Exhibit 2
AGREEMENT AND PLAN OF MERGER
dated as of
August 4, 2004
by
and among
FIRST DEFIANCE FINANCIAL CORP.,
FIRST FEDERAL BANK OF THE MIDWEST,
COMBANC, INC.
and
THE COMMERCIAL BANK
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICAL ONE -- THE MERGER
................................................... 1
1.01. Corporate
Merger...................................................
1
1.02. Effective
Time.....................................................
2
1.03. Governing Documents of the
Surviving Corporation................... 2
1.04. Bank
Merger........................................................
2
1.05. Structure of
Combination........................................... 2
ARTICLE TWO -- CONVERSION OF SHARES;
SURRENDER OF CERTIFICATES............... 2
2.01. Conversion of ComBanc
Shares....................................... 2
2.02. Exchange of ComBanc
Certificates................................... 2
2.03. Dissenting ComBanc
Shares.......................................... 4
2.04. Anti-Dilution
Provisions........................................... 7
2.05. FDEF
Shares........................................................
7
2.06. Tax
Consequences...................................................
7
ARTICLE THREE -- REPRESENTATIONS AND
WARRANTIES OF COMBANC AND
COMMERCIAL BANK
.............................................................
7
3.01. Corporate
Status...................................................
8
3.02. Capitalization of
ComBanc.......................................... 9
3.03. Capitalization of Commercial
Bank.................................. 9
3.04. Corporate
Proceedings.............................................. 10
3.05.
Authorization......................................................
10
3.06. Financial Statements of
ComBanc.................................... 10
3.07. SEC
Filings........................................................
11
3.08. Absence of Undisclosed
Liabilities................................. 11
3.09. Absence of
Changes................................................. 11
3.10.
Loans..............................................................
11
3.11. Allowance for Loan
Losses.......................................... 12
3.12. Reports and
Records................................................ 12
3.13.
Taxes..............................................................
12
3.14. Property and
Title................................................. 13
3.15. Legal
Proceedings..................................................
14
3.16. Compliance with Laws and
Regulations............................... 14
3.17. No
Conflict........................................................
15
3.18. Brokers, Finders and
Others........................................ 15
3.19. Employment
Agreements.............................................. 15
3.20. Employee Benefit
Plans............................................. 16
3.21.
Insurance..........................................................
17
3.22. Governmental and Third-Party
Proceedings........................... 18
3.23.
Contracts..........................................................
18
3.24. Environmental
Matters.............................................. 18
-i-
<PAGE>
3.25. ComBanc
Information................................................ 19
3.26. CRA
Compliance.....................................................
19
3.27. Ownership of FDEF
Shares........................................... 19
3.28. Fairness
Opinion................................................... 20
3.29. Real Property
Interest............................................. 20
3.30. Internal
Controls.................................................. 20
ARTICLE FOUR -- REPRESENTATIONS AND
WARRANTIES OF FDEF AND FIRST
FEDERAL
.....................................................................
21
4.01. Corporate
Status................................................... 21
4.02. Corporate
Proceedings.............................................. 21
4.03. Capitalization of
FDEF............................................. 21
4.04. Authorized and Effective
Agreement................................. 22
4.05. No
Conflict........................................................
23
4.06. SEC
Filings........................................................
23
4.07. Financial Statements of FDEF
and First Federal..................... 23
4.08. Brokers, Finders and
Others........................................ 24
4.09. Governmental and Third-Party
Proceedings........................... 24
4.10. Absence of Undisclosed
Liabilities................................. 24
4.11. Absence of
Changes................................................. 24
4.12. Legal
Proceedings..................................................
25
4.13. Regulatory
Matters................................................. 25
4.14. Ownership of ComBanc
Shares........................................ 25
ARTICLE FIVE -- FURTHER COVENANTS OF
COMBANC AND COMMERCIAL BANK............. 25
5.01. Operation of
Business.............................................. 25
5.02.
Notification.......................................................
28
5.03. Acquisition
Proposals.............................................. 29
5.04. Delivery of
Information............................................ 29
5.05. Affiliates Compliance with
the Securities Act...................... 29
5.06. Voting
Agreement................................................... 29
5.07. No
Control.........................................................
29
5.08. Accounting
Policies................................................ 30
5.09. ComBanc
Meeting.................................................... 30
5.10. Tax
Matters........................................................
30
5.11. Insurance
Coverage................................................. 31
5.12. Supplemental
Assurances............................................ 31
ARTICLE SIX -- FURTHER COVENANTS OF
FDEF..................................... 31
6.01. Employees; Employee
Benefits....................................... 31
6.02. Exchange
Listing................................................... 32
6.03.
Notification.......................................................
32
6.04.
Indemnification....................................................
32
6.05. Board of
Directors................................................. 33
-ii-
<PAGE>
6.06. Advisory
Board..................................................... 33
ARTICLE SEVEN -- FURTHER OBLIGATIONS OF THE
PARTIES.......................... 34
7.01. Cooperative
Action................................................. 34
7.02. Press
Releases.....................................................
34
7.03. Proxy/Prospectus;
Registration Statement........................... 34
7.04. Regulatory
Applications............................................ 35
7.05. Termination of Profit
Sharing Plan................................. 35
7.06.
Confidentiality....................................................
36
ARTICLE EIGHT -- CONDITIONS PRECEDENT TO
THE OBLIGATIONS OF THE
PARTIES
.....................................................................
36
8.01. Conditions to the
Obligations of FDEF and First Federal............ 36
8.02. Conditions to the
Obligations of ComBanc and Commercial Bank....... 37
8.03. Mutual
Conditions.................................................. 38
ARTICLE NINE --
CLOSING......................................................
38
9.01.
Closing............................................................
38
9.02. Closing Deliveries Required
of FDEF and First Federal.............. 39
9.03. Closing Deliveries Required
of ComBanc and Commercial Bank......... 39
ARTICLE TEN --
TERMINATION...................................................
39
10.01.
Termination........................................................
39
10.02. Effect of
Termination.............................................. 40
10.03. Termination
Fee.................................................... 40
10.04. Force
Majeure......................................................
40
ARTICLE ELEVEN --
MISCELLANEOUS.............................................. 41
11.01.
Notices............................................................
41
11.02.
Counterparts.......................................................
42
11.03. Entire
Agreement................................................... 42
11.04. Successors and
Assigns............................................. 42
11.05.
Captions...........................................................
42
11.06. Governing
Law...................................................... 42
11.07. Payment of Fees and
Expenses....................................... 42
11.08.
Amendment..........................................................
42
11.09.
Waiver.............................................................
42
11.10. No Third-Party
Rights.............................................. 42
11.11. Waiver of Jury
Trial............................................... 43
11.12.
Severability.......................................................
