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As filed with the Securities and Exchange Commission on March 17, 1998
Registration No. 333-___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------------------
INDIANA UNITED BANCORP
(Exact name of registrant as specified in its charter)
INDIANA 35-1562245
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
6022
(Primary Standard Industrial
Classification Code Number)
201 N. BROADWAY
GREENSBURG, INDIANA 47240
(812) 663-0157
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
ROBERT E. HOPTRY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
INDIANA UNITED BANCORP
201 N. BROADWAY
GREENSBURG, INDIANA 47240
(812) 663-0157
FAX: (812) 663-4812
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Please send copies of all communications to:
David W. Harper, Esq. Robert T. Wildman, Esq.
2450 Meidinger Tower Henderson, Daily, Withrow & DeVoe
Louisville, Kentucky 40202 2600 One Indiana Square
(502) 583-3081 Indianapolis, Indiana 46204
Fax: (502) 583-2418 (317) 639-4121
Fax: (317) 639-0191
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box [_].
___________________________________________________________________
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH
CLASS OF
SECURITIES TO PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED(1) REGISTERED PER UNIT(2) OFFERING PRICE(2) FEE(2)(3)
- -------------------------------------------------------------------------------
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Common Shares
without par
value 1,136,417 $20.89 $23,740,000 $7,003.30
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(1) This Registration Statement relates to the securities of the
Registrant issuable to holders of Common Stock of P.T.C. Bancorp, Brookville,
Indiana ("PTC"), an Indiana corporation, in the proposed merger of PTC with and
into Registrant.
(2) Pursuant to Rule 457(f)(2), the registration fee was computed on the
basis of the book value of PTC Common Stock at September 30, 1997. The
registration fee payable under Section 6(b) of the Securities Act of 1933, as
amended, is $7,003.30.
(3) No registration fee is payable because registrant has paid a greater
amount in connection with the submission of preliminary proxy materials relating
to the proposed merger to which this Registration Statement relates pursuant to
Rule 0-11(a).
_______________________________________________________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>
INDIANA UNITED BANCORP
AND
P.T.C. BANCORP
JOINT PROXY STATEMENT
------------------
INDIANA UNITED BANCORP
PROSPECTUS
This Joint Proxy Statement/Prospectus ("Proxy Statement/Prospectus") is
being furnished to shareholders of Indiana United Bancorp ("IUB") and P.T.C.
Bancorp ("PTC") in connection with the solicitation of proxies by the respective
Boards of Directors of such corporations for use at their Special Meetings of
Shareholders (including any adjournments or postponements thereof) to be held on
April 28, 1998. This Proxy Statement/Prospectus relates to the proposed merger
of PTC with and into IUB (the "Merger") pursuant to the Agreement and Plan of
Merger dated as of October 8, 1997 between IUB and PTC, as amended (the "Merger
Agreement").
This Proxy Statement/Prospectus also constitutes a prospectus of IUB with
respect to 1,136,417 Common Shares of IUB issuable to PTC shareholders in the
Merger. At the effective time of the Merger, subject to certain exceptions as
described in the Merger Agreement, each outstanding share of PTC Common Stock
will be automatically converted into the right to receive 1.075 Common Shares of
IUB. Based upon the capitalization of IUB and PTC as of September 30, 1997, the
shareholders of PTC will own IUB Common Shares representing approximately 47.6%
of the outstanding voting power of IUB immediately following the Merger.
This Proxy Statement/Prospectus and the form of proxy and other materials
accompanying this Proxy Statement/Prospectus are first being mailed to
shareholders of IUB and PTC on or about March 20, 1998.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION
OR THE INDIANA DEPARTMENT OF FINANCIAL INSTITUTIONS PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE
SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
BANK DEPOSITS, ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANKING OR NONBANKING
AFFILIATE OF INDIANA UNITED BANCORP AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION (THE
"FDIC") OR ANY OTHER
GOVERNMENT AGENCY.
------------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS MARCH 20, 1998
<PAGE>
TABLE OF CONTENTS
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AVAILABLE INFORMATION..................................................................................... 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................................................... 4
SUMMARY................................................................................................... 6
The Meetings.............................................................................................. 6
The Companies............................................................................................. 8
The Merger................................................................................................ 8
Management and Operations after the Merger................................................................ 11
Share Information and Market Price........................................................................ 12
Recent Developments....................................................................................... 13
Selected Consolidated Financial Data, Comparative Stock Prices and Comparative Per Share Data............. 13
SELECTED FINANCIAL DATA OF IUB............................................................................ 14
SELECTED FINANCIAL DATA OF PTC............................................................................ 15
PRO FORMA SELECTED FINANCIAL DATA......................................................................... 16
COMPARATIVE STOCK PRICES AND DIVIDENDS.................................................................... 18
COMPARATIVE PER SHARE DATA................................................................................ 19
INTRODUCTION.............................................................................................. 21
THE COMPANIES............................................................................................. 21
Indiana United Bancorp.................................................................................... 21
P.T.C. Bancorp............................................................................................ 21
THE MEETINGS.............................................................................................. 22
Matters to be Considered at the Special Meetings.......................................................... 22
Record Date; Shares Entitled to Vote; Quorum.............................................................. 22
Vote Required............................................................................................. 22
Voting of Proxies......................................................................................... 23
Revocability of Proxies................................................................................... 23
Dissenters' Rights........................................................................................ 23
Solicitation of Proxies................................................................................... 23
THE MERGER................................................................................................ 24
Merger Consideration...................................................................................... 24
Background of the Merger.................................................................................. 24
Reasons for the Merger; Recommendations of the Boards of Directors........................................ 26
Opinion of Financial Advisor to IUB....................................................................... 27
Opinion of Financial Advisor to PTC....................................................................... 30
Effective Time............................................................................................ 31
Conversion of PTC Common Stock; Procedures for Exchange of Certificates; Fractional Shares................ 31
Nasdaq National Market Listing............................................................................ 32
Conduct of Business Pending Merger........................................................................ 32
Conditions to the Consummation of the Merger.............................................................. 32
Regulatory Approvals Required............................................................................. 32
Certain Federal Income Tax Consequences................................................................... 32
Anticipated Accounting Treatment.......................................................................... 34
Effect on PTC's Employee Benefit and Stock Option Plans................................................... 34
Interests of Certain Persons in the Merger................................................................ 35
Resale of IUB Common Stock................................................................................ 35
MANAGEMENT AND OPERATIONS AFTER THE MERGER................................................................ 36
Directors After the Merger................................................................................ 36
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2
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Executive Officers After the Merger....................................................................... 37
Operations of the IUB Banks and People's Trust............................................................ 37
THE MERGER AGREEMENT...................................................................................... 37
The Merger................................................................................................ 37
Conversion of PTC Common Stock............................................................................ 38
Representations and Warranties............................................................................ 38
Certain Covenants......................................................................................... 38
Conditions to the Merger.................................................................................. 39
Saner Employment Agreement................................................................................ 40
Termination of the Merger Agreement....................................................................... 41
Termination Payment....................................................................................... 42
Effects of Termination.................................................................................... 42
CAPITALIZATION............................................................................................ 43
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS......................................................... 44
DESCRIPTION OF IUB CAPITAL STOCK.......................................................................... 51
Authorized Capital Stock.................................................................................. 51
Common Stock.............................................................................................. 51
Preferred Stock........................................................................................... 51
Shares Available for Future Issuance...................................................................... 51
COMPARISON OF RIGHTS OF HOLDERS OF IUB COMMON STOCK AND PTC COMMON STOCK.................................. 52
Nominations to the IUB Board.............................................................................. 52
Shareholder Proposals at IUB Annual Meeting............................................................... 52
PTC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................. 54
For the Nine Months Ended September 30, 1997 and 1996..................................................... 54
For the Years Ended December 31, 1996 and 1995............................................................ 58
PRINCIPAL HOLDERS OF PTC COMMON STOCK AND OWNERSHIP OF MANAGEMENT......................................... 66
Security Ownership of Certain Beneficial Owners........................................................... 66
Security Ownership of Management.......................................................................... 66
DISSENTERS' RIGHTS........................................................................................ 66
EXPERTS................................................................................................... 69
LEGAL MATTERS............................................................................................. 69
OTHER MATTERS............................................................................................. 69
INDEX TO PTC CONSOLIDATED FINANCIAL STATEMENTS............................................................ F-1
ANNEXES
Annex A Agreement and Plan of Merger...................................................................... A-1
Annex B Opinion of Stifel, Nicolaus and Company, Incorporated............................................. B-1
Annex C Opinion of Traub & Company, Inc................................................................... C-1
Annex D Chapter 44 of the Indiana Business Corporation Law Relating to Dissenters' Rights................. D-1
</TABLE>
3
<PAGE>
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATION OF PROXIES OR OFFERING OF SECURITIES MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES,
OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH, OR TO OR FROM ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES
MADE HEREUNDER SHALL, IN ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF IUB OR PTC SINCE THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
IUB and PTC are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the
following Regional Offices of the Commission: 7 World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549 at prescribed rates. IUB and PTC file their
reports, proxy statements and other information electronically with the
Commission and such material can be found at a Web site maintained by the
Commission (http://www.sec.gov.). IUB Common Shares are listed on The Nasdaq
Stock Market, Inc.'s National Market (trading symbol IUBC) and such material
relating to IUB may also be inspected at the offices of The Nasdaq Stock Market,
Inc., 1735 K. Street N.W., Washington, D.C. 20006.
IUB has filed with the Commission a registration statement on Form S-4
(together with all amendments, exhibits and schedules thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the IUB Common Shares that will be issued to holders of PTC Common
Stock in connection with the Merger. See "The Merger--Conversion of PTC Common
Stock." This Proxy Statement/Prospectus does not contain all of the information
set forth in the Registration Statement filed by IUB with the Commission,
certain portions of which are omitted in accordance with the rules and
regulations of the Commission. Such additional information is available for
inspection and copying at the offices of the Commission. Statements contained in
this Proxy Statement/Prospectus or in any document incorporated into this Proxy
Statement/Prospectus by reference as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by IUB with the Commission under
the Securities Act or the Exchange Act, or where indicated certain portions
thereof, are incorporated herein by reference:
1. IUB's Annual Report on Form 10-K for the year ended December 31, 1996
(the "IUB Form 10-K");
2. IUB's Quarterly Reports on Form 10-Q for the periods ended March 31,
June 30 and September 30, 1997 (the "IUB Form 10-Qs");
3. IUB's Current Report on Form 8-K dated October 20, 1997 (the "IUB Form
8-K");
4. The information in IUB's Prospectus dated December 8, 1997 (the
"Prospectus") filed pursuant to Rule 424(b) of the Securities Act in connection
with (i) IUB's Registration Statement on Form S-2 filed
4
<PAGE>
November 19, 1997 (Registration No. 333-40579), as amended on December 3, 1997,
and (ii) a related Registration Statement on Form S-2 filed December 9, 1997
pursuant to Rule 462(b) of the Securities Act (Registration No. 333-41789), that
is contained in the front cover page of the Prospectus and pages 1 and 2
thereof, and in pages 68 to 90 of the Prospectus under the captions "Description
of the Preferred Securities," "Description of the Subordinated Debentures,"
"Description of the Guarantee," "Expense Agreement" and "Relationship Among the
Preferred Securities, the Subordinated Debentures and the Guarantee," and that
relates to the registration (as a co-registrant with IUB Capital Trust, a
Delaware business trust affiliated with IUB) of up to $22,425,000 preferred
securities of IUB Capital Trust and related subordinated debentures and a
guaranty of IUB (the "Trust Preferred Offering");
5. The information contained in IUB's Annual Report to Shareholders for the
1996 fiscal year (the "1996 Annual Report") on pages 4 through 27 under the
captions "Management's Discussion and Analysis," "Report of Management on
Responsibility for Financial Information" and "Report of Independent Certified
Public Accountants"; and
6. The information contained in IUB's Proxy Statement for its Annual
Meeting of Shareholders held on May 20, 1997 (the "1997 Proxy Statement") on
pages 2 through 9 under the captions "INTRODUCTION--Principal Shareholders";
"ELECTION OF DIRECTORS"; "CERTAIN INFORMATION CONCERNING THE BOARD OF
DIRECTORS"; "EXECUTIVE OFFICERS OF THE COMPANY"; "EXECUTIVE COMPENSATION"; and
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
All documents filed by IUB pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this Proxy Statement/Prospectus and prior to
the Special Meeting should be deemed to be incorporated by reference into this
Proxy Statement/Prospectus and to be part hereof from the date of filing of such
documents. See "Available Information."
Any statement contained in a document incorporated or deemed to be
incorporated by reference should be deemed to be modified or superseded for
purposes hereof to the extent that a statement contained herein (or in any other
subsequently filed document that is or is deemed to be incorporated by reference
herein) modifies or supersedes such previous statement. Any statement so
modified or superseded shall not be deemed to constitute a part hereof except as
so modified or superseded.
All information contained or incorporated by reference in this Proxy
Statement/Prospectus relating to IUB has been supplied by IUB, and all such
information relating to PTC has been supplied by PTC.
THIS PROXY STATEMENT/PROSPECTUS IS ACCOMPANIED BY IUB'S 1996 ANNUAL REPORT,
ITS 1997 PROXY STATEMENT AND ITS FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1997. EXCEPT FOR THE INFORMATION PROVIDED IN IUB'S 1996 ANNUAL
REPORT AND 1997 PROXY STATEMENT UNDER THE CAPTIONS SPECIFICALLY IDENTIFIED
ABOVE, NO INFORMATION CONTAINED ELSEWHERE IN EITHER THE 1996 ANNUAL REPORT OR
THE 1997 PROXY STATEMENT IS INCORPORATED BY REFERENCE IN, AND SUCH INFORMATION
SHALL NOT CONSTITUTE A PART OF, THIS PROXY STATEMENT/PROSPECTUS.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN EXHIBITS
TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE HEREIN) ARE AVAILABLE, WITHOUT CHARGE, UPON ORAL OR WRITTEN REQUEST BY
ANY PERSON TO WHOM THIS PROXY STATEMENT/PROSPECTUS HAS BEEN DELIVERED FROM
INDIANA UNITED BANCORP, 201 N. BROADWAY, GREENSBURG, INDIANA 47240-0087,
ATTENTION: JAY B. FAGER, TREASURER AND CHIEF FINANCIAL OFFICER; TELEPHONE NUMBER
(812) 663-0157. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY SUCH
REQUEST SHOULD BE MADE BY APRIL 14, 1998.
5
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/ Prospectus. Reference is made to, and the summary is
qualified in its entirety by, the more detailed information contained or
incorporated by reference in this Proxy Statement/Prospectus and the Annexes
hereto. Shareholders are urged to read this Proxy Statement/Prospectus and the
Annexes hereto in their entirety.
THE MEETINGS
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Meetings of Shareholders.......... IUB. A special meeting of the shareholders of Indiana
United Bancorp ("IUB") will be held at the Conference
Center on the second floor of IUB's headquarters at 201
N. Broadway, Greensburg, Indiana on Tuesday, April 28,
1998, at 10:00 a.m., Eastern Standard Time (the "IUB
Special Meeting").
PTC. A special meeting of the shareholders of P.T.C.
Bancorp ("PTC") will be held at the Batesville branch of
PTC's subsidiary, People's Trust Company, located at
1049 State Road 229, Batesville, Indiana on Tuesday,
April 28, 1998, at 1:00 p.m., Eastern Standard Time (the
"PTC Special Meeting").
Matters to be Considered at the
Meetings........................ IUB. At the IUB Special Meeting, holders of IUB Common
Shares, no par value ("IUB Common Stock"), will consider
and vote upon a proposal to approve the Agreement and
Plan of Merger attached as Annex A to this Proxy
Statement/ Prospectus (the "Merger Agreement") providing
for the merger of PTC with and into IUB (the "Merger"),
and the issuance to PTC shareholders of 1.075 shares of
IUB Common Stock for each share of PTC Common Stock.
PTC. At the PTC Special Meeting, holders of PTC Common
Stock, no par value ("PTC Common Stock"), will consider
and vote upon a proposal to approve the Merger Agreement
attached as Annex A to this Proxy Statement/Prospectus
providing for the Merger of PTC with and into IUB, and
the issuance to PTC shareholders of 1.075 shares of IUB
Common Stock for each share of PTC Common Stock.
Record Date....................... The record date for the IUB Special Meeting and the PTC
Special Meeting is March 6, 1998 (the "Record Date").
Votes Required.................... IUB. Assuming the presence of a quorum, the affirmative
vote of the holders of a majority of the shares of IUB
Common Stock present and voting thereon is required to
approve the Merger Agreement. IUB has 1,250,897 shares
of IUB Common Stock outstanding and entitled to vote on
the Merger Agreement. The directors and executive
officers of IUB, who with their affiliates may be deemed
to beneficially own approximately 18.2% of the
outstanding IUB Common Stock, have, as shareholders,
agreed with IUB and PTC to vote their shares for
approval of the Merger Agreement.
PTC. Assuming the presence of a quorum, the affirmative
vote of the holders of a majority of the shares of PTC
Common Stock
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present and voting thereon is required to approve the
Merger Agreement. PTC has 1,026,401 shares of PTC Common
Stock outstanding and entitled to vote on the Merger
Agreement. The directors and executive officers of PTC,
who with their affiliates may be deemed to beneficially
own approximately 35.7% of the outstanding PTC Common
Stock, have, as shareholders, agreed with PTC and IUB to
vote their shares for approval of the Merger Agreement.
Voting of Proxies; Revocation..... All shares of IUB Common Stock represented at the IUB
Special Meeting by properly executed proxies received
prior to or at the IUB Special Meeting, and not revoked,
and all shares of PTC Common Stock represented at the
PTC Special Meeting by properly executed proxies
received prior to or at the PTC Special Meeting, and not
revoked, will be voted in accordance with the
instructions indicated on such proxies. If no
instructions are indicated, such proxies will be voted
FOR the approval of the Merger Agreement
Any proxy given may be revoked by the person giving it
at any time by (i) filing with the Secretary of IUB at
or before the taking of the vote at the IUB Special
Meeting, or the Secretary of PTC at or before the taking
of the vote at the PTC Special Meeting, as applicable, a
written notice of revocation bearing a later date than
the proxy, (ii) duly executing a later dated proxy
relating to the same shares and delivering it to the
Secretary of IUB before the taking of the vote at the
IUB Special Meeting, or the Secretary of PTC before the
taking of the vote at the PTC Special Meeting, as
applicable, or (iii) attending the IUB Special Meeting
or the PTC Special Meeting, as applicable, and voting in
person (although attendance at such Special Meeting will
not in and of itself constitute a revocation of a
proxy). Any written notice of revocation or subsequent
proxy should be sent and delivered, in the case of an
IUB shareholder, to Indiana United Bancorp, 201 N.
Broadway, P.O. Box 87, Greensburg, Indiana 47240, Attn:
Secretary, or hand delivered to the Secretary of IUB at
or before the taking of the vote at the IUB Special
Meeting. Any written notice of revocation or subsequent
proxy should be sent and delivered, in the case of a PTC
shareholder, to P.T.C. Bancorp, Reservoir Hill Road,
9014 State Road 101, P.O. Box 7, Brookville, Indiana
47012, Attn: Secretary, or hand delivered to the
Secretary of PTC at or before the taking of the vote at
the PTC Special Meeting.
Security Ownership of IUB. As of the Record Date, directors and executive
Management...................... officers of IUB and their affiliates may be deemed to be
beneficial owners of approximately 228,192 shares of IUB
Common Stock, or approximately 18.2% of the outstanding
IUB Common Stock. Such directors and executive officers
and their affiliates have, as shareholders, agreed to
vote their shares for approval of the Merger Agreement.
PTC. As of the Record Date, directors and executive
officers of PTC and their affiliates may be deemed to be
beneficial owners
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of approximately 366,559 shares of PTC Common Stock, or
approximately 35.7% of the outstanding PTC Common Stock.
Such directors and executive officers and their
affiliates have, as shareholders, agreed to vote their
shares for approval of the Merger Agreement.
THE COMPANIES
Indiana United Bancorp............ IUB, an Indiana corporation, is a bank holding company
with two banking subsidiaries: Union Bank and Trust
Company of Indiana ("Union Bank"), with offices in the
Indiana counties of Decatur and Jay, and Regional
Federal Savings Bank ("Regional Bank"), with offices in
the Indiana counties of Floyd and Clark (collectively,
the "IUB Banks"). At September 30, 1997, IUB had total
assets of $342.1 million, total deposits of $285.8
million and total shareholders' equity of $30.1 million.
IUB operates in predominately rural and suburban markets
and seeks to emphasize products and services that
compliment the values of traditional lifestyles in the
Midwestern part of the United States. IUB embraces a
community banking philosophy that permits personnel in
its local markets to act quickly and independently
(within the scope of policies established by IUB) with
respect to loan requests and customized services.
The executive offices of IUB are located at 201 N.
Broadway, Greensburg, Indiana 47240 and IUB's telephone
number is (812) 663-0157.
P.T.C. Bancorp.................... PTC, an Indiana corporation, is a bank holding company
with one bank subsidiary: People's Trust Company
("People's Trust"), with offices in the Indiana counties
of Dearborn, Franklin, Jefferson, Ripley, Rush, Fayette,
Decatur, Switzerland and Wayne. At September 30, 1997,
PTC had total assets of $302.7 million, total deposits
of $275.7 million and total shareholders' equity of
$23.7 million. PTC also operates in predominately rural
and suburban markets and embraces a community banking
philosophy that permits personnel in its local markets
to act quickly and independently (within the scope of
policies established by PTC) with respect to loan
requests and customized services.
The executive offices of PTC are located at Reservoir
Hill Road, 9014 State Road 101, Brookville, Indiana
47012, and PTC's telephone number is (765) 647-3591.
THE MERGER
Effect of Merger.................. At the effective time of the Merger (the "Effective
Time"), PTC will be merged with and into IUB, the
corporate existence of PTC will cease and, subject to
certain exceptions as described herein with respect to
shares owned by PTC or by IUB or any of their respective
subsidiaries (other than shares in trust accounts,
managed accounts and the like that are beneficially
owned by third parties (any such shares, "trust account
shares")) and shares owned by holders properly
exercising dissenters' rights ("Dissenting Shares"),
each outstanding share of PTC Common
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Stock will be automatically converted (subject to
certain provisions described herein with respect to
fractional shares) into the right to receive 1.075
shares of IUB Common Stock.
Recommendation of the Boards of
Directors and Reasons for the
Merger.......................... The Boards of Directors of IUB and PTC believe that the
terms of the Merger are fair to and in the best
interests of their respective shareholders and have
unanimously approved the Merger Agreement and the
related transactions. Each of the IUB Board of Directors
and the PTC Board of Directors unanimously recommends
that its shareholders approve the Merger Agreement. The
Boards of Directors of IUB and PTC believe that the
Merger will result in a combined entity with the
financial and managerial resources to compete more
effectively in the rapidly changing marketplace for
banking and financial services, and to take advantage of
opportunities that would not be reasonably available to
either organization on its own. The Boards of Directors
also believe that the Merger will result in a combined
entity capable of increasing its capitalization and
profitability through the achievement of economies of
scale, the elimination of redundancies and resulting
improvements in access to debt and equity markets.
Opinion of Financial Advisors..... Stifel, Nicolaus and Company, Incorporated ("Stifel")
has delivered its written opinion to the Board of
Directors of IUB that, as of October 8, 1997, the
exchange ratio of 1.075 shares of IUB Common Stock for
each share of PTC Common Stock was fair to the holders
of IUB Common Stock from a financial point of view.
Traub & Company, Inc. ("Traub") has delivered its
written opinion to the Board of Directors of PTC that,
as of October 9, 1997, the exchange ratio of 1.075
shares of IUB Common Stock for each share of PTC Common
Stock was fair to the holders of PTC Common Stock from a
financial point of view.
For information on the assumptions made, matters
considered and limits of the reviews by Stifel and
Traub, see "The Merger-- Opinion of Financial Advisor to
IUB, and --Opinion of Financial Advisor to PTC."
Shareholders are urged to read in their entirety the
opinions of Stifel and Traub, attached as Annexes B and
C, respectively, to this Proxy Statement/ Prospectus.
Conditions to the Merger;
Termination..................... Consummation of the Merger is subject to various
conditions, including: requisite shareholder and
regulatory approvals; the absence of any materially
burdensome requirement or condition imposed in
connection with any regulatory approval; approval for
listing on the Nasdaq National Market, subject to
official notice of issuance, of the IUB Common Shares to
be issued pursuant to the Merger; receipt of opinions by
Geo. S. Olive & Co. LLC, IUB's independent accountants,
and Crowe, Chizek
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
and Company LLP, PTC's independent accountants, in
respect of certain federal income tax consequences of
the Merger; and receipt of letters by such independent
accounting firms to the effect that the Merger qualifies
as a "pooling of interests" for accounting and financial
reporting purposes.
The Merger Agreement may be terminated at any time prior
to the Effective Time by mutual consent of IUB and PTC,
or by either party if any regulatory agency (i) shall
have denied approval of the Merger or if any other
governmental authority shall have prohibited
consummation of the Merger, (ii) the Merger shall not
have been consummated on or before April 30, 1998 or
(iii) the approval of the shareholders of IUB or PTC
required for consummation of the Merger shall not have
been obtained at the IUB Special Meeting or PTC Special
Meeting. Each of IUB and PTC also has the right to
terminate the Merger Agreement if concurrent with such
termination it enters into a definitive agreement
providing for the implementation of another merger or
other transaction that its Board of Directors has
determined is more favorable to its shareholders than
the Merger contemplated by the Merger Agreement, and in
connection with such termination the party terminating
the Merger Agreement pays to the other party a fee of
$1,000,000.
Nasdaq Listing.................... It is a condition to the Merger that the shares of IUB
Common Stock to be issued in the Merger be authorized
for listing on the Nasdaq National Market, subject to
official notice of issuance. The shares of IUB Common
Stock currently outstanding are listed on the Nasdaq
National Market (trading symbol IUBC).
Post-Merger Dividend Policy....... It is the current intention of those individuals who
will comprise the Board of Directors of IUB following
the Merger to declare dividends on shares of IUB Common
Stock following the Merger initially in the per share
amount of at least $0.28 per quarter or $1.12 per year.
It should be noted, however, that no such dividends have
been declared and that future dividends will be
determined by IUB's Board of Directors in accordance
with IUB's dividend policy, which considers the earnings
and financial condition of IUB and its subsidiaries and
other factors, including applicable governmental
regulations and policies.
Regulatory Approvals Required..... The Merger is subject to the prior approval by the
Federal Reserve Board and the Indiana Department of
Financial Institutions. The Federal Reserve Board and
the Indiana Department of Financial Institutions have
approved the Merger.
Dissenters' Rights................ Holders of PTC Common Stock have the right to dissent
from the Merger and to receive payment in cash of the
fair value of their shares upon full compliance with
Chapter 44 of the Indiana Business Corporation Law
("IBCL"). A copy of Chapter 44 of the IBCL is attached
to this Proxy Statement/Prospectus as Annex D.
Shareholders of PTC that desire to exercise dissenters'
rights must satisfy fully and precisely certain
procedural requirements
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
set forth in Annex D and summarized in the "Dissenters'
Rights" section of this Proxy Statement/ Prospectus,
including among other things not voting in favor of the
Merger Agreement, or else dissenters' rights will be
lost.
Holders of IUB Common Stock do not have the right to
dissent from the Merger under the IBCL because IUB
Common Stock trades in the Nasdaq National Market.
Certain Federal Income Tax
Consequences.................... The Merger is intended to be a tax-free reorganization
so that no gain or loss would be recognized by IUB or
PTC, and no gain or loss would be recognized by PTC
shareholders, except in respect of cash received for
fractional shares and except for holders who receive
cash payments upon properly exercising dissenters'
rights. Consummation of the Merger is conditioned upon
there being delivered opinions dated as of the closing
date of the Merger, from Geo. S. Olive & Co. LLC, IUB's
independent accountants, and Crowe, Chizek and Company
LLP, PTC's independent accountants, to the effect that
the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
Anticipated Accounting The Merger is expected to qualify as a "pooling of
Treatment....................... interests" for accounting and financial reporting
purposes. The receipt of a letter of Geo. S. Olive &
Co., LLC, the independent accountants of IUB, and Crowe,
Chizek and Company LLP, the independent accountants of
PTC, confirming that the Merger will qualify for pooling
of interests accounting treatment, is a condition to
consummation of the Merger.
MANAGEMENT AND OPERATIONS AFTER
THE MERGER
Directors After the Merger........ As of the Effective Time, the Board of Directors of IUB
will consist of ten directors, five of whom were the
directors of IUB and five of whom were the directors of
PTC as of the date of the Merger Agreement. These
directors are expected to serve until the 1998 Annual
Meeting of Shareholders of IUB (expected to be held on
June 23, 1998) and until their successors are duly
elected. The Merger Agreement provides that if, prior to
the Effective Time, any of the persons named either by
IUB or PTC to serve on such Board of Directors as of the
Effective Time declines or is unable to serve as a
director, the party that designated such individual may
name a replacement to become a director.
Executive Officers After The Robert E. Hoptry, currently the Chairman, President and
Merger.......................... Chief Executive Officer of IUB, will continue to be the
Chairman and Chief Executive Officer of IUB after the
Merger. James L. Saner, currently the President and
Chief Executive Officer of PTC, will become the
President and Chief Operating Officer of IUB after the
Merger. Robert S. Dunevant, currently the Chairman of
PTC, will hold the honorary position of Vice
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
Chairman of IUB after the Merger. Under the terms of an
employment agreement to be entered into between IUB and
Mr. Saner, Mr. Saner will be entitled to receive certain
payments and benefits from IUB if Mr. Saner is not
elected Chief Executive Officer of IUB by May 31, 1999
or at such earlier time following Mr. Hoptry's death,
resignation or removal.
Operations of Bank Subsidiaries... The Merger is not expected to substantially alter the
operations of the IUB Banks or People's Trust. Each of
the IUB Banks and People's Trust will retain its
separate corporate existence, charter and name. The
Merger also is not expected to change materially the
duties and responsibilities of officers and employees of
the IUB Banks and People's Trust.
SHARE INFORMATION AND MARKET IUB Common Stock is listed on the Nasdaq National Market
PRICE........................... under the symbol "IUBC." As of the Record Date, there
were 1,250,897 shares of IUB Common Stock outstanding
held by approximately 1,438 holders of record. PTC
Common Stock is not listed on any national securities
exchange or market. As of the Record Date, there were
1,026,401 shares of PTC Common Stock outstanding held by
approximately 572 holders of record.
The following table sets forth the last sale price per
share reported on the Nasdaq National Market for shares
of IUB Common Stock on October 9, 1997, the last trading
day preceding public announcement of the proposed
Merger, and on March 13, 1998. It also sets forth the
last sale price per share known to management of PTC
prior to public announcement of the proposed Merger and
March 13, 1998. The "PTC Common Stock Equivalent"
represents the last sale price of a share of IUB Common
Stock on such date multiplied by the exchange ratio of
1.075.
</TABLE>
<TABLE>
<CAPTION>
PTC COMMON
IUB COMMON PTC COMMON STOCK
STOCK STOCK EQUIVALENT
------------- ------------- -------------
<S> <C> <C> <C> <C>
October 9, 1997............. $ 43.375 $ 39.00 $ 46.6281
March 13, 1998.............. $ 49.00 $ 39.50 $ 52.675
</TABLE>
<TABLE>
<S> <C>
For additional information regarding the market prices
of IUB Common Stock and PTC Common Stock during the
previous two years, see "Comparative Stock Prices and
Dividends--Stock Prices."
IUB and PTC shareholders are advised to obtain current
market quotations for IUB Common Stock. It is expected
that the market price of IUB Common Stock will fluctuate
between the date of this Proxy Statement/Prospectus and
the date on which the Merger is consummated and
thereafter. Because the number of shares of IUB Common
Stock to be received by PTC shareholders in the Merger
is fixed and because the market price of IUB Common
Stock is subject to fluctuation, the value of the shares
of IUB Common Stock that PTC shareholders will receive
in the Merger may increase or decrease prior to the
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
Merger. No assurance can be given concerning the market
price of IUB Common Stock before or after the Effective
Time.
RECENT DEVELOPMENTS
Certain Financial Information at
December 31, 1997 (unaudited and
in thousands, except per share
amounts)........................
</TABLE>
<TABLE>
<CAPTION>
IUB PTC
---------- ----------
<S> <C> <C> <C>
Net Income................................... $ 3,775 $ 3,430
Earnings Per Share........................... 3.02 3.30
Total Assets................................. 371,751 321,993
Total Deposits............................... 289,821 293,842
Total Shareholders' Equity................... 30,777 24,229
</TABLE>
<TABLE>
<S> <C>
IUB Potential Acquisition of
Branches........................ IUB has been recently informed by a large regional bank
holding company located outside of Indiana that it has
been selected by that bank holding company as a
purchaser of two branches of a bank subsidiary located
in Madison County, Indiana (the "Branch Acquisitions").
These branches are being sold by this other bank holding
company following a bid process conducted by it.
Consummation of the Branch Acquisitions is subject to a
due diligence review of the assets of such branches and
execution of a definitive agreement expected to contain
customary conditions for transactions of this type.
While there can be no assurance that the Branch
Acquisitions will be consummated, IUB regards the
consummation of the Branch Acquisitions as probable and
expects such consummation to occur late in the second
quarter or early in the third quarter of 1998. The
Branch Acquisitions will involve the acquisition by
IUB's bank subsidiary, Union Bank, of approximately
$13.6 million of loans and the assumption of
approximately $32.2 million of deposits.
SELECTED FINANCIAL DATA,
COMPARATIVE STOCK PRICES AND
DIVIDENDS, AND COMPARATIVE PER
SHARE DATA...................... Set forth on the following pages are certain selected
consolidated financial data for IUB and PTC, selected
pro forma financial data, comparative stock prices and
dividends, and comparative per share data for IUB and
PTC. The selected pro forma financial data should be
read in conjunction with the "Pro Forma Condensed
Combined Financial Statements," including the notes
thereto, in this Proxy Statement/ Prospectus.
</TABLE>
13
<PAGE>
SELECTED FINANCIAL DATA OF IUB
The following table sets forth on a consolidated basis certain selected
financial data of IUB and is based on the consolidated financial statements of
IUB, including the notes thereto, incorporated by reference in this Proxy
Statement/Prospectus, and should be read in conjunction therewith. See
"Incorporation of Certain Documents by Reference" and "Pro Forma Combined
Condensed Financial Statements." Interim unaudited data for the nine months
ended September 30, 1997 and 1996 reflect, in the opinion of management of IUB,
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of such data. Results for the nine months ended September
30, 1997 are not necessarily indicative of results that may be expected for any
other interim period or for the entire year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
---------------------- ----------------------------------------------
1997 1996 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SELECTED RESULTS OF OPERATIONS:
Interest income....................................... $ 19,398 $ 17,692 $ 23,967 $ 22,835 $ 22,202 $ 24,226
Interest expense...................................... 9,639 8,868 12,006 11,852 10,901 12,345
---------- ---------- ---------- ---------- ---------- ----------
Net interest income................................... 9,759 8,824 11,961 10,983 11,301 11,881
Provision for loan losses............................. 183 90 150 30 115 357
---------- ---------- ---------- ---------- ---------- ----------
Net interest income after provision for loan losses... 9,576 8,734 11,811 10,953 11,186 11,524
Non-interest income................................... 1,370 1,093 1,502 1,457 2,588 1,628
Non-interest expense.................................. 6,201 6,608 8,619 8,229 9,040 9,243
---------- ---------- ---------- ---------- ---------- ----------
Income before income tax expense and cumulative effect
of change in accounting method...................... 4,745 3,219 4,694 4,181 4,734 3,909
Income tax expense.................................... 1,877 1,420 2,001 1,652 1,864 1,437
---------- ---------- ---------- ---------- ---------- ----------
Income before cumulative effect of change in
accounting method................................... 2,868 1,799 2,693 2,529 2,870 2,472
Cumulative effect of change in accounting method...... -- -- -- -- -- 450
---------- ---------- ---------- ---------- ---------- ----------
Net income............................................ $ 2,868 $ 1,799 $ 2,693 $ 2,529 $ 2,870 $ 2,922
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
PER SHARE DATA:(1)
Earnings per common share............................. $ 2.29 $ 1.40 $ 2.11 $ 1.91 $ 2.17 $ 2.19
Cash dividends declared............................... 0.74 0.61 0.83 0.69 0.60 0.51
Book value............................................ 24.05 21.38 22.18 20.98 17.49 17.99
Dividend payout ratio(2).............................. 32.28% 42.42% 39.29% 36.12% 25.15% 21.16%
SELECTED BALANCE SHEET DATA:(3)
Assets................................................ $ 342,051 $ 321,397 $ 328,346 $ 313,067 $ 306,047 $ 355,992
Securities............................................ 71,422 85,042 81,187 80,651 91,954 125,081
Loans................................................. 244,237 215,028 219,483 201,355 194,736 205,508
Allowance for loan losses............................. 2,670 2,823 2,506 2,754 2,784 2,682
Deposits.............................................. 285,760 271,031 276,402 262,346 261,371 310,063
Long-term debt........................................ 4,625 5,500 5,000 6,000 7,500 9,375
Preferred stock....................................... -- -- -- 2,000 2,400 2,700
Total shareholders' equity............................ 30,084 26,738 27,749 28,245 24,282 25,203
PERFORMANCE RATIOS:(4)
Return on average equity.............................. 13.39% 8.82% 9.89% 9.73% 12.18% 12.61%
Return on average assets.............................. 1.14 0.77 0.85 0.82 0.86 0.81
Net interest margin (fully taxable equivalent)........ 4.13 3.98 4.00 3.77 3.57 3.52
ASSET QUALITY RATIOS:
Allowance for loan losses to loans(3)................. 1.09% 1.31% 1.14% 1.37% 1.43% 1.31%
Non-performing loans to total loans(3)................ 0.09 0.68 0.57 0.80 0.59 0.60
Net loan losses to average loans...................... 0.01 0.01 0.19 0.03 0.01 0.18
CAPITAL RATIOS:
Average equity to average assets...................... 8.55% 8.82% 8.69% 8.70% 7.39% 6.83%
Tier 1 risk-based capital ratio(3).................... 13.46 13.94 13.81 15.32 15.86 12.87
Total risk-based capital ratio(3)..................... 14.68 15.18 15.05 16.57 17.11 14.12
Leverage ratio........................................ 8.58 8.29 8.31 8.84 8.69 7.01
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS:(5)
Including interest on deposits........................ 1.49x 1.36x 1.39x 1.35x 1.42x 1.31x
Excluding interest on deposits........................ 6.88 4.45 4.82 3.36 4.45 4.14
<CAPTION>
1992
----------
<S> <C>
SELECTED RESULTS OF OPERATIONS:
Interest income....................................... $ 28,029
Interest expense...................................... 15,545
----------
Net interest income................................... 12,484
Provision for loan losses............................. 686
----------
Net interest income after provision for loan losses... 11,798
Non-interest income................................... 1,572
Non-interest expense.................................. 8,834
----------
Income before income tax expense and cumulative effect
of change in accounting method...................... 4,536
Income tax expense.................................... 1,674
----------
Income before cumulative effect of change in
accounting method................................... 2,862
Cumulative effect of change in accounting method...... --
----------
Net income............................................ $ 2,862
----------
----------
PER SHARE DATA:(1)
Earnings per common share............................. $ 2.14
Cash dividends declared............................... 0.42
Book value............................................ 16.27
Dividend payout ratio(2).............................. 17.89%
SELECTED BALANCE SHEET DATA:(3)
Assets................................................ $ 368,924
Securities............................................ 131,372
Loans................................................. 204,000
Allowance for loan losses............................. 2,686
Deposits.............................................. 323,777
Long-term debt........................................ 10,645
Preferred stock....................................... 3,000
Total shareholders' equity............................ 23,347
PERFORMANCE RATIOS:(4)
Return on average equity.............................. 13.88%
Return on average assets.............................. 0.79
Net interest margin (fully taxable equivalent)........ 3.66
ASSET QUALITY RATIOS:
Allowance for loan losses to loans(3)................. 1.32%
Non-performing loans to total loans(3)................ 1.38
Net loan losses to average loans...................... 0.49
CAPITAL RATIOS:
Average equity to average assets...................... 6.11%
Tier 1 risk-based capital ratio(3).................... 12.09
Total risk-based capital ratio(3)..................... 13.34
Leverage ratio........................................ 6.25
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS:(5)
Including interest on deposits........................ 1.29x
Excluding interest on deposits........................ 4.34
</TABLE>
- ------------------------
(1) Per share data has been restated to give retroactive effect to a 10% stock
dividend in 1994.
(2) For all periods except for the nine months ended September 30, 1997, common
stock cash dividends as a percentage of net income adjusted for preferred
stock dividends. All preferred stock of IUB was redeemed in late 1996.
(3) At period end.
(4) Performance ratios for the nine-month periods are annualized.
(5) Earnings consist of income before income tax expense plus interest expense.
Fixed charges consist of interest expense. The portion of rent expense
deemed to be interest has been excluded since it is not material in any of
the periods presented. Preferred stock dividends represent the pretax
earnings required to cover preferred stock dividends.
14
<PAGE>
SELECTED FINANCIAL DATA OF PTC
The following table sets forth on a consolidated basis certain selected
financial data of PTC and is based on the consolidated financial statements of
PTC, including the notes thereto, included elsewhere in this Proxy
Statement/Prospectus, and should be read in conjunction therewith. See "Index to
PTC Consolidated Financial Statements" and "Pro Forma Combined Condensed
Financial Statements." Interim unaudited data for the nine months ended
September 30, 1997 and 1996 reflect, in the opinion of management of PTC, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of such data. Results for the nine months ended September 30,
1997 are not necessarily indicative of results that may be expected for any
other interim period or for the entire year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED RESULTS OF OPERATIONS:
Interest income.......................... $ 17,234 $ 15,804 $ 21,319 $ 19,420 $ 15,938 $ 13,750 $ 12,461
Interest expense......................... 8,679 8,121 10,897 9,835 7,255 6,216 6,104
--------- --------- --------- --------- --------- --------- ---------
Net interest income...................... 8,555 7,683 10,422 9,585 8,683 7,534 6,357
Provision for loan losses................ 610 616 828 740 450 560 505
--------- --------- --------- --------- --------- --------- ---------
Net interest income after provision for
loan losses............................ 7,945 7,067 9,594 8,845 8,233 6,974 5,852
Non-interest income...................... 1,860 1,762 2,349 1,901 1,876 1,847 1,230
Non-interest expense..................... 5,918 5,272 7,103 6,639 6,629 5,627 4,521
--------- --------- --------- --------- --------- --------- ---------
Income before income tax expense and
cumulative effect of change in
accounting method...................... 3,887 3,557 4,840 4,107 3,480 3,194 2,561
Income tax expense....................... 1,185 1,166 1,564 1,200 1,079 1,025 793
--------- --------- --------- --------- --------- --------- ---------
Income before cumulative effect of change
in accounting method................... 2,702 2,391 3,276 2,907 2,401 2,169 1,768
Cumulative effect of change in accounting
method................................. -- -- -- -- -- 186 --
--------- --------- --------- --------- --------- --------- ---------
Net income............................... $ 2,702 $ 2,391 $ 3,276 $ 2,907 $ 2,401 $ 2,355 $ 1,768
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
PER SHARE DATA:(1)
Earnings per common share................ $ 2.64 $ 2.31 $ 3.17 $ 2.86 $ 2.51 $ 2.57 $ 1.93
Cash dividends declared.................. 0.60 0.48 0.66 0.53 0.41 0.35 0.32
Book value............................... 23.13 20.22 21.14 18.91 15.52 14.37 12.08
Dividend payout ratio.................... 22.58% 20.49% 20.72% 18.66% 16.33% 13.71% 16.83%
SELECTED BALANCE SHEET DATA:(2)
Assets................................... $ 302,734 $ 272,776 $ 296,576 $ 264,712 $ 241,577 $ 198,669 $ 191,486
Securities............................... 53,893 65,092 63,594 57,927 55,925 44,152 39,005
Loans.................................... 220,653 188,770 196,963 173,179 159,096 134,778 119,330
Allowance for loan losses................ 1,969 2,155 2,000 1,722 1,601 1,359 1,026
Deposits................................. 275,679 248,642 271,127 241,734 222,299 181,437 175,905
Long-term debt........................... 250 608 500 1,000 1,408 2,200 2,200
Total shareholders' equity............... 23,740 20,753 21,653 19,218 15,767 13,155 11,058
PERFORMANCE RATIOS:(3)
Return on average equity................. 15.97% 15.84% 16.05% 16.48% 16.78% 19.53% 17.27%
Return on average assets................. 1.23 1.19 1.21 1.18 1.07 1.27 1.20
Net interest margin (fully taxable
equivalent)............................ 4.46 4.38 4.39 4.37 4.37 4.58 4.88
ASSET QUALITY RATIOS:
Allowance for loan losses to loans(2).... 0.89% 1.14% 1.02% 0.99% 1.01% 1.00% 0.86%
Non-performing loans to total loans(2)... 1.09 1.25 0.93 0.84 0.19 0.50 0.58
Net loan losses to average loans......... 0.41 0.13 0.30 0.36 0.14 0.19 0.31
CAPITAL RATIOS:
Average equity to average assets......... 7.71% 7.54% 7.55% 7.14% 6.37% 6.51% 6.97%
Tier 1 risk-based capital ratio(2)....... 10.73 10.78 10.54 10.19 (4) 9.76 (4)
Total risk-based capital ratio(2)........ 11.70 12.00 11.60 11.21 (4) 10.90 (4)
Leverage ratio........................... 7.26 7.05 6.73 6.55 (4) 5.87 (4)
</TABLE>
- ------------------------------
(1) Per share data has been restated to give retroactive effect for stock
dividends and splits.
(2) At period end.
(3) Performance ratios for the nine-month periods are annualized.
(4) Information not readily available.
