UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
I X I Quarterly Report pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 for the Quarterly Period Ended June 30, 1998
Or
I I Transition Report pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 for the Transition Period from _________ to ___________
Commission File Number 0-11244
German American Bancorp
(Exact name of registrant as specified in its charter)
INDIANA 35-1547518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
711 Main Street, Jasper, Indiana 47546
(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code: (812) 482-1314
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
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the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
---------- ----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 10, 1998
Common Stock, No par value 6,348,590
GERMAN AMERICAN BANCORP
INDEX
PART I. FINANCIAL INFORMATION
Item 1.
Consolidated Balance Sheets _ June 30, 1998 and
December 31, 1997
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Consolidated Statements of Income -- Three Months Ended
June 30, 1998 and 1997
Consolidated Statements of Income -- Six Months Ended
June 30, 1998 and 1997
Consolidated Statements of Cash Flows -- Six Months Ended
June 30, 1998 and 1997
Notes to Consolidated Financial Statements --
June 30, 1998
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Events
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GERMAN AMERICAN BANCORP
CONSOLIDATED BALANCE SHEET
(unaudited, dollars in thousands except per share data)
June 30, December 31,
1998 1997
ASSETS
Cash and Due from Banks $19,472 $20,090
Federal Funds Sold 14,225 20,300
Cash and Cash Equivalents 33,697 40,390
Interest-bearing Balances with Banks 2,673 2,798
Securities Available-for-Sale,
at market 105,837 100,449
Securities Held-to-Maturity, at cost 26,230 35,382
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Total Loans 407,100 378,380
Less: Unearned Income (1,033 ) (1,057)
Allowance for Loan Losses (7,133 ) (7,416)
Loans, Net 398,934 369,907
Premises, Furniture and Equipment, Net 13,351 13,191
Other Real Estate 365 388
Intangible Assets 1,478 1,572
Accrued Interest Receivable
and Other Assets 11,596 11,765
TOTAL ASSETS $594,161 $575,842
LIABILITIES
Noninterest-bearing Deposits $54,985 $62,502
Interest-bearing Deposits 461,417 438,531
Total Deposits 516,402 501,033
Short-term Borrowings 4,542 5,548
FHLB Borrowings 1,000 ---
Accrued Interest Payable and
Other Liabilities 6,512 7,182
TOTAL LIABILITIES 528,456 513,763
SHAREHOLDERS' EQUITY
Common Stock, No par value,
$1 stated value; 20,000,000
shares authorized 6,347 6,279
Preferred Stock, $10 par value;
500,000 shares authorized, none issued --- ---
Additional Paid-in Capital 39,497 38,088
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Retained Earnings 19,167 16,945
Unrealized Appreciation on Securities
Available-for-Sale, net of tax 694 767
TOTAL SHAREHOLDERS' EQUITY 65,705 62,079
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $594,161 $575,842
Common Shares issued and
outstanding at end of period 6,347,226 6,278,636
See accompanying notes to consolidated financial statements.
GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(unaudited, dollars in thousands except per share data)
Three Months Ended
June 30,
1998 1997
INTEREST INCOME
Interest and Fees on Loans $8,970 $8,411
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Interest on Federal Funds Sold 277 202
Interest on Short-term Investments 40 37
Interest and Dividends on Securities 2,028 2,150
TOTAL INTEREST INCOME 11,315 10,800
INTEREST EXPENSE
Interest on Deposits 5,246 4,964
Interest on Borrowings 61 85
TOTAL INTEREST EXPENSE 5,307 5,049
NET INTEREST INCOME 6,008 5,751
Provision for Loan Losses 55 (652 )
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 5,953 6,403
NONINTEREST INCOME
Income from Fiduciary Activities 92 87
Service Charges on Deposit Accounts 389 323
Investment Services Income 140 117
Other Charges, Commissions and Fees 202 180
Gain on Sales of Loans and Other Real Estate --- 2
Net Gain on Sales of Securities 7 ---
TOTAL NONINTEREST INCOME 830 709
NONINTEREST EXPENSE
Salaries and Employee Benefits 2,342 2,111
Occupancy Expense 384 277
Furniture and Equipment Expense 238 264
Computer Processing Fees 159 146
Professional Fees 159 350
Other Operating Expenses 898 819
TOTAL NONINTEREST EXPENSE 4,180 3,967
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Income before Income Taxes 2,603 3,145
Income Tax Expense 808 1,083
Net Income $1,795 $2,062
Weighted Average Shares Outstanding:
Basic 6,346,754 6,337,223
Diluted 6,361,299 6,345,005
Earnings Per Share And Diluted
Earnings Per Share $0.28 $0.33
Dividends Paid Per Share $0.12 $0.10
Comprehensive Income (See Note 1) $1,848 $ 2,487
See accompanying notes to consolidated financial statements.
GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(unaudited, dollars in thousands except per share data)
Six Months Ended
June 30,
1998 1997
INTEREST INCOME
Interest and Fees on Loans $17,900 $16,530
Interest on Federal Funds Sold 568 447
Interest on Short-term Investments 85 82
Interest and Dividends on Securities 4,011 4,267
TOTAL INTEREST INCOME 22,564 21,326
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INTEREST EXPENSE
Interest on Deposits 10,396 9,837
Interest on Borrowings 117 187
TOTAL INTEREST EXPENSE 10,513 10,024
NET INTEREST INCOME 12,051 11,302
Provision for Loan Losses 119 (426
)
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 11,932 11,728
NONINTEREST INCOME
Income from Fiduciary Activities 174 173
Service Charges on Deposit Accounts 709 637
Investment Services Income 274 223
Other Charges, Commissions and Fees 384 304
Gain on Sales of Loans and Other Real Estate 8 2
Net Gain on Sales of Securities 7 ---
TOTAL NONINTEREST INCOME 1,556 1,339
NONINTEREST EXPENSE
Salaries and Employee Benefits 4,639 4,152
Occupancy Expense 669 577
Furniture and Equipment Expense 556 525
Computer Processing Fees 329 290
Professional Fees 327 572
Other Operating Expenses 1,756 1,593
TOTAL NONINTEREST EXPENSE 8,276 7,709
Income before Income Taxes 5,212 5,358
Income Tax Expense 1,668 1,826
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Net Income $3,544 $3,532
Weighted Average Shares Outstanding:
Basic 6,346,299 6,337,017
Diluted 6,360,844 6,344,799
Earnings Per Share And Diluted
Earnings Per Share $0.56 $0.56
Dividends Paid Per Share $0.23 $0.20
Comprehensive Income (See Note 1) $3,471 $3,485
See accompanying notes to consolidated financial statements.
GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, dollar references in thousands)
Six Months Ended
June30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $3,544 $3,532
Adjustments to Reconcile Net Income to
Net Cash from Operating Activities:
Amortization and Accretion of Investments (58 ) 28
Depreciation and Amortization 661 799
Provision for Loan Losses 119 (426)
Net Gain on Sales of Securities (7 ) ---
Gain of Sales of Loans and Other Real Estate(8 ) (2)
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Change in Assets and Liabilities:
Unearned Income (24 ) (146)
Deferred Loan Fees (18 ) 1
Other Assets 612 104
Deferred Taxes (150 ) (204)
Other Liabilities (774 ) (174)
Total Adjustments 353 832
Net Cash from Operating Activities 3,897 4,364
CASH FLOWS FROM INVESTING ACTIVITIES
Cash and Cash Equivalents of
Acquired Subsidiary,
net of Purchase Price 3,715 ---
Change in Interest-bearing
Balances with Banks 173 (597)
Proceeds from Maturities of Other
Short-term Investments --- 1,000
Proceeds from Maturities of Securities
Available-for-Sale 52,670 17,314
Proceeds from Sales of Securities
Available-for-Sales 9,465 ---
Purchase of Securities
Available-for-Sale (59,255 ) (17,964)
Proceeds from Maturities of
Securities Held-to-Maturity 5,040 318
Proceeds from Sales of
Securities Held-to-Maturity 204 ---
Purchase of Securities Held-to-Maturity (2,988 ) (1,780)
Purchase of Loans (264 ) (27)
Loans Made to Customers
net of Payments Received (19,159 ) (13,418)
Proceeds from Sales of Loans 255 9
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Property and Equipment Expenditures (373 ) (1,419)
Proceeds from Sales of Other Real Estate 76 31
Net Cash from Investing Activities (10,441 ) (16,533)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Deposits 1,173 (458)
Change in Short-term Borrowings (1,006 ) (8,392)
Advances of Long-term Debt 1,000 ---
Repayments of Long-term Debt --- (1,000)
Dividends Paid (1,311 ) (1,123)
Purchase of interests in Fractional Shares (5 ) (5)
Exercise of Stock Options --- 2
Net Cash from Financing Activities (149 ) (10,976)
Net Change in Cash and Cash Equivalents (6,693 ) (23,145)
Cash and Cash Equivalents
at Beginning of Year 40,390 54,152
Cash and Cash Equivalents
at End of Period $33,697 $31,007
Cash Paid During the Year for:
Interest $10,960 $10,039
Income Taxes 1,418 1,530
See accompanying notes to consolidated financial statements.
GERMAN AMERICAN BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(unaudited)
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Note 1 -- Basis of Presentation
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with Generally Accepted Accounting Principles
have been condensed or omitted. Except for adjustments resulting from the
merger transactions described below, all adjustments made by management to these
unaudited statements were of a normal recurring nature. It is suggested that
these consolidated financial statements and notes be read in conjunction with
the financial statements and notes thereto in the German American Bancorp's
December 31, 1997 Annual Report to Shareholders.
German American Bancorp (referred to herein as the "Company," the
"Corporation," or the "Registrant") is a multi-bank holding company organized in
Indiana in 1982. The Company's principal subsidiaries are The German American
Bank, Jasper, Indiana ("German American Bank"), First State Bank, Southwest
Indiana, Tell City, Indiana ("First State Bank"), and German American Holdings
Corporation ("GAHC"), an Indiana corporation that owns all of the outstanding
capital stock of both Citizens State Bank, Petersburg, Indiana ("Citizens
State") and Peoples National Bank, Washington, Indiana ("Peoples"). The
Company, through its four bank subsidiaries, operates 24 banking offices in
seven contiguous counties in southwestern Indiana.
On June 1, 1998 the Company consummated mergers with the parent companies of
Citizens State and FSB Bank of Francisco, Indiana ("FSB Bank"). FSB Bank and an
existing affiliate, Community Trust Bank of Petersburg, Indiana were merged into
the Citizens State charter on that date. The reported operating results for
periods prior to June 1, 1998 have been retroactively adjusted to give the
effect to the merger with Citizens State. These mergers were accounted for as
poolings of interests. Prior year results do not include the effect of the
merger with FSB Bank, as restatement would not have resulted in a material
change in overall financial results.
<PAGE>
Under a new accounting standard, comprehensive income is now reported for all
periods. Comprehensive income includes both net income and other comprehensive
income. Other comprehensive income includes the change in unrealized
appreciation on securities available for sale, net of tax.
Note 2 -- Per Share Data
The Company paid a 5 percent stock dividend in December 1997. In lieu of
issuing fractional shares, the company purchased from shareholders their
fractional interest. The Cmpany also paid a two-for-one stock split in October
1997. In addition, the Company issued 995,678 shares related to the mergers
with the parent companies of Citizens State and FSB Bank on June 1, 1998.
Earnings per share amounts have been retroactively computed as though these
additionally issued shares had been outstanding for all periods presented.
Dividends paid per share amounts represent historical dividends declared without
restatement for pooling.
The computation of Earnings per Share and Diluted Earnings per Share are
provided as follows:
Three Months Ended
June 30,
1998 1997
Earnings per Share:
Net Income $1,795,000 $2,062,000
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Weighted Average Shares Outstanding 6,346,754 6,337,223
Earnings per Share: $ 0.28 $ 0.33
Diluted Earnings per Share:
Net Income $1,795,000 $2,062,000
Weighted Average Shares Outstanding 6,346,754 6,337,223
Stock Options 29,976 36,692
Assumed Shares Repurchased upon
Exercise of Options (15,431 ) (28,910 )
Diluted Weighted Average
Shares Outstanding 6,361,299 6,345,005
Diluted Earnings per Share $ .28 $ 0.33
Six Months Ended
June 30,
1998 1997
Earnings per Share:
Net Income $3,544,000 $3,532,000
Weighted Average Shares Outstanding 6,346,299 6,337,017
Earnings per Share: $ 0.56 $ 0.56
<PAGE>
Diluted Earnings per Share:
Net Income $3,544,000 $3,532,000
Weighted Average Shares Outstanding 6,346,299 6,337,017
Stock Options 29,976 36,692
Assumed Shares Repurchased upon
Exercise of Options (15,431) (28,910 )
Diluted Weighted Average
Shares Outstanding 6,360,844 6,344,799
Diluted Earnings per Share $ 0.56 $ 0.56
Note 3 _ Securities
The amortized cost and estimated market values of Securities as of June 30, 1998
are as follows (dollars in thousands):
Estimated
Amortized Market
Securities Available-for-Sale: Cost Value
U.S. Treasury Securities and
Obligations of U.S. Government
Corporations and Agencies $52,648 $52,807
Obligations of State and
Political Subdivisions 25,973 26,597
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Asset-/Mortgage-backed Securities 23,376 23,383
Corporate Securities 2,462 2,461
Total $104,459 $105,608
Estimated
Amortized Market
Securities Held-to-Maturity: Cost Value
Obligations of State and
Political Subdivisions $23,653 $24,507
Asset-/Mortgage-backed Securities 521 533
Other Securities 2,056 2,056
Total $26,230 $27,096
On the date of merger with Citizens State, investment securities with an
amortized cost of $8.0 million and estimated market value of $8.1 million were
reclassified from Held-to-Maturity to Available-for-Sale. This action was taken
as a result of the business combination and in order to conform Citizens State's
investment portfolio to the Company's asset/liability and interest rate risk
position.
The amortized cost and estimated market values of Securities as of December 31,
1997 are as follows (dollars in thousands):
Estimated
Amortized Market
Securities Available-for-Sale: Cost Value
U.S. Treasury Securities and
Obligations of U.S. Government
Corporations and Agencies $58,544 $58,575
<PAGE>
Obligations of State and
Political Subdivisions 20,448 21,670
Asset-/Mortgage-backed Securities 15,668 15,661
Corporate Securities 4,528 4,529
Other Securities 1 14
Total $99,189 $100,449
Estimated
Amortized Market
Securities Held-to-Maturity: Cost Value
U.S. Treasury Securities and
Obligations of U.S.
Government Corporation and Agencies $5,598 $5,601
Obligations of State and
Political Subdivisions 24,980 26,167
Asset-/Mortgage-backed Securities 2,372 2,389
Corporate Securities 311 303
Other Securities 2,121 2,121
Total $35,382 $36,581
At June 30, 1998 and December 31, 1997, U.S. Government Agency structured
notes with an amortized cost of $1,500,000 and $5,000,000 respectively, and fair
value of $1,497,000 and $4,986,000 respectively, are included in securities
available-for-sale. These notes consist primarily of step-up and single-index
bonds. Securities classified as held-to-maturity with a market value of
$204,000 were sold during the second quarter, primarily due to their small block
sizes, which were not cost effective to maintain in the Company's investment
portfolio. Each of these securities had a de minimus book value relative to the
original purchase price at the dates of sale.
Note 4 -- Loans
<PAGE>
Total loans, as presented on the balance sheet, are comprised of the
following classifications (dollars in thousands):
June 30,December 31,
1998 1997
Real Estate Loans Secured by 1-4
Family Residential Properties $130,652 $126,289
Agricultural Loans 63,279 60,421
Commercial and Industrial Loans 131,452 111,240
Loans to Individuals for Household,
Family and Other Personal
Expenditures 80,842 79,385
Lease Financing 875 1,045
Total Loans $407,100 $378,380
The overall loan portfolio is diversified among a variety of borrowers;
however, a significant portion of the debtors' ability to honor their contracts
is dependent upon the wood furniture manufacturing and agriculture industries,
including poultry. No unguaranteed concentration of credit in excess of 10
percent of total assets exists within any single industry group.
Note 5 -- Allowance for Loan Losses
A summary of the activity in the Allowance for Loan Losses is as follows
(dollars in thousands):
1998 1997
Balance at January 1 $7,416 $7,144
Allowance of Acquired Subsidiary 72 ---
Provision for Loan Losses 119 (426)
Recoveries of Prior Loan Losses 162 474
Loan Losses Charged to the Allowance (636 ) (536)
<PAGE>
Balance at June 30 $7,133 $6,656
Note 6 _ Business Combinations
On June 1, 1998 the Company acquired by merger CSB Bancorp of Petersburg,
Indiana (and its wholly owned subsidiary, Citizens State Bank of Petersburg) in
exchange for 928,475 shares of German American Bancorp common stock. Fractional
interests were paid in cash of $3. The transaction was accounted for as a
pooling of interests.
Also on June 1, 1998 the Company acquired by merger FSB Financial Corporation
of Francisco, Indiana (and its wholly owned subsidiary, FSB Bank of Francisco,
Indiana) in exchange for 67,203 shares of German American Bancorp common stock.
Fractional interests for this transaction were paid in cash of $2. The
transaction was accounted for as a pooling of interests; however, results for
1997 do not include the effect of this transaction, as restatement would not
have resulted in a material change in overall financial results. Total assets
and equity of FSB Bank at the date of merger were $15.5 million and $1.4
million, respectively.
The following is a reconciliation of the separate and combined net interest
income and net income of German American Bancorp, CSB Bancorp and FSB Financial
Corporation for the periods prior to the acquisition:
GERMAN AMERICAN
BANCORP CSB FSB
(as previously reported)BANCORP FINANCIAL COMBINED
For the period January 1, 1998
through June 1, 1998
Net interest income $8,518 $1,186 $250 $9,954
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Net income / (Loss) $2,548 $444 $(64) $2,928
For the three months ended
June 30, 1997
Net interest income $5,024 $727 $ --- $5,751
Net income $1,850 $212 $ --- $2,062
For the six months ended
June 30, 1997
Net interest income $9,852 $1,450 $ --- $11,302
Net income $3,124 $408 $ --- $3,532
Note 7 -- Proposed Acquisitions
In August 1998, the Company signed a definitive agreement providing for the
merger with 1st Bancorp, a $260 million banking company headquartered in
Vincennes, Indiana (Knox County).
Under the terms of the agreement, the shareholders of 1ST BANCORP would
receive shares of common stock of German American with a targeted aggregate
market value of $57,120,000 (based on market prices of German American common
stock during a period of 15 trading days ending on the second trading date
preceding closing) in a tax-free exchange, or approximately $50.94 per 1ST
BANCORP share (assuming exercise of all outstanding options). If the German
American share price is less than $28 per share or more than $33 per share
during the valuation period, however, then the number of shares to be issued in
<PAGE>
the transaction will be based on a minimum or maximum share price, as the case
may be, of $28 or $33. Accordingly, to the extent that German American's share
price during the valuation period is less than $28 or more than $33, then the
market value of the transaction could vary from the targeted value.
The proposed merger is subject to the approval of 1ST BANCORP's and German
American's shareholders as well as the approval of the appropriate bank
regulatory agencies, receipt of a fairness opinion and other conditions. The
merger is expected to be effective in the first quarter of 1999. 1ST BANCORP
has also signed a Stock Option Agreement with German American, giving German
American an option to purchase up to 19.9% of 1ST BANCORP's outstanding shares,
exercisable at $50.94 per share upon the occurrence of certain events that
create the potential for another party to acquire control of 1ST BANCORP.
1ST BANCORP's subsidiaries include First Federal Bank, A Federal Savings
Bank; First Financial Insurance Agency, Inc.; and First Title Insurance Company,
Inc. First Federal Bank operates a loan origination office in Evansville,
Indiana. First Financial Insurance Agency has offices in Vincennes and
Princeton, Indiana. Following the merger, First Federal Bank and 1ST BANCORP's
insurance subsidiaries will remain intact as wholly owned direct or indirect
subsidiaries of German American and will continue to serve their existing
markets from their present facilities.
<PAGE>
<PAGE>
ITEM 2.
GERMAN AMERICAN BANCORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
German American Bancorp ("the Company") is a multi-bank holding company based
in Jasper, Indiana. Its four affiliate banks conduct business in 24 offices in
Dubois, Daviess, Gibson, Martin, Pike, Perry and Spencer Counties in Southwest
Indiana. The banks provide a wide range of financial services, including
accepting deposits; making commercial, mortgage and consumer loans; issuing
credit life, accident and health insurance; providing trust services for
personal and corporate customers; providing safe deposit facilities; and
providing investment advisory and brokerage services.
This section presents an analysis of the consolidated financial condition of
the Company as of June 30, 1998 and December 31, 1997 and the consolidated
results of operations for the periods ended June 30, 1998 and 1997. This review
should be read in conjunction with the consolidated financial statements and
<PAGE>
other financial data presented elsewhere herein and with the financial
statements and other financial data, as well as the Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the
Company's December 31, 1997 Annual Report to Shareholders.
On June 1, 1998 the Company consummated mergers with the parent companies of
Citizens State and FSB Bank of Francisco, Indiana ("FSB Bank"). FSB Bank and an
existing affiliate, Community Trust Bank of Otwell, Indiana were merged into the
Citizens State charter on that date. The reported operating results for periods
prior to June 1, 1998 have been retroactively adjusted to give the effect to the
merger with Citizens State. Prior year results do not include the effect of the
merger with FSB Bank, as restatement would not have resulted in a material
change in overall financial results.
RESULTS OF OPERATIONS
Net Income:
Net income for the quarter and year-to-date ended June 30, 1998 was
$1,795,000 and $3,544,000. This compares to earnings for the quarter and year-
to-date ended June 30, 1997 of $2,062,000 and $3,532,000. Prior year net income
included $459,000 ($0.07 per share) in after-tax earnings due to a negative
provision for loan loss recorded at the Company's Union Banking Division, which
resulted from the collection of a single previously charged-off credit.
Excluding this non-recurring event, earnings increased 12 percent for the second
quarter of 1998, and 15 percent for the year-to-date ended June 30, 1998, over
comparative 1997 adjusted operating results.
Net income was $0.28 per share for the three months, and $0.56 per share for
the six months ended June 30, 1998 compared to $0.33 per share for the quarter,
and $0.56 for the six months ended June 30, 1997. As adjusted for the non-
recurring event previously discussed, net income was $0.26 per share for the
<PAGE>
three months ended, and $0.49 per share for the six months ended June 30, 1997.
1998 per share earnings increased 12 percent in the second quarter, and 17
percent for the year-to-date ended June 30, 1998, over the adjusted comparative
1997 results.
The Company achieved year-to-date improvements over the prior year (again
excluding the impact of the non-recurring event in 1997) for return on assets
(1.20 percent versus 1.10 percent), return on equity (11.01 percent versus 10.55
percent) and net interest margin (4.64 percent versus 4.60 percent). The
Company's year-to-date efficiency ratio showed continued improvement, declining
to 57.6 percent from the prior year's 57.9 percent.
Net Interest Income:
The following table summarizes German American Bancorp's net interest income
(on a taxable-equivalent basis, at an effective tax rate of 34 percent for each
period) for each of the periods presented herein (dollars in thousands):
Three Months Change from
Ended June 30, Prior Period
1998 1997 Amount Percent
Interest Income $11,707 $11,136 $571 5.1%
Interest Expense 5,307 5,049 258 5.1
Net Interest Income $6,400 $6,087 $313 5.1
Six Months Change from
Ended June 30, Prior Period
1998 1997 Amount Percent
Interest Income $23,341 $21,997 $1,344 6.1%
<PAGE>
Interest Expense 10,513 10,024 489 4.9
Net Interest Income $12,828 $11,973 $855 7.1
The increase in net interest income for the three and six months ended June
30, 1998 compared to the same periods of 1997 was primarily due to an increase
of loans, which generally provide a higher yield than investment securities, in
the mix of average earning assets. In addition, 1998 results include the
recovery of interest on a previously charged-off loan of approximately $68,000.
Net interest income, on a taxable-equivalent basis expressed as a percentage of
average earning assets, is referred to as the net interest margin, which
represents the average net effective yield on earning assets. For the first
half of 1998, the net interest margin was 4.64 percent compared to 4.60 percent
for the comparable period of 1997. This increase in margin was due primarily to
a decrease in debt to equity leverage.
Provision For Loan Losses:
The Company provides for future loan losses through regular provisions to the
allowance for loan losses. These provisions are made at a level which is
considered necessary by management to absorb estimated losses in the loan
portfolio. A detailed evaluation of the adequacy of this loan loss reserve is
completed quarterly by management.
The consolidated provision for loan losses was $119,000 and $(426,000) for
the first half in 1998 and 1997 and $55,000 and ($652,000) in the second quarter
in 1998 and 1997. The negative provision in the second quarter of 1997 resulted
from the collection of a single, previously charged-off credit, combined with
management's determination that certain specific reserve allocations were no
longer necessary due to the performance of the related loans. Absent this non-
recurring event, the provision totaled $302,000 for the first half, and $76,000
for the second quarter of 1997. The provision for loan losses to be recorded in
<PAGE>
future periods will be subject to adjustment based on the results of on-going
evaluations of the adequacy of the allowance for loan losses.
Net charge-offs were $460,000 or 0.46 percent of average loans for the three
months ended, and $474,000 or 0.24 percent of loans for the six months ended
June 30, 1998. Net charge-offs (recoveries) for the second quarter of 1997 were
$(376,000) or (0.10) percent of loans and were $62,000 or 0.03 percent of loans
for the first half of 1997. The majority of the 1998 charge-offs occurred at
Citizens State, on loans for which Citizens State had previously fully reserved
a specific allowance. Underperforming loans as a percentage of total loans were
0.82 percent and 0.86 percent, respectively on June 30, 1998 and December 31,
1997. See discussion under "Financial Condition" for more information regarding
underperforming assets.
