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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) July 19, 1999
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FIRST CAPITAL, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Indiana 0-25023 35-2056949
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(State or other Jurisdiction of (Commission (IRS Employer
Incorporation or Organization File Number) Identification No.)
220 Federal Drive N.W., Corydon, Indiana 47112
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(Address of Principal Executive Offices) (Zip Code)
(812) 738-2198
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(Registrant's Telephone Number, including Area Code)
Not Applicable
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(Former Name or Former Address, If Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
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On July 19, 1999, First Capital, Inc. ("First Capital"), entered into an
Agreement and Plan of Merger (the "Merger Agreement") with HCB Bancorp ("HCB")
pursuant to which First Capital and HCB will combine in a merger of equals. The
Merger Agreement is filed as Exhibit 2.1 hereto and is incorporated herein by
reference. The Merger Agreement provides that FC Acquisition Corp., a
wholly-owned subsidiary of First Capital, will be merged with and into HCB, with
HCB being the surviving entity (the "Merger") and becoming a wholly-owned
subsidiary of First Capital. Immediately following consummation of the Merger,
HCB will adopt a plan of liquidation pursuant to which it will merge with and
into First Capital. Immediately following the combination of First Capital and
HCB, Harrison County Bank, a bank organized under the laws of the State of
Indiana and a subsidiary of HCB ("HC Bank"), will merge with and into First
Federal Bank, a Federal Savings Bank, a federally chartered savings bank and
wholly-owned subsidiary of First Capital ("First Federal").
Pursuant to the terms of the Merger Agreement, each share of HCB common
stock, no par value per share, issued and outstanding at the Effective Time of
the Merger, shall become and be converted into the right to receive 15.5 shares
of First Capital common stock, par value $.01 per share. Upon consummation of
the Merger, the Board of Directors of First Capital will be increased from seven
to fourteen members and will consist of the then-current members of the Boards
of Directors of First Capital and HCB and the Board of Directors of First
Federal also will be increased from seven to fourteen members and will consist
of the then-current members of the Boards of Directors of First Federal and HC
Bank.
Consummation of the Merger is subject to various conditions, including the
approval of the shareholders of First Capital and HCB and the receipt of all
requisite regulatory approvals.
The joint press release issued by First Capital and HCB with respect to
the Merger is filed herewith as Exhibit 99.1.
The summary of the Merger Agreement is not complete and is qualified in
its entirety by reference to the complete text of such documents filed as an
exhibit herewith and incorporated herein by reference.
ITEM 7(C). FINANCIAL STATEMENTS AND EXHIBITS.
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Exhibit 2.1 Agreement and Plan of Merger, dated as of July 19, 1999, by and
among First Capital, Inc., FC Acquisition Corp. and HCB Bancorp
Exhibit 99.1 Joint Press Release issued by First Capital, Inc. and HCB Bancorp
on July 20, 1999
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST CAPITAL, INC.
Dated: July 22, 1999 By: /s/ J. Gordon Pendleton
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J. Gordon Pendleton
Chairman of the Board and
Chief Executive Officer
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EXHIBIT INDEX
Exhibit 2.1 Agreement and Plan of Merger, dated as of July 19, 1999, by and
among First Capital, Inc., FC Acquisition Corp. and HCB Bancorp
Exhibit 99.1 Joint Press Release issued by First Capital, Inc. and HCB Bancorp
on July 20, 1999.
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AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 19, 1999
BY AND AMONG
FIRST CAPITAL, INC.,
FC ACQUISITION CORP.
AND
HCB BANCORP
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TABLE OF CONTENTS
Page No.
Introductory Statement........................................................4
ARTICLE I
The Merger....................................................................4
Section 1.1. Structure of the Merger....................................4
Section 1.2. Effect on Outstanding Shares of HCB Common Stock...........5
Section 1.3. Exchange Procedures........................................6
Section 1.4. Effect on Outstanding Shares of Merger Sub Common Stock....8
Section 1.5. Directors of HCB after Effective Time......................8
Section 1.6. Articles of Incorporation and Bylaws of the Surviving
Corporation................................................8
Section 1.7. Stock Options..............................................8
Section 1.8. Bank Merger................................................9
Section 1.9. Alternative Structure......................................9
ARTICLE II
Representations and Warranties................................................9
Section 2.1. Disclosure Letters.........................................9
Section 2.2. Standards..................................................9
Section 2.3. Representations and Warranties of HCB.....................10
Section 2.4. Representations and Warranties of First Capital...........26
ARTICLE III
Conduct Pending the Merger...................................................41
Section 3.1. Conduct of Business Prior to the Effective Time...........41
Section 3.2. Forbearances..............................................41
ARTICLE IV
Covenants....................................................................44
Section 4.1. Acquisition Proposals.....................................44
Section 4.2. Certain Policies of HCB...................................47
Section 4.3. Access and Information....................................47
Section 4.4. Applications; Consents....................................48
Section 4.5. Antitakeover Provisions...................................48
Section 4.6. Additional Agreements.....................................48
Section 4.7. Publicity.................................................48
Section 4.8. Shareholders Meetings.....................................48
Section 4.9. Registration of First Capital Common Stock................49
Section 4.10.Affiliate Letters.........................................50
Section 4.11.Notification of Certain Matters...........................50
Section 4.12.Employees, Directors and Officers.........................50
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Section 4.13. Indemnification..........................................53
Section 4.14. Year 2000................................................54
ARTICLE V
Conditions to Consummation...................................................54
Section 5.1. Conditions to Each Party's Obligations....................54
Section 5.2. Conditions to the Obligations of First Capital............56
Section 5.3. Conditions to the Obligations of HCB......................57
ARTICLE VI
Termination..................................................................57
Section 6.1. Termination...............................................57
Section 6.2. Effect of Termination.....................................59
Section 6.3. Termination Fees..........................................59
ARTICLE VII
Closing, Effective Date and Effective Time...................................60
Section 7.1. Effective Date and Effective Time.........................60
Section 7.2. Deliveries at the Closing.................................60
ARTICLE VIII
Certain Other Matters........................................................60
Section 8.1. Certain Definitions; Interpretation.......................60
Section 8.2. Survival..................................................61
Section 8.3. Waiver; Amendment.........................................61
Section 8.4. Counterparts..............................................61
Section 8.5. Governing Law.............................................61
Section 8.6. Expenses..................................................61
Section 8.7. Notices...................................................62
Section 8.8. Entire Agreement; etc.....................................63
Section 8.9. Successors and Assigns; Assignment........................63
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AGREEMENT AND PLAN OF MERGER
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This is an AGREEMENT AND PLAN OF MERGER, dated as of the 19th day of
July, 1999 ("AGREEMENT"), by and among First Capital, Inc., an Indiana
corporation ("FIRST CAPITAL"), FC Acquisition Corp., an Indiana corporation and
wholly-owned subsidiary of First Capital ("MERGER SUB"), and HCB Bancorp, an
Indiana corporation ("HCB").
INTRODUCTORY STATEMENT
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The Board of Directors of each of First Capital, Merger Sub and HCB
(i) has determined that this Agreement and the business combination and related
transactions contemplated hereby are in the best interests of First Capital and
HCB, respectively, and in the best long-term interests of their respective
shareholders, (ii) has determined that this Agreement and the transactions
contemplated hereby are consistent with, and in furtherance of, its respective
business strategies and (iii) has approved, at meetings of each of such Boards
of Directors, this Agreement.
The parties hereto intend that the Merger as defined herein shall
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended ("IRC"), for federal income tax
purposes, and that the Merger shall be accounted for as a pooling-of-interests
transaction for accounting purposes.
First Capital and HCB desire to make certain representations,
warranties and agreements in connection with the business combination and
related transactions provided for herein and to prescribe various conditions to
such transactions.
In consideration of their mutual promises and obligations hereunder,
the parties hereto adopt and make this Agreement and prescribe the terms and
conditions hereof and the manner and basis of carrying it into effect, which
shall be as follows:
ARTICLE I
THE MERGER
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Section 1.1. Structure of the Merger. On the Effective Date (as
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defined in SECTION 7.1), Merger Sub will merge with and into HCB ("MERGER"),
with HCB being the surviving entity, pursuant to the provisions of, and with the
effect provided for in, the Indiana Business Corporation Law ("IBCL"). Upon
consummation of the Merger, the separate corporate existence of Merger Sub shall
cease. HCB shall be the surviving corporation in the Merger and shall continue
to be governed by the laws of the State of Indiana and its name and separate
corporate existence, with all of its rights, privileges, immunities, powers and
franchises, shall continue unaffected by the Merger. From and after the
Effective Time (as defined in SECTION
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7.1), HCB shall possess all of the properties and rights and be subject to all
of the liabilities and obligations of Merger Sub, all as more fully described in
Chapter 23-1-40 of the IBCL. Upon the Merger becoming effective, HCB will adopt
a plan of complete liquidation pursuant to which HCB shall merge with and into
First Capital immediately after the Effective Time.
Section 1.2. Effect on Outstanding Shares of HCB Common Stock.
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(a) By virtue of the Merger, automatically and without any action on
the part of the holder thereof, each share of common stock, no par value per
share, of HCB ("HCB COMMON STOCK") issued and outstanding at the Effective Time,
other than Excluded Shares (as defined below), shall become and be converted
into the right to receive 15.5 shares of common stock, par value $0.01 per
share, of First Capital ("FIRST CAPITAL COMMON STOCK") (the "EXCHANGE RATIO");
PROVIDED, HOWEVER, that, notwithstanding any other provision hereof, no fraction
of a share of First Capital Common Stock and no certificates or scrip therefor
will be issued in the Merger; instead, First Capital shall pay to each holder of
HCB Common Stock who would otherwise be entitled to a fraction of a share of
First Capital Common Stock an amount in cash, rounded to the nearest cent,
determined by multiplying such fraction by the average of the closing sales
price of First Capital Common Stock, as reported on the Nasdaq SmallCap Market
of The Nasdaq Stock Market, Inc. ("NASDAQ SMALLCAP MARKET"), for the 10
consecutive trading days immediately preceding the Closing Date (as defined in
SECTION 7.1) (collectively, the "MERGER CONSIDERATION"). In the event First
Capital Common Stock does not trade on one or more of the trading days in such
period, any such date shall be disregarded in computing the average closing
price and the average shall be based upon the closing sales price and number of
days on which First Capital Common Stock actually traded during such period.
(b) As used herein, "EXCLUDED SHARES" shall consist of (i) shares
the holder of which, pursuant to any applicable law providing for dissenters' or
appraisal rights, is entitled to receive payment in accordance with the
provisions of any such law, such holder to have only the rights provided under
any such law (the "DISSENTERS' SHARES") and (ii) shares held directly or
indirectly by First Capital (other than shares held in a fiduciary capacity or
in satisfaction of a debt previously contracted).
(c) If, between the date of this Agreement and the Effective Time,
the outstanding shares of First Capital Common Stock shall have been changed
into a different number of shares or into a different class by reason of any
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Exchange Ratio shall be adjusted
correspondingly to the extent appropriate to reflect such change.
(d) As of the Effective Time, each Excluded Share, other than
Dissenters' Shares, shall be canceled and retired and shall cease to exist, and
no exchange or payment shall be made with respect thereto. All shares of First
Capital Common Stock that are held by HCB, if any, other than shares held in a
fiduciary capacity or in satisfaction of a debt previously contracted, shall be
canceled and shall constitute authorized but unissued shares.
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(e) Shareholders of HCB who properly exercise and perfect statutory
dissenters' rights shall have the rights accorded to dissenting shareholders
under Chapter 23-1-44 of the IBCL.
Section 1.3. Exchange Procedures.
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(a) Appropriate transmittal materials ("LETTER OF TRANSMITTAL")
shall be mailed within ten calendar days after the Effective Time to each holder
of record of HCB Common Stock as of the Effective Time. A Letter of Transmittal
will be deemed properly completed only if accompanied by certificates
representing all shares of HCB Common Stock to be converted thereby.
(b) At and after the Effective Time, each certificate ("HCB
CERTIFICATE") previously representing shares of HCB Common Stock (except as
specifically set forth in SECTION 1.2) shall represent only the right to receive
the Merger Consideration.
(c) Prior to the Effective Time, First Capital shall deposit, or
shall cause to be deposited, with its transfer agent and registrar or such bank
or trust company that is selected by First Capital and is reasonably acceptable
to HCB to act as exchange agent ("EXCHANGE AGENT"), for the benefit of the
holders of shares of HCB Common Stock, for exchange in accordance with this
SECTION 1.3, an estimated amount of cash sufficient to pay the aggregate amount
of cash in lieu of fractional shares to be paid pursuant to SECTION 1.2, and
First Capital shall reserve for issuance with its transfer agent and registrar a
sufficient number of shares of First Capital Common Stock to provide for payment
of the Merger Consideration.
(d) The Letter of Transmittal shall (i) specify that delivery shall
be effected, and risk of loss and title to the HCB Certificates shall pass, only
upon delivery of the HCB Certificates to the Exchange Agent, (ii) be in a form
and contain any other provisions as First Capital may reasonably determine and
(iii) include instructions for use in effecting the surrender of the HCB
Certificates in exchange for the Merger Consideration. Upon the proper surrender
of the HCB Certificates to the Exchange Agent, together with a properly
completed and duly executed Letter of Transmittal, the holder of such HCB
Certificates shall be entitled to receive in exchange therefor (m) a certificate
representing that number of whole shares of First Capital Common Stock that such
holder has the right to receive pursuant to SECTION 1.2 and (n) a check in the
amount equal to the cash in lieu of fractional shares, if any, that such holder
has the right to receive pursuant to SECTION 1.2 and any dividends or other
distributions to which such holder is entitled pursuant to this SECTION 1.3. HCB
Certificates so surrendered shall forthwith be cancelled. As soon as practicable
following receipt of the properly completed Letter of Transmittal and any
necessary accompanying documentation, the Exchange Agent shall distribute First
Capital Common Stock and cash as provided herein. The Exchange Agent shall not
be entitled to vote or exercise any rights of ownership with respect to the
shares of First Capital Common Stock held by it from time to time hereunder,
except that it shall receive and hold all dividends or other distributions paid
or distributed with respect to such shares for the
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account of the persons entitled thereto. If there is a transfer of ownership of
any shares of HCB Common Stock not registered in the transfer records of HCB,
the Merger Consideration shall be issued to the transferee thereof if the HCB
Certificates representing such HCB Common Stock are presented to the Exchange
Agent, accompanied by all documents required, in the reasonable judgment of
First Capital and the Exchange Agent, (x) to evidence and effect such transfer
and (y) to evidence that any applicable stock transfer taxes have been paid.
(e) No dividends or other distributions declared or made after the
Effective Time with respect to First Capital Common Stock shall be remitted to
any person entitled to receive shares of First Capital Common Stock hereunder
until such person surrenders his or her HCB Certificates in accordance with this
SECTION 1.3. Upon the surrender of such person's HCB Certificates, such person
shall be entitled to receive any dividends or other distributions, without
interest thereon, which theretofore had become payable with respect to shares of
First Capital Common Stock represented by such person's HCB Certificates.
(f) From and after the Effective Time there shall be no transfers on
the stock transfer records of HCB of any shares of HCB Common Stock. If, after
the Effective Time, HCB Certificates are presented to First Capital, they shall
be cancelled and exchanged for the Merger Consideration deliverable in respect
thereof pursuant to this Agreement in accordance with the procedures set forth
in this SECTION 1.3.
(g) Any portion of the aggregate amount of cash to be paid in lieu
of fractional shares pursuant to SECTION 1.2, any dividends or other
distributions to be paid pursuant to this SECTION 1.3 or any proceeds from any
investments thereof that remains unclaimed by the shareholders of HCB for six
months after the Effective Time shall be repaid by the Exchange Agent to First
Capital upon the written request of First Capital. After such request is made,
any shareholders of HCB who have not theretofore complied with this SECTION 1.3
shall look only to First Capital for the Merger Consideration deliverable in
respect of each share of HCB Common Stock such shareholder holds, as determined
pursuant to SECTION 1.2 of this Agreement, without any interest thereon. If
outstanding HCB Certificates are not surrendered prior to the date on which such
payments would otherwise escheat to or become the property of any governmental
unit or agency, the unclaimed items shall, to the extent permitted by any
abandoned property, escheat or other applicable laws, become the property of
First Capital (and, to the extent not in its possession, shall be paid over to
it), free and clear of all claims or interest of any person previously entitled
to such claims. Notwithstanding the foregoing, neither the Exchange Agent nor
any party to this Agreement (or any affiliate thereof) shall be liable to any
former holder of HCB Common Stock for any amount delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(h) First Capital and the Exchange Agent shall be entitled to rely
upon HCB's stock transfer books to establish the identity of those persons
entitled to receive the Merger Consideration, which books shall be conclusive
with respect thereto. In the event of a dispute with respect to ownership of
stock represented by any HCB Certificate, First Capital and the
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Exchange Agent shall be entitled to deposit any Merger Consideration represented
thereby in escrow with an independent third party and thereafter be relieved
with respect to any claims thereto.
(i) If any HCB Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such HCB Certificate to be lost, stolen or destroyed and, if required by the
Exchange Agent, the posting by such person of a bond in such amount as the
Exchange Agent may direct as indemnity against any claim that may be made
against it with respect to such HCB Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed HCB Certificate the Merger
Consideration deliverable in respect thereof pursuant to SECTION 1.2.
Section 1.4. Effect on Outstanding Shares of Merger Sub Common Stock.
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By virtue of the Merger, automatically and without any action on the part of the
holder thereof, each share of common stock, par value $0.01 per share, of Merger
Sub issued and outstanding as of the Effective Time shall be converted into one
share of HCB Common Stock, as the surviving corporation.
Section 1.5. Directors of HCB after Effective Time. From and after
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the Effective Time, until duly changed in compliance with applicable law, the
Board of Directors of HCB shall consist of the directors of Merger Sub
immediately prior to the Effective Time.
Section 1.6. Articles of Incorporation and Bylaws of the Surviving
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Corporation. The Articles of Incorporation and Bylaws of HCB in effect
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immediately prior to the Effective Time shall be the Articles of Incorporation
and Bylaws of the surviving corporation until thereafter amended in accordance
with applicable law.
Section 1.7. Stock Options. At the Effective Time, by virtue of the
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Merger and without any action on the part of any holder of an option, each
option to acquire shares of HCB Common Stock (an "HCB OPTION") granted pursuant
to HCB's 1998 Officers' and Key Employees' Stock Option Plan (the "HCB OPTION
PLAN") that is then outstanding and unexercised shall be converted into and
become an option to acquire First Capital Common Stock on the same terms and
conditions as are in effect with respect to the HCB Option immediately prior to
the Effective Time (such option being referred to herein as a "CONVERTED
OPTION"), except that (i) the number of shares of First Capital Common Stock
subject to such HCB Option shall be equal to the number of shares of HCB Common
Stock subject to such HCB Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, the product being rounded, if necessary, up or
down to the nearest whole share, and (ii) the per share exercise price of the
HCB Option shall be adjusted by dividing the per share exercise price of the HCB
Option by the Exchange Ratio, and rounding to the nearest whole cent. It is
intended that the foregoing assumption of HCB Options shall be effected in a
manner which is consistent with the requirements of Section 424 of the IRC as to
any HCB Option that is an incentive stock option.
