1
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF
JULY 23, 2001
BY AND AMONG
SECOND BANCORP INCORPORATED
AND
SECOND MERGER CORP.
AND
COMMERCE EXCHANGE CORPORATION
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TABLE OF CONTENTS
PAGE
ARTICLE ONE -- THE MERGER....................................................2
1.01. Merger; Surviving Corporation..................................2
1.02. Effective Time.................................................2
1.03. Effects of the Merger..........................................2
ARTICLE TWO -- CONVERSION OF SHARES; SURRENDER OF CERTIFICATES...............3
2.01. Conversion of Security Shares..................................3
2.02. Surrender of Certificates......................................5
2.03. Merger Corp. Shares............................................8
ARTICLE THREE -- REPRESENTATIONS AND WARRANTIES OF COMMERCE..................8
3.01. Representations and Warranties of Commerce.....................8
ARTICLE FOUR -- REPRESENTATIONS AND WARRANTIES OF SECOND AND MERGER CORP....29
4.01. Representations and Warranties of Second and Merger Corp......29
ARTICLE FIVE -- FURTHER COVENANTS OF COMMERCE...............................32
5.01. Operation of Business.........................................32
5.02. Notification..................................................37
5.03. Shareholder Approval..........................................37
5.04. Acquisition Proposals.........................................37
5.05. Delivery of Information.......................................38
5.06. Takeover Laws.................................................38
5.07 Merger of Subsidiaries........................................38
5.08 Accounting Policies...........................................38
ARTICLE SIX -- FURTHER COVENANTS OF SECOND..................................39
6.01. Access to Information.........................................39
6.02. Notification..................................................39
6.03. Opportunity of Employment; Employee Benefits..................39
6.04. Takeover Laws.................................................40
6.05. Officers' and Directors' Indemnification......................40
ARTICLE SEVEN -- FURTHER OBLIGATIONS OF THE PARTIES.........................41
7.01. Necessary Further Action......................................41
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7.02. Cooperative Action............................................42
7.03. Satisfaction of Conditions....................................42
7.04. Confidentiality...............................................42
7.05. Press Releases................................................42
7.06. Proxy Statement...............................................43
7.07. Regulatory Applications.......................................43
7.08 No Conflicting Actions........................................43
ARTICLE EIGHT -- CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES.....44
8.01. Conditions to the Obligations of Second and Merger Corp.......44
8.02. Conditions to the Obligations of Commerce.....................45
8.03. Mutual Conditions.............................................47
ARTICLE NINE -- CLOSING.....................................................47
9.01. Closing.......................................................47
9.02. Closing Transactions Required of Second and Merger Corp.......48
9.03. Closing Transactions Required of Commerce.....................48
ARTICLE TEN -- NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS....49
10.01. Non-Survival of Representations, Warranties and Covenants.....49
ARTICLE ELEVEN -- TERMINATION...............................................49
11.01. Termination...................................................49
11.02. Effect of Termination.........................................51
ARTICLE TWELVE -- MISCELLANEOUS.............................................52
12.01. Notices.......................................................52
12.02. Counterparts..................................................53
12.03. Entire Agreement..............................................53
12.04. Successors and Assigns........................................53
12.05. Captions......................................................54
12.06. Governing Law.................................................54
12.07. Payment of Fees and Expenses..................................54
12.08. Amendment.....................................................54
12.09. Waiver........................................................54
12.10. Disclosure Schedule...........................................54
12.11. No Third-Party Rights.........................................54
12.12. Waiver of Jury Trial..........................................55
12.13. Severability..................................................55
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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:
"accumulated funding deficiency" -- Section 3.01(s)
"Acquisition Proposal" -- Section 5.04
"Agreement" -- Preamble
"benefit liabilities" -- Section 3.01(s)
"BHC Act" -- Section 3.01(a)
"Cash Amount" -- Section 2.01(b)
"CERCLA" -- Section 3.01(y)
"Closing" -- Section 9.01
"Closing Date" -- Section 9.01
"Code" -- Section 3.01(l)
"Commerce" -- Preamble
"Commerce ALLL" -- Section 2.01(c)
"Commerce Balance Sheet Date" -- Section 3.01(f)
"Commerce Bank" -- Preamble
"Commerce Bank Real Estate Collateral" -- Section 3.01(y)
"Commerce Certificates" -- Section 2.02(a)
"Commerce Disclosure Schedule" -- Preamble
"Commerce Dissenting Share" -- Section 2.02(i)
"Commerce Financial Statements" -- Section 3.01(f)
"Commerce Meeting" -- Section 5.03(b)
"Commerce Real Properties" -- Section 3.01(m)
"Commerce Shareholders' Adoption" -- Section 11.01(b)
"Commerce Shares" -- Preamble
"Commerce Stock Option Plans" -- Section 3.01(b)
"Commerce Stock Options" -- Section 3.01(b)
"Commerce Voting Debt" -- Section 3.01(b)
"Compensation and Benefit Plans" -- Section 3.01(s)
"Constituent Corporations" -- Preamble
"Consultants" -- Section 3.01(s)
"Costs" -- Section 6.04
"CRA" -- Section 3.01(t)
"Delaware Secretary of State" -- Section 1.02
"Directors" -- Section 3.01(s)
"disqualified individual" -- Section 3.01(s)
"DOL" -- Section 3.01(s)
"DGCL" -- Section 1.01
"Effective Time" -- Section 1.02
"employee pension benefit plans" -- Section 3.01(s)
"Employees" -- Section 3.01(s)
"Environmental Law" -- Section 3.01(y)
"ERISA" -- Section 3.01(s)
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"ERISA Affiliate" -- Section 3.01(s)
"ERISA Affiliate Plan" -- Section 3.01(s)
"excess parachute payment" -- Section 3.01(s)
"Exchange Act" -- Section 3.01(ff)
"Exchange Agent" -- Section 2.02(a)
"Exchange Fund" -- Section 2.02(a)
"FDIC" -- Section 3.01(k)
"Federal Reserve" -- Section 3.01(k)
"Final Month End" -- Section 2.01(c)
"GAAP" -- Section 2.01(c)
"Governmental Authority" -- Section 3.01(p)
"Hazardous Substances" -- Section 3.01(y)
"hazardous waste" -- Section 3.01(y)
"Indemnified Party" -- Section 6.04(a)
"infectious waste" -- Section 3.01(y)
"Insurance Amount" -- Section 6.04(b)
"Intellectual Property" -- Section 3.01(hh)
"IRS" -- Section 3.01(l)
"Knowledge" -- Section 3.01(h)
"Loan Assets" -- Section 3.01(i)
"Loan Documentation" -- Section 3.01(i)
"material" -- Section 3.01(a)
"material adverse effect" -- Section 3.01(a)
"Merger" -- Preamble
"Merger Consideration" -- Section 2.01(b)
"Merger Corp." -- Preamble
"Merger Corp. Shares" -- Section 2.03
"ODFI" -- Section 3.01(k)
"Officers" -- Section 3.01(s)
"OGCL" -- Section 1.01
"Ohio Secretary of State" -- Section 1.02
"PBGC" -- Section 3.01(s)
"PCBs" -- Section 3.01(y)
"Pension Plan" -- Section 3.01(s)
"Permitted Offer" -- Section 3.01(d)
"Proxy Statement" -- Section 5.03
"Regulatory Authorities" -- Section 3.01(o)
"reportable event" -- Section 3.01(s)
"Rights Agreement" -- Section 3.01(d)
"SEC" -- Section 3.01(c)
"Second" -- Preamble
"Second National Bank" -- Preamble
"single-employer plan" -- Section 3.01(s)
"solid waste" -- Section 3.01(y)
"Subsidiary" -- Section 3.01(c)
"Surviving Corporation" -- Section 1.01
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"Takeover Laws" -- Section 3.01(z)
"Tax Returns" -- Section 3.01(l)
"Tax" -- Section 3.01(l)
"welfare plans" -- Section 3.01(s)
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AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as
of July 23, 2001, is made and entered into by and among Second Bancorp
Incorporated, an Ohio corporation ("Second"), Second Merger Corp., an Ohio
corporation ("Merger Corp."), and Commerce Exchange Corporation, a Delaware
corporation ("Commerce") (Merger Corp. and Commerce are sometimes hereinafter
collectively referred to as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Commerce, Merger Corp. and
Second have each determined that it is in the best interests of their respective
corporations and shareholders for Merger Corp. to merge with and into Commerce
(the "Merger") and immediately thereafter for the surviving corporation to merge
with and into Second, upon the terms and subject to the conditions set forth in
and pursuant to the terms of this Agreement; and
WHEREAS, the Boards of Directors of Commerce, Merger Corp. and
Second have each approved this Agreement and the consummation of the
transactions contemplated hereby; and
WHEREAS, as a result of the Merger, in accordance with the
terms of this Agreement, Merger Corp. will cease to have a separate corporate
existence, Second will acquire all of the issued and outstanding shares of
Commerce as the surviving corporation and shareholders of Commerce will receive
from Second in exchange for each share of Class B Common Stock, without par
value, of Commerce (the "Commerce Shares"), an amount in cash calculated in
accordance with the terms of this Agreement; and
WHEREAS, promptly following the Merger, Commerce Exchange
Bank, an Ohio state-chartered bank ("Commerce Bank") wholly owned by Commerce,
will merge with and into The Second National Bank of ▇▇▇▇▇▇ ("Second National
Bank"), a national banking association wholly owned by Second; and
WHEREAS, Commerce has previously provided to Second a schedule
disclosing additional information about Commerce (the "Commerce Disclosure
Schedule");
NOW, THEREFORE, in consideration of the premises and the
respective representations, warranties, covenants, agreements and conditions
hereinafter set forth, Commerce and Second, intending to be legally bound
hereby, agree as follows:
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ARTICLE ONE
THE MERGER
1.01. MERGER; SURVIVING CORPORATION
Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.02), Merger Corp.
shall merge with and into Commerce in accordance with the General Corporation
Law of the State of Ohio (the "OGCL") and the Delaware General Corporation Law
(the "DGCL"). Commerce shall be the continuing and surviving corporation in the
Merger, shall continue to exist under the laws of the State of Delaware, and
shall be the only one of the Constituent Corporations to continue its separate
corporate existence after the Effective Time. As used in this Agreement, the
term "Surviving Corporation" refers to Commerce at and after the Effective Time.
As a result of the Merger, the outstanding shares of capital stock and the
treasury shares of the Constituent Corporations shall be converted in the manner
provided in Article Two.
1.02. EFFECTIVE TIME
The Merger shall become effective upon the latest of (a) the
filing of the appropriate certificate of merger with the Secretary of State of
the State of Ohio (the "Ohio Secretary of State"), (b) the filing of the
appropriate certificate of merger with the Secretary of State of the State of
Delaware (the "Delaware Secretary of State"), or (c) such time thereafter as is
agreed to in writing by Second and Commerce and so provided in the certificates
of merger. The date and time at which the Merger shall become effective is
referred to in this Agreement as the "Effective Time."
1.03. EFFECTS OF THE MERGER
At the Effective Time:
(a) the certificate of incorporation, as amended, of
Commerce as in effect immediately prior to the
Effective Time shall be the certificate of
incorporation of the Surviving Corporation;
(b) the bylaws, as amended, of Commerce as in effect
immediately prior to the Effective Time shall be the
bylaws of the Surviving Corporation; except that the
number of directors of the Surviving Corporation
shall be three;
(c) the directors of the Surviving Corporation shall be
the directors of Merger Corp. immediately prior to
the Effective Time;
(d) each individual who is an officer of Merger Corp.
immediately prior to the Effective Time shall be an
officer of the Surviving Corporation holding the same
office as held with Merger Corp. immediately prior to
the Effective Time and no other person shall be an
officer of the Surviving Corporation after the
Effective Time; and
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(e) the Merger shall have the effects prescribed in the
OGCL and DGCL.
ARTICLE TWO
CONVERSION OF SHARES; SURRENDER OF CERTIFICATES
2.01. CONVERSION OF COMMERCE SHARES
At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof:
(a) Conversion of Commerce Shares. Subject to Section
2.02, each Commerce Share issued and outstanding
immediately prior to the Effective Time shall be
converted into the amount of cash equal to the Cash
Amount as defined in Section 2.01(b) of this
Agreement. After the Effective Time, all such
Commerce Shares shall no longer be outstanding and
each certificate previously representing any Commerce
Shares shall thereafter represent the right to
receive the Cash Amount into which such Commerce
Shares have been converted. Certificates previously
representing Commerce Shares shall be surrendered for
the Cash Amount in consideration therefor in
accordance with Section 2.02, without interest.
(b) Cash Amount. Each Commerce Share shall be converted
into the right to receive an amount of cash (the
"Cash Amount") equal to the total of the "Merger
Consideration" as calculated in 2.01(c) below divided
by the number of Commerce Shares issued and
outstanding at the Effective Time.
(c) The Merger Consideration shall equal the sum of:
(i) $26,500,000.00,
(ii) plus the Consolidated Net Operating Earnings
of Commerce from January 1, 2001 through the
end of the calendar month preceding the
Effective Time or minus the Consolidated Net
Operating Losses of Commerce from January 1,
2001 through the end of the calendar month
preceding the Effective Time ("Final Month
End") and, if the Effective Time is after
the 15th day of the month, an additional
amount equal to one-half (50%) of the
average monthly Consolidated Net Operating
Earnings of Commerce for the three (3)
calendar months preceding the Effective
Time.
(iii) minus the aggregate dividends declared by
Commerce during the period from January 1,
2001 through the Effective Time,
(iv) plus the amount received by Commerce upon
the exercise of options to purchase Commerce
Shares from January 1, 2001 through the
Effective Time,
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(v) minus the amount of Transaction Costs
incurred by Commerce which exceed
$1,075,000.00 or plus an amount equal to the
amount by which Transaction Costs incurred
by Commerce are less than $1,075,000.00,
(vi) minus the amount by which the allowance for
loan and lease losses for Commerce
("Commerce ALLL") is less than an amount
equal to the amount of the Commerce ALLL
calculated in accordance with the
Interagency Policy Statement on the
Allowance for Loan and Lease Losses (ALLL)
(dated December 21, 1993) adopted by the
Federal Deposit Insurance Corporation plus
$300,000.00, and
(vii) less the amount of anticipated losses, if
any, in the correspondent account maintained
by Commerce Bank at National City Bank
arising from unresolved reconciling items in
that account other than losses for which
Commerce has provided in calculating its Net
Operating Earnings since January 1, 2001,
through the Final Month End. Commerce shall
notify Second of the amount of such losses
along with reasonable detail not later than
seven (7) days after the Final Month End.
Second shall have five (5) days thereafter
within which to confirm such amount or
challenge Commerce's calculation. If Second
and Commerce are not able to agree upon the
amount of such loss within fifteen (15) days
after such notice is given to Second by
Commerce, then the amount of loss shall be
resolved (A) by calculating the average of
the amount proposed by Second and the amount
proposed by Commerce so long as the
difference in such amounts does not exceed
$200,000; or (B) by mutual agreement of
Second and Commerce if the difference in
such amounts exceeds $200,000 but, if no
agreement can be reached, either Commerce or
Second may terminate this Agreement in
accordance with Article Eleven.
Consolidated Net Operating Earnings or Losses of
Commerce are defined as the consolidated net income
or loss after taxes determined by Commerce's
management in accordance with generally accepted
accounting principles ("GAAP") consistent with prior
practice, excluding gains or losses on sales of
securities, Transaction Costs and extraordinary
items. Such amount shall be reviewed by Second, and
any discrepancy as to such amount shall be resolved
by the mutual agreement of Commerce and Second, in
consultation with their respective independent
certified public accountants.