Noninterest Income:
Noninterest income increased approximately 15 percent over the prior year,
excluding net gains on sale, and was $823,000 and $1,541,000 for the second
quarter and year-to-date ended June 30, 1998. This compares to $707,000 and
$1,337,000 for the same periods in 1997. Higher revenues resulted from an 11
percent increase in service charges on deposits, a 23 percent increase in
investment services income and an increase of approximately $87,000 from other
ventures.
Noninterest Expense:
Noninterest expense was $4.2 million for the second quarter of 1998 compared
to $4.0 million for the second quarter of 1997. Year-to-date 1998 results were
$8.3 million versus $7.7 million for the first six months of 1997. This
represented a 5 percent increase for the quarter and 7 percent for the year-to-
date ended June 30, 1998 over the comparative periods for the prior year.
Noninterest expense slightly increased as an annualized percentage of average
<PAGE>
total assets to 2.80 percent in 1998 from 2.77 percent in the prior year. The
Company's efficiency ratio improved to 57.6 percent from 57.9 percent for 1997.
Salaries and Employee Benefits totaled $2.3 million and $4.6 million,
respectively, for the second quarter and year-to-date ended June 30, 1998 or 56
percent of total noninterest expense. These expenses increased approximately 12
percent over the same periods for 1997, when salaries and employee benefits
totaled $2.1 million and $4.2 million, respectively. Increases were incurred in
base compensation and selected benefits, including the Company's employee
computer purchase program, beginning in late 1997.
Total occupancy, furniture and equipment expense for the first six months of
1998 totaled $1.2 million. This was approximately $120,000 or 11 percent
greater than the $1.1 million incurred for the same period of the prior year.
These expenses are expected to continue to be higher in comparison to the prior
year, largely as a consequence of upgrading the Company's computer systems at
its existing and new affiliates. The Company is continuing its strategy to
implement state-of-the-art computer processing to provide the opportunities to,
over the long-term, better control the level of employee related expenses and
improve the quality of customer service provided by all of its affiliate
community banks.
Computer processing fees increased $39,000 in the first half of 1998 from the
first half of 1997. Nearly all of this difference is attributable to conversion
of new affiliates to the Company's data processing systems. Professional fees
for the first six months of 1998 totaled $327,000. This was a reduction of
$245,000 from the $572,000 recorded for the same period of 1997, primarily due
to a reserve for legal fees established in the second quarter of 1997, related
to an unasserted potential claim.
Other operating expenses increased approximately 10 percent from $819,000 and
$1,593,000 in the first three and six months of 1997 to $898,000 and $1,756,000
<PAGE>
in the first three and six months of 1998. These increases were incurred due to
the introduction of new banking products, related expenses and a refund of SAIF
assessment fees received in the first quarter of 1997.
FINANCIAL CONDITION
Total assets at June 30, 1998 were $594 million. This was an increase of $18
million from the December 31, 1997 total asset position and was due to an
increase in the loan portfolio.
Deposits at June 30, 1998 were $516 million, which was a $15 million increase
from year-end 1997. Transaction deposits experienced a seasonal decline from
year-end, while interest-bearing deposits increased $23 million. Combined
Short- and Long-term Borrowings at June 30, 1998 were $5.5 million, representing
no change from the December 31, 1997 position.
All of the Company's affiliate banks are members of the Federal Home Loan
Bank System ("FHLB"). The banks' membership in the FHLB provides an additional
source of liquidity for both long and short-term borrowing needs. The Company
had $1 million in FHLB borrowings outstanding at June 30, 1998.
Underperforming Assets:
The following is an analysis of the Company's underperforming assets at June
30, 1998 and December 31, 1997 (dollars in thousands):
June 30, December 31,
1998 1997
Nonaccrual Loans $753 $562
<PAGE>
Loans contractually past due
90 days or more 2,583 2,710
Renegotiated Loans --- ---
Total Underperforming Loans 3,336 3,272
Other Real Estate 365 146
Total Underperforming Assets $3,701 $3,418
Allowance for Loan Loss to
Underperforming Loans 213.82% 226.65%
Underperforming Loans to Total Loans 0.82% 0.86%
Capital Resources:
Shareholders' equity totaled $65.7 million at June 30, 1998 or 11.1 percent
of total assets, and $62.1 million at December 31, 1997 or 10.8 percent of total
assets.
Federal banking regulations provide guidelines for determining the capital
adequacy of bank holding companies and banks. These guidelines provide for a
more narrow definition of core capital and assign a measure of risk to the
various categories of assets. The Company is required to maintain minimum
levels of capital in proportion to total risk-weighted assets and off-balance
sheet exposures such as loan commitments and standby letters of credit.
Tier 1, or core capital, consists of shareholders' equity less goodwill, core
deposit intangibles, and certain deferred tax assets defined by bank
regulations. Tier 2 capital is defined as the amount of the allowance for loan
losses which does not exceed 1.25 percent of gross risk adjusted assets. Total
capital is the sum of Tier 1 and Tier 2 capital.
<PAGE>
The minimum requirements under these standards are generally at least a 4.0
percent leverage ratio, which is Tier 1 capital divided by defined "total
assets"; 4.0 percent Tier 1 capital to risk-adjusted assets; and, an 8.0 percent
total capital to risk-adjusted assets ratios. Under these guidelines, the
Company, on a consolidated basis, and each of its affiliate banks individually,
have capital ratios that substantially exceed the regulatory minimums.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
requires federal regulatory agencies to define capital tiers. These are: well
capitalized, adequately capitalized, under-capitalized, significantly under-
capitalized, and critically under-capitalized. Under these regulations, a
"well-capitalized" entity must achieve a Tier 1 Risk-based capital ratio of at
least 6.0 percent; a total capital ratio of at least 10.0 percent; and, a
leverage ratio of at least 5.0 percent, and not be under a capital directive
order.
At June 30, 1998 management is not under such a capital directive, nor is it
aware of any current recommendations by banking regulatory authorities which, if
they were to be implemented, would have or are reasonably likely to have, a
material effect on the Company's liquidity, capital resources or operations.
The table below presents the Company's consolidated risk-based capital
structure and capital ratios under regulatory guidelines (dollars in thousands):
June 30, December 31,
1998 1997
Tier 1 Capital:
Shareholders' Equity as presented
on the Balance Sheet $65,705 $62,079
Less: Unrealized Appreciation on
Securities Available-for-Sale (694) (767)
Less: Intangible Assets and
<PAGE>
Ineligible Deferred Tax Assets (1,567) (1,713)
Total Tier 1 Capital 63,444 59,599
Tier 2 Capital:
Qualifying Allowance for Loan Loss 5,091 4,786
Total Capital $68,535 $64,385
Risk-adjusted Assets $405,277 $378,770
To be Well
Capitalized
Under Prompt
Minimum for Corrective
Capital Action
Adequacy Provisions June 30, December 31,
Purposes (FDICIA) 1998 1997
Leverage Ratio 4.00% 5.00% 10.74% 10.59%
Tier 1 Capital to
Risk-adjusted Assets 4.00% 6.00% 15.65% 15.73%
Total Capital to
Risk-adjusted Assets 8.00% 10.00% 16.91% 17.00%
LIQUIDITY
<PAGE>
The Consolidated Statement of Cash Flows details the elements of change in the
Company's cash and cash equivalents. During the first six months of 1998,
operating activities provided $3.9 million of available cash, which included net
income of $3.5 million. Maturities of securities and short-term investments
netted $5.3 million in cash above the dollar amount of purchases. Major cash
outflows experienced during this six month period of 1998 included $1.3 million
in dividends, $373,000 in property and equipment purchases and net loan outlays
in the amount of $19.2 million. Deposits and borrowings increased by $1.2
million during the period. Total cash outflows for the period exceeded inflows
by $6.7 million, leaving cash and cash equivalents of $33.7 million at June 30,
1998.
YEAR 2000
All banks and financial institutions are faced with addressing a potentially
materially adverse event should their computer and operating systems fail to
accurately process business in the Year 2000. The Company, like any financial
institution, would suffer an interruption in its ability to transact business
should its systems fail due to Year 2000 programming inaccuracy.
An on-going formal review of the Company's computer systems and systems
providers is continuing, in order to determine the extent to which changes must
be implemented to avoid or minimize service issues associated with the Year
2000. The Company has developed a formal plan for the review, testing and
implementation of procedures to address certain issues that require attention
prior to the Year 2000, in order that its operations will not be materially
adversely affected. The Company's Year 2000 process is subject to regulatory
examination and at this time the Company believes itself to be in compliance
with significant regulatory requirements.
<PAGE>
The Company's service provider for all of its loan and deposit account
processing activity is Fiserv, a publicly listed company headquartered in
Milwaukee, Wisconsin. Fiserv's systems have been designated as mission critical
for the Year 2000 issue. Fiserv, a national service provider for over 3,300
financial institutions, has confirmed to the Company that the renovation and
testing of all core systems will be largely completed by December 25, 1998.
While the Company can obviously give no assurance as to Fiserv's performance in
the completion of this matter, the Company is unaware of any issues that would
cause Fiserv to be unable to renovate mission critical systems satisfactorily.
Due to the Company's existing computer upgrade initiatives and its reliance on
third party systems for the bulk of its processing functions, the incremental
expenses associated with Year 2000 issues are not expected to be material to
financial results.
The Year 2000 issue could also affect the ability of the Company's customers
to conduct operations in a timely and effective manner, and as such, could
adversely impact the quality of the Company's loan portfolio, its deposits, or
other sources of revenue and funding from customers. Although the Company has
not generally requested information from its customers regarding their potential
exposure to the Year 2000 issue or their plans to minimize any such exposure,
the Company is not aware of any specific significant customer which does not
expect to have this issue resolved prior to the Year 2000.
The above summary of the Company's Year 2000 preparations includes forward
looking statements, concerning the Company's present expectation that its
operations will not be materially adversely affected by Year 2000 issues. There
can be no assurance, however, that Year 2000 issues will not be encountered or
that their effect on the Company's operations, technology expenditures or
customer relationships will not be material.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
<PAGE>
The Company's exposure to market risk is reviewed on a regular basis by the
Asset/Liability Committee and the Boards of Directors of the holding company and
its affiliate banks. Other than as a result of the June 1, 1998 mergers with
Citizens State and FSB Bank, there have been no material changes in the
quantitative and qualitative disclosures about market risks from December 31,
1997. While these acquisitions added $93 million in assets and $10 million in
equity to the Company at the date of the mergers, the acquired banks
distribution of assets and liabilities do not materially impact the overall
market risk profile of the Company which was presented in the analysis and
disclosures provided in the Company's Form 10-K for the year ended December 31,
1997.
PART II. -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its Annual Meeting of Shareholders on April 23, 1998. At
the Annual Meeting, the shareholders elected as Directors for an additional two-
year term the six nominees proposed by the Board of Directors, and approved an
amendment of the Corporation's Articles of Incorporation to change the par value
of its capital stock from $10.00 per share to no par value per share.
Votes Votes Broker
Nominee Cast For Withheld Non-Votes
Gene C. Mehne 3,938,742.10 9,767.00 1,439,509.90
Robert L. Ruckriegel 3,935,837.23 9,767.00 1,439,509.90
Mark A. Schroeder 3,938,742.10 9,767.00 1,439,509.90
Larry J. Seger 3,938,742.10 9,767.00 1,439,509.90
Joseph L. Steurer 3,938,742.10 9,767.00 1,439,509.90
<PAGE>
C.L. Thompson 3,938,547.10 9,962.00 1,439,509.90
There were no abstentions.
The amendment of the Articles of Incorporation was approved by a vote of
3,881,068.30 votes in favor and 67,440.80 votes opposed with 1,439,509.90
abstentions or broker non-votes.
Item 5. Other Events
In August 1998, the Company signed a definitive agreement providing for the
merger with 1st Bancorp, a $260 million banking company headquartered in
Vincennes, Indiana (Knox County).
Under the terms of the agreement, the shareholders of 1ST BANCORP would
receive shares of common stock of German American with a targeted aggregate
market value of $57,120,000 (based on market prices of German American common
stock during a period of 15 trading days ending on the second trading date
preceding closing) in a tax-free exchange, or approximately $50.94 per 1ST
BANCORP share (assuming exercise of all outstanding options). If the German
American share price is less than $28 per share or more than $33 per share
during the valuation period, however, then the number of shares to be issued in
the transaction will be based on a minimum or maximum share price, as the case
may be, of $28 or $33. Accordingly, to the extent that German American's share
price during the valuation period is less than $28 or more than $33, then the
market value of the transaction could vary from the targeted value.
The proposed merger is subject to the approval of 1ST BANCORP's and German
American's shareholders as well as the approval of the appropriate bank
regulatory agencies, receipt of a fairness opinion and other conditions. The
merger is expected to be effective in the first quarter of 1999. 1ST BANCORP
has also signed a Stock Option Agreement with German American, giving German
<PAGE>
American an option to purchase up to 19.9% of 1ST BANCORP's outstanding shares,
exercisable at $50.94 per share upon the occurrence of certain events that
create the potential for another party to acquire control of 1ST BANCORP.
1ST BANCORP's subsidiaries include First Federal Bank, A Federal Savings
Bank; First Financial Insurance Agency, Inc.; and First Title Insurance Company,
Inc. First Federal Bank operates a loan origination office in Evansville,
Indiana. First Financial Insurance Agency has offices in Vincennes and
Princeton, Indiana. Following the merger, First Federal Bank and 1ST BANCORP's
insurance subsidiaries will remain intact as wholly owned direct or indirect
subsidiaries of German American and will continue to serve their existing
markets from their present facilities.
Following completion of the 1st Bancorp transaction, C. James McCormick,
Chairman of the Board of 1st Bancorp, will join the Company's Board of
Directors.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
2.1 Agreement and Plan of Reorganization between the Registrant,
CSB Bancorp, and Affiliates, dated December 8,1997. This
exhibit is incorporated by reference from Exhibit 2.1 to the
Registrant's Registration Statement on Form S-4 filed February
26, 1998.
<PAGE>
2.2 Agreement and Plan of Reorganization between the Registrant,
FSB Financial Corporation, and Affiliates, dated January 30,
1998. This exhibit is incorporated by reference from Exhibit
2.2 to the Registrant's Registration Statement on Form S-4
filed on February 26, 1998.
2.3 Agreement and Plan of Reorganization dated as of August 6, 1998
between 1st Bancorp and the Registrant.
2.4 Stock Option Agreement dated as of August 6, 1998 between 1st
Bancorp and Registrant.
3 Restated Articles of Incorporation of German American Bancorp
(as amended to change the par value from $10.00 to no par
value).
10.1 Stock Option Agreement executed May 1, 1998 between
the Registrant and James E. Essany
(1,155 shares).
27 Financial Data Schedule for the periods ended June 30, 1998 and
1997.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended June 30, 1998
except for a report filed June 16, 1998 which reported under Item 2, the
consummation on June 1, 1998 of the merger of FSB Financial Corporation of
Francisco, Indiana and CSB Bancorp of Petersburg, Indiana into German American
Holdings Corporation. A Press Release attached as Exhibit 99 to the June 16,
1998 8-K more fully described this transaction. It was also noted under Item 5,
<PAGE>
"Other Events" in the 8-K, that Michael J. Voyles, a member of the Board of
Directors of CSB Bancorp was added to the Board of Directors of the Company.
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 thereunto duly authorized.
GERMAN AMERICAN BANCORP
Date August 14, 1998 By/s/George W. Astrike
--------------- ------------------------
George W. Astrike
Chairman
Date August 14, 1998 By/s/John M. Gutgsell
--------------- ------------------------
John M. Gutgsell
Controller and Principal
Accounting Officer
<PAGE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
by and between
1ST BANCORP,
an Indiana corporation,
and
GERMAN AMERICAN BANCORP,
an Indiana corporation.
<PAGE>
Dated: August 6, 1998
Exhibit 2.3
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made August
6, 1998, by and between 1ST BANCORP, an Indiana corporation ("1ST BANCORP"), and
GERMAN AMERICAN BANCORP, an Indiana corporation ("German American").
Recitals
A. 1ST BANCORP is a corporation duly organized and existing under the Indiana
Business Corporation Law ("IBCL") that is duly registered with the Office of
Thrift Supervision ("OTS") as a savings and loan holding company under the Home
Owners' Loan Act ("HOLA"). 1ST BANCORP owns all of the outstanding capital
stock of First Federal Bank, A Federal Savings Bank (the "Bank"). The principal
place of business of 1ST BANCORP is Vincennes, Knox County, Indiana.
B.
C. The Bank is a federal savings bank duly organized and existing under the
HOLA, chartered by the OTS, with its principal banking office located in
Vincennes, Knox County, Indiana
D.
E. C. Financial Services of Southern Indiana Corporation ("FSSIC") is a
wholly-owned subsidiary of the Bank, and First Financial Insurance Agency, Inc.
("FFIAI"), and First Title Insurance Company ("FTC") are wholly-owned
subsidiaries of 1ST BANCORP, all with principal offices in Vincennes, Knox
County, Indiana (collectively FSSIC, FFIAI and FTC are referred to herein as the
"Subsidiaries"). The Subsidiaries are all Indiana corporations duly organized
and existing under the IBCL.
F.
D German American is a corporation duly organized and existing under the
IBCL and is duly registered with the Board of Governors of the Federal Reserve
System ("FRB") as a bank holding company under Bank Holding Company Act of 1956,
<PAGE>
as amended ("BHC Act"). The principal place of business of German American is
Jasper, Dubois County, Indiana.
E. The parties desire to effect a transaction whereby 1ST BANCORP will be
merged with and into German American in consideration of the issuance of German
American Common Stock.
Agreements
In consideration of the premises and the mutual terms and provisions set
forth in this Agreement, the parties agree as follows:
ARTICLE ONE
TERMS OF THE MERGER AND CLOSING
Section 1.01. The Merger. Pursuant to the terms and provisions of this
Agreement, the IBCL and the Plan of Merger attached hereto as Appendix A and
incorporated herein by reference (the "Plan of Merger"), 1ST BANCORP shall merge
with and into German American (the "Merger"). 1ST BANCORP shall be the "Merging
Company" in the Merger and its corporate identity and existence, separate and
apart from German American, shall cease on consummation of the Merger. German
American shall be the "Surviving Company" in the Merger, and its name shall not
be changed pursuant to the Merger.
<PAGE>
Section 1.02. Effect of the Merger. The Merger shall have all the effects
provided by the IBCL.
Section 1.03. The Merger - Conversion of Shares.
(a) At the time of filing with the Indiana Secretary of State of appropriate
Articles of Merger with respect to the Merger or at such later time as shall be
specified by such Articles of Merger (the "Effective Time"):
(b)
i) ( Each of the shares of common stock, $1.00 par value, of 1ST BANCORP
("1ST BANCORP Common") that are issued and outstanding immediately prior to
the Effective Time shall thereupon and without further action be converted
into shares of common stock, no par value, of German American ("German
American Common") at the Exchange Ratio which shall be calculated as set
forth in this Section 1.03(a)(i). 1ST BANCORP's shareholders of record at
the Effective Time, for the shares of 1ST BANCORP Common then held by them,
respectively, shall be allocated and entitled to receive (upon surrender of
certificates representing said shares for cancellation) shares of German
American Common, which total number of shares of German American Common
shall have a value (as hereinafter determined) of $57,120,000 subject,
however, to (A) the provisions of this Section 1.03(a) with respect to the
minimum and maximum number of shares to be exchanged, (B) the provisions of
Section 1.03(f) of this Agreement, and (C) the provisions of this Section
1.03(b) with respect to fractional shares. The consideration payable to
1ST BANCORP shareholders hereunder is sometimes hereafter referred to as
the "Merger Consideration."
For purposes of establishing the number of shares of German American
Common into which each share of 1ST BANCORP Common shall be converted at
the Effective Time (the "Exchange Ratio"), each share of German American
Common shall be valued (the "GA Common Value") at the average of the
highest closing bid and the lowest closing asked prices of German American
<PAGE>
Common as reported by the NASDAQ National Market System for the 15 trading
days ending on the second trading day preceding the Closing Date (as
defined by Section 1.06 hereof) (the "Valuation Period"). The GA Common
Value shall then be divided into the sum of $57,120,000 to establish (to
the nearest whole share) the aggregate number of shares of German American
Common into which all of the then issued and outstanding shares of 1ST
BANCORP Common shall be converted at the Effective Time. Notwithstanding
the above, if the GA Common Value exceeds $33 per share, then the aggregate
number of shares to be issued in the Merger will be determined by using $33
as the GA Common Value. Similarly, if the GA Common Value is below $28 per
share, then the aggregate number of shares to be issued in the Merger will
be determined by using $28 as the GA Common Value. The number of shares of
German American Common as so calculated shall then be divided by the number
of shares of 1ST BANCORP Common that are issued and outstanding as of the
Effective Time, with the quotient therefrom (carried to the fourth figure
past the decimal point) being the Exchange Ratio. The maximum and minimum
figures for the GA Common Value shall be subject to adjustment in
accordance with the provisions of Section 1.03(f) of this Agreement.
i) ( The shares of German American issued and outstanding immediately
prior to the Effective Time shall continue to be issued and outstanding
shares of German American.
(a) No fractional shares of German American Common shall be issued and, in lieu
thereof, holders of shares of 1ST BANCORP Common who would otherwise be entitled
to a fractional share interest (after taking into account all shares of 1ST
BANCORP Common held by such holder) shall be paid an amount in cash equal to the
product of such fractional share and the average of the highest bid and the
lowest asked price of a share of German American Common as quoted on the NASDAQ
National Market System on the last day of the Valuation Period.
(b)
<PAGE>
(c) At the Effective Time, all of the outstanding shares of 1ST BANCORP Common,
by virtue of the Merger and without any action on the part of the holders
thereof, shall no longer be outstanding and shall be canceled and retired and
shall cease to exist, and each holder of any certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of 1ST
BANCORP Common (the "Certificates") shall thereafter cease to have any rights
with respect to such shares, except the right of such holders to receive,
without interest, the Merger Consideration upon the surrender of such
Certificate or Certificates in accordance with Section 1.05.
(d)
(e) At the Effective Time, each share of 1ST BANCORP Common, if any, held in
the treasury of 1ST BANCORP or by any direct or indirect subsidiary of 1ST
BANCORP, including the Bank and the Subsidiaries (other than shares held in
trust accounts for the benefit of others or in other fiduciary, nominee or
similar capacities) immediately prior to the Effective Time shall be canceled.
(f)
(g) At the Effective Time, the shares of common stock of the Bank outstanding
immediately prior to the Effective Time shall be unchanged by the Merger and
shall be deemed owned by the Surviving Company.
(h)
(i) If (i) German American shall hereafter declare a stock dividend or other
distribution of property or securities (excluding any cash dividends and
excluding the five percent stock dividend that German American intends to
declare in late 1998) upon its shares of common stock or shall subdivide, split
up, reclassify or combine its shares of common stock, and (ii) the record date
for such transaction is prior to the date on which the Effective Time occurs,
appropriate adjustment or adjustments will be made in the maximum and minimum
figures for the GA Common Value as set forth in Section 1.03(a)(i) above.
(j)
(k) If any holders of 1ST BANCORP Common dissent from the Merger and demand
dissenters' rights under the IBCL, any issued and outstanding shares of 1ST
BANCORP Common held by such dissenting holders shall not be converted as
<PAGE>
described in this Section 1.03 but shall from and after the Effective Time
represent only the right to receive such consideration as may be determined to
be due to such dissenting holders pursuant to the IBCL; provided, however, that
each share of 1ST BANCORP Common outstanding immediately prior to the Effective
Time and held by a dissenting holder who shall, after the Effective Time,
withdraw his or her demand for dissenters' rights or lose his or her right to
exercise dissenters' rights shall have only such rights as provided under the
IBCL.
(l)
(m) Section 1.04. The Closing. The closing of the Merger (the "Closing")
shall take place at the offices of Leagre Chandler & Millard (or at such other
place as the parties may agree) at 9:00 A.M. Eastern Standard Time on the
Closing Date described in Section 1.06 of this Agreement.
(n)
Section 1.05. Exchange Procedures; Surrender of Certificates.
<PAGE>
(a) The Fifth Third Bank, Cincinnati, Ohio, shall act as Exchange Agent in the
Merger (the "Exchange Agent").
(a) As soon as reasonably practicable but in no event more than ten working
days after the Effective Time, the Exchange Agent shall mail to each record
holder of any Certificate or Certificates whose shares were converted into the
right to receive the Merger Consideration, a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
German American may reasonably specify) (each such letter the "Merger Letter of
Transmittal") and instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. As soon as reasonably
practical but in no event more than ten days after surrender to the Exchange
Agent of a Certificate, together with a Merger Letter of Transmittal duly
executed and any other required documents, the Exchange Agent shall transmit to
the holder of such Certificate the Merger Consideration. No interest on the
Merger Consideration issuable upon the surrender of the Certificates shall be
paid or accrued for the benefit of holders of Certificates.
(b)
(c) With respect to any certificate for shares of 1ST BANCORP Common which has
been lost, stolen or destroyed, German American shall be authorized to issue its
common stock (or to pay cash as to fractional shares) to the registered owner of
such certificate upon German American's receipt of an agreement to indemnify
German American against loss from such lost, stolen or destroyed certificate and
an affidavit of lost, stolen or destroyed stock certificate, both in form and
substance reasonably satisfactory to German American, and upon payment by the
1ST BANCORP shareholder of a reasonable fee for a security bond from a
recognized insurance company.
(d)
(e) No dividends that are otherwise payable on shares of German American Common
constituting the Merger Consideration shall be paid to persons entitled to
<PAGE>
receive such shares of German American Common until such persons surrender their
Certificates. Upon such surrender, there shall be paid to the person in whose
name the shares of German American Common shall be issued any dividends which
shall have become payable with respect to such shares of German American Common
(without interest and less the amount of taxes thereon, if any, which are
required to be withheld), between the Effective Time and the time of such
surrender.
(f)
(g) Section 1.06. The Closing Date. The Closing shall take place on the last
business day of the month during which each of the conditions in Sections
6.01(d) and 6.02(d) is satisfied or waived by the appropriate party, or on such
later or earlier date as 1ST BANCORP and German American may agree (the "Closing
Date"). The parties shall use their best efforts to cause the Effective Time of
the Merger to be as of the first business day of the calendar month that follows
the month in which the Closing occurs; provided, however, that in no event shall
the Effective Time be prior to January 4, 1999.
