SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant: Yes.
Filed by a Party other than the Registrant: No.
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as Permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
FIRST FINANCIAL CORPORATION
(Name Of Registrant As Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
(1) Title of each class of securities to which transaction
applies: N/A
(2) Aggregate number of securities to which transaction
applies: N/A
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing. N/A
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO] FIRST FINANCIAL CORPORATION
One First Financial Plaza
P.O. Box 540
Terre Haute, Indiana 47808
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held April 16, 1997
Notice is hereby given that, pursuant to the call of its Directors, an
Annual Meeting of Shareholders of First Financial Corporation ("Corporation")
will be held on April 16, 1997 at 11:00 o'clock a.m., local time, at One First
Financial Plaza, Terre Haute, Indiana.
The purposes of the meeting are:
(1) To elect the Board of Directors of the Corporation. If the
proposal described in Item (3) below is adopted by the
shareholders, the nominees will be elected in two classes of
five nominees each and one class of four nominees, with one
class having an initial term of one year, the second class
having an initial term of two years, and the third class
having an initial term of three years. If the proposal in Item
(3) below is not adopted, all nominees will be elected for a
term of one year.
(2) To adopt an amendment to the Corporation's Articles of
Incorporation increasing the authorized shares of Common Stock
from 10,000,000 to 40,000,000.
(3) To adopt an amendment to the Corporation's Articles of
Incorporation providing for the classification of the
Corporation's Board of Directors into three classes, setting
the number of directors at between 5 and 20, and providing
that vacancies on the Board of Directors may be filled for the
remainder of any unexpired term by a majority vote of
directors in office.
(4) To adopt an amendment to the Corporation's Articles of
Incorporation providing that directors may be removed only for
cause and only by the affirmative vote of at least 66 2/3% of
the shares eligible to vote for directors.
(5) To adopt an amendment to the Corporation's Articles of
Incorporation providing that special meetings of shareholders
may only be called by the Chairman or a majority of the
directors of the Corporation.
(6) To adopt an amendment to the Corporation's Articles of
Incorporation authorizing 10,000,000 shares of preferred
stock.
(7) To adopt an amendment to the Corporation's Articles of
Incorporation enumerating factors the Board may consider in
evaluating offers to acquire the Corporation.
(8) To adopt an amendment to the Corporation's Articles of
Incorporation to add a "fair price business combination"
provision.
(9) To adopt an amendment to the Corporation's Articles of
Incorporation to require a 66 2/3% vote of shareholders to
amend certain provisions of the Corporation's Articles of
Incorporation.
(10) To adopt an amendment to the Corporation's Articles of
Incorporation limiting the liability of directors and
indemnifying officers, directors, employees and agents of the
Corporation, to the extent permitted by Indiana law.
(11) To adopt other amendments to the Corporation's Articles of
Incorporation consistent with Indiana law.
(12) To transact such other business as may properly be presented
at the meeting.
<PAGE>
Some of the items to be voted on may have an "anti-takeover" effect.
Therefore, you are urged to read carefully the accompanying Proxy Statement.
Your Board of Directors recommends unanimously that you vote FOR the adoption of
the above proposals.
Only shareholders of record at the close of business on March 7, 1997,
will be entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
/s/ DONALD E. SMITH
DONALD E. SMITH
Chairman of the Board and President
March 25, 1997
IMPORTANT--PLEASE MAIL YOUR PROXY PROMPTLY
IN ORDER THAT THERE MAY BE PROPER REPRESENTATION AT THE
MEETING, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES
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<PAGE>
PROXY STATEMENT OF
FIRST FINANCIAL CORPORATION
One First Financial Plaza
P.O. Box 540
Terre Haute, Indiana 47808
(812) 238-6000
------------
ANNUAL MEETING OF SHAREHOLDERS
to be held April 16, 1997
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of First Financial Corporation (the "Corporation") of
proxies for use at an Annual Meeting of Shareholders of the Corporation to be
held on April 16, 1997 at 11:00 a.m. at One First Financial Plaza, Terre Haute,
Indiana, and at any and all adjournments of such meeting. This Proxy Statement
and accompanying form of proxy were first mailed to the shareholders on or about
March 25, 1997.
The Corporation is a multi-bank holding company which owns Terre Haute
First National Bank ("Terre Haute First"), First State Bank, First Citizens
State Bank, First Farmers State Bank, First Ridge Farm State Bank, First Parke
State Bank, First National Bank of Marshall and First Crawford State Bank.
Only shareholders of record as of March 7, 1997, will be entitled to
notice of, and to vote at, the Annual Meeting. As of March 1, 1997 the
Corporation had issued and outstanding 6,681,876 shares of common stock, which
were held by approximately 1,130 shareholders of record. There are no other
outstanding securities of the Corporation entitled to vote.
For the matter to be voted on at this Annual Meeting, each share is
entitled to one vote, exercisable in person or by proxy. Approval of a plurality
of the votes cast at the meeting, assuming a quorum is present, is required for
election of each nominated director. Action on any other matters to come before
the meeting, except as otherwise provided herein, must be approved by an
affirmative vote of a majority of the shares present, in person, or by proxy.
Abstentions, broker non-votes, and instructions on the accompanying proxy card
to withhold authority to vote for one or more of the named nominees will result
in the respective nominee receiving fewer votes.
The cost of soliciting proxies will be borne by the Corporation. In
addition to use of the mails, proxies may be solicited personally or by
telephone by officers, directors and certain employees who will not be specially
compensated for such soliciting.
Any shareholder giving a proxy has the right to revoke it at any time
before it is exercised. Therefore, execution of the proxy will not affect the
shareholder's right to vote in person if he or she attends the meeting.
Revocation may be made prior to the meeting (i) by written notice sent to John
W. Perry, Secretary, First Financial Corporation, One First Financial Plaza,
P.O. Box 540, Terre Haute, Indiana 47808, (ii) personally upon oral or written
request at the Annual Meeting, or (iii) by duly executing a proxy bearing a
later date.
The shares represented by proxies will be voted as instructed by the
shareholders giving the proxies. In the absence of specific instructions to the
contrary, proxies will be voted in favor of the election as directors of the
fourteen (14) persons named as nominees in this Proxy Statement and of all of
the proposals relating to the Corporation's Articles of Incorporation. If for
any reason any of the director/nominees becomes unable or is unwilling to serve
at the time of the meeting (an event which the Board of Directors does not
anticipate), the persons named as proxies in the accompanying form of proxy will
have discretionary authority to vote for a substitute nominee or nominees named
by the Board of Directors if the Board of Directors elects to fill such
nominees' positions. Any other matters that may properly come before the meeting
will be acted upon by the persons named as proxies in the accompanying form of
proxy in accordance with their discretion.
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<PAGE>
PROPOSAL I: ELECTION OF DIRECTORS
Fourteen (14) directors will be elected at the Annual Meeting. If
Proposal III which relates to an amendment of the Corporation's Articles of
Incorporation providing for the classification of the Corporation's Board of
Directors, is adopted by the shareholders, the Board of Directors will consist
of three classes holding the terms of office indicated below. If Proposal III is
not adopted, all fourteen (14) nominees will be nominated to serve for one-year
terms, until the next Annual Meeting and until his or her successor is elected
and qualified:
Class I (one-year term) Walter A. Bledsoe
Max L. Gibson
William A. Niemeyer
Donald E. Smith
Class II (two-year term) B. Guille Cox, Jr.
Anton H. George
Gregory L. Gibson
John W. Ragle
Virginia L. Smith
Class III (three-year term) Thomas T. Dinkel
Mari H. George
Norman L. Lowery
Patrick O'Leary
Chapman J. Root II
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<PAGE>
For each of the fourteen (14) nominees for director listed below there is a
brief summary of his or her present principal occupation, other business
experience during the last five years, age, and the year such individual first
became a director.
<TABLE>
<CAPTION>
Title or
Year Became Position with Principal Occupation
Name and Age a Director Corporation for the Last Five Years
------------ ---------- ----------- -----------------------
<S> <C> <C> <C>
Walter A. Bledsoe, 81 1983* Director Personal Investments
B. Guille Cox, Jr., 51 1987 Director Attorney-At-Law with Cox
Zwerner Gambill & Sullivan
Thomas T. Dinkel, 46 1989 Director President of Sycamore
Engineering, Inc.
Anton H. George, 37 1987 Director President of Indianapolis Motor
Speedway Corp.; Director
of Indiana Energy, Inc.
Mari H. George, 62 1989 Director Chairman of Indianapolis Motor
Speedway Corp.
Gregory L. Gibson, 34 1994 Director President of ReTec, Inc.
Max L. Gibson, 56 1983* Director President of Majax Company;
Director, IPALCO, Inc.
Norman L. Lowery, 50 1989 Vice-Chairman President of Terre Haute First
of the Board (effective January 1, 1996);
Attorney-At-Law with Wright
Shagley & Lowery through 1995
William A. Niemeyer, 74 1983* Director President of Niemeyer Coal Co.
Patrick O'Leary, 60 1983* Director President of Contract Services, LLC
John W. Ragle, 70 1983* Director President of Ragle & Company, Inc.
Chapman J. Root, II, 47 1989 Director President of Root Company;
Director of International
Speedway Corp.
Donald E. Smith, 70 1983* Chairman of the President of Terre Haute First
Board and President and First Financial Corporation
through 1995; Director of
Southern Indiana Gas and
Electric Company
Virginia L. Smith, 49 1987 Director President of R.J. Oil Co., Inc.
</TABLE>
- -----------
* First Financial Corporation was formed in 1983.
Additional Information Concerning Board of Directors
Attendance at Meetings. During 1996, the Board of Directors of the
Corporation held 12 regular meetings and a total of 19 meetings. No director
standing for re-election attended fewer than 75% of the aggregate number of
Board meetings and meetings on committees on which he or she served, except Mr.
George, Mr. Root and Mrs. George, who attended 60%, 50% and 40% of such
meetings, respectively.
Certain Relationships. Certain family relationships exist among the
directors of the Corporation. Donald E. Smith is the father of Virginia L. Smith
and father-in-law of Norman L. Lowery. Mari H. George is the mother of Anton H.
George. Max L. Gibson is the father of Gregory L. Gibson. There are no
arrangements or understandings between any of the directors pursuant to which
any of them have been selected for their respective positions.
-5-
<PAGE>
Committees. The Board of Directors had no standing nominating or any
committee performing similar functions during 1996; such functions are performed
by the Board of Directors as a whole.
The Corporation's Examining Committee, which consists of John W. Ragle,
Max Gibson, and Patrick O'Leary, reviews the Corporation's accounting functions,
operations and management and the adequacy and effectiveness of the internal
controls and internal auditing methods and procedures. This Committee recommends
to the Board the appointment of the independent public accountants for the
Corporation. This Committee met twice during 1996.
The Corporation's Compensation Committee, which consists of Messrs.
O'Leary, Smith, M. Gibson, Niemeyer, A. George, and Lowery, overviews the
compensation of the officers of subsidiary banks and recommends salaries and
bonus amounts to the full Board of Directors. Such Committee met four times in
1996.
Compensation of Directors. Directors of the Corporation received a fee
of $100 per meeting during 1996 if the meeting was held as a joint meeting with
the Board of Directors of Terre Haute First. Only one meeting of the Board of
Directors of the Corporation was not held as a joint meeting with the Board of
Directors of Terre Haute First during 1996. For meetings of the Board of
Directors of the Corporation which were not joint meetings with the Board of
Directors of Terre Haute First, directors received a fee of $500 per such
meeting attended.
Directors of Terre Haute First, a wholly-owned banking subsidiary of
the Corporation, received a fee in 1996 of $500 for each meeting attended and a
semi-annual fee of $2,300. In addition, Directors of Terre Haute First, other
than those employed by Terre Haute First, received a fee of $300 for each Loan
Discount Committee meeting attended. Directors of Terre Haute First that are not
yet seventy (70) have the option of participating in a deferred director's fee
program, pursuant to which each year, for five years, $6,000 of Director's fees
are deferred until the participant reaches the age of sixty-five (65) or seventy
(70), at which point the Director may elect to receive payments over a ten year
period. For 1996, the allocated cost of the deferred Director's fees was
$142,216, which is funded by Terre Haute First with insurance products.
Directors of First State Bank, a wholly-owned banking subsidiary of the
Corporation, received a fee of $200 for each meeting attended.
Directors of First Citizens State Bank, a wholly-owned banking
subsidiary of the Corporation, received a fee of $300 for each meeting attended.
Directors of First Farmers State Bank, a wholly-owned banking
subsidiary of the Corporation, received a fee of $200 for each meeting attended.
Directors of First Ridge Farm State Bank, a wholly-owned banking
subsidiary of the Corporation, received a fee of $200 for each meeting attended.
Directors of First Parke State Bank, a wholly-owned banking subsidiary
of the Corporation, received a fee of $200 for each meeting attended.
Directors of First National Bank of Marshall, a wholly-owned banking
subsidiary of the Corporation, received a fee of $325 for each meeting attended.
Directors of First Crawford State Bank, a wholly-owned banking
subsidiary of the Corporation, received a fee of $500 for each meeting attended.
EXECUTIVE OFFICERS OF THE CORPORATION
The executive officers of the Corporation, all of whom serve for a one
year term, consist of Donald E. Smith, Chairman of the Board and President;
Norman L. Lowery, Vice Chairman; John W. Perry, Secretary; Michael A. Carty,
Treasurer; and W. Edward Jukes, Chief Credit Officer. Mr. Perry, age
fifty-three, was Treasurer of the Corporation from 1983 through 1990 and has
been Secretary from 1990 through the present. For the past ten years, Mr.
Perry's principal occupation has been as the Senior Vice President of Terre
Haute First. Mr. Carty, age forty-six, has been Senior Vice President of Terre
Haute First since 1990 and was Vice President of Terre Haute First from 1983
until 1990. Mr. Jukes, age fifty-four, has been Senior Vice President of Terre
Haute First since 1989. For additional information concerning Messrs. Smith and
Lowery, see "PROPOSAL I: ELECTION OF DIRECTORS."
-6-
<PAGE>
COMPENSATION OF OFFICERS
Compensation Committee Report
Decisions on compensation of the Corporation's executives are made by
the Compensation Committee of the Board, which also serves as the Compensation
Committee of Terre Haute First. Each member of the Compensation Committee,
except Mr. Smith and Mr. Lowery, was a non-employee director. All decisions of
the Compensation Committee relating to the compensation of the Corporation's
executive officers are reviewed by the full Board. Pursuant to rules of the
Securities and Exchange Commission designed to enhance disclosure of corporation
policies toward executive compensation, set forth below is a report submitted by
Messrs. O'Leary (Chairman), Smith, Gibson, Niemeyer, A. George and Lowery in
their capacity as the Board's Compensation Committee addressing the
Corporation's compensation policies for 1996 as they affected Mr. Smith and
Messrs. Lowery, Perry, Jukes and Carty, the other executive officers other than
Mr. Smith who, for 1996, were the Corporation's most highly paid executive
officers whose total annual salary and bonus exceeded $100,000.
Compensation Policies Toward Executive Officers. The Compensation
Committee's executive compensation policies are designed to provide competitive
levels of compensation to the executive officers and to reward officers for
satisfactory individual performance and for satisfactory performance of the
Corporation as a whole. There are no established goals or standards relating to
performance of the Corporation which have been utilized in setting compensation
of individual employees.
Base Salary. Each executive officer is reviewed individually by the
Compensation Committee, which review includes an analysis of the performance of
the Corporation and Terre Haute First. In addition, the review includes, among
other things, an analysis of the individual's performance during the past fiscal
year, focusing primarily upon the following aspects of the individual's job or
characteristics of the individual exhibited during the most recent fiscal year:
quality and quantity of work; supervisory skills; dependability; initiative;
attendance; overall skill level; and overall value to the Corporation.
Annual Bonus Amounts. The Compensation Committee determines whether a
bonus should be paid based primarily upon the overall performance of the
Corporation. For 1996, Mr. Smith received a bonus of $115,000 and Messrs.
Lowery, Perry, Jukes and Carty each received a bonus, equal to 10.0% of their
salary, of $20,000, $13,707, $10,891, and $9,291, respectively.
