FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
November 7, 1997
GERMAN AMERICAN BANCORP
(Exact name of registrant as specified in charter)
Indiana 0-11244 35-1547518
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) Number)
711 Main Street, Jasper, Indiana 47546
(Address of Principal Executive Offices)
(812) 482-1314
(Registrant's telephone number, including area code)
NA
(Former Name and Former Address, if changed since last report)
ITEM 5. OTHER EVENTS
German American Bancorp (the `Company'') has signed two separate agreements
which provide for the merger of two Southwestern Indiana bank holding companies
and their subsidiaries into the Company. An Offer of Merger dated October 6,
1997 provides for the merger of CSB Bancorp (`CSB - Petersburg'') and its
wholly-owned banking subsidiary, The Citizens State Bank of Petersburg while a
Letter of Intent dated that same day calls for a merger of FSB Financial
Corporation (`FSB - Francisco'') and its wholly-owned subsidiary The Francisco
State Bank into the Company.
Under the terms of the Offer of Merger, German American Bancorp will issue
between 928,572 shares and 1,137,500 shares to CSB - Petersburg shareholders,
depending upon German American's average common stock price (as adjusted for the
Company's two-for-one stock split) during a period prior to the date of the
merger closing. CSB - Petersburg operates two banking facilities in Petersburg,
Pike County, Indiana.
In connection with the FSB - Francisco merger, the Company is expected to issue
common stock with an aggregate market value in excess of $2,000,000.00 based on
the September 30, 1997 common stock price. FSB - Francisco operates two banking
facilities in Gibson County, Indiana.
Both transactions are subject to the approval of definitive merger agreements by
the Boards of Directors of all the parties, approvals of shareholders, bank
regulatory approvals, and other conditions. Both transactions are contemplated
to become effective in early 1998. These two acquisitions are described more
fully in the Press Releases, Merger Offer and Letter of Intent which are
attached hereto and incorporated by reference.
ITEMS 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS
Exhibit No. Description
2.1 Second Amended and Restated Offer of Merger between German
American Bancorp and CSB Bancorp dated October 6, 1997.
2.2 Letter of Intent dated October 6, 1997 between FSB Financial
Corporation and German American Bancorp.
99.1 Press Release issued by the Company regarding CSB Bancorp
dated October 21, 1997.
99.2 Press Release issued by the Company on October 30, 1997 on Letter
of Intent of FSB - Francisco.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 7, 1997 German American Bancorp
----------------
By:/s/ John M. Gutgsell
-------------------------
SECOND AMENDED AND RESTATED OFFER OF MERGER
October 6, 1997
Board of Directors
CSB Bancorp
Petersburg, Indiana
Gentlemen:
Our Board of Directors has authorized me to present this Second Amended and
Restated Offer of Merger for the affiliation of CSB Bancorp (CSB) and its
subsidiary, The Citizens State Bank (Bank), with German American Bancorp
(Company) and its four affiliated community banks pursuant to a merger of CSB
with the Company (or a subsidiary of the Company) or similar transaction
(Merger). Concurrently with the Merger, CSB and the Company would cause the
Bank to acquire Community Trust Bank (CTB) by merging CTB with the Bank (the CTB
Acquisition).
Pursuant to the Merger, the Company would issue to the shareholders of CSB
such number of shares of Company common stock as would have an aggregate
"Closing Market Value" of at least $22,750,000. For this purpose, the Closing
Market Value of the Company Common Stock will be determined by averaging the bid
and ask prices as reported by NASDAQ at the close of each trading day within the
period of thirty calendar days that ends on the second business day prior to
such closing. The number of shares of Company common stock to be issued in the
Merger will be equal to, except as provided otherwise in this paragraph, the
quotient that results from dividing $22,750,000 by the Closing Market Value, but
would in no event be greater than 568,750 shares (even if the Closing Market
EXHIBIT 2.1
Value is less than $40.00) nor would it be fewer than 464,286 shares (even if
the Closing Market Value is more than $49.00).
If the Closing Market Value is less than $40.00, however, CSB would be entitled
to terminate the Merger.
The maximum and minimum number of shares issuable by the Company is
generally subject to appropriate adjustment on account of stock dividends,
splits, and the like and will be adjusted to give effect to the 2-for-1 stock
split that the Company announced October 2, 1997. However, because the effect
of the Company's annual five percent stock dividend (which will be declared and
paid in late 1997 prior to the time that CSB shareholders become Company
shareholders) has already been considered by the Company in determining the
number of shares to be issued under this Offer, no adjustment will be made for
such five percent dividend.