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Section 1.8. Bank Merger. Concurrently with or as soon as practicable
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after the execution and delivery of this Agreement, First Federal Bank, a
Federal Savings Bank ("FIRST FEDERAL"), a wholly-owned subsidiary of First
Capital, and Harrison County Bank ("HC BANK"), a wholly-owned subsidiary of HCB,
shall enter into the Plan of Bank Merger, in the form attached hereto as Exhibit
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A, pursuant to which HC Bank will merge with and into First Federal (the "BANK
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MERGER"). The parties hereto intend that the Bank Merger shall become effective
on the Effective Date.
Section 1.9. Alternative Structure. Notwithstanding anything to the
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contrary contained in this Agreement, prior to the Effective Time, First Capital
may specify that the structure or the proposed accounting treatment of the
transactions contemplated hereby be revised and the parties shall enter into
such alternative transactions as First Capital may determine to effect the
purposes of this Agreement; PROVIDED, HOWEVER, that such revised structure shall
not (i) adversely affect the tax effects of the Merger to HCB's shareholders or
alter or change the amount or kind of the Merger Consideration or (ii)
materially impede or delay the receipt of any Requisite Regulatory Approvals (as
defined in SECTION 2.3(F)). This Agreement and any related documents shall be
appropriately amended in order to reflect any such revised structure.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
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Section 2.1. Disclosure Letters. Prior to the execution and delivery
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of this Agreement, HCB and First Capital each have delivered to the other a
letter (each, its "DISCLOSURE LETTER") setting forth, among other things, facts,
circumstances and events the disclosure of which is required or appropriate in
relation to any or all of their respective representations and warranties (and
making specific reference to the Section of this Agreement to which they
relate). The mere inclusion of a fact, circumstance or event in a Disclosure
Letter shall not be deemed an admission by a party that such item represents a
material exception or that such item is reasonably likely to result in a
Material Adverse Effect (as defined in SECTION 8.1).
Section 2.2. Standards.
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(a) No representation or warranty of First Capital or HCB contained
in SECTIONS 2.3 OR 2.4, respectively, shall be deemed untrue or incorrect, and
no party hereto shall be deemed to have breached a representation or warranty,
on account of the existence or absence of any fact, circumstance or event
unless, as a direct or indirect consequence of such fact, circumstance or event,
individually or taken together with all other facts, circumstances or events
inconsistent with any paragraph of SECTIONS 2.3 OR 2.4, as applicable, there is
reasonably likely to exist a Material Adverse Effect. Neither First Capital's
nor HCB's representations, warranties and covenants contained in this Agreement
shall be deemed to be untrue or breached as a result of effects solely from
actions taken in compliance with a written request of the other party.
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Section 2.3. Representations and Warranties of HCB. Subject to
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SECTIONS 2.1 AND 2.2, HCB represents and warrants to First Capital, with respect
to itself and HC Bank, that, except as disclosed in HCB's Disclosure Letter:
(a) Organization; Qualification.
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(i) HCB is a corporation duly organized and validly existing
under the laws of the State of Indiana and is registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended ("BHCA").
(ii) HC Bank is a commercial bank duly organized and validly
existing under the laws of the State of Indiana and is wholly owned by HCB. The
deposits of HC Bank are insured by the Bank Insurance Fund of the Federal
Deposit Insurance Corporation ("FDIC") to the extent provided in the Federal
Deposit Insurance Act, as amended ("FDIA"). HC Bank is a member of Federal Home
Loan Bank of Indianapolis.
(iii) HCB and HC Bank each has all requisite corporate power
and authority to own, lease and operate its properties and to conduct the
business currently being conducted by it. HCB and HC Bank are each duly
qualified to transact business and in good standing in each jurisdiction in
which the character of the properties owned or leased by it or the nature of the
business conducted by it makes such qualification necessary, each of which
jurisdictions is listed on HCB's Disclosure Letter, except where the failure to
be so qualified would not have a Material Adverse Effect on HCB.
(iv) The Articles of Incorporation and Bylaws of HCB and HC
Bank delivered with HCB's Disclosure Letter are complete and correct as of the
date hereof.
(b) Subsidiaries.
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(i) HCB's Disclosure Letter sets forth (i) the name,
percentage ownership and number of shares of stock owned or controlled by HCB of
each corporation, partnership, joint venture or other entity in which HCB has,
directly or indirectly, an equity interest representing 5% or more of any class
of the capital stock thereof or other equity interests therein (individually, a
"SUBSIDIARY" and collectively, "SUBSIDIARIES"); (ii) the jurisdiction of
incorporation, capitalization and ownership of each Subsidiary; (iii) the names
of the officers and directors of each Subsidiary; and (iv) the jurisdictions in
which each Subsidiary is qualified or licensed to do business as a foreign
corporation. All such Subsidiaries and ownership interests are in compliance
with all applicable laws, rules and regulations relating to direct investments
in equity ownership interests.
(ii) HCB owns of record and beneficially all the capital stock
of each of its Subsidiaries free and clear of any claims, liens, encumbrances or
restrictions and there are no agreements or understandings with respect to the
voting or disposition of any such shares.
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Each of HCB's Subsidiaries is a corporation duly organized and validly existing
under the laws of its jurisdiction of incorporation, has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted and is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
character of the properties owned or leased by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified would not have a Material Adverse Effect on HCB. The outstanding
shares of capital stock of each Subsidiary have been validly authorized and
issued and are validly outstanding, fully paid and nonassessable.
(iii) None of HCB's Subsidiaries holds shares of its capital
stock in its treasury, and there are not, and on the Closing Date there will not
be, outstanding any (i) options, warrants or other rights with respect to the
capital stock of any Subsidiary, (ii) any securities convertible into or
exchangeable for shares of such capital stock or any other debt or equity
security of any Subsidiary or (iii) any other commitments of any kind for the
issuance of additional shares of capital stock or other debt or equity security
of any Subsidiary or options, warrants or other rights with respect to such
securities.
(iv) No Subsidiary of HCB other than HC Bank is an "insured
depository institution" as defined in the FDIA and the applicable regulations
thereunder.
(c) Capital Structure.
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(i) The authorized capital stock of HCB consists of 1,000,000
shares of HCB Common Stock. As of the date of this Agreement: (A) 79,900 shares
of HCB Common Stock were issued and outstanding, (B) no shares of HCB Common
Stock were reserved for issuance, except that 4,000 shares of HCB Common Stock
were reserved for issuance pursuant to the HCB Option Plan, and (C) no shares of
HCB Common Stock were held by HCB in its treasury or by its Subsidiaries. The
authorized capital stock of HC Bank consists of 8,000 shares of common stock,
par value $100 per share. As of the date of this Agreement, 8,000 shares of such
common stock were outstanding. All outstanding shares of capital stock of HCB
are duly authorized and validly issued, fully paid and nonassessable and not
subject to any preemptive rights and there are no agreements or understandings
with respect to the voting or disposition of any such shares. HCB's Disclosure
Letter sets forth a complete and accurate list of all outstanding options to
purchase HCB Common Stock that have been granted pursuant to the HCB Option
Plan, including the names of the option holders, dates of grant, exercise
prices, dates of vesting, dates of termination and shares subject to each grant.
(ii) No bonds, debentures, notes or other indebtedness having
the right to vote on any matters on which shareholders of HCB may vote are
issued or outstanding.
(iii) As of the date of this Agreement, except for the HCB
Option Plan, HCB neither has nor is bound by any outstanding subscriptions,
options, warrants, calls, rights,
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convertible securities, commitments or agreements of any character obligating
HCB to issue, deliver or sell, or cause to be issued, delivered or sold, any
additional shares of capital stock of HCB or obligating HCB to grant, extend or
enter into any such subscription, option, warrant, call, right, convertible
security, commitment or agreement. As of the date hereof, there are no
outstanding contractual obligations of HCB to repurchase, redeem or otherwise
acquire any shares of capital stock of HCB.
(d) Authority.
---------
(i) HCB has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of HCB. This Agreement has been duly and validly executed and
delivered by HCB and constitutes a valid and binding obligation of HCB,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally
and to general principles of equity, whether applied in a court of law or a
court of equity.
(ii) HC Bank has all requisite corporate power and authority
to enter into the Plan of Bank Merger and to consummate the transactions
contemplated thereby. The execution and delivery of the Plan of Bank Merger and
the consummation of the transactions contemplated thereby have been duly
authorized by the Board of Directors of HC Bank. The Plan of Bank Merger, upon
execution and delivery by HC Bank, will be duly and validly executed and
delivered by HC Bank and will constitute a valid and binding obligation of HC
Bank, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights and remedies
generally and to general principles of equity, whether applied in a court of law
or a court of equity.
(e) Shareholder Approval; Fairness Opinion. The affirmative vote of
--------------------------------------
a majority of the outstanding shares of HCB Common Stock entitled to vote on
this Agreement is the only vote of the shareholders of HCB required for approval
of this Agreement and the consummation of the Merger and the related
transactions contemplated hereby. HCB has received the written opinion of Young
& Associates, Inc. to the effect that, as of the date hereof, the Exchange Ratio
is fair, from a financial point of view, to the shareholders of HCB.
(f) No Violations. The execution, delivery and performance of this
-------------
Agreement by HCB do not, and the consummation of the transactions contemplated
hereby will not, assuming receipt of all Requisite Regulatory Approvals and
requisite shareholder approvals, constitute (i) a violation of any law, rule or
regulation or any judgment, decree, order, governmental permit or license of HCB
or any of its Subsidiaries, or to which HCB or any of its Subsidiaries (or any
of their respective properties) is subject, (ii) a violation of the Articles of
Incorporation or Bylaws of HCB or the similar organizational documents of any of
its Subsidiaries or (iii) a breach or violation of, or a default under (or an
event which, with due
12
<PAGE> 13
notice or lapse of time or both, would constitute a default under), or result in
the termination of, accelerate the performance required by, or result in the
creation of any lien, pledge, security interest, charge or other encumbrance
upon any of the properties or assets of HCB or any of its Subsidiaries under,
any of the terms, conditions or provisions of any note, bond, indenture, deed of
trust, loan agreement or other agreement, instrument or obligation to which HCB
or any of its Subsidiaries is a party, or to which any of their respective
properties or assets may be subject. The consummation by HCB and HC Bank of the
transactions (including the Bank Merger) contemplated hereby (exclusive of the
effect of any changes effected pursuant to SECTION 1.9) will not require any
approval, consent or waiver under any such law, rule, regulation, judgment,
decree, order, governmental permit or license or the approval, consent or waiver
of any other party to any such agreement, indenture or instrument, other than
(x) the approval of the holders of a majority of the outstanding shares of HCB
Common Stock entitled to vote and the approval of HCB as the sole shareholder of
HC Bank and (y) the approval of the Office of Thrift Supervision ("OTS") under
the Home Owners' Loan Act, as amended ("HOLA"), the approval of the Indiana
Department of Financial Institutions ("IDFI"), the approval of the Board of
Governors of the Federal Reserve System ("FRB") under the BHCA, if necessary (or
the receipt of a waiver of such requirement), and the approval of the
appropriate regulatory authority under Section 18(c) of the FDIA (collectively,
the "REQUISITE REGULATORY APPROVALS") and (z) such approvals, consents or
waivers as are required under the federal and state securities or "blue sky"
laws in connection with the transactions contemplated by this Agreement. As of
the date hereof, the executive officers of HCB know of no reason pertaining to
HCB why any of the approvals referred to in this SECTION 2.3(F) or in SECTION
2.4(F) should not be obtained without the imposition of any material condition
or restriction described in the proviso in SECTION 5.1(B).
(g) Reports and Financial Statements.
--------------------------------
(i) HCB and each of its Subsidiaries have each timely filed
all material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
December 31, 1996 with (A) the IDFI, (B) the FRB and (C) the FDIC (collectively,
"HCB'S REPORTS"), and have paid all fees and assessments due and payable in
connection therewith. As of their respective dates, none of HCB's Reports
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
(ii) Set forth in HCB's Disclosure Letter are true and
complete copies of:
(A) the audited consolidated balance sheets of HCB and
its Subsidiaries as of the end of last three fiscal years, and the related
consolidated statements of income, stockholders' equity and cash flows for the
years then ended; and
13
<PAGE> 14
(B) the unaudited consolidated balance sheet of HCB and
its Subsidiaries at March 31, 1999 and related consolidated statement of income
for the three months then ended.
The financial statements in the foregoing clauses (A) and (B) are
collectively referred to herein as the "HCB FINANCIAL STATEMENTS." The HCB
Financial Statements were prepared from the books and records of HCB and its
Subsidiaries, fairly present the consolidated financial position of HCB and its
Subsidiaries in each case at and as of the dates indicated and the consolidated
results of operations, retained earnings and cash flows of HCB and its
Subsidiaries for the periods indicated, and except as otherwise set forth in the
notes thereto were prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied throughout the periods covered thereby;
PROVIDED, HOWEVER, that the financial statements described in clause (C) above
are subject to normal year-end adjustments (which will not be material
individually or in the aggregate) and lack a statement of cash flows and
footnotes.
(h) Absence of Certain Changes or Events. Since December 31, 1998,
------------------------------------
(i) HCB and its Subsidiaries have not incurred any material liability, except in
the ordinary course of their business consistent with past practice, (ii) HCB
and its Subsidiaries have conducted their respective businesses only in the
ordinary and usual course of such businesses, (iii) there has not been any
Material Adverse Effect with respect to HCB, and (iv) there has been no change
in any accounting principles, practices or methods of HCB or any of its
Subsidiaries other than as required by GAAP.
(i) Absence of Claims. No litigation, controversy, claim, action,
-----------------
suit or other legal, administrative or arbitration proceeding before any court,
governmental agency or arbitrator is pending against HCB or any of its
Subsidiaries, and no such litigation, controversy, claim, action, suit or other
proceeding has been threatened. To the knowledge of HCB, there are no
investigations, reviews or inquiries by any court or governmental agency pending
or threatened against HCB or any of its Subsidiaries.
(j) Absence of Regulatory Actions. Since December 31, 1993, neither
-----------------------------
HCB nor any of its Subsidiaries has been a party to any cease and desist order,
written agreement or memorandum of understanding with, or any commitment letter
or similar undertaking to, or has been subject to any action, proceeding, order
or directive by, or has been a recipient of any extraordinary supervisory letter
from any federal or state governmental authority charged with the supervision or
regulation of depository institutions or depository institution holding
companies or engaged in the insurance of bank and/or savings and loan deposits
("GOVERNMENT REGULATORS"), or has adopted any board resolutions at the request
of any Government Regulator, or has been advised by any Government Regulator
that it is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such action, proceeding, order,
directive, cease and desist order, written agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter, board
resolutions or similar undertaking.
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<PAGE> 15
(k) Taxes. All federal, state, local and foreign tax returns
-----
required to be filed by or on behalf of HCB or any of its Subsidiaries have been
timely filed or requests for extensions have been timely filed and any such
extension shall have been granted and not have expired, and all such filed
returns are complete and accurate in all material respects. All taxes shown on
such returns, all taxes required to be shown on returns for which extensions
have been granted and all other taxes required to be paid by HCB or any of its
Subsidiaries have been paid in full or adequate provision has been made for any
such taxes on HCB's balance sheet (in accordance with GAAP). For purposes of
this SECTION 2.3(K), the term "taxes" shall include all income, franchise, gross
receipts, real and personal property, real property transfer and gains, wage and
employment taxes. As of the date of this Agreement, there is no audit
examination, deficiency assessment, tax investigation or refund litigation with
respect to any taxes of HCB or any of its Subsidiaries, and no claim has been
made by any authority in a jurisdiction where HCB or any of its Subsidiaries do
not file tax returns that HCB or any such Subsidiary is subject to taxation in
that jurisdiction. All taxes, interest, additions and penalties due with respect
to completed and settled examinations or concluded litigation relating to HCB or
any of its Subsidiaries have been paid in full or adequate provision has been
made for any such taxes on HCB's balance sheet (in accordance with GAAP). HCB
and its Subsidiaries have not executed an extension or waiver of any statute of
limitations on the assessment or collection of any tax due that is currently in
effect. HCB and each of its Subsidiaries has withheld and paid all taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, shareholder or other third
party, and HCB and each of its Subsidiaries has timely complied with all
applicable information reporting requirements under Part III, Subchapter A of
Chapter 61 of the IRC and similar applicable state and local information
reporting requirements.
(l) Agreements.
----------
(i) HCB's Disclosure Letter lists any contract, arrangement,
commitment or understanding (whether written or oral) to which HCB or any of its
Subsidiaries is a party or is bound:
(A) which would be a material contract as defined in
Item 601(b)(10) of Regulation S-K of the rules and regulations of the Securities
and Exchange Commission ("SEC");
(B) with any executive officer or other key employee of
HCB or any of its Subsidiaries the benefits of which are contingent, or the
terms of which are materially altered, upon the occurrence of a transaction
involving HCB or any of its Subsidiaries of the nature contemplated by this
Agreement;
(C) with respect to the employment of any directors,
officers employees or consultants;
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<PAGE> 16
(D) (including any stock option plan, phantom stock or
stock appreciation rights plan, restricted stock plan or stock purchase plan)
any of the benefits of which will be increased, or the vesting or payment of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement;
(E) containing covenants that limit the ability of HCB
or any of its Subsidiaries to compete in any line of business or with any
person, or that involve any restriction on the geographic area in which, or
method by which, HCB (including any successor thereof) or any of its
Subsidiaries may carry on its business (other than as may be required by law or
any regulatory agency);
(F) pursuant to which HCB or any of its Subsidiaries may
become obligated to invest in or contribute capital to any entity;
(G) not fully disclosed in the HCB Financial Statements
that relates to borrowings of money (or guarantees thereof) by HCB or HC Bank,
other than in the ordinary course of business; or
(H) which is a lease or license with respect to any
property, real or personal, whether as landlord, tenant, licensor or licensee,
involving a liability or obligation as obligor in excess of $10,000 on an annual
basis.
To the knowledge of HCB, each of the agreements and other documents
referenced in HCB's Disclosure Letter with respect to this SECTION 2.3(L)(I) is
a valid, binding and enforceable obligation of the parties sought to be bound
thereby, subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally and to general principles of equity,
whether applied in a court of law or a court of equity. HCB has previously
delivered to First Capital true and complete copies of each agreement and other
documents referenced in HCB's Disclosure Letter with respect to this SECTION
2.3(L)(I).
(ii) Neither HCB nor any of its Subsidiaries is in default
under (and no event has occurred which, with due notice or lapse of time or
both, would constitute a default under) or is in violation of any provision of
any note, bond, indenture, mortgage, deed of trust, loan agreement, lease or
other agreement to which it is a party or by which it is bound or to which any
of its respective properties or assets is subject.
(iii) HCB and each of its Subsidiaries owns or possesses valid
and binding licenses and other rights to use without payment all patents,
copyrights, trade secrets, trade names, servicemarks and trademarks used in its
businesses, and neither HCB nor any of its Subsidiaries has received any notice
of conflict with respect thereto that asserts the right of others. Each of HCB
and its Subsidiaries has performed all the obligations required to be
16
<PAGE> 17
performed by it and are not in default under any contact, agreement, arrangement
or commitment relating to any of the foregoing.