Other Compensation Plans. At various times in the past the Corporation
has adopted certain broad-based employee benefit plans in which the executive
officers are permitted to participate on the same terms as other corporation
employees who meet applicable eligibility criteria, subject to any legal
limitations on the amount that may be contributed or the benefits that may be
payable under the plans.
Benefits. The Corporation provides medical and pension benefits to the
executive officers that are generally available to other Corporation employees.
The amount of perquisites, as determined in accordance with the rules of the
Securities and Exchange Commission relating to executive compensation, did not
exceed 10% of salary and bonus for fiscal 1996.
Mr. Smith's 1996 Compensation. Regulations of the Securities and
Exchange Commission require that the Compensation Committee disclose the
Committee's basis for compensation reported for Mr. Smith in 1996. Mr. Smith's
salary and bonus are determined in the same manner as discussed above for other
executives, except that $75,000 of Mr. Smith's $115,000 bonus was made in
connection with an employment agreement providing for a split-dollar life
insurance arrangement between the Corporation, Terre Haute First and Mr. Smith.
The Compensation Committee believes that Mr. Smith has managed the Corporation
well.
Members of the 1996 Compensation Committee
------------------------------------------
Anton H. George Max L. Gibson Norman L. Lowery
William A. Niemeyer Patrick O'Leary Donald E. Smith
Compensation Committee Insider Participation
During the past fiscal year, Mr. Smith, the Chief Executive Officer,
and Mr. Lowery, the Vice- Chairman, served on the Compensation Committee but did
not participate in any discussion or voting with respect to the salaries or
bonuses of either Mr. Smith or Mr. Lowery. Moreover, Mr. Smith and Mr. Lowery
excused themselves from the room during the discussion by the Compensation
Committee of the compensation of both Mr. Smith and Mr. Lowery.
-7-
<PAGE>
Summary Compensation Table
The following table sets forth for the fiscal years ending December 31,
1996, 1995, and 1994 the cash compensation paid by the Corporation, as well as
certain other compensation paid or awarded during those years, to the Chief
Executive Officer and any other executive officer whose total annual salary and
bonus exceeded $100,000 during the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
Name and Principal Annual Compensation (1) All Other
Position Year Salary Bonus (2) Compensation (3)
- ------------------------ ---- -------- --------- ----------------
<S> <C> <C> <C> <C>
Donald E. Smith 1996 $274,148 $115,000 $ 9,188(4)
President, CEO and 1995 $263,604 $115,000 $14,997
Chairman 1994 $253,465 $ 40,000 $36,144
Norman L. Lowery 1996 $200,000 $ 20,000 $15,395
Vice Chairman (5)
John W. Perry 1996 $137,075 $ 13,707 $ 1,247(4)
Secretary 1995 $131,801 $ 12,673 $ 8,643
1994 $126,732 $ 12,673 $ 8,083
W. Edward Jukes 1996 $108,912 $ 10,891 $ 1,394(4)
Chief Credit Officer 1995 $104,723 $ 10,069 $ 7,185
1994 $100,695 $ 10,069 $ 6,844
Michael A. Carty 1996 $ 92,964 $ 9,296 $ 354(4)
Treasurer 1995 $ 89,389 $ 8,595 $ 5,127
1994 $ 85,951 $ 8,595 $ 4,880
</TABLE>
- ---------------
(1) While officers enjoy certain perquisites, such perquisites do not
exceed the lesser of $50,000 or 10% of such officer's salary and bonus
and are not required to be disclosed by applicable rules of the
Securities and Exchange Commission.
(2) The bonus amounts are payable pursuant to determinations made by the
Compensation Committee of the Corporation, as described in the
"Compensation Committee Report."
(3) These amounts include Corporation payments for the years noted on
behalf of the above-named individuals (except Mr. Smith) pursuant to a
life insurance program ("Life Insurance Program") for the executive
officers of Terre Haute First. Under the Life Insurance Program, Terre
Haute First purchased a life insurance policy on behalf of each
executive officer of Terre Haute First. The policy is owned by the
individual and will be paid at age 65 for those presently 55 or older,
and at age 60 for those who are less than 55 years of age. The annual
cost of this insurance for those reported (except for Mr. Smith) was as
follows: $4,395 for Mr. Lowery; $1,247 for Mr. Perry; $1,394 for Mr.
Jukes; and $354 for Mr. Carty. Mr. Smith no longer participates in the
group term life insurance policy of the Corporation (which coverage
would terminate upon his retirement). The Corporation paid for its
portion of a separate split-dollar life insurance policy for Mr. Smith
in 1996, which will continue to be in effect following his retirement
as an executive officer of the Corporation and Terre Haute First. In
1996, the dollar value of the benefit to Mr. Smith of the premium paid
by the Corporation and Terre Haute First in connection with such
policy, which was issued pursuant to an Employment Agreement between
the Corporation, Terre Haute First, and Mr. Smith, was $9,188 (which
amount is included in the amount reported for Mr. Smith above). The
Corporation expects to recover the premiums it pays for this
split-dollar policy from the proceeds of such policy. Because Mr.
Lowery was not eligible for the ESOP in 1996, a non-qualified deferred
compensation program was established. Contributions of $11,000 were
made in 1996 to this non-qualified plan on behalf of Mr. Lowery.
(4) Allocations to the named individual's respective account in the
Corporation's Employee Stock Ownership Plan ("ESOP") for 1996, which
are properly includable in this column, were not calculable as of the
date of this Proxy Statement. Such amounts for 1995 were as follows:
$7,216 for Mr. Smith; $7,216 for Mr. Perry; $5,791 for Mr. Jukes and
$4,773 for Mr.
Carty.
(5) Did not become an executive officer of the Corporation until January 1,
1996.
-8-
<PAGE>
Employee Benefit Plans
Employee Stock Ownership Plan. The Corporation sponsors the First
Financial Corporation Employee Stock Ownership Plan ("ESOP") and the First
Financial Corporation Employees' Pension Plan ("Pension Plan") for the benefit
of substantially all of the employees of the Corporation and its subsidiaries.
As discussed below, these plans constitute a "floor-offset" retirement program.
The Pension Plan is a defined benefit "floor" plan which provides each
participant with a minimum benefit or "floor" which is offset by the benefit
provided by the ESOP. Thus, if a participant's benefit under the ESOP is
insufficient to fund the minimum "floor" of benefits specified by the Pension
Plan, the Pension Plan will make up the difference. If a participant's benefit
under the ESOP is higher than the minimum or "floor" benefit under the Pension
Plan, the participant receives the higher benefit under the ESOP.
All employees of the Corporation and its subsidiaries become
participants in the ESOP after completing one year of service for the
Corporation or its subsidiaries and attaining age 21. Under the terms of the
ESOP, the Corporation or its subsidiaries, as participating employers, may
contribute Corporation common stock to the ESOP or contribute cash to the ESOP
which will be primarily invested in the Corporation's common stock. The amount
of contributions, when they are made, is determined by the Board of Directors of
the Corporation. No participant contributions are required or allowed under the
ESOP.
For a discussion of the forms in which benefits may be distributed
under the ESOP, see the discussion under "Defined Benefit Plan" below.
Participants have the right to direct the voting of the shares of the
Corporation's stock allocated to their accounts under the ESOP on all corporate
matters.
For the year ended December 31, 1996, the Corporation contributed to
the ESOP $600,000 in Corporation stock. The stock will be allocated to the
individual ESOP accounts of the participants effective as of December 31, 1996,
although no allocation to the individual accounts had been made or calculated as
of the date of mailing of this Proxy Statement.
Defined Benefit Plan. As described above, the Pension Plan was adopted
in conjunction with, but is separate from, the ESOP. Employees become
participants in the Pension Plan after completing one year of service for the
Corporation or its subsidiaries and attaining age 21. All employees of the
Corporation and its subsidiaries are eligible to become participants. No
participant contributions are required or allowed under the Pension Plan. The
Pension Plan, in conjunction with the ESOP, is designed to provide participants
with a minimum retirement benefit.
The monthly guaranteed minimum benefit under the Pension Plan is
reduced by the monthly benefit derived from the participant's vested portion of
his ESOP account balance, calculated by the actuary for the Pension Plan as a
single life annuity. The normal retirement benefit will begin at age 65 and be
paid monthly for as long as the participant lives.
The normal form of retirement benefit under the ESOP and Pension Plan
is a monthly life annuity. A married participant will receive an actuarially
equivalent joint and 50% survivor annuity (a monthly payment for the
participant's life with the surviving spouse receiving 50% of that amount for
life), unless the participant otherwise elects and the participant's spouse
consents to such election. A participant may also elect to receive his
retirement income from the ESOP and Pension Plan in the form of: a monthly
income payable for life; a monthly income payable for life with either 50%,
66-2/3%, or 100% of the participant's benefit paid to the participant's
designated beneficiary starting upon the participant's death and continuing for
as long as the beneficiary lives; or a monthly income payable for life with 60,
120 or 180 monthly payments guaranteed, provided that the number of guaranteed
monthly payments cannot be for a period greater than the joint life expectancy
of the participant and his spouse. The ESOP also provides that a participant's
benefit may be distributed in a single lump sum or substantially equal monthly,
quarterly or annual installments over a period which does not exceed the
participant's life expectancy (or the joint life expectancy of the participant
and his spouse). However, a participant may deem that all or any part of the
distribution from the ESOP be made in whole shares of the Corporation's common
stock prior to the date specified for distribution, with any fractional shares
distributed in cash.
The following table shows the estimated annual benefits payable under
the Pension Plan upon retirement at age 65 for various periods of Benefit
Service at specified levels of remuneration. The benefit amounts presented in
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<PAGE>
the totals are annual straight life annuity amounts without deduction for social
security or other offset amounts. A participant's Final Average Annual
Compensation shown under the Pension Plan is generally based on the compensation
set forth in the Summary Compensation Table.
<TABLE>
<CAPTION>
Estimated Minimum Annual Retirement Benefit
Years
of Benefit Final Average Annual Compensation 250K
Service 70K 100K 130K 160K 190K 220K or more
------- --- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
10 $16,795 $24,550 $32,500 $ 40,497 $ 45,267 $ 50,037 $ 52,555
20 33,200 49,100 65,000 81,025 93,745 106,465 113,181
30 42,800 63,650 84,500 105,553 125,000 125,000 125,000
40 44,100 65,925 87,750 109,848 125,000 125,000 125,000
</TABLE>
Maximum benefits under the Pension Plan are subject to the annual
limitation ($125,000 for 1996) imposed on qualified plans by the Internal
Revenue Code. The maximum compensation which may be taken into account for any
purpose under the Pension Plan is limited by the Internal Revenue Code to
$160,000 for 1997.
Under the Pension Plan, the executive officers of the Corporation named
in the Summary Compensation Table under "COMPENSATION OF OFFICERS" have the
following current years of benefit service: Donald E. Smith - 28 years; John W.
Perry - 22 years; Michael A. Carty - 20 years; W. Edward Jukes - 7 years; and
Norman L. Lowery - 1 year.
TRANSACTIONS WITH MANAGEMENT
Directors and principal officers of the Corporation and their
associates were customers of, and have had transactions with, the Corporation
and its subsidiary banks in the ordinary course of business during 1996.
Comparable transactions may be expected to take place in the future.
During 1996 various directors and officers of the Corporation and their
respective associates were indebted to the subsidiary banks from time to time.
These loans were made in the ordinary course of business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for similar transactions with other persons and did not involve more than
the normal risk of collectability or present other unfavorable features.
The law offices of B. Guille Cox, Jr., in which Mr. Cox is a partner,
were paid $16,113 in legal fees by the Corporation and its subsidiaries for the
fiscal year ending December 31, 1996.
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COMPARATIVE PERFORMANCE GRAPH
The following graph compares cumulative total shareholder return on the
Corporation's common stock over the last five fiscal years with the returns of
the CRSP Total Return Index for the NASDAQ Stock Market (U.S.) and the CRSP
Total Return Index for NASDAQ bank stocks. The graph assumes $100.00 was
invested on January 1, 1991 in the Corporation's common stock and in each of the
two indices shown, and the reinvestment of all dividends.
FFC STOCK
TOTAL RETURN COMPARISON
[CHART OMITTED AND REPLACED WITH TABLE]
12/91 12/92 12/93 12/94 12/95 12/96
----- ----- ----- ----- ----- -----
NASDAQ MARKET (US) 100 116.38 133.60 130.59 184.67 222.16
NASDAQ BANK 100 145.55 165.99 165.38 246.32 325.60
FFC STOCK 100 163.86 235.75 221.81 240.39 296.46
EMPLOYMENT CONTRACTS
On January 3, 1995, the Corporation, Terre Haute First, and Mr. Smith
entered into an Employment Agreement ("Agreement") whose term expires on
December 31, 2000 (although the Agreement may be renewed for successive one (1)
year terms as agreed upon by the parties). The Agreement provides that Mr. Smith
will serve as President and Chief Executive Officer of the Corporation during
the term of the agreement and perform such other duties as may be established by
the Board of Directors of the Corporation and Terre Haute First. Under the terms
of the Agreement, Mr. Smith will be paid an annual salary as set by the Board of
Directors of the Corporation and Terre Haute First. In addition, the Agreement
requires that the Corporation and Terre Haute First establish a split-dollar
life insurance arrangement with Mr. Smith which will insure the lives of Mr.
Smith and his spouse. Under the terms of the Agreement, the Corporation and
Terre Haute First expect to recover the premiums they pay for such policy from
the proceeds of such policy.
Effective January 1, 1997, Terre Haute First entered into an Employment
Agreement with Norman L. Lowery, its President and Chief Executive Officer. The
Employment Agreement is a five- year agreement and extends annually for an
additional one-year term to maintain its five-year term if Terre Haute First's
Board of Directors determines to so extend it. Under the Employment Agreement,
Mr. Lowery receives an initial annual salary equal to his current salary subject
to increases approved by the Board of Directors. The Employment Agreement also
provides, among other things, for Mr. Lowery's participation in other bonus and
fringe benefit plans available to the Corporation's and Terre Haute First's
employees. Mr. Lowery may terminate his employment upon ninety (90) days' prior
written notice to Terre Haute First. Terre Haute First may discharge Mr. Lowery
for just cause (as defined in the Employment Agreement) at any time or in
certain events specified by applicable law or regulations.
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If Terre Haute First terminates Mr. Lowery's employment for other than
just cause or Mr. Lowery is constructively discharged and such termination does
not occur within twelve months after a change in control of Terre Haute First or
the Corporation, the Employment Agreement provides for Mr. Lowery's receipt in a
lump-sum or periodic payments of an amount equal to the sum of (A) Mr. Lowery's
base salary through the end of the then-current term, plus (B) in Mr. Lowery's
sole discretion and in lieu of continued participation in Terre Haute First's
fringe benefit and retirement plans, cash in an amount equal to the cost of
obtaining all health, life, disability, retirement and other benefits which Mr.
Lowery would otherwise be eligible to receive if he continued to participate in
those plans through the end of the then-current term. In the event Terre Haute
First terminates Mr. Lowery's employment for other than just cause or Mr. Lowery
is constructively discharged within twelve months following a change in control
of Terre Haute First or the Corporation, the Employment Agreement provides for
Mr. Lowery's receipt of a lump-sum payment of an amount equal to the difference
between (A) the product of 2.99 times his "base amount" (as defined in Section
280G(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code")) and
(B) the sum of any other parachute payments, as determined under Section
280G(b)(2) of the Code, in addition to the benefits described above which he
would receive if the termination did not occur within 12 months following a
change in control.
If the payments provided for under the Employment Agreement, together
with any other payments made to Mr. Lowery by Terre Haute First, are determined
to be payments in violation of the "golden parachute" rules of the Code, such
payments will be reduced to the largest amount which would not cause Terre Haute
First to lose a tax deduction for such payments under those rules. As of the
date hereof, the cash compensation that would be paid to Mr. Lowery under the
Employment Agreement if such agreement were terminated within 12 months after a
change in control of Terre Haute First would be $621,920, plus all other amounts
he would otherwise be due under the Employment Agreement for the balance of its
term.
AMENDED AND RESTATED ARTICLES OF INCORPORATION AND BYLAWS
The Corporation's Board of Directors has unanimously adopted
resolutions proposing and recommending that the present Articles of
Incorporation of the Corporation (the "Current Articles") be amended and
restated by the adoption of Amended and Restated Articles of Incorporation of
the Corporation (the "Restated Articles"). A copy of the proposed Restated
Articles is attached to this Proxy Statement as Exhibit A.
