File No. 333-32245
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
AMENDMENT NO. 3 TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
HEARTLAND BANCSHARES, INC.
(Name of small business issuer as in its charter)
Indiana 6712 35-2017085
(State or other (Primary Standard (I.R.S.
jurisdiction of Industrial Employee
incorporation or Classification Identification
organization) Code Number) Number)
P.O. Box 469
Franklin, Indiana 46131
(317) 738-3915
(Address and telephone number of principal executive
offices and principal place of business or intended
principal place of business)
Steve Bechman, President
Heartland Bancshares, Inc.
P.O. Box 469
Franklin, Indiana 46131
(317) 738-3915
(Name, address, and telephone number of agent for service)
Copies to:
Mark B. Barnes, Esq. Timothy M. Harden, Esq.
Leagre Chandler & Millard Krieg DeVault Alexander
9100 Keystone Crossing, Suite 800 & Capehart
Indianapolis, IN 46240 2800 One Indiana Square
Telephone: (317) 843-1655 Indianapolis, IN 46204
Fax: (317) 846-7900 Telephone (317) 636-4341
Fax: (317) 636-1507
________________________________
Approximate date of proposed sale to the public: As soon as practicable
after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering.
_____
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. ____
==============================================================
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON
SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SECTION 8(a) OF THE SECURITIES ACT OF 1933, MAY
DETERMINE.
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PROSPECTUS
1,000,000 SHARES
HEARTLAND BANCSHARES, INC.
Common Stock
______________________
Heartland Bancshares, Inc., an Indiana corporation (the
"Company"), is offering for sale 1,000,000 shares of its Common
Stock (the "Common Stock"). The Company is a proposed bank holding
company organized to own all of the common stock of Heartland
Community Bank, an Indiana state chartered commercial bank (in
organization), to be headquartered in Franklin, Indiana (the
"Bank"). Neither the Company nor the Bank has ever conducted any
business operations other than matters related to their initial
organization and the raising of capital. See "Business." There has
been no public trading market for the Common Stock. Roney & Co.
L.L.C. (the "Underwriter" or "Roney & Co.") has advised the Company
that it anticipates making a market in the Common Stock following
completion of the offering, although there can be no assurance that
an active trading market will develop. See "Underwriting" for a
discussion of the factors considered in determining the initial
public offering price. The Company expects that the quotations for
the Common Stock will be reported on the NASD OTC Bulletin Board
under the symbol "HRTB." The directors and officers of the Company
are expected to purchase at least 74,500 of the shares of Common
Stock at the public offering price. In the event that all
necessary regulatory approvals have not been granted as of the date
of closing, the Underwriter and the Company intend to close the
offering into escrow. See "Possible Escrow of Proceeds."
__________________
THE COMMON STOCK OFFERED BY THIS PROSPECTUS INVOLVES A
SIGNIFICANT AMOUNT OF RISK. SEE "RISK FACTORS" ON PAGES 5 THROUGH
9 FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE
COMPANY'S COMMON STOCK. THESE SECURITIES ARE NOT SAVINGS
ACCOUNTS OR SAVINGS DEPOSITS AND THEY ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
__________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION OR THE FEDERAL DEPOSIT INSURANCE CORPORATION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION OR THE FEDERAL DEPOSIT INSURANCE CORPORATION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. <PAGE>
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=================================================================
Price to Underwriting Proceeds to
Public Discount(1)(2) Company (2)(3)
Per Share $10.00 $0.70 $9.30
Total(2) $10,000,000 $700,000 $9,300,000
=================================================================
(1) The Company has agreed to indemnify the Underwriter against
certain liabilities including liabilities under the Securities
Act of 1933. See "Underwriting".
(2) The Company has granted the Underwriter a 30-day option to
purchase up to 150,000 additional shares of its Common Stock
solely to cover over-allotments, if any. If the Underwriter
exercises such option in full, the Price to Public,
Underwriting Discounts, and Proceeds to the Company will be
approximately $11,500,000, $805,000 and $10,695,000,
respectively. See "Underwriting." The Underwriter has agreed
that reduced Underwriting Discounts of 4% will be incurred by
the Company for up to 200,000 shares sold by the Underwriter
to members of the Board of Directors or their immediate
families, and certain other persons. See "Underwriting." If
200,000 shares are so purchased, Underwriting Discounts will
be reduced by, and Proceeds to the Company will be increased
by, $60,000.
(3) Before deducting estimated offering expenses payable by the
Company of $160,000
_________________
The shares of Common Stock are offered by the Underwriter
subject to prior sale, when, as and if delivered to and accepted by
the Underwriter, and subject to the right of the Underwriter to
withdraw, cancel or modify such offer and to reject orders in whole
or in part. It is expected that delivery of the shares of Common
Stock will be made in Detroit, Michigan, to the Underwriter or
to the escrow agent, on or about September 26, 1997.
__________________
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 23, 1997.
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[MAP OF HEARTLAND COMMUNITY BANK SERVICE AREA]
__________________
AVAILABLE INFORMATION
The Company is not currently a reporting company pursuant to
the Securities Exchange Act of 1934 (the "Exchange Act"), but will
be required to file reports pursuant to the Exchange Act following
the completion of the offering for at least its fiscal year ending
December 31, 1997. The Company, which will use a December 31
fiscal year, intends to furnish its shareholders with annual
reports containing audited financial statements and, for the first
three quarters of each fiscal year, quarterly reports containing
unaudited financial information.
Requests for such documents should be directed to Jeffery D.
Joyce, Chief Financial Officer of Heartland Bancshares, Inc., at
P.O. Box 469, Franklin, Indiana 46131.
__________________
IN CONNECTION WITH THE OFFERING, THE UNDERWRITER MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE
THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and financial statements appearing elsewhere
in this Prospectus. Unless the context clearly suggests otherwise,
references in this Prospectus to the Company include the Bank.
Except as otherwise indicated, all information in this Prospectus
assumes no exercise of the Underwriter's over-allotment option.
The Company
Heartland Bancshares, Inc. (the "Company") is an Indiana
corporation whose primary purpose will be to own and operate
Heartland Community Bank (the "Bank") as the Bank's sole
shareholder. The Bank is organizing as an Indiana state-chartered
commercial bank with depository accounts to be insured by the Bank
Insurance Fund of the Federal Deposit Insurance Corporation (the
"FDIC"). The Bank's offices will be located in the Indiana cities
of Franklin and Greenwood in Johnson County, which is part of the
greater Indianapolis metropolitan area. The Bank's retail strategy
will be to offer, primarily in Johnson County, a wide range of
basic banking products and services that will be reasonably priced
and easily understood by the customer. The Bank's commercial
strategy will center on small to medium-sized businesses.
Completion of the offering will be conditioned on, among other
things, the Company and the Bank having received all necessary
regulatory approvals and satisfying certain conditions contained
therein. Management anticipates commencing business in the fourth
quarter of 1997.
REASON FOR STARTING HEARTLAND COMMUNITY BANK
The liberalization in recent years of Indiana's branch banking
laws, together with the expansion of interstate banking, has led to
substantial consolidation of the banking industry in Indiana and
especially in the metropolitan Indianapolis area in which the Bank
will be located. In many cases, when these consolidations
occurred, local boards of directors were dissolved and local
management was relocated or, in some cases, terminated.
In the opinion of the Company's management, this situation has
created a favorable opportunity for a new commercial bank with
local management and local directors. Management believes that
such a bank can be successful in attracting small to medium-sized
businesses and individuals as customers who wish to conduct
business with a locally owned and managed institution that
demonstrates an active interest in their business and personal
financial affairs. The Bank will seek to take advantage of this
opportunity by emphasizing in its marketing plan the Bank's local
management, and their strong ties and active commitment to the
community.
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MANAGEMENT
The Company has assembled a management team and a Board of
Directors that have strong business experience in the Bank's market
area and a shared vision and commitment to the future growth and
success of the Bank. The Bank intends to compete aggressively for
its banking business through a systematic program of direct calling
on both prospective customers and referral sources such as
attorneys, accountants and other business people, many of whom the
Bank's directors and officers have come to know during their
professional careers.
Steve Bechman, President and Chief Executive Officer of the
Company and the Bank, has over 21 years of banking experience in
the community, all with Citizens Bank of Central Indiana ("CBCI")
and its predecessors and affiliates. Prior to his resignation
earlier this year, Mr. Bechman was Regional President of CBCI,
which is a subsidiary of CNB Bancshares, Inc., of Evansville,
Indiana ("CNB"). CNB's stock is listed on the New York Stock
Exchange and at March 31, 1997, CNB had total assets of
approximately $4.2 billion. Mr. Bechman joined a predecessor of
CBCI in 1975 and he became Regional President of CBCI in 1993.
Jeffrey L. Goben, Executive Vice President and Chief Operating
Officer of the Company and the Bank, has over 24 years of banking
experience, the last 12 years being with CBCI and its predecessor.
Mr. Goben started his career in 1972 with the National Bank of
Greenwood, now a part of National City Bank. He joined a
predecessor of CBCI in July 1984 as Assistant Vice President and
Branch Manager. At various points in his career, Mr. Goben has
managed a wide variety of bank functions, including branch
administration, consumer banking, human resources, and marketing
and community development.
Keith Fox, with 14 years of banking experience in the Bank's
market area, most recently in commercial lending with CBCI, will be
the Bank's Vice President in charge of commercial lending
operations. John Morin, with 24 years of banking experience
primarily in the market area of the Bank, most recently was Vice
President in charge of consumer lending at CBCI. Mr. Morin will
head the Bank's consumer loan area. Jeffery D. Joyce, a certified
public accountant, has five years of experience with a major
regional accounting firm during which he focused primarily on
financial institutions. Mr. Joyce will be Vice President and Chief
Financial Officer of the Company and the Bank's Cashier and
Controller.
The Company has formed a Board of Directors comprised of
individuals with a broad background in business, agriculture, and
banking and a high level of community involvement. Current
directors include Gordon R. Dunn, former Chairman of the Board of
CBCI, and John Norton, previously a director of the former Franklin
Bank & Trust, Franklin, Indiana, which is now a part of KeyCorp.
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The Company anticipates that its directors and executive officers,
alone or with their associates, will purchase at least 74,500
shares in the offering. See "Principal Shareholders."
The management team represents a significant asset to the
Company and the Bank. These individuals have many years of personal
experience in the financial services industry, and many have worked
together successfully at CBCI. The Company believes that these
individuals and their relationships in the Bank's market area
should offer the Bank a substantial opportunity to attract new
relationships.
MARKET AREA
Johnson County was the second fastest growing county in the
State of Indiana from 1990 through 1996 based on estimates of the
Indiana Business Research Center. The Bank's main office will be
located on the main retail thoroughfare in Franklin, at 420 N.
Morton Street (U.S. Route 31), on property that has been purchased
by the Company and is being extensively renovated. The Bank
intends to open a branch office in newly-constructed leased space
in Greenwood, Indiana, 11 miles north of Franklin in Johnson County
and approximately 12 miles south of downtown Indianapolis, during
the fourth quarter of 1997. The Bank's primary service area will
be the northern two-thirds of Johnson County, which includes the
six Townships of Union, Needham, Franklin, White River, Pleasant,
and Clark. Management believes this community has an expanding and
diverse economic base, which includes a wide range of small to
medium-sized businesses engaged in manufacturing, services, and
retail. As of June, 1997, the unemployment rate for Johnson County
was 1.9%, compared with the statewide average of approximately
3.1%, according to Ball State University's Bureau of Business
Research. There are approximately 3,200 businesses in Johnson
County.
The Bank's main office will also serve as the Company's
corporate headquarters. The Company's address will be 420 N. Morton
Street, Franklin, Indiana 46131 once the new facility is opened;
the Company's current mailing address is P.O. Box 469, Franklin,
Indiana 46131. The Company's telephone number is 317-738-3915.
THE OFFERING
Securities offered
by the Company................. 1,000,000 shares of Common
Stock. In addition, the
Company has granted the
Underwriter an option to
purchase up to an additional
150,000 shares to cover
over-allotments. See
"Description of Capital Stock."
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Common Stock to be outstanding
after the offering............... 1,000,000 shares (1,150,000
shares if the over-allotment
option is exercised in full).
Use of proceeds by the
Company.......................... Capitalization of the Bank,
retirement of mortgage debt
relating to the acquisition of
the Franklin main office, and
repayment of borrowings that
have financed organization and
preopening expenses. See "Use
of Proceeds."
Possible Escrow of Funds......... The Underwriter and the Company
intend to close the offering
into escrow if all regulatory
approvals have not then been
granted as of the date of
closing. See "Possible Escrow
of Proceeds."
Proposed NASD Over-the-Counter
("OTC") Bulletin Board
Symbol........................... HRTB
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk
and should be considered only by persons who can afford the loss of
their investment. The following constitute some of the potential
risks of an investment in the Common Stock and should be carefully
considered by prospective investors prior to purchasing shares of
Common Stock. The order of the following is not intended to be
indicative of the relative importance of any described risk nor is
the following intended to be inclusive of all risks of investment
in the Common Stock.
LACK OF OPERATING HISTORY; DEVELOPMENT STAGE COMPANY; NEGATIVE NET
WORTH; PREDOMINANT PORTION OF PRE-OFFERING ASSETS INTANGIBLE
Neither the Company nor the Bank has any operating history.
The business of the Company and the Bank is subject to the risks
inherent in the establishment of a new business enterprise.
Because the Company is a development-stage company that is only
recently formed and the Bank and the Company are in the process of
obtaining the necessary regulatory approvals, subject to the
satisfaction of certain conditions, and the Bank has not commenced
banking operations as of the date of this prospectus, prospective
investors do not have access to all of the information that, in
assessing their proposed investment, is available to the purchasers
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of securities of a financial institution with a history of
operations. Prior to this offering, the Company had a
shareholder's deficit (negative net worth) and the predominant
portion of the Company's assets were intangible.
SIGNIFICANT START-UP LOSSES EXPECTED
As a result of the substantial start-up expenditures that must
be incurred by a new bank and the time it will take to develop its
deposit base and loan portfolio, it is expected that the Bank, and
thus the Company, will operate at a substantial loss during the
start-up of the Bank. Accordingly, neither the Company nor the
Bank is expected to be profitable in the first years of operation.
Cumulative losses during the first two years of operation are
expected to be at least $1,000,000, but there can be no assurance
that losses during these years will not exceed this amount. As a
result, it is anticipated that the book value of the Common Stock
will decrease accordingly. The preceding statements in this
paragraph (and others in this Prospectus) are forward-looking
statements that are based on assumptions rather than historical or
current facts and, therefore, are inherently uncertain and subject
to risk. There is no assurance that the Bank will ever operate
profitably. If the Company does not reach profitability and
recover its accumulated operating losses, the non-recoverable
portion of its investment in fixed assets and the expenses and
underwriting discounts incurred in connection with this offering,
investors will suffer a significant decline in the value of their
shares of Common Stock.
DELAY IN COMMENCING OPERATIONS
Although the Company and the Bank expect to receive all
regulatory approvals and commence business in their Franklin and
Greenwood facilities during the fourth quarter of 1997, there can
be no assurance as to when, if at all, these events will occur.
Any delay in commencing operations at either location will increase
pre-opening expenses and postpone realization by the Bank of
potential revenues. Absent the receipt of revenues and
commencement of profitable operations, the Company's accumulated
deficit will continue to increase (and book value per share
decrease) as operating expenses such as salaries and other
administrative expenses continue to be incurred.
GOVERNMENT REGULATION AND MONETARY POLICY, POSSIBLE ESCROW OF
PROCEEDS
The Company has filed an application to organize and establish
the Bank with the Department of Financial Institutions of the State
of Indiana (the "Department"). The Company expects that the
Department will act upon this application at a meeting of the
members of the Department scheduled to be held on September 25,
1997. The Company expects that the Department's approval will be
conditioned upon the payment by the Company to the Bank of at least
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$9 million of capital from the net proceeds of the offering and
satisfaction of other standard conditions. The Bank also expects
to receive approval for the insurance of its deposits by the FDIC
in September, 1997. If these approvals of the Department and
the FDIC are not granted by the time of closing of this offering,
the Company and the Bank intend to close this offering into escrow.
See "Possible Escrow of Proceeds."
The Company's application under the Bank Holding Company Act of
1956, as amended (the "BHCA") to become a bank holding company for
the Bank was approved by a delegate of the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board") on
September 17, 1997.
The Company and the Bank will be subject to extensive state
and federal government supervision, regulation and examination.
Existing state and federal banking laws will subject the Bank to
substantial limitations with respect to loans, purchase of
securities, payment of dividends and many other aspects of its
banking business. Recently enacted and proposed legislation may
adversely affect the banking industry or the operations of the Bank
and may result in increased competition in the financial services
industry. In June, 1997, broad financial reform legislation was
approved by the Banking Committee of the U.S. House of
Representatives. The proposed legislation includes provisions that
would permit, subject to certain restrictions, bank holding
companies to acquire manufacturing and other nonfinancial
companies, permit nonfinancial companies to acquire banks, and
require thrift institutions to convert to bank charters. On
September 16, 1997, the House Commerce Committee released a revised
bill that differs markedly from the version of the legislation
proposed by the Banking Committee. One significant difference in
the bills is that the Commerce Committee bill would generally
prohibit companies that own banks from engaging in commercial
activities. The Company cannot predict whether, or in what
form, this legislation may be enacted, and if enacted, what the
effect would be on the Company and the Bank. Federal economic and
monetary policy, as well as policy decisions of bank regulatory
authorities, may affect the Bank's ability to attract deposits,
make loans and achieve satisfactory interest spreads. See
"Supervision and Regulation."
NO ASSURANCE OF DIVIDENDS
It is anticipated that no dividends will be paid on the
Company's Common Stock for the foreseeable future. The Company
will be largely dependent upon dividends paid by the Bank for funds
to pay dividends on its Common Stock, if and when such dividends
are declared. No assurance can be given that future earnings of
the Bank, and resulting dividends to the Company, will be
sufficient to permit the legal payment of dividends to Company
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shareholders at any time in the future. See "Supervision and
Regulation." Even if the Company may legally declare dividends,
the amount and timing of such dividends will be at the discretion
of the Company's Board of Directors. The Board may in its sole
discretion decide not to declare dividends. These shares should
not be purchased by persons who need or desire dividend income from
this investment. For a more detailed discussion of other
limitations on the payment of cash dividends by the Company, see
"Dividend Policy."
COMPETITION
The Company and the Bank will face strong competition for
deposits, loans and other financial services from numerous Indiana
and out-of-state banks, thrifts, credit unions and other financial
institutions as well as other entities which provide financial
services, including consumer finance companies, securities
brokerage firms, mortgage brokers, equipment leasing companies,
insurance companies, mutual funds, and other lending sources and
investment alternatives. Some of the financial institutions and
financial services organizations with which the Bank will compete
are not subject to the same degree of regulation as the Bank. Many
of the financial institutions aggressively compete for business in
the Bank's proposed market areas. Many of these competitors have
been in business for many years, have established customer bases,
have substantially higher lending limits than the Bank, are larger
and will be able to offer certain services that the Bank does not
expect to provide in the foreseeable future, including home
electronic banking services and international banking services. In
addition, most of these entities have greater capital resources
than the Bank, which, among other things, may allow them to price
their services at levels more favorable to the customer and to
provide larger credit facilities than could the Bank. See
"Business -- Market Area" and "Business -- Competition."
Additionally, recently passed federal legislation regarding
interstate branching and banking and legislation affecting the cost
of deposit insurance premiums may act to increase competition in
the future from larger out-of-state banks and thrift institutions.
See "Supervision and Regulation -- Recent Regulatory Developments."
DEPENDENCE ON MANAGEMENT
The Company and the Bank are, and for the foreseeable future
will be, dependent primarily upon the services of Steve Bechman,
the President of the Company and the Bank, and Jeffrey L. Goben,
Executive Vice President of the Company and the Bank. There are no
employment agreements with either Mr. Bechman or Mr. Goben nor are
any employment agreements with these individuals planned; however,
the Company has applied for "key man" life insurance policies with
respect to Mr. Bechman and Mr. Goben. If the services of either
of these individuals were to become unavailable to the Company or
the Bank for any reason, or if the Company or the Bank were unable
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to hire highly qualified and experienced personnel either to
replace Mr. Bechman and Mr. Goben or any other proposed employee,
or to adequately staff the anticipated growth of the Bank, the
operating results of the Company and the Bank could be adversely
affected. See "Business -- Employees" and "Management."
DISCRETION IN USE OF PROCEEDS
The offering is intended to raise funds primarily to provide for
the initial capitalization of the Bank. While management currently
has no such plans, if opportunities arise, some of the proceeds of
the offering may also be used by the Company or the Bank to finance
acquisitions of other financial institutions, or of branches of
other institutions, or to finance expansion into other lines of
business closely related to banking. Management will retain
discretion in employing most of the proceeds of the offering. See
"Use of Proceeds."
LENDING RISKS AND LENDING LIMITS
The risk of nonpayment of loans is inherent in commercial
banking, and such nonpayment, if it occurs, would likely have a
material adverse effect on the Company's earnings and overall
financial condition as well as the value of the Common Stock.
Because the Bank does not have an operating history, none of the
Bank's customers will have an established credit history with the
Bank. Management will attempt to minimize the Bank's credit
exposure by carefully monitoring the concentration of its loans
within specific industries and through loan application and
approval procedures, but there can be no assurance that such
monitoring and procedures will reduce such lending risks. Credit
losses can cause insolvency and failure of a financial institution,
and in such event, its shareholders could lose their entire
investment.
The Bank's self-imposed lending limit initially will be
$1,000,000 per customer relationship. Accordingly, the size of the
loans which the Bank can offer to potential customers is less than
the size of loans which most of the Bank's competitors are able to
offer. This limit initially will affect the ability of the Bank to
seek relationships with the area's larger businesses. The Bank
expects to accommodate loan volumes in excess of its lending limit
through the sale of participations in such loans to other banks.
However, there can be no assurance that the Bank will be successful
in attracting or maintaining customers seeking larger loans or that
the Bank will be able to engage in participations of such loans on
terms favorable to the Bank.
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IMPACT OF INTEREST RATES
The results of operations for financial institutions,
including the Bank, may be materially and adversely affected by
changes in prevailing economic conditions, including declines in
real estate market values, rapid changes in interest rates and the
monetary and fiscal policies of the federal government. See
"Supervision and Regulation -- General" and "-- Recent Regulatory
Developments." The Bank's profitability is in part a function of
the spread between the interest rates earned on investments and
loans and the interest rates paid on deposits and other
interest-bearing liabilities. In the early 1990s, many banking
organizations experienced historically high interest rate spreads.
More recently, interest rate spreads have generally narrowed due to
changing market conditions and competitive pricing pressure, and
there can be no assurance that such factors will not continue to
narrow interest rate spreads or that the higher interest rate
spreads will return. Like most banking institutions, the Bank's
net interest spread and margin will be affected by general economic
conditions and other factors that influence market interest rates
and the Bank's ability to respond to changes to such rates. At any
given time, the Bank's assets and liabilities will be such that
they are affected differently by a given change in interest rates,
principally due to the fact that the Bank does not plan to match
the maturities of its loans precisely with its deposits and other
funding sources. As a result, an increase or decrease in rates
could have a material adverse effect on the Bank's net income,
capital and liquidity. While management intends to take measures
to mitigate interest rate risk, there can be no assurance that such
measures will be effective in minimizing the exposure to interest
rate risk. See "Supervision and Regulation."
IMPACT OF ECONOMIC CONDITIONS
Although economic conditions in the Bank's market area have
been generally favorable, there can be no assurance that such
conditions will continue to prevail. Substantially all the Bank's
loans are expected to be to businesses and individuals in Johnson
County, Indiana and any decline in the economy of this area could
have an adverse impact on the Bank. The Johnson County economy is,
however, widely diversified among various manufacturing, service
and retail businesses, with no single employer or group of
employers accounting for any substantial portion of the County's
total employment. See "Business -- Market Area."
NEED FOR TECHNOLOGICAL CHANGE
The banking industry is undergoing rapid technological changes
with frequent introductions of new technology-driven products and
services. In addition to better serving customers, the effective
use of technology increases efficiency and enables financial
institutions to reduce costs. The Company's future success will
depend in part on its ability to address the needs of its customers
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by using technology to provide products and services that will
satisfy customer demands for convenience as well as to create
additional efficiencies in the Bank's operations. Many of the
Bank's competitors have substantially greater resources to invest
in technological improvements. Such technology may permit
competitors to perform certain functions at a lower cost than the
Bank. There can be no assurance that the Bank will be able to
effectively implement new technology-driven products and services
or be successful in marketing such products and services to its
customers. See "Business -- Business Strategy."
ANTI-TAKEOVER PROVISIONS
The Indiana Business Corporation Law and the Company's
Articles of Incorporation and Bylaws contain certain provisions
that may discourage, delay or prevent a change in control of the
Company. In addition, federal law requires the approval of the
Federal Reserve Board prior to acquisition of "control" of a bank
holding company. As a result, these provisions could adversely
affect the price of the Common Stock by, among other things,
preventing a shareholder of the Company's Common Stock from
realizing a premium which might be paid as a result of a change in
control of the Company. See "Description of Capital Stock -
Certain Anti-Takeover Provisions."
BOARD'S AUTHORITY TO ISSUE PREFERRED STOCK
The Company's Articles of Incorporation authorize the Board of
Directors, without further shareholder approval or advance
notification, to issue one or more series of an authorized class of
2,000,000 preferred shares and to establish the relative rights,
designations, preferences and limitations or restrictions of each
series. Therefore, the Board of Directors may authorize and issue
a series of preferred shares with rights and preferences that are
superior to those of the common stock, and which could be used by
management to create voting impediments or to deter persons seeking
to effect a merger or otherwise gain control of the Company. See
"Description of Capital Stock -- Preferred Stock."
SHARES AVAILABLE FOR FUTURE SALE
Following this offering, all of the shares of the Company will
be freely salable without legal restriction by shareholders who are
not Directors, executive officers, or other "control persons" of
the Company. The Company's Directors and executive officers, who
are expected to purchase 74,500 shares in this offering, have
agreed with the Underwriter not to sell any of their shares for 150
days from the date of this Prospectus, and thereafter such
individuals, for so long as they remain "affiliates" of the Company
(as that term is defined by Rule 144 under the Securities Act of
1933, as amended), will be subject to the volume, manner of sale,
and other restrictions of Rule 144 with respect to any public sales
<PAGE>
<PAGE> 15
of shares for their accounts unless they rely upon another
exemption from registration under that Act. The sale, or
availability for sale, of substantial amounts of the Company's
common stock by its Directors and executive officers in the public
market, under Rule 144 or otherwise, could, in the future, have an
adverse effect on the market price of the Company's common stock.
See "Shares Available for Future Sale" and "Underwriting."</R?>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws provide for the indemnification of its
officers and directors, and thereby insulate its officers and
directors from liability for certain breaches of the duty of care.
It is possible that the indemnification obligations imposed under
these provisions could result in a charge against the Company's
earnings and thereby affect the market value of the Company's stock
and the availability of funds for payment of dividends to the
Company's shareholders. See "Description of Capital Stock."
DETERMINATION OF OFFERING PRICE; LIMITED TRADING MARKET EXPECTED
The initial public offering price of $10.00 per share was
determined by the Company in consultation with the Underwriter.
This price is not based upon earnings or any history of operations
and should not be construed as indicative of the present or
anticipated future value of the Common Stock. Prior to the
offering, there has been no public trading market for the Common
Stock. The price at which these shares are being offered to the
public may be greater than the market price for the Common Stock
following the offering. The Underwriter has advised the Company
that, upon completion of the offering, it intends to use reasonable
efforts to initiate quotations of the Common Stock on the NASD OTC
Bulletin Board and to act as a market maker in the Common Stock,
subject to applicable laws and regulatory requirements, although
the Underwriter is not obligated to do so. Making a market in
securities involves maintaining bid and ask quotations and being
able, as principal, to effect transactions in reasonable quantities
at those quoted prices, subject to various securities laws and
other regulatory requirements. The development of a public trading
market depends, however, upon the existence of willing buyers and
sellers, the presence of which is not within the control of the
Company, the Bank or any market maker. Market makers on the NASD
OTC Bulletin Board are not required to maintain a continuous
two-sided market and are required to honor firm quotations for only
a limited number of shares, and are free to withdraw firm
quotations at any time. Even with a market maker, factors such as
the limited size of the offering, the lack of earnings history of
the Company and the absence of a reasonable expectation of
dividends within the near future mean that there can be no
assurance of an active and liquid market for the Common Stock
developing in the foreseeable future. Even if a market develops,
<PAGE>
<PAGE> 16
there can be no assurance that a market will continue, or that
shareholders will be able to sell their shares at or above the
price at which these shares are being offered to the public.
Purchasers of Common Stock should carefully consider the limited
liquidity of their investment in the shares being offered hereby.
REGULATORY RISK
The banking industry is heavily regulated. Many of these
regulations are intended to protect depositors, the public, and the
deposit insurance funds administered by the FDIC, not shareholders.
Applicable laws, regulations, interpretations and enforcement
policies have been subject to significant, and sometimes
retroactively applied, changes in recent years, and may be subject
to significant future changes. There can be no assurance that such
future changes will not adversely affect the business of the
Company. In addition, the burden imposed by federal and state
regulations may place banks in general, and the Company
specifically, at a competitive disadvantage compared to less
regulated competitors. See "Supervision and Regulation."
FORWARD-LOOKING STATEMENTS
Certain statements throughout this Prospectus regarding the
Company's financial position, business strategy and plans and
objectives of Company management for future operations, are
forward-looking statements rather than historical or current facts.
When used in this Prospectus, words such as "anticipate,"
"believe," "estimate," "expect," "intend" and similar expressions,
as they relate to the Company or its management, identify forward-
looking statements. Such forward-looking statements are based on
the beliefs of the Company's management as well as assumptions made
by and information currently available to the Company's management.
Such statements are inherently uncertain, and there can be no
assurance that the underlying assumptions will prove to be valid.
Actual results could differ materially from those contemplated by
the forward-looking statements as a result of certain factors, such
as those disclosed under "Risk Factors," including but not limited
to the Company's lack of operating history, competitive factors and
pricing pressures, changes in legal and regulatory requirements,
technological change, product development risks and general
economic conditions. Such statements reflect the current views of
the Company with respect to future events and are subject to these
and other risks, uncertainties and assumptions relating to the
operations, results of operations, growth strategy and liquidity of
the Company. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by this paragraph.