(h)
Section 1.07. Actions At Closing.
<PAGE>
(a) At the Closing, 1ST BANCORP shall deliver to German American:
(i) certified copies of (A) the Articles of Incorporation and Bylaws of
1ST BANCORP, as amended; (B) the Charter and Bylaws of the Bank, as
amended; and (C) the Articles of Incorporation and Bylaws of each of the
Subsidiaries;
(i) a certificate or certificates signed by the chief executive officer of
1ST BANCORP, to the best of his knowledge and belief, after due inquiry,
that (A) each of the representations and warranties contained in Article
Two hereof is true and correct in all material respects at the time of the
Closing with the same force and effect as if such representations and
warranties had been made at Closing, and (B) 1ST BANCORP, the Bank, and the
Subsidiaries have performed and complied in all material respects, unless
waived by German American, with all of its respective obligations and
agreements required to be performed hereunder prior to the Closing Date;
(i) certified copies of the resolutions of 1ST BANCORP's Board of
Directors and shareholders, approving and authorizing the execution of this
Agreement and the Plan of Merger and authorizing the consummation of the
Merger;
(i) a certificate of the Indiana Secretary of State, dated a recent date,
stating that 1ST BANCORP is duly organized and validly existing under the
IBCL;
(i) a certificate of the OTS, dated a recent date, stating that the Bank
is duly organized and validly existing under the laws of the United States
of America;
<PAGE>
(i) certificates of the Indiana Secretary of State, dated a recent date,
stating that each of the Subsidiaries is duly organized and exists under
the IBCL; and
(i) the legal opinion of Barnes & Thornburg, counsel for 1ST BANCORP to
the effect set forth as Exhibit 1.07(a)(vii).
(a) At the Closing, German American shall deliver to 1ST BANCORP:
(b)
(i) a certificate signed by the Chief Executive Officer of German American
stating, to the best of his knowledge and belief, after due inquiry, that
(A) each of the representations and warranties contained in Article Three
is true and correct in all material respects at the time of the Closing
with the same force and effect as if such representations and warranties
had been made at Closing and (B) German American has performed and complied
in all material respects, unless waived by 1ST BANCORP with all of its
obligations and agreements required to be performed hereunder prior to the
Closing Date;
(i) certified copies of the resolutions of German American's Board of
Directors and (if required by the NASDAQ NMS listing standards or the IBCL)
German American's shareholders authorizing the execution of this Agreement
and the Plan of Merger and the consummation of the Merger;
(i) a certificate of the Indiana Secretary of State, dated a recent date,
stating that German American is duly organized and validly existing under
the IBCL; and
(i) the legal opinion of Leagre Chandler & Millard, counsel for German
American, in the form attached hereto as Exhibit 1.07(b)(iv).
(ii)
<PAGE>
(b) At the Closing, the parties shall insert the Exchange Ratio determined in
accordance with Section 1.03 of this Agreement into the Plan of Merger, and
shall execute and/or deliver to one another such Plan of Merger and such other
documents and instruments and take such other actions as shall be necessary or
appropriate to consummate the Merger.
(c)
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES OF 1ST BANCORP
1ST BANCORP hereby makes the following representations and warranties:
Section 2.01. Organization and Capital Stock.
<PAGE>
(a) 1ST BANCORP is a corporation duly organized and validly existing under the
IBCL and has the corporate power to own all of its property and assets, to incur
all of its liabilities and to carry on its business as now being conducted.
(a) The Bank is a federal savings bank duly chartered and validly existing
under the laws of the United States of America and has the corporate power to
own all of its property and assets, to incur all of its liabilities and to carry
on its business as now being conducted.
(b)
(c) 1ST BANCORP has authorized capital stock of 7,000,000 shares, 5,000,000 of
which are 1ST BANCORP Common, $1.00 par value, and 2,000,000 of which are
preferred capital stock, $1.00 par value. At the date of this Agreement, there
were 1,096,189 shares of 1ST BANCORP Common duly and validly issued and
outstanding, fully paid and non-assessable and no shares of preferred stock
issued and outstanding. None of the outstanding shares of 1ST BANCORP Common
has been issued in violation of any preemptive rights of the current or past
shareholders of 1ST BANCORP or in violation of any applicable federal or state
securities laws or regulations.
(d)
(e) The Bank has authorized capital stock of 5,000,000 shares of common stock,
$1.00 par value, 1,000 of which shares are issued and outstanding ("Bank
Common") and 2,000,000 shares of preferred stock, none of which are outstanding.
All of such shares of Bank Common are duly and validly issued and outstanding
and are fully paid and nonassessable. None of the outstanding shares of Bank
Common has been issued in violation of any preemptive rights of the current or
past shareholders of the Bank or in violation of any applicable federal or state
securities laws or regulations.
(f)
(g) (e) FSSIC has authorized capital stock of 1,000 shares of common stock, no
par value, one of which is issued and outstanding and is fully paid and
nonassessable. None of the outstanding shares of FSSIC Common has been issued
in violation of any preemptive rights of the current or past shareholders of
<PAGE>
FSSIC or in violation of any applicable federal or state securities laws or
regulations.
(h)
(i) (f) FFIAI has authorized capital stock of 1,000 shares of common stock, no
par value, 100 of which are issued and outstanding and are fully paid and
nonassessable. None of the outstanding shares of FFIAI Common has been issued
in violation of any preemptive rights of the current or past shareholders of
FFIAI or in violation of any applicable federal or state securities laws or
regulations.
(j)
(k) (g) FTC has authorized capital stock of 1,000 shares of common stock, no
par value, 100 of which are issued and outstanding and are fully paid and
nonassessable. None of the outstanding shares of FTC Common has been issued in
violation of any preemptive rights of the current or past shareholders of FTC or
in violation of any applicable federal or state securities laws or regulations.
(l)
(m) (h) Except as otherwise disclosed with particularity in a confidential
writing delivered by 1ST BANCORP to German American prior to execution of this
Agreement, which confidential writing thereafter shall be executed by all the
parties concurrently with the execution of this Agreement (the "Disclosure
Schedule"), there are no shares of capital stock or other equity securities of
1ST BANCORP, the Bank, or the Subsidiaries authorized, issued or outstanding and
no outstanding options, warrants, rights to subscribe for, calls, puts, or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock of 1ST
BANCORP, the Bank, or the Subsidiaries, or contracts, commitments,
understandings or arrangements by which 1ST BANCORP, the Bank, or the
Subsidiaries are or may be obligated to issue additional shares of its capital
stock or options, warrants or rights to purchase or acquire any additional
shares of its capital stock.
(n)
<PAGE>
(o) Section 2.02. Authorization; No Defaults. The Board of Directors of 1ST
BANCORP, by all appropriate action, has approved this Agreement, the Plan of
Merger and the Merger and has authorized the execution of this Agreement and the
Plan of Merger on its behalf by its duly authorized officers and the performance
by 1ST BANCORP of its obligations hereunder. Nothing in the Articles of
Incorporation or Bylaws of 1ST BANCORP, as amended, or the Charter or Bylaws of
the Bank, as amended, or the Articles of Incorporation or Bylaws of any of the
Subsidiaries, as amended, or in any material agreement or instrument, or any
decree, proceeding, law or regulation (except as specifically referred to in or
contemplated by this Agreement) by or to which 1ST BANCORP, the Bank, or any of
the Subsidiaries is bound or subject, would prohibit 1ST BANCORP from
consummating, or would be violated or breached by 1ST BANCORP's consummation of,
this Agreement and the Merger and other transactions contemplated herein on the
terms and conditions herein contained. This Agreement has been duly and validly
executed and delivered by 1ST BANCORP and constitutes a legal, valid and binding
obligation of 1ST BANCORP, enforceable against 1ST BANCORP in accordance with
its terms, subject to the provisions of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, or similar laws affecting the
enforceability of creditors' rights generally from time to time in effect and
equitable principles relating to the granting of specific performance and other
equitable remedies as a matter of judicial discretion. Neither 1ST BANCORP, the
Bank, nor any of the Subsidiaries is, nor will be by reason of the consummation
of the transactions contemplated herein, in material default under or in
material violation of any provision of, nor will the consummation of the
transactions contemplated herein afford any party a right to accelerate any
indebtedness under, 1ST BANCORP's, the Bank's, or any of the Subsidiaries'
articles of incorporation or bylaws, any material promissory note, indenture or
other evidence of indebtedness or security therefor, or any material lease,
contract, or other commitment or agreement to which either 1ST BANCORP or the
Bank is a party or by which it or its property is bound.
(p)
<PAGE>
(q) Section 2.03. Subsidiaries. Except (i) as otherwise disclosed in the
Disclosure Schedule, (ii) for the ownership by 1ST BANCORP of all the capital
stock of the Bank and FFIAI and FTC and (iii) for the ownership by the Bank of
all of the capital stock of FSSIC, neither 1ST BANCORP nor the Bank nor any of
the Subsidiaries has (or has had at any time in the last ten years) any direct
or indirect ownership interest in any corporation, partnership, limited
liability company, joint venture or other business.
(r)
(s) Section 2.04. Financial Information.
(t)
<PAGE>
(u) 1ST BANCORP has furnished to German American its audited financial
statements of 1ST BANCORP for the years ended June 30, 1997, 1996 and 1995 and
all subsequent financial statements of 1ST BANCORP included as part of 1ST
BANCORP's Quarterly Reports on Form 10-Q filed with the Securities and Exchange
Commission. Such financial statements were prepared in accordance with
generally accepted accounting principles applied on a consistent basis (except
as may be reflected in the notes thereto), and fairly present the consolidated
financial position and the consolidated results of operations, changes in
shareholders' equity and cash flows of 1ST BANCORP in all material respects as
of the date and for the period indicated.
(v)
(w) The Bank has furnished to German American its Thrift Financial Reports as
filed with the OTS for the quarters ended March 31, 1998, and June 30, 1998 (the
"TFR Reports"). The TFR Reports were prepared in accordance with the applicable
regulatory instructions on a consistent basis with previous such reports, and
fairly present the financial position and results of operations of the Bank in
all material respects as of the dates and for the periods indicated, subject,
however, to normal recurring year-end adjustments, none of which will be
material.
(x)
(y) (c) Each of the Subsidiaries has furnished to German American its
financial statements for the year-to-date periods ended March 31, 1998 and June
30, 1998. Such reports were prepared in accordance with any applicable
regulatory instructions on a consistent basis with previous such reports, and
fairly present the financial position and results of operations of the
Subsidiaries in all material respects as of the dates and for the periods
indicated, subject, however, to normal recurring year-end adjustments, none of
which will be material.
(z)
<PAGE>
(d) Except as set forth in the Disclosure Schedule, neither 1ST BANCORP,
the Bank, nor any one of the Subsidiaries, has any material liability, fixed or
contingent, except to the extent set forth in the financial statements and the
TFR Reports described in subsections (a), (b) and (c) of this Section 2.04
(collectively, the "1ST BANCORP Financial Statements") or incurred in the
ordinary course of business since the date of the most recent balance sheet of
1ST BANCORP, the Bank, or the Subsidiaries included in the 1ST BANCORP Financial
Statements.
(e) Except as otherwise provided in the Disclosure Schedule, 1ST BANCORP
does not engage in the lending business (except by and through the Bank) or any
other business or activity other than that which is incident to its ownership of
all the capital stock of the Bank or of FFIAI and FTC and does not own any
investment securities (except the capital stock of the Bank and FFIAI and FTC).
Section 2.05. Absence of Changes. Since June 30, 1997, and except to the
extent reflected in the TFR Reports, there has not been any material adverse
change in the financial condition, the results of operations or the business of
1ST BANCORP or the Bank, taken as a whole. The making by the Bank after June
30, 1998, of provisions for the purpose of increasing its allowance for possible
loan losses not exceeding in the aggregate the amount specified by Section 4.05
of this Agreement shall not be deemed a material adverse change for purposes of
this Section 2.05.
Section 2.06. Absence of Agreements with Banking Authorities. Neither 1ST
BANCORP nor the Bank is subject to any order (other than orders applicable to
saving and loan holding companies or savings banks generally) and neither is a
party to any agreement or memorandum of understanding with any federal or state
agency charged with the supervision or regulation of saving and loan holding
companies or savings banks, including without limitation, the OTS or the Federal
Deposit Insurance Corporation (the "FDIC").
<PAGE>
Section 2.07. Tax Matters. 1ST BANCORP and the Bank have filed all
federal, state and local tax returns due in respect of any of their respective
business, income and properties in a timely fashion and has paid or made
provision for all amounts shown due on such returns. All such returns fairly
reflect the information required to be presented therein in all material
respects. All provisions for accrued but unpaid taxes contained in the 1ST
BANCORP Financial Statements were made in accordance with generally accepted
accounting principles.
Section 2.08. Absence of Litigation. There is no material litigation,
claim or other proceeding pending or, to the knowledge of 1ST BANCORP,
threatened, before any judicial, administrative or regulatory agency or
tribunal, to which 1ST BANCORP, the Bank, or any one of the Subsidiaries is a
party or to which any of their properties are subject. Set forth in Section
2.08 of the Disclosure Schedule is a listing of all litigation to which 1ST
BANCORP is a named party.
Section 2.09. Employment Matters.
<PAGE>
(a) Except as set forth in the Disclosure Schedule, neither 1ST BANCORP, the
Bank, nor any one of the Subsidiaries is a party to or bound by any material
contract arrangement or understanding (written or otherwise) for the employment,
retention or engagement of any past or present officer, employee, agent,
consultant or other person or entity which, by its terms, is not terminable by
1ST BANCORP, the Bank, or one of the Subsidiaries respectively, on thirty (30)
days' written notice or less without the payment of any amount by reason of such
termination.
(b)
(c) (b) 1ST BANCORP, the Bank and each of the Subsidiaries are and have been
in material compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
including, without limitation, any such laws respecting employment
discrimination and occupational safety and health requirements, and (i) neither
1ST BANCORP, the Bank, nor any one of the Subsidiaries is engaged in any unfair
labor practice; (ii) there is no unfair labor practice complaint against 1ST
BANCORP, the Bank, or any of the Subsidiaries pending or, to the knowledge of
1ST BANCORP, threatened before the National Labor Relations Board; (iii) there
is no labor dispute, strike, slowdown or stoppage actually pending or, to the
knowledge of 1ST BANCORP, threatened against or directly affecting 1ST BANCORP,
the Bank, or any of the Subsidiaries; and (iv) neither 1ST BANCORP, the Bank,
nor any one of the Subsidiaries has experienced any material work stoppage or
other material labor difficulty during the past five years.
(d)
(e) (c) Except as set forth in the Disclosure Schedule, neither the execution
nor the delivery of this Agreement, nor the consummation of any of the
transactions contemplated hereby, will (i) result in any payment (including
without limitation severance, unemployment compensation or golden parachute
payment) becoming due to any director or employee of 1ST BANCORP, the Bank, or
any of the Subsidiaries from any of such entities, (ii) increase any benefit
otherwise payable under any of their employee plans or (iii) result in the
acceleration of the time of payment of any such benefit. No amounts paid or
<PAGE>
payable by 1ST BANCORP, the Bank, or any of the Subsidiaries to or with respect
to any employee or former employee of 1ST BANCORP, the Bank, or any of the
Subsidiaries will fail to be deductible for federal income tax purposes by
reason of Section 280G of the Internal Revenue Code of 1986, as amended ("Code")
or otherwise.
(f)
(g) Section 2.10. Reports. Since June 30, 1995, 1ST BANCORP, the Bank, and
each of the Subsidiaries have filed all reports, notices and other statements,
together with any amendments required to be made with respect thereto, if any,
that they were required to file with (i) the Securities and Exchange Commission
("SEC"), (ii) the OTS, (iii) the FDIC and (iv) any other governmental authority
with jurisdiction over 1ST BANCORP, the Bank, or any of the Subsidiaries. As of
their respective dates, each of such reports and documents, including the
financial statements, exhibits and schedules thereto, complied in all material
respects with the relevant statutes, rules and regulations enforced or
promulgated by the regulatory authority with which they were filed.
(h)
(i) Section 2.11. Investment Portfolio. All United States Treasury
securities, obligations of other United States Government agencies and
corporations, obligations of States and political subdivisions of the United
States and other investment securities held by the Bank, as reflected in the TFR
Reports, are carried on the books of the Bank in accordance with generally
accepted accounting principles, consistently applied. The Bank from and after
the date hereof will not engage in activities that would require that it
establish a trading account under applicable regulatory guidelines and
interpretations.
(j)
<PAGE>
Section 2.12. Loan Portfolio. To the knowledge of 1ST BANCORP, all loans
and discounts shown in the TFR Reports, or which were entered into after June
30, 1998, but before the Closing Date, were and will be made in all material
respects for good, valuable and adequate consideration in the ordinary course of
the business of the Bank, in accordance in all material respects with the Bank's
lending policies and practices unless otherwise approved by the Bank's Board of
Directors, and are not subject to any material defenses, set offs or
counterclaims, including without limitation any such as are afforded by usury or
truth in lending laws, except as may be provided by bankruptcy, insolvency or
similar laws or by general principles of equity. To the knowledge of 1ST
BANCORP, the notes or other evidences of indebtedness evidencing such loans and
all forms of pledges, mortgages and other collateral documents and security
agreements are and will be, in all material respects, enforceable, valid, true
and genuine and what they purport to be. To the knowledge of 1ST BANCORP, the
Bank has complied and will through the Closing Date continue to comply with all
laws and regulations relating to such loans, or to the extent there has not been
such compliance, such failure to comply will not materially interfere with the
collection of any such loan. Except as set forth in the Disclosure Schedule,
the Bank has not sold, purchased or entered into any loan participation
arrangement except where such participation is on a pro rata basis according to
the respective contributions of the participants to such loan amount. Except as
set forth in the Disclosure Schedule, 1ST BANCORP has no knowledge that any
condition of property in which the Bank has an interest as collateral to secure
a loan or that is held as an asset of any trust violates the Environmental Laws
(defined in Section 2.15) in any material respect or obligates 1ST BANCORP, or
the Bank, or the owner or operator of such property to remedy, stabilize,
neutralize or otherwise alter the environmental condition of such property.
<PAGE>
Section 2.13. ERISA.
(a) Except as disclosed in the Disclosure Schedule, no person participates
in any "employee welfare benefit plan" or "employee pension benefit plan" (as
those terms are respectively defined in Sections 3(1) and 3(2) of the Employee
Retirement Income Security Act of 1974 ("ERISA")), nor may any person reasonably
expect to participate in any such plan, in either case, on account of his or her
past or present employment with 1ST BANCORP or the Bank. 1ST BANCORP and the
Bank do not maintain any retirement or deferred compensation plan, savings,
incentive, stock option or stock purchase plan, unemployment compensation plan,
vacation pay, severance pay, bonus or benefit arrangement, insurance or
hospitalization program or any other fringe benefit arrangements (referred to
collectively hereinafter as "fringe benefit arrangements") for any past or
present employee, consultant or agent of 1ST BANCORP or the Bank, whether
pursuant to contract, arrangement, custom or informal understanding, which does
not constitute an "employee benefit plan" (as defined in Section 3(3) of ERISA),
except as listed in the Disclosure Schedule.
(a) During the past sixty months, 1ST BANCORP has not maintained any employee
welfare benefit plans or employee pension benefit plans except for plans listed
on the Disclosure Schedule. There have been no amendments to any of the
employee pension benefit plans, employee welfare benefit plans or fringe benefit
arrangements listed on the Disclosure Schedule since June 30, 1997, except as
set forth in the Disclosure Schedule.
(b)
(c) To the knowledge of 1ST BANCORP, all employee pension benefit plans,
employee welfare benefit plans and fringe benefit arrangements listed on the
Disclosure Schedule comply in form and in operation in all material respects
with all applicable requirements of law and regulation. To the knowledge of 1ST
BANCORP, all employee pension benefit plans maintained by 1ST BANCORP and the
Bank comply in form and in operation with all applicable requirements of Section
401(a) and, to the extent applicable, Section 401(k) of the Code. To the
<PAGE>
knowledge of 1ST BANCORP, except as disclosed in the Disclosure Schedule,
neither 1ST BANCORP nor the Bank has (i) incurred any liability for tax under
Section 4971 of the Code on account of any accumulated funding deficiency and no
plan or arrangement listed in the Disclosure Schedule has incurred any
accumulated funding deficiency within the meaning of Section 412 or 418(B) of
the Code; (ii) applied for or obtained a waiver by the IRS of any minimum
funding requirement under Section 412 of the Code; (iii) become subject to any
disallowance of deductions under Sections 419 or 419(A) of the Code; (iv)
incurred any liability for excise tax under Sections 4972, 4975, or 4976 of the
Code or any liability under Section 406 of ERISA; (v) incurred any liability to
the Pension Benefit Guaranty Corporation; (vi) had a reportable event (within
the meaning of Section 4043 of ERISA) for which notice is not waived by
applicable regulations; or (vii) breached any of the duties or failed to perform
any of the obligations imposed upon the fiduciaries or plan administrators under
Title I or ERISA.
(d)
(e) A true and correct copy of each of the plans and arrangements listed on the
Disclosure Schedule as in effect on the date hereof and each trust agreement
relating to each such plan and arrangement, has been supplied to German
American. A true and correct copy of the annual report (as described in Section
103 of ERISA) most recently filed for each plan listed in the Disclosure
Schedule has been supplied to German American, and there have been no material
changes in the financial condition in the respective plans from that stated in
the annual reports supplied. In the case of any plan or arrangement which is
not in written form, the Disclosure Schedule includes an accurate description of
such plan or arrangement. 1ST BANCORP and the Bank have provided to German
American a description of any liability or contingent liability which may be
incurred by 1ST BANCORP or the Bank if any plan or arrangement listed on the
Disclosure Schedule (including without limitation the payment by the Bank of
premiums for health care coverage for active employees or retirees) were
terminated or if 1ST BANCORP or the Bank was to cease its participation therein.
To the best of the knowledge of the present non-employee members of the Board of
<PAGE>
Directors of 1ST BANCORP and of the Bank (without any independent review of the
books and records of 1ST BANCORP and the Bank or the making of any other
independent inquiry), and to the best of the knowledge of the President of the
Bank (after review of the books and records of the Bank but without the
obligation to make any further independent inquiry), neither 1ST BANCORP nor the
Bank nor any of their affiliates or persons acting on their behalf have made any
written or oral promises or statements to employees or retirees who are now
living which might reasonably have been construed by them as promising
"lifetime" or other vested rights to benefits under any plan or arrangement
(other than any employee pension plan disclosed in the Disclosure Schedule) that
cannot be unilaterally terminated or modified by the Bank or 1ST BANCORP at
their discretion at any time without further obligation.
(f)
(g) Except as disclosed in the Disclosure Schedule, in the case of each plan or
arrangement listed in the Disclosure Schedule which is a defined benefit plan
(within the meaning of Section 3(35) of ERISA), the net fair market value of the
assets held to fund such plan or arrangement equals or exceeds the present value
of all accrued benefits thereunder, both vested and nonvested, on a plan
continuation basis and as determined in accordance with an actuarial costs
method acceptable under Section 3(31) of ERISA.
(h)
(i) On a timely basis, 1ST BANCORP and the Bank have made all contributions or
payments to or under each plan or arrangement listed in the Disclosure Schedule
as required pursuant to each such plan or arrangemen or in the alternative have
made sufficient provision for reserves to meet contributions and payments under
such plans or arrangements which have not been made because they are not yet
due.
(j)
(k) Except as otherwise provided in the Disclosure Schedule, none of the plans
or arrangements listed in the Disclosure Schedule owns (or has owned within the
past 60 months) any 1ST BANCORP Common or other securities of 1ST BANCORP, the
Bank or a related entity.
<PAGE>
(l)
(m) Section 2.14. Title to Properties; Insurance. 1ST BANCORP, the Bank, and
the Subsidiaries have marketable title, insurable at standard rates, free and
clear of all liens, charges and encumbrances (except taxes which are a lien but
not yet payable and liens, charges or encumbrances reflected in the 1ST BANCORP
Financial Statements and easements, rights-of-way, and other restrictions which
are not material and, in the case of other real estate owned, as such real
estate is internally classified on the books of the Bank, rights of redemption
under applicable law) to all real properties reflected on the 1ST BANCORP
Financial Statements as being owned by 1ST BANCORP, the Bank, or the
Subsidiaries, respectively. All material leasehold interests used by 1ST
BANCORP, the Bank, and the Subsidiaries in their respective operations are held
pursuant to lease agreements which are valid and enforceable in accordance with
their terms, subject to the provisions of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, or similar laws affecting the
enforceability of creditors' rights generally from time to time in effect and
equitable principles relating to the granting of specific performance and other
equitable remedies as a matter of judicial discretion. Except as set forth in
the Disclosure Schedule, all such properties comply in all material respects
with all applicable private agreements, zoning requirements and other
governmental laws and regulations relating thereto and there are no condemnation
proceedings pending or, to the knowledge of 1ST BANCORP, threatened with respect
to such properties. 1ST BANCORP, the Bank, and the Subsidiaries have valid
title or other ownership or use rights under licenses to all material intangible
personal or intellectual property used by 1ST BANCORP, the Bank, and the
Subsidiaries in their respective business free and clear of any claim, defense
or right of any other person or entity which is material to such property,
subject only to rights of the licensor pursuant to applicable license
agreements, which rights do not materially adversely interfere with the use or
enjoyment of such property. All insurable properties owned or held by 1ST
BANCORP, the Bank, or the Subsidiaries are insured in such amounts, and against
fire and other risks insured against by extended coverage and public liability
<PAGE>
insurance, as is customary with companies of the same size and in the same
business.
(n)
Section 2.15. Environmental Matters.
