<PAGE> 1
As filed with the Securities and Exchange Commission on November 13, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
TOWER FINANCIAL CORPORATION
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
INDIANA 6712 35-2051170
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------------
116 EAST BERRY STREET
FORT WAYNE, INDIANA 46802
(219) 420-9100
(Address and telephone number of principal executive offices and principal place
of business)
------------------------------
DONALD F. SCHENKEL
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
TOWER FINANCIAL CORPORATION
116 EAST BERRY STREET
FORT WAYNE, INDIANA 46802
(219) 420-9100
(Name, address and telephone number of agent for service)
------------------------------
Copies to:
<TABLE>
<S> <C>
DANIEL L. BOEGLIN DONALD J. KUNZ
LAWRENCE E. SHINE HONIGMAN MILLER SCHWARTZ AND COHN
BAKER & DANIELS 2290 FIRST NATIONAL BUILDING
SUITE 2700 DETROIT, MICHIGAN 48226-3583
300 NORTH MERIDIAN STREET (313) 465-7000
INDIANAPOLIS, INDIANA 46204-1782
(317) 237-0300
</TABLE>
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
this registration statement becomes effective.
------------------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE
SECURITIES TO BE REGISTERED OFFERING PRICE(1) AMOUNT OF REGISTRATION FEE
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<S> <C> <C>
Common Stock..................................... $23,000,000 $6,394
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
THIS PRELIMINARY PROSPECTUS IS NOT YET COMPLETED. , 1998
INITIAL PUBLIC OFFERING
PROSPECTUS
TOWER FINANCIAL LOGO
CORPORATION
2,000,000 SHARES OF COMMON STOCK
$10.00 PER SHARE
------------------------------------
Tower Financial Corporation
Lincoln Tower
116 East Berry Street
Fort Wayne, Indiana 46802
(219) 420-9100
The Offering:
<TABLE>
<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public Price........... $10.00 $20,000,000
Underwriting
Discounts............ $ $
------ -----------
Proceeds to Company.... $ $
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</TABLE>
The organizers of the Bank have expressed an interest in purchasing
shares in this offering, but they are not obligated to do so.
We are organizing a commercial bank named Tower Bank & Trust Company. We will be
the sole owner of the Bank, which will have its headquarters in Fort Wayne,
Indiana. The Bank will provide a full range of commercial and consumer banking
services for small- to
medium-sized businesses as well as individuals.
This is our initial public offering, and no public market currently exists for
our shares. The
market price of the shares after this offering may be higher or lower than the
offering price.
The underwriters have a 30-day option to purchase an additional 300,000 shares
to cover over-allotments.
Proposed Trading Symbol:
OTC Bulletin Board -- TWRF
------------------------------------
THIS IS A RISKY INVESTMENT. IT IS NOT A DEPOSIT OR AN ACCOUNT AND IS NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. YOU
SHOULD NOT INVEST IN THIS OFFERING UNLESS YOU CAN AFFORD TO LOSE YOUR ENTIRE
INVESTMENT. SOME OF THE RISKS OF THIS INVESTMENT ARE DESCRIBED UNDER THE CAPTION
"RISK FACTORS" BEGINNING ON PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION,
ANY BANK
REGULATORY AUTHORITY, NOR ANY OTHER GOVERNMENT AGENCY HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------------
MCDONALD INVESTMENTS INC.
RONEY CAPITAL MARKETS
A DIVISION OF FIRST CHICAGO CAPITAL MARKETS, INC.
, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE> 3
[MAP OF PROPOSED MARKET AREA]
NOTES TO READERS OF THIS PROSPECTUS
You should keep in mind the following points as you read this Prospectus:
- - This Prospectus contains forward-looking statements that reflect our views
about future events and financial performance. Actual results could differ
materially from those suggested by the forward-looking statements for various
reasons, including those discussed in the "Risk Factors" section beginning on
page 6. Therefore, you should not place undue reliance on these
forward-looking statements.
- - We use the term "WE" or "THE COMPANY" to refer to Tower Financial Corporation,
a corporation organized under Indiana law for the purpose of serving as the
holding company for the Bank. The stock that we are offering for sale is
common stock of the Company, not of the Bank. All of the Bank's common stock
will be owned by the Company. In some cases, depending on the context of the
statement, a reference to "we" or "the Company" will include the Bank, since
the Bank is our wholly-owned subsidiary.
- - We use the term "THE BANK" to refer to Tower Bank & Trust Company, a banking
corporation being organized under Indiana law.
- - This Offering is for 2,000,000 shares; however, the underwriters have a 30-day
option to purchase up to 300,000 additional shares to cover over-allotments.
Some of the disclosures in this Prospectus would be affected if the
underwriters exercise the option. Unless we state otherwise, we are assuming
that the underwriters will not exercise the option.
2
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this Prospectus.
It is not complete and does not contain all of the information that you should
consider before investing in the common stock. You should read the entire
Prospectus carefully.
THE COMPANY AND THE BANK
We are not an operating company, and we have not engaged in any significant
business to date. We were formed in July 1998 as an Indiana corporation to be
the holding company for the Bank. We are in the process of organizing the Bank
as an Indiana banking corporation. The Bank will provide a range of commercial
and consumer banking services primarily in Allen County, Indiana, including Fort
Wayne and its suburbs. Those services will reflect the Bank's strategy of
serving small- to medium-sized businesses and individual customers. The Bank's
lending strategy will focus on commercial loans and, to a lesser extent, on
consumer and residential mortgage loans. The Bank intends to offer a broad array
of deposit products, including checking, business checking, savings and money
market accounts, certificates of deposit and direct deposit services. The Bank's
main office will be located in downtown Fort Wayne and will serve as our
corporate headquarters. The Company and the Bank have the same address and phone
number:
Lincoln Tower
116 East Berry Street
Fort Wayne, Indiana 46802
(219) 420-9100
STATUS OF THE BANK'S ORGANIZATION
We are organizing an Indiana chartered bank with depository accounts to be
insured by the FDIC. The Bank will be a member of the Federal Reserve System. In
, 1998, we received preliminary approvals from the Indiana
Department of Financial Institutions to establish the Bank and from the FDIC for
deposit insurance. We also received preliminary approvals from the Board of
Governors of the Federal Reserve System to become a bank holding company and for
the Bank to become a member of the Federal Reserve System on , 1998.
These approvals will not be final until we satisfy certain conditions that are
customary in forming a bank, including the capitalization of the Bank. We expect
to satisfy these conditions and commence business in the first quarter of 1999.
REASONS FOR STARTING THE BANK
The expansion of interstate banking has contributed to substantial
consolidation of the banking industry in Indiana, including our proposed market
area in Allen County. Many of Fort Wayne's locally owned or managed banks either
have been acquired by large regional bank holding companies or have been
consolidated into branches of other banks. In many cases, when these
acquisitions and consolidations occurred, fees changed, branches were closed,
local management and personnel were relocated or terminated, and local boards of
directors were dissolved. We believe that, after consolidation, these banks no
longer offer the same level of personalized customer service.
Although the banking industry remains competitive, we believe that this
situation has created a favorable opportunity for a new locally owned and
managed commercial bank in our proposed market area. We want to take advantage
of this opportunity. We plan to do this by emphasizing our local ownership and
management and our strong ties and active commitment to the community. We
believe that a community bank can improve the economic development and overall
economy of its community. We believe that community residents will recognize
these benefits and that we will be successful in attracting individuals and
small- to medium-sized businesses as customers by taking an active interest in
their business and personal finances.
THE BANK'S MARKET AREA
The Bank's primary service area will be Allen County, Indiana. Allen County
includes the City of Fort Wayne, which is the second largest city in Indiana
based on population. According to available statistical
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<PAGE> 5
data, Fort Wayne is within a 250-mile radius of 17% of the total United States
population. Allen County covers 659 square miles and ranks second in population
out of Indiana's 93 counties. As of July 1998, Allen County had approximately
10,300 businesses and an unemployment rate of approximately 3.0%. Allen County
experienced significant growth in household income from 1990 to 1998.
Allen County is also a significant banking market in the State of Indiana.
As of June 30, 1997, the latest date for which data are available, total
deposits in Allen County, including banks, thrifts and credit unions, were
approximately $4.7 billion. Based on such data, from 1996 to 1997, total
deposits in Allen County grew approximately 7.3%, compared to approximately 2.5%
for the State of Indiana.
MANAGEMENT
Donald F. Schenkel is the Chairman of the Board, President and Chief
Executive Officer of the Company and the Bank. He has nearly 30 years of banking
experience. Most recently, Mr. Schenkel was First Vice President of NBD Bank
Indiana, a banking corporation which had assets of approximately $11 billion at
September 30, 1998. NBD Bank Indiana was a subsidiary of First Chicago NBD
Corporation, a multi-bank holding company which had assets at September 30,
1998, of approximately $124 billion. First Chicago NBD Corporation recently
merged with Banc One Corporation to become Bank One Corporation. From 1993 to
1998, Mr. Schenkel was the Division Head of Retail Banking and Private Banking &
Investment for NBD Bank Indiana in Northeast Indiana. From 1990 to 1993, Mr.
Schenkel was Senior Vice President of INB National Bank, a $6 billion regional
bank at December 31, 1992, that was acquired by NBD Bank, N.A., in 1993. His
positions at INB National Bank included senior level responsibility for retail
lending, commercial lending and branch administration. From 1985 to 1990, Mr.
Schenkel was an executive with Northhill Corporation, a company primarily
involved in real estate development. From 1966 to 1985, Mr. Schenkel worked for
Lincoln National Bank & Trust Company in Fort Wayne, a banking corporation whose
parent holding company, Lincoln Financial Corporation, was acquired by Norwest
Corporation in 1993. During this time, he held various positions, including
Senior Vice President and Secretary to the Board of Directors.
Kevin J. Himmelhaver is the Chief Financial Officer and Secretary of the
Company and the Bank. He has nearly 20 years of banking experience in the Fort
Wayne area. From 1979 to 1993, Mr. Himmelhaver worked for Lincoln Financial
Corporation and its principal subsidiary, Lincoln National Bank & Trust Company,
in various financial positions, most recently as First Vice President and
Controller with responsibility for accounting, tax, financial controls and
office services. After the acquisition in 1993 of Lincoln Financial Corporation
by Norwest Corporation and until 1998, Mr. Himmelhaver worked for Norwest Bank
Indiana, N.A., and Norwest Bank Ohio, N.A., which was a $2 billion banking
region of Norwest Corporation at September 30, 1998, as Senior Vice President
and Chief Financial Officer. He also was a director of these banks.
Curtis A. Brown is the Chief Lending Officer of the Company and the Chief
Operating Officer and Chief Lending Officer of the Bank. He has over 21 years of
banking experience, all with INB National Bank and its successor, NBD Bank
Indiana. Mr. Brown began his career as a retail bank manager from 1977 to 1982.
From 1982 until 1993, Mr. Brown worked in corporate banking, assuming increasing
responsibilities as an Assistant Vice President, Vice President, First Vice
President and Senior Loan Officer with INB National Bank. From 1993 until 1998,
Mr. Brown was responsible for managing corporate banking groups for NBD Bank
Indiana, most recently holding the positions of First Vice President and Group
Head.
We are assembling an experienced professional staff and expect to have
approximately 18 full-time employees when the Bank opens for business. We have
formed a Board of Directors with diverse backgrounds and experiences. In
addition to Mr. Schenkel, the current directors of the Company and the Bank are
Keith Busse (business), Peter Eshelman (insurance), Michael Gouloff
(architecture), Craig Hartman (business), Jerome Henry, Jr. (business), Michael
Mirro, M.D. (physician), Debra Niezer (business), William Niezer (insurance),
Maurice O'Daniel (business), Leonard Rifkin (business), Joseph Ruffolo
(business), Larry Smith (business), John Tippmann, Sr. (real estate), Richard
Tomkinson (business) and Irene Walters (education). We believe that our officers
and directors are a significant resource to the Company and the Bank.
4
<PAGE> 6
THE OFFERING
Securities Offered for Sale... Shares of Common Stock of Tower Financial
Corporation. For a description of these shares,
see "Description of Capital Stock" on page 35.
Number of Shares being
Offered....................... 2,000,000. In addition, the underwriters have a
30-day option to purchase up to 300,000
additional shares to cover over-allotments. For
a description of this option, see
"Underwriting" on page 39.
Price to the Public........... $10.00 per share.
Number of Shares to be
Outstanding after the
Offering...................... 2,000,000 shares will be outstanding
immediately after the Offering. This number
assumes that the underwriters do not exercise
their over-allotment option and does not
include the additional 310,000 shares that are
reserved for issuance under the Company's stock
option plan. For a description of this plan,
see "Executive Compensation -- 1998 Stock
Option and Incentive Plan" on page 23.
Dividend Policy............... We do not intend to pay any cash dividends in
the foreseeable future.
Use of Proceeds............... We will use the majority of the net proceeds of
the Offering to capitalize the Bank and repay
loans incurred in organizing the Bank and
preparing it to begin business. We will retain
all remaining net proceeds. For further
details, see "Use of Proceeds" on page 9.
Risk Factors.................. You should read the "Risk Factors" section
beginning on page 6 before deciding to invest
in the Offering.
Proposed Trading Market
and Symbol.................... OTC Bulletin Board: TWRF.
5
<PAGE> 7
RISK FACTORS
The common stock is a risky investment. It is not a deposit or an account
and is not insured by the FDIC or any other government agency. You should not
invest in the Offering unless you can afford to lose your entire investment.
This section describes some, but not all, of the risks of purchasing the common
stock. The order in which these risks are listed does not necessarily indicate
their relative importance.
NO OPERATING HISTORY
We are a new business with no operating history. New businesses are
inherently risky investments. Because the Bank has not yet opened, you do not
have access to information which would be available regarding a financial
institution that has been operating for several years, such as historical
financial data.
SIGNIFICANT LOSSES EXPECTED
In order for us to be profitable, we will need to attract a large number of
customers to deposit and borrow money, among other things. This will take time.
We expect to lose money for at least two years. Based on our projections, we
expect these losses to accumulate to more than $1,750,000 before we are
profitable. Although we believe we will be profitable, it is possible that we
may never be profitable and that you will lose part or all of your investment in
the common stock.
POSSIBLE DELAY IN COMMENCING OPERATIONS
We will be unable to begin operations until we receive all required
regulatory approvals. At this time, we have received all of the required
approvals on a preliminary basis. Our receipt of final approvals is subject to
satisfying conditions customary in forming a bank, including the capitalization
of the Bank. We expect to satisfy these conditions and obtain final approvals
during the first quarter of 1999, but a delay could occur. We are presently
incurring operating expenses for salaries, rent and other items. Because we are
not earning any operating revenue, we are currently operating at a loss and will
continue to do so during any period of delay.
GOVERNMENT REGULATION
We will be subject to extensive regulation by state and federal banking
authorities. Many of these regulations are intended to protect depositors, the
public or the FDIC, not shareholders. Regulatory requirements will affect our
lending practices, capital structure, investment practices, dividend policy and
many other aspects of our business. These requirements may constrain our rate of
growth. Changes in regulatory requirements could adversely affect us. Sometimes,
these changes are applied retroactively. Various aspects of our operations will
be affected by federal economic and monetary policies, which are outside our
control. See "Supervision and Regulation" on page 27.
NO PLANS TO PAY DIVIDENDS
We expect to pay no dividends on the common stock in the foreseeable
future. At least initially, we will have no significant assets other than our
ownership of the Bank, and our only source of funds for paying dividends will be
dividends we receive from the Bank. The Bank may not generate sufficient
earnings to enable it to pay dividends to us. Even if it does, our Board of
Directors would not be required to pay dividends to our shareholders. Regulatory
requirements will limit our ability and the Bank's ability to pay dividends. You
should not buy shares in this Offering if you need dividend income from this
investment. See "Dividend Policy" on page 10.
COMPETITION
Our business is extremely competitive. Because we are a start-up, most of
our competitors will be larger and have greater resources than we will. We will
have to overcome historical relationships to attract customers away from our
competition. We will compete with the following types of institutions:
- - other banks
- - savings banks
- - thrifts
- - credit unions
- - consumer finance companies
- - securities brokerage firms
- - mortgage brokers
- - insurance companies
- - mutual funds
- - trust companies
6
<PAGE> 8
Some of our competitors are not regulated as extensively as we are and,
therefore, may have greater flexibility in competing for business. Some of these
competitors are subject to similar regulation but have the advantages of
established customer bases, higher lending limits, extensive branch networks,
numerous automated teller machines or other factors. While we intend to offer
competitive rates on our products, we expect to compete primarily by offering
our customers personal service and local decision-making. See "Business --
Competition" on page 15.
DEPENDENCE ON MANAGEMENT
Donald F. Schenkel is our Chairman of the Board, President and Chief
Executive Officer. Mr. Schenkel provides extremely valuable services to us, and
he would be difficult to replace if he were to leave. We have an employment
agreement with Mr. Schenkel and carry $1 million of key man life insurance on
his life. See "Executive Compensation" on page 22.
CREDIT RISK
We will make various types of loans, including commercial, consumer,
residential mortgage and construction loans. We anticipate that approximately
80% of the Bank's loans will be commercial loans, although the actual percentage
may vary. We expect that approximately 20% of all commercial loans will be
commercial real estate loans. Commercial lending is more risky than residential
lending because loan balances are greater and the borrower's ability to repay is
contingent on the success of the borrower's operation. The risk of loan defaults
by borrowers is unavoidable in the banking industry. We will try to limit our
exposure to this risk by carefully monitoring the amount of loans we make within
specific industries and through prudent lending practices, but we will not be
able to eliminate this risk. Substantial credit losses could result in our
insolvency, which could cause you to lose your entire investment in the common
stock.
RELATIVELY LOW LENDING LIMIT
We expect that our initial lending limit will be approximately $2.25
million immediately following the Offering, based upon the legal lending limit
of 15% of capital and surplus. Because this limit is based upon a percentage of
the Bank's capital and surplus, the limit will likely decrease until the Bank is
profitable. Our lending limit will be significantly less than most of our
competitors and may affect our ability to seek relationships with larger
businesses in our market area. We intend to accommodate loans in excess of our
lending limit through the sale of participations in those loans to other banks,
but we may not be able to do so.
DEPENDENCE ON LOCAL ECONOMY
We will operate in Northeast Indiana, principally the City of Fort Wayne
and Allen County. While the economy in this area generally has been good in
recent years, an economic downturn in the area would probably have a significant
negative impact on us.
INTEREST RATE RISK
Our profitability will depend in substantial part on our "net interest
spread," which is the difference between the rates we receive on loans and
investments and the rates we pay for deposits and other sources of funds. Our
net interest spread will depend on many factors that are partly or entirely
outside our control, including competition, federal economic, monetary and
fiscal policies, and economic conditions generally. Historically, net interest
spreads for other financial institutions have widened and narrowed in response
to these and other factors. Changes in interest rates will affect our operating
performance and financial condition in diverse ways. We intend to try to
minimize our exposure to interest rate risk, but we will be unable to eliminate
it.
NEED TO IMPLEMENT DEVELOPMENTS IN TECHNOLOGY
To become and remain competitive in today's banking environment, we will
need to purchase and use new technology-based products and services on an
ongoing basis. These products and services can reduce
7
<PAGE> 9
operating costs and improve customer service. Many of our competitors will
have greater resources than us, which will give them an advantage in purchasing
and using advances in technology. Our success will depend, in part, on our
ability to implement new technologies.
LIMITED BASIS FOR DETERMINATION OF OFFERING PRICE
We determined the initial public offering price for the common stock in
consultation with the underwriters. Typically, a company and its underwriters
will base a decision like this on the company's historic earnings and financial
condition, the historic trading values of the stock and other similar factors.
Because we are a start-up entity, these factors are not meaningful in our case.
Therefore, we set the price by considering the initial public offering prices of
other start-up bank holding companies that we felt were similar in some ways to
us. The price of our common stock after the Offering may be more or less than
the public offering price.
LIMITED TRADING MARKET EXPECTED
Presently, the common stock is not publicly traded. The underwriters have
told us that, after the Offering, they intend to make a market in the common
stock and to initiate quotations on the OTC Bulletin Board. They are not
obligated to do this. As market makers on the OTC Bulletin Board, they are not
required to maintain a continuous two-sided market. While they are required to
honor firm quotations for a limited number of shares, they are free to withdraw
firm quotations at any time.
An active and liquid trading market for the common stock may not develop
even if the underwriters make a market in the stock. The trading volume of the
common stock will be limited, due to the relatively small size of the Offering,
the fact that the Company is a start-up and has no intention to pay cash
dividends in the foreseeable future and other factors.
ANTI-TAKEOVER PROVISIONS
Certain provisions of state and federal law and our Restated Articles of
Incorporation and By-Laws will make it more difficult for anyone to acquire
control of us without our board of directors' approval. See "Description of
Capital Stock -- Certain Provisions of Restated Articles of Incorporation and
By-Laws" and " -- Certain Provisions of Indiana Law" beginning on page 36 for a
discussion of some of these provisions. In many cases, shareholders receive a
premium for their shares in a change of control, and these provisions will make
it somewhat less likely that a change in control will occur or that you will
receive a premium for your shares if a change of control does occur.
YEAR 2000 READINESS
The "Year 2000 problem" arose because many existing computer systems use
only the last two digits to refer to a year. Therefore, these computer programs
do not properly recognize a year that begins with "20" instead of the familiar
"19." If not corrected, many computer applications and other technology-based
systems could fail or create erroneous results. The effects of this problem will
vary from system to system, and the extent of the potential impact of the Year
2000 problem is not yet known. The Year 2000 problem may adversely affect a
bank's operations and its ability to prepare financial statements. We are
organizing in 1998, and we expect that the Bank will begin business in early
1999. We are acquiring new computer equipment and expect to contract with a
leading supplier for information processing services. We will request written
assurance from our suppliers of computer equipment and information systems and
from our other third-party vendors that their products and services are Year
2000 ready. "Year 2000 ready" means that the system has been reviewed and
modified, if necessary, so that it will be able to accurately process dates
ending in the Year 2000 and after. Additionally, the Bank will request
information concerning each commercial borrower's state of Year 2000 readiness.
Because we are starting with new equipment, we do not expect to incur large
operating expenses to modify our systems to be Year 2000 ready. However, we
could experience interruptions in the Bank's business and significant losses if
we, or a supplier or vendor with whom we contract, are unable to achieve Year
2000 readiness before January 1, 2000.
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<PAGE> 10
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
common stock of the Company ("Common Stock") offered hereby are estimated to be
$ ($ if the underwriters' over-allotment option is exercised
in full), after deduction of the underwriting discounts, but before deducting
estimated offering expenses of $ .
The anticipated sources and uses of the proceeds from the Offering are set
forth below:
<TABLE>
<CAPTION>
AMOUNT PERCENTAGE
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<S> <C> <C>
Sources:
Sale of 2,000,000 shares of Common Stock............. $20,000,000 100%
=========== ===
Uses:
Capital contribution to the Bank(1).................. $15,000,000 75%
Underwriting discounts............................... $ %
Repayment of director loans.......................... $ 760,000 4%
Working capital(2)................................... $ %
----------- ---
Total uses...................................... $20,000,000 100%
=========== ===
</TABLE>
- -------------------------
(1) It is anticipated that the net proceeds received by the Bank will be used
primarily to fund investments in loans and securities and also for general
corporate purposes.
(2) A portion of the working capital will be used to pay certain expenses of the
Offering, and the balance will be used for general corporate purposes and to
pay operating expenses, as well as for possible future capital contributions
to the Bank.
The Company expects to contribute approximately $15,000,000 of the net
proceeds of the Offering to the Bank by purchasing all of the Bank's common
stock to be issued. The purchase of the Bank's common stock is intended to
provide the Bank with the capital required by regulators to commence operations.
The Bank plans to use approximately $100,000 for leasehold improvements and
related architectural and engineering services, and approximately $356,000 to
purchase furniture, fixtures and equipment and other necessary assets for the
Bank's operations. The Company expects to incur approximately $103,000 for
organizational expenses of the Bank, which will be paid primarily out of working
capital. A portion of these organizational expenses and other preopening and
certain offering expenses were financed on an interim basis from loans of
approximately $760,000 made to the Company by members of its Board of Directors.
It is anticipated that these loans, which are non-interest bearing and are due
on or before March 31, 1999, will be repaid by the Company promptly following
the completion of the Offering. Preopening income (consisting solely of interest
earned on temporary investments) will offset some of these expenses. It is
currently anticipated that the balance of the net proceeds received by the Bank
will be used to fund investments in loans and securities and for payment of
operating expenses. The estimated $ of net proceeds to be retained by
the Company (plus any net proceeds received as a result of the exercise of the
Underwriters' over-allotment option) will initially be invested by the Company
in investment grade securities and held by the Company as working capital for
general corporate purposes and to pay operating expenses, as well as for
possible future capital contributions to the Bank. These funds will also be
available to finance possible acquisitions of other branches or expansion into
other lines of business closely related to banking, although the Company
presently has no plans to do so.
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<PAGE> 11
DIVIDEND POLICY
The Company initially expects that Company and Bank earnings, if any, will
be retained to finance the growth of the Company and the Bank and that no cash
dividends will be paid for the foreseeable future. If and when the Bank achieves
profitability, recovers its accumulated deficit and funds an adequate reserve
for losses, the Company may consider payment of dividends. However, the
declaration of dividends is at the discretion of the Board of Directors, and
there is no assurance that dividends will be declared at any time. If and when
dividends are declared, the Company will be largely dependent upon dividends
received from the Bank for funds to pay dividends on the Common Stock. It is
also possible, however, that the Company might, at some time in the future, pay
dividends generated from income or investments and from other activities of the
Company.
As a banking corporation organized under Indiana law, the Bank will be
restricted as to the maximum amount of dividends it may pay to the Company.
Indiana law prohibits the Bank from declaring or paying dividends that would
impair the Bank's capital or that would be greater than its undivided profits.
In addition, the prior approval of the Department of Financial Institutions of
the State of Indiana (the "Department") is required for the payment of any
dividend if the aggregate amount of all dividends paid by the Bank during such
calendar year, including the proposed dividend, would exceed the sum of the
retained net income of the Bank for the year to date and previous two years. The
Department, the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") and the Federal Deposit Insurance Corporation (the "FDIC") are
also authorized to prohibit the payment of dividends by the Bank under certain
circumstances. See "Supervision and Regulation -- The Bank -- Dividends." Such
requirements and policies may limit the Company's ability to obtain dividends
from the Bank for its cash needs, including funds for acquisitions, payment of
dividends by the Company and the payment of operating expenses.
The Company is organized under the Indiana Business Corporation Law, which
prohibits the payment of a dividend if, after giving it effect, the corporation
would not be able to pay its debts as they become due in the usual course of
business or the corporation's total assets would be less than the sum of its
total liabilities plus (unless the articles of incorporation of the corporation
permit otherwise) the amount that would be needed, if the corporation were to be
dissolved, to satisfy the preferential rights upon dissolution of preferred
shareholders. In addition, the Federal Reserve Board may impose restrictions on
dividends paid by the Company. See "Supervision and Regulation -- The
Company -- Dividends."
CAPITALIZATION
The following table sets forth the capitalization of the Company as it is
projected to be immediately after the sale of the 2,000,000 shares of Common
Stock offered hereby and the application of the estimated net proceeds. See "Use
of Proceeds."
<TABLE>
<S> <C>
Debt........................................................ $ 0
Shareholders' equity:
Preferred stock, no par value, 4,000,000 shares
authorized, none issued................................ $ 0
Common stock, no par value, 6,000,000 shares authorized,
2,000,000 shares issued and outstanding................ 2,000,000
Additional paid-in capital................................ (1)
Retained earnings......................................... ()
----------
Total shareholders' equity.................................. $
==========
Book value per share........................................ $
</TABLE>
- -------------------------
(1) Net of underwriting discounts and offering expenses expected to be paid by
the Company of $ .
10
<PAGE> 12
BUSINESS
OVERVIEW
The Company was incorporated as an Indiana corporation on July 8, 1998. The
Company was formed to acquire all of the Bank's issued and outstanding stock and
to engage in the business of a bank holding company under the federal Bank
Holding Company Act of 1956, as amended. The Company is organizing the Bank as
an Indiana chartered bank with depository accounts to be insured by the FDIC and
as a member of the Federal Reserve System. On , 1998, the Department
issued an order approving the application to establish the Bank. On
, 1998, the Bank's application for FDIC deposit insurance was
approved. The Company's application to become a bank holding company for the
Bank was approved by the Federal Reserve Board on , 1998, and the
Bank's application to become a member of the Federal Reserve System was approved
by the Federal Reserve Board on , 1998. In each case, these
approvals were issued subject to the satisfaction of certain conditions that the
Company believes are customary in transactions of this type, including
conditions relating to capitalization of the Bank and continuing capital
adequacy. The Company and the Bank expect to satisfy such conditions and
commence business in the first quarter of 1999. See "Risk Factors -- Possible
Delay in Commencing Operations" and "Risk Factors -- Government Regulation."
The Bank will provide a range of commercial and consumer banking services
primarily in Allen County, Indiana, including Fort Wayne and its suburbs. Those
services will reflect the Bank's strategy of serving small-to medium-sized
businesses and individual customers. The Bank's lending strategy will focus on
commercial loans and, to a lesser extent, on consumer and residential mortgage
loans. The Bank intends to offer a broad array of deposit products, including
checking, business checking, savings and money market accounts, certificates of
deposit and direct-deposit services.
The Bank's main office will be located in downtown Fort Wayne and will
serve as the Company's corporate headquarters. The address of the Company and
the Bank is Lincoln Tower, 116 East Berry Street, Fort Wayne, Indiana 46802. The
Company's telephone number is (219) 420-9100.
REASONS FOR STARTING TOWER BANK & TRUST COMPANY
The expansion of interstate banking has contributed to substantial
consolidation of the banking industry in Indiana, including the Bank's proposed
primary service area in Allen County. Many of the area's locally owned or
managed financial institutions have either been acquired by large regional bank
holding companies or have been consolidated into branches of other financial
institutions. In many cases, these acquisitions and consolidations have been
accompanied by fee changes, branch closings, the dissolution of local boards of
directors, management and personnel changes and, in the perception of the
Company's management, a decline in the level of personalized customer service.
Although the banking industry remains competitive, management believes that
the consolidation of the banking industry has created a favorable opportunity in
the Company's proposed market area for a new commercial bank to offer services
to customers who wish to conduct business with a bank that has significant local
ownership and is managed by senior personnel who are well-known in the market
and live in the local community. The Company seeks to take advantage of this
opportunity by emphasizing the Company's local management and its strong ties
and active commitment to the community. Management believes that a community
bank can help foster the economic development of its community and create and
retain wealth within that community. Management believes that community
residents will recognize the benefits of a community bank and that the Bank will
be successful in attracting as customers individuals and small- to medium-sized
businesses by demonstrating an active interest in their business and personal
financial affairs.
