election Deadline (“ Mandatory Cash Shares ”), shall be converted into the right to receive the Per Share Cash Consideration, and no such Mandatory Cash Shares shall be converted into the right to receive the Per Share Stock Consideration, subject to the Aggregate Cash Consideration limitation set forth in paragraph (b).

(b) Aggregate Consideration .

(i) The “ Aggregate Cash Consideration ” for purposes of this Agreement shall be an amount equal to the Per Share Cash Consideration multiplied by 50% of the number of CNC Common Shares (excluding any of CNC’s Treasury Shares or CNC Common Shares owned by NB&T) outstanding as of the date hereof.

(ii) The “ Aggregate Stock Consideration ” for purposes of this Agreement shall be a number of NB&T Common Shares equal to 0.761 NB&T Common Shares multiplied by 50% of the number of CNC Common Shares (excluding any of CNC’s Treasury Shares or CNC Common Shares owned by NB&T) outstanding as of the date hereof.

(iii) If the number of CNC Common Shares issued and outstanding immediately prior to the Effective Time exceeds the number of CNC Common Shares issued and outstanding as of the date hereof, the Aggregate Stock Consideration and the Aggregate Cash Consideration will not be adjusted as a result of such excess, though appropriate adjustments will be made to the Per Share Stock Consideration and the Per Share Cash Consideration (as well as the Adjusted Per Share Cash Consideration and Adjusted Per Share Stock Consideration, in each case as defined below, if applicable).

(c) Adjustment for Change in Book Value . Subject to Section 3.01(b)(iii), in the event that, at the last day of the month immediately preceding the month in which the Effective Date occurs, CNC’s tangible net worth, excluding Accumulated Other Comprehensive Income, excluding the effect of an aggregate amount of up to $300,000 of legal, accounting and investment adviser fees and costs incurred or accrued by CNC or CNC Bank in connection with the Merger and this Agreement between March 31, 2009, and the last day of the month immediately preceding the month in which the Effective Date occurs (including the contingent

 

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fee payable to CNC’s investment adviser upon the effectiveness of the Parent Merger), excluding any reserves requested by NB&T in writing in order to conform to NB&T’s policies and practices, and excluding the amount paid by CNC or CNC Bank for the D&O Policy required by Section 6.20(b), all as calculated in accordance with generally accepted accounting principles and in a manner consistent with CNC’s Financial Statements (the “ Closing Consolidated Book Value ”), is less than $8,000,000, the Per Share Cash Consideration and the Per Share Stock Consideration shall be reduced.

(i) The reduced Per Share Cash Consideration shall equal the product of (a) the quotient of (I) $7,125,000 less the difference between (A) $8,000,000 and (B) the Closing Consolidated Book Value, divided by (II) $7,125,000 (rounded to the nearest fourth decimal place), multiplied by (b) $11.41 (rounded to the nearest cent) (the “Adjusted Per Share Cash Consideration”). For example, assuming the Closing Consolidated Book Value were $7,500,000, the Adjusted Per Share Cash Consideration would be:

 

(ii) The reduced Per Share Stock Consideration shall equal the product of (a) the quotient of (I) 7,125,000 less the difference between (A) 8,000,000 and (B) the Closing Consolidated Book Value, divided by (II) 7,125,000 (rounded to the nearest fourth decimal place), multiplied by (b) 0.761 (rounded to the nearest third decimal place) (the “Adjusted Per Share Stock Consideration”).

Wherever this Agreement refers to the “Per Share Cash Consideration” or the “Per Share Stock Consideration,” such terms shall refer to the Adjusted Per Share Cash Consideration and the Adjusted Per Share Stock Consideration if such an adjustment is required by this Subsection (c).

(d) Adjustment for Insurance Proceeds . In the event that (i) CNC Bank receives after the date of this Agreement and before the Effective Date payment from its Community Bank Bond insurer for claims disclosed in the CNC Disclosure Schedule submitted by CNC Bank prior to the date of this Agreement, and (ii) the Closing Consolidated Book Value, calculated in accordance with Section 3.01(c), adjusted to include, without duplication, the receipt of the insurance payment, net of Taxes (including, without limitation, any income Taxes resulting from the receipt or accrual of such payment) and direct expenses incurred in connection with collection of such payment (the “ Net Insurance Payment ”), exceeds $8,000,000, then each CNC shareholder as of the Effective Time shall receive a pro rata cash payment in addition to the Per Share Cash Consideration and the Per Share Stock Consideration such shareholder would otherwise receive pursuant to this Agreement. The amount of such additional cash payment per share (the “ Per Share Insurance Payment ”) shall equal the quotient of (a) the least of (1) $1,300,000, (2) the amount of the Net Insurance Payment or (3) the amount by which the Closing Consolidated Book Value, calculated in accordance with Section 3.01(c) and adjusted to include, without duplication, the receipt of the Net Insurance Payment, exceeds $8,000,000, divided by (b) 624,459 (rounded to the nearest cent). For example, if CNC Bank were to receive $100,000 for its claims and incur Taxes and direct expenses in connection with the collection of