(m) Labor Matters. HCB and its Subsidiaries are in material
-------------
compliance with all applicable laws respecting employment, retention of
independent contractors and employment practices, terms and conditions of
employment and wages and hours. Neither HCB nor any of its Subsidiaries is or
has ever been a party to, or is or has ever been bound by, any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor organization with respect to its employees, nor is HCB or any of
its Subsidiaries the subject of any proceeding asserting that it has committed
an unfair labor practice or seeking to compel HCB or any of its Subsidiaries to
bargain with any labor organization as to wages and conditions of employment,
nor is there any strike, other labor dispute or organizational effort involving
HCB or any of its Subsidiaries pending or overtly threatened.
(n) Employee Benefit Plans.
----------------------
(i) HCB's Disclosure Letter contains a complete and accurate
list of all pension, retirement, stock option, stock purchase, stock ownership,
savings, stock appreciation right, profit sharing, deferred compensation,
consulting, bonus, group insurance, severance and other benefit plans,
contracts, agreements and arrangements, including, but not limited to, "employee
benefit plans," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), incentive and welfare policies,
contracts, plans and arrangements and all trust agreements related thereto with
respect to any present or former directors, officers or other employees of HCB
or any of its Subsidiaries (hereinafter referred to collectively as the "HCB
EMPLOYEE PLANS"). There has been no announcement or commitment by HCB or any of
its Subsidiaries to create an additional HCB Employee Plan, or to amend any HCB
Employee Plan, except for amendments required by applicable law which do not
materially increase the cost of such HCB Employee Plan. With respect to each HCB
Employee Plan, included with HCB's Disclosure Letter is a true and correct copy
of (A) the annual report on the applicable form of the Form 5500 series filed
with the Internal Revenue Service ("IRS") for the most recent three plan years,
if required to be filed, (B) such HCB Employee Plan, including amendments
thereto, (C) each trust agreement, insurance contract or other funding
arrangement relating to such HCB Employee Plan, including amendments thereto,
(D) the most recent summary plan description and summary of material
modifications thereto for such HCB Employee Plan, if the HCB Employee Plan is
subject to Title I of ERISA, (E) the most recent actuarial report or valuation
if such HCB Employee Plan is a HCB Pension Plan (as defined below) and any
subsequent changes to the actuarial assumptions contained therein and (F) the
most recent determination letter issued by the IRS if such HCB Employee Plan is
a HCB Qualified Plan (as defined below).
(ii) There is no pending or threatened litigation,
administrative action or proceeding relating to any HCB Employee Plan. All of
the HCB Employee Plans comply in all material respects with all applicable
requirements of ERISA, the IRC and other applicable
17
<PAGE> 18
laws. There has occurred no "prohibited transaction" (as defined in Section 406
of ERISA or Section 4975 of the IRC) with respect to the HCB Employee Plans
which is likely to result in the imposition of any penalties or taxes under
Section 502(i) of ERISA or Section 4975 of the IRC upon HCB or any of its
Subsidiaries.
(iii) No liability to the Pension Benefit Guarantee
Corporation has been or is expected by HCB or any of its Subsidiaries to be
incurred with respect to any HCB Employee Plan which is subject to Title IV of
ERISA ("HCB PENSION PLAN"), or with respect to any "single-employer plan" (as
defined in Section 4001(a) of ERISA) currently or formerly maintained by HCB or
any entity which is considered one employer with HCB under Section 4001(b)(1) of
ERISA or Section 414 of the IRC (an "ERISA AFFILIATE"). No HCB Pension Plan had
an "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, as of the last day of the end of the most recent plan
year ending prior to the date hereof; the fair market value of the assets of
each HCB Pension Plan exceeds the present value of the "benefit liabilities" (as
defined in Section 4001(a)(16) of ERISA) under such HCB Pension Plan as of the
end of the most recent plan year with respect to the respective HCB Pension Plan
ending prior to the date hereof, calculated on the basis of the actuarial
assumptions used in the most recent actuarial valuation for such HCB Pension
Plan as of the date hereof; and no notice of a "reportable event" (as defined in
Section 4043 of ERISA) for which the 30-day reporting requirement has not been
waived has been required to be filed for any HCB Pension Plan within the
12-month period ending on the date hereof. Neither HCB nor any of its
Subsidiaries has provided, or is required to provide, security to any HCB
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the IRC. Neither HCB, its Subsidiaries, nor any ERISA
Affiliate has contributed to any "multiemployer plan," as defined in Section
3(37) of ERISA, on or after September 26, 1980.
(iv) Each HCB Employee Plan that is an "employee pension
benefit plan" (as defined in Section 3(2) of ERISA) and which is intended to be
qualified under Section 401(a) of the IRC (an "HCB QUALIFIED PLAN") has received
a favorable determination letter from the IRS, and HCB and its Subsidiaries are
not aware of any circumstances likely to result in revocation of any such
favorable determination letter. Each HCB Qualified Plan that is an "employee
stock ownership plan" (as defined in Section 4975(e)(7) of the IRC) has
satisfied all of the applicable requirements of Sections 409 and 4975(e)(7) of
the IRC and the regulations thereunder in all respects and any assets of any
such HCB Qualified Plan that are not allocated to participants' individual
accounts are pledged as security for, and may be applied to satisfy, any
securities acquisition indebtedness.
(v) HCB and its Subsidiaries do not have any obligations for
post-retirement or post-employment benefits under any HCB Employee Plan that
cannot be amended or terminated upon 60 days' notice or less without incurring
any liability thereunder, except for coverage required by Part 6 of Title I of
ERISA or Section 4980B of the IRC, or similar state laws, the cost of which is
borne by the insured individuals. With respect to HCB or any of its
Subsidiaries, for the HCB Employee Plans listed in HCB's Disclosure Letter, the
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<PAGE> 19
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in any payment or series of
payments by HCB or any of its Subsidiaries to any person which is an "excess
parachute payment" (as defined in Section 280G of the IRC), increase or secure
(by way of a trust or other vehicle) any benefits payable under any HCB Employee
Plan or accelerate the time of payment or vesting of any such benefit.
(o) Title to Assets. HCB's Disclosure Letter contains a complete and
---------------
accurate list of all real property owned or leased by HCB or any of its
Subsidiaries, including all properties of HCB or any of its Subsidiaries
classified as "other real estate owned" or words of similar import (the "REAL
PROPERTY"). To the knowledge of HCB, none of the buildings, structures or other
improvements located on the Real Property encroaches upon or over any adjoining
parcel or real estate or any easement or right-of-way. HCB and each of its
Subsidiaries has good and marketable title to its properties and assets
(including any intellectual property asset such as any trademark, service mark,
tradename or copyright) and property acquired in a judicial foreclosure
proceeding or by way of a deed in lieu of foreclosure or similar transfer, other
than property as to which it is lessee, in which case the related lease is valid
and in full force and effect. Each lease pursuant to which HCB or any of its
Subsidiaries is lessor is valid and in full force and effect and no lessee under
any such lease is in default or in violation of any provisions of any such
lease. All material tangible properties of HCB and each of its Subsidiaries are
in a good state of maintenance and repair, conform with all applicable
ordinances, regulations and zoning laws and are considered by HCB to be adequate
for the current business of HCB and its Subsidiaries.
(p) Compliance with Laws. HCB and each of its Subsidiaries has all
--------------------
permits, licenses, certificates of authority, orders and approvals of, and has
made all filings, applications and registrations with, all federal, state, local
and foreign governmental or regulatory bodies (each a "GOVERNMENTAL ENTITY")
that are required in order to permit it to carry on its business as it is
presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect, and no suspension or
cancellation of any of them is threatened. Since the date of its incorporation,
the corporate affairs of HCB have not been conducted in violation of any law,
ordinance, regulation, order, writ, rule, decree or condition to approval of any
Governmental Entity. The businesses of HCB and its Subsidiaries are not being
conducted in violation of any law, ordinance, regulation, order, writ, rule,
decree or condition to approval of any Governmental Entity.
(q) Fees. Other than financial advisory services performed for HCB
----
by Young & Associates, Inc., pursuant to an agreement dated July 13, 1999, a
true and complete copy of which has been previously delivered to First Capital,
neither HCB nor any of its Subsidiaries, nor any of their respective officers,
directors, employees or agents, has employed any broker or finder or incurred
any liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for HCB
or any of its Subsidiaries in connection with this Agreement or the transactions
contemplated hereby.
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(r) Environmental Matters.
---------------------
(i) With respect to HCB and each of its Subsidiaries:
(A) Each of HCB and its Subsidiaries, the Participation
Facilities (as defined below), and, to HCB's knowledge, the Loan Properties (as
defined below) are, and have been, in substantial compliance with, and are not
liable under, all Environmental Laws (as defined below);
(B) There is no suit, claim, action, demand, executive
or administrative order, directive, investigation or proceeding pending or
threatened, before any court, governmental agency or board or other forum
against HCB or any of its Subsidiaries or any Participation Facility (1) for
alleged noncompliance (including by any predecessor) with, or liability under,
any Environmental Law or (2) relating to the presence of or release into the
environment of any Hazardous Material (as defined below), whether or not
occurring at or on a site owned, leased or operated by HCB or any of its
Subsidiaries or any Participation Facility;
(C) To HCB's knowledge, there is no suit, claim, action,
demand, executive or administrative order, directive, investigation or
proceeding pending or threatened before any court, governmental agency or board
or other forum relating to or against any Loan Property (or HCB or any of its
Subsidiaries in respect of such Loan Property) (1) relating to alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (2) relating to the presence of or release into the
environment of any Hazardous Material, whether or not occurring at or on a site
owned, leased or operated by a Loan Property;
(D) To HCB's knowledge, the properties currently owned
or operated by HCB or any of its Subsidiaries (including, without limitation,
soil, groundwater or surface water on or under the properties, and buildings
thereon) are not contaminated with and do not otherwise contain any Hazardous
Material other than as permitted under applicable Environmental Law;
(E) Neither HCB nor any of its Subsidiaries has received
any notice, demand letter, executive or administrative order, directive or
request for information from any Governmental Entity or any third party
indicating that it may be in violation of, or liable under, any Environmental
Law;
(F) To HCB's knowledge, there are no underground storage
tanks on, in or under any properties owned or operated by HCB or any of its
Subsidiaries or any Participation Facility and no underground storage tanks have
been closed or removed from any properties owned or operated by HCB or any of
its Subsidiaries or any Participation Facility; and
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<PAGE> 21
(G) To HCB's knowledge, during the period of (1) HCB's
or any of its Subsidiaries' ownership or operation of any of their respective
current properties or (2) HCB's or any of its Subsidiaries' participation in the
management of any Participation Facility, there has been no contamination by or
release of Hazardous Materials in, on, under or affecting such properties. To
HCB's knowledge, prior to the period of (1) HCB's or any of its Subsidiaries'
ownership or operation of any of their respective current properties or (2)
HCB's or any of its Subsidiaries' participation in the management of any
Participation Facility, there was no contamination by or release of Hazardous
Material in, on, under or affecting such properties.
(ii) The following definitions apply for purposes of this
SECTION 2.3(R) and SECTION 2.4(R):
"LOAN PROPERTY" means any property in which the applicable
party (or a Subsidiary of it) holds a security interest and, where required by
the context, includes the owner or operator of such property, but only with
respect to such property.
"PARTICIPATION FACILITY" means any facility in which the
applicable party (or a Subsidiary of it) participates in the management
(including all property held as trustee or in any other fiduciary capacity) and,
where required by the context, includes the owner or operator of such property,
but only with respect to such property.
"ENVIRONMENTAL LAW" means any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, directive, executive or administrative order,
judgment, decree, injunction, legal requirement or agreement with any
Governmental Entity relating to (A) the protection, preservation or restoration
of the environment (which includes, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, structures, soil, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety as it relates to Hazardous Materials, or (B) the
exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of, Hazardous Materials, in each case as amended and as now in effect. The term
Environmental Law includes all federal, state and local laws, rules, regulations
or requirements relating to the protection of the environment or health and
safety, including, without limitation, the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Water Pollution Control Act of 1972,
the Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976 (including, but not limited to, the
Hazardous and Solid Waste Amendments thereto and Subtitle I relating to
underground storage tanks), the Federal Solid Waste Disposal and the Federal
Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide
Act, the Federal Occupational Safety and Health Act of 1970 as it relates to
Hazardous Materials, the Federal Hazardous Substances Transportation Act, the
Emergency Planning and Community Right-To-Know Act, the Safe Drinking Water Act,
the Endangered Species Act, the National
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<PAGE> 22
Environmental Policy Act, the Rivers and Harbors Appropriation Act or any
so-called "Superfund" or "Superlien" law, each as amended and as now or
hereafter in effect.
"HAZARDOUS MATERIAL" means any substance (whether solid,
liquid or gas) which is or could be detrimental to human health or safety or to
the environment, currently or hereafter listed, defined, designated or
classified as hazardous, toxic, radioactive or dangerous, or otherwise
regulated, under any Environmental Law, whether by type or by quantity,
including any substance containing any such substance as a component. Hazardous
Material includes, without limitation, any toxic waste, pollutant, contaminant,
hazardous substance, toxic substance, hazardous waste, special waste, industrial
substance, oil or petroleum, or any derivative or by-product thereof, radon,
radioactive material, asbestos, asbestos-containing material, urea formaldehyde
foam insulation, and polychlorinated biphenyls.
(s) Loan Portfolio; Allowance; Asset Quality.
----------------------------------------
(i) With respect to each loan owned by HCB or its Subsidiaries
in whole or in part, to HCB's knowledge:
(A) the note and the related security documents are each
legal, valid and binding obligations of the maker or obligor thereof,
enforceable against such maker or obligor in accordance with their terms;
(B) neither HCB nor any of its Subsidiaries, nor any
prior holder of a loan, has modified the note or any of the related security
documents in any material respect or satisfied, canceled or subordinated the
note or any of the related security documents except as otherwise disclosed by
documents in the applicable loan file;
(C) HCB or a Subsidiary of HCB is the sole holder of
legal and beneficial title to each loan (or HCB's or its Subsidiary's applicable
participation interest, as applicable), except as otherwise referenced on the
books and records of HCB or a Subsidiary of HCB;
(D) the note and the related security documents, copies
of which are included in the loan files, are true and correct copies of the
documents they purport to be and have not been suspended, amended, modified,
canceled or otherwise changed except as otherwise disclosed by documents in the
applicable loan file;
(E) there is no pending or threatened condemnation
proceeding or similar proceeding affecting the property that serves as security
for a loan, except as otherwise referenced on the books and records of HCB;
22
<PAGE> 23
(F) there is no litigation or proceeding pending or
threatened relating to the property that serves as security for a loan that
would have a Material Adverse Effect upon the related loan; and
(G) with respect to a loan held in the form of a
participation, the participation documentation is legal, valid, binding and
enforceable in accordance with its terms.
(ii) The allowance for possible loan losses reflected in HCB's
audited statement of condition at December 31, 1998 was, and the allowance for
possible losses shown on the balance sheets in HCB's Reports for periods ending
after December 31, 1998, in the opinion of management, was or will be adequate,
as of the dates thereof, under GAAP.
(iii) HCB's Disclosure Letter sets forth by category the
amounts of all loans, leases, advances, credit enhancements, other extensions of
credit, commitments and interest-bearing assets of HCB and its Subsidiaries that
have been classified (whether regulatory or internal) as "special mention,"
"substandard," "doubtful," "loss" or words of similar import, and HCB and its
Subsidiaries shall promptly after the end of any month inform First Capital of
any such classification arrived at any time after the date hereof. The "other
real estate owned" or words of similar import included in any non-performing
assets of HCB or any of its Subsidiaries is carried net of reserves at the lower
of cost or fair value, less estimated selling costs, based on current
independent appraisals or evaluations or current management appraisals or
evaluations; PROVIDED, HOWEVER, that "current" shall mean within the past 12
months.
(t) Deposits. None of the deposits of HCB or any of its Subsidiaries
--------
is a "brokered" deposit.
(u) Accounting Matters. Neither HCB nor any of its Subsidiaries or,
------------------
to the best of HCB's knowledge, any of its other affiliates has, through the
date hereof, taken or agreed to take any action that would prevent First Capital
from accounting for the Merger contemplated herein as a pooling-of-interests
transaction, and HCB has no knowledge of any fact or circumstance relating to it
that would prevent such accounting treatment.
(v) Antitakeover Provisions Inapplicable. HCB and its Subsidiaries
------------------------------------
have taken all actions required to exempt HCB, HC Bank, the Agreement, the
Merger and the Plan of Bank Merger from any provisions of an antitakeover nature
in their organization certificates and bylaws, and the provisions of any federal
or state "antitakeover," "fair price," "moratorium," "control share acquisition"
or similar laws or regulations.
(w) Material Interests of Certain Persons. No officer or director of
-------------------------------------
HCB or any of its Subsidiaries, or any "associate" (as such term is defined in
Rule 12b-2 under the Securities Exchange Act of 1934 ("EXCHANGE ACT")) of any
such officer or director, has any interest in any material contract or property
(real or personal), tangible or intangible, used in or pertaining to the
business of HCB or any of its Subsidiaries.
23
<PAGE> 24
(x) Insurance. In the opinion of management, HCB and its
---------
Subsidiaries are presently insured for amounts deemed reasonable by management
with, to HCB's knowledge, financially sound insurance companies, against such
risks as companies engaged in a similar business would, in accordance with good
business practice, customarily be insured. All of the insurance policies and
bonds maintained by HCB and its Subsidiaries are in full force and effect, HCB
and its Subsidiaries are not in default thereunder and all material claims
thereunder have been filed in timely fashion.
(y) Investment Securities; Derivatives; Borrowings.
----------------------------------------------
(i) Except for investments in Federal Home Loan Bank ("FHLB")
stock, pledges to secure FHLB borrowings, reverse repurchase agreements entered
into in arms-length transactions pursuant to normal commercial terms and
conditions and entered into in the ordinary course of business and restrictions
that exist for securities to be classified as "held to maturity," none of the
investments reflected in the consolidated balance sheet of HCB as of December
31, 1998, and none of the investment securities acquired by it or any of its
Subsidiaries since December 31, 1998, is subject to any restriction (contractual
or statutory) that would materially impair the ability of the entity holding
such investment freely to dispose of such investment at any time.
(ii) Except for adjustable-rate mortgage loans and
adjustable-rate FHLB advances, neither HCB nor any Subsidiary of HCB is a party
to or has agreed to enter into an exchange-traded or over-the-counter equity,
interest rate, foreign exchange or other swap, forward, future, option, cap,
floor or collar or any other contract that is a derivative contract (including
various combinations thereof) or owns securities that (A) are referred to
generically as "structured notes," "high risk mortgage derivatives," "capped
floating rate notes" or "capped floating rate mortgage derivatives" or (B) are
likely to have changes in value as a result of interest or exchange rate changes
that significantly exceed normal changes in value attributable to interest or
exchange rate changes.
(iii) Set forth in HCB's Disclosure Letter is a true and
complete list of HCB's borrowed funds (excluding deposit accounts) as of the
date hereof.