<PAGE>
(a) As used in this Agreement, "Environmental Laws" means all local, state and
federal environmental, health and safety laws and regulations in all
jurisdictions in which 1ST BANCORP, the Bank, or any one of the Subsidiaries has
done business or owned property, including, without limitation, the Federal
Resource Conservation and Recovery Act, the Federal Comprehensive Environmental
Response, Compensation and Liability Act, the Federal Clean Water Act, the
Federal Clean Air Act, and the Federal Occupational Safety and Health Act.
(b) Except as disclosed in the Disclosure Schedule, to the knowledge of
1ST BANCORP, the Bank, or the Subsidiaries, neither (i) the conduct by 1ST
BANCORP, the Bank, and the Subsidiaries of operations at any property, nor (ii)
any condition of any property owned by 1ST BANCORP, the Bank, or the
Subsidiaries within the past ten (10) years and used in its business operations,
nor (iii) the condition of any property owned by them within the past ten (10)
years but not used in their business operations, nor (iv) the condition of any
property held by them as a trust asset within the past ten (10) years, violates
or violated Environmental Laws in any material respect, and no condition or
event has occurred with respect to any such property that, with notice or the
passage of time, or both, would constitute a material violation of Environmental
Laws or obligate (or potentially obligate) 1ST BANCORP, the Bank, or the
Subsidiaries to remedy, stabilize, neutralize or otherwise alter the
environmental condition of any such property. Neither 1ST BANCORP, the Bank,
nor any one of the Subsidiaries has received any notice from any person or
entity that 1ST BANCORP, the Bank, or the Subsidiaries or the operation of any
facilities or any property owned by any of them, or held as a trust asset, are
or were in violation of any Environmental Laws or that any one of them is
responsible (or potentially responsible) for the cleanup of any pollutants,
contaminants, or hazardous or toxic wastes, substances or materials at, on or
beneath any such property.
Section 2.16. Compliance with Law. 1ST BANCORP, the Bank, and each of the
Subsidiaries have all material licenses, franchises, permits and other
<PAGE>
governmental authorizations that are legally required to enable it to conduct
their respective businesses as presently conducted and, to their knowledge, are
in compliance in all material respects with all applicable laws and regulations,
the violation of which would be material.
Section 2.17. Brokerage. Except as set forth in the Disclosure Schedule,
there are no claims, agreements, arrangements, or understandings (written or
otherwise) for brokerage commissions, finders' fees or similar compensation in
connection with the Merger payable by 1ST BANCORP, the Bank, or any of the
Subsidiaries.
Section 2.18. Material Contracts. Except as set forth in the Disclosure
Schedule, neither 1ST BANCORP, the Bank, nor any one of the Subsidiaries is a
party to or bound by any oral or written (i) material agreement, contract or
indenture under which it has borrowed or will borrow money (not including
federal funds and money deposited, including without limitation, checking and
savings accounts, certificates of deposit, money market accounts and other
deposit accounts and borrowings from the Federal Home Loan Bank ("FHLB") and the
FRB); (ii) material guaranty of any obligation for the borrowing of money or
otherwise, excluding endorsements made for collection and guarantees made in the
ordinary course of business and letters of credit issued in the ordinary course
of business; (iii) contract, arrangement or understanding with any present or
former officer, director or shareholder (except for deposit or loan agreements
entered into in the ordinary course of business); (iv) material license, whether
as licensor or licensee; (v) contract or commitment for the purchase of
materials, supplies or other real or personal property in an individual amount
in excess of $10,000 or for the performance of services over a period of more
than thirty days and involving an individual amount in excess of $25,000; (vi)
joint venture or partnership agreement or arrangement; (vii) contract
arrangement or understanding with any present or former consultant, advisor,
investment banker, broker, attorney or accountant; or (viii) contract, agreement
or other commitment not made in the ordinary course of business.
<PAGE>
Section 2.19. Compliance with Americans with Disabilities Act. (a) To the
best of 1ST BANCORP's knowledge, 1ST BANCORP, the Bank, and the Subsidiaries,
and their respective properties (including those held by any of them in a
fiduciary capacity) are in material compliance with all applicable provisions of
the Americans with Disabilities Act (the "ADA"), and (b) no action under the ADA
against 1ST BANCORP, the Bank, the Subsidiaries, or any of its properties has
been initiated nor, to the best of 1ST BANCORP's knowledge, has been threatened
or contemplated.
Section 2.20. Statements True and Correct. None of the information
supplied or to be supplied by 1ST BANCORP, the Bank, or the Subsidiaries for
inclusion in any documents to be filed with the SEC, the OTS, the FDIC, or any
other regulatory authority in connection with the Merger will, to the best of
the knowledge of 1ST BANCORP at the respective times such documents are filed,
be false or misleading with respect to any material fact or omit to state any
material fact necessary in order to make the statements therein not misleading.
Section 2.21. 1ST BANCORP's Knowledge. With respect to representations
and warranties herein that are made or qualified as being made "to the knowledge
of 1ST BANCORP" or words of similar import, it is understood and agreed that
matters within the knowledge of the directors and the executive officers of 1ST
BANCORP, of the Bank and of each of the Subsidiaries shall be considered to be
within the knowledge of 1ST BANCORP.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF GERMAN AMERICAN
German American hereby makes the following representations and warranties:
Section 3.01. Organization and Capital Stock.
<PAGE>
(a) German American is a corporation duly incorporated and validly existing
under the IBCL and has the corporate power to own all of its property and
assets, to incur all of its liabilities and to carry on its business as now
being conducted.
(b)
(c) (b) German American has authorized capital stock of (i) 20,000,000 shares
of German American Common, of which, as of the date of this Agreement, 6,346,039
shares are issued and outstanding (not including an additional approximately
317,302 shares that will be issued and delivered in December 1998, pursuant to
German American's annual five percent stock dividend), and (ii) 500,000 shares
of preferred stock, no par value per share, of which no shares are issued and
outstanding. All of the issued and outstanding shares of German American Common
are duly and validly issued and outstanding, fully paid and non-assessable.
(d)
(e) (c) The shares of German American Common that are to be issued to the
shareholders of 1ST BANCORP pursuant to the Merger have been duly authorized
and, when issued in accordance with the terms of this Agreement, will be validly
issued and outstanding, fully paid and non-assessable.
(f)
(g) Section 3.02. Authorization. The Board of Directors of German American
has, by all appropriate action, approved this Agreement, the Plan of Merger and
the Merger and authorized the execution hereof on its behalf by its duly
authorized officers and its performance of its obligations hereunder. Nothing
in the Articles of Incorporation or Bylaws of German American, as amended, or
any other agreement, instrument, decree, proceeding, law or regulation (except
for the need for approval of the issuance of additional shares pursuant to the
Merger by the shareholders of German American under the National Market System
listing standards of NASDAQ or the IBCL, and except as specifically referred to
in or contemplated by this Agreement) by or to which it or any of its
subsidiaries is bound or subject would prohibit German American from entering
into and consummating this Agreement and the Merger on the terms and conditions
herein contained. This Agreement has been duly and validly executed and
<PAGE>
delivered by German American and constitutes a legal, valid and binding
obligation of German American enforceable against German American in accordance
with its terms and no other corporate acts or proceedings are required by law to
be taken by German American to authorize the execution, delivery and performance
of this Agreement. Except for any requisite approvals of the FRB and OTS, and
the SEC's order declaring effective German American's registration statement
under the Securities Act of 1933, as amended ("Securities Act") with respect to
the Merger, and applicable state securities law filings and approvals, no notice
to, filing with, authorization by, or consent or approval of, any federal or
state regulatory authority is necessary for the execution and delivery of this
Agreement or the consummation of the Merger by German American. German American
is not, nor will by reason of the consummation of the transactions contemplated
herein be, in material default under or material violation of any provision of,
nor will the consummation of the transactions contemplated herein afford any
party a right to accelerate any indebtedness under, German American's articles
of incorporation or bylaws, any material promissory note, indenture or other
evidence of indebtedness of security thereof, or any material lease, contract or
other commitment or agreement to which German American is a party or other
commitment or agreement to which it is a party or by which it or its property is
bound.
(h)
(i) Section 3.03. Subsidiaries. Each of German American's subsidiaries is
duly organized and validly existing under the laws of the jurisdiction of its
incorporation and has the corporate power to own its respective properties and
assets, to incur its respective liabilities and to carry on its respective
business as now being conducted.
(j)
(k) Section 3.04. Financial Information. The consolidated balance sheet of
German American and its subsidiaries as of December 31, 1997 and related
consolidated statements of income, changes in shareholders' equity and cash
flows for the year then ended together with the notes thereto, included in
German American's most recent Annual Report on Form 10-K, as filed with the SEC
<PAGE>
(the "10-K"), and the unaudited consolidated balance sheets of German American
and its subsidiaries as of March 31, 1998 and the related unaudited consolidated
statements of income, changes in shareholders' equity and cash flows for the
periods then ended included in German American's Quarterly Reports on Form 10-Q
for the quarter ended March 31, 1998 as filed with the SEC (the "10-Q Reports")
(collectively the financial statements and notes thereto included in the 10-Q
Reports and the 10-K are sometimes referred to as the "German American Financial
Statements"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as disclosed
therein) and fairly present the consolidated financial position and the
consolidated results of operations, changes in shareholders' equity and cash
flows of German American and its consolidated subsidiaries as of the dates and
for the periods indicated (subject, in the case of interim financial statements,
to normal recurring year-end adjustments, none of which will be material).
(l)
(m) Section 3.05. Absence of Changes. Since December 31, 1997 (and except to
the extent reflected in the 10-Q Reports), there has not been any material
adverse change in the consolidated financial condition or the consolidated
results of operations or the business of German American and its subsidiaries,
taken as a whole.
(n)
(o) Section 3.06. Reports. Since January 1, 1995 (or, in the case of
subsidiaries of German American, the date of acquisition thereof by German
American, if later), German American and each of its subsidiaries have filed all
reports, notices and other statements, together with any amendments required to
be made with respect thereto, that it was required to file with (i) the SEC,
(ii) the FRB, (iii) the FDIC, (iv) the Office of the Comptroller of the Currency
("OCC"), (v) the Indiana Department of Financial Institutions ("IDFI"), (vi) any
applicable state securities or banking authorities, and (vii) any other
governmental authority with jurisdiction over German American or any of its
subsidiaries. As of their respective dates, each of such reports and documents,
as amended, including the financial statements, exhibits and schedules thereto,
<PAGE>
complied in all material respects with the relevant statutes, rules and
regulations enforced or promulgated by the regulatory authority with which they
were filed. None of the information included in such reports or documents was,
at their respective dates of filing, false or misleading with respect to any
material fact, or omitted to state any material fact necessary in order to make
the statements therein not misleading, on a consolidated basis, taking into
account the circumstances under which such reports or documents were filed and
considering the total mix of information that was at the time publicly available
concerning German American and its subsidiaries.
(p)
(q) Section 3.07. Absence of Litigation. There is no material litigation,
claim or other proceeding pending or, to the knowledge of German American,
threatened, before any judicial, administrative or regulatory agency or tribunal
against German American or any of its subsidiaries, or to which the property of
German American or any of its subsidiaries is subject, which is required to be
disclosed in SEC reports under Item 103 of Regulation S-K, and which has not
been so disclosed.
(r) Section 3.08. Absence of Agreements with Banking Authorities. Neither
German American nor any of its subsidiaries is subject to any order (other than
orders applicable to bank holding companies or banks generally) or is a party to
any agreement or memorandum of understanding with any federal or state agency
charged with the supervision or regulation of banks or bank holding companies,
including without limitation the FDIC, the OCC, the IDFI, and the FRB.
(s)
(t) Section 3.09. Compliance with Law. German American and its subsidiaries
have all material licenses, franchises, permits and other governmental
authorizations that are legally required to enable them to conduct their
respective businesses as presently conducted and are, and all times while this
Agreement is in effect shall be, in compliance in all material respects with all
applicable laws and regulations, including, without limitation, all rules,
regulations and requirements of the SEC, the violation of which would be
material.
<PAGE>
(u)
(v) Section 3.10. Environmental Matters.
(w)
<PAGE>
(x) As used in this Agreement, "Environmental Laws" means all local, state and
federal environmental, health and safety laws and regulations in all
jurisdictions in which German American or any of its subsidiaries has done
business or owned property, including, without limitation, the Federal Resource
Conservation and Recovery Act, the Federal Comprehensive Environmental Response,
Compensation and Liability Act, the Federal Clean Water Act, the Federal Clean
Air Act, and the Federal Occupational Safety and Health Act.
(y)
(z) (b) Except as previously disclosed to 1ST BANCORP regarding the banking
offices at 9th and Main Streets, Petersburg, Indiana and 231 West Broadway,
Princeton, Indiana, to the knowledge of German American or any of its
subsidiaries, neither (i) the conduct by German American or any of its
subsidiaries of operations at any property, nor (ii) any condition of any
property owned by German American or any of its subsidiaries within the past ten
(10) years and used in its business operations, nor (iii) the condition of any
property owned by them within the past ten (10) years but not used in their
business operations, nor (iv) the condition of any property held by them as a
trust asset within the past ten (10) years, violates or violated Environmental
Laws in any material respect, and no condition or event has occurred with
respect to any such property that, with notice or the passage of time, or both,
would constitute a material violation of Environmental Laws or obligate (or
potentially obligate) German American or any of its subsidiaries to remedy,
stabilize, neutralize or otherwise alter the environmental condition of any such
property. Neither German American or any of its subsidiaries has received any
notice from any person or entity that German American or any of its subsidiaries
or the operation of any facilities or any property owned by any of them, or held
as a trust asset, are or were in violation of any Environmental Laws or that any
one of them is responsible (or potentially responsible) for the cleanup of any
pollutants, contaminants, or hazardous or toxic wastes, substances or materials
at, on or beneath any such property.
(aa)
<PAGE>
(bb)Section 3.11. Statements True and Correct. None of the information
supplied or to be supplied by German American or any of its subsidiaries for
inclusion in any documents to be filed with the SEC, the OTS, the FDIC, or any
other regulatory authority in connection with the Merger will, to the best of
the knowledge of German American at the respective times such documents are
filed, be false or misleading with respect to any material fact or omit to state
any material fact necessary in order to make the statements therein not
misleading.
(cc) Section 3.12. German American's Knowledge. With respect to
representations and warranties herein that are made or qualified as being made
"to the knowledge of German American" or words of similar import, it is
understood and agreed that matters within the knowledge of the directors and the
executive officers of German American shall be considered to be within the
knowledge of German American.
ARTICLE FOUR
COVENANTS OF 1ST BANCORP
The parties hereto agree that the covenants contained in this Article Four
shall be effective from the date hereof through the earlier of the Effective
Time or the termination of this Agreement.
Section 4.01. Conduct of Business.
<PAGE>
(a) 1ST BANCORP, the Bank, and the Subsidiaries shall continue to carry on
their respective businesses, and shall discharge or incur obligations and
liabilities, only in the ordinary course of business as heretofore conducted
and, by way of amplification and not limitation with respect to such obligation,
neither 1ST BANCORP, the Bank nor any one of the Subsidiaries will, without the
prior written consent of German American:
(b)
(i) declare or pay any dividend or make any other distribution to
shareholders, whether in cash, stock or other property, except as provided
in Section 4.09 of this Agreement; or
(i) issue (or agree to issue) any common or other capital stock (other
than common stock for an aggregate of 25,200 shares issued to directors or
employees of 1ST BANCORP upon the exercise of stock options issued and
outstanding prior to the execution of the Letter of Intent dated June 15,
1998 between German American and 1ST BANCORP), or any options, warrants or
any other rights to subscribe for or purchase common or any other capital
stock or any securities convertible into or exchangeable for any capital
stock; or
(i) directly or indirectly redeem, purchase or otherwise acquire (or agree
to redeem, purchase or acquire) (except for shares acquired in satisfaction
of a debt previously contracted) any of their own common or any other
capital stock; or
(i) effect a split, reverse split, reclassification, or other similar
change in, or of, any common or other capital stock or otherwise reorganize
or recapitalize; or
(i) change the Articles of Incorporation or Bylaws of 1ST BANCORP or the
Charter or Bylaws of the Bank; or
<PAGE>
(vi) pay or agree to pay, conditionally or otherwise, any bonus other
than bonuses that were accrued as of June 30, 1998, for the fiscal year
ended June 30, 1998, in the aggregate amount of $278,000 and bonuses for
the six month period ended December 31, 1998, equal to $124,500 (which
amount approximates 50 percent of the average of the total amount of
bonuses paid in each of the prior two fiscal years); or
(vii) pay or agree to pay, conditionally or otherwise, additional
compensation (other than ordinary and normal salary increases consistent
with past practices) or severance benefit or otherwise make any changes out
of the ordinary course of business with respect to the fees or compensation
payable or to become payable to consultants, advisors, investment bankers,
brokers, attorneys, accountants, directors, officers or employees or,
except as required by law or this Agreement, adopt or make any change in
any Employee Plan or other arrangement or payment made to, for or with any
of such consultants, advisors, investment bankers, brokers, attorneys,
accountants, directors, officers or employees; provided, however, that 1ST
BANCORP and the Bank may pay the fees, expenses and other compensation of
consultants, advisors, investment bankers, brokers, attorneys and
accountants disclosed on the Disclosure Schedule when, if, and as earned by
them; or
(viii) borrow or agree to borrow any material amount of funds
except in the ordinary course of business, or directly or indirectly
guarantee or agree to guarantee any material obligations of others except
in the ordinary course of business or pursuant to outstanding letters of
credit; or
(ix) make or commit to make (or renew or commit to renew) any new
loan, or issue or commit to issue (or renew or commit to renew) any new
letter of credit or line of credit, or make (or commit to make) any
additional discretionary advance (not including any advance for the
<PAGE>
purposes and in the amount already committed) under any existing letter of
credit or line of credit, or purchase or agree to purchase any interest in
a loan participation, in aggregate principal amounts (A) in excess of
$300,000 to any one borrower (or group of affiliated borrowers) or (B) that
would cause the Bank's credit extensions or commitments to any one borrower
(or group of affiliated borrowers) to exceed $500,000 (German American's
consent to credit extensions in the ordinary course of business will not be
unreasonably withheld); or
(x) other than U.S. Treasury obligations or asset-backed securities
issued or guaranteed by United States governmental agencies or financial
institution certificates of deposit insured by the FDIC, in either case
having an average remaining life of five years or less (except that
maturities may extend to seven years on variable-rate securities), purchase
or otherwise acquire any investment security for their own accounts, or
sell any investment security owned by either of them which is designated as
held-to-maturity, or engage in any activity that would require the
establishment of a trading account for investment securities; or
(xi) increase or decrease the rate of interest paid on time deposits,
or on certificates of deposit, except in a manner and pursuant to policies
consistent with past practices; or
(xii) enter into or amend any agreement, contract or commitment
out of the ordinary course of business; or
(xiii) except in the ordinary course of business, place on any of
their assets or properties any mortgage, pledge, lien, charge, or other
encumbrance; or
(xiv) except in the ordinary course of business, cancel, release,
compromise or accelerate any material indebtedness owing to 1ST BANCORP,
<PAGE>
the Bank, or the Subsidiaries, or any claims which either of them may
possess, or voluntarily waive any material rights with respect thereto; or
(xv) sell or otherwise dispose of any real property or any material
amount of any personal property other than properties acquired in
foreclosure or otherwise in the ordinary course of collection of
indebtedness to 1ST BANCORP, the Bank, or the Subsidiaries; or
(xvi) foreclose upon or otherwise take title to or possession or
control of any real property without first obtaining a phase one
environmental report thereon, prepared by a reliable and qualified person
or firm reasonably acceptable to German American, which indicates that the
property is free of pollutants, contaminants or hazardous or toxic waste
materials; provided, however, that neither 1ST BANCORP, the Bank, nor any
one of the Subsidiaries shall be required to obtain such a report with
respect to single family, non-agricultural residential property of five
acres or less to be foreclosed upon unless it has reason to believe that
such property might contain such materials or otherwise might be
contaminated; or
(xvii) commit any act or fail to do any act which will cause a
material breach of any material agreement, contract or commitment to which
it is a party; or
(xviii) violate any law, statute, rule, governmental regulation or
order, which violation could reasonably be expected to have a material
adverse effect on its business, financial condition, or earnings; or
(xix) purchase any real or personal property or make any other
capital expenditure where the amount paid or committed therefor is in
excess of $10,000 other than (a) purchases of property made in the ordinary
course of business or (b) purchases made or costs incurred in connection
<PAGE>
with loan collection activities or foreclosure sales in connection with any
of 1ST BANCORP's, the Bank's, or any one of the Subsidiaries' loans,
without the consent of German American, which consent shall not be
unreasonably withheld; or
(xx) issue certificate(s) for shares of 1ST BANCORP Common to any 1ST
BANCORP shareholder in replacement of certificate(s) claimed to have been
lost or destroyed without first obtaining from such shareholder(s), at the
expense of such shareholder(s), reasonable payments for a surety bond from
a recognized insurance company in an amount that would indemnify 1ST
BANCORP (and its successors) against lost certificate(s) and obtaining a
usual and customary affidavit of loss and indemnity agreement from such
shareholder(s); provided, however, that 1ST BANCORP may waive the surety
bond requirement in connection with the issuance of replacement
certificates to any shareholder if the number of shares of 1ST BANCORP
Common so reissued (together with the number of shares previously reissued
since January 1, 1997, to such shareholder and all other shareholders who
are affiliated or associated with such shareholder) has an aggregate market
value of $2,500 or less; or
(xxi) hold a special, regular or annual meeting (or take action by
consent in lieu thereof) of the Board of Directors or the sole shareholder
of the Bank or of any one of the Subsidiaries for the purpose of appointing
or electing any new member to the Board of Directors of the Bank or any one
of the Subsidiaries (whether to fill a vacancy or otherwise) unless such
new member is approved in advance in writing by German American.
(b) 1ST BANCORP, the Bank, and the Subsidiaries shall take all necessary
action to ensure that all bonus arrangements of 1ST BANCORP, the Bank, or the
Subsidiaries, including all arrangements pursuant to the Management Incentive
Award Plan for the fiscal year ended June 30, 1998, and the six months ended
December 31, 1998, have been paid and terminated prior to the Closing Date.
<PAGE>
(c) Neither 1ST BANCORP, the Bank, nor any one of the Subsidiaries shall,
without the prior written consent of German American, engage in any transaction
or take any other action that would render untrue in any material respect any of
the representations and warranties of 1ST BANCORP contained in Article Two
hereof if such representations and warranties were given as of the date of such
transaction or action.
(d) 1ST BANCORP shall promptly notify German American in writing of the
occurrence of any matter or event known to 1ST BANCORP that is, or is likely to
become, materially adverse to the business, operations, properties, assets or
condition (financial or otherwise) of 1ST BANCORP, the Bank, or the Subsidiaries
taken as a whole.
(e) Neither 1ST BANCORP, the Bank, nor any of the Subsidiaries shall (a)
directly or indirectly solicit or encourage (nor shall they permit any of their
respective officers, directors, employees or agents directly or indirectly to
solicit or encourage), including by way of furnishing information other than the
terms of this Agreement, any inquiries or proposals from third parties for a
merger, consolidation, share exchange or similar transaction involving 1ST
BANCORP, the Bank, or the Subsidiaries or for the acquisition of the stock or
substantially all of the assets or business of 1ST BANCORP, the Bank, or the
Subsidiaries, or (b) subject to the fiduciary duties of the Directors of 1ST
BANCORP 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. 1ST BANCORP shall promptly notify
German American 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.
<PAGE>
Section 4.02. Breaches. 1ST BANCORP shall, in the event it has knowledge
of the occurrence of any event or condition which would cause or constitute a
breach (or would have caused or constituted a breach had such event occurred or
been known prior to the date of this Agreement) of any of its representations or
agreements contained or referred to in this Agreement, give prompt notice
thereof to German American and use its best efforts to prevent or promptly
remedy the same.
Section 4.03. Submission to Shareholders. 1ST BANCORP shall cause to be
duly called and held, on a date mutually selected by German American and 1ST
BANCORP, an annual or special meeting of its shareholders (the "1ST BANCORP
Shareholders' Meeting") for submission of this Agreement and the Merger for
approval of 1ST BANCORP shareholders as required by the IBCL. In connection
with the 1ST BANCORP Shareholders' Meeting, (i) 1ST BANCORP shall cooperate with
and assist German American in preparing and filing a registration statement
containing a Prospectus/Proxy Statement (the "Prospectus/Proxy Statement") with
the SEC in accordance with SEC requirements and 1ST BANCORP shall mail it to its
shareholders, (ii) 1ST BANCORP shall furnish German American all information
concerning itself that German American may reasonably request in connection with
such Prospectus/Proxy Statement, and (iii) the Board of Directors of 1ST BANCORP
shall (unless a written opinion of independent counsel for 1ST BANCORP relating
to the fiduciary duties of the Board of Directors advises against such a
recommendation, in which event the individual members of the Board of Directors
shall nevertheless remain personally obligated to support the Agreement and the
Merger pursuant to their personal undertakings on the signature page of this
Agreement) unanimously recommend to 1ST BANCORP's shareholders the approval of
this Agreement and the Merger contemplated hereby.
Section 4.04. Consummation of Agreement. 1ST BANCORP shall use its best
efforts to perform and fulfill all conditions and obligations on its part to be
performed or fulfilled under this Agreement and to effect the Merger in
accordance with the terms and provisions hereof. 1ST BANCORP shall furnish to
<PAGE>
German American in a timely manner all information, data and documents in the
possession of 1ST BANCORP, the Bank, or the Subsidiaries requested by German
American as may be required to obtain any necessary regulatory or other
approvals of the Merger or to file with the SEC a registration statement on Form
S-4 (the "Registration Statement") relating to the shares of German American
Common to be issued to the shareholders of 1ST BANCORP pursuant to the Merger
and this Agreement, and shall otherwise cooperate fully with German American to
carry out the purpose and intent of this Agreement.