15
<PAGE>
PRO FORMA SELECTED FINANCIAL DATA
The following table sets forth certain unaudited pro forma condensed
combined financial data for IUB giving effect to the Trust Preferred Offering at
September 30, 1997 and to the PTC Merger, which will be accounted for as a
pooling of interests, as if it had occurred in the periods indicated herein,
after giving effect to the pro forma adjustments described in the notes to the
unaudited Pro Forma Combined Condensed Financial Statements included elsewhere
in this Proxy Statement/Prospectus. This information should be read in
conjunction with the historical consolidated financial statements of IUB and
PTC, including the respective notes thereto, which are incorporated by reference
or included elsewhere in this Proxy Statement/Prospectus, and in conjunction
with the consolidated historical financial data for IUB and PTC and the other
pro forma financial information, including the notes thereto, appearing
elsewhere in this Proxy Statement/Prospectus. See "Incorporation of Certain
Documents by Reference," "Index to PTC Consolidated Financial Statements, "Pro
Forma Combined Condensed Financial Statements," "Selected Financial Data of IUB"
and "Selected Financial Data of PTC." The unaudited pro forma condensed combined
financial data are not necessarily indicative of the results that actually would
have occurred had the PTC Merger occurred as of the beginning of the periods
indicated herein, or that may be obtained in the future.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1997 YEAR ENDED DECEMBER 31, 1996
---------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
PRO PRO
IUB PTC FORMA(1) IUB PTC FORMA(1)
---------- ---------- ---------- ---------- ---------- -----------
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
SELECTED RESULTS OF OPERATIONS:
Interest income............................... $ 19,398 $ 17,234 $ 36,632 $ 23,967 $ 21,319 $ 45,286
Interest expense.............................. 9,639 8,679 18,318 12,006 10,897 22,903
---------- ---------- ---------- ---------- ---------- -----------
Net interest income........................... 9,759 8,555 18,314 11,961 10,422 22,383
Provision for loan losses..................... 183 610 793 150 828 978
---------- ---------- ---------- ---------- ---------- -----------
Net interest income after provision for loan
losses...................................... 9,576 7,945 17,521 11,811 9,594 21,405
Non-interest income........................... 1,370 1,860 3,230 1,502 2,349 3,851
Non-interest expense.......................... 6,201 5,918 12,119 8,619 7,104 15,723
---------- ---------- ---------- ---------- ---------- -----------
Income before income tax expense.............. 4,745 3,887 8,632 4,694 4,839 9,533
Income tax expense............................ 1,877 1,185 3,062 2,001 1,563 3,564
---------- ---------- ---------- ---------- ---------- -----------
Net income.................................... $ 2,868 $ 2,702 $ 5,570 $ 2,693 $ 3,276 $ 5,969
---------- ---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- ---------- -----------
PER SHARE DATA:(2)
Earnings per common share..................... $ 2.29 $ 2.64 $ 2.34 $ 2.11 $ 3.17 $ 2.49
Cash dividends declared....................... 0.74 0.60 0.74 0.83 0.66 0.83
Book value.................................... 24.05 23.13 22.62 22.18 21.14 20.78
Dividend payout ratio(3)...................... 32.28% 22.58% 31.72% 39.29% 20.72% 33.35%
SELECTED BALANCE SHEET DATA:(4)
Assets........................................ $ 342,051 $ 302,734 $ 667,380 $ 328,346 $ 296,576 $ 647,545
Securities.................................... 71,422 53,893 125,315 81,187 63,594 144,781
Loans......................................... 244,237 220,653 464,890 219,483 196,963 416,446
Allowance for loan losses..................... 2,670 1,969 4,639 2,506 2,000 4,506
Deposits...................................... 285,760 275,679 561,439 276,402 271,127 547,529
Long-term debt................................ 4,625 250 4,875 5,000 500 5,500
Guaranteed preferred beneficial interests in
IUB's subordinated debentures............... 22,425 22,425
Shareholders' equity.......................... 30,084 23,740 53,994 27,749 21,653 49,600
PERFORMANCE RATIOS:(5)
Return on average equity...................... 13.39% 15.97% 14.54% 9.89% 16.05% 12.56%
Return on average assets...................... 1.14 1.23 1.19 0.85 1.21 1.02
Net interest margin (fully taxable
equivalent)................................. 4.13 4.46 4.30 4.00 4.39 4.18
ASSET QUALITY RATIOS:
Allowance for loan losses to loans(4)......... 1.09% 0.89% 1.00% 1.14% 1.02% 1.08%
Non-performing loans to total loans(4)........ 0.09 1.09 0.39 0.57 0.93 0.72
Net loan losses to average loans.............. 0.01 0.41 0.15 0.19 0.30 0.24
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1997 YEAR ENDED DECEMBER 31, 1996
---------------------------------- -----------------------------------
PRO PRO
IUB PTC FORMA(1) IUB PTC FORMA(1)
---------- ---------- ---------- ---------- ---------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
CAPITAL RATIOS:
Average equity to average assets.............. 8.55% 7.71% 8.16% 8.69% 7.55% 8.17%
Tier 1 risk-based capital ratio(4)............ 13.46 10.73 15.42 13.81 10.54 15.45
Total risk-based capital ratio(4)............. 14.68 11.70 17.64 15.05 11.60 18.15
Leverage ratio................................ 8.58 7.26 10.29 8.31 6.73 9.77
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS:(6)
Including interest on deposits................ 1.49x 1.45x 1.47x 1.39x 1.44x 1.41x
Excluding interest on deposits................ 6.88 150.50 11.36 4.82 81.65 8.39
</TABLE>
- ------------------------------
(1) Pro forma income statement data assumes the acquisition of PTC occurred on
January 1, 1996. Pro forma balance sheet data assumes that the Merger and
the Trust Preferred Offering occurred at the end of each period presented.
(2) Per share data has been restated to give retroactive effect to PTC's 10%
stock dividend in 1996.
(3) For the year ended December 31, 1996, common stock cash dividends as a
percentage of net income adjusted for preferred stock dividends. All
preferred stock of IUB was redeemed in late 1996.
(4) At period end.
(5) Performance ratios for the nine-month period are annualized.
(6) Earnings consist of income before income tax expense plus interest expense.
Fixed charges consist of interest expense. The portion of rent expense
deemed to be interest has been excluded since it is not material in any of
the periods presented. Preferred stock dividends represent the pretax
earnings required to cover preferred stock dividends.
17
<PAGE>
COMPARATIVE STOCK PRICES AND DIVIDENDS
The shares of IUB Common Stock are listed on the Nasdaq National Market
under the trading symbol "IUBC." Shares of PTC Common Stock do not trade in any
established trading market and rarely trade. The following table sets forth, for
the periods indicated, the high and low closing sales prices per share of IUB
Common Stock as reported on the Nasdaq National Market, and the high and low
sales prices per share of PTC Common Stock in transactions of which management
of PTC is aware (there possibly being transactions in PTC Common Stock of which
management of PTC is not aware). Prices per share have been retroactively
adjusted to reflect all prior stock splits or share dividends.
STOCK PRICES
<TABLE>
<CAPTION>
PTC COMMON STOCK
IUB COMMON STOCK
--------------------- --------------------
HIGH LOW HIGH LOW
---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1996 First Quarter................................................... $ 26.25 $ 24.25 $ 25.50 $ 24.50
Second Quarter.................................................. 25.50 23.25 30.00 --
Third Quarter................................................... 27.00 24.75 30.00 --
Fourth Quarter.................................................. 29.0625 25.00 31.00 30.00
1997 First Quarter................................................... $ 34.00 $ 29.00 $ 31.00 $ 30.00
Second Quarter.................................................. 40.00 31.75 31.00 30.00
Third Quarter................................................... 41.50 38.00 31.00 30.00
Fourth Quarter.................................................. 45.75 41.50 39.00 --
1998 First Quarter (through March 13, 1998).......................... $ 49.00 $ 43.50 $ 39.50 --
</TABLE>
On October 9, 1997, the last trading day before the announcement of the
Merger Agreement, the last sales price of IUB Common Stock as reported on the
Nasdaq National Market was $43.375 per share. On March 13, 1998, the last sales
price of IUB Common Stock as reported on the Nasdaq National Market System was
$49.00 per share.
The last sales price per share of PTC Common Stock in a transaction known to
management of PTC was $39.50 per share and related to a sale of PTC Common Stock
on January 31, 1998.
The following table sets forth the last sale price per share reported on the
Nasdaq National Market for shares of IUB Common Stock on October 9, 1997, the
last trading day preceding public announcement of the proposed Merger, and on
March 13, 1998. It also sets forth the last sale price per share known to
management of PTC prior to public announcement of the proposed Merger and March
13, 1998. The "PTC Common Stock Equivalent" represents the last sale price of a
share of IUB Common Stock on such date multiplied by the exchange ratio of
1.075.
<TABLE>
<CAPTION>
PTC COMMON
IUB COMMON PTC COMMON STOCK
STOCK STOCK EQUIVALENT
------------- ------------- ----------
<S> <C> <C> <C>
October 9, 1997......................................................... $ 43.375 $ 39.00 $ 46.6281
March 13, 1998 ......................................................... $ 49.00 $ 39.50 $ 52.675
</TABLE>
IUB and PTC shareholders are advised to obtain current market quotations for
IUB Common Stock. It is expected that the market price of IUB Common Stock will
fluctuate between the date of this Proxy Statement/Prospectus and the date on
which the Merger is consummated and thereafter. Because the number of shares of
IUB Common Stock to be received by PTC shareholders in the Merger is fixed and
because the market price of IUB Common Stock is subject to fluctuation, the
value of the shares of IUB Common Stock that PTC shareholders will receive in
the Merger may increase or decrease prior to the
18
<PAGE>
Merger. No assurance can be given concerning the market price of IUB Common
Stock before or after the Effective Time.
On the Record Date, there were approximately 1,438 holders of record of IUB
Common Stock and approximately 572 holders of record of PTC Common Stock.
DIVIDENDS
The following table sets forth the cash dividends declared per share on IUB
Common Stock and PTC Common Stock for the periods indicated. Such information
has been retroactively adjusted to reflect all prior stock splits or share
dividends.
<TABLE>
<CAPTION>
IUB COMMON STOCK PTC COMMON STOCK
------------------- -------------------
<S> <C> <C> <C>
1996 First Quarter.................................................... $ 0.20 $ 0.146
Second Quarter................................................... 0.20 0.164
Third Quarter.................................................... 0.21 0.164
Fourth Quarter................................................... 0.22 0.185*
1997 First Quarter.................................................... $ 0.23 $ 0.185
Second Quarter................................................... 0.25 0.205
Third Quarter.................................................... 0.26 0.205
Fourth Quarter................................................... 0.27 0.225
1998 First Quarter (through March 13, 1998)........................... $ 0.28 $ 0.24
</TABLE>
- ------------------------
* In addition to this cash dividend, PTC declared a 10% stock dividend in this
quarter.
It is the current intention of those individuals who will comprise the Board
of Directors of IUB following the Merger to declare dividends on IUB Common
Stock following the Merger initially in the per share amount of at least $0.28
per quarter or $1.12 per year. See "Management and Operations After the
Merger--Directors After the Merger. It should be noted that no such dividends
have been declared and that future dividends will be determined by IUB's Board
of Directors in accordance with IUB's dividend policy, which considers the
earnings and financial condition of IUB and its subsidiaries and other factors,
including applicable governmental regulations and policies.
COMPARATIVE PER SHARE DATA
(Unaudited)
The following table sets forth for IUB Common Stock and PTC Common Stock
certain historical, pro forma and pro forma equivalent per share financial
information for the nine months ended September 30, 1997 and 1996 and for each
of the three consecutive years ended on or prior to December 31, 1996. The
information presented herein should be read in conjunction with the other
financial information for IUB and PTC appearing elsewhere in or incorporated by
reference in this Proxy Statement/Prospectus. See, "Incorporation of Certain
Documents by Reference"; "Selected Financial Data of IUB"; "Selected
19
<PAGE>
Financial Data of PTC"; "Index to PTC Consolidated Financial Statements." The
data presented below has been retroactively adjusted to reflect all prior stock
splits or share dividends.
<TABLE>
<CAPTION>
AT OR FOR THE NINE
MONTHS ENDED SEPTEMBER AT OR FOR THE YEAR ENDED DECEMBER
30, 31,
---------------------- ----------------------------------
1997 1996 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
IUB COMMON STOCK
Net income per share:
Historical.......................... $ 2.29 $ 1.40 $ 2.11 $ 1.91 $ 2.17
Pro forma........................... 2.33 1.76 2.49 2.23 2.25
Dividends per share:
Historical.......................... 0.74 0.61 0.83 0.69 0.60
Pro forma(a)........................ 0.74 0.61 0.83 0.69 0.60
Book value per share at period-end:
Historical.......................... 24.05 22.18
Pro forma........................... 22.62 20.78
PTC COMMON STOCK
Net income per share:
Historical.......................... 2.64 2.31 3.17 2.86 2.51
Pro forma equivalent(b)............. 2.50 1.89 2.68 2.40 2.42
Dividends per share:
Historical.......................... 0.60 0.48 0.66 0.53 0.41
Pro forma equivalent(b)............. 0.80 0.66 0.89 0.74 0.65
Book Value per share at period-end:
Historical.......................... 23.13 21.14
Pro forma equivalent(b)............. 24.32 22.34
</TABLE>
- ------------------------
(a) The IUB pro forma dividend per share amounts represent historical dividends
per share.
(b) The PTC pro forma equivalent per share amounts are calculated by multiplying
the IUB pro forma per share amounts by the exchange ratio of 1.075.
20
<PAGE>
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to shareholders of
Indiana United Bancorp ("IUB") in connection with the solicitation of proxies by
the IUB Board of Directors for use at the Special Meeting of Shareholders of IUB
(the "IUB Special Meeting") to be held in the Conference Center on the Second
Floor of IUB's headquarters at 201 North Broadway, Greensburg, Indiana on
Tuesday, April 28, 1998, at 10:00 a.m, Eastern Standard Time, and at any
adjournment or postponement thereof.
This Proxy Statement/Prospectus is also being furnished to shareholders of
P.T.C. Bancorp ("PTC") in connection with the solicitation of proxies by the PTC
Board of Directors for use at the Special Meeting of Shareholders of PTC (the
"PTC Special Meeting" and together with the IUB Special Meeting, the "Special
Meetings") to be held at the Batesville branch of People's Trust Company located
at 1049 State Road 229, Batesville, Indiana on Tuesday, April 28, 1998, at 1:00
p.m., Eastern Standard Time, and at any adjournment or postponement thereof.
At the Special Meetings, the shareholders of IUB and PTC will be asked to
approve the Agreement and Plan of Merger dated as of October 8, 1997, as amended
(the "Merger Agreement") between IUB and PTC, attached as Annex A hereto and
more fully described herein. The approximate date on which this Proxy
Statement/Prospectus is first being sent to shareholders is on or about March
20, 1998.
THE COMPANIES
INDIANA UNITED BANCORP
IUB is a bank and thrift holding company headquartered in Greensburg,
Indiana. Through its subsidiaries, Union Bank and Trust Company of Indiana, a
commercial bank organized under the laws of Indiana ("Union Bank"), and Regional
Federal Savings Bank, a federal savings bank ("Regional Bank"), IUB operates 12
offices in four eastern and southern Indiana counties. (Union Bank and Regional
Bank are sometimes individually referred to herein as an "IUB Bank" and
collectively as the "IUB Banks"). Both subsidiaries offer a broad range of loan
and deposit services to consumer, agricultural and commercial customers. Union
Bank also offers a full line of personal and business trust services and
property and casualty insurance services. The principal executive office of IUB
is located at 201 North Broadway, Greensburg, Indiana 47240 and its telephone
number is (812) 663-0157.
IUB operates in predominately rural and suburban markets and embraces a
community banking philosophy that emphasizes personal service and convenience,
community involvement, local decision-making authority, quick responses to loan
requests, and customized services. IUB endeavors to provide its branch managers,
lending officers, tellers and deposit service personnel with the authority to
act promptly in service of its customers within the scope of IUB policies. IUB
believes the benefits of this operating philosophy contribute to its success
while providing improved operating efficiencies, sound internal controls and
high credit underwriting standards that are critical to maintaining and
enhancing shareholder value.
P.T.C. BANCORP
PTC is a one-bank holding company headquartered in Brookville, Indiana.
Through its subsidiary, People's Trust Company, a commercial bank organized
under the laws of Indiana ("People's Trust"), PTC engages in a general
full-service commercial and consumer banking business. People's Trust conducts
its banking business through 17 offices located in nine eastern Indiana
counties, including Decatur County in which People's Trust recently established
a small branch that had deposits of approximately $3.7 million at December 31,
1997. Because IUB's Union Bank has a significant market share of deposits within
Decatur County and in order to expedite banking regulatory approvals, this
branch of People's Trust will be closed or sold prior to or soon after the
Merger. The sale or closing of this branch is not expected to have any material
adverse impact on the operations of IUB following the Merger. The principal
executive office of
21
<PAGE>
PTC is located at Reservoir Hill Road, 9014 State Road 101, Brookville, Indiana
and its telephone number is (765) 647-3591.
THE MEETINGS
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
IUB. At the IUB Special Meeting, holders of IUB's common shares ("IUB
Common Stock") will consider and vote upon the approval of the Merger Agreement.
THE BOARD OF DIRECTORS OF IUB HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
PTC. At the PTC Special Meeting, holders of PTC's common stock ("PTC Common
Stock") will consider and vote upon the approval of the Merger Agreement.
THE BOARD OF DIRECTORS OF PTC HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
IUB. Only shareholders of record of IUB at the close of business on March
6, 1998 (the "IUB Record Date") will be entitled to receive notice of the IUB
Special Meeting, and only holders of record of IUB Common Stock at that time
will be entitled to vote at the IUB Special Meeting. At the IUB Record Date, IUB
had outstanding 1,250,897 shares of IUB Common Stock. A majority of the
outstanding shares of IUB Common Stock must be represented in person or by proxy
at the IUB Special Meeting in order for a quorum to be present.
PTC. Only shareholders of record of PTC at the close of business on March
6, 1998 (the "PTC Record Date" and together with the IUB Record Date the "Record
Date") will be entitled to receive notice of the PTC Special Meeting, and only
holders of record of PTC Common Stock at that time will be entitled to vote at
the PTC Special Meeting. At the PTC Record Date, PTC had outstanding 1,026,401
shares of PTC Common Stock. A majority of the outstanding shares of PTC Common
Stock must be represented in person or by proxy at the PTC Special Meeting in
order for a quorum to be present.
VOTE REQUIRED
IUB. If a quorum is present, the affirmative vote of the holders of a
majority of the shares of IUB Common Stock represented at the IUB Special
Meeting and voting thereon is required to approve the Merger Agreement. Each
share of IUB Common Stock is entitled to one vote. Abstentions will be counted
as present in determining whether a quorum is present but will have no other
effect. As of the Record Date, IUB's directors, executive officers and their
affiliates may be deemed to be beneficial owners of approximately 228,192 shares
of IUB Common Stock, or approximately 18.2% of the outstanding IUB Common Stock.
The directors and executive officers of IUB have agreed to vote their shares for
approval of the Merger Agreement.
PTC. If a quorum is present, the affirmative vote of the holders of a
majority of the shares of PTC Common Stock represented at the PTC Special
Meeting and voting thereon is required to approve the Merger Agreement. Each
share of PTC Common Stock is entitled to one vote. Abstentions will be counted
as present in determining whether a quorum is present but will have no other
effect. As of the Record Date, PTC's directors, executive officers and their
affiliates may be deemed to be beneficial owners of approximately 366,559 shares
of PTC Common Stock, or approximately 35.7% of the outstanding PTC Common Stock.
The directors and executive officers of PTC have agreed to vote their shares for
approval of the Merger Agreement.
22
<PAGE>
VOTING OF PROXIES
Shares represented at the Special Meetings by properly executed proxies
received prior to or at the Special Meetings, and not revoked, will be voted in
accordance with the instructions indicated on such proxies. If no instructions
are indicated, such proxies will be voted FOR the approval of the Merger
Agreement. Proxies providing instructions to vote against the Merger will not be
voted in favor of adjournment of a Special Meeting in order to solicit
additional votes to approve the Merger.
If any other matters are properly presented for consideration at either of
the Special Meetings, the persons named in the form of proxy and acting
thereunder will have discretion to vote on those matters in accordance with
their best judgment to the same extent as the person signing the proxy would be
entitled to vote.
REVOCABILITY OF PROXIES
IUB. Any proxy given pursuant to this solicitation by a IUB shareholder may
be revoked by the person giving it at any time before it is voted. Proxies may
be revoked by (i) filing with the Secretary of IUB, at or before the taking of
the vote at the IUB Special Meeting, a written notice of revocation bearing a
later date than the proxy, (ii) duly executing a later dated proxy relating to
the same shares and delivering it to the Secretary of IUB before the taking of
the vote at the IUB Special Meeting or (iii) attending the IUB Special Meeting
and voting in person (although attendance at the IUB Special Meeting will not in
and of itself constitute a revocation of a proxy). Any written notice of
revocation or subsequent proxy should be sent and delivered to Indiana United
Bancorp, 201 North Broadway, P.O. Box 87, Greensburg, Indiana, 47420 Attention:
Secretary; or hand delivered to the Secretary of IUB at or before the taking of
the vote at the IUB Special Meeting.
PTC. Any proxy given pursuant to this solicitation by a PTC shareholder may
be revoked by the person giving it at any time before it is voted. Proxies may
be revoked by (i) filing with the Secretary of PTC, at or before the taking of
the vote at the PTC Special Meeting, a written notice of revocation bearing a
later date than the proxy, (ii) duly executing a later dated proxy relating to
the same shares and delivering it to the Secretary of PTC before the taking of
the vote at the PTC Special Meeting or (iii) attending the PTC Special Meeting
and voting in person (although attendance at the PTC Special Meeting will not in
and of itself constitute a revocation of a proxy). Any written notice of
revocation or subsequent proxy should be sent and delivered to P.T.C. Bancorp,
Reservoir Hill Road, 9014 State Road 101, P.O. Box 7, Brookville, Indiana, 47012
Attention: Secretary; or hand delivered to the Secretary of PTC at or before the
taking of the vote at the PTC Special Meeting.
DISSENTERS' RIGHTS
Holders of PTC Common Stock have the right to dissent from the Merger and to
receive payment of the fair value of their shares upon full compliance with
Chapter 44 of the Indiana Business Corporation Law ("IBCL"). See "Dissenters'
Rights." A copy of Chapter 44 of the IBCL is attached hereto as Annex D.
SOLICITATION OF PROXIES
All expenses of solicitation of proxies from IUB shareholders will be borne
by IUB and all expenses of solicitation of proxies from PTC shareholders will be
borne by PTC. Each of IUB and PTC will solicit proxies by mail, and each of
IUB's and PTC's directors, officers and employees may also solicit proxies by
telephone, telegram, facsimile or personal interview. These persons will receive
no additional compensation for these services but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation.
Continuing arrangements also will be made with custodians, nominees and
fiduciaries for the forwarding of proxy solicitation materials to beneficial
owners of shares held of record by such custodians, nominees and fiduciaries,
and IUB or PTC, as applicable, will reimburse such custodians, nominees and
fiduciaries for reasonable expenses incurred in connection therewith.
23
<PAGE>
HOLDERS OF PTC COMMON STOCK SHOULD NOT SEND ANY CERTIFICATES REPRESENTING
SHARES OF PTC COMMON STOCK WITH THE ENCLOSED PROXY CARD. IF THE MERGER IS
CONSUMMATED, A LETTER OF TRANSMITTAL WILL BE MAILED TO EACH PERSON WHO WAS A
HOLDER OF OUTSTANDING SHARES OF PTC COMMON STOCK IMMEDIATELY PRIOR TO THE
CONSUMMATION OF THE MERGER. PTC SHAREHOLDERS SHOULD SEND CERTIFICATES
REPRESENTING PTC COMMON STOCK TO THE EXCHANGE AGENT ONLY AFTER THEY RECEIVE, AND
IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED IN, THE LETTER OF TRANSMITTAL.
THE MERGER
MERGER CONSIDERATION
Upon consummation of the Merger, subject to certain exceptions with respect
to shares owned by PTC or IUB or any of their respective subsidiaries (other
than trust account shares) and shares owned by holders properly exercising
dissenters' rights, each outstanding share of PTC Common Stock will be
automatically converted (subject to the provisions with respect to fractional
shares described under "Conversion of PTC Common Stock" below) into the right to
receive 1.075 IUB Common Shares. The exchange ratio of 1.075 shares of IUB
Common Stock for each share of PTC Common Stock (the "Exchange Ratio") was
determined through arms-length negotiations between IUB and PTC, with IUB being
advised with respect to such negotiations by Stifel, Nicolaus and Company,
Incorporated, its financial advisor, and PTC being advised with respect to such
negotiations by Traub & Company, Inc., its financial advisor. See "Opinion of
Financial Advisor to IUB" and "Opinion of Financial Advisor to PTC."
Based upon the capitalization of IUB and PTC as of September 30, 1997, the
shareholders of PTC will own shares of IUB Common Stock representing
approximately 47.6% of the outstanding voting power of IUB immediately following
consummation of the Merger.
BACKGROUND OF THE MERGER
The past several years have been a period of substantial and rapid change in
the banking industry, characterized by numerous mergers or consolidations at the
national and regional level and intensified competition from large regional bank
holding companies and nonbank financial services organizations. During this
period, the managements of both IUB and PTC have carefully reviewed their
strategic alternatives and taken various steps to maintain and enhance their
long-term profitability in the face of changing industry conditions. Even with
these steps, however, market expansion and other business opportunities exist
that generally are available only to bank holding companies with greater market
capitalization and financial and managerial resources than either IUB or PTC,
and consequently are not reasonably available to either IUB or PTC on its own.
The chief executive officers of IUB and PTC have had general conversations
on numerous occasions since as early as 1990 about the possibility of combining
the two companies. In 1995, because of increasing consolidation within the
banking industry and the mutual desire of IUB and PTC to continue to conduct
business under a community banking philosophy by either remaining independent or
affiliating with a similar community banking organization, the directors of both
companies met over dinner so that they could become acquainted and discuss in
general terms the community banking philosophies of each company's board.
Despite a preliminary consensus that a combination of the two companies made
sense strategically, the two companies agreed in early 1996 that further
exploration of a merger or other combination between them would not be
productive because of the inability of the companies to reach agreement on the
manner in which each company should be valued for purposes of determining the
exchange ratio to be used in any such transaction.
Following this termination of discussions, IUB and PTC each continued to
explore its strategic options, including the acquisition of other banks or
branches, that would not involve a sale of the company.
24
<PAGE>
IUB determined to expand its search for expansion opportunities to include
organizations within Kentucky and Ohio, as well as Indiana. Over the course of
the next several months, IUB had preliminary discussions with three other
banking organizations, each with assets in the range of $175 million to $300
million. While no preliminary agreements were ever reached as to price or
structure of any transaction, discussions with one of these organizations
developed to the point that it became apparent to the IUB board that agreement
on the manner in which each organization should be valued for purposes of
determining an exchange ratio could likely be reached (which IUB had been unable
to do during its discussions with PTC). The IUB board continued to believe,
however, that a combination with PTC continued to provide the greatest strategic
benefits to IUB and its shareholders, primarily because of the compatibility of
the respective banking markets of IUB and PTC.
In February, 1997, during a social encounter, the chief executive officer of
IUB conveyed to the chief executive officer of PTC the fact that IUB was
prepared to commence substantive merger discussions with another banking
organization with which it had held preliminary discussions, unless PTC was
prepared to reconsider its position on the manner of valuing each company for
purposes of determining an exchange ratio, which in the view of the IUB board
provided too much emphasis on each company's earnings per share for the prior 12
months. The chief executive officer of each company related this conversation to
his board and in March, 1997, the boards of directors of IUB and PTC approved
the commencement of further discussions between the companies and the execution
of a confidentiality agreement. Shortly thereafter, IUB informed this other
banking organization that it did not wish to commence substantive merger
discussions and discussions with this other banking organization concerning a
possible affiliation ceased. During the ensuing period while the chief executive
officers of IUB and PTC discussed the business philosophy and operations of a
combined company, William G. Barron, an outside director of IUB and Robert S.
Dunevant, an outside director of PTC, each of whom is also a large shareholder
of his company, held discussions on the various issues that had to be resolved
for IUB and PTC to merge, including the composition of the board and the
executive management of the combined company. Shortly thereafter, on March 18,
1997, IUB's board approved the submission of a proposal to PTC providing for an
exchange ratio of up to 1.075 shares of IUB Common Stock for each share of PTC
Common Stock, subject to a due diligence review by each company of the other
company's business and operations, including asset quality. On March 23, 1997,
the PTC board met to discuss the exchange ratio proposed by IUB and determined
to proceed further with the merger discussions.
After March 23, 1997, the chief executive officers of the two companies, and
Messrs. Barron and Dunevant, each held further discussions to confirm that
understandings had been reached regarding the philosophy of the combined company
and the composition of its board of directors and executive management. On June
2, 1997, IUB and PTC reached an agreement in principle to merge and a letter
evidencing the agreement in principle was executed.
Thereafter, the independent accountants of IUB and PTC undertook an analysis
to confirm that the proposed merger would qualify as a pooling of interests for
accounting and financial reporting purposes because neither company was willing
to proceed further if such was not the case. During this analysis, such
independent accountants corresponded and had discussions with the Commission.
Following a determination by each company's independent accountants that the
proposed merger should qualify for pooling of interests accounting treatment,
IUB and PTC each commenced a due diligence review of the business, operations
and asset quality of the other. Following completion of these due diligence
reviews, preparation of the Merger Agreement commenced.
On September 3, 1997, the PTC board met to discuss the proposed merger. Also
at this meeting the PTC board received from its financial advisor, Traub &
Company, Inc., a report regarding its due diligence review of IUB and a verbal
opinion that the exchange ratio of 1.075 shares of IUB Common Stock for each
share of PTC Common Stock was fair to the shareholders of PTC from a financial
point of view.
On September 30, 1997, IUB directors William A. Barron and Philip A. Frantz
and counsel to IUB met with PTC directors Robert S. Dunevant and Dale J. Deffner
and counsel to PTC to discuss issues
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relating to provisions to be included in the Merger Agreement concerning an
employment agreement with PTC's chief executive officer, James L. Saner, and
related compensation issues. Later on September 30, 1997, the IUB board met to
review a draft of the Merger Agreement and a draft of the employment agreement
for Mr. Saner prepared by counsel to PTC. The IUB board received a report from
Stifel, Nicolaus and Company, Incorporated, its financial advisor, concerning
valuation and financial analyses of the proposed merger, and a verbal opinion
from that firm that the exchange ratio of 1.075 shares of IUB Common Stock for
each share of PTC Common Stock was fair to the shareholders of IUB from a
financial point of view. No action on the Merger Agreement was taken by the IUB
board at this meeting, primarily because of the need to finalize the employment
agreement with Mr. Saner consistent with the discussions that had occurred
earlier that day between certain directors of IUB and PTC.
On October 7, 1997, the IUB board again met to review the latest drafts of
the Merger Agreement and the employment agreement with Mr. Saner. The IUB board
determined at this meeting to approve the Merger Agreement subject to a few
modifications that it instructed its counsel to negotiate relating to Mr.
Saner's employment contract.
The next day, October 8, the PTC board again met to review the latest drafts
of the Merger Agreement and the employment agreement involving Mr. Saner, and to
consider the modifications requested by the IUB board. Following this meeting,
the PTC board approved the Merger Agreement, including an employment agreement
of Mr. Saner containing the modifications requested by the IUB board (this
employment agreement is an exhibit to the Merger Agreement attached as Annex A
to this Proxy Statement/Prospectus). Later that same day the IUB board met and
approved the Merger Agreement, including the employment agreement of Mr. Saner
annexed thereto. Late in the afternoon on October 9, 1997, IUB and PTC executed
the Merger Agreement as of October 8, 1997. In March, 1998, the parties amended
the Merger Agreement to change the date after which either party could terminate
the Merger Agreement if the Merger had not occurred by such date from March 31
to April 30, 1998.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
The Board of Directors of IUB believes that the terms of the Merger are fair
to and in the best interests of IUB and its shareholders and has unanimously
approved the Merger Agreement and the issuance of IUB Common Stock in connection
with the Merger, and recommends approval of the Merger Agreement by IUB
shareholders.
The Board of Directors of PTC believes that the terms of the Merger are fair
to and in the best interests of PTC and its shareholders and has unanimously
approved the Merger Agreement, and recommends approval of the Merger Agreement
by PTC shareholders.
In reaching its conclusions, each Board of Directors considered, among other
things, (i) information concerning the financial performance and condition,
business operations, capital levels, asset quality and prospects of each of IUB
and PTC and their projected future values and prospects as separate entities and
on a combined basis, (ii) current industry, economic and market conditions,
(iii) the structure of the Merger, (iv) the provisions for management of the
combined entity, (v) the terms of the Merger Agreement and the related
employment contract involving Mr. Saner, (vi) the opinion of its financial
advisor described below, (vii) regulatory approval requirements, (viii) the
community banking philosophy of each company and the ability of the combined
enterprise to compete better in relevant banking markets, and the comparability
of the banking markets of each company, (ix) the changing legal environment for
banking and financial services, and (x) the impact of the Merger on the
depositors, employees, customers and communities served.
Each of the foregoing matters involved the consideration of various issues
positive to effecting the Merger as well as potential negative issues inherent
in merger transactions of this type, such as the effect of the Merger on the
combined entity's book value, earnings per share and capital ratios, and the
uncertainties related to successfully integrating two companies and retaining
their respective bases of customers.
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Each Board determined that any potentially adverse consequences, uncertainties
or risks arising from the Merger were not material and were substantially
outweighed by the benefits anticipated to be achieved through the Merger.
Each Board of Directors determined that the Merger will result in a combined
entity with the financial and managerial resources to compete more effectively
in the rapidly changing marketplace for banking and financial services, and to
take advantage of opportunities that would not be reasonably available to either
company on its own. Each Board of Directors also believes that the Merger will
result in a combined entity capable of increasing its capitalization and
profitability through the achievement of economies of scale, the elimination of
redundancies and resulting improvements in access to debt and equity markets.
OPINION OF FINANCIAL ADVISOR TO IUB
IUB has retained Stifel to act as its financial advisor in connection with
rendering a fairness opinion with respect to the Merger. Stifel is an investment
banking and securities firm with membership on all principal U.S. securities
exchanges. As part of its investment banking activities, Stifel is regularly
engaged in the valuation of businesses and their securities in connection with
merger transactions and other types of acquisitions, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. Stifel has rendered its opinion
that, based upon and subject to the various considerations set forth therein, as
of October 8, 1997, the consideration to be paid by IUB for each share of PTC
Common Stock was fair, from a financial point of view, to the holders of IUB
Common Stock. Stifel is familiar with IUB, having acted as its financial advisor
in connection with the Merger Agreement and as its underwriter in the Trust
Preferred Offering. Representatives of Stifel participated in certain portions
of the meeting of IUB's Board of Directors on September 30, 1997 and, later, on
October 8, 1997 when the proposed Merger was again considered and certain
officers of IUB were authorized to enter into the Agreement and Plan of Merger.
The full text of Stifel's opinion which sets forth the assumptions made,
matters considered and limitations of the review undertaken, is attached as
Annex B to this Proxy Statement/Prospectus and is incorporated herein by
reference, and should be read in its entirety in connection with this Proxy
Statement/Prospectus. The summary of the opinion of Stifel set forth in this
Proxy Statement/Prospectus is qualified in its entirety by reference to the full
text of such opinion.
STIFEL'S OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE MERGER
CONSIDERATION FROM A FINANCIAL POINT OF VIEW AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY HOLDERS OF IUB COMMON STOCK AS TO HOW SUCH HOLDERS OF IUB
COMMON STOCK SHOULD VOTE AT THE IUB SPECIAL MEETING OR AS TO ANY OTHER MATTER.
In connection with its opinion dated October 8, 1997, Stifel reviewed and
analyzed material bearing upon the financial and operating condition of IUB and
PTC and material prepared in connection with the merger, including among other
things: (a) the Merger Agreement; (b) publicly available reports filed with the
Commission by IUB and by PTC; (c) certain other publicly available financial and
other information concerning IUB and PTC and the trading markets for the
publicly traded securities of IUB; (d) certain other internal information,
including projections for IUB and PTC, respectively prepared by the managements
of IUB and PTC and furnished to Stifel for purposes of its analysis; and (e)
publicly available information concerning certain other banks and bank holding
companies, savings banks and savings and loan associations, savings and loan
holding companies, the trading markets for their securities and the nature and
terms of certain other merger and acquisition transactions believed relevant to
its inquiry. Stifel also met with certain officers and representatives of IUB to
discuss the foregoing as well as other matters relevant to its inquiry,
including the past and current business operations, results of regulatory
examinations, financial condition and future prospects of IUB and PTC, both
separately and on a combined basis. In addition, Stifel reviewed the reported
price and trading activity for IUB Common Stock, compared certain financial and
stock market information for IUB and PTC with similar information for certain
other companies, the securities of which are publicly traded, reviewed the
financial terms of certain recent business combinations in the commercial
banking and thrift industries, and performed such other studies and analyses as
it considered appropriate. Stifel also took into account its assessment of
general economic, market and financial conditions and its experience in other
transactions, as well as its experience in securities valuations and knowledge
of the commercial banking and thrift industries generally.
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<PAGE>
In conducting its review and arriving at its opinion, Stifel relied upon and
assumed the accuracy and completeness of the financial and other information
provided to it or publicly available and did not attempt independently to verify
the same. Stifel has relied upon the managements of IUB and PTC as to the
reasonableness and achievability of the projections (and the assumptions and
basis therefor) provided to Stifel, and assumed that such projections,
including, without limitation, projected cost savings and operating synergies
resulting from the Merger, reflected the best currently available estimates and
judgments of such IUB management and PTC representatives and that such
projections would be realized in the amounts and time periods estimated. Stifel
also assumed, without independent verification, that the aggregate allowances
for loan losses for IUB and PTC were adequate to cover such losses. Stifel did
not conduct physical inspections of any of the properties or assets of IUB or
PTC, and Stifel did not make or obtain, and was not furnished with, any
evaluations or appraisals of any properties, assets or liabilities of IUB and
PTC. Stifel was retained by the IUB Board to express an opinion as to the
fairness, from a financial point of view, to the holders of IUB Common Stock of
the Exchange Ratio in the Merger.
In connection with rendering its opinion to the IUB Board, Stifel performed
a variety of financial analyses that are summarized below. The summary of the
presentations by Stifel to the Board of Directors of IUB as set forth herein
does not purport to be a complete description of such presentations. Stifel
believes that its analysis and the summary set forth herein must be considered
as a whole and that selecting portions of such analyses and the factors
considered therein, without considering all factors and analyses, could create
an incomplete view of the analyses and processes underlying its opinions. The
preparation of a fairness opinion is a complex process involving subjective
judgments and is not necessarily susceptible to partial analysis or summary
description. In its analyses, Stifel made numerous assumptions with respect to
industry performance, business and economic conditions, and other matters, many
of which are beyond the control of IUB or PTC. Any estimates contained in
Stifel's analyses are not necessarily indicative of actual future values or
results, which may be significantly more or less favorable than suggested by
such estimates. Estimates of values of companies do not purport to be appraisals
or necessarily reflect the actual prices at which companies or their securities
actually may be sold. No company or transaction utilized in Stifel's analyses
was identical to IUB or PTC or the Merger. Accordingly, such analyses are not
based solely on arithmetic calculations; rather, they involve complex
considerations and judgments concerning differences in financial and operating
characteristics of the relevant companies, the timing of the relevant
transactions, and prospective buyer interest, as well as other factors that
could affect the public trading values of the company or companies to which they
are being compared. None of the analyses performed by Stifel was assigned a
greater significance by Stifel than any other.
The following is a summary of the financial analyses performed by Stifel in
connection with providing its opinion to IUB's Board of Directors on October 8,
1997:
CONTRIBUTION ANALYSIS. Stifel reviewed certain projected financial
information for the six month period ended June 30, 1997 including net revenues
before loan loss provisions, net revenues adjusted for loan loss provisions, net
income, total assets, loans, total deposits, and stockholders' equity and
compared the percentage contribution of PTC to the pro forma combined figures
for IUB and PTC and to the percentage of total outstanding IUB Common Stock that
would be owned by the PTC stockholders as a result of the Merger. The
contribution analysis showed, among other things, that PTC would contribute
46.2% of combined net revenues before loan loss provisions, 43.5% of combined
net revenues adjusted for loan loss provisions, 47.0% of combined net income,
47.0% of combined total assets, 47.5% of combined loans, 49.0% of combined total
deposits, and 44.1% of combined stockholders' equity, while receiving 47.6% of
the outstanding shares in the combined institution. Ownership figures are based
on an exchange ratio of 1.075.
ACCRETION/DILUTION SUMMARY. Stifel reviewed certain estimated future
operating and financial information developed by both IUB and PTC for the pro
forma combined entity resulting from the Merger for the projected twelve month
period ended December 31, 1998. Based on this analysis, Stifel compared IUB's
estimated future stand-alone per share earnings with such projected figures for
the pro forma combined entity for this twelve month period. The Merger is
projected to be accretive on a projected pro forma basis in 1998 with respect to
earnings per share. Stifel also reviewed financial information developed by both
IUB and PTC for the pro forma combined entity resulting from the Merger for the
period ended
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June 30, 1997. Based on this analysis, Stifel compared IUB's stand-alone book
value per share and tangible book value with such calculated figures for the pro
forma combined entity at June 30, 1997. The Merger is dilutive on a pro forma
basis to the extent of approximately 5% with respect to book value per share and
8% with respect to tangible book value per share.
PRO FORMA EFFECT ON FINANCIAL CONDITION. Stifel reviewed certain estimated
future operating and financial information developed by both IUB and PTC for the
pro forma combined entity resulting from the Merger for the six month period
ended June 30, 1997. Based on this analysis, Stifel compared certain of IUB's
stand-alone capital ratios with such estimated figures for the pro forma
combined entity for this period. The Merger is projected to decrease certain of
IUB's capital ratios, including total equity to total assets (from 8.6% to
approximately 8.2%), and tangible total equity to total assets (from 8.6% to
approximately 7.9%), although IUB's financial condition is not materially
changed as a result of the Merger.
PRESENT VALUE ANALYSIS. Applying discounted cash flow analysis to the
theoretical future earnings and dividends of IUB and PTC, Stifel compared the
calculated value of an IUB share to the calculated value of a share of the
combined entity. The analysis was based upon a range of assumed returns on
assets, an assumed annual asset growth rate, current dividend rates, a range of
assumed price/earnings ratios, and a 10% discount rate. Stifel selected the
range of terminal price/earnings ratios on the basis of past and current trading
multiples for IUB and other commercial banks. Stifel determined that the present
value of IUB Common Stock ranged from $29.48 to $58.50 per share, and that the
present value of one share in the combined entity ranged from $29.90 to $59.40.
Based on this analysis, Stifel concluded that the Merger increases the
calculated value of a share of IUB Common Stock.
DISCOUNTED CASH FLOW ANALYSIS. Based upon estimates provided by management
of the future earnings and the range of profit improvements for the pro forma
combined entity, Stifel estimated the present value of future dividends
available to be paid to IUB under various scenarios assuming PTC maintains a
capital level of approximately 6.5% of assets. Based upon management's estimated
profitability ranges and a range of discount rates, under IUB ownership, PTC
could theoretically produce future cash flows to IUB with a present value
ranging from $25.14 per PTC share to $80.56 per PTC share.
SUMMARY ANALYSIS OF BANK MERGER TRANSACTIONS. Stifel analyzed certain
information relating to transactions in the banking industry, including
information for 247 acquisitions announced in the U.S. between September 23,
1996 and September 23, 1997, as well as for 58 bank acquisitions announced in
the Midwest Region of the U.S. during that same time period. Stifel also
analyzed 17 bank acquisitions announced in the Midwest Region of the U.S.
between September 23, 1996 and September 23, 1997 involving sellers with total
assets of between $100 million and $600 million. Stifel also analyzed 40 bank
and thrift acquisitions announced in the U.S. between January 1, 1990 and
September 23, 1997 categorized as mergers of equals. Stifel calculated the
following ratios with respect to the Merger and the selected transactions:
<TABLE>
<CAPTION>
ALL SELECTED MERGERS OF
IUB/ PTC ALL U.S. MIDWESTERN MIDWESTERN EQUALS
RATIOS MERGER MEDIAN MEDIAN MEDIAN MEDIAN
- -------------------------------------------------------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Deal Price per share/Book Value......................... 199.67% 205.60% 176.17% 200.76% 116.79%
Deal Price per share/Tangible Book Value................ 216.20% 212.53% 183.11% 210.53% 121.73%
Adjusted Deal Price/6.50% Equity........................ 220.82% 240.55% 209.71% 232.43% 119.33%
Deal Price per share/Last 12 months earnings per
share................................................. 13.17x 17.73x 16.01x 16.95x 11.16x
Deal Price/Assets....................................... 15.82% 18.45% 17.25% 19.91% 10.18%
Premium over Tangible Book Value/Deposits............... 9.27% 10.62% 8.65% 10.58% 2.25%
Deal Price/Deposits..................................... 17.33% 21.42% 19.66% 22.84% 12.61%
</TABLE>
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No company or transaction used in the above analyses as a comparison is
identical to PTC, IUB, or the Merger. Accordingly, an analysis of the results of
the foregoing is not mathematical; rather, it involves complex considerations
and judgments concerning differences in financial and operating characteristics
of the companies and other facts that could affect the public trading value of
the companies to which they are being compared.
As described above, Stifel's opinion and presentation to the IUB Board of
Directors were among the many factors taken into consideration by the IUB Board
in making its determination to approve the Merger.
For Stifel's services in connection with the Merger, IUB has agreed to pay
Stifel $150,000 pursuant to the terms of an engagement letter and has agreed to
reimburse Stifel for certain out-of-pocket expenses. Pursuant to the engagement
letter, IUB has agreed to indemnify Stifel, its affiliates and their respective
partners, directors, officers, agents, consultants, employees and controlling
persons against certain liabilities, including liabilities under the federal
securities laws.