<PAGE>
<PAGE> 17
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,000,000
shares of Common Stock offered hereby are estimated to be at least
$9,140,000 ($10,690,000 if the Underwriter's over-allotment option
is exercised in full), after deduction of the underwriting
discounts and commissions and estimated offering expenses payable
by the Company. Under certain circumstances the underwriting
discount may be reduced by up to $60,000, which would
correspondingly increase net proceeds to the Company by a like
amount. See "Underwriting."
The principal uses of the net proceeds of the offering are (a)
to capitalize the Bank with the capital required by regulators for
its opening, (b) to retire the mortgage debt relating to the
acquisition of the Franklin main office, and (c) to retire the
principal and interest of indebtedness that is owed to certain
directors and executive officers of the Company for pre-offering
borrowings by the Company (the "Borrowings"). The Borrowings
(which at August 31, 1997 were in the aggregate amount of principal
and interest of approximately $163,000) have funded the payment of
approximately $56,000 of the purchase price and other costs
associated with the acquisition of the Bank's Franklin main office
site, $5,000 of the Bank's costs of acquiring equipment and other
fixed assets, $33,000 of the Company's professional and other fees
and expenses in connection with this offering, and $69,000 of other
organizational and pre-opening expenses of the Company and the
Bank, including professional and consulting fees and expenses and
salaries and benefit expense for certain of the executive officers
of the Bank (not including Mr Bechman or Mr. Goben). The Bank will
assume the portion of the Borrowings that represents amounts spent
by the Company to pay expenses or acquire assets properly allocable
to the Bank (which is estimated to be approximately $130,000 of
principal and interest at August 31, 1997), and will retire that
portion of the Company's indebtedness from the funds that it
receives from the Company as part of the initial capitalization.
The aggregate amount of the Borrowings to be repaid at closing of
this offering will be larger than the August 31, 1997 amount due to
accrual of additional interest and the Company's anticipated
additional Borrowings from certain of its directors and executive
officers during September. From and after the date of the Bank's
capitalization by the Company, all further expenses associated with
the organization and pre-opening activities of the Bank, and all
further payments representing the deferred or financed purchase
price of Bank assets previously acquired by the Company on behalf
of the Bank, will be paid directly by the Bank.
<PAGE>
<PAGE> 18
The Company expects to apply the net proceeds of this offering
in the following approximate amounts:
Purchase of stock of Bank $9,000,000 98.5%
Retirement of Borrowings
allocable to Company's
pre-opening expenditures 60,000 .7%
Payment of Company organizational
and pre-opening expenditures 35,000 .4%
Working capital 45,000 .5%
_________ ____
TOTAL $9,140,000 100%
========= ====
The Company expects that the Bank will apply the $9,000,000
proceeds of its sale of stock to the Company in the following
approximate amounts:
Pre-payment of mortgage on
Franklin headquarters $ 484,000 5.4%
Retirement of Borrowings
allocable to Bank's pre-opening
expenditures 190,000 2.1%
Working capital 8,326,000 92.5%
_________ ____
TOTAL $9,000,000 100%
========= ====
The Company and the Bank retain discretion as to the use of
working capital, although at present there are no plans to use
working capital for purposes other than general corporate purposes,
including, in the case of the Bank, the funding of the Bank's loans
and the acquisition of investment securities for the Bank's
investment portfolio. Although these funds would be available to
finance possible acquisitions of other financial institutions or
branches or expansion into other lines of business closely related
to banking, the Company has no present plans to do so. The Company
has not determined how to apply the proceeds of any sale of stock
upon any exercise of the underwriter's over-allotment option, but
presently anticipates retaining those amounts as working capital of
the Company and not contributing those amounts to the capital of
the Bank.
<PAGE>
<PAGE> 19
POSSIBLE ESCROW OF PROCEEDS
In the event that the approvals of the Department and the FDIC
described under "Business -- Background" have not been granted as
of the closing, the Underwriter and the Company intend to deposit
the Common Stock and the purchase price therefor into an escrow
account with Bank One, Indiana, N.A. as escrow agent ("Escrow
Agent"). Upon receipt of those regulatory approvals, the Company
and Underwriter will direct the Escrow Agent to distribute the
purchase price, including interest earned thereon, to the Company
(less the underwriting discount, including interest earned thereon,
which shall be paid to the Underwriter) and the Common Stock to the
Underwriter. In the event those regulatory approvals are not
received by October 31, 1997, the purchase price, including
interest earned thereon, shall be returned to the Underwriter as
agent for prospective investors of the Common Stock ad the offering
will thereupon automatically terminate.
DIVIDEND POLICY
The Company initially expects that Company and Bank earnings, if
any, will be retained to finance the growth of the Company and the
Bank and that no cash dividends will be paid for the foreseeable
future. If the Company achieves profitability and recovers its
operating deficit, the Company may consider payment of dividends.
However, the declaration of dividends will be at the discretion of
the Board of Directors and there is no assurance that dividends
will be declared at any time. If and when dividends are declared,
the Company will be dependent largely upon dividends paid by the
Bank for funds to pay dividends on the Common Stock.
The ability of the Company and the Bank to pay dividends is
affected by various regulatory requirements and policies, such as
the requirement to maintain adequate capital above regulatory
guidelines. See "Supervision and Regulation." Such requirements
and policies may limit the Company's ability to obtain dividends
from the Bank for its cash needs, including funds for acquisitions,
payment of dividends by the Company and the payment of operating
expenses.
<PAGE>
<PAGE> 20
CAPITALIZATION
The following table sets forth the capitalization of the
Company as it is projected to be immediately after the sale of the
1,000,000 shares of Common Stock offered hereby and the application
of the estimated net proceeds. See "Use of Proceeds."
Preferred Stock, no par value,
2,000,000 shares authorized;
no shares issued and outstanding --
Common Stock, no par value,
10,000,000 shares authorized;
1,000,000 shares issued and
outstanding $1,000,000
Additional paid-in capital 8,140,000
Retained earnings (deficit) (50,000)
_________
Total shareholders' equity $9,090,000
=========
<PAGE>
<PAGE> 21
BUSINESS
BACKGROUND
The liberalization in recent years of Indiana's branch banking
laws, together with the expansion of interstate banking, has led to
substantial consolidation of the banking industry in Indiana and
especially the metropolitan Indianapolis area in which the Bank
will be located. In many cases, when these consolidations
occurred, local boards of directors were dissolved and local
management was relocated or, in some cases, terminated.
In the opinion of the Company's management, this situation has
created a favorable opportunity for a new bank with local
management and directors. Management of the Company believes that
such a bank can attract those customers who wish to conduct
business with a locally managed institution that demonstrates an
active interest in their business and personal financial affairs.
The Company believes that a locally managed institution will, in
many cases, be able to deliver more timely responses to customer
requests, provide customized financial products and services, and
offer the personal attention of the Bank's senior banking officers.
The Company is incorporated as an Indiana general corporation
and will hold all of the Bank's issued and outstanding stock and
will engage in the business of a bank holding company under the
federal Bank Holding Company Act of 1956, as amended ("BHCA"). The
Company expects that the Department will act upon the Company's
application to establish the Bank at a meeting of the members of
the Department scheduled to be held on September 25, 1997. The
Company expects that the Department's approval will be conditioned
upon the payment by the Company to the Bank of at least $9 million
of the net proceeds of this offering and satisfaction of other
standard conditions. The Bank's application for FDIC deposit
insurance was filed on June 17, 1997, and the FDIC's approval,
which is expected in late September 1997, will be subject to
certain conditions, including conditions related to capital
adequacy. The Company's application under the BHCA to become a
bank holding company for the Bank was approved by a delegate of the
Federal Reserve Board on September 17, 1997. The Bank expects to
receive the Department and FDIC approvals and to have all
regulatory conditions to the opening of the Bank satisfied in the
fourth quarter of 1997. There can be no assurance, however, as to
the timing of such approvals or that the Bank and the Company will
obtain such approvals. The Bank intends to commence business as
soon as reasonably practicable upon receipt of all regulatory
approvals, the satisfaction of regulatory conditions, and the
completion of its Franklin facility. See "Risk Factors -- Delay in
Commencing Operations" and "Risk Factors -- Government Regulation
and Monetary Policy."
<PAGE>
<PAGE> 22
Following completion of the offering and before commencement
of operations, the Bank intends to complete the furnishing of its
facilities, certain training of its staff and the purchase, lease
and installation of equipment necessary to transact a banking
business. Correspondent banking relationships and other
arrangements for services will be completed as necessary. The Bank
currently projects that the Bank will be prepared (subject to
regulatory approvals) to open at its Franklin facility and to open
its Greenwood branch facility during the fourth quarter of 1997.
The Company will own all of the issued and outstanding stock
of the Bank. Prior to the completion of the offering, the Company
will have only one share of Common Stock outstanding with such
share being held by Director Gordon R. Dunn. The Company's
principal office will be located at 420 N. Morton Street, Franklin,
Indiana 46131, and its telephone number is (317) 738-3915.
BUSINESS STRATEGY AND PLAN OF OPERATION
The Bank intends to provide a wide range of business and
consumer financial services to small to medium-sized business
customers and individuals. The foundation of this strategy will be
to emphasize local management and its commitment to the community.
Steve Bechman, President and Chief Executive Officer of the
Company, has over 21 years of banking experience in the community.
From 1993 to his resignation earlier this year, he was Regional
President for CBCI in Greenwood, Indiana. Jeffrey L. Goben,
Executive Vice President and Chief Operating Officer of the
Company, has over 24 years experience in the community. During his
career he has managed branch administration, consumer banking,
human resources, and marketing and community development functions.
Mr. Bechman and Mr. Goben have worked together for the last 13
years in the same banking organization. K. Keith Fox and John L.
Morin, Vice President -- Commercial Lending and Vice President --
Consumer Lending, respectively, also have many years of experience
in the Bank's primary market area. The Company's Vice President
and Chief Financial Officer, Jeffery D. Joyce, C.P.A., has five
years of public accounting experience primarily focused on
financial institutions with a major regional accounting firm.
Messrs. Bechman, Goben, Fox and Morin, who prior to their
resignations worked together at CBCI, are assembling a high-quality
staff of local employees. The staff will be committed to providing
outstanding customer service and banking products that are
reasonably priced and easily understood by the customer. The Bank
intends to compete aggressively for its banking business through a
systematic program of direct calling on both customers and referral
sources such as attorneys, accountants and other business people,
many of whom the management have come to know during their
professional careers.
<PAGE>
<PAGE> 23
BUSINESS FINANCIAL SERVICES. The Bank intends to offer
products and services consistent with its goal of attracting small
to medium-sized business customers as well as a variety of
individuals. Commercial loans will be offered on both a secured
and unsecured basis and will be available for working capital
purposes, the purchase of equipment and machinery, financing of
accounts receivable and inventory and for the purchase of real
estate, primarily owner occupied real estate. As part of its
banking business, the Bank may make loans to all types of borrowers
secured by first and junior mortgages on various types of real
estate, including without limitation, single-family residential,
multi-family residential, mixed use, commercial, developed, and
undeveloped. In making such loans, the Bank will be subject to
written policies, reviewed and approved at least annually by the
Bank's board of directors, pursuant to federal law and regulations.
Such policies address loan portfolio diversification and prudent
underwriting standards, loan administration procedures, and
documentation, approval and reporting requirements. In addition,
Federal regulations impose supervisory loan-to-value ratios
applicable to each type of loan secured by real estate.
The Bank will generally look to a borrower's business
operations as the principal source of repayment and will also seek,
when appropriate, security interests in the inventory, accounts
receivable or other personal property of the borrower, and personal
guaranties. Although the Bank intends to be aggressive in seeking
new loan growth, it intends to stress high quality in its loans.
To promote such standards, the Board of Directors of the Bank
intends to establish strict lending policies, including specified
lending authorities, loan review policies and lending committees.
In establishing such policies, the Board of Directors will be
required to conform to applicable bank regulatory requirements.
See "Supervision and Regulation." Mr. Bechman will be the Bank's
senior lender and Mr. Fox, most recently a commercial lending
officer of CBCI, where he was employed 8 years, will be the Bank's
Vice President of Commercial Lending.
The Bank will actively pursue business checking accounts by
offering competitive rates, computerized banking, and other
convenient services to many of its business customers. In some
cases the Bank will require its business borrowers to maintain
minimum balances. Management of the Bank also intends to establish
relationship with one or more correspondent banks and other
independent financial institutions to provide other services
required by its customers, including loan participations where the
requested loan amount exceeds the Bank's legal lending limit.
<PAGE>
<PAGE> 24
CONSUMER FINANCIAL SERVICES. The Bank's retail banking
strategy will initially focus on providing basic banking products
that are reasonably priced and easily understood by the customer.
The Bank will be capable of offering sophisticated electronic
banking services in the future, if there is sufficient customer
demand, through third-party service providers, which will allow the
Bank to be at the forefront of technology while minimizing the
costs of delivery. Many of the Bank's competitors, however, have
substantially greater resources to invest in technological
improvements, and substantially greater assets over which to spread
the cost of technology which may permit them to more effectively
implement new technology-driven products at a lower cost than can
the Bank.
The Bank will offer a full range of short to intermediate term
personal loans to individuals for various purposes, including
purchases of automobiles, mobile homes, boats and other
recreational vehicles, home improvements, education and personal
investments. The Bank anticipates that it will retain
substantially all of such loans. The Bank intends initially to
offer only adjustable rate mortgages. It does not anticipate
offering long-term fixed rate mortgage products, except through an
arrangement with outside providers. The Bank expects that any
fixed rate residential mortgage loans it generates will be sold to
third party investors, though with respect to some of such loans,
the Bank may continue to service the loans for a fee.
The Bank intends to offer other consumer lending services,
including credit cards and other personal loan products on both a
secured and unsecured basis. Mr. Morin, formerly Vice President of
Retail Banking at CBCI, has more than 24 years of banking
experience and will be the Bank's Vice President of Consumer
Lending.
DEPOSITS AND RETAIL BANKING. The Bank plans to offer its
retail customers a variety of deposit accounts. The Bank plans on
taking advantage of increasing population and rising income levels
in the growing areas of its primary market areas, including
Franklin, Needham, Clark, Pleasant, White River, and Union
Townships. Bank personnel will be trained to offer a variety of
deposit options. These options are expected to include demand
deposit accounts, regular savings accounts, NOW accounts, money
market demand accounts and certificates of deposit. The Bank's
deposit funding strategy will be to seek deposits aggressively
through competitive pricing.
<PAGE>
<PAGE> 25
MARKET RESPONSIVENESS. The management team will monitor the
performance of each part of the Bank's business strategy. The
strategy may change based on market conditions and acceptance of
the strategy and as the executive officers evaluate new
opportunities. The Bank expects to respond to changes in the
marketplace by focusing attention and resources on those areas that
show the greatest potential for growth. While the Bank expects to
concentrate on the business strategy as described above, market
forces may dictate alterations that cannot be predicted at this
time.
INVESTMENTS
The principal investment of the Company is expected to be its
purchase of all of the common stock of the Bank. See "Use of
Proceeds". Funds retained by the Company (including the net
proceeds obtained by the Company upon any exercise by the
Underwriter of its over - allotment option) may be invested at the
discretion of the Company in any lawful investment. Current
laws and regulations that limit the types of investments by bank
holding companies (see "Supervision and Regulation -- The Company -
- - Investments and Activities") were proposed to be made much less
restrictive by broad financial reform legislation approved by the
Banking Committee of the House of Representatives in June 1997, but
in September 1997 the House Commerce Committee released a revised
version of the legislation that generally would maintain the
current separation between banking and commerce (see "Supervision
and Regulation -- Regulatory Developments").
The Bank may invest in a wide variety of securities and may
participate in the federal funds market with other depository
institutions. Subject to certain exceptions, the Bank is
prohibited by law from investing in equity securities. The Bank
has established an investment policy, under which the President of
the Bank (or, in the President's absence, the Bank's Controller)
will have daily authority to make trades in accordance with the
policy. The investment policy will be reviewed by the Bank's Board
of Directors annually.
MARKET AREA
Johnson County was the second fastest growing county in the
State of Indiana from 1990 through 1996 based on estimates of the
Indiana Business Research Center. The Bank's main office will be
located on the main retail thoroughfare in Franklin, at 420 N.
Morton Street (U.S. Route 31), on property that has been purchased
by the Company and is being extensively renovated. The Bank
intends to open a branch office in newly-constructed leased space
in Greenwood, Indiana, 11 miles north of Franklin in Johnson County
and approximately 12 miles south of downtown Indianapolis, during
the fourth quarter of 1997. The Bank's primary service area will
be the northern two-thirds of Johnson County, which includes the
six Townships of Union, Needham, Franklin, White River, Pleasant,<PAGE>
<PAGE> 26
and Clark. As of June, 1997, the unemployment rate for Johnson
County was 1.9%, compared with the statewide average of
approximately 3.1%, according to Ball State University's Bureau of
Business Research. Median household income for Johnson County
residents in 1990 was $35,035, which was 22% higher than the
statewide average of $28,797.
Management believes this community has an expanding and
diverse economic base, which includes a wide range of small to
medium-sized businesses engaged in manufacturing, services, and
retail. There are approximately 3,200 businesses in Johnson
County. In 1990, Johnson County's ten largest private employers
accounted for only 6.39% of the total employment of this county,
highlighting the diversity and importance of small businesses.
COMPETITION
There are many thrifts, credit unions and bank offices located
within the Bank's primary and secondary market areas. Most are
branches of larger financial institutions which, in management's
view, are managed with a philosophy of strong centralization. The
Bank will face competition from the thrifts, credit unions and
other banks as well as finance companies, insurance companies,
mortgage companies, securities brokerage firms, equipment leasing
companies, mutual funds, money market funds and other providers of
financial services. Most of the Bank's competitors have been in
business a number of years, have established customer bases, are
larger and have higher lending limits than the Bank. The Bank will
compete for loans principally through its ability to communicate
effectively with its customers and to understand and meet their
needs. Management believes that its personal service philosophy
will enhance its ability to compete favorably in attracting
individuals and small businesses. The Bank will actively solicit
retail customers and will compete for deposits by offering
customers personal attention, professional service, computerized
banking and competitive interest rates.
BANK PREMISES
In July 1997, the Company purchased a 5,700 square foot
building at 420 N. Morton Street (U.S. Route 31), which is on the
main retail thoroughfare in Franklin, Indiana. The building on the
site, which will be used as the Bank's main office and the
Company's headquarters, is being extensively renovated. Total cost
of land, building, improvements and renovations is estimated to be
approximately $1,075,000. Acquisition and construction debt
associated with this facility will be assumed by the Bank upon its
organization and retired with the proceeds of the Bank's sale of
its stock to the Company.
<PAGE>
<PAGE> 27
The Company has agreed to lease a branch facility to be
constructed in Greenwood, Indiana, on State Road 135, one-half mile
north of Smith Valley Road. This branch will include approximately
3,800 square feet of space. The site has access to both State Road
135 and Smith Valley Road, which are principal thoroughfares in
Greenwood. Although the Bank intends to open the Greenwood branch
during the fourth quarter of 1997, there is no assurance that
necessary construction can be completed in time to open the
Greenwood branch at the same time as the Franklin office.
DATA PROCESSING
The Bank has executed an agreement with a core data processing
service provider. The Bank expects that the service will be
operational in time to permit the Bank to open during the fourth
quarter of 1997.
EMPLOYEES
Upon commencement of operations, the Bank expects to employ
approximately 18 full-time employees, including its executive
officers, teller staff and other support positions. Management
will encourage all employees to share management's goal of
high-quality customer service.
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and officers of the Company as of the date
hereof, and the contemplated directors and executive officers of
the Bank upon completion of its organization, are as follows:
<TABLE>
<CAPTION>
POSITION WITH DIRECTOR TERM POSITION(S)
NAME AND AGE THE COMPANY EXPIRES WITH THE BANK
<S> <C> <C> <C>
Steve Bechman, 46 President, Chief 1999 President, Chief
Executive Officer, Executive Officer,
and Director and Director
Jeffrey L. Goben, 45 Executive Vice 2000 Executive Vice
President, Chief President, Chief
Operating Officer, Operating Officer,
Secretary, and and Director
Director
K. Keith Fox, 37 Vice President -- Vice President,
Commercial Lending
John Morin, 47 Vice President -- Vice President,
Consumer Lending
<PAGE>
<PAGE> 28
Jeffery D. Joyce, 27 Vice President -- Cashier and
and Chief Controller
Financial Officer
Sharon Acton, 50 Director 2000 Director
Gordon R. Dunn, 76 Chairman of the 1999 Chairman of the
Board; Director Board; Director
J. Michael Jarvis, 54 Director 1998 Director
John Norton, 49 Director 2000 Director
Robert Richardson, 36 Director 1998 Director
Patrick A. Sherman, 49 Director 1998 Director
James C. Stewart, 46 Director 1999 Director
</TABLE>
Under Federal law and regulations and subject to certain
exceptions, the addition or replacement of any director, or the
employment, dismissal or reassignment of a senior executive
officer, of the Bank occurring within two years of the chartering
of the Bank, its acquisition by the Company, or any change in
control of the Bank or the Company (or at any time that the Bank is
not in compliance with applicable minimum capital requirements or
is otherwise in a troubled condition) is subject to prior notice to
and disapproval by the FDIC.
The Company's Bylaws provide that the number of directors, as
determined from time to time by the Board of Directors, shall be no
fewer than six and no more than fifteen. The Board of Directors
has presently fixed the number of directors at nine. The Articles
of Incorporation further provide that the directors shall be
divided into three classes, with each class serving a staggered 3-
year term and with the number of directors in each class being as
nearly equal as possible. The initial terms of the three classes
of directors have been established at one year, two years and three
years, respectively. The subsequent terms of each class of director
will be for three years.
It is anticipated that the entire Board of Directors of the
Bank will be elected annually by its shareholder, the Company.
Officers of the Company and the Bank will be appointed annually by
their respective Boards of Directors and perform such duties as are
prescribed in the Bylaws or by the Board of Directors.
None of the executive officers or staff is subject to any
agreements with former employers that restrict their right to fully
perform their duties with the Company or the Bank.
<PAGE>
<PAGE> 29
EXPERIENCE OF DIRECTORS AND OFFICERS
The experience and backgrounds of the directors and officers,
and their proposed positions with the Company, are summarized
below.
Steve Bechman (President, Chief Executive Officer, Director) has
been in banking in the community for over 21 years, all with
Citizens Bank of Central Indiana and its predecessors and
affiliates. He began his career at Bargersville State Bank,
Greenwood, Indiana ("BSB") and worked his way through the branch
system, commercial lending and several management positions. For
a two year period starting around July 1988 he was President of
BSB's affiliate, Bloomington Bank & Trust, Bloomington, Indiana
("BB&T"). In May 1992 BSB and BB&T were acquired by CNB
Bancshares, Inc., which merged BSB and BB&T to form Citizens Bank
of Central Indiana ("CBCI"). Mr. Bechman from 1993 until his
resignation in 1997 was CBCI's Regional President in charge of 13
locations in the Johnson County area. Mr. Bechman is a member of
the Board of Directors of the Indiana Bankers Association. Mr.
Bechman also serves on numerous boards of community organizations,
and is past president of the United Way of Johnson County,
President of the Johnson County Health Foundation, and incoming
President of the Franklin Chamber of Commerce.
Jeffrey L. Goben (Executive Vice President, Chief Operating
Officer, Secretary, Director) has been in banking in Johnson County
for the past 25 years. Mr. Goben started his career in 1972 with
National Bank of Greenwood, Greenwood, Indiana (now part of
National City Bank), and joined CBCI's predecessor Bargersville
State Bank in July 1984 as Assistant Vice President and branch
manager. When he left CBCI in May 1997, Mr. Goben was a Senior
Vice President in charge of marketing and community development.
Mr. Goben is also experienced in branch administration, human
resources and consumer lending. Mr. Goben is active in the
community, serving as Vice President and President-elect of the
Greenwood Chamber of Commerce, President of the Greenwood Senior
Citizens Center Board, and Past President of the Greenwood Sertoma
Club.
K. Keith Fox (Vice President of Commercial Lending) has been in
banking in the Johnson County community since May 1982. For most
of the last 9 years he was employed by CBCI. His bank experience
includes branch operations and commercial lending. Mr. Fox is an
active member of the Johnson County Builders Association and in
August 1997 completed his degree at the Graduate School of Banking
in Madison, Wisconsin.
<PAGE>
<PAGE> 30
John Morin (Vice President of Consumer Lending) began his banking
career at the National Bank of Greenwood, Johnson County, and has
24 years of banking experience, with 12 years at CBCI and 12 years
at the National Bank of Greenwood (now part of National City Bank).
During his career he has been a branch manager, commercial loan
officer and most recently Vice President in charge of retail
lending.
Jeffery D. Joyce (Vice President and Chief Financial Officer) is a
Certified Public Accountant who was employed with the Indianapolis
office of the public accounting firm of Crowe, Chizek and Company
LLP from September 1992 to May 1997. Most of his experience with
the firm was in the area of financial institution auditing and
consulting. Mr. Joyce is a Deacon of the Calvary Baptist Church in
Greenwood, Indiana, as well as Vice Chairman of the financial
committee. He is also active in United Way of Central Indiana and
Big Brothers of Johnson County.
Sharon Acton (Director) is employed by Cinergy/PSI, an electric
utility, as manager of the Franklin/Greenwood District providing
customer services to over 25,000 customers in the district. She is
active in numerous community organizations including the Franklin
Rotary and the Johnson County Historical Society. She also holds
office and serves on the Boards of Directors of the Franklin
Chamber of Commerce, United Way of Johnson County, Leadership
Johnson County and Johnson County Health Foundation. She is a life
time resident of Johnson County.
Gordon Dunn (Chairman of the Board; Director) is a retired
purchasing agent for the L.S. Ayres department stores. He was
employed there for 43 years. Mr. Dunn also formerly served as
Chairman of the Board of CBCI, and served as a Director of CBCI and
its predecessors for 22 years. He presently serves on the Boards
of the Franklin United Methodist Retirement Community and the Grace
United Methodist Church. He has also been active in the annual
campaign for the United Way of Johnson County.
J. Michael Jarvis (Director) is President and part owner of Power
Investments, Inc., an engine remanufacturer that is a division of
Delco Remy International, Inc. Mr. Jarvis is also President of
Production Engine Rebuild Association, which encompasses the United
States, Canada, England and all of South America. Mr. Jarvis is a
past president of the Franklin Chamber of Commerce and a current
member of the Franklin Rotary Club.
John Norton (Director) is owner and president of Norton Farms,
Inc., a grain farming operation located in Franklin, Indiana. He
is a lifelong resident of the Franklin area. Mr. Norton formerly
served as a Director on the Board of Ameritrust Indiana Corporation
(formerly Franklin Bank & Trust) for nine years. He is on the
Board of the Johnson County Historical Society, past director of
Leadership Johnson County and a member of the Board of Zoning
Appeals for Johnson County.
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<PAGE> 31
Robert Richardson (Director) since 1990 has been the majority owner
and president of MegaSys, Inc., a third party logistics company
located in Greenwood, Indiana. He serves on the Board of Directors
for Reach for Youth social services agency. Mr. Richardson is also
a member of American Society for Transportation and the Greenwood
Sertoma Club.
Patrick A. Sherman (Director) is President and part owner of
Sherman & Armbruster P.C., a public accounting firm located in
Greenwood, Indiana. Mr. Sherman has been a Certified Public
Accountant with this firm for 22 years. He is past president of
the Board of Aviation Commission for the City of Greenwood and
Board of Trustees of Valle Vista Hospital. He has also been the
Chairman of the finance committee for Our Lady of Greenwood
Catholic Church and past board member of the Greenwood Chamber of
Commerce.
James C. Stewart (Director) is currently under contract as a
consultant to Bauer Built Corp. to manage Jim Stewart Truck Tire
Company, a firm he owned for 24 years until October 1996. Mr.
Stewart's community involvement includes service as past director
of the Indianapolis Business Boosters organization, member of the
Indianapolis Athletic Club and Knights of Columbus. He is also a
member of the Indiana Motor Truck Association.
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
In the first year of operation, a cash retainer of $300 per
month is expected to be paid to non-employee directors of the
Company for their services, regardless of attendance at meetings.
In addition, non-employee directors will receive awards under the
1997 Stock Option Plan for Nonemployee Directors. See "1997 Stock
Option Plan for Nonemployee Directors."
The Company will commence paying salaries to Mr. Bechman
(initial rate of $115,000 per year) and to all five of its
executive officers as a group (aggregate initial rates of
approximately $400,000) upon completion of this offering. In
addition, the Company has paid aggregate salary to three of its
five executive officers (not including Mr. Bechman or Mr. Goben,
who have served without salary) for their services during the
organizational period through the date of this Prospectus in the
aggregate estimated amount of $5,750. The Bank's initial salary
levels for its executive officers are based on individual years of
experience and the compensation of officers in comparable positions
at competitive financial institutions. Executive officers'
compensation in subsequent years will be determined by the
Compensation Committee, a committee of the Bank's Board of
Directors comprised of a majority of outside (non-employee)
<PAGE>
<PAGE> 32
directors. Officers of the Bank may also participate in any
benefit plan adopted for broad participation by Bank employees,
such as a planned 401(k) plan. Neither the Company nor the Bank
has an employment agreement with any officer.
1997 STOCK OPTION PLAN
The Board of Directors has adopted, and the sole shareholder
of the Company has approved, the 1997 Stock Option Plan (the
"Plan)". The Plan's adoption is intended to enable the key
employees of the Company or any subsidiary (and non-employee
consultants) to participate in any growth and profitability of the
Company and encourage their continuation of service to the Company
or a subsidiary to the benefit of the Company and its shareholders.
Pursuant to the Plan, stock options may be granted which qualify
under the Internal Revenue Code as incentive stock options or as
stock options that do not qualify as incentive stock options. The
Board is of the judgment that the interests of the Company and its
shareholders will be advanced by implementation of this Plan. The
option price will not be less than fair market value of the shares
of shares of Common Stock at the time the option is granted, but in
any event not less than $10 per share during the 12 months
following the date of this Prospectus. The maximum number of
shares of Common Stock which may be issued under Plan during its
ten-year term will not exceed 75,000 shares (subject to anti-
dilution adjustments). The shares will be authorized but unissued
shares (including shares reacquired by the Company). In the event
of a change in control (as defined in the Plan), each option then
outstanding will become exercisable in full immediately prior to
such change in control.