Section 4.05. Financial Information. 1ST BANCORP shall allow German
American to make a special review of the assets of the Bank with a view to
determining the consistency of the procedures and standards employed by the Bank
in determining its allowance for possible loan losses with the procedures and
standards employed by German American's present bank subsidiaries. If, as a
result of such review or otherwise, the Bank after June 30, 1998, has made or
hereafter makes additions to its allowance for possible loan losses for the
purpose of increasing the amount of the allowance above its amount as of June
30, 1998, German American shall not assert that such additions (to the extent
that the amount thereof does not exceed an aggregate of $300,000) violate any
representation, warranty or covenant of 1ST BANCORP in this Agreement or
otherwise entitle German American to terminate its obligations to consummate the
transactions contemplated hereby.
Section 4.06. Environmental Reports. Except as German American shall
otherwise consent with respect to any residential real estate (which consent
will not be unreasonably withheld by German American), 1ST BANCORP shall, at 1ST
BANCORP's and German American's shared expense, cooperate with an environmental
consulting firm designated by German American in connection with the conduct by
such firm of a phase one environmental investigation on all real property owned
or leased by 1ST BANCORP, the Bank, or the Subsidiaries as of the date of this
Agreement, and any real property acquired or leased by 1ST BANCORP, the Bank, or
the Subsidiaries after the date of this Agreement, except as otherwise provided
<PAGE>
in Section 4.01(a)(xvi). If further investigation procedures are required as to
any property by the report of the phase one investigation in German American's
reasonable opinion, 1ST BANCORP shall as soon as practicable, at 1ST BANCORP's
and German American's shared expense, commission the taking of such further
procedures and provide a report of the results of such further procedures
("Phase Two Report") to German American. German American shall have fifteen
(15) business days from German American's receipt of any Phase Two Report to
notify 1ST BANCORP of any objection to the contents of the Phase Two Report.
Should the cost of taking all remedial and corrective actions and measures (i)
required by applicable law, or (ii) recommended or suggested in the Phase Two
Report and prudent in light of the recommendations or suggestions in the Phase
Two Report findings, in the aggregate, exceed the sum of $250,000, as reasonably
estimated by the environmental expert retained for such purpose by German
American and reasonably acceptable to 1st BANCORP, or if the cost of such
actions and measures cannot be so reasonably estimated by such expert with any
reasonable degree of certainty, then German American shall have the right
pursuant to Section 7.03 hereof, for a period of 10 business days following
receipt of such estimate or indication that the costs of such actions and
measures cannot be so reasonably estimated to terminate this Agreement without
further obligation to 1ST BANCORP, which shall be German American's sole remedy
in such event.
Section 4.07. Restriction on Resales. 1ST BANCORP shall obtain and
deliver to German American, at least thirty (30) days prior to the Closing Date,
signed representations, in form reasonably acceptable to German American, of
each shareholder who may reasonably be deemed an "affiliate" of 1ST BANCORP as
of the date of the 1ST BANCORP Shareholders' Meeting within the meaning of such
term as used in Rule 145 under the Securities Act regarding their prospective
compliance with the provisions of such Rule 145. 1ST BANCORP shall also obtain
and deliver to German American at least 30 days prior to the Closing Date, the
signed agreements of each shareholder who may reasonably be deemed an
"affiliate" (as such term is described in the preceding sentence) of 1ST BANCORP
<PAGE>
as of the date of the Shareholders' Meeting agreeing not to sell any shares of
German American Common or otherwise reduce his or her risk relative to such
shares, until such time as financial results covering at least thirty (30) days
of post-Merger combined operations have been filed by German American with the
SEC in a quarterly report on Form 10-Q or in an annual report on Form 10-K.
Section 4.08. Access to Information. 1ST BANCORP shall permit German
American reasonable access, in a manner which will avoid undue disruption or
interference with 1ST BANCORP's normal operations, to its, the Bank's, and the
Subsidiaries' properties and shall disclose and make available to German
American all books, documents, papers and records relating to its, the Bank's,
and the Subsidiaries' assets, stock ownership, properties, operations,
obligations and liabilities, including, but not limited to, all books of account
(including general ledgers), tax records, minute books of directors' and
shareholders' meetings, organizational documents, material contracts and
agreements, loan files, filings with any regulatory authority, accountants'
workpapers, litigation files, plans affecting employees, and any other business
activities or prospects in which German American may have an interest in light
of the transactions contemplated by this Agreement. During the period from the
date of this Agreement to the Effective Time, 1ST BANCORP will cause one or more
of its, the Bank's, or the Subsidiaries' designated representatives to confer on
a regular basis with the President of German American, or any other person
designated in a written notice given to 1ST BANCORP by German American pursuant
to this Agreement, to report the general status of the ongoing operations of 1ST
BANCORP, the Bank, and the Subsidiaries. 1ST BANCORP will promptly notify
German American of any material change in the normal course of the operation of
its business or properties and of any regulatory complaints, investigations or
hearings (or communications indicating that the same may be contemplated), or
the institution or the threat of litigation involving 1ST BANCORP, the Bank, or
any of the Subsidiaries, and will keep German American fully informed of such
events. German American hereby understands and agrees that all books,
documents, papers and records relating to 1ST BANCORP's, the Bank's, and the
<PAGE>
Subsidiaries' assets, stock ownership, properties, operations, obligations and
liabilities which it obtains, receives, reviews or has access to pursuant to
this Section 4.08 shall be subject to the Confidentiality Agreement between 1ST
BANCORP and German American ("Confidentiality Agreement").
Section 4.09. Dividends. Notwithstanding Section 4.01(a) of this
Agreement, 1ST BANCORP may (in the absence of any material adverse change in its
consolidated financial condition, results of operations, or business, other than
the adverse change that might result from additional provisions made to increase
the Bank's allowance for loan losses as contemplated by, and not exceeding the
maximum amount specified by, Section 4.05, and other than the adverse changes
that are expected to result from the expenses associated with the Merger and
accruals under the Director Deferred Compensation Plan of 1ST BANCORP resulting
from the Merger), continue to declare and pay quarterly cash dividends (during
September and December 1998 and during the third month of each subsequent
calendar quarter with respect to that calendar quarter) to 1ST BANCORP
shareholders in a quarterly amount not to exceed $.0667 per share of 1ST BANCORP
Common, or an aggregate of not more than $.2668 per share for the fiscal year
beginning July 1, 1998; provided, however, that no dividend may be paid to 1ST
BANCORP's shareholders during the quarter in which the Merger is consummated if,
during such quarter, 1ST BANCORP's shareholders will become entitled to receive
dividends on their shares of German American common stock received pursuant to
this Agreement.
Section 4.10. Termination and Modification of Benefit Plans. On or before
the Closing Date, 1ST BANCORP shall terminate the 1ST BANCORP Stock Option Plan,
the 1ST BANCORP 1997 Employee Stock Purchase Plan, and the 1ST BANCORP Automatic
Dividend Reinvestment and Stock Purchase Plan. On or before the date employees
of 1ST BANCORP and its Subsidiaries may begin participating in German American
Bancorp's Retirement Profit Sharing Plan, 1ST BANCORP shall terminate and
freeze its defined benefit pension plan and, in connection therewith, shall take
and shall have taken all necessary action to apply to the IRS for a
<PAGE>
determination letter in connection with such termination and provide all notices
to participants and to the Pension Benefit Guaranty Corporation as required by
and in accordance with ERISA. Upon such termination, all accrued benefits of
participants in the pension plan shall be payable at the times and in the
amounts provided for under that plan. The Bank shall continue to make
contributions to the pension plan through the date of such termination only to
the extent required to maintain the plan's tax-qualified status and to avoid
any federal income taxes or penalties attributable to the plan's funding status.
Subject to Section 5.12 hereof, on or before November 1, 1998, 1ST BANCORP shall
take and have taken all necessary steps to discontinue all medical insurance
benefits provided to any party who would not be eligible for such benefits under
the German American Bancorp Employee Benefits Plan.
ARTICLE FIVE
COVENANTS OF GERMAN AMERICAN
Section 5.01. Regulatory Approvals and Registration Statement.
<PAGE>
(a) German American shall file (and cooperate with 1ST BANCORP, the Bank, and
the Subsidiaries, in filing) all regulatory applications required in order to
consummate the Merger, including all necessary applications for the prior
approval of the FRB under the BHC Act and the OTS under the HOLA, as soon as
practicable after the date hereof. German American shall keep 1ST BANCORP
reasonably informed as to the status of such applications and promptly send or
deliver copies of such applications, and of any supplementally filed materials,
to counsel for 1ST BANCORP.
(a) German American shall file with the SEC the Registration Statement relating
to the shares of German American Common to be issued to the shareholders of 1ST
BANCORP pursuant to this Agreement as soon as practicable after the date hereof,
and shall use its best efforts to cause the Registration Statement to become
effective as soon as practicable. At the time the Registration Statement
becomes effective, the form of the Registration Statement shall comply in all
material respects with the provisions of the Securities Act and the published
rules and regulations thereunder, and shall not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not false or misleading. At the
time of the mailing thereof to the shareholders and at the time of any
Shareholders' Meeting, the Prospectus/Proxy Statement included as part of the
Registration Statement, as amended or supplemented by any amendment or
supplement, shall not contain any untrue statement of a material fact or omit to
state any material fact regarding German American or the Merger necessary to
make the statements therein not false or misleading. German American shall
timely file all documents required to obtain all necessary Blue Sky permits and
approvals, if any, required to carry out the Merger, shall pay all expenses
incident thereto and shall use its best efforts to obtain such permits and
approvals on a timely basis. German American shall promptly and properly
prepare and file any other filings required under the Securities Exchange Act of
1934 (the "Exchange Act") relating to the Merger or the Stock Option Agreement
referred to in Section 8.04 hereof, or otherwise required of it under the
<PAGE>
Exchange Act prior to the Effective Time, and shall deliver copies thereof to
1ST BANCORP's counsel promptly upon the filing thereof with the SEC.
(b)
(c) Section 5.02. Breaches. German American shall, in the event it has
knowledge of the occurrence of any event or condition which would cause or
constitute a breach (or would have caused or constituted a breach had such event
occurred or been known prior to the date of this Agreement) of any of its
representations or agreements contained or referred to in this Agreement, give
prompt notice thereof to 1ST BANCORP and use its best efforts to prevent or
promptly remedy the same.
(d) Section 5.03. Consummation of Agreement. German American shall use its
best efforts to perform and fulfill all conditions and obligations to be
performed or fulfilled under this Agreement and to effect the Merger in
accordance with the terms and conditions of this Agreement, and use its best
efforts to cause the Effective Time to occur on January 4, 1999 or as soon
thereafter as practicable.
(e)
(f) Section 5.04. Directors' and Officers' Indemnification.
<PAGE>
(g) Following the Effective Time, German American will provide the
directors and officers of 1ST BANCORP, the Bank, and the Subsidiaries from time
to time with the same directors' and officers' liability insurance coverage that
German American provides to directors and officers of its other banking
subsidiaries.
(h)
(i) For six (6) years after the Effective Time, German American shall (and
shall cause the Bank to) indemnify, defend and hold harmless the present and
former officers and directors of 1ST BANCORP, the Bank, and the Subsidiaries
(each, an "Indemnified Party") against all losses, expenses, claims, damages and
liabilities arising out of actions or omissions (arising from their present or
former status as officers or directors) occurring on or prior to the Effective
Time to the full extent then permitted under the applicable provisions of the
IBCL and the HOLA and under the articles of incorporation and bylaws of 1ST
BANCORP and the charter and bylaws of the Bank and under the articles of
incorporation and bylaws of the Subsidiaries.
(j)
(k) If during the six (6) year period after the Effective Time German American
or the Bank or any of its or their successors or assigns (i) shall consolidate
with or merge into any other corporation or entity and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) shall transfer all or substantially all of its properties and assets to any
individual, corporation or other entity, then and in each such case, proper
provision shall be made so that the successors and assigns of German American
and/or the Bank shall assume the obligations set forth in this Section 5.04.
(l)
(m) Section 5.05. Board of Directors of German American. German American
shall cause the Chairman of the Board of 1ST BANCORP to be appointed to the
Board of Directors of German American as of the Effective Time and shall take
action to waive the retirement provision in the German American Bylaws to allow
him to serve as a Director until the third annual meeting of German American
following the Closing Date.
<PAGE>
(n)
(o) Section 5.06. Board of Directors of the Bank. At the Effective Time, the
Board of Directors of the Bank shall be reconstituted at the sole discretion of
German American; provided, however, that German American agrees that no fewer
than four current members of the Board of Directors of the Bank shall be
appointed to serve as members of the Board of Directors of the Bank after the
Effective Time.
(p)
(q) Section 5.07. Preservation of Business. German American shall: (a)
conduct its business substantially in the manner as is presently being conducted
and in the ordinary course of business and not amend its articles of
incorporation in any manner that requires the approval of shareholders of German
American under the IBCL; (b) file, and cause its subsidiaries to file, all
required reports with applicable regulatory authorities; (c) comply with all
laws, statutes, ordinances, rules or regulations applicable to it and to the
conduct of its business, the noncompliance with which results or could result in
a material adverse effect on the financial condition, results of operations,
business, assets or capitalization of German American on a consolidated basis;
and (d) comply in all material respects with each contract, agreement,
commitment, obligation, understanding, arrangement, lease or license to which it
is a party by which it is or may be subject or bound, the breach of which could
result in a material adverse effect on the financial condition, results of
operations, business, assets or capitalization of German American on a
consolidated basis.
(r)
(s) Section 5.08. Securities and Exchange Commission Filings. German American
will provide 1ST BANCORP with copies of all filings made by German American with
the SEC under the Exchange Act; and the Securities Act and the respective rules
and regulations of the SEC thereunder as soon as practicable after such filings
are made at any time prior to the Effective Time.
(t)
<PAGE>
(u) Section 5.09. Rule 144(c) Information. Following the Effective Time,
German American shall make available adequate current public information about
itself as that terminology is used in and as required by Rule 144(c) of the SEC
under the Securities Act.
(v)
(w) Section 5.10. Authorization of Common Stock. At the Effective Time and on
such subsequent dates when the former shareholders of 1ST BANCORP surrender
their 1ST BANCORP share certificates for cancellation, the shares of German
American Common to be exchanged with former shareholders of 1ST BANCORP shall
have been duly authorized and validly issued by German American and shall be
fully paid and non-assessable and subject to no pre-emptive rights and listed
for trading on the NASDAQ NMS.
(x)
(y) Section 5.11. Benefit Plan Eligibility and Past Service Credit. Employees
of the Bank shall receive full vesting and eligibility credit under German
American's defined contribution retirement and other employee benefit plans for
their years and, if applicable, months of service to the Bank; provided,
however, that German American reserves the right to retain health insurance
benefits for eligible employees of the Bank under the current existing plan or
plans pertaining to such employees, which benefits and costs to the employees
shall be substantially equal to those under German American's health insurance
plan.
(z)
(aa) Section 5.12. Director and Retiree Benefit Payments. From and after the
date hereof and for a period of three years after the Effective Time, German
American will make payments to certain Directors and former employees of 1ST
BANCORP as outlined in a memorandum from George Astrike to Jim McCormick dated
July 27, 1998, a copy of which is attached to this Agreement as Appendix B. Any
post-retirement health insurance benefits other than the cash payments to be
made in lieu of such benefits as described in Appendix B for any employees or
directors of 1ST BANCORP and its Subsidiaries, shall be discontinued as of
November 1, 1998, as provided in Section 4.10 hereof.
<PAGE>
(bb)
(cc) Section 5.13. Executive Supplemental Retirement Income Agreements.
Following the Effective Time, German American agrees to cause the Bank to honor
all obligations under the Executive Supplemental Retirement Income Agreements
effective January 1, 1993, between the Bank and C. James McCormick, Frank D.
Baracani, Lynn Stenftenagel, Robert W. Ballard, Bradley M. Rust, Carroll C.
Hamner, and Gerald R. Belanger, and to guarantee the Bank's obligations
thereunder.
(dd)
(ee) Section 5.14. Director Deferred Compensation Plan. German American agrees
to honor all obligations to the individuals listed in the Disclosure Schedule as
parties to the related agreements under the Director Deferred Compensation Plan
as amended pursuant to Section 6.01(j) hereof. No additional director fee
deferrals will be permitted on and after the date hereof.
ARTICLE SIX
CONDITIONS PRECEDENT TO THE MERGER
Section 6.01. Conditions of German American's Obligations. The
obligations of German American to effect the Merger shall be subject to the
satisfaction (or waiver by German American) prior to or on the Closing Date of
the following conditions:
<PAGE>
(a) The representations and warranties made by 1ST BANCORP in this
Agreement shall be true in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had been made
or given on and as of the Closing Date.
(b)
(c) 1ST BANCORP shall have performed and complied in all material respects with
all of its obligations and agreements required to be performed on or prior to
the Closing Date under this Agreement.
(d)
(e) No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect, nor shall any proceeding by any bank regulatory authority or
governmental agency seeking any of the foregoing be pending. There shall not be
any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger which makes the consummation of the
Merger illegal.
(a) All necessary regulatory approvals, consents, authorizations and other
approvals required by law or stock market requirements for consummation of the
Merger, including approval of the Merger by the shareholders of German American
in order to comply with the NASDAQ NMS listing standards or the IBCL, shall have
been obtained and all waiting periods required by law shall have expired.
(b)
(c) German American shall have received the environmental reports required by
Sections 4.06 and 4.01(a)(xvi) hereof and shall not have elected, pursuant to
Section 4.06 hereof, to terminate and cancel this Agreement.
(d)
(e) German American shall have received all documents required to be received
from 1ST BANCORP or the Bank on or prior to the Closing Date, all in form and
substance reasonably satisfactory to German American.
(f)
<PAGE>
(g) German American shall have received a letter, dated as of the Effective
Time, from Crowe, Chizek and Company, LLP, its independent public accountants,
to the effect that the Merger will qualify for pooling of interests accounting
treatment under Accounting Principles Board Opinion No. 16 if closed and
consummated in accordance with this Agreement.
(h)
(i) The Registration Statement shall be effective under the Securities Act and
no stop orders suspending the effectiveness of the Registration Statement shall
be in effect or proceedings for such purpose pending before or threatened by the
SEC.
(j)
(k) German American shall have received from its counsel, Leagre Chandler &
Millard, an opinion to the effect that if the Merger is consummated in
accordance with the terms set forth in this Agreement, (i) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Code;
(ii) no gain or loss will be recognized by the holders of shares of 1ST BANCORP
Common upon receipt of the Merger Consideration (except for cash received in
lieu of fractional shares); (iii) the basis of shares of German American Common
received by the shareholders of 1ST BANCORP will be the same as the basis of
shares of 1ST BANCORP Common exchanged therefor; and (iv) the holding period of
the shares of German American Common received by the shareholders of 1ST BANCORP
will include the holding period of the shares of 1ST BANCORP Common exchanged
therefor, provided such shares were held as capital assets as of the Effective
Time.
(l)
(m) (j) The Bank and each of its directors who have not reached and will not
reach, on or before the Effective Time, the "Normal Retirement Date" specified
by his or her individual Director Deferred Compensation Agreement with the
Bank, shall have agreed to amend such Agreement from and after the Effective
Time as follows:
(n)
<PAGE>
(i) the monthly interest factor set forth in Section 1.7 of such
Agreement shall be 0.857%;
(ii) the monthly interest crediting rate set forth in Section 1.11 of
such Agreement shall be 0.521%; and
(iii) the phantom stock feature set forth in Section 1.14 and
referred to throughout such Agreement shall be eliminated as of December
31, 1998.
(k) All officers, directors and employees of 1ST BANCORP, the Bank, and
the Subsidiaries shall have exercised all stock options such that no options,
warrants, or other rights to purchase 1ST BANCORP Common are outstanding at the
Closing Date.
Section 6.02. Conditions of 1ST BANCORP's Obligations. 1ST BANCORP's
obligations to effect the Merger shall be subject to the satisfaction (or waiver
by 1ST BANCORP) prior to or on the Closing Date of the following conditions:
<PAGE>
(a) The representations and warranties made by German American in this
Agreement shall be true in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had been made
or given on the Closing Date.
(b)
(c) German American shall have performed and complied in all material respects
with all of its obligations and agreements required to be performed prior to the
Closing Date under this Agreement.
(d)
(e) No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect, nor shall any proceeding by any bank regulatory authority or other
governmental agency seeking any of the foregoing be pending. There shall not be
any action taken, or any statute, rule, regulation or order enacted, enforced or
deemed applicable to the Merger which makes the consummation of the Merger
illegal.
(f)
(g) All necessary regulatory approvals, consents, authorizations and other
approvals required by law for consummation of the Merger, including the
requisite approval of the Merger by the shareholders of 1ST BANCORP, shall have
been obtained and all waiting periods required by law shall have expired.
(h)
(i) 1ST BANCORP shall have received all documents required to be received from
German American on or prior to the Closing Date, all in form and substance
reasonably satisfactory to 1ST BANCORP.
(j)
(k) The Registration Statement shall be effective under the Securities Act and
no stop orders suspending the effectiveness of the Registration Statement shall
be in effect or proceedings for such purpose pending before or threatened by the
SEC, and German American shall have received all state securities or "Blue Sky"
approvals, authorizations, exemptions or permits required to issue the shares of
<PAGE>
German American Common as the Merger Consideration to the shareholders of 1ST
BANCORP.
(l)
(m) 1ST BANCORP shall have received from counsel for German American, Leagre
Chandler & Millard, an opinion reasonably satisfactory to 1ST BANCORP to the
effect that if the Merger is consummated in accordance with the terms set forth
in this Agreement, (i) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code; (ii) no gain or loss will be recognized
by the holders of shares of 1ST BANCORP Common upon receipt of the Merger
Consideration (except for cash received in lieu of fractional shares); (iii) the
basis of German American Common received by the shareholders of 1ST BANCORP will
be the same as the basis of 1ST BANCORP Common exchanged therefor; and (iv) the
holding period of the shares of German American Common received by the
shareholders of 1ST BANCORP will include the holding period of the shares of 1ST
BANCORP Common exchanged therefor, provided such shares were held as capital
assets as of the Effective Time.
(n)
(o) (h) The German American Common to be exchanged for the 1ST BANCORP Common
pursuant to the Merger shall have an aggregate value (as measured by the per
share average value of the German American Common during the Valuation Period
that is utilized to determine the Exchange Ratio pursuant to Section 1.03(a)) of
at least $57,120,000.
(p)
(q) (i) 1ST BANCORP shall have received from Olive Corporate Finance, LLC or
another reputable financial advisor a written fairness opinion stating that the
terms of the Merger are fair to the shareholders of 1ST BANCORP from a financial
point of view. Such written fairness opinion shall (i) be in form and substance
reasonably satisfactory to 1ST BANCORP, (ii) be dated as of the mailing date of
the Prospectus/Proxy Statement, and (iii) be included as an exhibit to such
Prospectus/Proxy Statement.
(r)
(s)
<PAGE>
ARTICLE SEVEN
TERMINATION OR ABANDONMENT
Section 7.01. Mutual Agreement. This Agreement may be terminated by the
mutual written agreement of the parties approved by their respective Boards of
Directors at any time prior to the Effective Time, regardless of whether
shareholder approval of this Agreement and the Merger by the shareholders of 1ST
BANCORP or German American shall have been previously obtained.
Section 7.02. Breach of Representations, Warranties or Covenants. In the
event that there is a material breach in any of the representations and
warranties or covenants of the parties, which breach is not cured within thirty
(30) days after notice to cure such breach is given by the non-breaching party,
then the Board of Directors of the non-breaching party, regardless of whether
approval by the shareholders of this Agreement and the Merger shall have been
previously obtained, and in addition to any other remedies to which the non-
breaching party may be entitled, may terminate and cancel this Agreement
effective immediately by providing written notice thereof to the other party
hereto.
Section 7.03. Adverse Environmental Reports. German American as
specifically provided by Section 4.06 may terminate this Agreement by giving
written notice thereof to1ST BANCORP.
Section 7.04. Failure of Conditions. In the event any of the conditions
to the obligations of either party are not satisfied or waived on or prior to
the Closing Date, and if any applicable cure period provided in Section 7.02
hereof has lapsed, then the Board of Directors of such party may, regardless of
whether approval by its shareholders of this Agreement and the Merger shall have
been previously obtained, terminate and cancel this Agreement on the Closing
Date by delivery of written notice thereof to the other party on such date.
<PAGE>
Section 7.05. Shareholder Approval Denial. If this Agreement and
consummation of the Merger is not approved by the shareholders of 1ST BANCORP,
or if the issuance of the additional German American Common is required to be
approved by the shareholders of German American pursuant to the NASDAQ NMS
listing standards or the IBCL and is not so approved at the meeting of German
American's shareholders called to consider such issuance, then either party may
terminate this Agreement by giving written notice thereof to the other party,
subject to Section 7.02.
Section 7.06. Regulatory Enforcement Matters. In the event that 1ST
BANCORP or the Bank, on the one hand, or German American, on the other hand,
shall become a party or subject to any memorandum of understanding, cease and
desist order, or civil money penalties imposed by any federal or state agency
charged with the supervision or regulation of savings associations, savings and
loan holding companies, or bank holding companies, after the date of this
Agreement, then the party that is not subject to such regulatory enforcement
may terminate this Agreement by giving written notice thereof to the other
party.
Section 7.07. Lapse of Time. If the Closing Date does not occur on or
prior to June 30, 1999, despite each party's best efforts to consummate the
Merger on or before that date, then this Agreement may be terminated by the
Board of Directors of either 1ST BANCORP or German American by giving written
notice thereof to the other party.
<PAGE>
ARTICLE EIGHT
GENERAL PROVISIONS
Section 8.01. Liabilities. In the event that this Agreement is terminated
or the Merger is abandoned pursuant to the provisions of Article Seven hereof,
no party hereto shall have any liability to any other party for costs, expenses,
damages, termination fees, or otherwise. Directors, officers and employees of
each party hereto shall have no personal liability under this Agreement with
respect to the representations and warranties of their respective parties except
for fraud or for their personal intentional and knowing participation in the
making of false or misleading statements in such representation and warranties.