43
11.13. Non-Survival of Representations,
Warranties and Covenants.......... 43
-iii-
<PAGE>
GLOSSARY OF DEFINED TERMS
The following
terms, when used in this Agreement, have the meanings
ascribed to them in the corresponding
Sections of this Agreement listed below:
"Acquisition Transactions"
-- Section
5.03
"Aggregated Cash Consideration"
-- Section
2.01(c)
"Agreement"
-- Preamble
"Average"
-- Section
2.01(b)
"Bank Merger"
-- Preamble
"Bank Merger Agreement"
-- Preamble
"BHCA"
-- Section
3.01(a)
"Cash Election Shares"
-- Section
2.02(a)
"CERCLA"
--
Section 3.24
"Closing"
-- Section
9.01
"Closing Date"
-- Section
9.01
"Code"
-- Section
2.02(f)
"ComBanc"
-- Preamble
"ComBanc Balance Sheet Date"
-- Section
3.06
"ComBanc Certificates"
-- Section
2.02(a)
"ComBanc Disclosure Schedule"
-- Article
Three
"ComBanc Dissenting Share"
-- Section
2.03
"ComBanc Financial Statements"
-- Section
3.06
"ComBanc Meeting"
-- Section
3.04(b)
"ComBanc Real Properties"
-- Section
3.14(a)
"ComBanc Shares"
-- Section
1.01
"ComBanc's Counsel"
-- Section
7.01
"ComBanc's Financial Advisor"
-- Section
3.18
"Commercial Bank"
-- Preamble
"Commercial Bank Real Estate Collateral"
-- Section 3.24
"Compensation and Benefit Plans"
-- Section
3.20(a)
"Consultants"
-- Section
3.20(a)
"Continuing Employees"
-- Section
6.01
"Corporate Merger"
-- Preamble
"CRA"
-- Section
3.26
"DGCL"
-- Section
1.01
"Directors"
-- Section
3.20(a)
"Effective Time"
-- Section
1.02
"Election Deadline"
--
Section
2.02(b)
"Election Form"
-- Section
2.02(a)
"Employees"
-- Section
3.20(a)
"Environmental Law"
-- Section
3.24
"ERISA"
-- Section 3.20(a)
"ERISA Affiliate"
-- Section
3.20(c)
"Exchange Act"
-- Section
3.07
"Exchange Agent"
-- Section
2.02(a)
"Exchange Ratio"
-- Section
2.01(a)
"FDEF"
-- Preamble
-iv-
<PAGE>
"FDEF Filed SEC Documents"
-- Section
4.10
"FDEF Financial Statements"
-- Section
4.07
"FDEF Shares"
-- Section
2.01(a)
"FDEF Stock Option Plans"
-- Section
4.03(a)
"FDEF Stock Options"
-- Section
4.03(a)
"FDEF's Counsel"
-- Section
7.01
"FDIC"
-- Section
3.01(b)
"Federal Reserve"
-- Section
3.01(b)
"First Federal"
-- Preamble
"GAAP"
-- Section
3.06
"Governmental Authority"
-- Section
3.16(c)
"HOLA"
-- Section
4.01(a)
"Hazardous Substances"
-- Section
3.24
"IRS"
-- Section
3.13
"Information"
-- Section
7.06
"Loan Assets"
-- Section
3.10
"Loan Documentation"
-- Section
3.10
"material"
-- Section
3.01(d)
"material adverse effect"
-- Section
3.01(d)
"MRP"
-- Section
4.03(a)
"Nasdaq"
-- Section
4.09
"No-Election Shares"
-- Section
2.02(a)
"ODFI"
--
Section
3.01(b)
"OGCL"
-- Section
1.01
"OTS"
-- Section
4.01(b)
"Officers"
-- Section
3.19(a)
"Outstanding ComBanc Shares"
--
Section
2.01(c)
"PCBs"
-- Section
3.24
"Pension Plan"
-- Section
3.20(b)
"Per Share Cash Consideration"
-- Section
2.01(a)
"Per Share Reduction"
-- Section
2.01(d)
"Per Share Stock Consideration"
-- Section
2.01(a)
"Proxy/Prospectus"
-- Section
7.03(a)
"Reallocated Cash Shares"
-- Section
2.02(c)
"Reallocated Stock Shares"
-- Section
2.02(c)
"Registration Statement"
-- Section
7.03(a)
"Regulatory Authorities"
-- Section
3.16(a)
"Rule 145 Affiliates"
-- Section
5.05
"SEC"
-- Section
3.01(c)
"Securities Act"
-- Section
3.20(b)
"Stock Election Shares"
-- Section
2.02(a)
"Subsidiary"
-- Section
3.01(c)
"Surviving Corporation"
-- Section
1.01
"Tax"
-- Section
3.13
"Tax Returns"
-- Section
3.13
"Updated ComBanc Disclosure Schedule"
--
Section 5.02
-v-
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT
AND PLAN OF MERGER (the "Agreement"), dated as of August
4, 2004, is made and entered into by and
among First Defiance Financial Corp.,
an Ohio corporation ("FDEF"); First Federal
Bank of the Midwest, a federal
savings bank ("First Federal"); ComBanc,
Inc., a Delaware corporation
("ComBanc"); and The Commercial Bank, an
Ohio commercial bank ("Commercial
Bank").
W I
T N E S S E T H:
WHEREAS, the
Boards of Directors of ComBanc, Commercial Bank, FDEF and
First Federal have each determined that it
is in the best interests of their
respective corporations and shareholders
for ComBanc to merge with and into
FDEF (the "Corporate Merger") followed by
the merger of Commercial Bank with
and into First Federal (the "Bank Merger"),
upon the terms and subject to the
conditions set forth in and pursuant to the
terms of this Agreement and the
Bank Merger Agreement to be entered into by
and between First Federal and
Commercial Bank, the form of which is
attached hereto as Exhibit A (the "Bank
Merger Agreement"); and
WHEREAS, the
Boards of Directors of ComBanc, Commercial Bank, FDEF and
First Federal have each approved this
Agreement and the consummation of the
transactions contemplated hereby;
NOW, THEREFORE,
in consideration of the premises and the respective
representations, warranties, covenants,
agreements and conditions hereinafter
set forth, FDEF, First Federal, ComBanc and
Commercial Bank, intending to be
legally bound hereby, agree as follows:
ARTICLE ONE
THE MERGER
1.01. Corporate
Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as
defined in Section 1.02), ComBanc
shall merge with and into FDEF in
accordance with the Ohio General Corporation
Law (the "OGCL") and the Delaware General
Corporation Law (the "DGCL"). FDEF
shall be the continuing and surviving
corporation in the Corporate Merger,
shall continue to exist under the laws of
the State of Ohio, and shall be the
only one of FDEF and ComBanc to continue
its separate corporate existence after
the Effective Time. As used in this
Agreement, the term "Surviving Corporation"
refers to FDEF immediately after the
Effective Time. As a result of the
Corporate Merger, the outstanding common
stock, without par value, of ComBanc
(the "ComBanc Shares") and ComBanc's
treasury shares shall be converted or
cancelled in the manner provided in Article
Two.
-1-
<PAGE>
1.02. Effective Time.
The Effective Time of
the Corporate Merger shall
be the date and time upon which the last of
the following occurs: (a) the
filing of the appropriate certificate of
merger with the Ohio Secretary of
State, (b) the filing of the appropriate
certificate of merger with the
Delaware Secretary of State or (c) such
time thereafter as is agreed to in
writing by FDEF and ComBanc and provided in
the certificates of merger filed
as set forth above.
1.03. Governing
Documents of the Surviving Corporation. At the Effective
Time, the articles of incorporation and
code of regulations of FDEF as in
effect immediately prior to the Effective
Time shall be the articles of
incorporation and code of regulations of
the Surviving Corporation.
1.04. Bank Merger.
Following the Corporate Merger, FDEF shall cause the
Bank Merger to be completed in accordance
with the Bank Merger Agreement.
1.05. Structure of
Combination. With the consent of ComBanc, which consent
shall not be unreasonably withheld, FDEF
and First Federal may at any time
change the method of effecting the mergers
(including, without limitation, the
provisions of this Article One) if and to
the extent FDEF deems such change to
be desirable; provided, however, that no
such change shall (i) alter or change
the amount or composition of the per share
merger consideration described in
Section 2.01 of this Agreement; (ii) be
likely to materially delay or
jeopardize receipt of any required
regulatory approvals or materially delay
the satisfaction of any conditions to the
closing of the Corporate Merger; or
(iii) adversely affect the tax treatment of
ComBanc or ComBanc stockholders as
a result of receiving the per share merger
consideration. ComBanc and
Commercial Bank shall, if requested by
FDEF, enter into one or more amendments
to this Agreement in order to effect any
such change.