BANKING AND COMMUNITY FACTORS:
As previously noted, concurrently with the holding company Merger, we
contemplate Citizens State Bank would acquire our existing Pike County
affiliate, Community Trust Bank. The Citizens State Bank, operating under its
existing banking charter and name and separate corporate identity, would then be
positioned to lead the Company's Pike County operations under the direction of
its present management and Board of Directors. To achieve an exactly
proportionate representation on the merged bank's Board of Directors between the
Community Trust Bank and the Citizens State Bank based on banking assets would
2
require that some CTB's Directors resign their seats. We are reluctant to make
such a request of them. We hope that you will consider that the present CTB
Director group will be reduced through expected retirements in the near future
in any event and that the members of the CTB Board include individuals whose
primary business activities are in Petersburg or Pike County. Further, as we
have previously advised you, none of the officers of Community Trust Bank who
are presently on its Board of Directors will become a member of the Board of
Directors of the merged bank. However, to assure you that the members of the
present Citizens State Bank Board of Directors, as a group that is most in touch
with the Petersburg community's interests, will have a prominent position on the
merged bank's Board for at least a transitional three-year period following the
Merger, German American will not cause the Board of the merged bank to be larger
than sixteen (initially constituted by the eight present Citizens State Bank
Directors, six representatives of Community Trust Bank, and two representatives
of the Company). Further, the Company will agree that nominations to fill any
vacancy that might arise during such three-year period in the Board seat
occupied by any of the eight Citizens' Directors serving at the time of closing
will be the exclusive right of the remaining Citizens' Directors serving at the
time of the closing who are then on the Board, subject of course to the
Company's right to refuse to vote to elect a nominee that the Company for
whatever reason finds objectionable. Further, between the time of acceptance of
the Offer and the time of consummation of the Merger (or, if earlier, the time
of termination of the transaction contemplated by the Offer without breach by
CSB of its obligations thereunder), the Board of Directors will not fill any
vacancy that might be created on its Board of Directors if the Company objects
to the person who is proposed to be appointed to fill the vacancy.
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In contrast to the staffing reductions that are often associated with bank
mergers and the negative impact these job losses have on the people involved and
the community as a whole, our Offer offers continuity of local employment. As
part of our no-merger-related-layoff policy, we offer employment opportunities
to all employees of all our affiliate banks. The employees of all of our
affiliate banks are welcomed into our organization on an equal basis. Your
employees will be eligible to participate (in accordance with the terms of our
plans) as soon as practicable after the closing of the Merger, and will receive
full vesting and eligibility credit for their seniority and years of service at
The Citizens State Bank under our benefit plans and other payroll practices,
such as our 401(k) plan, health insurance and disability plans, vacation
policies, etc.
An organizational chart showing our present intent is enclosed. Please
understand that we do not have an in-depth knowledge of your operations and
personnel. Because of our lack of knowledge regarding these matters, we have
included dual reportability to the Bank's Chief Executive Officer, Jerry Church,
who we intend to keep as the Bank's CEO indefinitely, and at least for the
three-year transitional period. Normal operating procedures would entail your
CEO making recommendations to the Board as to the proper alignment of personnel
regarding job function and lines of reportability. Future discussions at the
Board level will be necessary to determine if this proposed organizational chart
adequately addresses your Board's determination of the future needs of Citizens
State Bank.
As a means of providing enhanced administrative support to the staffs of
our affiliate banks we provide, at the holding company level, a number of
significant positions within the non-customer contact support functions. These
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support functions include audit, regulatory/tax reporting, financial accounting,
asset/liability management, human resource administration, technology support,
and marketing. Given the growth our Company is experiencing, your employees,
who currently may have to handle multiple facets of these various operating
functions along with their direct customer service responsibilities, can expect
to have enhanced career opportunities through specialization in these critical
support functions.
In connection with our expressed intent to continue the Bank's current
banking operation, we do not intend to discontinue any products or services
offered by the Bank to its customers. On the contrary, it is our intent to
enhance the Bank's ability to deliver the highest quality in customer service
and to broaden the range of product offerings through the introduction of
services such as trust/investment services and 24 hour automated banking
services (including ATMs and Voice Response Units). Utilizing leading edge
technology and marketing support, we are confident in our ability to assist The
Citizens State Bank staff in the marketing of both traditional and
nontraditional bank products and services while maintaining the community
banking philosophy which the customers of Citizens State Bank have enjoyed
throughout the Bank's history. In this way, The Citizens State Bank will be
positioned, in the future, to meet individual customer preferences; whether that
be through Home Banking, Internet Banking or Traditional Banking all of which
can still be delivered with the personal touch only available through a
hometown, community bank.
The Company's policy is to provide substantial operational autonomy for
each of its bank subsidiaries. It is important to assure that The Citizens
State Bank will continue to be in the best possible position to exercise that
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autonomy to the benefit of the Company's shareholders and its customers in Pike
County and the surrounding area. To that end, we agree that all Directors of
the Bank in office at the time of closing would continue to serve after the
closing of the Merger indefinitely, and for at least the three-year transitional
period following the Merger, subject of course to standard practices protecting
the Bank as it relates to bonding and regulatory issues. We take pride in the
fact that in the history of the Company, no eligible Director has declined to
continue his or her service following a merger. Further, in recognition of the
importance of the role that The Citizens State Bank will have in the Company's
organization, we will invite a representative of CSB, who is mutually acceptable
to the CSB Board and the Company Board, to join the Company's Board promptly
following the closing of the Merger, and thereafter will cause that
representative to be included among the Board of Directors' nominees to be re-
elected in future years, subject to the retirement age and other policies of the
Company's Board of Directors in effect from time to time.