The shareholders of the Corporation are being asked to vote on the
Restated Articles by voting on ten separate Proposals which describe the major
substantive changes made in the Restated Articles. If all Proposals 2 through 11
are approved by the shareholders, the Restated Articles will be deemed approved
by those shareholders and will become effective as soon as practicable after
such vote. If one or more of the Proposals are rejected by the shareholders
Amended and Restated Articles of Incorporation containing only the amendments
approved by the shareholders will be prepared and filed with the Indiana
Secretary of State. If none of the Proposals 2 through 11 are approved by the
shareholders, the Corporation's Articles of Incorporation will not be amended.
The following information should be read carefully since the amendments
set forth in Proposals 2 through 11 may be characterized as anti-takeover
measures which, if adopted, may tend to insulate management and make
accomplishment of certain transactions involving a potential change of control
of the Corporation more difficult.
If any of the Proposals 2 through 11 are approved and adopted by the
shareholders of the Corporation, the Corporation's Board of Directors intends to
approve and adopt a new Code of By-Laws for the Corporation (the "Restated
By-Laws"), which By-Laws also contain provisions not included in the present
By-Laws of the Corporation (the "Current By-Laws"), some of which may tend to
make accomplishment of certain transactions involving change of control of the
Corporation more difficult. Those changes which might be deemed to have an
"anti-takeover" effect will be described in this Proxy Statement.
Although the Board of Directors of the Corporation is not aware of any
effort that might be made to obtain control of the Corporation, the Board of
Directors believes that it is appropriate to include certain provisions in the
Corporation's Articles of Incorporation to protect the interest of the
Corporation and its shareholders from unsolicited changes in the control of the
Corporation in circumstances under which the Board of Directors of the
Corporation concludes will not be in the best interests of the Corporation or
the Corporation's shareholders.
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Although the Corporation's Board of Directors believes that the
restrictions on acquisition described below are beneficial to shareholders, the
provisions may have the effect of rendering the Corporation less attractive to
potential acquirors thereby discouraging future takeover attempts which would
not be approved by the Board of Directors but which certain shareholders might
deem to be in their best interest or pursuant to which shareholders might
receive a substantial premium for their shares over then current market prices.
These provisions will also render the removal of the incumbent Board of
Directors and of management more difficult. The Board of Directors has, however,
concluded that the potential benefits of these restrictive provisions outweigh
the possible disadvantages.
The following general discussion of the Proposals contains a summary of
the material provisions of the Restated Articles and By-Laws that may be deemed
to have an effect of delaying, deferring or preventing a change in the control
of the Corporation. The following description of certain of these provisions is
general and not necessarily complete, and with respect to provisions contained
in the Restated Articles reference should be made in each case to Exhibit A
hereto.
PROPOSAL II: AMENDMENT OF ARTICLES OF
INCORPORATION TO INCREASE AUTHORIZED CAPITAL STOCK
At a meeting held on March 18, 1997, the Corporation's Board of
Directors adopted resolutions approving and submitting to a vote of the
shareholders, an amendment to the Corporation's Articles of Incorporation which
would increase the authorized shares of the Corporation's Common Stock from
10,000,000 shares to 40,000,000 shares. This change will be made to the
Corporation's Articles of Incorporation if Proposal II is adopted by the
shareholders. The language which will be used to effect the change is set forth
in Section 6.01 of the Restated Articles which are attached hereto as Exhibit A.
On March 7, 1997, the number of the Corporation's outstanding shares of
Common Stock was 6,681,876; and the number of shares of Common Stock reserved
for the exercise of rights under the Shareholder Rights Plan was 3,318,124,
leaving no remaining authorized and unreserved shares of Common Stock.
Proposal II is being proposed to make available additional shares of
Common Stock for general corporate purposes, including acquisitions, financings,
stock dividends, stock splits, and issuances pursuant to the Shareholder Rights
Plan. If Proposal II is approved, 3,363,752 additional shares will be reserved
for the exercise of rights under the Shareholder Rights Plan. See "Other
Restrictions on Acquisition of the Corporation-- Shareholder Rights Plan." In
addition, the Board has concluded that it would be in the best interest of the
Corporation to be in a position to continue to expand its banking operations by
means of bank acquisitions involving the issuance of its capital stock. In the
judgment of management, the additional shares authorized by Proposal II should
be available to provide flexibility in corporate decisions in the event shares
should be needed for any such desirable corporate purpose. At this time, the
Corporation has no specific plans, understandings, or arrangements for issuing
any of the shares of capital stock to be authorized by Proposal II. If
additional shares are issued, the percentage ownership interests of existing
shareholders would be reduced and, depending on the terms pursuant to which new
shares are issued, the book value and earnings per share of outstanding stock
might be diluted. Moreover, such additional share issuance could be construed as
having an anti-takeover effect because the percentage ownership of a potential
acquiror would be reduced upon the issuance of additional shares. Except to the
extent shares will be reserved for issuance under the Shareholder Rights Plan,
no consideration was given by the Board of Directors to the use of any such
additional shares as an "anti-takeover" measure.
If Proposal II is adopted by the shareholders, the Board of Directors
could authorize the issuance of any authorized but unissued shares, including
those authorized by Proposal II, on terms determined by it without further
action by the shareholders, unless issued in a transaction, such as a merger or
consolidation, requiring shareholder approval. All attributes of additional
Common Stock to be authorized would be the same as those of the existing shares
of Common Stock. There are no preemptive rights with respect to the
Corporation's shares of Common Stock.
Provided that a quorum of shares of Common Stock is represented at the
Annual Meeting in person or by proxy (a "quorum" constituting a majority of the
outstanding shares of Common Stock), the affirmative vote of a greater number of
shares than the number of shares voted in opposition will be required for
approval of Proposal II. Proposal II, if approved and adopted, will become
effective upon filing of Articles of Amendment or Articles of Restatement in the
Office of the Secretary of State of Indiana. If the shareholders approve
Proposal II, the Corporation intends to accomplish this filing as soon as
practicable. The Board of Directors recommends a vote FOR Proposal II and,
unless directed otherwise, the proxies named in the proxy will vote the shares
represented by each proxy received by them FOR Proposal II.
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PROPOSAL III: STAGGERED BOARD OF DIRECTORS, NUMBER OF DIRECTORS AND
BOARD VACANCIES
Classified Board and Number of Directors. The changes made to the
Corporation's Articles of Incorporation by Proposal III provide that the Board
of Directors of the Corporation will be divided into three classes, with
directors in each class elected for three-year staggered terms. Therefore, it
would take two annual elections to replace a majority of the Corporation's
Board. The Current Articles provide for one-year terms for directors. Management
believes that it is desirable to ensure continuity and stability of the
Corporation's leadership and policies, thereby enabling it to carry out its
long-range plans for its benefit and that of its shareholders, and that a
staggered Board will assist in achieving such continuity and stability. Such a
staggered Board would moderate the pace of any change of control of the
Corporation since a person or entity acquiring a majority stock interest in the
Corporation would have to wait for at least two consecutive annual meetings,
covering a period of two years, in order to elect a majority of the
Corporation's Board of Directors. The inability to change the composition of the
Board of Directors immediately even if such change and composition were
determined by the shareholders of the Corporation to be beneficial to them may
tend to discourage a tender offer or takeover bid for the Corporation's stock.
The changes made in Proposal III also provide that the size of the
Board of Directors shall range between five (5) and twenty (20) directors, with
the exact number of directors to be fixed from time to time exclusively by the
Board of Directors pursuant to a resolution adopted by a majority of the total
number of directors of the Corporation. The Current Articles provide that the
By-Laws may fix the number of directors, without any limits on what that number
may be. The overall effect of this aspect of Proposal III may be to prevent a
person or entity from immediately acquiring control of the Corporation through
an increase in the number of the Corporation's directors and election of his or
its nominees to fill the newly-created vacancies.
The foregoing changes are set forth in Section 7.01 of the Restated
Articles attached hereto as Exhibit A.
Vacancies. The changes made to the Corporation's Articles of
Incorporation by Proposal III also provide that any vacancy occurring in the
Board of Directors, including a vacancy created by an increase in the number of
directors, shall be filled for the remainder of the unexpired term only by a
majority vote of the directors then in office. The Current By-Laws provide that
directors who fill vacancies on the Board will only serve until the next annual
meeting of the shareholders, and permit shareholders to fill the vacancies if
there is a tie among the remaining Board members on this issue. The change in
provisions concerning vacancies is being made to permit replacement directors to
serve the balance of any term (up to 3 years) being served by a director being
replaced or remaining in the term of the class of directors to which the new
director will be assigned.
The foregoing changes are set forth in Section 7.02 of the Restated
Articles attached hereto as Exhibit A.
Provided that a quorum of shares of Common Stock is represented at the
Annual Meeting in person or by proxy (a "quorum" constituting a majority of the
outstanding shares of Common Stock), the affirmative vote of a greater number of
shares than the number of shares voted in opposition will be required for
approval of Proposal III. Proposal III, if approved and adopted, will become
effective upon filing of Articles of Amendment or Articles of Restatement in the
Office of the Secretary of State of Indiana. If the shareholders approve
Proposal III, the Corporation intends to accomplish this filing as soon as
practicable. The Board of Directors recommends a vote FOR Proposal III and,
unless directed otherwise, the proxies named in the proxy will vote the shares
represented by each proxy received by them FOR Proposal III.
PROPOSAL IV: REMOVAL OF DIRECTORS
The changes made to the Corporation's Articles of Incorporation by
Proposal IV provide that a director or the entire Board of Directors may be
removed only for cause and only by the affirmative vote of at least 66 2/3% of
the shares eligible to vote generally in the election of directors. Removal for
"cause" includes removal for the director's personnel dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties and willful violation of any law,
rule or regulation (other than minor offenses such as traffic violations) or
final cease-and-desist order. The Current By-Laws provide that directors may be
removed by a majority vote of the shareholders, with or without cause. This
provision may, under certain circumstances, impede the removal of a director or
directors of the Corporation, thus precluding a person or entity from
immediately acquiring control of the Corporation's Board through the removal of
existing directors and the election of his or its nominees to fill the
newly-created vacancies.
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The foregoing changes are set forth in Section 7.03 of the Restated
Articles attached hereto as Exhibit A.
Provided that a quorum of shares of Common Stock is represented at the
Annual Meeting in person or by proxy (a "quorum" constituting a majority of the
outstanding shares of Common Stock), the affirmative vote of a greater number of
shares than the number of shares voted in opposition will be required for
approval of Proposal IV. Proposal IV, if approved and adopted, will become
effective upon filing of Articles of Amendment or Articles of Restatement in the
Office of the Secretary of State of Indiana. If the shareholders approve
Proposal IV, the Corporation intends to accomplish this filing as soon as
practicable. The Board of Directors recommends a vote FOR Proposal IV and,
unless directed otherwise, the proxies named in the proxy will vote the shares
represented by each proxy received by them FOR Proposal IV.
PROPOSAL V: RESTRICTIONS ON CALLING OF SPECIAL MEETINGS
The changes made to the Corporation's Articles of Incorporation by
Proposal V provide that a special meeting of shareholders may be called only by
the Chairman of the Board of the Corporation or pursuant to a resolution adopted
by a majority of the total number of directors of the Corporation. Shareholders
are not authorized to call a special meeting. The Current By-Laws permit the
President and holders of not less than 25% of the Corporation's outstanding
shares to call special meetings of shareholders. Thus, under Proposal V the
shareholders will lose any right to call special meetings. Although management
of the Corporation believes that this provision will discourage shareholder
attempts to disrupt the business of the Corporation between annual meetings of
shareholders, its effect may be to deter hostile takeovers by making it more
difficult for a person or entity to obtain immediate control of the Corporation
prior to the next annual meeting of shareholders of the Corporation. Moreover,
this provision may also prevent shareholders from using a special meeting as a
forum to address matters they may consider of immediate importance and
discourage takeovers which are desired by the shareholders.
The foregoing changes are set forth in Section 7.05 of the Restated
Articles attached hereto as Exhibit A.
Provided that a quorum of shares of Common Stock is represented at the
Annual Meeting in person or by proxy (a "quorum" constituting a majority of the
outstanding shares of Common Stock), the affirmative vote of a greater number of
shares than the number of shares voted in opposition will be required for
approval of Proposal V. Proposal V, if approved and adopted, will become
effective upon filing of Articles of Amendment or Articles of Restatement in the
Office of the Secretary of State of Indiana. If the shareholders approve
Proposal V, the Corporation intends to accomplish this filing as soon as
practicable. The Board of Directors recommends a vote FOR Proposal V and, unless
directed otherwise, the proxies named in the proxy will vote the shares
represented by each proxy received by them FOR Proposal V.
PROPOSAL VI: AUTHORIZATION OF PREFERRED STOCK
The changes made to the Corporation's Articles of Incorporation by
Proposal VI authorize 10,000,000 shares of preferred stock, without par value.
The Corporation is authorized to issue preferred stock from time to time in one
or more series subject to applicable provisions of law, and the Board of
Directors is authorized to fix the designations, powers, preferences and
relative participating, optional and other special rights of such shares,
including voting rights (if any and which could be as a separate class) and
conversion rights. In the event of a proposed merger, tender offer or other
attempt to gain control of the Corporation not approved by the Board of
Directors, it might be possible for the Board of Directors to authorize the
issuance of a series of preferred stock with rights and preferences that would
impede the completion of such a transaction. An effect of the possible issuance
of preferred stock, therefore, may be to deter a future takeover attempt. The
Board of Directors has no present plans or understandings for the issuance of
any preferred stock and does not intend to issue any preferred stock except on
terms which the Board of Directors deems to be in the best interests of the
Corporation and its shareholders. The Current Articles do not authorize any
preferred stock.
The consolidated and parent company only financial statements of the
Corporation and its subsidiaries, the notes thereto, and the related report of
Coopers & Lybrand L.L.P., appearing on pages 16 to 33 of the Corporation's
Annual Report for 1996 and Management's Discussion and Analysis of those
statements appearing on pages 34 to 44 of such Annual Report are incorporated
herein by reference.
The foregoing changes are set forth in Section 6.01 and 6.02 of the
Restated Articles attached hereto as Exhibit A.
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Provided that a quorum of shares of Common Stock is represented at the
Annual Meeting in person or by proxy (a "quorum" constituting a majority of the
outstanding shares of Common Stock), the affirmative vote of a greater number of
shares than the number of shares voted in opposition will be required for
approval of Proposal VI. Proposal VI, if approved and adopted, will become
effective upon filing of Articles of Amendment or Articles of Restatement in the
Office of the Secretary of State of Indiana. If the shareholders approve
Proposal VI, the Corporation intends to accomplish this filing as soon as
practicable. The Board of Directors recommends a vote FOR Proposal VI and,
unless directed otherwise, the proxies named in the proxy will vote the shares
represented by each proxy received by them FOR Proposal VI.
PROPOSAL VII: EVALUATION OF OFFERS
The changes made to the Corporation's Articles of Incorporation by
Proposal VII provide that the Board of Directors of the Corporation, when
determining to take or refrain from taking corporate action on any matter,
including making or declining to make any recommendation to the Corporation's
shareholders, may, in connection with the exercise of its judgment in
determining what is in the best interest of the Corporation, the Corporation's
banking subsidiaries and the shareholders of the Corporation, give due
consideration to all relevant factors, including, without limitation, the social
and economic effects of acceptance of such offer on the Corporation's customers
and the Corporations' banking subsidiaries' present and future account holders,
borrowers, employees and suppliers; the effect on the communities in which the
Corporation and the Corporation's banking subsidiaries operate or are located;
and the effect on the ability of the Corporation to fulfill the objectives of a
holding company and of the Corporation's banking subsidiaries or future
financial institution subsidiaries to fulfill the objectives of a financial
institution under applicable statutes and regulations. The Board of Directors
feels a responsibility for maintaining the financial and business integrity of
the Corporation. Banks occupy positions of special trust in the communities they
serve. They also provide opportunities for abuse by those who are not of
sufficient experience or competence or financial means to act professionally and
responsibly with respect to management of a financial institution. It is of
concern to the Corporation that it be managed in the interest of the communities
that it serves and that it maintain its integrity as a corporation providing
financial services to the communities in which it operates. Proposal VII also
authorizes the Board of Directors to take certain actions to encourage
negotiated rather than hostile and unilateral changes of control of the
Corporation or to oppose such a transaction deemed undesirable by the Board of
Directors including the adoption of so-called shareholder rights plans. The
Corporation adopted such a plan as of January 6, 1997. See "Shareholder Rights
Plan." By having these standards and provisions in the Corporation's Articles of
Incorporation, the Board of Directors may be in a stronger position to oppose
such a transaction if the Board concludes that the transaction would not be in
the best interest of the Corporation, even if the price offered is significantly
greater than the then market price of any equity security of the Corporation.