The Stock Option Committee of the Board of Directors of the
Company has granted options under the Plan to the following
officers:
Number of Shares
Name of Officer Covered by Options
Steve Bechman 20,000
Jeffrey L. Goben 15,000
Keith Fox 5,000
John Morin 5,000
Jeffery D. Joyce 5,000
The options, which are intended to be incentive options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, were granted as of the date immediately preceding the date
of this Prospectus. The exercise price for each option is $10 per
share. Each option is immediately exercisable with respect to 20
percent of the shares covered by the option and will vest with
<PAGE>
<PAGE> 33
respect to an additional 20 percent of the shares on each of the
following four anniversaries of the date of this Prospectus,
assuming continued employment of the optionee. The options will
expire on September 22, 2007.
1997 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
In order to increase the proprietary interest of nonemployee
directors of the Company and to enhance the Company's ability to
retain and attract experienced and knowledgeable directors, the
Board of Directors has adopted and the sole shareholder of the
Company has approved the 1997 Stock Option Plan for Nonemployee
Directors (the "Nonemployee Director Plan"). Pursuant to the
Nonemployee Director Plan, as of the close of business on the date
preceding the date of this Prospectus, the Company has granted to
each director of the Company who is not an employee of the Company
or any affiliate ("Nonemployee Director") an option to purchase
4,000 shares of Common Stock of the Company at the public offering
price of $10 per share. Nonemployee Directors who are first
appointed or elected after the date of this Prospectus, will
receive an option for a lesser number of shares, the number of
which will depend on which annual meeting is the first annual
meeting occurring concurrently with, or after he or she becomes a
Nonemployee Director. The total number of shares of the Company's
Common Stock which may be issued under the Nonemployee Director
Plan will not exceed 40,000 shares (subject to anti-dilution
adjustments). The shares will be authorized but unissued shares
(including shares reacquired by the Company). Options granted
under the Nonemployee Director Plan are immediately exercisable for
1,000 shares of Common Stock. On the date of each successive
annual meeting of the Company, each option will become exercisable
(assuming continued service on the Board of Directors) for an
additional 1,000 shares of Common Stock, until it is exercisable in
full. In the event of a "change in control" of the Company, as
defined in the Nonemployee Director Plan, each option then
outstanding shall become immediately exercisable in full,
immediately prior to such change in control. The option exercise
price for future options granted under the Nonemployee Director
Plan will be the fair market value per share on the date the option
is granted to the Nonemployee Director. The unexercised portion of
each option automatically expires, and is no longer exercisable, on
the earliest to occur of the following: (i) ten years after the
option is granted, (ii) three months after the person who was
granted the option ceases to be a Nonemployee Director, other than
due to permanent disability, death, or for cause, (iii) one year
following the death or permanent disability of the Nonemployee
Director, and (iv) termination of the Nonemployee Director's
service as such, for cause.
<PAGE>
<PAGE> 34
RELATED PARTY TRANSACTIONS
LOANS FROM ORGANIZERS AND REDEMPTION OF ORGANIZATIONAL STOCK
Over the past several months, the organizers of the Bank have
loaned funds (which at August 31, 1997 were in the aggregate amount
of principal plus accrued interest) of approximately $163,000 to
the Company to cover organizational expenses of the Company and the
Bank and other costs. Interest is payable on the loans at the
national prime rate. All of these loans will be repaid by the
Company and the Bank (with interest) from the net proceeds of the
offering. See "Use of Proceeds." The organizers include the
members of the Board of Directors and executive officers. In
addition, the Company will redeem the single share of Common Stock
currently owned by its Chairman of the Board, Gordon R. Dunn, upon
its organization for Mr. Dunn's $10 cost upon closing of this
offering.
BANKING TRANSACTIONS
It is anticipated that the directors and officers of the
Company and the Bank and the companies with which they are
associated will have banking and other transactions with the
Company and the Bank in the ordinary course of business. It is the
Bank's policy that any loans and commitments to lend to such
affiliated persons or entities included in such transactions will
be made in accordance with all applicable laws and regulations and
on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with unaffiliated parties of similar creditworthiness,
and will not involve more than normal risk or present other
unfavorable features to the Company and the Bank. Applicable law
and Bank policy generally require that transactions between the
Company or the Bank, and any officer, director, principal
shareholder, or other affiliate of the Company or the Bank will be
on terms no less favorable to the Company or the Bank than could be
obtained on an arm's-length basis from unaffiliated independent
third parties.
INDEMNIFICATION
The Bylaws of the Company provide for the indemnification of
directors and officers of the Company, including reasonable legal
fees, incurred by such directors and officers while acting for or
on behalf of the Company or the Bank as a director or officer,
subject to certain limitations. See "Description of Capital Stock."
The scope of such indemnification otherwise permitted by Indiana
law may be limited in certain circumstances by Federal law and
regulations. See "Supervision and Regulation -- Regulatory
Developments." The Company may purchase directors' and officers'
liability insurance for directors and officers of the Company and
the Bank.
<PAGE>
<PAGE> 35
PRINCIPAL SHAREHOLDERS
The Company has only one share of Common Stock outstanding
with such share being held by Mr. Dunn; that share will be redeemed
by the Company at its cost upon closing of this offering. The
following table sets forth certain information with respect to the
anticipated beneficial ownership of the Company's Common Stock
after the sale of shares offered hereby, by each of the current
directors and executive officers of the Company and by all such
directors and executive officers of the Company as a group. No
person is expected to beneficially own more than five percent of
the outstanding Common Stock following the offering. Pursuant to
the Underwriting Agreement, the Company will direct the underwriter
to offer to sell the number of shares listed below. All share
numbers are provided based upon such directions from the Company
and non-binding expressions of interest supplied by the persons
listed below. Depending upon their individual circumstances at the
time, each of such persons may purchase a greater or fewer number
of shares than indicated in the following table and in fact may
purchase no shares.
<TABLE>
<CAPTION>
Number of shares Percentage of
beneficially owned outstanding shares
Name after offering(1) after offering(4)
<S> <C> <C>
Sharon K. Acton 500(3) 0.05%
Steve Bechman 25,000(2) 2.50%
Gordon R. Dunn 6,000(3) 0.60%
K. Keith Fox 2,500(2) 0.25%
Jeffrey L. Goben 20,000(2) 2.00%
J. Michael Jarvis 2,000(3) 0.20%
Jeffery D. Joyce 1,000(2) 0.10%
John Morin 2,500(2) 0.25%
John Norton 4,000(3) 0.40%
Robert L. Richardson 4,000(3) 0.40%
Patrick A. Sherman 2,000(3) 0.20%
<PAGE>
<PAGE> 36
James C. Stewart 5,000(3) 0.50%
Directors and executive 74,500(2)(3) 7.45%
officers as a group
(12 persons)
______________________
</TABLE>
(1) Some or all of the Common Stock listed may be held jointly
with, or for the benefit of, spouses and children of, or
various trusts established by, the person indicated.
(2) Does not include an additional 10,000 shares that such persons
have the right to acquire, in the aggregate, within 60 days of
the date of this Prospectus pursuant to the Company's 1997
Employee Stock Option Plan (Mr. Bechman: 4,000 shares; Mr.
Goben: 3,000 shares; Mr. Fox: 1,000 shares; Mr. Morin: 1,000
shares; and Mr. Joyce: 1,000 shares). Such persons also hold
options under such plan to purchase an additional 40,000
shares (which will first become exercisable subject to
continued service in future years) as follows:
Mr. Bechman 16,000
Mr. Goben 12,000
Mr. Fox 4,000
Mr. Morin 4,000
Mr. Joyce 4,000
(3) Does not include 1,000 shares that such person has the right
to acquire within 60 days after the date of the Prospectus
pursuant to the Company's 1997 Stock Option Plan for
Nonemployee Directors. Such person also holds options under
such plan to purchase an additional 3,000 shares, which
options will first become exercisable (subject to continued
service) in future years.
(4) The percentages shown are based on the 1,000,000 shares
offered hereby and assume no exercise of the Underwriter's
over-allotment option.
<PAGE>
<PAGE> 37
SUPERVISION AND REGULATION
GENERAL
Financial institutions and their holding companies are
extensively regulated under federal and state law. Consequently,
the growth and earnings performance of the Company and the Bank can
be affected not only by management decisions and general economic
conditions, but also by the statutes administered by, and the
regulations and policies of, various governmental regulatory
authorities. Those authorities include, but are not limited to,
the Federal Reserve Board, the FDIC, the Department, the Securities
and Exchange Commission (the "SEC"), the Internal Revenue Service
and state taxing authorities. The effect of such statutes,
regulations and policies can be significant, and cannot be
predicted with a high degree of certainty.
Federal and state laws and regulations generally applicable to
financial institutions and their holding companies regulate, among
other things, the scope of business, investments, reserves against
deposits, capital levels relative to operations, lending activities
and practices, the nature and amount of collateral for loans, the
establishment of branches, mergers, consolidations and dividends.
The system of supervision and regulation applicable to the Company
and the Bank establishes a comprehensive framework for their
respective operations and is intended primarily for the protection
of the FDIC's deposit insurance funds, the depositors of the Bank
and the public, rather than shareholders of the Bank or the
Company.
Federal law and regulations, including provisions added by the
Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") and regulations promulgated thereunder, establish
supervisory standards applicable to the operation, management and
lending activities of the Bank, including internal controls, loan
documentation, credit underwriting, interest rate exposure, asset
growth, compensation and loan-to-value ratios for loans secured by
real property. The Bank intends to comply with these requirements,
and in some cases may apply more restrictive standards.
The following references to statutes and regulations are
intended to summarize material effects of certain government
regulation on the business of the Company and the Bank. Any change
in government regulation may have a material adverse effect on the
Company, the Bank and their operations.
THE COMPANY
GENERAL. The Company's application to serve as the holding
company for the Bank was approved by the Federal Reserve Bank of
Chicago on September 17, 1997, pursuant to regulations promulgated
under the Bank Holding Company Act of 1956, as amended ("BHCA").
<PAGE>
<PAGE> 38
When the Company becomes the sole shareholder of the Bank, the
Company will be a bank holding company and, as such, will be
subject to the supervision of and regulation by, the Federal
Reserve Board under the BHCA. Under the BHCA, the Company will be
subject to periodic examination by the Federal Reserve Board and
will be required to file periodic reports of its operations and
such additional information as the Federal Reserve Board may
require. The Company also will be required to file periodic
reports with, and otherwise comply with the rules and regulations
of, the SEC under the federal securities laws.
In accordance with Federal Reserve Board policy, the Company
will be expected to act as a source of financial strength to the
Bank and to commit resources to support the Bank in circumstances
where the Company might not do so absent such policy. In addition,
in certain circumstances an Indiana state bank having impaired
capital may be required by the Department of Financial Institutions
either to restore the bank's capital by a special assessment upon
its shareholders or to initiate the liquidation of the bank.
INVESTMENTS AND ACTIVITIES. Under the BHCA, bank holding
companies are prohibited, with certain limited exceptions, from
engaging in, or acquiring, directly or indirectly, control of
voting securities or assets of a company engaged in, any activity
other than banking or managing or controlling banks or an activity
that the Federal Reserve Board determines to be so closely related
to banking or managing or controlling banks as to be a proper
incident thereto. Under current Federal Reserve Board regulations,
such permissible non-bank activities include such things as
mortgage banking, equipment leasing, securities brokerage and
consumer and commercial finance company operations. Any such
acquisition will require, except in certain cases, prior written
notice to the Federal Reserve Board.
In evaluating a written notice of such an acquisition, the
Federal Reserve Board will consider various factors, including
among others the financial and managerial resources of the
notifying bank holding company and its subsidiaries, and the
relative public benefits and adverse effects which may be expected
to result from the performance of the activity by an affiliate of
such company. The Federal Reserve Board may apply different
standards to activities proposed to be commenced de novo and
activities commenced by acquisition, in whole or in part, of a
going concern. The required notice period may be extended by the
Federal Reserve Board under certain circumstances, including a
notice for acquisition of a company engaged in activities not
previously approved by regulation of the Federal Reserve Board. If
such a proposed acquisition is not disapproved or subjected to
conditions by the Federal Reserve Board within the applicable
notice period, it is deemed approved by the Federal Reserve Board.
<PAGE>
<PAGE> 39
In general, any direct or indirect acquisition by the Company
of any voting shares of any bank which would result in the
Company's direct or indirect ownership or control of more than 5%
of any class of voting shares of such bank, and any merger or
consolidation of the Company with another bank holding company,
will require the prior written approval of the Federal Reserve
Board under the BHCA. In acting on such applications, the Federal
Reserve Board must consider various statutory factors, including
among others, the effect of the proposed transaction on competition
in the relevant geographic and product markets, each party's
financial condition and managerial resources and record of
performance under the Community Reinvestment Act. Since September
29, 1995, the BHCA has permitted the Federal Reserve Board under
specified circumstances to approve the acquisition, by a bank
holding company located in one state, of a bank or bank holding
company located in another state, without regard to any prohibition
contained in state law. See "Recent Regulatory Developments."
The merger or consolidation of an existing bank subsidiary of
the Company with another bank, or the acquisition by such a
subsidiary of assets of another bank, or the assumption of
liability by such a subsidiary to pay any deposits in another bank,
will require the prior written approval of the responsible Federal
depository institution regulatory agency under the Bank Merger Act,
based upon a consideration of statutory factors similar to those
outlined above with respect to the BHCA. In addition, in certain
such cases an application to, and the prior approval of, the
Federal Reserve Board under the BHCA and/or the Department of
Financial Institutions of the State of Indiana, may be required.
CAPITAL REQUIREMENTS. The Federal Reserve Board uses capital
adequacy guidelines in its examination and regulation of bank
holding companies. If capital falls below minimum guidelines, a
bank holding company may, among other things, be denied approval to
acquire or establish additional banks or non-bank businesses.
The Federal Reserve Board's capital guidelines establish the
following minimum regulatory capital requirements for bank holding
companies: (i) a leverage capital requirement expressed as a
percentage of total assets, (ii) a risk-based requirement expressed
as a percentage of total risk-weighted assets, and (iii) a Tier 1
leverage requirement expressed as a percentage of total assets.
The leverage capital requirement consists of a minimum ratio of
total capital to total assets of 6%, with an expressed expectation
that banking organizations generally should operate above such
minimum level. The risk-based requirement consists of a minimum
ratio of total capital to total risk-weighted assets of 8%, of
which at least one-half must be Tier 1 capital (which consists
principally of shareholders' equity). The Tier 1 leverage
requirement consists of a minimum ratio of Tier 1 capital to total
assets of 3% for the most highly rated companies, with minimum
requirements of 4% to 5% for all others.
<PAGE>
<PAGE> 40
The risk-based and leverage standards presently used by the
Federal Reserve Board are minimum requirements, and higher capital
levels will be required if warranted by the particular
circumstances or risk profiles of individual banking organizations.
Further, any banking organization experiencing or anticipating
significant growth would be expected to maintain capital ratios,
including tangible capital positions (i.e., Tier 1 capital less all
intangible assets), well above the minimum levels.
The Federal Reserve Board's regulations provide that the
foregoing capital requirements will generally be applied on a
bank-only (rather than a consolidated) basis in the case of a bank
holding company with less than $150 million in total consolidated
assets unless: (i) the bank holding company is engaged directly or
indirectly in any nonbank activity involving significant leverage
or (ii) the holding company has outstanding significant debt held
by the general public. Nonetheless, on a pro forma basis, assuming
the issuance and sale by the Company of the 1,000,000 shares of
Common Stock offered hereby at $10.00 per share, the Company's
leverage capital ratio, risk-based capital ratio and Tier 1
leverage ratio, in each case as calculated on a consolidated basis
under the Federal Reserve Board's capital guidelines, would exceed
the minimum requirements.
The Company has committed to the Federal Reserve Bank of
Chicago that it will not, without the prior written consent of the
Federal Reserve Board, incur debt outside the ordinary course of
business until five years has elapsed from the date that the
Company has acquired the Bank.
DIVIDENDS. The Company is a corporation separate and distinct
from the Bank. Most of the Company's revenues will be received by
it in the form of dividends or interest paid by the Bank. The Bank
is subject to statutory restrictions on its ability to pay
dividends. See "The Bank -- Dividends." The Federal Reserve Board
has issued a policy statement on the payment of cash dividends by
bank holding companies. In the policy statement, the Federal
Reserve Board expressed its view that a bank holding company
experiencing earnings weaknesses should not pay cash dividends
exceeding its net income or which could only be funded in ways that
weakened the bank holding company's financial health, such as by
borrowing. Additionally, the Federal Reserve Board possesses
enforcement powers over bank holding companies and their non-bank
subsidiaries to prevent or remedy actions that represent unsafe or
unsound practices or violations of applicable statutes and
regulations. Among these powers is the ability to proscribe the
payment of dividends by banks and bank holding companies. Similar
enforcement powers over the Bank are possessed by the FDIC. The
"prompt corrective action" provisions of FDICIA impose further
restrictions on the payment of dividends by insured banks which
fail to meet specified capital levels and, in some cases, their
parent bank holding companies.
<PAGE>
<PAGE> 41
In addition to the restrictions on dividends imposed by the
Federal Reserve Board, the laws of the State of Indiana impose
certain restrictions on the declaration and payment of dividends by
Indiana corporations such as the Company. See "Description of
Capital Stock -- Common Stock -- Dividend Rights."
THE BANK
GENERAL. Upon completion of its organization, the Bank will
be an Indiana state-charted commercial bank, and its deposit
accounts will be insured up to applicable limits by the FDIC under
the Bank Insurance Fund (the "BIF"). As an FDIC-insured,
Indiana-chartered bank, the Bank will be subject to the
examination, supervision, reporting and enforcement requirements of
the Department of Financial Institutions, as the chartering
authority for Indiana banks, and the FDIC, as administrator of the
BIF. These agencies and federal and state law extensively regulate
various aspects of the banking business including, among other
things, permissible types and amounts of loans, investments and
other activities, capital adequacy, branching, interest rates on
loans and on deposits, the maintenance of non-interest bearing
reserves on deposit accounts and the safety and soundness of
banking practices.
DEPOSIT INSURANCE. As an FDIC-insured institution, the Bank
will be required to pay deposit insurance premium assessments to
the FDIC. Pursuant to FDICIA, the FDIC adopted a risk-based
assessment system under which all insured depository institutions
are assigned one of nine categories (consisting of one of three
capital subcategories and one of three supervisory subcategories)
and assessed insurance premiums based upon their level of capital
and supervisory evaluation. Institutions classified as
well-capitalized (as defined by the FDIC) and considered healthy
pay the lowest premium while institutions that are less than
adequately capitalized (as defined by the FDIC) and considered of
substantial supervisory concern pay the highest premium. Risk
classification of all insured institutions is made by the FDIC for
each semi-annual assessment period.
FDICIA required the FDIC to establish assessment rates at
levels which would restore the BIF to a mandated reserve ratio of
1.25% of insured deposits over a period not to exceed 15 years. In
November 1995, the FDIC determined that the BIF had reached the
required ratio. Accordingly, the FDIC has established the schedule
of BIF insurance assessments for the first semi-annual assessment
period of 1997, ranging from 0% of deposits for institutions in the
highest category to .27% of deposits for institutions in the lowest
category.
<PAGE>
<PAGE> 42
The FDIC may terminate the deposit insurance of any insured
depository institution if the FDIC determines, after a hearing,
that the institution or its directors have engaged or are engaging
in unsafe or unsound practices, or have violated any applicable
law, regulation, rule, order or any condition imposed in writing
by, or written agreement with, the FDIC, or if the institution is
in an unsafe or unsound condition to continue operations. The FDIC
may also suspend deposit insurance temporarily during the hearing
process for a permanent termination of insurance if the institution
has no tangible capital.
CAPITAL REQUIREMENTS. The FDIC has established the following
minimum capital standards for state-chartered, FDIC-insured
non-member banks, such as the Bank: (i) a leverage requirement
consisting of a minimum ratio of Tier 1 capital to total assets of
3% for the most highly-rated banks and a minimum ratio of Tier I
capital to total assets of 4% to 5% for all others, and (ii) a
risk-based capital requirement consisting of a minimum ratio of
total capital to total risk-weighted assets of 8%, of which at
least one-half of that total capital amount must consist of Tier 1
capital. Tier 1 capital consists principally of shareholders'
equity.
The capital requirements described above are minimum
requirements. Higher capital levels will be required if warranted
by the particular circumstances or risk profiles of individual
institutions. As a condition to the regulatory approvals of the
Bank's formation, the Bank will be required to have an initial
capitalization sufficient to provide a ratio of Tier 1 capital to
total estimated assets of at least 8% at the end of the third year
of operation.
PROMPT CORRECTIVE ACTION. FDICIA establishes a system of
prompt corrective action to resolve the problems of
undercapitalized institutions. Under this system, federal
depository institution regulators are required to take certain
mandatory supervisory actions, and may take certain discretionary
supervisory actions against undercapitalized institutions, the
severity of which depends upon the institution's degree of
capitalization. In addition, subject to a narrow exception, FDICIA
generally requires the federal depository institution regulators to
appoint a receiver or conservator for an institution that is
critically undercapitalized.
As mandated by FDICIA, the federal banking regulators have
specified by regulation the relevant capital measures at which an
insured depository institution is deem well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized. Pursuant to the FDIC's regulations
implementing the prompt corrective action provisions of FDICIA, a
bank will be deemed to be: (i) well capitalized if the bank has a
<PAGE>
<PAGE> 43
total risk-based capital ratio of 10% or greater, Tier 1 risk-based
capital ratio of 6% or greater and leverage ratio of 5% or greater;
(ii) adequately capitalized if the bank has a total risk-based
capital ratio of 8% or greater, Tier 1 risk-based capital ratio of
4% or greater and leverage ratio of 4% or greater (3% for the most
highly rated banks); (iii) undercapitalized if the bank has a total
risk-based capital ratio of less than 8%, Tier 1 risk-based capital
ratio of less than 4% or leverage ratio of less than 4% (less than
3% for the most highly rated banks); (iv) significantly
undercapitalized if the bank has a total risk-based capital ratio
of less than 6%, Tier 1 risk-based capital ratio of less than 3% or
leverage ratio of less than 3%; and (v) critically undercapitalized
if the bank has a ratio of tangible equity to total assets of 2% or
less.
Subject to certain exceptions, these capital ratios are
generally determined on the basis of Call Reports submitted by each
depository institution and the reports of examination by each
institution's appropriate federal depository institution regulatory
agency.
Depending upon the capital category to which an institution is
assigned, the regulators' corrective powers include: requiring the
submission of a capital restoration plan (which must include a
holding company guarantee of performance); placing limits on asset
growth and restrictions on activities; requiring the institution to
issue additional capital stock (including additional voting stock)
or to be acquired; restricting transactions with affiliates;
restricting the interest rate the institution may pay on deposits;
ordering a new election of directors of the institution; requiring
that senior executive officers or directors be dismissed;
prohibiting the institution from accepting deposits from
correspondent banks requiring the holding company to divest certain
subsidiaries including the institution; requiring the institution
to divest certain subsidiaries; prohibiting the payment of
principal or interest on subordinated debt; and ultimately,
appointing a receiver or conservator for the institution.
In general, a depository institution may be reclassified to a
lower category than is indicated by its capital position if the
appropriate federal depository institution regulatory agency
determines the institution to be otherwise in an unsafe or unsound
condition or to be engaged in an unsafe or unsound practice. This
could include a failure by the institution, following receipt of a
less-than-satisfactory rating on its most recent examination
report, to correct the deficiency.
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<PAGE> 44
DIVIDENDS. As a state-chartered commercial bank organized
under Indiana law, the Bank may declare and pay dividends to the
proposed sole shareholder (the Company) of so much undivided
profits as its Board of Directors deems expedient, subject to prior
approval of the Department if the proposed dividend (when added to
all prior dividends declared during the current calendar year)
would exceed current year "net profits" and retained "net profits"
for the previous two calendar years.
FDICIA generally prohibits a depository institution from
making any capital distribution (including payment of a dividend)
or paying any management fee to its holding company if the
depository institution would thereafter be undercapitalized. The
FDIC may prevent an insured bank from paying dividends if the bank
is in default of payment of any assessment due to the FDIC. In
addition, payment of dividends by a bank may be prevented by the
applicable federal regulatory authority if such payment is
determined, by reason of the financial condition of such bank, to
be an unsafe and unsound banking practice.
INSIDER TRANSACTIONS. The Bank is subject to certain
restrictions imposed by the Federal Reserve Act ("FRA") on any
extensions of credit to the Company or its subsidiaries, on
investments in the stock or other securities of the Company or its
subsidiaries, and the acceptance of the stock or other securities
of the Company or its subsidiaries as collateral for loans. These
restrictions limit the aggregate amount of transactions with any
individual affiliate to 10% of the Bank's capital and surplus,
limit the aggregate amount of transactions with all affiliates to
20% of the Bank's capital and surplus, require that loans and
certain other extensions of credit be secured by collateral in
certain specified amounts and types, generally prohibit the
purchase of low quality assets from affiliates and generally
require that certain transactions with affiliates, including loans
and asset purchases, be on terms and under circumstances, including
credit standards, that are substantially the same or at least as
favorable to the Bank as those prevailing at the time for
comparable transactions with nonaffiliated individuals or entities.
Also, the FRA prescribes certain limitations and reporting
requirements on extensions of credit by the Bank to its directors
and executive officers, to directors and executive officers of the
Company and its subsidiaries, to principal shareholders of the
Company and its subsidiaries, to principal shareholders of the
Company and to "related interests" of such directors, officers and
principal shareholders. Among other things, the FRA, and the
regulations thereunder, require such loans to be made on
substantially the same terms as those offered to unaffiliated
individuals, place limits on the amount of loans the Bank may
extend to such individuals and require certain approval procedures
to be followed. In addition, such legislation and regulations may
<PAGE>
<PAGE> 45
affect the terms upon which any person becoming a director or
officer of the Company or one of its subsidiaries or a principal
shareholder of the Company may obtain credit from banks with which
the Bank maintains a correspondent relationship.
SAFETY AND SOUNDNESS STANDARDS. On July 10, 1995, the FDIC,
the Office of Thrift Supervision, the Federal Reserve Board and the
Office of the Comptroller of the Currency published final
guidelines implementing the FDICIA requirement that the federal
banking agencies establish operational and managerial standards to
promote the safety and soundness of federally insured depository
institutions. The guidelines, which took effect on August 9, 1995,
establish standards for internal controls, information systems,
internal audit systems, loan documentation, credit underwriting,
interest rate exposure, asset growth and compensation, fees and
benefits, and specifically prohibit, as an unsafe and unsound
practice, excessive compensation that could lead to a material loss
to an institution. The federal banking agencies also adopted asset
quality and earnings standards that were added to the safety and
soundness guidelines effective October 1, 1996. If an institution
fails to comply with any of the standards set forth in the
guidelines, the institution's primary federal regulator may require
the institution to submit a plan for achieving and maintaining
compliance. Failure to submit an acceptable compliance plan, or
failure to adhere to a compliance plan that has been accepted by
the appropriate regulator, would constitute grounds for further
enforcement action.
STATE BANK ACTIVITIES. Under FDICIA, as implemented by final
regulations adopted by the FDIC, FDIC-insured state banks are
prohibited, subject to certain exceptions, from directly or
indirectly acquiring or retaining any equity investments of a type,
or in an amount, that are not permissible for a national bank.
FDICIA, as implemented by FDIC regulations, also prohibits
FDIC-insured state banks and their subsidiaries, subject to certain
exceptions, from engaging as principal in any activity that is not
permitted for a national bank or its subsidiary, respectively,
unless the bank meets, and continues to meet, its minimum
regulatory capital requirements and the FDIC determines the
activity would not pose a significant risk to the deposit insurance
fund of which the bank is a member. Impermissible investments and
activities must be divested or discontinued within certain time
frames set by the FDIC in accordance with FDICIA. These
restrictions are not currently expected to have a material impact
on the operations of the Bank.
<PAGE>
<PAGE> 46
CONSUMER BANKING. The Bank's business will include making a
variety of types of loans to individuals. In making these loans,
the Bank will be subject to state usury and regulatory laws and to
various federal statutes, such as the Equal Credit Opportunity Act,
Fair Credit Reporting Act, Truth in Lending Act, Real Estate
Settlement Procedures Act and Home Mortgage Disclosure Act, and the
regulations promulgated thereunder, which prohibit discrimination,
specify disclosures to be made to borrowers regarding credit and
settlement costs and regulate the mortgage loan servicing
activities of the Bank, including the maintenance and operation of
escrow accounts and the transfer of mortgage loan servicing. The
Riegle Act imposed new escrow requirements on depository and
non-depository mortgage lenders and servicers under the National
Flood Insurance Program. See "Recent Regulatory Developments." In
receiving deposits, the Bank will be subject to extensive
regulation under state and federal law and regulations, including
the Truth in Savings Act, the Expedited Funds Availability Act, the
Bank Secrecy Act, the Electronic Funds Transfer Act and the Federal
Deposit Insurance Act. Violation of these laws could result in the
imposition of significant damages and fines upon the Bank, its
directors and officers.
REGULATORY DEVELOPMENTS
The Deposit Insurance Funds Act of 1996 (the "DIFA"), which
was part of the omnibus appropriations bill for fiscal year 1997,
addresses the problem of the undercapitalized Savings Association
Insurance Fund (the "SAIF"). As required under the DIFA, the FDIC
imposed a one-time special assessment on savings associations to
bring the SAIF up to a mandated reserve ratio of 1.25% of insured
deposits.
In addition, beginning on January 1, 1997, banks and thrifts
are required to share in the payment of the Financing Corporation
(the "FICO") bonds. The FICO bonds were issued pursuant to the
Competitive Equality Banking Act of 1987 to recapitalize the
Federal Savings and Loan Insurance Corporation. Prior to the
enactment of the DIFA, savings associations alone paid assessments
on the FICO bonds.