None of our affiliate banks provide their Board members with health and
life insurance benefits; however, in order to offer a cash amount in lieu of
such benefit, the Company would have no objection to the Bank's payment of an
annual cash retainer to the existing Directors of Citizens State Bank of $3,000
per year paid in advance during their tenure for each of the first three years
following closing, in addition to their normal Director fees.
Recognizing the importance of demonstrating Citizens State Bank's and
German American Bancorp's commitment to the community, time is of the essence in
the construction of a new modern banking facility. Immediately following the
mutual execution of a definitive agreement, we will initiate detailed design
work and commence construction of a modern banking facility incorporating the
6
existing one square block former Moose property located between 3rd and 4th on
Main Street in Petersburg. The scope of the construction work and the completed
facility will be within the range that we have previously discussed.
Preliminary architectural estimates for a 15,000 to 18,000 square feet building,
including space to be utilized for future expansion, indicate a building budget
requirement of $1.5 to $2.0 million. Disposition and interim or permanent
utilization of the existing main office facility, and of CTB's existing
Petersburg branch facility, would be determined by the Board of the Bank, with a
view to the best interests of the Petersburg community and the Bank.
We encourage our local affiliates to give generously to support charitable,
fraternal, social, educational, recreational and other needs of the communities
that are served by that affiliate. The exact level of giving is a matter within
the Board's discretion and will often depend on the profitability of the
affiliate bank, the level of current community need, and other factors that are
difficult to project. In response to your request, German American agrees to
establish a minimum level of annual giving for the communities served by the
merged bank of two percent of the prior year's net income for a period of three
years following the transaction. Future years' community giving will be based
on the Board's annual independent determination of the level of giving required
to meet the needs of worthy projects within the communities served by the
combined institution after taking into account all relevant factors at the time.
Our Offer further contemplates that CSB may, in its discretion, form a non-
profit charitable foundation, managed by CSB's Board of Directors, for the
benefit of the communities served by the Bank. Annual funding for the
Foundation would be credited against the Bank's community-giving budget for each
year, including the minimum commitment expressed in the preceding paragraph. In
7
this way, the Merger will result in a tangible benefit to the community in
addition to the intangible benefits that flow from the preservation of the
identity and local management of the Bank. Through this Foundation, local Board
members can be assured that continued community support, which we believe is
critical to a community bank's identity, will remain as a cornerstone in The
Citizens State Bank's history of enriching the local community through its
charitable giving. There will also be continuation of local control over the
award of scholarships by the Trust Department of the Bank.
Your collective observation that the Bank should look to expand toward
Oakland City/Gibson County and Knox County in the immediate future is very
astute and in line with our strategic direction. As your own experience
indicates, timing of a merger is outside of the control of the expanding company
and is very difficult to project but certainly expansion in areas adjacent to
our existing markets is a high priority in our strategic planning.
OTHER TERMS AND CONDITIONS:
As required by the terms of the page headed Sealed Bidding Process
incorporated into CSB's Confidential Memorandum (Bidding Instructions), the
Company hereby confirms its acceptance of the terms and conditions specified by
the Bidding Instructions, including, without limitation, its agreements (a) to
cause the Merger by which its common stock will be issued to the CSB
shareholders to be fully registered under the Securities Act of 1933, as
amended, (b) to assume all assets and liabilities (including contingent
8
liabilities) of CSB, and (c) to agree to offer employment to all present CSB
officers for a period of at least six months (at least three years for Jerry
Church) after consummation of the Merger contemplated by the Offer under the
same terms and conditions as offered by CSB prior to the making of our Offer
unless any such officer is discharged for willful misconduct. The following
additional terms and conditions are applicable to this Offer, and will be
contained substantially as follows in the Merger agreement along with other
mutually agreeable terms and conditions:
1.The Board of Directors of each of the parties shall have approved a
Merger agreement and the parties thereafter shall have executed and
delivered the Merger agreement and shall have obtained all the necessary
or appropriate regulatory and shareholder approvals for consummation of
the Merger and the CTB Acquisition and issuance of the common stock
under applicable law and stock market requirements. The Merger agreement
will contain such representations, warranties, conditions, and other
terms and conditions as are mutually agreeable and customary in
community bank merger transactions. We are prepared to proceed to
submit a draft of a definitive agreement with respect to the Merger to
your counsel (which will be based upon the definitive agreement that we
negotiated with the Board of Directors of Peoples Bancorp of Washington,
which your present law firm also represented) within two business days
of notification from CSB of its acceptance of this Offer, with the
expectation of signing the definitive agreement promptly following the
mutually satisfactory conclusion of the due diligence reviews by each
party of the other party contemplated by item 10 below. Closing will
thereafter occur as soon as practicable following receipt of all
required regulatory and shareholder approvals.