These provisions are not in the Current Articles, but are contained in
the Indiana Business Corporation Law ("IBCL"), already applicable to the
Corporation. The validity and applicability of these provisions contained in
Proposal VII and in the IBCL has not been adjudicated by the courts in Indiana
and, therefore, the extent of their enforceability is unclear at this time.
These provisions are not designed to change the fiduciary duty obligations of
the Corporation's directors, but rather to clarify those obligations by
expressly stating the factors and actions the directors may consider and take.
The foregoing changes are set forth in Section 7.07 and 7.08 of the
Restated Articles attached hereto as Exhibit A.
Provided that a quorum of shares of Common Stock is represented at the
Annual Meeting in person or by proxy (a "quorum" constituting a majority of the
outstanding shares of Common Stock), the affirmative vote of a greater number of
shares than the number of shares voted in opposition will be required for
approval of Proposal VII. Proposal VII, if approved and adopted, will become
effective upon filing of Articles of Amendment or Articles of Restatement in the
Office of the Secretary of State of Indiana. If the shareholders approve
Proposal VII, the Corporation intends to accomplish this filing as soon as
practicable. The Board of Directors recommends a vote FOR Proposal VII and,
unless directed otherwise, the proxies named in the proxy will vote the shares
represented by each proxy received by them FOR Proposal VII.
PROPOSAL VIII: BUSINESS COMBINATIONS
The changes made by Proposal VIII will permit the Corporation's Board
of Directors to reject certain business combinations the Board deems
inappropriate even if a majority of the Corporation's shareholders believe such
business combinations would be beneficial to the Corporation.
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The changes made to the Corporation's Articles of Incorporation by
Proposal VIII require that certain business combinations between the Corporation
(or any majority-owned subsidiary thereof) and a 10% or greater shareholder
("Interested Shareholder") either be (i) approved by at least 80% of the total
number of outstanding voting shares of the Corporation or (ii) approved by a
majority of certain directors unaffiliated with such Interested Shareholder or
(iii) involve consideration per share generally equal to the higher of (A) the
highest amount paid by such Interested Shareholder or its affiliates in
acquiring any shares of the Common Stock or (B) the "Fair Market Value"
(generally, the highest closing bid paid for the Common Stock during the thirty
days preceding the date of the announcement of the proposed business combination
or on the date the Interested Shareholder became such, whichever is higher). No
similar provision is in the Corporation's Current Articles or Current By- Laws,
but there is a similar provision in the IBCL. See "Other Restrictions on
Acquisition of the Corporation - State Law."
Management believes it has become a not uncommon practice in corporate
takeovers to pay cash to acquire a controlling equity interest in a company and
then to acquire the remaining equity interest in the company by paying the
balance of the shareholders a price for their shares which is lower than the
price paid to acquire control and/or is in a less desirable form (e.g., debt or
other securities of the purchaser instead of cash). Management believes it is
often the case that in two-step acquisitions, arbitrageurs and professional
investors, because of their sophistication and expertise in the takeover area,
can take advantage of the more lucrative first-step tender offer, while many
long- term stockholders must accept the price paid in the second-step merger.
The Board is of the view that such "two-tier pricing" could work to the
disadvantage of long-term shareholders and could give arbitrageurs and
professional investors an unfair advantage over such shareholders in a takeover
situation.
The business combination provision is designed to prevent a purchaser
from utilizing two-tier pricing and similar inequitable tactics in the event of
an attempt to take over the Corporation. The provision is not designed to
prevent or discourage tender offers for 80% or more of the Common Stock of the
Corporation. If an Interested Shareholder owns (or can obtain the affirmative
votes of) at least 80% of the Voting Shares with respect to a business
combination, this provision will not limit the ability of the Interested
Shareholder to effect such business combination and thereby eliminate the
minority interest of the Corporation. However, the fact that the Corporation's
officers and directors currently beneficially own 10.17% of the Corporation's
voting shares could deter hostile tender offers for 80% or more of the
Corporation's outstanding Common Stock or open-market acquisitions of the
Corporation's Common Stock. Thus, this business combination provision might
deprive holders of the Corporation's stock of an opportunity to sell their stock
to such persons at prices which might be higher than the current market price of
such stock.
One effect of this provision might be to encourage consultation by an
offeror with the Board of Directors prior to or after commencing a tender offer
in an attempt to prevent a contest from developing. This provision may, thus,
strengthen the Board of Directors' position in dealing with any potential
offeror which might attempt to effect a takeover of the Corporation. The
provision will not make a business combination regarded by the Board of
Directors as being in the interests of the Corporation more difficult to
accomplish, but it will permit the Board of Directors to determine that a
business combination or tender or exchange offer is not in the interests of the
Corporation (and thus to oppose it) on the basis of various factors deemed
relevant. This provision, however, gives the Board of Directors the power to
oppose a business combination which the shareholders believe would be beneficial
to the Corporation.
The foregoing changes are set forth in Article 10 of the Restated
Articles attached hereto as Exhibit A.
Provided that a quorum of shares of Common Stock is represented at the
Annual Meeting in person or by proxy (a "quorum" constituting a majority of the
outstanding shares of Common Stock), the affirmative vote of a greater number of
shares than the number of shares voted in opposition will be required for
approval of Proposal VIII. Proposal VIII, if approved and adopted, will become
effective upon filing of Articles of Amendment or Articles of Restatement in the
Office of the Secretary of State of Indiana. If the shareholders approve
Proposal VIII, the Corporation intends to accomplish this filing as soon as
practicable. The Board of Directors recommends a vote FOR Proposal VIII and,
unless directed otherwise, the proxies named in the proxy will vote the shares
represented by each proxy received by them FOR Proposal VIII.
PROPOSAL IX: AMENDMENTS TO THE CORPORATION'S ARTICLES OF INCORPORATION
Pursuant to changes made to the Corporation's Articles of Incorporation
by Proposal IX, amendments to the Articles of Incorporation of the Corporation
must be approved by a majority vote of the Corporation's Board of Directors and
also by a vote of a greater number of shares in favor of, than the number voted
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against, the amendments; provided, however, that approval by at least 66 2/3% of
the outstanding voting shares is required for amendment of certain provisions
(i.e., provisions relating to number, classification, and removal of directors;
provisions relating to the manner of amending By-Laws; call of special
shareholder meetings; criteria for evaluating certain offers; and certain
business combinations). These voting requirements are intended to prevent the
holders of less than the required percentages of outstanding stock of the
Corporation from circumventing any of the foregoing provisions by amending the
Articles of Incorporation to delete or modify one or more of such provisions.
There is no supermajority voting requirement in the Corporation's Current
Articles or Current By-Laws, which may be amended by the vote of a greater
number of shares in favor of, than those shares voted against, the amendment,
and by a majority vote of directors, respectively.
The foregoing changes are set forth in Section 7.09 and Section 10.07
of the Restated Articles attached hereto as Exhibit A.
Provided that a quorum of shares of Common Stock is represented at the
Annual Meeting in person or by proxy (a "quorum" constituting a majority of the
outstanding shares of Common Stock), the affirmative vote of a greater number of
shares than the number of shares voted in opposition will be required for
approval of Proposal IX. Proposal IX, if approved and adopted, will become
effective upon filing of Articles of Amendment or Articles of Restatement in the
Office of the Secretary of State of Indiana. If the shareholders approve
Proposal IX, the Corporation intends to accomplish this filing as soon as
practicable. The Board of Directors recommends a vote FOR Proposal IX and,
unless directed otherwise, the proxies named in the proxy will vote the shares
represented by each proxy received by them FOR Proposal IX.
PROPOSAL X: INDEMNIFICATION OF OFFICERS AND DIRECTORS
AND LIMITATION OF LIABILITY
Indemnification of Officers and Directors and Limitation of Liability.
Under Proposal X, the Articles of Incorporation of the Corporation would
generally provide for indemnification of any person who is or was a director,
officer, employee, or agent of the Corporation, or who served at the
Corporation's request as a director, officer, employee, partner, trustee,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise. To qualify for indemnification, such
a person generally must have been successful on the merits or otherwise, or (i)
must have acted in good faith and in a manner he reasonably believed, in the
case of conduct in his official capacity, was in the best interest of the
Corporation, and, in all other cases, was not opposed to the Corporation's best
interests and (ii) in any criminal proceeding, either had reasonable cause to
believe that his conduct was lawful or had no reasonable cause to believe that
his conduct was unlawful. A person who qualifies for indemnification generally
is entitled to indemnity for any obligation to pay any judgments, settlements,
penalties, fines and expenses actually or reasonably incurred in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, and whether formal or informal, in which he or
she was made party as a result of his or her service on behalf of the
Corporation.
To the extent that a director, officer, employee or agent of the
Corporation has been successful, on the merits or otherwise, in the defense of
any action, suit or proceeding, or in the defense of any claim, issue or matter
therein, the Corporation shall indemnify such person against expenses (including
counsel fees) actually and reasonably incurred by such person in connection
therewith. Any other indemnification (unless ordered by a court) shall be made
by the Corporation only as authorized in the specific case, upon the
determination that indemnification of the director, officer, employee or agent
is permissible in the circumstances because he has met the applicable standard
of conduct. Such determination shall be made (1) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not at the time
parties to such action, suit or proceeding; or (2) if a quorum cannot be
obtained under subdivision (1), by a majority vote of a committee duly
designated by the Board of Directors (in which designation directors who are
parties may participate), consisting solely of two or more directors not at the
time parties to such action, suit or proceeding; or (3) by special legal
counsel: (A) selected by the Board of Directors or its committee in the manner
prescribed in subdivision (1) or (2), or (B) if a quorum of the Board of
Directors cannot be obtained under subdivision (1) and a committee cannot be
designated under subdivision (2), selected by a majority vote of the full Board
of Directors (in which selection directors who are parties may participate); or
(4) by the shareholders, but shares owned by or voted under the control of
directors who are at the time parties to such action, suit or proceeding may not
be voted on the determination.
Authorization of indemnification and evaluation as to reasonableness of
expenses shall be made in the same manner as the determination that
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<PAGE>
indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under subsection (3)
to select counsel.
These provisions are generally consistent with the Current Articles,
although they provide more detail regarding the method for determining if the
standard for permissive indemnification and reasonableness of expenses has been
met.
Limitation of Liability. Chapter 35 of the IBCL and Proposal X also
generally provide that no director of the Corporation shall be subject to
liability for any action taken as a director, or any failure to take any action
as a director, unless both the director has breached or failed to perform the
duties of the director's office in compliance with Indiana law and the breach or
failure to perform constitutes willful misconduct or recklessness under Indiana
or other governing law. Under Indiana law and Proposal X, a director does not
breach his duties as a director if he acts in good faith, with the care of an
ordinary prudent person similarly situated, and in a manner the director
reasonably believes to be in the best interests of the corporation. Proposal X
extends these limited liability provisions to officers, employees and agents of
the Corporation, as well as directors.
This provision eliminates the potential liability of the Corporation's
directors and officers for failure, except through willful misconduct or
recklessness, to satisfy their duty of care. It may thus reduce the likelihood
of derivative litigation against directors and officers and discourage or deter
shareholders or management from bringing a lawsuit against directors and
officers for breach of their duty of care, even though such an action, if
successful, might otherwise have been beneficial to the Corporation and its
shareholders. The provision will not preclude all equitable remedies for breach
of the duty of care, although such remedies might not be available as a
practical matter. Although there is no similar provision in the Current Articles
or Current By-Laws, this provision is consistent with existing provisions of the
IBCL, currently applicable to the Corporation.
To the best of management's knowledge, there is currently no pending or
threatened litigation for which indemnification may be sought or any recent
litigation involving directors of the Corporation that might have been affected
by the limited liability provision in Proposal X had it been in effect at the
time of the litigation.
The above provisions seek to ensure that the ability of the
Corporation's directors to exercise their best business judgment in managing the
Corporation's affairs is not unreasonably impeded by exposure to the potentially
high personal costs or other uncertainties of litigation. The Board believes
that these provisions are necessary to attract and retain qualified directors,
officers, and employees.
The foregoing changes are set forth in Section 9.05 and Article 11 of
the Restated Articles attached hereto as Exhibit A.
Provided that a quorum of shares of Common Stock is represented at the
Annual Meeting in person or by proxy (a "quorum" constituting a majority of the
outstanding shares of Common Stock), the affirmative vote of a greater number of
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<PAGE>
shares than the number of shares voted in opposition will be required for
approval of Proposal X. Proposal X, if approved and adopted, will become
effective upon filing of Articles of Amendment or Articles of Restatement in the
Office of the Secretary of State of Indiana. If the shareholders approve
Proposal X, the Corporation intends to accomplish this filing as soon as
practicable. The Board of Directors recommends a vote FOR Proposal X and, unless
directed otherwise, the proxies named in the proxy will vote the shares
represented by each proxy received by them FOR Proposal X.
PROPOSAL XI: OTHER PROVISIONS IN RESTATED ARTICLES
The Corporation's Board of Directors concluded that the changes made by
Proposals 2 through 11 would be made most efficiently and effectively by
completely restating the Corporation's Articles of Incorporation to read as
provided in the Restated Articles attached hereto as Exhibit A. The significant
substantive changes made by the Restated Articles which might have an
anti-takeover effect are described in Propositions 2 through 11, which the
regulations of the Securities and Exchange Commission require shareholders to
vote on separately. To ensure that the requisite shareholder approval is
obtained for all changes made in the Restated Articles and not just those
reflected in Proposals 2 through 11, shareholders are being asked to approve in
Proposal XI the balance of the revisions made in the Restated Articles attached
hereto as Exhibit A, most of which are simply provisions consistent with the
IBCL or the Corporation's Current Articles. Shareholders are urged to review the
Restated Articles in their entirety before voting on this Proposal XI.
Provided that a quorum of shares of Common Stock is represented at the
Annual Meeting in person or by proxy (a "quorum" constituting a majority of the
outstanding shares of Common Stock), the affirmative vote of a greater number of
shares than the number of shares voted in opposition will be required for
approval of Proposal XI. Proposal XI, if approved and adopted, will become
effective upon filing of Articles of Amendment or Articles of Restatement in the
Office of the Secretary of State of Indiana. If the shareholders approve
Proposal XI, the Corporation intends to accomplish this filing as soon as
practicable. The Board of Directors recommends a vote FOR Proposal XI and,
unless directed otherwise, the proxies named in the proxy will vote the shares
represented by each proxy received by them FOR Proposal XI.
Provisions in Restated Bylaws with Potential Anti-Takeover Effects
The Restated By-Laws impose certain advance notice and information
requirements in connection with the nomination by shareholders of candidates for
election to the Board of Directors or the proposal by shareholders of business
to be acted upon at an annual meeting of shareholders. Notice and information
concerning these matters must be provided to the Corporation not less than 120
days prior to the meeting, assuming sufficient prior public notice of the
meeting date has been given by the Corporation (as provided in the By-Laws).
There are no similar provisions in the Current By-Laws. Management believes that
it is in the best interests of the Corporation and its shareholders to provide
sufficient time to enable management to disclose to shareholders information
about a dissident slate of director nominees. This advance notice requirement
may also give management time to solicit its own proxies in an attempt to defeat
any dissident slate of nominations, should management determine that doing so is
in the best interests of shareholders generally. Similarly, adequate notice of
shareholder proposals will give management time to study such proposals and to
determine whether to recommend to the shareholders that such proposals be
adopted.
<PAGE>
The Restated By-Laws may be amended only by a majority vote of the
total number of directors of the Corporation.
Purpose and Effects of the Anti-Takeover Provisions of the Corporation Restated
Articles and By-Laws.