In 1994, the Congress enacted two major pieces of banking
legislation, the Riegle Community Direction Act (the "Riegle Act")
and the Riegle-Neal Interstate Banking and Branching Efficiency Act
(the "Riegle-Neal Act"). The Riegle Act addressed such varied
issues as the promotion of economic revitalization of defined urban
and rural "qualified distressed communities" through special
purpose "Community Development Financial Institutions," the
expansion of consumer protection with respect to certain loans
secured by a consumer's home and reverse mortgages and reductions
in compliance burdens regarding Currency Transaction Reports, in
addition to reform of the National Flood Insurance Program, the
promotion of a secondary market for small business loans and leases
and mandating specific changes to reduce regulatory impositions on
depository institutions and holding companies.<PAGE>
<PAGE> 47
The Riegle-Neal Act substantially changed the geographic
constraints applicable to the banking industry. Effective
September 29, 1995, the Riegle-Neal Act allows bank holding
companies to acquire banks located in any state in the United
States without regard to geographic restrictions or reciprocity
requirements imposed by state law, but subject to certain
conditions, including limitations on the aggregate amount of
deposits that may be held by the acquiring holding company and all
of its insured depository institution affiliates. Effective June
1, 1997 (or earlier if expressly authorized by applicable state
law), the Riegle-Neal Act allows banks to establish interstate
branch networks through acquisitions of other banks, subject to
certain conditions, including certain limitations on the aggregate
amount of deposits that may be held by the surviving bank and all
of its insured depository institution affiliates. The
establishment of de novo interstate branches or the acquisition of
individual branches of a bank in another state (rather than the
acquisition of an out-of-state bank in its entirety) is allowed by
the Riegle-Neal Act only if specifically authorized by state law.
The legislation allowed individual states to "opt-out" of certain
provisions of the Riegle-Neal Act by enacting appropriate
legislation prior to June 1, 1997.
Effective March 14, 1996, Indiana "opted in" to the interstate
branching provisions of the Riegle-Neal Act. The Indiana
legislation authorizes, subject to certain approval and other
requirements, Indiana-chartered banks to establish branches in
states other than Indiana and out-of-state banks to establish
branches in Indiana. Indiana and out-of-state banks are authorized
to establish branches either by acquisition or de novo.
FDIC regulations, which became effective April 1, 1996, impose
certain limitations (and in certain cases, prohibitions) on (i)
"golden parachute" severance payments by troubled depository
institutions, their subsidiaries and affiliated holding companies
to institution-affiliated parties (primarily directors, officers,
employees or principal shareholders of the institution), and (ii)
indemnification payments by a depository institution, their
subsidiaries and affiliated holding companies, regardless of
financial condition, to institution-affiliated parties. The FDIC
regulations impose limitations on indemnification payments which
could restrict, in certain circumstances, payments by the Company
or the Bank to their respective directors or officers otherwise
permitted under Indiana state law. See "Description of Capital
Stock."
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<PAGE> 48
In June, 1997, broad financial reform legislation was approved
by the Banking Committee of the U.S. House of Representative.
The legislation proposed by the Banking Committee included
provisions that would permit, subject to certain restrictions, bank
holding companies to acquire manufacturing and other nonfinancial
companies, permit nonfinancial companies to acquire banks, and
require thrift institutions to convert to bank charters. In
September, 1997, however, the House Commerce Committee released a
revised version of the legislation that differs markedly from the
Banking Committee proposal. As revised, the legislation generally
would maintain the current separation between banking and commerce.
The Company cannot predict whether, or in what form, this
legislation may be enacted, and if enacted, what the effect would
be on the Company and the Bank.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 10,000,000
shares of Common Stock, no par value, of which only one share was
issued and outstanding as of the date of this Prospectus and
2,000,000 shares of Preferred Stock, no par value, of which no
shares are issued and outstanding. At the conclusion of the
offering, 1,000,000 shares of Common Stock will be issued and
outstanding, assuming no exercise by the Underwriter of its over-
allotment option. The Board of Directors has the power to
determine the relative rights of and restrictions on any series of
Preferred Stock that it may authorize in the future and may provide
terms upon which preferred stock may be converted into shares of
any other class of stock, and may issue and sell such Preferred
Stock without prior shareholder approval. The Company has reserved
115,000 shares of Common Stock that may be issued under the
Company's stock option plans. The remaining authorized but
unissued shares of Common Stock may be issued upon authorization by
the Board of Directors without prior shareholder approval.
COMMON STOCK
VOTING RIGHTS. Each share of the Company's Common Stock
entitles the holder thereof to one vote on all matters on which the
holders of shares of the Company's Common Stock are entitled to
vote. Except for (a) supermajority votes required to approve
certain business combinations and certain other matters (see
"Description of Capital Stock -- Certain Provisions of Indiana Law
and the Company's Articles of Incorporation and Bylaws"), and (b)
certain corporate actions that must be approved by a majority of
the outstanding votes of the relevant voting group under the
Indiana Business Corporation Law (the "IBCL"), the affirmative vote
of the holders of the majority of the votes cast at a meeting at
which a quorum is present is sufficient to approve matters
submitted for shareholder approval, except that directors are
elected by a plurality of the votes cast. Shareholders do not have<PAGE>
<PAGE> 49
cumulative voting rights for the election of directors. Directors
may be removed, with or without cause, only by the vote of 80% of
the shares entitled to vote at an election of directors.
DIVIDEND RIGHTS. Subject to any preferential dividend rights
of a series of shares of preferred stock, the holders of Common
Stock are entitled to receive dividends as and when declared by the
Board of Directors from funds legally available for their payment.
Although the Company does not currently anticipate paying dividends
in the foreseeable future, holders of shares of Common Stock would
be entitled to share ratably in dividends, if any, that may be
declared on the Common Stock by the Board of Directors.
LIQUIDATION RIGHTS. Upon any liquidation, dissolution, or
winding up of the affairs of the Company, the holders of Common
Stock are entitled to share ratably in the assets legally available
for distribution to the holders of Common Stock after satisfaction
in full of any liquidation preference to which holders of Preferred
Stock, if any, may then be entitled.
OTHER MATTERS. The holders of shares of the Common Stock have
no preemptive or redemption rights or any preferred right to
purchase or subscribe for any authorized but unissued capital stock
or any securities of the Company convertible into Common Stock.
The outstanding shares are, and the shares offered hereby will be
when issued, fully paid and nonassessable. The shares of Common
Stock are not redeemable at the option of the Company or holders
thereof.
Heartland Bancshares, Inc., serves as the registrar and
transfer agent for its own Common Stock.
PREFERRED STOCK
The Company's Articles of Incorporation authorize the Board of
Directors, without further shareholder approval, to establish the
relative rights, designations, preferences, and limitations or
restrictions on the shares of Preferred Stock prior to the issuance
thereof, including, without limitation, dividend rights, conversion
rights, voting rights, liquidation preferences, redemption rights,
division into series, sinking fund provisions, and similar matters.
Thus, the Board of Directors may authorize and issue a series of
Preferred Stock with rights and preferences that are superior to
those of the Common Stock, the issuance of which could adversely
affect the voting power of the holders of Common Stock.
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<PAGE> 50
The availability of Preferred Stock with unspecified voting
rights and possibly other rights, such as a required approval of
mergers or other extraordinary corporate transactions, could be
used by management to create voting impediments or to deter persons
seeking to effect a merger or otherwise to gain control of the
Company. Preferred Stock may also be issued at sometime in the
future in connection with acquisitions by the Company of additional
companies or businesses. The Company has no present plans to issue
any series of Preferred Stock.
INDIANA LAW
Under the IBCL, several provisions could affect the
acquisition of the shares of or control over the Company. The IBCL
contains a Control Share Acquisition Chapter that may have the
effect of discouraging or making more difficult a hostile takeover
of an Indiana corporation. This provision also may have the effect
of discouraging premium bids for outstanding shares. The Control
Share Acquisition Chapter provides that, unless otherwise provided
in a corporation's articles of incorporation or by-laws, shares
acquired in certain acquisitions of the corporation's stock (which
take the acquiror over the successive thresholds of 20%, 33% and
50% of the corporation's stock) will be accorded voting rights only
if a majority of the disinterested shareholders approves a
resolution granting the potential acquiror the ability to vote such
shares. An Indiana corporation is subject to the Control Share
Acquisition Chapter if it has 100 or more shareholders and its
principal place of business is in Indiana. An Indiana corporation
otherwise subject to the Control Share Acquisition Chapter may
elect not to be governed by the statute by so providing in its
articles of incorporation or by-laws. The Company has not made
such an election and, therefore, the Company will be subject to the
statute when and if it has 100 or more shareholders.
In addition to the Control Share Acquisition Chapter, the IBCL
contains a Business Combination Chapter. The Business Combinations
Chapter provides that, unless a company elects not to be governed
by that chapter, certain Indiana corporations and a 10% or greater
shareholder may not engage in certain business combinations,
including mergers, sales of assets, recapitalizations, and reverse
stock splits for five years following the date on which the
shareholder obtained a 10% or greater ownership interest, unless
the acquisition has been approved in advance of that date by the
Board of Directors. In addition, if prior approval is not
obtained, the Company and such shareholder may not consummate a
business combination unless a majority of disinterested
shareholders approve the transaction or all shareholders receive a
price per share determined in accordance with the Business
Combinations Chapter. The Articles of Incorporation of the Company
provide that the Business Combinations Chapter shall not apply to
the Company. The Company could subsequently elect to be covered by
<PAGE>
<PAGE> 51
the Business Combination Chapter, however, but such an election
would remain ineffective for 18 months and would not apply to a
combination with a shareholder who acquired a 10% or greater
ownership position prior to the effective date of the election.
The Company's Restated Articles of Incorporation contain provisions
governing approval of certain business combinations. See
"Description of Capital Stock -- Articles of Incorporation and
Bylaws."
The IBCL specifically authorizes directors, in considering the
best interests of a corporation, to consider the effects of any
action on shareholders, employees, suppliers, and customers of the
corporation, the communities in which offices or other facilities
of the corporation are located, and any other factors the directors
consider pertinent. Under the IBCL, directors are not required to
approve a proposed business combination or other corporation action
if the directors determine in good faith, after considering and
weighing as they deem appropriate the effects of such action on the
corporation's constituents, that such approval is not in the best
interest of the corporation. The IBCL specifies that, in making
these determinations, directors are not required to consider the
effects of a proposed corporate action on any particular corporate
constituent group or interest (including the amounts that might be
paid to shareholders) as a dominant or controlling factor. The
IBCL explicitly provides that the different or higher degree of
scrutiny imposed in Delaware and certain other jurisdictions upon
director actions taken in response to potential changes in control
are inconsistent with the proper application of the applicable
provisions of the IBCL.
In taking or declining to take any action or in making any
recommendation to a corporation's shareholders with respect to any
matter, directors are authorized under the IBCL to consider both
the short-term and long-term interests of the corporation as well
as interests of other constituencies and other relevant factors.
Any determination made with respect to the foregoing by a majority
of disinterested directors shall conclusively be presumed to be
valid unless it can be demonstrated that such determination was not
made in good faith.
Because of the foregoing provisions of the IBCL, the Board
will have flexibility in responding to unsolicited proposals to
acquire the Company, and, accordingly, it may be more difficult for
an acquiror to gain control of the Company in a transaction not
approved by the Board.
The IBCL also imposes restrictions in connection with
shareholder derivative proceedings. The IBCL provides that if a
shareholder of the corporation files a derivative complaint, the
corporation's board of directors may establish a committee of
disinterested directors or other disinterested persons to
investigate the complaint. The IBCL authorizes a stay of any court
<PAGE>
<PAGE> 52
proceedings on the complaint until the investigation of such
committee is completed. If the committee determines that pursuit
of the claim through the derivative proceeding would not be in the
best interests of the corporation, then the committee can terminate
the derivative proceeding. The conclusion of the committee is
determinative unless the shareholder who filed the complaint can
demonstrate that the committee was not disinterested or did not act
in good faith.
ARTICLES OF INCORPORATION AND BYLAWS
REMOVAL OF DIRECTORS. The Articles of Incorporation provide
that a director may be removed from office with or without cause
prior to the expiration of his or her term only upon the
affirmative vote of the holders of at least 80% of the outstanding
shares of stock of the Company entitled to vote for the election of
directors at any meeting called for that purpose. The Articles do
not provide for the removal of a director by the remaining
directors.
CERTAIN BUSINESS COMBINATIONS. The Articles of Incorporation
of the Company include a provision imposing certain supermajority
vote and minimum price requirements on any "Business Combination"
with a "Related Person" unless the combination has been approved by
the vote of two-thirds of certain members of the Board of Directors
of the Company who are not associated with the Related Person.
This provision defines "Business Combination" very broadly to
include, subject to certain conditions, (i) any merger or
consolidation of the Company or any of its subsidiaries into or
with a Related Person, its affiliates or associates; (ii) any sale,
exchange, lease, transfer or other disposition by the Company or
any of its subsidiaries of all or any substantial part of its or
their assets or businesses to or with a Related Person, its
affiliates or associates; (iii) the purchase, exchange, lease or
acquisition by the Company or any of its subsidiaries of all or any
substantial part of the assets or business of a Related Person, its
affiliates or associates; (iv) any reclassification of securities,
recapitalization or other transaction that has the effect of
increasing the proportionate amount of the Company's Common Stock
(or other voting capital security) beneficially owned by a Related
Person; (v) any partial or complete liquidation, spinoff or splitup
of the Company or any of its subsidiaries; and (vi) the acquisition
by a Related Person of beneficial ownership upon issuance of Common
Stock (or other voting capital shares) of the Company or any of its
subsidiaries or any securities convertible into, or any rights,
warrants or options to acquire, any such shares.
<PAGE>
<PAGE> 53
"Related Person" also is defined broadly to mean (i) any
person (which includes any individual, corporation or entity other
than the Company or its subsidiaries) who beneficially owns ten
percent or more of the Company Common Stock (or other voting
capital security) (a "Ten Percent Shareholder"); (ii) any person
who within the preceding two-year period has been a Ten Percent
Shareholder and who directly or indirectly controls, is controlled
by, or is under common control with the Company; or (iii) any
person who has received, other than pursuant to or in a series of
transactions involving a public offering within the meaning of the
1933 Act, the Company Common Stock (or other voting capital
security) that has been owned by a Related Person within the
preceding two-year period.
In the absence of approval by the Company Directors who are
not associated with the Related Person or, in the alternative, the
agreement by the Related Person to pay all other shareholders a
certain minimum price for their shares, a Business Combination with
a Related Person would require the approval of 80% of the
outstanding voting stock plus the approval of a majority of the
outstanding shares that are not controlled by the Related Person.
In general terms, the restrictions apply to mergers or
consolidations of the Company of any subsidiary with any Related
Person, transfers or encumbrances of all or substantially all of
the assets of the Company to a Related Person, the adoption of any
plan of liquidation proposed by a Related Person or any transaction
which would have the effect, directly or indirectly, of increasing
the proportionate share of any class of equity securities of the
Company of any shareholder (including affiliates and associates)
who is the beneficial owner of more than 10% of the voting power of
the then outstanding shares entitled to vote generally in the
election of Directors of the Company. Absent the provision
regulating Business Combinations, mergers, consolidations, and
sales of all or substantially all assets would require only the
approval of a majority of the Board of Directors and (subject to
the rights of any Preferred Stock issued in the future) the
affirmative vote of a majority of the total number of outstanding
shares of the Company entitled to vote on the matter.
The percentage of the shares required to approve a Business
Combination by a Related Person may be reduced from 80% to two-
thirds if certain price and other requirements are met. The
shareholder voting requirements do not apply, however, if the
directors of the Company other than directors who are Related
Persons or Affiliates of Related Persons vote by a two-thirds vote
to approve the Business Combination.
This provision may tend to discourage or render it more
difficult for a person to acquire control of the Company, even if
such a transaction might generally be favorable to the interests of
shareholders. This provision may also tend to perpetuate present
management in that if a certain number of Directors do not approve
<PAGE>
<PAGE> 54
a proposed Business Combination it may be more difficult to obtain
the 80% shareholder approval requirement. In addition, this
provision may give Directors and minority shareholders veto power
over a Business Combination which a majority of the shareholders
may believe is desirable.
AMENDMENT, CHANGE, OR REPEAL OF CERTAIN ARTICLES. The
Articles provide that any amendment, change, or repeal of the
provisions of the Articles of Incorporation relating to Business
Combinations, the removal of Directors, or amendment of the
Articles must receive the approval of (a) at least 80% of the
outstanding voting power, and (b) in the case of an amendment,
change, or repeal of any of the above-stated provisions proposed by
or on behalf of a Related Person, the approval by a majority of the
shares not controlled by the Related Person. However, in the event
that an amendment, change, or repeal of those provisions is
approved by two-thirds of the Board of Directors, and, if the
amendment is proposed by or on behalf of a Related Person, by the
favorable vote of two-thirds of certain Directors who are not
associated with the Related Person, the affirmative vote of a
majority of the outstanding voting power would be sufficient to
approve any such amendment, change, or repeal.
CLASSIFIED BOARD. The Articles of Incorporation permit the
Bylaws to provide for the staggering of the terms of the members of
the Board of Directors to the full extent permitted by the IBCL.
The Bylaws provide for the Board of Directors to be divided into
three equal (or as nearly equal as possible) classes with only one
class of Directors being elected at any annual meeting. As a
result, approximately one-third of the Board of Directors is
elected each year. In addition, the Bylaws provide that any
vacancy shall be filled by a majority vote of the remaining
Directors. Any Director elected to fill such vacancy shall hold
office for the expired term of the class of which he is a member.
These provisions effectively prevent the shareholders of the
Company from changing a majority of the Directors at any single
election of Directors.
REDEMPTION OF SHARES ACQUIRED IN CONTROL SHARE ACQUISITIONS.
The Bylaws of the Company empower the Company to redeem shares that
are acquired in excess of the percentage-of-ownership thresholds
specified by the Control Share Acquisition Chapter of the IBCL in
the event that the disclosure statement required by the Control
Share Acquisition Chapter is not delivered or the acquired shares
are not accorded full voting rights by the shareholders. For
information concerning the Control Share Acquisition Chapter, see
"Description of Capital Stock - Indiana Law." The redemption price
is specified to be the fair market value per share of the shares to
be redeemed immediately prior to the first public announcement of
the intent or plan of the acquiring person to make a control share
acquisition.
<PAGE>
<PAGE> 55
DISCLOSURE PROCEDURE. The Bylaws provide, in accordance with
the IBCL, that the President may, in his or her discretion from
time to time, require a record shareholder to disclose to the
Company whether or not such shareholder holds shares of record for
the account of another person or persons who is or are the
beneficial owner(s) of such shares and, if so, the name(s) of such
beneficial owner(s). This disclosure procedure provides that if
the shareholder shall, without legal justification, fail to
disclose the information requested within ten (10) days of being
requested to do so, then the Company may, in the discretion of its
President, (a) prohibit the voting of any or all shares held by
such record shareholder at the next meeting of the shareholders;
(b) for so long as the failure to disclose continues, withhold
dividends with respect to such record shareholder's shares; (c)
acquire any or all of the shareholder's shares at a price
determined by market prices or market quotations of the shares (or
at a price determined by the Board of Directors in good faith to
represent the fair market value of such shares in the event that
there is no market for the shares) by mailing to such shareholder
a notice of acquisition; or (d) deny voting rights, withhold
dividends, and acquire shares, or exercise such rights in any
combination.
NOMINATION PROCEDURE. The Bylaws of the Company limit
eligibility for election to the Board of Directors at any meeting
of shareholders at which one or more Directors are to be elected to
(a) those persons named in (or replacements thereof named in
accordance with) the proxy or information statement prepared on
behalf of the Board of Directors of the Company and distributed to
shareholders in accordance with the proxy rules of the Securities
and Exchange Commission (the "SEC Proxy Rules") and (b) other
persons nominated from the floor of such shareholders meeting by a
shareholder, but only if (i) the names of the particular person or
persons who are proposed to be nominated are disclosed to the
Secretary of the Company by the nominating shareholder not later
than ten (10) business days prior to the shareholder meeting at
which such nomination is to be made and (ii) any "solicitation" of
"proxies" by such shareholder (or other persons) on behalf of such
other nominee(s) has been conducted in accordance with the SEC
Proxy Rules, if applicable.
SHARES ELIGIBLE FOR FUTURE SALE
The Company presently has one share of Common Stock
outstanding. That share is held by a member of the Board of
Directors and it will be redeemed at its original cost after
completion of the offering. Upon completion of the offering, the
Company expects to have 1,000,000 shares of its Common Stock
outstanding (plus any shares issued and sold upon exercise by the
Underwriter of the over-allotment option). The 1,000,000 shares of
the Company's Common Stock sold in the offering (plus any
additional shares sold upon the Underwriter's exercise of its
over-allotment option) have been registered with the Securities and
<PAGE>
<PAGE> 56
Exchange Commission ("SEC") under the Securities Act of 1933 (the
"Securities Act") and may generally be resold without registration
under the Securities Act unless they were acquired by directors,
executive officers or other affiliates of the Company
(collectively, "Affiliates"). Affiliates of the Company may
generally only sell shares of the Common Stock pursuant to Rule 144
under the Securities Act without registration.
In general, under Rule 144 as currently in effect, an
affiliate (as defined in Rule 144) of the Company may sell shares
of Common Stock within any three-month period in an amount limited
to the greater of 1% of the outstanding shares of the Company's
Common Stock or the average weekly trading volume in the Company's
Common Stock during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain manner-of-sale
provisions, holding periods for restricted shares, notice
requirements and the availability of current public information
about the Company.
The Company and the directors and officers of the Company and
the Bank (who are expected to hold an aggregate of approximately
74,500 shares after the offering), have agreed, or will agree, that
they will not issue, offer for sale, sell, transfer, grant options
to purchase or otherwise dispose of any shares of Common Stock
without the prior written consent of the Underwriter for a period
of 150 days from the date of this Prospectus, except that (i) they
may sell shares to the Company in payment of part or all of the
purchase price of shares purchased under the Stock Option Plan, and
(ii) the directors and officers may give Common Stock owned by them
to others who have agreed in writing to be bound by
the same agreement.
Prior to the offering, there has been no public trading market
for the Common Stock, and no predictions can be made as to the
effect, if any, that sales of shares or the availability of shares
for sale will have on the prevailing market price of the Common
Stock after completion of the offering. Nevertheless, sales of
substantial amounts of Common Stock in the public market could have
an adverse effect on prevailing market prices.
UNDERWRITING
The Underwriter has agreed, subject to the terms and
conditions of the Underwriting Agreement, to purchase from the
Company 1,000,000 shares of the Company's Common Stock. The
Underwriting Agreement provides that the obligations of the
Underwriter thereunder are subject to certain conditions and
provides for the Company's payment of certain expenses incurred in
connection with the review of the underwriting arrangements for the
offering by the National Association of Securities Dealers, Inc.
(the "NASD"). The Underwriter is obligated to purchase all
1,000,000 of the shares of Common Stock offered hereby, excluding
shares covered by the over-allotment option granted to the
Underwriter, if any are purchased.<PAGE>
<PAGE> 57
If the Underwriting Agreement is terminated, except in certain
limited cases, the Underwriting Agreement provides that the Company
will reimburse the Underwriter for all accountable out-of-pocket
expenses, including Underwriter's counsel's fees and any Blue Sky
costs, incurred by it in connection with the proposed purchase and
sale of the Common Stock, up to $30,000 (in addition to $10,000
already advanced by the Company to cover expenses). Such expenses
and advances will be credited by the Underwriter against the
underwriting discount otherwise payable to the Underwriter upon any
purchase by it of Common Shares.
The Company and the Underwriter have agreed that the
Underwriter will purchase the 1,000,000 shares of Common Stock
offered hereunder at a price to the public of $10.00 per share less
underwriting discounts and commissions of $0.70 per share.
However, underwriting discounts or commissions will be incurred by
the Company in the amount of $0.40 per share with respect to the
first 200,000 shares sold to members of the Board of Directors of
the Company, their immediate families or certain other designated
individuals. The Underwriter proposes to offer the Common Stock to
selected dealers who are members of the NASD, at a price of $10 per
share less a concession not in excess of $_______ per share. The
Underwriter may allow, and such dealers may re-allow, concessions
not in excess of $______ per share to certain other brokers and
dealers.
The Underwriter has informed the Company that the Underwriter
does not intend to make sales to any accounts over which it
exercises discretionary authority.
The Company has granted the Underwriter an option, exercisable
within 30 days after the date of this offering, to purchase up to
an additional 150,000 shares of Common Stock from the Company to
cover over-allotments, if any, at the same price per share as is to
be paid by the Underwriter for the other shares offered hereby. If
the over-allotment option is exercised in full, the Underwriter has
agreed to credit $25,000 of its accountable expenses in connection
with the offering that are otherwise reimbursable to the
Underwriter by the Company against the aggregate discount on the
over-allotment shares. The Underwriter may purchase such shares
only to cover over-allotments, if any, in connection with the
offering.
The Underwriting Agreement contains indemnity provisions
between the Underwriter and the Company and the controlling persons
thereof against certain liabilities, including liabilities arising
under the Securities Act. The Company is generally obligated to
indemnify the Underwriter and its controlling persons in connection
with losses or claims arising out of any untrue statement of a
material fact contained in this Prospectus or in related documents
filed with the Commission or with any state securities
administrator, or any omission of certain material facts from such
documents.<PAGE>
<PAGE> 58
There has been no public trading market for the Common Stock.
The price at which the shares are being offered to the public was
determined by negotiations between the Company and the Underwriter.
This price is not based upon earnings or any history of operations
and should not be construed as indicative of the present or
anticipated future value of the Common Stock. Several factors were
considered in determining the initial offering price of the Common
Stock, among them the size of the offering, the desire that the
security being offered be attractive to individuals and the
Underwriter's experience in dealing with initial public offerings
for financial institutions.
LEGAL PROCEEDINGS
Neither the Bank nor the Company is a party to any pending
legal proceedings or aware of any threatened legal proceedings
where the Company or the Bank may be exposed to any material loss.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed
upon for the Company by Leagre Chandler & Millard, Indianapolis,
Indiana. Krieg DeVault Alexander & Capehart, Indianapolis,
Indiana, is acting as counsel for the Underwriter in connection
with certain legal matters relating to the shares of Common Stock
offered hereby.
EXPERTS
The financial statements of the Company included in this
Prospectus have been audited by Crowe, Chizek and Company, LLP,
independent public accountants, as indicated in their report with
respect thereto. Such financial statements and their report have
been included herein in reliance upon the authority of said firm as
experts in accounting and auditing.
<PAGE>
<PAGE> 60
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange
Commission ("SEC") a Form SB-2 Registration Statement under the
Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth
in the Registration Statement, certain portions of which have been
omitted as permitted by the Rules and Regulations of the SEC. For
further information pertaining to the shares of Common Stock
offered hereby and to the Company, reference is made to the
Registration Statement, including the Exhibits filed as a part
thereof, copies of which can be inspected at and copied at the
Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices located
at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and Room 1400, 75 Park Place, New York New
York 10007. Copies of such materials can also be obtained at
prescribed rates by writing to the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. The
information is also available on the World Wide Web site maintained
by the SEC. The address of the site is http://www.sec.gov.
<PAGE>
F-1
HEARTLAND BANCSHARES, INC.
Franklin, Indiana
FINANCIAL STATEMENTS
June 30, 1997
CONTENTS
REPORT OF INDEPENDENT AUDITORS. . . . . . . . . . . . . . . . . . . . . . F-2
FINANCIAL STATEMENTS
BALANCE SHEET . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
STATEMENT OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . F-4
STATEMENT OF CHANGES IN SHAREHOLDER'S DEFICIT . . . . . . . . . . . F-5
STATEMENT OF CASH FLOWS . . . . . . . . . . . . . . . . . . . . . . F-6
NOTES TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . F-7
<PAGE>
<PAGE> F-2
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Heartland Bancshares, Inc.
Franklin, Indiana
We have audited the accompanying balance sheet of Heartland
Bancshares, Inc. (a company in the development stage) as of
June 30, 1997 and the related statements of operations, changes
in shareholder's deficit and cash flows for the period from
May 27, 1997 (date of inception) to June 30, 1997. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform our audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Heartland Bancshares, Inc. (a company in the development
stage) as of June 30, 1997, and the results of its operations and
its cash flows for the period from May 27, 1997 (date of
inception) to June 30, 1997 in conformity with generally accepted
accounting principles.
/s/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
Indianapolis, Indiana
July 25, 1997, except for
Note 2 as to which the
date is August 31, 1997.
<PAGE>
<PAGE> F-3
HEARTLAND BANCSHARES, INC.
(A Company in the Development Stage)
BALANCE SHEET
June 30, 1997
ASSETS
Cash $ 10,214
Premises and equipment 13,210
Organization costs 46,171
Deferred offering costs 29,500
______
$ 99,095
======
LIABILITIES AND SHAREHOLDER'S DEFICIT
Liabilities
Accounts payable $ 81,684
Related party notes payable (Note 2) 25,490
Total liabilities 107,174
Shareholder's deficit
Common stock - no par value; 10,000 shares
authorized; one share issued and
outstanding 10
Deficit accumulated during the development
stage (8,089)
_____
Total shareholder's deficit (8,079)
$ 99,095
======
<PAGE>
<PAGE> F-4
HEARTLAND BANCSHARES, INC.
(A Company in the Development Stage)
STATEMENT OF OPERATIONS
For the period from May 27, 1997 (date of inception)
to June 30, 1997
Operating expenses
Interest expense $ 385
Salaries and employee benefits 6,391
Other 1,313
_____
Total operating expenses 8,089
Loss before income taxes (8,089)
Provision for income taxes (Note 3) -
_____
Net loss $ (8,089)
=====<PAGE>
<PAGE> F-5
HEARTLAND BANCSHARES, INC.
(A Company in the Development Stage)
STATEMENT OF CHANGES IN SHAREHOLDER'S DEFICIT
For the period from May 27, 1997 (date of inception)
to June 30, 1997
<TABLE>
Deficit
Accumulated
During the
Common Development
Stock Stage Total
<S> <C> <C> <C>
Balance at inception (May 27, 1997) $ - $ - $ -
Issuance of common stock 10 - 10
Net loss - (8,089) (8,089)
______ _____ _____
Balance at June 30, 1997 $ 10 $(8,089) $(8,079)
====== ===== =====
/TABLE
<PAGE>
<PAGE> F-6
HEARTLAND BANCSHARES, INC.