ARTICLE TWO
CONVERSION OF SHARES; SURRENDER OF CERTIFICATES
2.01. Conversion
of ComBanc Shares. At the Effective Time, by virtue of
the Corporate Merger and without any action
on the part of the holder thereof:
(a) Subject to
Sections 2.02, 2.03 and 2.04, each ComBanc Share issued
and outstanding immediately prior to the
Effective Time (other than ComBanc
Shares to be canceled in accordance with
Section 2.01(d) and ComBanc
Dissenting Shares, as defined in Section
2.03) shall be converted into the
right to receive, at the election of the
holder thereof pursuant to Section
2.02(a):
(i) the number of common shares, $.01 par value per share, of
FDEF
("FDEF Shares") that is equal to the
Exchange Ratio as defined in Section
2.01(b) (the "Per Share Stock
Consideration"), or
(ii) a cash amount equal to $17.20 (the "Per Share Cash
Consideration").
(b) Subject to
adjustments, if any, pursuant to Section 2.01(c), the
Exchange Ratio shall be a fraction the
numerator of which shall be $17.20 and
the denominator of which shall be the
average closing price of an FDEF Share
for the five consecutive trading days
ending one trading day prior to the
Effective Time (the "Average"); provided,
however, that in the event the
Average is less than $21.56, then the
Exchange Ratio shall equal 0.79769;
provided further, however, that in the
event the Average is greater than
$26.35, the Exchange Ratio shall equal
0.65266.
-2-
<PAGE>
(c)
Notwithstanding anything in this Agreement to the contrary, to
preserve the status of the Corporate Merger
as a tax-free reorganization
within the meaning of Section 368(a)(1)(A)
of the Code, if the aggregate value
of the FDEF Shares to be issued in
connection with the Corporate Merger, based
upon the closing price of the FDEF Shares
as reported on The Nasdaq Stock
Market ("Nasdaq") on the business day
immediately preceding the Effective
Time, would be less than 45% of the sum of
the Aggregate Cash Consideration
(as defined below), plus the value of the
FDEF Shares to be received by the
holders of the ComBanc Shares as
consideration in connection with the
Corporate Merger, then FDEF may, in its
sole discretion, increase the Per
Share Stock Consideration so that the
aggregate value of the FDEF Shares to be
issued to the holders of the ComBanc Shares
in connection with the Corporate
Merger, as determined based upon the
closing price of the FDEF Shares on
Nasdaq on the business day immediately
preceding the Effective Time, is equal
to 45% of the sum of the Aggregate Cash
Consideration, plus the value of the
FDEF Shares to be received by the holders
of the ComBanc Shares as
consideration in connection with the
Corporate Merger. For purposes of this
Agreement, the "Aggregate Cash
Consideration" shall be an amount equal to the
Per Share Cash Consideration multiplied by
50% of the number of ComBanc Shares
outstanding at the Effective Time (the
"Outstanding ComBanc Shares") (i.e.
excluding any of ComBanc's treasury
shares).
(d) If the
shareholders' equity of ComBanc on the Closing Date is less
than $22,500,000, excluding unrealized
accumulated other comprehensive income
related to ComBanc's investment portfolio,
the Per Share Stock Consideration
and the Per Share Cash Consideration to be
paid for the ComBanc Shares shall
be decreased by an amount equal to (i) the
difference between $22,500,000 and
the shareholders' equity of ComBanc on the
Closing Date, divided by (ii) the
number of ComBanc Shares outstanding on the
Closing Date (the "Per Share
Reduction"), and each ComBanc shareholder
shall be entitled to receive from
FDEF either (a) an amount equal to $17.20
less the Per Share Reduction or (b)
a number of FDEF Shares equal to the
Exchange Ratio, where the numerator of
the Exchange Ratio shall be $17.20 less the
Per Share Reduction, subject to
the adjustment set forth in Section
2.01(b).
(e) No
certificates or scrip representing fractional FDEF Shares shall
be
issued. Each holder of ComBanc Shares who
would otherwise be entitled to
receive a fractional FDEF Share shall
receive an amount of cash equal to the
product obtained by multiplying (i) the
fractional FDEF Share interest to
which such holder (after taking into
account all ComBanc Shares held at the
Effective Time by such holder) would
otherwise be entitled by (ii) the
Average.
(f) Any treasury
shares held by ComBanc and any ComBanc Shares owned by
FDEF for its own account shall be cancelled
and retired at the Effective Time
and no consideration shall be issued in
exchange therefor.
-3-
<PAGE>
2.02. Exchange
of ComBanc Certificates.
(a) Seven
business days after the Effective Time, or as soon as
practicable thereafter, FDEF, or an
exchange agent designated by FDEF to
discharge its duties pursuant to this
Section 2.02 (the "Exchange Agent"),
shall mail to each holder of record of
ComBanc Shares (i) a form letter of
transmittal and instructions for use in
surrendering for exchange the
certificates evidencing the ComBanc Shares
("ComBanc Certificates") that will
have been cancelled and extinguished as a
result of the Corporate Merger and
(ii) an election form ("Election Form").
The letter of transmittal shall
specify that the risk of loss and title to
the ComBanc Certificates shall pass
only upon delivery of such certificates as
specified in the letter of
transmittal. 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 FDEF
Shares with respect to all such
holder's ComBanc Shares, (ii) to elect to
receive cash with respect to all
such holder's ComBanc Shares, (iii) to
elect to receive 50% cash and 50% FDEF
Shares with respect to such holder's
ComBanc Shares, or (iv) to indicate that
such holder makes no such election with
respect to such holder's ComBanc
Shares ("No-Election Shares"). Any ComBanc
Shares with respect to which the
holder has elected to receive cash are
hereinafter referred to as "Cash
Election Shares," and any ComBanc Shares
with respect to which the holder has
elected to receive FDEF Shares are
hereinafter referred to as "Stock Election
Shares." Any ComBanc Shares with respect to
which the holder thereof shall
not, as of the Election Deadline (as
defined below), 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 ComBanc Dissenting Shares
shall be deemed to be Cash Election Shares
for purposes of the allocation
provisions of subsection (c) below, but in
no event shall such shares be
classified as Reallocated Stock Shares (as
defined in Section 2.02 (c)(ii)(B)
below).
(b) For purposes
of this Agreement, the term "Election Deadline" shall
mean 5:00 p.m., Eastern Time, on the 20th
day following but not including the
date of mailing of the Election Form, or
such other date upon which FDEF and
ComBanc shall mutually agree prior to the
Effective Time. Any election to
receive cash, FDEF Shares or a combination
of cash and FDEF Shares shall have
been properly made only if the Exchange
Agent shall have actually received a
properly completed Election Form by 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.
(c) The Exchange
Agent shall effect the allocation among holders of
ComBanc Shares of rights to receive cash,
FDEF Shares, or a combination of
cash and FDEF Shares in accordance with the
Election Forms as follows:
(i) If the number of Cash Election Shares is less than one-half
of
the Outstanding ComBanc Shares, then:
(A) each of the Cash Election Shares (other than ComBanc
Dissenting Shares) shall be converted into
the right to receive the Per Share
Cash Consideration,
-4-
<PAGE>
(B) the Exchange Agent will allocate first among the
No-Election
Shares (by the method of allocation
described in Section 2.02 (d)(i) below)
and then, if necessary, will allocate among
the Stock Election Shares (by the
method of allocation described in Section
2.02 (d)(ii) below), a sufficient
number of non-Cash Election Shares
("Reallocated Cash Shares") such that the
sum of the number of Cash Election Shares
plus the number of Reallocated Cash
Shares equals one-half of the Outstanding
ComBanc Shares, and each of the
Reallocated Cash Shares shall be converted
into the right to receive the Per
Share Cash Consideration, and
(C) each of the No-Election Shares (if any) and Stock Election
Shares which are not Reallocated Cash
Shares shall be converted into the right
to receive the Per Share Stock
Consideration.
(ii) If the number of Cash Election Shares is greater than
one-half
of the Outstanding ComBanc Shares,
then:
(A) each of the Stock Election Shares and No-Election Shares
shall be converted into the right to
receive the Per Share Stock
Consideration,
(B) the Exchange Agent will allocate among the Cash Election
Shares (other than ComBanc Dissenting
Shares) (by the method of allocation
described in Section 2.02(d) below), a
sufficient number of Cash Election
Shares ("Reallocated Stock Shares") such
that the sum of the number of
remaining Cash Election Shares (including
all of the ComBanc Dissenting
Shares) equals one-half of the Outstanding
ComBanc Shares, and each of the
Reallocated Stock Shares shall be converted
into the right to receive the Per
Share Stock Consideration, and
(C) each of the Cash Election Shares (other than ComBanc
Dissenting Shares) which are not
Reallocated Stock Shares shall be converted
into the right to receive the Per Share
Cash Consideration.