 

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such claim in the amount of $50,000, and the Closing Consolidated Book Value, after recording the receipt of such net $50,000 payment, equaled $8,030,000, then the Per Share Insurance Payment would be:

($8,030,000 - $8,000,000) ÷ 624,459 = $.05

As another example, if CNC Bank were to receive $100,000 for its claims, incur $40,000 of Taxes and direct expenses in connection with collection of such payment, and the Closing Consolidated Book Value, after recording the receipt of such net $60,000 payment, equaled $8,200,000, then the Per Share Insurance Payment would be:

$60,000 ÷ 624,459 = $.10

(e) Treasury Shares . All Treasury Shares shall be canceled and retired at the Effective Time and no consideration shall be issued in exchange therefor.

(f) Outstanding NB&T Common Shares . Each NB&T Common Share issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding and unaffected by the Merger.

3.02 Rights as Shareholders; Share Transfers . At the Effective Time, holders of CNC Common Shares shall cease to be, and shall have no rights as, shareholders of CNC, other than (a) to receive any dividend or other distribution with respect to such CNC Common Shares with a record date occurring prior to the Effective Time, (b) to receive the consideration provided under this Article III, and (c) appraisal rights in the case of Dissenting Shares. After the Effective Time, there shall be no transfers on the stock transfer books of CNC or the Surviving Corporation of any CNC Common Shares.

3.03 Election and Exchange and Payment Procedures .

(a) Exchange Agent . NB&T’s transfer agent will act as agent (the “ Exchange Agent ”) for purposes of conducting the election procedure and the exchange and payment procedures as described in this Section 3.03.

(b) Election Procedure . No later than three business days following the Effective Time, NB&T shall cause the Exchange Agent to mail or make available to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented issued and outstanding CNC Common Shares (“ Old Certificates ”): (i) a notice and letter of transmittal, specifying that delivery shall be effected and risk of loss and title to the Old Certificates shall pass only upon proper delivery of such certificates to the Exchange Agent and advising such holder of the effectiveness of the Parent Merger and the procedure for surrendering to the Exchange Agent the Old Certificates in exchange for the consideration set forth in Section 3.01, and (ii) an election form in such form as NB&T and CNC shall mutually agree (the “ Election Form ”). Each Election Form shall permit the holder (or in the case of nominee record holders, the beneficial owner through proper instructions and documentation) (i) to elect to receive NB&T Common Shares with respect to all of such holder’s CNC Common Shares, (ii) to elect to receive cash with respect to all of such holder’s CNC Common Shares, (iii) to elect to

 

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receive cash with respect to some of such holder’s CNC Common Shares and to receive NB&T Common Shares with respect to such holder’s remaining CNC Common Shares, or (iv) to indicate that such holder makes no such election with respect to such holder’s CNC Common Shares (“ No Election Shares ”); provided, however, that each holder of Mandatory Cash Shares shall be permitted to elect only to receive cash with respect to such holder’s Mandatory Cash Shares. Any CNC Common Shares with respect to which the holder has elected to receive cash (including Mandatory Cash Shares) are hereinafter referred to as “ Cash Election Shares ,” and any CNC Common Shares with respect to which the holder has elected to receive NB&T Common Shares are hereinafter referred to as “ Stock Election Shares .” Any CNC Common Shares with respect to which the holder thereof shall not, as of the Election Deadline, have made an election by submission to the Exchange Agent of an effective, properly completed Election Form shall be deemed to be No Election Shares. Any Dissenting Shares shall be deemed to be Cash Election Shares for purposes of the allocation provisions of Subsection (d) below, but in no event shall such shares be classified as Reallocated Stock Shares.

(c) Election Deadline; Revocation or Modification of Election . For purposes of this Agreement, the term “ Election Deadline ” shall mean 5:00 p.m. Eastern Time/4:00 p.m. Central Time, on the 30th day following, but not including, the date of mailing of the Election Form, or such other date upon which NB&T and CNC shall mutually agree prior to the Effective Time. Any election to receive cash, NB&T Common Shares or a combination of cash and NB&T Common Shares shall have been properly made only if the Exchange Agent shall have actually received a properly completed Election Form by the Election Deadline. Any submitted Election Form may be revoked or changed by written notice to the Exchange Agent only if such notice of revocation or change is actually received by the Exchange Agent prior to the Election Deadline. The Exchange Agent shall be required to make all determinations as to when any election, modification or revocation has been received and whether any such election, modification or revocation has been properly made.