(A Company in the Development Stage)
STATEMENT OF CASH FLOWS
For the period from May 27, 1997 (date of inception)
to June 30, 1997
Cash flows from operating activities
Net loss $ (8,089)
Adjustments to reconcile net loss to
net cash from operating activities
Increase in accounts payable 81,684
______
Net cash from operating activities 73,595
Cash flows from investing activities
Purchase of fixed assets (13,210)
Organizational costs (46,171)
______
Net cash from investing activities (59,381)
Cash flows from financing activities
Proceeds from related party notes payable 25,490
Deferred offering costs (29,500)
Sale of common stock 10
______
Net cash from financing activities (4,000)
______
Net increase in cash 10,214
Cash at beginning of period -
_______
Cash at end of period $ 10,214
======
<PAGE>
<PAGE> F-7
HEARTLAND BANCSHARES, INC.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization: Heartland Bancshares, Inc. (the "Company") was
incorporated on May 27, 1997 to form a new bank, Heartland
Community Bank (the "Bank") to be located in Franklin, Indiana.
The Company intends to raise a minimum of $9,000,000 in equity
capital through the sale of 1,000,000 shares of the Company's
common stock at $10 per share, net of underwriting discounts and
offering costs. Proceeds from the offering will be used to
capitalize the Bank and provide working capital.
Nature of Business: The Bank intends to generate commercial,
mortgage and installment loans and receive deposits from
customers located in Johnson and contiguous counties in Indiana.
Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in the financial statement disclosures provided.
These estimates and assumptions may change in the future and
future results could differ.
Organization Costs: Organization costs represent incorporation
and legal costs and other costs relating to the establishment of
the Company. These costs will be amortized over a 60-month
period after the commencement of operations.
Deferred Offering Costs: Deferred offering costs include legal,
consulting and accounting costs incurred in connection with the
registration of the Company's common stock. Those costs will be
charged against the stock proceeds or, if the offering is not
successful, charged to expense at that time.
Office Equipment: Office equipment is stated at cost less
accumulated depreciation. Depreciation is computed using the
straight line method based on the estimated useful lives of the
assets. Maintenance and repairs are expensed and major
improvements are capitalized.
NOTE 2 - NOTES PAYABLE TO RELATED PARTIES
Demand notes payable, including accrued interest, in the amount
of $25,490 are outstanding to certain directors and officers of
the Company and bear interest at prime rate variable (which was
8.5% at June 30, 1997). As of August 31 the balance of demand
<PAGE>
<PAGE> F-8
notes payable, including accrued interest, was $163,082. The
Company intends to repay the loans from the proceeds of the
common stock offering. The notes are due no later than
December 31, 1997.
NOTE 3 - INCOME TAXES
At June 30, 1997, the Company had a loss of $8,089. At the
conclusion of its tax year, the Company may have an operating
loss carryforward which could be utilized over a 15 year period.
No deferred tax asset is recorded, as a valuation allowance
reduces the gross deferred tax asset of $2,750 to zero.
NOTE 4 - STOCK OPTIONS AND AUTHORIZED SHARES
On July 25, 1997, the Company's Board of Directors adopted two
stock option plans: an employee plan and a non-employee director
plan. Under the terms of the plans, options for up to 115,000
shares of the Company's common stock may be granted to key
management employees and directors of the Company and its
subsidiaries. The exercise price of the options will be
determined at the time of grant by an administrative committee to
be appointed by the Board of Directors and in any event, will not
be less than fair market value of the shares of Common Stock at
the time the option is granted.
Regarding the employee plan, options are immediately exercisable
with respect to 20 percent of the shares covered by the option
and will vest with respect to an additional 20 percent of the
shares on each of the following four anniversaries of the date of
grant, assuming continued employment of the optionee. The
options will expire after 10 years.
Regarding the Nonemployee Director Plan, options granted are
immediately exercisable for 1,000 shares of Common Stock per
nonemployee director. On the date of each successive annual
meeting of the Company, options will become exercisable (assuming
continued service on the Board of Directors) for an additional
1,000 shares of Common Stock per nonemployee director, until all
options are exercisable in full. In the event of a "change in
control" of the Company, as defined in the Nonemployee Director
Plan, options then outstanding shall become immediately
exercisable in full, immediately prior to such change in control.
The unexercised portion of each option automatically expires, and
is no longer exercisable, on the earliest to occur of the
following: (i) ten years after the option is granted, (ii) three
months after the person who was granted the option ceases to be a
Nonemployee Director, other than due to permanent disability,
death, or for cause, (iii) one year following the death or
permanent disability of the Nonemployee Director, and (iv)
termination of the Nonemployee Director's service as such, for
cause.
<PAGE>
<PAGE> F-9
Also on July 25, 1997, the Board of Directors amended the
articles of incorporation to increase authorized shares of common
stock to 10,000,000 and to authorize 2,000,000 shares of no par
preferred stock.
Franklin, Indiana
FINANCIAL STATEMENTS
June 30, 1997
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY
THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
PAGE
----
Available Information.................. 4
Prospectus Summary..................... 5
Risk Factors........................... 8
Use of Proceeds........................ 12
Possible Escrow of Proceeds............ 19
Dividend Policy........................ 19
Capitalization......................... 20
Business............................... 21
Management............................. 27
Related Party Transactions............. 34
Principal Shareholders................. 35
Supervision and Regulation............. 37
Description of Capital Stock........... 49
Shares Eligible for Future Sale........ 56
Underwriting........................... 57
Legal Proceedings...................... 59
Legal Matters.......................... 59
Experts................................ 59
Additional Information................. 60
Index to Financial Statements.......... F-1
------------------------
UNTIL DECEMBER 26, 1997 (90 DAYS AFTER THE EFFECTIVE DATE
OF THE OFFERING), ALL DEALERS EFFECTING TRANSACTIONS IN THE
COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITER AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
1,000,000 SHARES
HEARTLAND BANCSHARES, INC.
COMMON STOCK
--------------------------
PROSPECTUS
--------------------------
(LOGO)
September 23, 1997
- - -------------------------------------------------------
- - -------------------------------------------------------<PAGE>
<PAGE> II-1
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the Indiana Business Corporation Law and Article IV of
the Company's Restated Bylaws, the Company's officers and
directors are entitled to indemnification against all liability
and expense with respect to any civil or criminal claim, action,
suit or proceeding in which they are wholly successful. If they
are not wholly successful and even if they are adjudged liable or
guilty, they are entitled to indemnification if it is determined,
with respect to a civil action, by disinterested directors, a
special legal counsel, or a majority vote of the shares of the
Company's voting stock held by disinterested shareholders, that
they acted in good faith in what they reasonably believed to be
the best interests of the Company. With respect to any criminal
action, it must also be determined that they had no reasonable
cause to believe their conduct unlawful.
Under the Indiana Business Corporation Law, a director of
the Company cannot be held liable for actions that do not
constitute wilful misconduct or recklessness. In addition, the
Articles of Incorporation of the Company provide that directors
of the Company shall be immune from personal liability for any
action taken as a director, or any failure to take any action, to
the fullest extent permitted by the applicable provisions of the
Indiana Business Corporation Law from time to time in effect and
by general principles of corporate law. In addition, a director
of the Company against whom a shareholders' derivative suit has
been filed cannot be held liable if a committee of disinterested
directors of the Company, after a good faith investigation,
determines either that the shareholder has no right or remedy or
that pursuit of that right or remedy will not serve the best
interests of the Company.
At present, there are no claims, actions, suits or
proceedings pending where indemnification would be required under
the above, and the Company does not know of any threatened
claims, actions, suits or proceedings which may result in a
request for such indemnification.
<PAGE>
<PAGE> II-2
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in
connection with the sale and distribution of the Common Stock
being registered, other than underwriting discounts and
commissions. All amounts shown are estimates, except the SEC
registration fee and the NASD filing fee, and assume sale of
1,000,000 shares in the offering.
SEC registration fee. . . . . . . $ 3,485
NASD filing fee. . . . . . . . . . . 1,650
Printing and mailing expenses. . . . 16,500
Fees and expenses of counsel . . . . 60,000
Accounting and related expenses. . . 15,000
Blue Sky fees and expenses
(including counsel fees). . . . . . 15,000
Underwriter's Expenses*. . . . . . . 25,000
Miscellaneous. . . . . . . . . . . . 23,365
_______
Total . . . . . . . . . . . . . . $160,000
=======
*If the over-allotment option is exercised by the Underwriter in
full, the Underwriter will waive reimbursement of these expenses.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The registrant has borrowed approximately funds from its
organizers to pay organizational and related expenses as
disclosed in the Prospectus. To the extent that such
transactions would be deemed to involve the offer or sale of a
security, the registrant would claim exemption including, without
limitation, the exemption provided by Section 4(2) of the
Securities Act of 1933, for such transactions. In addition, the
registrant, sold one share of its Common Stock to a Director for
$10. The registrant also claims an exemption for such sale
pursuant to Section 4(2).
<PAGE>
<PAGE> II-3
ITEM 27.EXHIBITS.
Exhibit No. Description
1 *Form of Underwriting Agreement
3.1 *Amended and Restated Articles of Incorporation of
Heartland Bancshares, Inc.
3.2 *Amended and Restated Bylaws of Heartland Bancshares,
Inc.
5 *Opinion of Leagre Chandler & Millard
10.1 *1997 Stock Option Plan
10.2 *1997 Stock Option Plan for Nonemployee Directors
10.3 ***Form of Organization Agreement Under Which Debt
Described in Prospectus as "Borrowings" Was Incurred
10.4 ***Purchase Agreement and Note (Franklin, Indiana property)
10.5 ***Lease (Greenwood, Indiana property)
23.1 *Consent of Leagre Chandler & Millard (included in
opinion filed as Exhibit 5)
23.3 **Consent of Crowe, Chizek and Company, LLP
24 *Power of Attorney (included on page II-4)
27 *Financial Data Schedule (EDGAR filing only)
99 ***Form of Escrow Agreement between Bank One, Indiana,
N.A., Heartland Bancshares, Inc., and Roney & Co.
__________________
* Filed with the original Registration Statement.
** Filed with Amendments No. 1 and No. 2.
***Filed with this Amendment No. 3.
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes as follows:
(1) The registrant will provide to the underwriter at the
closing specified in the underwriting agreement certificates in
such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
(2) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
<PAGE>
<PAGE> II-4
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication
of such issue.
(3) The registrant will:
(i) For determining any liability under the Securities
Act, treat the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
registrant under Rule 424(b)(1), or (4) or 497(h) under the
Securities Act as part of this registration statement as of the
time the SEC declared it effective; and
(ii) For determining any liability under the Securities
Act, treat each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities
offered in the registration statement, and that offering of the
securities at that time as the initial bona fide offering of
those securities.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act
of 1933, the registrant certifies that it has reasonable grounds
to believe that it meets all of the requirements of filing on
Form SB-2 and authorized this Amendment No. 3 to this
registration statement to be signed on its behalf by the
undersigned, in the City of Franklin, State of Indiana, on
September 19, 1997.
HEARTLAND BANCSHARES, INC.
By /s/ Steve Bechman
Steve Bechman, President
In accordance with the requirements of the Securities Act of
1933, this Amendment No. 3 to this Registration Statement was
signed by the following persons in the capacities indicated on
September 19, 1997.
Signatures Title
/s/ Steve Bechman President (chief executive
Steve Bechman officer) and Director
/s/ Jeffrey L. Goben Director
Jeffrey L. Goben
Chief Financial Officer
/s/ Jeffery D. Joyce (principal financial and
Jeffery D. Joyce accounting officer)
<PAGE>
____________________________ Director
Sharon K. Acton
*
____________________________ Director
Gordon R. Dunn
____________________________ Director
J. Michael Jarvis
*
____________________________ Director
John Norton
____________________________ Director
Robert L. Richardson
____________________________ Director
Patrick A. Sherman
*
____________________________ Director
James C. Stewart
*By /s/ Steve Bechman
Steve Bechman, Attorney-in-fact
EXHIBIT 10.3
FORM OF
ORGANIZATION AGREEMENT
UNDER WHICH DEBT DESCRIBED IN PROSPECTUS
AS "BORROWINGS" WAS INCURRED
1. General. Each of the undersigned (collectively the
"Organizers"), in consideration of the commitments made by each of
the other Organizers, hereby agrees to become an Organizer and a
member of the Board of Directors of J.C. Investments, Inc., an
Indiana corporation (the "Company"). Each Organizer hereby agrees
to lend to the Company up to the maximum amount set forth beside
his name promptly upon call of the Company from time to time at any
time prior to December 31, 1997 (the "Loan Commitment"). The
Company is being organized for the express purposes of facilitating
the establishment of a new "de novo" commercial bank to service
Johnson County, Indiana and surrounding areas ("New Bank"). It is
anticipated that each of the Organizers shall be an incorporator of
the New Bank and shall also become a Director of the New Bank.
Each of the Organizers agrees to execute (in his capacity as an
incorporator or Director of the New Bank or the Company) the
necessary regulatory applications, registration statements, and
other documents that will be required in connection with the
organization of the Company and the New Bank (including the
required personal financial and biographical reports and
fingerprint cards) and in connection with the Company's planned
public stock offering (the "IPO"). Further, although the Company
is not at this time offering stock to the Organizers or the public,
the Company agrees that each Organizer will have the opportunity in
the IPO to purchase from the underwriters an amount of common
stock, at the public offering price, equal to at least the
principal amount that such Organizer has agreed to lend to the
Company in connection with its organization pursuant to this
Agreement.
2. Management of the Company. The Organizers hereby
unanimously consent as Directors of the Company (in lieu of holding
a meeting) that the affairs of the Company during its
organizational stage shall be managed by Steven L. Bechman, its
President, and Jeffery L. Goben, its Executive Vice President, who
are also Directors of the Company. Messrs. Bechman and Goben are
hereby designated by the unanimous consent of the Organizers as the
Executive Committee of the Company's Board of Directors, which
Executive Committee is hereby authorized to exercise all the powers
and authority of the Board of Directors to the fullest extent
permissible under the Indiana Business Corporation Law ("IBCL").
The Executive Committee, within the limits established by the IBCL,
shall have full authority to manage the Company towards its goal of
establishing the New Bank including, but not limited to, the
authority:
(i) to engage legal counsel, independent accountants, and
other professional consultants, to act for and on behalf
of the Company and to engage an underwriter for the
proposed public offering of stock of the Company;
(ii) to hire employees on such terms and conditions as
they deem necessary or appropriate;
(iii) to make all such applications to the Federal
Deposit Insurance Corporation, the Indiana Department of
Financial Institutions, the Board of Governors of the
Federal Reserve System, and all such other regulatory
bodies, as may be required to facilitate the formation of
the New Bank as a subsidiary of the Company;
(iv) to make calls upon the Organizers for Loans in
accordance with this Agreement; and
(v) to take all such further action as may be necessary
or appropriate to facilitate the organization of the
Company and the New Bank and the making of the IPO.
Each of the Organizers (other than Messrs. Bechman and Goben)
understands that he has no authority, as an individual, to act on
behalf of the Company or any of the other Organizers, or to bind
the Company in any way to third parties.
3. Terms of Loans; Loans Not Guaranteed or Insured. The
Company's obligations to each Organizer to repay amounts advanced
pursuant to the Loan Commitment ("Loans") shall be on open account
and shall not be evidenced by any note or separate document. The
unpaid principal balance of the Loans shall bear interest at the
national "prime rate" as quoted in The Wall Street Journal. The
principal and interest on the Loans shall be repaid to each
Organizer in a single installment on the date of closing of the
Company's planned IPO from the proceeds thereof, or (in the
unlikely event that the Company then has any assets to fund such
repayment) on December 31, 1997 if the IPO has not by then been
closed. Each Organizer understands that the amount of any Loans
made by him to the Company is risk capital that will be expended by
the Company during its development stage, and that the Loans are
unsecured corporate obligations that are not in any way guaranteed
by Messrs. Bechman or Goben or anyone else, and are not obligations
of a bank and are not insured. In the event that the New Bank is
not organized or the IPO does not occur for any reason, each
Organizer will likely sustain a loss of all or substantially all
the principal amount of the Loans.
4. Representations by the Organizers. Each of the
Organizers represents to the Company and to each other that he has
sufficient experience and expertise in business and financial
matters to evaluate independently the merits and risks of an
investment in the Company and the New Bank, that he presently has
liquid assets sufficient to fund his Loan Commitment, and that he
is prepared to sustain a total loss of his investment. Each
Organizer agrees that his personal participation in the management
of the Company and the New Bank, and his personal commitment to be
a member of the Board of Directors of the Company and the New Bank,
are critical to the Company, and to the decision of each other
Organizer to join in this Agreement, and therefore that his
interest in the Company and his rights and obligations to extend
credit under the Loan Commitment, cannot be transferred or assigned
by him without the unanimous consent of all the other Organizers
and compliance with applicable law. Further, each Organizer
promises each other Organizer that, if he later determines that he
cannot (or will not) lend all or any part of his Loan Commitment in
accordance with his legal commitment to do so indicated on the
signature pages thereof, he shall notify the other Organizers
immediately.
5. Notices. Notices to the Company shall be addressed to
the President thereof at the following address:
Steven L. Bechman, President
J.C. Investments, Inc.
P.O. Box 469
Franklin, Indiana 46131
Notices to the Organizers shall be sent to their addresses
indicated next to their signatures or to such other address as they
may specify by a notice sent to the Company and all other
Organizers.
6. Counterparts. This Organizers Agreement may be executed
in numerous counterparts (one with each individual Organizer).
Each of such counterparts shall be deemed an original and all such
counterparts together shall constitute one and the same instrument.
<PAGE>
ORGANIZATION AGREEMENT
COUNTERPART SIGNATURE PAGE
This Organization Agreement has been executed and delivered to
J.C. Investments, Inc. (subject to acceptance or rejection by the
Company in its discretion) by the following Organizer on the date
set forth below. The Organizer by signing below commits to lend
funds upon call of the Company from time to time at any time prior
to December 31, 1997, up to the aggregate principal amount of the
Loan Commitment set forth opposite his name, and agrees that he
shall become a Director of the Company upon its acceptance hereof.
<TABLE>
<CAPTION>
Dollar
Name, Address Amount of
and Taxpayer Identification Loan
Number of Organizer Commitment Date
<S> <C> <C>
_________________________ $____________ __________, 1997
(Signature)
_________________________
Printed Name
_________________________
_________________________
_________________________
Address
_________________________
Taxpayer Identification
Number
</TABLE>
ACCEPTED this _______ day of
________, 1997.
J.C. INVESTMENTS, INC.
By___________________________________
Steven L. Bechman, President
3035\EDGAR\ORGAGR10.3
EXHIBIT 10.4
PURCHASE AGREEMENT
J.C. INVESTMENTS, INC., an Indiana corporation (the
"Purchaser") offers to purchase from MAC'S RESTAURANTS, INC., an
Indiana corporation (the "Vendor"), the following described real
estate and other property located in Johnson County, Indiana,
commonly known as 420 N. Morton Street, Franklin, Indiana 46131,
the legal description of which is:
All of the South 125 feet of the following
described property:
Part of the west half of Section 14, and part
of the east half of Section 15, in Township 12
North, range 4 East of the Second Principal
Meridian, in Johnson County, Indiana,
described as follows:
Beginning at a point that is 342.00 feet north
of the north-west corner of Thompson and
McNutt Addition to the City of Franklin,
Indiana, said point being in the east line of
the Johnson County Fairgrounds; thence east
and parallel to the north line of said
addition 380.50 feet to the west line of the
right-of-way of U.S. Road 31; thence north
with said right-of-way line 250.00 feet;
thence west and parallel with the north line
of said Addition 379.00 feet to the east line
of said Fairgrounds; thence south 250.00 feet
to the place of beginning.
including all buildings and permanent improvements and fixtures
attached thereto, either permanently installed or which belong to
or are used in connection with the real estate, wherever located,
such as electrical or gas fixtures, heating equipment, hot water
heater and water softener, and all furniture and restaurant
equipment together with all privileges and appurtenances pertaining
thereto including any right, title and interest of Vendor in and to
adjacent streets, alleys or rights of way, and Vendor's rights
under that certain Easement for Use of Parking Areas in Common
dated April 17, 1987 with Edward Doyle Slifer of Christian County,
Illinois (the "Easement") (all referred to as the "Real Estate")
for $525,000.00 (the "Purchase Price"), payable upon and subject to
the following written terms and conditions:
I. Earnest Money Deposit. Purchaser has tendered to Vendor an
earnest money deposit of $2,500.00 (the "Earnest Money").
The Earnest Money shall be applied to the portion of the
Purchase Price payable in cash at the time of closing if the
transaction closes. The Earnest Money shall be returned
immediately to Purchaser if this offer is not accepted.
II. Method of Payment. On and after closing of this transaction,
Purchaser shall pay the Purchase Price to Vendor in
installments with interest from and after the closing on or
before December 31, 1997, as follows:
Cash payable at closing of $50,000.00 (including the
Earnest Money), interest rate on the unpaid balance
at 9.5% per annum calculated monthly and paid
monthly on or before the first day of each month in
arrears; level monthly payments of principal and
interest of $5,000.00 on or before the first day of
each month; first payment shall be due on August 1,
1997; interest shall commence the day after closing.
All unpaid principal and interest shall be paid in
full on or before December 31, 1997.
Purchaser's obligations to pay the unpaid balance of the
Purchase Price and interest thereon after the closing shall
be secured by (a) a mortgage on the Real Estate on the
standard form of the Indianapolis Bar Association (the
"Mortgage") and (b) the personal guaranties of Steven L.
Bechman and Jeffery L. Goben (the "Guaranties"), which shall
be delivered at closing.
III. Conditions of Offer. In addition to other provisions of this
Purchase Agreement, the Purchaser's obligations hereunder are
subject to satisfaction of the following conditions unless
waived, in whole or in part, by Purchaser.
A. That all improvements in the Real Estate are located
entirely within the bounds of the Real Estate as shown by
the survey to be prepared for closing and that there are
no encroachments thereon and no existing violations of
zoning ordinances or other restrictions applicable to the
Real Estate.
B. That results are satisfactory to Purchaser from a
geoenvironmental audit, Phase I, including asbestos
review, that is conducted at the Purchaser's expense.
C. That good and indefeasible title in fee simple to the
Real Estate is conveyed to Purchaser at closing, free and
clear of any and all liens, encumbrances, conditions,
easements (except the Easement), assessments,
reservations, and restrictions except:
1. the lien of current real estate taxes not
delinquent;
2. easements and restrictions that do not materially
affect Purchaser's intended use of the Real Estate
as a commercial bank or affect the marketability of
title; and
3. such matters satisfactory to Purchaser as may be
approved by Purchaser in writing.
D. That possession of the Real Estate is delivered to
Purchaser in the condition existing at the time of the
delivery of this offer by Purchaser to Vendor, ordinary
wear and tear excepted.
E. That the Easement (Attachment "A" to this Agreement) is
properly recorded in the Johnson County Recorder's
Office, and Mr. Slifer, the other party to the Easement,
shall have executed a written consent approving
Purchaser's intended modifications to the parking and
other areas covered by the Easement.
F. That the representations and warranties of Vendor in Part
IV are true and correct in all material respects as of
the closing date.
IV. Representations and Warranties of Vendor. Vendor represents
and warrants to Purchaser as follows, which representations
and warranties shall be deemed made by Vendor to Purchaser
also as of the closing and such representations and
warranties shall survive the closing:
A. There are no parties in possession of any portion of the
Real Estate as lessees, tenants at sufferance, or
trespassers.
B. There is no pending or threatened condemnation or similar
proceeding or assessment affecting the Real Estate, or
any part thereof, nor to the best knowledge and belief of
Vendor is any such proceeding or assessment contemplated
by any governmental authority.
C. Vendor is the fee simple owner of the title to the Real
Estate and Vendor is an Indiana corporation in good
standing, and all Board of Directors, shareholder and
other corporate approvals have been obtained to authorize
the Vendor to execute this Agreement and to sell the Real
Estate.
D. Vendor has paid or will pay at or prior to closing all
taxes, charges, debts, and other assessments then due by
the Vendor with respect to the Real Estate and will pay
in November, 1997 the installment of taxes then due with
respect to the Real Estate.
E. The Real Estate is not in a flood plain or water
district.
F. Vendor knows of no existing condition with respect to the
Real Estate which violates any government code, rule,
statute, ordinance or regulation.
G. Vendor has no knowledge that the Real Estate is subject
to any surface or subsurface ground faults, nor are there
any underground storage tanks present.
H. To the best of Vendor's knowledge, no fact or condition
exists which would result in the termination of the
current access from the Real Estate to any presently
existing highways and/or road adjoining or situated on
the Real Estate; or to any existing sewer or other
utility facilities servicing, adjoining, or situated on
the Real Estate.
I. Vendor has no knowledge of any pending or contemplated
change in any statute, ordinance, rule or other
governmental regulation applicable to the Real Estate; or
any action pending or threatened by any governmental
body, adjacent landowners or other persons, or of any
condition of the Real Estate, which would in any way
limit the use of the Real Estate or diminish its value.
J. There are no attachments, executions, assignments for the
benefits of creditors, or voluntary or involuntary
proceedings in bankruptcy or under any other debtor
relief laws contemplated by or pending or threatened
against Vendor or the Real Estate.
K. Vendor has no knowledge of any latent structural defects
of the Real Estate. THIS REPRESENTATION K IS NOT
INTENDED TO BE A WARRANTY AND NO EXPRESS OR IMPLIED
WARRANTY IS GIVEN BY VENDOR WITH RESPECT TO THE REAL
ESTATE WHICH IS TO BE PURCHASED BY PURCHASER "AS IS,"
ORDINARY WEAR AND TEAR EXCEPTED.
L. The Real Estate has not been designated a landmark or
historic building.
V. Survey and Title Evidence.
A. Vendor, at Vendor's expense, shall furnish Purchaser
within 15 days after acceptance of this offer a
Commitment for an Owner's Policy of Title Insurance
("Commitment") in an amount equal to the amount of the
Purchase Price from a company acceptable to Purchaser.
The Commitment shall include an endorsement certifying
that the Real Estate is properly zoned for Purchaser's
intended use as a commercial banking facility. If
Purchaser has an objection to items disclosed in such
Commitment or the survey provided for herein, Purchaser
shall promptly make written objections to Vendor after
receipt of each such instrument. If Purchaser makes such
objections, Vendor shall have ten (10) days from the date
such objections are disclosed to cure the same, and the
Closing Date shall be extended, if necessary; provided,
however, that Vendor makes no representation concerning
the zoning permissibility of Purchaser's intended use and
Vendor shall have no obligation to cure or remedy any
zoning obligation disclosed in the Commitment. Vendor
agrees to utilize its best efforts and reasonable
diligence to cure such objections (other than any
objections relating to zoning), if any. If the
objections are not satisfied within such time period,
Purchaser may (a) terminate this Agreement, or (b) waive
the unsatisfied objections and close the transaction.
B. Vendor, at Vendor's expense, shall provide a staked
survey of the Real Estate, certified as of a current
date, showing the location of all improvements and
easements located thereon, complying with the Minimum
Standard Detail Requirements for Indiana Land Title
Surveys, and shall reflect whether the Real Estate is
located in a designated flood zone area.
VI. Taxes and Assessments. Purchaser assumes and agrees to pay
all assessments for public improvements becoming a lien after
closing, and all installments of real estate taxes due and
payable in May, 1998, and thereafter.
VII. Risk of Loss. Vendor shall bear the risk of loss or damage
or destruction to the Real Estate occurring subsequent to the
acceptance of this Purchase Agreement and until delivery of
the deed. In the event any such damage or destruction is not
fully repaired prior to closing, Purchaser, at its option,
may either (a) terminate this Agreement, or (b) elect to
close the transaction, in which event Vendor's right to all
insurance proceeds resulting from such damage or destruction
shall be assigned in writing by Vendor to Purchaser.
VIII. Inspection. Purchaser acknowledges that Vendor has made no
warranties or representations pertaining to the quality or
condition of the Real Estate other than lack of actual
knowledge of ground faults, underground storage tanks, and
latent structural defects (Section IV (G) and (K)) and
regarding the Responsible Property Transfer Law (Section
XII). Purchaser has inspected the premises and agrees to
purchase the Real Estate in an "as is" condition. Vendor
agrees to maintain and to insure against fire and casualty
the Real Estate in its present condition (wear and tear
excepted) until possession is delivered to Purchaser.
IX. Default. If Purchaser breaches this Agreement and is in
default, (a) Vendor may seek specific performance or any
other remedy provided by law or equity; or (b) Vendor may
treat this Agreement as being terminated and receive the
Earnest Money as liquidated damages. If Vendor breaches this
Agreement and is in default, then the Earnest Money shall be
returned to Purchaser. In addition, if Vendor is in default,
the Purchaser may seek specific performance or any other
remedy provided by law or equity against the Vendor. If the
transaction does not close for any reason other than default
by Purchaser, the Vendor shall return the Earnest Money to
Purchaser.
X. Closing and Possession. The transaction shall be closed at
a time and place acceptable to the parties but in no event
later than July 1, 1997, and possession of the Real Estate
shall be delivered at Closing. Either party may, however,
request and receive a 15-day extension of the closing date in
the event the transaction cannot be closed due to delay in
obtaining the title or survey evidence or the Phase I report,
or satisfying objections to the results thereof.
A. At closing, Vendor shall deliver to Purchaser at Vendor's
sole cost and expense, the following:
1. A duly executed and acknowledged Corporate Warranty
Deed conveying good and indefeasible title in fee
simple to all of the Real Estate, free and clear of
any and all liens, encumbrances, conditions,
easements, assessments, reservations and
restrictions, except as permitted herein and/or
approved by Purchaser in writing.
2. Vendor's Affidavit.
3. An Owner's Policy of Title Insurance (the "Title
Policy") issued by a reputable title insurance
company chosen by the Vendor (the "Title Company")
in the full amount of the Purchase Price, dated as
of closing, insuring Purchaser's fee simple title
to the Real Estate to be good and indefeasible
subject only to those title exceptions permitted
herein, or as may be approved by Purchaser in
writing, and the standard printed exceptions
contained in the usual form of the Title Policy and
including the zoning endorsement required to be
included in the Commitment; however, the exception
as to area and boundaries shall be deleted and the
exception as to restrictive covenants shall be
endorsed "None of Record," unless any existing
restrictive covenants are approved by Purchaser.
4. A Bill of Sale containing warranties to title,
conveying title, free and clear of all liens, to
all personal property specified herein (but which
need not itemize property) all duly executed by
Vendor.
5. If requested by Purchaser, to the extent
assignable, an assignment of any one or more of the
insurance policies held by Vendor pertaining to the
Real Estate, duly executed by Vendor (insurance
costs to be prorated based on date of closing).
6. Evidence of Vendor's capacity and authority for the
closing of this transaction.
7. A certification establishing that no federal income
tax is required to be withheld under the Foreign
Investment and Real Property Tax Act, or a consent
to withholding of tax from the proceeds of sale as
required.