In the ordinary course of its business, Stifel actively trades equity
securities of IUB for its own account and for the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
OPINION OF FINANCIAL ADVISOR TO PTC
Traub and Company, Inc. ("Traub") has acted as PTC's financial advisor in
connection with the proposed merger between PTC and IUB and has assisted PTC's
Board of Directors in its examination of the fairness, from a financial point of
view, of the exchange ratio as it relates to the value of PTC Common Stock held
by PTC's shareholders. In particular, Traub considered the fairness of the terms
of the Merger Agreement, including the conversion of each of the shares of PTC
Common Stock issued and outstanding at the time of the Merger into 1.075 fully
paid and nonassessable shares of IUB Common Stock.
On September 3, 1997, Traub met with the Board of Directors of PTC to
discuss the financial condition, operation and prospects of IUB. Traub discussed
its findings regarding IUB's investment portfolio, trust portfolio and loan
portfolio, including its indirect lending. Traub also discussed IUB's management
of its various portfolios. At that time, Traub stated orally that the terms of
the Merger were fair to PTC Bancorp and its shareholders from a financial point
of view, and it later confirmed this opinion in writing on October 9, 1997. A
copy of that opinion is attached to this Proxy Statement/Prospectus as Annex C.
In connection with its opinion, Traub reviewed, among other things, publicly
available information relating to the financial condition, operations and
business of PTC and IUB, and certain financial and other information furnished
to Traub by the managements of both organizations. Traub also reviewed the
proposed Merger Agreement. In conducting its analyses, Traub considered IUB in
relation to the historical and current operating costs, economic trends and
conditions, industry trends, regional trends, market area, future potential,
competition, bank management, earnings, asset quality, loan loss reserve,
historic bank earnings, price to earnings, marketability of PTC and its
composite rating. Traub also relied upon its discussions with senior officers of
PTC, outside counsel and PTC's Board of Directors. Traub considered the fact
that the shares of PTC Common Stock, unlike shares of IUB Common Stock, were not
listed on any national securities exchange or market, and represented a
relatively illiquid investment. Traub evaluated the 1.075 exchange ratio
relative to PTC's contribution to the combined company's pro forma combined net
revenues, combined net income, combined total assets and combined shareholders'
equity. Traub also took into account, in rendering its opinion, the merger
consideration as it related to PTC's book value, tangible book value and
historical earnings. Finally, Traub considered the continued involvement of all
five PTC directors in the management of the combined company following the
Merger.
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In rendering its opinion, Traub relied, without independent verification,
upon the accuracy and completeness of all financial and other information that
was publicly available or furnished to Traub by PTC and IUB. Traub also assumed
that the transaction contemplated by the Merger Agreement would be accounted for
as a pooling of interests under generally accepted accounting principles.
Traub's advisory services and its opinion have been provided for the information
and assistance of the PTC Board of Directors in connection with its
consideration of the transaction contemplated by the Merger Agreement and its
opinion does not constitute a recommendation as to how any holder of PTC Common
Stock should vote on the Merger. Although Traub evaluated the fairness of the
exchange ratio to PTC, the exchange ratio itself was determined by PTC and IUB
through arms-length negotiations. PTC did not provide specific instructions to,
or place any limitation upon, Traub with respect to the procedures to be
followed or factors to be considered by Traub in performing its analyses or
rendering its fairness opinion.
The Traub opinion is necessarily based upon economic, market and other
conditions, as well as the information made available to Traub as of October 9,
1997. Traub has not been requested by PTC to update its opinion based upon
information since that date.
EFFECTIVE TIME
The Merger will become effective upon the filing of articles of merger with
the Secretary of State of the State of Indiana (the "Effective Time") or such
later time as is specified on such certificate. The filing with respect to the
Merger will occur on the first day that is five business days after satisfaction
or waiver of the latest to occur of the conditions to the Merger unless another
date is agreed to in writing by IUB and PTC.
The Merger Agreement may be terminated by either party if, among other
reasons, the Merger has not been consummated on or before April 30, 1998,
subject to the right of either party to extend such date to May 31, 1998 if at
April 30, 1998 all conditions to the Merger, other than the receipt of requisite
regulatory approvals, have been satisfied. See "The Merger Agreement--Conditions
to the Merger."
CONVERSION OF PTC COMMON STOCK; PROCEDURES FOR EXCHANGE OF CERTIFICATES;
FRACTIONAL SHARES
The conversion of PTC Common Stock (other than certain shares owned directly
or indirectly by IUB or PTC, and shares as to which dissenters' rights are
properly exercised ("Dissenting Shares")) into shares of IUB Common Stock will
occur automatically at the Effective Time.
As soon as practicable after the Effective Time, Mid-America Bank of
Louisville and Trust Company, Louisville, Kentucky, or another bank or trust
company designated by IUB and reasonably acceptable to PTC, in its capacity as
exchange agent (the "Exchange Agent"), will send a letter of transmittal to each
PTC shareholder. The letter of transmittal will contain instructions with
respect to the surrender of certificates representing PTC Common Stock to be
exchanged for shares of IUB Common Stock.
PTC SHAREHOLDERS SHOULD NOT FORWARD PTC STOCK CERTIFICATES TO THE EXCHANGE
AGENT UNTIL THEY HAVE RECEIVED A LETTER OF TRANSMITTAL. PTC SHAREHOLDERS SHOULD
NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
Until certificates representing PTC Common Stock are surrendered for
exchange after consummation of the Merger, holders thereof will not be
shareholders of IUB entitled to notice of or to vote on matters submitted to the
shareholders of IUB, and each outstanding certificate representing PTC Common
Stock shall represent after consummation of the Merger only the right to
receive, upon surrender of such certificate, the merger consideration. Until the
certificates representing PTC Common Stock are surrendered for exchange after
consummation of the Merger, holders of such certificates will not be paid
dividends on the shares of IUB Common Stock into which such shares have been
converted, but any such unpaid dividends will be paid, without interest, when
such certificates are properly surrendered.
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All shares of IUB Common Stock issued upon conversion of shares of PTC
Common Stock shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of PTC Common Stock, subject, however, to PTC's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time that may have been declared or made by PTC on
PTC Common Stock in accordance with the Merger Agreement on or prior to the
Effective Time and which remains unpaid at the Effective Time.
No fractional shares of IUB Common Stock will be issued to any PTC
shareholder upon consummation of the Merger. For each fractional share that
would otherwise be issued, IUB will pay by check an amount equal to the product
obtained by multiplying the fractional share interest to which such holder would
otherwise be entitled by the closing price for an IUB Common Share on the Nasdaq
National Market on the business day immediately preceding the Effective Time.
NASDAQ NATIONAL MARKET LISTING
It is a condition to the Merger that the shares of IUB Common Stock to be
issued in the Merger be authorized for listing on the Nasdaq National Market,
subject to official notice of issuance.
CONDUCT OF BUSINESS PENDING MERGER
Pursuant to the Merger Agreement, each of IUB and PTC has agreed to carry on
its business in the usual, regular and ordinary course and substantially in the
same manner as conducted prior to the execution of the Merger Agreement. See
"The Merger Agreement--Certain Covenants."
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The obligations of IUB and PTC to consummate the Merger are subject to
various conditions, including: obtaining requisite shareholder and regulatory
approvals; the absence of any materially burdensome requirement or condition
imposed in connection with the obtaining of any such regulatory approvals;
approval for listing on the Nasdaq National Market, subject to official notice
of issuance, of the shares of IUB Common Stock to be issued in the Merger;
receipt of opinions in respect of certain federal income tax consequences of the
Merger; and receipt of letters from IUB's and PTC's independent accountants to
the effect that the Merger qualifies for "pooling of interests" accounting
treatment. See "The Merger Agreement--Conditions to the Merger." While certain
conditions to the parties' obligations to consummate the Merger may be waived by
the parties, neither IUB nor PTC intends to waive any of the conditions
specifically enumerated above without a resolicitation of a vote by IUB and PTC
shareholders. With respect to the condition relating to the receipt of letters
from IUB's and PTC's independent accountants to the effect that the Merger
qualifies for pooling of interests accounting treatment, the exercise of
dissenters' rights by holders of more than 10% of the outstanding shares of PTC
Common Stock will result in the failure of this condition.
REGULATORY APPROVALS REQUIRED
The Merger is subject to the prior approval of the Federal Reserve Board and
the Indiana Department of Financial Institutions. The Federal Reserve Board and
the Indiana Department of Financial Institutions have approved the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated U.S. federal income
tax consequences of the Merger to holders of PTC Common Stock who hold such
stock as a capital asset. This summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), Treasury regulations thereunder, and
administrative rulings and court decisions in effect as of the date hereof, all
of which are subject to change at any time, possibly with retroactive effect.
This summary is not a complete description of all of the
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consequences of the Merger and, in particular, may not address U.S. federal
income tax considerations applicable to shareholders subject to special
treatment under U.S. federal income tax law (including, for example, non-U.S.
persons, financial institutions, dealers in securities, insurance companies or
tax-exempt entities, holders who acquired PTC Common Stock pursuant to the
exercise of an employee stock option or right or otherwise as compensation, and
holders who hold PTC Common Stock as part of a hedge, straddle or conversion
transaction). In addition, no information is provided herein with respect to the
tax consequences of the Merger under applicable foreign, state or local laws.
HOLDERS OF PTC COMMON STOCK ARE URGED TO CONSULT WITH THEIR TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE EFFECTS OF
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
In connection with the filing of the Registration Statement, Geo. S. Olive &
Co. LLC, independent accountants to IUB, and Crowe, Chizek and Company LLP,
independent accountants to PTC, each has delivered its opinion (each, a "Tax
Opinion"), based upon certain customary assumptions and representations, to the
effect that, in each case for U.S. federal income tax purposes:
(i) The Merger will be treated as a reorganization within the meaning of
Section 368(a) of the Code;
(ii) No gain or loss will be recognized by IUB or PTC as a result of the
Merger;
(iii) No gain or loss will be recognized by the holders of PTC Common
Stock who exchange all of their PTC Common Stock solely for IUB Common Stock
pursuant to the Merger (except with respect to cash received in lieu of a
fractional share interest in IUB Common Stock); and
(iv) The aggregate tax basis of the IUB Common Stock received by holders
of PTC Common Stock who exchange all of their PTC Common Stock solely for
IUB Common Stock pursuant to the Merger will be the same as the aggregate
tax basis of the PTC Common Stock surrendered in exchange therefor (reduced
by any basis amount allocable to the fractional share interest in IUB Common
Stock for which cash is received).
Each party's obligation to consummate the Merger is conditioned upon the
receipt by each of IUB and PTC of its respective Tax Opinion in form and
substance reasonably satisfactory to the party to whom such Tax Opinion is
addressed. Each of Geo. S. Olive & Co. LLC and Crowe, Chizek and Company LLP
will render its respective Tax Opinion on the basis of facts, representations
and assumptions set forth or referred to in such opinion that are consistent
with the state of facts existing at the Effective Time. In rendering the Tax
Opinions, each such independent accounting firm may require and rely upon
representations and covenants, including those contained in certificates of
officers of IUB, PTC and others, reasonably satisfactory in form and substance
to such firm. The Tax Opinions are not binding on the Internal Revenue Service
(the "IRS") or the courts, and the parties do not intend to request a ruling
from the IRS with respect to the Merger. Accordingly, there can be no assurance
that the IRS will not challenge such conclusion or that a court will not sustain
such challenge.
In the event that (i) either PTC or IUB fails to receive its Tax Opinion,
(ii) PTC determines to waive the condition to its obligation to consummate the
Merger relating thereto, and (iii) the material federal income tax consequences
to PTC shareholders are different from those described above, PTC will resolicit
the PTC shareholders prior to proceeding with consummation of the Merger.
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Based upon the current ruling position of the IRS, cash received by a holder
of PTC Common Stock in lieu of a fractional share interest in IUB Common Stock
will be treated as received in redemption of such fractional share interest, and
a PTC shareholder should generally recognize capital gain or loss for federal
income tax purposes measured by the difference between the amount of cash
received and the portion of the tax basis of the share of IUB Common Stock
allocable to such fractional share interest. Such gain or loss should be a
long-term capital gain or loss if the holding period for such share of PTC
Common Stock is greater than one year at the Effective Time. In certain
circumstances, holders of PTC Common Stock that are individuals may be entitled
to preferential treatment for net long-term capital gains, including, as a
result of recently enacted legislation, in the case of a capital asset held for
more than 18 months at the time of the disposition. The holding period of a
share of IUB Common Stock received in the Merger (including fractional share
interests deemed received and redeemed as described above) will include the
holder's holding period in the PTC Common Stock surrendered in exchange
therefor.
ANTICIPATED ACCOUNTING TREATMENT
The Merger is expected to qualify as a "pooling of interests" for accounting
and financial reporting purposes. Under this method of accounting, the recorded
assets and liabilities of IUB and PTC will be carried forward to IUB at their
recorded amounts; income of IUB will include income of IUB and PTC for the
entire fiscal year in which the Merger occurs; and the reported income of the
separate corporations for prior periods will be combined and restated as income
of IUB.
The Merger Agreement provides that a condition to the consummation of the
Merger is the receipt of a letter from the independent accountants of IUB and
PTC to the effect that the Merger qualifies as a "pooling of interests" for
accounting and financial reporting purposes. In the event such condition is not
met, the Merger would not be consummated unless the condition were waived and
approval of those shareholders entitled to vote on the Merger was resolicited.
EFFECT ON PTC'S EMPLOYEE BENEFIT AND STOCK OPTION PLANS
By its terms, the PTC 401(k) retirement plan will terminate as of the
Effective Time of the Merger and participants in such plan will be able to elect
to transfer funds in their account under such plan to IUB's 401(k) retirement
plan or to an individual retirement account that a participant alternatively may
wish to establish to receive a "rollover" contribution of the funds in his
account under such terminated plan.
After the Effective Time, employees of PTC that are participants in PTC
benefit plans will be entitled to participate in such benefit plans as IUB may
offer on a basis that does not discriminate between employees who were covered
by PTC benefit plans prior to the Merger and employees who were covered by IUB
benefit plans prior to the Merger. Each participant in any PTC benefit plan
prior to the Merger shall receive credit for purposes of (i) eligibility to
participate, vesting and eligibility to receive benefits under any IUB benefit
plan provided after the Merger and (ii) benefit accrual under any sickness or
vacation pay plan for service credited for the corresponding purpose under PTC
benefit plans.
At the Effective Time, each option to acquire PTC Common Stock (a "PTC Stock
Option") will be converted into an option to purchase the number of shares of
IUB Common Stock (rounded up to the nearest whole share) equal to the number of
shares of PTC Common Stock subject to the PTC Stock Option multiplied by 1.075,
at an exercise price per share of IUB Common Stock (rounded down to the nearest
penny) equal to the former exercise price per share of PTC Common Stock subject
to the PTC Stock Option divided by 1.075. The Merger Agreement contains
provisions that are intended to allow any PTC Option constituting an "incentive
stock option" within the meaning of federal income tax law to continue to
qualify as an incentive stock option to the maximum extent permitted by federal
income tax law.
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<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the IUB Board of Directors and the PTC
Board of Directors with respect to the Merger, shareholders should be aware that
certain members of IUB's and PTC's management and Board of Directors have
certain interests in the Merger that are in addition to the interests of
shareholders of IUB and PTC generally. The Boards of Directors of each of IUB
and PTC were aware of these interests and considered them, among other matters,
in approving the Merger Agreement and the transactions contemplated thereby.
MANAGEMENT AND BOARD POSITIONS. The Merger Agreement provides that each
director of IUB and PTC prior to the Merger will become a director of IUB
following the Merger. The Merger Agreement provides that IUB's current Chairman
of the Board, President and Chief Executive Officer, Robert E. Hoptry, also a
director of IUB, will be the Chairman of the Board and Chief Executive Officer
of IUB following the Merger. The Merger Agreement also provides that PTC's
current President and Chief Executive Officer, James L. Saner, will be the
President and Chief Operating Officer of IUB following the Merger. The Merger
Agreement further provides that PTC's current Chairman of the Board, Robert S.
Dunevant, will hold the honorary position of Vice Chairman of the Board of IUB
following the Merger. See "Management and Operations After the Merger."
SANER EMPLOYMENT AGREEMENT. The Merger Agreement provides for James L.
Saner, PTC's President and Chief Executive Officer, to have an employment
agreement with IUB following the Merger that provides that Mr. Saner will be the
President and Chief Operating Officer of IUB following the Merger and that Mr.
Saner will be entitled to receive certain payments and benefits from IUB if he
is not elected to the position of Chief Executive Officer on or before May 31,
1999. See "The Merger Agreement--Saner Employment Agreement."
PTC STOCK OPTIONS. PTC's President and Chief Executive Officer, James L.
Saner, holds options to acquire 14,623 shares of PTC Common Stock, all of which
he is expected to exercise prior to the Merger. Options to acquire 10,648 of
these shares are exercisable at the price of $14.65 per share, options to
acquire 1,775 of these shares are exercisable at $15.50 per share, options to
acquire 1,650 of these shares are exercisable at $21.82 per share and options to
acquire 550 of these shares are exercisable at $27.27 per share. Under the
exchange ratio in the Merger (1.075) and based upon the last sales price of IUB
Common Stock on March 13, 1998 ($49.00), Mr. Saner will receive in the Merger,
attributable to the exercise of these options, 15,719 shares of IUB Common Stock
having an aggregate value of approximately $770,213 which is approximately
$535,706 in excess of his aggregate cost to exercise such options.
INDEMNIFICATION. In the Merger Agreement, IUB has agreed to indemnify each
officer, director or employee of PTC against losses, claims and liabilities
arising out of acts or omissions occurring prior to the Effective Time to the
extent that PTC is permitted under Indiana law and its articles of incorporation
and bylaws to indemnify such person. IUB has also agreed to cause the persons
serving as officers and directors of PTC immediately prior to the Effective Time
to be covered for a period of three years from the Effective Time by the
directors' and officers' liability insurance and indemnification policy
maintained by PTC (or another policy providing substantially equivalent coverage
as IUB may determine to substitute) with respect to acts or omissions of such
directors and officers prior to the Effective Time, so long as the annual
premium for such coverage does not exceed 200% of such policy's premium in
effect on the date of the Merger Agreement.
RESALE OF IUB COMMON STOCK
The shares of IUB Common Stock issued pursuant to the Merger will be freely
transferable under the Securities Act except for shares issued to any PTC
shareholder who may be deemed to be an "affiliate" of PTC for purposes of Rule
145 under the Securities Act. It is expected that each such affiliate will enter
into an agreement with IUB providing that such affiliate will not transfer any
such shares of IUB Common
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<PAGE>
Stock received in the Merger except in compliance with the Securities Act and
accounting series releases of the Commission relating to the "pooling of
interests" method of accounting. This Proxy Statement/ Prospectus does not cover
resales of shares of IUB Common Stock.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
DIRECTORS AFTER THE MERGER
As provided in the Merger Agreement, as of the Effective Time, the Board of
Directors of IUB will consist of ten directors, of whom five were directors of
IUB and five were directors of PTC immediately prior to the Merger. Such Board
of Directors will serve until the 1998 Annual Meeting of Shareholders (expected
to be held on June 23, 1998) and until their successors are duly elected. The
Merger Agreement provides that if, prior to the Effective Time, any of the
persons named either by IUB or PTC to serve on such Board of Directors as of the
Effective Time declines or is unable to serve as a director, the party for whom
such individual was a director may name a replacement to become a director.
Set forth below is certain information about each person who currently is to
be a member of the Board of Directors as of the Effective Time.
<TABLE>
<CAPTION>
YEAR BECAME A
DIRECTOR OF IUB
(I) OR PTC (P),
NAME AS APPLICABLE AGE PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
- ---------------------------------- --------------- --- -------------------------------------------------------
<S> <C> <C> <C>
John E. Back...................... 1991(P) 68 Retired Senior Vice President, Sperry Rubber and
Plastics Company
William G. Barron................. 1983(I) 48 Chairman and President, Wm. G. Barron Enterprises
(commercial real estate broker, manager and
developer)
Dale J. Deffner................... 1984(P) 65 Partner, Deffner and Tebbe (public accounting firm)
Robert S. Dunevant................ 1984(P) 78 Chairman of the Board of PTC; retired Chief Executive
Officer of PTC
Philip A. Frantz.................. 1987(I) 53 Partner, Coldren & Frantz (attorneys at law)
Robert E. Hoptry.................. 1983(I) 59 Chairman of the Board, President and Chief Executive
Officer of IUB
James L. Saner.................... 1989(P) 46 President and Chief Executive Officer of PTC
Dale E. Smith..................... 1984(P) 64 President, Smith Realty and Insurance, Inc.
Martin G. Wilson.................. 1983(I) 71 Farmer
Edward J. Zoeller................. 1994(I) 52 President, E.M. Cummings Veneer, Inc. (manufacturer of
veneered furniture parts)
</TABLE>
Directors who will be officers of IUB following the Merger will not receive
any fees for their services as directors. It is presently contemplated that each
outside director of IUB will receive an annual retainer of $5,000 in addition to
$750 for each meeting of the Board of Directors attended. Members of committees
of the Board of Directors will receive fees of $750 for each committee meeting
attended when such meeting is held on a date on which the Board of Directors
does not meet. The foregoing compensation arrangements are the same as the
compensation arrangements for IUB directors in effect as of the date of this
Proxy Statement/Prospectus.
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<PAGE>
EXECUTIVE OFFICERS AFTER THE MERGER
As of the Effective Time, the following persons will be the executive
officers of IUB:
<TABLE>
<CAPTION>
NAME OFFICE
- ---------------------------------- ----------------------------------------------------------
<S> <C>
Robert E. Hoptry.................. Chairman of the Board and Chief Executive Officer
James L. Saner.................... President and Chief Operating Officer
Michael K. Bauer.................. Vice President
Daryl R. Tressler................. Vice President
Jay B. Fager...................... Treasurer
</TABLE>
See also Exhibit 5.20 to the Merger Agreement, attached as Annex A to this
Proxy Statement/ Prospectus, which is an employment agreement to be entered into
between IUB and Mr. Saner providing the terms under which Mr. Saner will be
employed and compensated by the Company, and compensated by the Company in
certain instances where he is no longer employed by the Company. For a summary
of the material terms of such employment agreement, see "The Merger
Agreement--Saner Employment Agreement."
OPERATIONS OF THE IUB BANKS AND PEOPLE'S TRUST
Following the Merger, IUB will conduct business through three bank
subsidiaries, the two IUB Banks and People's Trust. The Merger is not expected
to change materially the nature and extent of the business operations currently
conducted by the IUB Banks and People's Trust. The Merger also is not expected
to change materially the duties and responsibilities of officers and employees
of the IUB Banks and People's Trust.
Following the Merger, IUB and its bank subsidiaries, like most companies,
will face a potentially serious information systems (computer) problem because
many software applications and operational programs written in the past may not
properly recognize calendar dates beginning in the year 2000. This problem could
force computers to either shut down or provide incorrect data or information.
IUB and PTC have begun the process of identifying the changes required to its
computer programs and hardware, in consultation with software and hardware
providers and bank regulators. While IUB and PTC believe they are taking all
appropriate steps to assure year 2000 compliance, it is dependent on vendor
compliance to some extent. IUB and PTC are requiring their respective systems
and software vendors to represent that the services and products provided are,
or will be, year 2000 compliant, and contemplate a program of testing
compliance. The costs related to year 2000 compliance are not anticipated to
have a material adverse effect on the financial position of either company or
its subsidiaries.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement, a
copy of which is Annex A to this Proxy Statement/Prospectus. The following
summary is qualified in its entirety by reference to the complete text of the
Merger Agreement, which is incorporated herein by reference.
THE MERGER
Pursuant to the Merger Agreement and on the terms and subject to the
conditions set forth in the Merger Agreement, PTC will be merged into IUB and
the separate corporate existence of PTC will cease. The closing of the Merger
(the "Closing") will take place on the first day that is five business days
after the satisfaction or waiver of the conditions to the Merger unless another
date is agreed to in writing by IUB and PTC (the "Closing Date"). The Effective
Time of the Merger will occur upon the filing of articles of merger with the
Secretary of State of the State of Indiana on the Closing Date or at such later
time as is specified in such articles. The Effective Time of the Merger is
expected to occur on April 30, 1998.
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<PAGE>
CONVERSION OF PTC COMMON STOCK
At the Effective Time of the Merger, pursuant to the Merger Agreement, (i)
each issued and outstanding share of PTC Common Stock, other than shares held
directly or indirectly by IUB or PTC (excluding shares in trust accounts,
managed accounts and the like held by any subsidiary of IUB or PTC that are
beneficially owned by third parties) and shares with respect to which
dissenters' rights are properly exercised, will be converted into the right to
receive 1.075 shares of IUB Common Stock, and upon such conversion all such
outstanding shares of PTC Common Stock will be canceled and retired and will
cease to exist.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties by
both IUB and PTC as to, among other things, (i) due organization, good standing
and absence of violations of constitutive documents, (ii) ownership of
subsidiaries and other investments, (iii) capital structure, (iv) requisite
corporate power and authority to enter into the Merger Agreement and to
consummate the transactions contemplated by the Merger Agreement, due
authorization, execution and delivery of the Merger Agreement, validity and
enforceability of the Merger Agreement and the compliance of the Merger with
constitutive documents, agreements and applicable laws, (v) required filings and
approvals, (vi) financial and other disclosure contained in documents filed with
the Commission and the absence of undisclosed liabilities, (vii) absence of
certain material changes or events, (viii) its allowance for credit losses, (ix)
environmental matters, (x) information to be supplied by each in connection with
the Registration Statement and this Proxy Statement/Prospectus, (xi) the absence
of material violations or defaults under constitutive documents, contracts,
other agreements and judicial or administrative orders, (xii) compliance with
licenses, permits and applicable laws, (xiii) certain litigation, (xiv) tax
matters, (xv) material contracts, (xvi) employee benefit plans, (xvii)
subsidiaries, (xviii) agreements with bank regulators, (xix) the vote required,
(xx) title to properties, (xxi) the absence of action taken that would prevent
pooling of interests accounting treatment and (xxii) the inapplicability of the
Indiana Control Shares Act to the Merger.
CERTAIN COVENANTS
CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the Merger Agreement,
each of IUB and PTC has agreed to operate according to its ordinary and usual
course of business consistent with past practice, to seek to preserve intact its
current business organization and keep available the services of its current
directors, officers and employees, and to preserve its relationships with
customers, suppliers and others having business dealings with it so as not to
impair its goodwill and ongoing business prior to the Effective Time. Each of
IUB and PTC has agreed, among other things, not to (i) declare any dividends or
make any other distributions in respect of IUB Common Stock or PTC Common Stock,
except for regular quarterly cash dividends not in excess of $0.27 (in the case
of IUB) or the regular quarterly cash dividend most recently declared prior to
October 8, 1997 (in the case of PTC), (ii) issue or sell any shares of IUB
Common Stock or PTC Common Stock, (iii) amend its articles of incorporation or
its bylaws, (iv) sell or otherwise dispose of its properties or assets other
than in the ordinary course of a commercial banking business consistent with
past practice, (v) incur any indebtedness for borrowed money or make any loans,
advances or capital contributions to, or investments in, any other person, other
than in the ordinary course of a commercial banking business consistent with
past practice, or (vi) increase the compensation payable to its officers or
employees except consistent with past practice, grant any severance or
termination pay to, or enter into any employment or severance arrangement with,
any director, officer or employee, or establish, adopt, enter into or amend in
any material respect or take action to accelerate any rights or benefits under
any employee benefit plan.
Pursuant to the Merger Agreement, IUB and PTC have each agreed that it will
not take any action that would, or that could reasonably be expected to, result
in (i) any representations and warranties of such party set forth in the Merger
Agreement that are qualified as to materiality becoming untrue, (ii) any of
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<PAGE>
such representations and warranties that are not so qualified becoming untrue in
any material respect or (iii) any of the conditions to the Merger not being
satisfied.
SOLICITATION OF ACQUISITIONS PROPOSALS. Pursuant to the Merger Agreement,
each of IUB and PTC has agreed that it will not, and that it will direct and use
its best efforts to cause its officers, directors, employees and any investment
banker, attorney or other advisor or representative of it not to, (i) initiate,
solicit or encourage the submission of any Acquisition Proposal (as defined
below), (ii) enter into any agreement with respect to any Acquisition Proposal
or (iii) engage in any negotiations or discussions with or furnish any
information or data to, any third party relating to an Acquisition Proposal.
Each of IUB and PTC, however, may (a) furnish information to, and participate in
discussions or negotiations with, any person in connection with an unsolicited
bona fide written Acquisition Proposal to IUB or its shareholders or PTC or its
shareholders (as applicable) if and to the extent the Board of Directors
determines in good faith based on written advice of its outside legal counsel
that such action is necessary for the Board of Directors to comply with its
fiduciary duties to shareholders under applicable law, and (b) comply with Rule
14e-2 under the Exchange Act with respect to any Acquisition Proposal. For
purposes of the Merger Agreement, "Acquisition Proposal" means any proposal or
offer to IUB or PTC or the shareholders of either with respect to a merger,
acquisition, consolidation or similar transaction involving, or any purchase of
all or any significant portion of the assets or any equity securities of, PTC.
OTHER ACTIONS. Pursuant to the Merger Agreement, each party has agreed to
use its best efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other party in doing, all
things necessary, proper or advisable to consummate and make effective the
Merger and other transactions contemplated by the Merger Agreement.
INDEMNIFICATION. Pursuant to the Merger Agreement, IUB has agreed to
indemnify each officer, director or employee of PTC against losses, claims and
liabilities arising out of acts or omissions occurring prior to the Effective
Time to the extent that PTC is permitted under Indiana law and its articles of
incorporation and bylaws to indemnify such person. IUB has also agreed to cause
the persons serving as officers and directors of PTC immediately prior to the
Effective Time to be covered for a period of three years from the Effective Time
by the directors' and officers' liability insurance and indemnification policy
maintained by PTC (or another policy providing substantially equivalent coverage
as IUB may determine to substitute) with respect to acts or omissions of such
directors and officers prior to the Effective Time, so long as the annual
premium for such coverage does not exceed 200% of such policy's premium in
effect on the date of the Merger Agreement.
ACCESS TO INFORMATION. Pursuant to the Merger Agreement, each of IUB and
PTC has agreed to afford to the other and to its officers, employees,
accountants, counsel and other representatives reasonable access during normal
business hours prior to the Effective Time to all of its respective properties,
books, contracts, personnel and records. Except as required by law, IUB and PTC
have agreed to hold any non-public information in confidence.
CERTAIN OTHER COVENANTS. The Merger Agreement also contains customary
covenants applicable to transactions like the Merger, including covenants
relating to (i) each party's obligation to pay its own fees and expenses, (ii)
execution and delivery of closing documentation and (iii) use of reasonable
efforts to cause the Merger to qualify as a "reorganization" within the meaning
of Section 368(a) of the Code and to be recorded for accounting purposes as a
"pooling of interests."
CONDITIONS TO THE MERGER
The obligations of IUB, on the one hand, and PTC, on the other hand, to
consummate the Merger are subject to certain conditions, including the
following: (i) approval of the Merger Agreement by the affirmative vote of a
majority of the shares of IUB Common Stock and PTC Common Stock respectively
present and voting at the Special Meetings, assuming the presence of a quorum;
(ii) the receipt of all
39
<PAGE>
authorizations, consents, orders or approvals of any governmental or regulatory
authorities that are necessary for the consummation of the Merger; (iii) the
Registration Statement shall have become effective under the Securities Act and
shall not be the subject of any stop order or proceedings seeking a stop order;
(iv) the receipt by IUB and PTC of letters from IUB's independent accountants
and PTC's independent accountants to the effect that the Merger qualifies for
"pooling of interests" accounting treatment; (v) the absence of any temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger; (vi) the absence of any action taken,
or any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger by any governmental or regulatory authority that, in
connection with the grant of any governmental or regulatory approval, imposes
any condition or restriction upon IUB or its subsidiaries, or PTC or its
subsidiary, that materially adversely impacts the economic or business benefits
of the Merger so as to render inadvisable the consummation of the Merger; and
(vii) the shares of IUB Common Stock issuable pursuant to the Merger shall have
been approved for listing on the Nasdaq National Market subject to official
notice of issuance.
The obligations of IUB to consummate the Merger are also subject to certain
additional conditions, including the following: (i) the accuracy of the
representations and warranties of PTC set forth in the Merger Agreement; (ii)
PTC having performed in all material respects all obligations required to be
performed by it under the Merger Agreement at or prior to the Closing Date;
(iii) the obtaining by PTC of the consent or approval of each person whose
consent or approval shall be required in order to permit the succession by IUB,
as the surviving corporation pursuant to the Merger, to any obligation, right or
interest of PTC under any material contract, agreement or instrument; (iv)
receipt by IUB of an opinion of Geo. S. Olive & Co. LLC, to the effect that the
Merger will treated for federal income tax purposes as a reorganization within
the meaning Section 368(a) of the Code; and (v) the receipt by IUB from each
affiliate of PTC of an "affiliate's letter".
The obligation of PTC to consummate the Merger is also subject to additional
conditions, including the following: (i) the accuracy of the representations and
warranties of IUB set forth in the Merger Agreement; (ii) IUB having performed
in all material respects all obligations required to be performed by them under
the Merger Agreement at or prior to the Closing Date; (iii) the obtaining by IUB
of the consent or approval of each person whose consent or approval shall be
required in connection with the Merger under any material contract, agreement or
instrument; (iv) receipt by PTC of an opinion of Crowe, Chizek and Company LLP
to the effect that the Merger will be treated for Federal income tax purposes as
a reorganization within the meaning Section 368(a) of the Code; and (v) the
receipt by PTC from each affiliate of IUB of an "affiliate's letter."
SANER EMPLOYMENT AGREEMENT
Pursuant to the Merger Agreement, IUB will enter into an employment
agreement with PTC's President and Chief Executive Officer, James L. Saner,
which will become effective on the closing date of the Merger (the "Saner
Agreement"). The Saner Agreement has a term commencing from the closing date of
the Merger to May 31, 2002. During the term of the Saner Agreement, IUB agrees
to employ Mr. Saner as its President and Chief Operating Officer or, at the
request of the IUB Board of Directors, as its President and Chief Executive
Officer, as its Chief Executive Officer or as its Chairman of the Board and
Chief Executive Officer. Mr. Saner has agreed, at the request of the IUB Board
of Directors, to resign from the position of President and Chief Operating
Officer if at the time of such request Mr. Saner shall hold the position of
Chief Executive Officer or the positions of Chairman of the Board and Chief
Executive Officer of IUB. The Saner Agreement also provides that Mr. Saner will
be nominated for election to the IUB Board of Directors so long as he is
employed under the Saner Agreement, and that Mr. Saner shall also have the right
to serve as a director of each subsidiary of IUB.
Under the Saner Agreement, Mr. Saner will receive an annual base salary as
President and Chief Operating Officer of at least the greater of (i) $165,000
and (ii) an amount that is $10,000 less than the
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<PAGE>
highest annual base salary paid to any other senior executive officer of IUB or
any subsidiary of IUB. Under the Saner Agreement, Mr. Saner is entitled to
receive, should the IUB Board of Directors elect him to the position of Chief
Executive Officer, an annual base salary that is at least the greater of (i)
$165,000 and (ii) an amount that is $10,000 more than the highest annual base
salary paid to any other senior executive officer of IUB or any subsidiary of
IUB.
In addition to his annual base salary, Mr. Saner shall be entitled to
participate in all incentive compensation bonus and fringe benefit plans or
programs from time to time provided to any other senior executive officer of
IUB.
Mr. Saner has the ability to terminate the Saner Agreement and leave the
employ of IUB at any time and for any reason. In addition, Mr. Saner has the
right to terminate his employment with IUB and receive certain payments and
benefits from IUB for "Good Reason." "Good Reason" is defined as (i) the failure
of the IUB Board of Directors to elect Mr. Saner to the position of Chief
Executive Officer of IUB by May 31, 1999 or such earlier date as IUB's current
Chief Executive Officer, Robert E. Hoptry, shall cease to hold that position, or
(ii) a material breach of the Saner Agreement by IUB and a failure to cure such
breach that results in Mr. Saner terminating his employment with IUB within 30
days following the end of the cure period.
IUB also has the right to terminate Mr. Saner's employment at any time and
for any reason, but unless such termination is for "Cause," IUB is obligated to
make certain payments and provide certain benefits to Mr. Saner. "Cause" is
defined as (i) the conviction of a felony, (ii) the conviction of a crime
involving moral turpitude, (iii) misuse or embezzlement of funds, (iv) use of
alcohol or drugs in such manner as is reasonably likely to injure or materially
adversely affect the reputation of IUB or (v) wilful gross neglect or wilful
gross misconduct in carrying out duties that is not cured upon notice from IUB
and that results in material economic harm to IUB.
If Mr. Saner terminates his employment for Good Reason or if IUB terminates
Mr. Saner's employment other than for Cause, Mr. Saner is entitled to receive,
subject to his compliance with certain non-competition provisions described
below, his annual base salary, payable in accordance with IUB's general payroll
practices, for the lesser of (i) 36 months and (ii) the remainder of the term of
the Saner Agreement, except that Mr. Saner is always entitled to receive such
payment for a minimum of 12 months. In either of such instances, IUB is also
required to use its reasonable best efforts to provide Mr. Saner with continued
participation in insurance coverage plans on the same terms as other senior
executive officers then participate for a period of twelve months following the
termination of such employment.
As a condition to receiving the payments and benefits provided if Mr. Saner
terminates his employment for Good Reason or if IUB terminates Mr. Saner's
employment other than for Cause, Mr. Saner cannot be employed directly or
indirectly at, or act as a consultant to, any main office or branch office
conducting a banking business that is located in any Indiana county in which IUB
or any subsidiary has an office on the date of termination of Mr. Saner's
employment.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time of the Merger pursuant to the mutual written consent of IUB and PTC and at
the option of either IUB or PTC under certain circumstances, including the
following: (i) if at the Special Meetings the Merger Agreement is not approved
by the shareholders of IUB and PTC; (ii) if the Merger shall not have been
consummated on or before April 30, 1998, unless the failure to consummate the
Merger is the result of a willful and material breach of the Merger Agreement by
the party seeking to terminate the Merger Agreement; (iii) if any court or other
governmental agency shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise prohibiting the
Merger; (iv) in the event of a material breach by the other party to the Merger
Agreement; or (v) if (A) all the conditions to the Merger that are conditions to
the obligations of both IUB and PTC have been satisfied and (B) any of the
conditions to the
41
<PAGE>
obligations of the terminating party to consummate the Merger cannot be
satisfied on or before April 30, 1998.
In addition, the Merger Agreement may be terminated at the option of PTC if
the PTC Board of Directors determines that an Acquisition Proposal is more
favorable to the shareholders of PTC than the transactions contemplated by the
Merger Agreement and such Board of Directors shall concurrently approve, and PTC
shall concurrently enter into, a definitive agreement providing for the
implementation of the transactions contemplated by such Acquisition Proposal. In
order to terminate the Merger Agreement under this provision, PTC must give IUB
at least five business days' notice of its intention to terminate, and the PTC
Board of Directors is required to take into account the terms of any revised
proposal made by IUB during such five business-day period.
The Merger Agreement also may be terminated at the option of IUB if the IUB
Board of Directors determines that an Acquisition Proposal is more favorable to
the shareholders of IUB than the transactions contemplated by the Merger
Agreement and such Board of Directors shall concurrently approve, and IUB shall
concurrently enter into, a definitive agreement providing for the implementation
of the transactions contemplated by such Acquisition Proposal. In order to
terminate the Merger Agreement under this provision, IUB must give PTC at least
five business days' notice of its intention to terminate, and the IUB Board of
Directors is required to take into account the terms of any revised proposal
made by PTC during such five business-day period.
TERMINATION PAYMENT
If any person makes an Acquisition Proposal with respect to either IUB or
PTC (the party receiving such Acquisition Proposal, a "receiving party") and
thereafter (i) the Merger Agreement is terminated (a) for failure to obtain the
approval and adoption of the Merger Agreement by the shareholders of the
receiving party, (b) because the Closing shall not have occurred on or before
April 30, 1998 (if at the time of termination the receiving party is in material
breach of the Merger Agreement and such breach cannot be or has not been cured
within 30 days after the receiving party becomes aware of such breach or such
shorter period as may elapse between the date the receiving party becomes aware
of such breach and the time of termination), (c) because a court of competent
jurisdiction or other governmental agency shall have issued an order, decree or
ruling or taken any action permanently enjoining, restraining or otherwise
prohibiting the Merger (if at the time of termination the receiving party is in
material breach of the Merger Agreement and such breach cannot be or has not
been cured within 30 days after the receiving party becomes aware of such breach
or such shorter period that may elapse between the date the receiving party
becomes aware of such breach and the time of termination), (d) by the other
party as a result of the breach of the Merger Agreement by the receiving party,
(e) by the other party because any of the conditions to its obligations (other
than requisite regulatory approvals) is not capable of being satisfied prior to
April 30, 1998 or (f) by the receiving party to permit the receiving party to
enter into a definitive agreement providing for the implementation of another
Acquisition Proposal, and (ii) a definitive agreement with respect to an
Acquisition Proposal is executed or an Acquisition Proposal is consummated at or
within 12 months after such termination, then the receiving party shall pay to
the other party a fee of $1,000,000.
EFFECTS OF TERMINATION
In the event of termination of the Merger Agreement, the Merger Agreement
shall forthwith become void and have no effect, without any liability or
obligation on the part of IUB or PTC, other than (i) liability with respect to
any termination payment for which it may be liable, (ii) each party's obligation
to pay its own fees and expenses, (iii) certain obligations of confidentiality
and (iv) liability resulting from any willful and material breach by any party
to the Merger Agreement.
42
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited historical consolidated
capitalization of IUB as of September 30, 1997, and the unaudited pro forma
consolidated capitalization of IUB as of September 30, 1997 as if the Trust
Preferred Offering, the PTC Merger, and both the Trust Preferred Offering and
the Merger had taken place as of that date. The following data should be read in
conjunction with the financial information included in this Proxy
Statement/Prospectus or incorporated herein by reference. See "Selected
Financial Data of IUB," "Selected Financial Data of PTC," "Pro Forma Selected
Financial Data," "Pro Forma Combined Condensed Financial Statements,"
"Incorporation of Certain Documents by Reference" and "Index to PTC Consolidated
Financial Statements."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------------------------------
PRO FORMA
------------------------------------
IUB HISTORICAL ADJUSTED FOR
------------------------------------
TRUST
TRUST PREFERRED
IUB PREFERRED PTC OFFERING AND
HISTORICAL OFFERING MERGER PTC MERGER
----------- ----------- --------- ------------
<S> <C> <C> <C> <C>
LONG-TERM DEBT:
Notes payable................................................... $ 4,625 $ 4,625 $ 4,875 $ 4,875
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN IUB'S SUBORDINATED
DEBENTURES(1)................................................... 22,425 22,425
SHAREHOLDERS' EQUITY:
Preferred stock, 400,000 shares authorized, none issued and
outstanding...................................................
Common stock, $1.00 stated value, 3,000,000 shares authorized,
1,250,897 shares issued, actual; 2,387,314 issued, pro forma
combined...................................................... 1,251 1,251 2,387 2,387
Paid-in capital................................................. 10,677 10,667 21,526 21,526
Retained earnings............................................... 17,669 17,669 29,428 29,428
Net unrealized gains on investment securities available for
sale.......................................................... 487 487 653 653
----------- ----------- --------- ------------
Total shareholders' equity.................................... $ 30,084 $ 30,084 $ 53,994 $ 53,994
----------- ----------- --------- ------------
Total capitalization.......................................... $ 34,709 $ 57,134 $ 58,869 $ 81,294
----------- ----------- --------- ------------
----------- ----------- --------- ------------
CAPITAL RATIOS:
Shareholders' equity to total assets............................ 8.50% 8.25% 8.37% 8.09%
Leverage ratio(2)(3)............................................ 8.58 10.74 7.99 10.29
Risk-based capital ratios(3)(4).................................
Tier 1 capital to risk-weighted assets........................ 13.46 16.28 12.18 15.42
Total risk-based capital to risk-weighted assets.............. 14.68 22.60 13.28 17.64
</TABLE>
- ------------------------
(1) In connection with the issuance of the preferred beneficial interests in
IUB's subordinated debentures, IUB incurred expenses of approximately
$1,272,000 (including Underwriter's compensation of $897,000). The
Subordinated Debentures will mature on December 31, 2027, which date may be,
if certain conditions are met, (a) shortened to a date not earlier than
December 31, 2002, or (b) extended to a date not later than December 31,
2036.
(2) The leverage ratio is Tier 1 capital divided by adjusted total assets after
deducting intangible assets.
(3) The capital ratios, as adjusted, are computed including the total net
proceeds from the Trust Preferred Offering in a manner consistent with
Federal Reserve guidelines.
43
<PAGE>
(4) Federal Reserve guidelines for calculation of Tier 1 capital to
risk-weighted assets limit the amount of cumulative preferred stock which
can be included in Tier 1 capital to 25% of Total Tier 1 capital.
Approximately $9.8 million (or $17.2 million following the Merger) of the
aggregate amount of the preferred securities offered in the Trust Preferred
Offering is Tier 1 capital for IUB.