The Corporation's Board of Directors believes that the provisions
described above are prudent and will reduce the Corporation's vulnerability to
takeover attempts and certain other transactions which have not been negotiated
with and approved by its Board of Directors. The Board of Directors believes
these provisions are in the best interest of the Corporation, its shareholders,
and its banking subsidiaries. In the judgment of the Board of Directors, the
Corporation's Board of Directors will be in the best position to determine the
true value of the Corporation and to negotiate more effectively for what may be
in the best interests of the Corporation and its shareholders. The Board of
Directors believes that these provisions will encourage potential acquirors to
negotiate directly with the Board of Directors of the Corporation and discourage
hostile takeover attempts. It is also the view of the Board of Directors that
these provisions should not discourage persons from proposing a merger or other
transaction at prices reflecting the true value of the Corporation and which is
in the best interests of all shareholders.
Attempts to take over financial institutions and their holding
companies have recently increased. Takeover attempts that have not been
negotiated with and approved by the Board of Directors present to shareholders
the risk of a takeover on terms that may be less favorable than might otherwise
be available. A transaction that is negotiated and approved by the Board of
Directors, on the other hand, can be carefully planned and undertaken at an
opportune time to obtain maximum value for the Corporation and its shareholders,
with due consideration given to matters such as the management and business of
the acquiring corporation and maximum strategic development of the Corporation's
assets.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause it to undertake defensive measures at a
great expense. Although a tender offer or other takeover attempt may be made at
a price substantially above then current market prices, such offers are
sometimes made for less than all of the outstanding shares of a target company.
As a result, shareholders may be presented with the alternative of partially
liquidating their investment at a time that may be disadvantageous, or retaining
their investment in an enterprise which is under different management and whose
objective may not be similar to that of the remaining shareholders. The
concentration of control, which could result from a tender offer or other
takeover attempt, could also deprive the Corporation's remaining shareholders of
the benefits of certain protective provisions of the Securities Exchange Act of
1934, as amended ("1934 Act"), if the number of record owners becomes less than
300 and the Corporation terminates its registration under the 1934 Act.
Despite the belief of the Corporation's Board of Directors in the
benefits to shareholders of the foregoing provisions, the provisions may also
have the effect of discouraging future takeover attempts which would not be
approved by the Board of Directors, but which certain shareholders might deem to
be in their best interest or pursuant to which shareholders might receive a
substantial premium for their shares over then current market prices. As a
result, shareholders who might desire to participate in such a transaction may
not have an opportunity to do so. These provisions will also render the removal
of the incumbent Board of Directors and of management more difficult. The Board
of Directors has, however, concluded that the potential benefits of these
restrictive provisions outweigh the possible disadvantages.
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<PAGE>
Other Restrictions on Acquisition of the Corporation
State Law. Several provisions of the IBCL could affect the acquisition
of shares of the Common Stock or otherwise affect the control of the
Corporation. Chapter 43 of the IBCL prohibits certain business combinations,
including mergers, sales of assets, recapitalizations, and reverse stock splits,
between corporations such as the Corporation (assuming that it has over 100
shareholders) and an interested shareholder, defined as the beneficial owner of
10% or more of the voting power of the outstanding voting shares, for five years
following the date on which the shareholder obtained 10% ownership unless the
acquisition was approved in advance of that date by the board of directors. If
prior approval is not obtained, several price and procedural requirements must
be met before the business combination can be completed. These requirements are
similar to those contained in "Proposal VIII: Business Combinations." In
general, the price requirements contained in the IBCL may be more stringent than
those imposed in the Corporation's Restated Articles. However, the procedural
restraints imposed by Proposal VIII are somewhat broader than those imposed by
the IBCL. Also, the provisions of the IBCL may change at some future date, but
the relevant provisions of the Corporation's Restated Articles may only be
amended by a 66 2/3% vote of the shareholders of the Corporation.
In addition, the IBCL contains provisions designed to assure that
minority shareholders have some say in their future relationship with Indiana
corporations in the event that a person made a tender offer for, or otherwise
acquired, shares giving that person more than 20%, 33 1/3%, and 50% of the
outstanding voting securities of corporations having 100 or more shareholders
(the "Control Share Acquisitions Statute"). Under the Control Share Acquisitions
Statute, if an acquiror purchases those shares at a time that the corporation is
subject to the Control Share Acquisitions Statute, then until each class or
series of shares entitled to vote separately on the proposal, by a majority of
all votes entitled to be cast by that group (excluding shares held by officers
of the corporation, by employees of the corporation who are directors thereof
and by the acquiror), approves in a special or annual meeting the rights of the
acquiror to vote the shares which take the acquiror over each level of ownership
as stated in the statute, the acquiror cannot vote these shares. An Indiana
corporation otherwise subject to the Control Share Acquisitions Statute may
elect not to be covered by the statute by so providing in its Articles of
Incorporation or By-Laws. The Corporation, however, is subject to this statute.
The IBCL specifically authorizes Indiana corporations to issue options,
warrants or rights for the purchase of shares or other securities of the
corporation or any successor in interest of the corporation. These options,
warrants or rights may, but need not be, issued to shareholders on a pro rata
basis.
The IBCL specifically authorizes directors, in considering the best
interest of a corporation, to 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 directors consider pertinent. As described above,
Proposal VII relates to a provision having a similar effect. Under the IBCL,
directors are not required to approve a proposed business combination or other
corporate action if the directors determine in good faith that such approval is
not in the best interest of the corporation. In addition, the IBCL states that
directors are not required to redeem any rights under or render inapplicable a
shareholder rights plan or to take or decline to take any other action solely
because of the effect such action might have on a proposed change of control of
the corporation or the amounts to be paid to shareholders upon such a change of
control. The IBCL explicitly provides that the different or higher degree of
scrutiny imposed in Delaware and certain other jurisdictions upon director
actions taken in response to potential changes in control will not apply. The
Delaware Supreme Court has held that defensive measures in response to a
potential takeover must be "reasonable in relation to the threat posed".
In taking or declining to take any action or in making any
recommendation to a corporation's shareholders with respect to any matter,
directors are authorized under the IBCL to consider both the short-term and
long-term interests of the corporation as well as interests of other
constituencies and other relevant factors. Any determination made with respect
to the foregoing by a majority of the disinterested directors shall conclusively
be presumed to be valid unless it can be demonstrated that such determination
was not made in good faith.
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<PAGE>
Because of the foregoing provisions of the IBCL, the Board will have
flexibility in responding to unsolicited proposals to acquire the Corporation,
and accordingly it may be more difficult for an acquiror to gain control of the
Corporation in a transaction not approved by the Board.
Under the Indiana Financial Institutions Act, the prior approval of the
Indiana Department of Financial Institutions is required before the acquisition
of "control" of the Corporation or any of its state-chartered bank subsidiaries.
For these purposes, "control" means the acquisition of at least 25% of the
voting stock of an institution or the ability to direct the management or
policies of a bank or bank holding company.
Federal Law. The Change in Bank Control Act provides that no "person,"
acting directly or indirectly, or through or in concert with one or more
persons, other than a company, may acquire control of a bank holding company
unless at least 60 days prior written notice is given to the Board of Governors
of the Federal Reserve System (the "FRB") and the FRB has not objected to the
proposed acquisition.
The Bank Holding Company Act of 1956 also prohibits any "company,"
directly or indirectly or acting in concert with one or more other persons, or
through one or more subsidiaries or transactions, from acquiring control of an
insured bank without the prior approval of the FRB. In addition, any company
that acquires such control becomes a "bank holding company" subject to
registration, examination and regulation as a bank holding company by the FRB.
The term "control" for purposes of the Change in Bank Control Act and
the Bank Holding Company Act includes the power, directly or indirectly, to vote
more than 25% of any class of voting stock of the bank or bank holding company
or to control, in any manner, the election of a majority of the directors of the
bank or bank holding company. It also includes a determination by the FRB that
such company or person has the power, directly or indirectly, to exercise a
controlling influence over or to direct the management or policies of the bank.
FRB regulations set forth certain "rebuttable control determinations"
which arise upon (a) the acquisition of any voting securities of a state member
bank or bank holding company if, after the transaction, the acquiring person (or
persons acting in concert) owns, controls, or holds with power to vote 25
percent or more of any class of voting securities of the institution; or (b) the
acquisition of any voting securities of a state member bank or bank holding
company if, after the transaction, the acquiring person (or persons acting in
concert) owns, controls, or holds with power to vote 10 percent or more (but
less than 25 percent) of any class of voting securities of the institution, and
if (i) the institution has registered securities under Section 12 of the 1934
Act or (ii) no other person will own a greater percentage of that class of
voting securities immediately after the transaction.
The regulations also specify the criteria which the FRB uses to
evaluate control applications. The FRB is empowered to disapprove an acquisition
of control if it finds, among other things, that (i) the acquisition would
substantially lessen competition, (ii) the financial condition of the acquiring
person might jeopardize the institution or its depositors, or (iii) the
competency, experience, or integrity of the acquiring person indicates that it
would not be in the interest of the depositors, the institution, or the public
to permit the acquisition of control by such person.
Shareholder Rights Plan. The Corporation, as of January 6, 1997,
adopted a Shareholder Rights Plan (the "Plan"). The Plan is intended to protect
the long-term value of shareholders' investments in the Corporation by
encouraging any potential acquiror to negotiate with its Board of Directors. The
Plan will guard against partial or inadequate tender offers, open-market share
accumulations, and other abusive or coercive takeover tactics, and allow the
Board time to evaluate any offer and all options for long-term growth.
To implement the Plan, shareholders of record as of January 20, 1997,
received one right for each outstanding share of the Corporation's Common Stock.
Initially, the Rights trade automatically with the Common Stock and separate
Right Certificates will not be issued. The Rights will expire on January 6,
2007, unless earlier redeemed or exchanged.
Each Right entitles the registered holder, subject to the terms of the
Plan, to purchase from the Corporation one share of the Corporation's Common
Stock at a purchase price of $95.00 per share, subject to adjustment. The Rights
will not be exercisable until a subsequent distribution date which will only
occur if a person or group acquires beneficial ownership of 12% or more of the
Corporation's Common Stock (or is declared an "Adverse Person" by the
Corporation's Board) (subject to certain limits applicable to existing
shareholders), or announces a tender or exchange offer that would result in such
person or group owning 30% or more of the Common Stock.
If a person or group acquires beneficial ownership of 15% or more of
the Corporation's outstanding Common Stock (subject to certain limits applicable
to existing shareholders), each holder of a Right (other than the 15% holder
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whose Rights become void once such holder reaches the 15% threshold) will
thereafter have a right to purchase, upon payment of the purchase price of the
Right, that number of shares of the Corporation's Common Stock which at the time
of such transaction will have a market value equal to two times the purchase
price of the Right.
In the event that the Corporation is acquired in a merger or other
business combination transaction or 50% or more of its consolidated assets or
earning power are sold, each holder of a Right will thereafter have the right to
purchase, upon payment of the purchase price of the Right, that number of shares
of common stock of the acquiring company which at the time of such transaction
will have a market value of two times the purchase price of the Right.
The Board of Directors of the Corporation may exchange the Rights
(other than Rights owned by such person or group which have become void), in
whole or in part, at an exchange ratio of one share of Common Stock per Right
(subject to adjustment).
Under certain circumstances, the Board of Directors of the Corporation
may redeem the Rights in whole, but not in part, at a price of $0.01 per Right.
PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
The following table contains information concerning individuals or
entities who, to the knowledge of the Corporation, beneficially owned on March
1, 1997, more than 5% of the common stock of the Corporation:
Name and Address
of Beneficial Owner Shares Beneficially Owned Percent of Class
- ------------------- ------------------------- ----------------
First Financial Corporation 433,903(1) 6.49%
Employee Stock Ownership
Plan ("ESOP")
One First Financial Plaza
Terre Haute, Indiana 47807
Mary F. Hulman 718,066 10.75%
900 Wabash Avenue
Terre Haute, Indiana 47807
Princeton Mining Company 599,424 8.97%
State Road 46 South
Terre Haute, Indiana 47803
- --------------
(1) Represents shares held in trust by the Corporation's subsidiary, Terre
Haute First.
The Trust Departments of five (5) subsidiary banks of the Corporation
which have trust departments hold, as of March 1, 1997, 1,089,511 shares of the
Corporation's common stock for the beneficiaries of certain trusts, estates and
agencies administered by the subsidiary banks. The respective trust departments
are authorized to vote 397,530 shares of the Corporation's common stock which
such trust departments hold of record, either in person or by proxy, so long as
each vote is in the best interest of any such trust, estate or agency and the
beneficiaries or principals thereof. All shares held by such trust departments
will be voted in accordance with the instructions of co-fiduciaries,
beneficiaries or principals, as applicable.
Security Ownership Management
The following table sets forth as of March 1, 1997 the total number of
shares of common stock of the Corporation beneficially owned by each Director
and certain executive officers of the Corporation and by all Directors and
executive officers as a group. The number of shares shown as being beneficially
owned by each Director and executive officer are those over which he or she has
sole or shared voting or investment power.
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<TABLE>
<CAPTION>
Name of Beneficial Owner Shares Beneficially Owned (1) Percent of Class
------------------------ ------------------------- ----------------
<S> <C> <C>
Walter A. Bledsoe 14,278 .21%
B. Guille Cox, Jr. 40,714 .61% (2)
Thomas T. Dinkel 4,462 .07%
Anton H. George 295 .01%
Mari H. George 220 .01%
Gregory L. Gibson 28,742 .43%
Max L. Gibson 113,510 1.70%
Norman L. Lowery 11,310 .17%
William A. Niemeyer 6,790 .10%
Patrick O'Leary 23,143 .35%
John W. Ragle 54,280 .81%
Chapman J. Root, II 291,661 4.36% (3)
Donald E. Smith 61,608 .92%
Virginia L. Smith 2,914 .04%
John W. Perry 9,991 .15%
W. Edward Jukes 10,886 .16%
Michael A. Carty 4,588 .07%
All Directors and Executive Officers 679,392 10.17%
as a group (17 individuals)(4)
</TABLE>
(1) The information contained in this column is based upon stockholder
records of the Corporation and information furnished to the Corporation
by the individuals identified above.
(2) Mr. Cox, under certain circumstances, has the power, with the consent
of others, to vote an additional 218,609 shares (3.27%). These shares
are not reflected in the above amount.
(3) Includes 291,297 shares held by the 1992 Root Children's Business
Trust, of which Mr. Root is a trustee. Mr. Root disclaims beneficial
ownership with respect to all such shares in the trust except those in
which he is the beneficiary.
(4) Excludes 218,609 shares over which Mr. Cox may, under certain
circumstances, exercise voting control. Includes shares held for the
accounts of Donald E. Smith, John W. Perry, Michael A. Carty, and W.
Edward Jukes in the First Financial Corporation Employee Stock
Ownership Plan described above.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Corporation's directors and executive officers, and persons who own more than
ten percent of a registered class of the Corporation's equity securities, to
file with the Securities and Exchange Commission ("SEC") initial reports of
ownership and reports of changes in ownership of Corporation common stock and
other equity securities of the Corporation. Officers, directors and greater than
ten-percent shareholders are required by SEC regulations to furnish the
Corporation with copies of all Section 16(a) forms they file. To the best
knowledge of the Corporation, during the most recent fiscal year all officers,
directors and greater than ten-percent beneficial owners of the Corporation
timely filed all statements of beneficial ownership required to be filed with
the SEC.
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INDEPENDENT ACCOUNTANTS
The Board of Directors appointed Coopers & Lybrand L.L.P., Certified
Public Accountants as independent accountants to audit the books, records and
accounts of the Corporation for 1996. The Board of Directors anticipates that it
will appoint an independent public accountant to audit the books, records, and
accounts of the Corporation for 1997 in April, 1997. Representatives of Coopers
& Lybrand L.L.P. are expected to be in attendance at the annual meeting and will
be provided an opportunity to make a statement should they desire to do so and
to respond to appropriate inquiries from the shareholders. Coopers & Lybrand
L.L.P. have been independent accountants for the Corporation since 1984.
SHAREHOLDERS PROPOSALS
Any proposals which shareholders desire to present at the 1998 Annual
Meeting and have included in the Proxy Statement must be received by the
Corporation at its principal executive offices on or before November 25, 1997 to
be considered for inclusion in the Corporation's proxy material for that
meeting.