8. All other necessary documents to close this
transaction.
9. Proof of payment of Indiana Gross Income Tax, if
payable.
B. At the closing, Purchaser shall perform the following:
1. Pay the cash portion of the Purchase Price payable
at closing in the form of a certified or cashier's
check.
2. Furnish evidence of Purchaser's capacity and
authority for the closing of this transaction.
3. Deliver the Mortgage.
4. Deliver the Guaranties.
5. Execute all other necessary documents to close this
transaction.
XI. Duration of Offer. This offer shall expire if written
acceptance endorsed hereon is not delivered to Purchaser on
or before 5:00 p.m. o'clock on June ___, 1997.
XII. Responsible Property Transfer Law.
A. The Vendor represents to Purchaser that it is not
required to provide the Purchaser with a Disclosure
Statement pursuant to Indiana's Responsible Property
Transfer Law because the Real Estate is not defined as
"property" (I.C. Section 13-11-2-174).
B. If, after execution of this Agreement, Vendor learns that
the Real Estate comes within the terms of the Responsible
Property Transfer Law, then Vendor at its expense agrees
to provide Purchaser with the required Disclosure
Document and comply with all other parts of this law.
XIII. Sales Expenses. Vendor and Purchaser agree that all sales
expenses are to be paid in cash prior to or at the closing.
A. Vendor's Expenses. Vendor agrees to pay all costs of the
Owner's Title Policy; survey; 1/2 of any closing fee;
preparation of Deed and Vendor's Affidavit; Indiana Gross
Income Tax, if any; and other expenses stipulated to be
paid by Vendor under other provisions of this Agreement.
B. Purchaser's Expenses. Purchaser agrees to pay 1/2 of any
closing fee; and any other expenses stipulated to be paid
by Purchaser under other provisions of this Agreement.
C. No Brokerage. Purchaser and Vendor each represent and
warrant to the other that neither has engaged or
contacted or discussed the Real Estate with any broker or
other person who might or could assert any claim against
the Real Estate or against Vendor or Purchaser for a
brokerage commission, and each agrees to indemnify and
hold harmless the other for all expense and loss suffered
from any breach of this representation and warranty.
XIV. Miscellaneous.
A. Any notice required or permitted to be delivered
hereunder, shall be deemed received when personally
delivered, or on the second business day after it is
deposited in the United States mail, postage prepaid,
certified and return receipt requested, addressed to
Vendor or Purchaser, as the case may be, at the address
set forth below the signature of each party hereto.
B. This Agreement shall be construed under and in accordance
with the laws of the State of Indiana.
C. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives,
successors, and assigns. Purchaser intends to change its
corporate name to Heartland Bancshares, Inc., before the
date of closing, in which event all documents referred to
herein shall reference the new name. Vendor acknowledges
and understands Purchaser intends to assign its interest
in this Agreement to Heartland Bancshares, Inc.
Provided, however, until such time as the full amount of
the purchase price has been paid to Vendor, there shall
be no subsequent assignment of this agreement without
Vendor's prior written consent. In any event any
assignment of this agreement shall not relieve or void
the Guaranties of Steven L. Bechman and Jeffrey L.
Goldmen.
D. In case any one or more of the provisions contained in
this Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, such
invalidity, legality, or unenforceability shall not
affect any other provision hereof, and this Agreement
shall be construed as if such invalid, illegal, or
unenforceable provision had never been contained herein.
E. This Agreement constitutes the sole and only agreement of
the parties hereto and supersedes any prior
understandings or written or oral agreements between the
parties respecting the transaction and cannot be changed
except by their written consent.
F. Time is of the essence of this Agreement.
G. The prevailing party in any legal or equitable proceeding
against any other party brought under or with relation to
this Agreement or transaction shall be additionally
entitled to recover court costs and the prevailing
party's reasonable attorney's fees from the non-
prevailing party.
H. All rights, duties and obligations of the parties shall
survive the passing of title to, or an interest in the
Real Estate.
J.C. INVESTMENTS, INC.
DATED: 6-12-97 By /s/ Steven L. Bechman
Steven L. Bechman, President
Address:
P.O. Box 469
Franklin, IN 46131<PAGE>
ACCEPTANCE OF OFFER AND RECEIPT FOR EARNEST MONEY
The undersigned, Vendor, hereby accepts such offer and
acknowledges receipt of the Earnest Money to be held for
Purchaser's benefit and either applied, returned or
forfeited according to the terms of this Purchase
Agreement.
MAC'S RESTAURANTS, INC.
DATED: 6-16-97 By /s/ Debra J. Mennen
Its President
<PAGE>
PROMISSORY NOTE
[ON LENDER'S FORM -- APPLICABLE INFORMATION ONLY]
<TABLE>
<CAPTION>
BORROWER'S NAME/ADDRESS LENDER'S NAME/ADDRESS
<S> <C> <C>
HEARTLAND BANCSHARES, INC. FIRST STATE BANK, TRAFALGAR ACCOUNT #2154250
1681 N 125 W 110 N ST. RD. 135 LOAN NUMBER 48677
FRANKLIN, IN 46131 TRAFALGAR, IN 46181 DATE: JULY 24, 1997
MATURITY: JANUARY 20, 1998
LOAN AMOUNT $475,500.00
SS#: 35-2017085
</TABLE>
For value received, I promise to pay to you, or your
order, at your address listed above the PRINCIPAL sum of
FOUR HUNDRED SEVENTY FIVE THOUSAND FIVE HUNDRED AND
NO/100 Dollars $475,500.00.
Single Advance: I will receive all of this principal sum
on JULY 24, 1997. No additional advances are
contemplated under this note.
INTEREST: I agree to pay interest on the outstanding
principal balance from JULY 24, 1997 at the rate of
9.000% per year until FIRST CHANGE DATE.
Variable Rate: This rate may then change as stated
below.
Index Rate: The future rate will be 0.500% OVER the
following index rate: PRIME RATE AS PUBLISHED IN THE
WALL STREET JOURNAL
Frequency and Timing: The rate on this note may change
as often as DAILY. A change in the Interest rate will
take effect ON THE SAME DAY.
Effect of Variable Rate: A change in the interest rate
will have the following effect on the payments: THE
AMOUNT DUE AT MATURITY WILL CHANGE.
POST MATURITY RATE: I agree to pay interest on the unpaid
balance of this note owing after maturity, and until paid
in full, as stated below:
on the same fixed or variable rate basis in effect
before maturity (as indicated above).
PAYMENTS: I agree to pay this note as follows:
Interest: I agree to pay accrued interest AT MATURITY.
Principal: I agree to pay the principal JANUARY 20,
1998.
<TABLE>
<S> <C>
SECURITY: This note is separately PURPOSE: The purpose of this loan is
secured by FIRST REAL ESTATE MORTGAGE BUSINESS: PURCHASE COMMERCIAL PROPERTY.
ON THE PROPERTY LOCATED AT 420 N.
MORTON ST., FRANKLIN, IN AND 2055 SIGNATURES: I AGREE TO THE TERMS OF THIS
SHARES OF BNK NOTE (INCLUDING THOSE ON PAGE 2). I have
received a copy on today's date.
HEARTLAND BANCSHARES, INC.
Signature for Lender BY: /s/ Steven L. Bechman
STEVEN L. BECHMAN, PRESIDENT
BY:/s/ Jeffrey L. Goben
MARK W LEHMAN, VICE PRESIDENT JEFFREY L. GOBEN, SECRETARY/TREASURER
</TABLE>
3035\EDGAR\PURAGR10.4
LEASE
THIS LEASE, made this 6th day of September, 1997, by and
between J. Greg Allen d/b/a J. Greg Allen & Associates
("Landlord")and HEARTLAND BANCSHARES, INC. ("Tenant").
WITNESSETH:
ARTICLE I
LEASED PREMISES AND COMMON AREAS
Section 1.01. Leased Premises. Landlord hereby leases to
Tenant and Tenant hereby leases from Landlord a portion of an
integrated shopping center building (the "Leased
Premises") commonly known as 489 S. S.R. 135, located at the
Northeast corner of State Road 135 and Library Boulevard,
Greenwood, Indiana, on the real estate described in the attached
Exhibit A, incorporated herein by reference (the "Shopping
Center"). The portion of the Shopping Center hereby leased to
Tenant is outlined in red and designated as bank space, on the
attached Exhibit B, incorporated herein by reference (the
approximately 3,800 square feet ("Gross Leasable Area")).
Landlord shall be entitled to change or modify the Common Areas
(as defined in Section 5.01 hereof) or other improvements and
facilities of the Shopping Center provided that neither the
Leased Premises nor the general character of the Shopping Center
shall be changed.
Section 1.02. Use of Common Areas. Landlord grants to
Tenant, its agents, employees. invitees, licensees and
concessionaires, the non-exclusive right during the Term to use
the parking areas and ingress, egress and access roads and other
facilities in the Common Areas as shall be made available by
Landlord in its sole discretion. Tenant's use of the Common
Areas shall be in common with others entitled to the use thereof
and subject to the provisions of this Lease.
Section 1.03. Roof and Walls. Landlord shall have the
exclusive right to use all or any part of the roof and exterior
walls of the leased Premises for any purposes; to erect
additional stories or other structures over all or any part of
the Leased Premises, and to install, maintain, use, repair and
replace pipes, ducts, conduits, and wires leading through the
Leased Premises provided Landlord does so in a manner reasonably
calculated to minimize any interference with Tenant's use of the
Leased Premises.
ARTICLE II
LEASE TERM
Section 2.01. Term. The term of this Lease shall be for the
period commencing on the "Commencement Date" (as hereinafter
defined) and continuing for Ten (10) years from (i) the Rental
Commencement Date, if such date is the first day of a calendar
month, or (ii) the first day of the calendar month immediately
following the Rental Commencement Date, if such date is not the
first day of a calendar month ("Original Term"). The
"Commencement Date" shall be the date the improvements to be
constructed by Landlord as provided in Section 3.01 are
substantially completed, but in no event earlier than sixty (60)
days after the date the interior of the Leased Premises is
enclosed and ready to be built out (the "Build-Out Date"). The
"Rental Commencement Date" shall be the Commencement Date. As
used in this Lease, the term "Lease Year" shall mean a calendar
year, the first Lease Year commencing on the first day of January
following the Rental Commencement Date, and each succeeding Lease
Year commencing on the anniversary of the first Lease Year. A
"Fractional Lease Year" is defined to mean the period of the
Lease Term following the last full calendar Lease Year, whether
the Lease expires by its terms or otherwise. The Original term
and any renewal thereof are herein referred to as the "Leased
Term".
If Tenant is not in default hereunder, Tenant shall have the
option to renew the term of this Lease for one (1) additional
term of five (5) years each ("Option Period"). Such renewal
shall, be upon the same terms and conditions contained in the
Lease for the Original Term except for this provision giving the
renewal option and subject to an adjustment of the Minimum Annual
Rent (as hereinafter defined) as provided in Section 4.01 and
herein. Such option shall be exercised by the occurrence of each
of the following events: (i) Tenant's giving written notice to
Landlord of its intention to renew the Term of this Lease no
later than six (6) months prior to the expiration of the Lease
Term, and (ii) Tenant's giving written notice to landlord of its
acceptance of the Minimum Annual Rent as adjusted herein within
one hundred twenty days (120) prior to the expiration of the
Lease Term.
Section 2.02. Holding Over. If Tenant holds over and
remains in possession of the Leased Premises after the expiration
of the Lease Term, such holding over and continued possession
shall, if rent is paid by Tenant and accepted by Landlord, create
a tenancy from month to month upon the terms (other than length
of term) herein specified, which may at any time be terminated by
either party upon thirty (30) days written notice given to the
other party.
ARTICLE III
CONSTRUCTION OF IMPROVEMENT
Section 3.01. Landlord's Obligation for External Structure.
Landlord agrees that it will, at its own cost and expense,
construct the Leased Premises in substantial accordance with the
preliminary plans which have been submitted by Landlord to Tenant
for the construction of the "shell" of the Leased Premises.
Landlord shall provide Tenant with at least two weeks' written
notice of the Build-Out Date on which Tenant may commence its
interior work required under Section 3.02 hereof. Landlord shall
also construct, at Tenant's cost, Tenant's full service drive up
facility improvements. Notwithstanding anything herein to the
contrary, Tenant shall pay for, and shall not receive any
allowance from the Landlord with respect to, costs directly
related to the construction of a drive up facility, night
depository and ATM facilities, including canopy, curbing,
striping, drive up lanes, electrical, mechanical and drive up
hardware and variance costs with respect to the ATM facilities
(Tenant acknowledging that the location of the ATM machine may
have to be relocated if such variance is not granted): it is the
intention of the parties that the Landlord pay costs of
construction of the Leased Premises if the same was constructed
without a drive up facility, and that the Tenant pay all excess
costs caused by the construction of the drive up facility and ATM
facilities.
Section 3.02. Tenant's Obligations. Tenant shall undertake
completion of the Leased Premises, at Tenant's sole cost and
expense, except as provided herein, and by a contractor
satisfactory to Landlord, in accordance with (1) the outline
description set forth in the schedule entitled "Tenant's Work"
and attached hereto as Exhibit D and (ii) the plans and
specifications hereinafter referred to. Tenant agrees to submit
to Landlord for its approval, within thirty (30) days from the
date hereof, a bid price with complete plans and specifications
from a third party contractor including engineering, mechanical
and electrical work covering Tenant's Work as described in
Exhibit D in such detail as Landlord may reasonably require and
in compliance with all applicable statutes, ordinances,
regulations and codes, such plans and specifications shall be
paid for by the Tenant. If said plans and specifications are not
so submitted within said thirty (30) days, or if Landlord shall
determine that such plans and specifications are unacceptable and
Tenant does not satisfactorily resolve the deficiencies within 15
days after notice from Landlord, Landlord may terminate this
Lease. Unless extended by mutual agreement of the parties,
Tenant shall complete Tenant's work in a good and workmanlike
manner no later than sixty (60) days after the Build-Out Date.
In performing its work, Tenant shall not interfere with or delay
work performed by Landlord. Landlord shall have the right of
first refusal to perform the Tenant's Work by agreeing to do such
work at the same or less bid price provided by Tenant's third
party contractor, provided that Landlord may have additional
charges for any increased specifications or scope of work made by
Tenant. Landlord shall provide the Tenant with a Fifteen Dollar
($15.00) per square foot allowance to be paid by Landlord upon
completion of Tenant's Work, after inspection of such work by
Landlord and subject to completion of punchlist items as
determined by Landlord (in the event that Tenant's third party
contractor is used), and paid to the extent of the cost of such
work and Tenant shall pay Landlord for such work upon completion.
All of Tenant's trade fixtures and equipment installed in the
Leased Premises may be removed by Tenant upon expiration of the
term of this Lease, provided that (i) Tenant shall repair any
damage to the Leased Premises or the Shopping Center caused by
such removal, and (ii) all rents and other amounts then due and
payable hereunder are paid in full. After expiration of the
Lease Term, Landlord shall have the right to remove Tenant's
leasehold improvements, trade fixtures and equipment and to have
any damage from such removal repaired at Tenant's sole cost and
expense. Tenant's obligation to pay such expenses to Landlord
shall survive the expiration of the Lease Term.
Within thirty (30) days after the date Tenant opens the
Leased Premises for business, all costs and expenses of Tenant's
Work shall have been paid by Tenant (subject to Landlord's
reimbursement obligation), and Tenant shall have provided
Landlord with copies of executed lien waivers from all
contractors and suppliers furnishing labor or materials toward
the completion of Tenant's Work, provided, however, that Tenant
shall have the right to dispute any such costs and expenses
beyond the thirty (30) day period if Tenant furnishes Landlord or
any other entity designated by Landlord with a bond or other
assurances reasonably acceptable to Landlord that such costs and
expenses as finally determined will be paid by Tenant.
Section 3.O. Period Prior to Commencement Date. Except for
Landlord's gross negligence or willful misconduct, Landlord
shall have no responsibility or liability whatsoever for any loss
or damage to any of Tenant's leasehold improvements, fixtures,
equipment or merchandise installed or left in the Leased Premises
prior to the Commencement Date. Tenant's entry upon and
occupancy of the Leased Premises prior to the Commencement Date
shall be governed by and subject to the provisions, covenants and
conditions of this Lease with respect to insurance, indemnity,
remedies and mechanic's liens.
ARTICLE IV
RENT
Section 4.01. Minimum Rent. Tenant shall pay to Landlord as
minimum rent for the Leased Premises the following sums per year
("Minimum Annual Rent") in equal monthly installments ("Minimum
Monthly Rent"):
<TABLE>
<CAPTION>
Period Following Rental Minimum Annual Minimum Monthly
Commencement Date Rent Rent
<S> <C> <C>
Year 1 $60,420 $5,035.00
Year 2 $60,420 $5,035.00
Year 3 $60,420 $5,035.00
Year 4 $62,320 $5,193.33
Year 5 $64,220 $5,351.66
Year 6 $66,120 $5,510.00
Year 7 $68,020 $5,668.33
Year 8 $69,920 $5,826.66
Year 9 $71,820 $5,985.00
Year 10 $73,720 $6,143.33
</TABLE>
The Minimum Monthly Rent shall be payable in advance commencing
on the Rental Commencement Date and thereafter on the first day
of each calendar month during the Lease Term, without relief from
valuation or appraisement laws. If the Rental Commencement Date
is not the first day of a calendar month, Tenant shall pay on the
Rental Commencement Date a prorated portion of the Minimum
Monthly Rent for the first partial calendar month of the Lease
Term. Hereinafter, the term "Minimum Rent" shall refer to either
Minimum Annual Rent or Minimum Monthly Rent, as appropriate.
The Minimum Annual Rent for each Option Period shall
commence at the amount of the Minimum Annual Rent for the
immediately preceding Lease Year set forth in this Section 4.01,
plus $1,900 ($ .50 per square foot), and shall continue to be
increased at the rate of $1,900 per year. The Minimum Monthly
Rent shall be an amount equal to one-twelfth (1/12)
of the Minimum Annual Rent for the Option Period and shall be
paid at the same time and in the same manner as provided in the
Lease.
Section 4.02. Reimbursement of Expenses, etc. In addition
to the payment of Minimum Rent as provided in this Article IV,
Tenant shall pay to Landlord all other sums of money and charges
required to be paid by Tenant to Landlord under this Lease. If
any such sum or charge is not paid at the time provided in this
Lease, it shall nevertheless be collectible with the next
installment of Minimum Rent, provided that nothing contained
herein shall be deemed to suspend or delay the payment of such
sum or charge or to limit any remedy of Landlord in respect to
its nonpayment.
Section 4.03. Place of Payments. All payments required to
be paid and all statements or notices required to be rendered by
Tenant or Landlord shall be delivered to the other party at its
address set forth in Section 17.16 or to such other address as
Landlord or Tenant shall specify in accordance with such Section.
Section 4.04. Late Charges. In the event Tenant falls to
pay within ten (10) days after the same is due and payable any
installment of Minimum Annual Rent or any other sum or charge
required to be paid by Tenant to Landlord under this Lease,
Tenant shall pay a late charge of 10% of the unpaid amount. and
such unpaid amount shall bear interest from the due date thereof
to the date of payment at the rate of eighteen percent (18%) per
annum until paid. In the event such delinquency service charge
is due to Landlord, Tenant shall pay such charge to Landlord
along with and in addition to the next monthly payment of Rental.
ARTICLE V
COMMON AREAS
Section 5.01. Definition. As used in this Lease, "Common
Areas" are defined to mean all real estate shown in Exhibit A
together with improvements and other facilities located thereon
or appurtenant thereto designed for use in common by tenants of
the Shopping Center and their agents, employees, servants,
customers, invitees and licensees, with such facilities and
improvements including parking areas, ingress and egress access
roads, sanitary sewers and utility lines, walkways and sidewalks,
landscaped and planted areas and related facilities.
Section 5.02. Management of Common Areas. Landlord shall
operate, manage, equip, light, heat, cool, repair, clean,
maintain, and replace the Common Areas for their intended
purposes in such manner as Landlord in its reasonable discretion
shall determine, and the Common Areas shall at all times be
subject to the exclusive control and management of Landlord.
Landlord may at any time temporarily close all or any part of the
Common Areas to make repairs or changes and to perform such other
acts in or to the Common Areas as Landlord in its reasonable
discretion shall deem appropriate. Except as otherwise provided
herein if the amount or configuration of the Common Areas and any
other facilities not within the Leased Premises are changed or
diminished, Landlord shall not be subject to any liability; nor
shall Tenant be entitled to any compensation or diminution or
abatement of rent; nor shall such diminution of such areas be
deemed constructive or actual eviction. Landlord covenants that
Landlord shall maintain the Common Areas in a safe, clean and
orderly manner, and in a good state of repair, and shall keep the
Common Areas reasonably clear of snow and debris, and further,
Landlord shall provide proper supervision of the Common Areas, as
is necessary, and shall adequately illuminate the Common Areas
during business hours.
Section 5.03. Charges for Common Areas. Tenant shall pay to
Landlord Tenant's proportionate share of all costs and expenses
incurred by Landlord during the Lease Term in operating and
maintaining the Common Areas ('Common Areas Costs') as provided
in Article XIV. Subject to the limitations in Article XIV, the
Common Areas Costs shall include, but not be limited to, costs
and expenses paid or incurred for repairing, maintaining, and
operating improvements in the Common Areas such as paving, curbs,
walkways (including overhead walkways), storm and sanitary sewers
and lighting facilities, trash collection, utilities, security,
snow and ice removal, gardening and landscaping, striping of
parking areas, reasonable depreciation or amortization of, or
rents for, the improvement in or to the Common Areas and
equipment used in operation of Common Areas, wages, workmen's
compensation, unemployment taxes and Social Security taxes and a
management fee equal to five percent (5%) of gross rents due for
the Shopping Center.
Section 5.04. Employee Parking. If Landlord so designates,
Tenant and Tenant's employees shall park their cars only in those
portions of the parking areas designated for that purpose by
Landlord. Upon five (5) days prior written notice from Landlord,
Tenant shall provide Landlord with the automobile license numbers
of Tenant's employees.
ARTICLE VI
TAXES
Section 6.01. Taxes. Landlord will pay all Real Property
Taxes (as hereinafter defined) which may be levied or assessed by
any lawful authority against the land and improvements of the
Shopping Center. Tenant agrees to reimburse Landlord for its
proportionate share of such Real Property Taxes as provided in
Article XIV of this Lease. A tax bill submitted by Landlord to
Tenant shall be sufficient evidence of the amount of taxes
assessed or levied against the land and improvements of the
Shopping Center. For purposes of this Article, the term "Real
Property Taxes" shall include (i) the usual real property taxes;
(ii) any taxes which shall be levied in lieu of any such usual
real property taxes; (iii) any special assessments levied upon
the Shopping Center (except any payable in whole or in part
during the first year after the Shopping Center is completed and
assessed); and (iv) the expense of contesting the amount or
validity of any such taxes, charges or assessments, such expense
to be applicable to the period of the item contested.
Section 6.02. Substitute Tax. If due to a change in the
method of taxation, a tax and/or assessment upon or against the
rentals payable hereunder by Tenant to Landlord is imposed either
by way of substitution for the Real Property Taxes levied or
assessed against such land and such buildings, or in addition
thereto, or an income or franchise tax in substitution for the
Real Property Taxes levied against such land and buildings is
imposed, such taxes and/or assessments shall be deemed to
constitute a tax and/or assessment against such land and such
buildings and shall be included in the term Real Property Taxes
for the purpose of this Article VI.
Section 6.03. Taxes on Tenant's Business and Property.
Tenant shall pay and discharge when due all taxes and charges
imposed upon the conduct of its business in the Leased Premises
and all properly taxes imposed upon its fixtures, equipment,
merchandise, and other personal property on the Leased Premises.
ARTICLE VII
USE OF LEASED PREMISES
Section 7.01. Permissible Use. The Leased Premises shall
be continuously occupied and used solely for the purpose of
conducting the business of retail banking, of the same and for no
other purpose without Landlord's prior written consent.
Section 7.02. Opening for Business. Tenant shall proceed
with due diligence to open for business on the Leased Premises
within 30 days after the Rental Commencement Date, and shall
thereafter continuously, actively, and diligently operate its
business on the whole of the Leased Premises in a reputable
manner, maintaining in the Leased Premises a full staff of
employees during Regular Business Hours throughout the Lease Term
unless prevented from so doing by fire, strikes, or other
contingencies beyond Tenant's control. As used in this Lease,
the term "Regular Business Hours" shall mean the dates and hours
that Banks are customarily open for customer deposits and
withdrawals.
Section 7.03. Operation of Business. Tenant covenants and
agrees that:
(a) Tenant shall not conduct any auction, fire sale, or
bankruptcy sale on or about the Leased Premises without the
prior written consent of Landlord.
(b) Tenant shall not vacate or abandon the Leased Premises,
allow any waste, damage, floor overload or nuisance on the
Leased Premises, or use or permit the use of the Leased
Premises for any unlawful purpose;
(c) Tenant shall keep the Leased Premises in a careful, safe,
clean, and proper manner and condition in accordance with
all directions, rules, and regulations of the health, Fire,
building, and other offices and governmental agencies
having jurisdiction over the Leased Premises, and shall
comply with all laws, ordinances, rules, regulations,
orders, and decrees of any governmental entity or personnel
now or hereafter affecting or relating to the Leased
Premises or the use thereof.
(d) Tenant shall not display merchandise outside the Leased
Premises nor in any manner obstruct the sidewalks or other
areas adjacent to the Leased Premises nor burn or place
outside the Leased Premises garbage, trash, merchandise
containers, or other incidentals to Tenant's business;
(e) Tenant shall store all refuse in proper and fireproof
containers in areas which may be designated by Landlord.
(f) Tenant shall not use, or permit the use of loud speakers,
radios or other devices in a manner so as to be heard or
seen outside the Leased Premises without the prior written
consent of Landlord;
(g) Tenant shall load and unload all merchandise, supplies,
fixtures, equipment, and furniture and cause the collection
of rubbish only through such doors as may be designated by
Landlord:
(h) Tenant shall not place or permit to be placed or maintained
in or on any portion of the Shopping Center outside the
Leased Premises, including, but not limited to, any
exterior doors, walls, roof, or windows of the building
constituting part of the Leased Premises, any sign, awning,
or canopy or other advertising matter and shall not place
or permit to be placed or maintained any decoration,
lettering, or advertising maker on the glass or any window
or door of the Leased Premises without Landlord's prior
written approval, such approval being based on but not
limited to the items set forth in the Shopping Center Sign
Criteria set forth in the attached Exhibit "F" which is
incorporated herein by reference (the "Sign Criteria"); and
Tenant shall maintain any such approved signs, decorations,
lettering, or advertising matter in good condition,
appearance, and repair and in accordance with the Sign
Criteria at all times;
(i) Tenant shall refer to the Shopping Center building by name
in all advertising, stationery, and all other references to
its business location; and Tenant shall include the address
and identity of its business activity in the Leased
Premises in all advertisements made by Tenant in which the
address and identity of any other business activity of like
character conducted by Tenant within the Indianapolis
metropolitan area is mentioned;
Tenant shall comply with all other reasonable rules and
regulations established by Landlord from time to time with
regard to the operation of the Shopping Center;
(k) Tenant shall not use the plumbing facilities for any
purpose other than for which such facilities were
constructed, and no foreign substance of any kind shall be
placed therein, and the expense of any breakage, stoppage,
or damage resulting from a violation of this provision
shall be borne by Tenant;
(l) Tenant shall not make, paint, drill, or in any way deface any
walls, ceilings, partitions, floors, wood, stone, or
ironwork, without the written consent of the Landlord;
(m) Tenant shall not unreasonably interfere with the use of the
Common Areas by Landlord or others entitled to the use
thereof;
(n) Tenant shall neither solicit business in the Common Areas nor
distribute any handbills or other advertising matter in the
Common Areas;
(o) Tenant shall use its best efforts to cause its agents,
employees, customers, invitees, licensees, and
concessionaires to comply with the covenants and agreements
of this Section and with the reasonable rules and regulations
from time to time established by Landlord for the benefit of
the Shopping Center.
Section 7.04. Hazardous Substances. Tenant shall place no
underground storage tanks of any kind on the Leased Premises and
shall not place or use tanks, drums or other containers of any kind
on the Leased Premises, the contents of which are unknown to
Landlord and Tenant shall not engage in any activities involving
the use, treatment, transportation, generation, storage or disposal
of any Hazardous Substances in hazardous quantities and no
Hazardous Substances in hazardous quantities shall be released on
the Leased Premises by Tenant. The Term "Hazardous Substances"
means any hazardous or toxic substance regulated by any federal,
state or local statute or regulation, including but not limited to
the Comprehensive Environmental Response, Compensation and
Liability Act, the Resource Conservation and Recovery Act and the
Toxic Substance Control Act, or by any federal, state or local
governmental agencies having jurisdiction over the control of any
such substance including but not limited to the United States
Environmental Protection Agency.
<PAGE>
ARTICLE VIII
UTILITIES, HEATING, AND COOLING
Section 8.01. Utilities. Utilities for the Leased Premises
shall be installed, maintained, and paid for as follows:
(a) Landlord shall bring to the Leased Premises utilities as
provided in Exhibit C attached hereto. Such installation
shall be at Landlord's sole cost and expense and in accordance
with Exhibit C. No later than five (5) days after the
Commencement Date, Tenant shall have utilities connected by
the applicable utility company and shall pay the usual and
customary activation fees for such utilities which shall be
separately metered to Tenant. Further, if Landlord determines
that Tenant is a substantial user of any utilities which are
not separately metered, Landlord may require Tenant to install
submeters for such utilities at its sole cost and expense.
(b) Landlord shall maintain all utility conduits, piping,
conductor, and the like which serve the Leased Premises and
which are located off the Leased Premises. Tenant shall pay
to Landlord Tenant's pro rata share of all costs and expenses,
except for the cost of installation, paid or incurred by
Landlord in maintaining such utilities off the Leased
Premises. as provided in Article XIV of this Lease.
(c) Commencing on the Commencement Date, Tenant, at Tenant's sole
cost and expense, shall maintain all utility conduits, piping,
conductors, and the like located on the Leased Premises and
shall pay for utilities as follows:
(i) Utilities which are metered or submetered at Leased
Premises shall be paid by Tenant on a usage basis
as metered, and
(ii) Utilities which are not metered or submetered at
the Leased Premises shall be paid by the Tenant on
a pro rata basis as specified in Article XIV of
this Lease.