Section 8.02. Notices. Any notice or other communication hereunder shall
be in writing and shall be deemed to have been given or made (a) on the date of
delivery, in the case of hand delivery, or (b) three (3) business days after
deposit in the United States Registered or Certified Mail, with mailing receipt
postmarked by the Postal Service to show date of mailing, postage prepaid, or
(c) upon actual receipt if transmitted during business hours by facsimile (but
only if receipt of a legible copy of such transmission is confirmed by the
recipient); addressed (in any case) as follows:
<PAGE>
If to German American:
German American Bancorp
711 Main Street
Box 810
Jasper, Indiana 47546
Attn: George W. Astrike, Chairman of the Board
with a copy to:
Leagre Chandler & Millard
1400 First Indiana Plaza
135 North Pennsylvania
Indianapolis, Indiana 46204
Attn: Mark B. Barnes
John R. Zerkle
and
If to 1ST BANCORP or the Bank:
1ST BANCORP
101 North Third Street
Vincennes, Indiana 47951-1220
Attn: C. James McCormick, Chairman of the Board
with a copy to:
Barnes & Thornburg
1313 Merchants Bank Building
11 South Meridian Street
Indianapolis, Indiana 46204
Attn: Claudia V. Swhier
or to such other address as any party may from time to time designate by notice
to the other.
<PAGE>
Section 8.03. Non-survival of Representations and Agreements. No
representation, warranty or covenant contained in this Agreement shall survive
(and no claims for the breach or nonperformance thereof may be brought after)
the Effective Time except the covenants of German American in Sections 5.04,
5.05, 5.06, 5.09, 5.10, 5.12, 5.13, and 5.14 which shall survive the Effective
Time. No representation, warranty or covenant contained in this Agreement shall
survive (and, except for any intentional breach or nonperformance, no claims for
the breach or nonperformance, thereof may be brought after) the termination of
this Agreement pursuant to Article Seven hereof. The reliability and binding
effect of any representation or warranty made by any party in this Agreement
shall not be diminished or limited in any way by any review, or by the
opportunity to conduct any review, by or on behalf of the intended beneficiary
of the subject matter of the representation or warranty, whether before or after
the date of this Agreement, unless and to the extent that the reviewing party
and the other party expressly agree otherwise in writing.
Section 8.04. Stock Option Agreement. Concurrently with the execution of
this Agreement, German American and 1ST BANCORP are executing and delivering a
Stock Option Agreement that provides for the grant to German American of an
option to purchase up to 19.9% of the outstanding common stock of 1ST BANCORP
upon the occurrence of certain events that create the potential for another
party to acquire control of 1ST BANCORP. German American hereby agrees to make
all necessary filings with the SEC and the OTS or other governmental agencies in
connection with the receipt of such option from 1ST BANCORP.
Section 8.05. Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes and cancels any and all prior
discussions, negotiations, undertakings and agreements between the parties
relating to the subject matter hereof, including, without limitation, the Letter
of Intent dated June 15, 1998 of German American accepted by 1ST BANCORP.
<PAGE>
Section 8.06. Headings and Captions. The captions of Articles and
Sections hereof are for convenience only and shall not control or affect the
meaning or construction of any of the provisions of this Agreement.
Section 8.07. Waiver, Amendment or Modification. The conditions of this
Agreement which may only be waived by written notice specifically waiving such
condition addressed to the party claiming the benefit of the waiver. The
failure of any party at any time or times to require performance of any
provision hereof shall in no manner affect the right of such party at a later
time to enforce the same. This Agreement may not be amended or modified except
by a written document duly executed by the parties hereto.
Section 8.08. Rules of Construction. Unless the context otherwise
requires (a) a term used herein has the meaning assigned to it, and (b) an
accounting term not otherwise defined has the meaning assigned to it in
accordance with generally accepted accounting principles.
Section 8.09. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
be deemed one and the same instrument.
Section 8.10. Successors. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors. Except
for Sections 5.04, 5.10, 5.12, 5.13 and 5.14 of this Agreement (which are
intended to be for the benefit of present and former officers and directors and
their spouses, to the extent contemplated thereby, and their beneficiaries, and
may be enforced by such persons), there shall be no third party beneficiaries
hereof.
Section 8.11. Governing Law; Assignment. This Agreement shall be governed
by the laws of the State of Indiana. This Agreement may not be assigned by any
of the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written, with the unanimous approval of their
respective Boards of Directors.
GERMAN AMERICAN BANCORP
<PAGE>
By/s/George W. Astrike
George W. Astrike
Chairman of the Board and
Chief Executive Officer
<PAGE>
<PAGE>
1ST BANCORP
By/C. James McCormick
C. James McCormick
Chairman of the Board and
Chief Executive Officer
<PAGE>
APPROVED BY THE MEMBERS OF THE BOARD OF DIRECTORS OF 1ST BANCORP:
The undersigned Directors of 1ST BANCORP hereby (a) agree in their capacities as
Directors of 1ST BANCORP to recommend to 1ST BANCORP's shareholders the approval
of this Agreement and the Merger in accordance with 4.03 hereof, and (b) agree
to vote their shares of 1ST BANCORP Common that are registered in their personal
names (and agree to use their best efforts to cause all additional shares of 1ST
BANCORP Common over which they have voting influence or control to be voted) in
favor of the Merger at the 1ST BANCORP Shareholders' Meeting. Notwithstanding
the foregoing, the execution of the Agreement by the undersigned Directors of
1ST BANCORP or anything herein to the contrary, German American hereby
understands and agrees, as evidenced by its execution of this Agreement above,
that none of the undersigned Directors of 1ST BANCORP will have any obligation
or liability under this Agreement or otherwise to German American or any other
person or entity, except as provided in the foregoing sentence and in Section
8.01 hereof.
By/s/R. William Ballard By/s/Ruth Mix Carnahan
R. William Ballard Ruth Mix Carnahan
By/s/Frank Baracani By/s/C. James McCormick
Frank Baracani C. James McCormick
By/s/Donald G. Bell By/s/Rahmi Soyugenc
Donald G. Bell Rahmi Soyugenc
<PAGE>
By/s/James W. Bobe By/s/Lynn Stenftenagel
James W. Bobe Lynn Stenftenagel
By/s/John J. Summers
John J. Summers
PLAN OF MERGER
by and between
1ST BANCORP
(an Indiana corporation)
and
GERMAN AMERICAN BANCORP
<PAGE>
(an Indiana corporation)
APPENDIX A
<PAGE>
PLAN OF MERGER
THIS PLAN OF MERGER, made and entered into as of _________, 1998, between
1ST BANCORP, an Indiana corporation ("1ST BANCORP"), and German American
Bancorp, an Indiana corporation ("German American").
W I T N E S S E T H:
WHEREAS, 1ST BANCORP and German American deem it advisable for 1ST BANCORP
to merge with and into German American pursuant to this Plan of Merger in
accordance with the IBCL (as defined in Section 1.01); and
WHEREAS, the Boards of Directors of the parties hereto have approved an
Agreement and Plan of Reorganization that was executed and delivered as of
August 6, 1998 between them (the "Agreement and Plan of Reorganization");
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE ONE
THE MERGER
Section 1.01. The Merger. Pursuant to the terms and provisions of this
Plan of Merger and the Indiana Business Corporation Law ("IBCL"), 1ST BANCORP
shall merge with and into German American (the "Merger"). The Merger shall be
effective at 12:01 a.m. on _______ , 1999, subject to the filing of this Plan of
Merger in the Office of the Indiana Secretary of State prior to such time (the
"Effective Time").
Section 1.02. Merging Corporation. 1ST BANCORP shall be the merging
corporation under the Merger and its corporate identity and existence, separate
and apart from German American, shall cease on consummation of the Merger.
<PAGE>
Section 1.03. Surviving Corporation. German American shall be the
surviving corporation in the Merger and the Articles of Incorporation and
Bylaws of German American in effect prior to the Merger shall be the Articles
of Incorporation and Bylaws of the Surviving Corporation.
ARTICLE TWO
TERMS OF THE MERGER
AND CONVERSION OF SHARES
Section 2.01. Effect of the Merger. The Merger shall have all of the
effects provided by the IBCL.
Section 2.02. Conversion of Shares. At the Effective Time:
(a) Each of the not more than ________ shares of common stock, no par
value, of 1ST BANCORP ("1ST BANCORP Common") that are issued and
outstanding immediately prior to the Effective Time shall thereupon and
without further action be converted into the right to receive ______ [Here
insert the Exchange Ratio to be determined in accordance with the Agreement
<PAGE>
and Plan of Reorganization.]shares of common stock, no par value, of German
American ("German American Common") (the "Merger Consideration").
(b) The shares of German American Common issued and outstanding
immediately prior to the Effective Time shall continue to be issued and
outstanding shares of German American.
(c) If any holders of 1ST BANCORP Common dissent from the Merger and
demand dissenters' rights under the IBCL, any issued and outstanding shares
of 1ST BANCORP Common held by such dissenting holders shall not be
converted as described in Section 2.02(a) but shall from and after the
Effective Time represent only the right to receive such consideration as
may be determined to be due to such dissenting holders pursuant to the
IBCL; provided, however, that each share of 1ST BANCORP Common outstanding
immediately prior to the Effective Time and held by a dissenting holder who
shall, after the Effective Time, withdraw his demand for dissenters' rights
or lose his right to exercise dissenters' rights shall have only such
rights as provided under the IBCL.
<PAGE>
Section 2.03. Fractional Shares. No fractional shares of German American
Common shall be issued and, in lieu thereof, holders of shares of 1ST BANCORP
Common who would otherwise be entitled to a fractional share interest (after
taking into account all shares of 1ST BANCORP Common held by such holder) shall
be paid an amount in cash equal to the product of multiplying such fractional
share by $______. [Here insert the average of the highest bid and lowest ask
price of a share of German American Common as quoted on the NASDAQ National
Market System on the last day of the Valuation Period.]
Section 2.04. Exchange Procedures; Surrender of Certificates.
<PAGE>
(a) The Fifth Third Bank shall act as Exchange Agent in the Merger (the
"Exchange Agent").
(a) As soon as reasonably practicable but in no event more than ten
working days after the Effective Time, the Exchange Agent shall mail to
each record holder of any Certificate or Certificates whose shares were
converted into the right to receive the Merger Consideration, a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon proper delivery
of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as German American may reasonably specify) (each
such letter the "Merger Letter of Transmittal") and instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. As soon as reasonably practical but in no event more than
ten days after surrender to the Exchange Agent of a Certificate, together
with a Merger Letter of Transmittal duly executed and any other required
documents, the Exchange Agent shall transmit to the holder of such
Certificate the Merger Consideration. No interest on the Merger
Consideration issuable upon the surrender of the Certificates shall be paid
or accrued for the benefit of holders of Certificates. If the Merger
Consideration is to be issued to a person other than a person in whose name
a surrendered Certificate is registered, it shall be a condition of
issuance that the surrendered Certificate shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
issuance shall pay to the Exchange Agent any required transfer or other
taxes or establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not applicable. German American reserves the right in
all cases to require that a surety bond on terms and in an amount
satisfactory to German American be provided to German American at the
reasonable expense of the 1ST BANCORP shareholder in the event that such
shareholder claims loss of a Certificate and requests that German American
waive the requirement for surrender of such Certificate.
<PAGE>
ARTICLE THREE
AMENDMENT; TERMINATION; ASSIGNMENT
Section 3.01. Amendment. At any time prior to the Effective Time, the
parties to this Plan of Merger by mutual written agreement authorized by their
respective Boards of Directors (and whether before or after the shareholders of
German American and 1ST BANCORP have approved and adopted this Plan of Merger)
may amend this Plan of Merger; provided, however, that if the shareholders of
1ST BANCORP have approved and adopted this Plan of Merger, any such amendment
shall not have a material adverse effect on the shareholders of 1ST BANCORP.
Section 3.02. Termination. This Plan of Merger may be terminated by the
parties hereto prior to the Effective Time under the circumstances provided in,
and strictly in accordance with, the provisions of the Agreement and Plan of
Reorganization.
Section 3.03. Successors and Assigns. This Plan of Merger and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors but none of the provisions hereof shall
inure to the benefit of any other person, firm, or corporation whomsoever.
Neither this Plan of Merger nor any of the rights, interests, or obligations
hereunder shall be assigned by either of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Plan of Merger as
of the day and year first above written.
1ST BANCORP
<PAGE>
By/s/C. James McCormick
C. James McCormick
Chairman of the Board and
Chief Executive Officer
GERMAN AMERICAN BANCORP
By/s/George W. Astrike
George W. Astrike,
Chairman of the Board and
Chief Executive Officer
<PAGE>
GERMAN AMERICAN BANCORP
MEMO TO: Jim McCormick
FROM: George Astrike
DATE: July 27, 1998
SUBJECT: Director and Retiree Health Benefits Coverage
It is our understanding that 1ST BANCORP and its subsidiaries have no
contractual obligation to provide ongoing health benefits to any current or
former director and surviving spouses (excluding the obligation as outlined in
the agreement dated December 5, 1988 by and between Arthur L. Hart and First
Federal Bank). It is our further understanding that 1ST BANCORP and its
subsidiaries have no contractual obligation to provide post-retirement health
<PAGE>
benefits to any current or former employees. Promptly after the signing of a
definitive agreement, appropriate disclosures will be provided to all such
directors and employees confirming these assumptions. Such disclosures will
clearly communicate to all parties that the right of 1ST BANCORP and its
subsidiaries to terminate or make modifications to any current health benefits
exists and that 1ST BANCORP and its subsidiaries have the right to terminate or
make further modifications to any such benefits without further obligation or
notice.
In consideration of the change from your Company's current practice of
paying the cost of health benefits for certain directors, former directors, and
retired employees, we agree, for a 36-month period from the effective time of
the merger, to the following financial consideration:
. GROUP ONE: DIRECTORS ELIGIBLE FOR MEDICARE COVERAGE
Directors: Bell, Carnahan, McCormick and Summers
Payment: Will pay up to $200 per month ($2,400 annually) as
reimbursement of the Director's cost of obtaining Medicare and Medicare
supplemental insurance coverage.
(In the event any of the above named directors are rejected for Medicare
supplemental insurance coverage, GABC will pay $250 per month for a
three- year period from the date of our merger transaction in lieu of
the $200 monthly payment for Medicare and Medicare supplement coverage).
. GROUP TWO: DIRECTORS NOT ELIGIBLE FOR MEDICARE COVERAGE
Directors: Bobe and Soyugenc
<PAGE>
Payment: If Director is or becomes ineligible for any other group
medical plan, will pay up to $250 per month ($3,000 annually) as
reimbursement of the Director's cost of obtaining other insurance
coverage.
APPENDIX B
. GROUP THREE: ACTIVE EMPLOYEE DIRECTORS
Directors: Baracani and Stenftenagel
Payment: Not applicable. Coverage and Employee premiums will be
consistent to those provided and charged to other full-time active
employees.
. GROUP FOUR: RETIRED EMPLOYEES ELIGIBLE FOR EARLY RETIREE BENEFITS
Individuals: Ballard and Hamner
Payment: During the time the director/retired employee is eligible for
coverage as an early retiree under GABC's standard health benefit plan,
a payment of up to $250 per month ($3,000 annually) as reimbursement of
a portion of the premium paid by the director/retired employee toward
coverage under GABC's health benefit plan. Upon the director/retired
employee's eligibility for Medicare coverage, the monthly payment will
be equal to that paid to Group One.
<PAGE>
. GROUP FIVE: FORMER DIRECTORS, SPOUSES OF FORMER DIRECTORS AND CERTAIN
RETIRED EMPLOYEES
Individuals: Long, McClure, Riley, Rutledge and Floyd
Payment: Will pay up to $200 per month ($2,400 annually) as
reimbursement of the Individual's cost of obtaining Medicare and
Medicare supplemental insurance coverage.
. GROUP SIX: RETIRED EMPLOYEE PAYING THEIR OWN PREMIUM
Individuals: Jones and Cunningham
Payment: Not Applicable. Cunningham will not be eligible to
participate in GABC's health benefit plan. Jones may be eligible to
participate in GABC's plan as an early retiree and would be responsible
for the full premium amount charged for such coverage.
<PAGE>
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is
made and entered into as of August 6, 1998, by and between
1ST BANCORP, an Indiana corporation ("Issuer"), and GERMAN
AMERICAN BANCORP, an Indiana corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into that
certain Agreement and Plan of Reorganization, dated as of
August 6, 1998 (the "Merger Agreement"), providing for,
among other things, the merger of Issuer with and into
Grantee with Grantee as the surviving entity; and
WHEREAS, as a condition and inducement to
Grantee's execution of the Merger Agreement, Grantee has
required that Issuer agree, and Issuer has agreed, to grant
Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective
representations, warranties, covenants and agreements set
forth herein and in the Merger Agreement, and intending to
be legally bound hereby, Issuer and Grantee agree as
follows:
1 . DEFINED TERMS. Capitalized terms which are used
but not defined herein shall
have the meanings ascribed to such terms in the Merger
Agreement.
2. GRANT OF OPTION. Subject to the terms and
conditions set forth herein, Issuer hereby grants to Grantee
an irrevocable option (the "Option") to purchase up to
218,142 shares (as adjusted as set forth herein, the "Option
Shares," which shall include the Option Shares before and
after any transfer of such Option Shares) of common stock,
$1.00 par value per share ("Issuer Common Stock"), of Issuer
at a purchase price per Option Share (subject to adjustment
as set forth herein, the "Purchase Price") equal to $50.94
provided, however, that in no event shall the number of
shares of Issuer Common Stock for which this Option is
exercisable exceed the lesser of (i) 19.9% of the lssuer's
issued and outstanding shares of Issuer Common Stock without
giving effect to any shares subject to or issued pursuant to
the Option and (ii) that minimum number of shares of Issuer
Common Stock which when aggregated with any other shares of
Issuer Common Stock beneficially owned by Grantee or any
Affiliate thereof would cause the provisions of any Takeover
Laws of the IBCL to be applicable to the Merger or the
Option.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter
defined), as applicable, shall not be in material breach of its
agreements or covenants contained in this Agreement or the Merger
Agreement, and (ii) no preliminary or permanent injunction or
other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United
States shall be in effect, Holder may exercise the Option, in
whole or in part, at any time and from time to time following the
occurrence of a Purchase Event and prior to the termination of
the Option. The Option shall terminate and be of no further
force and effect upon the earliest to occur of (A) the Effective
Time, (B) termination of the Merger Agreement in accordance with
the terms thereof prior to the occurrence of a Purchase Event or
a Preliminary Purchase Event (other than a termination of the
Merger Agreement by Grantee pursuant to (i) Section 7.02 thereof
(but only if such termination was a result of a willful breach by
Issuer) or (ii) Section
Exhibit 2.4
7.05 thereof (but only if such termination was as a result of the
failure of the shareholders of Issuer to approve the Merger)
(each a "Default Termination")), (C) 18 months after a Default
Termination, and (D) 18 months after any termination of the
Merger Agreement following the occurrence of a Purchase Event or
a Preliminary Purchase Event. Any purchase of shares upon
exercise of the Option shall be subject to compliance with
applicable law, including, without limitation, any required
regulatory approvals under the Bank Holding Company Act of 1956,
as amended (the "BHC Act"), and the Savings and Loan Holding
Company Act. The term "Holder" shall mean the holder or holders
of the Option from time to time, and which initially is the
Grantee. The rights set forth in Section 8 shall terminate when
the right to exercise the Option terminates (other than as a
result of a complete exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of
the following events subsequent to the date of this Agreement:
(i) without Grantee's prior written consent,
Issuer shall have authorized, recommended, publicly
proposed or publicly announced an intention to authorize,
recommend or propose, or entered into an agreement with
any person (other than Grantee or any Subsidiary of Grantee)
to effect an Acquisition Transaction (as defined below). As
used herein, the term Acquisition Transaction shall mean (A)
a merger, consolidation or similar transaction involving
Issuer, or any of its Subsidiaries (other than transactions
solely between Issuer's Subsidiaries and transactions
involving Issuer or any Subsidiary in which the voting
securities of Issuer outstanding immediately prior thereto
continue to represent (by either remaining outstanding or
being converted into securities of the surviving entity or
the parent thereof) at least 75% of the combined voting
power of the voting securities of the Issuer or the
surviving entity or the parent thereof outstanding
immediately after the consummation of the transaction), (B)
the disposition, by sale, lease, exchange or otherwise, of
Assets of Issuer or any of its Subsidiaries representing in
either case 20% or more of the consolidated assets of Issuer
and its Subsidiaries, or (C) the issuance, sale or other
disposition of (including by way of merger, consolidation,
share exchange or any similar transaction) securities
representing 20% or more of the voting power of Issuer or
any of its Subsidiaries (any of the foregoing, an
"Acquisition Transaction"); or
(ii) any person (other than Grantee or any
Subsidiary of Grantee) shall have acquired beneficial
ownership (as such term is defined in Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), of or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under
the Exchange Act), other than a group of which Grantee or
any of its Subsidiaries is a member, shall have been formed
which beneficially owns or has the right to acquire
beneficial ownership of, 20% or more of the then-outstanding
shares of Issuer Common Stock,
(c) As used herein, a "Preliminary Purchase Event"
means any of the following
events:
(i) any person (other than Grantee or any
Subsidiary of Grantee) shall have commenced (as such term
is defined in Rule 14d-2 under the Exchange Act), or shall
have filed a registration statement under the Securities Act
of 1933, as amended (the "Securities Act") with respect to,
a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such
offer, such person would own or control 20% or more of the
then-outstanding shares of Issuer Common Stock (such an
offer being referred to herein as a "Tender Offer" or an
"Exchange Offer," respectively); or
(ii) the holders of Issuer Common Stock shall not
have approved the Merger Agreement at the meeting of
such stockholders held for the purpose of voting on the
Merger Agreement, such meeting shall not have been held or
shall have been canceled prior to termination of the Merger
Agreement, or Issuer's Board of Directors shall have
withdrawn or modified in a manner adverse to Grantee the
recommendation of Issuer's Board of Directors with respect
to the Merger Agreement, in each case after it shall have
been publicly announced that any person (other than Grantee
or any Subsidiary of Grantee) shall have (A) made a proposal
to engage in an Acquisition Transaction, (B) commenced a
Tender Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer, or (C)
filed an application (or given a notice), whether in draft
or final form, under any federal or state statute or
regulation (including a notice filed under the HSR Act and
an application, or notice filed under the BHC Act, the Bank
Merger Act, or the Change in Bank Control Act of 1978)
seeking the Consent to an Acquisition Transaction from any
federal or state governmental or regulatory authority or
agency.
As used in this Agreement, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Holder wishes to exercise the
Option, it shall send to Issuer a written notice (the date of
which being herein referred to as the "Notice Date") specifying
(i) the total number of Option Shares it intends to purchase
pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 30 business days from the
Notice Date for the closing (the "Closing") of such purchase (the
"Closing Date_). If prior Consent of any governmental or
regulatory agency or authority is required in connection with
such purchase, Issuer shall cooperate with Holder in the filing
of the required notice or application for such Consent and the
obtaining of such Consent and the Closing shall occur immediately
following receipt of such Consents (and expiration of any
mandatory waiting periods).
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to
Issuer, in immediately available funds by wire transfer to a bank
account designated by Issuer, an amount equal to the Purchase
Price multiplied by the number of Option Shares to be purchased
on such Closing Date, and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified in
Section 13(f) hereof.
(b) At each Closing, simultaneously with the delivery
of immediately available funds and surrender of this Agreement as
provided in Section 4(a), (i) Issuer shall deliver to Holder (A)
a certificate or certificates representing the Option Shares to
be purchased at such Closing, which Option Shares shall be free
and clear of all liens, claims, charges and encumbrances of any
kind whatsoever and subject to no pre-emptive rights, and (B) if
the Option is exercised in part only, an executed new agreement
with the same terms as this Agreement evidencing the right to
purchase the balance of the shares of Issuer Common Stock
purchasable hereunder, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise
dispose of such Option Shares in violation of applicable federal
and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required
by applicable law, certificates for the Option Shares delivered
at each Closing shall be endorsed with a restrictive legend which
shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A STOCK
OPTION AGREEMENT DATED AS OF AUGUST 6, 1998. A COPY OF SUCH
AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT
CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST
THEREFOR.
It is understood and agreed that: (i) the references in the above
legend to resale restrictions of the Securities Act shall be
removed by delivery of substitute certificate(s) without such
reference if Holder shall have delivered to Issuer a copy of a
letter from the staff of the SEC, or an opinion of counsel in
form and substance reasonably satisfactory to Issuer and its
counsel, to the effect that such legend is not required for
purposes of the Securities Act: (ii) the references in the above
legend to the provisions of this Agreement shall be removed by
delivery of substitute certificate(s) without such reference if
the shares have been sold or transferred in compliance with the
provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend
shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer
hereby represents and warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and
authority to enter into this Agreement and, subject to any
approvals referred to herein, to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate
action on the part of Issuer. This Agreement has been duly
executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and, at all
times from the date hereof until the obligation to deliver Issuer
Common Stock upon the exercise of the Option terminates, will
have reserved for issuance, upon exercise of the Option, the
number of shares of Issuer Common Stock necessary for Holder to
exercise the Option, and Issuer will take all necessary corporate
action, to authorize and reserve for issuance all additional
shares of Issuer Common Stock or other securities which may be
issued pursuant to Section 7 upon exercise of the Option. The
shares of Issuer Common Stock to be issued upon due exercise of
the Option, including all additional Shares of Issuer Common
Stock or other securities which may be issuable pursuant to
Section 7, upon issuance pursuant hereto, shall be duly and
validly issued, fully paid, and nonassessable, and shall be
delivered free and clear of all liens, claims, charges, and
encumbrances of any kind or nature whatsoever, including any
preemptive rights of any stockholder of Issuer.
(c) Issuer has taken all action so that the entering
into of this Agreement and the consummation of the transactions
contemplated by this Agreement do not and will not result in the
grant of any rights to any Person under the Articles of
Incorporation, Bylaws, or other governing instruments of Issuer
or any of its subsidiaries or restrict or impair the ability of
Grantee to vote, or otherwise to exercise the rights of a
stockholder with respect to, shares of Issuer or any of its
subsidiaries that may be directly or indirectly acquired or
controlled by it.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee
hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any
approvals or consents referred to herein, to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee. This Agreement has been
duly executed and delivered by Grantee.