Transaction costs are defined as costs incurred by
Commerce or Commerce Bank in connection with the
Merger on or after January 1, 2001 for (a) legal,
accounting, investment banking and other professional
services, (b) employee severance and retention
expenses for the persons
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listed in or parties to agreements described in
Section 3.01(r) of the Commerce Disclosure Schedule
(whether paid or committed to be paid by Commerce,
Commerce Bank or Second), but which shall not include
Commerce or Commerce Bank employees covered by the
severance transition plan described in Section 6.03,
and (c) the conduct of Commerce's shareholder meeting
including, without limitation, production and mailing
of its proxy materials.
2.02. SURRENDER OF CERTIFICATES
(a) Exchange Agent. At or prior to the Effective Time,
Second shall deposit, or shall cause to be deposited,
with American Stock Transfer & Trust Company (the
"Exchange Agent"), for the benefit of the holders of
certificates which immediately prior to the Effective
Time evidenced Commerce Shares (the "Commerce
Certificates"), for exchange in accordance with this
Article Two, cash in the amount of the Merger
Consideration calculated in accordance with Section
2.01(c) (such cash being hereinafter referred to as
the "Exchange Fund") payable pursuant to Section 2.01
in substitution and exchange for such Commerce
Shares.
(b) Surrender Procedures. Within seven (7) days after the
Effective Time, Second shall cause the Exchange Agent
to mail to each holder of record of Commerce Shares
immediately prior to the Effective Time, (i) a letter
of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the
Commerce Certificates shall pass, only upon delivery
of such Commerce Certificates to the Exchange Agent,
and which shall be in such form and have such other
provisions as Second may reasonably specify) and (ii)
instructions for use in effecting the surrender of
the Commerce Certificates in exchange for the Cash
Amount. Upon surrender by such holder of a Commerce
Certificate or Certificates evidencing all Commerce
Shares standing in such holder's name for
cancellation to the Exchange Agent together with such
letter of transmittal, duly executed, the holder of
such Commerce Certificate or Certificates shall be
entitled to receive in exchange therefor the Cash
Amount by a check, which such holder has the right to
receive in respect of the Commerce Certificate or
Certificates surrendered pursuant to the provisions
of this Article Two (after taking into account all
Commerce Shares then held by such holder), and the
Commerce Certificate or Certificates so surrendered
shall forthwith be canceled. Second shall cause the
Exchange Agent to mail the exchange check by U.S.
mail, postage prepaid, within seven (7) days
following receipt of all required documentation. In
the event of a transfer of ownership of Commerce
Shares which is not registered in the transfer
records of Commerce, a check in respect of the Cash
Amount, may be issued to a transferee if the Commerce
Certificate representing such Commerce Shares is
presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such
transfer and by evidence that any applicable share
transfer taxes have been paid. Until surrendered
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as contemplated by this Section 2.02, each Commerce
Certificate shall be deemed at any time after the
Effective Time for all corporate purposes (except as
provided in Section 2.02(c)) to represent only the
right to receive upon such surrender the Cash Amount
as contemplated by this Section 2.02, without
interest.
(c) No Further Ownership Rights in Commerce Shares. The
Cash Amount paid pursuant to Section 2.02 shall be
deemed to have been issued in full satisfaction of
all rights pertaining to such Commerce Shares,
subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other
distributions with a record date prior to the
Effective Time which may have been declared or made
by Commerce on such Commerce Shares in accordance
with the terms of this Agreement on or prior to the
Effective Time and which remain unpaid at the
Effective Time. If, after the Effective Time,
Commerce Certificates are presented to Second for any
reason, they shall be canceled and exchanged as
provided in this Article Two.
(d) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the
shareholders of Commerce for six months after the
Effective Time shall be delivered to Second, upon
demand, and any shareholders of Commerce who have not
theretofore complied with this Article Two shall
thereafter look only to Second for payment of their
claim for the Cash Amount, in each case without
interest.
(e) No Liability. None of Second, Commerce, the Exchange
Agent or the Surviving Corporation shall be liable to
any former holder of Commerce Shares for cash
delivered to a public official pursuant to any
applicable abandoned property, escheat or similar
law.
(f) Share Transfer Books. Unless otherwise required by
Section 262 of the DGCL, after the Effective Time
there shall be no further registration of transfers
on the share transfer books of the Surviving
Corporation of the Commerce Shares which were
outstanding immediately prior to the Effective Time.
(g) Lost Certificates. If there shall be delivered to the
Exchange Agent by any person who is unable to produce
any Commerce Certificate for Commerce Shares for
surrender to the Exchange Agent in accordance with
this Section 2.02:
(a) Evidence to the satisfaction of the
Surviving Corporation or Second that such
Commerce Certificate has been lost,
wrongfully taken, or destroyed;
(b) Such security or indemnity as may be
requested by the Surviving Corporation or
Second to save it harmless (which may
include the requirement to obtain a third
party bond or surety); and
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(c) Evidence to the satisfaction of the
Surviving Corporation or Second that such
person was the owner of the Commerce Shares
theretofore represented by each such
Commerce Certificate claimed by him to be
lost, wrongfully taken or destroyed and that
he is the person who would be entitled to
present such Commerce Certificate for
exchange pursuant to this Agreement;
then the Exchange Agent, in the absence of actual
notice to it that any Commerce Shares theretofore
represented by any such Commerce Certificate have
been acquired by a bona fide purchaser, shall deliver
to such person the Cash Amount that such person would
have been entitled to receive upon surrender of each
such lost, wrongfully taken or destroyed Commerce
Certificate.
(h) Waiver. The Surviving Corporation or Second 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 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.
(i) Commerce Shareholders' Appraisal Rights. Anything
contained in this Agreement or elsewhere to the
contrary notwithstanding, if any holder of an
outstanding Commerce Share shall properly exercise
appraisal rights with respect thereto in accordance
with Section 262 of the DGCL (a "Commerce Dissenting
Share"), then:
(i) Each such Commerce Dissenting Share shall
nevertheless be deemed to be extinguished at
the Effective Time as provided elsewhere in
this Agreement;
(ii) Each person perfecting such appraisal rights
shall thereafter have only such rights (and
shall have such obligations) as are provided
in Section 262 of the DGCL, and neither
Second nor the Surviving Corporation shall
be required to deliver any cash payments to
such person in substitution for each such
Commerce Dissenting Share in accordance with
this Agreement; provided, however, that, if
any such person shall have failed to perfect
or shall withdraw or lose such holder's
rights under subsection (k) of Section 262
of the DGCL, each such holder's Commerce
Dissenting Shares shall thereupon be deemed
to have been converted as of the Effective
Time into the right to receive the Cash
Amount, without any interest thereon,
pursuant to Section 2.01.
No holder of Commerce Dissenting Shares shall be
entitled to submit a letter of transmittal, and any
letter of transmittal submitted by a holder of
Commerce Dissenting Shares shall be invalid.
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2.03. MERGER CORP. SHARES
Each issued and outstanding common share of Merger Corp.
("Merger Corp. Shares"), immediately prior to the Effective Time shall be
converted into and thereafter evidence one share of Class B Common Stock,
without par value, of the Surviving Corporation.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF COMMERCE
3.01. REPRESENTATIONS AND WARRANTIES OF COMMERCE
Commerce hereby represents and warrants to Second that:
(a) Corporate Status.
(i) Commerce is a Delaware corporation and a
bank holding company registered under the
Bank Holding Company Act of 1956, as amended
(the "BHC Act"), but has not qualified as a
financial holding company under the BHC Act;
is duly organized, validly existing and in
good standing under the laws of Delaware;
and has the full corporate power and
authority to own its property, to carry on
its business as presently conducted.
Commerce 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 would not have a material
adverse effect on Commerce. True and
complete copies of the certificate of
incorporation and bylaws of Commerce and all
amendments thereto have been delivered to
Second by Commerce in Section 3.01(a) of the
Commerce Disclosure Schedule.
(ii) Commerce Bank is the only Subsidiary (as
that term is defined in Section 3.01(c)) of
Commerce. Commerce Bank is an Ohio
state-chartered bank; is duly organized,
validly existing and in good standing under
the laws of the State of Ohio; and has full
corporate power and authority to own its
property, and to carry on its business as
presently conducted. Commerce Bank is a
member of the Federal Reserve System.
Commerce 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 would not have a
material adverse effect on Commerce Bank.
True and complete copies of the governing
instruments of Commerce Bank and all
amendments thereto have been delivered to
Second in Section 3.01(a) of the Commerce
Disclosure Schedule.
(iii) As used in this Agreement, (A) any reference
to any event, change or effect being
"material" with respect to any entity means
an
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event, change or effect which is 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 (B)
the term "material adverse effect" means,
with respect to an entity, a material
adverse effect on the financial condition,
properties, assets, liabilities, businesses
or results of operations of such entity and
its subsidiaries taken as a whole or on the
ability of such entity to perform without
material delay its obligations under this
Agreement or consummate the Merger and the
other material transactions contemplated by
this Agreement.
(b) Capitalization of Commerce.
(i) The authorized capital of Commerce consists
solely of 670,000 shares of Class A common
stock, without par value, none of which is
issued, and 2,500,000 shares of Class B
common stock, without par value, of which
1,816,038 Commerce Shares are issued and
outstanding. No Commerce Shares are held in
treasury by Commerce. All outstanding
Commerce 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 Commerce Shares issued have been
issued in compliance with all applicable
federal and state securities laws. As of the
date of this Agreement, no Commerce Shares
were subject to issuance upon the exercise
of stock options (the "Commerce Stock
Options") granted under the Commerce
Exchange Bank Amended & Restated Stock
Option Plan (the "Commerce Stock Option
Plan"). Commerce has furnished to Second, as
part of Section 3.01(b) of the Commerce
Disclosure Schedule, a true and complete
copy of the Commerce Stock Option Plan and a
list of all participants therein which
identifies the number of Commerce Shares
subject to Commerce Stock Options held by
each participant, the exercise price or
prices of such Commerce Stock Options and
the dates each Commerce Stock Option was
granted, becomes exercisable and expires.
(ii) As of the date of this Agreement, except for
this Agreement and the Commerce Stock
Options, there are no options, warrants,
calls, rights, commitments or agreements of
any character to which Commerce is a party
or by which it is bound obligating Commerce
to issue, deliver or sell, or cause to be
issued, delivered or sold, any additional
Commerce Shares or obligating Commerce 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 Commerce to repurchase,
redeem or otherwise acquire any Commerce
Shares except for such obligations arising
under the Commerce Stock Option Agreement.
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(iii) Except as disclosed in Section 3.01(b) of
the Commerce Disclosure Schedule, since
December 31, 2000, Commerce has not (A)
issued or permitted to be issued any
Commerce Shares, or securities exercisable
for or convertible into Commerce Shares,
other than upon exercise of the Commerce
Stock Options granted prior to the date
hereof under the Commerce Stock Option Plan;
(B) repurchased, redeemed or otherwise
acquired, directly or indirectly through
Commerce Bank or otherwise, any Commerce
Shares; or (C) declared, set aside, made or
paid to the shareholders of Commerce
dividends or other distributions on the
outstanding Commerce Shares.
(iv) No bonds, debentures, notes or other
indebtedness of Commerce having the right to
vote on any matters on which Commerce
shareholders may vote ("Commerce Voting
Debt") are issued or outstanding.
(c) Subsidiary. Commerce Bank is the only Subsidiary of
Commerce. Commerce owns of record and beneficially
all of the issued and outstanding equity securities
of Commerce Bank. There are no options, warrants,
calls, rights, commitments or agreements of any
character to which Commerce or Commerce Bank is a
party or by which any of them is bound obligating
Commerce Bank to issue, deliver or sell, or cause to
be issued, delivered or sold, additional equity
securities of Commerce Bank (other than to Commerce)
or obligating Commerce or Commerce Bank to grant,
extend or enter into any such option, warrant, call,
right, commitment or agreement. There are no
contracts, commitments, understandings or
arrangements relating to Commerce's rights to vote or
to dispose of the equity securities of Commerce Bank
which it owns. All of the equity securities of
Commerce Bank held by Commerce are fully paid and
non-assessable (except as provided in Sections
1107.07 and 1121.52, Ohio Revised Code) and are owned
by Commerce free and clear of any charge, mortgage,
pledge, security interest, hypothecation,
restriction, claim, option, lien, encumbrance or
interest of any persons whatsoever. Except as
disclosed in Section 3.01(c) of the Commerce
Disclosure Schedule, Commerce 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 Commerce Bank.
For purposes of this Agreement, "Subsidiary" has the
meaning ascribed to it in Rule 1-02 of Regulation S-X
promulgated by the Securities and Exchange Commission
(the "SEC").
(d) Corporate Proceedings. All corporate proceedings of
Commerce necessary to authorize the execution,
delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby,
in each case by Commerce, have been duly and validly
taken,
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except for the adoption of this Agreement by the
holders of at least a majority of the outstanding
Commerce Shares entitled to vote thereon (which is
the only required shareholder vote thereon). The
Board of Directors of Commerce has recommended
adoption of this Agreement by the shareholders of
Commerce and directed that this Agreement be
submitted to the shareholders of Commerce for their
approval. This Agreement has been validly executed
and delivered by duly authorized officers of
Commerce. The Merger constitutes a "Permitted Offer"
as defined under the Commerce Exchange Corporation
Common Stock Rights Agreement ("Rights Agreement")
because the Board of Directors of Commerce has taken
action appropriate under the Rights Agreement and no
holder of Commerce Shares shall have any rights under
the Rights Agreement as a result of the Merger.
(e) Authorized and Effective Agreement. This Agreement
constitutes the legal, valid and binding obligation
of Commerce, enforceable against Commerce in
accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar
laws relating to or affecting the enforcement of
creditors' rights generally, by general equitable
principles (regardless of whether enforceability is
considered in a proceeding in equity or at law) and
by an implied covenant of good faith and fair
dealing. Commerce has the absolute and unrestricted
right, power, authority and capacity to execute and
deliver this Agreement and, subject to the required
adoption of this Agreement by the Commerce
shareholders, 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.
(f) Financial Statements of Commerce. In Section 3.01(f)
of the Commerce Disclosure Schedule, Commerce has
furnished to Second accurate and complete copies of
consolidated financial statements of Commerce
consisting of (i) audited consolidated balance sheets
as of December 31, 2000, 1999 and 1998 (December 31,
2000, is referred to in this Agreement as the
"Commerce Balance Sheet Date"), and the related
consolidated statements of income, changes in
shareholders' equity and cash flows for the three
years ended December 31, 2000, including accompanying
notes and the reports thereon of ▇▇▇▇▇, ▇▇▇▇▇▇ and
Company and (ii) the unaudited consolidated balance
sheet as of June 30, 2001, the related unaudited
consolidated statements of income for the three
months ended June 30, 2001, of changes in
shareholders' equity for the three months ended June
30, 2001 (collectively, all of such consolidated
financial statements are referred to as the "Commerce
Financial Statements"). The Commerce Financial
Statements were prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a
consistent basis and present fairly, in all material
respects, the consolidated financial condition of
Commerce at the dates, and the
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consolidated results of operations and cash flows for
the periods, stated therein; subject, in the case of
the interim statements, to normal year-end audit
adjustments which are not expected to be,
individually or in the aggregate, materially adverse
to Commerce and the absence of a statement of cash
flows and full footnotes.
