Civista Bancshares(CIVB) - 2025 Q2 - Quarterly Results

Preamble and Recitals Recitals The agreement outlines the strategic merger of Farmers into Civista Bank, intended to qualify as a tax-free reorganization - The agreement is dated July 10, 2025, among Civista Bancshares, Inc, Civista Bank, and The Farmers Savings Bank[26] - The transaction is a strategic merger where Farmers will merge into Civista Bank, with Civista Bank as the surviving entity[28] - The merger is intended to qualify as a tax-free "reorganization" under Section 368(a) of the Internal Revenue Code[29] The Merger The Merger The Farmers Savings Bank will legally merge into Civista Bank, which will be the surviving entity under Ohio law - At the Effective Time, Farmers will merge with and into Civista Bank, with Civista Bank continuing as the surviving bank[31] - Civista may change the method of the combination if it does not alter the merger consideration, adversely affect tax consequences, or materially delay regulatory approvals[32][33] Closing and Effective Time The merger's closing will occur within 30 days of satisfying all conditions, becoming effective upon filing with the Ohio Secretary of State - The closing will take place within thirty (30) days following the satisfaction or waiver of all conditions[34] - The merger becomes effective upon the filing of the Certificate of Merger with the Ohio Secretary of State[34] Conversion of Shares Each Farmers Common Share will be converted into a mix of cash and Civista common stock, with adjustments for fractional shares Merger Consideration per Farmers Common Share | Consideration Type | Formula / Amount | | :--- | :--- | | Cash Consideration | $34,925,000 divided by the number of outstanding Farmers Common Shares | | Stock Consideration | 1,434,491 Civista Common Shares divided by the number of outstanding Farmers Common Shares (the "Exchange Ratio") | - No fractional Civista Common Shares will be issued; instead, shareholders will receive cash based on the 5-day average closing price of Civista stock[41] - The stock consideration can be increased and cash consideration decreased to the minimum extent necessary to ensure the merger qualifies as a tax-free reorganization[42] Farmers Adjusted Shareholders' Equity The cash consideration is subject to an adjustment based on Farmers' final Adjusted Shareholders' Equity relative to a $56 million threshold Equity Adjustment Mechanism | Condition | Adjustment to Cash Consideration per Share | | :--- | :--- | | Adjusted Shareholders' Equity < $56,000,000 (Equity Minimum) | Reduced by the shortfall amount, divided by total shares | | Adjusted Shareholders' Equity > $56,000,000 (Equity Minimum) | Increased by 50% of the excess amount, divided by total shares | - Adjusted Shareholders' Equity is calculated based on GAAP as of the month-end prior to closing, excluding certain transaction expenses and including adjustments for investment portfolio valuation[44] Dissenters' Rights Farmers shareholders who properly exercise dissenters' rights under Ohio law will receive fair value payment instead of merger consideration - Shareholders who properly dissent under Section 1701.85 of the OGCL will not receive the Merger Consideration[47] - Dissenting shareholders are entitled to receive payment for the fair value of their shares, but if they fail to perfect or withdraw their rights, they will receive the standard Merger Consideration[48] Directors and Officers of the Surviving Bank The existing directors and officers of Civista Bank will continue to lead the surviving bank after the merger - The directors of the Surviving Bank will be the directors of Civista Bank immediately prior to the Effective Time[50] - The officers of the Surviving Bank will be the officers of Civista Bank immediately prior to the Effective Time[51] Delivery of Merger Consideration Exchange Agent Civista will appoint Equiniti Trust Co as the exchange agent to manage the distribution of merger consideration - Civista will appoint Equiniti Trust Co. as the exchange agent for the merger[54] Exchange Procedures Shareholders will receive instructions to exchange their shares for merger consideration, with unclaimed funds reverting to Civista after one year - Within five business days after the Effective Time, the Exchange Agent will mail a Letter of Transmittal to each Farmers shareholder[57] - Shareholders will receive their merger consideration, including cash for fractional shares and any owed dividends, after surrendering their certificates or book-entry shares with a completed Letter of Transmittal[57] - Any portion of the Exchange Fund unclaimed after one year will be returned to Civista, and shareholders must then look to Civista for payment[63] Representations and Warranties of Farmers Capitalization Farmers represents it has 500 common shares authorized and outstanding, with no other equity rights or repurchase obligations - Farmers' authorized capital stock consists of 500 common shares, all of which are issued and outstanding[70] - Farmers has no outstanding options, warrants, or other commitments to issue additional equity securities[70] Financial Statements Farmers affirms its provided financial statements conform to GAAP, fairly present its financial position, and contain no undisclosed material liabilities - Farmers has provided unaudited financial statements for