ANNUAL REPORT TO SHAREHOLDERS
The 1996 Annual Report to Shareholders, containing financial statements
for the year ended December 31, 1996, and other information concerning the
operations of the Corporation is enclosed herewith, but is not to be regarded as
proxy soliciting material.
UPON WRITTEN REQUEST, THE CORPORATION WILL PROVIDE WITHOUT CHARGE TO
EACH REQUESTING SHAREHOLDER, A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM
10-K WHICH IS REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 1996. ADDRESS ALL REQUESTS TO:
MICHAEL A. CARTY, TREASURER
FIRST FINANCIAL CORPORATION
ONE FIRST FINANCIAL PLAZA
P.O. BOX 540
TERRE HAUTE, INDIANA 47808
OTHER MATTERS
The Annual Meeting is called for the purposes set forth in the Notice.
The Board of Directors of the Corporation does not know of any matters for
action by shareholders at such Annual Meeting other than the matters described
in the notice. However, the enclosed Proxy will confer discretionary authority
with respect to matters which are not known to the Board of Directors at the
time of the printing hereof and which may properly come before the Annual
Meeting. It is the intention of the persons named in the Proxy to vote pursuant
to the Proxy with respect to such matters in accordance with their best
judgment.
By Order of the Board of Directors
/s/ DONALD E. SMITH
DONALD E. SMITH
Chairman of the Board and President
<PAGE>
FIRST FINANCIAL CORPORATION
One First Financial Plaza
P.O. Box 540
Terre Haute, Indiana 47808
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James E. Brown and Ronald K. Rich, or
either of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all shares
of common stock of First Financial Corporation which the undersigned is entitled
to vote at the Annual Meeting of Shareholders to be held at One First Financial
Plaza, Terre Haute, Indiana, on Wednesday, April 16, 1997, at 11:00 a.m. (local
time), or any adjournment thereof, on the following matters:
1. If the proposed Amended and Restated Articles of Incorporation
specified in Item 3 below are adopted by the shareholders, the Board will
consist of three classes as indicated below. If such Articles of Incorporation
are not adopted, all fourteen of the director nominees will be nominated to
serve until the next succeeding Annual Meeting of Shareholders.
FOR all nominees listed below |_| WITHHOLD AUTHORITY |_|
(except as marked to vote for all
to the contrary below) nominees listed below
Class I (one-year term) Walter A. Bledsoe, Max L. Gibson,
William A. Niemeyer, Donald E. Smith
Class II (two-year term) B. Guille Cox, Jr., Anton H. George,
Gregory L. Gibson, John W. Ragle,
Virginia L. Smith
Class III (three-year term) Thomas T. Dinkel, Mari H. George, Norman
L. Lowery, Patrick O'Leary,
Chapman J. Root II
(Instruction: to withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list provided above.)
2. Proposal to amend the Corporation's Articles of Incorporation to
increase the authorized shares of Common Stock from 10,000,000 to 40,000,000.
This same change is a part of the Amended and Restated Articles of Incorporation
specified in Item 3 below, and is being proposed as a separate item to permit
its adoption even if Item 3 is not approved.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To adopt an amendment to the Corporation's Articles of Incorporation
providing for the classification of the Corporation's Board of Directors into
three classes, setting the number of directors at between 5 and 20, and
providing that vacancies on the Board of Directors may be filled for the
remainder of any unexpired term by a majority vote of directors in office.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
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<PAGE>
4. To adopt an amendment to the Corporation's Articles of Incorporation
providing that directors may be removed only for cause and only by the
affirmative vote of at least 66 2/3% of the shares eligible to vote for
directors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. To adopt an amendment to the Corporation's Articles of Incorporation
providing that special meetings of shareholders may only be called by the
Chairman or a majority of the directors of the Corporation.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
6. To adopt an amendment to the Corporation's Articles of Incorporation
authorizing 10,000,000 shares of preferred stock.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
7. To adopt an amendment to the Corporation's Articles of Incorporation
enumerating factors the Board may consider in evaluating offers to acquire the
Corporation.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
8. To adopt an amendment to the Corporation's Articles of Incorporation
to add a "fair price business combination" provision.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
9. To adopt an amendment to the Corporation's Articles of Incorporation
to require a 66 2/3% vote of shareholders to amend certain provisions of the
Corporation's Articles of Incorporation.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
10. To adopt an amendment to the Corporation's Articles of
Incorporation limiting the liability of directors and indemnifying officers,
directors, employees and agents of the Corporation, to the extent permitted by
Indiana law.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
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<PAGE>
11. To adopt other amendments to the Corporation's Articles of
Incorporation consistent with Indiana law.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
12. In their discretion, on such other matters as may properly come
before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR IF NO DIRECTION
IS INDICATED, WILL BE VOTED FOR PROPOSAL NOS. 1 THROUGH 11.
Please sign exactly as name appears below. If there are two or more
owners, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer.
If a partnership, please sign in partnership name by authorized person.
Dated:__________________, 1997 ---------------------------------------------
(Signature)
--------------------------------------------
(Signature, if held jointly)
Your vote is important. Please mark, sign,
date and return this Proxy promptly using
the enclosed envelope.
EXHIBIT A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
FIRST FINANCIAL CORPORATION
ARTICLE 1
Name
The name of the Corporation is First Financial Corporation.
ARTICLE 2
Purposes and Powers
Section 2.01. Purposes. The purposes for which the Corporation is formed
are the transaction of any or all lawful business for which corporations may be
incorporated under the Indiana Business Corporation Law, as the same may, from
time to time, be amended (the "Act").
Section 2.02. Powers. The Corporation shall have the same powers as an
individual to do all things necessary or convenient to carry out its business
and affairs, including without limitation, all the powers specifically
enumerated in the Act.
ARTICLE 3
Term of Existence
The period during which the Corporation shall continue is perpetual.
ARTICLE 4
Registered Office and Resident Agent
The street address of the registered office of the Corporation is:
One First Financial Plaza
P.O. Box 540
Terre Haute, Indiana 47808
and the name and business office address of its registered agent in charge
of such office are:
Donald E. Smith
First Financial Corporation
One First Financial Plaza
P.O. Box 540
Terre Haute, Indiana 47808
ARTICLE 5
Number of Shares
The total number of shares which the Corporation shall have authority to
issue is Fifty Million (50,000,000) shares, all of which are without par value.
ARTICLE 6
Terms of Shares
Section 6.01. Designation of Classes, Number and Par Value of Shares. The
shares of authorized capital shall be divided into Ten Million (10,000,000)
shares of Preferred Stock, without par value, as hereinafter provided
("Preferred Stock"), and Forty Million (40,000,000) shares of Common Stock,
without par value ("Common Stock"), as hereinafter provided.
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Section 6.02. Rights, Privileges, Limitations and Restrictions of Preferred
Stock. The Board of Directors of the Corporation is vested with authority to
determine and state the designations and the relative preferences, limitations,
voting rights, if any, and other rights of the Preferred Stock and of each
series of Preferred Stock by the adoption and filing in accordance with the Act,
before the issuance of any shares of such Preferred Stock or series of Preferred
Stock, of an amendment or amendments to these Articles of Incorporation as the
same may, from time to time, be amended, determining the terms of such Preferred
Stock or series of Preferred Stock ("Preferred Stock Designation"). All shares
of Preferred Stock of the same series shall be identical with each other in all
respects. The number of authorized shares of Preferred Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the voting power of all of the
then outstanding shares of the capital stock of the Corporation entitled to vote
generally in the election of Directors, after giving effect to the provisions in
Article 11 hereof ("Voting Stock"), voting as a single class, without a separate
vote of the holders of the Preferred Stock or any series thereof, unless a vote
of any such holders is required pursuant to the Preferred Stock Designation.
Section 6.03. Rights, Privileges, Limitations and Restrictions of Common
Stock.
Clause 6.031. Single Class. The shares of Common Stock shall
constitute a separate and single class and shall not be issued in series.
All shares of Common Stock shall be identical with each other in all
respects.
Clause 6.032. Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation, the
holders of the shares of Common Stock shall be entitled, after payment or
provision for payment of the debts and other liabilities of the Corporation
and of all shares of stock having priority over the Common Stock, in the
event of voluntary or involuntary liquidation, dissolution or winding up,
to share ratably in the remaining net assets of the Corporation.
Clause 6.033. Voting Rights. Every holder of shares of Common Stock
shall have the right, at every Shareholders' meeting, to one vote for each
share of Common Stock standing in his name on the books of the Corporation,
except as otherwise provided in the Act.
Section 6.04. Issuance of Shares. The Board of Directors has authority to
authorize and direct the issuance by the Corporation of shares of Preferred
Stock and Common Stock at such times, in such amounts, to such persons, for such
considerations and upon such terms and conditions as it may, from time to time,
determine upon, subject only to the restrictions, limitations, conditions and
requirements imposed by the Act, other applicable laws and these Articles of
Incorporation, as the same may, from time to time, be amended.
Section 6.05. Distributions Upon Shares. The Board of Directors has
authority to authorize and direct the payment of dividends and the making of
other distributions by the Corporation in respect of the issued and outstanding
shares of Preferred Stock and Common Stock (i) at such times, in such amount and
forms, from such sources and upon such terms and conditions as it may, from time
to time, determine upon, subject only to the restrictions, limitations,
conditions and requirements imposed by the Act, other applicable laws and these
Articles of Incorporation, as the same may, from time to time, be amended, and
(ii) in shares of the same class or series or in shares of any other class or
series without obtaining the affirmative vote or the written consent of the
holders of the shares of the class or series in which the payment or
distribution is to be made.
Section 6.06. Acquisition of Shares. The Board of Directors has authority
to authorize and direct the acquisition by the Corporation of the issued and
outstanding shares of Preferred Stock and Common Stock at such times, in such
amounts, from such persons, for such considerations, from such sources and upon
such terms and conditions as it may, from time to time, determine upon, subject
only to the restrictions, limitations, conditions and requirements imposed by
the Act, other applicable laws and these Articles of Incorporation, as the same
may, from time to time, be amended.
Section 6.07. Recognition Procedure for Beneficial Ownership of Shares or
Rights. The Board of Directors may establish in the Code of By-Laws of the
Corporation a recognition procedure by which the beneficial owner of any share
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or right of the Corporation that is registered on the books of the Corporation
in the name of a nominee is recognized by the Corporation, to the extent
provided in any such recognition procedure, as the owner thereof.
Section 6.08. Disclosure Procedure for Beneficial Ownership of Shares or
Rights. The Board of Directors may establish in the Corporation's Code of
By-Laws a disclosure procedure by which the name of the beneficial owner of any
share or right of the Corporation that is registered on the books of the
Corporation in the name of a nominee shall, to the extent not prohibited by the
Act or other applicable laws, be disclosed to the Corporation. Any disclosure
procedure established by the Board of Directors may include reasonable sanctions
to ensure compliance therewith, including without limitation (i) prohibiting the
voting of, (ii) providing for mandatory or optional reacquisition by the
Corporation of, and (iii) the withholding or payment into escrow of any dividend
or other distribution in respect of, any share or right of the Corporation as to
which the name of the beneficial owner is not disclosed to the Corporation as
required by such disclosure procedure.
Section 6.09. No Pre-emptive Rights. The holders of the Common Stock and
the holders of the Preferred Stock or any series of the Preferred Stock shall
have no pre-emptive rights to subscribe to or purchase any shares of Common
Stock, Preferred Stock or other securities of the Corporation.
Section 6.10. Record Ownership of Shares or Rights. The Corporation, to the
extent permitted by law, shall be entitled to treat the person in whose name any
share or right of the Corporation is registered on the books of the Corporation
as the owner thereof for all purposes, and shall not be bound to recognize any
equitable or any other claim to, or interest in, such share or right on the part
of any other person, whether or not the Corporation shall have notice thereof.
ARTICLE 7
Directors
Section 7.01. Number. The number of Directors of the Corporation shall not
be less than five (5) nor more than twenty (20), as may be specified from time
to time by resolution adopted by a majority of the total number of the
Corporation's Directors. If and whenever the Board of Directors has not
specified the number of Directors, the number shall be fourteen (14). The
directors elected by the Shareholders shall be divided into three (3) classes,
as nearly equal in number as possible, with the term of office of the first
class to expire at the Annual Meeting of Shareholders held following the fiscal
year ended December 31, 1997, the term of office of the second class to expire
at the Annual Meeting of Shareholders held following the fiscal year ended
December 31, 1998, and the term of office of the third class to expire at the
Annual Meeting of Shareholders held following the fiscal year ended December 31,
1999. At each Annual Meeting of Shareholders following such initial
classification, Directors elected by the Shareholders to succeed those Directors
whose term expires shall be elected for a term of office to expire at the third
succeeding Annual Meeting of Shareholders after their election. Each Director
shall hold office until his successor is chosen and qualified. There shall be no
cumulative voting by Shareholders of any class or series in the election of
Directors of the Corporation.
Section 7.02. Vacancies. Subject to the rights of the holders of any series
of Preferred Stock then outstanding, newly-created directorships resulting from
any increase in the authorized number of Directors or any vacancies in the Board
of Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause shall be filled only by a majority vote of
the Continuing Directors, as defined below, although less than a quorum of the
Board of Directors. Directors so chosen shall hold office for a term expiring at
the Annual Meeting of Shareholders at which the term of the class to which they
have been elected expires. No decrease in the number of authorized Directors
constituting the entire Board of Directors shall shorten the term of any
incumbent Director. For purposes of this section, the term "Continuing Director"
shall mean any Director then serving as such who was a member of the
Corporation's Board of Directors on April 16, 1997, or was recommended for
appointment or election (before such person's initial assumption of office as a
Director) by majority of the Continuing Directors then on the Board.
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Section 7.03. Removal. Subject to the rights of the holders of any series
of Preferred Stock then outstanding, any Director, or the entire Board of
Directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least 66 2/3% of the voting power
of all of the shares of the Corporation entitled to vote generally in the
election of Directors, voting together as a single class. For purposes of this
section, removal for cause shall be limited to the grounds then specifically
enumerated in 12 C.F.R. ss. 563.39 (or any successor provision) with respect to
termination for cause.
Section 7.04. Shareholder Nomination of Director Candidates and
Introduction of Business. Advance notice of Shareholder nominations for the
election of Directors and of business to be brought by Shareholders before any
meeting of the Shareholders of the Corporation shall be given in the manner
provided in the Corporation's Code of By-Laws.
Section 7.05. Calling of Special Shareholder Meetings. Special meetings of
the Shareholders of the Corporation may only be called by the Chairman of the
Board of Directors or by the Board of Directors pursuant to a resolution adopted
by a majority of the total number of Directors of the Corporation.
Section 7.06. Code of By-Laws. The Board of Directors of the Corporation
shall have power, without the assent or vote of the Shareholders, to make,
alter, amend or repeal the Code of By-Laws of the Corporation by the affirmative
vote of a number of Directors equal to a majority of the number who constitute a
full Board of Directors at the time of such action. Shareholders shall not have
any power to make, alter, amend or repeal the Corporation's Code of By-Laws.
Section 7.07. Factors to be Considered by Board. In addition to any other
considerations which the Board of Directors may lawfully take into account, in
determining whether to take or to refrain from taking corporate action on any
matter, including making or declining to make any recommendation to the
Shareholders of the Corporation, the Board of Directors may in its discretion
consider the long-term as well as short-term best interests of the Corporation
(including the possibility that these interests may be best served by the
continued independence of the Corporation), taking into account, and weighing as
the Directors deem appropriate, the social and economic effects of such action
on present and future employees, suppliers, customers of the Corporation and its
subsidiaries (including account holders and borrowers of any of the
Corporation's subsidiaries), the effect upon communities in which offices or
other facilities of the Corporation are located, and the effect on the
Corporation's ability to fulfill its corporate obligations as a bank holding
company and on the ability of any of its subsidiary financial institutions to
fulfill the objectives of a financial institution under applicable statutes and
regulations, and any other factors the Directors consider pertinent.