(g) Absence of Undisclosed Liabilities. Except as
disclosed in Section 3.01(g) of the Commerce
Disclosure Schedule, neither Commerce nor Commerce
Bank had any debt, obligation, guarantee or liability
at the Commerce Balance Sheet Date, whether absolute,
accrued, contingent or otherwise except for debts,
obligations, guarantees or liabilities which,
individually or in the aggregate, do not exceed
$10,000, which is not adequately reflected and
reserved in the Commerce Financial Statements. Except
as disclosed in Section 3.01(g) of the Commerce
Disclosure Schedule, all debts, liabilities,
guarantees and obligations of Commerce and Commerce
Bank incurred since the Commerce 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
3.01(g) of the Commerce Disclosure Schedule, neither
Commerce nor Commerce Bank is in default or breach of
any material agreement to which Commerce or Commerce
Bank is a party; except for defaults or breaches
which do not have a material adverse effect on them.
(h) Absence of Changes. Except as set forth in Section
3.01(h) of the Commerce Disclosure Schedule, since
the Commerce Balance Sheet Date: (i) Commerce has not
suffered any material adverse effect, and, to the
knowledge of Commerce, no fact or condition exists
which Commerce believes will cause such a material
adverse effect in the future; and (ii) Commerce has
not taken or permitted any of the actions described
in Section 5.01(b) of this Agreement. For purposes of
this Agreement, an individual will be deemed to have
"knowledge" of a particular fact or other matter if:
(a) such individual is actually aware of such
fact or other matter; or
(b) a prudent individual would be expected to
discover or otherwise become aware of such
fact or other matter in the course of
conducting a reasonably comprehensive
investigation concerning the existence of
such fact or other matter.
Commerce or Second will be deemed to have "knowledge"
of a particular fact or other matter if any
individual who is serving as a director or officer of
such corporation has, or at any time had, knowledge
of such fact or other matter.
(i) Loan Documentation. The documentation ("Loan
Documentation") governing or relating to the loan and
credit-related assets ("Loan Assets")
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representing the loan portfolio of Commerce Bank is
legally sufficient for the purposes intended thereby
and creates enforceable rights of Commerce 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, 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. Except as set forth in
Section 3.01(i) of the Commerce 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 3.01(i) of the Commerce Disclosure Schedule,
Commerce Bank is not a party to a loan, including any
loan guaranty, with any director, executive officer
or five percent (5%) shareholder of Commerce or
Commerce Bank, or any person, corporation or
enterprise controlling, controlled by or under common
control with either Commerce or Commerce Bank. Except
as set forth in Section 3.01(i) of the Commerce
Disclosure Schedule, all loans and extensions of
credit that have been made by Commerce Bank comply
with applicable regulatory limitations and
procedures.
(j) Allowance for Loan Losses. Except as set forth in
Section 3.01(j) of the Commerce Disclosure Schedule,
there is no loan which was made by Commerce Bank and
which is reflected as an asset of Commerce Bank on
the Commerce Financial Statements that (i) is 90 days
or more delinquent or (ii) has been classified by
examiners (regulatory or internal) as "Substandard,"
"Doubtful" or "Loss." The Commerce ALLL reflected on
the Commerce Financial Statements has been determined
in accordance with GAAP and in accordance with all
rules and regulations applicable to Commerce and
Commerce Bank and is reasonably adequate in all
material respects. Commerce has considered all
potential losses known to Commerce in establishing
the current Commerce ALLL, other than such losses
that if incurred would not have a material adverse
effect on either Commerce or Commerce Bank, all in
accordance with Commerce Bank's credit policy and
policy for the allowance for loan and lease losses as
in effect from time to time.
(k) Reports and Records. Commerce and Commerce Bank have
filed all reports and maintained all records required
to be filed or maintained by them under the rules and
regulations of the Board of Governors of the Federal
Reserve System (the "Federal Reserve"), the Ohio
Division of Financial Institutions (the "ODFI"), and
the Federal Deposit Insurance Corporation (the
"FDIC"), except for such reports and records the
failure to file or maintain would not reasonably be
expected to have a material adverse effect on
Commerce or Commerce Bank. 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
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20
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.
(l) Taxes. Except as set forth in Section 3.01(l) of the
Commerce Disclosure Schedule, Commerce and Commerce
Bank have timely filed all returns, statements,
reports and forms (including 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 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 through the
date of this Agreement except where the failure to
file would not have a material adverse effect. Such
Tax Returns are and will be true, correct and
complete in all material respects as of the Closing
Date. Commerce and Commerce Bank have paid and
discharged all Taxes due from them, other than such
Taxes that are adequately reserved as shown on the
Commerce Financial Statements or have arisen in the
ordinary course of business since the Commerce
Balance Sheet Date. Except as set forth in Section
3.01(l) of the Commerce 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 Commerce, is threatening to assert
against Commerce or Commerce Bank any deficiency or
claim for additional Taxes. There are no unexpired
waivers by Commerce or Commerce Bank of any statute
of limitations with respect to Taxes. Except as set
forth in Section 3.01(l) of the Commerce Disclosure
Schedule, no extension of time within which to file
any tax return has been filed, or has been requested
or granted. The accruals and reserves for Taxes
reflected in the Commerce Financial Statements are
adequate for the periods covered. Commerce and
Commerce 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 Commerce or
Commerce Bank, other than liens for current Taxes not
yet due and payable. Neither Commerce nor Commerce
Bank has agreed to make, or is required to make, any
adjustment under Section 481(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). Except
as set forth in Section 3.01(l) of the Commerce
Disclosure Schedule, neither Commerce nor Commerce
Bank is a party to any agreement, contract,
arrangement or plan that has resulted, or could
result, individually or in the
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21
aggregate, in the payment of "excess parachute
payments" within the meaning of Section 280G of the
Code. Neither Commerce nor Commerce Bank 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 Commerce is or was
the common parent corporation. No Tax is required to
be withheld pursuant to Section 1445 of the Code as a
result of the transactions contemplated by this
Agreement. All material elections with respect to
Taxes affecting Commerce as of the date hereof are
set forth in Section 3.01(l) of the Commerce
Disclosure Schedule. After the date hereof, no
election with respect to Taxes will be made without
the written consent of Second. None of the assets of
Commerce or Commerce Bank is property which Commerce
or Commerce Bank is required to treat as being owned
by any other person pursuant to the so-called "safe
harbor lease" provisions of former Section 168(f)(8)
of the Code. None of the assets of Commerce or
Commerce Bank directly or indirectly secures any debt
the interest on which is tax-exempt under Section
103(a) of the Code. None of the assets of Commerce or
Commerce Bank is "tax-exempt use property" within the
meaning of Section 168(h) of the Code. Neither
Commerce nor Commerce Bank is, and has not been, a
United States real property holding corporation (as
defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section
897(c)(1)(A)(ii) of the Code. Neither Commerce nor
Commerce Bank is a party to any joint venture,
partnership or other arrangement or contract which
could be treated as a partnership for federal income
tax purposes. Commerce has not made nor is bound by
any election under Section 197 of the Code. Neither
Commerce nor Commerce Bank has any excess loss
account (as defined in Treasury Regulations Section
1.1502-19 with respect to the stock of Commerce
Bank).
(m) Property and Title. Section 3.01(m) of the Commerce
Disclosure Schedule lists and describes all real
property, and any leasehold interest in real
property, owned or held by Commerce or Commerce Bank
and used in the business of Commerce or Commerce Bank
(collectively, the "Commerce Real Properties"). The
Commerce Real Properties constitute all of the real
property and interests in real property used in the
businesses of Commerce and Commerce Bank. True and
complete copies of all leases of real property to
which Commerce or Commerce Bank is a party have been
provided to Second in Section 3.01(m) of the Commerce
Disclosure Schedule. Such leasehold interests have
not been assigned or subleased. All leases of real
property and all other leases that are material to
Commerce and Commerce Bank and under which Commerce
or Commerce Bank, as lessee, leases real or personal
property, are valid and binding in accordance with
their respective terms, there is not under such lease
any material existing default by Commerce or Commerce
Bank or any event which with notice or lapse of time
would constitute such a default. Commerce and
Commerce Bank own, and are in rightful
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possession of, and have good title to, all of the
other assets indicated in the Commerce Financial
Statements as being owned by Commerce or Commerce
Bank, free and clear of any charge, mortgage, pledge,
security interest, hypothecation, restriction, claim,
option, lien, encumbrance or interest of any persons
whatsoever except those described in the Commerce
Financial Statements or Section 3.01(m) of the
Commerce Disclosure Schedule and except for those
assets disposed of in the ordinary course of business
consistent with past practices. All of the assets of
Commerce and Commerce Bank are in good operating
condition, except for normal maintenance and routine
repairs, and are reasonably adequate to continue to
conduct the businesses of Commerce and Commerce Bank
as such businesses are presently being conducted.
(n) Legal Proceedings. Except as set forth in Section
3.01(n) of the Commerce Disclosure Schedule, there
are no actions, suits, proceedings, claims or
investigations pending or appealable or, to the
knowledge of Commerce and Commerce Bank, threatened
in any court, before any governmental agency or
instrumentality or in any arbitration proceeding (i)
against Commerce or Commerce Bank which would have a
material adverse effect on Commerce; or (ii) against
or by Commerce or Commerce Bank which would prevent
the consummation of this Agreement or any of the
transactions contemplated hereby or declare the same
to be unlawful or cause the rescission thereof.
(o) Regulatory Matters. None of Commerce, Commerce Bank
and the respective properties of Commerce and
Commerce Bank 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 or engaged in the insurance of deposits
(including, without limitation, the Federal Reserve,
the ODFI and the FDIC) or the supervision or
regulation of Commerce or Commerce Bank
(collectively, the "Regulatory Authorities") except
as described in Section 3.01(o) of the Commerce
Disclosure Schedule. Neither Commerce nor Commerce
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 such
order, judgment, decree, agreement, memorandum of
understanding, commitment letter, supervisory letter
or similar submission. Except as described in Section
3.01(o) of the Commerce Disclosure Schedule, neither
Commerce nor Commerce Bank is engaged in any activity
which would be prohibited as a nonbanking activity
under 12 C.F.R. Section 225.21.
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(p) No Conflict. Subject to the required adoption of this
Agreement by the shareholders of Commerce, receipt of
the required approvals of Regulatory Authorities and
Governmental Authorities, and expiration of
applicable regulatory waiting periods, the execution,
delivery and performance of this Agreement, and the
consummation of the transactions contemplated by this
Agreement, by Commerce do not and will not (i)
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: (A) any federal, state or local
law, regulation, ordinance, order, rule or
administrative ruling of any administrative agency or
commission or other federal, state or local
governmental authority or instrumentality (each, a
"Governmental Authority") applicable to Commerce or
Commerce Bank or any of their respective properties;
(B) the certificate of incorporation or bylaws of
Commerce, or the articles and regulations of Commerce
Bank; (C) any material agreement, indenture or
instrument to which Commerce or Commerce Bank is a
party or by which it or its properties or assets may
be bound; or (D) any order, judgment, writ,
injunction or decree of any court, arbitration panel
or any Governmental Authority applicable to Commerce
or Commerce Bank; (ii) result in the creation or
acceleration of any security interest, mortgage,
option, claim, lien, charge or encumbrance upon or
interest in any property of Commerce or Commerce
Bank; or (iii) 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 Commerce
or Commerce Bank.
(q) Brokers, Finders and Others. Except for the fees paid
or payable to Austin Associates, Inc., there are no
fees or commissions of any sort whatsoever claimed
by, or payable by Commerce or Commerce Bank to, any
broker, finder, intermediary, attorney, accountant or
any other similar person in connection with effecting
this Agreement or the transactions contemplated
hereby, except for ordinary and customary legal and
accounting fees.
(r) Employment Agreements. Except as disclosed in Section
3.01(r) of the Commerce Disclosure Schedule, neither
Commerce nor Commerce Bank is a party to any
employment, change in control, severance or
consulting agreement not terminable at will or
obligated to pay any severance bonus or other
compensation as a result of the Merger. Neither
Commerce nor Commerce 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. To
Commerce's Knowledge, Commerce and Commerce Bank are
in compliance in all material respects with all
applicable laws respecting employment and employment
practices, terms and conditions of employment and
wages and hours, and neither Commerce nor Commerce
Bank has engaged in any unfair labor practice.
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(s) Employee Benefit Plans.
(i) Section 3.01(s)(i) of the Commerce
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 (A) Commerce
or Commerce 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 Commerce or
Commerce Bank participates or to which any
such Employees, Consultants, Officers or
Directors either participate or are parties
or (B) any ERISA Affiliate (as defined
below) (collectively, the "Compensation and
Benefit Plans"). Neither Commerce nor
Commerce Bank has any commitment to create
any additional Compensation and Benefit Plan
or to modify or change any existing
Compensation and Benefit Plan, except as
otherwise contemplated by Section 6.03 of
this Agreement, and/or as may be required by
applicable law.
(ii) Each Compensation and Benefit Plan has been
operated and administered in all material
respects in accordance with its terms and
with applicable law, including, but not
limited to, ERISA, the Code, the Securities
Act (as defined in Section 3.01(u)), the
Exchange Act (as defined in Section
3.01(ff)), 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, except where the failure to
make such filings, disclosures and notices
would not have a material adverse effect.
Each 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 determination
letter (including a determination that the
related trust under such Compensation and
Benefit Plan is exempt from tax under
Section 501(a) of the Code) from the IRS and
Commerce is not aware of any circumstances
likely to result in revocation of any such
favorable determination letter. There is no
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material pending or, to the knowledge of
Commerce, threatened legal action, suit or
claim relating to the Compensation and
Benefit Plans other than routine claims for
benefits thereunder. Neither Commerce nor
Commerce 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
Commerce or Commerce 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.
(iii) Neither Commerce, Commerce Bank, nor any
other entity which is considered one
employer with Commerce under Section
4001(a)(14) of ERISA or Section 414(b), (c)
or (m) of the Code (an "ERISA Affiliate")
maintains or maintained, within the six (6)
year period ending on the Effective Time, a
single employer plan (within the meaning of
Section 4001(a)(15) of ERISA. None of
Commerce, Commerce 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. There is no pending investigation or
enforcement action by the Department of
Labor (the "DOL"), the IRS or any other
Governmental Authority with respect to any
Compensation and Benefit Plan.
(iv) 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 Commerce or
Commerce Bank is a party have been timely
made or have been reflected on the Commerce
Financial Statements. Neither any Pension
Plan nor any ERISA Affiliate Plan has an
"accumulated funding deficiency" (whether or
not waived) within the meaning of Section
412 of the Code or Section 302 of ERISA.
None of Commerce, Commerce Bank or any ERISA
Affiliate (x) has provided, or would
reasonably be expected to be required to
provide, security to any Pension Plan or to
any ERISA Affiliate Plan pursuant to Section
401(a)(29) of the Code, and (y) has taken
any action, or omitted to take any action,
that has resulted, or would reasonably be
expected to result, in the imposition of a
lien under Section 412(n) of the Code or
pursuant to ERISA.