(iii) If the number of Cash Election Shares (including the
ComBanc
Dissenting Shares) is equal to one-half of
the Outstanding ComBanc Shares,
then subparagraphs (c)(i) and (ii) above
shall not apply and all No-Election
Shares and all Stock Election Shares shall
be converted into the right to
receive the Per Share Stock
Consideration.
(d) Any pro rata
allocation shall be performed by the Exchange Agent as
follows:
(i) If the Exchange Agent is required pursuant to Section
2.02 (c)(i)(B) 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 be allocated a pro
rata portion (based on such
holder's No-Election Shares relative to all
No-Election Shares) of the total
Reallocated Cash Shares.
(ii) If the Exchange Agent is required pursuant to Section
2.02(c)(i)(B) 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 be
allocated a pro rata portion (based
on such holder's Stock Election Shares
relative to all Stock Election Shares)
of the remainder of the total Reallocated
Cash Shares less the number of
No-Election Shares which are Reallocated
Cash Shares.
-5-
<PAGE>
(iii) If the Exchange Agent is required pursuant to Section
2.02(c)(ii)(B) to designate from among all
holders of Cash Election Shares the
Reallocated Stock Shares to receive the Per
Share Stock Consideration, each
holder of Cash Election Shares shall be
allocated a pro rata portion (based on
such holder's Cash Election Shares relative
to all Cash Election Shares) of
the remainder of the total Reallocated
Stock Shares less the number of
No-Election Shares which are Reallocated
Stock Shares. For purposes of this
Section 2.02(d)(iii), ComBanc Dissenting
Shares shall not be considered to be
Cash Election Shares.
(e) Upon
surrender of a ComBanc Certificate for cancellation, together
with a letter of transmittal, duly
executed, the holder of such ComBanc
Certificate shall be entitled to receive in
exchange therefor a certificate
representing the full number of FDEF Shares
and/or the amount of cash into
which the aggregate number of ComBanc
Shares previously represented by such
surrendered ComBanc Certificate shall have
been converted pursuant to this
Agreement., and the ComBanc Certificate so
surrendered shall thereafter be
cancelled. All payments made upon the
surrender of ComBanc Certificates
pursuant to this Article Two shall be
deemed to have been made in full
satisfaction of all rights pertaining to
the shares evidenced by such ComBanc
Certificates.
(f) If any
ComBanc Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that
fact by the person claiming such
ComBanc Certificate to be lost, stolen or
destroyed and, if required by FDEF
in its sole discretion, the posting by such
person of a bond in such amount as
FDEF may determine is reasonably necessary
as indemnity against any claim that
may be made against it with respect to such
ComBanc Certificate, the Exchange
Agent shall issue in exchange for such
lost, stolen or destroyed ComBanc
Certificate the cash and/or FDEF Shares
(and cash in lieu of fractional FDEF
Share interests, if any) deliverable in
respect thereof.
(g) None of
FDEF, ComBanc, the Exchange Agent or the Surviving
Corporation shall be liable to any former
holder of ComBanc Shares for any
payment of the Per Share Stock
Consideration, the Per Share Cash
Consideration, any cash in lieu of a
fractional FDEF Share interest or any
dividends or distributions with respect to
FDEF Shares delivered to a public
official if required by any applicable
abandoned property, escheat or similar
law.
(h) No dividends
or other distributions declared after the Effective Time
with respect to FDEF Shares and payable to
the holders of record thereof after
the Effective Time shall be paid to the
holder of any unsurrendered ComBanc
Certificate until it is surrendered by the
holder thereof. Subject to the
effect, if any, of applicable law, after
the subsequent surrender and exchange
of a ComBanc Certificate, the record holder
thereof shall be entitled to
receive any dividends or other
distributions, without any interest thereon,
which became payable with respect to the
FDEF Shares represented by such
ComBanc Certificate.
(i) After the
Effective Time, there shall be no further registration or
transfer of ComBanc Shares on the stock
transfer books of ComBanc. In the
event that, after the Effective Time,
ComBanc Certificates are presented for
transfer, they shall be cancelled and
exchanged as provided in this Article
Two.
-6-
<PAGE>
(j) FDEF or the
Exchange Agent shall be entitled to deduct and withhold
from the Per Share Stock Consideration or
the Per Share Cash Consideration
such amounts as FDEF or the Exchange Agent
is required to deduct and withhold
with respect to the making of such payment
under the Internal Revenue Code of
1986, as amended (the "Code"), or any other
provision of domestic or foreign
tax law (whether national, federal, state,
provincial, local or otherwise). To
the extent that amounts are so withheld and
paid over to the appropriate
taxing authority by FDEF 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 ComBanc Certificates.
(k) The
Surviving Corporation may from time to time waive one or more
of
the rights provided to it in this Article
Two to withhold certain payments,
deliveries and distributions; and no such
waiver shall constitute a waiver of
its rights thereafter to withhold any such
payment, delivery or distribution
in the case of any person.
2.03. Dissenting
ComBanc Shares. Anything contained in this Agreement or
elsewhere to the contrary notwithstanding,
if any holder of an outstanding
ComBanc Share dissents from the Corporate
Merger pursuant to Section 262 of
the DGCL and is thereby entitled to
appraisal rights thereunder (a "ComBanc
Dissenting Share"), then such ComBanc
Dissenting Share shall be extinguished
but shall not be converted into the right
to receive the Per Share Stock
Consideration or the Per Share Cash
Consideration. Instead, such ComBanc
Dissenting Share shall be entitled only to
such rights (and shall have such
obligations) as are provided in Section 262
of the DGCL.
2.04.
Anti-Dilution Provisions. The Exchange Ratio shall be adjusted
to
reflect any occurrence subsequent to the
date of this Agreement but prior to
the Effective Time, pursuant to which the
outstanding FDEF Shares shall have
been or will be 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 FDEF's
capitalization.
2.05. FDEF
Shares. Each FDEF Share issued and outstanding immediately
prior to the Effective Time shall continue
to be issued and outstanding and
unaffected by the Corporate Merger.
2.06. Tax
Consequences. For federal income tax purposes, the Corporate
Merger is intended to constitute a
reorganization within the meaning of
Section 368(a) of the Code. The parties
hereto hereby adopt this Agreement as
a "plan of reorganization" within the
meaning of Treasury Department
regulation sections 1.368-2(g) and
1.368-3(a).
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF
COMBANC AND COMMERCIAL BANK
Except as set
forth on a disclosure schedule prepared by ComBanc and
Commercial Bank (the "ComBanc Disclosure
Schedule"), ComBanc and Commercial
Bank represent and warrant to FDEF and
First Federal that each of the
following statements is true and
accurate:
-7-
<PAGE>
3.01. Corporate
Status.
(a) ComBanc is a
Delaware corporation and a bank holding company
registered under the Bank Holding Company
Act of 1956, as amended ("BHCA").
ComBanc is duly organized, validly existing
and in good standing under the
laws of the State of Delaware and has the
full corporate power and authority
to own its property, to carry on its
business as presently conducted, and to
enter into and, subject to the required
adoption of this Agreement by the
ComBanc stockholders and the obtaining of
appropriate approvals of
Governmental and Regulatory Authorities (as
defined below), perform its
obligations under this Agreement and
consummate the transactions contemplated
by this Agreement. ComBanc is not qualified
to do business in any other
jurisdiction or required to be so qualified
to do business in any other
jurisdiction except where the failure to be
so qualified individually or in
the aggregate would not reasonably be
expected to have a material adverse
effect on ComBanc. ComBanc has provided to
FDEF and First Federal true and
complete copies of the certificate of
incorporation and bylaws of ComBanc, in
each case as amended to the date of this
Agreement.