(b) This Option is not being, and any Option Shares
or other securities acquired by Grantee upon exercise of the
Option will not be, acquired with a view to the public
distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from
registration under any applicable securities laws.
(c) Grantee has taken all necessary action to exempt
the transactions contemplated by this Agreement from any
applicable Takeover Laws.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock
by reason of a stock dividend, stock split, split-up,
recapitalization, combination, exchange of shares or similar
transaction, the type and number of shares or securities subject
to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the
agreements governing such transaction, if any, so that Holder
shall receive, upon exercise of the Option, the number and class
of shares or other securities or property that Holder would have
received in respect of Issuer Common Stock if the Option had been
exercised immediately prior to such event, or the record date
therefor, as applicable. If any additional shares of Issuer
Common Stock are issued after the date of this Agreement (other
than pursuant to an event described in the first sentence of this
Section 7(a) or pursuant to this Option), the number of shares of
Issuer Common Stock subject to the Option shall be adjusted so
that, after such issuance, it, together with any shares of Issuer
Common Stock previously issued pursuant hereto, shall not exceed
the lesser of (i) 19.9% of the number of shares of Issuer Common
Stock then issued and outstanding, without giving effect to any
shares subject to or issued pursuant to the Option and (ii) that
minimum number of shares of Issuer Common Stock, which when
aggregated with any other shares of Issuer Common Stock
beneficially owned by Grantee or any Affiliate thereof would
cause the provisions of any Takeover Laws of the IBCL to be
applicable to the Merger or the Option.
(b) In the event that Issuer shall enter in an
agreement (i) to consolidate with or merge into any person, other
than Grantee or one of its Subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation or
merger; (ii) to permit any person, other than Grantee or one of
its Subsidiaries, to merge into Issuer and Issuer shall be the
continuing or surviving corporation, but, in connection with such
merger, the then outstanding shares of Issuer Common Stock shall
be changed into or exchanged for stock or other securities of
Issuer or any other person or cash or any other property and the
outstanding shares of Issuer Common Stock immediately prior to
such merger shall after such merger represent less than 50% of
the outstanding shares and share equivalents of the merged
company; or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee
or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions
so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein,
be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of Grantee, of either (x) the Acquiring
Corporation (as defined below) or (y) any person that controls
the Acquiring Corporation (in each case, such person being
referred to as the "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as
the Option, provided that, if the terms of the Substitute Option
cannot, for legal reasons, be the same as the Option, such terms
shall be as similar as possible and in no event less advantageous
to Grantee. The Substitute Option Issuer shall also enter into
an agreement with the then holder or holders of the Substitute
Option in substantially the same form as this Agreement, which
shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for
such number of shares of the Substitute Common Stock (as
hereinafter defined) as is equal to the Assigned Value (as
hereinafter defined) multiplied by the number of shares of the
Issuer Common Stock for which the Option was theretofore
exercisable, divided by the Average Price (as hereinafter
defined). The exercise price of the Substitute Option per share
of the Substitute Common Stock (the "Substitute Purchase Price")
shall then be equal to the Purchase Price, multiplied by a
fraction in which the numerator is the number of shares of the
Issuer Common Stock for which the Option was theretofore
exercisable and the denominator is the number of shares for which
the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (y) Issuer in a
merger in which Issuer is the continuing or surviving
person, and (z) the transferee of all or any substantial
part of the Issuer's assets (or the assets of its
Subsidiaries).
(ii) "Substitute Common Stock" shall mean the
common stock issued
by the Substitute Option Issuer upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the highest
of (x) the price per share of the Issuer Common Stock at
which a Tender Offer or Exchange Offer therefor has been
made by any person (other than Grantee), (y) the price per
share of the Issuer Common Stock to be paid by any person
(other than the Grantee) pursuant to an agreement with
Issuer, and (z) the highest last sale price per share of
Issuer Common Stock quoted on the Nasdaq National Market (or
if Issuer Common Stock is not quoted on such exchange, the
highest bid price per share on any day as quoted on the
principal trading market or securities exchange on which
such shares are traded as reported by a recognized source
chosen by Grantee) within the six-month period immediately
preceding the agreement; provided, that in the event of a
sale of less than all of Issuer's assets, the Assigned Value
shall be the sum of the price paid in such sale for such
assets and the current market value of the remaining assets
of Issuer as determined by a nationally recognized
investment banking firm selected by Grantee (or by a
majority in interest of the Grantees if there shall be more
than one Grantee (a "Grantee Majority")) and reasonably
acceptable to Issuer, divided by the number of shares of the
Issuer Common Stock outstanding at the time of such sale.
In the event that an exchange offer is made for the Issuer
Common Stock or an agreement is entered into for a merger or
consolidation involving consideration other than cash, the
value of the securities or other property issuable or
deliverable in exchange for the Issuer Common Stock shall be
determined by a nationally recognized investment banking
firm selected by Grantee and reasonably acceptable to Issuer
(or if applicable, Acquiring Corporation). (If there shall
be more than one Grantee, any such selection shall be made
by a Grantee Majority.)
(iv) "Average Price" shall mean the average
closing price of a share of the Substitute Common Stock
for the one year immediately preceding the consolidation,
merger or sale in question, but in no event higher than the
last sale price of the shares of the Substitute Common Stock
on the day preceding such consolidation, merger or sale;
provided that if Issuer is the issuer of the Substitute
Option, the Average Price shall be computed with respect to
a share of common stock issued by Issuer, the person merging
into Issuer or by any company which controls or is
controlled by such merger person, as Grantee may elect.
(f) In no event pursuant to any of the foregoing
paragraphs shall the Substitute Option be exercisable for more
than 19.9% of the aggregate of the shares of the Substitute
Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be
exercisable for more than 19.9% of the aggregate of the shares of
Substitute Common Stock but for this clause (f), the Substitute
Option Issuer shall make a cash payment to Grantee equal to the
excess of (i) the value of the Substitute Option without giving
effect to the limitation in this clause (f) over (ii) the value
of the Substitute Option after giving effect to the limitation in
this clause (f). This difference in value shall be determined by
a nationally recognized investment banking firm selected by
Grantee (or a Grantee Majority) and reasonably acceptable to the
Acquiring Corporation.
(g) Issuer shall not enter into any transaction
described in subsection (b) of this Section 7 unless the
Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer
hereunder and take all other actions that may be necessary so
that the provisions of this Section 7 are given full force and
effect (including, without limitation, any action that may be
necessary so that the shares of Substitute Common Stock are in no
way distinguishable from or have lesser economic value than other
shares of common stock issued by the Substitute Option Issuer).
(h) The provisions of Sections 8, 9, 10, and 11 shall
apply, with appropriate adjustments, to any securities for which
the Option becomes exercisable pursuant to this Section 7 and, as
applicable, references in such sections to "Issuer," "Option,"
"Purchase Price" and "Issuer Common Stock" shall be deemed to be
references to "Substitute Option Issuer," "Substitute Option,"
"Substitute Purchase Price" and "Substitute Common Stock,"
respectively.
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a), at
the request of Holder at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d)) and
ending 18 months immediately thereafter, Issuer shall repurchase
from Holder the Option and all shares of Issuer Common Stock
purchased by Holder pursuant hereto with respect to which Holder
then has beneficial ownership. The date on which Holder
exercises its rights under this Section 8 is referred to as the
"Request Date." Such repurchase shall be at an aggregate price
(the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder
for any shares of Issuer Common Stock acquired by
Holder pursuant to the Option with respect to which Holder
then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable
Price (as defined below) for each share of Issuer Common
Stock over (y) the Purchase Price (subject to adjustment
pursuant to Section 7), multiplied by the number of shares
of Issuer Common Stock with respect to which the Option has
not been exercised; and
(iii) the excess, if any, of the Applicable
Price over the Purchase Price (subject to adjustment
pursuant to Section 7) paid (or, in the case of Option
Shares with respect to which the Option has been exercised
but the Closing Date has not occurred, payable) by Holder
for each share of Issuer Common Stock with respect to which
the Option has been exercised and with respect to which
Holder then has beneficial ownership, multiplied by the
number of such shares.
(b) If Holder exercises its rights under this Section
8, Issuer shall, within ten business days after the Request Date,
pay the Section 8 Repurchase Consideration to Holder in
immediately available funds, and contemporaneously with such
payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of' Issuer Common Stock
purchased thereunder with respect to which Holder then has
beneficial ownership, and Holder shall warrant that it has sole
record and beneficial ownership of such shares and that the same
are then free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever. Notwithstanding the
foregoing, to the extent that prior notification to or Consent of
any governmental or regulatory agency or authority is required in
connection with the payment of all or any portion of the Section
8 Repurchase Consideration, Holder shall have the ongoing option
to revoke its request for repurchase pursuant to Section 8, in
whole or in part, or to require that Issuer deliver from time to
time that portion of the Section 8 Repurchase Consideration that
it is not then so prohibited from paying and promptly file the
required notice or application for Consent and expeditiously
process the same (and each party shall cooperate with the other
in the filing of any such notice or application and the obtaining
of any such Consent). If any governmental or regulatory agency
or authority disapproves of any part of Issuer's proposed
repurchase pursuant to this Section 8, Issuer shall promptly give
notice of such fact to Holder. If any governmental or regulatory
agency or authority prohibits the repurchase in part but not in
whole, then Holder shall have the right (i) to revoke the
repurchase request or (ii) to the extent permitted by such agency
or authority, determine whether the repurchase should apply to
the Option and/or Option Shares and to what extent to each, and
Holder shall thereupon have the right to exercise the Option as
to the number of Option Shares for which the Option was
exercisable at the Request Date less the sum of the number of
shares covered by the Option in respect of which payment has been
made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been
repurchased. Holder shall notify Issuer of its determination
under the preceding sentence within five business days of receipt
of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of
Holder's rights under this Section 8 shall terminate on the date
of termination of this Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable
Price" means the highest of (i) the highest price per share of
Issuer Common Stock paid for any such share by the person or
groups described in Section 8(d)(i), (ii) the price per share of
Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination
transaction described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii),
or (iii) the highest last sale price per share of Issuer Common
Stock quoted on the Nasdaq National Market (or if Issuer Common
Stock is not quoted on such exchange, the highest bid price per
share as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a
recognized source chosen by Holder) during the 60 business days
preceding the Request Date; provided, however, that in the event
of a sale of less than all of Issuer's Assets, the Applicable
Price shall be the sum of the price paid in such sale for such
assets and the current market value of the remaining assets of
Issuer as determined by an independent nationally recognized
investment banking firm selected by Holder and reasonably
acceptable to Issuer (which determination shall be conclusive for
all purposes of this Agreement), divided by the number of shares
of the Issuer Common Stock outstanding at the time of such sale.
If the consideration to be offered, paid or received pursuant to
either of the foregoing clauses (i) or (ii) shall be other than
in cash, the value of such consideration shall be determined in
good faith by an independent nationally recognized investment
banking firm selected by Holder and reasonably acceptable to
Issuer, which determination shall be conclusive for all purposes
of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur
if (i) any person (other than Grantee or any subsidiary of
Grantee) shall have acquired beneficial ownership (as such term
is defined in Rule 13d-3 promulgated under the Exchange Act), or
the right to acquire beneficial ownership, or any "group" (as
such term is defined under the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire
beneficial ownership of 50% or more of the then-outstanding
shares of Issuer Common Stock, or (ii) any of the transactions
described in Section 7(b)(i), 7(b)(ii), or 7(iii) shall be
consummated.
9. REGISTRATION RIGHTS.
(a) Issuer shall, subject to the conditions of
subparagraph (c) below, if requested by any Holder, including
Grantee and any permitted transferee ("Selling Holder"), as
expeditiously as possible prepare and file a registration
statement under the Securities Laws if necessary in order to
permit the sale or other disposition of any or all shares of
Issuer Common Stock or other securities that have been acquired
by or are issuable to Selling Holder upon exercise of the Option
in accordance with the intended method of sale or other
disposition stated by Holder in such request (it being understood
and agreed that any such sale or other disposition shall be
effected on a widely distributed basis so that, upon consummation
thereof, no purchaser or transferee shall beneficially own more
than 5% of the shares of Issuer Common Stock then outstanding),
including, without limitation, a "shelf" registration statement
under Rule 415 under the Securities Act or any successor
provision, and Issuer shall use its best efforts to qualify such
shares or other securities for sale under any applicable state
securities laws. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder.
(b) If Issuer at any time after the exercise of the
Option, but prior to the termination of the Option, proposes to
register any shares of Issuer Common Stock under the Securities
Laws in connection with an underwritten public offering of such
Issuer Common Stock, Issuer will promptly give written notice to
Holder of its intention to do so and, upon the written request of
Holder given within 30 days after receipt of any such notice
(which request shall specify the number of shares of Issuer
Common Stock intended to be included in such underwritten public
offering by Selling Holder), Issuer will use all reasonable
efforts to cause all such shares, the holders of which shall have
requested participation in such registration, to be so registered
and included in such underwritten public offering; provided, that
Issuer may elect to not cause any such shares to be so registered
(i) if the underwriters in good faith determine that the
inclusion of such shares would interfere with the successful
marketing of the shares of Issuer Common Stock for the account of
Issuer, or (ii) in the case of a registration solely to implement
a dividend reinvestment or similar plan, an employee benefit plan
or a registration filed on Form S-4 or any successor form, or a
registration filed on a form which does not permit registrations
of resales; provided, further, that such election pursuant to
clause (i) may only be made once. If some but not all the shares
of Issuer Common Stock, with respect to which Issuer shall have
received requests for registration pursuant to this subparagraph
(b), shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Selling
Holders and any other person (other than Issuer or any person
exercising demand registration rights in connection with such
registration) who or which is permitted to register their shares
of Issuer Common Stock in connection with such registration pro
rata in the proportion that the number of shares requested to be
registered by each Selling Holder bears to the total number of
shares requested to be registered by all persons then desiring to
have Issuer Common Stock registered for sale (other than Issuer
or any person exercising demand registration rights in connection
with such registration).
(c) Issuer shall use all reasonable efforts to cause
the registration statement referred to in subparagraph (a) above
to become effective and to obtain all consents or waivers of
other parties which are required therefor and to keep such
registration statement effective, provided, that Issuer may delay
any registration of Option Shares required pursuant to
subparagraph (a) above for a period not exceeding 90 days,
provided Issuer shall in good faith determine that any such
registration would adversely affect an offerings, or contemplated
offering of other securities by Issuer. Notwithstanding anything
to the contrary contained herein, Issuer shall not be required
to register Option Shares under the Securities Laws pursuant to
subparagraph (a) above:
(i) prior to the occurrence of a Purchase Event
and following the termination of the Option;
(ii) more than twice;
(iii)within 90 days after the effective date of a
registration referred to in subparagraph (b) above
pursuant to which the Selling Holders concerned were
afforded the opportunity to register such shares under the
Securities Laws and such shares were registered as
requested; and
(iv) unless a request therefor is made to Issuer
by Selling Holders holding at least 15% or more of the
aggregate number of Option Shares then outstanding or the
right to acquire at least 15% of the Option Shares.
In addition to the foregoing, Issuer shall not be
required to maintain the effectiveness of any registration
statement after the expiration of 120 days from the effective
date of such registration statement. Issuer shall use all
reasonable efforts to make any filings, and take all steps, under
all applicable state securities laws to the extent necessary to
permit the sale or other disposition of the Option Shares so
registered in accordance with the intended method of distribution
for such shares, provided, that Issuer shall not be required to
consent to general jurisdiction or qualify to do business in any
state where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.
(d) Except where applicable state law prohibits such
payments, Issuer will pay all expenses (including without
limitation registration fees, qualification fees, blue sky fees
and expenses (including the fees and expenses of Issuer's
counsel), accounting expenses, printing expenses, expenses of
underwriters, excluding discounts and commissions but including
liability insurance if Issuer so desires or the underwriters so
require, and the reasonable fees and expenses of any necessary
special experts) in connection with each registration pursuant to
subparagraph (a) or (b) above (including the related offerings
and sales by Selling Holders) and all other qualifications,
notifications or exemptions pursuant to subparagraph (a) or (b)
above. Underwriting discounts and commissions relating to Option
Shares and any other expenses incurred by such Selling Holders in
connection with any such registration (including expenses of
Selling Holders' counsel) shall be borne by such Selling Holders.
(e) In connection with any registration under
subparagraph (a) or (b) above Issuer hereby agrees to indemnify
the Selling Holders, and each underwriter thereof, including each
person, if any, who controls such holder or underwriter within
the meaning of Section 15 of the Securities Act, against all
expenses, losses, claims, damages and liabilities caused by any
untrue statement of a material fact contained in any registration
statement or prospectus (including any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except
insofar as such expenses, losses, claims, damages or liabilities
of such indemnified party are caused by any untrue statement or
alleged untrue statement or any omission or alleged omission made
in reliance upon and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use
therein, and Issuer and each officer, director and controlling
person of Issuer shall be indemnified by such Selling Holder, or
by such underwriter, as the case may be, for all such expenses,
losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement or omission made in reliance upon, and
in conformity with, information furnished in writing to Issuer by
such holder or such underwriter, as the case may be, expressly
for such use.
Promptly upon receipt by a party indemnified under this
subparagraph (e) of notice of the commencement of any action
against such indemnified party in respect of which indemnity or
reimbursement may be sought against any indemnifying party under
this subparagraph (e), such indemnified party shall notify the
indemnifying party in writing of the commencement of such action,
but the failure so to notify the indemnifying party shall not
relieve it of any liability which it may otherwise have to any
indemnified party under this subparagraph (e), except to the
extent such failure to notify materially prejudices the
indemnifying party. In case notice of commencement of any such
action shall be given to the indemnifying party as above
provided, the indemnifying party shall be entitled to participate
in and, to the extent it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense of
such action at its own expense, with counsel chosen by it and
reasonably satisfactory to such indemnified party. The
indemnified party shall have the right to employ separate counsel
in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable
costs of investigation) shall be paid by the indemnified party
unless (i) the indemnifying party either agrees to pay the same,
(ii) the indemnifying party falls to assume the defense of such
action with counsel satisfactory to the indemnified party, or
(iii) the indemnified party has been advised by counsel that one
or more legal defenses may be available to the indemnifying party
that may be contrary to the interest of the indemnified party, in
which case the indemnifying party shall be entitled to assume the
defense of such action notwithstanding its obligation to bear
fees and expenses of such counsel; provided, however, that the
indemnifying party shall not be liable for the expenses of more
than one firm of counsel for all indemnified parties in any
jurisdiction. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may
not be unreasonably withheld
If the indemnification provided for in this subparagraph (e)
is unavailable to a party otherwise entitled to be indemnified in
respect of any expenses, losses, claims, damages or liabilities
referred to herein, then the indemnifying party, in lieu of
indemnifying such party otherwise entitled to be indemnified,
shall contribute to the amount paid or payable by such party to
be indemnified as a result of such expenses, losses, claims,
damages or liabilities in such proportion as is appropriate to
reflect the relative benefits received by issuer, all Selling
Holders and the underwriters from the offering of the securities
and also the relative fault of Issuer, all Selling Holders and
the underwriters in connection with the statements or omissions
which resulted in such expenses, losses, claims, damages or
liabilities, as well as any other relevant equitable
considerations. The amount paid or payable by a party as a
result of the expenses, losses, claims, damages and liabilities
referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim; provided,
that in no case shall any Selling Holder be responsible, in the
aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No
person guilty of fraudulent misrepresentation (within the meaning
of Section 1 (f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation. Any obligation by any holder to
indemnify shall be several and not joint with other holders.
In connection with any registration pursuant to
subparagraph (a) or (b) above, Issuer and each Selling Holder
(other than Grantee) shall enter into an agreement containing the
indemnification provisions of this subparagraph (e).
(f) Issuer shall use its best efforts to comply with
all reporting requirements and will do all such other things as
may be necessary to permit the expeditious sale at any time of
any Option Shares by Holder in accordance with and to the extent
permitted by any rule or regulation promulgated by the SEC from
time to time, including, without limitation, Rules 144 and 144A.
(g) Issuer will pay all stamp taxes in connection
with the issuance and the sale of the Option Shares and in
connection with the exercise of the Option, and will save Holder
harmless, without limitation as to time, against any and all
liabilities, with respect to all such taxes.
10. QUOTATION; LISTING. If Issuer Common Stock or any
other securities to be acquired upon exercise of the Option are
then authorized for quotation or trading or listing on any
securities exchange or any automated quotations system maintained
by a self-regulatory organization, Issuer, upon the request of
Holder, will promptly file an application, if required, to
authorize for quotation or trading or listing the shares of
Issuer Common Stock or other securities to be acquired upon
exercise of the Option on the securities exchange or any
automated quotations system maintained by a self-regulatory
organization and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
11. DIVISION OF OPTION. This Agreement (and the Option
granted hereby) are exchangeable, without expense, at the option
of Holder, upon presentation and surrender of this Agreement at
the principal office of Issuer for other Agreements providing for
Options of different denominations entitling the holder thereof
to purchase in the aggregate the same number of shares of Issuer
Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any other Agreements and related
Options for which this Agreement (and the Option granted hereby)
may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated,
Issuer will execute and deliver a new Agreement of like tenor and
date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
12. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in Section
9, each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses
of its own financial consultants, investment bankers, accountants
and counsel.
(b) WAIVER AND AMENDMENT. Any provision oft his
Agreement may be waived at any time by the party that is entitled
to the benefits of such provision. This Agreement may not be
modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the
parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY;
SEVERABILITY. This Agreement, together with the Merger Agreement
and the other documents and instruments referred to herein and
therein, between Grantee and Issuer (a) constitutes the entire
agreement and supersedes all prior agreements and understandings,
both written and oral, between the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any
person other than the parties hereto (other than any transferees
of the Option Shares or any permitted transferee of this
Agreement pursuant to Section 12(h) and other than as provided in
the Merger Agreement) any rights or remedies hereunder. If any
term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or a federal or state
governmental or regulatory agency or authority to be invalid,
void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or
invalidated. If for any reason such court or regulatory agency
determines that the Option does not permit Holder to acquire, or
does not require Issuer to repurchase, the full number of shares
of Issuer Common Stock as provided in Sections 3 and 8 (as
adjusted pursuant to Section 7), it is the express intention of
Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible
without any amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed
and construed in accordance with the laws of the State of Indiana
without regard to any applicable conflicts of law rules.
(e) DESCRIPTIVE HEADINGS. The descriptive headings
contained herein are for convenience of reference only and shall
not affect in any way the meaning or interpretation of this
Agreement.
(f) NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (with confirmation) or mailed by
registered or certified mail (return receipt requested) to the
parties at the addresses set forth in the Merger Agreement (or at
such other address for a party as shall be specified by like
notice).
(g) COUNTERPARTS. This Agreement and any amendments
hereto may be executed in two counterparts, each of which shall
be considered one and the same agreement and shall become
effective when both counterparts have been signed, it being
understood that both parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder or under the Option
shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent
of the other party, except that Grantee may assign this Agreement
to a wholly owned Subsidiary of Grantee and Grantee may assign
its rights hereunder in whole or in part after the occurrence of
a Purchase Event. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and
assigns.
(i) FURTHER ASSURANCES. In the event of any exercise
of the Option by Holder, Issuer and Holder shall execute and
deliver all other documents and instruments and take all other
action that may be reasonably necessary in order to consummate
the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree
that this Agreement may be enforced by either party through
specific performance, injunctive relief and other equitable
relief. Both parties further agree to waive any requirement for
the securing or posting of any bond in connection with the
obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may
have for any failure to perform this Agreement.
(k) CONFIDENTIALITY AGREEMENTS. The parties hereto
agree that this Agreement supersedes any provision of the
Confidentiality Agreements that could be interpreted to preclude
the exercise of any rights or the fulfillment of any obligations
under this Agreement, and that none of the provisions included in
the Confidentiality Agreements will act to preclude Holder from
exercising the Option or exercising any other rights under this
Agreement or act to preclude Issuer from fulfilling any of its
obligations under this Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this
Stock Option Agreement to be signed by their respective officers
thereunto duly authorized, all as of the day and year first
written above.
GERMAN AMERICAN BANCORP
By/s/George W. Astrike
George W. Astrike
Chairman of the Board and
Chief E
1ST BANCORP
By/s/C. James McCormick
C. James McCormick
Chairman of the Board and
Chief
RESTATED
ARTICLES OF INCORPORATION
OF GERMAN AMERICAN BANCORP
(as amended April 23, 1998)
ARTICLE I
Name
The name of the Corporation is German American Bancorp.
ARTICLE II
Purposes and Powers
Section 1. Purposes of the Corporation. The purposes for which the
Corporation is formed are to transact any or all lawful business permitted by
applicable law and for which corporations may now or hereafter be incorporated
under the Corporation Law.
Section 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 Bylaws as from time to
time in effect.
ARTICLE III
<PAGE>
Term of Existence
The period during which the Corporation shall continue is perpetual.
Exhibit 3
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 711 Main Street, P.O.
Box 810, Jasper, Indiana 47546, and the name of its Resident Agent at such
office at the time of adoption of these Restated Articles of Incorporation is
George W. Astrike.
ARTICLE V
Shares
<PAGE>
The total number of shares of capital stock the Corporation has authority
to issue shall be 20,500,000 shares consisting of 20,000,000 common shares (the
"Common Shares") and 500,000 preferred shares (the "Preferred Shares"). The
Corporation's shares shall have no par value. Solely for the purpose of any
statue or regulation imposing any tax or fee based upon the capitalization of
the corporation, however, all of the shares shall be deemed to have a stated
value of $1.00 per share.