(v) Except as disclosed in Section 3.01(s)(v) of
the Commerce Disclosure Schedule, neither
Commerce nor Commerce Bank has any
obligations to provide retiree health and
life insurance or other retiree death
benefits under any Compensation and Benefit
Plan,
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other than benefits mandated by Section
4980B of the Code. Except as disclosed in
Section 3.01(s)(v) of the Commerce
Disclosure Schedule, there has been no
communication to Employees by Commerce or
Commerce Bank that would reasonably be
expected to promise or guarantee such
Employees retiree health or life insurance
or other retiree death benefits on a
permanent basis.
(vi) Commerce and Commerce Bank do not maintain
any Compensation and Benefit Plans covering
foreign Employees.
(vii) With respect to each Compensation and
Benefit Plan, if applicable, Commerce has
provided or made available to Second, true
and complete copies of existing: (A)
Compensation and Benefit Plan documents and
amendments thereto; (B) trust instruments
and insurance contracts; (C) two most recent
Forms 5500 filed with the IRS; (D) most
recent actuarial report and financial
statement; (E) most recent summary plan
description; (F) forms filed with the PBGC
within the past year (other than for premium
payments); (G) most recent determination
letter issued by the IRS; (H) any Form 5310,
Form 5310A, Form 5300 or Form 5330 filed
within the past year with the IRS; and (I)
most recent nondiscrimination tests
performed under ERISA and the Code
(including but not limited to Code Section
401(k) and 401(m) tests).
(viii) Except as disclosed on Section 3.01(s)(viii)
of the Commerce 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
(A) entitle any Employee, Consultant or
Director to any payment (including severance
pay or similar compensation) or any increase
in compensation, (B) result in the vesting
or acceleration of any benefits under any
Compensation and Benefit Plan, except as
required by law or (C) result in any
material increase in benefits payable under
any Compensation and Benefit Plan.
(ix) Except as disclosed on Section 3.01(s)(ix)
of the Commerce Disclosure Schedule, neither
Commerce nor Commerce Bank maintains any
compensation plans, programs or arrangements
the payments under which would not
reasonably be expected to be deductible as a
result of the limitations under Section
162(m) of the Code and the regulations
issued thereunder.
(x) Except as disclosed on Section 3.01(s)(x) of
the Commerce Disclosure Schedule, as a
result, directly or indirectly, of the
transactions contemplated by this Agreement
(including, without
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limitation, as a result of any termination
of employment prior to or following the
Effective Time), none of Second, Commerce or
the Surviving Corporation, or any of their
respective Subsidiaries will be obligated to
make a payment that would be characterized
as an "excess parachute payment" to an
individual who is a "disqualified
individual" (as such terms are defined in
Section 280G of the Code) of Commerce on a
consolidated basis, without regard to
whether such payment is reasonable
compensation for personal services performed
or to be performed in the future.
(t) Compliance with Laws. Each of Commerce and Commerce
Bank:
(i) has been and is in compliance with all
applicable federal, state and local
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 Commerce or Commerce Bank.
Commerce and Commerce Bank have taken all
actions necessary to be in compliance with
applicable privacy regulations under the
▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act of 1999;
(ii) has all permits, licenses, authorizations,
orders and approvals of, and has made all
filings, applications and registrations
with, all Governmental Authorities that are
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 Commerce or
Commerce Bank; all such permits, licenses,
certificates of authority, orders and
approvals are in full force and effect and,
to Commerce's knowledge, no suspension or
cancellation of any of them is threatened;
and
(iii) has received no notification or
communication from any Governmental
Authority (A) asserting that Commerce or
Commerce Bank is not in compliance with any
of the statutes, regulations or ordinances
which such Governmental Authority enforces
or (B) threatening to revoke any license,
franchise, permit or governmental
authorization (nor, to Commerce's knowledge,
do any reasonable grounds for any of the
foregoing exist), which has
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not been resolved to the satisfaction of the
Governmental Authority which sent such
notification or communication.
(iv) has not received any notice of
non-compliance with the applicable
provisions of the Federal Community
Reinvestment Act, as amended ("CRA"), and
the regulations promulgated thereunder.
Commerce Bank has received a CRA rating of
satisfactory or better from the Federal
Reserve in Commerce Bank's most recent
examination. Commerce knows of no fact or
circumstance or set of facts or
circumstances which would cause Commerce or
Commerce Bank to receive any notice of
non-compliance with such provisions or cause
the CRA rating of Commerce or Commerce Bank
to fall below satisfactory.
(u) Commerce Information. None of the information
relating to Commerce and Commerce Bank to be
contained in the Proxy Statement (as that term is
defined in Section 5.03(b) below), as of the date
such Proxy Statement is mailed to shareholders of
Commerce and up to and including the date of the
meeting of Commerce's shareholders to which such
Proxy Statement relates, will contain any untrue
statement of a material fact or omit 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, provided that, in each case,
information as of a later date shall be deemed to
modify information as of an earlier date. All
information about Commerce and Commerce Bank included
in the Proxy Statement prepared by Commerce pursuant
to Section 5.03 will be deemed to have been supplied
by Commerce.
(v) Insurance.
(i) Section 3.01(v) of the Commerce Disclosure
Schedule sets forth a list of all of the
insurance policies, binders or bonds
maintained by Commerce or Commerce Bank and
a description of all claims filed by
Commerce or Commerce Bank against the
insurers of Commerce and Commerce Bank since
December 31, 1998. Commerce and Commerce
Bank are insured with reputable insurers
against such risks and in such amounts as
the management of Commerce reasonably has
determined to be prudent in accordance with
industry practices. All such insurance
policies are in full force and effect;
Commerce and Commerce Bank are not in
material default thereunder; and all claims
thereunder have been filed in due and timely
fashion.
(ii) The savings accounts and deposits of
Commerce Bank are insured up to applicable
limits by the FDIC in accordance with the
Federal Deposit Insurance Act, and Commerce
Bank has paid all assessments and filed all
reports required by the Federal Deposit
Insurance Act.
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(w) Governmental and Third-Party Proceedings. No consent,
approval, authorization of, or registration,
declaration or filing with, any court, Governmental
Authority or any other third party is required to be
made or obtained by Commerce or Commerce Bank in
connection with the execution, delivery or
performance by Commerce of this Agreement or the
consummation by Commerce 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 Ohio and Delaware
Secretaries of State pursuant to the OGCL and DGCL
and (C) the adoption of this Agreement by the
Commerce shareholders. As of the date hereof,
Commerce is not aware of any reason why the approvals
set forth in Section 8.03 will not be received
without the imposition of a condition, restriction or
requirement of the type described in Section 8.03(b).
(x) Contracts. Section 3.01(x) of the Commerce Disclosure
Schedule sets forth a list, identifying by dates,
subject matter and parties, of all contracts,
agreements and instruments to which Commerce or
Commerce Bank is a party or by which any of them is
bound, and (A) which cannot be terminated by Commerce
or Commerce Bank without penalty or (B) which relate
to the borrowing of money by Commerce or Commerce
Bank or the guarantee of any obligation by Commerce
or Commerce Bank (other than with respect to Federal
Home Loan Bank or Federal Reserve Bank advances) or
(C) which are not in the ordinary course of their
respective businesses. True, complete and correct
copies of all such contracts, agreements and
instruments have been delivered to Second in Section
3.01(x) of the Commerce Disclosure Schedule. Neither
Commerce nor Commerce Bank, nor to the Knowledge of
Commerce or Commerce Bank any other party thereto, is
in default under any such contract, agreement,
commitment, arrangement or other instrument to which
it is a party, by which its respective assets,
business or operations may be bound or affected in
any way, or under which it or its respective assets,
business or operations receive benefits, and there
has not occurred any event that, with the lapse of
time or the giving of notice or both, would
constitute such a default, except where a default
would not have a material adverse effect on Commerce
or Commerce Bank.
(y) Environmental Matters.
(RELATING TO COLLATERAL PROPERTIES) Except as otherwise
disclosed in Section 3.01(y) of the Commerce Disclosure
Schedule: (i) no investigations, inquiries, orders, hearings,
actions or other proceedings by or before any court or
Governmental Authority are pending or threatened in connection
with any real properties in respect of which Commerce Bank has
foreclosed or holds a mortgage or mortgages (hereinafter
referred to as the "Commerce Bank Real Estate Collateral");
(ii) while Phase I environmental reports contained within
individual loan files of Commerce Bank may disclose conditions
at or upon
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Commerce Bank Real Estate Collateral which may require
remediation by the responsible party therefor, or, if further
deterioration or degeneration occurs may require remediation
under applicable Environmental Law, no such environmental
reports identify or infer that Commerce, Commerce Bank, or the
mortgagor is or may be such a responsible party; (iii) to the
knowledge of Commerce or Commerce Bank no claims at any time
have been made or threatened by any third party against
Commerce or Commerce Bank, or with respect to the Commerce
Bank Real Estate Collateral or improvements thereon, relating
to damage, contribution, cost recovery, compensation, loss,
injunctive relief, remediation or injury resulting from any
Hazardous Substance (as that term is defined in this Section
3.01(y)); (iv) to the knowledge of Commerce or Commerce Bank,
no Hazardous Substances have been integrated into the Commerce
Bank Real Estate Collateral or improvements thereon or any
component thereof in such manner or quantity as may reasonably
be expected to or in fact would pose a threat to human health
or the value of the real property and improvements; (v) to
Commerce's and Commerce Bank's knowledge, no portion of the
Commerce Bank Real Estate Collateral or improvements thereon
is located within 500 feet of (A) a release of Hazardous
Substance which has been reported or is required to be
reported under any Environmental Law or (B) the location of
any site used, in the past or presently, for the treatment,
transportation, storage or disposal of any Hazardous
Substances; and (vi) neither Commerce nor Commerce Bank has
knowledge that (A) any of the Commerce Bank Real Estate
Collateral or improvements thereon has been used for the
treatment, transportation, storage or disposal of Hazardous
Substances or has been contaminated by Hazardous Substances,
(B) any of the Commerce Real Estate Collateral or improvements
thereon have in the past or presently contain underground
storage tanks, friable asbestos materials or PCB-containing
equipment.
(BANK-OWNED PROPERTY) Except as otherwise disclosed in Section
3.01(y) of the Commerce Disclosure Schedule: (i) to the
knowledge of Commerce and Commerce Bank, neither Commerce nor
Commerce Bank has engaged in any activity in violation of any
applicable Environmental Law; (ii)(A) no investigations,
inquiries, orders, hearings, actions or other proceedings by
or before any court or Governmental Authority are pending or,
to the knowledge of Commerce or Commerce Bank, threatened in
connection with any of Commerce's or Commerce Bank's
activities and any Commerce Real Properties or improvements
thereon, (iii) no claims at any time have been made or
threatened by any third party against Commerce or Commerce
Bank, or with respect to the Commerce Real Properties or
improvements thereon, relating to damage, contribution, cost
recovery, compensation, loss, injunctive relief, remediation
or injury resulting from any Hazardous Substance (as that term
is defined in this Section 3.01(y)); (iv) no Hazardous
Substances have been integrated into the Commerce Real
Properties or improvements thereon or any component thereof,
in such manner or quantity as may reasonably be expected to or
in fact would pose a threat to human health or the value of
the real property and improvements; (v) to Commerce's and
Commerce Bank's knowledge, no portion of the Commerce Real
Properties or improvements thereon, is located within 500 feet
of (A) a
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31
release of Hazardous Substance which has been reported or is
required to be reported under any Environmental Law or (B) the
location of any site used, in the past or presently, for the
treatment, transportation, storage or disposal of any
Hazardous Substances; and (vi) neither Commerce nor Commerce
Bank has knowledge that (A) any of the Commerce Real
Properties or improvements thereon has been used for the
treatment, transportation, storage or disposal of Hazardous
Substances or has been contaminated by Hazardous Substances,
(B) any of the business operations of Commerce or Commerce
Bank have contaminated lands, waters or other property of
others with Hazardous Substances, except routine,
office-generated solid waste in compliance with applicable
laws, or (C) any of the Commerce Real Properties or
improvements thereon have in the past or presently contain
underground storage tanks, friable asbestos materials or
PCB-containing equipment.
For purposes of this Agreement, (i) "Environmental
Law" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended
("CERCLA"); the Resource Conservation and Recovery
Act of 1976, as amended; the Hazardous Materials
Transportation Act, as amended; the Toxic Substances
Control Act, as amended; the Federal Water Pollution
Control Act, as amended; the Safe Drinking Water Act,
as amended; the Clean Air Act, as amended; the
Occupational Safety and Health Act of 1970, as
amended; the Hazardous & Solid Waste Amendments Act
of 1984, as amended; the Superfund Amendments and
Reauthorization Act of 1986, as amended; the
regulations promulgated thereunder, and any other
federal, state, county, municipal, local or other
statute, law, ordinance or regulation which may
relate to or deal with human health or the
environment, as of the date of this Agreement, and
(ii) "Hazardous Substances" means, at any time: (a)
any "hazardous substance" as defined in ss.101(14) of
CERCLA or regulations promulgated thereunder; (b) any
"solid waste," "hazardous waste," or "infectious
waste," as such terms are defined in any other
Environmental Law as of the date of this Agreement;
and (c) friable asbestos, urea-formaldehyde,
polychlorinated biphenyls ("PCBs"), nuclear fuel or
material, chemical waste, radioactive material,
explosives, known carcinogens, petroleum products and
by-products, and other dangerous, toxic or hazardous
pollutants, contaminants, chemicals, materials or
substances listed or identified in, or regulated by,
any Environmental Law.
(z) Takeover Laws. Commerce has taken all action required
to be taken by it in order to exempt this Agreement
and the transactions contemplated hereby from, and
this Agreement and the transactions contemplated
hereby are exempt from, the requirements of any
"moratorium", "control share", "fair price",
"affiliate transaction", "business combination" or
other anti-takeover laws or regulations of any state
(collectively, "Takeover Laws") applicable to it,
including, without limitation, those of the States of
Ohio and Delaware.
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(aa) Risk Management Instruments. All material interest
rate swaps, caps, floors, option agreements, futures
and forward contracts and other similar risk
management arrangements, whether entered into for
Commerce's own account, or for the account of one or
more of Commerce Bank or any of their respective
customers (all of which are listed on Section
3.01(aa) of the Commerce Disclosure Schedule), were
entered into (i) in accordance with prudent business
practices and all applicable laws, rules, regulations
and regulatory policies and (ii) with counter-parties
believed to be financially responsible at the time;
and each of them constitutes the valid and legally
binding obligation of Commerce or Commerce Bank,
enforceable in accordance with its terms, and is in
full force and effect. Neither Commerce nor Commerce
Bank, nor to Commerce's knowledge any other party
thereto, is in breach of any of its obligations under
any such agreement or arrangement.
(bb) Books and Records. Except as otherwise disclosed in
Section 3.01(bb) of the Commerce Disclosure
Schedules, the books and records of Commerce and
Commerce Bank have been fully, properly and
accurately maintained and have been maintained in
accordance with regular business practices. Such
books and records fairly reflect the substance of
events and transactions included therein.
(cc) Repurchase Agreements. With respect to any agreement
pursuant to which Commerce or Commerce Bank has
purchased securities subject to an agreement to
repurchase, Commerce or Commerce Bank, as the case
may be, has a valid, perfected first lien or security
interest in or evidence of ownership in book entry
form of the government securities or other collateral
securing the repurchase agreement, and the value of
such collateral equals or exceeds the amount of the
debt secured thereby.
(dd) Disclosure. No representation or warranty by Commerce
contained in this Agreement and no statement
contained in any certificate or other document
(including the Commerce Disclosure Schedule)
furnished by Commerce to Second pursuant to this
Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary to
make the statements contained herein and therein not
misleading, in the light of the circumstances under
which they were made.