(d) Reallocation of NB&T Common Shares and Cash . The Exchange Agent shall effect the allocation among holders of CNC Common Shares of rights to receive cash, NB&T Common Shares, or a combination of cash and NB&T Common Shares in accordance with the Election Forms as follows:

(i) If (A) the number of Cash Election Shares multiplied by the Per Share Cash Consideration, plus (B) the cash to be paid in lieu of fractional NB&T Common Shares pursuant to Subsection (j) below, is less than the Aggregate Cash Consideration, then:

(1) each of the Cash Election Shares (other than Dissenting Shares) shall be converted into the right to receive the Per Share Cash Consideration;

(2) the Exchange Agent will designate first among the No Election Shares and then from the Stock Election Shares (by the method described in Subsection (e) below), a sufficient number of such shares to receive the Per Share Cash Consideration (such redesignated shares hereinafter referred to as “ Reallocated Cash Shares ”) such that the sum of (a) the product of (1) the sum of

 

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the number of Cash Election Shares plus the number of Reallocated Cash Shares, multiplied by (2) the Per Share Cash Consideration, plus (b) the amount of cash to be paid in lieu of fractional NB&T Common Shares pursuant to Subsection (j) below, equals the Aggregate Cash Consideration, and each of the Reallocated Cash Shares shall be converted into the right to receive the Per Share Cash Consideration; and

(3) each of the No Election Shares and Stock Election Shares that are not Reallocated Cash Shares shall be converted into the right to receive the Per Share Stock Consideration.

(ii) If (A) the number of Cash Election Shares multiplied by the Per Share Cash Consideration, plus (B) the cash to be paid in lieu of fractional NB&T Common Shares pursuant to Subsection (j) below, is greater than the Aggregate Cash Consideration, then:

(1) each of the Stock Election Shares and No Election Shares shall be converted into the right to receive the Per Share Stock Consideration;

(2) the Exchange Agent will designate among the Cash Election Shares (other than Dissenting Shares) (by the method described in Subsection (e) below), a sufficient number of such shares to receive the Per Share Stock Consideration (such redesignated shares hereinafter referred to as “ Reallocated Stock Shares ”) such that the sum of (a) the product of (1) the number of remaining Cash Election Shares and Mandatory Cash Shares) multiplied by (2) the Per Share Cash Consideration, plus (b) the amount of cash to be paid in lieu of fractional NB&T Common Shares pursuant to Subsection (j) below, equals the Aggregate Cash Consideration, and each of the Reallocated Stock Shares shall be converted into the right to receive the Per Share Stock Consideration; and

(3) each of the Cash Election Shares (other than Dissenting Shares) that are not Reallocated Stock Shares shall be converted into the right to receive the Per Share Cash Consideration.

(iii) If (A) the number of Cash Election Shares (including Dissenting Shares) multiplied by the Per Share Cash Consideration, plus (B) the cash to be paid in lieu of fractional NB&T Common Shares pursuant to Subsection (j) below, is equal to the Aggregate Cash Consideration, then subparagraphs (i) and (ii) above shall not apply, all No Election Shares and all Stock Election Shares shall be converted into the right or receive the Per Share Stock Consideration and all Cash Election Shares shall be converted into the right to receive the Per Share Cash Consideration.

(e) Method of Designation .

(i) If the Exchange Agent is required pursuant to Subsection (d) to designate from among all No Election Shares the Reallocated Cash Shares to receive the Per Share Cash Consideration, each holder of No Election Shares shall have a pro rata

 

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portion (based on such holder’s No Election Shares relative to all No Election Shares) of such holder’s No Election Shares designated as Reallocated Cash Shares.

(ii) If the Exchange Agent is required pursuant to Subsection (d) to designate from among all Stock Election Shares the Reallocated Cash Shares to receive the Per Share Cash Consideration, each holder of Stock Election Shares shall have a pro rata portion (based on such holder’s Stock Election Shares relative to all Stock Election Shares) of such holder’s Stock Election Shares designated as Reallocated Cash Shares.

(iii) If the Exchange Agent is required pursuant to Subsection (d) to designate from among all Cash Election Shares the Reallocated Stock Shares to receive the Per Share Stock Consideration, each holder of Cash Election Shares (except Mandatory Cash Shares and Dissenting Shares) shall have a pro rata portion (based on such holder’s Cash Election Shares relative to all Cash Election Shares) of such holder’s Cash Election Shares designated as Reallocated Stock Shares. If such designation of Cash Election Shares results in all Cash Election Shares other than Dissenting Shares and Mandatory Cash Shares being designated Reallocated Stock Shares and additional Cash Election Shares must be designated Reallocated Stock Shares, then each holder of Mandatory Cash Shares shall have a pro rata portion (based on such holder’s Mandatory Cash Shares relative to all Mandatory Cash Shares) of such holder’s Mandatory Cash Shares designated as Reallocated Stock Shares.