MARKET AREA
The Bank's primary service area will be Allen County, Indiana, which
includes the City of Fort Wayne, the second largest city in Indiana based on
population. According to available statistical data, Fort Wayne is within a
250-mile radius of 17% of the total United States population. Allen County
covers 659 square miles
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<PAGE> 13
and ranks second in population out of Indiana's 93 counties. As of July 1998,
Allen County had approximately 10,300 businesses and an unemployment rate of
approximately 3.0%. Allen County experienced significant growth in household
income from 1990 to 1998.
Allen County is also a significant banking market in the State of Indiana.
As of June 30, 1997, the latest date for which data are available, total
deposits in Allen County, including banks, thrifts and credit unions, were
approximately $4.7 billion. Based on such data, from 1996 to 1997, total
deposits in Allen County grew approximately 7.3%, compared to approximately 2.5%
for the State of Indiana.
PROPOSED LENDING PRACTICES
The Bank expects to make loans to individuals and businesses located within
the Bank's proposed market area. The Bank anticipates that its loan portfolio
will consist of commercial loans (80%), residential mortgage loans (10%) and
personal loans (10%), although these percentages are approximations and the
actual percentages may vary. The Bank anticipates that its legal lending limit
under applicable regulations will be approximately $2.25 million immediately
following the Offering, based on the legal lending limit of 15% of capital and
surplus.
COMMERCIAL LOANS. Commercial loans will be made primarily to small- and
medium-sized businesses. These loans will be both secured and unsecured and are
expected to be made available for general operating purposes, acquisition of
fixed assets including real estate, purchases of equipment and machinery,
financing of inventory and accounts receivable, as well as any other purposes
considered appropriate. The Bank will generally look to a borrower's business
operations as the principal source of repayment, but will also receive, when
appropriate, mortgages on real estate, security interests in inventory, accounts
receivable and other personal property and/or personal guarantees. Approximately
20% of the Bank's commercial loans are expected to be commercial real estate
loans secured by a first lien on the commercial real estate. In addition, the
Company expects that the majority of the Bank's commercial loans that are not
mortgage loans will be secured by a lien on equipment, inventory and/or other
assets of the commercial borrower.
Commercial lending involves more risk than residential lending because loan
balances are greater and repayment is dependent upon the borrower's operations.
The Bank will attempt to minimize the risks associated with these transactions
by generally limiting its exposure to owner-operated properties of customers
with an established profitable history. In many cases, risk will be further
reduced by (i) limiting the amount of credit to any one borrower to an amount
less than the Bank's legal lending limit and (ii) avoiding certain types of
commercial real estate financings.
RESIDENTIAL MORTGAGE LOANS. The Bank expects to originate residential
mortgage loans, which are generally long-term, with either fixed or variable
interest rates. The Bank's anticipated general policy, which is subject to
review by management as a result of changing market and economic conditions and
other factors, will be to retain all or a portion of variable interest rate
mortgage loans in the Bank's loan portfolio and to sell all fixed rate loans in
the secondary market. The Bank also expects to offer home equity loans. The Bank
does not expect to retain servicing rights with respect to the majority of the
residential mortgage loans that it originates. The Company anticipates that all
of the Bank's residential real estate loans will be secured by a first lien on
the real estate and that the majority of the Bank's personal loans will be home
equity loans secured by a second lien on real estate.
PERSONAL LOANS AND LINES OF CREDIT. The Bank will make personal loans and
lines of credit available to consumers for various purposes, such as the
purchase of automobiles, boats and other recreational vehicles, and the making
of home improvements and personal investments. The Bank expects to retain
substantially all of such loans. Depending, in part, on the level of demand
among the Bank's customers and other considerations, the Bank may consider
offering credit card services.
Consumer loans generally have shorter terms and higher interest rates than
residential mortgage loans and, except for home equity lines of credit, usually
involve more credit risk than mortgage loans because of the type and nature of
the collateral. Consumer lending collections are dependent on a borrower's
continuing financial stability and are thus likely to be adversely affected by
job loss, illness or personal bankruptcy. In
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<PAGE> 14
many cases, repossessed collateral for a defaulted consumer loan will not
provide an adequate source of repayment of the outstanding loan balance because
of depreciation of the underlying collateral. The Bank intends to underwrite its
loans carefully, with a strong emphasis on the amount of the down payment,
credit quality, employment stability and monthly income. These loans are
expected generally to be repaid on a monthly repayment schedule with the payment
amount tied to the borrower's periodic income. The Bank believes that the
generally higher yields earned on consumer loans will help compensate for the
increased credit risk associated with such loans and that consumer loans will be
important to its efforts to serve the credit needs of its customer base.
LOAN POLICIES. Although the Bank intends to take a progressive and
competitive approach to lending, it will stress high quality in its loans.
Because of the Bank's local nature, management believes that quality control
should be achievable while still providing prompt and personal service. The Bank
will be subject to written loan policies that contain general lending guidelines
and will be subject to periodic review and revision by the Loan and Investment
Committee and the Bank's Board of Directors. These policies concern loan
administration, documentation, approval and reporting requirements for various
types of loans.
The Bank will seek to make sound loans, while recognizing that lending
money involves a degree of business risk. The Bank's loan policies are designed
to assist the Bank in managing the business risk involved in making loans. These
policies provide a general framework for the Bank's loan operations, while
recognizing that not all loan activities and procedures can be anticipated. The
Bank's loan policies instruct lending personnel to use care and prudent
decision-making and to seek the guidance of the Chief Lending Officer or the
President and Chief Executive Officer of the Bank where appropriate.
The Bank's loan policies include procedures for oversight and monitoring of
the Bank's lending practices and loan portfolio. The Bank will have a Loan and
Investment Committee comprised initially of Mr. Schenkel, Mr. Brown and other
appropriate lending personnel. Initially, certain senior officers will have
signatory authority for loans up to $1 million, and Mr. Schenkel and Mr. Brown
will have joint authority to approve loans from $1 million to $1.5 million.
These limits will be subject to review and revision by the Bank's Board of
Directors from time to time. The Loan and Investment Committee of the Bank's
Board of Directors will be responsible for approving all loans that exceed the
established limits for the senior officers.
The Bank's loan policies provide guidelines for loan-to-value ratios that
limit the size of certain types of loans to a maximum percentage of the value of
the collateral securing the loans, which percentage varies by the type of
collateral, including the following maximum loan-to-value ratios: raw land
(65%), improved residential real estate lots (75%), owner-occupied commercial
real estate (80%), non-owner-occupied commercial real estate (75%), first
mortgages on residences (80%), and junior mortgages on residences (90%). The
Bank expects to use credit risk insurance, principally for residential real
estate mortgages where the loan-to-value ratio exceeds 80%. Regulatory and
supervisory loan-to-value limits are established by the Federal Deposit
Insurance Corporation Improvement Act of 1991. The Bank's internal loan-to-value
limitations will follow those limits and, in certain cases, will be more
restrictive than those required by the regulators.
The Bank's loan policies also include other underwriting standards for
loans secured by liens on real estate. These underwriting standards are designed
to determine the maximum loan amount that a borrower has the capacity to repay
based upon the type of collateral securing the loan and the borrower's income.
For owner-occupied residential real estate mortgages, the monthly payments on
the loan are not to exceed 28% of the borrower's monthly income. For
owner-occupied commercial real estate mortgages, the annual payments, combined
with the borrower's other required debt payments, are not to exceed 80% of the
borrower's net annual projected cash flow. In addition, the loan policies
require that the Bank obtain a written appraisal by a state certified appraiser
for loans secured by real estate in excess of $250,000, subject to certain
limited exceptions. The appraiser must be selected by the Bank and must be
independent and licensed. For loans secured by real estate that are less than
$250,000, the Bank may elect to conduct an in-house real estate evaluation. The
Bank's loan policies also include maximum amortization schedules and loan terms
for each category of loans secured by liens on real estate. Loans secured by
commercial real estate will be subject to a maximum term of 10 years and a
maximum amortization schedule of 20 years. Loans secured by residential
13
<PAGE> 15
real estate with variable interest rates will have a maximum term and
amortization schedule of 30 years. The Bank intends to sell to the secondary
market all loans secured by residential real estate with fixed interest rates,
thereby reducing the interest rate risk and credit risk to the Bank. Loans
secured by vacant land will be subject to a maximum term of 3 years and a
maximum amortization schedule of 10 years.
The Bank's loan policies also establish a limit on the aggregate amount of
loans to any one borrower. These loan policies provide that no loan shall be
granted where the aggregate liability of the borrower to the Bank will exceed
$1.5 million. This internal lending limit is subject to review and revision by
the Board of Directors from time to time.
In addition, the Bank's loan policies provide guidelines for (i) personal
guarantees, (ii) environmental policy review, (iii) loans to employees,
executive officers and directors, (iv) problem loan identification, (v)
maintenance of a loan loss reserve and (vi) other matters relating to the Bank's
lending practices.
DEPOSITS AND OTHER SERVICES
DEPOSITS. The Bank intends to offer a broad range of deposit services,
including checking accounts, money market accounts, savings accounts and time
deposits of various types. Transaction accounts and time certificates will be
tailored to the principal market area at rates competitive with those offered in
the area. All deposit accounts will be insured by the FDIC up to the maximum
amount permitted by law. The Bank intends to solicit these accounts from
individuals, businesses, associations, financial institutions and government
entities.
OTHER SERVICES. The Bank may consider providing additional services in the
future, such as personal computer based at-home banking and trust services.
Management believes that the Bank's personalized service approach will benefit
from customer visits to the Bank. Management will continue to evaluate the
desirability of adding telephone, electronic and at-home banking services.
Should the Bank choose to do so, the Bank could provide one or more of these
services at a future date using a third-party service provider. The Bank will
offer a courier service for customer convenience. In addition, the Bank may
establish relationships with correspondent banks and other independent financial
institutions to provide other services requested by its customers, including
loan participations where the requested loan amounts exceed the Bank's policies
or legal lending limits.
INVESTMENTS
The principal investment of the Company will be its purchase of all of the
common stock of the Bank. Funds retained by the Company from time to time may be
invested in various debt instruments, including but not limited to obligations
of or guaranteed by the United States, general obligations of a state or
political subdivision thereof, bankers' acceptances of deposit of United States
commercial banks, or commercial paper of United States issuers rated in the
highest category by a nationally recognized statistical rating organization.
Although the Company is permitted to make limited portfolio investments in
equity securities and to make equity investments in subsidiary corporations
engaged in certain non-banking activities (which may include real estate-related
activities such as mortgage banking, community development, real estate
appraisals, arranging equity financing for commercial real estate, and owning or
operating real estate used substantially by the Bank or acquired for future
use), the Company has no present plans to make any such equity investment. See
"Supervision and Regulation -- The Company -- Investments and Activities." The
Company's Board of Directors may alter the Company's investment policy without
shareholder approval.
The Bank may invest its funds in a wide variety of debt instruments and may
participate in the federal funds market with other depository institutions.
Subject to certain exceptions, the Bank is prohibited from investing in equity
securities. Real estate acquired by the Bank in satisfaction of or foreclosure
upon loans may be held by the Bank for no longer than 10 years after the date of
acquisition without the written consent of the Department. The Bank is also
permitted to invest an aggregate amount not in excess of 50% of the "sound
capital" of the Bank in such real estate and buildings as is necessary for the
convenient transaction of its business. The Bank's Board of Directors may alter
the Bank's investment policy without shareholder approval.
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<PAGE> 16
FUNDING SOURCES
The Bank plans to fund its operations initially from the proceeds of this
Offering and, on an ongoing basis, primarily with local deposits. However, the
Bank may also use alternative funding sources as needed, including advances from
a Federal Home Loan Bank, when eligible, and other forms of wholesale financing.
These alternative funding sources may be more costly than local deposits.
COMPETITION
There are many thrift institutions, credit unions and bank offices located
within the Bank's proposed primary service area. Most are branches of larger
financial institutions which, in management's view, are managed with a
philosophy of strong centralization. The Bank will face competition from thrift
institutions, credit unions and other banks as well as finance companies,
insurance companies, mortgage companies, securities brokerage firms, money
market funds, trust companies and other providers of financial services. Most of
the Bank's competitors have been in business a number of years, have established
customer bases, are larger and have higher lending limits than the Bank. The
Bank will compete for loans principally through its ability to communicate
effectively with its customers and understand and meet their needs. Management
believes that its personal service philosophy will enhance its ability to
compete favorably in attracting individuals and small- and medium-sized
businesses. The Bank will actively solicit retail customers and will compete for
deposits by offering customers personal attention, professional service,
off-site ATM capability and competitive interest rates.
EMPLOYEES
The Bank is assembling a staff of experienced professionals and expects to
have approximately 18 full-time employees when it opens for business. In
addition to Messrs. Schenkel, Himmelhaver and Brown, these employees are
expected to include two experienced commercial lending officers, one or more
mortgage loan originators, a private banking officer, a retail banking
officer/marketing officer and additional customer service and support personnel.
OFFICE FACILITIES
The Bank is leasing the ground floor of the Lincoln Tower, a landmark
building located at 116 East Berry Street in downtown Fort Wayne, Indiana, for
use as the Bank's main office and the Company's headquarters. The leased space,
which formerly was occupied by a large regional bank, consists of approximately
13,900 usable square feet and includes drive-through banking windows. Surface
and garage parking will be available at no cost to the Bank's customers. The
Bank believes that this space will be adequate for its present needs. The
building has been leased on an arm's-length basis from one of the Company's and
the Bank's directors. See "Related Party Transactions -- Lease of Headquarters
Building."
The lease for the Bank's office has an initial term of ten years commencing
on January 1, 1999, and the Bank has one renewal option for an additional ten
years. The lease payments are $9.75 per square foot annually for the first two
years. Rent will increase at the rate of $1.25 per square foot at the
commencement of the third, fifth and seventh years of the initial term. The
landlord will be responsible for the payment of taxes, insurance and utilities.
The Bank expects to spend approximately $100,000 for tenant improvements and
related architectural and engineering services, and additional funds for
furniture, fixtures and other equipment.
PLAN OF OPERATION
The Company does not expect to need to raise additional funds during the
twelve months following the completion of the Offering. Management has
concluded, based on current pre-opening growth projections, that the Bank is
likely to have adequate funds to meet its cash requirements for at least twelve
months assuming it receives the capital contribution from the Company described
under "Use of Proceeds." Management expects to expend approximately $100,000 for
leasehold improvements and related architectural and engineering services, and
approximately $356,000 for furniture, fixtures, equipment and other necessary
assets, prior to commencing operations. During the first twelve months of
operation, the Company does not
15
<PAGE> 17
anticipate requiring substantial additional equipment. At this time, management
expects to hire approximately ten employees, in addition to the original 18,
during the first twelve months of operations.
WHERE YOU CAN FIND MORE INFORMATION
As a result of this Offering, the Company will be subject to the
informational requirements of the Securities Exchange Act of 1934 (the "Exchange
Act") and will file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). You may read and copy any reports, statements or other
information that the Company files, including the Registration Statement with
respect to the Common Stock offered hereby and all exhibits, financial
statements and schedules thereto, at the Commission's Public Reference Room at
450 Fifth Street, N.W., Washington DC 20549. Please call the Commission at
1-800-SEC-0330 for further information on the operation of the Public Reference
Room. In addition, these materials may be inspected at the Commission's regional
offices located at Seven World Trade Center, Suite 1300, New York, NY 10048, and
CitiCorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. The
Commission also maintains an Internet site that contains reports, proxy and
information statements and other public filings. The address of that site is
http://www.sec.gov.
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<PAGE> 18
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and executive officers of the Company as of the date hereof,
and their contemplated positions with the Bank upon completion of the Offering,
are as follows:
<TABLE>
<CAPTION>
POSITION(S) WITH POSITION(S)
NAME AGE THE COMPANY WITH THE BANK
---- --- ---------------- -------------
<S> <C> <C> <C>
Curtis A. Brown...................... 43 Chief Lending Officer Chief Operating Officer
and Chief Lending Officer
Keith E. Busse....................... 55 Director Director
Peter T. Eshelman.................... 45 Director Director
Michael S. Gouloff................... 51 Director Director
Craig S. Hartman..................... 44 Director Director
Jerome F. Henry, Jr.................. 48 Director Director
Kevin J. Himmelhaver................. 42 Chief Financial Officer Chief Financial Officer
and Secretary and Secretary
Michael Mirro, M.D................... 49 Director Director
Debra A. Niezer...................... 43 Director Director
William G. Niezer.................... 48 Director Director
Maurice D. O'Daniel.................. 66 Director Director
Leonard Rifkin....................... 67 Director Director
Joseph D. Ruffolo.................... 57 Director Director
Donald F. Schenkel................... 57 Chairman of the Board, Chairman of the Board,
President, Chief Executive President, Chief Executive
Officer and Director Officer and Director
Larry L. Smith....................... 50 Director Director
John V. Tippmann, Sr................. 57 Director Director
J. Richard Tomkinson................. 51 Director Director
Irene A. Walters..................... 56 Director Director
</TABLE>
Curtis A. Brown is the Chief Lending Officer of the Company and the Chief
Operating Officer and Chief Lending Officer of the Bank, positions he has held
since October 1998. He is a native of Fort Wayne and has over 21 years of
experience in the banking industry. Mr. Brown began his career as a retail bank
manager from 1977 to 1982 with INB National Bank. From 1982 until 1993, Mr.
Brown assumed increasing responsibilities in corporate banking as an Assistant
Vice President, Vice President, First Vice President and Senior Loan Officer
with INB National Bank. INB National Bank was acquired by NBD Bank, N.A. in
1993. From 1993 until 1998, Mr. Brown managed corporate banking groups for NBD
Bank Indiana in Fort Wayne, most recently holding the positions of First Vice
President and Group Head. Mr. Brown is involved in United Way of Allen County, a
board member of Anthony Wayne Services, Inc., and a member of the Workforce
Development Council of the Greater Fort Wayne Chamber of Commerce.
Keith E. Busse is a director of the Company and the Bank. Since September
1993, Mr. Busse has served as Chief Executive Officer of Steel Dynamics, Inc., a
primary steel-making company headquartered in Butler, Indiana, and formed by Mr.
Busse and others in 1993. Steel Dynamics, Inc., is a publicly-held company and a
significant supplier of flat-rolled steel in the upper Midwest that had net
sales of $420 million for 1997 and employed 455 persons as of March 2, 1998. In
1997, Mr. Busse and Steel Dynamics were listed in Business Week as being among
the country's top 10 "entrepreneurs" and entrepreneurial corporations, and Mr.
Busse was named the regional winner of the Indiana Ernst & Young Emerging
Entrepreneur of the Year award. Mr. Busse is also a director of Steel Dynamics,
Inc., and Qualitech Steel Corporation. Mr. Busse is involved in area civic and
charitable organizations, including Junior Achievement, the Leukemia Society of
America and local Little League and Senior League Baseball. He is also a board
member of Bridgewater Development Company, Fort Wayne Fury and Fort Wayne
Kustom.
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<PAGE> 19
Peter T. Eshelman is a director of the Company and the Bank. Mr. Eshelman
is President and Chief Executive Officer of American Specialty Companies, Inc.,
a sports and entertainment risk management company based in Roanoke, Indiana, of
which he is the majority shareholder. He has held these positions since 1989.
Mr. Eshelman is also a founding trustee of American Specialty Foundation, a
charitable foundation for educational development of youth through sports, the
Chairman of the Roanoke, Indiana, Chamber of Commerce Beautification Committee,
and serves as an appointee of Governor O'Bannon on the State of Indiana
Regulated Amusement and Safety Device Board.
Michael S. Gouloff is a director of the Company and the Bank. Mr. Gouloff
has served as President of Schenkel Schultz Architects, a national architectural
firm known for the design of educational and correctional facilities, since 1985
and has been employed by the firm since 1973. He is currently a registered
architect in 18 states. A Fort Wayne native, Mr. Gouloff is an active member of
the community, currently serving on the boards of Canterbury School, Fort Wayne
Country Club, Fort Wayne Airport Authority and Parkview Hospital. Mr. Gouloff is
a current Commissioner for the Hoosier Lottery and a past Commissioner for the
Indiana State Office Building Commission.
Craig S. Hartman is a director of the Company and the Bank. Mr. Hartman is
Chairman and Chief Executive Officer of Preferred, Inc., a commercial and
industrial painting, roofing and flooring company. Mr. Hartman founded
Preferred, Inc., in 1973 at the age of 18 and has served as its Chief Executive
Officer since that time. He also serves as Chief Executive Officer of Preferred
Environmental Services, Inc., an asbestos and lead abatement company founded in
January 1991. Mr. Hartman currently is a member of the Fort Wayne Junior
Achievement Board of Directors, the boards of the Indiana Chamber of Commerce
and the Greater Fort Wayne Chamber of Commerce Foundation and a member of the
Indiana Chapter of the Young President's Organization. Mr. Hartman is a native
of Fort Wayne and has been involved in numerous other community organizations.
He has been recognized in the Fort Wayne community and the state as an
entrepreneur and small business person and was a delegate to The White House
Conference on Small Business in 1995.
Jerome F. Henry, Jr., is a director of the Company and the Bank. Mr. Henry
was the founder and is the President of Midwest Pipe & Steel, Inc., a company
specializing in steel service, industrial scrap and steel brokerage. Mr. Henry
has held this position since 1975. Mr. Henry is also President of Paragon Tube
Corporation, a manufacturer of steel tubing, and Paragon Steel Trading, Inc., a
distributor of steel coils, each of which is headquartered in Fort Wayne. He has
held these respective positions since 1990 and 1995. A native of Bloomington,
Indiana, Mr. Henry has lived in Fort Wayne for 40 years. He is involved with Big
Brothers, St. Joseph Community Health Foundation and St. Anne Home and is a
member of the Urban Enterprise Zone Board.
Kevin J. Himmelhaver is the Chief Financial Officer and Secretary of the
Company and the Bank, positions he has held since October 1998 and November
1998, respectively. Mr. Himmelhaver has nearly 20 years of banking experience in
the Fort Wayne area. From 1979 to 1993, Mr. Himmelhaver worked for Lincoln
Financial Corporation and its principal subsidiary, Lincoln National Bank &
Trust Company, in various financial positions, most recently as First Vice
President and Controller with responsibility for accounting, tax, financial
controls and office services. Lincoln Financial Corporation was acquired by
Norwest Corporation in 1993. From 1993 to 1998, Mr. Himmelhaver worked for
Norwest Bank Indiana, N.A., and Norwest Bank Ohio, N.A., which was a $2 billion
banking region of Norwest Corporation at September 30, 1998, as Senior Vice
President and Chief Financial Officer. His responsibilities included managing
regional finance, properties and various operations groups, as well as strategic
planning, acquisitions and asset and liability management. Mr. Himmelhaver also
served as a director of Norwest Bank Indiana, N.A., and Norwest Bank Ohio, N.A.
A native of Fort Wayne, Indiana, Mr. Himmelhaver is a board member of the Summit
Club, a director and the Treasurer of Fort Wayne Aquatics, Inc., and a 1998
graduate of Leadership Fort Wayne.
Michael Mirro, M.D., is a director of the Company and the Bank. Dr. Mirro
has been a partner of Fort Wayne Cardiology since 1982 and has previously served
on the group's governing board. Fort Wayne Cardiology recently merged with a
multi-specialty internal medicine group to form Indiana Medical
18
<PAGE> 20
Associates, LLC. Dr. Mirro served as founding board chairman during the merger.
Indiana Medical Associates, LLC is a group of 46 physicians providing health
services to the entire Northeast Indiana Region. Dr. Mirro is a Fellow of the
American College of Physicians, American College of Cardiology and American
College of Chest Physicians. Recently, he served as President of the Fort
Wayne/Allen County Medical Society. Dr. Mirro is a past member of the Indiana
Medical Licensing Board. Dr. Mirro's civic interests include serving as the
Chairman of the Greater Fort Wayne Chamber of Commerce and as the past Chairman
of the Economic Development Council for that organization. His community
interests also have included serving on the Board of Trustees of the YMCA of
Greater Fort Wayne.
Debra A. Niezer is a director of the Company and the Bank. Ms. Niezer is
the Vice President and Assistant Treasurer of AALCO Distributing Company, a beer
distributor in Fort Wayne. She has held these positions since April 1995. From
January 1989 to March 1995, Ms. Niezer served as Vice President and Employee
Benefits Officer for NBD Bank Indiana in Fort Wayne. Prior to that time she
served as Vice President and Trust Officer for First of America Bank-LaPorte,
N.A., from December 1983 to October 1988. A native of Fort Wayne, Ms. Niezer is
the past President of the Gamma Lambda Chapter of Kappa Kappa Kappa and will be
Co-Chair of Bishop Dwenger High School Saints Alive! in 1999.
William G. Niezer is a director of the Company and the Bank. Mr. Niezer is
the President and Chief Executive Officer of Acordia of Indiana, Inc., an
insurance broker, positions he has held since September 1997. Mr. Niezer
previously served as President and Chief Executive Officer of Acordia of
Northeast Indiana, Inc., an insurance broker and third-party administrator, from
February 1995 to September 1997 and the Director of Property & Casualty
Operations of Acordia of Northeast Indiana, Inc., from October 1994 to February
1995. Prior to that time, Mr. Niezer was the President of O'Rourke, Andrews &
Maroney, Inc., a regional insurance broker, from May 1988 to October 1994. Mr.
Niezer is the President of the Board of Trustees of the University of St.
Francis, a member of the Allen County Plan Commission, and a board member of St.
Joseph Community Health Foundation. Mr. Niezer is a native of Fort Wayne and has
previously served on the boards of the Fort Wayne Ballet and St. Anne Home.
Maurice D. O'Daniel is a director of the Company and the Bank. Mr. O'Daniel
is the Chairman and Chief Executive Officer of O'Daniel Automotive, Inc., an
automobile dealership with four locations in the Fort Wayne area. Mr. O'Daniel
has served in these positions since July 1979. From 1975 to 1977, Mr. O'Daniel
served on the board and loan committee of First Federal Savings & Loan
Corporation in Evansville, Indiana, and in 1995 and 1996, he was Chairman of the
Board of Northern Indiana Trust Corporation in Fort Wayne. He currently serves
as a director of St. Joseph Community Health Foundation and is Chairman of the
Junior Achievement Foundation and a member of the Greater Fort Wayne Chamber of
Commerce Economic Development Council.
Leonard Rifkin is a director of the Company and the Bank. Mr. Rifkin served
as the Chief Executive Officer and President of OmniSource, Inc., from 1970
until 1996, when he was appointed Chairman and Chief Executive Officer,
positions he currently holds. OmniSource is a scrap metal processing, trading
and brokerage company that specializes in scrap management programs throughout
the United States and Canada. OmniSource was originally incorporated in 1943 in
Fort Wayne, Indiana, as Superior Iron & Metal and today employs 1,250 persons
and operates from 25 locations throughout the Midwest. Mr. Rifkin is also a
director of Steel Dynamics, Inc., and Qualitech Steel Corporation. His civic
involvement includes the Greater Fort Wayne Chamber of Commerce and the Fort
Wayne Philharmonic.
Joseph D. Ruffolo is a director of the Company and the Bank. Since 1993,
Mr. Ruffolo has been a member of Ruffolo Richard, LLC, a business investment
firm located in Fort Wayne. Ruffolo Richard, LLC, specializes in management
buy-outs, capital sourcing and acquisitions. From 1988 to 1993, Mr. Ruffolo
served as Chief Executive Officer and President of North American Van Lines, a
moving company. Mr. Ruffolo has resided in Fort Wayne since 1974, is a director
of Parkview Health System, Inc., and is active with the Fort Wayne Museum of Art
and the Greater Fort Wayne Chamber of Commerce.
Donald F. Schenkel is the President and Chief Executive Officer and a
director of the Company and of the Bank, positions he has held since July 1998,
and was elected the Chairman of the Board of the Company and the Bank in October
1998. Mr. Schenkel is a native of Fort Wayne and has nearly 30 years of
experience
19
<PAGE> 21
in the banking industry. Most recently, Mr. Schenkel served as First Vice
President of NBD Bank Indiana, a banking corporation which had assets of
approximately $11 billion at September 30, 1998. NBD Bank Indiana was a
subsidiary of First Chicago NBD Corporation, a multi-bank holding company which
had assets at September 30, 1998, of approximately $124 billion. First Chicago
NBD Corporation recently merged with Banc One Corporation to become Bank One
Corporation. From 1993 to 1998, he served in the capacities of Division Head of
Retail Banking, with deposits in excess of $1 billion, and Private Banking &
Investments, with assets of over $5 million, for NBD Bank Indiana. From 1990 to
1993, Mr. Schenkel served as Senior Vice President of INB National Bank, a $6
billion regional bank at December 31, 1992, that was acquired by NBD Bank, N.A.,
in 1993. His positions with INB National Bank included senior level
responsibility for commercial lending, retail lending and branch administration.
From 1985 to 1990, Mr. Schenkel was an executive with Northhill Corporation, a
company involved primarily in real estate development. From 1966 to 1985, Mr.
Schenkel was employed by Lincoln National Bank & Trust Company in Fort Wayne,
whose parent holding company, Lincoln Financial Corporation, was acquired by
Norwest Corporation in 1993. During this time, Mr. Schenkel held various
positions, including Senior Vice President and Secretary to the Board of
Directors. Mr. Schenkel serves as Chairman of the St. Joseph Community Health
Foundation and is a member of the Board of Trustees of the University of St.
Francis. He is also a board member of the Fort Wayne Zoological Society, Junior
Achievement and Leadership Fort Wayne.
Larry L. Smith is a director of the Company and the Bank. Mr. Smith has
served since March 1993 as President and Chief Executive Officer of Q.C. Onics,
Inc., an automotive supplier based in Angola, Indiana. From 1988 to 1992, Mr.
Smith was employed by Navistar International Transportation Company as Vice
President of Truck Engineering. Prior to this time, Mr. Smith had a twenty-year
career with Chrysler Corporation, where he held numerous management positions in
product engineering, manufacturing and quality control. During his tenure as
Chief Engineer of Vehicle Safety Management with Chrysler Corporation, he was
appointed by the U.S. Secretary of Transportation to the National Highway
Traffic Safety Administration's Research Board on Highway Safety. Mr. Smith
previously served on the board and the Trust Committee of Summit Bank in Fort
Wayne. He has been active in numerous civic and charitable organizations in the
Fort Wayne area, such as the Greater Fort Wayne Chamber of Commerce, the Fort
Wayne Urban League, Junior Achievement, the Fort Wayne Philharmonic and the Fort
Wayne Corporate Council.
John V. Tippmann, Sr., is a director of the Company and the Bank. Mr.
Tippmann is Chairman of the Tippmann Group, a position he has held since 1985.