(z) Indemnification. Except as provided in the Articles of
---------------
Incorporation or Bylaws of HCB or the similar governing documents of its
Subsidiaries, neither HCB nor any Subsidiary of HCB is a party to any agreement
that provides for the indemnification of any of its present or future directors,
officers, employees or other persons who serve or served in any other capacity
with any other enterprise at the request of HCB, and, to the knowledge of HCB,
there are no claims for which any person would be entitled to indemnification
under the Articles of Incorporation or Bylaws of HCB or the similar governing
documents of any of its Subsidiaries, under any applicable law or regulation or
under any indemnification agreement.
24
<PAGE> 25
(aa) Books and Records. The books and records of HCB and its
-----------------
Subsidiaries on a consolidated basis have been, and are being, maintained in
accordance with applicable legal and accounting requirements and reflect in all
material respects the substance of events and transactions that should be
included therein.
(bb) Corporate Documents. The minute books of HCB constitute a
-------------------
complete and correct record of all actions taken by its board of directors (and
each committee thereof) and its shareholders. The minute books of each of HCB's
Subsidiaries constitutes a complete and correct record of all actions taken by
the respective boards of directors (and each committee thereof) and the
shareholders of each such Subsidiary.
(cc) Tax Treatment of the Merger. As of the date hereof, HCB has no
---------------------------
knowledge of any fact or circumstance relating to it that would prevent the
transactions contemplated by this Agreement from qualifying as a tax-free
reorganization under the IRC.
(dd) Beneficial Ownership of First Capital Common Stock. As of the
--------------------------------------------------
date hereof, HCB beneficially owns 25,000 shares of First Capital Common Stock
and does not have any option, warrant or right of any kind to acquire the
beneficial ownership of any shares of First Capital Common Stock.
(ee) Year 2000 Matters. HCB has completed a review of its computer
-----------------
systems to identify systems that could be affected by the "Year 2000" issue and
reasonably believes it has identified all such Year 2000 problems. HCB's
management has developed and commenced implementation of a plan which is
designed to complete any required initial changes to its computer systems ("HCB
Y2K PLAN") and to complete testing of those changes by September 30, 1999. Year
2000 issues have not had, and are not reasonably expected to have, a Material
Adverse Effect on HCB.
(ff) Registration Statement. The information regarding HCB and its
----------------------
Subsidiaries to be supplied by HCB for inclusion in the Registration Statement
on Form S-4 to be filed by First Capital with the SEC under the Securities Act
of 1933, as amended ("SECURITIES ACT") for the purpose of registering the shares
of First Capital Common Stock to be issued to HCB's shareholders in the Merger
(including the joint proxy statement and prospectus ("JOINT PROXY
STATEMENT-PROSPECTUS") constituting a part thereof) (as amended or supplemented
from time to time, the "REGISTRATION STATEMENT"), will not, at the time the
Registration Statement becomes effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(gg) Community Reinvestment Act Compliance. HC Bank is in compliance
-------------------------------------
with the applicable provisions of the Community Reinvestment Act ("CRA") and the
regulations promulgated thereunder, and HC Bank currently has a CRA rating of
satisfactory or better. To HCB's knowledge, there is no fact or circumstance or
set of facts or circumstances that would
25
<PAGE> 26
cause HC Bank to fail to comply with such provisions or cause the CRA rating of
HC Bank to fall below satisfactory.
(hh) Undisclosed Liabilities. As of the date hereof, HCB and its
-----------------------
Subsidiaries have not incurred any debt, liability or obligation of any nature
whatsoever (whether accrued, contingent, absolute or otherwise and whether due
or to become due) except for (i) liabilities reflected on or reserved against in
the consolidated financial statements of HCB as of December 31, 1998, and (ii)
liabilities incurred since December 31, 1998 in the ordinary course of business
consistent with past practice that, either alone or when combined with all
similar liabilities, have not had, and would not reasonably be expected to have,
a Material Adverse Effect on HCB.
Section 2.4. Representations and Warranties of First Capital. Subject
-----------------------------------------------
to SECTIONS 2.1 AND 2.2, First Capital represents and warrants to HCB, with
respect to itself, Merger Sub and First Federal, that, except as specifically
disclosed in First Capital's Disclosure Letter:
(a) Organization; Qualification.
---------------------------
(i) First Capital is a corporation duly organized and validly
existing under the laws of the State of Indiana and is registered as a savings
and loan holding company under the HOLA.
(ii) First Federal is a stock savings bank duly organized and
validly existing under the laws of the United States and is wholly owned by
First Capital. The deposits of First Federal are insured by the Savings
Association Insurance Fund of the FDIC to the extent provided in the FDIA. First
Federal is a member of Federal Home Loan Bank of Indianapolis.
(iii) Merger Sub is a corporation duly organized and validly
existing under the laws of the State of Indiana. Merger Sub does not currently
conduct any business.
(iv) First Capital and First Federal each has all requisite
corporate power and authority to own, lease and operate its properties and to
conduct the business currently being conducted by it. First Capital and First
Federal are each duly qualified to transact business and in good standing in
each jurisdiction in which the character of the properties owned or leased by it
or the nature of the business conducted by it makes such qualification
necessary, each of which jurisdictions is listed on First Capital's Disclosure
Letter, except where the failure to be so qualified would not have a Material
Adverse Effect on First Capital.
(v) The Articles of Incorporation and Bylaws of First Capital
and Merger Sub and the Federal Stock Charter and Bylaws of First Federal
delivered with First Capital's Disclosure Letter are complete and correct as of
the date hereof.
26
<PAGE> 27
(b) Subsidiaries.
------------
(i) First Capital's Disclosure Letter sets forth (i) the name,
percentage ownership and number of shares of stock owned or controlled by First
Capital of each corporation, partnership, joint venture or other entity in which
First Capital has, directly or indirectly, an equity interest representing 5% or
more of any class of the capital stock thereof or other equity interests therein
(individually, a "SUBSIDIARY" and collectively, "SUBSIDIARIES"); (ii) the
jurisdiction of incorporation, capitalization and ownership of each Subsidiary
other than First Federal; (iii) the names of the officers and directors of each
Subsidiary other than First Federal; and (iv) the jurisdictions in which each
Subsidiary is qualified or licensed to do business as a foreign corporation. All
such Subsidiaries and ownership interests are in compliance with all applicable
laws, rules and regulations relating to direct investments in equity ownership
interests.
(ii) First Capital owns of record and beneficially all the
capital stock of each of its Subsidiaries free and clear of any claims, liens,
encumbrances or restrictions and there are no agreements or understandings with
respect to the voting or disposition of any such shares. Each of First Capital's
Subsidiaries is a corporation duly organized and validly existing under the laws
of its jurisdiction of incorporation, has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the character
of the properties owned or leased by it or the nature of the business conducted
by it makes such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect on First Capital. The
outstanding shares of capital stock of each Subsidiary have been validly
authorized and issued and are validly outstanding, fully paid and nonassessable.
(iii) None of First Capital's Subsidiaries holds shares of its
capital stock in its treasury, and there are not, and on the Closing Date there
will not be, outstanding any (i) options, warrants or other rights with respect
to the capital stock of any Subsidiary, (ii) any securities convertible into or
exchangeable for shares of such capital stock or any other debt or equity
security of any Subsidiary or (iii) any other commitments of any kind for the
issuance of additional shares of capital stock or other debt or equity security
of any Subsidiary or options, warrants or other rights with respect to such
securities.
(iv) No Subsidiary of First Capital other than First Federal
is an "insured depository institution" as defined in the FDIA, and the
applicable regulations thereunder.
(c) Capital Structure.
-----------------
(i) The authorized capital stock of First Capital consists of
5,000,000 shares of First Capital Common Stock and 1,000,000 shares of preferred
stock, par value $.01
27
<PAGE> 28
per share ("FIRST CAPITAL PREFERRED STOCK"). As of the date of this Agreement:
(A) 1,291,824 shares of First Capital Common Stock were issued and outstanding,
exclusive of shares held in treasury, (B) no shares of First Capital Preferred
Stock were issued and outstanding, (C) no shares of First Capital Common Stock
were reserved for issuance, except that 40,077 shares of First Capital Common
Stock were reserved for issuance pursuant to First Capital's 1994 Stock Option
Plan ("FIRST CAPITAL OPTION PLAN"), (D) no shares of First Capital Preferred
Stock were reserved for issuance, and (E) no shares of First Capital Common
Stock were held by First Capital in its treasury or by First Federal. The
authorized capital stock of First Federal consists of 4,000,000 shares of common
stock, par value $1.00 per share, and 1,000,000 shares of preferred stock, par
value $1.00 per share. As of the date of this Agreement, 1,000 shares of such
common stock were outstanding and no shares of such preferred stock were
outstanding. The authorized capital stock of Merger Sub consists of 1,000 shares
of common stock, par value $.01 per share. As of the date of this Agreement, 100
shares of such common stock were issued and outstanding. All outstanding shares
of capital stock of First Capital are duly authorized and validly issued, fully
paid and nonassessable and not subject to any preemptive rights and there are no
agreements or understandings with respect to the voting or disposition of any
such shares.
(ii) No bonds, debentures, notes or other indebtedness having
the right to vote on any matters on which shareholders of First Capital may vote
are issued or outstanding.
(iii) As of the date of this Agreement, except for this
Agreement and the First Capital Option Plan, First Capital neither has, nor is
bound by any outstanding subscriptions, options, warrants, calls, rights,
convertible securities, commitments or agreements of any character obligating
First Capital to issue, deliver or sell, or cause to be issued, delivered or
sold, any additional shares of capital stock of First Capital or obligating
First Capital to grant, extend or enter into any such subscription, option,
warrant, call, right, convertible security, commitment or agreement. As of the
date hereof, there are no outstanding contractual obligations of First Capital
to repurchase, redeem or otherwise acquire any shares of capital stock of First
Capital.
(d) Authority.
---------
(i) First Capital and Merger Sub each have the requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by the Boards of Directors of each of First Capital and Merger Sub.
This Agreement has been duly and validly executed and delivered by First Capital
and Merger Sub and constitutes a valid and binding obligation of First Capital
and Merger Sub, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights and remedies
generally and to general principles of equity, whether applied in a court of law
or a court of equity.
28
<PAGE> 29
(ii) First Federal has all requisite corporate power and
authority to enter into the Plan of Bank Merger and to consummate the
transactions contemplated thereby. The execution and delivery of the Plan of
Bank Merger and the consummation of the transactions contemplated thereby have
been duly authorized by the Board of Directors of First Federal. The Plan of
Bank Merger, upon execution and delivery by First Federal, will be duly and
validly executed and delivered by First Federal and will constitute a valid and
binding obligation of First Federal, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally and to general principles of equity,
whether applied in a court of law or a court of equity.
(e) Shareholder Approval; Fairness Opinion. The affirmative vote of
--------------------------------------
a majority of the outstanding shares of First Capital Common Stock entitled to
vote on this Agreement is the only vote of the shareholders of First Capital
required for approval of the Agreement and the consummation of the Merger and
the related transactions contemplated hereby. First Capital has received the
written opinion of Charles Webb & Company, a Division of Keefe, Bruyette &
Woods, Inc. to the effect that, as of the date hereof, the Exchange Ratio is
fair, from a financial point of view, to shareholders of First Capital.
(f) No Violations. The execution, delivery and performance of this
-------------
Agreement by First Capital do not, and the consummation of the transactions
contemplated hereby will not, assuming receipt of all Requisite Regulatory
Approvals and requisite shareholder approvals, constitute (i) a violation of any
law, rule or regulation or any judgment, decree, order, governmental permit or
license of First Capital or any of its Subsidiaries, or to which First Capital
or any of its Subsidiaries (or any of their respective properties) is subject,
(ii) a violation of the Articles of Incorporation or Bylaws of First Capital or
similar organizational documents of any of its Subsidiaries or (iii) a breach or
violation of, or a default under (or an event which, with due notice or lapse of
time or both, would constitute a default under), or result in the termination
of, accelerate the performance required by, or result in the creation of any
lien, pledge, security interest, charge or other encumbrance upon any of the
properties or assets of First Capital or any of its Subsidiaries, under any of
the terms, conditions or provisions of any note, bond, indenture, deed of trust,
loan agreement or other agreement, instrument or obligation to which First
Capital or any of its Subsidiaries is a party, or to which any of their
respective properties or assets may be subject. The consummation by First
Capital and First Federal of the transactions (including the Bank Merger)
contemplated hereby (exclusive of the effect of any changes effected pursuant to
SECTION 1.9) will not require any approval, consent or waiver under any such
law, rule, regulation, judgment, decree, order, governmental permit or license
or the approval, consent or waiver of any other party to any such agreement,
indenture or instrument, other than (1) the approval of the holders of a
majority of the outstanding shares of First Capital Common Stock and the
approval of First Capital as the sole shareholder of Merger Sub and First
Federal, (2) the Requisite Regulatory Approvals and (3) such approvals, consents
or waivers as are required under the federal and state securities or "blue sky"
laws in connection with the transactions contemplated by this Agreement. As of
the date hereof, the executive officers of First Capital know of no reason
pertaining to First Capital why
29
<PAGE> 30
any of the approvals referred to in this SECTION 2.4(F) should not be obtained
without the imposition of any material condition or restriction described in the
last proviso in SECTION 5.1(B).
(g) Reports and Financial Statements.
--------------------------------
(i) First Capital and each of its Subsidiaries have timely
filed all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were required to
file since December 31, 1996 with (A) the OTS, (B) the SEC, (C) the National
Association of Securities Dealers ("NASD"), and (D) the FDIC (collectively,
"FIRST CAPITAL'S REPORTS"), and have paid all fees and assessments due and
payable in connection therewith. As of their respective dates, none of First
Capital's Reports contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. All of First Capital's Reports filed with the SEC complied
in all material respects with the applicable requirements of the Exchange Act
and the rules and regulations of the SEC promulgated thereunder.
(ii) Each of the financial statements of First Capital
included in First Capital's Reports filed with the SEC complied as to form, as
of their respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto. The financial statements included in First
Capital's Reports were prepared from the books and records of First Capital and
its Subsidiaries, fairly present the consolidated financial position of First
Capital and its Subsidiaries in each case at and as of the dates indicated and
the consolidated results of operations, retained earnings and cash flows of
First Capital and its Subsidiaries for the periods indicated, and except as
otherwise set forth in the notes thereto were prepared in accordance with GAAP
consistently applied throughout the periods covered thereby; PROVIDED, HOWEVER,
that the unaudited financial statements for interim periods are subject to
normal year-end adjustments (which will not be material individually or in the
aggregate) and lack a statement of cash flows and footnotes.
(h) Absence of Certain Changes or Events. Except as disclosed in
------------------------------------
First Capital's Reports filed with the SEC prior to the date of this Agreement,
since June 30, 1998, (i) First Capital and its Subsidiaries have not incurred
any material liability, except in the ordinary course of their business
consistent with past practice, (ii) First Capital and its Subsidiaries have
conducted their respective businesses only in the ordinary and usual course of
such businesses, (iii) there has not been any Material Adverse Effect with
respect to First Capital, and (iv) there has been no change in any accounting
principles, practices or methods of First Capital or any of its Subsidiaries
other than as required by GAAP.
(i) Absence of Claims. No litigation, controversy, claim, action,
-----------------
suit or other legal, administrative or arbitration proceeding before any court,
governmental agency or arbitrator is pending against First Capital or any of its
Subsidiaries, and, to First Capital's
30
<PAGE> 31
knowledge, no such litigation, controversy, claim, action, suit or other
proceeding has been threatened. To the knowledge of First Capital, there are no
investigations, reviews or inquiries by any court or governmental agency pending
or threatened against First Capital or any of its Subsidiaries.
(j) Absence of Regulatory Actions. Since December 31, 1993, neither
-----------------------------
First Capital nor First Federal has been a party to any cease and desist order,
written agreement or memorandum of understanding with, or any commitment letter
or similar written undertaking to, or has been subject to any action,
proceeding, order or directive by, or has been a recipient of any extraordinary
supervisory letter from any Government Regulator, or has adopted any board
resolutions at the request of any Government Regulator, or has been advised by
any Government Regulator that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such action,
proceeding, order, directive, cease and desist order, written agreement,
memorandum of understanding, extraordinary supervisory letter, commitment
letter, board resolutions or similar written undertaking.
(k) Taxes. All federal, state, local and foreign tax returns
-----
required to be filed by or on behalf of First Capital or any of its Subsidiaries
have been timely filed or requests for extensions have been timely filed and any
such extension shall have been granted and not have expired, and all such filed
returns are complete and accurate in all material respects. All taxes shown on
such returns, all taxes required to be shown on returns for which extensions
have been granted and all other taxes required to be paid by First Capital or
any of its Subsidiaries have been paid in full or adequate provision has been
made for any such taxes on First Capital's balance sheet (in accordance with
GAAP). For purposes of this SECTION 2.4(K), the term "taxes" shall include all
income, franchise, gross receipts, real and personal property, real property
transfer and gains, wage and employment taxes. As of the date of this Agreement,
there is no audit examination, deficiency assessment, tax investigation or
refund litigation with respect to any taxes of First Capital or any of its
Subsidiaries, and no claim has been made by any authority in a jurisdiction
where First Capital or any of its Subsidiaries do not file tax returns that
First Capital or any such Subsidiary is subject to taxation in that
jurisdiction. All taxes, interest, additions and penalties due with respect to
completed and settled examinations or concluded litigation relating to First
Capital or any of its Subsidiaries have been paid in full or adequate provision
has been made for any such taxes on First Capital's balance sheet (in accordance
with GAAP). First Capital and its Subsidiaries have not executed an extension or
waiver of any statute of limitations on the assessment or collection of any tax
due that is currently in effect. First Capital and each of its Subsidiaries have
withheld and paid all taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other third party, and First Capital and each of its
Subsidiaries have timely complied with all applicable information reporting
requirements under Part III, Subchapter A of Chapter 61 of the IRC and similar
applicable state and local information reporting requirements.
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<PAGE> 32
(l) Agreements.
----------
(i) First Capital's Disclosure Letter lists any contract,
arrangement, commitment or understanding (whether written or oral) to which
First Capital or any of its Subsidiaries is a party or is bound:
(A) which is a material contract as defined in Item
601(b)(10) of Regulation S-K of the rules and regulations of the SEC;
(B) with any executive officer or other key employee of
First Capital or any of its Subsidiaries the benefits of which are contingent,
or the terms of which are materially altered, upon the occurrence of a
transaction involving First Capital or any of its Subsidiaries of the nature
contemplated by this Agreement;
(C) with respect to the employment of any directors,
officers employees or consultants;
(D) (including any stock option plan, phantom stock or
stock appreciation rights plan, restricted stock plan or stock purchase plan)
any of the benefits of which will be increased, or the vesting or payment of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement;
(E) containing covenants that limit the ability of First
Capital or any of its Subsidiaries to compete in any line of business or with
any person, or that involve any restriction on the geographic area in which, or
method by which, First Capital (including any successor thereof) or any of its
Subsidiaries may carry on its business (other than as may be required by law or
any regulatory agency);
(F) pursuant to which First Capital or any of its
Subsidiaries may become obligated to invest in or contribute capital to any
entity;
(G) not fully disclosed in the First Capital's Reports
that relates to borrowings of money (or guarantees thereof) by First Capital or
First Federal, other than in the ordinary course of business; or
(H) which is a lease or license with respect to any
property, real or personal, whether as landlord, tenant, licensor or licensee,
involving a liability or obligation as obligor in excess of $10,000 on an annual
basis.