(f) Exchange Fund . At or prior to the Effective Time, NB&T shall deposit, or shall cause to be deposited, with the Exchange Agent , for the benefit of the holders of Old Certificates , for exchange in accordance with this Article III, an estimated amount of cash (such cash, together with any dividends or distributions with a record date occurring on or after the Effective Time with respect thereto [without any interest on any such cash, dividends or distributions], being hereinafter referred to as the “ Exchange Fund ”) to be paid pursuant to this Article III in exchange for outstanding CNC Common Shares. Promptly after the Election Deadline, the Exchange Agent shall distribute NB&T Common Shares and make payment of such cash as provided herein. The Exchange Agent shall not be entitled to vote or to exercise any rights of ownership with respect to the NB&T Common Shares held by it from time to time hereunder, except that it shall receive and hold in trust for the recipients of the NB&T Common Shares until distributed thereto pursuant to the provision of this Agreement all dividends or other distributions paid or distributed with respect to such NB&T Common Shares for the account of the persons entitled thereto.

(g) Surrender of Certificates . After the completion of the foregoing allocation, each holder of an Old Certificate who surrenders such Old Certificate to the Exchange Agent shall, upon acceptance thereof by the Exchange Agent, shall be entitled to receive in exchange therefor a certificate representing the full number of NB&T Common Shares and/or the amount of cash into which the aggregate number of CNC Common Shares represented by such surrendered Old Certificate shall have been converted pursuant to Section 3.01(a) and the Old Certificate shall thereafter be cancelled. The Exchange Agent shall accept such Old Certificates upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. Each Old Certificate that is not surrendered to the Exchange Agent in accordance with the

 

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procedures provided for herein shall, except as otherwise herein provided, until duly surrendered to the Exchange Agent, be deemed to evidence ownership of the number of NB&T Common Shares or the right to receive the amount of cash into which such CNC Common Shares shall have been converted. After the Effective Time, there shall be no further transfer on the records of CNC of Old Certificates and, if such Old Certificates are presented to CNC for transfer, they shall be canceled against delivery of certificates for NB&T Common Shares and/or cash as provided above. No interest will be paid on any cash to be paid in exchange for CNC Common Shares that any such holder shall be entitled to receive pursuant to this Article III.

(h) Lost Certificates . If there shall be delivered to the Exchange Agent by any person who is unable to produce any Old Certificate for surrender to the Exchange Agent in accordance with this Article III:

(i) Evidence to the reasonable satisfaction of the Surviving Corporation that such Old Certificate has been lost, wrongfully taken, or destroyed;

(ii) A bond in such amount as the Surviving Corporation or the Exchange Agent may reasonably request as indemnity against any claim that may be made against the Surviving Corporation and/or the Exchange Agent with respect to such Old Certificate; and

(iii) Evidence to the reasonable satisfaction of the Surviving Corporation that such person was the owner of the CNC Common Shares represented by each such Old Certificate claimed by him or her to be lost, wrongfully taken or destroyed and that he or she is the person who would be entitled to present such Old Certificate for exchange pursuant to this Agreement;

then the Exchange Agent, in the absence of actual notice to it that any CNC Common Shares represented by any Old Certificate has been acquired by a bona fide purchaser, shall deliver to such person the cash that such person would have been entitled to receive upon surrender of each such lost, wrongfully taken or destroyed Old Certificate.

(i) Release of Exchange Fund . Any portion of the Exchange Fund that remains unclaimed by the shareholders of CNC for six months after the Effective Time shall be paid to NB&T. Any shareholders of CNC who have not theretofore complied with this Article III shall thereafter look only to NB&T for payment of the Merger consideration. Notwithstanding the foregoing, neither the Exchange Agent nor NB&T shall be liable to any former holder of CNC Common Shares for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.

(j) No Fractional NB&T Common Shares .

(i) No certificates or scrip representing fractional NB&T Common Shares shall be issued upon the surrender for exchange of Old Certificates, and such fractional NB&T Common Share interests will not entitle the owner thereof to vote or to any rights of a shareholder of the Surviving Corporation.

 

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(ii) Each holder of CNC Common Shares who would otherwise be entitled to receive a fractional NB&T Common Share shall receive from the Exchange Agent an amount of cash equal to the product obtained by multiplying (a) the fractional NB&T Common Share interest to which such holder (after taking into account all CNC Common Shares held at the Effective time by such holder) would otherwise be entitled by (b) the Per Share Cash Consideration.