9
2.The consolidated results of operations and financial condition of CSB
and its subsidiaries, as described by the December 31, 1996 and all
quarterly and interim 1997 financial statements filed by CSB or the Bank
with supervisory regulatory authorities or made available to
shareholders, shall have been fairly presented in accordance with
generally accepted accounting principles and practices applicable to
banks, consistently applied, including the full and fair disclosures of,
or adequate reserves against, all liabilities, absolute or contingent,
to which CSB and its subsidiaries are subject.
The operation and condition of the business, properties, prospects and
affairs, financial and otherwise, of CSB from the date of its December
31, 1996 financial statements through the effective date of the Merger,
shall have been continued without changes, except changes in the
ordinary course of business, which individually or in the aggregate
shall not have been materially adverse, and except changes reflected by
the quarterly or other interim 1997 financial statements of the Bank.
3.There shall have been no material change since December 31, 1996, in the
nature of the business, capital structure, compensation arrangements or
dividend policies of CSB, and no additional stock or other securities of
CSB (or warrants, options, convertible securities, or other rights to
acquire such stock or other securities) shall have been issued. The
amount of CSB's dividend at year end 1997 may be as large as is
consistent with your historical dividend practices for your December
10
dividend in relation to earnings and other relevant factors but in any
event is not to be larger than the dividend declared in December 1996.
The Merger agreement shall include provisions that harmonize CSB's semi-
annual dividend payment schedule with the Company's quarterly payment
schedule, so that, for any period of time, a shareholder of CSB shall be
entitled to receive either CSB's semi-annual dividend, or the Company's
quarterly dividend, but not both.
4.All currently outstanding common stock of CSB shall have been duly
authorized, validly issued, fully paid and nonassessable.
5.There shall be no pending or threatened litigation or administrative
proceedings to restrain or invalidate the Merger or otherwise relating
to or affecting the Merger, or affecting or relating to CSB or the Bank
or their business or properties.
6.The affiliation shall be tax-free to the shareholders of CSB and shall
qualify as a pooling of interests for financial reporting purposes.
7.The Board of Directors of CSB (a) shall have approved this Offer and the
definitive agreement by favorable vote of at least the number of members
of the whole Board of Directors required under applicable law and the
governing corporate documents of CSB, (b) shall cause the Merger to be
submitted for a vote of the shareholders of CSB at the earliest possible
date, and (c) in connection which such shareholder vote, the Directors
who have approved this Offer shall (unless in the written opinion of
counsel for CSB the fiduciary duties of the Board of Directors prohibit
11
such a recommendation, in which event the individual members of the
Board shall nevertheless personally support the Merger and vote for it
at any shareholder meeting at which it is considered) recommend the
Merger to the shareholders of CSB and shall vote their personal shares
in favor of such Merger. From and after the time of acceptance of this
Offer by CSB and until such time as the Merger has been completed or the
Merger transaction shall have been terminated or abandoned without
breach by CSB of its obligations under this Offer or the definitive
agreement, neither CSB nor the Bank shall (a) directly or indirectly
solicit, encourage or facilitate (nor shall they permit any of their
respective officers, Directors, employees or agents directly or
indirectly to solicit, encourage or facilitate), including by way of
furnishing information other than the fact of the acceptance of the
Offer by CSB, any inquiries or proposals from third parties for a
merger, consolidation, share exchange or similar transaction involving
CSB or the Bank or for the acquisition of the stock or substantially all
of the assets or business of CSB or the Bank, or (b) subject to the
fiduciary duties of the Directors of CSB as advised by counsel in a
written opinion, discuss with or enter into conversations with any
person concerning any such merger, consolidation, share exchange,
acquisition or other transaction. CSB shall promptly during the time
period identified in the preceding sentence notify the Company orally
(to be confirmed in writing as soon as practicable thereafter) of all of
the relevant details concerning any inquiries or proposals that it may
receive relating to any such matters, including actions it intends to
take with respect to such matters.
12
8.The Company would not extend this Offer and thereby incur the
significant expenses associated with the Merger and the CTB Acquisition
and forego on a long-term basis the opportunity to pursue other
acquisition opportunities without assurance that its costs and expenses
would be fairly compensated if CSB were to willfully fail to perform for
reasons not contemplated by this Offer. Accordingly, as an integral
part of this Offer, in the event that the transactions contemplated by
this Offer terminate because CSB willfully fails to perform its
obligations for reasons not contemplated by this Offer (including but
not limited to termination by the Board of Directors following receipt
of a proposal for a merger, consolidation, asset sale, or other business
combination with any other party, or the failure of the CSB shareholders
to approve the Merger at a shareholders meeting held following receipt
of such a proposal if CSB should announce within a period of twelve
months from the date of that meeting that CSB has accepted an
acquisition proposal from any third party), then (as an alternative to
specific performance and in addition to whatever other legal rights or
remedies to which the Company may be entitled against other parties), at
the Company's option CSB shall (a) pay to the Company a termination fee
of $455,000 and (b) reimburse the Company for all of its out-of-pocket
costs and expenses in connection with the Merger incurred from and after
the date of acceptance of the Offer, including its legal, accounting,
environmental and other consulting fees and expenses, but in any event
not more than $100,000 of such costs and expenses. The parties agree
that the actual damages that would be caused to the Company by reason of
any such willful failure to perform cannot be determined with certainty
due to the Company's opportunity cost in proceeding with this Offer
compared to proceeding with other opportunities that are available to
13
the Company and other factors. The parties further agree that the
amounts payable pursuant to this item 8 represent a reasonable estimate
of the Company's opportunity cost and other damages that may be awarded
as either a termination fee or as liquidated damages to the Company if
it chooses not to seek specific performance of this Offer, and that such
amounts represent the sole damages from CSB and the Bank to which the
Company is entitled.