To the knowledge of First Capital, each of the agreements and other
documents referenced in First Capital's Disclosure Letter with respect to this
SECTION 2.4(L)(I) is a valid,
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<PAGE> 33
binding and enforceable obligation of the parties sought to be bound thereby,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally and to general principles of equity,
whether applied in a court of law or a court of equity. First Capital has
previously delivered to HCB true and complete copies of each agreement and other
documents referenced in First Capital's Disclosure Letter with respect to this
SECTION 2.4(L)(I).
(ii) Neither First Capital nor any of its Subsidiaries is in
default under (and no event has occurred which, with due notice or lapse of time
or both, would constitute a default under) or is in violation of any provision
of any note, bond, indenture, mortgage, deed of trust, loan agreement, lease or
other agreement to which it is a party or by which it is bound or to which any
of its respective properties or assets is subject.
(iii) First Capital and each of its Subsidiaries owns or
possesses valid and binding licenses and other rights to use without payment all
patents, copyrights, trade secrets, trade names, servicemarks and trademarks
used in its businesses, and neither First Capital nor any of its Subsidiaries
has received any notice of conflict with respect thereto that asserts the right
of others. Each of First Capital and its Subsidiaries has performed all the
obligations required to be performed by it and are not in default under any
contract, agreement, arrangement or commitment relating to any of the foregoing.
(m) Labor Matters. First Capital and its Subsidiaries are in
-------------
material compliance with all applicable laws respecting employment, retention of
independent contractors and employment practices, terms and conditions of
employment and wages and hours. Neither First Capital nor any of its
Subsidiaries is or has ever been a party to, or is or has ever been bound by,
any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization with respect to its
employees, nor is First Capital or any of its Subsidiaries the subject of any
proceeding asserting that it has committed an unfair labor practice or seeking
to compel First Capital or any of its Subsidiaries to bargain with any labor
organization as to wages and conditions of employment, nor is there any strike,
other labor dispute or organizational effort involving First Capital or any of
its Subsidiaries pending or overtly threatened.
(n) Employee Benefit Plans.
----------------------
(i) First Capital's Disclosure Letter contains a complete and
accurate list of all pension, retirement, stock option, stock purchase, stock
ownership, savings, stock appreciation right, profit sharing, deferred
compensation, consulting, bonus, group insurance, severance and other benefit
plans, contracts, agreements and arrangements, including, but not limited to,
"employee benefit plans," as defined in Section 3(3) of ERISA, incentive and
welfare policies, contracts, plans and arrangements and all trust agreements
related thereto with respect to any present or former directors, officers or
other employees of First Capital or any of its Subsidiaries (hereinafter
referred to collectively as the "FIRST CAPITAL EMPLOYEE PLANS").
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Except as set forth in First Capital's Disclosure Letter, there has been no
announcement or commitment by First Capital or any of its Subsidiaries to create
an additional First Capital Employee Plan, or to amend any First Capital
Employee Plan, except for amendments required by applicable law which do not
materially increase the cost of such First Capital Employee Plan.
(ii) There is no pending or threatened litigation,
administrative action or proceeding relating to any First Capital Employee Plan.
All of the First Capital Employee Plans comply in all material respects with all
applicable requirements of ERISA, the IRC and other applicable laws. There has
occurred no "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the IRC) with respect to the First Capital Employee Plans which
is likely to result in the imposition of any penalties or taxes under Section
502(i) of ERISA or Section 4975 of the IRC upon First Capital or any of its
Subsidiaries.
(iii) No liability to the Pension Benefit Guarantee
Corporation has been or is expected by First Capital or any of its Subsidiaries
to be incurred with respect to any First Capital Employee Plan which is subject
to Title IV of ERISA ("FIRST CAPITAL PENSION PLAN"), or with respect to any
"single-employer plan" (as defined in Section 4001(a) of ERISA) currently or
formerly maintained by First Capital or any ERISA Affiliate. No First Capital
Pension Plan had an "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, as of the last day of the end of the most
recent plan year ending prior to the date hereof; the fair market value of the
assets of each First Capital Pension Plan exceeds the present value of the
"benefit liabilities" (as defined in Section 4001(a)(16) of ERISA) under such
First Capital Pension Plan as of the end of the most recent plan year with
respect to the respective First Capital Pension Plan ending prior to the date
hereof, calculated on the basis of the actuarial assumptions used in the most
recent actuarial valuation for such First Capital Pension Plan as of the date
hereof; and no notice of a "reportable event" (as defined in Section 4043 of
ERISA) for which the 30-day reporting requirement has not been waived has been
required to be filed for any First Capital Pension Plan within the 12-month
period ending on the date hereof. Neither First Capital nor any of its
Subsidiaries has provided, or is required to provide, security to any First
Capital Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the IRC. Neither First Capital, any of its
Subsidiaries, nor any ERISA Affiliate has contributed to any "multiemployer
plan," as defined in Section 3(37) of ERISA, on or after September 26, 1980.
(iv) Each First Capital Employee Plan that is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) and which is
intended to be qualified under Section 401(a) of the IRC (a "FIRST CAPITAL
QUALIFIED PLAN") has received a favorable determination letter from the IRS, and
First Capital and its Subsidiaries are not aware of any circumstances likely to
result in revocation of any such favorable determination letter. Each First
Capital Qualified Plan that is an "employee stock ownership plan" (as defined in
Section 4975(e)(7) of the IRC) has satisfied all of the applicable requirements
of Sections 409 and 4975(e)(7) of the IRC and the regulations thereunder in all
respects and any assets of any such
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First Capital Qualified Plan that are not allocated to participants' individual
accounts are pledged as security for, and may be applied to satisfy, any
securities acquisition indebtedness.
(v) First Capital and its Subsidiaries do not have any
obligations for post-retirement or post-employment benefits under any First
Capital Employee Plan that cannot be amended or terminated upon 60 days' notice
or less without incurring any liability thereunder, except for coverage required
by Part 6 of Title I of ERISA or Section 4980B of the IRC, or similar state
laws, the cost of which is borne by the insured individuals. With respect to
First Capital or any of its Subsidiaries, for the First Capital Employee Plans
listed in First Capital's Disclosure Letter, the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
result in any payment or series of payments by First Capital or any of its
Subsidiaries to any person which is an "excess parachute payment" (as defined in
Section 280G of the IRC), increase or secure (by way of a trust or other
vehicle) any benefits payable under any First Capital Employee Plan or
accelerate the time of payment or vesting of any such benefit.
(o) Title to Assets. First Capital's Disclosure Letter contains a
---------------
complete and accurate list of all real property owned or leased by First Capital
or any of its Subsidiaries, including all properties of First Capital or any of
its subsidiaries classified as "real estate owned" or words of similar import
(the "REAL PROPERTY"). To the knowledge of First Capital, none of the buildings,
structures or other improvements located on the Real Property encroaches upon or
over any adjoining parcel or real estate or any easement or right-of-way. First
Capital and each of its Subsidiaries has good and marketable title to its
properties and assets (including any intellectual property asset such as any
trademark, service mark, tradename or copyright) and property acquired in a
judicial foreclosure proceeding or by way of a deed in lieu of foreclosure or
similar transfer, other than property as to which it is lessee, in which case
the related lease is valid and in full force and effect. Each lease pursuant to
which First Capital or any of its Subsidiaries is lessor is valid and in full
force and effect and no lessee under any such lease is in default or in
violation of any provisions of any such lease. All material tangible properties
of First Capital and each of its Subsidiaries are in a good state of maintenance
and repair, conform with all applicable ordinances, regulations and zoning laws
and are considered by First Capital to be adequate for the current business of
First Capital and its Subsidiaries.
(p) Compliance with Laws. Each of First Capital and each of its
--------------------
Subsidiaries has all permits, licenses, certificates of authority, orders and
approvals of, and has made all filings, applications and registrations with, all
Governmental Entities that are required in order to permit it to carry on its
business as it is presently conducted; all such permits, licenses, certificates
of authority, orders and approvals are in full force and effect, and, to First
Capital's knowledge, no suspension or cancellation of any of them is threatened.
Since the date of its incorporation, the corporate affairs of First Capital have
not been conducted in violation of any law, ordinance, regulation, order, writ,
rule, decree or condition to approval of any Governmental Entity. The businesses
of First Capital and its Subsidiaries are not being conducted in violation
35
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of any law, ordinance, regulation, order, writ, rule, decree or condition to
approval of any Governmental Entity.
(q) Fees. Other than the financial advisory services performed for
----
First Capital by Charles Webb & Company, a Division of Keefe, Bruyette & Woods,
Inc., pursuant to an agreement dated June 3, 1999, a true and complete copy of
which has been previously delivered to HCB, neither First Capital nor any of its
Subsidiaries, nor any of their respective officers, directors, employees or
agents, has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions or finder's fees, and no
broker or finder has acted directly or indirectly for First Capital or any of
its Subsidiaries in connection with this Agreement or the transactions
contemplated hereby.
(r) Environmental Matters. With respect to First Capital and each of
---------------------
its Subsidiaries:
(i) Each of First Capital and its Subsidiaries, the
Participation Facilities and, to First Capital's knowledge, the Loan Properties
are, and have been, in substantial compliance with, and are not liable under,
all Environmental Laws;
(ii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or
threatened, before any court, governmental agency or board or other forum
against First Capital or any of its Subsidiaries or any Participation Facility
(A) for alleged noncompliance (including by any predecessor) with, or liability
under, any Environmental Law or (B) relating to the presence of or release into
the environment of any Hazardous Material, whether or not occurring at or on a
site owned, leased or operated by First Capital or any of its Subsidiaries or
any Participation Facility;
(iii) To First Capital's knowledge, there is no suit, claim,
action, demand, executive or administrative order, directive, investigation or
proceeding pending or threatened before any court, governmental agency or board
or other forum relating to or against any Loan Property (or First Capital or any
of its Subsidiaries in respect of such Loan Property) (A) relating to alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (B) relating to the presence of or release into the
environment of any Hazardous Material, whether or not occurring at or on a site
owned, leased or operated by a Loan Property;
(iv) To First Capital's knowledge, the properties currently
owned or operated by First Capital or any of its Subsidiaries (including,
without limitation, soil, groundwater or surface water on or under the
properties, and buildings thereon) are not contaminated with and do not
otherwise contain any Hazardous Material other than as permitted under
applicable Environmental Law;
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(v) Neither First Capital nor any of its Subsidiaries has
received any notice, demand letter, executive or administrative order, directive
or request for information from any Governmental Entity or any third party
indicating that it may be in violation of, or liable under, any Environmental
Law;
(vi) To First Capital's knowledge, there are no underground
storage tanks on, in or under any properties owned or operated by First Capital
or any of its Subsidiaries any Participation Facility and no underground storage
tanks have been closed or removed from any properties owned or operated by First
Capital or any of its Subsidiaries or any Participation Facility; and
(vii) To First Capital's knowledge, during the period of (A)
First Capital's or any of its Subsidiaries' ownership or operation of any of
their respective current properties or (B) First Capital's or any of its
Subsidiaries' participation in the management of any Participation Facility,
there has been no contamination by or release of Hazardous Materials in, on,
under or affecting such properties. To First Capital's knowledge, prior to the
period of (x) First Capital's or any of its Subsidiaries' ownership or operation
of any of their respective current properties or (y) First Capital's or any of
its Subsidiaries' participation in the management of any Participation Facility,
there was no contamination by or release of Hazardous Material in, on, under or
affecting such properties.
(s) Loan Portfolio; Allowance; Asset Quality.
----------------------------------------
(i) With respect to each loan owned by First Capital or its
Subsidiaries in whole or in part, to First Capital's knowledge:
(A) the note and the related security documents are each
legal, valid and binding obligations of the maker or obligor thereof,
enforceable against such maker or obligor in accordance with their terms;
(B) neither First Capital nor any of its Subsidiaries,
nor any prior holder of a loan, has modified the note or any of the related
security documents in any material respect or satisfied, canceled or
subordinated the note or any of the related security documents except as
otherwise disclosed by documents in the applicable loan file;
(C) First Capital or a Subsidiary of First Capital is
the sole holder of legal and beneficial title to each loan (or First Capital's
or its Subsidiary's applicable participation interest, as applicable), except as
otherwise referenced on the books and records of First Capital or a Subsidiary;
(D) the note and the related security documents, copies
of which are included in the loan files, are true and correct copies of the
documents they purport to
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be and have not been suspended, amended, modified, canceled or otherwise changed
except as otherwise disclosed by documents in the applicable loan file;
(E) there is no pending or threatened condemnation
proceeding or similar proceeding affecting the property that serves as security
for a loan, except as otherwise referenced on the books and records of First
Capital;
(F) there is no litigation or proceeding pending or
threatened relating to the property that serves as security for a loan that
would have a Material Adverse Effect upon the related loan; and
(G) with respect to a loan held in the form of a
participation, the participation documentation is legal, valid, binding and
enforceable in accordance with its terms.
(ii) The allowance for possible loan losses reflected in First
Capital's audited statement of condition at June 30, 1998 was, and the allowance
for possible losses shown on the balance sheets in First Capital's Reports for
periods ending after June 30, 1998, in the opinion of management, was or will be
adequate, as of the dates thereof, under GAAP.
(iii) First Capital's Disclosure Letter sets forth by category
the amounts of all loans, leases, advances, credit enhancements, other
extensions of credit, commitments and interest-bearing assets of First Capital
and its Subsidiaries that have been classified (whether regulatory or internal)
as "special mention," "substandard," "doubtful," "loss," or words of similar
import, and First Capital and First Federal shall promptly after the end of any
month inform HCB of any such classification arrived at any time after the date
hereof. The "real estate owned" or words of similar import included in any
non-performing assets of First Capital or any of its Subsidiaries is carried net
of reserves at the lower of cost or fair value, less estimated selling costs,
based on current independent appraisals or evaluations or current management
appraisals or evaluations; PROVIDED, HOWEVER, that "current" shall mean within
the past 12 months.
(t) Deposits. None of the deposits of First Capital or any of its
--------
Subsidiaries is a "brokered" deposit.
(u) Accounting Matters. Neither First Capital nor any of its
------------------
Subsidiaries or, to the best of First Capital's knowledge, any of its other
affiliates has, through the date hereof, taken or agreed to take any action that
would prevent First Capital from accounting for the merger contemplated herein
as a pooling-of-interests transaction, and First Capital has no knowledge of any
fact or circumstance relating to it that would prevent such accounting
treatment.
(v) Antitakeover Provisions Inapplicable. First Capital and its
------------------------------------
Subsidiaries have taken all actions required to exempt First Capital, Merger
Sub, First Federal, the Agreement, the Merger and the Plan of Bank Merger from
any provisions of an antitakeover
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nature in their organization certificates and bylaws, and the provisions of any
federal or state "antitakeover," "fair price," "moratorium," "control share
acquisition" or similar laws or regulations.
(w) Material Interests of Certain Persons. Except as disclosed in
-------------------------------------
First Capital's Reports, no officer or director of First Capital or any of its
Subsidiaries, or any "associate" (as such term is defined in Rule 12b-2 under
the Exchange Act) of any such officer or director, has any interest in any
material contract or property (real or personal), tangible or intangible, used
in or pertaining to the business of First Capital or any of its Subsidiaries.
(x) Insurance. In the opinion of management, First Capital and its
---------
Subsidiaries are presently insured for amounts deemed reasonable by management
with, to First Capital's knowledge, financially sound insurance companies,
against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured. All of the
insurance policies and bonds maintained by First Capital and its Subsidiaries
are in full force and effect, First Capital and its Subsidiaries are not in
default thereunder and all material claims thereunder have been filed in timely
fashion.
(y) Investment Securities; Derivatives; Borrowing.
---------------------------------------------
(i) Except for investments in FHLB stock, pledges to secure
FHLB borrowings, reverse repurchase agreements entered into in arms-length
transactions pursuant to normal commercial terms and conditions and entered into
in the ordinary course of business and restrictions that exist for securities to
be classified as "held to maturity," none of the investments reflected in the
consolidated balance sheet of First Capital as of March 31, 1999, and none of
the investment securities acquired by it or any of its Subsidiaries since March
31, 1999 is subject to any restriction (contractual or statutory) that would
materially impair the ability of the entity holding such investment freely to
dispose of such investment at any time.
(ii) Except for adjustable-rate mortgages and adjustable-rate
FHLB advances, neither First Capital nor any Subsidiary of First Capital is a
party to or has agreed to enter into an exchange-traded or over-the-counter
equity, interest rate, foreign exchange or other swap, forward, future, option,
cap, floor or collar or any other contract that is a derivative contract
(including various combinations thereof) or owns securities that (A) are
referred to generically as "structured notes," "high risk mortgage derivatives,"
"capped floating rate notes" or "capped floating rate mortgage derivatives" or
(B) are likely to have changes in value as a result of interest or exchange rate
changes that significantly exceed normal changes in value attributable to
interest or exchange rate changes.
(iii) Set forth in First Capital's Disclosure Letter is a true
and complete list of First Capital's borrowed funds (excluding deposit accounts)
as of the date hereof.
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(z) Indemnification. Except as provided in the Articles of
---------------
Incorporation or Bylaws of First Capital or the similar governing documents of
its Subsidiaries, neither First Capital nor any Subsidiary of First Capital is a
party to any agreement that provides for the indemnification of any of its
present or future directors, officers, employees, or other persons who serve or
served in any other capacity with any other enterprise at the request of First
Capital, and, to the knowledge of First Capital, there are no claims for which
any person would be entitled to indemnification under the Articles of
Incorporation or Bylaws of First Capital or the similar governing documents of
any of its Subsidiaries, under any applicable law or regulation or under any
indemnification agreement.
(aa) Books and Records. The books and records of First Capital and
-----------------
its Subsidiaries on a consolidated basis have been, and are being, maintained in
accordance with applicable legal and accounting requirements and reflect in all
material respects the substance of events and transactions that should be
included therein.
(bb) Corporate Documents. The minute books of First Capital
-------------------
constitute a complete and correct record of all actions taken by its board of
directors (and each committee thereof) and its shareholders. The minute books of
each of First Capital's Subsidiaries constitutes a complete and correct record
of all actions taken by the respective boards of directors (and each committee
thereof) and the shareholders of each such Subsidiary.
(cc) Tax Treatment of the Merger. As of the date hereof, First
---------------------------
Capital has no knowledge of any fact or circumstance relating to it that would
prevent the transactions contemplated by this Agreement from qualifying as a
tax-free reorganization under the IRC.
(dd) Beneficial Ownership of HCB Common Stock. As of the date
----------------------------------------
hereof, First Capital beneficially owns no shares of HCB Common Stock and does
not have any option, warrant or right of any kind to acquire the beneficial
ownership of any shares of HCB Common Stock.
(ee) Year 2000 Matters. First Capital has completed a review of its
-----------------
computer systems to identify systems that could be affected by the "Year 2000"
issue and reasonably believes it has identified all Year 2000 problems. First
Capital's management has developed and commenced implementation of a plan which
is designed to complete any required initial changes to its computer systems
("FIRST CAPITAL Y2K PLAN") and to complete testing of those changes by September
30, 1999. Year 2000 issues have not had, and are not reasonably expected to
have, a Material Adverse Effect on First Capital.