(b) Commercial
Bank is an Ohio commercial bank and a Federal Reserve
member bank, and is regulated by the Ohio
Division of Financial Institutions
(the "ODFI"), the Board of Governors of the
Federal Reserve System (the
"Federal Reserve"), and the Federal Deposit
Insurance Corporation (the
"FDIC"). Commercial Bank is duly organized,
validly existing and in good
standing under the laws of the State of
Ohio and has full power and authority,
corporate or otherwise, to own its property
and to carry on its business as
presently conducted. Commercial Bank is not
qualified to do business in any
other jurisdiction or required to be
qualified to do business in any other
jurisdiction, except where the failure to
be so qualified individually or in
the aggregate would not reasonably be
expected to have a material adverse
effect on Commercial Bank. Commercial Bank
has provided to FDEF and First
Federal true and complete copies of the
articles of incorporation and other
governing instruments of Commercial Bank,
in each case as amended to the date
of this Agreement.
(c) Commercial
Bank is the only Subsidiary (as defined below) of ComBanc.
For purposes of this Agreement,
"Subsidiary" has the meaning ascribed to such
term in Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange
Commission (the "SEC").
(d) As used in
this Agreement, (i) any reference to any event, change,
effect, development, circumstance or
occurrence being "material" with respect
to any entity means an event, change,
effect, development, circumstance or
occurrence that is or is reasonably likely
to be material in relation to the
financial condition, properties, assets,
liabilities, businesses or results of
operations of such entity and its
subsidiaries taken as a whole, and (ii) the
term "material adverse effect" means, with
respect to any entity, an event,
change, effect, development, circumstance
or occurrence that, individually or
together with any other event, change,
effect, development, circumstance or
occurrence, (A) has or would be reasonably
likely to have a material adverse
effect on the business, condition
(financial or otherwise), capitalization,
assets (tangible or intangible),
liabilities (accrued, contingent or
otherwise), operations, regulatory affairs,
financial performance or prospects
of such entity and its Subsidiaries, taken
as a whole, or (B) materially
impairs the ability of such entity to
perform its obligations under this
Agreement or to consummate the Corporate
Merger and the other transactions
contemplated by this Agreement.
-8-
<PAGE>
3.02.
Capitalization of ComBanc.
(a) The
authorized capital of ComBanc consists solely of 5,000,000
ComBanc Shares, of which 2,211,014 are
issued and outstanding and 164,986 are
held in treasury. All outstanding ComBanc
Shares have been duly authorized and
are validly issued, fully paid and
non-assessable, and were not issued in
violation of the preemptive rights of any
person. All ComBanc Shares issued
have been issued in compliance in all
material respects with all applicable
federal and state securities laws.
(b) As of the
date of this Agreement, there are no options, warrants,
calls, rights, commitments or agreements of
any character to which ComBanc is
a party or by which it is bound, obligating
ComBanc to issue, deliver or sell,
or cause to be issued, delivered or sold,
any additional ComBanc Shares or
obligating ComBanc to grant, extend or
enter into any such option, warrant,
call, right, commitment or agreement. As of
the date of this Agreement, there
are no outstanding contractual obligations
of ComBanc to repurchase, redeem or
otherwise acquire any ComBanc Shares.
(c) Except as
disclosed in Section 3.02(c) of the ComBanc Disclosure
Schedule, since December 31, 2003, ComBanc
has not (A) issued or permitted to
be issued any ComBanc Shares, or securities
exercisable for or convertible
into ComBanc Shares; (B) repurchased,
redeemed or otherwise acquired, directly
or indirectly through any ComBanc
Subsidiary or otherwise, any ComBanc Shares;
or (C) declared, set aside, made or paid to
the stockholders of ComBanc
dividends or other distributions on the
outstanding ComBanc Shares.
(d) No bonds,
debentures, notes or other indebtedness of ComBanc having
the right to vote on any matters on which
ComBanc stockholders may vote are
issued or outstanding.
3.03.
Capitalization of Commercial Bank.
(a) The
authorized capital of Commercial Bank consists solely of
1,188,000 shares of common stock, of which
1,188,000 are issued and
outstanding. All outstanding shares of
Commercial Bank are owned beneficially
and of record by ComBanc. Such shares have
been duly authorized and are
validly issued, fully paid and
non-assessable, were not issued in violation of
the preemptive rights of any person, and
have been issued in compliance in all
material respects with all applicable
federal and state securities laws.
(b) As of the
date of this Agreement, there are no options,
warrants, calls, rights, commitments or
agreements of any character to which
Commercial Bank is a party or by which it
is bound, obligating Commercial Bank
to issue, deliver or sell, or cause to be
issued, delivered or sold, any
additional shares of Commercial Bank or
obligating Commercial Bank to grant,
extend or enter into any such option,
warrant, call, right, commitment or
agreement. As of the date of this
Agreement, there are no outstanding
contractual obligations of Commercial Bank
to repurchase, redeem or otherwise
acquire any shares of Commercial Bank.
-9-
<PAGE>
(c) Commercial
Bank has not (A) issued or permitted to be issued any
shares of Commercial Bank, or securities
exercisable for or convertible into
shares of Commercial Bank; (B) repurchased,
redeemed or otherwise acquired,
directly or indirectly any shares of
Commercial Bank; or (C) declared, set
aside, made or paid to the shareholders of
Commercial Bank dividends or other
distributions on the outstanding shares of
Commercial Bank.
(d) No bonds,
debentures, notes or other indebtedness of Commercial Bank
having the right to vote on any matters on
which Commercial Bank shareholders
may vote are issued or outstanding.
3.04. Corporate
Proceedings.
(a) This
Agreement has been (i) duly executed and delivered by ComBanc
and Commercial Bank, (ii) approved by the
boards of directors of ComBanc and
Commercial Bank and (iii) adopted by
ComBanc as the sole shareholder of
Commercial Bank.
(b) Subject to
the adoption of this Agreement by a majority of the issued
and outstanding ComBanc Shares at a meeting
of the ComBanc stockholders (the
"ComBanc Meeting") and to the filing of all
requisite applications with
Regulatory Authorities and the receipt of
all requisite regulatory approvals,
ComBanc and Commercial Bank have all
requisite corporate power and authority
to enter into this Agreement and to perform
all of their obligations
hereunder.
3.05.
Authorization. This Agreement has been duly executed and
delivered
by each of ComBanc and Commercial Bank, and
assuming the due authorization,
execution and delivery by FDEF and First
Federal, constitutes a valid and
binding obligation of each of ComBanc and
Commercial Bank, enforceable against
each of them in accordance with its terms,
except as such enforceability may
be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent
conveyance and other similar laws relating
to or affecting the enforcement of
creditors' rights generally, by general
equitable principles (regardless of
whether enforceability is considered in a
proceeding in equity or at law) and
by an implied covenant of good faith and
fair dealing and 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. {section} 1818(b) or
by appointment of a conservator by the
FDIC. Each of ComBanc and Commercial
Bank has the right, power, authority and
capacity to execute and deliver this
Agreement and, subject to the required
adoption of this Agreement by the
ComBanc stockholders, the obtaining of
appropriate approvals by Regulatory
Authorities and Governmental Authorities
and the expiration of applicable
regulatory waiting periods, to perform its
obligations under this Agreement.