9.We understand that CSB presently has the opportunity to accept proposals
from other bidders that do not have banking offices in the applicable
geographic banking market as presently defined by the Federal Reserve
Bank of St. Louis, and that, although both CSB and the Company agree
that the Merger and the CTB acquisition will not result in any
significant adverse effect on competition, CSB is reluctant to accept
the Company's Offer without financial assurance from the Company that
closing of the Merger and the CTB Acquisition will not be prevented by
governmental authorities on antitrust grounds. Therefore, the Company
agrees that if a final order denying any necessary banking approval is
entered by any bank regulatory agency with jurisdiction in the matter,
or if the Department of Justice should obtain an order of any court of
appropriate jurisdiction enjoining consummation of the Merger and the
CTB Acquisition, then the Company shall (a) pay CSB a termination fee,
which is agreed to represent a reasonable estimate of CSB's opportunity
cost, of $455,000, and (b) reimburse CSB for all of its out-of-pocket
costs and expenses in connection with the Merger incurred from the date
of acceptance of this Offer, including its legal, accounting,
environmental, and other consulting fees and expenses, but in any event
not more than $100,000 of such costs and expenses. CSB agrees to
14
cooperate in obtaining all such approvals, including (a) promptly
withdrawing the Bank's membership in the Federal Reserve System upon the
execution of the definitive agreement for the Merger in order to make
the Bank an FRS non-member like all other state bank subsidiaries of the
Company, and (b) consenting to the dual employment of its counsel, Krieg
DeVault Alexander & Capehart, by the Company and CSB in connection with
preparing the necessary economic brief addressing the potential anti-
competitive consequences of the Merger, provided that the Company agrees
to be responsible for all such firm's fees and expenses in connection
with such economic briefing.
10. Our management and advisors will undertake a customary confidential
due diligence review of the financial condition, results of
operations, business and properties of CSB and the Bank and their
subsidiaries or affiliates if this Offer is accepted, commencing
Monday, October 6, 1997, and continuing through at least Tuesday,
October 7, 1997. It is a condition of our Offer that the results of
our due diligence review will be satisfactory to us. The Company and
CSB shall use their best efforts to keep the existence of this Offer
confidential until the conclusion of our "due diligence" review (and
that of CSB contemplated by Item 12 below), at which time the parties
shall promptly issue a mutually acceptable press release. Assuming
that all due diligence reviews are completed on or before Monday,
October 13, 1997, we contemplate an announcement as early as the close
of business on Tuesday, October 14, 1997.
11. Except as specified by items 8 and 9 in the Other Terms and Conditions
outlined above, each party will bear all of the expenses it incurs in
15
connection with this Offer and the transactions contemplated hereby.
The Company will bear all legal and other costs and expenses in
connection with obtaining the necessary regulatory approvals.
12. The provisions of items 2 (fair presentation of recent financial
statements and lack of subsequent material adverse financial change),
4 (due authorization and valid issuance of outstanding stock), 5 (lack
of pending or threatened administrative proceedings) and 10
(opportunity for management and advisors to conduct a due diligence
review) of this Offer, as they apply to CSB and the Bank, shall also
reciprocally apply to the Company and its subsidiaries on a
consolidated basis. In other words, CSB and its advisors shall have
the opportunity to conduct a due diligence review of the Company if it
accepts this Offer, the results of which must be satisfactory to CSB,
provided that such review commences Friday, October 10, and concludes
Monday, October 13, as planned, in order to facilitate the making of
the public announcement at the earliest possible time. Further, the
Merger agreement will include usual and customary provisions, among
others, (a) that protect CSB against any unfair presentation of the
Company's financial condition and results of operations in its most
recent financial statements and reports, and against subsequent
material adverse change; (b) that assure CSB of the legality of the
Company's outstanding common stock; and (c) that protect CSB against
pending or threatened litigation or proceedings that may be instituted
against the Merger or the CTB Acquisition or against the Company or
its business or properties.
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13. This Offer, when accepted by CSB, shall constitute a legally binding
agreement enforceable against CSB and the Company in accordance with
its terms. If a definitive agreement with respect to the Merger is
not executed by December 1, 1997, or if the due diligence review of
the Company or CSB of the other is not satisfactory to the reviewing
party, then the agreement created by your acceptance of this Offer
will terminate and thereafter be of no force or effect upon written
notice of termination hereof delivered by the Company or CSB to the
other.