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following Pro Forma Combined Condensed Balance Sheet at September 30,
1997 (Unaudited), the Pro Forma Combined Condensed Statement of Income for the
Nine Months ended September 30, 1997 (Unaudited) and the Pro Forma Combined
Condensed Statements of Income for the Years Ended December 31, 1996, 1995 and
1994 (Unaudited) combine the historical consolidated balance sheets of IUB and
PTC at September 30, 1997 and the historical consolidated statements of income
of IUB and PTC for the nine months ended September 30, 1997 and for the years
ended December 31, 1996, 1995 and 1994, in each case giving effect to the
Merger, which will be accounted for as a pooling of interests, as if the Merger
had occurred on the dates indicated therein, after giving effect to the pro
forma adjustments described in the Notes to Pro Forma Combined Condensed
Financial Statements (Unaudited). For a description of the pooling of interests
accounting with respect to the Merger, see "The Merger--Anticipated Accounting
Treatment." The following Pro Forma Combined Condensed Balance Sheet at
September 30, 1997 (Unaudited) also gives effect to the Trust Preferred Offering
as if it had occurred as of such date. This information should be read in
conjunction with the historical consolidated financial statements of IUB,
including their respective notes thereto, which are incorporated by reference in
this Proxy Statement/ Prospectus, and in conjunction with the historical
consolidated financial statements of PTC appearing elsewhere in this Proxy
Statement/Prospectus. See "Incorporation of Certain Documents by Reference" and
"Index to PTC Consolidated Financial Statements." The pro forma financial data
do not give effect to any cost savings that may result from the Merger. The pro
forma financial data are not necessarily indicative of the results that actually
would have occurred had the Merger been consummated on the dates indicated or
that may be obtained in the future.
44
<PAGE>
INDIANA UNITED BANCORP AND SUBSIDIARIES
P.T.C. BANCORP AND SUBSIDIARY
PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
IUB PTC ADJUSTMENTS CONSOLIDATED
---------- ---------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 17,838 $ 18,281 $ 520(2) $ 36,639
Short-term investments...................................... 1,398 21,153(3) 22,551
Investment securities available-for-sale.................... 71,422 28,132 99,554
Investment securities held-to-maturity...................... 25,761 25,761
Loans....................................................... 244,237 220,653 464,890
Less: Allowance for loan losses............................. (2,670) (1,969) (4,639)
---------- ---------- ------------
Net loans................................................. 241,567 218,684 460,251
Premises and equipment, net................................. 6,355 3,939 10,294
Accrued interest receivable and other assets................ 4,869 6,539 1,272(3) 12,330
(350)(4)
---------- ---------- ----------- ------------
Total assets............................................ $ 342,051 $ 302,734 $ 22,595 $ 667,380
---------- ---------- ----------- ------------
---------- ---------- ----------- ------------
LIABILITIES
Deposits.................................................... $ 285,760 $ 275,679 $ 561,439
Short-term borrowings....................................... 17,885 17,885
Long-term debt.............................................. 4,625 250 4,875
Accrued interest payable and other liabilities.............. 3,697 3,065 6,762
---------- ---------- ------------
Total liabilities....................................... 311,967 278,994 590,961
---------- ---------- ------------
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN IUB'S
SUBORDINATED DEBENTURES...................................... $ 22,425(3) 22,425
----------- ------------
SHAREHOLDERS' EQUITY
Common stock................................................ 1,251 1,026 110(5) 2,387
Paid-in capital............................................. 10,677 10,439 520(2) 21,526
(110)(5)
Retained earnings........................................... 17,669 12,109 (350)(4) 29,428
Net unrealized gain on securities available-for-sale........ 487 166 653
---------- ---------- ----------- ------------
Total shareholders' equity.............................. 30,084 23,740 170 53,994
---------- ---------- ----------- ------------
Total liabilities and shareholders' equity.............. $ 342,051 $ 302,734 $ 22,595 $ 667,380
---------- ---------- ----------- ------------
---------- ---------- ----------- ------------
</TABLE>
45
<PAGE>
INDIANA UNITED BANCORP AND SUBSIDIARIES
P.T.C. BANCORP AND SUBSIDIARY
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
IUB PTC CONSOLIDATED
--------- --------- ------------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
Interest Income
Loans, including fees....................................................... $ 15,388 $ 14,316 $ 29,704
Investment securities....................................................... 3,759 2,639 6,398
Other interest.............................................................. 251 279 530
--------- --------- ------------
Total interest income..................................................... 19,398 17,234 36,632
--------- --------- ------------
Interest Expense
Deposits.................................................................... 8,832 8,653 17,485
Short-term borrowings....................................................... 510 510
Long-term debt.............................................................. 297 26 323
--------- --------- ------------
Total interest expense.................................................... 9,639 8,679 18,318
--------- --------- ------------
Net interest income....................................................... 9,759 8,555 18,314
Provision for loan losses................................................... 183 610 793
--------- --------- ------------
Net interest income after provision for loan losses......................... 9,576 7,945 17,521
--------- --------- ------------
Non-interest Income
Insurance commissions....................................................... 316 75 391
Fiduciary activities........................................................ 169 20 189
Service charges on deposit accounts......................................... 462 944 1,406
Mortgage banking activities................................................. 766 766
Net realized gains (losses) on securities................................... (80) 8 (72)
Other....................................................................... 503 47 550
--------- --------- ------------
Total non-interest income................................................. 1,370 1,860 3,230
--------- --------- ------------
Non-interest Expense
Salaries and employees benefits............................................. 3,483 3,346 6,829
Net occupancy and equipment expense......................................... 1,168 895 2,063
Deposit insurance expense................................................... 104 22 126
Data processing expense..................................................... 289 289
Other....................................................................... 1,446 1,366 2,812
--------- --------- ------------
Total non-interest expense................................................ 6,201 5,918 12,119
--------- --------- ------------
Income Before Income Taxes.................................................... 4,745 3,887 8,632
Income Taxes.................................................................. 1,877 1,185 3,062
--------- --------- ------------
Net Income.................................................................... $ 2,868 $ 2,702 $ 5,570
--------- --------- ------------
--------- --------- ------------
Net Income Per Common Share................................................... $ 2.29 $ 2.64 $ 2.34
Weighted Average Common Shares Outstanding.................................... 1,251 1,025 2,385
</TABLE>
46
<PAGE>
INDIANA UNITED BANCORP AND SUBSIDIARIES
P.T.C. BANCORP AND SUBSIDIARY
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
IUB PTC CONSOLIDATED
----------- --------- ------------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
Interest Income
Loans, including fees....................................................... $ 18,266 $ 17,125 $ 35,391
Investment securities....................................................... 5,308 3,631 8,939
Federal funds sold.......................................................... 380 433 813
Other interest.............................................................. 13 130 143
----------- --------- ------------
Total interest income..................................................... 23,967 21,319 45,286
----------- --------- ------------
Interest Expense
Deposits.................................................................... 10,863 10,837 21,700
Short-term borrowings....................................................... 689 689
Long-term debt.............................................................. 454 60 514
----------- --------- ------------
Total interest expense.................................................... 12,006 10,897 22,903
----------- --------- ------------
Net interest income....................................................... 11,961 10,422 22,383
Provision for loan losses................................................... 150 828 978
----------- --------- ------------
Net interest income after provision for loan losses......................... 11,811 9,594 21,405
----------- --------- ------------
Non-interest Income
Customer service fees, insurance commissions................................ 438 102 540
Fiduciary activities........................................................ 232 31 263
Service charges on deposit accounts......................................... 520 1,199 1,719
Mortgage banking income..................................................... 795 795
Net realized gains on securities............................................ 104 104
Other....................................................................... 312 118 430
----------- --------- ------------
Total non-interest income................................................. 1,502 2,349 3,851
----------- --------- ------------
Non-interest Expense
Salaries and employees benefits............................................. 4,482 4,137 8,619
Net occupancy and equipment expense......................................... 1,477 833 2,310
Deposit insurance expense................................................... 736 2 738
Data processing expense..................................................... 372 372
Other....................................................................... 1,924 1,759 3,683
----------- --------- ------------
Total non-interest expense................................................ 8,619 7,103 15,722
----------- --------- ------------
Income Before Income Taxes.................................................... 4,694 4,840 9,534
Income Taxes.................................................................. 2,001 1,564 3,565
----------- --------- ------------
Net Income.................................................................... $ 2,693 $ 3,276 $ 5,969
----------- --------- ------------
----------- --------- ------------
Net Income Per Common Share................................................... $ 2.11 $ 3.17 $ 2.49
Weighted Average Common Shares Outstanding.................................... 1,251 1,032 2,396
</TABLE>
47
<PAGE>
INDIANA UNITED BANCORP AND SUBSIDIARIES
P.T.C. BANCORP AND SUBSIDIARY
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
IUB PTC CONSOLIDATED
----------- --------- ------------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Interest Income
Loans, including fees................................................. $ 16,938 $ 15,446 $ 32,384
Investment securities................................................. 5,543 3,438 8,981
Federal funds sold.................................................... 305 473 778
Other interest........................................................ 49 63 112
----------- --------- ------------
Total interest income............................................. 22,835 19,420 42,255
----------- --------- ------------
Interest Expense
Deposits.............................................................. 10,308 9,733 20,041
Short-term borrowings................................................. 932 932
Long-term debt........................................................ 612 102 714
----------- --------- ------------
Total interest expense............................................ 11,852 9,835 21,687
----------- --------- ------------
Net interest income............................................... 10,983 9,585 20,568
Provision for loan losses............................................. 30 740 770
----------- --------- ------------
Net interest income after provision for loan losses................... 10,953 8,845 19,798
----------- --------- ------------
Non-interest Income
Insurance commissions................................................. 473 99 572
Fiduciary activities.................................................. 189 27 216
Service charges on deposit accounts................................... 450 1,192 1,642
Mortgage banking income............................................... 447 447
Net realized gains (losses) on securities............................. 16 (76) (60)
Other................................................................. 329 212 541
----------- --------- ------------
Total non-interest income......................................... 1,457 1,901 3,358
----------- --------- ------------
Non-interest Expense
Salaries and employees benefits....................................... 4,467 3,725 8,192
Net occupancy and equipment expense................................... 1,469 763 2,232
Deposit insurance expense............................................. 395 251 646
Data processing expense............................................... 350 350
Other................................................................. 1,898 1,550 3,448
----------- --------- ------------
Total non-interest expense........................................ 8,229 6,639 14,868
----------- --------- ------------
Income Before Income Taxes.............................................. 4,181 4,107 8,288
Income Taxes............................................................ 1,652 1,200 2,852
----------- --------- ------------
Net Income.............................................................. $ 2,529 $ 2,907 $ 5,436
----------- --------- ------------
----------- --------- ------------
Net Income Per Common Share............................................. $ 1.91 $ 2.86 $ 2.29
Weighted Average Common Shares Outstanding.............................. 1,251 1,016 2,378
</TABLE>
48
<PAGE>
INDIANA UNITED BANCORP AND SUBSIDIARIES
P.T.C. BANCORP AND SUBSIDIARY
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
IUB PTC CONSOLIDATED
----------- --------- ------------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Interest Income
Loans, including fees................................................. $ 15,941 $ 12,535 $ 28,476
Investment securities................................................. 6,131 3,038 9,169
Federal funds sold.................................................... 115 252 367
Other interest........................................................ 15 113 128
----------- --------- ------------
Total interest income............................................. 22,202 15,938 38,140
----------- --------- ------------
Interest Expense
Deposits.............................................................. 9,787 7,117 16,904
Short-term borrowings................................................. 483 483
Long-term debt........................................................ 631 138 769
----------- --------- ------------
Total interest expense............................................ 10,901 7,255 18,156
----------- --------- ------------
Net interest income............................................... 11,301 8,683 19,984
Provision for loan losses............................................. 115 450 565
----------- --------- ------------
Net interest income after provision for loan losses................... 11,186 8,233 19,419
----------- --------- ------------
Non-interest Income
Insurance commissions................................................. 509 111 620
Fiduciary activities.................................................. 200 38 238
Service charges on deposit accounts................................... 475 1,024 1,499
Mortgage banking income............................................... 463 463
Net realized gains (losses) on securities............................. (154) (15) (169)
Gain on sale of branches.............................................. 1,229 1,229
Other................................................................. 329 255 584
----------- --------- ------------
Total non-interest income......................................... 2,588 1,876 4,464
----------- --------- ------------
Non-interest Expense
Salaries and employees benefits....................................... 4,553 3,344 7,897
Net occupancy and equipment expense................................... 1,521 899 2,420
Deposit insurance expense............................................. 666 430 1,096
Data processing expense............................................... 352 352
Other................................................................. 2,300 1,604 3,904
----------- --------- ------------
Total non-interest expense........................................ 9,040 6,629 15,669
----------- --------- ------------
Income Before Income Taxes.............................................. 4,734 3,480 8,214
Income Taxes............................................................ 1,864 1,079 2,943
----------- --------- ------------
Net Income.............................................................. $ 2,870 $ 2,401 $ 5,271
----------- --------- ------------
----------- --------- ------------
Net Income Per Common Share............................................. $ 2.17 $ 2.51 $ 2.28
Weighted Average Common Shares Outstanding.............................. 1,251 957 2,309
</TABLE>
49
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1
The Pro Forma Combined Condensed Balance Sheet as of September 30, 1997, and
the Pro Forma Combined Condensed Statements of Income for the three years ended
December 31, 1996 and the nine months ended September 30, 1997, combine the
historical consolidated financial statements of IUB and PTC and are presented as
if the Merger had occurred on January 1, 1994, 1995, 1996 and 1997, after giving
effect to the pro forma adjustments described in the accompanying notes. In
addition, the Pro Forma Combined Condensed Balance Sheet as of September 30,
1997 gives effect to the guaranteed preferred beneficial interests in IUB's
subordinated debentures registered in the Trust Preferred Offering.
The Pro Forma Combined Condensed Financial Statements are not necessarily
indicative of the consolidated financial position or results of future
operations of the combined entity or of the actual results that would have been
achieved had the Merger and the Trust Preferred Offering been consummated as of
the dates indicated.
NOTE 2
Represents the cash proceeds from the exercise of PTC stock options and
related shareholders' equity.
NOTE 3
Represents the temporary investment of net proceeds of $21,153,000, debt
issue costs of $1,272,000 and $22,425,000 guaranteed preferred beneficial
interests in IUB's subordinated debentures registered in the Trust Preferred
Offering. The anticipated annual expense associated with the Trust Preferred
Offering is approximately $2,003,000 before income taxes (approximately
$1,210,000 after income taxes). Income and expense related to the Trust
Preferred Offering are not considered in the Pro Forma Combined Condensed
Statements of Income.
NOTE 4
Represents the current capitalized acquisition costs related to the Merger.
NOTE 5
Represents the acquisition adjustment that includes the elimination of
1,057,132 shares of PTC Common Stock (including 30,731 shares issued upon the
exercise of stock options) and the issuance of 1,136,417 shares of IUB Common
Stock in the Merger. The value of the issued shares over the retired shares is
allocated as follows: $1,136,417 to capital stock and the balance to paid-in
capital.
NOTE 6
Weighted average shares outstanding for PTC have been increased by the
number of shares of PTC Common Stock issuable upon the exercise of outstanding
stock options in the periods ended on the following dates:
<TABLE>
<S> <C>
30,731
September 30, 1997............................................ shares
32,856
December 31, 1996............................................. shares
32,576
December 31, 1995............................................. shares
26,549
December 31, 1994............................................. shares
</TABLE>
50
<PAGE>
DESCRIPTION OF IUB CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The authorized capital stock of IUB consists of 3.4 million shares, of which
3 million are shares of common stock, without par value, and 400,000 are shares
of preferred stock, without par value. IUB has 1,250,897 shares of common stock
issued and outstanding and 1,136,417 shares of common stock reserved for
issuance in connection with the Merger. No shares of preferred stock are
outstanding or reserved for issuance.
COMMON STOCK
Holders of shares of common stock are entitled to one vote for each share on
all matters voted on by shareholders and, except as required by law or provided
in any resolution adopted by IUB's Board of Directors with respect to any series
of preferred stock, will exclusively possess all voting power. Holders of shares
of common stock do not have any conversion, redemption or preemptive rights.
Subject to any preferential rights of any outstanding series of preferred stock
designated by IUB's Board of Directors from time to time, the holders of common
stock will be entitled to such dividends as may be declared from time to time by
the Board of Directors from funds available therefor, and upon liquidation will
be entitled to receive pro rata all assets of IUB available for distribution to
such holders.
PREFERRED STOCK
The Board of Directors of IUB is authorized to provide for the issuance of
preferred stock, in one or more series, and to fix for each such series such
voting powers, designations, and relative, participating, optional and other
special rights, and such qualifications, limitations or restrictions, as are
stated in the resolution adopted by the Board of Directors providing for the
issuance of such series and as are permitted by the IBCL.
SHARES AVAILABLE FOR FUTURE ISSUANCE
Following the Merger, IUB will have 612,686 authorized shares of common
stock (approximately 20% of the number of shares of common stock authorized) and
all 400,000 of its authorized shares of preferred stock remaining available for
issuance as the need arises in connection with future acquisitions,
combinations, equity financings, share distributions and dividends, employee
benefit plans and other corporate purposes. The issuance of additional shares of
common stock and the issuance of any shares of preferred stock may occur without
further authorization by shareholders on such terms as IUB's Board of Directors,
subject to its fiduciary duties, may lawfully determine. The effect of the
issuance of additional shares of common stock (other than on a pro rata basis
among holders of common stock) would be to dilute the present voting power and,
depending on the terms of issuance, possibly the book or market value of the
shares of common shares from that prior to such issuance.
The ability to issue additional common stock or any preferred stock, in
addition to the other corporate purposes described above, could enable the IUB
Board of Directors to make more difficult the replacement of incumbent directors
or the accomplishment of certain business combinations or takeover attempts
opposed by the Board of Directors, even though any such business combination or
takeover attempt may be supported by holders of a significant percentage of
IUB's outstanding common stock.
IUB presently has no plan, understanding or arrangement to issue additional
common stock, other than in connection with the Merger or upon the proper
exercise of stock options granted by PTC prior to the Merger and assumed by IUB
in the Merger Agreement. The 1,136,417 shares of IUB Common Stock that IUB has
reserved for issuance includes shares reserved for issuance upon the exercise of
any of such stock options after the Merger. However, in view of IUB's strategy
to aggressively pursue acquisitions of bank holding companies, banks (or their
branches), thrift institutions (or their branches) or companies
51
<PAGE>
conducting businesses deemed closely related to banking or managing or
controlling banks or thrift institutions, IUB believes that it is likely that
additional common stock and possibly preferred stock may be issued in the future
in connection with acquisitions that IUB will seek to make in the future.
COMPARISON OF RIGHTS OF HOLDERS OF IUB COMMON STOCK
AND PTC COMMON STOCK
The rights of IUB shareholders and PTC shareholders are governed principally
by the IBCL, and the articles of incorporation and bylaws of each company. In
many instances, including dividend rights, election of directors, removal of
directors, indemnification of directors and officers, rights of appraisal,
rights of inspection of corporate books and records and liquidation rights, the
rights of the holders of PTC Common Stock are the same as the rights of the
holders of IUB Common Stock. The following summary compares certain rights of
the holders of PTC Common Stock to the rights of holders of IUB Common Stock in
areas where those rights are materially different.
The Bylaws of IUB contain certain provisions regarding nominations of
candidates for election as directors and the bringing of business before an
annual meeting of shareholders of IUB for which the Bylaws of PTC contain no
comparable provisions.
NOMINATIONS TO THE IUB BOARD
The IUB Board of Directors considers nominations of candidates for election
as directors. The IUB Bylaws establish an advance notice procedure for
shareholders to make nominations of candidates for election as directors (the
"Nomination Notice Procedure"). The Nomination Notice Procedure provides that
only persons who are nominated by, or at the direction of, the Board of
Directors, or by a shareholder who has given timely written notice to the
Secretary of IUB prior to the meeting at which directors are to be elected, will
be eligible for election as directors of IUB. Under the Nomination Notice
Procedure, to be timely, notice of shareholder nominations to be made at an
annual or special meeting must be received by IUB not less than 60 days nor more
than 90 days prior to the scheduled date of the meeting (or, if less than 70
days' notice or prior public disclosure of the date of the meeting is given, the
10th day following the earlier of (i) the day that such notice was mailed or
(ii) the day such public disclosure was made).
Under the Nomination Notice Procedure, a shareholder's notice to IUB
proposing to nominate a person for election as a director must contain certain
information, including, without limitation, the identity and address of the
nominating shareholder, the number of shares of IUB Common Stock that are owned
by such shareholder and all information regarding the proposed nominee that
would be required to be included in a proxy statement soliciting proxies for the
proposed nominee. If the Chairman of the Board or other officer presiding at a
meeting determines that a person was not nominated in accordance with the
Nomination Notice Procedure, such person will not be eligible for election as a
director.
By requiring advance notice of nominations by shareholders, the Nomination
Notice Procedure affords the IUB Board to consider the qualifications of the
proposed nominees and, to the extent deemed necessary or desirable by the Board,
to inform shareholders about such qualifications.
SHAREHOLDER PROPOSALS AT IUB ANNUAL MEETING
The Bylaws of IUB establish an advance notice procedure for shareholders to
bring business before an annual meeting of shareholders of IUB (the "Shareholder
Notice Procedure"). The Shareholder Notice Procedure provides that at an annual
meeting only such business may be conducted as has been brought before the
meeting by, or at the direction of, the Board or by a shareholder who has given
timely written notice to the Secretary of IUB of such shareholder's intention to
bring such business before such meeting. Under the Shareholder Notice Procedure,
to be timely, notice of shareholder proposals to be made at an annual meeting
must be received by IUB not less than 60 days nor more than 90 days prior to the
scheduled date of the meeting (or, if less than 70 days' notice or prior public
disclosure of the date of the
52
<PAGE>
meeting is given, the 10th day following the earlier of (i) the day such notice
was mailed or (ii) the day such public disclosure was made).
Under the Shareholder Notice Procedure, a shareholder's notice relating to
the conduct of the meeting must contain certain information about such business
and about the proposing shareholder, including, without limitation, a brief
description of the business the shareholder proposes to bring before the annual
meeting, the reasons for conducting such business at such meeting, the name and
address of such shareholder, the number of shares of IUB Common Stock
beneficially owned by such shareholder and any material interest of such
shareholder in the business so proposed. If the Chairman of the Board or other
officer presiding at a meeting determines that such business was not brought
before the meeting in accordance with the Shareholder Notice Procedure, such
business will not be conducted at such meeting.
By requiring advance notice of other proposed business, the Shareholder
Notice Procedure is intended to provide an orderly procedure for conducting
annual meetings of shareholders and, to the extent deemed necessary or desirable
by the Board, will provide the Board with an opportunity to inform shareholders,
prior to such meetings, of any business proposed to be conducted at such
meetings, together with any recommendations as to the Board's position regarding
action to be taken with respect to such business, so that shareholders can
better decide whether to attend such a meeting or to grant a proxy regarding the
disposition of any such business.
53
<PAGE>
PTC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
CERTAIN STATEMENTS IN THIS SECTION CONSTITUTE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE
EXCHANGE ACT. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS OF THE IUB OR PTC TO DIFFER MATERIALLY FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS.
GENERAL
The business of PTC consists of holding and administering its interest in
People's Trust. The principal business of People's Trust consists of attracting
deposits from consumer and commercial customers and making loans to individuals
and businesses. People's Trust offers various products for depositors, including
checking and savings accounts, certificates of deposit and safe deposit boxes.
Loans consist principally of loans to individuals secured by mortgage liens on
residential properties, consumer loans generally secured by liens on personal
property, and loans to businesses generally secured by liens on business assets
such as inventory, accounts receivable, commercial real estate and other
property. People's Trust also offers trust services to individuals, businesses
and institutions.
People's Trust operates 17 banking offices in nine eastern and southeastern
counties in Indiana. In 1996, People's Trust opened new banking offices in the
Greensburg and Connersville markets and in the first quarter of 1997 purchased
an office in Hanover. People's Trust will continue to take advantage of
opportunities to expand its number of locations if the expansion appears to
represent a profitable opportunity, however, there is no assurance this
expansion will occur.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
RESULTS OF OPERATIONS
Net income for the nine months ended September 30, 1997 was $2,702,000
compared to $2,391,000 for the same period in 1996, which represented a $311,000
or 13.0% increase. Earnings per share also increased from $2.31 per share to
$2.64 per share for the same period. Higher net interest income, which was
partially offset by higher non-interest expense, accounted for most of the
increase in net income. Net income and earnings per share for the third quarter
of 1997 versus the third quarter of 1996 were also higher. Again, higher net
interest income, offset by higher non-interest expenses, were the main
contributors.
For the nine-month period ended September 30, 1997, as compared to the same
period in 1996, net interest income increased by $872,000 or 11.3%. A similar
proportional increase also occurred during the third quarter of 1997 versus the
third quarter of 1996. Higher volumes (average balances) of financial assets and
liabilities, rather than changes in underlying interest rates, were the main
reason for increased interest income and interest expense. Average loans were
$209,000,000 for the nine months ended September 30, 1997 compared to
$181,300,000 for the same period in 1996, or about $27,700,000 higher. Average
deposits were $266,900,000 for the nine-month period ended September 30, 1997
versus $243,900,000 for 1996, or about $23,000,000 higher. Net interest margin
(net interest income on a tax equivalent basis divided by average total earnings
assets) was 4.46% for the nine-month period ended September 30, 1997 and 4.38%
for the same period in 1996.
Non-interest income was relatively stable for the nine-month period ended
September 30, 1997 versus 1996; however, certain components of non-interest
income did change significantly. Mortgage banking income, which consists of
gains (losses) on loan sales and service fee income, was $103,000 higher for the
third quarter of 1997 versus 1996, and $189,000 higher for the nine-month period
ended September 30,
54
<PAGE>
1997 versus 1996. During the second and third quarters, the long-term interest
rates charged on mortgages declined and PTC saw an increase in refinancing and
new originations take place. Gains on securities included a sale of common stock
in 1996, but was a one-time gain and therefore not reported in 1997.
Non-interest expense increased from $5,272,000 for the nine months ended
September 30, 1996 to $5,918,000 for the same period in 1997, or a $646,000
increase. Most of this increase was related to higher salaries and benefits and
higher occupancy and equipment expense. Higher salary and benefit costs were
directly attributed to a revised management structure which was implemented on
January 1, 1997; and called for the hiring of several new commercial lenders, a
financial controller, an executive vice president, and several regional sales
managers so PTC could be better positioned for additional growth and loan
production activity.
Higher occupancy and equipment expenses were directly attributed to PTC's
expansion of its current ATM program which included the refurbishing of four
existing ATM's, the addition of four new ATM's and the addition of one cash
dispenser at an Indiana convenience store. PTC also converted to a new network
and service provider in order to attain long term cost reductions in driving the
ATM network. In addition, PTC expanded its branch network by acquiring a full
service branch in March 1997 in Hanover, Indiana, and establishing a de novo
branch in Madison, Indiana in September 1997.
FINANCIAL CONDITION
Total assets increased slightly by $6,158,000 or 2.1% from December 31, 1996
to September 30, 1997. Gross loans increased by $23,690,000 or 12.0% during the
same period. A decline in cash equivalents of $7,904,000 was used to fund the
increase in loans, along with sales and maturities of available-for-sale
securities. Loan demand continued to be strong in 1997. PTC believes it has
positioned itself to grow its loan portfolio by adding employees to increase
originations. As of September 30, 1997, PTC had obtained an 80.0% loan to
deposit ratio. A detailed presentation of loans by category follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996 $ CHANGE % CHANGE
------------- ------------ --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Construction loans.............................................. $ 13,462 $ 13,650 (188) (1.4)%
Real estate--farmland........................................... 11,948 8,302 3,646 43.9
Real estate--1-4 family residential............................. 88,473 79,808 8,665 10.8
Real estate--non-farm, non-residential.......................... 48,917 35,068 13,849 39.5
Commercial and industrial....................................... 17,932 22,986 (5,054) (22.0)
Consumer loans.................................................. 22,227 24,543 (2,266) (9.2)
Tax-exempt loans................................................ 11,347 8,390 2,957 35.2
Other loans..................................................... 6,297 4,216 2,081 49.3
------------- ------------ ---------
Total loans..................................................... $ 220,653 $ 196,963 $ 23,690 12.0%
------------- ------------ --------- -----
------------- ------------ --------- -----
</TABLE>
55
<PAGE>
ASSET QUALITY
Provision for loan losses was relatively stable for 1997 versus 1996. An
analysis of activity in the allowance for loan losses follows:
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------- -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Balance at January 1...................................................... $ 2,000 $ 1,722
Provision for loan losses................................................. 610 616
Losses charged to allowance............................................... (750) (327)
Recoveries credited to allowance.......................................... 109 144
------ ------
Balance at September 30................................................... $ 1,969 $ 2,155
------ ------
------ ------
</TABLE>
A summary of non-performing loans follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Non-accrual loans................................................................... $ 2,349 $ 1,794
Restructured loans.................................................................. -- --
Accruing loans 90 days or more past due............................................. 56 34
------ ------
Total non-performing loans........................................................ $ 2,405 $ 1,828
------ ------
------ ------
Allowance for loan losses........................................................... $ 1,969 $ 2,000
Allowance/total loans............................................................... 0.89% 1.02%
Allowance/non-performing loans...................................................... 81.9 109.4
Non-performing loans/total loans.................................................... 1.09 0.93
</TABLE>
During the first quarter of 1996, PTC was notified of a bankruptcy filed by
Bennett Funding, a commercial loan customer. At that time PTC had loans
outstanding to this customer totaling more than $1,500,000. The loans were
placed on non-accrual in April, 1996 and caused PTC's non-performing loans to
increase to 1.26% of total loans during the second quarter of 1996. Of the
$750,000 in chargeoffs recorded during the first nine months in 1997, $550,000
related to the Bennett Funding relationship. Throughout 1996 and 1997, PTC
litigated these loans and by the third quarter of 1997 a settlement had been
approved by the bankruptcy court. That agreement provides for substantial
repayment of the remaining $750,000 in carrying value of these loans at
September 30, 1997.
The allowance for loan losses is evaluated quarterly. As part of the
analysis, management allocates portions of the allowance to segments of the loan
portfolio based upon the review of specific problem credits and historical loss
experience. PTC maintains a watch list and maintains an ongoing loan review
function. Loans may be placed on the watch list as a result of delinquent
status, concern about the borrower's financial condition or the value of
collateral securing a loan, or simply to more closely monitor a borrower's
financial condition. At September 30, 1997, the loans on PTC's watch list
aggregated $5.2 million (2.4% of total loans), including the non-performing
loans disclosed above.
While management believes that the allowance is adequate as of September 30,
1997, it intends to significantly fund the provision during the fourth quarter
because PTC's overall loan growth exceeded 13.5% in 1996 and will exceed 14%
growth in 1997. A comparative review of the PTC's allowance for loan loss to its
peer group, which consists of financial institutions between $150,000,000 and
$300,000,000 in assets, was completed. Through this analysis, it was determined
that PTC's allowance to total loans percentage relationship was significantly
less than its peer group. Management will fund the reserve during
56
<PAGE>
the fourth quarter of 1997 to bring PTC closer to its peer group and to
recognize the tremendous growth experienced during the past two years.
CAPITAL
Shareholders' equity increased from $21,653,000 at December 31, 1996 to
$23,740,000 at September 30, 1997. The increase of $2,087,000 was almost solely
due to retained earnings--net income less cash dividends.
PTC and People's Trust are subject to regulatory capital requirements
administered by the federal banking agencies. "Consolidated" actual and minimum
required capital ratios for capital adequacy and prompt corrective action
purposes are presented below. ("Bank only" ratios are substantially the same as
"consolidated"). PTC and People's Trust are both considered "well-capitalized"
for prompt corrective action purposes.
<TABLE>
<CAPTION>
MINIMUM REQUIRED TO
BE "WELL-
MINIMUM REQUIRED FOR CAPITALIZED" UNDER
CAPITAL ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION REGULATIONS
--------- ----------------------- ---------------------
<S> <C> <C> <C>
AS OF SEPTEMBER 30, 1997
- -----------------------------------------------------------------
Tier 1 capital to average assets............................... 7.26% 4.0% 5.0%
Tier 1 capital to risk-weighted assets......................... 10.73 4.0 6.0
Total capital to risk-weighted assets.......................... 11.70 8.0 10.0
AS OF DECEMBER 31, 1996
- -----------------------------------------------------------------
Tier 1 capital to average assets............................... 6.73% 4.0% 5.0%
Tier 1 capital to risk-weighted assets......................... 10.54 4.0 6.0
Total capital to risk-weighted assets.......................... 11.60 8.0 10.0
</TABLE>
LIQUIDITY
Liquidity management involves maintaining sufficient cash levels to fund
operations and to meet the requirements of borrowers, depositors and creditors.
High levels of liquidity bear higher corresponding costs, measured in terms of
lower yields on short-term investments, more liquid earning assets, and higher
interest expense involved in extending liability maturities. Liquid assets
include cash and cash equivalents, loans and securities maturing within one
year, and money market instruments. In addition, PTC holds $20,972,000 of AFS
securities maturing after one year which can be sold to meet liquidity needs.
Liquidity is supported by maintaining a relatively stable funding base,
which is achieved by diversifying funding sources, extending the contractual
maturity of liabilities, and limiting reliance on volatile short-term purchased
funds. Short-term funding needs may arise from declines in deposits or other
funding sources, draw downs of loan commitments and requests for new loans.
PTC's strategy is to fund assets to the maximum extent possible with core
deposits, which provide a sizable source of relatively stable and low-cost
funds. Average core deposits funded approximately 87% of total earning assets at
September 30, 1997.
Management believes PTC has sufficient liquidity to meet all reasonable
borrower, depositor, and creditor needs in the present economic environment. PTC
has not received any recommendations from regulatory authorities, which would
materially affect liquidity, capital resources or operations.
INTEREST RATE RISK
At September 30, 1997, PTC held approximately $178,606,000 in assets
comprised of securities, loans, short-term investments, and federal funds sold,
which were interest sensitive in one year or less time
57
<PAGE>
horizons. PTC's interest rate sensitivity analysis at September 30, 1997 appears
below. Core deposits are distributed or spread among the various repricing
categories based upon historical patterns of repricing which are reviewed
periodically by management. The assumptions regarding these repricing
characteristics greatly influence conclusions regarding interest sensitivity.
Management believes its assumptions regarding these liabilities are reasonable.
Effective asset/liability management requires the maintenance of a proper
ratio between maturing or repriceable interest-earning assets and
interest-bearing liabilities. It is the policy of PTC that rate-sensitive assets
less rate-sensitive liabilities to total assets are kept within a range of 85%
to 115% for all time periods one year and longer.
<TABLE>
<CAPTION>
MATURING OR REPRICING
(DOLLARS IN THOUSANDS)
3 MONTHS ONE YEAR 5 YEARS 5 YEARS
------------- ------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Rate-sensitive assets.................................. $ 63,131 115,475 85,065 $ 25,335
Rate-sensitive liabilities............................. 88,169 111,064 47,496 29,396
------------- ------------- ------------ ------------
Rate-sensitive GAP (assets less liabilities)........... $ (25,038) $ 4,411 $ 37,569 $ (4,061)
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
Rate-sensitive GAP (cumulative)........................ $ (25,038) $ (20,627) $ 16,942 $ 12,881
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
Percent of total assets (cumulative)................... (8.3)% (6.8)% 5.6 % 4.3 %
Rate-sensitive assets/liabilities (cumulative)......... 71.6 89.6 106.9 104.7
</TABLE>
EFFECTS OF CHANGING PRICES
PTC's asset and liability structure is substantially different from that of
an industrial company in that most of its assets and liabilities are monetary in
nature. Management believes the impact of inflation on financial results depends
upon PTC's ability to react to changes in interest rates and, by such reaction,
reduce the inflationary impact on performance. Interest rates do not necessarily
move in the same direction at the same time, or at the same magnitude, as the
prices of other goods and services, As discussed previously, management relies
on its ability to manage the relationship between interest-sensitive asset and
liabilities to protect against wide interest rate fluctuations, including those
resulting from inflation.
FACILITIES AND TECHNOLOGY
In an effort to make its service more accessible and convenient, PTC is
considering renovating its main banking facility in Rushville. This renovation
will enhance customer accessibility to the bank's various products and services
as well as enhance drive-through banking, ATM accessibility and customer
parking.
During 1997, PTC initiated many technological improvements. Certain of these
improvements represent capital investments, which allows PTC to continue to
efficiently compete within the financial services industry which is becoming
increasingly dependent upon technology. Investments are being made in additional
ATM's, cash dispensers, Automated Voice Response System, debit cards, and
additional state-of-the-art personal computers which will allow for improved
efficiencies in customer service.
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
The following discussion and analysis provides information regarding PTC's
consolidated financial condition and results of operations as of and for the
years ended December 31, 1995 and 1996.
EARNINGS SUMMARY
PTC's net income for 1996 was $3,276,000 compared with net income for 1995
of $2,907,000, an increase of $369,000 or 12.7%. Earnings per share were $3.17
in 1996 compared to $2.86 for 1995.
58
<PAGE>
NET INTEREST INCOME
Net interest income is the principal component of net income for PTC and is
determined by the relative size and characteristics of interest-earning assets
and interest-bearing liabilities. The increase in net income in 1996 resulted
primarily from an increase in net interest income. For the years ended December
31, 1996 and 1995 net interest income was $10,422,000 and $9,585,000,
respectively. This represents an increase in 1996 of $837,000 (8.03%).
Growth in net interest income is drawn primarily from growth in earning
assets. Average earning assets increased to $257,011,000 in 1996 from
$234,731,000 in 1995, an increase of $22,280,000 (9.5%). The most significant
increase in average earning assets occurred in average loans which increased
$16,943,000 (10.1%) to $184,447,000 in 1996. Increasing loan balances were the
primary cause of the increase in net interest income during 1996. The following
table sets forth, for the periods indicated, information regarding the average
balances of interest-earning assets and interest-bearing liabilities, the dollar
amount of interest income and interest expense, and the resulting yield on
average interest-earning assets and rates on average interest-bearing
liabilities. Average balances are also provided for non-earning assets, non-
interest-bearing liabilities and shareholders' equity.
Net interest income also depends on the rates paid on assets and the rates
paid on liabilities. The net interest margin represents net interest income as a
percent of average earning assets. The net interest margin, or margin on earning
assets, was 4.39% in 1996 and 4.37% in 1995. Interest rates were low and stable
during this time period and the result has been about the same margins.
59
<PAGE>
RATE/VOLUME ANALYSIS
<TABLE>
<CAPTION>
1996 1995
---------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
---------- --------- ----------- ---------- --------- ---------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
Short-term investments
Interest-bearing balances with banks................. $ 2,274 $ 130 5.72% $ 1,034 $ 62 6.00%
Federal funds sold................................... 7,317 433 5.92 7,923 473 5.97
Securities:
Taxable.............................................. 38,224 2,440 6.38 39,394 2,498 6.34
Non-taxable(1)....................................... 24,749 1,805 7.29 18,876 1,424 7.54
Loans and leases:(2)
Taxable(3)........................................... 176,529 16,658 9.44 160,915 15,062 9.36
Non-taxable(1)....................................... 7,918 708 8.94 6,589 582 8.83
---------- --------- ----- ---------- --------- ---------
Total earning assets................................. 257,011 22,174 8.63 234,731 20,101 8.56
---------- --------- ----- ---------- --------- ---------
Cash and due from banks................................ 6,992 6,196
Premises and equipment, net............................ 3,246 2,971
Intangible assets...................................... 1,678 1,899
Accrued interest receivable and other assets........... 3,384 3,051
Less: Allowance for loan losses........................ (1,976) (1,607)
---------- ----------
Total assets......................................... $ 270,335 $ 247,241
---------- ----------
---------- ----------
INTEREST-BEARING LIABILITIES
Savings and interest-bearing demand deposits........... $ 78,529 2,247 2.86 75,087 2,155 2.87
Time deposits.......................................... 148,079 8,590 5.80 132,604 7,579 5.72
Notes payable.......................................... 782 60 7.67 1,247 102 8.18
---------- --------- ---------- ---------
Total interest-bearing liabilities................... 227,390 10,897 4.79 208,938 9,836 4.71
---------- --------- ----- ---------- --------- ---------
Demand deposit accounts................................ 20,136 18,778
Other liabilities...................................... 2,396 1,879
---------- ----------
Total liabilities.................................... 249,922 229,595
Shareholders' equity................................... 20,413 17,646
---------- ----------
Total liabilities and shareholders' equity........... $ 270,335 $ 247,241
---------- ----------
---------- ----------
Net interest/spread.................................... $ 11,277 3.84% $ 10,265 3.85%
--------- ----- --------- ---------
--------- ----- --------- ---------
Margin................................................. 4.39% 4.37%
----- ---------
----- ---------
</TABLE>
- ------------------------------
(1) Effective tax rates were determined as though interest earned on PTC's
investments in municipal bonds and loans was fully taxable. Interest yields
on state and municipal securities are presented on a fully taxable
equivalent basis using a 34% tax rate.
(2) Interest income on loans included fees of $437,000 and $370,000 for 1996 and
1995.
(3) Non-accrual loans are included in average balance.
60
<PAGE>
The following table presents information regarding PTC's interest income and
interest expense for the periods indicated. The table presents the amount of
change in interest income or interest expense which is attributable to the
change in the average balance (volume) and the amount of change which is related
to change in rates. The net change, attributable to the combined impact of
volume and rate, has been allocated proportionately to the change due to volume
and the change due to rate. Increases in balances were responsible for an
increase in net interest income of $1,058,000 during 1996, however, this was
offset by a decrease in spread of $46,000 resulting in a $1,012,000 increase in
net interest income.
<TABLE>
<CAPTION>
1996-1995
---------------------------------
<S> <C> <C> <C>
CHANGE CHANGE
TOTAL DUE TO DUE TO
CHANGE VOLUME RATE
--------- --------- -----------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
EARNING ASSETS
Short-term investments
Interest-bearing balances with banks............................................... $ 68 $ 71 $ (3)
Federal funds sold................................................................. (40) -- (40)
Securities
Taxable............................................................................ (58) (75) 17
Non-taxable........................................................................ 381 430 (49)
Loans and leases
Taxable............................................................................ 1,596 1,472 124
Non-taxable........................................................................ 126 119 7
--------- --------- -----
Total earning assets............................................................. 2,073 2,017 56
--------- --------- -----
INTEREST-BEARING LIABILITIES
Savings and interest-bearing demand deposits......................................... 92 99 (7)
Time deposits........................................................................ 1,011 896 115
Notes payable........................................................................ (42) (36) (6)
--------- --------- -----
Total interest-bearing liabilities............................................... 1,061 959 102
--------- --------- -----
Net interest/spread.............................................................. $ 1,012 $ 1,058 $ (46)
--------- --------- -----
--------- --------- -----
</TABLE>
NON-INTEREST INCOME
Total non-interest income was $2,349,000 in 1996 and $1,902,000 in 1995.
This reflected an increase in 1996 of $447,000 (23.5%). Service charges on
deposit accounts were relatively flat in 1996 compared to 1995. The amounts were
$1,199,000 in 1996 compared to $1,192,000 in 1995.
Mortgage banking revenues included net gains and losses realized when
mortgage loans were sold into the secondary market, service fee revenue earned
from servicing those loans after they were sold and points paid by customers at
time of closing. Mortgage banking revenue, as reflected in PTC's financial
statements, has not been reduced by the associated costs, such as compensation
expense, which is shown elsewhere within non-interest expense. Total mortgage
banking revenue was $795,000 in 1996 and $447,000 in 1995. This reflects an
increase in 1996 of $348,000 (78%). The majority of this increase is from PTC
adopting SFAS No. 122 which recognizes the income value of servicing rights.
This accounting change increased income in mortgage banking $225,000 in 1996.
People's Trust sold its travel agency in April, 1996 so it could concentrate
its focus on additional banking facilities, products and services. As a result,
travel commission revenues decreased from $178,000 in 1995 to $66,000 in 1996
(62.8%). PTC does not engage in the purchase and sale of securities with the
intent to generate gains. PTC may sell available-for-sale securities for
liquidity or to manage its asset/
61
<PAGE>
liability position. During 1996, such sales, as well as gains and losses
realized when securities were called prior to their maturity, generated net
gains of $104,000 compared to losses in 1995 of $76,000.
NON-INTEREST EXPENSE
Non-interest expense, or overhead, includes the costs of personnel,
occupancy, data processing equipment, insurance, and other costs of sustaining
operations. Overhead for the years ended December 31, 1996 and 1995 was
$7,103,000 and $6,639,000, respectively. This reflects increases of $464,000
(7%) in 1996. More than half of total non-interest expense was comprised of
salaries and employee benefits. During 1996 and 1995 salaries and employee
benefits were $4,137,000 and $3,725,000 respectively. This represents an 11%
increase which was due to People's Trust opening and staffing two new branches
during 1996. The new branches are expected to have a positive effect on net
income by the beginning of 1998.
FDIC insurance expense decreased $249,000 in 1996 as a result of a decrease
in the premium rates charged to insured banks. Other operating expenses
increased $208,000 from 1995 to 1996 for a variety of reasons, including higher
advertising and promotional expenses, legal and professional fees, and charge
card expenses.
INCOME TAXES
PTC's income tax expense was affected primarily by the level of pre-tax
income. As income increased, tax expense did as well. Tax expense for 1996
increased $364,000 over 1995. PTC can and does purchase tax-free investments and
originates tax-free loans as a means of generating tax-free income, effectively
mitigating tax expense.
ASSET AND LIABILITY MANAGEMENT
PTC engages in a formal process of measuring and defining the amount of
interest rate risk. Interest rate risk is the effect on net interest income
resulting from changes in interest rates. The goal of the asset and liability
management process is to maintain a high, yet stable, net interest margin by
identifying the degree of interest rate risk and developing tactics and
strategies to mitigate the extent to which net interest income will be affected
by changes in interest rates.
The following table illustrates the repricing opportunities, or "rate
sensitivity" of interest-earning assets and interest bearing liabilities. A
repricing may occur if the rate on the asset or liability changes as interest
rates change, or, when the rate is fixed, at the time they mature. The "gap" is
the difference between rate sensitive assets and rate sensitive liabilities
within a specific time frame. Gap is considered an indicator of the effect a
change in interest may have on net interest income.
As of December 31, 1996, PTC's rate-sensitive liabilities exceeded
rate-sensitive assets through one year. This would indicate that if rates
increase, net interest income may decrease. In order to determine accurately the
effect of changes in interest rates, the repricing effect of each type of
interest-earning asset and interest-bearing liability must be measured. Assets
and liabilities have different characteristics and the magnitude of change
differs for each. Management continually monitors the changes to net interest
income which may result from changing interest rates.