(ff) Registration Statement. The information regarding First Capital
----------------------
and its Subsidiaries to be supplied by First Capital for inclusion in the
Registration Statement will not, at the time the Registration Statement becomes
effective, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order
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to make the statements therein, in light of the circumstances under which they
are made, not misleading.
(gg) Community Reinvestment Act Compliance. First Federal is in
-------------------------------------
material compliance with the applicable provisions of the CRA and the
regulations promulgated thereunder, and First Federal currently has a CRA rating
of satisfactory or better. To First Capital's knowledge, there is no fact or
circumstance or set of facts or circumstances that would cause First Federal to
fail to comply with such provisions or cause the CRA rating of First Federal to
fall below satisfactory.
(hh) Undisclosed Liabilities. As of the date hereof, First Capital
-----------------------
and its Subsidiaries have not incurred any debt, liability or obligation of any
nature whatsoever (whether accrued, contingent, absolute or otherwise and
whether due or to become due) except for (i) liabilities reflected on or
reserved against in the financial statements of First Capital as of June 30,
1998, and (ii) liabilities incurred since June 30, 1998 in the ordinary course
of business consistent with past practice that, either alone or when combined
with all similar liabilities, have not had, and would not reasonably be expected
to have, a Material Adverse Effect on First Capital.
ARTICLE III
CONDUCT PENDING THE MERGER
--------------------------
Section 3.1. Conduct of Business Prior to the Effective Time. Except
-----------------------------------------------
as expressly provided in this Agreement, during the period from the date of this
Agreement to the Effective Time, each of First Capital and HCB shall, and shall
cause each of their respective Subsidiaries to, use commercially reasonable
efforts to (a) conduct its business in the regular, ordinary and usual course
consistent with past practice; (b) maintain and preserve intact its business
organization, properties, leases, employees and advantageous business
relationships and retain the services of its officers and key employees, (c)
take no action which would adversely affect or delay the ability of HCB or First
Capital to perform their respective covenants and agreements on a timely basis
under this Agreement and (d) take no action which would adversely affect or
delay the ability of HCB, HC Bank, First Capital or First Federal to obtain any
necessary approvals, consents or waivers of any governmental authority required
for the transactions contemplated hereby or which would reasonably be expected
to result in any such approvals, consents or waivers containing any material
condition or restriction.
Section 3.2. Forbearances. Without limiting the covenants set forth
------------
in SECTION 3.1 hereof, except as otherwise provided in this Agreement and except
to the extent required by law or regulation or any Governmental Entity, during
the period from the date of this Agreement to the Effective Time, neither First
Capital nor HCB shall, and neither First Capital nor HCB shall permit any of
their respective Subsidiaries to, without the prior written consent of the other
party:
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(a) change any provisions of its Articles of Incorporation or Bylaws
or the similar governing documents of its Subsidiaries (except that First
Capital and First Federal may amend their respective Bylaws to impose an age
limitation on directors);
(b) (i) issue any shares of capital stock except pursuant to the
exercise of stock options or warrants outstanding as of the date of this
Agreement; (ii) change the terms of any outstanding stock options or warrants;
(iii) issue, grant or sell any option, warrant, call, commitment, stock
appreciation right, right to purchase or agreement of any character relating to
the authorized or issued capital stock of First Capital or HCB; or (iv) split,
combine, reclassify or adjust any shares of its capital stock or otherwise
change its capitalization;
(c) make, declare or pay any cash or stock dividend or make any
other distribution on, or directly or indirectly redeem, purchase or otherwise
acquire, any shares of its capital stock or any securities or obligations
convertible into or exchangeable for any shares of its capital stock (except (i)
in the case of First Capital, for regular quarterly cash dividends at a rate not
in excess of $0.10 per share of First Capital Common Stock, (ii) in the case of
HCB, for an annual cash dividend for 1999 at a rate not in excess of $6.10 per
share of HCB Common Stock, which shall be paid prior to the Closing Date and
(iii) dividends paid by any of the Subsidiaries of each of First Capital and HCB
to First Capital or HCB, respectively, for the purpose of enabling First Capital
or HCB to pay the dividends specified in (i) and (ii));
(d) other than in the ordinary course of business, incur any
indebtedness for borrowed money or assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any individual,
corporation or entity (it being understood and agreed that incurrence of
indebtedness in the ordinary course of business shall include, without
limitation, the creation of deposit liabilities, borrowings from the Federal
Home Loan Bank, sales of certificates of deposit and entering into repurchase
agreements);
(e) other than in the ordinary course of business consistent with
past practice, (i) sell, transfer, mortgage, encumber or otherwise dispose of
any of its material properties, leases or assets to any individual, corporation
or other entity other than a direct or indirect wholly owned Subsidiary or (ii)
cancel, release or assign any indebtedness of any such individual, corporation
or other entity;
(f) increase in any manner the compensation or fringe benefits of
any of its employees or directors, other than general increases in compensation
for non-executive officer employees in the ordinary course of business
consistent with past practice; pay any pension or retirement allowance not
required by any existing plan or agreement to any such employees or directors,
or become a party to, amend or commit itself to fund or otherwise establish any
trust or account related to any First Capital Employee Plan or HCB Employee Plan
with or for the benefit of any employee or director (except First Capital may
adopt a stock-based benefit plan or plans pursuant to which it would reserve
76,876 shares for issuance upon the exercise of stock options awarded under such
plan and 30,750 shares for awards of restricted stock); voluntarily
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accelerate the vesting of any stock options or other compensation or benefit;
make any discretionary contribution to any First Capital Employee Plan or HCB
Employee Plan; hire any employee with an annual total compensation payment in
excess of $35,000 or enter into any employment contract;
(g) implement or adopt any change in its accounting principles,
practices or methods, except as may be required by GAAP or regulatory
guidelines;
(h) settle any claim, action or proceeding involving any liability
for money damages in excess of $100,000 or impose material restrictions upon the
operations of First Capital or HCB or any of their respective Subsidiaries;
(i) acquire or agree to acquire, by merging or consolidating with,
or by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets, in each case which are
material, individually or in the aggregate, to First Capital or HCB, except in
satisfaction of debts previously contracted;
(j) make, renew, increase, extend or purchase any loans other than
in conformance with written lending policies in effect as of the date of this
Agreement;
(k) establish or commit to the establishment of any new branch or
other office facilities other than those for which all regulatory approvals have
been obtained;
(l) other than in the ordinary course of business consistent with
past practice in individual amounts not to exceed $50,000, make any investment
either by purchase of stock or securities, contributions to capital, property
transfers, or purchase of any property or assets of any other individual,
corporation or other entity other than a Subsidiary;
(m) make any investment in any debt security, including
mortgage-backed and mortgage-related securities (other than US government and US
government agency securities with final maturities not greater than five years,
mortgage-backed or mortgage related securities which would not be considered
"high risk" securities pursuant to Thrift Bulletin Number 52 issued by the OTS
or securities of the FHLB, in each case that are purchased in the ordinary
course of business consistent with past practice);
(n) enter into, renew, amend or terminate any contract or agreement,
or make any change in any of its leases or contracts, other than with respect to
those involving aggregate payments of less than, or the provision of goods or
services with a market value of less than, $20,000 per annum;
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(o) knowingly take any action that would prevent or impede the
Merger from qualifying (i) for pooling-of-interests accounting treatment or (ii)
as a reorganization within the meaning of Section 368 of the IRC;
(p) make any capital expenditures in excess of $20,000 per
expenditure from the date of this Agreement until the Effective Date other than
pursuant to binding commitments existing on the date hereof, and other than
expenditures necessary to maintain existing assets in good repair or to make
payment of necessary taxes;
(q) elect to any executive office any person who is not an executive
officer as of the date of this Agreement or elect to the Board of Directors any
person who is not a member of the Board of Directors as of the date of this
Agreement;
(r) take any action that is intended or expected to result in any of
its representations and warranties set forth in this Agreement becoming untrue
at any time prior to the Effective Time, or in any of the conditions to the
Merger set forth in Article V not being satisfied, or in a violation of any
provision of this Agreement, except, in every case, as may be required by
applicable law; or
(s) agree or make any commitment to take any action that is
prohibited by this SECTION 3.2.
ARTICLE IV
COVENANTS
---------
Section 4.1. Acquisition Proposals.
---------------------
(a) From and after the date hereof until the termination of this
Agreement, neither HCB or HC Bank, nor any of their respective officers,
directors, employees, representatives, agents or affiliates (including, without
limitation, any investment banker, attorney or accountant retained by HCB or any
of its Subsidiaries), will, directly or indirectly, initiate, solicit or
knowingly encourage (including by way of furnishing non-public information or
assistance), or facilitate knowingly, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any HCB
Acquisition Proposal (as defined below), or enter into or maintain or continue
discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain an HCB Acquisition Proposal or agree to or endorse any
HCB Acquisition Proposal, or authorize or permit any of its officers, directors
or employees or any of its Subsidiaries or any investment banker, financial
advisor, attorney, accountant or other representative retained by any of its
Subsidiaries to take any such action, and HCB shall notify First Capital orally
(within 1 business day) and in writing (as promptly as practicable, but in no
event later than 2 calendar days) of such inquiries and proposals which it or
any of its Subsidiaries or any such officer, director, employee, investment
banker, financial advisor,
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attorney, accountant or other representative may receive relating to any of such
matters and, if such inquiry or proposal is in writing, HCB shall deliver to
First Capital a copy of such inquiry or proposal promptly; PROVIDED, HOWEVER,
that nothing contained in this SECTION 4.1(A) shall prohibit the Board of
Directors of HCB from (i) furnishing information to, or entering into
discussions or negotiations with any person or entity that makes an unsolicited
written, bona fide proposal to acquire HCB pursuant to a merger, consolidation,
share exchange, business combination, tender or exchange offer or other similar
transaction, if, and only to the extent that, (A) the Board of Directors of HCB
receives a written opinion from its independent financial advisor that such
proposal may be superior to the Merger from a financial point-of-view to HCB's
shareholders, (B) the Board of Directors of HCB, after consultation with and
based on the written advice of independent legal counsel, determines in good
faith that such action is necessary for the Board of Directors of HCB to comply
with its fiduciary duties to shareholders under applicable law (such proposal
that satisfies (A) and (B) being referred to herein as an "HCB SUPERIOR
PROPOSAL") and (C) prior to furnishing such information to, or entering into
discussions or negotiations with, such person or entity, HCB (1) provides
reasonable notice to First Capital to the effect that it is furnishing
information to, or entering into discussions or negotiations with, another party
and (2) receives from such person or entity an executed confidentiality
agreement in reasonably customary form, (ii) complying with Rule 14e-2
promulgated under the Exchange Act with regard to a tender or exchange offer or
(iii) failing to make or withdrawing or modifying its recommendation and
entering into an HCB Superior Proposal if there exists an HCB Superior Proposal
and the Board of Directors of HCB, after consultation with and based upon the
written advice of independent legal counsel, determines in good faith that such
action is necessary for the Board of Directors of HCB to comply with its
fiduciary duties to shareholders under applicable law. For purposes of this
Agreement, "HCB ACQUISITION PROPOSAL" shall mean any of the following (other
than the transactions contemplated hereunder) involving HCB or any of its
Subsidiaries: (i) any merger, consolidation, share exchange, business
combination, or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 10% or more of the assets of
HCB and its Subsidiaries, taken as a whole, in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for 10% or more of the
outstanding shares of capital stock of HCB or the filing of a registration
statement under the Securities Act in connection therewith; or (iv) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
(b) From and after the date hereof until the termination of this
Agreement, neither First Capital or First Federal, nor any of their respective
officers, directors, employees, representatives, agents or affiliates
(including, without limitation, any investment banker, attorney or accountant
retained by First Capital or any of its Subsidiaries), will, directly or
indirectly, initiate, solicit or knowingly encourage (including by way of
furnishing non-public information or assistance), or facilitate knowingly, any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any First Capital Acquisition Proposal (as defined below),
or enter into or maintain or continue discussions or negotiate with any person
or entity in furtherance of such inquiries or to obtain an First Capital
Acquisition Proposal or
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<PAGE> 46
agree to or endorse any First Capital Acquisition Proposal, or authorize or
permit any of its officers, directors or employees or any of its Subsidiaries or
any investment banker, financial advisor, attorney, accountant or other
representative retained by any of its Subsidiaries to take any such action, and
First Capital shall notify HCB orally (within 1 business day) and in writing (as
promptly as practicable, but in no event later than 2 calendar days) of such
inquiries and proposals which it or any of its Subsidiaries or any such officer,
director, employee, investment banker, financial advisor, attorney, accountant
or other representative may receive relating to any of such matters and, if such
inquiry or proposal is in writing, First Capital shall deliver to HCB a copy of
such inquiry or proposal promptly; PROVIDED, HOWEVER, that nothing contained in
this SECTION 4.1(B) shall prohibit the Board of Directors of First Capital from
(i) furnishing information to, or entering into discussions or negotiations with
any person or entity that makes an unsolicited written, bona fide proposal to
acquire First Capital pursuant to a merger, consolidation, share exchange,
business combination, tender or exchange offer or other similar transaction, if,
and only to the extent that, (A) the Board of Directors of First Capital
receives a written opinion from its independent financial advisor that such
proposal may be superior to the Merger from a financial point-of-view to First
Capital's shareholders, (B) the Board of Directors of First Capital, after
consultation with and based on the written advice of independent legal counsel,
determines in good faith that such action is necessary for the Board of
Directors of First Capital to comply with its fiduciary duties to shareholders
under applicable law (such proposal that satisfies (A) and (B) being referred to
herein as a "FIRST CAPITAL SUPERIOR PROPOSAL") and (C) prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, First Capital (x) provides reasonable notice to HCB to the effect
that it is furnishing information to, or entering into discussions or
negotiations with, another party and (y) receives from such person or entity an
executed confidentiality agreement in reasonably customary form, (ii) complying
with Rule 14e-2 promulgated under the Exchange Act with regard to a tender or
exchange offer or (iii) failing to make or withdrawing or modifying its
recommendation and entering into a First Capital Superior Proposal if there
exists a First Capital Superior Proposal and the Board of Directors of First
Capital, after consultation with and based upon the written advice of
independent legal counsel, determines in good faith that such action is
necessary for the Board of Directors of First Capital to comply with its
fiduciary duties to shareholders under applicable law. For purposes of this
Agreement, "FIRST CAPITAL ACQUISITION PROPOSAL" shall mean any of the following
(other than the transactions contemplated hereunder) involving First Capital or
any of its Subsidiaries: (i) any merger, consolidation, share exchange, business
combination, or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 10% or more of the assets of
First Capital and its Subsidiaries, taken as a whole, in a single transaction or
series of transactions; (iii) any tender offer or exchange offer for 10% or more
of the outstanding shares of capital stock of First Capital or the filing of a
registration statement under the Securities Act in connection therewith; or (iv)
any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
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<PAGE> 47
Section 4.2. Certain Policies of HCB.
-----------------------
(a) First Capital and HCB shall cooperate to determine whether HCB
shall cause HC Bank to modify and change its loan, litigation and real estate
valuation policies and practices (including loan classifications and levels of
reserves) and investment and asset/liability management policies and practices
so as to be consistent on a mutually satisfactory basis with those of First
Federal; PROVIDED, HOWEVER, that HCB shall not be required to take such action
prior to the date on which all Requisite Regulatory Approvals and shareholder
approvals are received, and until after receipt of written confirmation from
First Capital that it is not aware of any fact or circumstance that would
prevent completion of the Merger and PROVIDED FURTHER, that such policies and
procedures are not prohibited by GAAP or any applicable laws and regulations.
(b) HCB's representations, warranties and covenants contained in
this Agreement shall not be deemed to be untrue or breached in any respect for
any purpose as a consequence of any modifications or changes undertaken solely
on account of this SECTION 4.2.
Section 4.3. Access and Information. Upon reasonable notice, HCB and
----------------------
First Capital shall (and shall cause their respective Subsidiaries to) afford to
the other and their respective representatives (including, without limitation,
directors, officers and employees of such party and its affiliates and counsel,
accountants and other professionals retained by such party) such reasonable
access during normal business hours throughout the period prior to the Effective
Time to the books, records (including, without limitation, tax returns and work
papers of independent auditors), properties, personnel and to such other
information as either party may reasonably request and during such period, each
of HCB and First Capital shall, and shall cause their respective Subsidiaries
to, make available to the other party a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of federal securities laws or federal or
state banking laws; PROVIDED, HOWEVER, that no investigation pursuant to this
SECTION 4.3 shall affect or be deemed to modify any representation or warranty
made herein. First Capital and HCB will not, and will cause their respective
representatives not to, use any information obtained pursuant to this SECTION
4.3 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. Subject to the requirements of applicable law,
each of First Capital and HCB will keep confidential, and will cause their
respective representatives to keep confidential, all information and documents
obtained pursuant to this SECTION 4.3 unless such information (i) was already
known to such party or an affiliate of such party, other than pursuant to a
confidentiality agreement or other confidential relationship, (ii) becomes
available to such party or an affiliate of such party from other sources not
known by such party to be bound by a confidentiality agreement or other
obligation of secrecy, (iii) is disclosed with the prior written approval of the
other party or (iv) is or becomes readily ascertainable from published
information or trade sources. In the event that this Agreement is terminated or
the transactions contemplated by this Agreement shall otherwise fail to be
consummated, each party shall promptly cause all copies of documents or extracts
thereof containing information and data as to another party hereto (or an
affiliate of any party hereto) to be returned to the party that furnished the
same.
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Section 4.4. Applications; Consents.
----------------------
(a) As soon as practicable after the date hereof, First Capital
shall submit any requisite applications for, or requests for waiver of, the
Requisite Regulatory Approvals, and each of the parties hereto shall, and they
shall cause their respective Subsidiaries to, submit any applications, notices
or other filings to any other Governmental Entity the approval of which is
required for consummation of the Merger and the Bank Merger.
(b) As soon as practicable after the date hereof, each of the
parties hereto shall, and they shall cause their respective Subsidiaries to, use
its best efforts to obtain any consent, authorization or approval of any third
party that is required to be obtained in connection with the Merger or the Bank
Merger.
Section 4.5. Antitakeover Provisions. First Capital, HCB and their
-----------------------
respective Subsidiaries shall take all steps required by any relevant federal or
state law or regulation or under any relevant agreement or other document to
exempt or continue to exempt the other party, the Agreement, the Merger and the
Bank Merger from any provisions of an antitakeover nature in First Capital's,
HCB's or their respective Subsidiaries' organization certificates and bylaws and
the provisions of any federal or state antitakeover laws.
Section 4.6. Additional Agreements. Subject to the terms and
---------------------
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take promptly, or cause to be taken promptly, all actions
and to do promptly, or cause to be done promptly, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including the Bank
Merger, as expeditiously as possible, including using efforts to obtain all
necessary actions or non-actions, extensions, waivers, consents and approvals
from all applicable Governmental Entities, effecting all necessary
registrations, applications and filings (including, without limitation, filings
under any applicable state securities laws) and obtaining any required
contractual consents and regulatory approvals.