(ee) Investment Securities. Except as disclosed in Section
3.01(ee) of the Commerce Disclosure Schedule, each of
Commerce and Commerce Bank has good and marketable
title to all securities held by it (except securities
sold under repurchase agreement or held in any
fiduciary or agency capacity), free and clear of any
charge, mortgage, pledge, security interest,
hypothecation, restriction, claim, option, lien,
encumbrance or interest of any person or persons
whatsoever, except to the extent such securities are
pledged in the ordinary course of business consistent
with prudent banking practice to secure obligations
of Commerce or Commerce Bank. Such
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securities are valued on the books of Commerce in
accordance with GAAP.
(ff) SEC Filings. The Commerce Shares are not registered
with the SEC pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
(gg) Fiduciary Responsibilities. To Commerce's knowledge,
during the applicable statute of limitations period,
(i) Commerce Bank has prudently administered all
accounts (if any) for which it acts as a fiduciary or
agent, including, but not limited to, accounts for
which it serves as a trustee, agent, custodian,
personal representative, guardian or conservator in
accordance with the terms of the governing documents
and applicable state and federal law and regulation
and common law, and (ii) neither Commerce Bank nor
any Director, Officer or Employee of Commerce Bank
acting on behalf of Commerce Bank has committed any
breach of trust with respect to any such fiduciary or
agency account, except where a breach would not have
a material adverse effect upon either Commerce or
Commerce Bank, and the accountings of each such
fiduciary or agency account are true and correct and
accurately reflect the assets of such fiduciary or
agency account. Neither Commerce nor Commerce Bank
has acted as an investor advisor. To the knowledge of
Commerce, there is no investigation or inquiry by any
regulatory Authority pending or threatened against or
affecting Commerce Bank relating to the compliance by
Commerce Bank with sound fiduciary principles and
applicable regulations.
(hh) Intellectual Property. Except as set forth in Section
3.01(hh) of the Commerce Disclosure Schedule, (i)
Commerce and Commerce Bank own, or have all rights
necessary to use (in each case, free and clear of any
liens, obligations for royalties or transfer
restrictions), all Intellectual Property (as defined
below) used in or necessary for the conduct of its
business as currently conducted; (ii) with respect to
each item of Intellectual Property owned or used by
Commerce or Commerce Bank immediately prior to the
Effective Time: such item will be owned or available
for use by Second on identical terms and conditions
immediately subsequent to the Effective Time and at
all times thereafter; such item is not subject to any
outstanding injunction, judgment, order, decree,
ruling, or charge to which Commerce or Commerce Bank
is a party or Commerce or Commerce Bank has
knowledge; no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand to
which Commerce or Commerce Bank is a party or
Commerce or Commerce Bank has knowledge is pending,
or, to the knowledge of Commerce or Commerce Bank, is
threatened, claimed or asserted which challenges the
legality, validity, enforceability, use, or ownership
of such item; and neither Commerce nor Commerce Bank
has agreed to indemnify any Person for or against any
interference, infringement, misappropriation, or
other
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conflict with respect to such item; (iii) the past
and current use of any Intellectual Property by
Commerce and Commerce Bank did not and does not
infringe on or otherwise violate the rights of any
person and is in accordance with any applicable
license pursuant to which Commerce or Commerce Bank
acquired the right to use any Intellectual Property;
(iv) no person is challenging, infringing on or
otherwise violating any right of Commerce or Commerce
Bank with respect to any Intellectual Property; and
(iv) no Intellectual Property owned and/or licensed
by Commerce or Commerce Bank is being used or
enforced in a manner that would result in the
abandonment, cancellation or unenforceability of such
Intellectual Property. To the extent that any
Intellectual Property is held by Commerce or Commerce
Bank pursuant to any license, sublicense, agreement,
or permission: such license, sublicense, agreement,
or permission will not cease to be legal, valid,
binding, enforceable, and in full force and effect on
identical terms as a result of the passage of time or
the consummation of the transactions contemplated
hereby; such license, sublicense, agreement, or
permission covering the item is legal, valid,
binding, enforceable, perpetual and in full force and
effect; no party to the license, sublicense,
agreement, or permission is in breach or default, and
to Commerce's and Commerce Bank's knowledge, no event
has occurred which with notice or lapse of time would
constitute a breach or default or permit termination,
modification, or acceleration thereunder. With
respect to all Intellectual Property of Commerce
which constitutes trade secrets: Commerce and
Commerce Bank have at all times taken all reasonable
security precautions to prevent disclosure or misuse
of the item, there has been no public or other
disclosure with respect to the item, except
disclosures pursuant to written confidentiality
agreements signed by the recipient, the item is not
in the public domain and neither Commerce nor
Commerce Bank has granted any license or other
permission to any third party to use any such item.
To Commerce's knowledge, neither Commerce nor
Commerce Bank has interfered with, infringed upon,
misappropriated, or otherwise violated any
Intellectual Property rights of third parties, nor
committed any acts of unfair competition, and none of
the managers, members, directors officers or
employees of Commerce or Commerce Bank has received
since January 1, 1996 any written charge, complaint,
claim, demand, or notice alleging any such
interference, infringement, misappropriation, or
violation (including without limitation any claim
that Commerce and Commerce Bank must license or
refrain from using any Intellectual Property right of
any party). Neither Commerce nor Commerce Bank has
submitted a patent application or application for
Registration with respect to any of its Intellectual
Property. Neither Commerce nor Commerce Bank has
granted any license or other permission to any third
party to use any of its Intellectual Property. For
purposes of this Agreement, "Intellectual Property"
shall mean trademarks, service marks, brand names,
certification marks, trade dress and other
indications of origin, the goodwill associated with
the foregoing and registrations in any jurisdiction
of, and applications in any jurisdiction
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35
to register, the foregoing, including any extension,
modification or renewal of any such registration or
application; inventions, discoveries and ideas,
whether patentable or not, in any jurisdiction;
patents, applications for patents (including, without
limitation, divisions, continuations, continuations
in part and renewal applications), and any renewals,
extensions or reissues thereof, in any jurisdiction,
nonpublic information, trade secrets and confidential
information and rights in any jurisdiction to limit
the use or disclosure thereof by any person; writings
and other works, whether copyrightable or not, in any
jurisdiction; and registrations or applications for
registration of copyrights in any jurisdiction, and
any renewals or extensions thereof; and any similar
intellectual property or proprietary rights.
(ii) Ownership of Second Shares. As of the date hereof,
except as otherwise disclosed in Section 3.01(ii) of
the Commerce Disclosure Schedule, neither Commerce
nor, to the knowledge of Commerce, any of its
Directors, (i) beneficially owns, directly or
indirectly, or (ii) is a party to any agreement,
arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, any
shares of Second.
(jj) Fairness Opinion. The Board of Directors of Commerce
has received an opinion of Austin Associates, Inc.
dated the date of this Agreement to the effect that
the consideration to be received by the Commerce
shareholders in the Merger is fair, from a financial
point of view, to the Commerce shareholders, and such
opinion has not been withdrawn or modified.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF SECOND AND MERGER CORP.
4.01. REPRESENTATIONS AND WARRANTIES OF SECOND AND MERGER
CORP.
Each of Second and Merger Corp. hereby warrants and represents
to Commerce that:
(a) Corporate Status. Second is an Ohio corporation and a
financial holding company as defined in Section 2(p)
of the BHC Act. Merger Corp. is an Ohio corporation.
Each of Second and Merger Corp. is duly organized,
validly existing and in good standing under the laws
of the State of Ohio; and has the full corporate
power and authority to enter into and, subject to the
required obtaining of appropriate approvals of
Governmental Authorities and Regulatory Authorities,
perform its obligations under this Agreement and
consummate the transactions contemplated by this
Agreement.
(b) Corporate Proceedings. All corporate proceedings of
Second and Merger Corp. necessary to authorize the
execution, delivery and performance of this
Agreement, and the consummation of the transactions
contemplated
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by this Agreement have been duly and validly taken.
This Agreement has been validly executed and
delivered by duly authorized officers of Second and
Merger Corp.
(c) Authorized and Effective Agreement. This Agreement
constitutes the legal, valid and binding obligation
of Second and Merger Corp., enforceable against
Second and Merger Corp. in accordance with its terms,
except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws relating to or
affecting the enforcement of creditors' rights
generally, by general equitable principles
(regardless of whether enforceability is considered
in a proceeding in equity or at law) and by an
implied covenant of good faith and fair dealing.
Second and Merger Corp. have the absolute and
unrestricted right, power, authority and capacity to
execute and deliver this Agreement and, subject to
the satisfaction of the requirements referred to in
Section 4.01(g), and the expiration of applicable
regulatory waiting periods, to perform their
obligations under this Agreement.
(d) No Conflict. Subject to the satisfaction of the
requirements referred to in Section 4.01(g), the
expiration of applicable regulatory waiting periods,
the execution, delivery and performance of this
Agreement, and the consummation of the transactions
contemplated by this Agreement, by Second and Merger
Corp. do not and will not (i) 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:
(A) any federal, state or local law, regulation,
ordinance, order, rule or administrative ruling of
any Governmental Authority applicable to Second or
Merger Corp. or any of their properties; (B) the
Articles or Regulations of Second or Merger Corp.;
(C) any material agreement, indenture or instrument
to which Second or Merger Corp. is a party or by
which they or their properties or assets may be
bound; or (D) any order, judgment, writ, injunction
or decree of any court, arbitration panel or any
Governmental Authority applicable to Second or Merger
Corp.; (ii) result in the creation or acceleration of
any security interest, mortgage, option, claim, lien,
charge or encumbrance upon or interest in any
property of Second or Merger Corp.; or (iii) 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 Second or Merger
Corp.
(e) SEC Filings. Second has filed all reports and proxy
materials required to be filed by it with the SEC
pursuant to the Exchange Act, except for any reports
or proxy materials the failure to file which would
not have a material adverse effect upon Second and
its Subsidiaries taken as a whole. 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
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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.
(f) Brokers, Finders and Others. There are no fees or
commissions of any sort whatsoever claimed by, or
payable by Second or Merger Corp. to, any broker,
finder, intermediary or any other similar person in
connection with effecting this Agreement or the
transactions contemplated hereby.
(g) Governmental and Third-Party Proceedings. No consent,
approval, authorization of, or registration,
declaration or filing with, any court, Governmental
Authority or any other third party is required to be
made or obtained by Second or Merger Corp. in
connection with the execution, delivery or
performance by Second or Merger Corp. of this
Agreement or the consummation by Second or Merger
Corp. of the transactions contemplated hereby, except
for (A) filings of applications or 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 and (C) receipt of the approvals
set forth in Section 7.07. As of the date hereof,
Second and Merger Corp. are not aware of any reason
why the approvals set forth in Section 7.07 will not
be received without the imposition of a condition,
restriction or requirement of the type described in
Section 8.03(b).
(h) Second Information. None of the information relating
to Second and its Subsidiaries to be provided for the
Proxy Statement, as of the date such Proxy Statement
is mailed to shareholders of Commerce and up to and
including the date of the meeting of the Commerce
shareholders to which such Proxy Statement relates,
will contain any untrue statement of a material fact
or omit 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, provided
that, in each case, information as of a later date
shall be deemed to modify information as of an
earlier date.
(i) Disclosure. No representation or warranty by Second
or Merger Corp. contained in this Agreement, and no
statement contained in any certificate or other
document furnished by Second or Merger Corp. to
Commerce pursuant to this Agreement contains any
untrue statement of a material fact or omits to state
a material fact necessary to make the statements
contained herein and therein not misleading, in the
light of the circumstances under which they were
made.
(j) Financial Ability to Perform; Compliance with
Regulations. Second and Merger Corp. have the
financial wherewithal to perform their respective
obligations under this Agreement. To Second's
knowledge, Second and
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Merger Corp. are, and will be immediately following
the transactions contemplated by this Agreement, in
compliance with all applicable capital, debt,
financial and non-financial regulations of federal
and state banking agencies having primary regulatory
jurisdiction over them, except where failure to
comply would not have a material adverse effect.
ARTICLE FIVE
FURTHER COVENANTS OF COMMERCE
5.01. OPERATION OF BUSINESS
Commerce covenants with Second that throughout the period from
the date of this Agreement to and including the Closing:
(a) Conduct of Business. Commerce's business, and the
business of Commerce Bank, will be conducted only in
the ordinary and usual course consistent with past
practice. Without the written consent of Second,
Commerce shall not, and shall cause Commerce Bank not
to (i) take any action which would be inconsistent
with any representation or warranty of Commerce set
forth in this Agreement or which would cause a breach
of any such representation or warranty if made at or
immediately following such action; or (ii) engage in
any lending activities other than in the ordinary
course of business consistent with past practice. To
the extent permitted under applicable law or
regulation, Commerce shall send to Second via
facsimile transmission a copy of all loan
presentations made to the Board of Directors of
Commerce or Commerce Bank within three (3) business
days after such presentations are transmitted to such
Board and all other proposals for loans in excess of
$500,000.00; provided, however, if, to Commerce
Bank's knowledge both Commerce Bank and Second
National Bank are bidding for the same loan from the
same customer or potential customer, then the
transmission of such loan proposal to Second shall
not be made by Commerce or Commerce Bank until three
(3) business days after the loan is funded. Commerce
and Commerce Bank shall notify Second prior to (x)
hiring any full-time employee, other than replacement
employees for positions then existing; and (y)
purchasing any investment securities (provided that
if Management of Commerce Bank determines it is
necessary to immediately purchase securities as
reasonably determined pursuant to Commerce Bank's
liquidity policy and/or investment policy, then
Commerce Bank shall notify Second promptly after such
securities purchase). To the extent not prohibited by
law or regulation, Commerce and Commerce Bank will
cooperate fully with Second to retain loan and
deposit customers of Commerce Bank.
(b) Changes in Business and Capital Structure. Except as
provided for by this Agreement or as otherwise
approved expressly in writing by Second, Commerce
will not, and will cause Commerce Bank not to:
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(i) sell, transfer, mortgage, pledge or subject
to any lien or otherwise encumber any of the
assets of Commerce or Commerce Bank,
tangible or intangible, except in the
ordinary course of business for full and
fair consideration actually received;
(ii) make any capital expenditure or capital
additions or betterments which individually
exceed $25,000.00 or exceed $100,000.00 in
the aggregate.