(k) No Liability . None of NB&T, CNC, the Exchange Agent or the Surviving Corporation shall be liable to any former holder of CNC Common Shares for any payment of the Per Share Stock Consideration, the Per Share Cash Consideration, any cash in lieu of a fractional NB&T Common Share interest, the Per Share Insurance Payment or any dividends or distributions with respect to NB&T Common Shares delivered to a public official if required by any applicable abandoned property, escheat or similar law.

(l) Withholding Rights . NB&T or the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Old Certificates such amounts as NB&T or the Exchange Agent is required to deduct and withhold with respect to the making of such payment under the Code, or any other provision of domestic or foreign tax law (whether national, federal, state, provincial, local or otherwise). To the extent that amounts are so withheld and paid over to the appropriate taxing authority by NB&T or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Old Certificates.

(m) Waiver . The Surviving Corporation may from time to time, in the case of one or more persons, waive one or more of the rights provided to it in this Article III to withhold certain payments, deliveries and distributions; and no such waiver shall constitute a waiver of its rights thereafter to withhold any such payment, delivery or distribution in the case of any person.

(n) Anti-Dilution Provisions . The Per Share Stock Consideration shall be adjusted fully to reflect any occurrence, subsequent to the date of this Agreement but prior to the Effective Time, pursuant to which the outstanding NB&T Common Shares shall have been increased, decreased, changed into or exchanged for a different number or kind of shares or securities through reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other like changes in NB&T’s capitalization. Such an adjustment shall not be required due to NB&T’s repurchase of shares in connection with NB&T’s employee stock ownership plan. Nothing contained herein shall be deemed to permit any action which may be proscribed by this Agreement.

(o) Dividends and Distributions . No dividends or other distributions with respect to NB&T Common Shares with a record date occurring after the Effective Time shall be paid to the holder of any unsurrendered Old Certificate representing CNC Common Shares converted in the Parent Merger into the right to receive shares of such NB&T Common Shares until the holder thereof shall be entitled to receive NB&T Common Share certificates in Exchange therefor in accordance with the procedures set forth in this Section 3.03. After becoming so entitled in accordance with this Section 3.03(o), the record holder thereof also shall be entitled to receive any such dividends or other distributions, without any interest thereon,

 

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which had become payable after the Effective Time with respect to NB&T Common Shares such holder had the right to receive upon surrender of the Old Certificates.

3.04 Dissenting Shares . Anything contained in this Agreement or elsewhere to the contrary notwithstanding, any holder of an outstanding CNC Common Share that seeks relief as a dissenting shareholder under Section 1701.85 of the OGCL shall thereafter have only such rights (and shall have such obligations) as are provided therein, and the Surviving Corporation shall be required to deliver only such cash payments to which the Dissenting Shares are entitled pursuant to Section 1701.85 of the OGCL. If any holder of Dissenting Shares shall forfeit such right to payment of the fair value under Section 1701.85 of the OGCL, each holder’s Dissenting Shares shall thereupon be deemed to have been converted as of the Effective Time into the right to receive the Per Share Cash Consideration, without interest.

3.05 Tax Consequences . For federal income tax purposes, the Parent Merger is intended to constitute a reorganization within the meaning of Section 368(a) of the Code. The parties hereto adopt this Agreement as a “plan of reorganization” within the meaning of Treasury Department regulation sections 1.368-2(g) and 1.368-3(a).

ARTICLE IV

Actions Pending Consummation of Merger

4.01 Forbearances of CNC . From the date hereof until the Effective Time, except as expressly contemplated or permitted by this Agreement or required by an applicable Regulatory Order, without the prior written consent of NB&T, CNC shall not, and shall cause each of its Subsidiaries not to:

(a) Ordinary Course . Conduct the business of CNC and its Subsidiaries other than in the ordinary and usual course or fail to use reasonable efforts to preserve intact their respective business organizations and assets and maintain their respective rights, franchises and existing relations with customers, suppliers, employees and business associates, or voluntarily take any action which, at the time taken, is reasonably likely to have an adverse effect upon CNC’s ability to perform any of its material obligations under this Agreement or prevent or materially delay the consummation of the transactions contemplated by this Agreement, or enter into any new line of business or materially change its lending, investment, underwriting, risk, asset liability management or other banking and operating policies, except as required by applicable law or policies imposed by any Governmental Authority or by any applicable Regulatory Order.

(b) Capital Stock . (i) Issue, sell or otherwise permit to become outstanding, or authorize the creation of, any additional CNC Common Shares or any Rights, (ii) enter into any agreement with respect to the foregoing, (iii) permit any additional CNC Common Shares to become subject to new grants of employee or director stock options, other Rights or similar stock-based employee rights, or (iv) effect any recapitalization, reclassification, stock split, or similar change in capitalization.

(c) Dividends; distributions; adjustments . (i) Make, declare, pay or set aside for payment any dividend or distribution on any shares of its capital stock, other than dividends

 

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from wholly-owned Subsidiaries to CNC, or (ii) directly or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise acquire, any shares of its capital stock.