The Tippmann Group, through its three subsidiaries, operates frozen/refrigerated
distribution warehouses, specializes in the design and construction of frozen
food process and cold storage facilities, and manages approximately 41 buildings
throughout the Midwest. The Tippmann Group is based in Fort Wayne, has annual
revenues of approximately $75 million, and employs approximately 400 people. Mr.
Tippmann is a native of Fort Wayne and board member of St. Joseph Community
Health Foundation, Board President of Vincent House, Inc., and the current
Chairman of Annual Bishops Appeal Fort Wayne/South Bend.
J. Richard Tomkinson is a director of the Company and the Bank. Mr.
Tomkinson is the President and owner of Tomkinson Automotive Group. He has
served in this position since 1979. Tomkinson Automotive Group operates two Fort
Wayne area automobile dealerships. Mr. Tomkinson also is the President and co-
owner of Lincoln Graphics, Inc., a Fort Wayne graphics design and reproduction
company serving architects and construction companies in Northeast Indiana, and
Vice President and co-owner of Gallatin Highlands Corporation, a Big Sky,
Montana real estate development company. Mr. Tomkinson has been a member of the
National Auto Dealers Association since 1977.
Irene A. Walters is a director of the Company and the Bank. Ms. Walters is
the Director of University Relations and Communications at Indiana
University-Purdue University Fort Wayne. Ms. Walters has held this position
since 1995. Prior to that time, from 1990 to 1995, Ms. Walters was the Executive
Director of the Fort Wayne Bicentennial Celebration Council. Ms. Walters has
served in leadership positions in many civic and charitable projects and has
served on numerous boards in the Fort Wayne area for over twenty-five years,
such as United Way of Allen County, the American Cancer Society, Three Rivers
Festival, Anthony Wayne Services, Inc., the McMillen Center for Health
Education, the Fort Wayne Civic Theatre, Fort Wayne
20
<PAGE> 22
Historical Society, WFWA Channel 39, the Fort Wayne Jewish Federation, the YWCA
and Leadership Fort Wayne. In 1994, she received Indiana's highest civilian
award, the Sagamore of the Wabash, and in 1995 was named Fort Wayne's Citizen of
the Year by the Fort Wayne Journal-Gazette. She led Fort Wayne's award-winning
All-America City delegation in 1998 and most recently was appointed Co-Chair of
the City of Fort Wayne Millennium Celebration Commission.
Under federal law and regulations, and subject to certain exceptions, the
addition or replacement of any director or the employment, dismissal or
reassignment of a senior executive officer of the Bank or the Company at any
time that the Bank is not in compliance with applicable minimum capital
requirements or is otherwise in a troubled condition, or when the Federal
Reserve Board has determined that such prior notice is appropriate, is subject
to prior notice to and disapproval by the Federal Reserve Board. In addition,
directors and officers of the Bank may be removed by order of the Department
under certain circumstances.
The Company's By-Laws provide that the number of directors of the Company
shall be eighteen. This number is subject to change from time to time by a vote
of 66 2/3% of the Board of Directors without shareholder approval. There are
currently two vacancies on the Board. Directors of the Company are divided into
three classes with staggered three-year terms. The term of the first class will
expire at the annual meeting of shareholders in 2000, and the terms of the
second and third classes will expire at the annual meetings of shareholders in
2001 and 2002, respectively. The terms of the Company's current and proposed
directors will expire as follows: -2000; -2001;
-2002.
It is anticipated that the entire Board of Directors of the Bank will be
elected annually by the Company as its sole shareholder.
Executive officers of the Company and of the Bank serve at the discretion
of their respective Boards of Directors. Mr. Rifkin is the first cousin of Ms.
Walters' spouse. Ms. Niezer is the sister-in-law of Mr. Niezer. There are no
other family relationships among any of the directors or executive officers of
the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has an Executive Committee, an Audit Committee and a
Compensation Committee. The Executive Committee consists of Messrs. Busse,
Eshelman, Gouloff, Hartman, Ruffolo and Schenkel. The Audit Committee consists
of Messrs. Niezer and Tomkinson, Ms. Walters and Ms. Niezer, and the
Compensation Committee consists of Messrs. Busse, Eshelman, Gouloff, Hartman and
Ruffolo. The Executive Committee has authority to act on behalf of the Board of
Directors between meetings and, with certain exceptions, the authority to take
all actions that the full Board could take. The Audit Committee is responsible
for recommending independent auditors, reviewing with the independent auditors
the scope and results of the audit engagement, establishing and monitoring the
Company's financial policies and control procedures, reviewing and monitoring
the provision of non-audit services by the Company's auditors and reviewing all
potential conflict of interest situations. See "Related Party Transactions." The
Compensation Committee is responsible for reviewing, determining and
establishing the salaries, bonuses and other compensation of the executive
officers of the Company and for administering the Company's 1998 Stock Option
Plan.
COMPENSATION OF DIRECTORS
Joseph Ruffolo and one of his affiliates have provided consulting services
to the Company during 1998 relating to the establishment of the Company and the
Bank. These services include market analysis, director sourcing, and the
development and generation of information disclosed in the applications to the
federal and state banking regulatory authorities. As compensation for these
services, on January , 1999, the Company granted to Mr. Ruffolo options to
purchase 2,500 shares of Common Stock at an exercise price of $10.00 per share.
The options become exercisable upon the closing of the Offering and expire
.
Craig Hartman has provided services to the Company to assist in its
formation. These services include the identification of potential investors and
directors and consulting services with respect to the viability of establishing
a locally-owned bank and with respect to the identity of professional advisors
to the Company, including the engagement of the underwriters. As compensation
for these services, on January , 1999, the
21
<PAGE> 23
Company granted Mr. Hartman options to purchase 7,500 shares of Common Stock at
an exercise price of $10.00 per share. The options become exercisable upon the
closing of the Offering and expire .
In the first year of operation, no other compensation is expected to be
paid to any directors of the Company or the Bank for their services in such
capacities, except for options to purchase shares of Common Stock granted by the
Company to each of the directors. See "Executive Compensation -- 1998 Stock
Option and Incentive Plan." Depending on the structure and operation of the
Company, the operations of the Bank and other factors, the Company's and the
Bank's Boards of Directors may thereafter determine that reasonable fees or
compensation are appropriate. In that event, it is likely that directors of the
Company and the Bank would receive compensation, such as meeting fees, which
would be consistent with the compensation paid to directors of financial
institution holding companies and banks of similar size.
EXECUTIVE COMPENSATION
The annual compensation for Mr. Schenkel, the Chairman of the Board,
President and Chief Executive Officer of the Company and the Bank, for the first
year of his employment is expected to be $152,260, including an automobile
allowance paid by the Company. The Company also paid Mr. Schenkel a hiring bonus
in 1998 in the amount of $100,000 to compensate him for accrued benefits
forfeited by him upon leaving his previous employer to accept his positions with
the Company. Mr. Himmelhaver, the Chief Financial Officer and Secretary of the
Company and the Bank, is expected to be paid a salary of $105,000 for the first
year of his employment; and Mr. Brown, Chief Lending Officer of the Company and
Chief Operating Officer and Chief Lending Officer of the Bank, is expected to be
paid a salary of $115,000 for that same period. These officers' compensation in
subsequent years will be determined by the Company's and the Bank's Boards of
Directors. In making their determinations, it is expected that the Boards of
Directors will receive recommendations from their Compensation Committees, which
will be comprised of outside directors. Mr. Schenkel and the other officers of
the Company and the Bank may participate in the Company's 1998 Stock Option and
Incentive Plan. Officers of the Bank may also participate in any benefit plans
adopted for Bank employees generally. Pending the establishment of the Company's
and the Bank's benefit plans for employees generally, the Company has purchased
life insurance and disability insurance covering Messrs. Schenkel, Himmelhaver
and Brown. The Bank expects to adopt a 401(k) plan for its employees.
The Company has entered into employment agreements with Messrs. Schenkel,
Himmelhaver and Brown, each for a term of years. The agreements prohibit the
officers from competing with the Company during the periods of their employment
and for an additional months thereafter.
SUMMARY COMPENSATION TABLE
The following table shows compensation paid to the Company's Chairman of
the Board, President and Chief Executive Officer for the period from inception
of the Company to December 31, 1998. No other executive officer of the Company
received compensation exceeding $100,000 for such period.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------
OTHER ANNUAL ALL OTHER
NAME AND POSITION SALARY BONUS COMPENSATION COMPENSATION
----------------- ------ ----- ------------ ------------
<S> <C> <C> <C> <C>
Donald F. Schenkel,.............................. $66,923 $100,000 $7,346(1)
Chairman of the Board,
President and Chief
Executive Officer
</TABLE>
- -------------------------
(1) Of this amount, $4,256 represents payment of a car allowance; $1,298
represents payment of health, dental and disability insurance premiums; and
$1,792 represents payment of life insurance premiums.
22
<PAGE> 24
1998 STOCK OPTION AND INCENTIVE PLAN
On December , 1998, the Board of Directors and the sole stockholder of
the Company adopted the 1998 Stock Option and Incentive Plan (the "1998 Stock
Option Plan"). Under the 1998 Stock Option Plan, the Company may award stock
options and performance shares to employees and directors of the Company. The
aggregate number of shares of Common Stock that may be awarded under the 1998
Stock Option Plan is 310,000, subject to adjustment in certain events. No
individual participant may receive awards for more than shares in
any calendar year.
The 1998 Stock Option Plan is currently administered by the Board of
Directors of the Company. After consummation of the Offering, the 1998 Stock
Option Plan will be administered by the Compensation Committee. Subject to the
terms of the 1998 Stock Option Plan, the Compensation Committee will have the
sole discretion and authority to select those persons to whom awards will be
made, to designate the number of shares to be covered by each award, to
establish vesting schedules, to specify all other terms of the awards (subject
to certain restrictions) and to interpret the 1998 Stock Option Plan.
With respect to stock options under the 1998 Stock Option Plan that are
intended to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code, the option price must be at least 100% (or, in the case
of a holder of more than 10% of the Common Stock, 110%) of the fair market value
of a share of Common Stock on the date of the grant of the stock option. The
Compensation Committee will establish, at the time the options are granted, the
exercise price of options that do not qualify as incentive stock options
("non-qualified stock options"), which may not be less than 85% of the fair
market value of a share of Common Stock on the date of grant. No incentive stock
option granted under the 1998 Stock Option Plan may be exercised more than ten
years (or, in the case of a holder of more than 10% of the Common Stock, five
years) from the date of grant or such shorter period as the Compensation
Committee may determine at the time of the grant. Non-qualified stock options
may be exercised during such period as the Compensation Committee determines at
the time of grant, which period may not be more than ten years from the date of
grant. Under the 1998 Stock Option Plan, the Compensation Committee may also
make awards of performance shares, in which case the grantee would be granted
shares of Common Stock, subject to the Company's satisfaction of performance
determined by the Compensation Committee.
On January , 1999, the Company's Board of Directors granted options to
employees and directors under the 1998 Stock Option Plan for an aggregate of
shares of Common Stock, effective at the closing date of the
Offering. Each of such options has an exercise price equal to the initial public
offering price set forth on the cover page of this Prospectus and has a term of
ten years. The options vest on . Of these option grants,
non-qualified stock options to purchase 2,500 shares were granted to Joseph
Ruffolo, and non-qualified stock options to purchase 7,500 shares were granted
to Craig Hartman, as compensation for services provided to the Company as
described under "Management -- Compensation of Directors." Incentive stock
options to purchase , and shares
were granted to Messrs. Schenkel, Himmelhaver and Brown as compensation for
services rendered in their capacities as officers of the Company and the Bank.
Additionally, non-qualified stock options to purchase an aggregate of
23
<PAGE> 25
150,000 shares were granted to each of the directors of the Company as
compensation for services rendered in that capacity as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NAME OF DIRECTOR SUBJECT TO OPTION
---------------- -----------------
<S> <C>
Keith E. Busse
Peter T. Eshelman
Michael S. Gouloff
Craig S. Hartman
Jerome F. Henry, Jr.
Michael Mirro, M.D.
Debra A. Niezer
William G. Niezer
Maurice D. O'Daniel
Leonard Rifkin
Joseph D. Ruffolo
Donald F. Schenkel
Larry L. Smith
John V. Tippmann, Sr.
J. Richard Tomkinson
Irene A. Walters
</TABLE>
RELATED PARTY TRANSACTIONS
Since its inception, the Company has engaged in transactions with entities
controlled by its directors and their affiliates. Management believes that each
of these transactions was on terms no less favorable to the Company than those
that could be obtained from an unaffiliated third party. The Company anticipates
that, subsequent to the Offering, it will continue to engage in certain of these
transactions if economically advantageous to the Company. Future related party
transactions will be subject to the review and approval of the Company's Audit
Committee, which will be composed exclusively of four of the Company's outside
directors, and such transactions will be on terms no less favorable to the
Company than those that could be obtained from an unaffiliated third party.
LOANS FROM DIRECTORS
Over the past several months, each of the directors of the Company has made
a loan to the Company to fund start-up expenses. These loans total approximately
$760,000. Each loan is evidenced by a promissory note payable to the director,
which is non-interest bearing and is due on or before March 31, 1999. The
Company intends to repay the notes promptly following the completion of the
Offering.
LEASE OF HEADQUARTERS BUILDING
The Company leases its headquarters facility, which contains the only
location of the Bank, from Tippmann Properties, Inc., agent for Director John V.
Tippmann, Sr. The headquarters facility is located in the Lincoln Tower, a
landmark building in downtown Fort Wayne, and consists of drive-through banking
windows and approximately 13,900 square feet of usable office space. The lease
is a ten-year lease commencing on January 1, 1999, with annual rental payments
of $9.75 per square foot for the first two years of the lease and fixed
increases at the rate of $1.25 per square foot every two years thereafter,
ending at $14.75 per square foot for the last two years of the lease. The lease
provides for one renewal of ten years at then prevailing market rates. In the
event the Bank does not receive its charter, the Company may terminate the lease
without further obligation. The Company believes that this lease is on terms at
least as favorable as could be obtained from an unaffiliated third party. The
Company has paid Tippmann Properties, Inc., $4,743 under an interim lease for
temporary office space during fiscal year 1998.
24
<PAGE> 26
CONSULTING SERVICES
Director Joseph Ruffolo and one of his affiliates have provided consulting
services to the Company during fiscal year 1998 relating to the establishment of
the Company and the Bank. Additionally, Director Craig Hartman has provided
services to the Company to assist in its formation. See
"Management -- Compensation of Directors."
INSURANCE
The Company has obtained key man life, director and officer liability,
property, liability, automobile and worker's compensation insurance through
Acordia of Indiana, Inc., an insurance broker whose President and Chief
Executive Officer is Director William Niezer. The Company paid a commission to
Acordia of Indiana, Inc., of $1,390.
OTHER
During fiscal year 1998, the Company paid $6,250 to GKG Designs, an
interior design firm owned by Gretchen Gouloff, spouse of Director Michael
Gouloff, for interior design services. Additionally, the Company has leased a
car from O'Daniel Automotive, Inc., a car dealership owned by Director Maurice
O'Daniel, for two years with a lease payment of $605 per month and has paid
$4,256 on the car lease during fiscal year 1998. The Company has also purchased
a computer from Preferred, Inc., an affiliate of Director Craig Hartman, for
$1,600. The purchase price was determined by the parties based on the estimated
value of the computer.
BANKING TRANSACTIONS
The Company anticipates that the directors and officers of the Company and
the Bank and the companies with which they are associated will have banking and
other transactions with the Company and the Bank in the ordinary course of
business. Any loans and commitments to lend to such affiliated persons or
entities will be made in accordance with all applicable laws and regulations and
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with unaffiliated
parties of similar creditworthiness, and will not involve more than normal risk
or present other unfavorable features to the Company and the Bank. Transactions
between the Company or the Bank, on one hand, and any officer, director,
principal shareholder, or other affiliate of the Company or the Bank, on the
other hand, will be on terms no less favorable to the Company or the Bank than
could be obtained on an arm's-length basis from unaffiliated third parties.
25
<PAGE> 27
PRINCIPAL SHAREHOLDERS
The Company has to date issued only one share of Common Stock. The
following table sets forth the anticipated beneficial ownership of the Common
Stock after the sale of the shares offered hereby by (i) each person expected by
the Company to beneficially own more than 5% of the outstanding Common Stock,
(ii) each director of the Company, (iii) each of the Company's executive
officers and (iv) all current directors and executive officers of the Company as
a group. Pursuant to the Underwriting Agreement between the Company and the
underwriters (the "Underwriting Agreement"), the Company will direct the
underwriters to offer to sell the number of shares listed below to the directors
and executive officers listed below. All share numbers are provided based upon
such directions from the Company and non-binding expressions of interest
supplied by the directors and executive officers. Depending upon their
individual circumstances at the time, each of such persons may purchase a
greater or fewer number of shares than indicated, and in fact may purchase no
shares.
<TABLE>
<CAPTION>
AFTER OFFERING
------------------------------------
NUMBER OF SHARES PERCENTAGE
NAME AND ADDRESS BENEFICIALLY OWNED(1) OF CLASS(2)
---------------- --------------------- -----------
<S> <C> <C>
Curtis A. Brown.............................................
7626 Lissa Court
Fort Wayne, Indiana 46804
Keith E. Busse..............................................
4500 County Road 59
Butler, Indiana 46721
Peter T. Eshelman...........................................
142 North Main Street
Roanoke, Indiana 46783
Michael S. Gouloff..........................................
111 East Wayne Street
Fort Wayne, Indiana 46802
Craig S. Hartman............................................
4031 Transportation Drive
Fort Wayne, Indiana 46818
Jerome F. Henry, Jr.........................................
1702 Winter Street
Fort Wayne, Indiana 46803
Kevin J. Himmelhaver........................................
9119 Bradenton Road
Fort Wayne, Indiana 46835
Michael Mirro, M.D..........................................
1819 Carew Street
Fort Wayne, Indiana 46805
Debra A. Niezer.............................................
12515 Chapelwood Place
Fort Wayne, Indiana 46845
William G. Niezer...........................................
1721 Magnavox Way
Fort Wayne, Indiana 46801
Maurice D. O'Daniel.........................................
5611 Illinois Road
Fort Wayne, Indiana 46801
</TABLE>
26
<PAGE> 28
<TABLE>
<CAPTION>
AFTER OFFERING
------------------------------------
NUMBER OF SHARES PERCENTAGE
NAME AND ADDRESS BENEFICIALLY OWNED(1) OF CLASS(2)
---------------- --------------------- -----------
<S> <C> <C>
Leonard Rifkin..............................................
1610 North Calhoun Street
Fort Wayne, Indiana 46802
Joseph D. Ruffolo...........................................
200 East Main Street
Fort Wayne, Indiana 46802
Donald F. Schenkel..........................................
10710 Country Wood Trail
Fort Wayne, Indiana 46845
Larry L. Smith..............................................
1410 Wohlert Street
Angola, Indiana 46703
John V. Tippmann, Sr........................................
9009 Coldwater Road
Fort Wayne, Indiana 46825
J. Richard Tomkinson........................................
4140 Coldwater Road
Fort Wayne, Indiana 46825
Irene A. Walters............................................
2101 East Coliseum Boulevard
Fort Wayne, Indiana 46805
Directors and executive officers of the Company as a group
(18 persons)..............................................
</TABLE>
- -------------------------
* Less than one percent.
(1) Some or all of the Common Stock listed may be held jointly with, or for the
benefit of, spouses and children of, or various trusts established by, the
person indicated.
(2) The percentages shown are based on the 2,000,000 shares offered hereby,
assuming no exercise of the underwriters' over-allotment option.
SUPERVISION AND REGULATION
GENERAL
Financial institutions and their holding companies are extensively
regulated under federal and state law. Consequently, the growth and earnings
performance of the Company and the Bank can be affected not only by management
decisions and general economic conditions, but also by the statutes administered
by, and the regulations and policies of, various governmental regulatory
authorities. Those authorities include, but are not limited to, the Federal
Reserve Board, the FDIC, the Department, the Internal Revenue Service and state
taxing authorities. The effect of such statutes, regulations and policies can be
significant and cannot be predicted with a high degree of certainty.
Federal and state laws and regulations generally applicable to financial
institutions and their holding companies regulate, among other things, the scope
of business, investments, reserves against deposits, capital levels relative to
operations, lending activities and practices, the nature and amount of
collateral for loans, the establishment of branches, mergers, consolidations and
dividends. The system of supervision and regulation applicable to the Company
and the Bank establishes a comprehensive framework for their respective
operations and is intended primarily for the protection of the FDIC's deposit
insurance funds, the depositors of the Bank and the public, rather than
shareholders of the Bank or the Company.
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<PAGE> 29
Federal law and regulations, including provisions added by the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") and regulations
promulgated thereunder, establish supervisory standards applicable to the
lending activities of the Bank, including internal controls, credit
underwriting, loan documentation and loan-to-value ratios for loans secured by
real property.
The following references to statutes and regulations are intended to
summarize certain government regulation of the business of the Company and the
Bank and are qualified by reference to the text of such statutes and
regulations. Any change in government regulation may have a material adverse
effect on the business of the Company and the Bank.
THE COMPANY
GENERAL. The Company is organizing the Bank as an Indiana chartered bank
with depository accounts to be insured by the FDIC and as a member of the
Federal Reserve System. On , 1998, the Department issued an order
approving the application to establish the Bank. On , 1998,
the Bank's application for FDIC deposit insurance was approved. The Company's
application to become a bank holding company for the Bank was approved by the
Federal Reserve Board on , 1998, and the Bank's application
to become a member of the Federal Reserve System was approved by the Federal
Reserve Board on , 1998. These approvals were issued subject
to the satisfaction of certain conditions that the Company believes are
customary, including conditions relating to capitalization of the Bank and
continuing capital adequacy. The Company and the Bank expect to satisfy such
conditions and commence business in the first quarter of 1999.
When the Company becomes the sole shareholder of the Bank, the Company will
be a bank holding company and, as such, will be required to register with, and
will be subject to regulation by, the Federal Reserve Board under the federal
Bank Holding Company Act of 1956, as amended (the "BHCA"). Under the BHCA, the
Company will be subject to examination by the Federal Reserve Board and will be
required to file reports of its operations and such additional information as
the Federal Reserve Board may require.
In accordance with Federal Reserve Board policy, the Company will be
expected to act as a source of financial strength to the Bank and to commit
resources to support the Bank in circumstances where the Company might not do so
absent such policy. In addition, in certain circumstances, an Indiana banking
corporation may be required by order of the Department to increase the sound
capital of the bank or reduce the amount of its deposits.
Any loans by a bank holding company to a subsidiary bank are subordinate in
right of payment to deposits and to certain other indebtedness of such
subsidiary bank. In the event of a bank holding company's bankruptcy, any
commitment by the bank holding company to a federal bank regulatory agency to
maintain the capital of a subsidiary bank will be assumed by the bankruptcy
trustee and entitled to a priority of payment. This priority would also apply to
guarantees of capital plans under FDICIA.
INVESTMENTS AND ACTIVITIES. Under the BHCA, bank holding companies are
prohibited, with certain limited exceptions, from engaging in activities other
than those of banking or of managing or controlling banks and from acquiring or
retaining direct or indirect ownership or control of voting shares or assets of
any company which is not a bank or bank holding company, other than subsidiary
companies furnishing services to or performing services for its subsidiaries,
and other subsidiaries engaged in activities which the Federal Reserve Board
determines to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto. Since September, 1995, the BHCA has
permitted the Federal Reserve Board under specified circumstances to approve the
acquisition, by a bank holding company located in one state, of a bank or bank
holding company located in another state, without regard to any prohibition
contained in state law. See "Recent Regulatory Developments."
In general, any direct or indirect acquisition by the Company of any voting
shares of any bank which would result in the Company's direct or indirect
ownership or control of more than 5% of any class of voting shares of such bank,
and any merger or consolidation of the Company with another bank holding
company, will require the prior written approval of the Federal Reserve Board
under the BHCA. In acting on such
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<PAGE> 30
applications, the Federal Reserve Board must consider various statutory factors,
including among others, the effect of the proposed transaction on competition in
relevant geographic and product markets, the convenience and needs of the
communities to be served and each party's financial condition, managerial
resources and record of performance under the Community Reinvestment Act.
The merger or consolidation of the Bank with another bank, or the
acquisition by the Bank of assets of another bank, or the assumption of
liability by the Bank to pay any deposits in another bank, will require the
prior written approval of the primary federal bank regulatory agency of the
acquiring or surviving bank under the federal Bank Merger Act based upon a
consideration of statutory factors similar to those outlined above with respect
to the BHCA. In addition, in certain such cases an application to, and the prior
approval of, the Federal Reserve Board under the BHCA and/or the Department
under the Indiana Financial Institutions Act, may be required.
With certain limited exceptions, the BHCA prohibits bank holding companies
from acquiring direct or indirect ownership or control of voting shares or
assets of any company other than a bank, unless the company involved is engaged
solely in one or more activities which the Federal Reserve Board has determined
to be so closely related to banking or managing or controlling banks as to be a
proper incident thereto. Under current Federal Reserve Board regulations, such
permissible non-bank activities include such things as mortgage banking,
equipment leasing, securities brokerage, and consumer and commercial finance
company operations. As a result of recent amendments to the BHCA, many types of
such acquisitions may be affected by those bank holding companies which satisfy
certain statutory criteria concerning management, capitalization, and regulatory
compliance, if written notice is given to the Federal Reserve Board within 10
business days after the transaction. In other cases, prior written notice to the
Federal Reserve Board will be required.
In evaluating a written notice of such an acquisition, the Federal Reserve
Board will consider various factors, including among others the financial and
managerial resources of the notifying bank holding company and the relative
public benefits and adverse effects which may be expected to result from the
performance of the activity by an affiliate of such company. The Federal Reserve
Board may apply different standards to activities proposed to be commenced de
novo and activities commenced by acquisition, in whole or in part, of a going
concern. The required notice period may be extended by the Federal Reserve Board
under certain circumstances, including a notice for acquisition of a company
engaged in activities not previously approved by regulation of the Federal
Reserve Board. If such a proposed acquisition is not disapproved or subjected to
conditions by the Federal Reserve Board within the applicable notice period, it
is deemed approved by the Federal Reserve Board.
CAPITAL REQUIREMENTS. The Federal Reserve Board uses capital adequacy
guidelines in its examination and regulation of bank holding companies. If
capital falls below minimum guidelines, a bank holding company may, among other
things, be denied approval to acquire or establish additional banks or non-bank
businesses.
The Federal Reserve Board's capital guidelines establish the following
minimum regulatory capital requirements for bank holding companies: (i) a
leverage capital requirement expressed as a percentage of total assets, (ii) a
risk-based requirement expressed as a percentage of total risk-weighted assets,
and (iii) a Tier 1 leverage requirement expressed as a percentage of total
assets. The leverage capital requirement consists of a minimum ratio of total
capital to total assets of 6%, with an expressed expectation that banking
organizations generally should operate above such minimum level. The risk-based
requirement consists of a minimum ratio of total capital to total risk-weighted
assets of 8%, of which at least one-half must be Tier 1 capital (which consists
principally of shareholders' equity). The Tier 1 leverage requirement consists
of a minimum ratio of Tier 1 capital to total assets of 3% for the most
highly-rated companies, with minimum requirements of 4% to 5% for all others.
The risk-based and leverage standards presently used by the Federal Reserve
Board are minimum requirements, and higher capital levels will be required if
warranted by the particular circumstances or risk profiles of individual banking
organizations. Further, any banking organization experiencing or anticipating
significant growth would be expected to maintain capital ratios, including
tangible capital positions (i.e., Tier 1 capital less all intangible assets),
well above the minimum levels.
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The Federal Reserve Board's regulations provide that the foregoing capital
requirements will generally be applied on a bank-only (rather than a
consolidated) basis in the case of a bank holding company with less than $150
million in total consolidated assets. On a pro forma basis, because the Company
will not have any debt outstanding and assuming the issuance and sale by the
Company of the 2,000,000 shares of Common Stock offered hereby at $10.00 per
share, the Company's leverage capital ratio, risk-based capital ratio and Tier 1
leverage ratio immediately after the Offering, in each case as calculated on a
consolidated basis and a bank-only basis under the Federal Reserve Board's
capital guidelines, would exceed the minimum requirements.
FDICIA requires the federal bank regulatory agencies biennially to review
risk-based capital standards to ensure that they adequately address interest
rate risk, concentration of credit risk and risks from non-traditional
activities and, since adoption of the Riegle Community Development and
Regulatory Improvement Act of 1994 (the "Riegle Act"), to do so taking into
account the size and activities of depository institutions and the avoidance of
undue reporting burdens. See "Recent Regulatory Developments." In 1995, the
agencies adopted regulations requiring as part of the assessment of an
institution's capital adequacy the consideration of: (i) identified
concentrations of credit risks, (ii) the exposure of the institution to a
decline in the value of its capital due to changes in interest rates, and (iii)
the application of revised conversion factors and netting rules on the
institution's potential future exposure from derivative transactions. In
addition, the agencies in September 1996, adopted amendments to their respective
risk-based capital standards to require banks and bank holding companies having
significant exposure to market risk arising from, among other things, trading of
debt instruments, (i) to measure that risk using an internal value-at-risk model
conforming to the parameters established in the agencies' standards and (ii) to
maintain a commensurate amount of additional capital to reflect such risk. The
new rules were adopted effective January 1, 1997, with compliance mandatory from
and after January 1, 1998.
DIVIDENDS. The Company is a corporation separate and distinct from the
Bank. Most of the Company's revenues will be received by it in the form of
dividends or interest paid by the Bank. The Bank is subject to statutory
restrictions on its ability to pay dividends. See "-- The Bank -- Dividends."
The Federal Reserve Board has issued a policy statement on the payment of cash
dividends by bank holding companies. In the policy statement, the Federal
Reserve Board expressed its view that a bank holding company should not pay cash
dividends exceeding its net income or which could only be funded in ways that
weakened the bank holding company's financial health, such as by borrowing.
Additionally, the Federal Reserve Board possesses enforcement powers over bank
holding companies and their non-bank subsidiaries to prevent or remedy actions
that represent unsafe or unsound practices or violations of applicable statutes
and regulations. Among these powers is the ability in appropriate cases to
proscribe the payment of dividends by banks and bank holding companies. The
Federal Reserve Board and the Department possess similar enforcement powers over
the Bank. It is also unlawful for any insured depository institution to pay a
dividend at a time when it is in default of payment of any assessment to the
FDIC. The "prompt corrective action" provisions of FDICIA impose further
restrictions on the payment of dividends by insured banks which fail to meet
specified capital levels and, in some cases, their parent bank holding
companies.
In addition to the restrictions on dividends imposed by the Federal Reserve
Board, the Indiana Business Corporation Law imposes certain restrictions on the
declaration and payment of dividends by Indiana corporations such as the
Company. See "Dividend Policy."