Section 7.08. Authorized Board Actions. In furtherance and not in
limitation of the powers conferred by law or in these Articles of Incorporation,
as the same may, from time to time, be amended, the Board of Directors (and any
committee of the Board of Directors) is expressly authorized, to the extent
permitted by law, to take such action or actions as the Board or such committee
may determine to be reasonably necessary or desirable to (A) encourage any
person (as defined in Section 10.03, Clause 10.031 hereof) to enter into
negotiations with the Board of Directors and management of the Corporation with
respect to any transaction which may result in a change in control of the
Corporation which is proposed or initiated by such person or (B) contest or
oppose any such transaction which the Board of Directors or such committee
determines to be unfair, abusive or otherwise undesirable with respect to the
Corporation and its business, assets or properties or the Shareholders of the
Corporation, including, without limitation, the adoption of such plans or the
issuance of such rights, options, capital stock, notes, debentures or other
evidences of indebtedness or other securities of the Corporation (which issuance
may be with or without consideration, and may (but need not) be issued pro
rata), which rights, options, capital stock, notes, evidences of indebtedness
and other securities (i) may be exchangeable for or convertible into cash or
other securities on such terms and conditions as may be determined by the Board
or such committee and (ii) may provide for the treatment of any holder or class
of holders thereof designated by the Board of Directors or any such committee in
respect of the terms, conditions, provisions and rights of such securities which
is different from, and unequal to, the terms, conditions, provisions and rights
applicable to all other holders thereof.
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Section 7.09. Amendment, Repeal. Notwithstanding anything contained in the
Articles of Incorporation or the Code of By-Laws of the Corporation to the
contrary and notwithstanding that a lesser percentage or no vote may be
specified by law, but in addition to any affirmative vote of the holders of any
particular class or series of capital stock of the Corporation required by law
or any Preferred Stock Designation, the affirmative vote of the holders of at
least 66 2/3% of the voting power of all of the then-outstanding shares of
Voting Stock, voting together as a single class, shall be required to alter,
amend, change or repeal this Article 7.
ARTICLE 8
Directors
The names and post office addresses of the initial Board of Directors of
the Corporation are as follows:
Name Post Office Address
Walter A. Bledsoe P.O. Box 540
One First Financial Plaza
Terre Haute, Indiana 47808
B. Guille Cox, Jr. P.O. Box 540
One First Financial Plaza
Terre Haute, Indiana 47808
Thomas T. Dinkel P.O. Box 540
One First Financial Plaza
Terre Haute, Indiana 47808
Anton H. George P.O. Box 540
One First Financial Plaza
Terre Haute, Indiana 47808
Mari H. George P.O. Box 540
One First Financial Plaza
Terre Haute, Indiana 47808
Gregory L. Gibson P.O. Box 540
One First Financial Plaza
Terre Haute, Indiana 47808
Max L. Gibson P.O. Box 540
One First Financial Plaza
Terre Haute, Indiana 47808
Norman L. Lowery P.O. Box 540
One First Financial Plaza
Terre Haute, Indiana 47808
William A. Niemeyer P.O. Box 540
One First Financial Plaza
Terre Haute, Indiana 47808
Patrick O'Leary P.O. Box 540
One First Financial Plaza
Terre Haute, Indiana 47808
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John W. Ragle P.O. Box 540
One First Financial Plaza
Terre Haute, Indiana 47808
Chapman J. Root II P.O. Box 540
One First Financial Plaza
Terre Haute, Indiana 47808
Donald E. Smith P.O. Box 540
One First Financial Plaza
Terre Haute, Indiana 47808
Virginia L. Smith P.O. Box 540
One First Financial Plaza
Terre Haute, Indiana 47808
ARTICLE 9
Provisions for Regulation of Business and Conduct
of Affairs of Corporation
Section 9.01. Amendments of Articles of Incorporation. Except as otherwise
provided in Articles 7 and 10 hereof, the Corporation reserves the right to
increase or decrease the number of its authorized shares, or any class or series
thereof, and to reclassify the same, and to amend, alter, change or repeal any
provision contained in these Articles of Incorporation, or any amendment hereto,
or to add any provision to these Articles of Incorporation or to any amendment
hereto, in any manner now or hereafter prescribed or permitted by the Act or any
other applicable laws, and all rights and powers conferred upon Shareholders,
Directors and/or Officers in these Articles of Incorporation, or any amendment
hereto, are granted subject to this reserve power. No Shareholder has a vested
property right resulting from any provision in these Articles of Incorporation,
or any amendment hereto, or authorized to be in the Code of By-Laws of the
Corporation or these Articles of Incorporation by the Act, including, without
limitation, provisions relating to management, control, capital structure,
dividend entitlement, or purpose or duration of the Corporation.
Section 9.02. Action by Shareholders. Meetings of the Shareholders of the
Corporation shall be held at such place, within or without the State of Indiana,
as may be specified in the Code of By-Laws of the Corporation or in the
respective notices, or waivers of notice, thereof. Any action required or
permitted to be taken at any meeting of the Shareholders may be taken without a
meeting if a consent in writing setting forth the action so taken is signed by
all the Shareholders entitled to vote with respect thereto, and such written
consent is filed with the minutes of the proceedings of the Shareholders.
Section 9.03. Action by Directors. Meetings of the Board of Directors of
the Corporation or any committee thereof shall be held at such place, within or
without the State of Indiana, as may be specified in the Code of By-Laws of the
Corporation or in the respective notices, or waivers of notice, thereof. Any
action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if a
consent in writing setting forth the action so taken is signed by all members of
the Board of Directors or of such committee, as the case may be, and such
written consent is filed with the minutes of the proceedings of such Board or
committee.
Section 9.04. Places of Keeping of Corporate Records. The Corporation shall
keep at its principal office a copy of (1) its Articles of Incorporation, and
all amendments thereto currently in effect; (2) its Code of By-Laws, and all
amendments thereto currently in effect; (3) minutes of all meetings of the
Shareholders and records of all actions taken by the Shareholders without a
meeting (collectively, "Shareholders Minutes") for the prior three years; (4)
all written communications by the Corporation to the Shareholders including the
financial statements furnished by the Corporation to the Shareholders
("Shareholder Communications") for the prior three years; (5) a list of the
names and business addresses of the current Directors and the current Officers
of the Corporation; and (6) the most recent Annual Report of the Corporation as
filed with the Secretary of State of Indiana. The Corporation shall also keep
and maintain at its principal office, or at such other place or places within or
without the State of Indiana as may be provided, from time to time, in the Code
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of By-Laws, (1) minutes of all meetings of the Board of Directors and of each
committee of such Board, and records of all actions taken by the Board of
Directors and by each committee without a meeting; (2) appropriate accounting
records of the Corporation; (3) a record of the Shareholders in a form that
permits preparation of a list of the names and addresses of all the
Shareholders, in alphabetical order, stating the number of shares held by each
Shareholder; and (4) Shareholders Minutes for periods preceding the prior three
years. All of the records of the Corporation described in this Section 9.04
(collectively, the "Corporate Records") shall be maintained in written form or
in another form capable of conversion into written form within a reasonable
time.
Section 9.05. Limitation of Liability and Reliance on Corporate Records and
Other Information.
Clause 9.051. General Limitation. No Director, member of any committee
of the Board of Directors, or of another committee appointed by the Board,
Officer, employee or agent of the Corporation ("Corporate Person") shall be
liable for any loss or damage if, in taking or omitting to take any action
causing such loss or damage, either (1) such Corporate Person acted (A) in
good faith, (B) with the care an ordinarily prudent person in a like
position would have exercised under similar circumstances, and (C) in a
manner such Corporate Person reasonably believed was in the best interests
of the Corporation, or (2) such Corporate Person's breach of or failure to
act in accordance with the standards of conduct set forth in Clause
9.051(1) above (the "Standards of Conduct") did not constitute willful
misconduct or recklessness.
Clause 9.052. Reliance on Corporate Records and Other Information. Any
"Corporate Person" shall be fully protected, and shall be deemed to have
complied with the Standards of Conduct, in relying in good faith, with
respect to any information contained therein, upon (1) the Corporate
Records, or (2) information, opinions, reports or statements (including
financial statements and other financial data) prepared or presented by (A)
one or more other Corporate Persons whom such Corporate Person reasonably
believes to be competent in the matters presented, (B) legal counsel,
public accountants or other persons as to matters that such Corporate
Person reasonably believes are within such person's professional or expert
competence, (C) a committee of the Board of Directors or other committee
appointed by the Board of Directors, of which such Corporate Person is not
a member, if such Corporate Person reasonably believes such committee of
the Board of Directors or such appointed committee merits confidence, or
(D) the Board of Directors, if such Corporate Person is not a Director and
reasonably believes that the Board merits confidence.
Section 9.06. Interest of Directors in Contracts. Any contract or other
transaction between the Corporation and (i) any Director, or (ii) any
corporation, unincorporated association, business trust, estate, partnership,
trust, joint venture, individual or other legal entity ("Legal Entity") (A) in
which any Director has a material financial interest or is a general partner, or
(B) of which any Director is a director, officer, or trustee (collectively, a
"Conflict Transaction"), shall be valid for all purposes, if the material facts
of the Conflict Transaction and the Director's interest were disclosed or known
to the Board of Directors, a committee of the Board of Directors with authority
to act thereon, or the Shareholders entitled to vote thereon, and the Board of
Directors, such committee or such Shareholders authorized, approved or ratified
the Conflict Transaction. A Conflict Transaction is authorized, approved or
ratified:
(1) By the Board of Directors or such committee, if it receives the
affirmative vote of a majority of the Directors who have no interest in the
Conflict Transaction, notwithstanding the fact that such majority may not
constitute a quorum or a majority of the Board of Directors or such
committee or a majority of the Directors present at the meeting, and
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notwithstanding the presence or vote of any Director who does have such an
interest; provided, however, that no Conflict Transaction may be
authorized, approved or ratified by a single Director; and
(2) By such Shareholders, if it receives the vote of a majority of the
shares entitled to be counted, in which vote shares owned or voted under
the control of any Director who, or of any Legal Entity that, has an
interest in the Conflict Transaction may be counted; provided, however,
that a majority of such shares, whether or not present, shall constitute a
quorum for the purpose of authorizing, approving or ratifying a Conflict
Transaction.
This Section 9.06 shall not be construed to require authorization,
ratification or approval by the Shareholders of any Conflict Transaction, or to
invalidate any Conflict Transaction, that would otherwise be valid under the
common and statutory law applicable thereto.
Section 9.07. Compensation of Directors. The Board of Directors is hereby
specifically authorized, in and by the Code of By-Laws of the Corporation, or by
resolution duly adopted by such Board, to make provision for reasonable
compensation to its members for their services as Directors, and to fix the
basis and conditions upon which such compensation shall be paid. Any Director of
the Corporation may also serve the Corporation in any other capacity and receive
compensation therefor in any form.
Section 9.08. Direction of Purposes and Exercise of Powers by Directors.
The Board of Directors, subject to any specific limitations or restrictions
imposed by the Act or these Articles of Incorporation, as the same may, from
time to time, be amended, shall direct the carrying out of the purposes and
exercise the powers of the Corporation, without previous authorization or
subsequent approval by the Shareholders of the Corporation.
ARTICLE 10
Provisions for Certain Business Combinations
Section 10.01. Vote Required.
Clause 10.011. Higher Vote for Certain Business Combinations. In
addition to any affirmative vote required by law or these Articles of
Incorporation, and except as otherwise expressly provided in Section 10.02
of this Article 10:
1. any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (A) any Interested Shareholder (as
hereinafter defined), or (B) any other corporation (whether or not
itself an Interested Shareholder) which is, or after such merger
or consolidation would be, an Affiliate (as hereinafter defined)
of an Interested Shareholder; or
2. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or
with any Interested Shareholder or any Affiliate of any Interested
Shareholder, of any assets of the Corporation or any Subsidiary
having an aggregate Fair Market Value equaling or exceeding 25% or
more of the combined assets of the Corporation and its
Subsidiaries; or
3. the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of transactions) of any securities of
the Corporation or any Subsidiary to any Interested Shareholder or
any Affiliate of any Interested Shareholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate Fair Market Value equaling or exceeding 25% of the
combined assets of the Corporation and its Subsidiaries except
pursuant to an employee benefit plan of the Corporation or any
Subsidiary thereof; or
4. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Shareholder or any Affiliate of any Interested
Shareholder; or
5. any reclassification of securities (including any reverse stock
split) or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or
any other transaction (whether or not with or into or otherwise
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involving any Interested Shareholder) which has the effect,
directly or indirectly, of increasing the proportionate share of
the outstanding shares of any class or series of equity or
convertible securities of the Corporation or any Subsidiary which
is Beneficially Owned (as hereinafter defined) directly or
indirectly by any Interested Shareholder or any Affiliate of any
Interested Shareholder;
shall require the affirmative vote of the holders of at least 80% of the
voting power of all of the then-outstanding shares of Voting Stock, voting
together as a single class. Such affirmative vote shall be required
notwithstanding that any other provisions of these Articles of
Incorporation, or any provision of law, or any Preferred Stock Designation,
or any agreement with any national securities exchange or otherwise might
otherwise permit a lesser vote or no vote.
Clause 10.012. Definition of "Business Combination." The term "Business
Combination" as used in this Article 10 shall mean any transaction which is
referred to in any one or more of paragraphs (1) through (5) of Clause
10.011 of this Section 10.01.
Section 10.02. When Higher Vote is Not Required. The provisions of Section
10.01 of this Article 10 shall not be applicable to any particular Business
Combination, and such Business Combination shall require only such affirmative
vote as is required by law, and any other provision of these Articles of
Incorporation, and any Preferred Stock Designation, if, in the case of a
Business Combination that does not involve any cash or other consideration being
received by the Shareholders of the Corporation, solely in their capacity as
Shareholders of the Corporation, the condition specified in the following Clause
10.021 is met or, in the case of any other Business Combination, the conditions
specified in either of the following Clause 10.021 or 10.022 are met:
Clause 10.021. Approval by Continuing Directors. The Business
Combination shall have been approved by a majority of the Continuing
Directors (as hereinafter defined); provided, however, that this condition
shall not be capable of satisfaction unless there are at least three
Continuing Directors.
Clause 10.022. Price and Procedure Requirements. All of the following
conditions shall have been met:
1. The consideration to be received by holders of shares of a
particular class (or series) of outstanding capital stock
(including Common Stock) shall be in cash or in the same form as
the Interested Shareholder or any of its Affiliates has previously
paid for shares of such class (or series) of capital stock. If the
Interested Shareholder or any of its Affiliates has paid for
shares of any class (or series) of capital stock with varying
forms of consideration, the form of consideration to be received
per share by holders of shares of such class (or series) of
capital stock shall be either cash or the form used to acquire the
largest number of shares of such class (or series) of capital
stock previously acquired by the Interested Shareholder.
2. The aggregate amount of (x) the cash and (y) the Fair Market Value
as of the date (the "Consummation Date") of the consummation of
the Business Combination, of the consideration other than cash to
be received per share by holders of Common Stock in such Business
Combination shall be at least equal to the higher of the following
(in each case appropriately adjusted in the event of any stock
dividend, stock split, combination of shares or similar event):
A. (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Shareholder or any of its
Affiliates for any shares of Common Stock acquired by them
within the two-year period immediately prior to the date of
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the first public announcement of the proposal of the Business
Combination (the "Announcement Date") or in any transaction in
which the Interested Shareholder became an Interested
Shareholder, whichever is higher; and
B. The Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested
Shareholder became an Interested Shareholder (the
"Determination Date"), whichever is higher.
3. The aggregate amount of (x) the cash and (y) the Fair Market
Value, as of the Consummation Date, of the consideration other
than cash to be received per share by holders of shares of any
class (or series), other than Common Stock, of outstanding capital
stock of the Corporation shall be at least equal to the highest of
the following (in each case appropriately adjusted in the event of
any stock dividend, stock split, combination of shares or similar
event), it being intended that the requirements of this
subparagraph (3) shall be required to be met with respect to every
such class (or series) of outstanding capital stock whether or not
the Interested Shareholder or any of its Affiliates has previously
acquired any shares of a particular class (or series) of capital
stock:
A. (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the Interested Shareholder or any of
its Affiliates for any shares of such class (or series) of
capital stock acquired by them within the two-year period
immediately prior to the Announcement Date or in any
transaction in which it became an Interested Shareholder,
whichever is higher;
B. the Fair Market Value per share of such class (or series) of
capital stock on the Announcement Date or on the
Determination Date, whichever is higher; and
C. (if applicable) the highest preferential amount per share,
if any, to which the holders of shares of such class (or
series) of capital stock would be entitled in the event of
any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation.