(d) Compensation; Employment Agreements . Enter into, modify, amend, renew or terminate any employment, consulting, severance, retention, change in control, or similar agreements or arrangements with any director, consultant, officer or employee of CNC or its Subsidiaries, hire or engage any full-time employee or consultant, other than as replacements for positions existing on the date hereof, or grant any salary or wage increase or bonus or increase any employee benefit (including incentive or bonus payments), except (i) as Previously Disclosed, or (ii) for changes that are required by applicable law.

(e) Benefit Plans . Enter into, establish, adopt, amend, modify or terminate (except (i) as may be required by applicable law, (ii) to satisfy Previously Disclosed contractual obligations existing as of the date hereof, (iii) as contemplated by this Agreement or (iv) the regular annual renewal of insurance contracts) any pension, retirement, stock option, stock purchase, savings, profit sharing, deferred compensation, change in control, consulting, bonus, group insurance or other employee benefit, incentive or welfare contract (including related administrative services contracts), plan or arrangement, or any trust agreement (or similar arrangement) related thereto, in respect of any director, consultant, officer or employee of CNC or its Subsidiaries, or take any action to accelerate the payment of benefits or the vesting or exercisability of stock options, restricted stock or other compensation or benefits payable thereunder.

(f) Dispositions . Sell, transfer, mortgage, pledge, encumber or otherwise dispose of or discontinue any of its assets, deposits, business or properties except in the ordinary course of business for full and fair consideration actually received.

(g) Acquisitions . Acquire (other than by way of foreclosures or acquisitions of control in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the ordinary and usual course of business consistent with past practice) all or any portion of the assets, business, deposits or properties of any other Person.

(h) Governing Documents . Amend the CNC Articles, the CNC Code or the articles of incorporation, articles of association, regulations or bylaws (or similar governing documents) of any of CNC’s Subsidiaries.

(i) Accounting Methods . Implement or adopt any change in its accounting principles, practices or methods, other than as may be required by generally accepted accounting principles.

(j) Material Contracts . Except in the ordinary course of business consistent with past practice, enter into or terminate any Material Contract or amend or modify in any material respect any of its existing Material Contracts.

(k) Claims . Except in the ordinary course of business consistent with past practice, settle any claim, action or proceeding, including any claim, action or proceeding instituted by a Governmental Authority, except for any claim, action or proceeding which does not involve precedent for other material claims, actions or proceedings and which involves solely

 

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money damages in an amount, individually or in the aggregate for all such settlements, that is not material to CNC and its Subsidiaries, taken as a whole.

(l) Adverse Actions . (i) Take any action while knowing that such action would, or is reasonably likely to, prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code; or (ii) knowingly take any action that is intended or is reasonably likely to result in (I) 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, (II) any of the conditions to the Merger set forth in Article VII not being satisfied or (III) a material violation of any provision of this Agreement except, in each case, as may be required by applicable law or by any Governmental Authority.

(m) Risk Management . Except pursuant to applicable law or as required by any Governmental Authority, (i) implement or adopt any material change in its interest rate and other risk management policies, procedures or practices; (ii) fail to follow its existing policies or practices with respect to managing its exposure to interest rate and other risk; (iii) fail to use commercially reasonable means to avoid any material increase in its aggregate exposure to interest rate risk; or (iv) fail to follow its existing policies or practices with respect to managing its fiduciary risks.

(n) Borrowings . Borrow or agree to borrow any funds, including but not limited to pursuant to repurchase transactions, or directly or indirectly guarantee or agree to guarantee any obligations of any other Person, except in each case in the ordinary course of business and with a final maturity of less than one year.

(o) Indirect Loans . Make or purchase any indirect or brokered loans.

(p) Capital Expenditures . Except as Previously Disclosed, make any capital expenditure or capital additions or improvements which individually exceed $10,000 or in the aggregate exceed $50,000.

(q) Lending . (i) Establish any new lending programs or make any changes in the policies of any Subsidiary of CNC concerning which Persons may approve loans; or (ii) originate or issue a commitment to originate any loan in a principal amount in excess of $250,000.

(r) Taxes . (i) Fail to prepare or file or cause to be prepared or filed in a timely manner consistent with past practice all Tax Returns that are required to be filed (with extensions) at or before the Effective Time; (ii) fail to pay any Tax due (whether or not required to be shown on any such Tax Returns); or (iii) make, change or revoke any Tax election or Tax accounting method, file any amended Tax return, settle any Tax claim or assessment or consent to the extension or waiver of any statute of limitations with respect to Taxes (or offer or agree to do any of the foregoing or surrender its rights to do any of the foregoing or to claim any refund of Taxes or file any amended Tax Return).