(iii) become bound by, enter into, or perform any
material contract, commitment or transaction
which is other than in the ordinary course
of its business, which is not terminable by
Commerce or Commerce Bank without penalty,
or which would cause or result in its being
unable to perform its obligations under this
Agreement;
(iv) declare, pay or set aside for payment any
dividends or make any distributions on its
capital shares issued and outstanding;
(v) purchase, redeem, retire or otherwise
acquire any of its capital shares;
(vi) issue or grant any option or right to
acquire any of its capital shares or any
Voting Debt or effect, directly or
indirectly, any share split,
recapitalization, combination, exchange of
shares, readjustment or other
reclassification;
(vii) amend its articles or certificate of
incorporation, regulations, by-laws or other
governing documents;
(viii) merge or consolidate with any other person
or otherwise reorganize except for the
Merger;
(ix) 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) any real property or all or any
portion of, the assets, business, deposits
or properties of any other entity;
(x) enter into, establish, adopt or amend any
pension, retirement, stock option, stock
purchase, savings, profit-sharing, deferred
compensation, consulting, bonus, group
insurance or other employee benefit,
incentive or welfare contract, plan or
arrangement, or any trust agreement (or
similar arrangement) related thereto, in
respect of any Director, Officer or Employee
of Commerce or Commerce Bank, or take any
action to accelerate the vesting or
exercisability of stock options, restricted
stock or other compensation or benefits
payable thereunder; provided, however, that
Commerce may
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(A) take such actions in order to satisfy
either applicable law or contractual
obligations existing as of the date hereof
and disclosed in the Commerce Disclosure
Schedule or regular annual renewals of
insurance contracts; (B) terminate the
Commerce Exchange Bank 401(k) Profit Sharing
Plan and Trust at any time before the
Effective Time, with benefit distributions
deferred until the IRS issues a favorable
determination with respect to the
terminating plan's tax-qualified status upon
termination and with Commerce and Second to
cooperate in good faith to apply for such
approval and to agree upon associated plan
termination amendments that shall, among
other things, provide for the application of
all assets of a terminating plan for its
participants, and allow plan participants
not only to receive lump-sum distributions
of their benefits but also to transfer those
benefits to a qualified retirement plan
maintained by Second; and (c) terminate any
of its welfare benefit plans at any time
before the Effective Time;
(xi) announce or pay any general wage or salary
increase or bonus, other than normal pay
increases and bonuses consistent with past
practices, or enter into or amend or renew
any employment, consulting, severance or
similar agreements or arrangements with any
Officer, Director or Employee, except, in
each case, for changes which are required by
applicable law or to satisfy contractual
obligations existing as of the date hereof
and disclosed in the Commerce Disclosure
Schedule;
(xii) enter into or terminate any contract, other
than a loan contract, requiring the payment
or receipt of $25,000 or more in any
12-month period or $75,000 in the aggregate
or amend or modify in any material respect
any of its existing material contracts;
(xiii) incur any indebtedness for money borrowed or
incur any material obligation or liability
other than in the ordinary course of
business;
(xiv) implement or adopt any change in its
accounting principles, practices or methods,
other than as may be required by GAAP, or
upgrade the classification of any loan or
lease for purposes of calculation of the
Commerce ALLL without Second's approval,
which approval will not be unreasonably
withheld;
(xv) waive or cancel any right of material value
or material debts, except in the ordinary
course of business consistent with past
practices;
(xvi) take any action that would result in (A) any
of its representations or warranties
contained in this Agreement being or
becoming untrue in any material respect at
any time at or prior to the Effective Time,
(B) any of the conditions to the Merger set
forth in
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Article Eight not being satisfied or (C) a
violation of any provision of this Agreement
except, in each case, as may be required by
applicable law or regulation;
(xvii) cause any material adverse change in the
amount or general composition of deposit
liabilities other than in the ordinary
course of business, or as may be reasonably
required pursuant to Commerce Bank liquidity
policy;
(xviii) make any material investment other than in
the ordinary course of business, or as may
be reasonably required pursuant to Commerce
Bank liquidity policy or investment policy;
or
(xix) enter into any agreement to do any of the
foregoing.
(c) Maintenance of Property. Commerce and Commerce Bank
will use their commercially reasonable efforts to
maintain and keep their respective properties and
facilities in their present condition and working
order, ordinary wear and tear excepted.
(d) Performance of Obligations. Commerce and Commerce
Bank will perform all of their obligations under all
agreements relating to or affecting their respective
properties, rights and businesses, except where
nonperformance would not have a material adverse
effect on Commerce or Commerce Bank.
(e) Maintenance of Business Organization. Commerce will,
and will cause Commerce Bank to, use their
commercially reasonable efforts to maintain and
preserve their respective business organizations
intact; to retain present key Employees; and to
maintain the respective relationships of customers,
suppliers and others having business relationships
with them. Commerce will not, and will cause Commerce
Bank not to, take any action or omit to take any
action which would terminate or enable any Employee
of Commerce or Commerce Bank to terminate his
employment or employment agreement without cause and
continue thereafter to receive compensation.
(f) Insurance. Commerce and Commerce Bank will maintain
insurance coverage with reputable insurers, which in
respect of amounts, premiums, types and risks
insured, were maintained by them at the Commerce
Balance Sheet Date, and upon the renewal or
termination of such insurance, Commerce and Commerce
Bank will use commercially reasonable best efforts to
renew or replace such insurance coverage with
reputable insurers, in respect of the amounts,
premiums, types and risks insured or maintained by
them at the Balance Sheet Date.
(g) Access to Information. Following the public
announcement of this Agreement made jointly by
Commerce and Second, Commerce will, and
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will cause Commerce Bank to, take all action
reasonably necessary to (i) afford the officers and
designated representatives of Second full access
during normal business hours upon reasonable notice
to all of Commerce's and Commerce Bank's respective
properties and, to the extent Commerce or Commerce
Bank has or may provide such access to Commerce Bank
Real Estate Collateral (including for purposes of
inspection and investigation for soil and groundwater
tests), books, records, Tax Returns and reports,
financial statements, contracts and commitments, and
any work papers relating to any of the foregoing;
(ii) furnish to Second any and all documents, copies
of documents, and information (A) concerning
compliance and/or noncompliance with Environmental
Laws and with respect to the past, present or
suspected future presence of Hazardous Substances on
the Commerce Real Properties and Commerce Bank Real
Estate Collateral, including but not limited to
environmental audit and Phase I reports, and (B)
concerning Commerce's and Commerce Bank's affairs as
Second may reasonably request; (iii) afford full
access to Second to Commerce's and Commerce Bank's
Officers, Directors, Employees and agents in order
that Second may have full opportunity to make such
investigation as it shall desire to make of the
business and affairs of Commerce and Commerce Bank;
and (iv) authorize Second's representatives to
inquire of government agencies, and inspect the files
of those agencies, with respect to the environmental
conditions on and about the Commerce Real Properties
and Commerce Bank Real Estate Collateral. During the
period from the date of this Agreement to the
Effective Time, Commerce shall promptly furnish
Second with copies of all monthly and other interim
financial statements produced in the ordinary course
of business as the same shall become available.
(h) Payment of Taxes. Commerce shall, and shall cause
Commerce Bank to, timely file all Tax Returns
required to be filed on or before the Effective Time,
and accrue for and pay any Tax shown on such Tax
Returns to be due.
(i) Risk Management. Except as required by applicable law
or regulation, neither Commerce nor Commerce Bank
shall (i) implement or adopt any material change in
its interest rate risk management 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 risks; or (iii) fail to use
commercially reasonable means to avoid any material
increase in its aggregate exposure to interest rate
risk.
(j) Exercise of Options. Commerce shall take the action
reasonably necessary to cause each holder of
unexercised options under the Commerce Stock Option
Plan to exercise such options before the Effective
Time.
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5.02. NOTIFICATION
Between the date of this Agreement and the Closing Date,
Commerce will promptly notify Second in writing if Commerce becomes aware of any
fact or condition that (a) causes or constitutes a material breach of any of
Commerce's representations and warranties or (b) would (except as expressly
contemplated by this Agreement) cause or constitute a material breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. During the
same period, Commerce will promptly notify Second of (i) the occurrence of any
uncured breach of any of Commerce's covenants contained in this Agreement, (ii)
the occurrence of any event that may make the satisfaction of the conditions in
this Agreement impossible or unlikely or (iii) the occurrence of any event that
is reasonably likely, individually or taken with all other facts, events or
circumstances known to Commerce, to result in a material adverse effect with
respect to Commerce. In addition, if at any time prior to the Effective Time,
any event or circumstance relating to Commerce or any of its Officers or
Directors should be discovered which should be set forth in a supplement to the
Proxy Statement, Commerce shall promptly inform Second.
5.03. SHAREHOLDER APPROVAL
Commerce covenants that:
(a) The Board of Directors of Commerce will recommend the
adoption of this Agreement and the approval of the
transactions contemplated hereby to the shareholders
of Commerce, subject to that Board's fiduciary
obligations under Delaware law as determined in good
faith after consultation with and based upon advice
of independent legal counsel and investment banker.
(b) Commerce will call a meeting of its shareholders (the
"Commerce Meeting") to be held as soon as reasonably
practicable, for the purpose of adopting this
Agreement and approving the transactions contemplated
hereby and will, subject to the provisions of
Sections 5.03(a) and 5.04, use its best efforts to
effect such adoption and approval. Commerce will
prepare appropriate proxy solicitation materials in
respect of the Commerce Meeting (the "Proxy
Statement").
5.04. ACQUISITION PROPOSALS
From and after the date hereof and continuing until the
earlier of a) the Closing pursuant to Section 9.01, or b) the termination of
this Agreement pursuant to Section 11.01, Commerce will not, directly or
indirectly, through any of its Officers, Directors, agents or advisors, (i)
solicit or initiate or knowingly encourage, including by means of furnishing
information, any proposals, offers or inquiries from any person relating to any
acquisition or purchase of the outstanding shares of any class of voting
securities of, or 20% or more of the assets or deposits of, Commerce or Commerce
Bank, or any merger, tender or exchange offer, consolidation or business
combination involving, Commerce or Commerce Bank (an "Acquisition Proposal") or
(ii) unless the Board of directors of Commerce determines in good faith that
such action is required for that Board to fulfill the Board's fiduciary duties
and
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obligations to the Commerce shareholders under Delaware law as advised by
counsel to Commerce and Commerce gives prior notice to Second of such action (in
which event Commerce may furnish information), engage in negotiations with or
disclose any nonpublic information relating to Commerce or Commerce Bank or
afford access to the Commerce Real Properties, or the books or records of
Commerce or Commerce Bank to any person that may be considering or has made an
Acquisition Proposal. Commerce shall promptly (within 24 hours) notify Second,
orally and in writing, if any such proposal, offer, inquiry or contact is made
and shall, in any such notice, indicate the identity and terms and conditions of
any proposal or offer, or any such inquiry or contact. Commerce shall
immediately cease and cause to be terminated any activities, discussions or
negotiations conducted prior to the date of this Agreement with any parties
other than Second with respect to any Acquisition Proposal and shall use its
reasonable best efforts to enforce any confidentiality or similar agreement
relating to an Acquisition Proposal.
5.05. DELIVERY OF INFORMATION
(a) Commerce will promptly furnish to Second all
information requested by Second regarding Commerce's
assets, properties, business, affairs, operations,
condition (financial or otherwise), prospects and
corporate organization as shall be required by the
rules and regulations under the Securities Act or by
the SEC for inclusion in the Registration Statement
to be filed by Second in connection with its proposed
issuance of trust preferred shares and shall
otherwise reasonably cooperate with Second in
Second's preparation and filing of such Registration
Statement.
(b) Commerce shall furnish to Second promptly after such
documents are available: (i) all reports, proxy
statements or other communications by Commerce to its
shareholders generally; and (ii) all press releases
relating to any transactions.
5.06. TAKEOVER LAWS
Commerce shall take all necessary steps to (a) exempt (or
cause the continued exemption of) this Agreement and the Merger from the
requirements of any Takeover Law and from any provisions under its certificate
of incorporation and bylaws, as applicable, by action of the Board of Directors
of Commerce or otherwise, and (b) assist in any challenge by Second to the
validity, or applicability to the Merger, of any Takeover Law.
5.07 MERGER OF SUBSIDIARIES
In the event that Second shall request, Commerce shall take
such actions, and shall cause Commerce Bank to take such actions, as may be
required in order to effect, at or after the Effective Time, the merger of
Commerce Bank with and into Second National Bank.
5.08 ACCOUNTING POLICIES
After Final Month End, after the shareholders of Commerce have
approved the Merger and after the receipt of necessary regulatory approvals, on
or before the Effective Time
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and at the request of Second, Commerce shall cause Commerce Bank to promptly
establish and take such reserves and accruals to conform Commerce Bank's loan,
accrual and reserve policies to Second National Bank policies; shall cause
Commerce Bank to promptly establish and take such accruals, reserves and charges
in order to implement such policies in respect of excess facilities and
equipment capacity, severance costs, litigation matters, write-off or write down
of various assets and other appropriate accounting adjustments; and Commerce
shall promptly recognize for financial accounting purposes such expenses of the
Merger and restructuring charges related to or to be incurred in connection with
the Merger, to the extent permitted by law and consistent with generally
accepted accounting principles and with the fiduciary duties of the officers and
directors of Commerce and Commerce Bank.
ARTICLE SIX
FURTHER COVENANTS OF SECOND
6.01. ACCESS TO INFORMATION
Second shall furnish to Commerce promptly after such documents
are available: (i) all reports, proxy statements or other communications by
Second to its shareholders generally; and (ii) all press releases relating to
any transactions.
6.02. NOTIFICATION
Between the date of this Agreement and the Closing Date,
Second will promptly notify Commerce in writing if Second becomes aware of any
fact or condition that (a) causes or constitutes a material breach of any of
Second's representations and warranties or (b) would (except as expressly
contemplated by this Agreement) cause or constitute a material breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. During the
same period, Second will promptly notify Commerce of (i) the occurrence of any
material uncured breach of any of Second's covenants contained in this
Agreement, or (ii) the occurrence of any event that may make the satisfaction of
the conditions in this Agreement impossible or unlikely. In addition, if at any
time prior to the Effective Time, any event or circumstance relating to Second
or any of its Officers or Directors should be discovered which is required by
applicable law or regulation to be set forth in a supplement to the Proxy
Statement, Second shall promptly inform Commerce.
6.03. OPPORTUNITY OF EMPLOYMENT; EMPLOYEE BENEFITS
Second shall cause Second National Bank to offer the existing
full time employees of Commerce Bank the opportunity to become employees of
Second National or Commerce shall offer reasonable and customary severance
compensation based upon years of service (pursuant to the severance transition
plan for this transaction heretofore disclosed by Second to Commerce), and
Second shall cause to be made available outplacement consultation services to
employees of Commerce Bank who are not offered employment (other than employees
who are otherwise parties to employment or change in control agreements or
severance bonuses). Nothing in this section or elsewhere in this Agreement shall
be deemed to be a contract of employment or be construed to give said employees
any rights other than as employees at will under Ohio law and said employees
shall not be deemed to be third-party beneficiaries of this provision. From and
after the Effective Time, the Employees of Commerce
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and Commerce Bank shall continue to participate in the Commerce Compensation and
Benefit Plans in effect at the Effective Time unless and until Second, in its
sole discretion, shall determine that the Employees of Commerce and Commerce
Bank shall, subject to applicable eligibility requirements, participate in
employee benefit plans of Second and that all or some of the Commerce
Compensation and Benefit Plans shall be terminated or merged into certain
employee benefit plans of Second. Notwithstanding the foregoing, each Commerce
Employee and Commerce Bank Employee shall be credited with years of service with
Commerce, Commerce Bank and, to the extent credit would have been given by
Commerce or Commerce Bank for years of service with a predecessor (including any
business organization acquired by Commerce or Commerce Bank), years of service
with a predecessor of Commerce or Commerce Bank, for purposes of eligibility and
vesting (but not for benefit accrual purposes with respect to any defined
benefit plan of Second) in the employee benefit plans of Second (except that no
employee of Commerce Bank shall receive credit for years of service with respect
to any defined benefit plan of Second), and shall not be subject to any
exclusion or penalty for pre-existing conditions that were covered under the
Commerce Compensation and Benefit Plans immediately prior to the Effective Time,
or to any waiting period relating to such coverage. Second shall cause COBRA
continuation health care coverage to be available, in accordance with applicable
law, to all eligible employees and their eligible dependents of Commerce and/or
Commerce Bank who were covered under a Commerce or Commerce Bank group health
plan and who cease to be employees of Commerce or Commerce Bank as of the
Effective Time, and all former eligible employees (and their eligible
dependents) who are receiving or are eligible to receive, upon election, COBRA
continuation health care coverage under a Commerce or Commerce Bank group health
plan as of the Effective Time. The foregoing covenants shall survive the Merger,
and Second shall before the Effective Time adopt resolutions that amend its
tax-qualified retirement plans to provide for the Commerce or Commerce Bank
service credits referenced herein.