62
<PAGE>
INTEREST RATE SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
4-12 1-5 AFTER NON-INTEREST
0-3 MONTHS MONTHS YEARS 5 YEARS BEARING TOTAL
---------- ---------- --------- --------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Cash and due from banks.......................... $ 10,772 $ 2,213 $ 12,985
Federal funds sold............................... 13,200 13,200
Interest bearing balances with financial
institutions................................... $ 898 $ 999 1,897
Securities....................................... 3,460 5,538 46,828 $ 7,768 63,594
Loans............................................ 40,103 100,731 36,897 17,337 1,895 196,963
Allowance for loan losses........................ (2,000) (2,000)
Other assets..................................... 9,936 9,936
---------- ---------- --------- --------- ----------- ----------
Total assets................................... 67,535 107,167 84,724 25,105 12,044 $ 296,575
---------- ---------- --------- --------- ----------- ----------
----------
Non-interest-bearing deposits.................... $ 32,350 $ 32,350
Passbook savings................................. $ 30,114 30,114
Interest bearing deposits........................ $ 57,654 -- 57,654
CD's >100M....................................... 9,232 12,330 $ 7,388 28,950
CD's >100M....................................... 22,296 47,173 39,924 $ 12 109,405
IRA's............................................ 2,115 3,369 7,169 12,653
Note payable..................................... 500 500
Other liabilities................................ 3,296 3,296
Capital.......................................... 21,653 21,653
---------- ---------- --------- --------- ----------- ----------
Total liabilities.............................. 91,797 92,986 54,481 12 57,299 $ 296,575
---------- ---------- --------- --------- ----------- ----------
----------
Periodic gap....................................... $ (24,262) $ 14,181 $ 30,243 $ 25,093 $ (45,255)
---------- ---------- --------- --------- -----------
---------- ---------- --------- --------- -----------
Cumulative gap..................................... $ (24,262) $ (10,081) $ 20,162 $ 45,255
---------- ---------- --------- ---------
---------- ---------- --------- ---------
</TABLE>
A significant assumption that creates the large negative gap in the 0 to 3
month category is that all interest-bearing demand accounts are subject to
immediate repricing. While it is true that contractually, those accounts are
subject to immediate repricing, the rates paid on those accounts are not
generally tied to specific indices and are influenced by market conditions and
other factors. Accordingly, a general movement in interest rates, either up or
down, may not have any immediate effect on the rates paid on these deposit
accounts. The foregoing table illustrates only one source of information about
sensitivity to interest rate movements. The core of PTC's asset and liability
management process consists of simulations that take into account the time that
various assets and liabilities may reprice and the degree to which various
categories of such assets and liabilities will respond to general interest rate
movements. Interest rate risk can only be represented by a measurement of the
effects of changing interest rates given the capacity for, and magnitude of,
change of specific assets and liabilities.
LIQUIDITY
Liquidity refers to the availability of funds to meet deposit withdrawals,
fund loan commitments and pay expenses. During 1996, PTC's loan portfolio
increased to $197,000,000 at December 31, 1996 from $173,000,000 at December 31,
1995, an increase of $24,000,000 or 13.7%. Increases in deposits provided one
source of funding for loan growth in 1996. Average deposits increased
$20,000,000 (10%) between 1995 and 1996. Additional funding for loan growth was
provided through sales and maturities of securities.
63
<PAGE>
A common measure of liquidity is the loan to deposit ratio. As of December
31, PTC had a loan to deposit ratio of 72.6% in 1996, and 71.7% in 1995.
Increasing this ratio was an important goal for PTC's management during 1996,
and significantly added to PTC's profitability.
Loan commitments include unfunded portions of lines of credit and commercial
letters of credit. These unfunded commitments may or may not require funding. At
December 31, 1996 and 1995, such commitments totaled $29,000,000 and
$18,000,000, respectively. Loan commitments generate fee income for PTC.
LOAN QUALITY
PTC has maintained a high level of quality in the loan portfolio.
Non-performing loans are those loans which are past due more than 90 days and
still accruing interest and those loans on which PTC no longer accrues interest.
As of December 31, 1996 and 1995, non-performing loans totaled $1,828,000 and
$1,464,000, respectively. As a percent of total loans, non-performing loans were
0.93% at December 31, 1996 and 0.84% at December 31, 1995.
The provision for loan losses is a charge to earnings to provide for
potential loan losses. The provision for loan losses was $828,000 in 1996 and
$740,000 in 1995. Coverage of potential loan losses is provided by the allowance
for loan losses. The adequacy of the allowance for loan losses is evaluated at
least quarterly by the credit review function and management based upon a review
of identified loans with more than a normal degree of risk, historical loss
percentages, and present and forecasted economic conditions affecting borrowers.
At December 31, the allowance for loan losses was $2,000,000 for 1996 and
$1,722,000 for 1995. As a percent of total loans, the allowance for loan losses
was 1.02% and 0.99% at those points in time. Management's analysis indicates
that the allowance for loan losses at December 31, 1996, was adequate to cover
potential losses on identified loans with credit problems and on the remaining
portfolio. Contained within the general allowance for loan loss specific
allocations can be made if management can determine a loss. In the case of loans
to a bankrupt commercial borrower, management had specifically reserved
$475,000.
Gross loan chargeoffs in 1996 and 1995 were $726,000 and $855,000,
respectively. As a percentage of average loans, gross loan chargeoffs were 0.39%
and 0.51% for those periods.
Effective January 1, 1995, PTC was required to adopt SFAS No. 114 which
required recognition of loan impairment. Loans are considered impaired if full
principal or interest payments are not anticipated. Impaired loans are carried
at the present value of expected cash flows discounted at the loan's effective
interest rate or at the fair value of the collateral if the loan is collateral
dependent. A portion of the allowance for loan losses is allocated to impaired
loans. PTC's average investment in impaired loans during 1996 was $844,000. At
December 31, 1996, $1,300,000 of loans were deemed to be impaired and $475,000
of the allowance for loan losses was allocated to those loans. At December 31,
1995, impaired loans were $129,000. The large increase in impaired loans was
related to loans to Bennett Funding.
CAPITAL
In June, 1994, PTC completed a rights offering of its common shares at
$25.00 per share ($15.50 per share when adjusted for a subsequent stock split
and stock dividend). The net proceeds after commissions and expenses from the
sale of 60,000 shares were approximately $1,453,000. This rights offering
included options which were exercised in January 1996, resulting in the issuance
of 28,449 shares for a total of $485,000 at $17.05 per share ($15.50 when
adjusted for a subsequent stock dividend). In April, 1996, PTC repurchased
22,634 shares at a market price of $30 per share ($27.27 when adjusted for a
subsequent stock dividend).
Both PTC and People's Trust are required to comply with capital requirements
promulgated by their primary regulators. Those regulations require the
maintenance of specified levels of capital to total assets
64
<PAGE>
(the leverage ratio) and to risk-weighted assets (the risk-based capital ratio).
These regulations require maintaining a leverage ratio of at least 5% for
"well-capitalized" entities and a total risk-based capital ratio of at least
10%.
PTC and People's Trust were in full compliance with all regulatory capital
requirements at December 31, 1996. The following table indicates PTC's actual
capital levels at the dates indicated.
REGULATORY CAPITAL REQUIREMENTS
<TABLE>
<CAPTION>
MINIMUM REQUIRED
TO BE WELL-
CAPITALIZED
MINIMUM REQUIRED UNDER PROMPT
FOR CAPITAL CORRECTIVE
ADEQUACY PURPOSES ACTION REGULATIONS
ACTUAL
-------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
--------- --------- --------- ----- --------- -----
(DOLLARS IN THOUSANDS)
Total capital (to
risk-weighted assets)
PTC.................... $ 21,836 11.60% $ 15,055 8.0% $ 18,819 10.0%
People's Trust......... 21,487 11.46 14,995 8.0 18,744 10.0
Tier 1 capital (to
risk-weighted assets)
PTC.................... 19,836 10.54 7,528 4.0 11,291 6.0
People's Trust......... 19,487 10.40 7,498 4.0 11,246 6.0
Tier 1 capital (to
average assets)
PTC.................... 19,836 6.73 11,795 4.0 14,744 5.0
People's Trust......... 19,487 6.63 11,753 4.0 14,692 5.0
</TABLE>
PTC and People's Trust at year-end 1996 were categorized as
well-capitalized.
SELECTED FINANCIAL RATIOS
The following table indicates certain key financial ratios for PTC for the
years indicated:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Return on assets............................................................. 1.21% 1.18%
Return on equity............................................................. 16.05 16.48
Dividend payout ratio........................................................ 21 19
Equity to assets ratio....................................................... 7.55 7.14
</TABLE>
NEW ACCOUNTING PRONOUNCEMENTS
SFAS No. 125 was issued by the FASB in 1996. It revises the accounting for
transfers of financial assets, such as loans and securities, and for
distinguishing between sales and secured borrowings. It is effective for some
transactions in 1997 and others in 1998. The effect on the financial statements
of PTC and People's Trust is not expected to be material.
65
<PAGE>
PRINCIPAL HOLDERS OF PTC COMMON STOCK AND
OWNERSHIP OF MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of the Record Date the persons known by
PTC to own beneficially (as determined in accordance with the rules and
regulations of the Commission) more than 5% of the outstanding PTC Common Stock.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED PERCENTAGE
- --------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Robert S. Dunevant 216,935 21.1%
3402 N. Dearborn Road
West Harrison, IN 47060
Dale J. Deffner 65,566 6.4%
11013 Lakeside Terrace
Brookville, IN 47012
</TABLE>
- ------------------------
(1) Beneficial ownership as reported in the above table has been determined in
accordance with Rule 13d-3 under the Exchange Act. Unless otherwise
indicated, beneficial ownership includes both sole or shared voting power
and sole or shared investment power.
SECURITY OWNERSHIP OF MANAGEMENT
PTC MANAGEMENT. The following table sets forth as of the Record Date
information concerning PTC Common Stock that each director of PTC (other than
Messrs. Dunevant and Deffner), and all current directors and executive officers
of PTC as a group, may be deemed to beneficially own. Information about the
beneficial ownership of PTC Common Stock by Messrs. Dunevant and Deffner is
provided in the immediately preceding table concerning persons beneficially
owning more than 5% of the outstanding PTC Common Stock.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME OWNED(1) PERCENTAGE
- --------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
John E. Back......................................................... 30,833 3.0%
James L. Saner....................................................... 20,789 2.0%
Dale E. Smith........................................................ 32,436 3.2%
Directors and executive officers as a group (five persons)........... 366,559 35.7%
</TABLE>
- ------------------------
(1) Beneficial ownership as reported in the above table has been determined in
accordance with Rule 13d-3 under the Exchange Act. Unless otherwise
indicated, beneficial ownership includes both sole or shared voting power
and sole or shared investment power.
IUB MANAGEMENT. No current director or executive officer of IUB
beneficially owns any outstanding PTC Common Stock.
DISSENTERS' RIGHTS
The following discussion is not a complete statement of the law pertaining
to dissenters' rights under Chapter 44 of the IBCL and is qualified in its
entirety by the full text of Chapter 44 which is reprinted in its entirety as
Annex D to this Proxy Statement/Prospectus.
66
<PAGE>
Under Chapter 44 of the IBCL, record holders or beneficial owners of PTC
Common Stock who do not vote in favor of the Merger and who otherwise comply
with the procedures set forth in Chapter 44 may obtain, in lieu of shares of IUB
Common Stock to which they otherwise would be entitled under the Merger
Agreement, cash equal to the "fair value" of their shares of PTC Common Stock.
PTC management has not attempted to determine the "fair value" of shares of PTC
Common Stock under the IBCL. However, because "fair value" under the IBCL
generally excludes appreciation in anticipation of the corporate action giving
rise to the dissenters' rights, PTC management believes that the per share value
of the consideration to be received by PTC shareholders in the Merger will be
greater than the "fair value" per share of PTC Common Stock under the IBCL.
Under Chapter 44, where a merger is to be submitted for approval at a
meeting of shareholders, as in the case of the PTC Special Meeting, the
corporation, prior to the meeting, must notify each of its shareholders entitled
to dissenters' rights that such dissenters' rights are available and include in
such notice a copy of Chapter 44. This Proxy Statement/Prospectus shall
constitute such notice to the holders of shares of PTC Common Stock and the
applicable statutory provisions of the IBCL are attached to this Proxy
Statement/Prospectus as Annex D. Any PTC shareholder who wishes to exercise such
dissenters' rights or who wishes to preserve his right to do so should review
the following discussion and Annex D carefully because failure to timely and
properly comply with the procedures specified will result in the loss of
dissenters' rights under the IBCL.
In order to qualify for dissenters' rights, a PTC shareholder:
(a) must file a written notice of intention to demand payment of fair
value with PTC prior to the commencement of voting on the Merger; and
(b) must not vote for approval of the Merger Agreement.
Record holders of shares of PTC Common Stock may assert dissenters' rights
as to fewer than all of the shares registered in such holder's name only if such
holder dissents with respect to all shares beneficially owned by any one person.
In such event, the record holder shall disclose the name and address of each
beneficial owner on whose behalf such holder dissents and thereafter such shares
shall be considered as if registered in the name of the beneficial owner.
A beneficial owner of shares (who is not the record holder) may assert
dissenters' rights and shall be treated as a dissenting shareholder if such
beneficial owner submits to PTC, not later than the time for assertion of
dissenters' rights, the written consent of the record holder. A beneficial owner
may not dissent with respect to less than all of the shares that such beneficial
owner owns or those shares over which the beneficial owner has the right to
vote, whether or not such shares are registered in such beneficial owner's name.
A shareholder who elects to exercise dissenters' rights should mail or
deliver a written notice of intention to demand payment to PTC at Reservoir Hill
Road, 9014 State Road 101, P.O. Box 7, Brookville, Indiana 47012 Attn:
Secretary, or may deliver such written notice of intention to the Secretary at
the PTC Special Meeting prior to the vote on approval of the Merger Agreement. A
vote against approval of the Merger Agreement, whether in person or by proxy, is
not sufficient to constitute the written objection required to assert
dissenters' rights. A proxy that does not specify a vote will be voted in favor
of approval of the Merger Agreement. A shareholder who returns and does not
revoke a proxy that does not include voting instructions will be deemed to have
voted to approve the Merger Agreement and to have waived all dissenters' rights.
If the Merger Agreement is approved, PTC will send a dissenters' notice
thereof to each dissenter who gave proper notice of intention to demand payment
and who refrained from voting in favor of the Merger Agreement. In such
dissenters' notice, PTC shall state where and when (not less than 30 days after
mailing of the notice) the dissenting shareholder must make a formal demand for
payment (on a form supplied by PTC) and the certificates for PTC Common Stock
must be deposited. A PTC shareholder sent a dissenters'
67
<PAGE>
notice must demand payment, certify whether the shareholder acquired beneficial
ownership of the shares before the date of the first announcement to the news
media or to shareholders of the terms of the Merger (October 9, 1997) and
deposit his certificates in accordance with the terms of the dissenters' notice.
Promptly after the Effective Time of the Merger, PTC must remit to
dissenters who have made demand and have deposited their certificates the amount
which PTC estimates to be the fair value of the shares. Such remittance shall be
accompanied by (i) a balance sheet, a statement of income and a statement of
changes in shareholders' equity of PTC for a fiscal year ending not more than 16
months before the date of payment together with the latest available interim
statements, (ii) a statement of PTC's estimate of the fair value of the shares,
and (iii) a notice of the right of dissenters to demand supplemental payment.
Alternatively, PTC may give written notice that no remittance will be made in
which event PTC will return any certificates delivered pending final payment.
PTC may elect to withhold payment from a dissenter unless the dissenter was the
beneficial owner of the shares before October 9, 1997.
A dissenter who believes that the amount stated or remitted is less than the
fair value of such dissenter's shares may prepare and send to PTC an estimate of
the fair value of the shares, which shall be deemed a demand for payment of that
amount or the deficiency from the remittance made, provided that if PTC has
remitted payment of its estimated value and a dissenter does not file an
estimate within 30 days after mailing of the remittance, such dissenter shall be
entitled to no more than the amount remitted to such dissenter by PTC.
Within 60 days after the timely receipt of demands for payment, if any
demand for payment remains unsettled, PTC may commence a proceeding in the
circuit or superior court for Franklin County, Indiana requesting that the fair
value of the shares be determined. All dissenters whose demands have not been
settled shall be made party to such proceedings and a copy of the petition shall
be served on each such dissenter. If PTC fails to commence such a proceeding
within the 60-day period, it must pay each dissenter whose demand remains
unsettled the amount demanded.
The court may appoint one or more persons as appraisers to receive evidence
and recommend a decision on the question of fair value. Each dissenter made a
party to the proceeding is entitled to judgment for the amount, if any, by which
the court finds the fair value of the dissenter's shares, plus interest, exceeds
the amount previously paid by PTC; or the fair value, plus accrued interest, of
the dissenter's shares acquired after October 9, 1997 for which PTC has elected
to withhold payment. "Fair value", with respect to a dissenter's shares, means
the value of the shares immediately before the effective date of the Merger,
excluding any appreciation or depreciation in anticipation of the Merger unless
exclusion would be inequitable. Interest is payable from the effective date of
the Merger until the date of payment, at the average rate currently paid by PTC
on its principal bank loans or, if none, at a rate that is "fair and equitable"
under all circumstances.
The costs of the action may be determined by the court and taxed upon the
parties as the court deems equitable. The court may also order that all or a
portion of the expenses incurred by any shareholder in connection with an
appraisal, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts utilized in the appraisal proceeding, be charged
pro rata against the value of all of the shares of PTC Common Stock entitled to
appraisal.
PTC shareholders considering asserting dissenters' rights should be aware
that the fair value of their shares of PTC Common Stock as determined under
Chapter 44 could be more than, the same as or less than the consideration they
would receive pursuant to the Merger Agreement if they did not assert
dissenters' rights, and that investment banking opinions as to fairness from a
financial point of view are not necessarily opinions as to fair value under
Chapter 44.
Any holder of shares of PTC Common Stock who has duly exercised his
dissenters' rights in compliance with the IBCL will not, after the effective
date of the Merger, be entitled to vote the shares of PTC Common Stock subject
to such demand for any purpose or be entitled to the payment of dividends or
68
<PAGE>
other distributions on those shares (except dividends or other distributions
payable to holders of record of shares of PTC Common Stock as of a date prior to
the effective date of the Merger).
Failure to follow the steps required by Chapter 44 of the IBCL for
perfecting appraisal rights may result in the loss of such rights (in which
event a shareholder will be entitled to receive 1.075 shares of IUB Common Stock
for each share of PTC Common Stock owned by him).
EXPERTS
The consolidated financial statements of IUB as of December 31, 1996 and
1995, and for each of the years in the three year period ended December 31,
1996, incorporated by reference in this Proxy Statement/Prospectus, have been
audited by Geo. S. Olive & Co. LLC, independent accountants, to the extent and
for the periods set forth in its report appearing elsewhere herein. The
consolidated financial statements of IUB are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as an expert in
auditing and accounting.
The consolidated financial statements of PTC as of December 31, 1996 and
1995, and for each of the years in the two year period ended December 31, 1996,
included in this Proxy Statement/ Prospectus, have been audited by Crowe, Chizek
and Company LLP, independent accountants, to the extent and for the periods set
forth in its report appearing elsewhere herein. The consolidated financial
statements of PTC are included herein in reliance upon such report given upon
the authority of such firm as an expert in auditing and accounting.
LEGAL MATTERS
The legality of the shares of IUB Common Stock being offered hereby will be
passed upon for IUB by David W. Harper, Esq., Louisville, Kentucky.
OTHER MATTERS
Under the IBCL, no other business may be presented at the Special Meetings
other than as set forth herein and in the accompanying Notice of Special
Meetings.
69
<PAGE>
INDEX TO PTC CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PTC UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Interim Consolidated Balance Sheets as of September 30, 1997 (unaudited) and December
31, 1996............................................................................ F-2
Interim Consolidated Statements of Income for the nine months ended September 30,
1997 and 1996 (unaudited)........................................................... F-3
Interim Consolidated Statements of Cash Flows for the nine months ended September 30,
1997 and 1996 (unaudited)........................................................... F-4
Interim Consolidated Statements of Changes in Shareholders' Equity for the nine
months ended September 30, 1997 and 1996 (unaudited)................................ F-5
Notes to Interim Consolidated Financial Statements (unaudited)....................... F-6
PTC AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditor's Report......................................................... F-7
Consolidated Balance Sheets as of December 31, 1996 and 1995......................... F-8
Consolidated Statements of Income for each of the years ended December 31, 1996 and
1995................................................................................ F-9
Consolidated Statements of Cash Flows for each of the years ended December 31, 1996
and 1995............................................................................ F-10
Consolidated Statements of Changes in Shareholders' Equity for each of the years
ended December 31, 1996 and 1995.................................................... F-11
Notes to Consolidated Financial Statements........................................... F-12
</TABLE>
F-1
<PAGE>
PTC INTERIM CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1996
SEPTEMBER 30, ------------
1997
-------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................................... $ 18,281 $ 26,185
Interest-bearing balances with financial institutions............................... 1,398 1,897
Available-for-sale securities....................................................... 28,132 38,376
Held-to-maturity securities......................................................... 25,761 25,218
Total loans......................................................................... 220,653 196,963
Less: Allowances for loan losses................................................ (1,969) (2,000)
------------- ------------
Net loans.................................................................. 218,684 194,963
Premises and equipment, net......................................................... 3,939 3,512
Accrued interest receivable and other assets........................................ 6,539 6,425
------------- ------------
Total assets.................................................................... $ 302,734 $ 296,576
------------- ------------
------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits........................................................................ $ 275,679 $ 271,127
Notes payable................................................................... 250 500
Accrued interest payable and other liabilities.................................. 3,065 3,296
------------- ------------
Total liabilities............................................................. 278,994 274,923
Shareholders' equity
Common Stock.................................................................... 1,026 1,024
Additional paid-in capital...................................................... 10,439 10,413
Retained earnings............................................................... 12,109 10,018
Net unrealized gain or loss on available-for-sale securities.................... 166 198
------------- ------------
Total shareholders' equity.................................................... 23,740 21,653
------------- ------------
Total liabilities and shareholders' equity.................................... $ 302,734 $ 296,576
------------- ------------
------------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
PTC INTERIM CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans................................. $5,017 $4,312 $14,316 $12,648
Interest on securities..................................... 836 946 2,639 2,696
Other interest............................................. 62 135 279 460
---------- ---------- ---------- ----------
Total interest income.................................... 5,915 5,393 17,234 15,804
INTEREST EXPENSE
Interest on deposits....................................... 2,976 2,752 8,653 8,074
Interest on notes payable.................................. 9 13 26 47
---------- ---------- ---------- ----------
Total interest expense................................... 2,985 2,765 8,679 8,121
---------- ---------- ---------- ----------
Net interest income.......................................... 2,930 2,628 8,555 7,683
Provision for loan losses.................................. (210) (227) (610) (616)
---------- ---------- ---------- ----------
Net interest income after provision for loan losses.......... 2,720 2,401 7,945 7,067
NON-INTEREST INCOME
Service charges and fees on deposit accounts............... 331 299 944 887
Mortgage banking income.................................... 360 257 766 577
Gain (loss) on securities.................................. 8 4 8 103
Other income............................................... 48 49 142 195
---------- ---------- ---------- ----------
Total non-interest income................................ 747 609 1,860 1,762
NON-INTEREST EXPENSE
Salaries and benefits...................................... 1,156 1,045 3,346 3,117
Occupancy and equipment, net............................... 306 230 895 682
FDIC insurance............................................. 7 1 22 2
Data processing expense.................................... 98 88 289 266
Other operating expenses................................... 509 437 1,366 1,205
---------- ---------- ---------- ----------
Total non-interest expense............................... 2,076 1,801 5,918 5,272
---------- ---------- ---------- ----------
Income before income taxes................................... 1,391 1,209 3,887 3,557
Less: income taxes....................................... (429) (363) (1,185) (1,166)
---------- ---------- ---------- ----------
Net income................................................... $ 962 $ 846 $ 2,702 $ 2,391
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings per share........................................... $ .94 $ .82 $ 2.64 $ 2.31
Average shares outstanding................................... 1,025,102 1,032,129 1,024,629 1,034,244
Dividends per share.......................................... $ .205 $ .165 $ .595 $ .475
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PTC INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.............................................................. $ 2,702 $ 2,391
Adjustments to reconcile net income to net cash from operating
activities
Depreciation.......................................................... 367 274
Provision for loan losses............................................. 610 616
(Gain)/loss on sale of securities..................................... (8) (103)
Amortization of intangible assets..................................... 173 164
Other adjustments..................................................... (342) (787)
------- -------
Net cash from operating activities.................................. 3,502 2,555
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from paydowns and maturities of held-to-maturity securities.... 2,873 5,470
Proceeds from sales of available-for-sale securities.................... 4,506 3,381
Proceeds from paydowns and maturities of available-for-sale
securities............................................................ 7,728 12,874
Purchases of held-to-maturity securities................................ (3,416) (11,774)
Purchases of available-for-sale securities.............................. (1,982) (17,116)
Net change in loans..................................................... (24,300) (16,207)
Net change in deposits with other financial institutions................ 499 294
Property and equipment expenditures..................................... (794) (616)
------- -------
Net cash from investing activities.................................... (14,886) (23,694)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits.................................................. (2,236) 6,907
Deposits assumed in branch acquisition, net of premium paid............. 6,548 --
Dividends paid.......................................................... (610) (490)
Payments on note payable................................................ (250) (392)
Proceeds from issuance of stock......................................... 28 485
Redemption of stock..................................................... -- (620)
------- -------
Net cash from financing activities.................................... 3,480 5,890
------- -------
Net change in cash and cash equivalents................................... (7,904) (15,249)
Cash and cash equivalents at beginning of period.......................... 26,185 24,474
------- -------
Cash and cash equivalents at end of period................................ $ 18,281 $ 9,225
------- -------
------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PTC INTERIM CONSOLIDATED STATEMENTS OF CHANGE IN
SHAREHOLDERS' EQUITY
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ------------------
<S> <C> <C>
Balance January 1......................................................... $ 21,653 $ 19,218
Net income................................................................ 2,702 2,391
Issuance of stock......................................................... 28 485
Redemption of stock....................................................... -- (620)
Cash dividends paid....................................................... (610) (490)
Change in net unrealized gain or loss on available-for-sale securities.... (33) (231)
------- -------
Balance September 30...................................................... $ 23,740 $ 20,753
------- -------
------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PTC NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--BASIS OF PRESENTATION
The consolidated financial statements include the accounts of PTC Bancorp
(the "Company") and its wholly owned subsidiary, Peoples Trust Company (the
"Bank"). All significant intercompany accounts and transactions have been
eliminated.
These financial statements were prepared in accordance with the instructions
for Form 10-QSB and, therefore, do not include all of the disclosures necessary
for a complete presentation of financial position, results of operations and
cash flows in conformity with generally accepted accounting principles. These
financial statements have been prepared on a basis consistent with the annual
financial statements and include, in the opinion of management, all adjustments,
consisting of only normal recurring adjustments, necessary for a fair
presentation of the results of operations and financial position at the end of
and for the periods presented.
NOTE 2--PENDING ACCOUNTING CHANGES
The Company does not expect the anticipated adoption of any newly issued
accounting standards to have a material impact on future operations or financial
position.
NOTE 3--EARNINGS PER SHARE
Earnings per share have been computed based upon the weighted average number
of shares outstanding during the periods presented, adjusted for any stock
dividends. Common stock equivalents are not materially dilutive.
NOTE 4--PENDING BUSINESS COMBINATION
On October 8, 1997, the Company agreed to merge with Indiana United Bancorp
("IUB"). IUB is a bank and thrift holding company located in Greensburg,
Indiana. Under terms of the agreement, each outstanding common share of PTC
Bancorp, including shares outstanding under option plans, will be converted into
1.075 common shares of IUB. The proposed transaction requires approval by
regulatory authorities and shareholders of both companies. The proposed
transaction is expected to be consummated during the first quarter of 1998. It
is expected to be accounted for as a pooling-of-interests.
F-6
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
P.T.C. Bancorp
Brookville, Indiana
We have audited the accompanying consolidated balance sheets of P.T.C.
Bancorp as of December 31, 1996 and 1995, and the related consolidated
statements of income, cash flows, and changes in shareholders' equity for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of P.T.C.
Bancorp as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
Crowe, Chizek and Company LLP
Indianapolis, Indiana
January 23, 1997
F-7
<PAGE>
P.T.C. BANCORP
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Cash and cash equivalents....................................................... $ 26,185,347 $ 24,474,107
Interest bearing balances with financial institutions.......................... 1,897,000 2,386,369
Securities available for sale, at fair value................................... 38,375,826 38,426,368
Securities held to maturity.................................................... 25,218,575 19,500,690
Loans, net of deferred loan fees............................................... 196,963,140 173,178,986
Allowance for loan losses...................................................... (2,000,324) (1,721,947)
-------------- --------------
Net loans.................................................................... 194,962,816 171,457,039
Premises and equipment, net.................................................... 3,511,742 3,066,738
Intangible assets.............................................................. 1,619,480 1,838,483
Accrued interest receivable and other assets................................... 4,805,212 3,561,956
-------------- --------------
Total assets............................................................. $ 296,575,998 $ 264,711,750
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing deposits.............................................. $ 32,349,585 $ 19,752,746
Interest bearing deposits.................................................. 238,777,267 221,981,686
-------------- --------------
Total deposits........................................................... 271,126,852 241,734,432
Notes payable................................................................ 500,000 1,000,000
Accrued interest payable and other liabilities............................... 3,295,811 2,759,219
-------------- --------------
Total liabilities........................................................ 274,922,663 245,493,651
-------------- --------------
Commitments and contingencies
Shareholders' equity
Preferred stock, no par value; 1,000,000 shares authorized, no shares issued
and outstanding
Common stock, $1 stated value: 2,000,000 shares authorized, 1,024,276 and
924,069 shares issued and outstanding...................................... 1,024,276 924,069
Additional paid-in capital................................................... 10,413,146 7,908,794
Retained earnings............................................................ 10,017,584 10,208,434
Unrealized gain on securities available for sale, net........................ 198,329 176,802
-------------- --------------
Total shareholders' equity............................................... 21,653,335 19,218,099
-------------- --------------
Total liabilities and shareholders' equity............................... $ 296,575,998 $ 264,711,750
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE>
P.T.C. BANCORP
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans....................................................... $ 17,125,228 $ 15,446,482
Interest on investment securities
Taxable........................................................................ 2,440,146 2,497,641
Non-taxable.................................................................... 1,190,681 940,240
Interest on balances with financial institutions................................. 129,627 62,347
Interest on federal funds sold................................................... 433,394 473,399
------------- -------------
Total interest income...................................................... 21,319,076 19,420,109
INTEREST EXPENSE
Interest on deposits............................................................. 10,837,329 9,733,562
Interest on notes payable........................................................ 59,968 101,717
------------- -------------
Total interest expense..................................................... 10,897,297 9,835,279
------------- -------------
NET INTEREST INCOME................................................................ 10,421,779 9,584,830
Provision for loan losses........................................................ 828,000 740,000
------------- -------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES........................ 9,593,779 8,844,830
NON-INTEREST INCOME
Service charges on deposit accounts.............................................. 1,198,556 1,192,275
Mortgage banking income.......................................................... 795,208 446,859
Securities gains/(losses)........................................................ 103,650 (76,367)
Travel commission income......................................................... 66,249 177,906
Other income..................................................................... 185,480 161,004
------------- -------------
Total non-interest income.................................................. 2,349,143 1,901,677
NON-INTEREST EXPENSES
Salaries and employee benefits................................................... 4,136,754 3,724,693
Occupancy and equipment expense.................................................. 832,571 763,126
Data processing expense.......................................................... 372,441 349,613
FDIC assessment.................................................................. 2,000 250,796
Other operating expenses......................................................... 1,759,694 1,551,058
------------- -------------
Total non-interest expense................................................. 7,103,460 6,639,286
------------- -------------
INCOME BEFORE INCOME TAXES......................................................... 4,839,462 4,107,221
Provision for income taxes....................................................... 1,563,693 1,199,964
------------- -------------
NET INCOME......................................................................... $ 3,275,769 $ 2,907,257
------------- -------------
------------- -------------
Net income per share............................................................... $ 3.17 $ 2.86
------------- -------------
------------- -------------
Weighted average common shares outstanding......................................... 1,031,922 1,016,476
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to financial statements.
F-9
<PAGE>
P.T.C. BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................................................... $ 3,275,769 $ 2,907,257
Adjustments to reconcile net income to net cash from operating activities:
Depreciation................................................................. 282,456 294,920
Provision for loan losses.................................................... 828,000 740,000
(Gain)/loss on sale of securities............................................ (103,650) 76,367
Amortization of intangible assets............................................ 219,003 230,006
Change in accrued interest receivable and other assets....................... (1,257,376) 17,776
Net amortization/(accretion) on securities................................... 115,337 (86,123)
Change in accrued interest payable and other liabilities..................... 536,591 655,718
-------------- --------------
Net cash from operating activities....................................... 3,896,130 4,835,921
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment expenditures............................................ (727,460) (633,368)
Loans made to customers and principal collections thereon...................... (24,333,777) (14,701,975)
Proceeds from sales, maturities, and principal paydowns of securities available
for sale..................................................................... 17,658,091 21,903,216
Proceeds from maturities and principal paydowns of securities held to
maturity..................................................................... 7,121,140 5,514,261
Purchases of securities available for sale..................................... (17,615,607) (20,898,559)
Purchases of securities held to maturity....................................... (12,807,006) (6,712,188)
Net change in deposits with other financial institutions....................... 489,369 (1,102,398)
-------------- --------------
Net cash from investing activities....................................... (30,215,250) (16,631,011)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposit accounts................................................. 29,392,420 19,435,429
Payments on note payable....................................................... (500,000) (407,500)
Dividends paid................................................................. (678,929) (542,520)
Redemption of shares of stock.................................................. (689,590) --
Proceeds from issuance of stock................................................ 506,459 --
-------------- --------------
Net cash from financing activities....................................... 28,030,360 18,485,409
-------------- --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS.......................................... 1,711,240 6,690,319
Cash and cash equivalents at beginning of year................................... 24,474,107 17,783,788
-------------- --------------
Cash and cash equivalents at end of year......................................... $ 26,185,347 $ 24,474,107
-------------- --------------
-------------- --------------
Cash paid during the period for:
Interest....................................................................... $ 10,879,210 $ 9,223,655
Income taxes................................................................... 1,721,825 1,224,500
</TABLE>
See accompanying notes to financial statements.
F-10
<PAGE>
P.T.C. BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
UNREALIZED
GAIN/(LOSS)
ON
ADDITIONAL SECURITIES TOTAL
COMMON PAID-IN RETAINED TREASURY AVAILABLE SHAREHOLDERS'
STOCK CAPITAL EARNINGS STOCK FOR SALE EQUITY
------------ ------------- ------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1995.......... $ 857,627 $ 6,155,621 $ 9,868,073 $ (204,761) $ (909,344) $ 15,767,216
Net income......................... 2,907,257 2,907,257
Cash dividends ($.53 per share).... (542,520) (542,520)
Cancellation of treasury shares.... (17,907) (186,854) 204,761 --
10% stock dividend (Note 1)........ 84,349 1,940,027 (2,024,376) --
Change in unrealized gain/ (loss)
on securities.................... 1,086,146 1,086,146
------------ ------------- ------------- ----------- ------------ -------------
BALANCES AT DECEMBER 31, 1995........ 924,069 7,908,794 10,208,434 -- 176,802 19,218,099
Net income......................... 3,275,769 3,275,769
Cash dividends ($.66 per share).... (678,929) (678,929)
10% stock dividend (Note 1)........ 92,923 2,694,767 (2,787,690) --
Redemption of shares (22,634
shares).......................... (22,634) (666,956) (689,590)
Exercised stock options (1,469
shares).......................... 1,469 19,934 21,403
Issuance of shares to existing
shareholders (28,449 shares)..... 28,449 456,607 485,056
Change in unrealized gain/ (loss)
on securities.................... 21,527 21,527
------------ ------------- ------------- ----------- ------------ -------------
BALANCES AT DECEMBER 31, 1996........ $ 1,024,276 $ 10,413,146 $ 10,017,584 $ -- $ 198,329 $ 21,653,335
------------ ------------- ------------- ----------- ------------ -------------
------------ ------------- ------------- ----------- ------------ -------------
</TABLE>
See accompanying notes to financial statements.
F-11
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of P.T.C. Bancorp (Company) and its wholly-owned subsidiary, People's
Trust Company (Bank). All significant intercompany transactions have been
eliminated in consolidation.
DESCRIPTION OF BUSINESS: P.T.C. Bancorp generates mortgage, commercial, and
installment loans and receives deposits from customers located primarily in
southeastern Indiana. The majority of the Company's loans are secured by
specific items of collateral including business assets, consumer assets and real
property.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS: The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses.
Actual results could differ from those estimates. Estimates that are more
susceptible to change in the near term include the allowance for loan losses and
fair values of certain securities.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include cash on hand,
amounts due from banks and federal funds sold. Generally, federal funds are sold
for one-day periods. The Company reports net cash flows for customer loan
transactions, deposit transactions, and deposits made with other institutions.
SECURITIES: Securities are classified by management at date of purchase as
available for sale or held to maturity. Securities classified as available for
sale are securities that might be sold in response to changes in interest rates,
changes in prepayment risk, or other similar factors, and which are carried at
fair value. The unrealized gain/(loss) on securities available for sale is
reflected as a separate component of shareholders' equity, net of tax.
Securities classified as held to maturity are securities that the Company has
both the ability and positive intent to hold to maturity and are carried at
amortized cost (cost adjusted for amortization of premium or accretion of
discounts). Interest income on securities is recognized using the level yield
basis. Gains and losses on sales of securities are computed on a specific
identification basis.
LOANS HELD FOR SALE: During the normal course of business, the Company
originates certain mortgage loans for the purpose of selling them in certain
secondary markets. These loans are carried at the lower of aggregate cost or
market value.
LOANS: Loans are reported at the principal balance outstanding, net of
deferred loan fees and costs, the allowance for loan losses, and charge-offs.
Interest income is reported on the interest method and includes amortization of
net deferred loan fees and costs over the loan term.
Interest income is not reported when full loan repayment is in doubt,
typically when payments are past due over 90 days. Interest received on such
loans is recognized on the cash basis or reported as principal reductions.
ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses is a valuation
allowance, increased by the provision for loan losses and decreased by
charge-offs less recoveries. Management estimates the allowance balance required
based on past loan loss experience, known and inherent risks in the portfolio,
information about specific borrower situations and estimated collateral values,
economic conditions, and other factors. Allocations of the allowance may be made
for specific loans, but the entire allowance is available for any loan that, in
management's judgment, should be charged-off.
F-12
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loan impairment is reported when full payment under the loan terms is not
expected. Impairment is evaluated in total for smaller-balance loans of similar
nature such as residential mortgage, consumer, and credit card loans, and on an
individual loan basis for other loans. If a loan is impaired, a portion of the
allowance is allocated so that the loan is reported, net, at the present value
of estimated future cash flows using the loan's existing rate. Loans are
evaluated for impairment when payments are delayed, typically 90 days or more,
or when the internal grading system indicates a doubtful classification.
SERVICING RIGHTS: Upon adopting Financial Accounting Standard No. 122 at
the start of 1996, servicing rights represent the allocated value of servicing
rights retained on loans sold. Servicing rights are expensed in proportion to,
and over the period of, estimated net servicing revenues. Impairment is
evaluated based on the fair value of the rights, using groupings of the
underlying loans as to interest rates and term. Any impairment of a grouping is
reported as a valuation allowance.
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost, net of
accumulated depreciation. Depreciation is charged to operating expense over the
useful lives of assets and is computed on straight-line and accelerated methods.
Maintenance and repairs are charged to operations as incurred. Improvements are
capitalized and disposals are recorded in the year sold or abandoned.
INTANGIBLE ASSETS: Intangible assets consist of goodwill and core deposit
intangibles. Goodwill is being amortized on a straight-line method over fifteen
years. The core deposit is being amortized based on the estimated life of the
deposits assumed, which is ten years.
STOCK OPTIONS: Expenses for compensation under stock option plans is based
on APB Opinion 25, with expense reported only if options are granted below
market price at date of grant. Proforma disclosures of net income and earnings
per share as required by FASB Statement No. 123 are not presented, because the
fair value of options granted during 1996 and 1995 is not material.
INCOME TAXES: Deferred tax liabilities and assets are determined at each
balance sheet date. They are measured by applying enacted tax laws to future
amounts that will result from differences in the financial statement and tax
basis of assets and liabilities. Recognition of deferred tax assets is limited
by the establishment of a valuation reserve unless management concludes that
they are more likely than not going to result in future tax benefits to the
Company. Income tax expense is the amount paid for the current year income tax
liability plus or minus the change in deferred taxes.
EARNINGS PER SHARE: Earnings per share is based on the weighted average
common shares outstanding. The Company declared a 10 percent stock dividend in
November, 1995 and 1996. Earnings and dividend per share amounts have been
retroactively restated. Stock options are not materially dilutive for earnings
per share purposes.
F-13
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
NOTE 2 -- SECURITIES
The amortized cost and fair values of securities available for sale are as
follows at December 31:
<TABLE>
<CAPTION>
1996
------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
U.S. Treasury and government agency securities............. $ 30,066,088 $ 255,260 $ (42,771) $ 30,278,577
State and political subdivisions........................... 1,971,500 63,384 (338) 2,034,546
Mortgage-backed and other asset-backed securities.......... 2,582,657 46,082 (7,177) 2,621,562
Corporate debt securities.................................. 1,906,294 38,374 (24,399) 1,920,269
Equity securities.......................................... 1,520,872 -- -- 1,520,872
------------- ----------- ----------- -------------
Totals............................................... $ 38,047,411 $ 403,100 $ (74,685) $ 38,375,826
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
1995
------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
U.S. Treasury and government agency securities............. $ 27,892,354 $ 232,387 $ (51,533) $ 28,073,208
State and political subdivisions........................... 2,336,997 78,183 (4,562) 2,410,618
Mortgage-backed and other asset-backed securities.......... 2,782,970 50,560 (6,849) 2,826,682
Corporate debt securities.................................. 3,599,169 8,896 (14,315) 3,593,750
Equity securities.......................................... 1,522,110 -- -- 1,522,110
------------- ----------- ----------- -------------
Totals............................................... $ 38,133,600 $ 370,026 $ (77,259) $ 38,426,368
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
</TABLE>
F-14
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
NOTE 2 -- SECURITIES (CONTINUED)
The amortized cost and fair values of securities held to maturity are as follows
at December 31:
<TABLE>
<CAPTION>
1996
------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
U.S. Treasury and government agency securities $ 167,763 $ 29,632 $ -- $ 197,395
State and political subdivisions........................... 24,187,781 228,516 (50,568) 24,365,729
Mortgage-backed securities................................. 296,915 37,800 (223) 334,492
Other debt securities...................................... 566,116 94 (2,846) 563,364
------------- ----------- ----------- -------------
Totals............................................... $ 25,218,575 $ 296,042 $ (53,637) $ 25,460,980
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
1995
------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
U.S. Treasury and government agency securities............. $ 154,914 $ 41,972 $ -- $ 196,886
State and political subdivisions........................... 17,895,268 244,728 (32,592) 18,107,406
Mortgage-backed securities................................. 950,508 61,933 -- 1,012,441
Other debt securities...................................... 500,000 -- -- 500,000
------------- ----------- ----------- -------------
Totals............................................... $ 19,500,690 $ 348,633 $ (32,592) $ 19,816,733
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
</TABLE>
The amortized cost and fair value of securities at December 31, 1996, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
---------------------------- ----------------------------
AMORTIZED AMORTIZED
COST FAIR VALUE COST FAIR VALUE
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Due in one year or less............................. $ 5,061,467 $ 5,065,127 $ 3,411,075 $ 3,432,023
Due after one year through five years............... 27,210,079 27,418,423 18,374,449 18,492,951
Due after five years through ten years.............. 1,303,734 1,344,787 1,957,637 1,977,253
Due after ten years................................. 368,602 405,055 1,178,499 1,224,261
------------- ------------- ------------- -------------
Total fixed maturity debt securities................ 33,943,882 34,233,392 24,921,660 25,126,488
Mortgage-backed securities.......................... 2,582,657 2,621,562 296,915 334,492
Equity securities................................... 1,520,872 1,520,872 -- --
------------- ------------- ------------- -------------
$ 38,047,411 $ 38,375,826 $ 25,218,575 $ 25,460,980
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
Proceeds from sales of securities during 1996 and 1995 were $3,736,825 and
$3,573,149. Gross gains of $122,427 and gross losses of $18,777 were realized on
sales of available for sale securities in 1996. Gross gains of $8,408 and gross
losses of $84,775 were realized on sales of available for sale securities in
1995.
F-15
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
NOTE 2 -- SECURITIES (CONTINUED)
At December 31, 1996 and 1995, securities carried at $2,263,725 and
$5,773,900 were pledged to secure public deposits and for other purposes.
NOTE 3 -- LOANS
Loans are comprised of the following classifications:
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Real estate--residential......................................................... $ 74,433,000 $ 61,544,000
Real estate--commercial.......................................................... 43,370,000 36,140,000
Real estate construction......................................................... 13,650,000 9,583,000
Commercial....................................................................... 41,655,000 39,518,000
Consumer......................................................................... 21,325,000 23,723,000
Other............................................................................ 2,875,000 2,987,000
Deferred loan fees............................................................... (345,000) (316,000)
-------------- --------------
Total loans, net of deferred loan fees..................................... $ 196,963,000 $ 173,179,000
-------------- --------------
-------------- --------------
</TABLE>
Residential real estate loans include loans held for sale of $430,000 and
$2,117,000.