Section 8.02. Discontinuance of Services. Landlord reserves
and shall at all times have the right to cut off and discontinue,
without notice to Tenant, water, electricity, heating and air
conditioning, or other utilities and services whenever Tenant has
failed to pay in accordance with the terms of this Lease any
amounts due by Tenant for rental or otherwise. Landlord shall
under no circumstances be liable to Tenant in damages or otherwise
for any interruption in service of water, electricity, heating, air
conditioning, or other utilities and services caused by an
unavoidable delay, by the making of any necessary repairs or
improvements, or by any cause beyond Landlord's reasonable control,
or by discontinuance as provided in the preceding sentence of this
Section.
ARTICLE IX
MAINTENANCE AND ALTERATIONS
Section 9.01. Landlord's Obligations. Landlord shall keep in
good repair the utility systems serving the Common Areas. Except
as provided in Section 8.01(b), Landlord shall not be responsible
for the maintenance, operation, or replacement of the heating and
air conditioning systems within the Leased Premises, the
maintenance, operation, and repair of which shall be the sole
responsibility of Tenant; provided, however, that if such systems
serve more than one tenant in the Shopping Center, Landlord shall
cause such maintenance, operation, and repair to occur and shall
bill each tenant served by such systems for their pro rata share of
the costs, which shall be paid as provided in Section 4.02.
Landlord shall also keep in good repair the foundation, structural
parts, outer walls (except the interior faces thereof), downspouts,
gutters, and roof of the building in which the Leased Premises are
located. Landlord shall not, however, be responsible for making
any such repairs occasioned by the willful or negligent act of
Tenant, its agent, employee, contractor, servant, customers,
invitee, licensee, assignee, lessee, or concessionaire, and Tenant
shall promptly make any such repairs at its sole cost and expense.
Landlord shall not be called upon to make any other improvements or
repairs of any kind upon the Leased Premises.
Section 9.02. Tenant's Obligations. Tenant shall not suffer
or permit any injury to the Leased Premises and, except as provided
in the foregoing Section 9.01, Tenant shall keep and
maintain the Leased Premises and every part therein (including, but
not limited to, the exterior and interior portions of all doors and
other entrances; door checks and closers; security gates; windows,
glass, signage, interior and exterior electrical, heating,
ventilating, air conditioning, plumbing, sewage, and other
mechanical and utility equipment and systems; fixtures; and
interior walls, floors and floor coverings, and ceiling) in good
order, condition, and repair. Without limiting the generality of
the foregoing, Tenant shall conduct a program of preventative
maintenance and repair of all electrical, heating, ventilating, air
conducting, plumbing, sewage, and other mechanical and utility
equipment and systems servicing the Leased Premises and shall be
responsible for any and all maintenance, replacement, or repairs to
such equipment and systems except as otherwise expressly provided
in foregoing Section 9.01. Tenant shall replace any glass and
windows and doors (including any frames, retaining members, and
appurtenances thereto) in the Leased Premises which may be broken
or damaged. Notwithstanding any provision herein to the contrary,
Tenant shall not be responsible for making any repairs occasioned
by any willful act or negligence of Landlord or its employees or
agents, which repairs shall be made by Landlord at its sole cost
and expense. Tenant shall immediately notify landlord of any
damage, injury, or disrepair of any part of the Leased Premises
known to Tenant.
Section 9.03. Alterations and Additions. Tenant shall make no
alterations or additions to any part of the Leased Premises without
the prior written consent of Landlord except the leasehold
improvements which Tenant is expressly entitled to make in
accordance with Section 3.02 herein. All such alterations and
additions to the Leased Premises shall be made in accordance with
all applicable laws, and shall remain for the benefit of Landlord,
provided, however, that Landlord may elect by written notice to
Tenant to require that Tenant, at its expense, remove on or before
fifteen (15) days after expiration or earlier termination of this
Lease all or a portion of the alternations or additions made by
Tenant and repair any damage to the Leased Premises caused by such
removal. Tenant's obligations under this Section shall survive the
expiration or earlier termination of this Lease.
Section 9.04. Mechanic's Liens. Tenant shall not suffer or
give cause for the filing of any mechanic's lien against the Leased
Premises. In the event any mechanic's lien is filed against the
Leased Premises or any part thereof for work claimed to have been
done for, or material claimed to have been furnished to the Tenant,
Tenant shall cause such mechanic's lien to be discharged of record
within forty (40) days after filing or, alternatively, Tenant shall
furnish to Landlord (or any other entity designated by Landlord)
within such forty (40) day period a bond or other assurances
reasonably acceptable to Landlord that such claimed indebtedness as
finally determined will be paid by Tenant. Tenant shall indemnify
and save harmless Landlord from all costs, losses, expenses, and
attorneys' fees in connection with any such mechanic's lien.
ARTICLE X
INDEMNIFICATION AND INSURANCE
Section 10.01. Indemnification. Subject to Section 10.07,
Tenant assumes all risks and responsibilities for accidents,
injuries, or damages to persons or property (other than as provided
in Section 10.02 with respect to damage by fire and casualty), and
agrees to indemnify and hold harmless Landlord from any and all
claims, liabilities, losses, costs, and expenses (including
attorneys' fees), arising from or in connection with the condition,
use or control by Tenant of the Leased Premises and any
improvements thereon during the Lease Term other than from causes
arising solely from Landlord's willful misconduct or gross
negligence. Subject to Section 10.07, Landlord agrees to indemnify
and hold Tenant harmless from any and all claims, liabilities,
losses, costs and expenses (including attorneys' fees), arising
from or in connection with the condition, use or control by the
Landlord of the Common Area during the Lease Term other than from
causes arising solely from Tenant's willful misconduct or gross
negligence.
Section 10.02. Insurance-Landlord. Landlord shall maintain
public liability insurance against damage to persons and property
in the Common Areas in amounts not less than Tenant is required to
maintain pursuant to Section 10.04 and shall agree to hold the
Tenant harmless for all liabilities covered by this insurance.
Landlord shall carry during the Lease Term fire and extended
coverage insurance on all buildings in the Shopping Center for at
least their full insurable value. Tenant shall not be liable to
Landlord for any damage by fire or other casualty with respect to
the Leased Premises and the Shopping Center, no matter how caused,
it being understood that Landlord will look solely to its insurers
for reimbursement of any losses required to be insured against
hereunder. Landlord shall also maintain business interruption
insurance and/or loss of "rental value" insurance in such amounts
as Landlord shall reasonably deem necessary. Tenant agrees to
reimburse Landlord for its proportionate share of the Insurance
Premiums for all such insurance, as provided in Article XIV.
Section 10.03. Increase in Insurance Rates. If Tenant uses or
permits the use of the Leased Premises or any part thereof in any
manner so as to increase the cost of insurance to Landlord over and
above the normal rates from time to time applicable to the Leased
Premises for use for the purpose permitted under this Lease, Tenant
shall pay to Landlord upon demand any such increase in the premiums
for such insurance whether or not Landlord has consented to such
use.
Section 10.04. Insurance-Tenant. Tenant shall, during the
Lease Term, keep in full force and effect policies of public
liability insurance (with contractual liability endorsement
covering the matters set forth in Section 10.01 above), in
companies and in a form acceptable to Landlord with respect to the
Leased Premises and the business operated by Tenant and/or any
subtenants of Tenant in the Leased Premises, in which both Landlord
and Tenant shall be named as parties covered thereby, and in which
limits of liability for injury or death to any one person shall be
in an amount of not less than One Million Dollars ($1,000,000.00),
and for injury or death of more than one person in any one accident
in an amount of not less than One Million Dollars ($1,000,000.00),
and for damage to property in an amount of not less than Two
Hundred Fifty Thousand Dollars ($250,000.00). Tenant shall, at its
own expense, also keep in full force and effect policies of plate
glass insurance, if plate glass is a part of Leased Premises, and
fire and extended coverage, vandalism, malicious mischief and
special extended coverage insurance in any amount adequate to cover
the cost or replacement of all alterations, changes, decorations,
additions, fixtures, and other improvements in the Leased Premises
in the event of a loss, in companies, and in form acceptable to
Landlord. The insurance which Tenant agrees to carry in this
Section shall insure the full insurable value of all such
improvements installed in the Leased Premises, on a reproduction
cost basis, whether the same have been paid for entirely or
partially by Tenant. Landlord and other tenants and occupants
shall not be liable for any damage by fire or other casualty with
respect to such improvements, no matter how caused, it being
understood that Tenant will look solely to its insurers for
reimbursement. All insurance provided by Tenant as required in
this Section 10.04 shall be carried in favor of Landlord and
Tenant, as their respective interests may appear. Tenant shall
upon request furnish Landlord with certificates of insurance, and
all such insurance shall carry a provision providing that it will
not be subject to cancellation, termination, or change except after
at least ten (10) days prior written notice to Landlord. If Tenant
fails to comply with the above requirements, Landlord may obtain
such insurance and keep same in effect, and Tenant shall pay
Landlord all premium costs thereof upon demand.
Section 10.05. Waiver of Claims. Landlord and Tenant shall
not be liable for, and each hereby waives all claims against the
other for, any injuries, damages (including, but not limited to,
consequential damages) or losses, of or to person, property, or
otherwise, sustained by Landlord and Tenant, provided, however,
that this shall not waive Landlord's or Tenant's claims for
contract damages resulting from breach of this Lease or pursuant to
their respective indemnifications of one another under Section
10.01 of this Article X.
Section 10.06. Tenant's Property. All property of Tenant kept
or stored in, upon, or about the Leased Premises shall be so kept
or stored at the sole risk of Tenant and Tenant shall hold Landlord
harmless from any claims, costs, or expenses, including attorney's
fees arising out of damage thereof, except for causes arising
solely from Landlord's willful misconduct or gross negligence.
Section 10.07. Waiver of Subrogation. In addition to any
other waiver herein, Landlord and Tenant each hereby waive any
claim against the other for any loss resulting from any cause,
including the negligence of the other, to the extent of the
insurance proceeds available therefore. All insurance policies
maintained by the Landlord or Tenant as provided in this Article X
shall contain an agreement by the insurer waiving the insurer's
right of subrogation against the other party to this Lease or
agreeing not to acquire any rights of recovery which the insured
has expressly waived prior to loss. Each of the parties hereto
agrees that if the provision waiving subrogation in any of such
policies of insurance requires that notice of such waiver be served
upon the insurer, such notice shall be promptly served by the party
obtaining such insurance.
ARTICLE XI
FIRE AND CASUALTY
If the Leased Premises become partially or totally destroyed
by fire or other casualty insurable under full standard extended
risk insurance, so as to become partially or totally untenantable,
the same shall be repaired or replaced at the expense of Landlord.
However, if more than fifty percent (50%) of the gross leasable
area of the building in which the Leased Premises are located shall
be destroyed or so damaged by fire or other casualty as to become
wholly untenantable, then Landlord may rebuild or put the building
in good condition and fit for occupancy within a reasonable time
after such destruction or damage, or it may give notice in writing
to Tenant terminating the Lease. Within sixty (60) days after such
casualty, Landlord shall either give Tenant notice of its intention
to repair or rebuild or shall give Tenant notice of its intention
to terminate the Lease. Any proceeds from the fire and extended
coverage insurance not utilized by Landlord in restoring the Leased
Premises shall be and remain the sole property of Landlord.
Minimum Rent shall proportionately abate during the time that the
Leased Premises or any part are unusable by reason of any such
damage thereto.
ARTICLE XII
EMINENT DOMAIN
In the event that all or a part of the Leased Premises is
taken or condemned for public or quasi-public use under any statute
or by the right of eminent domain, or that, in lieu thereof, all or
a part of the Leased Premises is sold to a public or quasi-public
body under threat of condemnation, and such taking, condemnation,
or sale renders of the Leased Premises unsuitable for operation of
the Tenant's business therein, this Lease shall terminate on the
date possession of all or such part of the Leased Premises is
transferred to the condemning authority. All rent shall be paid up
to the date of transfer of possession to the condemning authority,
and all compensation awarded or paid for taking or sale in lieu
thereof shall belong to and be the sole property of Landlord, and
Tenant shall have no claim against Landlord for the value of any
unexpired portion of the Lease Term, provided, however, that Tenant
shall be entitled to any award expressly made to Tenant for
Tenant's interest in the Lease, loss of business, or depreciation
to and cost of removal of stock and fixtures so long as such award
shall not reduce the compensation paid or awarded to Landlord. In
the event that only a portion of the Leased Premises is taken or
condemned and such taking does not materially affect the business
of Tenant, Tenant shall be entitled to a proportionate abatement of
Minimum Rent but shall not be entitled to any award or payment made
for such taking.
ARTICLE XIII
DEFAULT AND REMEDIES
Section 13.01. Events of Default. Each of the following shall
be deemed a default by Tenant:
(a) Tenant's failure to pay rent (including Minimum Rent and
Additional Rent) as herein provided when due, and such failure
continues for more than five (5) days:
(b) Tenant's failure to perform or observe any other terms,
conditions, or covenants of this Lease to be performed or
observed by Tenant as and when performance or observance is
due, and such failure continues for more than thirty (30) days
after Landlord gives written notice thereof to Tenant;
(c) Any change or modification in the use of the Leased Premises
as set forth in Section 7.01 or any substantial change in the
quality or character of such use if such change adversely
affects the Shopping Center, as solely determined by Landlord
and such change or modification continues for a period of
thirty (30) days after Landlord gives written notice thereof
to Tenant;
(d) Tenant's vacation or abandonment of the Leased Premises or any
failure to keep the Leased Premises open for business as
provided in Section 7.02 (without limiting the meaning of the
terms "vacation or abandonment", the transfer of a substantial
part of the operations, business, and personnel of the Tenant
to some other location shall be deemed to be a breach of this
subsection, notwithstanding the fact that Tenant shall
thereafter continue to pay the rent due under this Lease) and
such vacation or abandonment continues for more than thirty
(30) days after Landlord gives written notice thereof to
Tenant;
(e) Tenant (i) files or consents by answer or otherwise to the
filing against it of a petition for relief or reorganization
or arrangement or any other petition in bankruptcy or
liquidation, or to take advantage of any bankruptcy or
insolvency law of any Jurisdiction, (ii) makes an assignment
of custodian, receiver, trustee or other officer with similar
powers of itself or of any substantial part of its property,
or (v) takes action for the purpose of any of the foregoing;
(f) A court or governmental authority of competent jurisdiction,
without consent by Tenant, enters an order appointing a
custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial
power of its property, or constituting an order for relief or
approving a petition for relief or reorganization or any other
petition in bankruptcy or insolvency law of any jurisdiction,
or ordering the dissolution, winding up or liquidation of
Tenant, or if any such petition is filed against Tenant and
such petition is not dismissed within sixty (60) days;
(g) This Lease or any estate of Tenant hereunder is levied upon
under any attachment or execution and such attachment or
execution is not vacated within sixty (60) days;
(h) Tenant assigns this Lease, except as otherwise permitted under
Article XVII, Section 17.02 of this Lease. Without Landlord's
prior written consent; or
(i) Dissolution or, if Tenant is a corporation. other termination
of Tenant's corporate or bank charter.
Section 13.02. Landlord's Rights Upon Tenant's Default. In
the event of any defaulted in the foregoing Section 13.01 without
any demand or notice, Landlord, in addition prove to any other
rights or remedies at law or in equity, may:
(a) elect to terminate this Lease;
(b) in the event that Tenant has failed to perform any of its
covenants under this Lease other than a covenant to pay rent,
perform the covenant or covenants of Tenant which are in
default (entering upon the Leased Premises for such purpose,
if necessary); and Landlord's performance of any such
covenant shall neither subject Landlord to liability for any
loss, inconvenience, or damage to Tenant nor be construed as
a waiver of Tenant's default or of any other right or remedy
of Landlord in respect of such default, or as waiver of any
covenant, term, or condition of this Lease; or
(c) immediately re-enter upon the Leased Premises, remove all
persons and property therefrom, and store such property in a
public warehouse or elsewhere at the sole cost and for the
account of Tenant, all without service of notice or resort to
legal process, without being deemed guilty of trespass or
becoming liable for any loss or damage which may be
occasioned thereby, and without such re-entry being deemed to
terminate this Lease.
Section 13.03. Re-Letting. In the event Landlord re-enters
upon the Leased Premises as provided in clause (c) or the foregoing
Section 13.02 or takes possession of the Leased Premises pursuant
to legal proceedings or pursuant to any notice provided for by law,
Landlord may either terminate this Lease, or from time to time
without terminating this Lease, make alternations and repairs
reasonably necessary for the purpose of re-letting the Leased
Premises and re-let the Leased Premises or any part thereof for
such term or terms (which may extend beyond the term of this Lease)
at such rental and upon such other terms and conditions as Landlord
in its reasonable discretion deems advisable. Upon each reletting,
all rentals received from such re-letting shall be applied first to
payment of costs of such alterations and repairs, second to the
payment of rent and any other indebtedness due and unpaid
hereunder; and the remainder, if any, shall be held by Landlord and
applied in payment of future rent as it becomes due and payable
hereunder. If the rentals received from such re-letting during any
month are less than amounts to be paid hereunder by Tenant during
that month, Tenant shall pay any such deficiency to Landlord. Such
deficiency shall be calculated and paid monthly. No re-entry or
taking of possessions by Landlord of the Leased Premises shall be
construed as an election to terminate this Lease unless a written
notice of termination is given to Tenant. Notwithstanding any re-
letting without termination, Landlord may at any time thereafter
elect to terminate this Lease for Tenant's previous default.
Notwithstanding any other provisions contained in this Lease,
in the event the depository institution then operating on the
Leased Premises is closed, or is taken over by any depository
institution supervisory authority ("Authority"), Landlord may, in
either such event, terminate this Lease only with the concurrence
of any Receiver or Liquidator appointed by such Authority;
provided, that in the event this Lease is so terminated by the
Receiver or Liquidator, the maximum claim of Landlord for rent,
damages or indemnity for injury resulting from the termination,
rejection or abandonment of the unexpired Lease shall by law
in no event be in an amount equal to all accrued and unpaid rent to
the date of termination.
Section 13.04. Damages Upon Termination. In the event that
Landlord at any time terminates this Lease for any default by
Tenant, in addition to any other remedies Landlord may have,
Landlord may recover from Tenant all damages Landlord may incur by
reason of such default, including costs of recovering the Leased
Premises, reasonable attorneys' fees, and the value at the time of
such termination of the excess, if any, of the amount if rent and
charges equivalent to rent reserved in this Lease for the remainder
of the Leased Term over the then reasonable rental value of the
Leased Premises for the remainder of the Lease Term. All such
amounts shall be immediately due and payable by Tenant to Landlord.
In determining the rent which would be payable by Tenant subsequent
to default, the annual rental for each year of the unexpired
portion of the Lease Term to the time of default, or during the
preceding two (2) full calendar years, whichever period is shorter,
shall be used; provided, however, that Tenant shall not be required
to pay such average rent if it is required to pay twice the Minimum
Rent pursuant to Section 7.02 hereof.
Section 13.05. Indemnification Upon Default. In the event of
any breach hereunder by either Landlord or Tenant, the other party
may, after sixty (60) days' written notice to the defaulting party,
cure such breach for the account and at the expense of the
defaulting party. Any money spent or cost or expense incurred by
either party in curing such a breach or default for the account of
the other party shall be reimbursed to either Tenant or Landlord,
as the case may be, by the defaulting party on the first day of the
month following the payment of such money or the incurring of such
costs and expenses. In the event that Landlord fails to reimburse
Tenant for any such expenditure as and when provided herein, Tenant
may deduct such amounts from the rental payment or payments
thereafter due. Upon any default by Landlord or Tenant hereunder,
the defaulting party shall be liable for and hereby agrees to apply
any and all liabilities, losses, costs and expenses including
attorneys' fees incurred by the non defaulting party as a result of
such default and in exercising the non defaulting party's rights
and remedies in connection with such default.
Section 13.06. Remedies Cumulative. The remedies of Landlord
and Tenant hereunder shall be cumulative, and no one of them shall
be construed as exclusive or any other or of any remedy provided by
law or in equity. The exercise of any one such right or remedy by
the Landlord or Tenant shall not impair its standing to exercise
any other such right or remedy.
ARTICLE XIV
TENANT'S PAYMENT OF PRO RATA SHARE
Section 14.01. Tenant's Pro Rata Share. Tenant shall pay as
additional rent to Landlord, in the manner provided in Section
14.02 herein, Tenant's pro rata share (as defined in Section 14.02
herein) of all charges, liabilities, costs, and expenses of every
kind and nature paid or incurred (including appropriate reserves)
by Landlord during the Lease Term for each Year or Fractional Lease
Year which are attributable to or relate to the Shopping Center for
the following:
(a) Common Areas Costs, as described in Section 5.03;
(b) Real Property Taxes, as described in Article VI;
(c) Utilities, as described in Section 8.01;
(d) Insurance Premiums, as described in Section 10.02; and
(e) Maintenance and Repairs, as described in Section 9.01,
except for repair and maintenance of the foundation,
structural parts, outer walls and HVAC, plumbing and
sewage systems outside of the Leased Premises which shall
be at the expense of Landlord.
(items (a) through (e) hereinafter referred to in the aggregate as
"Operating Costs").
Notwithstanding any provision contained in this Article XIV,
or in this Lease, to the contrary, Operating Costs shall not
include the following, or the following shall be credits against or
deductions from Operating Costs, as the case may be:
(a) depreciation on the Shopping Center or any Common Areas;
(b) costs of capital improvements, except those:
(i) made to the Shopping Center by Landlord, after the
Commencement Date of this Lease, that produce a net
reduction in Operating Costs; or
(ii) made to the Shopping Center by Landlord primarily
to comply with any governmental law or regulation
that was not in force at the Commencement Date,
(c) costs of space planning, tenant improvements, marketing
expenses, finders fees and real estate broker
commissions;
(d) any and all expenses for which Landlord is reimbursed
(either by an insurer, condemnor or other person or
entity), but only to the extent of such reimbursement,
and any and all expenses for which Landlord is reimbursed
by a tenant in the Shopping Center pursuant to a lease
provision in such tenant's lease or as a result of any
act, omission, default or negligence of a tenant or as
the result of a breach by a tenant of the provision of
such tenant's lease;
(e) executive salaries or compensation:
(f) costs in connection with services or benefits of a type
which are not provided to Tenant, but are provided to
another tenant or occupant;
(g) mark-ups on electricity and condenser cooler water for
heat pumps in excess of Landlord's costs therefore;
(h) Landlord's general overhead and administrative expenses
not directly allocable to the operation of the Shopping
Center other than the management fee permitted herein;
(i) cost of repair or other work necessitated by the gross
negligence or willful misconduct of Landlord or
Landlord's employees, contractors or agents;
(j) gross revenues from charges, if any, made for the use of
the parking areas and other Common Areas or common
facilities of the Shopping Center;
(k) costs of repairs to the Shopping Center, or any part
thereof, resulting from defects in or inadequacy of the
initial design or construction of same, or resulting from
code violations or the payment of fines or citations in
connection therewith;
(l) costs of providing or performing improvements, work or
repairs to or within any portion of the Shopping Center
occupied by other tenants, or to be occupied by other
tenants, or which is/are not part of the Common Areas;
(m) any interest on any financing for the Shopping Center, or
interest and penalties incurred as a result of Landlord's
late payment of any bill;
(n) any bad debt loss, rent loss or reserve for bad debt or
rent loss;
(o) legal or other fees, audit fees, leasing commissions,
advertising expenses and other costs incurred in
connection with the original development or original
leasing of the Shopping Center or future re-leasing of
the Shopping Center as well as all other advertising and
promotional costs, disputes with other tenants and third
parties;
(p) costs of repairing or restoring any portion of the
Shopping Center damaged or destroyed by any casualty or
peril whether insured, uninsured or uninsurable; or
(q) costs in connection with the clean-up or removal of
hazardous materials, unless the need for such clean-up or
removal is caused by Tenant.
Section 14.02. Calculation and Payment. Tenant's pro-rata
share of the Operating Costs shall be that portion of such
Operating Costs which the Gross Leasable Area of the Leased
Premises bears to the total gross leasable area in the Shopping
Center. Tenant shall pay on a monthly basis its pro rata share of
the Operating Costs for each Lease Year or Fractional Lease Year
during, the calendar month, in advance, in any amount estimated by
the Landlord as provided in this Section. Landlord's estimate
shall be made on the basis of the most recent Annual Operating Cost
Statement, if available, adjusted to reflect reasonably anticipated
increases or decreases of Operating Costs. An Annual Operation
Cost Statement prepared by Landlord in accordance with generally
accepted accounting principles shall be provided by Landlord to
Tenant not later than March 1 of each calendar year setting forth
in reasonable detail the actual Operating Costs paid or incurred by
Landlord in the next preceding twelve-month period ending December
31 and thereupon there shall be an adjustment between Landlord and
Tenant with Tenant's payment to Landlord or repayment by Landlord
as may be required to the end that Landlord shall receive the
entire amount of Tenant's pro rata share of such Operating Costs
and not more. The dates of any such statements may, at the option
of the Landlord, be subject to change. If Tenant does not agree
with Landlord's statement of Additional Rent, then Tenant shall
have the right, if written notice of the nature and extent of such
disagreement is given to Landlord not later than thirty (30) days
following receipt of such statement by Tenant, and Landlord and
Tenant are unable to resolve such disagreement by negotiation, to
cause an audit to be made of Landlord's records concerning
Operating Expenses by an independent certified public accountant
designated by Landlord from a list of not less than three (3) such
accountants provided by Tenant, as the expense of Tenant, unless
such audit discloses an error in excess of ten percent (10%) in the
computation of Additional Rent, in which event such audit shall be
at the expense of Landlord. The results of such audit shall be
binding upon Landlord and Tenant. If no such notice is received by
Landlord within thirty (30) days following receipt of a statement
of Additional Rent by Tenant, then such statement shall be
conclusively deemed to have been approved and accepted by Tenant.
Pending resolution of any dispute with respect to statements and,
if it shall be finally determined that any portion of such sums was
not properly due, Landlord shall immediately refund the appropriate
sum to Tenant.
ARTICLE XV
ACCESS TO LEASED PREMISES
Tenant shall permit Landlord, or Landlord's agents, to enter
upon the Leased Premises at reasonable times during Tenant's
business hours and upon reasonable advance notice of at least
twenty-four (24) hours for purposes of inspecting the Leased
Premises or performing any services required of Landlord hereunder
or for purposes of showing the Leased Premises to potential and/or
existing mortgagees, purchasers and prospective tenants. The
foregoing notwithstanding, Landlord is not required to give notice
to Tenant in the event Landlord must enter the Leased Premises
because of emergency circumstances. In the exercise of its rights
hereunder, Landlord shall (i) minimize disruption to or
interference with Tenant's permitted use of the Leased Premises and
(ii) maintain the confidentiality of Tenant's books. records and
information located on or within the Leased Premises and Tenant's
relationship with Tenant's employees, clients and customers.
Landlord, or Landlord's agents, shall exercise Landlord's rights
hereunder only when accompanied by an agent of Tenant.
ARTICLE XVI
LIMITATION OF LANDLORD'S LIABILITY
Tenant agrees that Tenant shall look solely to Landlord's
interests in and to the Shopping Center, subject to prior rights of
any mortgagee of the Shopping Center, for solicitation of any
judgment (or other judicial process) requiring payment of money by
Landlord in the event of default or breach by Landlord of any of
the covenants, terms or conditions of this Lease to be observed or
performed by Landlord, and that no other assets of Landlord shall
be subject to levy, execution, or of the process for satisfaction
of Tenant's remedies. The term "Landlord", as used in this Lease
in relation to covenants, agreements, and conditions to be observed
and performed by Landlord, shall be limited to mean and include
only the owner or owners from time to time of Landlord's interest
in this Lease. In the event of any transfer or transfers of such
interest (except a transfer for security), Landlord named herein
(or the transferor, in the case of a subsequent transfer) shall,
after the date of such transfer, be released from all personal
liability for performance of any covenant, agreement, and
conditions shall bind Landlord, its successors and assigns, only
during and in respect of their respective successive periods of
ownership.
ARTICLE XVII
MISCELLANEOUS
Section 17.01. Security Deposit and Security Interest. Tenant
shall, upon execution of this Lease, deposit with Landlord a
security deposit of $5,035. Landlord shall not be liable for any
interest on the Security Deposit which is made to secure the
performance by Tenant of the terms and covenants of their Lease.
Landlord may apply this security deposit in whole or in part to any
past due rent or to defray any moving damage or loss sustained by
Landlord as a result of a breach of this Lease by Tenant. To the
extent used the security deposit must be replenished by Tenant upon
demand. To the extent not used by Landlord the security deposit
will be returned to Tenant following termination of the Lease.
Landlord may deliver the security deposit to any purchaser or other
transferor of the Shopping Center thereupon shall be released from
further obligations with respects to such deposit. Landlord shall
not be required to hold the security deposit in a separate account
but may coincide it with Landlord's other funds.
Section 17.02. Assignment and Subletting. Tenant shall not
assign this Lease or sublet the whole or any part of the Leased
Premises, or permit any other persons. including concessionaires or
licensees, to occupy the same without the prior written consent of
Landlord. Such consent shall not be implied from references in
this Lease to assignees, sublessees, concessionaires, or licensees.
The consent by Landlord to any assignment or subletting shall not
constitute a waiver of the requirement for such consent to any
subsequent assignment or subletting. Any such assignment or
subletting, even with the consent of Landlord, shall not relieve
Tenant from liability for payment of rent or other sums herein
provided or from the performance of any other obligations under
this Lease. The acceptance of rent from any other person shall not
be deemed to be a waiver of any of the provisions of this Lease or
to be a consent to the assignment of this Lease or the subletting
of the Leased Premises. Any transfer of this Lease by operation of
law (including, but not limited to, a transfer as a result of a
merger, consolidation, or liquidation of Tenant if Tenant is a
corporation) shall constitute an assignment for purposes of this
Lease. Notwithstanding the foregoing, Tenant shall be entitled to
transfer and assign this Lease to its wholly-owned subsidiary,
Heartland Community Bank, so long as such bank has a minimum
capital of $7,500,000 and executes assumption documents acceptable
to Landlord. In such event, Heartland Bancshares, Inc. shall be
released from this Lease.