THE BANK
GENERAL. Upon completion of its organization, the Bank will be an Indiana
banking corporation, and a member of the Federal Reserve System. As a
state-chartered, member bank, the Bank will be subject to the examination,
supervision, reporting and enforcement jurisdiction of the Department, as the
chartering authority for Indiana banks, and the Federal Reserve Board, as the
primary federal bank regulatory agency for state-chartered, member banks. The
Bank's deposit accounts will be insured by the Bank Insurance Fund ("BIF") of
the FDIC, which has supervision, reporting and enforcement jurisdiction over BIF
insured banks. These agencies, and federal and state law, extensively regulate
various aspects of the banking business including, among other things,
permissible types and amounts of loans, investments and other activities,
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<PAGE> 32
capital adequacy, branching, interest rates on loans and on deposits, the
maintenance of non-interest bearing reserves on deposit accounts and the safety
and soundness of banking practices.
DEPOSIT INSURANCE. As an FDIC-insured institution, the Bank will be
required to pay deposit insurance premium assessments to the FDIC. Pursuant to
FDICIA, the FDIC adopted a risk-based assessment system under which all insured
depository institutions are placed into one of nine categories and assessed
insurance premiums based upon their level of capital and supervisory evaluation.
Institutions classified as well-capitalized (as defined by the FDIC) and not
exhibiting financial, operational or compliance weaknesses pay the lowest
premium, while institutions that are less than well-capitalized (as defined by
the FDIC) and exhibit such weaknesses in a moderately severe to unsatisfactory
degree pay the highest premium. Risk classification of all insured institutions
is made by the FDIC for each semi-annual assessment period.
The FDIC is required to establish semi-annual assessment rates so as to
maintain the ratio of each deposit insurance fund to total estimated insured
deposits at not less than 1.25%. Currently, the FDIC has established a schedule
of BIF insurance assessments ranging from 0% of deposits for institutions in the
highest category to .27% of deposits for institutions in the lowest category.
The FDIC may terminate the deposit insurance of any insured depository
institution if the FDIC determines, after a hearing, that the institution or its
directors have engaged or are engaging in unsafe or unsound practices, or have
violated any applicable law, regulation, order or any condition imposed in
writing by, or written agreement with, the FDIC, or if the institution is in an
unsafe or unsound condition to continue operations. The FDIC may also suspend
deposit insurance temporarily during the hearing process for a permanent
termination of insurance if the institution has no tangible capital.
CAPITAL REQUIREMENTS. The Federal Reserve Board has established the
following minimum capital standards for state-chartered, member banks, such as
the Bank: a leverage requirement consisting of a minimum ratio of Tier 1 capital
to total assets of 3% for the most highly-rated banks with minimum requirements
of 4% to 5% for all others, and a risk-based capital requirement consisting of a
minimum ratio of total capital to total risk-weighted assets of 8%, at least
one-half of which must be Tier 1 capital. Tier 1 capital consists principally of
shareholders' equity. In addition, the Federal Reserve Board has adopted
requirements for each state-chartered, member bank whose "trading activity" (the
sum of "trading assets and liabilities") as shown on its most recent
Consolidated Report of Condition and Income ("Call Report") exceeds either 10%
or more of its total assets or $1 billion, (i) to measure its market risk using
an internal value-at-risk model conforming to the FDIC's capital standards, and
(ii) to maintain a commensurate amount of additional capital to reflect such
risk.
The capital requirements described above are minimum requirements. Higher
capital levels will be required if warranted by the particular circumstances or
risk profiles of individual institutions. As a condition to the regulatory
approvals of the Bank's formation, the Bank will be required to have an initial
capitalization sufficient to provide a ratio of Tier 1 capital to total
estimated assets of at least 8% at the end of the third year of operation.
The Federal Deposit Insurance Act (the "FDIA") establishes five capital
categories, and the federal bank regulatory agencies, as directed by the FDIA,
have adopted, subject to certain exceptions, the following minimum requirements
for each of such categories:
<TABLE>
<CAPTION>
TOTAL RISK-BASED TIER 1 RISK-BASED
CAPITAL RATIO CAPITAL RATIO LEVERAGE RATIO
---------------- ----------------- --------------
<S> <C> <C> <C>
Well capitalized.......................... 10% or above 6% or above 5% or above
Adequately capitalized.................... 8% or above 4% or above 4% or above
Undercapitalized.......................... Less than 8% Less than 4% Less than 4%
Significantly undercapitalized............ Less than 6% Less than 3% Less than 3%
Critically undercapitalized............... -- -- A ratio of tangible
equity to total assets
of 2% or less
</TABLE>
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Subject to certain exceptions, these capital ratios are generally
determined on the basis of Call Reports submitted by each depository institution
and the reports of examination of the appropriate federal bank regulatory
agency.
Among other things, the FDIA requires the federal bank regulatory agencies
to take prompt corrective action in respect of depository institutions that do
not meet minimum capital requirements. The scope and degree of regulatory
intervention is linked to the capital category to which a depository institution
is assigned.
Depending upon the capital category to which an institution is assigned,
the regulators' corrective powers include: requiring the submission of a capital
restoration plan; placing limits on asset growth and restrictions on activities;
requiring the institution to issue additional capital stock (including
additional voting stock) or to be acquired; restricting transactions with
affiliates; restricting the interest rate the institution may pay on deposits;
ordering a new election of directors of the institution; requiring that senior
executive officers or directors be dismissed; prohibiting the institution from
accepting deposits from correspondent banks; requiring the institution to divest
certain subsidiaries; prohibiting the payment of principal or interest on
subordinated debt; and, ultimately, appointing a receiver for the institution.
In general, a depository institution may be reclassified to a lower
category than is indicated by its capital position if the appropriate federal
depository institution regulatory agency determines the institution to be
otherwise in an unsafe or unsound condition or to be engaged in an unsafe or
unsound practice. This could include a failure by the institution, following
receipt of a less-than-satisfactory rating on its most recent examination
report, to correct the deficiency.
DIVIDENDS. As a banking corporation organized under Indiana law, the Bank
will be restricted as to the maximum amount of dividends it may pay to the
Company. Indiana law prohibits the Bank from declaring or paying dividends that
would impair the Bank's capital or that would be greater than its undivided
profits. In addition, the prior approval of the Department is required for the
payment of any dividend if the aggregate amount of all dividends paid by the
Bank during such calendar year, including the proposed dividend, would exceed
the sum of the retained net income of the Bank for the year to date and previous
two years.
The FDIA generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the depository institution would thereafter be
undercapitalized. The FDIC may prevent an insured bank from paying dividends if
the bank is in default of payment of any assessment due to the FDIC. In
addition, payment of dividends by a bank may be prevented by the applicable
federal regulatory authority if such payment is determined, by reason of the
financial condition of such bank, to be an unsafe and unsound banking practice.
As described above, the Federal Reserve Board has issued a policy statement
providing that bank holding companies and insured banks should generally only
pay dividends out of current operating earnings.
INSIDER TRANSACTIONS. The Bank is subject to certain federal and state
statutory and regulatory restrictions on any extensions of credit to the Company
or its subsidiaries, on investments in the stock or other securities of the
Company or its subsidiaries, and on the acceptance of the stock or other
securities of the Company or its subsidiaries as collateral for loans to any
person. Certain limitations and reporting requirements are also placed on
extensions of credit by the Bank to its directors and officers, to directors and
officers of the Company and its subsidiaries, to principal shareholders of the
Company, and to "related interests" of such directors, officers and principal
shareholders. In addition, such legislation and regulations may affect the terms
upon which any person becoming a director or officer of the Company or one of
its subsidiaries or a principal shareholder of the Company may obtain credit
from banks with which the Bank maintains a correspondent relationship.
SAFETY AND SOUNDNESS STANDARDS. On July 10, 1995, the FDIC, the Office of
Thrift Supervision, the Federal Reserve Board and the Office of the Comptroller
of the Currency published final guidelines implementing the FDICIA requirement
that the federal banking agencies establish operational and managerial standards
to promote the safety and soundness of federally insured depository
institutions. The guidelines, which took effect on August 9, 1995, establish
standards for internal controls, information systems, internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset growth,
and compensation, fees and benefits. In general, the guidelines prescribe the
goals to be achieved in each area, and each
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<PAGE> 34
institution will be responsible for establishing its own procedures to achieve
those goals. If an institution fails to comply with any of the standards set
forth in the guidelines, the institution's primary federal bank regulator may
require the institution to submit a plan for achieving and maintaining
compliance. The preamble to the guidelines states that the agencies expect to
require a compliance plan from an institution whose failure to meet one or more
of the standards is of such severity that it could threaten the safe and sound
operation of the institution. Failure to submit an acceptable compliance plan,
or failure to adhere to a compliance plan that has been accepted by the
appropriate regulator, would constitute grounds for further enforcement action.
Effective October 1, 1996, the agencies expanded the guidelines to establish
asset quality and earnings standards. As before, the expanded guidelines make
each depository institution responsible for establishing its own procedures to
meet such goals.
STATE BANK ACTIVITIES. Under FDICIA, as implemented by final regulations
adopted by the FDIC, FDIC-insured state banks are prohibited, subject to certain
exceptions, from making or retaining equity investments of a type, or in an
amount, that are not permissible for a national bank. FDICIA, as implemented by
FDIC regulations, also prohibits FDIC-insured state banks and their
subsidiaries, subject to certain exceptions, from engaging as principal in any
activity that is not permitted for a national bank or its subsidiary,
respectively, unless the bank meets, and continues to meet its minimum
regulatory capital requirements and the FDIC determines the activity would not
pose a significant risk to the deposit insurance fund of which the bank is a
member. Impermissible investments and activities must be divested or
discontinued within certain time frames set by the FDIC in accordance with
FDICIA. These restrictions are not currently expected to have a material impact
on the operations of the Bank.
CONSUMER BANKING. The Bank's business will include making a variety of
types of loans to individuals. In making these loans, the Bank will be subject
to state usury and regulatory laws and to various federal statutes, such as the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in
Lending Act, the Real Estate Settlement Procedures Act and the Home Mortgage
Disclosure Act, and the regulations promulgated thereunder, which prohibit
discrimination, specify disclosures to be made to borrowers regarding credit and
settlement costs and regulate the mortgage loan servicing activities of the
Bank, including the maintenance and operation of escrow accounts and the
transfer of mortgage loan servicing. The Riegle Act imposed new escrow
requirements on depository and non-depository mortgage lenders and servicers
under the National Flood Insurance Program. See "Recent Regulatory
Developments." In receiving deposits, the Bank will be subject to extensive
regulation under state and federal law and regulations, including the Truth in
Savings Act, the Expedited Funds Availability Act, the Bank Secrecy Act, the
Electronic Funds Transfer Act, and the FDIA. Violation of these laws could
result in the imposition of significant damages and fines upon the Bank, its
directors and officers.
MONETARY POLICIES. The commercial banking business is affected not only by
general economic conditions but also by the monetary policies of the Federal
Reserve Board. The instruments of monetary policy employed by the Federal
Reserve Board include open market operations in United States Government
securities, changes in the discount rate on member bank borrowing and changes in
reserve requirements against deposits held by all federally insured banks.
Federal Reserve Board monetary policies have had a significant effect on the
operating results of commercial banks in the past and are expected to continue
to do so in the future. In view of changing conditions in the national economy
and in the money markets, as well as the effect of actions by monetary fiscal
authorities, including the Federal Reserve Board, no prediction can be made as
to possible future changes in interest rates, deposit levels, loan demand or the
business and earnings of the Bank.
COMMUNITY REINVESTMENT ACT. Under the Community Reinvestment Act (the
"CRA") and the implementing regulations, the Bank will have a continuing and
affirmative obligation to help meet the credit needs of its local community,
including low and moderate-income neighborhoods, consistent with the safe and
sound operation of the institution. The CRA requires the board of directors of
financial institutions, such as the Bank, to adopt a CRA statement for each
assessment area that, among other things, describes its efforts to help meet
community credit needs and the specific types of credit that the institution is
willing to extend. The Bank's service area initially was designated as Wayne
Township in Allen County, Indiana. The Bank's office will be located in Allen
County. The Bank's Board of Directors is required to review the appropriateness
of this delineation at least annually.
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RECENT REGULATORY DEVELOPMENTS
In 1994, the Congress enacted two major pieces of banking legislation, the
Riegle Act and the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 (the "Riegle-Neal Act"). The Riegle Act addressed such varied issues as
the promotion of economic revitalization of defined urban and rural "qualified
distressed communities" through special purpose "Community Development Financial
Institutions," the expansion of consumer protection with respect to certain
loans secured by a consumer's home and reverse mortgages, and reductions in
compliance burdens regarding Currency Transaction Reports, in addition to reform
of the National Flood Insurance Program, the promotion of a secondary market for
small business loans and leases, and mandating specific changes to reduce
regulatory impositions on depository institutions and holding companies.
The Riegle-Neal Act substantially changed the geographic constraints
applicable to the banking industry. Effective September 29, 1995, the
Riegle-Neal Act allows bank holding companies to acquire banks located in any
state in the United States without regard to geographic restrictions or
reciprocity requirements imposed by state law, but subject to certain
conditions, including limitations on the aggregate amount of deposits that may
be held by the acquiring holding company and all of its insured depository
institution affiliates. Effective June 1, 1997 (or earlier if expressly
authorized by applicable state law), the Riegle-Neal Act allows banks to
establish interstate branch networks through acquisitions of other banks,
subject to certain conditions, including certain limitations on the aggregate
amount of deposits that may be held by the surviving bank and all of its insured
depository institution affiliates. The establishment of de novo interstate
branches or the acquisition of individual branches of a bank in another state
(rather than the acquisition of an out-of-state bank in its entirety) is allowed
by the Riegle-Neal Act only if specifically authorized by state law. The
legislation allowed individual states to "opt-out" of certain provisions of the
Riegle-Neal Act by enacting appropriate legislation prior to June 1, 1997.
In 1996, Indiana authorized out-of-state banks to establish branch offices
in Indiana. The Indiana Financial Institutions Act now permits, in appropriate
circumstances, (a) with the approval of the Department, (i) the acquisition of
all or substantially all of the assets of an Indiana-chartered bank by an FDIC-
insured bank, savings bank or savings association located in another state, (ii)
the acquisition by an Indiana-chartered bank of all or substantially all of the
assets of an FDIC-insured bank, savings bank or savings association located in
another state, (iii) the consolidation of one or more Indiana-chartered banks
and FDIC-insured banks, savings banks or savings associations located in other
states having laws permitting such consolidation, with the resulting
organization chartered by Indiana, and (iv) the organization of a branch in
Indiana by FDIC-insured banks located in other states, the District of Columbia
or U.S. territories or protectorates having laws permitting an Indiana-chartered
bank to establish a branch in such jurisdiction, and (b) upon written notice to
the Department, (i) the acquisition by an Indiana-chartered bank of one or more
branches (not comprising all or substantially all of the assets) of an
FDIC-insured bank, savings bank or savings association located in another state,
the District of Columbia, or a U.S. territory or protectorate, (ii) the
establishment by Indiana-chartered banks of branches located in other states,
the District of Columbia, or U.S. territories or protectorates, and (iii) the
consolidation of one or more Indiana-chartered banks and FDIC-insured banks,
savings banks or savings associations located in other states, with the
resulting organization chartered by one of such other states, and (c) the sale
by an Indiana-chartered bank of one or more of its branches (not comprising all
or substantially all of its assets) to an FDIC-insured bank, savings bank or
savings association located in a state in which an Indiana-chartered bank could
purchase one or more branches of the purchasing entity.
FDIC regulations impose limitations (and in certain cases, prohibitions) on
(i) certain "golden parachute" severance payments by troubled depository
institutions and their affiliated holding companies to institution-affiliated
parties (primarily directors, officers, employees, or principal shareholders of
the institution), and (ii) certain indemnification payments by a depository
institution or its affiliated holding company, regardless of financial
condition, to institution-affiliated parties. The FDIC regulations impose
limitations on indemnification payments which could restrict, in certain
circumstances, payments by the Company or the Bank to their respective directors
or officers otherwise permitted under the Indiana Business Corporation Law
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or the Indiana Financial Institutions Act, respectively. See "Description of
Capital Stock -- Indemnification of Directors and Officers."
The Omnibus Consolidated Appropriations Act, 1997 ("OCCA"), was enacted
September 30, 1996. It amended many of the principal federal laws regulating
banks and bank holding companies. As part of the projected conversion or closure
of all thrift institutions in the United States, OCCA modified existing laws (a)
to impose a special, one-time assessment on all deposits insured by the Savings
Association Insurance Fund ("SAIF") of the FDIC to bring the SAIF reserves to
the statutory minimum ratio of 1.25% of all SAIF-insured deposits, (b) to permit
the financing corporation to impose (in the same manner as regular FDIC
insurance assessments) assessments upon commercial banks to fund repayment of
its bonds which had been issued to pay for losses resulting from widespread
failures of thrift institutions during the 1980's, (c) to prohibit shifting
deposits from SAIF insurance to BIF insurance and (d) to merge, prospectively,
the BIF and SAIF into a single deposit insurance fund. The merger of the funds
will occur on January 1, 1999, if no insured depository institution remains a
savings association on that date. There can be no assurance whether or when the
merger of the BIF and SAIF will in fact occur.
OCCA also amended the BHCA (a) to eliminate the requirement of prior
written notice to the Federal Reserve Board by well-capitalized and well-managed
bank holding companies meeting certain statutory criteria wishing to engage de
novo (or in certain cases through acquisition) in a non-banking activity already
permitted by order or regulation of the Federal Reserve Board, (b) to shorten to
12 business days the prior written notice to the Federal Reserve Board required
from well-managed and well-capitalized bank holding companies meeting such
criteria for other acquisitions of non-banking companies engaged in non-banking
activities so permitted and (c) to eliminate the opportunity for a hearing on
applications to the Federal Reserve Board for permission to engage in
non-banking activities (other than the acquisition of a savings association).
Among the other changes made by OCCA, the statute (a) increased the number
of banks exempted from compliance with the record-keeping and reporting
requirements of the Home Mortgage Disclosure Act and eligible for an 18-month
cycle of regulatory examinations by increasing the total assets cut-off in each
case, (b) simplified the disclosure requirements for residential mortgage loans
by harmonizing the requirements of the Truth-in-Lending Act and Real Estate
Settlement Procedures Act, (c) substantially re-wrote the Fair Credit Reporting
Act and (d) expanded the authority of the Federal Reserve Board under the
Consumer Leasing Act and directed the Board to issue model disclosure forms for
use in leasing personal property.
DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock does not purport
to be complete and is subject in all respects to applicable Indiana law and to
the provisions of the Company's Restated Articles of Incorporation and By-Laws,
copies of which have been filed as exhibits to the Registration Statement of
which this Prospectus is a part.
The authorized capital stock of the Company consists of 6,000,000 shares of
Common Stock and 4,000,000 shares of Preferred Stock. Upon consummation of the
Offering, and assuming no exercise of the underwriters' over-allotment option,
there will be 2,000,000 shares of Common Stock issued and outstanding and no
shares of Preferred Stock issued and outstanding. An additional
shares of Common Stock will be issuable upon exercise of outstanding options
granted under the 1998 Stock Option Plan. See "Executive Compensation -- 1998
Stock Option and Incentive Plan." Immediately prior to the Offering, only one
share of Common Stock is outstanding.
COMMON STOCK
Each holder of Common Stock will be entitled to one vote per share of
record on all matters to be voted upon by the stockholders. Holders will not
have cumulative voting rights in connection with the election of directors or
any other matter. Subject to the preferential rights of the holders of any
Preferred Stock that may at the time be outstanding, each share of Common Stock
will entitle the holder thereof to an equal and ratable
35
<PAGE> 37
right to receive dividends when, if and as declared from time to time by the
Board of Directors out of funds legally available therefor. The Company does not
anticipate paying cash dividends in the foreseeable future. See "Dividend
Policy."
In the event of the liquidation, dissolution or winding up of the Company,
the holders of Common Stock will be entitled to share ratably in all assets
remaining after payments to creditors and after satisfaction of the liquidation
preference, if any, of the holders of any Preferred Stock that may at the time
be outstanding. Holders of Common Stock will have no preemptive or redemption
rights and will not be subject to further calls or assessments by the Company.
All of the shares of Common Stock to be issued and sold in the Offering will be,
immediately upon consummation of the Offering, validly issued, fully paid and
nonassessable.
PREFERRED STOCK
The authorized Preferred Stock is available for issuance from time to time
at the discretion of the Board of Directors without shareholder approval. The
Board of Directors has the authority to prescribe for each series of Preferred
Stock it establishes the number of shares in that series, the number of votes
(if any) to which the shares in that series are entitled, the consideration for
the shares in that series, and the designations, powers, preferences and other
rights, qualifications, limitations or restrictions of the shares in that
series. Depending upon the rights prescribed for a series of Preferred Stock,
the issuance of Preferred Stock could have an adverse effect on holders of
Common Stock by delaying or preventing a change in control of the Company,
making removal of the present management of the Company more difficult or
imposing restrictions upon the payment of dividends and other distributions to
the holders of Common Stock.
AUTHORIZED BUT UNISSUED SHARES
Indiana law does not require shareholder approval for any issuance of
authorized shares. Authorized but unissued shares may be used for a variety of
corporate purposes, including future public or private offerings to raise
additional capital or to facilitate corporate acquisitions. One of the effects
of the existence of authorized but unissued shares may be to enable the Board of
Directors to issue shares to persons friendly to current management, which
issuance could render more difficult or discourage an attempt to obtain control
of the Company by means of a merger, tender offer, proxy contest or otherwise,
and thereby protect the continuity of the Company's management and possibly
deprive the shareholders of opportunities to sell their shares of Common Stock
at prices higher than prevailing market prices.
CERTAIN PROVISIONS OF RESTATED ARTICLES OF INCORPORATION AND BY-LAWS
Certain provisions of the Company's Restated Articles of Incorporation and
By-Laws may delay or make more difficult unsolicited acquisitions or changes of
control of the Company. Such provisions could have the effect of discouraging
third parties from making proposals involving an unsolicited acquisition or
change in control of the Company, although such proposals, if made, might be
considered desirable by a majority of the Company's shareholders. Such
provisions may also have the effect of making it more difficult for third
parties to cause the replacement of the current management of the Company
without the concurrence of the Board of Directors. These provisions include: (i)
the division of the Board of Directors into three classes serving "staggered"
terms of office of three years (see "Management -- Directors and Officers");
(ii) the availability of authorized but unissued shares of stock for issuance
from time to time at the discretion of the Board of Directors (see "--
Authorized But Unissued Shares"); (iii) provisions allowing the removal of
directors only for cause and only upon a 66 2/3% shareholder vote taken at a
meeting called for that purpose; (iv) provisions which require the participation
of 80% of the voting power of the outstanding Common Stock in order for the
shareholders to demand the calling of a special meeting of shareholders; and (v)
requirements for advance notice for raising business or making nominations at
shareholders' meetings.
The Company's By-Laws establish an advance notice procedure with regard to
business to be brought before an annual or special meeting of shareholders of
the Company and with regard to the nomination, other than by or at the direction
of the Board of Directors, of candidates for election as directors. Although the
Company's By-Laws do not give the Board of Directors any power to approve or
disapprove shareholder
36
<PAGE> 38
nominations for the election of directors or proposals for action, they may have
the effect of precluding a contest for the election of directors or the
consideration of shareholder proposals if the established procedures are not
followed, and of discouraging or deterring a third party from conducting a
solicitation of proxies to elect its own slate of directors or to approve its
proposal without regard to whether consideration of such nominees or proposals
might be harmful or beneficial to the Company and its shareholders.
CERTAIN PROVISIONS OF INDIANA LAW
The Indiana Business Corporation Law (the "IBCL") applies to the Company as
an Indiana corporation. Under certain circumstances, the following provisions of
the IBCL may delay, prevent or make more difficult unsolicited acquisition or
changes of control of the Company. Such provisions also may have the effect of
preventing changes in the management of the Company. It is possible that such
provisions could make it more difficult to accomplish transactions which
shareholders may otherwise deem to be in their best interests.
CONTROL SHARE ACQUISITIONS. Pursuant to Sections 23-1-42-1 to 23-1-42-11 of
the IBCL, an "acquiring person" who makes a "control share acquisition" in an
"issuing public corporation" may not exercise voting rights on any "control
shares" unless such voting rights are conferred by a majority vote of the
disinterested shareholders of the issuing corporation at a special meeting of
such shareholders held upon the request and at the expense of the acquiring
person. In the event that control shares acquired in a control share acquisition
are accorded full voting rights and the acquiring person acquires control shares
with a majority or more of all voting power, all shareholders of the issuing
corporation have dissenters' rights to receive the fair value of their shares.
Under the IBCL, "control shares" means shares acquired by a person that, when
added to all other shares of the issuing public corporation owned by that person
or in respect to which that person may exercise or direct the exercise of voting
power, would otherwise entitle that person to exercise voting power of the
issuing public corporation in the election of directors within any of the
following ranges: (i) one-fifth or more but less than one-third; (ii) one-third
or more but less than a majority; or (iii) a majority or more. "Control share
acquisition" means, subject to certain exceptions, the acquisition, directly or
indirectly, by any person of ownership of, or the power to direct the exercise
of voting power with respect to, issued and outstanding control shares. Shares
acquired within 90 days or pursuant to a plan to make a control share
acquisition are considered to have been acquired in the same acquisition.
"Issuing public corporation" means a corporation which is organized in Indiana,
has 100 or more shareholders, its principal place of business, its principal
office or substantial assets within Indiana and either (i) more than 10% of its
shareholders resident in Indiana, (ii) more than 10% of its shares owned by
Indiana residents or (iii) 10,000 shareholders resident in Indiana. The above
provisions do not apply if, before a control share acquisition is made, the
corporation's articles of incorporation or by-laws (including a board adopted
by-law) provide that they do not apply. The Company's Restated Articles of
Incorporation and By-Laws do not exclude the Company from the restrictions
imposed by such provisions.
CERTAIN BUSINESS COMBINATIONS. Sections 23-1-43-1 to 23-1-43-23 of the IBCL
restrict the ability of a "resident domestic corporation" to engage in any
combinations with an "interested shareholder" for five years after the
interested shareholder's date of acquiring shares unless the combination or the
purchase of shares by the interested shareholder on the interested shareholder's
date of acquiring shares is approved by the board of directors of the resident
domestic corporation before that date. If the combination was not previously
approved, the interested shareholder may effect a combination after the
five-year period only if such shareholder receives approval from a majority of
the disinterested shares or the offer meets certain fair price criteria. For
purposes of the above provisions, "resident domestic corporation" means an
Indiana corporation that has 100 or more shareholders. "Interested shareholder"
means any person, other than the resident domestic corporation or its
subsidiaries, who is (i) the beneficial owner, directly or indirectly, of 10% or
more of the voting power of the outstanding voting shares of the resident
domestic corporation or (ii) an affiliate or associate of the resident domestic
corporation and at any time within the five-year period immediately before the
date in question was the beneficial owner of 10% or more of the voting power of
the then outstanding shares of the resident domestic corporation. The above
provisions do not apply to corporations that so elect in an amendment to their
articles of incorporation approved by a majority of the disinterested shares.
Such an amendment, however, would not become effective until 18 months after its
passage and would apply only to
37
<PAGE> 39
stock acquisitions occurring after its effective date. The Company's Restated
Articles of Incorporation do not exclude the Company from the restrictions
imposed by such provisions.
DIRECTORS' DUTIES AND LIABILITY. Under Section 23-1-35-1 of the IBCL,
directors are required to discharge their duties: (i) in good faith; (ii) with
the care an ordinarily prudent person in a like position would exercise under
similar circumstances; and (iii) in a manner the directors reasonably believe to
be in the best interests of the Company. However, the IBCL also provides that a
director is not liable for any action taken as a director, or any failure to
act, unless the director has breached or failed to perform the duties of the
director's office and the action or failure to act constitutes willful
misconduct or recklessness. The exoneration from liability under the IBCL does
not affect the liability of directors for violations of the federal securities
laws.
Section 23-1-35-1 of the IBCL also provides that a board of directors, in
discharging its duties, may consider, in its discretion, both the long-term and
short-term best interests of the corporation, taking into account, and weighing
as the directors deem appropriate, the effects of an action on the corporation's
shareholders, employees, suppliers and customers and the communities in which
offices or other facilities of the corporation are located and any other factors
the directors consider pertinent. If a determination is made with the approval
of a majority of the disinterested directors of the board, that determination is
conclusively presumed to be valid unless it can be demonstrated that the
determination was not made in good faith after reasonable investigation. Once
the board has determined that the proposed action is not in the best interests
of the corporation, it has no duty to remove any barriers to the success of the
action, including a rights plan. Section 23-1-35-1 specifically provides that
certain judicial decisions in Delaware and other jurisdictions, which might be
looked upon for guidance in interpreting Indiana law, including decisions that
propose a higher or different degree of scrutiny in response to a proposed
acquisition of the corporation, are inconsistent with the proper application of
that section.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Restated Articles of Incorporation provide that, to the
extent not inconsistent with applicable law, the Company shall indemnify each of
its directors, officers, employees and agents against all liability and
reasonable expense that may be incurred by him or her in connection with or
resulting from any claim in which he or she may become involved by reason of the
fact that he or she is or was a director, officer, employee or agent of the
Company or by reason of any action taken or not taken by him or her in any such
capacity, if such person is wholly successful with respect to the claim or, if
not wholly successful, then if such person is determined to have acted in good
faith, in what he or she reasonably believed to be the best interests of the
Company (or at least not opposed to its best interests) and, in addition, with
respect to a criminal claim, is determined to have had reasonable cause to
believe that his or her conduct was lawful or had no reasonable cause to believe
that his or her conduct was unlawful.
FDIC regulations impose limitations on indemnification payments which could
restrict, in certain circumstances, payments by the Company or the Bank to their
respective directors or officers otherwise permitted or required under the IBCL
or the Company's Restated Articles of Incorporation.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the Company pursuant to the provisions
discussed above or otherwise, the Company has been advised that, in the opinion
of the Commission, such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is State Street Bank
& Trust Company, Boston, Massachusetts.
38
<PAGE> 40
SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to the Offering, the Company has one share of Common
Stock outstanding, which is held by a member of the Board of Directors. This
share of Common Stock shall be redeemed concurrently with the completion of the
Offering. Upon completion of the Offering, the Company expects to have 2,000,000
shares of Common Stock outstanding, all of which (plus any additional shares
sold upon the Underwriters' exercise of their over-allotment option) will have
been registered with the SEC under the Securities Act and will be eligible for
resale without registration under the Securities Act unless they were acquired
by directors, executive officers or other affiliates of the Company
(collectively, "Affiliates"). Affiliates of the Company generally will be able
to sell shares of the Common Stock only in accordance with the limitations of
Rule 144 under the Securities Act.