6.04. TAKEOVER LAWS
Second shall take all necessary steps to (a) exempt (or cause
the continued exemption of) this Agreement and the Merger from the requirements
of any Takeover Law and from any provisions under its Articles and Regulations,
as applicable, by action of the Board of Directors of Second or otherwise, and
(b) assist in any challenge by Commerce to the validity, or applicability to the
Merger, of any Takeover Law.
6.05. OFFICERS' AND DIRECTORS' INDEMNIFICATION
(a) Following the Effective Time, Second shall indemnify,
defend and hold harmless the present Directors and
Officers of Commerce and Commerce Bank (each, an
"Indemnified Party") against costs or expenses
(including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with
any claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or
investigative, arising out of actions or omissions
occurring prior to the Effective Time to the fullest
extent that Commerce or Commerce Bank is required to
indemnify (and advance expenses to) an Indemnified
Party under the laws of the jurisdiction of formation
or incorporation of Commerce or Commerce Bank, and
the certificate of incorporation,
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articles, bylaws and regulations of Commerce or
Commerce Bank, in each case to the extent applicable
to the particular Indemnified Party, as in effect on
the date hereof; provided that any determination
required to be made with respect to whether an
Indemnified Party's conduct complies with the
standards set forth under the laws of the
jurisdiction of formation or incorporation, the
articles, certificate of incorporation, bylaws and
regulations of Commerce or Commerce Bank, as
appropriate, shall be made by the court in which the
claim, action, suit or proceeding was brought or by
independent counsel (which shall not be counsel that
provides material services to Second) selected by
Second and reasonably acceptable to such Indemnified
Party.
(b) For a period of six (6) years from the Effective
Time, Second shall provide that portion of directors'
and officers' liability insurance that serves to
reimburse the present and former Officers and
Directors of Commerce and Commerce Bank (determined
as of the Effective Time) (as opposed to Commerce)
with respect to claims against such Officers and
Directors arising from facts or events which occurred
before the Effective Time, on terms no less favorable
than those in effect on the date hereof; provided,
however, that Second may substitute therefor policies
providing at least comparable coverage containing
terms and conditions no less favorable than those in
effect on the date hereof; provided, however, that in
no event shall Second be required to expend more than
$60,000 (the "Insurance Amount") to maintain or
procure such directors' and officers' liability
insurance coverage; provided, further that, if Second
is unable to maintain or obtain the insurance called
for by this Section 6.07(b), Second shall use its
commercially reasonable efforts to obtain as much
comparable insurance as is available for the
Insurance Amount; and provided, further, that
Officers and Directors of Commerce or Commerce Bank
may be required to make application and provide
customary representations and warranties to Second's
insurance carrier for the purpose of obtaining such
insurance.
(c) Any Indemnified Party wishing to claim
indemnification under Section 6.05(a), upon learning
of any claim, action, suit, proceeding or
investigation described above, shall promptly notify
Second thereof; provided that the failure so to
notify shall not affect the obligations of Second
under Section 6.05(a) unless and to the extent that
Second is actually prejudiced as a result of such
failure.
ARTICLE SEVEN
FURTHER OBLIGATIONS OF THE PARTIES
7.01. NECESSARY FURTHER ACTION
Each of Commerce, Merger Corp. and Second agrees to use its
reasonable best efforts in good faith to take, or cause to be taken, all
necessary actions and execute all additional
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documents, agreements and instruments required to consummate the transactions
contemplated in this Agreement.
7.02. COOPERATIVE ACTION
Subject to the terms and conditions of this Agreement, each of
Commerce, Merger Corp. and Second agrees to use its reasonable best efforts in
good faith to take, or cause to be taken, all further actions and execute all
additional documents, agreements and instruments which may be reasonably
required, in the opinion of counsel for Commerce and counsel for Second, to
satisfy all legal requirements of the States of Ohio and Delaware and the United
States, so that this Agreement and the transactions contemplated hereby will
become effective as promptly as practicable.
7.03. SATISFACTION OF CONDITIONS
Each of Second, Merger Corp. and Commerce shall use its
reasonable best efforts in good faith to satisfy all of the conditions to this
Agreement and to cause the consummation of the transactions described in this
Agreement, including making all applications, notices and filings with
Governmental Authorities and Regulatory Authorities and taking all steps to
secure promptly all consents, rulings and approvals of Governmental Authorities
and Regulatory Authorities which are necessary for the performance by each party
of each of its obligations under this Agreement and the transactions
contemplated hereby.
7.04. CONFIDENTIALITY
Second, Merger Corp. and Commerce agree for themselves, and
their representatives, successors and assigns, that any and all information each
obtains (including information obtained by their subsidiaries) from the other
will be kept strictly confidential and not be disclosed by them or their
representatives, agents, successors and assigns to any other person or group,
except among their attorneys, accountants and other representatives; except for
any disclosure of such information to which the other consents in writing or
which in the opinion of counsel for the disclosing party is required to be made
under the Securities Act of 1933, the Exchange Act, or other applicable laws or
orders in order to permit any transaction in their securities; and except for
information already in the public domain not as a result of the actions of the
disclosing person or its representatives in violation of this provision. In the
event that the transactions contemplated by this Agreement shall fail to be
consummated for any reason, each party to this Agreement shall promptly cause
all information relating to the other party, and furnished by the other party or
prepared pursuant to information provided by the other party regardless of who
prepared the information, to be returned to the other party or be destroyed.
7.05. PRESS RELEASES
Each of Second, Merger Corp. and Commerce shall not make any
press release or other public announcement concerning the transactions
contemplated by this Agreement without the consent of the other party hereto as
to the form and contents of such press release or public announcement, except to
the extent that such press release or public announcement may be required by law
or NASDAQ rules to be made before such consent can be obtained.
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7.06. PROXY STATEMENT
Each of Commerce, Merger Corp. and Second agrees, if it shall
become aware prior to the Effective Time of any information furnished by it that
would cause any of the statements in the Proxy Statement to be false or
misleading with respect to any material fact, or to omit to state any material
fact necessary to make the statements therein not false or misleading, to
promptly inform the other party thereof and to take the necessary steps to
correct the Proxy Statement.
7.07. REGULATORY APPLICATIONS
Second and Commerce and their respective Subsidiaries shall
cooperate and use their respective reasonable best efforts to prepare all
documentation, to timely effect all filings not later than thirty (30) days
after the date of this Agreement and to obtain all permits, consents, approvals
and authorizations of all third parties and Governmental and Regulatory
Authorities necessary to consummate the transactions contemplated by this
Agreement. Each of Second and Commerce shall provide all information required
from them in order to enable the other to make necessary filings. Such
information shall be delivered within four (4) days of a written request for
such information. Each of Second and Commerce shall have the right to review in
advance, and to the extent practicable, each will consult with the other, in
each case subject to applicable laws relating to the exchange of information,
with respect to, and shall be provided in advance so as to reasonably exercise
its right to review in advance, all material written information submitted to
any third party or any Governmental or Regulatory Authority in connection with
the transactions contemplated by this Agreement. In exercising the foregoing
right, each of the parties hereto agrees to act reasonably and as promptly as
practicable. Each party hereto agrees that it will consult with the other party
hereto with respect to the obtaining of all material permits, consents,
approvals and authorizations of all third parties and Governmental and
Regulatory Authorities necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the other apprised of
the status of material matters relating to completion of the transactions
contemplated hereby. Each party agrees, upon request, to furnish the other party
with all information concerning itself, its Subsidiaries, directors, officers
and shareholders and such other matters as may be reasonably necessary or
advisable in connection with any filing, notice or application made by or on
behalf of such other party or of its Subsidiary to any third party or
Governmental or Regulatory Authority.
7.08 NO CONFLICTING ACTIONS
Second shall not enter into any agreement or transaction,
undertake any obligation, indebtedness or liability, or take any acts or actions
that are reasonably likely to materially impair or preclude Second's ability to
obtain the Governmental or Regulatory Authority to consummate the transactions
contemplated by this Agreement without the imposition of a condition,
restriction or requirement of the type described in Section 8.03(b).
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ARTICLE EIGHT
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES
8.01. CONDITIONS TO THE OBLIGATIONS OF SECOND AND MERGER
CORP.
The obligations of Merger Corp. and Second under this
Agreement shall be subject to the satisfaction, or written waiver by Merger
Corp. and Second prior to the Closing Date, of each of the following conditions
precedent:
(a) The representations and warranties of Commerce set
forth in this Agreement shall be true and correct in
all material respects as of the date of this
Agreement and as of the Closing Date as though such
representations and warranties were also made as of
the Closing Date, except (i) that those
representations and warranties which by their terms
speak as of a specific date shall be true and correct
as of such date and (ii) where the failure to be so
true and correct would not, individually or in the
aggregate, have or be reasonably likely to have a
material adverse effect on Commerce or Commerce Bank;
and Second and Merger Corp. shall have received a
certificate, dated the Closing Date, signed on behalf
of Commerce by the chief executive officer and the
chief financial officer of Commerce to such effect.
(b) Commerce shall have performed in all material
respects all of its covenants and obligations under
this Agreement to be performed by it on or prior to
the Closing Date, including those relating to the
Closing, and Second and Merger Corp. shall have
received a certificate, dated the Closing Date,
signed on behalf of Commerce by the chief executive
officer and the chief financial officer of Commerce
to such effect.
(c) Second and Merger Corp. shall have received the
written opinion of ▇▇▇▇▇ & Berne LLP, counsel to
Commerce, dated the Closing Date, to the effect that,
on the basis of the facts, representations and
assumptions set forth in the opinion: (i) Commerce is
a corporation validly existing and in good standing
under the laws of the State of Delaware ; (ii)
Commerce Bank is an Ohio state-chartered bank
corporation validly existing and in good standing
under the laws of the State of Ohio; (iii) all
eligible accounts of deposit in Commerce Bank are
insured by the FDIC to the fullest extent permitted
by law; (iv) Commerce is a duly and validly
registered bank holding company under the BHCA; (v)
this Agreement has been duly approved by the Board of
Directors of Commerce and duly adopted by the
shareholders of Commerce, no further corporate
proceedings are required to authorize the
transactions contemplated by this Agreement and the
Rights Agreement does not apply to the Merger; (vi)
this Agreement has been duly executed by Commerce and
constitutes a binding obligation on Commerce
enforceable in accordance with its terms against
Commerce, except as the same may be limited by
bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, and other similar laws
relating to or affecting the enforcement of
creditors' rights generally, by general
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equitable principles (regardless of whether
enforceability is considered in a proceeding in
equity or at law) and an implied covenant of good
faith and fair dealing; (vii) the execution and
delivery of this Agreement did not, and the
consummation of the Merger will not, conflict with
any provision of the certificate of incorporation,
articles, regulations, bylaws or other governing
documents of Commerce or Commerce Bank; (viii)
Commerce has the full corporate power and authority
to perform its obligations under this Agreement and
to consummate the transactions contemplated by this
Agreement; (ix) Commerce and Commerce Bank have the
full corporate power and authority to own their
respective properties and to carry on their
respective businesses as presently conducted; (x)
upon the filing of the certificates of merger with
the Secretaries of State of Ohio and Delaware, the
Merger shall become effective in accordance with the
terms thereof; and (xi) such counsel knows (without
independent investigation) of no pending or
threatened actions, suits, proceedings, claims or
investigations which would prevent the consummation
of this Agreement or any of the transactions
contemplated hereby or declare the same to be
unlawful or cause the rescission thereof.
(d) Second shall have received a copy of a statement,
issued by Commerce pursuant to Section 1.897-2(h) of
the regulations issued under the Code, certifying
that the Commerce Shares are not a U.S. real property
interest and dated not more than thirty days prior to
the Closing Date.
(e) Commerce shall have obtained the consent or approval
of each person (other than Governmental and
Regulatory Authorities) whose consent or approval
shall be required in order to permit the succession
by the Surviving Corporation pursuant to the Merger
to any obligation, right or interest of Commerce or
Commerce Bank under any loan or credit agreement,
note, mortgage, indenture, lease, license or other
agreement or instrument, except those for which
failure to obtain such consents and approvals would
not, individually or in the aggregate, have a
material adverse effect, after the Effective Time, on
the Surviving Corporation, Merger Corp. or Second.
8.02. CONDITIONS TO THE OBLIGATIONS OF COMMERCE
The obligations of Commerce under this Agreement shall be
subject to satisfaction, or written waiver by Commerce prior to the Closing
Date, of each of the following conditions precedent:
(a) The representations and warranties of Second and
Merger Corp. set forth in this Agreement shall be
true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as
though such representations and warranties were also
made as of the Closing Date, except (i) that
representations and warranties which by their terms
speak as of a specific date shall be true and correct
as of such date and (ii) where
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the failure to be so true and correct would not,
individually or in the aggregate, have or be
reasonably likely to have a material adverse effect
on Second and its Subsidiaries; and Commerce shall
have received a certificate, dated the Closing Date,
signed on behalf of Second and Merger Corp. by the
chief executive officer and the chief financial
officer of each to such effect.
(b) Second and Merger Corp. shall have performed in all
material respects all of their covenants and
obligations under this Agreement to be performed by
them on or prior to the Closing Date, including those
related to the Closing, and Commerce shall have
received a certificate, dated the Closing Date,
signed on behalf of Second and Merger Corp. by the
chief executive officer and the chief financial
officer of each to such effect.
(c) Commerce shall have received the written opinion of
Vorys, ▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇ LLP, counsel to
Second and Merger Corp., dated the Closing Date, to
the effect that, on the basis of the facts,
representations and assumptions set forth in the
opinion, (i) Second and Merger Corp. are each
corporations, validly existing and in good standing
under the laws of the State of Ohio; (ii) Second is a
bank holding company or a financial holding company
as defined under the BHC Act; (iii) this Agreement
has been duly approved by the Boards of Directors of
Second and Merger Corp. and by the shareholder of
Merger Corp. and no further corporate proceedings are
required to authorize the transactions contemplated
by this Agreement; (iv) this Agreement has been duly
executed by Second and Merger Corp. and constitutes
the binding obligation of Second and Merger Corp.,
enforceable in accordance with its terms against
Second and Merger Corp., except as the same may be
limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium 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; (v) the execution and delivery of this
Agreement did not, and the consummation of the Merger
will not, conflict with any provision of the Articles
or Regulations of Second or Merger Corp.; (vi) each
of Second and Merger Corp. has the full corporate
power and authority to perform its obligations under
this Agreement and to consummate the transactions
contemplated by this Agreement; and (vii) upon the
filing of the appropriate certificate of merger with
the Secretaries of State of Ohio and Delaware, the
Merger shall become effective in accordance with the
terms thereof; and (viii) such counsel knows (without
independent investigation) of no pending or
threatened actions, suits, proceedings, claims or
investigations which would prevent the consummation
of this Agreement or any of the transactions
contemplated hereby or declare the same to be
unlawful or cause the rescission thereof.