Mortgage loans serviced for others are not reported as assets. These loans
totaled $86,495,000 and $69,090,000 at year-end 1996 and 1995. At year-end 1996,
mortgage servicing rights were $225,000. Activity during 1996 included $258,000
of additions and amortization expense of $33,000. There was no valuation
allowance at year-end 1996.
NOTE 4 -- ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Beginning balance..................................................................... $ 1,721,947 $ 1,600,551
Provision for loan losses............................................................. 828,000 740,000
Losses charged to the allowance....................................................... (725,569) (855,690)
Recoveries credited to the allowance.................................................. 175,946 237,086
------------ ------------
Ending balance.................................................................. $ 2,000,324 $ 1,721,947
------------ ------------
------------ ------------
Impaired loans were as follows:
Year-end loans with no allowance for loan losses allocated............................ $ -- $ 128,797
Year-end loans with allowance for loan losses allocated............................... 1,300,000 --
Amount of the allowance allocated..................................................... 475,000 --
Average of impaired loans during the year............................................. 844,059 490,179
Interest income recognized during impairment.......................................... 27,756 --
Cash-basis interest income recognized................................................. 27,756 --
</TABLE>
F-16
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
NOTE 5 -- PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31 follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Land.................................................................................. $ 351,916 $ 351,916
Buildings and improvements............................................................ 3,738,630 3,418,627
Equipment and furniture............................................................... 2,481,732 2,090,435
------------ ------------
Total........................................................................... 6,572,278 5,860,978
Less accumulated depreciation......................................................... 3,060,536 2,794,240
------------ ------------
Total premises and equipment, net............................................... $ 3,511,742 $ 3,066,738
------------ ------------
------------ ------------
</TABLE>
NOTE 6 -- DEPOSITS
Certificates of deposits in denominations of $100,000 or more as of December
31, 1996 and 1995 were $28,948,860 and $24,318,073.
At year-end 1996, stated maturities of time deposits were:
<TABLE>
<S> <C>
1997.......................................................... $96,265,835
1998.......................................................... 36,673,139
1999.......................................................... 9,893,852
2000.......................................................... 6,163,774
2001.......................................................... 1,955,978
Thereafter.................................................... 29,172
-----------
$150,981,750
-----------
-----------
</TABLE>
NOTE 7 -- NOTES PAYABLE
The Company has a note payable maturing on December 31, 1998, which is
secured by 100% of the Bank's common stock. Payments are due each quarter,
consisting of $92,500 principal plus accrued interest. Interest is calculated
based on the LIBOR rate plus 2.85% (7.44% at December 31, 1996).
NOTE 8 -- BENEFIT PLANS
The Company maintains a 401(K) profit-sharing plan covering substantially
all employees. Under this plan, employer matching contributions are 50% of
employee contributions, up to 6% of eligible salary, plus a profit sharing
allocation to all eligible employees. Annual contributions are at the discretion
of the Board of Directors. Contributions provided for the 401(K) plan and
charged to operations totaled $157,893 and $148,657 in 1996 and 1995.
The Company maintains a stock option plan covering directors and executive
officers. Options are granted at no less than fair value of the Company's stock.
Accordingly, no compensation cost has been recognized. Options under the officer
plan are generally subject to a 4-year vesting schedule, and expire five years
from date of vesting. There were 5,060 options granted during 1995, and 2,365
during 1996. At year-end 1996, there were 32,731 options outstanding under the
officer plan with a weighted average exercise price of $16.93, and range of
exercise prices of $14.65 - $27.27. There were no options granted in 1995 or
1996 under the director's plan. At year-end 1996, there were 2,096 options
outstanding with an effective price of $13.23 per share.
F-17
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
NOTE 9 -- INCOME TAXES
An analysis of the components of income taxes follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Current income taxes.............................................. $ 1,551,766 $ 1,354,446
Deferred income taxes............................................. 11,927 (154,482)
------------ ------------
Total income taxes.............................................. $ 1,563,693 $ 1,199,964
------------ ------------
------------ ------------
</TABLE>
The difference between the financial statement tax provision and amounts
computed by applying the federal income tax rate of 34% to pretax income is
reconciled as follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Expected provision................................................ $ 1,645,417 $ 1,396,455
Tax effect of:
Tax-exempt interest income...................................... (545,956) (448,220)
Non-deductible interest expense................................. 94,244 74,669
State income tax, net........................................... 278,603 231,799
Other items..................................................... 91,385 (54,739)
------------ ------------
Applicable income tax......................................... $ 1,563,693 $ 1,199,964
------------ ------------
------------ ------------
</TABLE>
The net deferred tax asset is comprised of the following components:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses......................................... $ 549,957 $ 439,692
Deferred compensation............................................. 55,737 60,490
Core deposit intangibles.......................................... 67,258 53,394
Other............................................................. 5,348 117,030
----------- -----------
678,300 670,606
Deferred tax liabilities:
Unrealized gain on securities available-for-sale.................. (130,085) (115,965)
Depreciation...................................................... (32,575) (16,113)
Accretion on securities........................................... (20,553) (17,394)
----------- -----------
(183,213) (149,472)
Valuation allowance................................................. -- --
----------- -----------
Net deferred tax asset............................................ $ 495,087 $ 521,134
----------- -----------
----------- -----------
</TABLE>
NOTE 10 -- COMMITMENTS AND CONTINGENCIES
The Company, in the ordinary course of business, has loans, commitments and
contingent liabilities, such as guarantees, commitments to extend credit, etc.,
which are not reflected in the accompanying consolidated balance sheets. The
Company's exposure to credit loss in the event of nonperformance by the
F-18
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
NOTE 10 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
other party to the financial guarantees is represented by the contractual
amounts of those instruments. The Company uses the same credit policy to make
such commitments as it uses for on-balance-sheet items.
The contractual amount of these financial instruments are summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Commitments to extend credit................................... $ 26,634,000 $ 15,879,000
Standby letters of credit...................................... 2,349,000 2,111,000
</TABLE>
The commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established under the contract.
Generally, such commitments are for no more than one year, and most are variable
rate contracts. These commitments are primarily credit card, overdraft
protection, and commercial lines of credit.
Since many commitments expire without being used, the amounts do not
necessarily represent future cash commitments. Collateral obtained upon exercise
of the commitment is determined using management's credit evaluation of the
borrower, and may include accounts receivable, inventory, property, land and
other items.
At December 31, 1996 and 1995, the Company was required by the Federal
Reserve to have $3,542,000 and $2,704,000 on deposit or as cash in hand. These
reserves do not earn interest.
NOTE 11 -- RELATED PARTY TRANSACTIONS
Certain directors, officers and principal shareholders of the Company were
also customers of the Bank. The aggregate amount of loans to these persons
totaled $2,139,417 and $2,520,434 at December 31, 1996 and 1995.
Related party deposits totaled $1,337,157 at year-end 1996.
NOTE 12 -- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
CASH AND SHORT-TERM INVESTMENTS: For those short-term instruments, the
carrying amount is a reasonable estimate of fair value.
SECURITIES: For securities, fair value equals quoted market price, if
available. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar instruments.
LOANS RECEIVABLE: The fair value of loans is estimated by discounting
future cash flows using the current rates at which similar loans would be made
to borrowers with similar credit ratings and for the same remaining maturities.
DEPOSIT LIABILITIES: The fair value of demand deposits, savings accounts,
and certain money market deposits is the amount payable on demand at the
reporting date. The fair value of fixed-maturity
F-19
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
NOTE 12 -- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
certificates of deposit is estimated using the rates currently offered for
deposits of similar remaining maturities.
NOTES PAYABLE: Carrying value is a reasonable estimate of fair value for
this adjustable rate instrument.
OFF-BALANCE SHEET ITEMS: Carrying value is a reasonable estimate of fair
value. These instruments are short term in nature.
The estimated fair values of financial instruments at December 31 are as
follows:
<TABLE>
<CAPTION>
1996 1996
CARRYING VALUE FAIR VALUE
--------------- ---------------
<S> <C> <C>
Financial assets:
Cash and short-term investments.......................... $ 28,082,000 $ 28,082,000
Securities available for sale............................ 38,376,000 38,376,000
Securities held to maturity.............................. 25,219,000 25,461,000
Loans.................................................... 196,963,000 196,816,000
Financial liabilities:
Deposits................................................. (271,127,000) (271,807,000)
Notes payable............................................ (500,000) (500,000)
Off balance sheet items.................................... -- --
</TABLE>
<TABLE>
<CAPTION>
1995 1995
CARRYING VALUE FAIR VALUE
--------------- ---------------
<S> <C> <C>
Financial assets:
Cash and short-term investments.......................... $ 26,860,000 $ 26,860,000
Securities available for sale............................ 38,426,000 38,426,000
Securities held to maturity.............................. 19,500,000 19,817,000
Loans.................................................... 171,457,000 172,189,000
Financial liabilities:
Deposits................................................. (241,735,000) (242,814,000)
Notes payable............................................ (1,000,000) (1,000,000)
Off balance sheet items.................................... -- --
</TABLE>
NOTE 13 -- REGULATORY MATTERS
The Company and Bank are subject to regulatory capital requirements
administered by federal banking agencies. Capital adequacy guidelines and prompt
corrective action regulations involve quantitative measures of assets,
liabilities and certain off-balance-sheet items calculated under regulatory
accounting practices. Capital amounts and classifications are also subject to
qualitative judgments by regulators about components, risk weightings, and other
factors, and the regulators can lower classifications in certain cases. Failure
to meet various capital requirements can initiate regulatory action that could
have a direct material effect on the financial statements.
F-20
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
NOTE 13 -- REGULATORY MATTERS (CONTINUED)
The prompt corrective action regulations provide five classifications,
including well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized, although these
terms are not used to represent overall financial condition. If adequately
capitalized, regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and plans for capital restoration are required. The minimum
requirements are:
<TABLE>
<CAPTION>
CAPITAL TO RISK-
WEIGHTED ASSETS
-------------------------- TIER 1 CAPITAL
TOTAL TIER 1 TO AVERAGE ASSETS
----- ------ ----------------------
<S> <C> <C> <C>
Well capitalized................................... 10% 6% 5%
Adequately capitalized............................. 8% 4% 4%
Undercapitalized................................... 6% 3% 3%
</TABLE>
At year end 1996, consolidated actual capital levels (in thousands) and
minimum required levels were:
<TABLE>
<CAPTION>
MINIMUM REQUIRED TO BE
MINIMUM REQUIRED FOR
WELL CAPITALIZED UNDER
CAPITAL ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION REGULATIONS
---------------------- ---------------------- ----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk-weighted
assets)
Consolidated.................. $ 21,836 11.60% $ 15,055 8.0% $ 18,819 10.0%
Bank.......................... $ 21,487 11.46% $ 14,995 8.0% $ 18,744 10.0%
Tier 1 capital (to risk-weighted
assets)
Consolidated.................. $ 19,836 10.54% $ 7,528 4.0% $ 11,291 6.0%
Bank.......................... $ 19,487 10.40% $ 7,498 4.0% $ 11,246 6.0%
Tier 1 capital (to average
assets)
Consolidated.................. $ 19,836 6.73% $ 11,795 4.0% $ 14,744 5.0%
Bank.......................... $ 19,487 6.63% $ 11,753 4.0% $ 14,692 5.0%
</TABLE>
The Company and Bank at year-end 1996 were categorized as well capitalized.
NOTE 14 -- PENDING ACCOUNTING CHANGES
Financial Accounting Standard No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities, was issued by
the Financial Accounting Standards Board in 1996. It revises the accounting for
transfers of financial assets, such as loans and securities, and for
distinguishing between sales and secured borrowings. It is effective for some
transactions in 1997 and others in 1998. The effect on the financial statements
is not expected to be material.
F-21
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of October 8,
1997, among INDIANA UNITED BANCORP, an Indiana corporation ("IUB") and PTC
BANCORP, an Indiana corporation ("PTC").
R E C I T A L S
A. The Boards of Directors of IUB and PTC each have determined that a
business combination involving the merger of PTC with and into IUB is in the
best interests of their respective companies and their respective companies'
shareholders, communities, customers and other constituencies, and presents an
opportunity for IUB and PTC and their respective shareholders to achieve
long-term strategic and financial benefits, and accordingly have agreed to
effect the merger provided for herein (the "Merger") upon the terms and subject
to the conditions set forth herein.
B. IUB and PTC desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and to prescribe various
conditions to the Merger.
C. For federal income tax purposes, it is intended that the Merger qualify
as a reorganization under the provisions of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code").
D. It is intended that the Merger shall be recorded for accounting and
financial reporting purposes as a pooling of interests.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained herein, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
1.1 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
Agreement, articles of merger (the "Articles of Merger") shall be duly executed
and acknowledged by the Surviving Corporation (as defined in Section l.3) and
thereafter delivered to the Secretary of State of the State of Indiana, for
filing, as provided in the Indiana Business Corporation Law (the "IBCL"), as
soon as practicable on or after the Closing Date (as defined in Section 1.2).
The Merger shall become effective upon the filing of the Articles of Merger with
the Secretary of State of the State of Indiana or at such time thereafter as is
provided in the Articles of Merger (the "Effective Time").
1.2 CLOSING. The closing of the Merger (the "Closing") will take place at
10:00 a.m. on a date to be specified by the parties, which shall be the first
day which is five business days after satisfaction of the latest to occur of the
conditions set forth in Sections 6.1, 6.2(b) and 6.3(b) (other than delivery of
the officers' certificates referred to in Sections 6.2(b) and 6.3(b)), provided
that the other closing conditions set forth in Article VI have been met or
waived as provided in Article VI at or prior to the Closing (the "Closing
Date"), at the offices of Henderson, Daily, Withrow & DeVoe, 2600 One Indiana
Square, Indianapolis, Indiana 46204, unless another time, date or place is
agreed to by the parties hereto.
1.3 EFFECTS OF THE MERGER. At the Effective Time, (a) the separate
existence of PTC shall cease and PTC shall be merged with and into IUB, (b) the
articles of incorporation of IUB as in effect immediately prior to the Effective
Time shall be the articles of incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law and (c)
the bylaws of IUB as in effect immediately prior to the Effective Time shall be
the bylaws of the Surviving Corporation until
A-1
<PAGE>
thereafter changed or amended as provided therein or by applicable law. As used
in this Agreement, "Surviving Corporation" shall mean IUB. At and after the
Effective Time, the Merger will have the effects set forth in Section 23-1-40-6
of the IBCL.
ARTICLE II
EFFECT OF THE MERGER ON THE STOCK OF PTC;
EXCHANGE OF CERTIFICATES
2.1 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any common stock of
PTC ("PTC Common Stock"):
(a) CANCELLATION OF CERTAIN SHARES. All PTC Common Stock that is owned
by PTC as treasury stock or by IUB or by any wholly owned Subsidiary of PTC
or IUB (other than shares in trust accounts, managed accounts and the like
that are beneficially owned by third parties (any such shares, "trust
account shares")) shall be canceled and shall cease to exist and no shares
of common stock of IUB or other consideration shall be delivered in exchange
therefor.
(b) CONVERSION OF PTC COMMON STOCK. Each of the shares of PTC Common
Stock issued and outstanding immediately prior to the Effective Time of the
Merger shall be converted into 1.075 (such number being referred to as the
"Conversion Ratio") fully paid and non-assessable shares of common stock of
IUB, without par value ("IUB Common Stock"), all in accordance with Section
2.2.
(c) DISSENTING SHARES. Notwithstanding any other provisions of this
Agreement to the contrary, PTC Common Stock that is outstanding immediately
prior to the Effective Time and which is held by shareholders who shall not
have voted in favor of the Merger or consented thereto in writing and who
shall have properly delivered in writing notice of intent to demand payment
for such shares in accordance with Section 23-1-44-11 of the IBCL and who
thereafter shall have properly demanded payment and otherwise complied with
the provisions of Section 23-1-44-13 of the IBCL (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive the consideration provided in Section 2.1(b). Such shareholders
("Dissenting Holders") shall be entitled to receive payment of the fair
value of such PTC Common Stock held by them in accordance with the
provisions of Section 23-1-44-15 or 23-1-44-19 of the IBCL, as applicable,
except that all Dissenting Shares held by shareholders who shall have failed
to perfect or who effectively shall have withdrawn or lost their rights to
receive payment of the fair value of such PTC Common Stock under such
provisions of the IBCL shall thereupon be deemed to have been converted into
and to have become exchangeable for, as of the Effective Time, the right to
receive the consideration provided in Section 2.1(b), without any interest
thereon, upon surrender of the certificate or certificates that formerly
evidenced such PTC Common Stock in accordance with Section 2.2.
(d) ADJUSTMENT TO CONVERSION RATIO. If, prior to the Effective Time of
the Merger, IUB shall pay a dividend in, subdivide, combine into a smaller
number of shares or issue by reclassification of its shares any IUB Common
Stock, the Conversion Ratio shall be multiplied by a fraction, the numerator
of which shall be the number of shares of IUB Common Stock outstanding
immediately after, and the denominator of which shall be the number of such
shares outstanding immediately before, the occurrence of such event, and the
product shall be the Conversion Ratio for purposes of Section 2.1(b).
2.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. IUB shall authorize a commercial bank (or such
other person or persons as shall be acceptable to PTC) to act as exchange
agent hereunder (the "Exchange Agent"). As soon as practicable, but not
later than three business days after the Effective Time, IUB shall deposit
with the Exchange Agent, in trust for the holders of certificates which
immediately prior to the Effective
A-2
<PAGE>
Time represented PTC Common Stock converted in the Merger ("PTC
Certificates"), certificates representing the shares of IUB Common Stock
(such shares of IUB Common Stock, together with any dividends or
distributions with respect thereto in accordance with Section 2.2(c), being
hereinafter referred to as the "Exchange Fund") issuable pursuant to Section
2.1(b) (less, if applicable, the number of Excess Shares that will not be
issued and sold because of payment for fractional shares being made pursuant
to Section 2.2(e)(iv)) in exchange for the outstanding PTC Common Stock (the
"IUB Certificates").
(b) EXCHANGE PROCEDURES.
(i) As soon as practicable after the Effective Time, the Exchange
Agent shall mail to each recordholder of a PTC Certificate a letter of
transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the PTC Certificates shall pass, only upon
actual delivery thereof to the Exchange Agent and shall contain
instructions for use in effecting the surrender of PTC Certificates in
exchange for the consideration described in the next sentence). Upon
surrender for cancellation to the Exchange Agent of all PTC Certificates
held by any recordholder of PTC Certificates, together with such letter
of transmittal duly executed, such holder shall be entitled to receive in
exchange therefor an IUB Certificate(s) representing the number of whole
shares of IUB Common Stock into which the PTC Common Stock represented by
the surrendered PTC Certificate(s) shall have been converted at the
Effective Time pursuant to this Article II, cash in lieu of any
fractional share of IUB Common Stock in accordance with Section 2.2(e)
and certain dividends and other distributions in accordance with Section
2.2(c), and the PTC Certificate(s) so surrendered shall forthwith be
canceled; PROVIDED, HOWEVER, that PTC Certificates surrendered for
exchange by any person constituting an "affiliate" of PTC for purposes of
Rule 145(c) under the Securities Act of 1933, as amended (the "Securities
Act"), shall not be exchanged for IUB Certificates until IUB has received
a written agreement from such person as provided in Section 5.3.
(ii) Until PTC Certificates have been surrendered and exchanged for
IUB Certificates as herein provided, each outstanding PTC Certificate
shall be deemed at any time after the Effective Time to represent only
the right to receive upon such surrender an IUB Certificate(s)
representing a whole number of shares of IUB Common Stock and cash in
lieu of any fractional share as contemplated by this Section 2.2. No
transfer taxes shall be payable in connection with any such exchange,
except that if any IUB Certificate (or any check representing cash in
lieu of a fractional share) is to be issued in the name other than that
in which the PTC Certificate surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the person
requesting such exchange shall pay to the Exchange Agent any transfer or
other taxes required by reason of the issuance of the IUB Certificate (or
check) in a name other than that of the registered holder of the PTC
Certificate, or shall establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not applicable. IUB or the Exchange
Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of PTC Common
Stock such amounts as IUB or the Exchange Agent are required to deduct
and withhold under the Code, or any provision of state, local or foreign
tax law, with respect to the making of such payment. To the extent that
amounts are so withheld by IUB or the Exchange Agent, such withheld
amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of PTC Common Stock in respect of whom such
deduction and withholding was made by IUB or the Exchange Agent. If
outstanding PTC Certificates are not surrendered prior to six years after
the Effective Time of the Merger (or, in any particular case, prior to
such earlier date on which dividends and other distributions, if any,
described above would otherwise escheat to or become the property of any
governmental unit or agency), the amount of dividends and other
distributions, if any, that have become payable and that thereafter
become payable on IUB Common Stock evidenced by such PTC Certificates as
A-3
<PAGE>
provided herein shall, to the extent permitted by applicable law, become
the property of IUB (and, to the extent not in its possession, shall be
paid over to it), free and clear of all claims or interest of any person
previously entitled thereto.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the Effective Time with respect
to IUB Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered PTC Certificate with respect to the
IUB Common Stock represented thereby, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section
2.2(e), until the holder of such PTC Certificate shall surrender it. Subject
to the effect of applicable laws, following surrender of any such PTC
Certificate, there shall be paid to the holder of the IUB Certificate
representing whole shares of IUB Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender or promptly thereafter
as is practicable, the amount of any cash payable with respect to a
fractional share of IUB Common Stock to which such holder is entitled
pursuant to Section 2.2(e) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid
with respect to such whole number of shares of IUB Common Stock and (ii) at
the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender and a
payment date subsequent to surrender payable with respect to such whole
number of shares of IUB Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN PTC COMMON STOCK. All IUB Common
Stock issued upon conversion of PTC Common Stock in accordance with the
terms hereof (including any cash paid pursuant to Section 2.2(e)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to
such PTC Common Stock, SUBJECT, HOWEVER, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a
record date prior to the Effective Time that may have been declared or made
by PTC on PTC Common Stock in accordance with the terms of this Agreement on
or prior to the Effective Time and which remain unpaid at the Effective
Time. At the Effective Time, the stock transfer books of PTC shall be closed
to holders of PTC Common Stock immediately prior to the Effective Time and
no transfer of PTC Common Stock by any such holder shall thereafter be made
or recognized. If, after the Effective Time, PTC Certificates are presented
to the Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Article II.
(e) NO FRACTIONAL SHARES.
(i) No fractional share of IUB Common Stock and no certificate or
scrip therefor, or other evidence of ownership thereof, will be issued,
and no right to receive cash in lieu thereof shall entitle the holder
thereof to any voting or other rights of a holder of shares or fractional
share interests.
(ii) As promptly as practicable following the Effective Time, the
Exchange Agent shall determine the excess of (i) the number of shares of
IUB Common Stock delivered to the Exchange Agent by IUB pursuant to
Section 2.2(a) over (ii) the aggregate number of whole shares of IUB
Common Stock to be distributed to holders of PTC Common Stock pursuant to
Section 2.2(b) (such excess being herein called the "Excess Shares"). As
promptly as practicable after such determination of the number of Excess
Shares, the Exchange Agent, as agent for the holders of PTC Common Stock,
shall sell the Excess Shares in the over-the-counter market at then
prevailing prices, all in the manner provided in subparagraph (iii) of
this Section 2.2(e).
(iii) The sale of the Excess Shares by the Exchange Agent shall be
executed in the over-the-counter market through one or more market makers
for IUB Common Stock and shall be executed in round lots to the extent
practicable. Until the net proceeds of such sale or sales have been
distributed to the holders of PTC Common Stock, the Exchange Agent will
hold such proceeds in trust for the holders of PTC Common Stock (the
"Excess Shares Trust"). IUB shall
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pay all commissions, transfer taxes and other out-of-pocket transaction
costs, including the expenses and compensation of the Exchange Agent,
incurred in connection with such sale of the Excess Shares. The Exchange
Agent shall determine the portion of the Excess Shares Trust to which
each holder of PTC Common Stock shall be entitled, if any, by multiplying
the amount of the aggregate net proceeds comprising the Excess Shares
Trust by a fraction, the numerator of which is the amount of the
fractional share interest to which such holder of PTC Common Stock is
entitled (after taking into account all shares of PTC Common Stock then
held by such holder) and the denominator of which is the aggregate amount
of fractional share interests to which all holders of PTC Common Stock
are entitled.
(iv) Notwithstanding the provisions of subparagraphs (ii) and (iii)
above, if the parties shall so agree in writing prior to the Closing,
then in lieu of the issuance and sale of Excess Shares and the making of
the payments contemplated in said subparagraphs, each holder of PTC
Common Stock shall be paid an amount in cash equal to the product
obtained by multiplying the fractional share interest to which such
holder (after taking into account all shares of PTC Common Stock then
held by such holder) would otherwise be entitled by the midpoint between
the highest "bid" and lowest "asked" price for a share of IUB Common
Stock in the over-the-counter market for the business day immediately
preceding the Closing Date, and, in such case, all references herein to
the cash proceeds of the sale of the Excess Shares and similar references
shall be deemed to mean and refer to the payments calculated as set forth
in this subparagraph (iv).
(v) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of PTC Common Stock with respect to
any fractional share interests, the Exchange Agent shall make available
such amounts to such holders of PTC Common Stock subject to and in
accordance with the terms of Section 2.2(b).
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the shareholders of PTC for six months after
the Effective Time shall be delivered to the Surviving Corporation, upon
demand, and any shareholders of PTC who have not theretofore complied with
this Article II shall thereafter look only to IUB for payment of their claim
for IUB Common Stock, any cash in lieu of fractional shares of IUB Common
Stock and any dividends or distributions with respect to IUB Common Stock.
(g) NO LIABILITY. Neither IUB, PTC nor the Surviving Corporation shall
be liable to any holder of PTC Common Stock for any amount paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF PTC. PTC represents and warrants to
IUB that:
(a) ORGANIZATION, STANDING AND POWER. PTC is a corporation duly
organized and validly existing under the laws of the State of Indiana. Each
of PTC's Subsidiaries is a corporation duly organized and validly existing
under the laws of its state of incorporation or organization. Each of PTC
and its Subsidiaries has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted,
and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing
of its properties makes such qualification necessary, except where the
failure to be so qualified would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on PTC. For
purposes of this Agreement: (i) "Material Adverse Change" or "Material
Adverse Effect" means, when used with respect to IUB, PTC or the Surviving
Corporation, as the case may be, any change or effect that is or would
reasonably be expected (insofar as can reasonably be foreseen at the time)
to be materially adverse to the business, properties, assets, liabilities,
condition (financial or otherwise) or results of
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operations of IUB and its Subsidiaries taken as a whole, PTC and its
Subsidiaries taken as a whole, or the Surviving Corporation and its
Subsidiaries taken as a whole, as the case may be; provided, however, that
no Material Adverse Change or Material Adverse Effect shall be deemed to
have occurred by reason of a change or effect resulting from general
economic conditions, general industry conditions, changes in banking laws or
regulations of general applicability or interpretations thereof, or a
general deterioration in the financial markets; and (ii) "Subsidiary" means
any corporation, partnership, joint venture or other legal entity of which
IUB, PTC or the Surviving Corporation, as the case may be (either alone or
through or together with any other Subsidiary), owns, directly or
indirectly, 50% or more of the capital stock or other equity interest the
holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation, partnership,
joint venture or other legal entity.
(b) CAPITAL STRUCTURE.
(i) The authorized capital stock of PTC consists of 2,000,000 shares
of common stock, without par value ("PTC Common Stock"), 1,026,401 shares
of which are outstanding, an aggregate of 30,731 shares of which are
reserved for issuance in connection with outstanding stock options (each
a "PTC Option") granted under the PTC Incentive Stock Option Plan (the
"PTC Stock Option Plan") and no shares of which are held by PTC in its
treasury; and 1,000,000 shares of preferred stock, no par value, with
respect to which the board of directors is authorized to determine the
series and classes thereof together with the rights, privileges and
voting rights. No shares of preferred stock are outstanding, reserved for
issuance or held by PTC in its treasury.
(ii) No bonds, debentures, notes or other indebtedness having the
right to vote (or convertible into or exercisable for securities having
the right to vote) on any matters on which shareholders of PTC may vote
("Voting Debt") are issued or outstanding. All outstanding shares of PTC
Common Stock are, and any PTC Common Stock that may be issued pursuant to
the exercise of any outstanding stock option will be, duly authorized,
validly issued, fully paid and nonassessable and not subject to
preemptive rights.
(iii) Except as set forth herein, in any PTC SEC Document (as defined
in Section 3.1(d) hereof) filed prior to the date hereof or the letter
dated and delivered to IUB on the date hereof (the "PTC Letter"), which
relates to this Agreement and is designated therein as being the PTC
Letter, there is no option, warrant, call, right (including any
preemptive right), commitment or any other agreement of any character
that PTC or any Subsidiary is a party to, or may be bound by, requiring
it to issue, transfer, sell, purchase or redeem any shares of capital
stock, any Voting Debt, or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for any shares of
capital stock of PTC or any Subsidiary, or to provide funds to, or make
an investment (in the form of a loan, capital contribution or otherwise)
in, any of PTC's Subsidiaries or (excepting loans made in the ordinary
course of a commercial banking business) any other corporation,
partnership, firm, individual, trust or other legal entity (each, and any
group of any two or more of the foregoing, a "Person").
(iv) Except as set forth in any PTC SEC Document filed prior to the
date hereof or the PTC Letter, and except for this Agreement, there is no
voting trust or other agreement or understanding to which PTC or any
Subsidiary is a party, or may be bound by, with respect to the voting of
the capital stock of PTC or any Subsidiary.
(v) Since December 31, 1994, except as set forth in any PTC SEC
Document filed prior to the date hereof or the PTC Letter, PTC has not
(A) issued or permitted to be issued any shares of capital stock, or
securities exercisable for or convertible into shares of capital stock,
of PTC or any Subsidiary; (B) repurchased, redeemed or otherwise
acquired, directly or indirectly through any Subsidiary, any shares of
capital stock of PTC or any Subsidiary (other than the acquisition of
trust account shares); or (C) declared, set aside, made or paid to
shareholders of PTC dividends or other distributions on the outstanding
shares of capital stock of PTC, other than regular quarterly cash
dividends at a rate not in excess of the regular quarterly cash dividend
most recently declared by PTC prior to September 30, 1997.
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(c) AUTHORITY.
(i) PTC has all requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement and the consummation by PTC of the
transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of PTC and no other corporate proceedings on the
part of PTC are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby (other than the approval of this
Agreement by the shareholders of PTC in accordance with the IBCL and
PTC's articles of incorporation). This Agreement has been duly and
validly executed and delivered by PTC and, assuming this Agreement
constitutes the valid and binding agreement of IUB, constitutes the valid
and binding agreement of PTC, enforceable in accordance with its terms,
except that the enforcement hereof may be limited by (A) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, (B) general
principles of equity (regardless of whether enforceability is considered
in a proceeding in equity or at law) and (C) judicial discretion.
(ii) Except as set forth in the PTC Letter, the execution and
delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby (subject to approval by the shareholders
of PTC of this Agreement) will not, conflict with or result in any
violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, amendment,
cancellation, acceleration or payment of any obligation or the loss of a
material benefit under, or the creation of a lien, pledge, security
interest, charge or other encumbrance on assets (any such conflict,
violation, default, right of termination, amendment, cancellation,
acceleration or payment, loss or creation, a "Violation") pursuant to,
any provisions of the articles of incorporation or bylaws of PTC or any
Subsidiary or, except as set forth in the PTC Letter, and subject to
obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in Subsection (iii)
below, result in any Violation of any loan or credit agreement, note,
mortgage, indenture, lease, Benefit Plan (as defined in Section 3.1(o))
or other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to PTC or any Subsidiary or their
respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any federal or state court,
administrative agency or commission or other governmental authority or
instrumentality (a "Governmental Entity") is required by or with respect
to PTC or any Subsidiary in connection with the execution and delivery of
this Agreement, or the consummation by PTC of the transactions
contemplated hereby, the failure to obtain which would have a Material
Adverse Effect on PTC, except for (A) the filing by IUB of an application
with the Board of Governors of the Federal Reserve System (the "Federal
Reserve") under the Bank Holding Company Act of 1956, as amended ("BHC
Act"), and approval of same, (B) the filing by IUB of a Registration
Statement on Form S-4 ("S-4") with the Securities and Exchange Commission
("SEC"), and the declaration by the SEC of its effectiveness, (C) the
filing by IUB and PTC with the SEC of (x) a joint proxy statement in
definitive form relating to the meetings of IUB's and PTC's shareholders
to be held in connection with the Merger (the "Proxy Statement") and (y)
such reports under Section 13(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as may be required in connection with
this Agreement and the transactions contemplated hereby, (D) the filing
by IUB of Articles of Merger with the Secretary of State of the State of
Indiana, and appropriate documents with the relevant authorities of other
states in which PTC is qualified to do business, (E) the filing of an
application by IUB with the Director of the Department of Financial
Institutions of the State of Indiana ("DFI"), and approval thereof, (F)
notices to or filings with the Small Business Administration ("SBA"), or
the Internal Revenue Service (the "IRS") or the Pension Benefit Guaranty
Corporation (the "PBGC") with respect to
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any Benefit Plans, and (G) such filings and approvals as may be required
under the "blue sky" laws of various states.
(d) PTC SEC DOCUMENTS; FINANCIAL STATEMENTS. PTC has made available to
IUB the Registration Statement on Form 10-SB and Amendment No. 1 thereto
filed by it in April and July, 1997 respectively, with the SEC under the
Exchange Act in the form (including exhibits) filed with the SEC
(collectively, the "PTC Form 10") and its quarterly report on Form 10-QSB
for the quarter ending June 30, 1997, as filed with the SEC in August, 1997
(the "PTC Form 10-Q"). As of their respective dates, the PTC Form 10 and
Form 10-Q did not, and each document filed by PTC with the SEC under the
Securities Act or the Exchange Act subsequent to the date hereof (together
with the PTC Form 10 and Form 10-Q, collectively the "PTC SEC Documents")
will not, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were
made, not misleading, PROVIDED, HOWEVER, that PTC makes no representation
with respect to information supplied by IUB for use in PTC SEC Documents
after the date hereof. Each of the consolidated balance sheets included in
or incorporated by reference into the PTC SEC Documents (including their
related notes and schedules) fairly presents the consolidated financial
condition of PTC and its consolidated Subsidiaries as of the date set forth
therein and each of the consolidated statements of income and of changes in
financial position included or incorporated by reference into the PTC SEC
Documents (including any related notes and schedules) fairly presents the
results of operations, retained earnings and changes in financial position,
as the case may be, of PTC and its consolidated Subsidiaries for the periods
set forth therein (subject, in the case of unaudited statements to normal
year-end adjustments and any other adjustments described therein which
individually or in the aggregate will not be material in amount or effect),
in each case in accordance with generally accepted accounting principals
consistently applied during the periods involved, except as may be noted
therein.
(e) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in the
PTC Letter or disclosed in any PTC SEC Document filed prior to the date
hereof, since December 31, 1996, neither PTC nor any Subsidiary has incurred
any material liability or obligation (indirect, direct or contingent),
except in the ordinary course of its business consistent with past
practices, taken any of the prohibited actions set forth in Section 4.1, or
suffered any change, or any event involving a prospective change, in its
business, financial condition or results of operations that has had, or is
reasonably likely to have, a Material Adverse Effect on PTC.
(f) ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in the PTC
Letter or disclosed in any PTC SEC Document filed prior to the date hereof,
neither PTC nor any Subsidiary has any obligations or liabilities
(contingent or otherwise) that might reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on PTC. PTC has
set forth in the PTC Letter, as of the date hereof, all interest rate and
currency exchange agreements, and all trading positions regarding any form
or type of derivative financial product the value of which is linked to, or
derived from, the value of an underlying asset, rate or index.
(g) ALLOWANCE FOR CREDIT LOSSES. Except as set forth in the PTC
Letter, the allowance for credit losses (the "Allowance") shown on the
consolidated statements of financial position of PTC and its Subsidiaries as
of June 30, 1997 was, and the Allowance shown on each of the consolidated
statements of condition of PTC and its Subsidiaries as of a date subsequent
to the execution of this Agreement will be, in each case as of the dates
thereof, determined in accordance with safe and sound banking practices and
the guidelines and policies of the Federal Deposit Insurance Corporation
("FDIC"), and was (or will be) adequate, in the reasonable judgment of
management, to provide for losses relating to or inherent in the loan and
lease portfolios (including accrued interest receivables) of PTC and its
Subsidiaries and other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by PTC and its Subsidiaries.
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(h) ENVIRONMENTAL MATTERS. Except as set forth in the PTC Letter,
neither PTC, any of its Subsidiaries, nor any properties presently or
previously owned or operated by PTC or any of its Subsidiaries has been or
is in violation of or liable under any Environmental Law (as hereinafter
defined). There are no actions, suits or proceedings, or demands, claims,
notices or investigations (including notices, demand letters or requests for
information from any environmental agency) instituted or pending, or to the
knowledge of PTC, threatened, relating to the liability of any properties
owned or operated by PTC or any of its Subsidiaries under any Environmental
Law. "Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement between PTC or
IUB, as the case may be, and any Governmental Entity relating to (i) the
protection, preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water, ground water, drinking
water supply, surface soil, subsurface soil, plant and animal life or any
other natural resource), and/or (ii) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production,
release or disposal of any substance presently listed, defined, designated
or classified as hazardous, toxic, radioactive or dangerous, or otherwise
regulated, whether by type or by quantity, including any material containing
any such substance as a component; and includes, without limitation, the
Resource Conservation and Recovery Act, the Clean Air Act, the Federal Water
Pollution Control Act, the Toxic Substances Control Act and the
Comprehensive Environmental Response, Compensation and Liability Act.
(i) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by PTC for inclusion in (i) the S-4 to be filed with the SEC by IUB
in connection with the issuance of IUB Common Stock in the Merger will, at
the time the S-4 is filed with the SEC and at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (ii) the Proxy Statement to be filed
with the SEC in connection with the meeting of shareholders will, at the
dates of mailing to shareholders of IUB and PTC and at the times of the
meetings of shareholders of IUB and PTC to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Proxy Statement (except for such portions thereof
that relate only to IUB) will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder. The information set forth in the PTC Letter by PTC for purposes
of this Agreement is true and accurate in all material respects.
(j) NO DEFAULT. Except as set forth in the PTC Letter, no Violation
exists on the part of PTC or any Subsidiary with respect to any term,
condition or provision of (i) its articles of incorporation or bylaws, (ii)
any note, mortgage, indenture, other evidence of indebtedness, guaranty,
license, agreement or other contract, instrument or contractual obligation
to which PTC or any Subsidiary is now a party or by which it or any of its
properties or assets may be bound, or (iii) any order, writ, injunction or
decree applicable to PTC or any Subsidiary, except for possible Violations
that, individually or in the aggregate, do not, and, insofar as reasonably
can be foreseen, in the future will not, have a Material Adverse Effect on
PTC.
(k) COMPLIANCE WITH LICENSES, PERMITS AND APPLICABLE LAWS. PTC and its
Subsidiaries have received such certificates, permits, licenses, franchises,
consents, approvals, orders, authorizations and clearances from appropriate
governmental entities (the "PTC Permits") as are necessary to own or lease
and operate their respective properties and to conduct their respective
businesses as currently owned or leased and conducted, and all such PTC
Permits are valid and in full force and effect. PTC and its Subsidiaries are
in compliance in all material respects with their respective obligations
under the PTC Permits, with only such exceptions as, individually or in the
aggregate, would not reasonably
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be expected to have a Material Adverse Effect on PTC, and no event has
occurred that allows, or after notice or lapse of time, or both, would
allow, revocation or termination of any material PTC Permit. Except as set
forth in the PTC Letter, the businesses of PTC and its Subsidiaries are not
being conducted in violation of any law, ordinance or regulation of any
Governmental Entity, except for possible violations that individually or in
the aggregate do not, and insofar as reasonably can be foreseen, in the
future will not, have a Material Adverse Effect on PTC. Except for routine
examinations by Governmental Entities charged with the supervision or
regulation of banks or bank holding companies or the insurance of bank
deposits ("Bank Regulators"), as of the date of this Agreement, to the
knowledge of PTC, no investigation by any Governmental Entity with respect
to PTC or any of its Subsidiaries is pending or threatened.
(l) ACTIONS AND PROCEEDINGS. Except as set forth in the PTC Letter,
there are no outstanding orders, judgments, injunctions, awards or decrees
of any Governmental Entity against or affecting PTC or any Subsidiary, any
of its or their current or to its knowledge former directors, employees,
consultants, agents or shareholders, as such, any of its or their
properties, assets or business or any PTC Benefit Plan. Except as set forth
in the PTC Letter, there are no actions, suits or claims or legal,
administrative or arbitration proceedings or investigations pending or, to
the knowledge of PTC, threatened against or affecting PTC or any Subsidiary,
any of its or their current or former directors, officers, employees,
consultants, agents or shareholders, as such, any of its or their
properties, assets or business or any PTC Benefit Plan. There are no
actions, suits or claims or legal, administrative or arbitration proceedings
or investigations or labor disputes pending or, to the knowledge of PTC,
threatened against or affecting PTC or any Subsidiary, any of its or their
current or former directors, officers, employees, consultants, agents or
shareholders, as such, any of its or their properties, assets or business or
any PTC Benefit Plan relating to the transactions contemplated by this
Agreement.
(m) TAXES. To PTC's knowledge, PTC and each of its Subsidiaries have
filed all tax returns required to be filed by any of them and have paid (or
PTC has paid on their behalf), or have set up an adequate reserve for the
payment of, all Taxes required to be paid as shown on such returns, and the
most recent PTC financial statements included or incorporated by reference
in any PTC SEC Document reflect an adequate reserve for all Taxes payable by
PTC and its Subsidiaries accrued through the date of such financial
statements. No material deficiencies for any Taxes have been proposed,
asserted or assessed against PTC or any of its Subsidiaries that are not
adequately reserved for. Except with respect to claims for refund, the
federal income tax returns of PTC and each of its Subsidiaries consolidated
in such returns have been examined by and settled with the IRS, or the
statute of limitations with respect to such years has expired (and no waiver
extending the statute of limitations has been requested or granted), for all
years through 1993. For the purpose of this Agreement, the term "Taxes"
(including, with correlative meaning, the term "tax") shall include, except
where the context otherwise requires, all federal, state, local and foreign
income, profits, franchise, gross receipts, payroll, sales, employment,
unemployment (including unemployment insurance premiums or contributions),
use, property, withholding, excise, occupancy, and other taxes, duties or
assessments of any nature whatsoever, together with all interest, penalties
and additions imposed with respect to such amounts.
(n) CERTAIN AGREEMENTS. Except as set forth in the PTC Letter or
disclosed in any PTC SEC Document filed prior to the date hereof, and except
for this Agreement, as of the date of this Agreement, neither PTC nor any of
its Subsidiaries is a party to any oral or written (i) employment or other
agreement, contract, commitment, program, policy or arrangement requiring
PTC or any Subsidiary to pay compensation (including any salary, bonus,
deferred compensation, incentive compensation, severance, vacation or sick
pay, or any other fringe benefit payment) or any other type of remuneration
to any Person, (ii) agreement or plan, including any stock option plan, any
of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement, or the value of any of the
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benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement, (iii) contract or agreement not terminable
on 30 days' or less notice involving the payment of more than $7,500 in any
12 month period; or (iv) contract or agreement that materially limits the
ability of PTC directly or through any of its Subsidiaries to compete in any
line of business or with any Person or in any geographic area or during any
period of time.
(o) BENEFIT PLANS.
(i) PTC has disclosed in the PTC Letter or a PTC SEC Document filed
prior to the date hereof each employee benefit plan (including, without
limitation, any "employee benefit plan," as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended,
("ERISA")) (all the foregoing being herein called "Benefit Plans"),
maintained or contributed to by PTC or any Subsidiary (the "PTC Benefit
Plans"). PTC will make available to IUB a true and correct copy of (A)
the most recent annual report (Form 5500) filed with the IRS, (B) each
such PTC Benefit Plan, (C) each trust agreement relating to such PTC
Benefit Plan, (D) the most recent summary plan description for each PTC
Benefit Plan for which a summary plan description is required, (E) the
most recent actuarial report or valuation relating to a PTC Benefit Plan
subject to Title IV of ERISA and (F) the most recent determination letter
issued by the IRS with respect to any PTC Benefit Plan qualified under
Section 401(a) of the Code.
(ii) With respect to the PTC Benefit Plans, individually and in the
aggregate, except as set forth in the PTC Letter or any PTC SEC Document
filed prior to the date hereof, no event has occurred and, to the
knowledge of the PTC, there exists no condition or set of circumstances,
in connection with which PTC or any of its Subsidiaries could be subject
to any liability (except liability for benefits, claims and funding
obligations payable in the ordinary course) under ERISA, the Code or any
other applicable law.
(p) SUBSIDIARIES. PTC has set forth in the PTC Letter the name of each
Subsidiary of it. All of the shares of capital stock of each Subsidiary are
held directly or indirectly by PTC and such shares are validly issued, fully
paid and nonassessable and, except as set forth in the PTC Letter or any PTC
SEC Document filed prior to the date hereof, are owned by PTC free and clear
of any lien, charge, encumbrance, claim, option, right of first refusal,
limitation on voting rights, or other restriction of any nature whatsoever.
The Subsidiary conducting a commercial banking business is a bank duly
organized under Title 28 of the Indiana Code, validly existing and in good
standing with the DFI, and all of the deposits of such Subsidiary are
insured by the Bank Insurance Fund of the FDIC to the maximum extent
permitted by law.
(q) AGREEMENTS WITH BANK REGULATORS. Neither PTC nor any Subsidiary is
a party to any written agreement or memorandum of understanding with, or a
party to any commitment letter or similar undertaking to, or subject to any
order or directive by, or is a recipient of any extraordinary supervisory
letter from, any Bank Regulator which restricts materially the conduct of
its business, or in any manner relates to its capital adequacy, its credit
policies or its management, nor has PTC been advised by any Bank Regulator
that it is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, directive,
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter or similar submission.