In general, under Rule 144 as currently in effect, an affiliate (as defined
in Rule 144) of the Company may sell shares of Common Stock within any
three-month period in an amount limited to the greater of 1% of the outstanding
shares of the Company's Common Stock or the average weekly trading volume in the
Company's Common Stock during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to certain manner-of-sale provisions, notice
requirements and the availability of current public information about the
Company.
The Company and the directors and officers of the Company and the Bank (who
are expected to hold an aggregate of approximately shares after the
Offering, excluding the shares that they have the right to acquire pursuant to
options granted to them under the Company's 1998 Stock Option Plan) have agreed,
or will agree, that they will not issue, offer for sale, sell, transfer, grant
options to purchase or otherwise dispose of any shares of Common Stock, without
the prior written consent of the Underwriters, for a period of 180 days from the
date of this Prospectus, except that (i) the Company may issue shares upon the
exercise of options under the Company's 1998 Stock Option Plan and (ii) the
directors and officers may give Common Stock owned by them to others who have
agreed in writing to be bound by the same agreement.
As of January , 1999, the Company had outstanding options to
purchase an aggregate of shares of its Common Stock at an
exercise price equal to the initial public offering price of the Common Stock,
as specified on the cover page of this Prospectus, pursuant to the Company's
1998 Stock Option Plan. See "Executive Compensation -- 1998 Stock Option and
Incentive Plan."
Prior to the Offering, there has been no public trading market for the
Common Stock, and no predictions can be made as to the effect, if any, that
sales of shares or the availability of shares for sale will have on the
prevailing market price of the Common Stock after completion of the Offering.
Nevertheless, sales of substantial amounts of Common Stock in the public market
could have an adverse effect on prevailing market prices.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, Roney Capital Markets, a
division of First Chicago Capital Markets, Inc., and McDonald Investments Inc.
(the "Underwriters"), have severally agreed to purchase from the Company, and
the Company has agreed to sell to each of the Underwriters, the respective
number of shares of Common Stock as set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
Roney Capital Markets, a division of First Chicago Capital
Markets, Inc..............................................
McDonald Investments Inc....................................
---------
Total.................................................. 2,000,000
=========
</TABLE>
39
<PAGE> 41
The Underwriting Agreement provides that the Underwriters' obligations to
pay for and accept delivery of those shares of Common Stock are subject to
certain conditions precedent, and that the Underwriters are committed to
purchase all of those shares of Common Stock if any shares are purchased.
The Underwriting Agreement provides that, except in certain limited cases,
the Company will reimburse the Underwriters for all accountable out-of-pocket
expenses incurred by them in connection with the proposed purchase and sale of
the Common Stock, up to a maximum of $50,000. The Company has advanced $20,000
to the Underwriters as a non-refundable payment in connection with such expense
reimbursement. The Underwriting Agreement provides that, upon completion of the
Offering, the Underwriters will credit the out-of-pocket expenses reimbursed
against the underwriting discount.
The Company and the Underwriters have agreed that the Underwriters will
purchase the 2,000,000 shares of Common Stock offered hereunder at a price to
the public of $10.00 per share less underwriting discounts of $ per share.
The Underwriters propose to offer the Common Stock to select dealers who are
members of the National Association of Securities Dealers, Inc., at a price of
$10.00 per share less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, concessions not in excess
of $ per share to certain other brokers and dealers. After the commencement
of the Offering, the public offering price, the concession and the reallowance
may be changed.
The Company and the executive officers and directors of the Company have
agreed to be subject to certain lock-up restrictions as described above in
"Shares Eligible for Future Sale."
The Underwriters have informed the Company that the Underwriters do not
intend to make sales to any accounts over which the Underwriters exercise
discretionary authority.
The Company has granted the Underwriters an option, exercisable within 30
days after the date of the Offering, to purchase up to 300,000 shares of Common
Stock from the Company to cover over-allotments, if any, at the same price per
share as is to be paid by the Underwriters for the other shares offered hereby.
The Underwriters may purchase the shares only to cover over-allotments, if any,
in connection with the Offering. If the Underwriters exercise the over-allotment
option in full, the total price to the public, underwriting discounts and
proceeds to the Company will be approximately $23,000,000, $ and
$ , respectively.
The Common Stock offered hereunder is a new issue of securities with no
prior established trading market. The Underwriters have advised the Company
that, upon completion of the Offering, they intend to make a market in the
Common Stock, although they are not obligated to do so. Making a market in
securities involves maintaining bid and ask quotations and being able, as
principal, to effect transactions in reasonable quantities at those quoted
prices, subject to various securities laws and other regulatory requirements.
The development of a public trading market depends, however, upon the existence
of willing buyers and sellers, the presence of which is not within the control
of the Company, the Bank or any market-maker. The Underwriters may discontinue
market-making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Common Stock offered hereunder.
In connection with the Offering of the Common Stock, the Underwriters may
engage in stabilizing transactions and short covering transactions on the OTC
Bulletin Board in accordance with Regulation M of the Exchange Act. Stabilizing
transactions involve bids to purchase the Common Stock in the open market for
the purpose of pegging, fixing or maintaining the price of the Common Stock.
Short-covering transactions involve purchases of the Common Stock in the open
market after the distribution has been completed in order to cover short
positions. Such stabilizing transactions and short-covering transactions may
cause the price of the Common Stock to be higher than it would otherwise be in
the absence of such transactions. Such activities, if commenced by the
Underwriters, may be discontinued at any time.
The Underwriting Agreement contains indemnity provisions between the
Underwriters and the Company and the controlling persons thereof against certain
liabilities, including liabilities arising under the Securities Act. The Company
is generally obligated to indemnify the Underwriters and their respective
controlling persons in connection with losses or claims arising out of any
untrue statement of a material fact contained in this Prospectus or in related
documents filed with the Commission or with any state securities administrator,
or out of any omission of certain material facts from such documents.
40
<PAGE> 42
Prior to this Offering, there has been no public market for the Common
Stock. Accordingly, the public offering price for the Common Stock was
determined by negotiations among the Company and the Underwriters. This price is
not based upon earnings or any history of operations and should not be construed
as indicative of the present or anticipated future value of the Common Stock.
Several factors were considered in determining the initial offering price of the
Common Stock, among them the size of the Offering, the initial public offering
prices of similar start-up bank holding companies, the Underwriters' experience
in dealing with initial public offerings for financial institutions and the
general condition of the equity securities market. There can be no assurance,
however, that the prices at which the Common Stock will sell in the public
market after this Offering will not be lower than the price at which the shares
of Common Stock are sold by the Underwriters.
Mr. Craig Hartman, a director of the Company, has provided consulting
services to the Company that included identifying the Underwriters for this
Offering. See "Management -- Compensation of Directors" and "Related Party
Transactions -- Consulting Services."
The following table sets forth the fees and expenses the Company will incur
in connection with the Offering of the Common Stock, other than underwriting
discounts and commissions. Except for the Securities and Exchange Commission's
registration fee and the NASD filing fee, all amounts shown are estimates and
assume the sale of 2,000,000 shares of Common Stock.
<TABLE>
<S> <C>
Registration Fee............................................ $6,394
NASD Filing Fee............................................. 2,800
Printing and Mailing Expenses...............................
Legal Fees and Expenses.....................................
Accounting Fees and Expenses................................
Blue Sky Fees and Expenses..................................
Registrar and Transfer Agent Fees and Expenses..............
Premium for Director and Officer Liability Insurance........
Miscellaneous...............................................
------
Total.................................................. $
======
</TABLE>
LEGAL PROCEEDINGS
Neither the Bank nor the Company is a party to any pending legal proceeding
or aware of any threatened legal proceeding where the Company or the Bank may be
exposed to any material loss.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed upon for the
Company by Baker & Daniels. Certain legal matters will be passed upon for the
Underwriters by Honigman Miller Schwartz and Cohn.
EXPERTS
The balance sheet as of October 31, 1998 and statements of operations,
stockholder's deficit, and cash flows for the period July 8, 1998 (date of
inception) through October 31, 1998, of the Company included in this Prospectus
have been included herein in reliance upon the report of PricewaterhouseCoopers
LLP, independent accountants, given upon authority of that firm as experts in
accounting and auditing.
41
<PAGE> 43
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
SB-2 under the Securities Act with respect to the Common Stock offered hereby
(the "Registration Statement"). This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the shares of Common Stock offered
hereby, reference is hereby made to the Registration Statement, including the
exhibits, financial statements and schedules thereto. Statements contained in
this Prospectus regarding the contents of any contract or other document are not
necessarily complete; with respect to each such contract or document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference.
42
<PAGE> 44
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Financial Statements:
Balance Sheet............................................. F-3
Statement of Operations................................... F-4
Statement of Changes in Stockholder's Deficit............. F-5
Statement of Cash Flows................................... F-6
Notes to Financial Statements............................. F-7
</TABLE>
F-1
<PAGE> 45
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Tower Financial Corporation:
In our opinion, the accompanying balance sheet and the related statements
of operations, changes in stockholder's deficit and cash flows present fairly,
in all material respects, the financial position of Tower Financial Corporation
(a development stage company) at October 31, 1998, and the results of its
operations and cash flows for the period from July 8, 1998 (date of inception)
to October 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management, our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
Fort Wayne, Indiana
November 11, 1998
F-2
<PAGE> 46
TOWER FINANCIAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
As of October 31, 1998
<TABLE>
<S> <C>
ASSETS
Cash........................................................ $ 12,007
Interest bearing deposits in bank........................... 475,000
---------
Total cash and cash equivalents........................ 487,007
Equipment, at cost.......................................... 11,512
Deferred offering costs..................................... 73,850
---------
Total assets........................................... $ 572,369
=========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Liabilities:
Accounts payable and accrued expenses..................... $ 139,102
Accounts payable and accrued expenses -- related
parties................................................ 24,187
Related party notes payable............................... 750,000
---------
Total liabilities...................................... 913,289
Commitments and contingencies
Stockholder's deficit:
Preferred stock, no par value, 4,000,000 shares
authorized; no shares issued and outstanding...........
Common stock, no par value, 6,000,000 shares authorized; 1
share subscribed.......................................
Additional paid-in capital................................
Deficit accumulated during the development stage.......... (340,920)
---------
Total stockholder's deficit............................ (340,920)
---------
Total liabilities and stockholder's deficit............ $ 572,369
=========
</TABLE>
The followings notes are an integral part of the financial statements.
F-3
<PAGE> 47
TOWER FINANCIAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
For the period from July 8, 1998 (date of inception) to October 31, 1998
<TABLE>
<S> <C>
Operating expenses:
Salaries and benefits expense............................. $ 199,660
Professional fees......................................... 114,857
Other expenses............................................ 26,403
---------
Total operating expenses............................... 340,920
---------
Net loss............................................... $(340,920)
=========
</TABLE>
The following notes are an integral part of the financial statements.
F-4
<PAGE> 48
TOWER FINANCIAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDER'S DEFICIT
For the period from July 8, 1998 (date of inception) to October 31, 1998
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
PREFERRED COMMON PAID-IN DEVELOPMENT
STOCK STOCK CAPITAL STAGE TOTAL
--------- ------ ---------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balance at inception (July 8, 1998).... $ $ $ $ $
Issuance of common stock............... 10 10
Common stock subscription.............. (10) (10)
Net loss............................... (340,920) (340,920)
--------- ---- --------- --------- ---------
Balance, October 31, 1998.............. $ $ $ $(340,920) $(340,920)
========= ==== ========= ========= =========
</TABLE>
The following notes are an integral part of the financial statements.
F-5
<PAGE> 49
TOWER FINANCIAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
For the period from July 8, 1998 (date of inception) to October 31, 1998
<TABLE>
<S> <C>
Cash flows from operating activities
Net loss.................................................. $(340,920)
Adjustments to reconcile net loss to net cash used in
operating activities:
Increase in accounts payable and accrued expenses...... 163,289
---------
Net cash used in operating activities................ (177,631)
---------
Cash flows from investing activities
Equipment expenditures.................................... (11,512)
---------
Net cash used in investing activities................ (11,512)
---------
Cash flows from financing activities
Proceeds from related party notes payable................. 750,000
Deferred offering costs................................... (73,850)
---------
Net cash provided from financing activities.......... 676,150
---------
Net increase in cash and cash equivalents................... 487,007
Cash and cash equivalents, beginning of period..............
---------
Cash and cash equivalents, end of period.................... $ 487,007
=========
</TABLE>
The following notes are an integral part of the financial statements.
F-6
<PAGE> 50
TOWER FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. ORGANIZATION: Tower Financial Corporation (the "Company") was
incorporated on July 8, 1998. The Company's activities to date have been
limited to the organization of Tower Bank & Trust Company (the "Bank"),
as well as preparation for a common stock offering estimated to be
$20,000,000 (the "offering"). A substantial portion of the proceeds of
the offering will be used by the Company to provide initial
capitalization of the Bank. The start-up of the Bank is contingent upon
receiving the approval of various banking regulatory authorities and
also a successful completion of the offering.
b. NATURE OF BUSINESS: The Bank intends to offer a full range of commercial
and consumer banking services primarily within Allen County, Indiana.
c. USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from those estimates.
d. CASH AND CASH EQUIVALENTS: The Company considers all highly liquid
investment instruments, including investments with maturities of three
months or less at acquisition, to be cash equivalents. At October 31,
1998 cash equivalents consisted of certificates of deposit aggregating
$400,000.
e. DEFERRED OFFERING COSTS: Deferred offering costs consist of professional
fees incurred in connection with the registration of the Company's
common stock. These costs will be charged against the stock proceeds or,
if the offering is not successful, charged to operations at that time.
f. INCOME TAXES: The Company utilizes the liability method of accounting
for deferred income taxes. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to
reverse.
2. NOTES PAYABLE RELATED PARTIES:
Non-interest bearing notes payable in the amount of $750,000 are
outstanding to members of the Board of Directors of the Company. The notes are
to be paid with proceeds received from the offering and are to be repaid on or
before March 31, 1999.
3. LEASE COMMITMENT:
The Company has a lease commitment with a related party company owned by a
director for space to be used as the Company's main office effective January 1,
1999. The lease term is for ten years at rents ranging from approximately
$11,300 to $17,100 per month with an option to extend for one successive ten
year period. The Company incurred rent expense of approximately $3,900 to this
related party for temporary space through October 31, 1998.
Future minimum commitments for the following calendar years are
approximately:
<TABLE>
<S> <C>
1999........................................................ $135,400
2000........................................................ 135,400
2001........................................................ 152,800
2002........................................................ 152,800
2003........................................................ 170,200
--------
Total.................................................. $746,600
========
</TABLE>
F-7
<PAGE> 51
TOWER FINANCIAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. INCOME TAXES:
At October 31, 1998 the Company had net operating loss carryforwards of
approximately $341,000. No deferred tax asset is recorded, as a valuation
allowance reduces the gross deferred tax asset of approximately $136,000 to
zero.
5. OTHER:
The Company has entered into a letter of employment with its
president/chief executive officer whereby the Company has deposited in escrow a
certificate of deposit in the amount of $200,000 which will be disbursed to the
president in the event that the Bank does not receive all required regulatory
approvals to commence business. In addition, certain members of management are
entitled to incentive bonuses aggregating $35,000 upon commencement of the
Bank's business operations.
The Company has entered into a five year contract with a data processing
company to outsource the Company's data processing effective February 1, 1999.
The contract contains automatic renewal options and fees are primarily based on
the volume of transactions subject to certain minimum monthly amounts.
F-8
<PAGE> 52
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE IN THIS
OFFERING SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION IN THIS
PROSPECTUS IS CORRECT AS OF ANY SUBSEQUENT DATE. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS OR AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES
IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 9
Dividend Policy....................... 10
Capitalization........................ 10
Business.............................. 11
Management............................ 17
Executive Compensation................ 22
Related Party Transactions............ 24
Principal Shareholders................ 26
Supervision and Regulation............ 27
Description of Capital Stock.......... 35
Shares Eligible for Future Sale....... 39
Underwriting.......................... 39
Legal Proceedings..................... 41
Legal Matters......................... 41
Experts............................... 41
Additional Information................ 42
Index to Financial Statements......... F-1
</TABLE>
------------------------
UNTIL , 1999 (90 DAYS AFTER THE EFFECTIVE DATE OF THE
OFFERING), ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,000,000 SHARES
TOWER FINANCIAL LOGO
CORPORATION
COMMON STOCK
----------------------------
PROSPECTUS
----------------------------
RONEY CAPITAL MARKETS
A division of FIRST CHICAGO CAPITAL MARKETS, INC.
MCDONALD INVESTMENTS INC.
January , 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 53
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Indiana Business Corporation Law provides that a corporation, unless
limited by its articles of incorporation, is required to indemnify its directors
and officers against reasonable expenses incurred in the successful defense of
any proceeding arising out of their serving as a director or officer of the
corporation.
As permitted by the Indiana Business Corporation Law, the Company's
Restated Articles of Incorporation provide for indemnification of directors,
officers, employees and agents of the Company against any and all liability and
reasonable expense that may be incurred by them, arising out of any claim or
action, civil, criminal, administrative or investigative, in which they may
become involved by reason of being or having been a director, officer, employee
or agent. To be entitled to indemnification, those persons must have been wholly
successful in the claim or action or the Board of Directors must have
determined, based upon a written finding of legal counsel or another independent
referee, or a court of competent jurisdiction must have determined, that such
persons acted in good faith in what they reasonably believed to be the best
interest of the Company (or at least not opposed to its best interests) and, in
addition, in any criminal action, had reasonable cause to believe their conduct
was lawful (or had no reasonable cause to believe that their conduct was
unlawful). The Restated Articles of Incorporation authorize the Company to
advance funds for expenses to an indemnified person, but only upon receipt of an
undertaking that he or she will repay the same if it is ultimately determined
that such party is not entitled to indemnification.
The rights of indemnification provided by the Restated Articles of
Incorporation are not exhaustive and are in addition to any rights to which a
director or officer may otherwise be entitled by contract or as a matter of law.
Irrespective of the provisions of the Restated Articles of Incorporation, the
Company may, at any time and from time to time, indemnify directors, officers,
employees and other persons to the full extent permitted by the provisions of
applicable law at the time in effect, whether on account of past or future
transactions.
The Company has agreed to indemnify the Underwriters, and the Underwriters
have agreed to indemnify the Company, against certain civil liabilities,
including liabilities under the Securities Act. Reference is made to the Form of
Underwriting Agreement filed as Exhibit 1 herewith.
In addition, the Company has obtained a directors' and officers' liability
and company reimbursement policy that insures against certain liabilities under
the Securities Act, subject to applicable retentions.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses the Company will incur
in connection with the issuance and distribution of the securities being
registered hereunder, other than underwriting discounts and commissions. Except
for the SEC registration fee and the NASD filing fee, all amounts shown are
estimates and assume the sale of 2,000,000 shares in the Offering.
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee........................................ $6,394
NASD Filing Fee............................................. 2,800
Printing and Mailing Expenses...............................
Legal Fees and Expenses.....................................
Accounting Fees and Expenses................................
Blue Sky Fees and Expenses..................................
Registrar and Transfer Agent Fees and Expenses..............
Premium for Director and Officer Liability Insurance........
Miscellaneous...............................................
------
Total.................................................. $
======
</TABLE>
II-1
<PAGE> 54
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
During the past several months, the Company has borrowed approximately
$760,000 from members of the Company's Board of Directors to pay organizational
and related expenses. To the extent that such transactions would be deemed to
involve the offer or sale of a security, the Company would claim an exemption
from registration under the Securities Act, in reliance on Section 4(2) of the
Securities Act, for such transactions. In addition, the Company sold one share
of its Common Stock to Donald F. Schenkel, Chairman of the Board, President and
Chief Executive Officer and a director of the Company, for $10.00. The Company
also claims an exemption for such sale pursuant to Section 4(2) of the
Securities Act.
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
Exhibit 1* Form of Underwriting Agreement
Exhibit 3.1 Restated Articles of Incorporation of the Registrant
Exhibit 3.2 By-Laws of the Registrant
Exhibit 4* Specimen Stock Certificate of the Registrant
Exhibit 5 Opinion of Baker & Daniels with respect to the legality of
the securities being registered
Exhibit 10.1 Lease Agreement
Exhibit 10.2* Electronic Data Processing Services Contract
Exhibit 10.3* 1998 Stock Option and Incentive Plan
Exhibit 10.4* Employment Agreement with Donald F. Schenkel
Exhibit 10.5* Employment Agreement with Kevin J. Himmelhaver
Exhibit 10.6* Employment Agreement with Curtis A. Brown
Exhibit 21 Subsidiaries
Exhibit 23.1 Consent of PricewaterhouseCoopers LLP
Exhibit 23.2 Consent of Baker & Daniels (included in Exhibit 5)
Exhibit 24 Power of Attorney (included on page II-4 of this
Registration Statement)
Exhibit 27 Financial Data Schedule
</TABLE>
- -------------------------
* To be filed by amendment.
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes that:
(1) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(2) For determining any liability under the Securities Act, treat the
information omitted from the form of the prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and
II-2
<PAGE> 55
contained in the form of prospectus filed by the Registrant under Rule
424(b)(1) or (4) or 497(h) under the Securities Act as part of this
Registration Statement as of the time the Commission declared it effective.
(3) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
(4) The Registrant will provide to the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations
and registered in such names as required by the Underwriters to permit
prompt delivery to each purchaser.
II-3
<PAGE> 56
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Fort Wayne, Indiana, on November 11, 1998.
TOWER FINANCIAL CORPORATION
By: /s/ DONALD F. SCHENKEL
------------------------------------
Donald F. Schenkel, Chairman of the
Board, President and Chief
Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Donald F. Schenkel and Kevin J. Himmelhaver, and
each of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or his substitute may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DONALD F. SCHENKEL Chairman of the Board, President, Chief November 11, 1998
- ------------------------------------ Executive Officer and Director (principal
Donald F. Schenkel executive officer)
/s/ KEVIN J. HIMMELHAVER Chief Financial Officer (principal November 11, 1998
- ------------------------------------ financial and accounting officer)
Kevin J. Himmelhaver
Director November , 1998
- ------------------------------------
Keith E. Busse
Director November , 1998
- ------------------------------------
Peter T. Eshelman
/s/ MICHAEL S. GOULOFF Director November 11, 1998
- ------------------------------------
Michael S. Gouloff
/s/ CRAIG S. HARTMAN Director November 11, 1998
- ------------------------------------
Craig S. Hartman
/s/ JEROME F. HENRY, JR. Director November 11, 1998
- ------------------------------------
Jerome F. Henry, Jr.
Director November , 1998
- ------------------------------------
Michael Mirro, M.D.
</TABLE>
II-4
<PAGE> 57
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DEBRA A. NIEZER Director November 11, 1998
- ------------------------------------
Debra A. Niezer
/s/ WILLIAM G. NIEZER Director November 11, 1998
- ------------------------------------
William G. Niezer
Director November , 1998
- ------------------------------------
Maurice D. O'Daniel
Director November , 1998
- ------------------------------------
Leonard Rifkin
/s/ JOSEPH D. RUFFOLO Director November 11, 1998
- ------------------------------------
Joseph D. Ruffolo
/s/ LARRY L. SMITH Director November 11, 1998
- ------------------------------------
Larry L. Smith
Director November , 1998
- ------------------------------------
John V. Tippmann, Sr.
Director November , 1998
- ------------------------------------
J. Richard Tomkinson
/s/ IRENE A. WALTERS Director November 11, 1998
- ------------------------------------
Irene A. Walters
</TABLE>
II-5
<PAGE> 58
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<C> <S>
1* Form of Underwriting Agreement
3.1 Restated Articles of Incorporation of the Registrant
3.2 By-Laws of the Registrant
4* Specimen Stock Certificate of the Registrant
5 Opinion of Baker & Daniels with respect to the legality of
the securities being registered
10.1 Lease Agreement
10.2* Electronic Data Processing Services Contract
10.3* 1998 Stock Option and Incentive Plan
10.4* Employment Agreement with Donald F. Schenkel
10.5* Employment Agreement with Kevin J. Himmelhaver
10.6* Employment Agreement with Curtis A. Brown
21 Subsidiaries
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Baker & Daniels (included in Exhibit 5)
24 Power of Attorney (included on page II-4 of this
Registration Statement)
27 Financial Data Schedule
</TABLE>
- -------------------------
* To be filed by amendment.
II-6
<PAGE> 1
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
TOWER FINANCIAL CORPORATION
Tower Financial Corporation (hereinafter referred to as the
"Corporation"), desiring to amend and restate its Articles of Incorporation
effective as of the date of filing hereof with the Office of the Indiana
Secretary of State, pursuant to the provisions of the Indiana Business
Corporation Law (hereinafter referred to as the "Corporation Law"), submits the
following Restated Articles of Incorporation.
ARTICLE I
Name
----
The name of the Corporation is Tower Financial Corporation.
ARTICLE II
Purposes and Powers
-------------------
Section 2.1. Purposes of the Corporation. The purposes for which
the Corporation is formed are (a) to engage in the general business of a bank
holding company, and to carry on such activities of every kind or nature as may
be allied or incidental to such general business, and (b) to engage in the
transaction of any or all lawful business for which corporations may now or
hereafter be incorporated under the Corporation Law.
Section 2.2. Powers of the Corporation. The Corporation shall have
(a) all powers now or hereafter authorized by or vested in corporations pursuant
to the provisions of the Corporation Law, (b) all powers now or hereafter vested
in corporations by common law or any other statute or act, and (c) all powers
authorized by or vested in the Corporation by the provisions of these Restated
Articles of Incorporation or by the provisions of its By-Laws as from time to
time in effect.
ARTICLE III
Term of Existence
-----------------
The period during which the Corporation shall continue is
perpetual.
<PAGE> 2
ARTICLE IV
Registered Office and Agent
---------------------------
The street address of the Corporation's registered office at
the time of adoption of these Restated Articles of Incorporation is 116 East
Berry Street, Fort Wayne, Indiana 46802 and the name of its Resident Agent at
such office at the time of adoption of these Restated Articles of Incorporation
is Donald F. Schenkel.
ARTICLE V
Authorized Shares
-----------------
Section 5.1. Authorized Classes and Number of Shares. The total
number of shares which the Corporation has authority to issue shall be
10,000,000 shares, consisting of 6,000,000 shares of common stock, without par
value (the "Common Stock"), and 4,000,000 shares of Preferred Stock, without par
value (the "Preferred Stock").
Section 5.2. General Terms of All Shares. The Corporation
shall have the power to acquire (by purchase, redemption, or otherwise), hold,
own, pledge, sell, transfer, assign, reissue, cancel, or otherwise dispose of
the shares of the Corporation in the manner and to the extent now or hereafter
permitted by the laws of the State of Indiana (but such power shall not imply an
obligation on the part of the owner or holder of any share to sell or otherwise
transfer such share to the Corporation), including the power to purchase,
redeem, or otherwise acquire the Corporation's own shares, directly or
indirectly, and without pro rata treatment of the owners or holders of any class
or series of shares, unless, after giving effect thereto, the Corporation would
not be able to pay its debts as they become due in the usual course of business
or the Corporation's total assets would be less than its total liabilities (and
without regard to any amounts that would be needed, if the Corporation were to
be dissolved at the time of the purchase, redemption, or other acquisition, to
satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those of the holders of the shares of the
Corporation being purchased, redeemed, or otherwise acquired, unless otherwise
expressly provided with respect to a series of Preferred Stock in the provisions
of these Restated Articles of Incorporation adopted by the Board of Directors
pursuant to Section 5.5 hereof describing the terms of such series). Shares of
the Corporation purchased, redeemed, or otherwise acquired by it shall
constitute authorized but unissued shares, unless prior to any such purchase,
redemption, or other acquisition, or within thirty (30) days thereafter, the
Board of Directors adopts a resolution providing that such shares constitute
authorized and issued but not outstanding shares.
The Board of Directors of the Corporation may dispose of, issue,
and sell shares in accordance with, and in such amounts as may be permitted by,
the laws of the State of Indiana and the provisions of these Restated Articles
of Incorporation and for such consideration, at such price or prices, at such
time or times and upon such terms and conditions (including the privilege of
-2-
<PAGE> 3
selectively repurchasing the same) as the Board of Directors of the Corporation
shall determine, without the authorization or approval by any shareholders of
the Corporation. Shares may be disposed of, issued, and sold to such persons,
firms, or corporations as the Board of Directors may determine, without any
preemptive or other right on the part of the owners or holders of other shares
of the Corporation of any class or kind to acquire such shares by reason of
their ownership of such other shares.
The Corporation shall have the power to declare and pay dividends
or other distributions upon the issued and outstanding shares of the
Corporation, subject to the limitation that a dividend or other distribution may
not be made if, after giving it effect, the Corporation would not be able to pay
its debts as they become due in the usual course of business or the
Corporation's total assets would be less than its total liabilities (and without
regard to any amounts that would be needed, if the Corporation were to be
dissolved at the time of the dividend or other distribution, to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those of the holders of shares receiving the dividend or other
distribution, unless otherwise expressly provided with respect to a series of
Preferred Stock in the provisions of these Restated Articles of Incorporation
adopted by the Board of Directors pursuant to Section 5.5 hereof describing the
terms of such series). The Corporation shall have the power to issue shares of
one class or series as a share dividend or other distribution in respect of that
class or series or one or more other classes or series.
Section 5.3. Voting Rights of Shares.
(a) Common Stock. Except as otherwise provided by the Corporation
Law and subject to such shareholder disclosure and recognition procedures (which
may include voting prohibition sanctions) as the Corporation may by action of
its Board of Directors establish, the Common Stock has unlimited voting rights
and each outstanding share of Common Stock shall, when validly issued by the
Corporation, entitle the record holder thereof to one vote at all shareholders'
meetings on all matters submitted to a vote of the shareholders of the
Corporation.
(b) Preferred Stock. Except as required by the Corporation Law or
by the provisions of these Restated Articles of Incorporation adopted by the
Board of Directors pursuant to Section 5.5 hereof describing the terms of the
Preferred Stock or a series thereof, the holders of Preferred Stock shall have
no voting rights or powers. Shares of Preferred Stock shall, when validly issued
by the Corporation, entitle the record holder thereof to vote as and on such
matters, but only as and on such matters, as the holders thereof are entitled to
vote under the Corporation Law or under the provisions of these Restated
Articles of Incorporation adopted by the Board of Directors pursuant to Section
5.5 hereof describing the terms of the Preferred Stock or a series thereof
(which provisions may provide for special, conditional, limited, or unlimited
voting rights, including multiple or fractional votes per share, or for no right
to vote, except to the extent required by the Corporation Law) and subject to
such shareholder disclosure and recognition procedures (which may include voting
prohibition sanctions) as the Corporation may by action of the Board of
Directors establish.