If you desire to accept our Offer, please sign and return the enclosed copy
to our President not later than 10:00 a.m., October 6, 1997.
Very truly yours,
GERMAN AMERICAN BANCORP
By:/s/ Mark S. Schroeder
------------------------
President
CSB Bancorp, intending to be legally bound, hereby accepts the above Second
Amended and Restated Offer of Merger at 9:00 a.m. on this 6th day of October,
1997.
CSB BANCORP
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By:/s/ Marion R. Klipsch
------------------------
President
0014\02\AMENDED.OFF
October 6, 1997
Board of Directors
FSB Financial Corporation
c/o R.J. McConnell, Esq.
Bose McKinney & Evans
2700 First Indiana Plaza
135 North Pennsylvania Street
Indianapolis, IN 46204
Re: Letter of Intent for Acquisition of FSB Financial Corporation
-------------------------------------------------------------
Gentlemen:
Our Board of Directors has authorized me to set forth our proposal that
German American Bancorp (the `Company'') acquire FSB Financial Corporation
(`FSB'') and its subsidiary, FSB Bank (the ``Bank'') pursuant to a merger or
other acquisition transaction (the `Transaction''). The financial terms of the
Transaction will involve the issuance by the Company to the shareholders of FSB
of such number of shares of its common stock (`Company Stock'') as will have an
aggregate market value (determined as of the closing date as set forth below)
equal to 150 percent of the sum of (a) the book value of FSB at June 30, 1997,
plus (or minus) (b) the amount of net earnings (loss) retained after payment of
dividends, if any but before any securities transactions gains of FSB (as
EXHIBIT 2.2
Board of Directors 2 October 6, 1997
determined to the satisfaction of the Company) from June 30, 1997, to the end of
the month immediately preceding the month in which the transaction is effective,
plus (c) if the executive bonus pool described in item 9 below is created by the
Board of Directors of the Bank, and if the Bank thereby obtains a release from
the Chief Executive Officer of all employment related claims, the after-tax
effect of any bonus payment (not exceeding $75,000 pre-tax) that may be paid or
payable to the Bank's present Chief Executive Officer thereunder (`Purchase
Price'). Fees and expenses incurred by FSB in connection with the acquisition
(but only to the extent that such fees and expenses exceed $15,000), and any
amounts paid or payable before or after the closing pursuant to the executive
retention bonus pool described in item 9 below, will be considered in
determining the net earnings (loss) of FSB for purposes of computing the
Purchase Price.
The number of shares of Company Stock to be issued in the Transaction will
be determined by dividing (a) the Purchase Price by (b) the market value of the
Company Stock as of the closing date, as determined by averaging the closing bid
and asked prices of the Company Stock on each of the ten trading days ending on
the second trading day prior to the closing (the `Closing Market Value'').
`Book Value'' of FSB shall be equal to its shareholders equity determined
in accordance with generally accepted accounting principles applied on a
consistent basis as at June 30, 1997.
Consummation of the Transaction is conditioned upon preparation of and
approval by the parties of a definitive agreement, containing such
representations, warranties, conditions, and other matters as are customary in
transactions of this type. None of such representation and warranties will
survive the closing. In addition, the following terms and conditions are
applicable to our proposal and will be contained in the definitive agreement:
Board of Directors 3 October 6, 1997
1.The parties shall have obtained all the necessary or appropriate
regulatory and shareholder approvals for consummation of the
Transaction.
2.FSB's earnings and financial condition, as described in its most recent
financial statements filed with supervisory regulatory authorities and
as determined at closing of the Transaction in connection with the
determination of the Purchase Price, shall have been fully and fairly
presented in accordance with generally accepted accounting principles
and practices applicable to banks, consistently applied, including the
full and fair disclosure of or adequate reserves against all
liabilities, absolute or contingent, to which FSB was subject.
3.A special review of FSB's financial statements and condition shall have
been conducted by independent auditors and the Company's officers, the
results of which (including a determination of the adequacy of all
reserves) shall be fully satisfactory to both FSB and the Company.
Pending completion of that review, both FSB and the Company shall
endeavor to keep the existence of this letter of intent confidential.
4.The operation and condition of the business, property, prospects and
affairs, financial and otherwise, of FSB (including its levels of core
deposits and loans) from the date of its most recent financial
statements through the effective date of the proposed acquisition, shall
have been continued without change, except changes in the ordinary
course of business, which individually or in the aggregate shall not
have been materially adverse.
5.There shall have been no material change in the nature of FSB's business
capital structure, compensation or dividend policies, and no additional
Board of Directors 4 October 6, 1997
common stock of FSB shall have been issued; provided, however, that FSB
may, at its expense and consequent reduction in Purchase Price,
establish an executive retention bonus pool as described in item 9
below.
6.All currently outstanding common stock of FSB and all Company Stock that
will be issued pursuant to the proposed acquisition, shall have been
duly authorized, validly issued, fully paid and nonassessable.
7.There shall be a continuing absence of any pending or threatened
litigation or administrative proceeding to restrain or invalidate the
proposed acquisition or otherwise relating to or affecting the proposed
acquisition.