(s) Offices and Facilities . (i) Open, close or relocate any offices at which business is conducted (including any ATMs); or (ii) fail to use commercially reasonable efforts

 

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to maintain and keep their respective properties and facilities in their present condition and working order, ordinary wear and tear excepted.

(t) Interest Rates . Increase or decrease the rate of interest paid on time deposits or certificates of deposit, except in a manner consistent with past practices in relation to rates prevailing in the relevant market.

(u) Foreclosures . Foreclose upon or otherwise take title to or possession or control of any real property or entity thereon without first obtaining a Phase I Environmental Site Assessment performed pursuant to ASTME 1527-05 thereon which indicates that the property is free of Hazardous Material; provided , however , that no such report shall be required to be obtained with respect to single-family residential real property of one acre or less to be foreclosed upon unless CNC or its Subsidiary has reason to believe such real property may contain any such Hazardous Material.

(v) Deposit Liabilities . Except as set forth in the CNC Disclosure Schedule, cause any material adverse change in the amount or general composition of deposit liabilities other than in the ordinary course of business.

(w) Securities Transactions . Enter into any securities transaction or otherwise acquire any investment security.

(x) Commitments . Agree or commit to do any of the foregoing.

4.02 Forbearances of NB&T . From the date hereof until the Effective Time, except as expressly contemplated or permitted by this Agreement, without the prior written consent of CNC, NB&T shall not, and shall cause each of its Subsidiaries not to:

(a) Extraordinary Dividends . Make, declare, pay or set aside for payment any extraordinary or special dividends or distributions on any shares of its capital stock, other than dividends from wholly-owned Subsidiaries to NB&T.

(b) Accounting Methods . Implement or adopt any change in its accounting principles, practices or methods, other than as may be required by generally accepted accounting principles.

(c) Adverse Actions . (i) Take any action while knowing that such action would, or is reasonably likely to, prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code; or (ii) knowingly take any action that is intended or is reasonably likely to result in (I) 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, (II) any of the conditions to the Merger set forth in Article VII not being satisfied or (III) a material violation of any provision of this Agreement except, in each case, as may be required by applicable law or by any Governmental Authority; provided , however , that nothing contained herein shall limit the ability of NB&T to exercise its rights under the Voting Agreement.

 

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(d) Governing Documents . Amend the NB&T Articles, the NB&T Code or any of the governing documents or the articles of association or bylaws of NB&T Bank in a manner that would adversely affect the economic or other benefits of the Merger to the holders of the CNC Common Shares.

(e) Commitments . Agree or commit to do any of the foregoing.

ARTICLE V

Representations and Warranties

5.01 Disclosure Schedules . On or prior to the date hereof, NB&T delivered to CNC a schedule, and CNC delivered to NB&T a schedule (each respectively, its “ 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, as an exception to one or more representations or warranties contained in Section 5.03 or 5.04 or to one or more of its respective covenants contained in Article IV or Article VI; provided , however , that the mere inclusion of an item in a Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by a party that such item represents a material exception or fact, event or circumstance or that such item is reasonably likely to have or result in a Material Adverse Effect on the party making the representation.

5.02 Standard . No representation or warranty of CNC or NB&T contained in Section 5.03 or 5.04 shall be deemed untrue or incorrect, and no party hereto shall be deemed to have breached a representation or warranty, as a consequence of the existence of any fact, event or circumstance unless such fact, circumstance or event, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty contained in Section 5.03 or 5.04, has had, or is reasonably likely to have, a Material Adverse Effect.

5.03 Representations and Warranties of CNC . Subject to Sections 5.01 and 5.02 and except as Previously Disclosed in a Section of its Disclosure Schedule corresponding to the relevant Section below, CNC hereby represents and warrants to NB&T that the following are true and correct:

(a) Organization, Standing and Authority . CNC is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio and is duly qualified to do business and is in good standing in any foreign jurisdictions where its ownership or leasing of property or assets or the conduct of its business requires it to be so qualified. The foreign jurisdictions in which CNC conducts business are set forth in the CNC Disclosure Schedule. CNC is registered as a bank holding company under the BHCA.

(b) Capital Structure of CNC . As of the date of this Agreement, the authorized capital stock of CNC consists solely of 1,500,000 CNC Common Shares, of which 624,459 shares are outstanding and no shares are subject to options. As of the date of this Agreement, no CNC Common Shares were held in the CNC 401(k) Plan, and 32,674 shares of Treasury Stock were held by CNC or otherwise owned by CNC or its Subsidiaries. The outstanding CNC Common Shares have been duly authorized, are validly issued and outstanding, fully paid and nonassessable, and were not issued in violation of any preemptive rights. As of

 

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the date hereof, except as Previously Disclosed in its Disclosure Schedule: (A) there are no CNC Common Shares authorized and reserved for issuance, and (B) CNC does not have any commitment to authorize, issue or sell any CNC Common Shares or Rights, except pursuant to this Agreement. As of the date hereof, CNC does not have any Rights issued or outstanding with respect to CNC Common Shares.