ARTICLE VI
Terms of Shares
Section 1. 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. The power to purchase, redeem, or otherwise
acquire the Corporation's own shares, directly or indirectly, may be exercised
without pro rata treatment of the owners or holders of any class or series of
shares. The Corporation may not purchase, redeem or otherwise acquire the
Corporation's own shares if, 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
(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 Shares in the
provisions of these Restated Articles of Incorporation adopted by the Board of
Directors pursuant to Section 3(a) of this Article VI describing the terms of
<PAGE>
such series). Shares of the Corporation purchased, redeemed, or otherwise
acquired by it shall constitute authorized by unissued shares, unless the Board
of Directors shall at any time adopt 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
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 (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 Shares in the
provisions of these Restated Articles of Incorporation adopted by the Board of
Directors pursuant to Section 3(a) of this Article VI describing the terms of
such series). The Corporation shall have the power to issue shares of one class
<PAGE>
or series as a share dividend or other distribution in respect of that class or
series or one or more other classes or series, except as may be otherwise
provided with respect to a series of Preferred Shares in the provisions of these
Restated Articles of Incorporation adopted by the Board of Directors pursuant to
Section 3(a) of this Article VI describing the terms of such series.
Section 2. Terms of Common Shares. The Common Shares 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 issued and outstanding Preferred Shares under this Article VI,
the holders of Common Shares shall be entitled to share ratably in such
dividends or other distributions (other than purchases, redemptions, or other
acquisitions of Common Shares of the Corporation), if any, as are declared and
paid from time to time on the Common Shares 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 Shares of the full amount to which they shall be
entitled under this Article VI, the holders of Common Shares shall be entitled,
to the exclusion of the holders of the Preferred Shares of any and all series,
to share, ratably according to the number of Common Shares held by them, in all
remaining assets of the Corporation available for distribution to its
shareholders.
Section 3. Terms of Preferred Shares.
(a) Preferred Shares 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
<PAGE>
one or more series of Preferred Shares and may determine the preferences,
limitations, and relative voting and other rights of one or more series of
Preferred Shares 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 that series of Preferred Shares. All shares of a series
of Preferred Shares must have preferences, limitations, and relative voting and
other rights identical to those of other shares of the same series. No series
of Preferred Shares need have preferences, limitations, or relative voting or
other rights identical with those of any other series of Preferred Shares.
Before issuing any shares of a series of Preferred Shares, 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
fixes and sets forth the distinctive designation of such series; the number of
shares that 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; and the preferences,
limitations, and relative voting and other rights of the series. Authority is
hereby expressly vested in the Board of Directors, by such amendment, to fix all
of the 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) Preferred Shares of any series that have been redeemed (whether
through the operation of a sinking fund or otherwise) or purchased by the
Corporation, or that, 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 Shares, subject to such limitations
(if any) as may be fixed by the Board of Directors with respect to such series
of Preferred Shares in accordance with Section 3 (a) of this Article VI.
<PAGE>
ARTICLE VII
Voting Rights
Section 1. Common Shares. Except as otherwise provided by the Corporation
Law or by the provisions of these Restated Articles of Incorporation adopted by
the Board of Directors pursuant to Section 3(a) of Article VI hereof describing
the Preferred Shares or a series thereof, and subject to such shareholder
disclosure and recognition procedures (which may include sanctions for
noncompliance therewith to the fullest extent permitted by the Corporation Law)
as the Corporation may by action of the Board of Directors establish, the Common
Shares have unlimited voting rights. At every meeting of the shareholders of
the Corporation every holder of Common Shares shall be entitled to one vote in
person or by proxy for each Common Share standing in such holder's name on the
share transfer records of the Corporation.
Section 2. Preferred Shares. 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 3(a) of Article VI hereof describing the
terms of Preferred Shares or a series thereof, the holders of Preferred Shares
shall have no voting rights or powers. Preferred Shares shall, when validly
issued by the Corporation, entitle the record holder thereof to vote on such
matters, but only on such matters, as the holders thereof are entitled to vote
under the Corporation Law or under these Restated Articles of Incorporation
adopted by the Board of Directors pursuant to Section 3(a) of Article VI hereof
describing the terms of Preferred Shares 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 sanctions
for noncompliance therewith to the fullest extent permitted by the Corporation
Law) as the Corporation may by action of the Board of Directors establish.
<PAGE>
ARTICLE VIII
Directors
Section 1. Number. The Board of Directors at the time of adoption of
these Restated Articles of Incorporation is composed of ten members. The number
of Directors shall be fixed by, or fixed in accordance with, the Bylaws.
Whenever there are nine or more Directors, the Bylaws may also provide for
staggering the terms of the members of the Board of Directors by dividing the
total number of Directors into two or three groups (with each group containing
one-half or one-third of the total, as near as may be) whose terms of office
expire at different times.
Section 2. Election of Directors by Holders of Preferred Shares. The
holders of one or more series of Preferred Shares 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 3(a) of
Article VI hereof describing the terms of the series of Preferred Shares.
Section 3. Vacancies. Vacancies occurring in the Board of Directors shall
be filled in the manner provided in the Bylaws or, if the Bylaws do not provide
for the filling of vacancies, in the manner provided by the Corporation Law.
Section 4. Removal of Directors. Any or all of the members of the Board
of Directors may be removed, with or without cause, at a meeting of the
shareholders called expressly for that purpose, by the affirmative vote of the
holders of at least 80 percent of the outstanding shares then entitled to vote
at an election of Directors. However, a Director elected by the holders of a
<PAGE>
series of Preferred Shares as authorized by Section 2 of this Article VIII may
be removed only by the affirmative vote of the holders of at least 80 percent of
the outstanding shares of that series then entitled to vote at an election of
Directors. Directors may not be removed by the Board of Directors.
Section 5. 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 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;
<PAGE>
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 5 unwarranted. A Director may, in considering the best interests
of the Corporation, consider the effects of any action on shareholders,
employees, suppliers, and customers of the Corporation, and communities in which
offices or other facilities of the Corporation are located, and any other
factors the Director considers pertinent.
Directors shall be immune from personal liability for any action taken as a
Director, or any failure to take any action, to the fullest extent permitted by
the applicable provisions of the Corporation Law from time to time in effect and
by general principles of corporate law.
ARTICLE IX
Provisions for Regulation of Business and Conduct of Affairs of Corporation
Section 1. Bylaws. The Board of Directors shall have the exclusive power
to make, alter, amend, or repeal, or to waive provisions of, the Bylaws of the
Corporation by the affirmative vote of a majority of the number of Directors
then in office, except 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
Bylaws. The Board of Directors may also adopt Emergency Bylaws 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 Bylaws by the affirmative vote of a majority of the entire number
of Directors at the time.
Section 2. Amendment or Repeal. (a) Any amendment, change or repeal of
Section 4 of Article VIII, Section 2 or 3 of Article IX, or Article X of these
Restated Articles of Incorporation, or any other amendment of these Restated
<PAGE>
Articles of Incorporation which would have the effect of modifying or permitting
circumvention of those provisions, shall require the affirmative vote, at a
meeting of shareholders of the Corporation, by the holders of a least 80 percent
of the outstanding shares of all classes of Voting Shares of the Corporation
(considered for purposes of this Section 2(a) as a single class and as defined
in Article X) and, if the amendment, change or repeal shall be proposed by or on
behalf of a Related Person (as that term is defined in Article X), by an
Independent Majority of Shareholders (as defined in Article X); provided,
however, that this Section 2(a) shall not apply to, and such vote shall not be
required for, any such amendment, change or repeal recommended to shareholders
by the favorable vote of not less than two-thirds of the Board of Directors and,
if the amendment, change or repeal shall be proposed by or on behalf of a
Related Person, by the favorable vote of not less than two-thirds of the
Continuing Directors (as defined in Article X and computed with reference to the
Related Person who shall propose such amendment, change or repeal), and any such
amendment, change or repeal so recommended shall require only the shareholder
vote required under the applicable provisions of the Corporation Law.
(b) Except as otherwise expressly provided in Section 2(a) above, 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 3. Removal of Chairman of the Board and President. The Chairman
of the Board and the President, and each of them, may be removed from office at
any time, with or without cause, at a meeting of the Board of Directors called
expressly for that purpose, but only by the affirmative vote of two-thirds of
all other members of the entire Board of Directors, Any vacancy created by the
removal of the Chairman or the President may be filled only by the affirmative
vote of two-thirds of all remaining members of the Board.
<PAGE>
ARTICLE X
Approval of Business Combinations
Section 1. Supermajority Vote. Except as provided in Sections 2 and 3 of
this Article X, neither the Corporation nor any of its Subsidiaries shall become
party to any Business Combination with a Related Person without the prior
affirmative vote at a meeting of the Corporation's shareholders:
(a) By the holders of not less than 80 percent of the outstanding
shares of all classes of Voting Shares of the Corporation considered for
purposes of this Article X as a single class, and
(b) By an Independent Majority of Shareholders.
Such favorable votes shall be in addition to any shareholder vote that
would be required without reference to this Section 1 and shall be required
notwithstanding the fact that no vote may be required, or that some lesser
percentage may be specified by law or in other Articles of these Restated
Articles of Incorporation or the Bylaws of the Corporation or otherwise.
Section 2. Reduced Supermajority Vote for Fair Pricing. The provisions of
Section 1 shall apply to a Business Combination, except that the percentage vote
required by Section 1 (a) shall be reduced from not less than 80 percent to not
less than two-thirds, if all of the conditions set forth in subsections (a)
through (d) of this Section 2 are satisfied.
(a) The fair market value of the property, securities or other
consideration to be received per share by holders of each class or series
of capital shares of the Corporation in the Business Combination is not
less, as of the date of the consummation of the Business Combination (the
"Consummation Date"), than the higher of the following: (i) the highest
<PAGE>
per share price (with appropriate adjustments for recapitalizations and for
share splits, share dividends and like distributions) including brokerage
commissions and solicitation fees paid by the Related Person in acquiring any
of its holdings of such class or series of capital shares within the two-year
period immediately prior to the first public announcement of the proposed
Business Combination ("Announcement Date") or in the transaction in which it
became a Related Person, whichever is higher, plus interest compounded
annually, from the later of the date that the Related Person became a Related
Person (the "Determination Date"), or the date two years before the
Consummation Date, through the Consummation Date, at the rate publicly
announced as the "prime rate" of interest of Citibank, N.A. (or of such other
major bank headquartered in New York as may be selected by a majority of the
Continuing Directors) from time to time in effect, less the aggregate
amount of any cash dividends paid and the fair market value of any dividends
paid in other than cash on each such share from the date from which interest
accrues under the preceding clause through the Consummation Date up to but
not exceeding the amount of interest so payable per share; OR (ii) if such
class or series is then traded on an exchange or is the subject of regularly
published quotations from three or more broker/dealers who make a market in
such class or series for their own accounts, the fair market value per share
of such class or series on the Announcement Date, as determined by the highest
closing sales price on such exchange or the highest closing bid quotation
with respect to such shares during the 30-day period immediately preceding
the Announcement Date. In the event of a Business Combination upon
consummation of which the Corporation would be the surviving corporation or
company or would continue to exist (unless it is provided, contemplated or
intended that as part of such Business Combination or within one year after
consummation thereof a plan of liquidation or dissolution of the
Corporation will be effected), the term "other consideration to be
received" shall include (without limitation) Common Shares and/or the shares of
any other class of shares retained by shareholders of the Corporation other
than Related Persons who are parties to such Business Combination;
<PAGE>
(b) The consideration to be received in such Business Combination by
holders of each class or series of capital shares other than the Related
Person involved shall, except to the extent that a shareholder agrees
otherwise as to all or part of the shares which he or she owns, be in the
same form and of the same kind as the consideration paid by the Related
Person in acquiring the majority of the capital shares of such class or series
already Beneficially Owned by it within the two-year period ending on the
Determination Date;
(c) After such Related Person became a Related Person and prior to
the consummation of such Business Combination: (i) such Related Person shall
have taken steps to insure that the Board of Directors of the Corporation
included at all times representation by Continuing Directors proportionate to
the ratio that the number of Voting Shares of the Corporation from time to time
not Beneficially Owned by the Related Person bears to all Voting Shares of
the Corporation outstanding at the time in question (with a Continuing
Director to occupy any resulting fractional position among the Directors); (ii)
such Related Person shall not have acquired from the Corporation, directly
or indirectly, any shares of the Corporation (except upon conversion of
convertible securities acquired by it prior to becoming a Related Person or
as a result of a pro rata share dividend, share split or division of shares
or in a transaction that satisfied all applicable requirements of this
Article X); (iii) such Related Person shall not have acquired any additional
Voting Shares of the Corporation or securities convertible into or exchangeable
for Voting Shares except as a part of the transaction which resulted in
such Related Person's becoming a Related Person; and (iv) such Related
Person shall not have received the benefit, directly or indirectly (except
proportionately as a shareholder), of any loans, advances, guarantees,
pledges or other financial assistance or tax credits provided by the
Corporation or any Subsidiary, or made any major change in the Corporation's
business or equity capital structure or entered into any contract, arrangement
<PAGE>
or understanding with the Corporation except any such change, contract,
arrangement or understanding as may have been approved by the favorable vote
of not less than a majority of the Continuing Directors of the Corporation;
and
(d) A proxy statement complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations of the
Securities and Exchange Commission thereunder, as then in force for
corporations subject to the requirements of Section 14 of such Act (even if the
Corporation is not otherwise subject to Section 14 of such Act), shall have
been mailed to all holders of Voting Shares for the purpose of soliciting
shareholder approval of such Business Combination. Such proxy statement shall
contain on the face page thereof, in a prominent place, any recommendations as
to the advisability (or inadvisability) of the Business Combination which the
Continuing Directors, or any of them, may have furnished in writing and, if
deemed advisable by a majority of the Continuing Directors, a fair summary of
an opinion of a reputable investment banking firm addressed to the
Corporation as to the fairness (or lack of fairness) of the terms of such
Business Combination from the point of view of the holders of Voting Shares
other than any Related Person (such investment banking firm to be selected
by a majority of the Continuing Directors, to be furnished with all
information it reasonably requests, and to be paid a reasonable fee for its
services upon receipt by the Corporation of such opinion).
Section 3. Director Approval Exception. The provisions of Sections 1 and
2 of this Article X shall not apply to, and such votes shall not be
required, if:
(a) The Continuing Directors of the Corporation by a two-thirds vote
(i) have expressly approved a memorandum of understanding with the Related
Person with respect to the Business Combination prior to the time the Related
Person became a Related Person, or (ii) have otherwise approved the Business
<PAGE>
Combination (this provision is incapable of satisfaction unless there is at
least one Continuing Director); or
(b) The Business Combination is solely between the Corporation and
another corporation, 100 percent of the Voting Shares of which are owned
directly or indirectly by the Corporation.
Section 4. Definitions. For the purpose of this Article X:
(a) A "Business Combination" means:
(i) the sale, exchange, lease, transfer or other disposition to
or with a Related Person or any Affiliate or Associate of such
Related Person by the Corporation or any of its Subsidiaries (in a
single transaction or a Series of Related Transactions) of all or
substantially all, or any Substantial Part, of its or their assets or
businesses (including, without limitation, any securities issued by
a Subsidiary);
(ii) The purchase, exchange, lease or other acquisition by the
Corporation or any of its Subsidiaries (in a single transaction
or a Series of Related Transactions) of all or substantially all,
or any Substantial Part, of the assets or business of a Related
Person or any Affiliate or Associate of such Related Person;
(iii) Any merger or consolidation of the Corporation or any
Subsidiary thereof into or with a Related Person or any Affiliate
or Associate of such Related Person or into or with another Person which,
after such merger or consolidation, would be an Affiliate or an
Associate of a Related Person, in each case irrespective of
which Person is the surviving entity in such merger or
consolidation;
<PAGE>
(iv) Any reclassification of securities, recapitalization or other
transaction (other than a redemption in accordance with the
terms of the security redeemed) which has the effect, directly or
indirectly, of increasing the proportionate amount of Voting Shares of
the Corporation or any Subsidiary thereof which are
Beneficially Owned by a Related Person, or any partial or complete
liquidation, spin-off, split-off or split-up of the Corporation or
any Subsidiary thereof; provided, however, that this
Section 4(a)(iv) shall not relate to any transaction of the types
specified in this Article X that has been approved by a majority of the
Continuing Directors; or
(v) The acquisition upon the issuance thereof of Beneficial
Ownership by a Related Person of Voting Shares or securities convertible
into Voting Shares or any voting securities or securities convertible
into voting securities of any Subsidiary of the Corporation,
or the acquisition upon the issuance thereof of Beneficial Ownership
by a Related Person of any rights, warrants or options to acquire
any of the foregoing or any combination of the foregoing Voting Shares
or voting securities of the Subsidiary.
(b) A "Series of Related Transactions" shall be deemed to include not
only a series of transactions with the same Related Person but
also a series of separate transactions with a Related Person or any
Affiliate or Associate of such Related Person.
(c) A "Person" shall mean any individual, firm, corporation or other
entity and any partnership, syndicate or other group.
(d) "Related Person" shall mean any Person (other than the Corporation
or any of the Corporation's Subsidiaries) who or that:
<PAGE>
(i) is the Beneficial Owner, directly or indirectly, of more
than ten percent of the voting power of the outstanding Voting
Shares;
(ii) is an Affiliate of the Corporation and at any time within
the two-year period immediately prior to the date in question was
the Beneficial Owner, directly or indirectly, of ten percent or
more of the voting power of the then outstanding shares of Voting
Shares; or
(iii) is an assignee of or has otherwise succeeded to any Voting
Shares which were at any time within the two-year period
immediately prior to the date in question beneficially owned by any
Related Person, if such assignment or succession shall have occurred
in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities
Act of 1933.
A Related Person shall be deemed to have acquired a share of the
Corporation at the time when such Related Person became the Beneficial Owner
thereof. For the purposes of determining whether a Person is the Beneficial
Owner of ten percent or more of the voting power of the then outstanding Voting
Shares, the outstanding Voting Shares shall be deemed to include any Voting
Shares that may be issuable to such Person pursuant to a right to acquire
such Voting Shares and that is therefore deemed to be Beneficially Owned by
such Person pursuant to Section 4(e)(ii)(a). A Person who is a Related Person
at (i) the time any definitive agreement relating to a Business Combination is
entered into, (ii) the record date for the determination of shareholders
entitled to notice of and to vote on a Business Combination, or (iii) the
time immediately prior to the consummation of a Business Combination, shall
be deemed a Related Person.
<PAGE>
(e) A Person shall be a "Beneficial Owner" of any Voting Shares:
(i) which such Person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(ii) which such Person or any of its Affiliates or Associates
has (a) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (b) the right to vote pursuant to any agreement, arrangement
or understanding; or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of its Affiliates
or Associates has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any
Voting Shares.
(f) An "Affiliate" of, or a person Affiliated with, a specific
Person, means a Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
the Person specified.
(g) The term "Associate" used to indicate a relationship with any
Person, means (i) any corporation or organization (other than this Corporation
or a majority-owned Subsidiary of this Corporation) of which such Person is
an officer or partner or is, directly or indirectly, the Beneficial Owner of
five percent or more of any class of equity securities, (ii) any trust or other
estate in which such Person has a substantial beneficial interest or as to
which such Person serves as trustee or in a similar fiduciary capacity, (iii)
<PAGE>
any relative or spouse of such Person, or any relative of such spouse, who has
the same home as such Person, or (iv) any investment company registered under
the Investment Company Act of 1940, for which such Person or any Affiliate of
such Person serves as investment advisor.
(h) "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition of
Related Person set forth in paragraph (d) of this Section 4, the term
"Subsidiary" shall mean only a corporation of which a majority of each class
of equity security is owned, directly or indirectly, by the Corporation.
(i) "Continuing Director" means any member of the Board of Directors
of the Corporation (the "Board"), other than the Related Person who proposes
the Business Combination in question and his Affiliates and Associates, who
(i) is a member of the Board at the time this Article X first became effective
or (ii) was a member of the Board prior to the time that the Related Person who
proposes the Business Combination in question became a Related Person or
(iii) is a successor of a Continuing Director who was recommended to
succeed the Continuing Director by a majority of Continuing Directors then
on the Board.
(j) "Independent Majority of Shareholders" shall mean the holders of a
majority of the outstanding Voting Shares that are not Beneficially Owned or
controlled, directly or indirectly, by the Related Person who proposes the
Business Combination in question.
(k) "Voting Shares" shall mean all outstanding capital shares of the
Corporation or another corporation entitled to vote generally in the election
of Directors, and each reference to a proportion of shares of Voting Shares
shall refer to such proportion of the votes entitled to be cast by such
shares.
<PAGE>
(l) "Substantial Part" means properties and assets involved in any
single transaction or a Series of Related Transactions having an aggregate
fair market value of more than ten percent of the total consolidated assets
of the Person in question as determined immediately prior to such transaction
or Series of Related Transactions.
Section 5. Director Determinations. A majority of the Continuing
Directors shall have the power to determine for the purposes of this Article X,
on the bases of information known to them: (i) the number of Voting Shares of
which any Person is the Beneficial Owner, (ii) whether a Person is an Affiliate
or Associate of another, (iii) whether a Person has an agreement, arrangement or
understanding with another as to the matters referred to in the definition of
"Beneficial Owner," (iv) whether the assets subject to any Business Combination
constitute a Substantial Part, (v) whether two or more transactions constitute a
Series of Related Transactions, and (vi) such other matters with respect to
which a determination is required under this Article X.
In connection with the exercise of its judgment in determining what is in
the best interests of the Corporation and its shareholders when evaluating a
business combination or a proposal by another Person or Persons to make a
business combination or a tender or exchange offer (regardless of whether such
proposal is otherwise subject to this Article X), the Board of Directors of the
Corporation shall, in addition to considering the adequacy of the consideration
to be paid in connection with any such transaction, consider all of the
following factors and any other factors that it deems relevant: (i) the social
and economic effects of the transaction on the Corporation and its Subsidiaries,
employees, depositors, loan and other customers, creditors and other elements of
the communities in which the Corporation and its Subsidiaries operate or are
located; (ii) the business and financial condition and earnings prospects of
the acquiring Person or Persons, including, but not limited to, debt service and
other existing or likely financial obligations of the acquiring Person or
<PAGE>
Persons and their Affiliates and Associates, and the possible effect of such
conditions upon the Corporation and its Subsidiaries and the other elements of
the communities in which the Corporation and its Subsidiaries operate or are
located; and (iii) the competence, experience, and integrity of the acquiring
Person or Persons and its or their management and Affiliates and Associates.
Section 6. Fiduciary Obligations Unaffected. Nothing in this Article X
shall be construed to relieve any Related Person from any fiduciary duty imposed
by law.
<PAGE>
May 1, 1998
Mr. James E. Essany
German American Bancorp
711 Main Street
P O Box 810
Jasper, IN 47547-0810
RE: Incentive Stock Option Agreement
Dear Mr. Essany:
The Stock Option Committee of the Board of Directors of
German American Bancorp (the _Corporation_ ), pursuant to
section 7 of the GAB Bancorp 1992 Stock Option Plan (the
_ Plan_ ), hereby grants to you, in replacement of a portion
of the shares covered by your options dated April 20, 1993
and January 15, 1997, which has been exercised in part as of
this date, a replacement option (the _Option_ ), which
Option shall have the following terms and conditions, in
addition to those provided in the Plan:
1. NumberseofPrShares:e$31.1,155ershares,,e subjectteto
adjustmentdassprovidedpinethetPlan.
0e noon,atJasper
time,eonoAprilf19,o2003.
he date of this Option, and
shall be cancel
The Option, which is intended to qualify as an
_ incentive stock option_ within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended, shall be
in all respects limited and conditioned as provided in the
Plan. A copy of the Plan is enclosed with this letter.
During your lifetime, the Option will be exercisable only by
you. Neither the Option nor any right thereunder may be
transferred other than by will or the laws of descent and
distribution. Exercise of the Option shall be subject to
your making the representations set forth below and any
representations to such other matters as the Committee, in
its discretion, may determine to be necessary or advisable
to evidence compliance with requirements under the
Securities Act of 1933, as amended, or state securities laws
for registering or exempting from registration any offer of
sale of the Corporation's securities pursuant to the Plan.
Exhibit 10.1
This letter, upon your delivery of an executed copy to
the Corporation, shall constitute a binding incentive stock
option agreement between your the Corporation.
Very truly yours,
GERMAN AMERICAN BANCORP
BY THE STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS
BY:
By/s/Joseph F. Steurer
Chairman of the Stock Option
Committee
ACKNOWLEDGMENT AND AGREEMENT
I hereby acknowledge receipt of this letter granting me
the above Option as well as receipt of a copy of the Plan,
and I acknowledge and agree to be bound by the following:
1. I have received a copy of the Plan and agree to be
bound by the terms and conditions set for the therein.
2. The Common Shares subject to the Option are being
offered pursuant to the _ private offering_ exemption
provided by Section 4(2) of the Securities Act of 1933, as
amended (the _ 1933 Act_ ). In that connection, I agree
that I will acquire Common Shares pursuant to this Option
for investment purposes for my own account without any view
to redistribute them to others. Further, I agree not to
sell, pledge, hypothecate, or otherwise transfer Common
Shares acquired pursuant to the Option except upon delivery
to the Corporation of an opinion of counsel or such other
evidence as may be satisfactory to the Corporation that such
transfer is exempt from registration under the 1933 Act, as
amended, applicable state securities laws, or any rule or
regulation promulgated thereunder.
3. The certificates evidencing the Common Shares,
including both originally and subsequently issued
certificates, will bear a restrictive legend substantially
as follows:
The Common Shares represented by this certificate
have not been registered under the Securities Act
of 1933, as amended, or the securities laws of any
state and have been acquired in a private
offering. Sales, pledges, hypothecations, and
other transfers of the Common may be made only
upon delivery to the Corporation of an opinion of
counsel or other evidence satisfactory to the
Corporation that such transfer is exempt from
registration under the Securities Act of 1933, as
amended, applicable state securities laws, or any
rule or regulation promulgated thereunder.
4. The Corporation will issue instructions to
its transfer agent, Fifth Third Bank, not to honor
request for transfer of Common Shares issued subject to
the Option, whether or not evidenced by originally or
subsequently issued certificates, unless the conditions
set forth in the preceding legend have been satisfied.
EXECUTED the 1st day of May, 1998.
By/s/James E. Essany
James E. Essany
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