3.06. Financial
Statements of ComBanc. Except as set forth in Section 3.06
of the ComBanc Disclosure Schedule, the
audited consolidated financial
statements of ComBanc, consisting of
consolidated statements of financial
condition as of December 31, 2003, 2002 and
2001, and the related consolidated
statements of earnings, shareholders'
equity and cash flows for the three
years then ended, including the related
notes and the reports thereon of BKD,
LLP, and the unaudited interim consolidated
statements of ComBanc, consisting
of consolidated statements of financial
condition as of June 30, 2004 (the
"ComBanc Balance Sheet Date"), the related
unaudited consolidated statements
of earnings, cash flows, including the
related notes thereto, for the six
months ended June 30, 2004, of ComBanc
(collectively, all of such audited and
unaudited consolidated financial statements
are referred to as the "ComBanc
Financial Statements"), copies of which
have recently been provided to FDEF
and First Federal, have been prepared in
accordance with United States
generally accepted accounting principles
("GAAP") applied on a consistent
basis during the periods involved (except
as may be indicated in the notes
thereto) and present fairly, in all
material respects, the consolidated
financial condition, earnings and cash
flows of ComBanc and Commercial Bank
for the periods then ended.
-10-
<PAGE>
3.07. SEC
Filings. ComBanc has filed all reports and proxy materials
required to be filed by it with the SEC
pursuant to the Securities Exchange
Act of 1934 (the "Exchange Act"). All such
filings, at the time of filing,
complied in all material respects as to
form and included all exhibits
required to be filed under the applicable
rules of the SEC. None of such
documents, when filed, contained any untrue
statement of a material fact or
omitted to state a material fact required
to be stated therein or necessary in
order to make the statements therein, in
light of the circumstances under
which they were made, not misleading.
3.08. Absence of
Undisclosed Liabilities. Except as set forth in the
ComBanc Financial Statements or in Section
3.08 of the ComBanc Disclosure
Schedule, ComBanc and Commercial Bank have
no liabilities or obligations
(whether accrued, absolute, contingent or
otherwise) as of the date hereof,
other than liabilities and obligations that
individually or in the aggregate
could not reasonably be expected to have a
material adverse effect on ComBanc
or Commercial Bank. Except as set forth in
Section 3.08 of the ComBanc
Disclosure Schedule, all debts,
liabilities, guarantees and obligations of
ComBanc and Commercial Bank incurred since
the ComBanc Balance Sheet Date have
been incurred in the ordinary course of
business and are usual and normal in
amount both individually and in the
aggregate. Except as disclosed in Section
3.08 of the ComBanc Disclosure Schedule,
neither ComBanc nor Commercial Bank
is in default or breach of any material
agreement to which ComBanc or
Commercial Bank is a party other than any
such breaches or defaults that
individually or in the aggregate would not
reasonably be expected to have a
material adverse effect on ComBanc or
Commercial Bank. To the knowledge of
ComBanc and Commercial Bank, no other party
to any material agreement to which
ComBanc or Commercial Bank is a party is in
default or breach of such
agreement, which breach or default would
reasonably be expected to have a
material adverse effect on ComBanc or
Commercial Bank.
3.09. Absence of
Changes. Except as set forth in Section 3.09 of the
ComBanc Disclosure Schedule, since the
ComBanc Balance Sheet Date there has
not been any material adverse change in the
business, operations, assets or
financial condition of ComBanc and
Commercial Bank taken as a whole.
3.10. Loans.
Except for such insufficiencies as would not reasonably be
expected to have a material adverse effect
on ComBanc or Commercial Bank, the
documentation ("Loan Documentation")
governing or relating to the loan and
credit-related assets ("Loan Assets")
included in the loan portfolio of
Commercial Bank is legally sufficient for
the purposes intended thereby and
creates enforceable rights of Commercial
Bank in accordance with the terms of
such Loan Documentation, subject to
applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent
conveyance and other similar laws
relating to or affecting the enforcement of
creditors' rights generally. All
loans and extensions of credit that have
been made by Commercial Bank comply
in all material respects with applicable
regulatory limitations and
procedures. Except as set forth in Section
3.10 of the ComBanc Disclosure
Schedule, no debtor under any of the Loan
Documentation has asserted any claim
or defense with respect to the subject
matter thereof. Except as set forth in
Section 3.10 of the ComBanc Disclosure
Schedule, neither ComBanc nor
Commercial Bank is a party to a loan,
including any loan guaranty, with any
director, executive officer or 5%
shareholder of ComBanc or Commercial Bank,
or any person, corporation or enterprise
controlling, controlled by or under
common control with either ComBanc or
Commercial Bank.
-11-
<PAGE>
3.11. Allowance
for Loan Losses. Except as set forth in Section 3.11 of
the ComBanc Disclosure Schedule, there is
no loan which is reflected as an
asset in the ComBanc Financial Statements
that (a) is 90 days or more
delinquent, (b) has been classified as
"substandard," "doubtful" or "loss," or
(c) has been designated as "special
mention." ComBanc's allowance for loan
losses has been determined in accordance
with GAAP and in accordance with all
rules and regulations applicable to ComBanc
and Commercial Bank and is
adequate to provide for reasonably
anticipated losses on outstanding loans.
3.12. Reports
and Records. ComBanc and Commercial Bank have filed all
reports and maintained all records required
to be filed or maintained by them
under the rules and regulations of the
Federal Reserve, the ODFI and the FDIC.
All such documents and reports complied in
all material respects with
applicable requirements of law and rules
and regulations in effect at the time
such documents and reports were filed and
contained in all material respects
the information required to be stated
therein. None of such documents or
reports, when filed, contained any untrue
statement of a material fact or
omitted to state a material fact required
to be stated therein or necessary in
order to make the statements therein, in
light of the circumstances under
which they were made, not misleading.
3.13. Taxes.
(a) Except as
set forth in Section 3.13(a) of the ComBanc Disclosure
Schedule, ComBanc and Commercial Bank have
timely filed all returns,
statements, reports and forms (including,
without limitation, elections,
declarations, disclosures, schedules,
estimates and information returns)
(collectively, the "Tax Returns") with
respect to all federal, state, local
and foreign income, gross income, gross
receipts, gains, premium, sales, use,
ad valorem, transfer, franchise, profits,
withholding, payroll, employment,
excise, severance, stamp, occupancy,
license, lease, environmental, customs,
duties, property, windfall profits and all
other taxes (including, without
limitation, any interest, penalties or
additions to tax with respect thereto,
individually a "Tax," and collectively,
"Taxes") required to be filed with the
appropriate tax authority. Such Tax Returns
were true, correct and complete in
all material respects. ComBanc and
Commercial Bank have paid and discharged
all Taxes due (whether reflected on such
Tax Returns or otherwise), other than
such Taxes that are adequately accrued as
shown on the ComBanc Financial
Statements or have arisen in the ordinary
course of business since the ComBanc
Balance Sheet Date.
-12-
<PAGE>
(b) Except as
set forth in Section 3.13(b) of the ComBanc Disclosure
Schedule, neither the Internal Revenue
Service (the "IRS") nor any other
taxing agency or authority, domestic or
foreign, has asserted, is now
asserting or, to the knowledge of ComBanc
or Commercial Bank, is threatening
to assert against ComBanc or Commercial
Bank any deficiency or claim for
additional Taxes. There are no unexpired
waivers by ComBanc or Commercial Bank
of any statute of limitations with respect
to Taxes. The accruals and reserves
for Taxes reflected in the ComBanc
Financial Statements are adequate in all
material respects for the periods covered.
ComBanc and Commercial Bank have
withheld or collected and paid over to the
appropriate Governmental
Authorities or are properly holding for
such payment all Taxes required by law
to be withheld or collected. There are no
liens for Taxes upon the assets of
ComBanc or Commercial Bank, other than
liens for current Taxes not yet due and
payable. Neither ComBanc nor Commercial
Bank has agreed to make, or is
required to make, any adjustment under
Section 481(a) of the Code.
(c) Except as
set forth in Section 3.13(c) of the ComBanc Disclosure
Schedule, neither ComBanc nor Commercial
Bank is a party to any agreement,
contract, arrangement or plan that has
resulted, or could result, individually
or in the aggregate, in the payment of
"excess parachute payments" within the
meaning of Section 280G of the Code.