fiscal years 2022, 2023, 2024 and the interim period ended May 31, 2025[79] - The financial statements were prepared in conformity with GAAP and fairly present the financial position of Farmers[79] - Farmers has no material liabilities other than those reflected in its financial statements, incurred in the ordinary course of business, or related to this agreement[80] Farmers Benefit Plans Farmers represents its employee benefit plans are compliant and confirms the merger will not trigger excess parachute payments or tax gross-ups - A list of all material employee benefit plans (Farmers Benefit Plans) is provided in Section 3.11(a) of the Farmers Disclosure Schedule[89] - The execution of the merger agreement will not result in an "excess parachute payment" within the meaning of Section 280G of the Code[99] - No Farmers Benefit Plan provides for the gross-up or reimbursement of taxes under Section 4999 or 409A of the Code[99] Opinion Farmers' board received a fairness opinion from Janney Montgomery Scott LLC confirming the merger consideration is financially fair to its shareholders - The Board of Directors of Farmers received a fairness opinion from Janney Montgomery Scott LLC[109] - The opinion concludes that the Merger Consideration is fair from a financial point of view to Farmers' shareholders[109] Representations and Warranties of Civista and Civista Bank Capitalization Civista represents its capital structure and confirms the shares issued in the merger will be duly authorized and fully paid Civista Capitalization | Security | Amount | | :--- | :--- | | Authorized Common Shares | 40,000,000 | | Outstanding Common Shares | 15,519,072 | | Treasury Shares | 3,860,536 | | Authorized Preferred Shares | 200,000 | | Outstanding Preferred Shares | 0 | - The Civista Common Shares to be issued in the Merger will be duly authorized, validly issued, fully paid, nonassessable, and free of preemptive rights[161] Reports Civista affirms it has timely filed all required regulatory reports since December 31, 2021, without material misstatements or omissions - Since December 31, 2021, Civista has timely filed all required reports with Regulatory Agencies and other Governmental Entities[167] - Civista SEC Reports complied in all material respects with applicable law and did not contain material misstatements or omissions[168] Covenants Relating to Conduct of Business Farmers Forbearances Farmers is prohibited from taking certain actions before closing without Civista's consent to preserve its business operations and value - Farmers shall not issue additional shares, equity rights, or grant equity-based awards[183] - Farmers is restricted from paying dividends other than quarterly dividends consistent with past practice, not to exceed $1,500 per share per quarter[183] - Farmers cannot, without consent, make or acquire any loan or commitment that results in a total credit exposure to a single borrower exceeding $750,000[185] - Farmers cannot increase compensation or benefits for directors, officers, or employees, except for ordinary course salary increases and specified annual bonuses[183] Civista and Civista Bank Forbearances Civista is restricted from actions that could jeopardize the merger's tax-free status or adversely affect Farmers' shareholders - Civista shall not take any action that would prevent the merger from qualifying as a tax-free reorganization[187] - Civista shall not effect any Change in Capitalization (e.g., stock split, reverse stock split)[187] - Civista cannot amend its articles or regulations in a manner that would materially and adversely affect Farmers' shareholders relative to existing Civista shareholders[187] Additional Agreements Regulatory Matters Both parties will cooperate on all regulatory filings, including the Form S-4 registration statement, to secure necessary approvals promptly - Civista and Farmers will cooperate to prepare the Proxy Statement and Form S-4 to be filed with the SEC[189] - The parties will use commercially reasonable efforts to promptly file all necessary applications to obtain all required permits, consents, and approvals from governmental entities[190] Shareholder Approval Farmers' board must recommend the merger to its shareholders and hold a vote, regardless of any alternative acquisition proposals - Farmers' Board of Directors will recommend that its shareholders approve the merger agreement (the "Farmers Recommendation")[197] - Farmers must hold a shareholder meeting to vote on the agreement, even if the Board effects a "Change in the Farmers Recommendation"[198] Employee Matters The agreement details post-merger employee benefits, severance, and specific bonus and SEP plan contributions permitted for Farmers - Farmers employees whose employment is terminated without cause within six months of closing will receive a severance payment of two weeks' base pay per year of service, with a minimum of 4 weeks and a maximum of 26 weeks[209] - Farmers may pay annual bonuses for 2025 up to an aggregate amount of $115,000[211] - Farmers may make contributions to the Farmers SEP Plan for 2025 up to an aggregate amount of $100,000[211] - Civista will request that Farmers terminate its Simplified Employee Pension (SEP) Plan immediately prior to the Effective Time, and will permit rollovers into Civista's 401(k) plan[205] Indemnification; Directors' and Officers' Insurance