(r) VOTE REQUIRED. The affirmative vote of the holders of a majority
of the outstanding shares of PTC Common Stock entitled to vote thereon is
the only vote of the holders of any class or series of PTC capital stock
necessary to approve this Agreement and the transactions contemplated
hereby.
(s) PROPERTIES. Except as set forth in the PTC Letter or disclosed in
any PTC SEC Document filed prior to the date hereof, PTC or one of its
Subsidiaries (A) has good, valid and marketable title to all the properties
and assets reflected in the most recent audited financial statements
included in any PTC SEC Document as being owned by PTC or one of its
Subsidiaries, or acquired after the date
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thereof (except properties sold or otherwise disposed of since the date
thereof in the ordinary course of business), free and clear of all
mortgages, pledges, security interests, claims, liens, charges, options or
other encumbrances of any nature whatsoever (including, without limitation,
in the case of real property, easements and rights-of-way) (collectively,
"Liens"), except (x) statutory Liens securing payments not yet due, (y)
Liens on assets of any Subsidiary of PTC incurred in the ordinary course of
a commercial banking business and (z) such Liens and imperfections or
irregularities of title that do not materially affect the use of the
properties or assets subject thereto or affected thereby or otherwise
materially impair business operations at such properties, and (B) is the
lessee of all leasehold estates reflected in the most recent audited
financial statements included in any PTC SEC Document or acquired after the
date thereof (except for leases that have expired by their terms since the
date thereof) and is in possession of the properties purported to be leased
thereunder, and each such lease is valid without default thereunder by the
lessee or, to PTC's knowledge, the lessor.
(t) POOLING OF INTERESTS. To PTC's knowledge, neither PTC nor any
Subsidiary has taken or failed to take any action that would prevent the
accounting for the Merger as a pooling of interests in accordance with
Accounting Principles Board Opinion No. 16, the interpretive releases issued
pursuant thereto, and the pronouncements of the SEC.
(u) OWNERSHIP OF IUB STOCK. Neither PTC nor, to its best knowledge,
any of its affiliates or associates (as such terms are defined for purposes
of Section 23-1-43-18 of the IBCL), (i) beneficially owns, directly or
indirectly, or (ii) is a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of,
shares of capital stock of IUB which in the aggregate represents 10% or more
of the outstanding shares of capital stock of IUB entitled to vote generally
in the election of directors.
(v) SECTION 23-1-43-18 OF THE IBCL NOT APPLICABLE. The provisions of
Section 23-1-43-18 of the IBCL will not, prior to the termination of this
Agreement, assuming the accuracy of the representations contained in Section
3.2(u) (without giving effect to the knowledge qualification therein), apply
to this Agreement, the Merger or the transactions contemplated hereby.
3.2 REPRESENTATIONS AND WARRANTIES OF IUB. IUB represents and warrants to
PTC as follows:
(a) ORGANIZATION, STANDING AND POWER. IUB is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Indiana. Each of IUB's Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation or organization. Each of IUB and its Subsidiaries has all
requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted, and is duly qualified and
in good standing to do business in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification necessary, except where the failure to be so qualified would
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on IUB.
(b) CAPITAL STRUCTURE.
(i) The authorized capital stock of IUB consists of 3,000,000 shares
of common stock, without par value ("IUB Common Stock"), 1,250,897 shares
of which are outstanding and none of which are reserved for issuance or
held by IUB in its treasury; and 400,000 shares of preferred stock,
without par value, with respect to which the board of directors is
authorized to determine the series and classes thereof together with the
rights, privileges and voting rights ("IUB Preferred Stock"). There are
no shares of IUB Preferred Stock outstanding, reserved for issuance or
held by IUB in its treasury.
(ii) No Voting Debt of IUB is issued or outstanding. All outstanding
shares of IUB Common Stock are duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights.
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(iii) Except as set forth in any IUB SEC Document (as defined in
Section 3.2(d) hereof) filed prior to the date hereof or the letter dated
and delivered to PTC on the date hereof (the "IUB Letter"), which relates
to this Agreement and is designated therein as being the IUB Letter,
there is no option, warrant, call, right (including any preemptive
right), commitment or any other agreement of any character that IUB or
any Subsidiary is a party to, or may be bound by, requiring it to issue,
transfer, sell, purchase or redeem any shares of capital stock, any
Voting Debt, or any securities or rights convertible into, exchangeable
for, or evidencing the right to subscribe for any shares of capital stock
of IUB or any Subsidiary, or to provide funds to, or make an investment
(in the form of a loan, capital contribution or otherwise) in, any of
IUB's Subsidiaries or (excepting loans made in the ordinary course of a
commercial banking business) any other Person.
(iv) Except as set forth in any IUB SEC Document filed prior to the
date hereof or the IUB Letter, and except for this Agreement, there is no
voting trust or other agreement or understanding to which IUB or any
Subsidiary is a party, or may be bound by, with respect to the voting of
the capital stock of IUB or any Subsidiary.
(v) Since December 31, 1994, except as set forth in any IUB SEC
Document filed prior to the date hereof or the IUB Letter, IUB has not
(A) issued or permitted to be issued any shares of capital stock, or
securities exercisable for or convertible into shares of capital stock,
of IUB or any Subsidiary; (B) repurchased, redeemed or otherwise
acquired, directly or indirectly through any Subsidiary, any shares of
capital stock of IUB or any Subsidiary (other than the acquisition of
trust account shares); or (C) declared, set aside, made or paid to
shareholders of IUB dividends or other distributions on the outstanding
shares of capital stock of IUB, other than regular quarterly cash
dividends at a rate not in excess of the regular quarterly dividend most
recently declared by IUB prior to September 30, 1997.
(c) AUTHORITY.
(i) IUB has all requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement and the consummation by IUB of the
transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of IUB, and no other corporate proceedings on the
part of IUB are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby (other than the approval of this
Agreement by the shareholders of IUB in accordance with the IBCL and
IUB's articles of incorporation). This Agreement has been duly and
validly executed and delivered by IUB, and assuming this Agreement
constitutes the valid and binding agreement of PTC, constitutes the valid
and binding agreement of IUB, enforceable in accordance with its terms,
except that the enforcement hereof may be limited by (A) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, (B) general
principles of equity (regardless of whether enforceability is considered
in a proceeding in equity or at law) and (C) judicial discretion.
(ii) Except as set forth in the IUB Letter, the execution and
delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby (subject to approval by its
shareholders) will not, create any Violation under any provisions of the
articles of incorporation or bylaws of IUB or any Subsidiary or, except
as set forth in the IUB Letter and subject to obtaining or making the
consents, approvals, orders, authorizations, registrations, declarations
and filings referred to in Subsection (iii) below, result in any
Violation of any loan or credit agreement, note, mortgage, indenture,
lease, Benefit Plan (as defined in Section 3.1(o)) or other agreement,
obligation, instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
IUB or any Subsidiary or their respective properties or assets.
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(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to IUB or any Subsidiary in connection with
the execution and delivery of this Agreement, or the consummation by IUB
of the transactions contemplated hereby, the failure to obtain which
would have a Material Adverse Effect on IUB, except for (A) the filing by
IUB of an application with the Federal Reserve under the BHC Act, and
approval of same, (B) the filing by IUB of the S-4 with the SEC, and the
declaration by the SEC of its effectiveness, (C) the filing by IUB and
PTC with the SEC of (x) the Proxy Statement and (y) such reports under
Section 13(a) of the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated hereby, (D) the filing
by IUB of Articles of Merger with the Secretary of State of the State of
Indiana, and appropriate documents with the relevant authorities of other
states in which IUB is qualified to do business, (E) the filing of an
application by IUB with the Director of the DFI, and the approval
thereof, (F) notices to or filings with the SBA, or the IRS or the PBGC
with respect to any Benefit Plans, and (G) such filings and approvals as
may be required under the "blue sky" laws of various states.
(d) IUB SEC DOCUMENTS: FINANCIAL STATEMENTS. IUB has made available to
PTC each document filed by it since December 31, 1994 with the SEC under the
Securities Act or the Exchange Act, including without limitation, (i) IUB's
Annual Report on Form 10-K for the year ended December 31, 1996, (ii) IUB's
Quarterly Report on Form 10-Q for the period ended March 31 and June 30,
1997, and (iii) IUB's definitive proxy statement for its 1997 Annual Meeting
of Shareholders held May 20, 1997, each in the form (including exhibits and
any amendments) filed with the SEC (collectively, together with all reports
and documents filed with the SEC subsequent to the date hereof, the "IUB SEC
Documents"). As of their respective dates, each of the IUB SEC Documents did
not, and each of the IUB SEC Documents filed with the SEC subsequent to the
date hereof will not, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which
they were made, not misleading, provided, however that IUB makes no
representation with respect to information supplied by PTC for use in IUB
SEC Documents after the date hereof. Each of the consolidated balance sheets
included in or incorporated by reference into the IUB SEC Documents
(including their related notes and schedules) fairly presents the
consolidated financial condition of IUB and its consolidated Subsidiaries as
of the date set forth therein and each of the consolidated statements of
income and of changes in financial position included or incorporated by
reference into the IUB SEC Documents (including any related notes and
schedules) fairly presents the results of operations, retained earnings and
changes in financial position, as the case may be, of IUB and its
consolidated Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements to normal year-end adjustments and any other
adjustments described therein which individually or in the aggregate will
not be material in amount or effect), in each case in accordance with
generally accepted accounting principals consistently applied during the
periods involved, except as may be noted therein.
(e) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in the
IUB Letter or disclosed in any IUB SEC Document filed prior to the date
hereof, since December 31, 1996, neither IUB nor any Subsidiary has incurred
any material liability obligation (indirect, direct or contingent), except
in the ordinary course of its business consistent with past practices, taken
any of the prohibited actions set forth in Section 4.1, or suffered any
change, or any event involving a prospective change, in its business,
financial condition or results of operations that has had, or is reasonably
likely to have, a Material Adverse Effect on IUB.
(f) ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in the IUB
Letter or disclosed in any IUB SEC Document filed prior to the date hereof,
neither IUB nor any Subsidiary has any obligations or liabilities
(contingent or otherwise) that might reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on IUB. IUB has
set forth in the IUB Letter, as of the date
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hereof, all interest rate and currency exchange agreements, and all trading
positions regarding any form or type of derivative financial product the
value of which is linked to, or derived from, the value of an underlying
asset, rate or index.
(g) ALLOWANCE FOR CREDIT LOSSES. Except as set forth in the IUB
Letter, the Allowance shown on the consolidated statements of financial
position of IUB and its Subsidiaries as of June 30, 1997 was, and the
Allowance shown on each of the consolidated statements of condition of IUB
and its Subsidiaries as of a date subsequent to the execution of this
Agreement will be, in each case as of the dates thereof, determined in
accordance with safe and sound banking practices and the guidelines and
policies of the FDIC, and was (or will be) adequate, in the reasonable
judgment of management, to provide for losses relating to or inherent in the
loan and lease portfolios (including accrued interest receivables) of IUB
and its Subsidiaries and other extensions of credit (including letters of
credit and commitments to make loans or extend credit) by IUB and its
Subsidiaries.
(h) ENVIRONMENTAL MATTERS. Except as set forth in the IUB Letter,
neither IUB, any of its Subsidiaries, nor any properties presently or
previously owned or operated by IUB or any of its Subsidiaries has been or
is in violation of or liable under any Environmental Law. There are no
actions, suits or proceedings, or demands, claims, notices or investigations
(including notices, demand letters or requests for information from any
environmental agency) instituted or pending, or to the knowledge of IUB,
threatened, relating to the liability of any properties owned or operated by
IUB or any of its Subsidiaries under any Environmental Law.
(i) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by IUB for inclusion in (i) the S-4 to be filed with the SEC by IUB
in connection with the issuance of IUB Common Stock in the Merger will, at
the time the S-4 is filed with the SEC and at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (ii) the Proxy Statement to be filed
with the SEC in connection with the meeting of shareholders will, at the
dates of mailing to shareholders of IUB and PTC and at the time of the
meetings of shareholders of IUB and PTC to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Proxy Statement (except for such portions thereof
that relate only to PTC) will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder. The information set forth in the IUB Letter by IUB for purposes
of this Agreement is true and accurate in all material respects.
(j) NO DEFAULT. Except as set forth in the IUB Letter, no Violation
exists on the part of IUB or any Subsidiary with respect to any term,
condition or provision of (i) its articles of incorporation or bylaws, (ii)
any note, mortgage, indenture, other evidence of indebtedness, guaranty,
license, agreement or other contract, instrument or contractual obligation
to which IUB or any Subsidiary is now a party or by which it or any of its
properties or assets may be bound, or (iii) any order, writ, injunction or
decree applicable to IUB or any Subsidiary, except for possible Violations
that, individually or in the aggregate, do not, and, insofar as reasonably
can be foreseen, in the future will not, have a Material Adverse Effect on
IUB.
(k) COMPLIANCE WITH LICENSES, PERMITS AND APPLICABLE LAWS. IUB and its
Subsidiaries have received such certificates, permits, licenses, franchises,
consents, approvals, orders, authorizations and clearances from appropriate
governmental entities (the "IUB Permits") as are necessary to own or lease
and operate their respective properties and to conduct their respective
businesses as currently owned or leased and conducted, and all such IUB
Permits are valid and in full force and effect. IUB and its Subsidiaries are
in compliance in all material respects with their respective obligations
under
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the IUB Permits, with only such exceptions as, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect on IUB, and no event has occurred that allows, or after notice of
lapse of time, or both, would allow, revocation or termination of any
material IUB Permit. Except as set forth in the IUB Letter, the businesses
of IUB and its Subsidiaries are not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity, except for possible
violations that individually or in the aggregate do not, and insofar as
reasonably can be foreseen in the future will not, have a Material Adverse
Effect on IUB. Except for routine examinations by Bank Regulators, as of the
date of this Agreement, to the knowledge of IUB, no investigation by any
Governmental Entity with respect to IUB or any of its Subsidiaries is
pending or threatened.
(l) ACTIONS AND PROCEEDINGS. Except as set forth in the IUB Letter,
there are no outstanding orders, judgments, injunctions, awards or decrees
of any Governmental Entity against or affecting IUB or any Subsidiary, any
of its or their current or to its knowledge former directors, employees,
consultants, agents or shareholders, as such, any of its or their
properties, assets or business or any IUB Benefit Plan. Except as set forth
in the IUB Letter, there are no actions, suits or claims or legal,
administrative or arbitration proceedings or investigations pending or, to
the knowledge of IUB, threatened against or affecting IUB or any Subsidiary,
any of its or their current or former directors, officers, employees,
consultants, agents or shareholders, as such, any of its or their
properties, assets or business or any IUB Benefit Plan. There are no
actions, suits or claims or legal, administrative or arbitration proceedings
or investigations or labor disputes pending or, to the knowledge of IUB,
threatened against or affecting IUB or any Subsidiary, any of its or their
current or former directors, officers, employees, consultants, agents or
shareholders, as such, any of its or their properties, assets or business or
any IUB Benefit Plan relating to the transactions contemplated by this
Agreement.
(m) TAXES. To IUB's knowledge, IUB and each of its Subsidiaries have
filed all tax returns required to be filed by any of them and have paid (or
IUB has paid on their behalf), or have set up an adequate reserve for the
payment of, all Taxes required to be paid as shown on such returns, and the
most recent IUB financial statements included or incorporated by reference
in any IUB SEC Document reflect an adequate reserve for all Taxes payable by
IUB and its Subsidiaries accrued through the date of such financial
statements. No material deficiencies for any Taxes have been proposed,
asserted or assessed against IUB or any of its Subsidiaries that are not
adequately reserved for. Except with respect to claims for refund, the
federal income tax returns of IUB and each of its Subsidiaries consolidated
in such returns have been examined by and settled with the IRS, or the
statute of limitations with respect to such years has expired (and no waiver
extending the statute of limitations has been requested or granted), for all
years through 1993.
(n) CERTAIN AGREEMENTS. Except as set forth in the IUB Letter or
disclosed in any IUB SEC Document filed with the SEC prior to the date
hereof, and except for this Agreement, as of the date of this Agreement,
neither IUB nor any of its Subsidiaries is a party to any oral or written
(i) employment or other agreement, contract, commitment, program, policy or
arrangement requiring IUB or any Subsidiary to pay compensation (including
any salary, bonus, deferred compensation, incentive compensation, severance,
vacation or sick pay, or any other fringe benefit payment) or any other type
of remuneration to any Person, (ii) agreement or plan, including any stock
option plan, any of the benefits of which will be increased, or the vesting
of the benefits of which will be accelerated, by the occurrence of any of
the transactions contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement, (iii) contract or agreement not terminable
on 30 days' or less notice involving the payment of more than $7,500 in any
12 month period; or (iv) contract or agreement that materially limits the
ability of IUB directly or through any of its Subsidiaries to compete in any
line of business or with any Person or in any geographic area or during any
period of time.
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(o) BENEFIT PLANS.
(i) IUB has disclosed in the IUB Letter or a IUB SEC Document filed
prior to the date hereof each Benefit Plan maintained or contributed to
by IUB or any Subsidiary (the "IUB Benefit Plans"). IUB will make
available to PTC a true and correct copy of (A) the most recent annual
report (Form 5500) filed with the IRS, (B) each such IUB Benefit Plan,
(C) each trust agreement relating to such IUB Benefit Plan, (D) the most
recent summary plan description for each IUB Benefit Plan for which a
summary plan description is required, (E) the most recent actuarial
report or valuation relating to an IUB Benefit Plan subject to Title IV
of ERISA and (F) the most recent determination letter issued by the IRS
with respect to any IUB Benefit Plan qualified under Section 401(a) of
the Code.
(ii) With respect to the IUB Benefit Plans, individually and in the
aggregate, except as set forth in the IUB Letter or any IUB SEC Document
filed prior to the date hereof, no event has occurred and, to the
knowledge of the IUB, there exists no condition or set of circumstances,
in connection with which IUB or any of its Subsidiaries could be subject
to any liability (except liability for benefits, claims and funding
obligations payable in the ordinary course) under ERISA, the Code or any
other applicable law.
(p) SUBSIDIARIES. IUB has set forth in the IUB Letter the name of each
Subsidiary of it. All of the shares of capital stock of each Subsidiary are
held directly or indirectly by IUB and such shares are validly issued, fully
paid and nonassessable and, except as set forth in the IUB Letter or
disclosed in any IUB SEC Document filed with the SEC prior to the date
hereof, are owned by IUB free and clear of any lien, charge, encumbrance,
claim, option, right of first refusal, limitation on voting rights, or other
restriction of any nature whatsoever. Each Subsidiary conducting a
commercial banking business is a bank duly organized under Title 28 of the
Indiana Code, validly existing and in good standing with the DFI, and all of
the deposits of each such Subsidiary (except Regional Federal Savings Bank)
are insured by the Bank Insurance Fund of the FDIC (the Savings Association
Insurance Fund of the FDIC with respect to Regional Federal Savings Bank) to
the maximum extent permitted by law.
(q) AGREEMENTS WITH BANK REGULATORS. Neither IUB nor any Subsidiary is
a party to any written agreement or memorandum of understanding with, or a
party to any commitment letter or similar undertaking to, or subject to any
order or directive by, or is a recipient of any extraordinary supervisory
letter from, any Bank Regulator which restricts materially the conduct of
its business, or in any manner relates to its capital adequacy, its credit
policies or its management, nor has IUB been advised by any Bank Regulator
that it is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, directive,
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter or similar submission.
(r) VOTE REQUIRED. The affirmative vote of the holders of a majority
of the outstanding shares of IUB Common Stock entitled to vote thereon is
the only vote of the holders of any class or series of IUB capital stock
necessary to approve this Agreement and the transactions contemplated
hereby.
(s) PROPERTIES. Except as set forth in the IUB Letter or disclosed in
any IUB SEC Document filed prior to the date hereof, IUB or one of its
Subsidiaries (A) has good, valid and marketable title to all the properties
and assets reflected in the most recent audited financial statements
included in any IUB SEC Document as being owned by IUB or one of its
Subsidiaries, or acquired after the date thereof (except properties sold or
otherwise disposed of since the date thereof in the ordinary course of
business), free and clear of all Liens, except (x) statutory Liens securing
payments not yet due, (y) Liens on assets of any Subsidiary of IUB incurred
in the ordinary course of a commercial banking business and (z) such Liens
and imperfections or irregularities of title that do not materially affect
the use of the properties or assets subject thereto or affected thereby or
otherwise materially impair business operations at such properties, and (B)
is the lessee of all leasehold estates reflected in the most recent audited
financial statements included in any IUB SEC Document or acquired after the
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date thereof (except for leases that have expired by their terms since the
date thereof) and is in possession of the properties purported to be leased
thereunder, and each such lease is valid without default thereunder by the
lessee or, to IUB's knowledge, the lessor.
(t) POOLING OF INTERESTS. To IUB's knowledge, neither IUB nor any
Subsidiary has taken or failed to take any action that would prevent the
accounting for the Merger as a pooling of interests in accordance with
Accounting Principles Board Opinion No. 16, the interpretive releases issued
pursuant thereto, and the pronouncements of the SEC.
(u) OWNERSHIP OF PTC STOCK. Neither IUB nor, to its best knowledge,
any of its affiliates or associates (as such terms are defined for purposes
of Section 23-1-43-18 of the IBCL), (i) beneficially owns, directly or
indirectly, or (ii) is a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of,
shares of capital stock of PTC which in the aggregate represents 10% or more
of the outstanding shares of capital stock of PTC entitled to vote generally
in the election of directors.
(v) SECTION 23-1-43-18 OF THE IBCL NOT APPLICABLE. The provisions of
Section 23-1-43-18 of the IBCL will not, prior to the termination of this
Agreement, assuming the accuracy of the representations contained in Section
3.1(u) (without giving effect to the knowledge qualification therein), apply
to this Agreement, the Merger or the transactions contemplated hereby.
ARTICLE IV
COVENANTS OF IUB AND PTC
4.1 BUSINESS IN ORDINARY COURSE.
(a) During the period from the date of this Agreement to the Effective
Time, IUB shall, and shall cause its Subsidiaries to, conduct business only
in the ordinary and usual course consistent with past practices and shall,
and shall cause such Subsidiaries to, use their best efforts to maintain and
preserve its business organization, employees and advantageous business
relationships and retain the services of its officers and key employees.
(b) During the period from the date of this Agreement to the Effective
Time, PTC shall, and shall cause its Subsidiaries to, conduct business only
in the ordinary and usual course consistent with past practices and shall,
and shall cause such Subsidiaries to, use their best efforts to maintain and
preserve its business organization, employees and advantageous business
relationships and retain the services of its officers and key employees.
(c) Without the prior written consent of PTC, IUB shall not declare, set
aside or pay any dividend or make any other distribution with respect to its
capital stock whether in cash, stock or other property, after the date of
this Agreement, except for the declaration and payment of regular quarterly
cash dividends on the IUB Common Stock in an amount not to exceed $0.27 per
share.
(d) Without the prior written consent of IUB, PTC shall not declare, set
aside or pay any dividend or make any other distribution with respect to its
capital stock whether in cash, stock or other property, after the date of
this Agreement, except for the declaration and payment of regular quarterly
cash dividends on the PTC Common Stock in an amount not to exceed the amount
of the most recent quarterly cash dividend paid by PTC prior to the date of
this Agreement; PROVIDED, HOWEVER, that the parties agree that PTC shall
coordinate the declaration of dividends of PTC Common Stock, and the record
date and payment dates relating thereto, with the dividend record and
payment dates for IUB Common Stock so that the holders of PTC common stock
shall not receive two dividends, or fail to receive one dividend, for any
quarter with respect to their shares of IUB Common Stock.
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(e) Except as expressly provided herein or in the IUB Letter or PTC
Letter, during the period from the date hereof to the Effective Time,
neither IUB or any Subsidiary of IUB on the one hand, nor PTC or any
Subsidiary of PTC on the other hand, without the prior written consent of
the other, will:
(i) issue, sell or pledge any capital stock or any options, warrants,
or other rights to subscribe for or purchase capital stock or any
securities convertible into or exchangeable for any capital stock, except
pursuant to options outstanding on the date hereof under the PTC Stock
Option Plans;
(ii) directly or indirectly redeem, purchase or otherwise acquire any
of their respective capital stock or ownership interests (except for the
acquisition of trust account shares or in satisfaction of debts
previously contracted);
(iii) effect a reclassification, recapitalization, split-up, exchange
of shares, readjustment or other similar change in or to any capital
stock or otherwise merge, liquidate, reorganize or recapitalize;
(iv) change its articles of incorporation or bylaws;
(v) enter into, adopt or amend any employment agreement, severance
agreement, change of control agreement or similar agreement or plan
relative to the foregoing; or grant any increase (other than ordinary and
normal increases consistent with past practices) in the compensation
payable or to become payable to directors, officers or employees; or
except as required by law, pay or agree to pay any bonus, or adopt or
make any change in any bonus, insurance, pension, or Benefit Plan;
(vi) except in the ordinary course of its business consistent with
past practice, borrow or agree to borrow any funds, including but not
limited to repurchase transactions, or indirectly guarantee or agree to
guarantee any obligations of others;
(vii) enter into, modify or extend any agreement, contract or
commitment out of the ordinary course of business, other than letters of
credit, loan agreements, deposit agreements, and other lending, credit
and deposit documents made in the ordinary course of business;
(viii) except in the ordinary course of business, place on any of its
assets or properties any mortgage, pledge, lien, charge, or other
encumbrance;
(ix) place on any of its real estate assets or properties any
mortgage, pledge, lien, charge or other encumbrance;
(x) cancel any material indebtedness owing to it or any claims which
it may possess or waive any rights of material value;
(xi) sell or otherwise dispose of any real property or any material
amount of tangible or intangible personal property other than properties
acquired in foreclosure or otherwise in the ordinary collection of
indebtedness;
(xii) knowingly or willfully commit any act or fail to commit any act
which will cause a material breach of any agreement, contract or
commitment;
(xiii) violate any law, statute, rule, governmental regulation, or
order, which violation might have a Material Adverse Effect on IUB or PTC
as the case may be;
(xiv) engage in any activity or transaction outside the ordinary
course of business;
(xv) enter into or acquire any derivatives contract or structured
note;
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(xvi) enter into any new, or modify, amend or extend the terms of any
existing, contracts relating to the purchase or sale of financial or
other futures, or any put or call option relating to cash, securities or
commodities or any interest rate swap agreements or other agreements
relating to the hedging of interest rate risk; or
(xvii) settle any claim, action or proceeding involving monetary
damages, except in the ordinary course of business consistent with past
practice.
(d) IUB shall not, without the prior written consent of PTC, willfully
engage in any transaction or willfully take any action that would render
untrue any of the representations and warranties of IUB contained in Article
III hereof, if such representations and warranties were given as of the date
of such transaction or action.
(e) PTC shall not, without the prior written consent of IUB, willfully
engage in any transaction or willfully take any action that would render
untrue any of the representations and warranties of PTC contained in Article
III hereof, if such representations and warranties were given as of the date
of such transaction or action.
(f) IUB and PTC will each use their best efforts to maintain their
respective properties and assets in their present state of repair, order and
condition, reasonable wear and tear excepted, and to maintain and keep in
full force and effect all policies of insurance presently in effect,
including the insurance of accounts with the FDIC.
4.2 NO SOLICITATION. (a) Each of IUB and PTC respectively agree that it
shall not, nor shall it permit any of it Subsidiaries to, nor shall it authorize
or permit any officer, director or employee of or any investment banker,
attorney or other advisor or representative of, it or any Subsidiary to, (i)
solicit, initiate or encourage the submission of any takeover proposal (as
defined below), (ii) enter into any agreement with respect to any takeover
proposal or (iii) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any takeover proposal; PROVIDED, HOWEVER,
that nothing contained in this Agreement shall prevent either IUB or PTC or the
Board of Directors of either from (A) furnishing nonpublic information to, or
entering into discussions or negotiations with, any person in connection with an
unsolicited bona fide written takeover proposal to IUB or PTC or their
respective shareholders, if and only to the extent that the Board of Directors
of IUB or PTC, as applicable, determines in good faith based on written advice
of its outside legal counsel that such action is necessary for such Board of
Directors to comply with its fiduciary duties to shareholders under applicable
law, or (B) complying with Rule 14e-2 promulgated under the Exchange Act with
regard to a takeover proposal. Without limiting the foregoing, it is understood
that any violation of the restrictions set forth in the preceding sentence by
any executive officer of IUB or PTC or any of its respective Subsidiaries or any
investment banker, attorney or other advisor or representative of IUB or PTC or
any of their respective Subsidiaries, whether or not such person is purporting
to act on behalf of IUB or any Subsidiary or PTC or any Subsidiary, as
applicable, or otherwise, shall be deemed to be a breach of this Section 4.2(a)
by the party for whom such person is an executive officer of, or an investment
banker, attorney or other advisor or representative for, such party or any
Subsidiary. For purposes of this Agreement, "takeover proposal" means any
proposal for a merger, consolidation or other business combination involving IUB
or PTC or any Subsidiary of either or any proposal or offer to acquire in any
manner, directly or indirectly, more than 20% of any class of voting securities
of IUB or PTC or any Subsidiary of either, or assets representing a substantial
portion of the assets of IUB and its Subsidiaries, taken as a whole, or PTC and
its Subsidiaries, taken as a whole, other than the Merger contemplated by this
Agreement. Each of IUB and PTC shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations by it or any of
its officers, investment bankers, attorneys or other advisors or representatives
with any parties conducted heretofore with respect to any of the foregoing.
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(b) Subject to Section 7.1(d) (in the case of IUB) and Section 7.1(e)
(in the case of PTC), neither the Board of Directors of IUB or PTC nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to the other party, the adoption, approval or
recommendation by such Board of Directors or any such committee of this
Agreement or (ii) approve or recommend, or propose to approve or recommend,
any takeover proposal.
(c) Each of IUB and PTC promptly shall advise the other orally and in
writing of any takeover proposal or any inquiry with respect to or which
could lead to any takeover proposal and the identity of the person making
any such takeover proposal or inquiry. Each of IUB and PTC shall keep the
other promptly and fully informed in all material respects of the status and
details of any such takeover proposal or inquiry.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 INSPECTION OF RECORDS; CONFIDENTIALITY.
(a) IUB and PTC shall each afford to the other and to the other's
accountants, counsel and other representatives (and their Subsidiaries)
reasonable access during normal business hours during the period prior to
the Effective Time to all of their respective properties, books, contracts,
commitments and records, including all attorneys' responses to auditors'
requests for information, and accountants' work papers, developed by either
of them or their respective Subsidiaries or their respective accountants or
attorneys, and will permit each other and their respective representatives
to discuss such information directly with each other's officers, directors,
employees, attorneys and accountants. IUB and PTC shall each use their best
efforts to furnish to the other all other information concerning its
business, properties and personnel as such other party may reasonably
request. Any failure to comply with this covenant shall be disregarded if
promptly corrected without material adverse consequences to the other party.
The availability or actual delivery of such information (except where set
forth in the IUB Letter or PTC Letter) shall not affect the representations,
warranties, covenants, and agreements of the party providing such
information that are contained in this Agreement or in any certificates or
other documents delivered pursuant hereto.
(b) In the event that this Agreement is terminated, each party shall
return all non-public documents furnished hereunder, shall destroy all
documents or portions thereof prepared by such other party that contain
non-public information furnished by the other party pursuant hereto and, in
any event, shall hold all non-public information confidential unless or
until such information is or becomes a matter of public knowledge or is or
becomes known to the party receiving the information through persons other
than the party providing such information.
5.2 PREPARATION OF S-4 AND THE PROXY STATEMENT. IUB shall prepare and file
with the SEC the S-4, in which the Proxy Statement will be included as a
prospectus. Each of IUB and PTC shall use all reasonable efforts to have the S-4
declared effective under the Securities Act as promptly as practicable after
such filing. IUB shall also take any action (other than qualifying to do
business in any jurisdiction in which it is now not so qualified) required to be
taken under any applicable state securities laws in connection with the issuance
of IUB Common Stock in the Merger and PTC shall furnish all information
concerning PTC and the holders of PTC Common Stock as may be reasonably
requested in connection with any such action.
5.3 SHAREHOLDER MEETINGS.
(a) IUB. IUB shall, as soon as practicable, duly call, give notice of,
convene and hold a meeting of its shareholders (the "IUB Shareholders
Meeting") for the purpose of voting upon the approval of this Agreement and
the transactions contemplated hereby. Subject to Section 7.1(d), IUB shall,
through its Board of Directors, recommend to its shareholders approval of
this Agreement and
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the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, IUB agrees that its obligations pursuant to the
first sentence of this Section 5.3(a) shall not be altered by the
commencement, public proposal, public disclosure or communication to IUB of
any takeover proposal. IUB shall coordinate and cooperate with PTC with
respect to the timing of such meeting and shall use its best efforts to hold
such meeting within one day of the date on which PTC shall hold a meeting of
its shareholders pursuant to Section 5.3(b), and as soon as practicable
after the date on which the S-4 becomes effective.
(b) PTC. PTC shall, as soon as practicable, duly call, give notice of,
convene and hold a meeting of its shareholders (the "PTC Shareholders
Meeting") for the purpose of voting upon the approval of this Agreement and
the transactions contemplated hereby. Subject to Section 7.1(e), PTC shall,
through its Board of Directors, recommend to its shareholders approval of
this Agreement and the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, PTC agrees that its obligations
pursuant to the first sentence of this Section 5.3(b) shall not be altered
by the commencement, public proposal, public disclosure or communication to
PTC of any takeover proposal. PTC shall coordinate and cooperate with IUB
with respect to the timing of such meeting and shall use its best efforts to
hold such meeting within one day of the date on which IUB shall hold a
meeting of its shareholders pursuant to Section 5.3(a), and as soon as
practicable after the date on which the S-4 becomes effective.
5.4 AFFILIATES.
(a) OF PTC. At least 30 days prior to the Closing Date, PTC shall
deliver to IUB a list of names and addresses of those persons who were, in
PTC's reasonable judgment, at the record date for its meeting of
shareholders to approve the Merger, "affiliates" (each such person, an
"Affiliate") of PTC within the meaning of Rule 145 of the rules and
regulations promulgated under the Securities Act. PTC shall provide IUB such
information and documents as IUB shall reasonably request for purposes of
reviewing such list. PTC shall use all reasonable efforts to deliver or
cause to be delivered to IUB and PTC, prior to the Closing Date, from each
of the Affiliates of PTC identified in the foregoing list, an Affiliate
Letter in the form attached hereto as Exhibit 5.4(a). IUB shall be entitled
to place legends as specified in such Affiliate Letters on the certificates
evidencing any IUB Common Stock to be received by such Affiliates pursuant
to the terms of this Agreement, and to issue appropriate stop transfer
instructions to the transfer agent for IUB Common Stock, consistent with the
terms of such Affiliate Letters.
(b) OF IUB. At least 30 days prior to the Closing Date, IUB shall
deliver to PTC a list of names and addresses of those persons who were, in
IUB's reasonable judgment, at the record date for its meeting of
shareholders to approve the Merger, Affiliates of IUB. IUB shall provide PTC
such information and documents as PTC shall reasonably request for purposes
of reviewing such list. IUB shall use all reasonable efforts to deliver or
cause to be delivered to IUB, prior to the Closing Date, from each of the
Affiliates of IUB identified in the foregoing list, an Affiliate Letter in
the form attached hereto as Exhibit 5.4(b).
5.5 BROKERS. Each of IUB and PTC represents, as to itself and its
Subsidiaries, that no agent, broker, investment banker or other firm or person
or officer or director of either is or will be entitled to any broker's or
finder's fee or any other commission, bonus or similar fee in connection with
any of the transactions contemplated by this Agreement.
5.6 COOPERATION. Each party covenants that it will use its best efforts to
bring about the transactions contemplated by this Agreement as soon as
practicable, unless this Agreement is terminated as provided herein. Subject to
the terms and conditions herein provided, each of the parties hereto agrees to
use all reasonable efforts to take, or cause to be taken, all action, and to do,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement at the earliest practicable time. In case at any
time after
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the Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and/or directors of IUB or PTC,
as the case may be, shall take all such necessary action. Each party shall use
its reasonable best efforts to preserve for itself and the other party each
available legal privilege with respect to the confidentiality of their
negotiations and related communications, including the attorney-client
privilege.
5.7 REGULATORY APPLICATIONS. IUB and PTC shall, as soon as reasonably
practicable, file all necessary applications relating to the Merger with all
applicable regulatory authorities, and shall use their best efforts to respond
as promptly as practicable to all inquiries received concerning said
applications. In the event of an adverse or unfavorable determination by any
regulatory authority, or in the event the Merger is challenged or opposed by any
administrative or legal proceeding, whether by the United States Department of
Justice or otherwise, the determination of whether and to what extent to seek
appeal or review, administrative or otherwise, or other appropriate remedies
shall be jointly made by IUB and PTC. The party filing an application shall
deliver a copy thereof to the other party in advance of filing with a reasonable
opportunity for such other party to review the application, and copies of all
responses from or written communications from regulatory authorities relating to
the Merger or this Agreement (to the extent permitted by law), and the filing
party shall also deliver a final copy of each regulatory application to the
other party promptly after it is filed with the appropriate regulatory
authority. Each party shall advise the other party periodically of the status of
each regulatory application.
5.8 FINANCIAL STATEMENTS AND REPORTS. From the date of this Agreement and
prior to the Effective Time: (a) each party will make available to the other,
not later than ninety 90 days after the end of any fiscal year, its Annual
Report on Form 10-K or 10-KSB as the case may be (and all schedules and exhibits
thereto) for the fiscal period then ended prepared in conformity with generally
accepted accounting principles; (b) each party will make available to the other
not later than 30 days after the end of any fiscal quarter, the Reports of
Condition and Income filed by each of its subsidiaries that is a financial
institution with its primary regulator which shall be prepared in accordance
with all applicable rules and regulations; (c) each party will make available to
the other not later than 45 days after the end of each quarter, its Report on
Form 10-Q or 10-QSB, as the case may be, for such quarter as filed with the SEC
which shall be prepared in conformity with generally accepted accounting
principles and the rules and regulations of the SEC; and (d) each party will
make available to the other any and all other material reports filed with the
SEC, the Federal Reserve Board, the OCC, the FDIC, the OTS, or any other
regulatory agency within three business days of the filing of any such report.
5.9 NOTICE. At all times prior to the Effective Time, each party shall
promptly notify the other in writing of the occurrence of any event which will
or may result in the failure to satisfy any of the conditions specified in
Sections 6.2 (in the case of PTC) or 6.3 (in the case of IUB). In the event that
either party becomes aware of the occurrence or impending occurrence of any
event which would constitute or cause a breach by it of any of its
representations and warranties, covenants or agreements herein in any material
respect, or would have constituted or caused a breach by it of its
representations and warranties, covenants or agreements herein in any material
respect, had such an event occurred or been known prior to the date hereof, said
party shall immediately give detailed and written notice thereof to the other
party, and shall, unless the same has been waived in writing by the other party,
use its reasonable efforts to remedy the same, provided that such efforts, if
not successful, shall not be deemed to satisfy any condition precedent to the
Merger.
5.10. PUBLIC ANNOUNCEMENTS. Subject to each party's disclosure obligations
imposed by law, IUB and PTC will cooperate with each other in the development
and distribution of all news releases and other public information disclosures
with respect to this Agreement or any of the transactions contemplated hereby
and shall not issue any public announcement or statement with respect hereto or
thereto without the consent of the other party (which consent shall not be
unreasonably withheld).
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5.11 EXPENSES. Subject to Section 7.2, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses, except that those expenses incurred
in connection with printing the S-4 and the Proxy Statement, as well as the
filing fee relating thereto, shall be shared equally by IUB and PTC.
5.12 PTC OPTIONS.
(a) As of the Effective Time, each of the PTC Options that is
outstanding as of the Effective Time shall be assumed by IUB and converted
into an option to purchase the number of shares of IUB Common Stock (rounded
up to the nearest whole share) equal to the number of shares of PTC Common
Stock subject to such option multiplied by the Conversion Ratio at an
exercise price per share of IUB Common Stock (rounded down to the nearest
penny) equal to the former exercise price per share of PTC Common Stock
under such option immediately prior to the Effective Time divided by the
Conversion Ratio; PROVIDED, HOWEVER, that to the extent any PTC Option
constitutes an "incentive stock option" (within the meaning of Section 422
of the Code) immediately prior to the Effective Time, such PTC Option shall
continue to qualify as an incentive stock option to the maximum extent
permitted by Section 422 of the Code, and the assumption of the PTC Option
provided by this Section 5.12 shall satisfy the conditions of Section 424(a)
of the Code.
(b) Except as provided in Section 5.12(a), each PTC Option assumed by
IUB as of the Effective Time shall continue to have, and shall be subject
to, the same terms and conditions set forth in or otherwise established
pursuant to the PTC Stock Option Plan (as defined in Section 3.1(b))
pursuant to which such PTC Option was granted.
(c) As of the Effective Time of the Merger, IUB shall enter into an
assumption agreement with respect to each PTC Option which shall provide for
IUB's assumption of the obligations of PTC under the PTC Stock Option Plan.
Prior to the Effective Time, PTC shall make such amendments, if any, to the
PTC Stock Option Plan as shall be necessary to permit such assumption in
accordance with this Section 5.12.
5.13 SURVIVING CORPORATION BENEFIT PLANS.
(a) GENERAL. Unless otherwise mutually determined, and subject to the
provisions of Section 5.13(c), the PTC Benefit Plans in effect on the date
of this Agreement shall remain in effect after the Effective Time. Following
the Effective Time of the Merger, the Surviving Corporation shall formulate
Benefit Plans for the Surviving Corporation and its Subsidiaries, with
respect both to employees who were covered by the PTC Benefit Plans and IUB
Benefit Plans at the Effective Time and employees who were not covered by
such plans at the Effective Time, that provide benefits for services after
the Effective Time on a basis that does not discriminate between employees
who were covered by PTC Benefit Plans and employees who were covered by IUB
Benefit Plans.
(b) CREDIT FOR PAST SERVICE. Without limitation on the foregoing
provisions of this Section 5.13, each participant of any PTC Benefit Plan
shall receive credit for purposes of (i) eligibility to participate, vesting
and eligibility to receive benefits under any IUB Benefit Plan or any
benefit plan of the Surviving Corporation or any of its Subsidiaries that
replaces a PTC Benefit Plan or IUB Benefit Plan, and (ii) benefit accrual
under any severance, sickness or vacation pay plan, for service credited for
the corresponding purpose under such PTC Benefit Plan; PROVIDED, HOWEVER,
that such crediting of service shall not operate to duplicate any benefit to
any such participant or the funding for any such benefit.
(c) PTC 401K PENSION PLAN. Pursuant to its terms, PTC's 401K Pension
Plan (the "Plan") will terminate as of the Effective Time of the Merger and
all PTC employees who have elected to participate in the Plan will become
fully vested. Accordingly, at the Effective Time of the Merger, IUB shall
take such actions as are necessary to permit employees of PTC and its
Subsidiaries, who so elect,
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to participate in IUB's existing retirement or pension plan until such time
as the Surviving Corporation formulates benefit plans to be applicable to
all employees of the Surviving Corporation and its Subsidiaries. For those
employees who elect to transfer their 401K pension funds to IUB, IUB shall
provide benefits and services after the Effective Time on a basis that does
not discriminate between employees who were covered by PTC's 401K Pension
Plan and IUB's retirement or pension plan. Employees of PTC and its
Subsidiaries shall receive credit for purposes of eligibility to
participate, vesting and eligibility to receive benefits in IUB's retirement
or pension plan consistent with their number of years of service with PTC.
5.14 EXTENT OF KNOWLEDGE. For purposes of this Agreement and any other
certificate or document delivered by one party to the other pursuant hereto, the
"best knowledge" of IUB or PTC shall be limited to matters actually known to any
of its executive officers.
5.15 POOLING AND TAX-FREE REORGANIZATION TREATMENT. Neither IUB nor PTC
shall intentionally cause to be taken any action, whether before or after the
Effective Time, that would disqualify the Merger as a "pooling of interests" for
accounting and financial reporting purposes or as a "reorganization" within the
meaning of Section 368(a) of the Code.
5.16 NASDAQ STOCK MARKET LISTING. IUB shall use its best efforts to list
on the Nasdaq Stock Market, Inc.'s National Market, subject to official notice
of issuance, the shares of IUB Common Stock to be issued in the Merger.
5.17 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. IUB agrees
that the Merger shall not affect or diminish any of PTC's duties and obligations
of indemnification existing immediately prior to the Effective Time in favor of
employees, agents, directors, or officers of PTC arising by virtue of the
Articles of Incorporation, or Bylaws of PTC in the form in effect at the date of
this Agreement or arising by operation of law or arising by virtue of any
contract, resolution or other agreement or document existing at the date of this
Agreement, and such duties and obligations shall continue in full force and
effect for so long as they would (but for the Merger) otherwise survive and
continue in full force and effect. IUB shall cause the persons serving as
officers and directors of PTC immediately prior to the Effective Time to be
covered for a period of three years from the Effective Time by the directors'
and officers' liability insurance and indemnification policy maintained by PTC
on the date hereof (provided that IUB may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions which are
not materially less advantageous than such policy) with respect to acts or
omissions occurring prior to the Effective Time which were committed by such
officers and directors in their capacity as such so long as the annual premium
therefor does not exceed 200% of the annual premium in effect on the date
hereof.
5.18 SURVIVING CORPORATION BOARD OF DIRECTORS. The Board of Directors of
IUB will take such action as may be necessary (including the amendment of the
IUB bylaws) to cause the number of directors comprising the full Board of
Directors of IUB immediately prior to or at the Effective Time to be 10 persons,
5 of whom shall be existing directors of IUB prior to the Effective Time
designated by IUB and 5 of whom shall be existing directors of PTC prior to the
Effective Time designated by PTC. If, prior to the Effective Time, any such
designees shall decline or be unable to serve, the party that designated such
person shall designate another person to serve in such person's stead. Each such
person so designated shall be a director of the Surviving Corporation until the
earlier of his resignation or removal or until his successor is duly elected or
appointed, as the case may be.