(d) Neither
ComBanc nor Commercial Bank (i) has ever been a member of an
affiliated group of corporations, within
the meaning of Section 1504 of the
Code, other than an affiliated group of
which ComBanc is or was the common
parent corporation, or (ii) has any
liability for the Taxes of any other
person or entity under Treasury Department
Regulation Section 1.1502-6 (or any
similar provision of state, local or
foreign law), as a transferee or
successor, by contract or otherwise.
(e) No Tax is
required to be withheld pursuant to Section 1445 of the
Code as a result of the transactions
contemplated by this Agreement.
3.14. Property
and Title.
(a) Section
3.14(a) of the ComBanc Disclosure Schedule lists and
describes all real property, and any
leasehold interest in real property,
owned or held by ComBanc or Commercial Bank
(collectively, the "ComBanc Real
Properties"). Copies of all leases of
ComBanc Real Properties to which ComBanc
or Commercial Bank is a party have been
provided to FDEF. Such leasehold
interests have not been assigned or
subleased. All ComBanc Real Properties
which are owned by ComBanc or Commercial
Bank are free and clear of all
mortgages, liens, security interests,
defects, encumbrances, easements,
restrictions, reservations, conditions,
covenants, agreements, encroachments,
rights of way and zoning laws, except (i)
those set forth in Section 3.14(a)
of the ComBanc Disclosure Schedule; (ii)
easements, restrictions,
reservations, conditions, covenants, rights
of way, zoning laws and other
defects and irregularities in title and
encumbrances which do not materially
impair the use thereof for the purposes for
which they are held; and (iii)
liens for current Taxes not yet due and
payable.
(b) ComBanc and
Commercial Bank own, and are in rightful possession of,
and have good title to, all of the other
assets indicated in the ComBanc
Financial Statements as being owned by
ComBanc or Commercial Bank, free and
clear of any charge, mortgage, pledge,
security interest, hypothecation,
restriction, claim, option, lien,
encumbrance or interest of any persons
whatsoever except (a) those described in
Section 3.14(b) of the ComBanc
Disclosure Schedule and (ii) those assets
disposed of in the ordinary course
of business consistent with past
practices.
-13-
<PAGE>
(c) The assets
of ComBanc and Commercial Bank, taken as a whole, are
adequate to continue to conduct the
businesses of ComBanc and Commercial Bank
as such businesses are presently being
conducted.
3.15. Legal
Proceedings. Except as set forth in Section 3.15 of the
ComBanc Disclosure Schedule and other than
routine foreclosure and collection
matters where ComBanc or Commercial Bank
are only plaintiffs, there are no
actions, suits, proceedings, claims or
investigations pending or, to the
knowledge of ComBanc or Commercial Bank,
threatened in any court, before any
governmental agency or instrumentality or
in any arbitration proceeding
against or by ComBanc or Commercial
Bank.
3.16. Compliance
with Laws and Regulations.
(a) Except as
set forth in Section 3.16(a) of the ComBanc Disclosure
Schedule, neither ComBanc, Commercial Bank
nor their respective properties is
a party to or subject to any order,
judgment, decree, agreement, memorandum of
understanding or similar arrangement with,
or a commitment letter or similar
submission to, or extraordinary supervisory
letter from, any court or federal
or state governmental agency or authority,
including any such agency or
authority charged with the supervision or
regulation of financial institutions
(or their holding companies) or issuers of
securities (including, without
limitation, the Federal Reserve, the ODFI,
the FDIC, and the SEC) or the
supervision or regulation of ComBanc or
Commercial Bank (collectively, the
"Regulatory Authorities"). Neither ComBanc
nor Commercial Bank has been
advised by any Regulatory Authority that
such Regulatory Authority is
contemplating issuing or requesting (or is
considering the appropriateness of
issuing or requesting) any new or
additional order, judgment, decree,
agreement, memorandum of understanding,
commitment letter, supervisory letter
or similar submission.
(b) Each of
ComBanc and Commercial Bank has been in compliance with all
applicable federal, state, local and
foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or
decrees applicable thereto or to the
employees conducting such business,
including, without limitation, the Equal
Credit Opportunity Act, as amended, the
Fair Housing Act, as amended, the
Federal Community Reinvestment Act, as
amended, the Home Mortgage Disclosure
Act, as amended, and all other applicable
fair lending laws and other laws
relating to discriminatory business
practices, except for failures to be in
compliance which, individually or in the
aggregate, have not had or would not
reasonably be expected to have a material
adverse effect on ComBanc or
Commercial Bank.
(c) Each of
ComBanc and Commercial Bank has all permits, licenses,
authorizations, orders and approvals of,
and has made all filings,
applications and registrations with, each
Regulatory Authority and
administrative agency or commission or
other federal, state or local
government authority or instrumentality
(each, a "Governmental Authority")
that is required in order to permit it to
own or lease its properties and to
conduct its business as presently
conducted, except where the failure to
obtain any of the foregoing or to make any
such filing, application or
registration has not had or would not
reasonably be expected to have a
material adverse effect on ComBanc or
Commercial Bank; and all such permits,
licenses, certificates of authority, orders
and approvals are in full force
and effect and no suspension or
cancellation of any of them has been
threatened in writing.
-14-
<PAGE>
(d) The savings
accounts and deposits of Commercial Bank are insured up
to applicable limits by the FDIC in
accordance with the Federal Deposit
Insurance Act, and Commercial Bank has paid
all assessments and filed all
reports required by the Federal Deposit
Insurance Act.
3.17. No
Conflict. Except as set forth in the ComBanc Disclosure
Schedule, subject to the required adoption
of this Agreement by the
stockholders of ComBanc, receipt of the
required approvals of Governmental and
Regulatory Authorities, expiration of
applicable regulatory waiting periods,
and required filings under federal and
state securities laws, the execution,
delivery and performance of this Agreement,
and the consummation of the
transactions contemplated hereby, by
ComBanc and Commercial Bank does not and
will not (a) conflict with, or result in a
violation of, or result in the
breach of or a default (or which with
notice or lapse of time would result in
a default) under, any provision of: (i) any
federal, state or local law,
regulation, ordinance, order, rule or
administrative ruling of any
Governmental Authority applicable to
ComBanc or Commercial Bank or any of
their respective properties; (ii) the
certificate of incorporation or bylaws
of ComBanc, or the articles of
incorporation, code of regulations or other
governing instruments of Commercial Bank;
(iii) any material agreement,
indenture or instrument to which ComBanc or
Commercial Bank is a party or by
which either of their properties or assets
may be bound; or (iv) any order,
judgment, writ, injunction or decree of any
court, arbitration panel or any
Governmental Authority applicable to
ComBanc or Commercial Bank; (b) result in
the creation or acceleration of any
security interest, mortgage, option,
claim, lien, charge or encumbrance upon or
interest in any property of ComBanc
or Commercial Bank; or (c) violate the
terms or conditions of, or result in
the cancellation, modification, revocation
or suspension of, any material
license, approval, certificate, permit or
authorization held by ComBanc or
Commercial Bank.
3.18. Brokers,
Finders and Others. Except for $266,000 in aggregate fees
and expenses that are payable to Keefe,
Bruyette and Woods, Inc. ("ComBanc's
Financial Advisor") and the ordinary and
customary legal and accounting fees,
there are no fees or commissions of any
sort whatsoever claimed by, or payable
by ComBanc or Commercial Bank to, any
broker, finder, intermediary, attorney,
accountant or any other similar person in
connection with effecting this
Agreement or the transactions contemplated
hereby.
3.19. Employment
Agreements. Neither ComBanc nor Commercial Bank is a
party to any employment, change in control,
severance or consulting agreement.
Neither ComBanc nor Commercial Bank is a
party to, bound by or negotiating,
any collective bargaining agreement, nor
are any of their respective employees
represented by any labor union or similar
organization. Each of ComBanc and
Commercial Bank is in compliance with all
applicable laws respecting
employment and employment practices, terms
and conditions of employment and
wages and hours other than with respect to
any noncompliance that individually
or in the aggregate would not reasonably be
expected to have a material
adverse effect on ComBanc or Commercial
Bank. Neither ComBanc nor Commercial
Bank has engaged in any unfair labor
practice, other than practices that
individually or in the aggregate would not
reasonably be expected to have a
material adverse effect on ComBanc or
Commercial Bank.