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(d) Second and Merger Corp. shall have obtained the
consent or approval of each person (other than
Governmental and Regulatory Authorities) whose
consent or approval shall be required in connection
with the transactions contemplated hereby under any
loan or credit agreement, note, mortgage, indenture,
lease, license or other agreement or instrument,
except those for which failure to obtain such
consents and approvals would not, individually or in
the aggregate, have a material adverse effect, after
the Effective Time, on Second.
8.03. MUTUAL CONDITIONS
The obligations of Commerce, Merger Corp. and Second under
this Agreement shall be subject to the satisfaction, or written waiver by
Second, Merger Corp. and Commerce prior to the Closing Date, of each of the
following conditions precedent:
(a) The shareholders of Commerce shall have duly adopted
this Agreement by the required vote.
(b) All approvals of Governmental Authorities and
Regulatory Authorities required to consummate the
transactions contemplated by this Agreement shall
have been obtained and shall remain in full force and
effect and all statutory waiting periods in respect
thereof shall have expired and no such approvals or
statute, rule or order shall contain any conditions,
restrictions or requirements which Second reasonably
determines would either before or after the Effective
Time (i) have a material adverse effect on Second and
its Subsidiaries taken as a whole after giving effect
to the consummation of the Merger; or (ii) prevent
Second from realizing the major portion of the
economic benefits of the Merger and the transactions
contemplated thereby which Second currently
anticipates obtaining.
(c) No temporary restraining order, preliminary or
permanent injunction or other order issued by a court
of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger
shall be in effect. No Governmental or Regulatory
Authority of competent jurisdiction shall have
enacted, issued, promulgated, enforced, threatened,
commenced a proceeding with respect to or entered any
statute, rule, regulation, judgment, decree,
injunction or other order (whether temporary,
preliminary or permanent) prohibiting or delaying
consummation of the transactions contemplated by this
Agreement.
ARTICLE NINE
CLOSING
9.01. CLOSING
The closing (the "Closing") of the transactions contemplated
by this Agreement shall be held at the offices of Second, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.,
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, commencing at 10:00 a.m., local time, on (a) the date
designated by Second, which date shall not
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be earlier than the third business day to occur after the last of the conditions
set forth in Article Eight shall have been satisfied or waived in accordance
with the terms of this Agreement (excluding conditions that, by their terms,
cannot be satisfied until the Closing Date) or later than the last business day
of the month in which such third business day occurs; provided, no such election
shall cause the Closing to occur on a date after that specified in Section
11.01(b)(i) of this Agreement or after the date or dates on which any
Governmental or Regulatory Authority approval or any extension thereof expires,
or (b) such other date to which the parties agree in writing. The date of the
Closing is sometimes herein called the "Closing Date."
9.02. CLOSING TRANSACTIONS REQUIRED OF SECOND AND MERGER
CORP.
At the Closing, Second and Merger Corp. shall cause all of the
following to be delivered to Commerce:
(a) Certificates of merger duly executed by Merger Corp.
in accordance with Section 1701.81 of the OGCL and
Section 252 of the DGCL and in appropriate form for
filing, respectively, with the Secretaries of State
of Ohio and Delaware.
(b) The certificates of Second and Merger Corp.
contemplated by Section 8.02(a) and (b) of this
Agreement.
(c) Copies of resolutions adopted by the directors of
Second and Merger Corp. and by the sole shareholder
of Merger Corp., approving and adopting this
Agreement and authorizing the consummation of the
transactions described herein, accompanied by a
certificate of the secretary or assistant secretary
of Second and Merger Corp., dated as of the Closing
Date, and certifying (i) the date and manner of
adoption of each such resolution; and (ii) that each
such resolution is in full force and effect, without
amendment or repeal, as of the Closing Date.
(d) The opinion of counsel to Second and Merger Corp.
contemplated by Section 8.02(c) of this Agreement.
9.03. CLOSING TRANSACTIONS REQUIRED OF COMMERCE
At the Closing, Commerce shall cause all of the following to
be delivered to Second:
(a) Certificates of merger duly executed by Commerce in
accordance with Section 1701.81 of the OGCL and
Section 252 of the DGCL and in appropriate form for
filing, respectively, with the Ohio Secretaries of
State of Ohio and Delaware.
(b) The certificates of Commerce contemplated by Sections
8.01(a) and (b) of this Agreement.
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(c) Copies of all resolutions adopted by the directors
and the shareholders of Commerce approving and
adopting this Agreement and authorizing the
consummation of the transactions described herein,
accompanied by a certificate of the secretary or the
assistant secretary of Commerce, dated as of the
Closing Date, and certifying (i) the date and manner
of the adoption of each such resolution; and (ii)
that each such resolution is in full force and
effect, without amendment or repeal, as of the
Closing Date.
(d) The opinion of counsel to Commerce contemplated by
Section 8.01(c) of this Agreement.
ARTICLE TEN
NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
10.01. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS
The representations, warranties and covenants of Second,
Merger Corp. and Commerce set forth in this Agreement, or in any document
delivered pursuant to the terms hereof or in connection with the transactions
contemplated hereby, shall not survive the Closing and the consummation of the
transactions referred to herein, other than covenants which by their terms are
to survive or be performed after the Effective Time (including, without
limitation, those set forth in Sections [6.03, 6.05, 7.04 and 7.05], this
Article Ten, Article Eleven and Article Twelve); except that no such
representations, warranties or covenants shall be deemed to be terminated or
extinguished so as to deprive Second or Commerce or Commerce Bank (or any
director, officer or controlling person thereof) of any defense in law or equity
which otherwise would be available against the claims of any person, including,
without limitation, any shareholder or former shareholder of either Commerce or
Second.
ARTICLE ELEVEN
TERMINATION
11.01. TERMINATION
This Agreement may be terminated, and the Merger may be
abandoned, at any time prior to the Effective Time, whether prior to or after
this Agreement has been adopted by the shareholders of Commerce:
(a) By mutual written agreement of Commerce, Merger Corp.
and Second duly authorized by action taken by or on
behalf of their respective Board of Directors;
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(b) By either Commerce or Second and Merger Corp., duly
authorized by action taken by or on behalf of their
respective Board of Directors, upon written
notification to the non-terminating party by the
terminating party, if:
(i) at any time after December 31, 2001, if the
Merger shall not have been consummated on or
prior to such date and such failure to
consummate the Merger is not caused by a
breach of this Agreement by the terminating
party;
(ii) the shareholders of Commerce shall not have
adopted this Agreement (the "Commerce
Shareholders' Adoption") by reason of the
failure to obtain the requisite vote upon a
vote held at a Commerce Meeting, or any
adjournment thereof;
(iii) the approval of any Governmental or
Regulatory Authority required for
consummation of the Merger and the other
transactions contemplated by this Agreement
shall have been denied by final
non-appealable action of such Governmental
or Regulatory Authority; or
(iv) Commerce and Second are not able to reach
agreement on the amount of anticipated
losses described in Section 2.01(c)(vii)
within twenty-one (21) days after the notice
described in Section 2.01(c)(vii) is given
to Second by Commerce.
(c) By Second and Merger Corp., duly authorized by action
taken by or on behalf of their Boards of Directors,
by providing written notice to Commerce, if:
(i) prior to the Closing Date, any
representation and warranty of Commerce
shall have become untrue such that the
condition set forth at Section 8.01(a) would
not be satisfied and which breach has not
been cured within 30 days following receipt
by Commerce of written notice of breach or
is incapable of being cured during such time
period; or
(ii) Commerce shall have failed to comply in any
material respect with any covenant or
agreement on the part of Commerce contained
in this Agreement required to be complied
with prior to the date of such termination,
which failure to comply shall not have been
cured within 30 days following receipt by
Commerce of written notice of such failure
to comply or is incapable of being cured
during such time period.
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(d) By Commerce, duly authorized by action taken by or on
behalf of its Board of Directors, by providing
written notice to Second and Merger Corp., if:
(i) prior to the Closing Date, any
representation and warranty of Second or
Merger Corp. shall have become untrue such
that the condition set forth at Section
8.02(a) would not be satisfied and which
breach has not been cured within 30 days
following receipt by Second and Merger Corp.
of written notice of breach or is incapable
of being cured during such time period;
(ii) Second or Merger Corp. shall have failed to
comply in any material respect with any
covenant or agreement on the part of Second
or Merger Corp. contained in this Agreement
required to be complied with prior to the
date of such termination, which failure to
comply shall not have been cured within 30
days following receipt by Second and Merger
Corp. of written notice of such failure to
comply or is incapable of being cured during
such time period; or
(iii) the Board of Directors of Commerce
determines in good faith, based upon advice
from independent counsel, that termination
of this Agreement is required for the Board
of Directors of Commerce to comply with its
fiduciary duties to shareholders imposed by
law by reason of an Acquisition Proposal
having been made and provided Commerce
complied with its obligations under Section
5.04 and provided further that Commerce's
ability to terminate pursuant to this
subsection (d)(iii) is conditioned upon the
payment by Commerce to Second of any amounts
owed by Commerce to Second pursuant to
Section 11.02(b).
11.02. EFFECT OF TERMINATION.
(a) If this Agreement is validly terminated by either
Commerce or Second pursuant to Section 11.01, this
Agreement will forthwith become null and void and
there will be no liability or obligation on the part
of either Commerce or Second, except (i) that the
provisions of Sections 7.04, 7.05 and 12.07 and this
Section 11.02 will continue to apply following any
such termination, (ii) that nothing contained herein
shall relieve any party hereto from liability for
breach of its representations, warranties, covenants
or agreements contained in this Agreement and (iii)
as provided in paragraph (b) below.
(b) In the event that any person or group shall have made
an Acquisition Proposal prior to termination, and (i)
after receipt of such Acquisition Proposal this
Agreement is terminated by the Commerce Board of
Directors or the shareholders of Commerce fail to
approve the Merger and (ii) within one (1) year
thereafter any Acquisition Proposal is accepted by
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the Commerce Board of Directors or an Acquisition
Proposal is consummated, then Commerce shall pay to
Second, by wire transfer of same day funds, within
two (2) business days thereafter, a termination fee
of $1,325,000.00.
(c) If Second shall breach its obligation under this
Agreement to consummate the Merger and pay the
holders of Commerce Shares the Merger Consideration,
then Second agrees to pay to Commerce $1,325,000.00
as liquidated damages for such breach. The sum is
agreed upon as liquidated damages and not as a
penalty. The parties hereto have computed, estimated
and agreed upon the sum as an attempt to make a
reasonable forecast of probable actual loss because
of the difficulty of estimating with exactness the
damages that will result.
(d) In the event any action, suit, proceeding or claim is
commenced or asserted by a party against another
party and/or any director or officer of such other
party relating, directly or indirectly, to this
Agreement, it is expressly agreed that no party shall
be entitled to obtain any punitive, exemplary,
treble, or consequential damages of any type under
any circumstances in connection with such action,
suit, proceeding or claim, regardless of whether such
damages may be available under law, the parties
hereby waiving their rights, if any, to recover any
such damages in connection with any such action,
suit, proceeding or claim.
ARTICLE TWELVE
MISCELLANEOUS
12.01. NOTICES
All notices, requests, demands and other communications
required or permitted to be given under this Agreement shall be given in writing
and shall be deemed to have been duly given (a) on the date of delivery if
delivered by hand or by telecopy or telefacsimile, upon confirmation of receipt,
(b) on the first business day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the third business day following
the date of mailing if sent by certified mail, postage prepaid, return receipt
requested. All notices thereunder shall be delivered to the following addresses:
If to Commerce, to:
Commerce Exchange Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., President
Facsimile Number: ▇▇▇-▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇ & Berne, LLP
▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Facsimile Number: ▇▇▇-▇▇▇-▇▇▇▇
If to Second or Merger Corp., to:
Second Bancorp Incorporated
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile Number: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Vorys, ▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇ LLP
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Any party to this Agreement may, by notice given in accordance with this Section
12.01, designate a new address for notices, requests, demands and other
communications to such party.
12.02. COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be a duplicate original, but all of which taken
together shall be deemed to constitute a single instrument.
12.03. ENTIRE AGREEMENT
This Agreement (including each exhibit and schedule provided
pursuant hereto), represents the entire agreement between the parties hereto in
respect of the subject matter of this Agreement and supersedes the
Confidentiality Agreement dated November 27, 2000, to which Second, Commerce and
Austin Associates, Inc. are parties, and any and all prior and contemporaneous
agreements between the parties hereto in connection with the subject matter of
this Agreement.
12.04. SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns (including successive, as well as
immediate, successors and assigns) of
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the parties hereto. This Agreement may not be assigned by either party hereto
without the prior written consent of the other party.
12.05. CAPTIONS
The captions contained in this Agreement are included only for
convenience of reference and do not define, limit, explain or modify this
Agreement or its interpretation, construction or meaning and are in no way to be
construed as part of this Agreement.
12.06. GOVERNING LAW
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Ohio, without giving effect to
principles of conflicts or choice of laws (except to the extent that mandatory
provisions of Federal law are applicable).
12.07. PAYMENT OF FEES AND EXPENSES
Except as otherwise agreed in writing, each party hereto shall
pay all its respective costs and expenses, including legal and accounting fees,
and all expenses relating to its performance of, and compliance with, its
undertakings herein. All fees to be paid to Governmental and Regulatory
Authorities in connection with the transactions contemplated by this Agreement
shall be borne by Second.
12.08. AMENDMENT
From time to time and at any time prior to the Effective Time,
this Agreement may be amended only by an agreement in writing executed in the
same manner as this Agreement, after authorization of such action by the Boards
of Directors of the Constituent Corporations and Second; except that after the
Commerce Meeting, this Agreement may not be amended if it would violate the DGCL
or OGCL.
12.09. WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege.
12.10. DISCLOSURE SCHEDULE
In the event of any inconsistency between the statements in
the body of this Agreement and those in the Commerce Disclosure Schedule (other
than an exception expressly set forth as such in the Commerce Disclosure
Schedule with respect to a specifically identified representation or warranty),
the statements in the body of this Agreement will control.
12.11. NO THIRD-PARTY RIGHTS
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Except as specifically set forth herein, nothing expressed or
referred to in this Agreement will be construed to give any person other than
the parties to this Agreement any legal or equitable right, remedy or claim
under or with respect to this Agreement or any provision of this Agreement. This
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement and their successors and
assigns.
12.12. WAIVER OF JURY TRIAL
Each of the parties hereto irrevocably waives any and all
right to trial by jury in any legal proceeding arising out of or related to this
Agreement or the transactions contemplated hereby.
12.13. SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
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IN WITNESS WHEREOF, this Agreement and Plan of Merger has been
executed on behalf of Second Bancorp Incorporated, Second Merger Corp. and
Commerce Exchange Corporation to be effective as of the date set forth in the
first paragraph above.
ATTEST: SECOND BANCORP INCORPORATED
/s/▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/▇.▇. Blossom
---------------------------------- --------------------------------
Printed Name: ▇.▇. (▇▇▇▇) Blossom
Title: President and Chief Executive
Officer
ATTEST: COMMERCE EXCHANGE CORPORATION
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. By:/s/▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------- ---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
President Printed Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:Chairman of the Board
ATTEST: SECOND MERGER CORP.
/s/▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By:/s/▇.▇. Blossom
---------------------------------- ---------------------------------
Printed Name:▇.▇. (▇▇▇▇) Blossom
Title:President
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