4. After such Interested Shareholder has become an Interested
Shareholder and prior to the consummation of such Business
Combination: (a) except as approved by a majority of the
Continuing Directors, there shall have been no failure to declare
and pay at the regular date therefor any full quarterly dividends
(whether or not cumulative) on any outstanding Preferred Stock;
(b) there shall have been (I) no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to
reflect any subdivision of the Common Stock), except as approved
by a majority of the Continuing Directors, and (II) an increase
in such annual rate of dividends as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which
has the effect of reducing the number of outstanding shares of
the Common Stock, unless the failure so to increase such annual
rate is approved by a majority of the Continuing Directors; and
(c) neither such Interested Shareholder nor any of its Affiliates
shall have become the beneficial owner of any additional shares
of Voting Stock except as part of the transaction which results
in such Interested Shareholder becoming an Interested
Shareholder; provided, however, that no approval by Continuing
Directors shall satisfy the requirements of this subparagraph (4)
unless at the time of such approval there are at least three
Continuing Directors.
5. After such Interested Shareholder has become an Interested
Shareholder, such Interested Shareholder and any of its Affiliates
shall not have received the benefit, directly or indirectly
(except proportionately, solely in such Interested Shareholder's
or Affiliate's capacity as a Shareholder of the Corporation), of
any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided by
the Corporation, whether in anticipation of or in connection with
such Business Combination or otherwise.
6. A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules
or regulations) shall be mailed to all Shareholders of the
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Corporation at least 30 days prior to the consummation of such
Business Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or
subsequent provisions).
7. Such Interested Shareholder shall have provided the Corporation
with such information as shall have been requested pursuant to
Section 10.05 of this Article 10 within the time period set forth
therein.
Section 10.03. Certain Definitions. For the purposes of this Article 10:
Clause 10.031. A "person" shall include an individual, a group acting
in concert, a corporation, a partnership, an association, a joint venture,
a pool, a joint stock company, a trust, an unincorporated organization or
similar company, a syndicate or any other group formed for the purpose of
acquiring, holding or disposing of securities.
Clause 10.032. "Interested Shareholder" means any person (other than
the Corporation or any Subsidiary) who or which:
1. is the beneficial owner (as hereinafter defined), directly or
indirectly, of ten percent or more of the voting power of the
outstanding Voting Stock; or
2. is an Affiliate or an Associate 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
Voting Stock; or
3. is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by
any Interested Shareholder, 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, as amended.
Clause 10.033. A person shall be a "beneficial owner" of, or shall
"Beneficially Own," any Voting Stock:
1. which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns, directly or indirectly
within the meaning of Rule 13d-3 under the Securities Exchange Act
of 1934, as in effect on April 16, 1997; or
2. 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 (but neither such person nor any such
Affiliate or Associate shall be deemed to be the beneficial owner
of any shares of Voting Stock solely by reason of a revocable
proxy granted for a particular meeting of Shareholders, pursuant
to a public solicitation of proxies for such meeting, and with
respect to which shares neither such person nor any such Affiliate
or Associate is otherwise deemed the beneficial owner); or
3. which are beneficially owned, directly or indirectly, within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934,
as in effect on April 16, 1997, 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 (other than solely by reason of a
revocable proxy as described in subparagraph (2) of this Clause
10.033) or disposing of any shares of Voting Stock; provided,
however, that in the case of any employee stock ownership or
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similar plan of the Corporation or of any Subsidiary in which the
beneficiaries thereof possess the right to vote any shares of
Voting Stock held by such plan, no such plan nor any trustee with
respect thereto (nor any Affiliate of such trustee), solely by
reason of such capacity of such trustee, shall be deemed, for any
purpose hereof, to beneficially own any shares of Voting Stock
held under any such plan.
Clause 10.034. For the purposes of determining whether a person is an
Interested Shareholder pursuant to Clause 10.032 of this Section 10.03, the
number of shares of Voting Stock deemed to be outstanding shall include
shares deemed owned through application of Clause 10.033 of this Section
10.03 but shall not include any other unissued shares of Voting Stock which
may be issuable pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise.
Clause 10.035. "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on
April 16, 1997.
Clause 10.036. "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
Interested Shareholder set forth in Clause 10.032 of this Section 10.03,
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.
Clause 10.037. "Continuing Director" for purposes of this Article 10
means any member of the Board of Directors of the Corporation who is
unaffiliated with the Interested Shareholder and was a member of the Board
prior to the time that the Interested Shareholder became an Interested
Shareholder, and any director who is thereafter chosen to fill any vacancy
on the Board of Directors or who is elected and who, in either event, is
unaffiliated with the Interested Shareholder and in connection with his or
her initial assumption of office is recommended for appointment or election
by a majority of Continuing Directors then on the Board.
Clause 10.038. "Fair Market Value" means: (i) in the case of stock, the
highest closing sale price during the 30-day period immediately preceding
the date in question of a share of such stock on the Composite Tape for New
York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the
Composite Tape, on the New York Stock Exchange, or, if such stock is not
listed on such Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934, as amended, on which
such stock is listed, or, if such stock is not listed on any such exchange,
the highest closing bid quotation with respect to a share of such stock
during the 30-day period preceding the date in question on the National
Association of Securities Dealers, Inc. Automated Quotations System or any
system then in use, or if no such quotations are available, the fair market
value on the date in question of a share of such stock as determined by the
Board in accordance with Section 10.04 of this Article 10, in each case
with respect to any class of stock, appropriately adjusted for any dividend
or distribution in shares of such stock or any combination or
reclassification of outstanding shares of such stock into a smaller number
of shares of such stock; and (ii) in the case of property other than cash
or stock, the fair market value of such property on the date in question as
determined by the Board in accordance with Section 10.04 of this Article
10.
Clause 10.039. Reference to "highest per share price" shall in each
case with respect to any class of stock reflect an appropriate adjustment
for any dividend or distribution in shares of such stock or any stock split
or reclassification of outstanding shares of such stock into a greater
number of shares of such stock or any combination or reclassification of
outstanding shares of such stock into a smaller number of shares of such
stock.
Clause 10.310. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be
received" as used in Clauses 10.022(2) and 10.022(3) of Section 10.02 of
this Article 10 shall include the shares of Common Stock and/or the shares
of any other class (or series) of outstanding capital stock retained by the
holders of such shares.
Section 10.04. Powers of the Board of Directors. A majority of the total
number of Directors of the Corporation, but only if a majority of such Directors
shall then consist of Continuing Directors or, if a majority of the total number
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of Directors shall not then consist of Continuing Directors, a majority of the
then Continuing Directors, shall have the power and duty to determine, on the
basis of information known to them after reasonable inquiry, all facts necessary
to determine compliance with this Article 10, including, without limitation, (a)
whether a person is an Interested Shareholder, (b) the number of shares of
Voting Stock beneficially owned by any person, (c) whether a person is an
Affiliate or Associate of another, (d) whether the applicable conditions set
forth in Clause 10.022 of Section 10.02 have been met with respect to any
Business Combination, (e) the Fair Market Value of stock or other property in
accordance with Clause 10.038 of Section 10.03 of this Article 10, and (f)
whether the assets which are the subject of any Business Combination referred to
in Clause 10.011(2) of Section 10.01 have, or the consideration to be received
for the issuance or transfer of securities by the Corporation or any Subsidiary
in any Business Combination referred to in Clause 10.011(3) of Section 10.01
has, an aggregate Fair Market Value equaling or exceeding 25% of the combined
assets of the Corporation and its Subsidiaries.
Section 10.05. Information to be Supplied to the Corporation. A majority of
the total number of Directors of the Corporation, but only if a majority of such
Directors shall then consist of Continuing Directors or, if a majority of the
total number of Directors shall not then consist of Continuing Directors, a
majority of the then Continuing Directors, shall have the right to demand that
any person who it is reasonably believed is an Interested Shareholder (or holds
of record shares of Voting Stock Beneficially Owned by any Interested
Shareholder) supply the Corporation with complete information as to (i) the
record owner(s) of all shares Beneficially Owned by such person who it is
reasonably believed is an Interested Shareholder, (ii) the number of, and class
or series of, shares Beneficially Owned by such person who it is reasonably
believed is an Interested Shareholder and held of record by each such record
owner and the number(s) of the stock certificate(s) evidencing such shares, and
(iii) any other factual matter relating to the applicability or effect of this
Article 10, as may be reasonably requested of such person, and such person shall
furnish such information within 10 days after receipt of such demand.
Section 10.06. No Effect on Fiduciary Obligations of Interested
Shareholders. Nothing contained in this Article 10 shall be construed to relieve
any Interested Shareholder from any fiduciary obligation imposed by law.
Section 10.07. Amendment, Repeal, Etc. Notwithstanding any other provisions
of these Articles of Incorporation or the Code of By-Laws of the Corporation to
the contrary and notwithstanding that a lesser vote or no vote may be specified
by law, but in addition to any affirmative vote of the holders of any particular
class or series of the Corporation's capital stock required by law or any
Preferred Stock Designation, the affirmative vote of the holders of at least 66
2/3 percent of the voting power of all of the then-outstanding shares of Voting
Stock, voting together as a single class, shall be required to alter, amend or
repeal this Article 10.
ARTICLE 11
Indemnification
Section 11.01. General. The Corporation shall, to the fullest extent to
which it is empowered to do so by the Act, or any other applicable laws, as from
time to time in effect, indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal, by reason of the fact that he is or was a Director,
Officer, employee or agent of the Corporation, or who, while serving as such
Director, Officer, employee or agent of the Corporation, is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, whether for profit or not, against
expenses (including counsel fees), judgments, settlements, penalties and fines
(including excise taxes assessed with respect to employee benefit plans)
actually or reasonably incurred by him in accordance with such action, suit or
proceeding, if he acted in good faith and in a manner he reasonably believed, in
the case of conduct in his official capacity, was in the best interests of the
Corporation, and in all other cases, was not opposed to the best interests of
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the Corporation, and, with respect to any criminal action or proceeding, he
either had reasonable cause to believe his conduct was lawful or no reasonable
cause to believe his conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not meet the prescribed standard of conduct.
Section 11.02. Authorization of Indemnification. To the extent that a
Director, Officer, employee or agent of the Corporation has been successful, on
the merits or otherwise, in the defense of any action, suit or proceeding
referred to in Section 11.01 of this Article, or in the defense of any claim,
issue or matter therein, the Corporation shall indemnify such person against
expenses (including counsel fees) actually and reasonably incurred by such
person in connection therewith. Any other indemnification under Section 11.01 of
this Article (unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case, upon a determination that indemnification of
the Director, Officer, employee or agent is permissible in the circumstances
because he has met the applicable standard of conduct. Such determination shall
be made (1) by the Board of Directors by a majority vote of a quorum consisting
of Directors who were not at the time parties to such action, suit or
proceeding; or (2) if a quorum cannot be obtained under subdivision (1), by a
majority vote of a committee duly designated by the Board of Directors (in which
designation Directors who are parties may participate), consisting solely of two
or more Directors not at the time parties to such action, suit or proceeding; or
(3) by special legal counsel: (A) selected by the Board of Directors or its
committee in the manner prescribed in subdivision (1) or (2), or (B) if a quorum
of the Board of Directors cannot be obtained under subdivision (1) and a
committee cannot be designated under subdivision (2), selected by a majority
vote of the full Board of Directors (in which selection Directors who are
parties may participate); or (4) by the Shareholders, but shares owned by or
voted under the control of Directors who are at the time parties to such action,
suit or proceeding may not be voted on the determination.
Authorization of indemnification and evaluation as to reasonableness of
expenses shall be made in the same manner as the determination that
indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under subsection (3)
to select counsel.
Section 11.03. Good Faith Defined. For purposes of any determination under
Section 11.01 of this Article 11, a person shall be deemed to have acted in good
faith and to have otherwise met the applicable standard of conduct set forth in
Section 11.01 if his action is based on information, opinions, reports, or
statements, including financial statements and other financial data, if prepared
or presented by (1) one or more Officers or employees of the Corporation or
another enterprise whom he reasonably believes to be reliable and competent in
the matters presented; (2) legal counsel, public accountants, appraisers or
other persons as to matters he reasonably believes are within the person's
professional or expert competence; or (3) a committee of the Board of Directors
of the Corporation or another enterprise of which the person is not a member if
he reasonably believes the committee merits confidence. The term "another
enterprise" as used in this Section 11.03 shall mean any other corporation or
any partnership, joint venture, trust, employee benefit plan or other enterprise
of which such person is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent. The provisions of this
Section 11.03 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standards of conduct set forth in Section 11.01 of this Article 11.
Section 11.04. Payment of Expenses in Advance. Expenses incurred in
connection with any civil or criminal action, suit or proceeding may be paid for
or reimbursed by the Corporation in advance of the final disposition of such
action, suit or proceeding, as authorized in the specific case in the same
manner described in Section 11.02 of this Article, upon receipt of a written
affirmation of the Director, Officer, employee or agent's good faith belief that
he has met the standard of conduct described in Section 11.01 of this Article
and upon receipt of a written undertaking by or on behalf of the Director,
Officer, employee or agent to repay such amount if it shall ultimately be
determined that he did not meet the standard of conduct set forth in this
Article 11, and a determination is made that the facts then known to those
making the determination would not preclude indemnification under this Article
11.
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Section 11.05. Provisions Not Exclusive. The indemnification provided by
this Article shall not be deemed exclusive of any other rights to which a person
seeking indemnification may be entitled under these Articles of Incorporation,
the Corporation's Code of By-Laws, any resolution of the Board of Directors or
Shareholders, any other authorization, whenever adopted, after notice, by a
majority vote of all Voting Stock then outstanding, or any contract, both as to
action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
Director, Officer, employee or agent, and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 11.06. Vested Right to Indemnification. The right of any individual
to indemnification under this Article shall vest at the time of occurrence or
performance of any event, act or omission giving rise to any action, suit or
proceeding of the nature referred to in Section 11.01 of this Article 11 and,
once vested, shall not later be impaired as a result of any amendment, repeal,
alteration or other modification of any or all of these provisions.
Notwithstanding the foregoing, the indemnification afforded under this Article
shall be applicable to all alleged prior acts or omissions of any individual
seeking indemnification hereunder, regardless of the fact that such alleged acts
or omissions may have occurred prior to the adoption of this Article. To the
extent such prior acts or omissions cannot be deemed to be covered by this
Article 11, the right of any individual to indemnification shall be governed by
the indemnification provisions in effect at the time of such prior acts or
omissions.
Section 11.07. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a Director, Officer, employee or
agent of the Corporation, or who is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against any liability asserted against or incurred by the
individual in that capacity or arising from the individual's status as a
Director, Officer, employee or agent, whether or not the Corporation would have
power to indemnify the individual against the same liability under this Article
11.
Section 11.08. Additional Definitions. For purposes of this Article,
references to the "Corporation" shall include any domestic or foreign
predecessor entity of the Corporation in a merger or other transaction in which
the predecessor's existence ceased upon consummation of the transaction.
For purposes of this Article, serving an employee benefit plan at the
request of the Corporation shall include any service as a Director, Officer,
employee or agent of the Corporation which imposes duties on, or involves
services by such Director, Officer, employee, or agent with respect to an
employee benefit plan, its participants, or beneficiaries. A person who acted in
good faith and in a manner he reasonably believed to be in the best interests of
the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the Corporation"
referred to in this Article.
For purposes of this Article, "party" includes any individual who is or was
a plaintiff, defendant or respondent in any action, suit or proceeding, or who
is threatened to be made a named defendant or respondent in any action, suit or
proceeding.
For purposes of this Article, "official capacity," when used with respect
to a Director, shall mean the office of director of the Corporation; and when
used with respect to an individual other than a Director, shall mean the office
in the Corporation held by the Officer or the employment or agency relationship
undertaken by the employee or agent on behalf of the Corporation. "Official
capacity" does not include service for any other foreign or domestic corporation
or any partnership, joint venture, trust, employee benefit plan, or other
enterprise, whether for profit or not.
Section 11.09. Payments a Business Expense. Any payments made to any
indemnified party under this Article under any other right to indemnification
shall be deemed to be an ordinary and necessary business expense of the
Corporation, and payment thereof shall not subject any person responsible for
the payment, or the Board of Directors, to any action for corporate waste or to
any similar action.
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