An assignment, in the case of a corporation. shall be deemed
to include any sale or transfer, whether by operation of law or
otherwise, of greater than thirty percent (30%) of the outstanding
shares of the corporation or in the event the present shareholder
shall, singly or collectively, cease to own, directly or
indirectly, the controlling interest in the voting shares of
Tenant. An assignment in the case of a partnership shall be deemed
to include any sale, transfer, assignment, or pledge which has the
effect that the present partners shall, singly or collectively,
cease to own, directly or indirectly, the controlling interest or
a majority of the partnership Interests in Tenant.
Without in any way limiting Landlord's right to refuse to give
consent to any assignment of subletting of this Lease, Landlord
reserves the right to refuse to give such consent if in Landlord's
discretion and opinion the proposed use of the Leased Premises or
quality of merchandising operation in the Leased Premises is or may
be in any way adversely affected, or if the financial worth of the
proposed next occupant is less than that of Tenant. Tenant agrees
to reimburse Landlord for reasonable accounting and attorneys' fees
incurred in conjunction with the processing and documentation of
any such requested transfer, assignment, subletting, licensing, or
concession agreement, change of ownership or hypothecation of this
Lease or Tenant's interest in and to the Leased Premises.
Section 17.03. Estoppel Certificates. Prior to opening the
Leased Premises for business, Tenant shall deliver to Landlord a
written statement in recordable form certifying (if such is the
case) that Landlord has completed construction of the improvements
constituting part of the Leased Premises in accordance with its
obligations contained herein, that Tenant has accepted possession
of the Leased Premises, that this Lease is in full force and effect
and has not been assigned, modified, supplemented, or amended, and
indicating the Commencement Date and the dates to which the Minimum
Rent and other charges have been paid in advance, if any. At any
time and from time to time, Tenant agrees, within ten (10)
days of any request in writing from Landlord, to execute,
acknowledge, and deliver to Landlord a statement in writing
certifying, if this be the fact, that this lease is unmodified, in
full force and effect, and there are no defenses or offsets thereto
(or if there have been modifications, that the same is in full
force and effect as modified and stating the modifications) and the
dates to which the Minimum Rent and any other additional rentals
have been paid.
Section 17.04. Subordination and Attornment. Tenant shall
upon Landlord's request subordinate this Lease to the lien of any
mortgage now or hereafter placed upon Landlord's interest in the
Leased Premises are a pan or upon any buildings hereafter placed
upon the land of which the Leased Premises form a pan. In
addition, upon the request of Landlord, Tenant will subordinate its
rights hereunder to the lien of any mortgage or mortgages or the
lien or security interest from any other method of financing or
refinancing (hereafter collectively referred to as "Mortgage") now
or hereafter against the land, Landlord's interest therein, or the
Leased Premises and the buildings now or thereafter built or to be
built in the Shopping Center, and to all renewals, modifications,
replacements, consolidations, and extensions thereof. Tenant shall
execute and deliver, upon demand, such further instrument or
instruments subordinating this Lease to the lien of any such
Mortgage provided any subordinating shall be upon the express
condition that this Lease and any extension or renewal thereof
shall remain in full force and effect during the term of the Lease,
notwithstanding any default in the payment and performance of such
mortgage and notwithstanding any foreclosure proceedings with
respects hereto, providing however, that Tenant shall perform all
of the terms, covenants, and conditions of this Lease by it
undertaken to be performed. Tenant shall, in the event that any
proceedings are brought for the foreclosure of any Mortgage made by
Landlord covering that Leased Premises, attorn to the purchaser
upon such foreclosure and recognize such purchaser as landlord
under this Lease; provided, however, notwithstanding the foregoing
language in this Section 17.04, if the holder of any such
mortgage(s) shall take title to the Leased Premises through
foreclosure of any such mortgage(s) or deed in lieu of foreclosure,
Tenant's use, possession and enjoyment of the premises shall not be
disturbed, and this Lease shall continue in full force and effect
as long as Tenant is not in default, and this I.ease shall
automatically become a lease directly between any successor to
Landlord's interest, as landlord and tenant.
Section 17.05. Covenant of Quiet Enjoyment. Landlord agrees
that if Tenant performs all the covenants and agreements herein
provided to be performed by Tenant, Tenant shall, at all times
during the Lease Term, have the peaceable and quiet enjoyment of
possession of the Leased Premises without any manner of hindrance
from Landlord or any persons claiming under Landlord. This Lease
does not guarantee a continuance of light and air over the Leased
Premises or any property adjoining the Leased Premises.
Section 17.06. Accord and Satisfaction. No payment by Tenant
or receipt by Landlord of a lesser amount than the rent herein
stipulated shall be deemed to be other than on account of the
earliest stipulated rent; nor shall any endorsement or statement on
the check or letter accompanying any check or payment as rent be
deemed an accord and satisfaction, and Landlord may accept any such
check or payment without prejudice to Landlord's right to recover
the balance of such rent or to pursue any other remedy provided in
this Lease.
Section 17.07. No Option. The submission of this Lease for
examination by Tenant shall not constitute a reservation of or
option for the Leased Premises. This Lease shall become effective
as Lease only upon execution and delivery thereof by Landlord and
Tenant.
Section 17.08. Memorandum of Lease. All parties hereto shall
not record this Lease, but each party shall execute upon request of
the other a "Memorandum of Lease" suitable for recording.
Section 17.09. Relationship of Parties. Nothing contained
herein, including, but not limited to, the method of computing
rent, shall be deemed or construed by the parties hereto, or by any
third party, as creating between the parties hereto the
relationship of principal an agent, partnership, joint venture, or
any relationship other than the relationship of landlord and
tenant.
Section 17.10. Waivers. No waivers of any covenant or
condition or the breach of any covenant or condition of this Lease
shall be deemed to constitute a waiver of any subsequent breach of
such covenant or condition, nor justify or authorize a non-
observance upon any occasion of such covenant or condition or any
other covenant or condition, nor shall the acceptance of rent by
Landlord at any time when Tenant is in default of any covenant or
condition be construed as a waiver of such default or Landlord's
right to terminate this Lease on account of such default.
Section 17.11. Severability. The invalidity or
unenforceability of any particular provision of this Lease shall
not affect the other provisions, and this Lease shall be construed
in all respects as if such invalid or unenforceable provision had
not been contained herein.
Section 17.12. Benefit of Persons Affected. This Lease and
all of the terms and provisions hereof shall inure to the benefit
of and be binding upon, the respective heirs, executors,
administrators, successors and assigns of Landlord and Tenant
except as otherwise expressly provided herein.
Section 17.13. Construction. This Lease shall be governed in
accordance with the laws of the State of Indiana. Whenever in this
Lease a singular word is used, it shall also include the plural
wherever required by the contract and vice versa. All references
in this Lease to periods of days shall be construed to refer to
calendar, not business, days. The captions in this Lease are for
convenience only and do not in any way limit or amplify the terms
and provisions of this Lease. Any exhibits hereto are incorporated
by reference and made a part hereof with the same effect as if set
out in full herein.
Section 17.14. Entire Agreement, Amendments. This instrument
contains the entire agreement between the parties hereto with
respect to the subject matter hereof. All representations,
promises and prior or contemporaneous undertakings between such
parties are merged into and expressed in this instrument, and any
and all prior agreements between such parties are hereby canceled.
The agreements contained in this instrument shall not be amended,
modified, or supplemented except by a written agreement duly
executed by both Landlord and Tenant.
Section 17.15. Notices. Any notice, demand, consent or waiver
required or permitted to be given or served by either party to this
Lease shall be in writing and shall be deemed to have been duly
cloven if delivered in person or sent by United States certified or
registered mail, return receipt requested, addressed to the other
party as follows:
Landlord: Greg Allen and Associates
1700 West Smith Valley Rd. Suite B-1
Greenwood, IN 46142
Tenant: Heartland Bancshares, Inc.
P.O. Box 469
Franklin, Indiana 46131
Any party may change its address for notice from time to time by
serving notice on the other party as provided above. The date of
service of any notice served by mail shall be the date upon which
such notice is deposited in a post office of the United States
Postal Service.
Section 17.16. Counterparts. This Lease may be executed in
separate counterparts, each of which when so executed shall be an
original, but all of such counterparts shall together constitute
one and the same instrument.
Section 17.17. Broker. Tenant covenants, warrants and
represents that no broker, was instrumental in bringing about or
consummating this Lease and that Tenant had no conversations or
negotiations with any broker, except concerning the leasing of the
Leased Premises. Tenant agrees to indemnify and hold harmless
Landlord against and from any claims for any brokerage commissions
and all costs, expenses and liabilities in connection therewith
including, without limitation, attorneys' fees and expenses arising
out of any conversations or negotiations had by Tenant with any
broker
Section 17.18. Canopy Sign. Tenant shall install a sign
acceptable to Landlord on the front of the Leased Premises and the
south side of the Leased Premises, neither sign to exceed 26 feet
in length, prior to opening for business. Tenant will not erect
any signs except in conformity with the Shopping Center Sign
Criteria set forth in the attached Exhibit "_____".
IN WITNESS WHEREOF, the parties have executed this Lease as of
the day and year first above written.
J. GREG ALLEN d/b/a/
J. GREG ALLEN & ASSOC.
BY: /s/ J. Gregg Allen
J. GREG ALLEN
'Landlord"
HEARTLAND BANCSHARES, INC.
By: /s/ Steven L. Bechman
Steven L. Bechman, President
"Tenant"
STATE OF INDIANA )
) SS:
COUNTY OF JOHNSON )
Before me, a Notary Public in and for said County and State,
personally appeared J. Greg Allen, d/b/a Greg Allen & Assoc., who
acknowledged the execution of the foregoing Lease, and who, having
been duly sworn, stated that any representations contained therein
are true.
Witness my hand and Notarial Seal this 6th day of Sept., 1997.
My Commission Expires: /s/ Michael J. Watkins
Notary Public
Printed: MICHAEL J. WATKINS
10-28-97 Resident of Johnson County
STATE OF INDIANA )
) SS:
COUNTY OF JOHNSON )
Before me, a Notary Public in and for said County and State,
personally appeared Steven L. Bechman, the President of Heartland
Bancshares, who acknowledged the execution of the foregoing Lease
for and on behalf of said Heartland Bancshares, and who, having
been duly sworn, stated that any representations contained therein
are true.
Witness my hand and Notarial Seal this 6th day of Sept., 1997.
My Commission Expires: /s/ Michael J. Watkins
Notary Public
Printed: MICHAEL J. WATKINS
10-28-97 Resident of Johnson County
[EXHIBITS OMITTED]
3035\EDGAR\LEASE10.5
ESCROW AGREEMENT
BANK ONE, INDIANA, NA
THIS ESCROW AGREEMENT (the "Escrow Agreement") dated and
effective as of the 26th day of September, 1997 among RONEY & CO.
("Roney"), HEARTLAND BANCSHARES, INC. ("Heartland"), and BANK ONE,
INDIANA, NA, as escrow agent hereunder (in such capacity, the
"Escrow Agent"), all being duly authorized to execute and deliver
this Escrow Agreement.
R E C I T A L S
WHEREAS, Heartland is in the process of forming an Indiana
chartered commercial bank ("Bank"); and
WHEREAS, in connection with the formation of the Bank, Heartland is
offering up to 1,150,000 shares of its common stock ("Shares") in
accordance with the terms and conditions set forth in the
prospectus ("Prospectus") to be dated September 23, 1997
("Offering"); and
WHEREAS, pursuant to the Underwriting Agreement between Heartland
and Roney (the "Underwriting Agreement"), Roney, among other
things, is to deliver a check for the purchase price of the Shares;
and
WHEREAS, pursuant to the Underwriting Agreement, Heartland, among
other things, is to deliver a stock certificate for the Shares
being purchased by Roney; and
WHEREAS, as a condition to the purchase and sale of the Shares
provided for in the Underwriting Agreement, Heartland must have
obtained all necessary regulatory approvals including those of the
Indiana Department of Financial Institutions and the Federal
Deposit Insurance Corporation; and
WHEREAS, pending the receipt of such approval, Roney and Heartland
desire that, and have requested the Escrow Agent to be engaged as
agent in accordance with the terms and conditions hereof to provide
for the safekeeping of both the Shares and the purchase price
therefor; and
WHEREAS, Escrow Agent is willing to perform such services in
accordance with the terms and conditions hereof and has established
the Escrow Account hereunder;
W I T N E S S E T H:
NOW, THEREFORE in consideration of the covenants and
agreements herein contained, and for other good, fair and valuable
considerations and reasonably equivalent value, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto,
the Escrow Agent, Roney and Heartland do agree as follows,
intending to be legally bound:<PAGE>
<PAGE> 2
Section 1. CERTAIN RULES OF CONSTRUCTION AND DEFINED TERMS.
For all purposes of this Escrow Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) All Persons and entities defined or mentioned herein as
parties hereto or to the other agreements, instruments, documents
and the like mentioned herein shall include, as applicable, each
and all of their respective heirs, legal representatives,
successors and assigns.
(b) All references to agreements, instruments, documents and
the like herein shall mean and include all amendments, supplements
and modifications thereto and restatements thereof and
substitutions therefor, as such agreements, instruments, documents
and the like are so amended, supplemented, modified or restated in
accordance with their respective terms.
(c) The words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Escrow Agreement as a whole
and not to any particular Section or other subdivision.
(d) All headings used in this Escrow Agreement are for the
convenience of the parties only and shall not be used in construing
the meaning or intent of the terms and provisions hereof.
(e) The following terms shall have the respective meanings
set forth or referred to below in this Section. Except where the
context otherwise requires, words importing the singular number
shall include the plural and vice versa.
"Business Day" shall mean any day on which banks are open for
general banking business in the State of Indiana, other than a
Saturday, a Sunday, a legal holiday or any other day on which banks
in the State of Indiana are required or authorized by law or
executive order to close. If any action or time for performance
pursuant to this Escrow Agreement is to occur on any day that is
not a Business Day, such time for action or performance shall be
extended to the next Business Day.
"Condition" or "Conditions" shall mean the Escrow Agent, upon
receipt of the Roney Property (as hereinafter defined) and
Heartland Property (as hereinafter defined), shall hold such Roney
Property and Heartland Property as Escrow Agent for Roney and
Heartland until (i) the Bank has received approval of the Indiana
Department of Financial Institutions as a state chartered
commercial bank and (ii) the Bank has received approval for deposit
insurance from the Federal Deposit Insurance Corporation
(collectively the "Banking Regulatory Approvals"). If the Banking
<PAGE>
<PAGE> 3
Regulatory Approvals are received (as evidenced by written
confirmation by Roney and Heartland), the Escrow Agent shall
deliver the Roney Property and Heartland Property pursuant to the
Escrow Instructions in Section 3. The conditions shall be subject
to the receipt of written instructions in compliance with the
requirements by a Trust Officer of the Escrow Agent at the Escrow
Agent's Corporate Trust Offices, during the Escrow Agent's business
hours on a Business Day on or before the Release Date.
"Roney" shall have the meaning assigned to such term in the
preamble to this Escrow Agreement.
"Escrow Agent" shall have the meaning assigned to such term in
the preamble to this Escrow Agreement.
"Indemnified Party" shall mean the Escrow Agent and\or any of
its shareholders, directors, agents, officers and employees.
"Heartland" shall have the meaning assigned to such term in
the preamble to this Escrow Agreement.
"Person" shall mean any individual, corporation, trust,
unincorporated organization, governmental authority or any other
form of entity.
"Permitted Investments" shall mean The One Group U.S. Treasury
Money Market Fund or as otherwise directed by Roney and Heartland
in writing to the Escrow Agent.
"Roney Property" shall mean the following items of property:
Eleven Million Five Hundred Thousand Dollars ($11,500,000).
"Heartland Property" shall mean the following items of
property: One (1) stock certificate for One Million One Hundred
Fifty Thousand shares of Heartland Bancshares, Inc. Common Stock.
"Release Date" shall mean October 31, 1997.
Section 2. DEPOSIT IN ESCROW. Roney and Heartland will
deliver to the Escrow Agent the Roney Property and the Heartland
Property to be held by the Escrow Agent in escrow pursuant to the
provisions of this Escrow Agreement.
Section 3. ESCROW INSTRUCTIONS. The Escrow Agent is hereby
authorized and instructed to deliver the Roney Property, including
any interest earned thereon, to Heartland less the underwriting
discount and interest earned thereon, which shall be paid to Roney
<PAGE>
<PAGE> 4
and the Heartland Property to Roney as agent for the purchasers
thereof upon strict compliance with the Condition(s); provided,
however, should the Condition(s) not be satisfied by the Escrow
Agent's close of business on the Release Date, the Escrow Agent
shall promptly redeliver the Roney Property, including any interest
earned thereon, to Roney as agent for the prospective purchasers of
the Shares and the Heartland Property to Heartland; whereupon in
either event the Escrow Agent's duties and liabilities in
connection with this Escrow Agreement and the Roney Property and
Heartland Property shall terminate.
Section 4. INVESTMENT OF FUNDS HELD BY ESCROW AGENT. Pending
distribution in accordance with the provisions of Section 3 hereof,
all collected and available funds held by the Escrow Agent pursuant
to this Escrow Agreement shall be invested in The One Group U.S.
Treasury Money Market Fund or, if directed in writing, in other
Permitted Investments. The parties hereby acknowledge and agree
that unless written instructions and collected and available funds
are delivered to the Escrow Agent by 11:00 a.m. Eastern Standard
Time on a business day, the funds will remain uninvested until the
next business day.
Section 5. AVAILABILITY OF FUNDS/DELIVERY OF PROPERTY.
All parties acknowledge and agree that delivery of the Roney
Property is subject to the sale and final settlement of Permitted
Investments. Delivery of the Condition(s) when funds are invested
in The One Group U.S. Treasury Money Market Fund must be made to
the Escrow Agent by 11:00 a.m., Eastern Standard Time, if the
Roney Property is to be delivered by the close of that business
day. Otherwise, the Roney Property and the Heartland Property will
be delivered on the next business day. With respect to the sale
of any other Permitted Investment, if the final settlement of that
sale has not occurred by 1:00 p.m. Eastern Standard Time on the day
the Condition(s) is delivered to the Escrow Agent, all parties
acknowledge and agree that the Roney Property and the Heartland
Property will be delivered on the next business day.
Section 6. CONCERNING THE ESCROW AGENT. (a) All parties
acknowledge and agree that the Escrow Agent is acting solely and
exclusively as a depository hereunder. The Escrow Agent shall have
no liability to any Person in acting upon or refraining from
acting on any written notice, request, waiver, consent,
certificate, receipt, authorization, or other paper or document
which the Escrow Agent believes to be genuine and what it purports
to be.
<PAGE>
<PAGE> 5
(b) The Escrow Agent may confer with legal counsel in the
event of any dispute or question as to the construction of any of
the provisions hereof, or its duties hereunder, and it shall incur
no liability and it shall be fully protected in acting in
accordance with the opinions of such counsel.
(c) In the event of any conflicting or inconsistent claims or
demands being made in connection with the subject matter of this
Escrow Agreement, or in the event that the Escrow Agent is in doubt
as to what action it should take hereunder, the Escrow Agent may,
at its option, refuse to comply with any claims or demands on it,
or refuse to take any other action hereunder so long as such
disagreement continues or such doubt exists, and in any such event,
the Escrow Agent shall not be or become liable in any way or to any
person for its failure or refusal to act, and the Escrow Agent
shall be entitled to continue to refrain from acting until (i) the
rights of all parties have been fully and finally adjudicated by a
court of competent jurisdiction, or (ii) all differences shall have
been settled and all doubt resolved by agreement among all of the
interested Persons, and the Escrow Agent shall have been notified
thereof in writing signed by all such Persons. In addition to the
foregoing rights, in the event the Escrow Agent has any doubt as to
the course of action it should take under this Escrow Agreement,
the Escrow Agent is hereby authorized to petition any Superior
Court of Marion, County or the United States District Court of the
Southern District of Indiana for instructions or to interplead the
funds or assets so held (including the Roney Property, the
Heartland Property and any investments) into such court. The
parties agree to the jurisdiction of either of said courts over
their persons as well as the Roney Property and the Heartland
Property, waive personal service of process, and agree that service
of process by certified or registered mail, return receipt
requested, to the address set forth below each party's signature to
this Escrow Agreement shall constitute adequate service. Roney and
Heartland hereby agree to indemnify and hold the Escrow Agent
harmless from any liability or losses occasioned thereby and to pay
any and all of its fees, costs, expenses, and counsel fees and
expenses incurred in any such action and agree that, on such
petition or interpleader action, the Escrow Agent, its servants,
agents, employees or officers will be relieved of further
liability. The Escrow Agent is hereby given a lien upon, and
security interest in, all Roney Property and Heartland Property in
the Escrow Agent's actual or constructive possession, and all
investment and reinvestment of such Roney Property and Heartland
Property and the earnings thereon, to secure the Escrow Agent's
rights to payment or reimbursement (or both) under this Escrow
Agreement.
<PAGE>
<PAGE> 6
(d) THE INDEMNIFIED PARTY SHALL NOT BE LIABLE TO ANY PERSON
FOR ANYTHING WHICH IT MAY DO OR REFRAIN FROM DOING IN CONNECTION
WITH THIS ESCROW AGREEMENT, INCLUDING THE INDEMNIFIED PARTY'S OWN
NEGLIGENCE, BUT EXCLUDING THE INDEMNIFIED PARTY'S OWN GROSS
NEGLIGENCE OR WILLFUL MALFEASANCE. THE INDEMNIFIED PARTY'S
LIABILITY FOR ANY GROSSLY NEGLIGENT PERFORMANCE OR NON-PERFORMANCE
SHALL NOT EXCEED ITS FEES IN CONNECTION WITH THE SERVICES PROVIDED
HEREUNDER. IN NO EVENT SHALL THE INDEMNIFIED PARTY BE LIABLE TO
RONEY OR HEARTLAND OR ANY THIRD PARTY FOR SPECIAL, INDIRECT, OR
CONSEQUENTIAL DAMAGES, OR LOST PROFITS OR LOSS OF BUSINESS, ARISING
UNDER OR IN CONNECTION WITH THIS ESCROW AGREEMENT.
(e) RONEY AND HEARTLAND HEREBY AGREE JOINTLY AND SEVERALLY
TO PROTECT, DEFEND, INDEMNIFY AND HOLD HARMLESS THE INDEMNIFIED
PARTY AGAINST, ANY AND ALL COSTS, LOSSES, DAMAGES, LIABILITIES,
CLAIMS, EXPENSES (INCLUDING COUNSEL FEES AND EXPENSES) AND CLAIMS
INCURRED BY IT WITHOUT GROSS NEGLIGENCE OR WILLFUL MALFEASANCE ON
THE INDEMNIFIED PARTY'S PART ARISING OUT OF OR IN CONNECTION WITH
ITS ENTERING INTO THIS ESCROW AGREEMENT AND THE CARRYING OUT OF ITS
DUTIES HEREUNDER, INCLUDING THE COSTS AND EXPENSES OF DEFENDING
ITSELF AGAINST ANY CLAIM OF LIABILITY RELATING TO THIS ESCROW
AGREEMENT.
(f) The Escrow Agent may resign for any reason, upon 30 days
written notice to Roney and Heartland to this Escrow Agreement.
Upon expiration of such 30 day notice period, the Escrow Agent may
deliver all cash and other property in its possession, after the
payment of all fees and expenses of the Escrow Agent, under this
Escrow Agreement to any successor escrow agent appointed jointly by
Roney and Heartland, or if no successor escrow agent has been so
appointed, to any court of competent jurisdiction in Marion County,
Indiana. Upon either such delivery, the Escrow Agent shall be
released from any and all liability under this Escrow Agreement.
A termination under this paragraph shall in no way discharge
clauses (d), (e) and (g) of this Section 6 affecting reimbursement
of expenses, indemnity and fees. The Escrow Agent shall have the
right to deduct from the property to be transferred to any
successor agent any unpaid fees and expenses.
(g) Contemporaneously with the execution of this Escrow
Agreement, Heartland shall pay to the Escrow Agent an Acceptance
Fee of $1,000 and a base Annual Administration Fee of $1,000, which
fee shall be deemed fully earned immediately, regardless of the
actual length of time during which this Escrow Agreement is
effective. In addition, Heartland agrees to pay to the Escrow
Agent its customary fees and expenses, including counsel fees and
expenses for the services rendered by it pursuant to the provisions
of this Escrow Agreement. Heartland agrees to reimburse the Escrow
<PAGE>
<PAGE> 7
Agent for its expenses, including counsel fees and expenses
incurred in connection with the negotiation of this Escrow
Agreement shall be paid upon execution of this Escrow Agreement.
The Escrow Agent's current fee schedule is attached hereto as
Exhibit A (but such fees may be adjusted from time to time, in
which case Heartland agrees to pay the adjusted fees).
Notwithstanding anything to the contrary from either Roney or
Heartland, the Escrow Agent shall be entitled to retain from any
disbursements requested hereunder any outstanding fees and/or
expenses due to it hereunder. The Escrow Agent is hereby granted
a first lien on the Roney Property and Heartland Property for all
indebtedness that may become owing to the Escrow Agent pursuant to
this Escrow Agreement. In the event such fees or expenses are not
paid to Escrow Agent within thirty (30) days after Escrow Agent
makes demand therefore from Heartland, the Escrow Agent may charge
such fee against the Roney Property, either against the corpus of
the Roney Property or interest earned thereon.
(h) It is strictly understood that the Escrow Agent has no
duty to disburse any funds to any Person until such funds have been
collected by the Escrow Agent and those funds are available in
accordance with normal banking procedures and/or policy. In the
event that any funds, including collected funds, deposited in the
Escrow Account prove uncollectible, Roney and the Escrow Agent
shall immediately reimburse the Escrow Agent upon request for the
face amount of such deposit.
Section 7. MISCELLANEOUS.
(a) All notices and communications hereunder shall be in
writing, and shall be deemed to be duly given if sent first class
mail, postage prepaid to the address set forth below the signature
of the party to receive such notice. Any party to this Escrow
Agreement may, from time to time, change its address for notices by
giving written notice of such change to the other parties hereto.
The Escrow Agent shall not be charged with knowledge of any fact,
including but not limited to performance or non-performance of any
condition, unless it has actually received written notice thereof
from all of the parties hereto of their authorized representative
clearly referring to this Escrow Agreement.
(b) The rights created by this Escrow Agreement shall inure
to the benefit of, and the obligations created hereby shall be
binding upon, the successors and assigns of each of the parties
hereto.
(c) This Escrow Agreement shall be construed and enforced
according to the laws of the State of Indiana.
<PAGE>
<PAGE> 8
(d) This Escrow Agreement shall terminate and Escrow Agent
shall be discharged of all responsibility hereunder at such time as
Escrow Agent shall have completed its duties hereunder; provided,
however, the Escrow Agent's rights to indemnity and to receive
payment of its fees and expenses shall survive any termination of
this Escrow Agreement.
(e) This Escrow Agreement may be executed in several
counterparts, which taken together shall constitute a single
document.
(f) This Escrow Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to
the transactions described herein and supersedes all prior
agreements or understandings, written or oral, between the parties
with respect thereto. There are no implied duties under this
Escrow Agreement. The Escrow Agent's only duty is to act in
accordance with specific written instructions furnished by the
parties to this Escrow Agreement. The Escrow Agent is not a party
to any other agreement and the Escrow Agent shall not be subject to
any other agreement even though reference thereto may be made
herein.
(g) If any provision of this Escrow Agreement is declared by
a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall nevertheless continue
in full force and effect without being impaired or invalidated in
any way.
(h) No amendment, modification or waiver of any provision of
this Escrow Agreement nor consent to any departure by any Person
from the provisions hereof shall be effective in any event unless
the same shall be in writing and signed by each of Roney, Heartland
and Escrow Agent, and then any such waiver or consent shall be
effective only in the specific instance and purpose for which
given.
(i) Pursuant to the regulations of the Office of the
Comptroller of the Currency [12 C.F.R. 12.5(a)], Roney and
Heartland have the right to receive, at no additional cost and
within five business days of the transaction, a written
notification disclosing certain information relating to securities
purchase and sale transactions in the Escrow Account. The Escrow
Agent has the option of furnishing to Roney and Heartland either
(1) a copy of the broker-dealer confirmation relating to the
transaction or (2) a written notification disclosing: the Escrow
Agent's name, the account name, the Escrow Agent's capacity in the
transaction, the date of execution (and, upon Roney's and
Heartland's written request, the time of execution) of the
<PAGE>
<PAGE> 9
transaction, the identity, price and number of shares involved, the
remuneration to the broker-dealer and his identity, the total
remuneration to be received by the Escrow Agent, and, if no
broker-dealer was involved, the identity of the person from whom
the security was purchased or to whom it was sold.
In lieu of the foregoing time and form of notification, Roney
and Heartland agree that the Escrow Agent's periodic statements,
transmitted pursuant to the terms of this Escrow Agreement, will
suffice.
(j) The following persons are authorized to direct the Escrow
Agent regarding any transactions to this Escrow Agreement
including, but not limited to, investment and/or disbursement of
the Roney Property and the Heartland Property.
John C. Donnelly Steve Bechman
Roney Heartland
(k) Roney and Heartland warrant to the Escrow Agent that
there are no federal, state or local tax liabilities or filing
requirements whatsoever concerning the Escrow Agent's actions
contemplated hereunder and warrant and represent to the Escrow
Agent that the Escrow Agent has no duty to withhold or file any
report or any tax liability under any federal or state income
tax, local or state property tax, local or state sales or use
taxes, or any other tax by any taxing authority. Roney and
Heartland hereto agree jointly and severally to indemnify the
Escrow Agent fully from any tax liability, penalties or interest
incurred by the Escrow Agent arising hereunder and agree to pay
in full any such tax liability together with penalty and
interest, if any, that is ultimately assessed against the Escrow
Agent for any reason as a result of its action hereunder (except
for the Escrow Agent's individual income tax liability).
* * * * *
<PAGE>
IN WITNESS WHEREOF, Roney, Heartland and Escrow Agent have
executed this Escrow Agreement effective as of the day and year
first above written.
"RONEY" RONEY & CO.
One Griswold
Detroit, Michigan 48223
By: _______________________________
Title:_____________________________
Tax Identification Number:_________
"HEARTLAND" HEARTLAND BANCSHARES, INC.
P.O. Box 469
Franklin, Indiana 46131
By: _______________________________
Title:____________________________
Tax Identification Number:________
"ESCROW AGENT" BANK ONE, INDIANA, NA
Corporate Trust Department
111 Monument Circle - Suite 1611
Indianapolis, Indiana 46277
By: _______________________________
Title:_____________________________