8.There shall be protection by FSB against the claims of any person who
might be entitled to claim a brokerage fee as a result of contacts with
FSB or its principal, and the expenses of any fairness opinion that FSB
may request in connection with the Transaction shall be charged against
earnings for purposes of determining the Purchase Price.
9.In connection with this Transaction, we anticipate a simultaneous merger
of the Bank with and into Community Trust Bank, an existing affiliate of
the Company, or another of our affiliate banks. In accordance with our
corporate policy and practice, we anticipate offering continued
employment opportunities to your employees. However, because the
position of Chief Executive Officer will not be available following the
bank merger, the Company will not be in a position to offer comparable
employment to the Bank's Chief Executive Officer following the
Transaction. The Company would consider discussing other employment
opportunities with the Bank's Chief Executive Officer, but recognizes
that an employment position acceptable to both the Company and the Chief
Board of Directors 5 October 6, 1997
Executive Officer may not be attainable. In light of this fact, the
Company will not object to the establishment of an executive officer
retention bonus pool for the purpose of securing the continued attention
of selected Bank officers (including the Chief Executive Officer) to the
Bank's business through and including the date of completion of the
Transaction, payable upon closing of the Transaction subject to
continued service through such date. Amounts paid or payable at or
after closing under such pool shall be chargeable against net earnings
(loss) of the Bank and will consequently result in a reduction of the
Purchase Price, except that the after-tax effect of any bonus payment
(not exceeding $75,000 pre-tax) that may be paid or payable to the
Bank's present Chief Executive Officer will be added back to the Bank's
adjusted book value for purposes of determining the Purchase Price if
the Chief Executive Officer executes and delivers to the Bank a release
of the Bank from any employment related claims.
10.While we cannot give assurances as to the decision of our local bank
affiliate (Community Trust Bank) in this regard, the Company is prepared
to recommend that your Chairman of the Board be invited to join
Community Trust Bank's Board of Directors.
11.The Company and FSB shall receive satisfactory assurances at closing as
to the tax-free nature of the transaction and the Company shall have
received satisfactory comfort as to the eligibility for treatment under
the pooling of interests method of accounting for financial reporting
purposes.
This letter, when executed by FSB, will be construed only as summarizing
and considering our intentions at the present time. It does not constitute a
binding contract on the part of the Company or FSB.
Board of Directors 6 October 6, 1997
If our proposal meets with your approval and you desire to work toward the
Transaction, please sign and return the enclosed copy of this letter to us, no
later than October 8, 1997. The continued validity of the intentions expressed
herein will depend on execution of the definitive agreement on or before
November 1, 1997, or such later date as the parties may mutually agree.
Yours very truly,
GERMAN AMERICAN BANCORP
By: /s/ Mark A. Schroeder
-------------------------
President
The foregoing is hereby approved and agreed to this 9th day of October,
1997, by and on behalf of FSB Financial Corporation by the undersigned thereunto
duly authorized.
FSB FINANCIAL CORPORATION
Board of Directors 7 October 6, 1997
By:/s/ Michael B. McConnell
---------------------------
Jasper, Indiana, October 21, 1997
GERMAN AMERICAN BANCORP ANNOUNCES SIGNING OF AGREEMENT TO MERGE WITH CSB BANCORP
OF PETERSBURG
George W. Astrike, Chairman of the Board and Chief Executive Officer of German
American Bancorp (NASDAQ: GABC), Jasper, Indiana, and Lester Nixon, Chairman of
CSB Bancorp, Petersburg, Indiana, announced today that they have signed an
agreement providing for the merger of CSB Bancorp and its $75 million
subsidiary, Citizens State Bank, with German American Bancorp.
Under the terms of the agreement, CSB Bancorp shareholders are expected to
receive shares of German American Bancorp valued at not less than $22,750,000
(or $142.19 for each of the 160,000 shares of CSB Bancorp currently outstanding)
in a tax-free exchange. The specific number of German American shares to be
issued will be determined based on German American's share price during a period
immediately preceding the date of merger, but will not be less than 464,286
shares. The proposed merger is subject to the approval of shareholders as well
as bank regulatory approvals and other conditions. The parties contemplate that
the merger will become effective in early 1998.
Astrike, Chairman of German American Bancorp remarked, `This transaction
represents another strategically significant move for our company by
EXHIBIT 99.1
Page 2 of 2
strengthening our existing presence in Pike County and enhancing our ability to
serve customers in the adjacent counties of Gibson and Knox, which have recently
experienced and are expected to continue to experience strong economic growth.
The Pike, Gibson and Knox county area also enjoys a strong agricultural presence
which fits well into the Company's commitment of providing a full range of
financial services to the agricultural community.''
Astrike added `German American Bancorp is committed to creating a regional
affiliation of community banks such as Citizens to preserve local interest and
control of vital banking services. By uniting to spread operating costs and
service delivery systems over a larger base, affiliated banks in a common
geographic area can compete more effectively with larger metropolitan banking
companies and still preserve the local autonomy that has allowed those banks to
serve the unique characteristics of their own markets, including the vital
business and agricultural segments.''