-3-
<PAGE> 4
Section 5.4. Other Terms of Common Stock. The Common Stock shall be
equal in every respect insofar as their relationship to the Corporation is
concerned, but such equality of rights shall not imply equality of treatment as
to redemption or other acquisition of shares by the Corporation. Subject to the
rights of the holders of any outstanding Preferred Stock issued under Section
5.5 hereof, the holders of Common Stock shall be entitled to share ratably in
such dividends or other distributions (other than purchases, redemptions, or
other acquisitions of shares by the Corporation), if any, as are declared and
paid from time to time on the Common Stock at the discretion of the Board of
Directors. In the event of any liquidation, dissolution, or winding up of the
Corporation, either voluntary or involuntary, after payment shall have been made
to the holders of the Preferred Stock of the full amount to which they shall be
entitled under this Article V, the holders of Common Stock shall be entitled, to
the exclusion of the holders of the Preferred Stock of any and all series, to
share, ratably according to the number of shares of Common Stock held by them,
in all remaining assets of the Corporation available for distribution to its
shareholders.
Section 5.5. Other Terms of Preferred Stock.
(a) Preferred Stock may be issued from time to time in one or
more series, each such series to have such distinctive designation and such
preferences, limitations, and relative voting and other rights as shall be set
forth in these Restated Articles of Incorporation. Subject to the requirements
of the Corporation Law and subject to all other provisions of these Restated
Articles of Incorporation, the Board of Directors of the Corporation may create
one or more series of Preferred Stock and may determine the preferences,
limitations, and relative voting and other rights of one or more series of
Preferred Stock before the issuance of any shares of that series by the adoption
of an amendment to these Restated Articles of Incorporation that specifies the
terms of the series of Preferred Stock. All shares of a series of Preferred
Stock must have preferences, limitations, and relative voting and other rights
identical with those of other shares of the same series and, if the description
of the series set forth in these Restated Articles of Incorporation so provides,
no series of Preferred Stock need have preferences, limitations, or relative
voting or other rights identical with those of any other series of Preferred
Stock.
Before issuing any shares of a series of Preferred Stock, the Board
of Directors shall adopt an amendment to these Restated Articles of
Incorporation, which shall be effective without any shareholder approval or
other action, that sets forth the preferences, limitations, and relative voting
and other rights of the series, and authority is hereby expressly vested in the
Board of Directors, by such amendment:
(1) To fix the distinctive designation of such series and the
number of shares which shall constitute such series, which number may be
increased or decreased (but not below the number of shares thereof then
outstanding) from time to time by action of the Board of Directors;
(2) To fix the voting rights of such series, which may consist of
special, conditional, limited, or unlimited voting rights, including
multiple or fractional votes per share, or no right to vote (except to the
extent required by the Corporation Law);
-4-
<PAGE> 5
(3) To fix the dividend or distribution rights of such series and
the manner of calculating the amount and time for payment of dividends or
distributions, including, but not limited to:
(A) the dividend rate, if any, of such series;
(B) any limitations, restrictions, or conditions on the
payment of dividends or other distributions, including whether
dividends or other distributions shall be noncumulative or
cumulative or partially cumulative and, if so, from which date or
dates;
(C) the relative rights of priority, if any, of payment of
dividends or other distributions on shares of that series in
relation to Common Stock and shares of any other series of
Preferred Stock; and
(D) the form of dividends or other distributions, which may
be payable at the option of the Corporation, the shareholder, or
another person (and in such case to prescribe the terms and
conditions of exercising such option), or upon the occurrence of a
designated event in cash, indebtedness, stock or other securities
or other property, or in any combination thereof,
and to make provisions, in the case of dividends or other distributions
payable in stock or other securities, for adjustment of the dividend or
distribution rate in such events as the Board of Directors shall
determine;
(4) To fix the price or prices at which, and the terms and
conditions on which, the shares of such series may be redeemed or
converted, which may be
(A) at the option of the Corporation, the shareholder, or
another person or upon the occurrence of a designated event;
(B) for cash, indebtedness, securities, or other property or
any combination thereof; and
(C) in a designated amount or in an amount determined in
accordance with a designated formula or by reference to extrinsic
data or events;
(5) To fix the amount or amounts payable upon the shares of such
series in the event of any liquidation, dissolution, or winding up of the
Corporation and the relative rights of priority, if any, of payment upon
shares of such series in relation to Common Stock and shares of any other
series of Preferred Stock; and to determine whether or not any such
preferential rights upon dissolution need be considered in
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determining whether or not the Corporation may make dividends,
repurchases, or other distributions;
(6) To determine whether or not the shares of such series shall be
entitled to the benefit of a sinking fund to be applied to the purchase or
redemption of such series and, if so entitled, the amount of such fund and
the manner of its application;
(7) To determine whether or not the issue of any additional shares
of such series or of any other series in addition to such series shall be
subject to restrictions in addition to restrictions, if any, on the issue
of additional shares imposed in the provisions of these Restated Articles
of Incorporation fixing the terms of any outstanding series of Preferred
Stock theretofore issued pursuant to this Section 5.5 and, if subject to
additional restrictions, the extent of such additional restrictions; and
(8) Generally to fix the other preferences or rights, and any
qualifications, limitations, or restrictions of such preferences or
rights, of such series to the full extent permitted by the Corporation
Law; provided, however, that no such preferences, rights, qualifications,
limitations, or restrictions shall be in conflict with these Restated
Articles of Incorporation or any amendment hereof.
(b) Shares of Preferred Stock of any series that have been redeemed
(whether through the operation of a sinking fund or otherwise) or purchased by
the Corporation, or which, if convertible, have been converted into shares of
the Corporation of any other class or series, may be reissued as a part of such
series or of any other series of Preferred Stock, subject to such limitations
(if any) as may be fixed by the Board of Directors with respect to such series
of Preferred Stock in accordance with subsection (a) of this Section 5.5.
ARTICLE VI
Directors
---------
Section 6.1. Number. The Board of Directors at the time of adoption
of these Restated Articles of Incorporation is composed of eighteen (18)
members, and the number of Directors shall be fixed by the By-Laws and may be
changed from time to time by amendment to the By-Laws. Whenever the By-Laws
provide that the number of Directors shall be three (3) or more, the By-Laws may
also provide for staggering the terms of the members of the Board of Directors
by dividing the total number of Directors into three (3) groups (with each group
containing one-third (1/3) of the total, as near as may be) whose terms of
office expire at different times.
Notwithstanding the first sentence of this Section 6.1, any
amendment to the By-Laws that would effect:
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(a) any increase in the number of Directors over such number as
then in effect,
(b) any reduction in the number of Directors below such number as
then in effect, or
(c) any elimination or modification of the groups or terms of
office of the Directors as the By-Laws then in effect may provide,
shall also be approved by the affirmative vote of at least sixty-six and
two-thirds percent (66-2/3%) of the entire number of Directors of the
Corporation at the time.
Section 6.2. Qualifications. Directors need not be shareholders of
the Corporation or residents of this or any other state in the United States.
Section 6.3. Vacancies. Vacancies occurring in the Board of
Directors shall be filled in the manner provided in the By-Laws or, if the
By-Laws do not provide for the filling of vacancies, in the manner provided by
the Corporation Law. The By-Laws may also provide that in certain circumstances
specified therein, vacancies occurring in the Board of Directors may be filled
by vote of the shareholders at a special meeting called for that purpose or at
the next annual meeting of shareholders.
Section 6.4. Liability of Directors. A Director's
responsibility to the Corporation shall be limited to discharging his duties as
a Director, including his duties as a member of any committee of the Board of
Directors upon which he may serve, in good faith, with the care an ordinarily
prudent person in a like position would exercise under similar circumstances,
and in a manner the Director reasonably believes to be in the best interests of
the Corporation, all based on the facts then known to the Director.
In discharging his duties, a Director is entitled to rely on
information, opinions, reports, or statements, including financial statements
and other financial data, if prepared or presented by:
(a) One (1) or more officers or employees of the Corporation whom
the Director reasonably believes to be reliable and competent in the
matters presented;
(b) Legal counsel, public accountants, or other persons as to
matters the Director reasonably believes are within such person's
professional or expert competence; or
(c) A committee of the Board of which the Director is not a member
if the Director reasonably believes the Committee merits confidence;
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but a Director is not acting in good faith if the Director has knowledge
concerning the matter in question that makes reliance otherwise permitted by
this Section 6.4 unwarranted.
A Director shall not be liable for any action taken as a Director,
or any failure to take any action, unless (a) the Director has breached or
failed to perform the duties of the Director's office in compliance with this
Section 6.4, and (b) the breach or failure to perform constitutes willful
misconduct or recklessness.
Section 6.5. Factors to be Considered by Board. In determining
whether to take or refrain from taking any action with respect to any matter,
including making or declining to make any recommendation to shareholders of the
Corporation, the Board of Directors may, in its discretion, consider both the
short term and long term best interests of the Corporation (including the
possibility that these interests may be best served by the continued
independence of the Corporation), taking into account, and weighing as the
Directors deem appropriate, the social and economic effects thereof on the
Corporation's present and future employees, suppliers and customers of the
Corporation and its subsidiaries, the communities in which offices or other
facilities of the Corporation are located, and any other factors the Directors
consider pertinent.
Section 6.6. Removal of Directors. Any or all of the members of the
Board of Directors may be removed, for good cause, only at a meeting of the
shareholders called expressly for that purpose, by the affirmative vote of the
holders of outstanding shares representing at least sixty-six and two-thirds
percent (66-2/3%) of all the votes then entitled to be cast at an election of
Directors. Directors may not be removed in the absence of good cause.
Section 6.7. Election of Directors by Holders of Preferred Stock.
The holders of one (1) or more series of Preferred Stock may be entitled to
elect all or a specified number of Directors, but only to the extent and subject
to limitations as may be set forth in the provisions of these Restated Articles
of Incorporation adopted by the Board of Directors pursuant to Section 5.5
hereof describing the terms of the series of Preferred Stock.
ARTICLE VII
Provisions for Regulation of Business
and Conduct of Affairs of Corporation
-------------------------------------
Section 7.1. Meetings of Shareholders. Meetings of the shareholders
of the Corporation shall be held at such time and at such place, either within
or without the State of Indiana, as may be stated in or fixed in accordance with
the By-Laws of the Corporation and specified in the respective notices or
waivers of notice of any such meetings.
Section 7.2. Special Meetings of Shareholders. Special meetings of
the shareholders, for any purpose or purposes, unless otherwise prescribed by
the Corporation Law, may be called at any time by the Board of Directors or the
officers authorized to do so by the By-Laws and shall be
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called by the Board of Directors if the Secretary of the Corporation receives
one (1) or more written, dated, and signed demands for a special meeting,
describing in reasonable detail the purpose or purposes for which it is to be
held, from the holders of shares representing at least twenty-five percent (25%)
of all the votes entitled to be cast on any issue proposed to be considered at
the proposed special meeting; provided, however, that any such demand(s)
delivered to the Secretary at any time at which the Corporation has more than 50
shareholders must be properly delivered by the holders of shares representing at
least 80% of all votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting. If the Secretary receives one (1) or
more proper written demands for a special meeting of shareholders, the Board of
Directors may set a record date for determining shareholders entitled to make
such demand.
Section 7.3. Meetings of Directors. Meetings of the Board of
Directors of the Corporation shall be held at such place, either within or
without the State of Indiana, as may be authorized by the By-Laws and specified
in the respective notices or waivers of notice of any such meetings or otherwise
specified by the Board of Directors. Unless the By-Laws provide otherwise (a)
regular meetings of the Board of Directors may be held without notice of the
date, time, place, or purpose of the meeting and (b) the notice for a special
meeting need not describe the purpose or purposes of the special meeting.
Section 7.4. Action Without Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or shareholders,
or of any committee of such Board, may be taken without a meeting, if the action
is taken by all members of the Board or all shareholders entitled to vote on the
action, or by all members of such committee, as the case may be. The action must
be evidenced by one (1) or more written consents describing the action taken,
signed by each Director, or all the shareholders entitled to vote on the action,
or by each member of such committee, as the case may be, and, in the case of
action by the Board of Directors or a committee thereof, included in the minutes
or filed with the corporate records reflecting the action taken or, in the case
of action by the shareholders, delivered to the Corporation for inclusion in the
minutes or filing with the corporate records. Action taken under this Section
7.4 is effective when the last Director, shareholder, or committee member, as
the case may be, signs the consent, unless the consent specifies a different
prior or subsequent effective date, in which case the action is effective on or
as of the specified date. Such consent shall have the same effect as a unanimous
vote of all members of the Board, or all shareholders, or all members of the
committee, as the case may be, and may be described as such in any document.
Section 7.5. By-Laws. The Board of Directors shall have the
exclusive power to make, alter, amend, or repeal, or to waive provisions of, the
By-Laws of the Corporation by the affirmative vote of a majority of the entire
number of Directors at the time, except as expressly provided in Section 6.1
hereof and as provided by the Corporation Law. All provisions for the regulation
of the business and management of the affairs of the Corporation not stated in
these Restated Articles of Incorporation shall be stated in the By-Laws. The
Board of Directors may adopt Emergency By-Laws of the Corporation and shall have
the exclusive power (except as may otherwise be provided therein) to make,
alter, amend, or repeal, or to waive provisions of, the Emergency By-Laws by the
affirmative vote of a majority of the entire number of Directors at the time.
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Section 7.6. Interest of Directors. (a) A conflict of interest
transaction is a transaction with the Corporation in which a Director of the
Corporation has a direct or indirect interest. A conflict of interest
transaction is not voidable by the Corporation solely because of the Director's
interest in the transaction if any one (1) of the following is true:
(1) The material facts of the transaction and the Director's
interest were disclosed or known to the Board of Directors or a Committee
of the Board of Directors and the Board of Directors or committee
authorized, approved, or ratified the transaction.
(2) The material facts of the transaction and the Director's
interest were disclosed or known to the shareholders entitled to vote and
they authorized, approved, or ratified the transaction.
(3) The transaction was fair to the Corporation.
(b) For purposes of this Section 7.6, a Director of the Corporation
has an indirect interest in a transaction if:
(1) Another entity in which the Director has a material financial
interest or in which the Director is a general partner is a party to the
transaction; or
(2) Another entity of which the Director is a director,
officer, or trustee is a party to the transaction and the transaction is,
or is required to be, considered by the Board of Directors of the
Corporation.
(c) For purposes of Section 7.6(a)(1), a conflict of interest
transaction is authorized, approved, or ratified if it receives the affirmative
vote of a majority of the Directors on the Board of Directors (or on the
committee) who have no direct or indirect interest in the transaction, but a
transaction may not be authorized, approved, or ratified under this section by a
single Director. If a majority of the Directors who have no direct or indirect
interest in the transaction vote to authorize, approve, or ratify the
transaction, a quorum shall be deemed present for the purpose of taking action
under this Section 7.6. The presence of, or a vote cast by, a Director with a
direct or indirect interest in the transaction does not affect the validity of
any action taken under Section 7.6(a)(1), if the transaction is otherwise
authorized, approved, or ratified as provided in such subsection.
(d) For purposes of Section 7.6(a)(2), a conflict of interest
transaction is authorized, approved, or ratified if it receives the affirmative
vote of the holders of shares representing a majority of the votes entitled to
be cast. Shares owned by or voted under the control of a Director who has a
direct or indirect interest in the transaction, and shares owned by or voted
under the control of an entity described in Section 7.6(b), may be counted in
such a vote of shareholders.
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Section 7.7. Nonliability of Shareholders. Shareholders of the
Corporation are not personally liable for the acts or debts of the Corporation,
nor is private property of shareholders subject to the payment of corporate
debts.
Section 7.8. Indemnification of Officers, Directors, and Other
Eligible Persons.
(a) To the extent not inconsistent with applicable law, every
Eligible Person shall be indemnified by the Corporation against all Liability
and reasonable Expense that may be incurred by him in connection with or
resulting from any Claim, (1) if such Eligible Person is Wholly Successful with
respect to the Claim, or (2) if not Wholly Successful, then if such Eligible
Person is determined, as provided in either Section 7.8(f) or 7.8(g), to have
acted in good faith, in what he reasonably believed to be the best interests of
the Corporation or at least not opposed to its best interests and, in addition,
with respect to any criminal claim is determined to have had reasonable cause to
believe that his conduct was lawful or had no reasonable cause to believe that
his conduct was unlawful. The termination of any Claim, by judgment, order,
settlement (whether with or without court approval), or conviction or upon a
plea of guilty or of nolo contendere, or its equivalent, shall not create a
presumption that an Eligible Person did not meet the standards of conduct set
forth in clause (2) of this subsection (a). The actions of an Eligible Person
with respect to an employee benefit plan subject to the Employee Retirement
Income Security Act of 1974 shall be deemed to have been taken in what the
Eligible Person reasonably believed to be the best interests of the Corporation
or at least not opposed to its best interests if the Eligible Person reasonably
believed he was acting in conformity with the requirements of such Act or he
reasonably believed his actions to be in the interests of the participants in or
beneficiaries of the plan.
(b) The term "Claim" as used in this Section 7.8 shall include
every pending, threatened, or completed claim, action, suit, or proceeding and
all appeals thereof (whether brought by or in the right of this Corporation or
any other corporation or otherwise), civil, criminal, administrative, or
investigative, formal or informal, in which an Eligible Person may become
involved, as a party or otherwise:
(1) by reason of his being or having been an Eligible Person, or
(2) by reason of any action taken or not taken by him in his
capacity as an Eligible Person, whether or not he continued in such
capacity at the time such Liability or Expense shall have been incurred.
(c) The term "Eligible Person" as used in this Section 7.8 shall
mean every person (and the estate, heirs, and personal representatives of such
person) who is or was a Director, officer, employee, or agent of the Corporation
or is or was serving at the request of the Corporation as a Director, officer,
employee, agent, or fiduciary of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other organization
or entity, whether for profit or not. An Eligible Person shall also be
considered to have been serving an employee benefit plan at the request of the
Corporation if his duties to the Corporation also imposed duties on, or
otherwise involved services by, him to the plan or to participants in or
beneficiaries of the plan.
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(d) The terms "Liability" and "Expense" as used in this Section 7.8
shall include, but shall not be limited to, counsel fees and disbursements and
amounts of judgments, fines, or penalties against (including excise taxes
assessed with respect to an employee benefit plan), and amounts paid in
settlement by or on behalf of an Eligible Person.
(e) The term "Wholly Successful" as used in this Section 7.8 shall
mean (1) termination of any claim against the Eligible Person in question
without any finding of liability or guilt against him, (2) approval by a court,
with knowledge of the indemnity herein provided, of a settlement of any Claim,
or (3) the expiration of a reasonable period of time after the making or
threatened making of any Claim without the institution of the same, without any
payment or promise made to induce a settlement.
(f) Every Eligible Person claiming indemnification hereunder (other
than one who has been Wholly Successful with respect to any Claim) shall be
entitled to indemnification (1) if special independent legal counsel, which may
be regular counsel of the Corporation or other disinterested person or persons,
in either case selected by the Board of Directors, whether or not a
disinterested quorum exists (such counsel or person or persons being hereinafter
called the "Referee"), shall deliver to the Corporation a written finding that
such Eligible Person has met the standards of conduct set forth in Section
7.8(a)(2), and (2) if the Board of Directors, acting upon such written finding,
so determines. The Board of Directors shall, if an Eligible Person is found to
be entitled to indemnification pursuant to the preceding sentence, also
determine the reasonableness of the Eligible Person's Expenses. The Eligible
Person claiming indemnification shall, if requested, appear before the Referee,
answer questions that the Referee deems relevant and shall be given ample
opportunity to present to the Referee evidence upon which he relies for
indemnification. The Corporation shall, at the request of the Referee, make
available facts, opinions, or other evidence in any way relevant to the
Referee's findings that are within the possession or control of the Corporation.
(g) If an Eligible Person claiming indemnification pursuant to
Section 7.8(f) is found not to be entitled thereto, or if the Board of Directors
fails to select a Referee under Section 7.8(f) within a reasonable amount of
time following a written request of an Eligible Person for the selection of a
Referee, or if the Referee or the Board of Directors fails to make a
determination under Section 7.8(f) within a reasonable amount of time following
the selection of a Referee, the Eligible Person may apply for indemnification
with respect to a Claim to a court of competent jurisdiction, including a court
in which the Claim is pending against the Eligible Person. On receipt of an
application, the court, after giving notice to the Corporation and giving the
Corporation ample opportunity to present to the court any information or
evidence relating to the claim for indemnification that the Corporation deems
appropriate, may order indemnification if it determines that the Eligible Person
is entitled to indemnification with respect to the Claim because such Eligible
Person met the standards of conduct set forth in Section 7.8(a)(2). If the court
determines that the Eligible Person is entitled to indemnification, the court
shall also determine the reasonableness of the Eligible Person's Expenses.
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(h) The rights of indemnification provided in this Section 7.8
shall be in addition to any rights to which any Eligible Person may otherwise be
entitled. Irrespective of the provisions of this Section 7.8, the Board of
Directors may, at any time and from time to time, (1) approve indemnification of
any Eligible Person to the full extent permitted by the provisions of applicable
law at the time in effect, whether on account of past or future transactions,
and (2) authorize the Corporation to purchase and maintain insurance on behalf
of any Eligible Person against any Liability asserted against him and incurred
by him in any such capacity, or arising out of his status as such, whether or
not the Corporation would have the power to indemnify him against such
liability.
(i) Expenses incurred by an Eligible Person with respect to any
Claim, may be advanced by the Corporation (by action of the Board of Directors,
whether or not a disinterested quorum exists) prior to the final disposition
thereof upon receipt of an undertaking by or on behalf of the Eligible Person to
repay such amount unless he is determined to be entitled to indemnification.
(j) The provisions of this Section 7.8 shall be deemed to be a
contract between the Corporation and each Eligible Person, and an Eligible
Person's rights hereunder shall not be diminished or otherwise adversely
affected by any repeal, amendment, or modification of this Section 7.8 that
occurs subsequent to such person becoming an Eligible Person.
(k) The provisions of this Section 7.8 shall be applicable to
Claims made or commenced after the adoption hereof, whether arising from acts or
omissions to act occurring before or after the adoption hereof.
ARTICLE VIII
Miscellaneous Provisions
------------------------
Section 8.1. Amendment or Repeal. Except as otherwise expressly
provided for in these Restated Articles of Incorporation, the Corporation shall
be deemed, for all purposes, to have reserved the right to amend, alter, change,
or repeal any provision contained in these Restated Articles of Incorporation to
the extent and in the manner now or hereafter permitted or prescribed by
statute, and all rights herein conferred upon shareholders are granted subject
to such reservation.
Section 8.2. Redemption of Shares Acquired in Control Share
Acquisitions. If and whenever the provisions of IC 23-1-42 apply to the
Corporation, it is authorized to redeem its securities pursuant to IC
23-1-42-10.
Section 8.3. Captions. The captions of the Articles and Sections of
these Restated Articles of Incorporation have been inserted for convenience of
reference only and do not in any way define, limit, construe, or describe the
scope or intent of any Article or Section hereof.
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EXHIBIT 3.2
BY-LAWS
OF
TOWER FINANCIAL CORPORATION
(As last amended effective November 11, 1998)
ARTICLE I
Meetings of Shareholders
Section 1.1. Annual Meetings. Annual meetings of the shareholders
of the Corporation shall be held on the third Tuesday of May of each year
commencing in May, 2000, with the first annual meeting to be held on January 4,
1999, at such hour and at such place within or without the State of Indiana as
shall be designated by the Board of Directors. In the absence of designation,
the meeting shall be held at the principal office of the Corporation at 11:00
a.m. (local time). The Board of Directors may, by resolution, change the date or
time of such annual meeting, provided such annual meeting shall be held in any
event within five (5) months after the close of each fiscal year of the
corporation. If the day fixed for any annual meeting of shareholders shall fall
on a legal holiday, then such annual meeting shall be held on the first
following day that is not a legal holiday.
Section 1.2. Special Meetings. Special meetings of the shareholders
of the Corporation may be called at any time by the Board of Directors or the
Chairman of the Board and shall be called by the Board of Directors if the
Secretary receives written, dated and signed demands for a special meeting,
describing in reasonable detail the purpose or purposes for which it is to be
held, from the holders of shares representing at least twenty-five percent (25%)
of all votes entitled to be cast on any issue proposed to be considered at the
proposed special meeting; provided, however, that any such demand(s) delivered
to the Secretary at any time at which the Corporation has more than 50
shareholders must be properly delivered by the holders of shares representing at
least 80% of all the votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting. If the Secretary receives one (1) or
more proper written demands for a special meeting of shareholders, the Board of
Directors may set a record date for determining shareholders entitled to make
such demand. The Board of Directors or the Chairman of the Board, as the case
may be, calling a special meeting of shareholders shall set the date, time and
place of such meeting, which may be held within or without the State of Indiana.
Section 1.3. Notices. A written notice, stating the date, time, and
place of any meeting of the shareholders, and, in the case of a special meeting,
the purpose or purposes for which such meeting is called, shall be delivered or
mailed by the Secretary of the Corporation, to each shareholder of record of the
Corporation entitled to notice of or to vote at such meeting no fewer than ten
(10) nor more than sixty (60) days before the date of the meeting. In the event
of a special meeting of shareholders required to be called as the result of a
demand therefor made by
<PAGE> 2
shareholders, such notice shall be given no later than the sixtieth (60th) day
after the Corporation's receipt of the demand requiring the meeting to be
called. Notice of shareholders' meetings, if mailed, shall be mailed, postage
prepaid, to each shareholder at his address shown in the Corporation's current
record of shareholders.
Notice of a meeting of shareholders shall be given to shareholders
not entitled to vote, but only if a purpose for the meeting is to vote on any
amendment to the Corporation's Articles of Incorporation, merger, or share
exchange to which the Corporation would be a party, sale of the Corporation's
assets, dissolution of the Corporation, or consideration of voting rights to be
accorded to shares acquired or to be acquired in a "control share acquisition"
(as such term is defined in the Indiana Business Corporation Law). Except as
required by the foregoing sentence or as otherwise required by the Indiana
Business Corporation Law or the Corporation's Articles of Incorporation, notice
of a meeting of shareholders is required to be given only to shareholders
entitled to vote at the meeting.
A shareholder or his proxy may at any time waive notice of a
meeting if the waiver is in writing and is delivered to the Corporation for
inclusion in the minutes or filing with the Corporation's records. A
shareholder's attendance at a meeting, whether in person or by proxy, (a) waives
objection to lack of notice or defective notice of the meeting, unless the
shareholder or his proxy at the beginning of the meeting objects to holding the
meeting or transacting business at the meeting, and (b) waives objection to
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice, unless the shareholder or
his proxy objects to considering the matter when it is presented. Each
shareholder who has, in the manner above provided, waived notice or objection to
notice of a shareholders' meeting shall be conclusively presumed to have been
given due notice of such meeting, including the purpose or purposes thereof.
If an annual or special shareholders' meeting is adjourned to a
different date, time, or place, notice need not be given of the new date, time,
or place if the new date, time, or place is announced at the meeting before
adjournment, unless a new record date is or must be established for the
adjourned meeting.
Section 1.4. Business of Shareholder Meetings. At each annual
meeting, the shareholders shall elect the directors and shall conduct only such
other business as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be (a) specified in the
notice of the meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (b) otherwise properly brought before the meeting by
or at the direction of the Board of Directors or (c) otherwise properly brought
before the meeting by a shareholder of the Corporation who (i) was a shareholder
of record at the time of giving the notice provided for in this Section 1.4,
(ii) is entitled to vote at the meeting and (iii) complied with the notice
procedures set forth in this Section 1.4. For business to be properly brought
before an annual meeting by a shareholder, the shareholder must have given
timely notice thereof in writing to the Secretary of the Corporation at the
principal executive office of the Corporation. To be timely, a shareholder's
notice shall be delivered not less than 90 days nor more than 120 days prior to
the first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date
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of the annual meeting is advanced by more than 30 days or delayed by more than
60 days from such anniversary date, notice by the shareholder, to be timely,
must be so delivered not earlier than the 120th day prior to such annual meeting
and not later than the close of business on the later of the 90th day prior to
such annual meeting or the 10th day following the day on which public
announcement (as defined herein) of the date of such meeting is first made.
Such shareholder's notice shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the meeting and the reasons for
conducting such business at the meeting and any material interest in such
business of such shareholder and the beneficial owner, if any, on whose behalf
the proposal is made; (b) as to the shareholder giving the notice and the
beneficial owner, if any, on whose behalf the proposal is made (i) the name and
address of such shareholder, as they appear on the Corporation's books, and the
name and address of such beneficial owner, (ii) the class and number of shares
of the Corporation which are owned beneficially and of record by such
shareholder and such beneficial owner as of the date such notice is given, and
(iii) a representation that such shareholder intends to appear in person or by
proxy at the meeting to propose such business; (c) in the event that such
business includes a proposal to amend either the Articles of Incorporation or
the By-Laws of the Corporation, the language of the proposed amendment; and (d)
if the shareholder intends to solicit proxies in support of such shareholder's
proposal, a representation to that effect. The foregoing notice requirements
shall be deemed satisfied by a shareholder if the shareholder has notified the
Corporation of his or her intention to present a proposal at an annual meeting
and such shareholder's proposal has been included in a proxy statement that has
been prepared by management of the Corporation to solicit proxies for such
annual meeting; provided, however, that if such shareholder does not appear or
send a qualified representative to present such proposal at such annual meeting,
the Corporation need not present such proposal for a vote at such meeting,
notwithstanding that proxies in respect of such vote may have been received by
the Corporation. Notwithstanding anything in these By-Laws to the contrary, no
business shall be conducted at any annual meeting except in accordance with this
Section 1.4, and the Chairman of the Board or other person presiding at an
annual meeting of shareholders may refuse to permit any business to be brought
before an annual meeting without compliance with the foregoing procedures or if
the shareholder solicits proxies in support of such shareholder's proposal
without such shareholder having made the representation required by clause (d)
of the second preceding sentence.
For the purposes of this Section 1.4, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). In addition to the provisions of this Section 1.4, a
shareholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth herein. Nothing in these By-Laws shall be deemed to affect any rights of
the shareholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
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Section 1.5. Notice of Shareholder Nominations. Nominations of
persons for election as Directors may be made by the Board of Directors or by
any shareholder who is a shareholder of record at the time of giving the notice
of nomination provided for in this Section 1.5 and who is entitled to vote in
the election of Directors. Any shareholder of record entitled to vote in the
election of Directors at a meeting may nominate a person or persons for election
as Directors only if timely written notice of such shareholder's intent to make
such nomination is given to the Secretary of the Corporation in accordance with
the procedures for bringing business before an annual meeting set forth in
Section 1.4 of these By-Laws. To be timely, a shareholder's notice shall be
delivered (i) with respect to an election to be held at an annual meeting of
shareholders, not less than 90 days nor more than 120 days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than 30 days
or delayed by more than 60 days from such anniversary date, notice by the
shareholder, to be timely, must be so delivered not earlier than the 120th day
prior to such annual meeting and not later than the close of business on the
later of the 90th day prior to such annual meeting or the 10th day following the
day on which public announcement (as defined in Section 1.4 of these By-Laws) is
first made of the date of such meeting, and (ii) with respect to an election to
be held at a special meeting of shareholders, not earlier than the 120th day
prior to such special meeting and not later than the close of business on the
later of the 90th day prior to such special meeting or the 10th day following
the day on which public announcement is first made of the date of the special
meeting and of the nominees to be elected at such meeting.