-15-
<PAGE>
3.20. Employee
Benefit Plans.
(a) Section
3.20(a) of the ComBanc Disclosure Schedule contains a
complete and accurate list of all bonus,
incentive, deferred compensation,
pension (including, without limitation,
Pension Plans defined below),
retirement, profit-sharing, thrift,
savings, employee stock ownership, stock
bonus, stock purchase, restricted stock,
stock option, severance, welfare
(including, without limitation, "welfare
plans" within the meaning of Section
3(1) of the Employee Retirement Income
Security Act of 1974, as amended
("ERISA")), fringe benefit plans,
employment or severance agreements and all
similar practices, policies and
arrangements maintained or contributed to
(currently or within the last six years) by
(i) ComBanc or Commercial Bank and
in which any employee or former employee
(the "Employees"), consultant or
former consultant (the "Consultants"),
officer or former officer (the
"Officers"), or director or former director
(the "Directors") of ComBanc or
Commercial Bank participates or to which
any such Employees, Consultants,
Officers or Directors are parties or (ii)
any ERISA Affiliate (as defined
below) (collectively, the "Compensation and
Benefit Plans"). Neither ComBanc
nor Commercial Bank has any commitment to
create any additional Compensation
and Benefit Plan or to modify or change any
existing Compensation and Benefit
Plan, except to the extent required by
law.
(b) Each
Compensation and Benefit Plan has been operated and
administered
substantially in accordance with its terms
and with applicable law, including,
but not limited to, ERISA, the Code, the
Securities Act of 1933, as amended
(the "Securities Act"), the Exchange Act,
the Age Discrimination in Employment
Act, or any regulations or rules
promulgated thereunder, and all filings,
disclosures and notices required by ERISA,
the Code, the Securities Act, the
Exchange Act, the Age Discrimination in
Employment Act and any other
applicable law have been timely made. The
prototype plan sponsor of the
Compensation and Benefit Plan which is an
"employee pension benefit plan"
within the meaning of Section 3(2) of ERISA
(a "Pension Plan") and which is
intended to be qualified under Section
401(a) of the Code has received a
favorable opinion letter from the IRS and
neither ComBanc nor Commercial Bank
(i) has obtained a determination letter
from the IRS or (ii) is aware of any
circumstances likely to result in
revocation of such prototype plan sponsor's
favorable opinion letter. There is no
material pending or, to the knowledge of
ComBanc or Commercial Bank, threatened,
legal action, suit or claim relating
to the Compensation and Benefit Plans other
than routine claims for benefits
thereunder. Neither ComBanc nor Commercial
Bank has engaged in a transaction,
or omitted to take any action, with respect
to any Compensation and Benefit
Plan that would reasonably be expected to
subject ComBanc or Commercial Bank
to a tax or penalty imposed by either
Section 4975 of the Code or Section 502
of ERISA, assuming for purposes of Section
4975 of the Code that the taxable
period of any such transaction expired as
of the date hereof.
(c) Except as
set forth in Section 3.20(c) of the ComBanc Disclosure
Schedule, (i) none of ComBanc or Commercial
Bank, or any entity which is
considered one employer with ComBanc or
Commercial Bank under Section
4001(a)(14) of ERISA or Section 414(b), (c)
or (m) of the Code (an "ERISA
Affiliate"), has ever sponsored, maintained
or been obligated to contribute to
any Pension Plan subject to either Title IV
of ERISA or the funding
requirements of Section 412 of the Code;
(ii) none of ComBanc or Commercial
Bank, or any ERISA Affiliate, has
contributed, or has been obligated to
contribute, to a multiemployer plan under
Subtitle E of Title IV of ERISA (as
defined in ERISA Sections 3(37)(A) and
4001(a)(3)) at any time since September
26, 1980; and (iii) there is no pending
investigation or enforcement action by
the PBGC, the Department of Labor, the IRS
or any other Governmental Authority
with respect to any Compensation and
Benefit Plan.
-16-
<PAGE>
(d) Except as
set forth in Section 3.20(d) of the ComBanc Disclosure
Schedule, all contributions required to be
made under the terms of any
Compensation and Benefit Plan or ERISA
Affiliate plan or any employee benefit
arrangements under any collective
bargaining agreement to which ComBanc or
Commercial Bank is a party have been timely
made or have been reflected on the
ComBanc Financial Statements.
(e) Except as
disclosed in Section 3.20(e) of the ComBanc Disclosure
Schedule, neither ComBanc nor Commercial
Bank has any obligations to provide
retiree health and retiree life insurance
or other retiree death benefits
under any Compensation and Benefit Plan,
other than benefits mandated by
Section 4980B of the Code.
(f) ComBanc and
Commercial Bank do not maintain any foreign Compensation
and Benefit Plans.
(g) With respect
to each Compensation and Benefit Plan, if applicable,
ComBanc or Commercial Bank has provided to
FDEF, true and complete copies of:
(i) Compensation and Benefit Plan documents
and all subsequent amendments
thereto; (ii) trust instruments and
insurance contracts and all subsequent
amendments thereto; (iii) the most recent
annual returns (Forms 5500) and
financial statements; (iv) the most recent
summary plan descriptions and all
subsequent summaries of material
modifications; (v) the most recent
determination letter issued by the IRS with
respect to each Compensation and
Benefit Plan that is intended to comply
with Code {section} 401(a); and (vi)
any Form 5310, Form 5310A, Form 5300 or
Form 5330 filed with the IRS within
the twelve months ending immediately before
the date hereof.
(h) Except as
disclosed in Section 3.20(h) of the ComBanc Disclosure
Schedule, the consummation of the
transactions contemplated by this Agreement
would not, directly or indirectly
(including, without limitation, as a result
of any termination of employment prior to
or following the Effective Time),
reasonably be expected to (i) entitle any
Employee, Officer, Consultant or
Director to any payment (including
severance pay or similar compensation) or
any increase in compensation, (ii) result
in the vesting or acceleration of
any benefits under any Compensation and
Benefit Plan or (iii) result in any
material increase in benefits payable under
any Compensation and Benefit Plan.
3.21. Insurance.
ComBanc and Commercial Bank are insured with reputable
insurers against such risks and in such
amounts as the management of ComBanc
and Commercial Bank reasonably have
determined to be prudent in accordance
with industry practices. Section 3.21 of
the ComBanc Disclosure Schedule lists
all of the insurance policies, binders or
bonds maintained by ComBanc or
Commercial Bank and a description of all
claims filed by ComBanc or Commercial
Bank against the insurers of ComBanc and
Commercial Bank since January 1,
2001. All such insurance policies are in
full force and effect, neither
ComBanc nor Commercial Bank is in material
default thereunder and all claims
thereunder have been filed in due and
timely fashion.
-17-
<PAGE>
3.22.
Governmental and Third-Party Proceedings. Except as set forth
in
Section 3.22 of the ComBanc Disclosure
Schedule, no consent, approval,
authorization of, or registration,
declaration or filing with, any court,
Governmental Authority, Regulatory
Authority or any other third party is
required to be made or obtained by ComBanc
or Commercial Bank in connection
with the execution, delivery or performance
by ComBanc of this Agreement or
the consummation by ComBanc of the
transactions contemplated hereby, except
for (a) filings of applications and
notices, as applicable, with and the
approval of certain federal and state
banking authorities, (b) the filing of
the appropriate certificates of merger with
the Secretaries of State of Ohio
and Delaware pursuant to the OGCL and DGCL,
(c) the adoption of this Agreement
by the ComBanc stockholders, and (d) the
filing with the SEC of the
Proxy/Prospectus (as defined in Section
7.03(a)).
3.23. Contracts.
Section 3.23 of the ComBanc Disclosure Schedule
describes all contracts, whether written or
oral, in existence as of the date
of this Agreement (other than