Section 4.7. Publicity. The initial press release announcing this
---------
Agreement shall be a joint press release and thereafter HCB and First Capital
shall consult with each other in issuing any press releases or otherwise making
public statements with respect to the Merger and any other transaction
contemplated hereby and in making any filings with any Governmental Entity or
with any national securities exchange or market with respect thereto.
Section 4.8. Shareholders Meetings. First Capital and HCB each shall
---------------------
take all action necessary, in accordance with applicable law and their
respective Articles of Incorporation and Bylaws, to convene a meeting of their
respective shareholders (each, a "SHAREHOLDER MEETING") as promptly as
practicable for the purpose of considering and voting on approval and adoption
of the transactions provided for in this Agreement. Except to the extent legally
required for the discharge by the Board of Directors of its fiduciary duties,
the Board of Directors of each
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of First Capital and HCB shall (a) recommend at its Shareholder Meeting that the
shareholders vote in favor of and approve the transactions provided for in this
Agreement and (b) use its reasonable best efforts to solicit such approvals.
First Capital and HCB shall coordinate and cooperate with respect to the timing
of their respective Shareholder Meetings.
Section 4.9. Registration of First Capital Common Stock.
------------------------------------------
(a) As soon as practicable after the date hereof, First Capital
shall, in cooperation with HCB, prepare a Joint Proxy Statement-Prospectus for
the purpose of taking shareholder action on the Merger and this Agreement and
subject to the provisions of SECTION 4.4, file the Joint Proxy
Statement-Prospectus with the SEC, respond to comments of the staff of the SEC
and, promptly after the Registration Statement is declared effective by the SEC,
mail the Joint Proxy Statement-Prospectus to the respective holders of record
(as of the applicable record date) of shares of voting stock of each of HCB and
First Capital. First Capital and HCB each represents and covenants to the other
that the Joint Proxy Statement-Prospectus, and any amendment or supplement
thereto, with respect to the information pertaining to it or its Subsidiaries at
the date of mailing to its shareholders and the date of its Shareholder Meeting
will be in compliance with the Exchange Act and all relevant rules and
regulations of the SEC.
(b) First Capital shall, as promptly as practicable, prepare and
file with the SEC the Registration Statement in which the Joint Proxy
Statement-Prospectus will be included (including any pre-effective or
post-effective amendments or supplements thereto). First Capital and HCB shall
use all reasonable efforts to have the Registration Statement declared effective
under the Securities Act as promptly as practicable after such filing. First
Capital will advise HCB promptly after First Capital receives notice of the time
when the Registration Statement has become effective or any supplement or
amendment has been filed, of the issuance of any stop order or the suspension of
the qualification of the shares of capital stock issuable pursuant to the
Registration Statement, or the initiation or threat of any proceeding for any
such purpose, or of any request by the SEC for the amendment or supplement of
the Registration Statement or for additional information. First Capital will
provide HCB with as many copies of such Registration Statement and all
amendments thereto promptly upon the filing thereof as HCB may reasonably
request.
(c) First Capital shall use its best efforts to obtain, prior to the
effective date of the Registration Statement, all necessary state securities
laws or "blue sky" permits and approvals required to carry out the transactions
contemplated by this Agreement.
(d) Prior to the Effective Time, First Capital shall notify the
Nasdaq SmallCap Market of the additional shares of First Capital Common Stock to
be issued by First Capital in exchange for the shares of HCB Common Stock.
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Section 4.10. Affiliate Letters.
-----------------
(a) HCB shall use its best efforts to cause each director, executive
officer and other person who is an "affiliate" of HCB under Rule 145 of the
Securities Act and the pooling-of-interests accounting rules to deliver to First
Capital as soon as practicable and prior to the mailing of the Joint Proxy
Statement-Prospectus executed letter agreements, each substantially in the form
attached hereto as Exhibit B, providing that such person will (i) comply with
---------
Rule 145, and (ii) refrain from transferring shares as required by the
pooling-of-interests accounting rules.
(b) First Capital shall use its best efforts to cause each director,
executive officer and other person who is an "affiliate" of First Capital under
the pooling of interests accounting rules to deliver to HCB as soon as
practicable and prior to the mailing of the Joint Proxy Statement-Prospectus
executed letter agreements, each substantially in the form attached hereto as
Exhibit C, providing that such person will refrain from transferring shares as
- ---------
required by the pooling-of-interests accounting rules.
Section 4.11. Notification of Certain Matters. Each party shall give
-------------------------------
prompt notice to the other of: (i) any event or notice of, or other
communication relating to, a default or event that, with notice or lapse of time
or both, would become a default, received by it or any of its Subsidiaries
subsequent to the date of this Agreement and prior to the Effective Time, under
any contract material to the financial condition, properties, businesses or
results of operations of each party and its Subsidiaries taken as a whole to
which each party or any Subsidiary is a party or is subject; and (ii) any event,
condition, change or occurrence which individually or in the aggregate has, or
which, so far as reasonably can be foreseen at the time of its occurrence, is
reasonably likely to result in a Material Adverse Effect or which would have
been required to be disclosed on such party's Disclosure Letter had such event,
condition, change or occurrence been known at the time such party delivered its
Disclosure Letter; PROVIDED, HOWEVER, that no notice provided pursuant to this
Section 4.11 shall affect or be deemed to modify any representation or warranty
made herein. Each of HCB and First Capital shall give prompt notice to the other
party of any notice or other communication from any third party alleging that
the consent of such third party is or may be required in connection with any of
the transactions contemplated by this Agreement.
Section 4.12 Employees, Directors and Officers.
---------------------------------
(a) All persons who are employees of HCB or HCB Bank immediately
prior to the Effective Time ("HCB'S EMPLOYEES") shall, at the Effective Time,
become employees of First Capital or First Federal, respectively ("CONTINUING
EMPLOYEES"); PROVIDED, HOWEVER, that in no event shall any of HCB's Employees be
officers of First Capital or First Federal, or have or exercise any power or
duty conferred upon such an officer, unless and until duly elected or appointed
to such position in accordance with the bylaws of First Capital or First
Federal. Subject to paragraph (g) of this SECTION 4.12, all of HCB's Employees
who remain following the
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Effective Date shall be employed at the will of First Capital or First Federal
and no contractual right to employment shall inure to such employees because of
this Agreement.
(b) Subject to the provisions of paragraphs (c), (d), (e) and (f) of
this SECTION 4.12, at or as soon as practicable following the Effective Time,
First Capital and First Federal shall establish and implement a new program of
compensation and benefits designed to cover all similarly situated employees on
a uniform basis (the "NEW COMPENSATION AND BENEFITS PROGRAM"). The New
Compensation and Benefits Program may contain any combination of new plans or
continuation of plans maintained by First Capital and First Federal or by HCB
and HC Bank, including plans intended to be tax-qualified under section 401(a)
of the IRC, immediately in effect prior to the Effective Time. To the extent
that it is not practicable to implement any constituent part of the New
Compensation and Benefits Program at the Effective Time, First Capital and First
Federal shall, subject to the provisions of paragraph (f) of this SECTION 4.12,
continue in effect any comparable plan maintained immediately prior to the
Effective Time for the respective employees of First Capital, First Federal, HCB
and HC Bank for a transition period. Notwithstanding the above, no Continuing
Employee shall become a participant in any First Capital Employee Plan that
requires a designation of the Board of Directors of First Capital or First
Federal in order to participate without such designation in advance of
participation.
(c) Subject to the provisions of paragraphs (d), (e) and (f) of this
SECTION 4.12, each constituent part of the New Compensation and Benefits Program
shall recognize, in the case of persons employed by First Capital, First
Federal, HCB or HC Bank immediately prior to the Effective Time who continue to
be employed by First Capital or First Federal immediately after the Effective
Time, all service with First Capital, First Federal, HCB or HC Bank as service
with First Capital and First Federal for all purposes, including eligibility and
vesting; PROVIDED, HOWEVER, that such service shall not be recognized to the
extent such recognition would result in a duplication of benefits.
(d) In the case of any constituent part of the New Compensation and
Benefits Program which is a life, health or long-term disability insurance plan:
(i) such plan shall not apply any preexisting condition limitations for
conditions covered under the applicable insurance plans maintained by First
Capital, First Federal, HCB or HC Bank as of the Effective Time, (ii) each such
plan shall honor any deductible and out-of-pocket expenses incurred under the
applicable insurance plan maintained by First Capital, First Federal, HCB or HC
Bank as of the Effective Time and (iii) each such plan shall waive any medical
certification otherwise required in order to assure the continuation of coverage
of such plan (but subject to any overall limit on the maximum amount of coverage
under such plans).
(e) All Continuing Employees shall become eligible to participate in
the First Federal Bank, a Federal Savings Bank Employee Stock Ownership Plan
("FIRST FEDERAL ESOP"), subject to their satisfaction of the eligibility
requirements set forth in the First Federal
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ESOP, as of the later to occur of the Effective Time or the first day of the
plan year beginning in 2000.
(f) As of the Effective Time, each HCB Employee who is a participant
in the HCB 401(k) Plan (the "HCB 401(K) PLAN") shall become fully vested in his
or her account balance in the HCB 401(k) Plan and the HCB 401(k) Plan will
either be merged into the First Federal Bank, FSB Profit Sharing with 401(k)
Option Plan (the "FIRST FEDERAL 401(K) PLAN") effective as of a date following
the Effective Time selected by First Federal or terminated immediately prior to,
on, or after the Effective Time. The determination as to whether the HCB 401(k)
Plan shall be terminated or merged into the First Federal 401(k) Plan shall be
made jointly by First Capital and HCB. Effective as of the date of the merger of
the HCB 401(k) Plan into the First Capital 401(k) Plan, if applicable, or the
termination of the HCB 401(k) Plan (or the Effective Time, if subsequent to such
termination), if applicable, HCB Employees who are then participating in the HCB
401(k) Plan shall become participants in the First Federal 401(k) Plan.
(g) At the Effective Time, First Capital and First Federal shall
enter into an agreement with William D. Harrod, substantially in the form
attached hereto as Exhibit D and shall enter into agreements with Dennis Thomas
---------
and Brad Backherms, substantially in the form attached hereto as Exhibit E.
---------
(h) First Capital shall cause its Board of Directors to be increased
to 14 members as of the Effective Time and, as of the Effective Time, shall
cause its Board of Directors to be constituted of the then-current members of
the First Capital Board of Directors and the then-current members of the HCB
Board of Directors. First Federal shall cause its Board of Directors to be
increased to 14 members as of the Effective Time and, as of the Effective Time,
shall cause its Board of Directors to be constituted of the then-current members
of the First Federal Board of Directors and the then-current members of the HC
Bank Board of Directors. First Capital shall appoint J. Gordon Pendleton as
Chairman of the Board of Directors of First Capital as of the Effective Time.
First Federal shall appoint Earl Book as Chairman of the Board of Directors of
First Federal as of the Effective Time.
(i) From and after the Effective Time, Samuel E. Uhl shall serve as
Chief Executive Officer and President of First Federal and William D. Harrod
shall serve as Chief Executive Officer and President of First Capital, each to
hold office until their respective successors are duly elected or appointed and
qualified.
(j) The annual cash bonuses payable to eligible employees of HC Bank
shall be determined and paid, prior to the Effective Time, for the 1999 calendar
year in accordance with the procedures used for the 1998 calendar year. Prior to
the Effective Time, First Federal shall pay a cash bonus to eligible employees
of First Federal for the six months ended December 31, 1999 in accordance with
the procedures used for the 1999 fiscal year. No bonuses shall be paid by First
Capital, First Federal, HCB or HC Bank for any period of service after December
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31, 1999. After the Effective time, First Capital and First Federal shall
implement a new bonus program as part of the New Compensation and Benefits
Program.
Section 4.13. Indemnification.
---------------
(a) From and after the Effective Time through the third anniversary
of the Effective Date, First Capital agrees to indemnify and hold harmless each
present and former director and officer of HCB and its Subsidiaries and each
officer or employee of HCB and its Subsidiaries that is serving or has served as
a director or trustee of another entity expressly at HCB's request or direction
(each, an "INDEMNIFIED PARTY"), against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, amounts paid in settlement,
losses, claims, damages or liabilities (collectively, "COSTS") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement), whether asserted or claimed prior
to, at or after the Effective Time, and to advance any such Costs to each
Indemnified Party as they are from time to time incurred, in each case to the
fullest extent such Indemnified Party would have been indemnified as a director,
officer or employee of HCB and its Subsidiaries and as then permitted under
applicable law.
(b) Any Indemnified Party wishing to claim indemnification under
SECTION 4.13(A), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify First Capital thereof, but the failure to
so notify shall not relieve First Capital of any liability it may have hereunder
to such Indemnified Party if such failure does not materially and substantially
prejudice First Capital. In the event of any such claim, action, suit,
proceeding or investigation, (i) First Capital shall have the right to assume
the defense thereof with counsel reasonably acceptable to the Indemnified Party
and First Capital shall not be liable to such Indemnified Party for any legal
expenses of other counsel subsequently incurred by such Indemnified Party in
connection with the defense thereof, except that if First Capital does not elect
to assume such defense within a reasonable time or counsel for the Indemnified
Party at any time advises that there are issues which raise conflicts of
interest between First Capital and the Indemnified Party (and counsel for First
Capital does not disagree), the Indemnified Party may retain counsel
satisfactory to such Indemnified Party, and First Capital shall remain
responsible for the reasonable fees and expenses of such counsel as set forth
above, to be paid promptly as statements therefor are received; PROVIDED,
HOWEVER, that First Capital shall be obligated pursuant to this paragraph (b) to
pay for only one firm of counsel for all Indemnified Parties in any one
jurisdiction with respect to any given claim, action, suit, proceeding or
investigation unless the use of one counsel for such Indemnified Parties would
present such counsel with a conflict of interest; (ii) the Indemnified Party
will reasonably cooperate in the defense of any such matter; and (iii) First
Capital shall not be liable for any settlement effected by an Indemnified Party
without its prior written consent, which consent may not be withheld unless such
settlement is unreasonable in light of such claims, actions, suits, proceedings
or investigations against, or defenses available to, such Indemnified Party.
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(c) First Capital shall pay all reasonable Costs, including
attorneys' fees, that may be incurred by any Indemnified Party in successfully
enforcing the indemnity and other obligations provided for in this SECTION 4.13
to the fullest extent permitted under applicable law. The rights of each
Indemnified Party hereunder shall be in addition to any other rights such
Indemnified Party may have under applicable law.
(d) First Capital shall maintain HCB's existing directors and
officers' liability insurance policy (or provide a policy providing comparable
coverage and amounts on terms no less favorable to the persons currently covered
by HCB's existing policy, including First Capital's existing policy if it meets
the foregoing standard) covering persons who are currently covered by such
insurance for a period of two years after the Effective Time; PROVIDED, HOWEVER,
that in no event shall First Capital be obligated to expend, in order to
maintain or provide insurance coverage pursuant to this SECTION 4.13(D), an
amount per annum in excess of 125% of the amount of the annual premiums paid by
HCB as of the date hereof for such insurance ("MAXIMUM INSURANCE AMOUNT");
PROVIDED FURTHER, that if the amount of the annual premiums necessary to
maintain or procure such insurance coverage exceeds the Maximum Insurance
Amount, First Capital shall obtain the most advantageous coverage obtainable for
an annual premium equal to the Maximum Insurance Amount.
(e) In the event First Capital or any of its successors or assigns
(i) consolidates with or merges into any other person or entity and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any person or entity, then, and in each such case, to the extent
necessary, proper provision shall be made so that the successors and assigns of
First Capital assume the obligations set forth in this SECTION 4.13.
(f) The provisions of this SECTION 4.13 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
representatives.
Section 4.14. Year 2000. From the date hereof until the Effective
---------
Time, First Capital and HCB shall use their best efforts to implement and/or to
undertake the HCB Y2K Plan or the First Capital Y2K Plan, as the case may be,
and to comply with all Federal Financial Institution Examination Council Year
2000 regulations and guidelines. Notwithstanding the foregoing, First Capital
and HCB shall consult with each other before replacing any material hardware or
software or entering into any agreement with regard to resolving any Year 2000
issues.
ARTICLE V
CONDITIONS TO CONSUMMATION
--------------------------
Section 5.1. Conditions to Each Party's Obligations. The respective
--------------------------------------
obligations of each party to effect the Merger shall be subject to the
satisfaction of the following conditions:
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<PAGE> 55
(a) Shareholder Approvals. This Agreement shall have been approved
---------------------
by the requisite vote of HCB's and First Capital's shareholders in accordance
with applicable laws and regulations.
(b) Regulatory Approvals. All Requisite Regulatory Approvals shall
--------------------
have been obtained and shall remain in full force and effect, and all statutory
waiting periods shall have expired; PROVIDED, HOWEVER, that none of such
approvals shall contain any condition or requirement that would so materially
and adversely impact the economic or business benefits to First Capital or HCB
of the transactions contemplated hereby that, had such condition or requirement
been known, such party would not, in its reasonable judgment, have entered into
this Agreement.
(c) No Injunctions or Restraints; Illegality. No party hereto shall
----------------------------------------
be subject to any order, decree or injunction of a court or agency of competent
jurisdiction that enjoins or prohibits the consummation of the Merger or the
Bank Merger and no Governmental Entity shall have instituted any proceeding for
the purpose of enjoining or prohibiting the consummation of the Merger, the Bank
Merger or any transactions contemplated by this Agreement. No statute, rule or
regulation shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits, restricts or makes illegal consummation of
the Merger or the Bank Merger.
(d) Registration Statement; Blue Sky Laws. The Registration
-------------------------------------
Statement shall have been declared effective by the SEC and no proceedings shall
be pending or threatened by the SEC to suspend the effectiveness of the
Registration Statement, and First Capital shall have received all required
approvals by state securities or "blue sky" authorities with respect to the
transactions contemplated by this Agreement.
(e) Pooling Letters. First Capital and HCB shall each have received
---------------
a letter from their respective independent certified public accountants
addressed to First Capital or HCB, as the case may be, to the effect that they
are not aware of any facts or circumstances that might cause the Merger not to
qualify for pooling-of-interests accounting treatment.
(f) Tax Opinion. First Capital and HCB shall have received an
-----------
opinion of Muldoon, Murphy & Faucette LLP, dated as of the Effective Date, in
form and substance customary in transactions of the type contemplated hereby,
and reasonably satisfactory to First Capital and HCB, substantially to the
effect that on the basis of the facts, representations and assumptions set forth
in such opinion which are consistent with the state of facts existing at the
Effective Time, the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the IRC and that
accordingly:
(i) No gain or loss will be recognized by First Capital,
Merger Sub, First Federal, HCB or HC Bank as a result of the Merger;
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<PAGE> 56
(ii) Except to the extent of any cash received in lieu of a
fractional share interest in First Capital Common Stock, no gain or loss will be
recognized by the shareholders of HCB who exchange their HCB Common Stock for
First Capital Common Stock pursuant to the Merger;
(iii) The tax basis of First Capital Common Stock received by
shareholders who exchange their HCB Common Stock for First Capital Common Stock
in the Merger will be the same as the tax basis of HCB Common Stock surrendered
pursuant to the Merger, reduced by any amount allocable to a fractional share
interest for which cash is received and increased by any gain recognized on the
exchange; and
(iv) The holding period of First Capital Common Stock received
by each shareholder in the Merger will include the holding period of HCB Common
Stock exchanged therefor, provided that such shareholder held such HCB Common
Stock as a capital asset on the Effective Date.