(c) Subsidiaries .

(i)(A) CNC Bank is the only Subsidiary of CNC, (B) CNC owns, directly or indirectly, all of the issued and outstanding equity securities of CNC Bank, (C) no equity securities of CNC Bank are or may become required to be issued (other than to CNC) by reason of any Right or otherwise, (D) there are no contracts, commitments, understandings or arrangements by which CNC Bank is or may be bound to sell or otherwise transfer any equity securities of CNC Bank (other than to CNC), (E) there are no contracts, commitments, understandings, or arrangements relating to CNC’s rights to vote or to dispose of such securities and (F) all of the equity securities of CNC Bank held by CNC are fully paid and nonassessable (except pursuant to 12 U.S.C. Section 55) and are owned by CNC free and clear of any Liens.

(ii) Except as Previously Disclosed, CNC does not own beneficially, directly or indirectly, any equity securities or similar interests of any Person, or any interest in a partnership or joint venture of any kind, other than CNC Bank.

(iii) CNC Bank is an “insured depository institution” as defined in the Federal Deposit Insurance Act and applicable regulations thereunder and is a member of the Federal Reserve System and of the Federal Home Loan Bank of Cincinnati.

(iv) Except as Previously Disclosed, CNC Bank does not own beneficially, directly or indirectly, any equity securities or similar interests of any Person, or any interest in a partnership or joint venture of any kind.

(v) CNC Bank is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, and is duly qualified to do business and is in good standing in any foreign jurisdictions where its ownership or leasing of property or assets or the conduct of its business requires it to be so qualified.

(d) Corporate Power . Each of CNC and CNC Bank has full corporate power and authority to carry on its business as it is now being conducted and to own all of its properties and assets. Subject to the adoption of this Agreement by the holders of two thirds of the outstanding CNC Common Shares entitled to vote thereon (the “ CNC Shareholder Adoption ”) and the approval of this Agreement and the Merger by applicable Regulatory Authorities, CNC has the corporate power and authority to execute, deliver and perform its obligations under this Agreement, and CNC Bank has the corporate power and authority to consummate the Subsidiary Merger in accordance with the terms of this Agreement.

(e) Corporate Authority; Authorized and Effective Agreement . Subject to the CNC Shareholder Adoption, this Agreement and the transactions contemplated hereby have been authorized by all necessary corporate action of CNC and the CNC Board prior to the date of this

 

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Agreement. The Agreement to Merge, when executed by CNC Bank, shall have been approved by the Board of Directors of CNC Bank and by CNC, as the sole shareholder of CNC Bank. This Agreement is a valid and legally binding obligation of CNC, enforceable against CNC in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles).

(f) Regulatory Approvals; No Defaults .

(i) No consents or approvals of, or filings or registrations with, any Governmental Authority or with any third party are required to be made or obtained by CNC or CNC Bank in connection with the execution, delivery or performance by CNC of this Agreement or the consummation of the transactions contemplated hereby, including the Merger, except for (A) the filings of applications, notices and the Agreement to Merge, as applicable, with federal and state banking authorities to approve the transactions contemplated by the Agreement, (B) the filing of the certificate of merger with the OSS pursuant to the OGCL, and (C) the receipt of the approvals set forth in Section 7.01(b). As of the date hereof, CNC is not aware of any reason why the approvals set forth in Section 7.01(b) will not be received without the imposition of a condition, restriction or requirement of the type described in Section 7.01(b).

(ii) Subject to the CNC Shareholder Adoption, the receipt of the approvals set forth in Section 7.01(b), the expiration of related regulatory waiting periods, and the required filings under federal and state securities laws, the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the Merger, do not and will not (A) result in a breach or violation of, or a default under, or give rise to any Lien, any acceleration of remedies or any right of termination under, any law, rule or regulation or any judgment, decree, order, governmental permit or license, or agreement, indenture or instrument of CNC or of CNC Bank or to which CNC or CNC Bank or their properties are subject or bound, (B) constitute a breach or violation of, or a default under, the CNC Articles or the CNC Code of Regulations or (C) require any consent or approval under any such law, rule, regulation, judgment, decree, order, governmental permit or license, agreement, indenture or instrument.

(g) Financial Statements; Material Adverse Effect; Internal Controls .

(i) CNC has delivered or will deliver to NB&T (a) audited consolidated financial statements for each of the fiscal years ended December 31, 2008, 2007, 2006, 2005, and 2004, respectively, consisting of consolidated balance sheets and the related consolidated statements of income and shareholde