Civista will indemnify Farmers' former directors and officers and purchase a six-year "tail" D&O insurance policy for them - Civista will indemnify former directors and officers of Farmers after the Effective Time[213] - Civista will purchase a six-year "tail" Directors' and Officers' Liability Insurance (D&O) policy, with a premium capped at 150% of the current policy's annual premium[214] No Solicitation Farmers is prohibited from soliciting other offers but may engage with a superior proposal under its fiduciary duties, subject to a matching right for Civista - Farmers is prohibited from soliciting, initiating, or encouraging any alternative Acquisition Proposal[215] - Farmers' board may engage with an unsolicited, bona fide written Acquisition Proposal if it is deemed a "Superior Proposal" and failing to do so would likely violate fiduciary duties[217] - Before changing its recommendation, Farmers must provide Civista with a three-business-day "Notice Period" to allow Civista to negotiate and adjust the terms of its offer[220] Voting Agreements Key Farmers shareholders are required to sign a Voting Agreement, committing their votes in favor of the merger - Key Shareholders of Farmers must deliver a duly executed Voting Agreement, committing to vote in favor of the merger[231] Deposit Agreement Members of the Lee Family must agree to maintain at least 95% of their deposit balances with the surviving bank for two years post-merger - The Lee Family will enter a Deposit Agreement to retain at least 95% of their aggregate deposit balances with the Surviving Bank for at least two years post-merger[234] Lock-Up Agreements Key Farmers shareholders must enter lock-up agreements restricting the sale of their newly acquired Civista stock for a defined period - Key Shareholders will be subject to a six-month lock-up period where they cannot sell any Civista shares received in the merger[235] - For 18 months following the lock-up period, Key Shareholders cannot sell more than 20,000 Civista shares in any 30-day period[235] Conditions Precedent Conditions to Each Party's Obligation to Effect the Merger The merger is contingent upon several mutual conditions, including shareholder approval, regulatory consent, and Nasdaq listing authorization - The merger is conditional upon receiving the Farmers Shareholder Approval[237] - The Form S-4 must be declared effective by the SEC and the new Civista shares must be authorized for listing on Nasdaq[238] - All requisite regulatory approvals must be obtained and be in full force and effect[240] Conditions to Obligations of Civista and Civista Bank Civista's obligation to close is conditional on the accuracy of Farmers' warranties, receipt of a tax opinion, and limited shareholder dissent - Farmers' representations and warranties must be true and correct, and it must have performed its obligations under the agreement[242][243] - Civista must receive a legal opinion that the merger will qualify as a tax-free reorganization under Section 368(a) of the Code[244] - The holders of not more than 10% of the outstanding Farmers Common Shares shall have perfected dissenters' rights[248] Termination and Amendment Termination The agreement can be terminated by mutual consent, regulatory denial, a material breach, or if the merger is not completed by June 30, 2026 - The agreement can be terminated by mutual written consent[253] - Either party can terminate if the merger is not completed by June 30, 2026[253] - Civista can terminate if the Farmers Board of Directors effects a Change in the Farmers Recommendation[253] - Either party can terminate if the Farmers Shareholder Approval is not obtained[254] Fees and Expenses Each party bears its own costs, but Farmers must pay a $2.5 million termination fee to Civista under specific circumstances - Generally, each party pays its own fees and expenses[256] Termination Fee | Fee Amount | Payable By | Payable To | Conditions | | :--- | :--- | :--- | :--- | | $2,500,000 | Farmers | Civista | Payable if the agreement is terminated under certain conditions (e.g., Civista terminates due to a change in recommendation by Farmers' board, or Farmers enters into an alternative acquisition agreement within 12 months of certain termination events) | General Provisions Governing Law; Jurisdiction The agreement is governed by Ohio law, with legal disputes to be handled exclusively in the courts of Erie County, Ohio - The agreement is governed by the laws of the State of Ohio[269] - Legal disputes will be handled exclusively in federal or state courts in Erie County, Ohio[269] Waiver of Jury Trial All parties to the agreement irrevocably waive their right to a jury trial for any litigation related to the agreement - Each party waives any right to a trial by jury in respect of any litigation related to the agreement[271] Exhibit A: Form of Voting Agreement Voting Agreement Key Farmers shareholders must sign this agreement, committing to vote for the merger and granting Civista an irrevocable proxy - Shareholders agree to vote their shares in favor of the merger agreement and against any competing proposal[285] - Shareholders grant Civista an irrevocable proxy to vote their shares in accordance with the agreement[287] - Shareholders agree not to sell, pledge, or transfer their shares without Civista's prior written consent during the term of the agreement[295]