Such shareholder's notice shall set forth: (a) the name and address
of the shareholder who intends to make the nomination, of the person or persons
to be nominated and of the beneficial owner, if any, on whose behalf the
nomination is made; (b) a representation that the shareholder is a holder of
record of stock of the Corporation entitled to vote at such meeting in such
election and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the shareholder, any such beneficial
owner, each nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be made by the
shareholder; (d) such other information regarding each nominee proposed by such
shareholder as would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission had
each nominee been nominated, or intended to be nominated, by the Board of
Directors; (e) the consent of each nominee to serve as a Director if so elected;
and (f) if the shareholder intends to solicit proxies in support of such
shareholder's nominee(s), a representation to that effect. The chairman of any
meeting of shareholders to elect Directors and the Board of Directors may refuse
to acknowledge the nomination of any person not made in compliance with the
foregoing procedure or if the shareholder solicits proxies in support of such
shareholder's nominee(s) without such shareholder having made the representation
required by clause (f) of the preceding sentence. In addition to the provisions
of this Section 1.5, a shareholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth herein.
Section 1.6. Voting. Except as otherwise provided by the Indiana
Business Corporation Law or the Corporation's Articles of Incorporation, each
share of the capital stock of any class of the Corporation that is outstanding
at the record date established for any annual or special
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meeting of shareholders and is outstanding at the time of and represented in
person or by proxy at the annual or special meeting, shall entitle the record
holder thereof, or his proxy, to one (1) vote on each matter voted on at the
meeting.
Section 1.7. Quorum. Unless the Corporation's Articles of
Incorporation or the Indiana Business Corporation Law provide otherwise, at all
meetings of shareholders, a majority of the votes entitled to be cast on a
matter, represented in person or by proxy, constitutes a quorum for action on
the matter. Action may be taken at a shareholders' meeting only on matters with
respect to which a quorum exists; provided, however, that any meeting of
shareholders, including annual and special meetings and any adjournments
thereof, may be adjourned to a later date although less than a quorum is
present. Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
Section 1.8. Vote Required To Take Action. If a quorum exists as to
a matter to be considered at a meeting of shareholders, action on such matter
(other than the election of Directors) is approved if the votes properly cast
favoring the action exceed the votes properly cast opposing the action, except
as the Corporation's Articles of Incorporation or the Indiana Business
Corporation Law require a greater number of affirmative votes. Directors shall
be elected by a plurality of the votes properly cast.
Section 1.9. Record Date. Only such persons shall be entitled to
notice of or to vote, in person or by proxy, at any shareholders' meeting as
shall appear as shareholders upon the books of the Corporation as of such record
date as the Board of Directors shall determine, which date may not be earlier
than the date seventy (70) days immediately preceding the meeting. In the
absence of such determination, the record date shall be the fiftieth (50th) day
immediately preceding the date of such meeting. Unless otherwise provided by the
Board of Directors, shareholders shall be determined as of the close of business
on the record date.
Section 1.10. Proxies. A shareholder may vote his shares either in
person or by proxy. A shareholder may appoint a proxy to vote or otherwise act
for the shareholder (including authorizing the proxy to receive, or to waive,
notice of any shareholders' meeting within the effective period of such proxy)
by signing an appointment form, either personally or by the shareholders'
attorney-in-fact. An appointment of a proxy is effective when received by the
Secretary or other officer or agent authorized to tabulate votes and is
effective for eleven (11) months unless a longer period is expressly provided in
the appointment form. The proxy's authority may be limited to a particular
meeting or may be general and authorize the proxy to represent the shareholder
at any meeting of shareholders held within the time provided in the appointment
form. Subject to the Indiana Business Corporation Law and to any express
limitation on the proxy's authority appearing on the face of the appointment
form, the Corporation is entitled to accept the proxy's vote or other action as
that of the shareholder making the appointment.
Section 1.11. Removal of Directors. Any or all of the members of
the Board of Directors may be removed, for good cause, only at a meeting of the
shareholders called expressly for that purpose, by a vote of the holders of
outstanding shares representing at least sixty-six and
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two-thirds percent (66-2/3%) of the votes then entitled to be cast at an
election of Directors. Directors may not be removed in the absence of good
cause.
Section 1.12. Written Consents. Any action required or
permitted to be taken at a shareholders' meeting may be taken without a meeting
if the action is taken by all the shareholders entitled to vote on the action.
The action must be evidenced by one (1) or more written consents describing the
action taken, signed by all the shareholders entitled to vote on the action, and
delivered to the Corporation for inclusion in the minutes or filing with the
corporate records. Action taken under this Section 1.12 is effective when the
last shareholder signs the consent, unless the consent specifies a different
prior or subsequent effective date, in which case the action is effective on or
as of the specified date. Such consent shall have the same effect as a unanimous
vote of all shareholders and may be described as such in any document.
Section 1.13. Participation by Conference Telephone. The
Chairman of the Board or the Board of Directors may permit any or all
shareholders to participate in an annual or special meeting of shareholders by,
or through the use of, any means of communication, such as conference telephone,
by which all shareholders participating may simultaneously hear each other
during the meeting. A shareholder participating in a meeting by such means shall
be deemed to be present in person at the meeting.
ARTICLE II
Directors
Section 2.1. Number and Terms. The business and affairs of the
Corporation shall be managed under the direction of a Board of Directors
consisting of eighteen (18) Directors. The Board of Directors may change the
initial number of Directors at any meeting of the Board of Directors by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
entire number of Directors at the time.
Beginning as of the annual meeting of shareholders held in 1999,
the Directors shall be divided into three (3) groups, with each group consisting
of one-third (1/3) of the total Directors, as near as may be, with the term of
office of the first group to expire at the annual meeting of shareholders in
2000, the term of office of the second group to expire at the annual meeting of
shareholders in 2001, and the term of office of the third group to expire at the
annual meeting of shareholders in 2002; and at each annual meeting of
shareholders, the Directors chosen to succeed those whose terms then expire
shall be identified as being of the same group as the Directors they succeed and
shall be elected for a term expiring at the third succeeding annual meeting of
shareholders.
Despite the expiration of a Director's term, the Director shall
continue to serve until his successor is elected and qualified, or until the
earlier of his death, resignation, disqualification or removal, or until there
is a decrease in the number of Directors. Any vacancy occurring in the Board of
Directors, from whatever cause arising, shall be filled by selection of a
successor by a
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majority vote of the remaining members of the Board of Directors (although less
than a quorum); provided, however, that if such vacancy or vacancies leave the
Board of Directors with no members or if the remaining members of the Board are
unable to agree upon a successor or determine not to select a successor, such
vacancy may be filled by a vote of the shareholders at a special meeting called
for that purpose or at the next annual meeting of shareholders. The term of a
Director elected or selected to fill a vacancy shall expire at the end of the
term for which such Director's predecessor was elected, or if the vacancy arises
because of an increase in the size of Board of Directors, at the end of the term
specified at the time of election or selection.
The Directors and each of them shall have no authority to bind the
Corporation except when acting as a Board.
Section 2.2. Quorum and Vote Required To Take Action. A majority of
the whole Board of Directors shall be necessary to constitute a quorum for the
transaction of any business, except the filling of vacancies. If a quorum is
present when a vote is taken, the affirmative vote of a majority of the
Directors present shall be the act of the Board of Directors, unless the act of
a greater number is required by the Indiana Business Corporation Law, the
Corporation's Articles of Incorporation or these By-Laws.
Section 2.3. Annual and Regular Meetings. The Board of Directors
shall meet annually, without notice, immediately following the annual meeting of
the shareholders, for the purpose of transacting such business as properly may
come before the meeting. Other regular meetings of the Board of Directors, in
addition to said annual meeting, shall be held on such dates, at such times and
at such places as shall be fixed by resolution adopted by the Board of Directors
and specified in a notice of each such regular meeting, or otherwise
communicated to the Directors. The Board of Directors may at any time alter the
date for the next regular meeting of the Board of Directors.
Section 2.4. Special Meetings. Special meetings of the Board of
Directors may be called by any member of the Board of Directors upon not less
than twenty-four (24) hours' notice given to each Director of the date, time,
and place of the meeting, which notice need not specify the purpose or purposes
of the special meeting. Such notice may be communicated in person (either in
writing or orally), by telephone, telegraph, teletype, or other form of wire or
wireless communication, or by mail, and shall be effective at the earlier of the
time of its receipt or, if mailed, five (5) days after its mailing. Notice of
any meeting of the Board may be waived in writing at any time if the waiver is
signed by the Director entitled to the notice and is filed with the minutes or
corporate records. A Director's attendance at or participation in a meeting
waives any required notice to the Director of the meeting, unless the Director
at the beginning of the meeting (or promptly upon the Director's arrival)
objects to holding the meeting or transacting business at the meeting and does
not thereafter vote for or assent to action taken at the meeting.
Section 2.5. Written Consents. Any action required or permitted to
be taken at any meeting of the Board of Directors may be taken without a meeting
if the action is taken by all members of the Board. The action must be evidenced
by one (1) or more written consents describing the action taken, signed by each
Director, and included in the minutes or filed with the corporate
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records reflecting the action taken. Action taken under this Section 2.5 is
effective when the last Director signs the consent, unless the consent specifies
a different prior or subsequent effective date, in which cases the action is
effective on or as of the specified date. A consent signed under this Section
2.5 shall have the same effect as a unanimous vote of all members of the Board
and may be described as such in any document.
Section 2.6. Participation by Conference Telephone. The Board
of Directors may permit any or all Directors to participate in a regular or
special meeting by, or through the use of, any means of communication, such as
conference telephone, by which all Directors participating may simultaneously
hear each other during the meeting. A Director participating in a meeting by
such means shall be deemed to be present in person at the meeting.
Section 2.7. Executive Committee. The Board of Directors shall
appoint up to six (6) members to an Executive Committee. The Executive Committee
shall, subject to the restrictions of Section 2.9, be authorized to exercise the
authority of the full Board of Directors at any times other than during regular
or special meetings of the Board of Directors. All actions taken by the
Executive Committee shall be reported at the first regular meeting of the Board
of Directors following such actions. Members of the Executive Committee shall
serve at the pleasure of the Board of Directors.
Section 2.8. Other Committees. The Board of Directors may create
one (1) or more committees in addition to the Executive Committee and appoint
members of the Board of Directors to serve on them, by resolution of the Board
of Directors adopted by a majority of all the Directors in office when the
resolution is adopted. The committee may exercise the authority of the Board of
Directors to the extent specified in the resolution. Each committee may have one
(1) or more members, and all the members of such committee shall serve at the
pleasure of the Board of Directors.
Section 2.9. Limitations on Committees; Notice, Quorum and Voting.
(a) Neither the Executive Committee nor any other committee
hereafter established may:
(1) authorize dividends or other distributions, except a committee may
authorize or approve a reacquisition of shares if done according to
a formula or method prescribed by the Board of Directors;
(2) approve or propose to shareholders action that is required to
be approved by shareholders;
(3) fill vacancies on the Board of Directors or on any of its
committees;
(4) except as permitted under Section 2.9(a)(7) below, amend the
Corporation's Articles of Incorporation under IC 23-1-38-2;
(5) adopt, amend, repeal, or waive provisions of these By-Laws;
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(6) approve a plan of merger not requiring shareholder approval; or
(7) authorize or approve the issuance or sale or a contract for sale of
shares, or determine the designation and relative rights,
preferences, and limitations of a class or series of shares, except
the Board of Directors may authorize a committee (or an executive
officer of the Corporation designated by the Board of Directors) to
take the action described in this Section 2.9(a)(7) within limits
prescribed by the Board of Directors.
(b) Except to the extent inconsistent with the resolutions creating
a committee, Sections 2.1 through 2.6 of these By-Laws, which govern meetings,
action without meetings, notice and waiver of notice, quorum and voting
requirements and telephone participation in meetings of the Board of Directors,
apply to each committee and its members as well.
ARTICLE III
Officers
Section 3.1. Designation, Selection and Terms. The officers of the
Corporation shall consist of the Chairman of the Board, the Chief Executive
Officer and President, the Chief Financial Officer, the Chief Lending Officer,
the Treasurer and the Secretary. The Board of Directors may also elect Vice
Presidents, Assistant Secretaries and Assistant Treasurers, and such other
officers or assistant officers as it may from time to time determine by
resolution creating the office and defining the duties thereof. In addition, the
Chairman of the Board or the Chief Executive Officer and President may, by a
certificate of appointment creating the office and defining the duties thereof
delivered to the Secretary for inclusion with the corporate records, from time
to time create and appoint such assistant officers as they deem desirable. The
officers of the Corporation shall be elected by the Board of Directors (or
appointed by the Chairman of the Board or the Chief Executive Officer and
President as provided above) and need not be selected from among the members of
the Board of Directors, except for the Chairman of the Board and the Chief
Executive Officer and President who shall be members of the Board of Directors.
Any two (2) or more offices may be held by the same person. All officers shall
serve at the pleasure of the Board of Directors and, with respect to officers
appointed by the Chairman of the Board or the Chief Executive Officer and
President, also at the pleasure of such officers. The election or appointment of
an officer does not itself create contract rights.
Section 3.2. Removal. The Board of Directors may remove any officer
at any time with or without cause. An officer appointed by the Chairman of the
Board or the Chief Executive Officer and President may also be removed at any
time, with or without cause, by either of such officers. Vacancies in such
offices, however occurring, may be filled by the Board of Directors at any
meeting of the Board of Directors (or by appointment by the Chairman of the
Board or the Chief Executive Officer and President, to the extent provided in
Section 3.1 of these By-Laws).
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Section 3.3. Chairman of the Board. The Chairman of the Board
shall, if present, preside at all meetings of the shareholders and the Board of
Directors and shall have such powers and perform such duties as are assigned to
him by the Board of Directors.
Section 3.4. Chief Executive Officer and President. The Chief
Executive Officer and President shall be the chief executive and principal
policymaking officer of the Corporation. Subject to the authority of the Board
of Directors, he shall formulate the major policies to be pursued in the
administration of the Corporation's affairs. He shall study and make reports and
recommendations to the Board of Directors with respect to major problems and
activities of the Corporation and shall see that the established policies are
placed into effect and carried out. In the absence of the Chairman of the Board,
the Chief Executive Officer and President shall preside at all meetings of the
shareholders and of the Board of Directors.
Section 3.5. Chief Lending Officer. The Chief Lending Officer
shall be the chief lending officer of the Corporation, shall exercise the powers
and perform all of the duties customary to that office. He shall be responsible
for the Corporation's oversight of the lending activities of its subsidiaries,
subject to the supervision and direction of the Chairman of the Board and the
Chief Executive Officer and President, and shall have and perform such further
powers and duties as the Board of Directors may, from time to time, prescribe
and as the Chief Executive Officer and President may, from time to time,
delegate to him.
Section 3.6. Chief Financial Officer. The Chief Financial Officer
shall be the chief financial officer of the Corporation and shall perform all of
the duties customary to that office. He shall be responsible for all of the
Corporation's financial affairs, subject to the supervision and direction of the
Chief Executive Officer and President, and shall have and perform such further
powers and duties as the Board of Directors may, from time to time, prescribe
and as the Chief Executive Officer and President may, from time to time,
delegate to him.
Section 3.7. Vice Presidents. Each Vice President shall have such
powers and perform such duties as the Board of Directors may, from time to time,
prescribe and as the Chief Executive Officer and President may, from time to
time, delegate to him.
Section 3.8. Treasurer. The Treasurer shall perform all of the
duties customary to that office, shall be the chief accounting officer of the
Corporation and shall be responsible for maintaining the Corporation's
accounting books and records and preparing its financial statements, subject to
the supervision and direction of the Chief Financial Officer and other superior
officers within the Corporation. He shall also be responsible for causing the
Corporation to furnish financial statements to its shareholders pursuant to IC
23-1-53-1.
Section 3.9. Assistant Treasurer. In the absence or inability of
the Treasurer, the Assistant Treasurer, if any, shall perform only such duties
as are specifically assigned to him, in writing, by the Board of Directors, the
Chief Executive Officer and President, the Chief Financial Officer, or the
Treasurer.
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Section 3.10. Secretary. The Secretary shall be the custodian of
the books, papers, and records of the Corporation and of its corporate seal, if
any, and shall be responsible for seeing that the Corporation maintains the
records required by IC 23-1-52-1 (other than accounting records) and that the
Corporation files with the Indiana Secretary of State the annual report required
by IC 23-1-53-3. The Secretary shall be responsible for preparing minutes of the
meetings of the shareholders and of the Board of Directors and for
authenticating records of the Corporation, and he shall perform all of the other
duties usual in the office of Secretary of a corporation.
Section 3.11. Assistant Secretary. In the absence or inability of
the Secretary, the Assistant Secretary, if any, shall perform only such duties
as are provided herein or specifically assigned to him, in writing, by the Board
of Directors, the Chief Executive Officer and President, or the Secretary.
Section 3.12. Salary. The Board of Directors may, at its
discretion, from time to time, fix the salary of any officer by resolution
included in the minute book of the Corporation.
ARTICLE IV
Checks
All checks, drafts, or other orders for payment of money shall be
signed in the name of the Corporation by such officers or persons as shall be
designated from time to time by resolution adopted by the Board of Directors and
included in the minute book of the Corporation; and in the absence of such
designation, such checks, drafts, or other orders for payment shall be signed by
the Chairman of the Board, the Chief Executive Officer and President, Chief
Financial Officer, Chief Lending Officer or the Treasurer.
ARTICLE V
Loans
Such of the officers of the Corporation as shall be designated from
time to time by resolution adopted by the Board of Directors and included in the
minute book of the Corporation shall have the power, with such limitations
thereon as may be fixed by the Board of Directors, to borrow money in the
Corporation's behalf, to establish credit, to discount bills and papers, to
pledge collateral, and to execute such notes, bonds, debentures, or other
evidences of indebtedness, and such mortgages, trust indentures, and other
instruments in connection therewith, as may be authorized from time to time by
such Board of Directors.
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ARTICLE VI
Execution of Documents
The Chairman of the Board, the Chief Executive Officer and
President or any other officer authorized by the Board of Directors may, in the
Corporation's name, sign all deeds, leases, contracts, or similar documents
unless otherwise directed by the Board of Directors or otherwise provided herein
or in the Corporation's Articles of Incorporation, or as otherwise required by
law.
ARTICLE VII
Stock
Section 7.1. Execution. Certificates for shares of the capital
stock of the Corporation shall be signed by the Chairman of the Board or the
Chief Executive Officer and President and by the Secretary and the seal of the
Corporation (or a facsimile thereof), if any, may be thereto affixed. Where any
such certificate is also signed by a transfer agent or a registrar, or both, the
signatures of the officers of the Corporation may be facsimiles. The Corporation
may issue and deliver any such certificate notwithstanding that any such officer
who shall have signed, or whose facsimile signature shall have been imprinted
on, such certificate shall have ceased to be such officer.
Section 7.2. Contents. Each certificate issued after the adoption
of these By-Laws shall state on its face the name of the Corporation and that it
is organized under the laws of the State of Indiana, the name of the person to
whom it is issued, and the number and class of shares and the designation of the
series, if any, the certificate represents, and shall state conspicuously on its
front or back that the Corporation will furnish the shareholder, upon his
written request and without charge, a summary of the designations, relative
rights, preferences, and limitations applicable to each class and the variations
in rights, preferences, and limitations determined for each series (and the
authority of the Board of Directors to determine variations for future series).
Section 7.3. Transfers. Except as otherwise provided by law or by
resolution of the Board of Directors, transfers of shares of the capital stock
of the Corporation shall be made only on the books of the Corporation by the
holder thereof, in person or by duly authorized attorney, on payment of all
taxes thereon and surrender for cancellation of the certificate or certificates
for such shares (except as hereinafter provided in the case of loss,
destruction, or mutilation of certificates) properly endorsed by the holder
thereof or accompanied by the proper evidence of succession, assignment, or
authority to transfer, and delivered to the Secretary or an Assistant Secretary.
Section 7.4. Stock Transfer Records. There shall be entered upon
the stock records of the Corporation the number of each certificate issued, the
name and address of the registered holder of such certificate, the number, kind,
and class of shares represented by such certificate, the date of issue, whether
the shares are originally issued or transferred, the registered holder from whom
transferred, and such other information as is commonly required to be shown by
such records. The stock records of the Corporation shall be kept at its
principal office, unless the Corporation appoints
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a transfer agent or registrar, in which case the Corporation shall keep at its
principal office a complete and accurate shareholders' list giving the names and
addresses of all shareholders and the number and class of shares held by each.
If a transfer agent is appointed by the Corporation, shareholders shall give
written notice of any changes in their addresses from time to time to the
transfer agent.
Section 7.5. Transfer Agents and Registrars. The Board of Directors
may appoint one or more transfer agents and one or more registrars and may
require each stock certificate to bear the signature of either or both.
Section 7.6. Loss, Destruction, or Mutilation of Certificates.
The holder of any of the capital stock of the Corporation shall immediately
notify the Corporation of any loss, destruction, or mutilation of the
certificate therefor, and the Board of Directors may, in its discretion, cause
to be issued to him a new certificate or certificates of stock, upon the
surrender of the mutilated certificate, or, in the case of loss or destruction,
upon satisfactory proof of such loss or destruction. The Board of Directors may,
in its discretion, require the holder of the lost or destroyed certificate or
his legal representative to give the Corporation a bond in such sum and in such
form, and with such surety or sureties as it may direct, to indemnify the
Corporation, its transfer agents, and registrars, if any, against any claim that
may be made against them or any of them with respect to the capital stock
represented by the certificate or certificates alleged to have been lost or
destroyed, but the Board of Directors may, in its discretion, refuse to issue a
new certificate or certificates, save upon the order of a court having
jurisdiction in such matters.
Section 7.7. Form of Certificates. The form of the
certificates for shares of the capital stock of the Corporation shall conform to
the requirements of Section 7.2 of these By-Laws and be in such printed form as
shall from time to time be approved by resolution of the Board of Directors.
ARTICLE VIII
Seal
The corporate seal of the Corporation shall, if the Corporation
elects to have one, be in the form of a disc, with the name of the Corporation
and "INDIANA" on the periphery thereof and the word "SEAL" in the center.
ARTICLE IX
Miscellaneous
Section 9.1. Indiana Business Corporation Law. The provisions of
the Indiana Business Corporation law, as amended, applicable to all matters
relevant to, but not specifically covered by, these By-Laws are hereby, by
reference, incorporated in and made a part of these By-Laws.
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Section 9.2. Fiscal Year. The fiscal year of the Corporation shall
end on the 31st day of December of each year.
Section 9.3. Election to be governed by Indiana Code Section
23-1-43. Effective upon the registration of the Corporation's common stock under
Section 12 of the Securities Exchange Act of 1934, as amended, the Corporation
shall be governed by the provisions of IC 23-1-43 regarding business
combinations.
Section 9.4. Control Share Acquisition Statute. The provisions of
IC 23-1-42 shall apply to the acquisition of shares of the Corporation.
Section 9.5. Redemption of Shares Acquired in Control Share
Acquisitions. If and whenever the provisions of IC 23-1-42 apply to the
Corporation, any or all control shares acquired in a control share acquisition
shall be subject to redemption by the Corporation, if either:
(a) no acquiring person statement has been filed with the
Corporation with respect to such control share acquisition in accordance
with IC 23-1-42-6, or
(b) the control shares are not accorded full voting rights by
the Corporation's shareholders as provided in IC 23-1-42-9.
A redemption pursuant to Section 9.5(a) may be made at any time during the
period ending sixty (60) days after the last acquisition of control shares by
the acquiring person. A redemption pursuant to Section 9.5(b) may be made at any
time during the period ending two (2) years after the shareholder vote with
respect to the granting of voting rights to such control shares. Any redemption
pursuant to this Section 9.5 shall be made at the fair value of the control
shares and pursuant to such procedures for such redemption as may be set forth
in these By-Laws or adopted by resolution of the Board of Directors.
As used in this Section 9.5, the terms "control shares," "control
share acquisition," "acquiring person statement," and "acquiring person" shall
have the meanings ascribed to such terms in IC 23-1-42.
Section 9.6. Amendments. These By-Laws may be rescinded,
changed, or amended, and provisions hereof may be waived, at any meeting of the
Board of Directors by the affirmative vote of a majority of the entire number of
Directors at the time, except as otherwise required by the Corporation's
Articles of Incorporation, by the Indiana Business Corporation Law, or by
specific sections of these By-Laws.
Section 9.7. Definition of Articles of Incorporation. The term
"Articles of Incorporation" as used in these By-Laws means the Amended or
Restated Articles of Incorporation of the Corporation as from time to time are
in effect.
-14-
<PAGE> 1
EXHIBIT 5
BAKER & DANIELS
300 NORTH MERIDIAN STREET, SUITE 2700 INDIANAPOLIS, INDIANA 46204
(317)237-0300. FAX (317) 237-1000
November 12, 1998
Tower Financial Corporation
116 East Berry Street
Fort Wayne, Indiana 46802
Ladies and Gentlemen:
We have examined the corporate records and proceedings of Tower
Financial Corporation, an Indiana corporation (the "Company"), with respect to:
(a) the organization of the Company and (b) the legal sufficiency of all
corporate proceedings of the Company taken in connection with the authorization,
issuance, form, validity and nonassessability of the authorized but unissued
shares (including the shares to cover an over-allotment option) of Common Stock,
without par value, of the Company ("Common Stock") to be offered for sale by the
Company under its Registration Statement on Form SB-2(the "Registration
Statement"), in connection with which this opinion is given.
Based on such examination, we are of the opinion that:
1. The Company is a duly organized and validly existing
corporation under the laws of the State of Indiana.
2. The Company is authorized to have outstanding 6,000,000 shares
of Common Stock.
3. The shares of Common Stock being offered pursuant to the
Registration Statement are validly authorized and, when the Registration
Statement shall have become effective and the authorized but unissued shares of
Common Stock being offered by the Company pursuant thereto have been sold upon
the terms and conditions described in the Registration Statement and set forth
in the Underwriting Agreement to be filed as an exhibit to the Registration
Statement, all of such shares will be legally issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to us under the heading "Legal
Matters" in the Prospectus which is a part of the Registration Statement. In
giving this consent, we do not admit that we come within the category of persons
whose consent is required under Section 7 of the Act or rules and regulations of
the Securities and Exchange Commission promulgated thereunder.
Your very truly,
/s/ BAKER & DANIELS
<PAGE> 1
EXHIBIT 10.1
OFFICE LEASE
TIPPMANN PROPERTIES INC., as agent for JOHN V. TIPPMANN, SR. ("Lessor"), in
consideration of the rent herein reserved and the covenants to be performed by
TOWER FINANCIAL CORPORATION ("Lessee"), does hereby grant, demise, and lease to
Lessee the premises described in Section 1 upon the following terms and
conditions:
1. Leased Premises. That the Lessor, for and in consideration of the
payment of the rentals and the performance of the covenants and agreements
hereinafter contained, does hereby demise and lease unto the Lessee, and the
Lessee does hereby rent and take from the Lessor, the "Leased Premises" known as
Suite 100 containing approximately 13,891 useable square feet in the building
known as Lincoln Tower and located at 116 E. Berry St, Fort Wayne, Indiana
(hereinafter referred as "Leased Premises").The Leased Premises shall, however,
be deemed to include the following additional areas and/or facilities in,
adjacent to, or to be used in connection with the Building and Leased Premises
(hereinafter the "Additional Facilities"):
(a) The safe deposit facilities, including (but not limited to) the
walk-in vault, lobby, reception areas, containing approximately 1,158 Square
Feet and access to the common areas adjacent thereto on the lower level, the
stairway and elevator egress from and to the main Building lobby. Further
delineated on the floor plan attached hereto as EXHIBIT "C". Rent for this area
shall be abated for 1 year. At the end of said 1 year period, Lessee shall have
the option with thirty (30) days prior written notice to Lease this space for
the remaining term of the Lease, on the same terms and conditions as set forth
in this Lease and for the same per square foot rental rate that is then in
effect (subject to increase as provided herein).
(b) Access and egress into and through the main Building lobby, into and
from the Leased Premises during all banking hours.
(c) Access to and use of the drive-through banking facilities on the east
side of the Building (to be modified by Lessor in accordance with the provisions
of Section 21.3(a), as well as access and egress onto, over, and out from paved
parking/drive-through area, and the right to maintain two unobstructed lanes of
automobiles waiting to use such facilities. Per attached EXHIBIT "D".
(d) Use of 5 Parking spaces and Right Of First Refusal on 5 additional
spaces adjacent to the Building on the east, reserved for Bank patron short-term
walk-in use. Parking spaces can be changed or discontinued at any time. Rent for
parking shall be $50.00 monthly per space. Further delineated on the floor plan
attached here to as EXHIBIT "D".
(e) The right to install, use, and maintain at Lessee's cost and expense,
not less than one automatic teller machine on the north facing facade in the
sheltered area where the prior ATM was installed and or conversion of one
drive-through to an ATM at Lessee's expense, or in the building lobby if
mutually agreeable to both parties.
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The legal description of the building and property in which the Leased
Premises are located is attached hereto as EXHIBIT "A" and made a part hereof.
The Leased Premises are further delineated on the Floor Plan attached hereto as
EXHIBIT "B" and made a part hereof. The Additional Facilities are further
delineated on the schematics attached hereto as EXHIBITS "C" AND "D".
2. Term. Subject to Lessee's option to terminate this Lease, in
accordance with the terms of Section 21.2, the term of this Lease shall be for a
period of 10 years, or until sooner terminated as herein provided, commencing on
January 1, 1999 and ending on December 31, 2008 (the "Lease
Term").Provided, however, that Lessee shall be entitled to enter and have access
to the Leased Premises upon execution of this Lease and until the commencement
date, for purposes of preparing the Leased Premises for occupancy including
(without limitation) construction activity, decorating, fixturing, carpeting,
and signage work.
3. Use & Occupancy. Lessee shall use and occupy the Leased Premises
only for commercial banking and for no other purpose, and Lessor hereby agrees
that Lessee shall be the sole tenant on the main floor or on the Leased Premises
that will be permitted under the terms of its lease to engage in the conduct of
a commercial banking business. Lessee shall, at Lessee's own expense, obtain any
and all licenses and permits necessary for Lessee's use of the Leased Premises.