Astrike continued, `To capitalize on the opportunity to achieve maximum
operational efficiency while enhancing service capabilities and to allow for a
strong and unified effort in Pike, Gibson, and Knox counties, German American
Bancorp's existing Pike County affiliate, Community Trust Bank, will be merged
with Citizens State Bank and operate under the Citizens name. Following this
combination, the resulting banking entity will have assets of approximately $115
million and will serve the residents and businesses of Pike, Gibson, and Knox
counties with five convenient locations.''
Page 2 of 2
Jerry A. Church, President and CEO of Citizens State Bank, stated `One of
German American's strengths, and that of their affiliated banks, lies in a
commitment to community banking and to the communities in which they operate.
We look forward to being part of an organization that possesses the necessary
capital and operating expertise to support our long-standing commitment to our
area farmers, businesses, and consumers.''
The completion of the transaction, which follows the Company's acquisition of
the $90 million Peoples National Bank, Washington, IN in March 1997, will result
in German American Bancorp's assets aggregating approximately $575 million, and
through its four banking affiliates, it will operate 22 offices in 15
JASPER, INDIANA, OCTOBER 30, 1997GERMAN AMERICAN BANCORP ANNOUNCES LATEST
ACQUISITION, DECLARES QUARTERLY CASH DIVIDEND AND 5% STOCK DIVIDEND, AND
REPORTS RECORD THIRD QUARTER EARNINGS
German American Bancorp (NASDAQ: GABC) today announced the signing of a letter
of intent providing for the merger of FSB Financial Corporation and its $16
million subsidiary, FSB Bank of Francisco and Princeton, Indiana, with German
American Bancorp. George W. Astrike, Chairman and CEO of German American,
stated `The acquisition of FSB further solidifies our previously announced
commitment to enhance our market presence in the Gibson County area. Our
present intent is to consolidate the operations of FSB and our existing Pike
County affiliate, Community Trust Bank, under the name and banking charter of
Citizens State Bank of Petersburg, Indiana, with whom we announced an agreement
to merge on October 21, 1997.''
Astrike continued, `The combination of these three community oriented banking
institutions under a unified charter affords the opportunity to enhance the
depth and quality of banking products and services available to the banks'
customers. The emphasis of the combined bank will be to continue to serve the
consumer, small business, and agricultural customers in the Pike and Gibson
county area while capitalizing on the economic growth occurring in the
Princeton, Indiana market resulting from construction of the new Toyota truck
manufacturing plant.''
In connection with the FSB merger, German American will issue its stock in a
tax-free exchange for the stock of FSB Financial Corporation. Based on the
EXHIBIT 99.2
Page 2 of 2
current stock price, the transaction is anticipated to have an aggregate market
value in excess of $2 million. The transaction, which is subject to shareholder
and regulatory approvals, is contemplated to become effective in early 1998.
It was also announced that the Board of Directors of German American Bancorp has
declared a $.22 per share quarterly cash dividend ($.11 adjusted for the two-
for-one stock split which will be effective on November 1, 1997) payable on or
by November 20, 1997 to shareholders of record as of November 10, 1997. The
Company further announced the declaration of its 5 percent annual stock dividend
to shareholders of record as of November 28, 1997 payable on or before December
20, 1997.
Astrike stated, `Our annual stock dividend plan, when combined with our
intention to maintain the current quarterly cash dividend payout
following this year's stock dividend, is intended to result in an effective 5
percent increase in future cash dividends received by our shareholders. We are
extremely pleased to be able to pass along to our shareholders the benefits of
the Company's strong operating earnings in the form of increased cash
dividends.''
Earnings for the third quarter of 1997 were $1,563,000 or $.61 per share,
increasing 38% or $.16 per share over the earnings of $1,129,000 or $.45 per
share for the third quarter of 1996. Year-to-date earnings for 1997 were also a
record $4,687,000 or $1.84 per share, up $948,000 or $.36 per share compared to
the $3,739,000 or $1.48 per share earned during the first nine months of 1996.
Page 2 of 2
In the third quarter, net interest income improved by approximately 10% while
noninterest income increased by 30% due to increased service charge and fee
income. Additionally, the level of noninterest expenses declined by
approximately 2% resulting largely from the effect of the $157,000 special
assessment by the FDIC in the third quarter of 1996 for Savings Association
Insurance Fund (SAIF) deposits.
Earnings per share data have not been adjusted to reflect the two-for-one stock
split payable on November 1, 1997 and the 5 percent annual stock dividend
payable in December.
Following completion of the pending transactions with FSB Financial Corporation
and CSB Bancorp, German American Bancorp will have projected assets of $600
million and will operate 4 subsidiary banks with 24 banking offices in Daviess,
Dubois, Gibson, Martin, Perry, Pike and Spencer counties in southwestern
Indiana. Its stock, which had a closing price of $53.125 on October 29, 1997
and a stated book value of $20.54 as of September 30, 1997, is traded on