Such opinion may be based on, in addition to the review of such
matters of fact and law as Muldoon, Murphy & Faucette LLP considers appropriate,
(x) representations made at the request of Muldoon, Murphy & Faucette LLP by
First Capital, First Federal, HCB, HC Bank, shareholders of First Capital or
HCB, or any combination of such persons and (y) certificates provided at the
request of Muldoon, Murphy & Faucette LLP by officers of First Capital, First
Federal, HCB, HC Bank and other appropriate persons.
Section 5.2. Conditions to the Obligations of First Capital. The
----------------------------------------------
obligations of First Capital to effect the Merger shall be further subject to
the satisfaction of the following additional conditions, any one or more of
which may be waived by First Capital:
(a) Representations and Warranties; Performance of Obligations. Each
----------------------------------------------------------
of the obligations of HCB and HC Bank, respectively, required to be performed by
it at or prior to the Closing pursuant to the terms of this Agreement shall have
been duly performed and complied with in all material respects and the
representations and warranties of HCB and HC Bank contained in this Agreement
shall be true and correct, subject to SECTIONS 2.1 and 2.2, as of the date of
this Agreement and as of the Effective Time as though made at and as of the
Effective Time (except as to any representation or warranty that specifically
relates to an earlier date), and First Capital shall have received a certificate
to the foregoing effect signed by the chief executive officer and the chief
financial or principal accounting officer of HCB.
(b) Third Party Consents. HCB shall have obtained the consent or
--------------------
approval of each person (other than the governmental approvals or consents
referred to in SECTION 5.1(B)) whose consent or approval shall be required in
order to permit the succession by First Capital or any of its Subsidiaries to
any obligation, right or interest of HCB or its Subsidiaries under any loan or
credit agreement, note, mortgage, indenture, lease, license or other agreement
or instrument to which HCB or its Subsidiaries is a party or is otherwise bound,
except those for
56
<PAGE> 57
which failure to obtain such consents and approvals would not, individually or
in the aggregate, have a Material Adverse Effect on First Capital (after giving
effect to the consummation of the transactions contemplated hereby) or upon the
consummation of the transactions contemplated hereby.
(c) Good Standing and Other Certificates. First Capital shall have
------------------------------------
received certificates (such certificates to be dated as of a day as close as
practicable to the Closing Date) from appropriate authorities as to the
corporate existence of HCB and its Subsidiaries and such other documents and
certificates to evidence fulfillment of the conditions set forth in SECTIONS 5.1
and 5.2 as First Capital may reasonably require.
(d) Dissenters' Shares. Dissenters' rights shall not have been
------------------
exercised with respect to more than 10% of the outstanding shares of HCB Common
Stock.
Section 5.3. Conditions to the Obligations of HCB. The obligations of
------------------------------------
HCB to effect the Merger shall be further subject to the satisfaction of the
following additional conditions, any one or more of which may be waived by HCB:
(a) Representations and Warranties; Performance of Obligations. Each
----------------------------------------------------------
of the obligations of First Capital and First Federal, respectively, required to
be performed by it at or prior to the Closing pursuant to the terms of this
Agreement shall have been duly performed and complied with in all material
respects and the representations and warranties of First Capital and First
Federal contained in this Agreement shall be true and correct, subject to
SECTIONS 2.1 and 2.2, as of the date of this Agreement and as of the Effective
Time as though made at and as of the Effective Time (except as to any
representation or warranty which specifically relates to an earlier date), and
HCB shall have received a certificate to the foregoing effect signed by the
chief executive officer and the chief financial or principal accounting officer
of First Capital.
(b) Good Standing and Other Certificates. HCB shall have received
------------------------------------
certificates (such certificates to be dated as of a day as close as practicable
to the Closing Date) from appropriate authorities as to the corporate existence
of First Capital and its Subsidiaries and such other documents and certificates
to evidence fulfillment of the conditions set forth in SECTIONS 5.1 and 5.3 as
HCB may reasonably require.
ARTICLE VI
TERMINATION
-----------
Section 6.1. Termination. This Agreement may be terminated, and the
-----------
Merger abandoned, at any time prior to the Effective Time, either before or
after any requisite shareholder approval:
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<PAGE> 58
(a) by the mutual consent of First Capital and HCB in a written
instrument, if the Board of Directors of each so determines by vote of a
majority of the members of its entire Board; or
(b) by either First Capital or HCB, if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in the
event of the failure of the shareholders of HCB or First Capital to approve the
Agreement at its Shareholder Meeting called to consider such approval; PROVIDED,
HOWEVER, that HCB or First Capital, as the case may be, shall only be entitled
to terminate the Agreement pursuant to this clause if it has complied in all
material respects with its obligations under SECTION 4.8; or
(c) by either First Capital or HCB, by written notice to the other
party, if either (i) any approval, consent or waiver of a Governmental Entity
required to permit consummation of the transactions contemplated hereby shall
have been denied or (ii) any Governmental Entity of competent jurisdiction shall
have issued a final, unappealable order enjoining or otherwise prohibiting
consummation of the transactions contemplated by this Agreement; or
(d) by either First Capital or HCB, if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in the
event that the Merger is not consummated by April 30, 2000, unless the failure
to so consummate by such time is due to the breach of any representation,
warranty or covenant contained in this Agreement by the party seeking to
terminate; or
(e) by either First Capital or HCB (provided that the party seeking
termination is not then in material breach of any representation, warranty,
covenant or other agreement contained herein), in the event of (i) a failure to
perform or comply by the other party with any covenant or agreement of such
other party contained in this Agreement, which failure or non-compliance is
material in the context of the transactions contemplated by this Agreement, or
(ii) any inaccuracies, omissions or breach in the representations, warranties,
covenants or agreements of the other party contained in this Agreement the
circumstances as to which either individually or in the aggregate have, or
reasonably could be expected to have, a Material Adverse Effect on such other
party; in either case which has not been or cannot be cured within 30 calendar
days after written notice thereof is given by the party seeking to terminate to
such other party; or
(f) by either First Capital or HCB, if the Board of Directors of the
other party does not publicly recommend in the Joint Proxy Statement-Prospectus
that shareholders approve and adopt this Agreement or if, after recommending in
the Joint Proxy Statement-Prospectus that shareholders approve and adopt this
Agreement, the Board of Directors of the other party shall have withdrawn,
qualified or revised such recommendation in any respect materially adverse to
the party seeking to terminate this Agreement; or
58
<PAGE> 59
(g) by First Capital, if the Board of Directors of First Capital
reasonably determines that a proposal made by a third party to acquire, directly
or indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction, for consideration consisting of cash and/or securities,
more than 50% of the combined voting power of the shares of First Capital Common
Stock then outstanding or all or substantially all of the assets of First
Capital constitutes a First Capital Superior Proposal and that such proposal
must be accepted in order to comply with the Board of Directors' fiduciary
duties to shareholders under applicable law; or
(h) by HCB, if the Board of Directors of HCB reasonably determines
that a proposal made by a third party to acquire, directly or indirectly,
including pursuant to a tender offer, exchange offer, merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction, for consideration consisting of cash and/or securities, more than
50% of the combined voting power of the shares of HCB Common Stock then
outstanding or all or substantially all of the assets of HCB constitutes a HCB
Superior Proposal and that such proposal must be accepted in order to comply
with the Board of Directors' fiduciary duties to shareholders under applicable
law.
Section 6.2. Effect of Termination. In the event of termination of
---------------------
this Agreement by either First Capital or HCB as provided in SECTION 6.1, this
Agreement shall forthwith become void and have no effect, and there shall be no
liability on the part of any party hereto or their respective officers and
directors, except (i) the last three sentences of SECTION 4.3, and SECTIONS 6.3,
8.6 and 8.7, shall survive any termination of this Agreement, and (ii) that
notwithstanding anything to the contrary contained in this Agreement, no party
shall be relieved or released from any liabilities or damages arising out of its
willful breach of any provision of this Agreement.
Section 6.3. Termination Fees.
----------------
(a) In the event that (i) First Capital terminates this Agreement
pursuant to SECTION 6.1(G) or (ii) HCB or First Capital terminates this
Agreement pursuant to SECTION 6.1(B) or 6.1(F) after it has been publicly
announced prior to First Capital's Shareholders Meeting that a person (other
than HCB) has made or disclosed an intention to make a proposal to engage in a
merger, consolidation, share exchange or other similar transaction with First
Capital or First Federal and within 12 months after the termination of this
Agreement First Capital or First Federal enters into an agreement with any
person to effect a merger, consolidation, share exchange or other similar
transaction, then First Capital shall, within 10 business days following written
demand by HCB, pay to HCB an amount equal to $500,000.
(b) In the event that (i) HCB terminates this Agreement pursuant to
SECTION 6.1(H) or (ii) First Capital or HCB terminates this Agreement pursuant
to SECTION 6.1(B) or 6.1(F) after it has been publicly announced prior to HCB's
Shareholders Meeting that a person (other than First Capital) has made or
disclosed an intention to make a proposal to engage in a merger,
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<PAGE> 60
consolidation, share exchange or other similar transaction with HCB or HC Bank
and within 12 months after the termination of this Agreement HCB or HC Bank
enters into an agreement with any person to effect a merger, consolidation,
share exchange or other similar transaction, then HCB shall, within 10 business
days following written demand by First Capital, pay to First Capital an amount
equal to $500,000.
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME
------------------------------------------
Section 7.1. Effective Date and Effective Time. The closing of the
---------------------------------
transactions contemplated hereby ("CLOSING") shall take place at the offices of
Muldoon, Murphy & Faucette LLP, 5101 Wisconsin Avenue, N.W., Washington, D.C.
20016, unless another place is agreed to by First Capital and HCB, on a date
designated by First Capital ("CLOSING DATE") that is no later than 14 days
following the date on which the expiration of the last applicable waiting period
in connection with notices to and approvals of Governmental Entities shall occur
and all conditions to the consummation of this Agreement are satisfied or
waived, or on such other date as may be agreed to by the parties; PROVIDED,
HOWEVER, that the Closing shall occur no earlier than January 1, 2000. Prior to
the Closing Date, Merger Sub and HCB shall execute Articles of Merger in
accordance with all appropriate legal requirements, which shall be filed as
required by law on the Closing Date, and the Merger provided for therein shall
become effective upon such filing or on such date as may be specified in such
Articles of Merger. The date of such filing or such later effective date as
specified in the Articles of Merger is herein referred to as the "EFFECTIVE
DATE." The "EFFECTIVE TIME" of the Merger shall be as set forth in the Articles
of Merger.
Section 7.2. Deliveries at the Closing. Subject to the provisions of
-------------------------
Articles V and VI, on the Closing Date there shall be delivered to First Capital
and HCB the documents and instruments required to be delivered under Article V.
ARTICLE VIII
CERTAIN OTHER MATTERS
---------------------
Section 8.1. Certain Definitions; Interpretation. For purposes of
-----------------------------------
this Agreement:
"person" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization or other
entity;
"MATERIAL ADVERSE EFFECT" means an effect which is material and
adverse to the business, financial condition or results of operations of HCB or
First Capital, as the context may dictate, and its Subsidiaries (as defined
herein) taken as a whole; PROVIDED, HOWEVER, that any such effect resulting from
any (i) changes in laws, rules or regulations or generally accepted accounting
principles or regulatory accounting requirements or interpretations thereof that
apply to both First Capital and First Federal and HCB and HC Bank, as the case
may be, or to similarly
60
<PAGE> 61
situated financial and/or depository institutions or (ii) changes in economic
conditions affecting financial institutions generally, including but not limited
to, changes in the general level of market interest rates shall not be
considered in determining if a Material Adverse Effect has occurred; and
"knowledge" means, with respect to a party hereto, actual knowledge
of the members of the Board of Directors of that party or any officer of that
party with the title ranking not less than senior vice president.
When a reference is made in this Agreement to Sections, Exhibits or
Schedules, such reference shall be to a Section of, Exhibit or Schedule to, this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for ease of reference only and shall not affect
the meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation." Any singular term in this Agreement
shall be deemed to include the plural, and any plural term the singular. Any
reference to gender in this Agreement shall be deemed to include any other
gender.
Section 8.2. Survival. Only those agreements and covenants of the
--------
parties that are by their terms applicable in whole or in part after the
Effective Time, including SECTIONS 4.12, 4.13, and 8.6 of this Agreement, shall
survive the Effective Time. All other representations, warranties, agreements
and covenants shall be deemed to be conditions of the Agreement and shall not
survive the Effective Time.
Section 8.3. Waiver; Amendment. Prior to the Effective Time, any
-----------------
provision of this Agreement may be: (i) waived in writing by the party
benefitted by the provision or (ii) amended or modified at any time (including
the structure of the transaction) by an agreement in writing between the parties
hereto except that, after the vote by the shareholders of HCB or First Capital,
no amendment or modification may be made that would reduce the amount or alter
or change the kind of consideration to be received by holders of HCB Common
Stock or contravene any provision of the IBCL or the federal banking laws, rules
and regulations.
Section 8.4. Counterparts. This Agreement may be executed in
------------
counterparts each of which shall be deemed to constitute an original, but all of
which together shall constitute one and the same instrument.
Section 8.5. Governing Law. This Agreement shall be governed by, and
-------------
interpreted in accordance with, the laws of the State of Indiana, without regard
to conflicts of laws principles.
Section 8.6. Expenses. Each party hereto will bear all expenses
--------
incurred by it in connection with this Agreement and the transactions
contemplated hereby.
61
<PAGE> 62
Section 8.7. Notices. All notices, requests, acknowledgments and
-------
other communications hereunder to a party shall be in writing and shall be
deemed to have been duly given when delivered by hand, overnight courier or
facsimile transmission (confirmed in writing) to such party at its address or
facsimile number set forth below or such other address or facsimile transmission
as such party may specify by notice (in accordance with this provision) to the
other party hereto.
If to HCB, to:
HCB Bancorp
P.O. Box 37
710 Main Street, NE
Palmyra, Indiana 47164
Facsimile: (812) 364-4056
Attention: William W. Harrod
President
With copies to:
Andrew B. Buroker, Esq.
Krieg DeVault Alexander & Capehart, LLP
One Indiana Square, Suite 2800
Indianapolis, Indiana 46204-2017
Facsimile: (317) 636-1507
If to First Capital, to:
First Capital, Inc.
220 Federal Drive, N.W.
Corydon, Indiana 47112
Facsimile: (812) 738-2202
Attention: J. Gordon Pendleton
Chairman of the Board and
Chief Executive Officer
and Samuel E. Uhl
President and Chief Operating Officer
62
<PAGE> 63
With copies to:
Paul M. Aguggia, Esq.
Muldoon, Murphy & Faucette LLP
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Facsimile: (202) 966-9409
Section 8.8. Entire Agreement; etc. This Agreement, together with the
----------------------
Plan of Bank Merger and the Disclosure Letters, represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
heretofore made. All terms and provisions of this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Except for SECTION 4.12 and 4.13, which confer rights on
the parties described therein, nothing in this Agreement is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
Section 8.9. Successors and Assigns; Assignment. This Agreement shall
----------------------------------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that this Agreement may
not be assigned by either party hereto without the written consent of the other
party.
63
<PAGE> 64
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the 19th day of July, 1999.
FIRST CAPITAL, INC.
By: /s/ J. Gordon Pendleton
----------------------------
J. Gordon Pendleton
Chairman of the Board and
Chief Executive Officer
FC ACQUISITION CORP.
By: /s/ Samuel E. Uhl
-----------------------------
Samuel E. Uhl
President
HCB BANCORP
By: /s/ Earl Book
-----------------------------
Earl Book
Chairman of the Board
64
<PAGE> 1
TUESDAY JULY 20, 8:56 AM EASTERN TIME
Company Press Release
First Capital, Inc. and HCB Bancorp Agree to Merger of Equals
CORYDON, Ind.--(BUSINESS WIRE)--July 20, 1999--The boards of directors of First
Capital, Inc. (Nasdaq SmallCap:FCAP - news) and HCB Bancorp on July 19 announced
a merger of equals forming a $203 million bank with nine offices in Harrison,
Floyd and Washington counties in Indiana. First Capital, based in Corydon, is
the parent of First Federal Bank.
HCB Bancorp, based in Palmyra, is the parent of Harrison County Bank. The
combined bank will operate under the name First Harrison Bank, and the merged
holding company will retain the name First Capital.
Under the terms of the merger agreement, each share of HCB Bancorp common stock
would be exchanged for 15.5 shares of First Capital common stock, with cash paid
in lieu of fractional shares. First Capital expects to issue approximately
1,245,000 shares in the transaction.
The transaction is intended to constitute a tax-free reorganization under the
Internal Revenue Code so that shareholders of HCB Bancorp will not recognize any
gain or loss in connection with the exchange. In addition, it is intended that
the merger be accounted for as a "pooling-of-interests."
Gordon Pendleton, the current Chairman and Chief Executive Officer of First
Capital and First Federal Bank, will remain Chairman of First Capital. Earl
Book, the current Chairman of HCB Bancorp and Harrison County Bank, will become
Chairman of First Harrison Bank. The Boards of Directors of First Capital and
First Harrison Bank will be composed of all of the current members of the Boards
of Directors of First Capital and HCB Bancorp.
Samuel E. Uhl, the current President of First Capital and First Federal Bank,
will become President and Chief Executive Officer of First Harrison Bank.
William W. Harrod, the current President and Chief Executive Officer of HCB
Bancorp and Harrison County Bank, will become President and Chief Executive
Officer of First Capital.
First Capital and HCB Bancorp expect the transaction to be accretive to earnings
per share in the first year of combined operations. Both companies expect to
realize cost savings equal to approximately 8% of their combined general and
administrative expenses through consolidation of back office operations,
elimination of duplicate professional expenses, and normal attrition. All
present employees will be retained.
"We are extremely pleased to be joining forces with Harrison County Bank," said
Gordon Pendleton, Chairman and Chief Executive Officer of First Capital. "Our
market areas, management expertise and community banking approach complement
each other wonderfully."
"We believe that the combination with First Federal Bank is a winning one for
our customers, shareholders, employees, and the communities in which we do
business," said Earl Book, Chairman of HCB Bancorp. "Our customers will benefit
from the larger number of branches and
<PAGE> 2
greater resources of the combined banks, while our shareholders will benefit
from holding shares in a larger, publicly traded company."
At March 31, 1999, First Capital had total assets of $117 million, deposits of
$86 million and stockholders' equity of $17 million. First Capital operates
three banking offices in Corydon and New Salisbury, Indiana.
At March 31, 1999, HCB Bancorp had total assets of $87 million, deposits of $75
million and stockholders' equity of $12 million. HCB Bancorp operates six
banking offices in Palmyra, Crandall, Hardinsburg, Greenville, New Albany, and
Georgetown, Indiana.
The merger is subject to the approval of the shareholders of both companies and
to the receipt of all required regulatory approvals. The transaction is expected
to close in the first quarter of 2000.
CONTACT:
First Capital, Inc.
Samuel E. Uhl, 812/738-2198
or
HCB Bancorp
William W. Harrod, 812/364-6192