Lessee shall comply with and obey all laws, regulations, or orders of any
governmental authority or agency, including but not limited to the provisions of
the American with Disabilities Act, it's regulations and amendments, as well as
directions of the Lessor, including building rules and regulations as changed or
modified from time to time by Lessor on reasonable notice to Lessee, all of
which are and will be a part of this Lease as shown on Exhibit "E". Lessee shall
maintain the Leased Premises in a clean and sanitary condition; shall allow no
noxious odors to emanate therefrom; shall commit no waste or damage; and shall
not do or permit anything to be done in or about the Leased Premises which will
in any way obstruct or interfere with the rights of any other tenants or
occupants of the building or injure or annoy them. Lessor shall not be
responsible to Lessee for the nonperformance by any other tenant or occupant of
any of the rules and regulations hereto attached, or as amended from time to
time, but agrees to take reasonable measures, including enforcement action as
and when necessary, to assure such other tenants' performance.
Lessee agrees to accept the Leased Premises in their present condition,
subject to Lessor's obligations as set forth in Section 5 and to complete,
perform alterations to, repair or maintain the Leased Premises. As set forth in
Section 21.3.
4. Rent.
Effective January 1, 1999 to December 31, 2000, Lessee shall pay a
minimum annual rent without offset or reduction for any reason whatsoever of One
Hundred Thirty Five Thousand Four Hundred Thirty-Seven and 25/00ths Dollars
($135,437.25)for the Leased Premises, and such minimum annual rent shall be paid
in equal monthly installments of Eleven Thousand Two Hundred
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Eighty-Six and 44/00ths Dollars ($11,286.44) in advance, on the first day of
each month. In succeeding years Lessee shall pay rent as indicated below:
TERM ANNUAL MONTHLY
---- ------ -------
1/01/01 TO 12/31/02 $ 152,801.00 $ 12,733.42
------- -------- ---------- ----------
1/01/03 TO 12/31/04 170,164.75 14,180.40
------- -------- ---------- ----------
1/01/05 TO 12/31/06 187,528.50 15,627.38
------- -------- ---------- ----------
1/01/07 TO 12/31/08 204,892.25 17,074.35
------- -------- ---------- ----------
(a) If Lessor or its agent has not received the full monthly
installment by the tenth (10th) day of the month in which it is due, Lessee
shall also pay a late fee of seven percent (7%)of the monthly installment.
Acceptance or waiver of a late fee for a particular month shall not preclude
Lessor from resorting to any other available remedy for subsequent failure to
make timely payments of rent. The rental payment for any fractional month of
occupancy shall be prorated.
4.1 Security Deposit. Lessee has deposited with Lessor the sum of Eleven
Thousand Two Hundred Eighty-Six and 44/00ths Dollars ($11,286.44)as a security
deposit, to be held by Lessor, without liability for interest, as security for
the faithful performance by Lessee of all of the terms, covenants, and
conditions of this Lease, and may be applied by Lessor, in whole or in part, for
the payment of any past due rent or other money, damage or loss which may be
sustained by Lessor because of a breach of this Lease by Lessee. In the event of
any such application by Lessor, Lessee shall, upon the written demand of Lessor,
forthwith remit to Lessor a sufficient amount of cash to restore the security to
the original sum deposited. Said deposit shall be returned to Lessee upon
termination of Lessee's occupancy hereunder, provided Lessee has complied with
all of the terms, covenants and conditions of this Lease, including those
relating to the condition in which the Leased Premises shall be left by Lessee.
Lessee shall also be liable to Lessor for any amount in excess of such deposit
reasonably required to so restore the Leased Premises to such condition or cure
such default. Lessor may deliver such deposit to any purchaser or other
transferee of Lessor's interest in the real estate, and thereupon Lessor shall
be discharged from any further liability with respect to such deposit.
5. Services. During the term of this Lease:
(a) Lessor shall, at its own cost and expense, maintain in good condition
and repair the interior of the Leased Premises, including but not limited to the
electrical systems, heating and air conditioning systems, sprinkler and plumbing
systems, plate glass windows, doors, and overhead doors, and the vaulted ceiling
and adjacent upper side walls (including the
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painted or frescoed artwork and decorative plasterwork thereon) in the main
banking lobby.
(b) Lessor shall, at its own cost and expense, maintain in good condition
and repair, the roof,(including the roof area over the drive-through facility as
modified), exterior walls, foundation and structural frame of the building of
which the Leased Premises are a part.
(c) Lessor shall provide snow removal and grounds keeping services, and
shall maintain the common areas inside and outside the Building such as
restrooms, hallways, walkways, driveway (including the drive-through facility),
parking areas (including the area serving the drive-through facility) and yard.
(d) Lessor shall furnish such heating, cooling, water and sewer utilities
and services which in its sole judgment are reasonably necessary for the
comfortable use and occupancy of the Leased Premises during normal business
hours on all generally recognized business days, but no failure to furnish such
services (except as the result of the willful neglect of Lessor), and no
interruption or suspension of any such service when necessary by reason of
governmental regulation, civil commotion or riot, accident or emergency, or for
repairs, alterations or improvements considered desirable or necessary by Lessor
shall be construed as an eviction of Lessee or work an abatement or diminution
of rent or render Lessor or its agents or employees liable for damages either to
person, business or property suffered by Lessee, its employees, licensees or
invites by reason of any such failure, or release Lessee from any of its
obligations under this Lease.
(e) Lessee shall be responsible for its own janitorial services and
maintaining vaults, drive-through equipment and include floor covering
maintenance and replacement as needed throughout the term of the Lease.
6. Liens. Lessee shall keep the Leased Premises free from any liens,
including but not limited to mechanic's liens. In the event any lien attaches to
the Leased Premises by virtue of an act or failure to act on the part of Lessee,
Lessor shall have the right, but no obligation, to pay the amount of such lien
to cause its release and such amount shall be considered additional rent to be
paid to it by Lessee on demand with interest at 12% per year from the day of
recording of the lien.
7. Assignment & Subletting. Lessee shall not assign this Lease nor
sublet the Leased Premises in whole or in part without Lessor's prior written
consent, which shall not be unreasonably withheld.
8. Fire and Extended Insurance Coverage. During the Lease Term, Lessor
shall maintain fire and extended insurance coverage on the Leased Premises, but
shall not protect Lessee's property on the Leased Premises in the event of
damage, however caused.
Lessee shall be responsible to maintain in full force and effect insurance
on all of its own inventory, fixtures and equipment in the Leased
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Premises. Lessor shall have no interest in the insurance upon Lessee's
inventory, equipment and fixtures and will sign all documents necessary or
proper in connection with the settlement of any claim or loss by Lessee.
Lessee, at its own expense, shall provide and keep in force with companies
acceptable to Lessor public liability insurance, for the benefit of Lessor and
Lessee jointly, against liability for bodily injury or death to any one person
and property damage in an amount of not less than One Million Dollars
($1,000,000.00) combined single limit per occurrence, such limits to be for any
greater amounts as may be reasonably indicated by circumstances from time to
time existing. Lessee shall furnish Lessor with a certificate of such insurance
within thirty (30) days of the commencement date of this Lease, and whenever
required shall satisfy Lessor that such policy is in full force and effect. Such
policy shall name Lessor as an additional insured and shall be primary and
noncontributing with any insurance carried by Lessor. The policy shall further
provide that it shall not be canceled or altered without twenty (20) days prior
written notice to Lessor.
9. Alterations. Except as contemplated by Section 21.4 Lessee will not
make any alteration to the Leased Premises or any part thereof without first
obtaining Lessor's written approval of such alteration; and Lessee agrees that
any improvements made by it, save for its fixtures and equipment, shall
immediately become the property of Lessor and shall remain upon the Leased
Premises in the absence of agreement to the contrary. All improvements or
alterations are to be made in accordance with building standards in respect to
materials and fixtures. Lessee will not cut or drill into or secure any
fixtures, apparatus or equipment of any kind to any part of the Leased Premises
without first obtaining Lessor's written consent. Lessee shall within ten (10)
days after notice from Lessor discharge any mechanic's lien for materials or
labor claimed to have been furnished to the Premises on Lessee's behalf.
10 Lessor's Non-Liability and Indemnification of Lessor.
10.1 Non-Liability of Lessor. Lessor or its agents shall not be liable
for any injury or damage to persons or property resulting from any cause
whatsoever unless caused by or due to the negligence of Lessor, its agents,
servants, or employees.
10.2 Indemnification of Lessor. Lessee covenants to indemnify and save
Lessor and its agents harmless from and against any and all liability, damages,
expenses, fees, penalties, actions, suits, costs, claims or judgments arising
from injury during the Lease Term to persons or property, within or without the
Leased Premises, occasioned wholly or in part by an act or acts, omission or
omissions of Lessee, its agents, servants, contractors, employees, visitors or
licensees occurring on the Leased Premises.
10.3 Non-Liability of Lessor - Damage from Adjoining Premises or Other
Tenants on Demised Premises. Without limitations to Lessor's obligations under
Section 3, Lessor shall not be responsible or liable to Lessee for any loss or
damage that may be occasioned by or through either the acts or omissions
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<PAGE> 6
of persons occupying adjoining premises, persons occupying any part of the
building adjacent to or connected with the Demised Premises, or tenants in any
other part of the Building constituting part of the Leased Premises.
Nothing in this section shall preclude Lessee from bringing any action
necessary to obtain damages from either the occupants of adjoining or connected
buildings, or tenants of the Building constituting part of the Leased Premises,
if damages are incurred by Lessee as a result of their actions.
10.4 Release of Lessor from Liability. Lessor shall not be liable, and
Lessee waives all claims, for injury or damage to persons or property sustained
by Lessee of the Building constituting part of the Leased Premises itself,
resulting from (2) any accident in or about the Leased Premises, or any injury
or damage resulting directly or indirectly from any such accident that is
attributable to any act or negligence of Lessee or its agents, representives,
customers, or invitees. Lessee also waives all claims for injury or damage to
any of its property or equipment due to or caused by water, snow, frost, steam,
excessive heat or cold, sewage, gas, odors noise or the bursting or leakage of
pipes or plumbing fixtures.
If any damage results from any act or negligence of Lessee, Lessee
shall repair the damages within thirty (30) days or within a reasonable period
if the damages cannot be repaired in a thirty (30) day period. If Lessee fails
or refuses to make the repairs, Lessor may, at the option of Lessor, repair the
damage, whether caused to the building or to any occupants, and Lessee shall pay
to Lessor the total cost of the repairs and damages. All personal property
belonging to Lessee or to any occupant that is in the building or on the demised
shall be there at the risk of Lessee or the occupant only, and Lessor shall not
be liable for any damage to or the theft or misappropriation of such property.
Lessee shall indemnify Lessor for any costs including attorney's fees
relating to Lessee's negligence or any other wrongful act.
10.5 Assumption by Lessee of Liability for Accidents from Lessee's use
of the Leased Premises. Lessee shall assume all liability for any injury or
damages that may arise from any accident that occurs in front of the Leased
Premises, or in, or about the Leased Premises in any area under the control of
the Lessee or adjacent to thereto. Lessee shall indemnify Lessor against any and
all claims filed by parties injured or damaged by an accident as provided in
this section.
11. Waiver of Subrogation. Lessor and Lessee agree that insurance carried
by either of them against loss or damage by fire or other casualty shall contain
a clause whereby the insurer waives its rights to subrogation against the other
party. Upon request, each party agrees to furnish evidence of such waiver to the
other party. Any release or waiver of the right of subrogation shall be
effective only to the extent that the injured or damaged party is insured
against such injury or damage and only if this release of
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waiver shall not adversely affect the right of the injured or damaged party to
recover under such insurance policy.
12. Rights Reserved to Lessor. Lessor reserves and shall at all times have
the right to re-enter the Leased Premises in any emergency and also to inspect
the same, and to alter, improve, remodel, repair, or show the Leased Premises
and any portion of the real estate of which the Leased Premises are a part
without abatement of rent and without incurring any liability to Lessee
therefore. Lessee hereby waives as against Lessor any claim for damages for any
injury or inconvenience to or interference with Lessee's business, any loss of
occupancy or quiet enjoyment of the Leased Premises, and any other loss
occasioned thereby.
13. Insolvency or Bankruptcy. The appointment of a receiver to take
possession of all or substantially all of the assets of Lessee, or an assignment
by Lessee for the benefit of creditors or any action taken or suffered by Lessee
under any insolvency, bankruptcy, or reorganization act, shall constitute a
breach of this Lease by Lessee. In no event shall this Lease be assigned or
assignable by operation of law or by voluntary or involuntary bankruptcy
proceedings or otherwise, and in no event shall this Lease or any right or
privileges hereunder be an asset of Lessee under any bankruptcy, insolvency, or
reorganization proceedings. The provisions of this Section 13, however, shall be
subject to the provisions of Section 14.1.
14. Default. Subject to the provisions of Section 14.1, in the event of
any breach of this Lease by Lessee, after ten days' written notice. Lessor,
besides any other rights or remedies it may have by law or otherwise, shall have
the immediate right of re-entry and may remove all persons and property from the
Leased Premises. Such property may be removed and stored at the cost of and at
the sole risk of Lessee. Should Lessor elect to re-enter as herein provided, or
should Lessor take possession pursuant to legal proceedings or pursuant to any
notice provided for by law, Lessor may either terminate this Lease or may, from
time to time, without terminating this Lease, relet said Leased Premises or any
part thereof for such term or terms (which may be for a term extending beyond
the term of this Lease) and at such rental or rentals and upon such other terms
and conditions as Lessor in its sole discretion may deem advisable with the
right to make alterations and repairs to said Leased Premises. Termination of
the Lease or eviction of Lessee by Lessor for Lessee's breech of the Lease
Agreement shall not release Lessee from liability of rental payments for the
balance of the term of the Lease. Upon such reletting (a) Lessee shall be
immediately liable to pay to Lessor, in addition to any indebtedness other than
rent due hereunder, the cost and expense of such reletting and of such
alterations and repairs incurred by Lessor, and the amount, if any, by which the
rent reserved in this Lease for the period of such reletting (up to but not
beyond the Lease Term) exceeds the amount agreed to be paid as rent for the
Leased Premises for such period of reletting; or (b) at the option of Lessor,
rents received from such reletting shall be applied first to the payment of any
indebtedness, other than rent due hereunder, from Lessee to Lessor; second, to
the payment of any costs and expenses of such reletting and of such alterations
and repairs; third, to the payment of rent due and unpaid hereunder; and the
residue, if any shall be
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held by Lessor and applied in payment of future rent as the same may become due
and payable hereunder.
Should Lessor at any time terminate this Lease for any breach, in addition
to any other remedy Lessor may have, Lessor may recover from Lessee all damages
Lessor may incur by reason of such breach, including the cost of recovering the
Leased Premises and including the rent reserved and charged in this Lease for
the remainder of the stated term, all of which amounts shall be immediately due
and payable, along with attorneys' fees, from Lessee to Lessor, and Lessor shall
have no obligation to relet.
14.1 Federal Deposit Insurance Corporation (FDIC) Consent, Notwithstanding
any other provisions contained in this Lease, in the event (a) Lessee or its
successors or assignees shall become insolvent or bankrupt, or if it or their
interests under this Lease shall be levied upon or sold under execution or other
legal process, or (b) the depository institution then operating on the Premises
is closed, or is taken over by any depository institution supervisory authority
("Authority"), Lessor may, in either such event, terminate this Lease only with
the concurrence of any Receiver or Liquidator appointed by such Authority;
provided, that in the event this Lease is terminated by the Receiver or
Liquidator, the maximum claim of Lessor for rent, damages, or indemnity for
injury resulting from the termination, rejection, or abandonment of the
unexpired Lease shall by law in no event be in an amount equal to all accrued
and unpaid rent to the date of termination.
15. Damage by Fire and Eminent Domain. If, during the Lease Term, the
real estate of which the Leased Premises is a part is so damaged by fire or
other casualty or a part or all of it is taken by eminent domain proceedings
such that the real estate or the Leased Premises are rendered unfit for
occupancy, as determined by Lessor, and Lessor gives Lessee written notice to
that effect, then this Lease shall cease and terminate from the date of such
damage or taking. In such case, Lessee shall pay the rent apportioned to the
time of damage or taking and shall immediately surrender the Leased Premises to
Lessor upon Lessor's request therefore. If, following damage to the Leased
Premises for cause other than by Lessee's acts or omissions to act, Lessor gives
Lessee written notice that it has determined that such damage can be repaired
within ninety (90) days from the date of damage, Lessor, if it so elects, may
enter and repair and this Lease shall not be affected, except that the rent
shall be apportioned and suspended while such repairs are being made until the
Leased Premises are again suitable for occupancy. If, however, such damage is
caused by Lessee's acts or failure to act, and Lessor elects, in accordance with
this Section, to repair, then Lessee's obligation to pay rent shall not be
suspended, nor shall such rent be apportioned, but Lessee shall be obligated to
pay the full rent reserved in accordance with the terms of this Lease during
such period of repair.
16. Surrender of Premises. At the end of the Lease Term or any renewal
thereof or other sooner termination of this Lease, Lessee will peaceably deliver
up to Lessor possession of the Leased Premises, together with all improvements
or additions upon or belonging to the same, by whomsoever made, broom swept and
in the same condition received or first installed, ordinary
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wear and tear excepted. Upon the termination of this Lease, Lessee shall at
Lessee's sole cost remove all counters, trade fixtures, office furniture and
equipment installed by Lessee, unless otherwise agreed to in writing by Lessor.
Lessee shall also repair any damage caused by such removal. Property not so
removed shall be deemed abandoned at the termination of this Lease by Lessee and
title to the same shall thereupon pass to Lessor. Lessee shall indemnify Lessor
against any loss or liability resulting from delay by Lessee in so surrendering
the Leased Premises including, without limitation, any claims made by any
succeeding Lessee founded on such delay.
17. Waiver. The waiver by Lessor of any term, covenant or condition herein
contained shall not be deemed to be a waiver of such term, covenant, or
condition or any subsequent breach of the same or any other term, covenant or
condition herein contained. The subsequent acceptance of rent hereunder by
Lessor shall not be deemed to be a waiver of any preceding breach by Lessee of
any term, covenant, or condition of this Lease, other than failure of Lessee to
pay the particular rental so accepted, regardless of Lessor's knowledge of such
preceding breach at the time of acceptance of such rent.
18. Notices. All notices and demands which may or are required to be given
by either party to the other hereunder shall be in writing and shall be sent by
United States certified or registered mail, postage prepaid to the addresses set
out below, or to such other place as Lessor or Lessee may from time to time
designate in writing.
Lessee: Tower Financial Corporation
Attention: President
Address: 116 E. Berry St, Suite 100, Fort Wayne, Indiana 46802
Lessor: Tippmann Properties, Inc., as agent for JOHN V. TIPPMANN, SR.
Address: 9009 Coldwater Road, Fort Wayne, Indiana 46825
19. Abandonment. If Lessee shall abandon or vacate the Leased Premises
before the end of the Lease Term or any other event shall happen entitling
Lessor to take possession thereof, Lessor may take possession of said Leased
Premises, relet the same without such action being deemed an acceptance of a
surrender of this Lease or in any way terminating Lessee's liability hereunder,
and Lessee shall remain liable to pay the rent herein reserved, less the net
amount actually realized from such reletting after deduction of any expenses
incident to such repossessions and reletting.
20. Holding Over. If Lessee shall retain possession of the Leased Premises
with the written consent of Lessor after the expiration of the Lease Term, and
rent is accepted from Lessee during such period, such occupancy and payment
shall be construed as an extension of this Lease for a period from month to
month only from the date of such expiration. In such event, if either Lessor or
Lessee desires to terminate the Lease at the end of any month, the party
desiring to terminate the same shall give the other party at least thirty (30)
days written notice to that effect. Failure on the part of Lessee to give such
notice shall obligate it to pay rent for an additional calendar month, following
the month in which Lessee vacates the Leased
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Premises. If Lessee retains possession of the Leased Premises after the
expiration of the Lease Term without the written consent of Lessor, Lessee shall
pay to Lessor as liquidated damages, 1 2 the amount of monthly rent (including
additional rent, if applicable) specified in this Lease for each month that
Lessee retains possession of the Leased Premises or any part thereof after
termination of this Lease. This provision shall not be deemed to waive Lessor's
right to re-entry or any other right hereunder or at law.
21. Miscellaneous.
(a) This Lease shall be governed by the laws of the State of Indiana.
(b) It is agreed that Lessor has not made any statement, promise, or
agreement or taken upon itself any engagement whatsoever verbally or in writing
in conflict with the terms of this Lease or that in any way modifies, varies,
alters, enlarges, or invalidates any of its provisions and that no obligations
of Lessor shall be implied in addition to the obligations herein stated.
(c) Lessor covenants that Lessee, upon paying the rent herein provided
and performing all the covenants of this Lease by it to be performed, shall have
quiet possession of the Leased Premises.
(d) Lessee warrants and represents to Lessor that Lessee has employed no
broker or agent in connection with the negotiations relating to this Lease, and
Lessee shall indemnify and hold harmless Lessor from and in respect of any
claim, liability, or damage against or to Lessor arising from or in respect of a
breach of the foregoing warranty and representation.
(e) This Lease shall be binding upon, and shall inure to the benefit of,
the respective successors and assigns of the Lessor and the Lessee.
(f) Lessee shall be solely responsible for any and all costs involved in
placing, erecting, painting or lettering any signs designating the location of
its' business, whether such signs shall be in common areas of the Leased
Premises,on or around the doors or entrances into the Leased Premises, on the
front entrance of the Building and/or on the drive-through facility lot.
Further, Lessee agrees to use signs which are consistent in size, color, type,
and location with building standards and to be approved by Lessor.(which
approval shall not be unreasonably withheld).
21.1 OPTION TO RENEW Lessee shall have the option to renew this Lease for an
additional 10 year term at market rate plus CPI increases annually, provided
that Lessee is not in default in the performance of any of its covenants under
the Lease and further provided that Lessee notifies Lessor in writing 120 days
prior to the end of the original term of the Lease stating Lessee's desire to
renew.
21.2 OPTION TO CANCEL Lessee shall have the option to cancel this Lease
prior to the commencement there of in the event the Bank does not receive its
charter, without further obligation. However, it will abandon the improvements
provided for in Section 21.4 by Lessee.
10
<PAGE> 11
21.3 LESSOR ALSO AGREES TO PROVIDE THE FOLLOWING:
(a) Improvements to drive-through windows as shown on EXHIBIT "C",
consisting of two drive-through lanes operable by a single teller and
with a single pass-through lane.
(b) Improvements if necessary to meet any building code requirements
(c) A secure, demising wall, including all current door openings
between the Leased Premises and the ground floor of the "Annex" on the
West side of the Building.
(d) Various unspecified improvements to the exterior and common areas of
the Building.
(e) Until such time as a tenant is secured to occupy the mezzanine area
on the west side of the Leased Premises (the "West Mezzanine Space").
Lessor shall provide secure gated and/or otherwise locked door entries
into such West Mezzanine Space (in such manner as shall be in the
interest of maintaining an intrusion=resistant banking facility). Such
work shall be provided by Lessor, using architectural elements
consistent with the building and fire code requirements, safety
regulations,and regulatory requirements. Lessor also agrees that the
use of such west Mezzanine Space shall be consistent with ordinary
business and professional office use.
(f) So long as Lessor has not received a prior bona fide offer from a
third party to lease the mezzanine area on the east side of the Leased
Premises (the"East Mezzanine Space"). Lessee shall have the right, on
five (5) business days notice to Lessor, to Lease such East Mezzanine
Space, on terms and conditions as set forth in this Lease, and for same
per square foot rental rate that is then in effect (subject to increase
as provided herein).
(g) Until such time as the east Mezzanine Space has been leased, in
accordance with Lessee's rights under Sections 21.3(f) and Lessor shall
provide secure, gated and/or otherwise locked door entries into such
East Mezzanine space ( in such manner as shall be in the interest of
maintaining an intrusion-resistant banking facility), Such work shall
be provided by Lessor, using architectural elements consistent with
Building style,materials, and decor, and which meets all applicable
building fire code requirements, safety regulations,and regulatory
requirements. Lessor also agrees that the use of such East Mezzanine
Space shall be consistent with ordinary business and professional
office use.
11
<PAGE> 12
21.4 LESSEE TO PROVIDE THE FOLLOWING IMPROVEMENTS:
(A) Re-carpet all carpeted areas of the Leased Premises
(B) Painting or decorating of Leased Premises as needed
(C) Exterior signage of building, drive-through lot and
facility, which shall be approved by Lessor
(D) Cut opening into drive-through window area.
(a) All improvements provided by Lessee shall commence after execution
of this Lease and shall be complete prior to commencement of the
Lease.
(b) Lessee will provide all of its own furniture, equipment and
personal property.
(c) Final plans and specifications are subject to approval by both
parties.
22. MORTGAGES.
(a) Lessee agrees, at any time and from time to time, upon request by
Lessor, or the holder of any mortgage given by Lessor, to execute, acknowledge,
and deliver to Lessor or to the mortgage holder, a written statement certifying:
(a) that the Lease has not been modified and is in full force and effect (or if
there have been modifications, identifying them and stating that they are in
full force and effect); (b) that there are no defaults under the Lease on the
part of Lessor; (c) that no rent abatement or offsets are claimed by Lessee (if
such is the fact); (d) the dates to which the fixed rents and other charges have
been paid; and (e) such other matters as may be reasonably requested by Lessor
or such other party, it being intended that any such statement delivered
pursuant to this paragraph may be relied upon by any mortgage holder or any
authorized assignee of Lessor or any prospective purchaser of Lessor.
(b) Lessee further agrees, at any time and from time to time, to execute a
consent to the assignment of this Lease by Lessor to its mortgagee or any
proposed purchaser.
(c) Lessee accepts this Lease subject and subordinate to any mortgage(s)
now or at any time hereafter constituting a lien or charge upon the Leased
Premises; provide, however, that if any mortgagee elects to have Lessee's
interest in this Lease superior to any such instrument, then by notice to Lessee
from such mortgagee, this Lease will be deemed superior to such lien, whether
this Lease is executed before or after such mortgage. Lessee will give notice to
any mortgage holder whose address shall have been furnished to it, whenever
notice is given to Lessor by Lessee hereunder, and no such notice to the Lessor
will be effective against the mortgage holder unless also given to such mortgage
holder.
22.1 ATTORNMENT AND NON-DISTURBANCE. In the event any mortgage shall be
made superior to this Lease, the holder thereof shall agree in writing with
12
<PAGE> 13
Lessee that the rights of Lessee to quiet enjoyment and possession under this
Lease will not be terminated or disturbed by any action which any such holder
may take to foreclose any such mortgage or to enforce its rights and remedies
thereunder, so long as a default shall not have occurred under this Lease and no
event shall have occurred which, with the passage of time or giving of notice or
both, would constitute a default. Lessee in such agreement shall covenant and
agree that the holder, or anyone claiming by, through or under the holder shall
not be:
(a) Liable for any act or omission for any prior lessor (including Lessor);
or
(b) subject to any offsets or defenses which Lessee might have against
any prior lessor (including Lessor); or
(c) bound by any basic rent, additional rent, or other charges which Lessee
might have paid for more than the current month to any prior lessor
(including Lessor); or
(d) bound by any modifications of the Lease made after Lessee receives
notice of such mortgage and without the consent of such mortgage
holder.
22.2 In the event any proceedings are brought for foreclosure of the Leased
Premises, or in the event of a deed in lieu of foreclosure, or in any other such
similar proceeding, Lessee shall attorn to the mortgage holder or the purchaser
as the Lessor under this Lease, and Lessee shall, at the request of Lessor,
shall execute a document in form proper for recording, confirming such agreement
to attorn.
23. Exhibits. The following exhibits are attached to this Lease and
hereby incorporated by this reference:
Exhibit "A" - Legal Description
Exhibit "B" - Floor Plan
Exhibit "C" - Additional Facilities (Safe Deposit Facilities)
Exhibit "D" - Additional Facilities (Parking/Drive-Through Banking)
Exhibit "E" - Lessor's Rules
13
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Indenture of Lease this
6th day of October, 1998 .
TIPPMANN PROPERTIES, INC.
Agent for JOHN V. TIPPMANN, SR. TOWER FINANCIAL CORPORATION
By: /s/ John V. Tippmann Sr. By: /s/ Donald F. Schenkel
--------------------------------- ------------------------------
Printed: John V. Tippmann Sr. Printed: Donald F. Schenkel
---------------------------- -------------------------
Date: October 6, 1998 Date: October 6, 1998
------------------------------- ---------------------------
(LESSOR) (LESSEE)
STATE OF INDIANA )
)SS:
COUNTY OF ALLEN )
14
<PAGE> 15
Before me, the undersigned a notary public in and for said county and state,
personally appeared John V. Tippmann, Sr. who acknowledged his/her execution of
this Lease to be his/her official and voluntary act and deed, in the capacity
shown herein.
Subscribed and shown to before me this 6th day of October, 1998.
/s/ A. Tracy Gibson
----------------------------------
Notary's Signature
A. Tracy Gibson
----------------------------------
Notary's Name Typed or Printed
Allen September 14, 2006
-------------------- --------------------
County of Residence Commission Exp. Date
STATE OF INDIANA )
)SS:
COUNTY OF ALLEN )
Before me, the undersigned a Notary Public in and for said county and
state, personally appeared Donald F. Schenkel, who acknowledged his/her
execution of this Lease to be his/her official and voluntary act and deed, in
the capacity shown herein.
Subscribed and shown to before me this 6th day of October, 1998.
/s/ A. Tracy Gibson
----------------------------------
Notary's Signature
A. Tracy Gibson
----------------------------------
Notary's Name Typed or Printed
Allen September 14, 2006
-------------------- --------------------
County of Residence Commission Exp. Date
15
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Tower Bank & Trust Company, an Indiana banking corporation, is
in the process of being organized and will become a subsidiary of the Company.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form SB-2 filed by
Tower Financial Corporation of our report dated November 11, 1998, on our audit
of the financial statements of Tower Financial Corporation. We also consent to
the reference to our firm under the caption "Experts."
/s/ PricewaterhouseCoopers LLP
Fort Wayne, Indiana
November 12, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TOWER FINANCIAL CORPORATION AS OF OCTOBER 31, 1998 AND
FOR THE PERIOD FROM JULY 8, 1998 (DATE OF INCEPTION) THROUGH OCTOBER 31, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-08-1998
<PERIOD-END> OCT-31-1998
<CASH> 12,007
<INT-BEARING-DEPOSITS> 475,000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 85,362
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 572,369
<DEPOSITS> 0
<SHORT-TERM> 750,000
<LIABILITIES-OTHER> 163,289
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> (340,920)
<TOTAL-LIABILITIES-AND-EQUITY> 572,369
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 0
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 340,920
<INCOME-PRETAX> (340,920)
<INCOME-PRE-EXTRAORDINARY> (340,920)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (340,920)
<EPS-PRIMARY> (340,920)
<EPS-DILUTED> (340,920)
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