5.19 SURVIVING CORPORATION OFFICERS. At the Effective Time, pursuant to
the terms hereof (and, in the case of James L. Saner, the employment contract
referred to in Section 5.20), (a) Robert E. Hoptry shall hold the positions of
Chairman of the Board and Chief Executive Officer of the Surviving Corporation
and shall be entitled to serve in such capacities until his resignation or
removal or until his successor is elected or appointed, as the case may be, and
(b) James L. Saner shall hold the position of President and Chief Operating
Officer of the Surviving Corporation and shall be entitled to serve in such
capacity until
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his resignation or removal or until his successor is duly elected or appointed
in accordance with the articles of incorporation and bylaws of the Surviving
Corporation. At or promptly after the Effective Time, the Board of Directors of
the Surviving Corporation will take such action as may be necessary (including
the amendment of the Surviving Corporation's bylaws) to cause Robert S. Dunevant
to be elected to the honorary position of Vice Chairman of the Board. If any of
such persons is unable or unwilling to hold such office(s) as set forth above,
his successor shall be selected by the Board of Directors of the Surviving
Corporation in accordance with its bylaws. At the Effective Time, each of the
other officers of IUB immediately prior to the Effective Time shall continue to
hold his or her respective office as an officer of the Surviving Corporation
until the earlier of his or her resignation or removal or until his or her
successor is duly elected or appointed, as the case may be.
5.20 EMPLOYMENT CONTRACT. IUB shall, as of or prior to the Effective Time,
enter into an employment contract with James L. Saner in the form set forth in
Exhibit 5.20.
5.21 IUB CONTEMPLATED OFFERING. PTC acknowledges that IUB has informed it,
on a confidential basis, that IUB is contemplating an underwritten public
offering of securities of a newly formed Subsidiary to be guaranteed by IUB, as
more fully described in the IUB Letter (the "Contemplated Offering"). PTC hereby
consents to the Contemplated Offering, should IUB determine to commence it. Any
decision not to commence the Contemplated Offering by IUB, or any failure to
consummate the Contemplated Offering for any reason (other than a material
breach by PTC of its obligations under this Section 5.21), shall not affect the
obligations of IUB or PTC under this Agreement. With respect to the Contemplated
Offering, PTC shall provide IUB and its legal counsel, accountants and other
representatives, and to the underwriter of the Contemplated Offering and its
legal counsel and other representatives, with such information about the
business and condition (financial and otherwise) of PTC as they collectively
shall deem necessary or appropriate in connection with the registration and
consummation of the Contemplated Offering under the Securities Act and any
applicable state securities or blue sky laws. PTC shall instruct and otherwise
use its best efforts to cause its directors, officers, employees, agents and
advisors to cooperate with IUB and the underwriter of the Contemplated Offering,
and the respective representatives and advisors of each, with respect to the
provision of such information regarding PTC. PTC shall consent, and shall use
its best efforts to cause its independent certified accountants to consent, in
such form as may be reasonably required by IUB, to the inclusion of such
information about PTC in the registration statement (including any amendments or
supplements thereto) relating to the Contemplated Offering (and in the
prospectus constituting a part thereof) to the extent such consent is required
by the SEC. None of the information supplied or to be supplied by PTC for
inclusion in the registration statement relating to the Contemplated Offering
(and in the prospectus constituting a part thereof) will, at the time the
registration statement is filed with the SEC, at the time it becomes effective
and at the time of consummation of the Contemplated Offering, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Prior to filing the
registration statement relating to the Contemplated Offering (or any amendment
or supplement thereto), IUB will take such actions as are reasonable under the
circumstances to provide PTC, on a confidential basis, with copies of such
registration statement (or amendment or supplement) proposed to be filed with
the SEC, and to allow PTC the opportunity to comment promptly thereon with
respect to information disclosed about PTC. In the event the Merger is not
consummated (other than (i) because of a breach by PTC of any representation,
warranty, covenant or other agreement contained in this Agreement which would
give rise to the failure of a condition set forth in Section 6.2(a) or 6.2(b) or
(ii) the termination of this Agreement by PTC pursuant to Section 7.1(e)), IUB
shall reimburse PTC for all its reasonable out-of-pocket expenses actually
incurred in connection with the performance of its obligations under this
Section 5.21, up to a maximum of $10,000, which amount shall be payable by wire
transfer of same day funds within 5 business days of written demand, accompanied
by a reasonably detailed statement of such expenses and appropriate supporting
documentation therefor.
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5.22 PTC ALLOWANCE PROVISION. On or before December 15, 1997, PTC shall
increase its Allowance by such amount as shall be necessary to cause its
Allowance to be 1.2% of the gross amount of its loans, leases and other
extensions of credit at November 30, 1997.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) SHAREHOLDER APPROVALS. This Agreement shall have been respectively
approved by the affirmative vote of the holders of the outstanding shares of
IUB Common Stock and PTC Common Stock.
(b) OTHER APPROVALS. Other than the filing of the Articles of Merger
provided for by Section 1.1, all authorizations, consents, orders or
approvals of, or declarations or filings with, and all expirations of
waiting periods imposed by, any Governmental Entity (all of the foregoing,
"Consents") that are necessary for the consummation of the Merger, other
than immaterial Consents the failure to obtain which would not have a
significant adverse effect on the consummation of the Merger or on the
Surviving Corporation and its Subsidiaries, taken as a whole, after
consummation of the Merger, shall have been filed, occurred or been obtained
(all such permits, approvals, filings and consents and the lapse of all such
waiting periods being referred to as the "Requisite Regulatory Approvals")
and all such Requisite Regulatory Approvals shall be in full force and
effect. IUB shall have received all state securities or blue sky permits and
other authorizations necessary to issue the IUB Common Stock in exchange for
PTC Common Stock and to consummate the Merger.
(c) S-4. The S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceeding seeking a stop
order.
(d) POOLING. IUB and PTC shall have received a letter from Geo. S.
Olive & Co., LLC, IUB's independent public accountants, and Crowe Chizek and
Company, LLP, PTC's independent public accountants, to the effect that the
Merger qualifies for "pooling of interests" accounting treatment under
Accounting Principles Board Opinion No. 16, the interpretive releases issued
pursuant thereto, and the pronouncements of the SEC if consummated in
accordance with this Agreement.
(e) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect,
nor shall any proceeding by any Governmental Entity seeking any of the
foregoing be pending. There shall not be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to
the Merger, which makes the consummation of the Merger illegal.
(f) BURDENSOME CONDITION. There shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, by any Governmental Entity which, in connection
with the grant of a Requisite Regulatory Approval, imposes any condition or
restriction upon IUB or its Subsidiaries, PTC or its Subsidiaries, or the
Surviving Corporation or its Subsidiaries, that would so materially
adversely impact the economic or business benefits of the transactions
contemplated by this Agreement as to render inadvisable the consummation of
the Merger.
(g) NMS LISTING. The shares of IUB Common Stock issuable pursuant to
this Agreement shall have been approved for listing on the National Market
of the Nasdaq Stock Market, Inc., subject to official notice of issuance.
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6.2 CONDITIONS TO OBLIGATIONS OF IUB. The obligations of IUB to effect the
Merger are subject to the satisfaction of the following conditions or waiver by
IUB on or prior to the Closing Date:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of PTC set forth in this Agreement that are qualified as to materiality
shall be true and correct, and the representations and warranties of PTC set
forth in this Agreement that are not so qualified shall be true and correct
in all material respects, in each case as of the date of this Agreement and
as of the Closing Date as though made on and as of the Closing Date, except
to the extent such representation or warranty expressly relates to an
earlier date ( in which case as of such date), and IUB shall have received a
certificate signed on behalf of PTC by the Chief Executive Officer and the
Chief Financial Officer of PTC to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PTC. PTC shall have performed in all
material respects all obligations required to be performed by it under this
Agreement, at or prior to the Closing Date, and IUB shall have received a
certificate signed on behalf of PTC by the Chief Executive Officer and the
Chief Financial Officer of PTC to such effect.
(c) CONSENTS UNDER AGREEMENTS. PTC shall have obtained the consent or
approval of each person (other than the Governmental Entities referred to in
Section 6.1(b)) whose consent or approval shall be required in order to
permit the succession by the Surviving Corporation pursuant to the Merger to
any obligation, right or interest of PTC or any Subsidiary of PTC under any
loan or credit agreement, note, mortgage, indenture, lease license or other
agreement or instrument, except those for which failure to obtain such
consents and approvals would not, in the reasonable opinion of IUB,
individually or in the aggregate, have a Material Adverse Effect on the
Surviving Corporation or upon the consummation of the transactions
contemplated hereby.
(d) TAX OPINION. IUB shall have received an opinion of Geo. S. Olive &
Co., LLC, dated the Closing Date, in form and substance satisfactory to IUB,
to the effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code.
(e) LETTERS FROM PTC AFFILIATES. IUB shall have received from each
person named in the letter referred to in Section 5.4(a) an executed copy of
an agreement in the form of Exhibit 5.4(a).
6.3 CONDITIONS TO OBLIGATIONS OF PTC. The obligations of PTC to effect the
Merger are subject to the satisfaction or waiver by PTC on or prior to the
Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of IUB set forth in this Agreement that are qualified as to materiality
shall be true and correct, and the representations and warranties of IUB set
forth in this Agreement that are not so qualified shall be true and correct
in all material respects, in each case as of the date of this Agreement and
as of the Closing Date as though made on and as of the Closing Date, except
to the extent such representation or warranty expressly relates to another
date (in which case as of such date), and PTC shall have received a
certificate signed on behalf of IUB by the Chief Executive Officer and the
Chief Financial Officer of IUB to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF IUB. IUB shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and PTC have received a
certificate signed on behalf of IUB by the Chief Executive Officer and the
Chief Financial Officer of IUB to such effect.
(c) CONSENTS UNDER AGREEMENTS. IUB shall have obtained the consent or
approval of each person (other than the Governmental Entities referred to in
Section 6.1(b)) whose consent or approval shall be required in connection
with the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease, license or other agreement or
instrument, except those for which failure to obtain such consents and
approvals would not, in the reasonable opinion of
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PTC, individually or in the aggregate, have a Material Adverse Effect on the
Surviving Corporation or upon the consummation of the transactions
contemplated hereby.
(d) TAX OPINION. PTC shall have received an opinion of Crowe Chizek
and Company, LLP, dated the Closing Date, in form and substance satisfactory
to PTC, to the effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code.
(e) LETTERS FROM IUB AFFILIATES. IUB shall have received from each
person named in the letter referred to in Section 5.4(b) an executed copy of
an agreement substantially in the form of Exhibit 5.4(b).
ARTICLE VII
TERMINATION; EXPENSES; AMENDMENT; WAIVER
7.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after the approval of this
Agreement by the shareholders of IUB and/or PTC:
(a) by mutual written consent of IUB and PTC;
(b) by either IUB or PTC:
(i) if, at a duly held shareholders meeting of IUB or any adjournment
thereof at which approval of this Agreement is voted upon, the approval of
the shareholders of IUB shall not have been obtained;
(ii) if, at a duly held shareholders meeting of PTC or any adjournment
thereof at which approval of this Agreement is voted upon, the approval of
the shareholders of PTC shall not have been obtained;
(iii) if the Merger shall not have been consummated on or before April
30, 1998, unless the failure to consummate the Merger is the result of a
willful and material breach of this Agreement by the party seeking to
terminate this Agreement; PROVIDED, HOWEVER, that if all the conditions set
forth in Sections 6.1 (other than 6.1(b)), 6.2 and 6.3 have been satisfied
by or prior to such date, either IUB or PTC may, by notice to the other on
or prior to such date, extend such date to the latest date so extended by
either party but in no event later than May 31, 1998;
(iv) if any court of competent jurisdiction or other Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become final and
non-appealable;
(v) in the event of a breach by the other party of any representation,
warranty, covenant or other agreement contained in this Agreement which (A)
would give rise to the failure of a condition set forth in Section 6.2(a) or
6.2(b) or Section 6.3(a) or 6.3(b), as applicable, and (B) cannot be or has
not been cured within 30 days after the giving of written notice to the
breaching party of such breach ("Material Breach") (PROVIDED that the
terminating party is not then in breach of any representation, warranty,
covenant or other agreement that would give rise to a failure of a condition
described in clause (A) above);
(c) by either IUB or PTC in the event that (i) all the conditions to the
obligation of such party to effect the Merger set forth in Section 6.1 shall
have been satisfied and (ii) any condition to the obligation of such party to
effect the Merger set forth in Section 6.2 (in the case of IUB) or Section 6.3
(in the case of PTC) is not capable of being satisfied prior to the end of the
period referred to in Section 7.1(b)(iii);
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(d) by IUB, subject to Section 7.5(b), if the Board of Directors of IUB
shall concurrently approve, and IUB shall concurrently enter into, a definitive
agreement providing for the implementation of the transactions contemplated by a
takeover proposal; PROVIDED, HOWEVER, that (i) IUB is not then in breach of
Section 4.2 or in breach of any other representation, warranty, covenant or
agreement that would give rise to a failure of a condition set forth in Section
6.3(a) or 6.3(b); (ii) the Board of Directors of IUB shall have complied with
Section 7.5(b) in connection with such takeover proposal and (iii) no
termination pursuant to this Section 7.1(d) shall be effective unless IUB shall
simultaneously make the payment required by Section 7.2(a); or
(e) by PTC, subject to Section 7.5(c), if the Board of Directors of PTC
shall concurrently approve, and PTC shall concurrently enter into, a definitive
agreement providing for the implementation of the transactions contemplated by a
takeover proposal; PROVIDED, HOWEVER that (i) PTC is not then in breach of
Section 4.2 or in breach of any other representation, warranty, covenant or
agreement that would give rise to a failure of a condition set forth in Section
6.2(a) or 6.2(b); (ii) the Board of Directors of PTC shall have complied with
Section 7.5(c) in connection with such takeover proposal and (iii) no
termination pursuant to this Section 7.1(e) shall be effective unless PTC shall
simultaneously make the payment required by Section 7.2(b).
7.2 EFFECT OF TERMINATION.
(a) In the event that any person shall make a takeover proposal with respect
to IUB and thereafter (i) this Agreement is terminated (A) pursuant to Section
7.1(b)(i), (B) pursuant to Section 7.1(b)(iii) (if at the time of termination
(x) IUB is in breach of any representation, warranty, covenant or other
agreement that would give rise to a failure of a condition set forth in Section
6.3(a) or 6.3(b) and (y) such breach cannot be or has not been cured within 30
days after IUB becomes aware of such breach or such shorter period as may elapse
between the date IUB becomes aware of such breach and the time of termination),
(C) pursuant to Section 7.1(b)(iv) (if at the time of termination (x) IUB is in
breach of any representation, warranty, covenant or other agreement that would
give rise to a failure of a condition set forth in Section 6.3(a) or 6.3(b) and
(y) such breach cannot be or has not been cured within 30 days after IUB becomes
aware of such breach), (D) by PTC pursuant to Section 7.1(b)(v), (E) by PTC
pursuant to Section 7.1(c) or (F) by IUB pursuant to Section 7.1(d), and (ii) a
definitive agreement with respect to a takeover proposal is executed, or a
takeover proposal is consummated, at or within 12 months after such termination,
then PTC shall be paid a fee of $1,000,000 in connection with such termination,
which amount shall be payable by wire transfer of same day funds on the date
such agreement is executed, or such takeover proposal is consummated, as
applicable. IUB acknowledges that the agreements contained in this Section
7.2(a) are an integral part of the transactions contemplated by this Agreement,
and that without these agreements, PTC would not enter into this Agreement;
accordingly, if IUB fails to promptly pay the amount due pursuant to this
Section 7.2(a), and, in order to obtain such payment, PTC commences a suit that
results in a judgment against IUB for the fees set forth in this Section 7.2(a),
IUB shall also pay to PTC its costs and expenses (including reasonable
attorneys' fees) in connection with such suit.
(b) In the event that any person shall make a takeover proposal with respect
to PTC and thereafter (i) this Agreement is terminated (A) pursuant to Section
7.1(b)(ii), (B) pursuant to Section 7.1(b)(iii) (if at the time of termination
(x) PTC is in breach of any representation, warranty, covenant or other
agreement that would give rise to a failure of a condition set forth in Section
6.2(a) or 6.2(b) and (y) such breach cannot be or has not been cured within 30
days after PTC becomes aware of such breach or such shorter period as may elapse
between the date PTC becomes aware of such breach and the time of termination),
(C) pursuant to Section 7.1(b)(iv) (if at the time of termination (x) PTC is in
breach of any representation, warranty, covenant or other agreement that would
give rise to a failure of a condition set forth in Section 6.2(a) or 6.2(b) and
(y) such breach cannot be or has not been cured within 30 days after PTC becomes
aware of such breach), (D) by IUB pursuant to Section 7.1(b)(v), (E) by IUB
pursuant to Section 7.1(c) or (F) by PTC pursuant to Section 7.1(e), and (ii) a
definitive agreement with respect to a takeover proposal is executed, or a
takeover proposal is consummated, at or within 12 months after such termination,
then
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IUB shall be paid a fee of $1,000,000 in connection with such termination, which
amount shall be payable by wire transfer of same day funds on the date such
agreement is executed, or such takeover proposal is consummated, as applicable.
PTC acknowledges that the agreements contained in this Section 7.2(b) are an
integral part of the transactions contemplated by this Agreement, and that
without these agreements, IUB would not enter into this Agreement; accordingly,
if PTC fails to promptly pay the amount due pursuant to this Section 7.2(b),
and, in order to obtain such payment, IUB commences a suit that results in a
judgment against PTC for the fees set forth in this Section 7.2(b), PTC shall
also pay to IUB its costs and expenses (including reasonable attorneys' fees) in
connection with such suit.
(c) In the event of termination of this Agreement by either IUB or PTC as
provided in Section 7.1, this Agreement shall forthwith become void and have no
effect, without any liability or obligation on the part of IUB or PTC, other
than the provisions of Section 5.1(b), Section 5.11, this Section 7.2 and
Article VIII and except to the extent that such termination results from the
willful and material breach by a party of any its representations, warranties,
covenants or other agreements set forth in this Agreement.
7.3 AMENDMENT. This Agreement may be amended by the parties at any time
before or after the approval of this Agreement by the shareholders of IUB and/or
PTC; PROVIDED, HOWEVER, that after such approval by the shareholders of IUB
and/or PTC, there shall be made no amendment that pursuant to the IBCL requires
further approval by the shareholders of IUB and/or PTC without the further
approval of such shareholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties
7.4 EXTENSION WAIVER. At any time prior to the Effective Time of the
Merger, the parties may (i) extend the time for the performance of any of the
obligations or other acts of the other parties; (ii) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement; or (iii) subject to the proviso
of Section 7.3, waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
7.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER.
(a) A termination of this Agreement pursuant to Section 7.1, an amendment of
this Agreement pursuant to Section 7.3 or an extension or waiver pursuant to
Section 7.4 shall, in order to be effective, require, in the case of IUB and/or
PTC, action by its Board of Directors or, in the case of an extension or waiver
pursuant to Section 7.4, the duly authorized designee of its Board of Directors.
(b) IUB shall provide to PTC written notice prior to any termination of this
Agreement pursuant to Section 7.1(d) advising PTC (i) that the Board of
Directors of IUB in the exercise of its good faith judgment as to its fiduciary
duties to the shareholders of IUB under applicable law, after receipt of written
advice of outside legal counsel, has determined (on the basis of such takeover
proposal and the terms of this Agreement, as then in effect) that such
termination is required in connection with a takeover proposal that is more
favorable to the shareholders of IUB than the transactions contemplated by this
Agreement (taking into account all terms of such takeover proposal and this
Agreement, including all conditions) and (ii) as to the material terms of any
such takeover proposal. At any time after five business days following receipt
of such notice, IUB may terminate this Agreement as provided in Section 7.1(d)
only if the Board of Directors of IUB determines that such takeover proposal is
more favorable to the shareholders of IUB than the transactions contemplated by
this Agreement (taking into account all terms of such takeover proposal and this
Agreement, including all conditions, and which determination shall be made in
light of any revised proposal made by PTC prior to the expiration of such five
business day period) and IUB concurrently enters into a definitive agreement
providing for the implementation of the transactions contemplated by such
takeover proposal.
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(c) PTC shall provide to IUB written notice prior to any termination of this
Agreement pursuant to Section 7.1(e) advising IUB (i) that the Board of
Directors of PTC in the exercise of its good faith judgment as to its fiduciary
duties to the shareholders of PTC under applicable law, after receipt of written
advice of outside legal counsel, has determined (on the basis of such takeover
proposal and the terms of this Agreement, as then in effect) that such
termination is required in connection with a takeover proposal that is more
favorable to the shareholders of PTC than the transactions contemplated by this
Agreement (taking into account all terms of such takeover proposal and this
Agreement, including all conditions) and (ii) as to the material terms of any
such takeover proposal. At any time after five business days following receipt
of such notice, PTC may terminate this Agreement as provided in Section 7.1(e)
only if the Board of Directors of PTC determines that such takeover proposal is
more favorable to the shareholders of PTC than the transactions contemplated by
this Agreement (taking into account all terms of such takeover proposal and this
Agreement, including all conditions, and which determination shall be made in
light of any revised proposal made by IUB prior to the expiration of such five
business day period) and PTC concurrently enters into a definitive agreement
providing for the implementation of the transactions contemplated by such
takeover proposal.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time of the Merger. This
Section 8.1 shall not limit any covenant or agreement of the parties that by its
terms contemplates performance after the Effective Time of the Merger.
8.2 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given (i) on
the first business day following the date received, if delivered personally or
by telecopy (with telephonic confirmation of receipt by the addressee), (ii) on
the business day following timely deposit with an overnight courier service, if
sent by overnight courier specifying next day delivery and (iii) on the first
business day that is at least two days following deposit in the mails, if sent
by first class mail, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
<TABLE>
<S> <C>
(a) If to IUB, to it at: Indiana United Bancorp
201 N. Broadway
P.O. Box 87
Greensburg, IN 47240-0087
Attn: Robert E. Hoptry, Chairman,
President and Chief Executive
Officer
Telecopy No. (812) 663-4812
With a copy (which shall not David W. Harper, Esq.
constitute notice) to: 2450 Meidinger Tower
Louisville, Kentucky 40202
Telecopy No. (502) 583-2418
</TABLE>
and
<TABLE>
<S> <C>
(b) If to PTC, to it at: P.T.C. Bancorp
1250 Franklin Avenue
Brookville, IN 47012
Attn: James L. Saner, President and
Chief Executive Officer
</TABLE>
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<TABLE>
<S> <C>
Telecopy No. (765) 647-2238
With a copy (which shall not constitute Robert T. Wildman, Esq.
notice) to: Henderson, Daily, Withrow & DeVoe
2600 One Indiana Square
Indianapolis, IN 46204
Telecopy No. (317) 639-0191
</TABLE>
8.3 INTERPRETATION. Unless the context otherwise requires, words
describing the singular number shall include the plural and vice versa, and
words denoting any gender shall include all genders and words denoting natural
persons shall include corporations and other entities and vice versa. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. When a
reference is made in this Agreement to any "Section" or "Exhibit," such
reference shall be to a section or exhibit to this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." Whenever the words "or any Subsidiary," "or any Subsidiaries," "nor
any "Subsidiary" or "nor any Subsidiaries" are used in this Agreement in
connection with a preceding reference to a party to this Agreement, they shall
be deemed to refer to a Subsidiary or Subsidiaries of that party. The phrase
"made available" in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom such information is to
be made available, and the correlative phrase "make available" shall mean that
such information shall be promptly made available if so requested. The phrases
"the date of this Agreement," "the date hereof" and terms of similar import,
unless the context otherwise requires, shall be deemed to refer to October 8,
1997.
8.4 ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Article II and Sections 5.12, 5.13 and 5.17 (collectively, the "Third Party
Provisions"), nothing in this Agreement, express or implied, is intended to
confer on any person other than the parties hereto any rights, remedies,
obligations or liabilities under or by reason of this Agreement. The Third Party
Provisions may be enforced on behalf of PTC or the other respective
beneficiaries thereof by those individuals who were the directors of PTC
immediately prior to the Effective Time. IUB shall pay all expenses, including
attorneys' fees, that may be incurred by such directors in enforcing the Third
Party Provisions.
8.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
8.6 COUNTERPARTS. This Agreement may be executed in separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. It shall not be
necessary, in making proof of this Agreement or any counterpart hereof, to
produce or account for any of the other counterparts.
8.7 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable shall be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement. If any provision of this Agreement is so broad
as to be unenforceable, the provision shall be interpreted to be only so broad
as is enforceable.
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8.8 INCORPORATION OF DOCUMENTS. The PTC Letter, the IUB Letter, and all
Exhibits attached hereto and referred to herein are hereby incorporated herein
and made a part hereof for all purposes as if fully set forth herein.
8.9 ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with its specific terms or were otherwise breached. It is accordingly
agreed that any party shall be entitled to seek an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any court of the United States located in the
State of Indiana or in Indiana state court, this being in addition to any other
remedy to which it is entitled at law or in equity.
8.10 WAIVERS. Except as provided in this Agreement or in any waiver
pursuant to Section 7.4, no action taken pursuant to this Agreement, including
any investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any other
provision hereunder.
8.11 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
signed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
<TABLE>
<S> <C> <C>
INDIANA UNITED BANCORP
By: ROBERT E. HOPTRY
-----------------------------------------
Robert E. Hoptry,
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
P.T.C. BANCORP
By: JAMES L. SANER
-----------------------------------------
James L. Saner,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
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EXHIBIT 5.4(a)
, 1998
Indiana United Bancorp
201 N. Broadway
Greensburg, IN 47240
P.T.C. Bancorp
1250 Franklin Avenue
Brookville, IN 47012
Gentlemen:
I have been advised that as of the date hereof I may be deemed to be an
"affiliate" of P.T.C. Bancorp ("PTC"), as the term "affiliate" is (i) defined
for purposes of paragraphs (c) and (d) of Rule 145 of the Rules and Regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), and/or
(ii) used in and for purposes of Accounting Series Releases 130 and 135, as
amended, of the Commission. Pursuant to the terms of the Agreement and Plan of
Merger dated as of October 8, 1997 between Indiana United Bancorp ("IUB") and
PTC (the "'Agreement"), PTC will be merged with and into IUB (the "Merger").
As a result of the Merger, I may receive shares of Common Stock of IUB ("IUB
Shares") in exchange for shares owned by me of Common Stock of PTC ("PTC
Shares").
I hereby represent to and covenant with IUB that in the event I receive any
IUB Shares as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the IUB Shares in
violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed its
requirements and other applicable limitations upon my ability to sell,
transfer or otherwise dispose of IUB Shares, to the extent I felt necessary,
with my counsel or counsel for PTC.
C. I have been advised that the issuance of IUB Shares to me pursuant to the
Merger has been registered with the Commission under the Act on a
Registration Statement on Form S-4. However, I have also been advised that,
because at the time the Merger was submitted for a vote of the shareholders
of PTC I may be deemed to have been an affiliate of PTC, and the
distribution by me of the IUB Shares has not been registered under the Act,
I may not sell, transfer or otherwise dispose of IUB Shares issued to me in
the Merger unless (i) such sale, transfer or other disposition has been
registered under the Act, (ii) such sale, transfer or other disposition is
made in conformity with the volume and other limitations of Rule 145
promulgated by the Commission under the Act, or (iii) in the opinion of
counsel reasonably acceptable to IUB, such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
D. I understand that IUB is under no obligation to register the sale, transfer
or other disposition of the IUB Shares by me or on my behalf under the Act.
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E. I also understand that stop transfer instructions will be given to IUB's
transfer agents with respect to the IUB Shares and that there will be placed
on the certificates for the IUB Shares issued to me, or any substitutions
therefor, a legend stating in substance:
"The shares represented by this certificate were issued in a transaction
to which Rule 145 promulgated under the Securities Act of 1933 applies.
The shares represented by this certificate may only be transferred in
accordance with the terms of an agreement dated , 1998
between the registered holder hereof and the Issuer, a copy of which
agreement is on file at the principal offices of the Issuer."
F. I also understand that unless the transfer by me of my IUB Shares has been
registered under the Act or is a sale made in conformity with the provisions
of Rule 145, IUB reserves the right to put the following legend on the
certificates issued to my transferee:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and were acquired from a person who
received such shares in a transaction to which Rule 145 promulgated
under the Securities Act of 1933 applies. The shares have been acquired
by the holder not with a view to, or for resale in connection with, any
distribution thereof within the meaning of the Securities Act of 1933
and may not be sold, pledged or otherwise transferred except in
accordance with an exemption from the registration requirements of the
Securities Act of 1933."
It is understood and agreed that the legends set forth in paragraphs E and F
above shall be removed by delivery of substitute certificates without such
legend if the undersigned shall have delivered to IUB a copy of a letter from
the staff of the Commission, or an opinion of counsel in form and substance
reasonably satisfactory to IUB, to the effect that such legend is not required
for purposes of the Act.
I further represent to and covenant with IUB and PTC that I have not, within
the 30 days prior to the Effective Time (as defined in the Agreement), sold,
transferred or otherwise disposed of any PTC Shares or IUB Shares held by me and
that I will not sell, transfer or otherwise dispose of any IUB Shares, whether
received by me in the Merger or otherwise, until after such time as results
covering at least 30 days of combined operations of PTC and IUB have been
published by IUB, in the form of a quarterly earnings report, an effective
registration statement filed with the Commission, a report to the Commission on
Form 10-K, 10-Q or 8-K, or any other public filing or announcement that includes
such combined results of operations.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of PTC as described in the first paragraph of this
letter, or as a waiver of any rights I may have to object to any claim that I am
such an affiliate on or after the date of this letter.
Very truly yours,
_______________________________________
[Affiliate's Name]
Accepted this day of
________________, 1998 by:
INDIANA UNITED BANCORP
By:______________________________
Robert E. Hoptry, Chairman
and Chief Executive Officer
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<PAGE>
P.T.C. BANCORP
By:______________________________
James L. Saner, President and
Chief Executive Officer
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<PAGE>
EXHIBIT 5.4(b)
, 1998
Indiana United Bancorp
201 N. Broadway
Greensburg, IN 47240-0087
Gentlemen and Ladies:
I have been advised that as of the date hereof I may be deemed to be an
"affiliate" of Indiana United Bancorp, Inc. ("IUB"), as the term "affiliate" is
(i) defined for purposes of paragraphs (c) and (d) of Rule 145 of the Rules and
Regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"), and/or (ii) used in and for purposes of Accounting Series Releases 130
and 135, as amended, of the Commission. Pursuant to the terms of the Agreement
and Plan of Merger (the "Agreement") dated as of October 8, 1997 between IUB and
P.T.C. Bancorp ("PTC"), PTC will be merged with and into IUB (the "Merger").
I hereby represent to and covenant with IUB that I have not, within the 30
days prior to the Effective Time (as defined in the Agreement), sold,
transferred or otherwise disposed of any shares of Common Stock of PTC ("PTC
Shares") or shares of Common Stock of IUB ("IUB Shares") held by me and that I
will not sell, transfer or otherwise dispose of any IUB Shares, whether received
by me in the Merger or otherwise, until after such time as results covering at
least 30 days of combined operations of PTC and IUB have been published by IUB,
in the form of a quarterly earnings report, an effective registration statement
filed with the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K,
or any other public filing or announcement that includes such combined results
of operations.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of IUB as described in the first paragraph of this
letter, or as a waiver of any rights I may have to object to any claim that I am
such an affiliate on or after the date of this letter.
Very truly yours,
_______________________________________
[Affiliate's Name]
Accepted this day of , 1998 by:
INDIANA UNITED BANCORP
By:__________________________________
Robert E. Hoptry
Chairman and Chief Executive Officer
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<PAGE>
EXHIBIT 5.20
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") made and entered into as of the day
of , 199 by and between INDIANA UNITED BANCORP (the "Company"), an
Indiana corporation, and JAMES L. SANER ("Executive").
RECITALS:
A. Executive is currently serving as President and Chief Executive Officer
of P.T.C. Bancorp ("PTC").
B. The Company and PTC have agreed to merge pursuant to the terms of that
certain Agreement and Plan of Merger dated as of October 8, 1997 between the
Company and PTC (the "Merger Agreement").
C. Executive is willing to commit himself to be employed by the Company on
the terms and conditions herein set forth and thus to forego opportunities
elsewhere.
D. The parties desire to enter into this Agreement, as of the Effective Date
(as hereinafter defined), setting forth the terms and conditions for the
employment relationship of Executive with the Company.
AGREEMENT:
NOW, THEREFORE, IN CONSIDERATION of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:
1. EMPLOYMENT AND TERM.
(a) EMPLOYMENT. The Company agrees to employ Executive, and Executive
agrees to be employed by the Company, in accordance with the terms and
provisions of this Agreement during the term thereof (as described below).
(b) TERM. The term of this Agreement shall commence as of the Closing
Date (the "Effective Date") of the Merger (as defined in the Merger
Agreement) and shall continue until May 31, 2002 (such term being referred
to hereinafter as the "Employment Period"); PROVIDED, HOWEVER, that if the
Merger Agreement is terminated prior to the Closing Date as provided
therein, then, at the time of such termination, this Agreement shall be
deemed cancelled and of no force or effect.
2. DUTIES AND POWERS.
(a) POSITION. During the Employment Period, Executive shall serve as
the President and Chief Operating Officer of the Company or, at the request
of the Board of Directors of the Company (the "Board"), as (i) its President
and Chief Executive Officer, (ii) its Chief Executive Officer or (iii) its
Chairman of the Board and Chief Executive Officer. At the request of the
Board, Executive shall resign at any time from the position of President and
Chief Operating Officer if Executive shall then hold the position of Chief
Executive Officer or the positions of Chairman of the Board and Chief
Executive Officer of the Company.
(b) DUTIES AS PRESIDENT. As President and Chief Operating Officer of
the Company, Executive will report directly to the Chief Executive Officer
of the Company and will have primary responsibility and authority to manage,
direct and administer the operations of the Company's subsidiaries. During
any time that Executive shall serve as Chief Executive Officer of the
Company, Executive shall report
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only to the Board. The precise services, duties and authority of Executive
may be further defined, extended or curtailed from time to time at the
discretion of the Board; PROVIDED, HOWEVER, that such services, duties and
authority shall always be consistent with those that are customary for the
position held by Executive under this Agreement.
(c) BOARD MEMBERSHIP. Executive shall be a member of the Board at the
Effective Time of the Merger (as defined in the Merger Agreement) and, so
long as Executive is employed by the Company, the Board shall propose
Executive for re-election to the Board throughout the Employment Period. So
long as Executive is employed by the Company, the Company shall also cause
Executive to be elected to the board of directors of each subsidiary of the
Company, subject to Executive's right to choose not to serve on any such
board.
(d) ATTENTION. During the Employment Period, and excluding any periods
of vacation and sick leave to which Executive is entitled, Executive shall
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to him under this Agreement, use his
reasonable best efforts to carry out such responsibilities faithfully and
efficiently. It shall not be considered a violation of the foregoing for
Executive to (i) serve on the board of directors of a reasonable number of
trade associations and/or charitable organizations, (ii) engage in
charitable activities and community affairs and (iii) manage his personal
investments and affairs, provided that such activities do not materially
interfere with the proper performance of his duties and responsibilities
under this Agreement.
3. COMPENSATION.
Executive shall receive the following compensation for his services
hereunder to the Company:
(a) SALARY. During the Employment Period, Executive's annual base
salary (the "Annual Base Salary"), payable in accordance with the Company's
general payroll practices, in effect from time to time, shall be at the
annual rate established by the Board, but in no event less than the greater
of (i) $165,000, (ii) an amount that is $10,000 less than the highest annual
base salary paid to any other senior executive officer of the Company or its
subsidiaries, if Executive shall not hold the position of Chief Executive
Officer of the Company, and (iii) an amount that is $10,000 more than the
highest annual base salary paid to any other senior executive officer of the
Company or its subsidiaries, if Executive shall hold the position of Chief
Executive Officer of the Company. Subject to the foregoing, the Board may
from time to time direct such upward adjustments in Annual Base Salary as
the Board deems to be necessary or desirable, including, without limitation,
adjustments in order to reflect increases in the cost of living. The Annual
Base Salary shall not be reduced after any increase thereof. Any increase in
Annual Base Salary shall not serve to limit or reduce any other obligation
of the Company under this Agreement.
(b) INCENTIVE COMPENSATION. During the Employment Period, Executive
shall be entitled to receive a bonus with respect to any particular fiscal
year in such amount and on such terms as the Board, in its discretion, shall
determine in accordance with bonus plans, practices, programs and policies
from time to time established by the Board for senior executive officers
generally. During the Employment Period, Executive shall participate in such
short-term incentive compensation plans and such long-term incentive
compensation plans as the Company may provide from time to time to any other
senior executive officer of the Company.
(c) EXPENSES. The Company shall reimburse Executive for all expenses,
including those for travel and entertainment, properly incurred by him in
the performance of his duties hereunder, in accordance with policies
established from time to time by the Board.
(d) FRINGE BENEFITS. During the Employment Period and (except as
provided in Section 5.(a)(iii)) so long as Executive is employed by the
Company, Executive shall be entitled to receive
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fringe benefits and participate in welfare, benefit, insurance, stock option
and stock purchase plans of the Company in accordance with the plans,
practices, programs and policies of the Company from time to time in effect,
commensurate with his position and at least to the same extent as any senior
executive officer of the Company.
4. TERMINATION OF EMPLOYMENT.
(a) DEATH. Executive's employment shall terminate automatically upon
his death during the Employment Period.
(b) BY THE COMPANY FOR CAUSE. The Company may terminate Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean (i) the conviction of Executive of a felony,
(ii) the conviction of Executive of a crime involving moral turpitude, (iii)
Executive's misuse or embezzlement of funds belonging to the Company, (iv)
Executive's use of alcohol or drugs in such manner as is reasonably likely
to injure or materially adversely affect the reputation of the Company or
its employees, officers, directors, customers or agents, or (v) Executive's
willful gross neglect or willful gross misconduct in carrying out his duties
under this Agreement that is not cured within 10 days' notice from the
Company and that results in material economic harm to the Company.
(c) BY THE COMPANY WITHOUT CAUSE. Notwithstanding any other provision
of this Agreement, the Company may terminate Executive's employment other
than by termination for Cause during the Employment Period, but only upon
the affirmative vote of members of the Board comprising in number a majority
of the full Board, plus one.
(d) BY EXECUTIVE FOR GOOD REASON. Executive may terminate his
employment during the Employment Period for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean (i) the failure of the Board to
elect Executive as the Chief Executive Officer of the Company upon the
earlier of (x) the death, resignation or removal of Robert E. Hoptry as
Chief Executive Officer of the Company and (y) May 31, 1999, and Executive's
termination of his employment within 30 days following such failure by the
Board, or (ii) a material breach of any provision of this Agreement by the
Company that is not cured within 10 days' notice from Executive, and
Executive's termination of his employment within 30 days following such
failure by the Company to cure such material breach within such cure period.
(e) BY EXECUTIVE WITHOUT GOOD REASON. Notwithstanding any other
provision of this Agreement, Executive may terminate his employment other
than for Good Reason during the Employment Period.
(f) NOTICE OF TERMINATION. Any termination by the Company for Cause,
or by Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 10(b)
of this Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice that (i) indicates the specific termination provision
in this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated, and
(iii) if the Date of Termination (as defined in Section 4(f)) is other than
the date of receipt of such notice, specifies the termination date (which
date shall be not more than 30 days after the giving of such notice). The
failure by Executive or the Company to set forth in the Notice of
Termination any fact or circumstance that contributes to a showing of Good
Reason or Cause shall not waive any right of Executive or the Company
hereunder or preclude Executive or the Company from asserting such fact or
circumstance in enforcing Executive's or the Company's rights hereunder.
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<PAGE>
(g) DATE OF TERMINATION. "Date of Termination" means (i) if
Executive's employment is terminated by the Company for Cause or by
Executive for Good Reason, the date of receipt of the Notice of Termination
or any later date specified therein, as the case may be, (ii) if Executive's
employment is terminated by the Company other than for Cause, the Date of
Termination shall be the date on which the Company notifies Executive of
such termination, (iii) if Executive's employment is terminated by reason of
death, the Date of Termination shall be the date of death, and (iv) if
Executive's employment is terminated by him other than for Good Reason, the
Date of Termination shall be the date on which Executive notifies the
Company of such termination.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) TERMINATION OTHER THAN FOR CAUSE OR WITHOUT GOOD REASON. During
the Employment Period, if the Company shall terminate Executive's employment
(other than in the case of a termination for Cause), Executive shall
terminate his employment for Good Reason or Executive's employment shall
terminate by reason of death (termination in any such case being referred to
as a "Termination"):
(i) The Company shall pay Executive a lump sum amount in cash equal to
the sum of Executive's Annual Base Salary and other compensation accrued
through the Date of Termination to the extent not theretofore paid (which
amount shall be paid within 30 days after the Date of Termination); and
(ii) In the event of Termination other than by reason of Executive's
death, and subject to Executive's compliance with the provisions of Section
6, the Company shall pay Executive his Annual Base Salary, at the annualized
rate in effect on the Date of Termination, payable in accordance with the
Company's general payroll practices, for the lesser of (x) 36 months and (y)
the remainder of the Employment Period; PROVIDED, HOWEVER, that
notwithstanding the foregoing, Executive in such case shall be entitled to
receive payment for at least 12 months; and
(iii) In the event of Termination by the Company other than for Cause
pursuant to Section 3(b) or by Executive for Good Reason pursuant to Section
3(d), and subject to Executive's compliance with the provisions of Section
6, the Company shall use its reasonable best efforts to provide Executive
with continued participation in all medical, dental, hospital, life and
disability insurance coverage plans or programs, on the same terms as senior
executive officers then participate generally, for a period of 12 months
following the month immediately preceding the Date of Termination; PROVIDED,
HOWEVER, that if Executive is precluded from continuing his participation in
any such plan or program as provided in this subsection (iii), then the
Company shall promptly reimburse Executive (on a pre-tax basis) for that
portion of the premiums actually paid by Executive to continue medical,
dental and/or hospital insurance coverage during such 12 month period,
pursuant to the provisions of the Consolidated Omnibus Budget Reconciliation
Act ("COBRA"), as is equal to the amount actually paid by the Company for
the benefit of Executive immediately prior to the Date of Termination, with
any other portion of such premiums and any premiums to continue such
insurance coverage under COBRA after such 12 months to be borne by
Executive, and any premiums incurred by Executive in continuing or obtaining
life and/or disability insurance coverage, whether upon exercising any
conversion rights under a master group contract applicable to the Company or
otherwise, shall be borne by Executive.
(b) TERMINATION BY THE COMPANY FOR CAUSE OR BY EXECUTIVE OTHER THAN FOR
GOOD REASON. If Executive's employment shall be terminated for Cause during
the Employment Period, or if Executive terminates employment during the
Employment Period other than a termination for Good Reason, the Company
shall have no further obligations to the Executive under this Agreement
other than the obligation to pay to Executive the Annual Base Salary and
other compensation accrued through the Date of Termination.
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6. NON-COMPETE.
In consideration for the payments to be provided Executive pursuant to
Section 5(a)(ii), and also any benefits provided pursuant to Section 5(a)(iii)
(collectively, the "Termination Benefits"), and until such time as Executive
shall release the Company from its obligations to provide the Termination
Benefits under Section 5(a)(ii) and/or 5(a)(iii), in a form satisfactory to
counsel for the Company, or the period during which the Company is obligated to
provide such Termination Benefits shall have expired, Executive, while receiving
any Termination Benefits, shall not be employed directly or indirectly at, or
act as a consultant to, any main office or branch office conducting a commercial
or savings bank business that is located in any county within Indiana in which
the Company or any subsidiary (whether now or hereafter existing) has a main
office or branch office on the Date of Termination.
7. NON-EXCLUSIVITY OF RIGHTS.
Nothing in this Agreement shall prevent or limit Executive's future
participation in any benefit plan, program, policy or practice provided by the
Company and for which Executive may qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under any other contract or
agreement entered into after the Effective Date with the Company.
8. CONFIDENTIAL INFORMATION.
Executive shall hold in a fiduciary capacity for the benefit of the Company
all secret, confidential information, knowledge or data relating to the Company
or any of its affiliated companies, and their respective businesses, which shall
have been obtained by Executive during Executive's employment by the Company or
any of its affiliated companies (either before or after the Effective Date) and
that shall not have been or now or hereafter have become public knowledge (other
than by acts by Executive or representatives of Executive in violation of this
Agreement). During the Employment Period, Executive shall not, without the prior
written consent of the Company or as may otherwise be required by law or legal
process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it.
9. SUCCESSORS.
(a) ASSIGNMENT BY EXECUTIVE. This Agreement is personal to Executive
and without the prior written consent of the Company shall not be assignable
by Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by
Executive's legal representatives.
(b) SUCCESSORS AND ASSIGNS OF THE COMPANY. This Agreement shall inure
to the benefit of and be binding upon the Company, its successors and
assigns.
(c) ASSUMPTION. The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its businesses
and/or assets as aforesaid that assumes and agrees to perform this
Agreement, by operation of law or otherwise.
10. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Indiana, without reference to
its principles of conflict of laws. The captions of
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<PAGE>
this Agreement are not part of the provisions hereof and shall have no force
or effect. This Agreement may not be amended, modified, repealed, waived,
extended or discharged except by an agreement in writing signed by the party
against whom enforcement of such amendment, modification, repeal, waiver,
extension or discharge is sought. No person, other than pursuant to a
resolution of the Board or a committee thereof, shall have authority on
behalf of the Company to agree to amend, modify, repeal, waive, extend or
discharge any provision of this Agreement or anything in reference thereto.
(b) NOTICES. All notices and other communications hereunder shall be
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return-receipt requested, postage prepaid,
addressed, in either case, at the Company's headquarters or to such other
address as either party shall have furnished to the other in writing in
accordance herewith. Notice and communications shall be effective when
actually received by the addressee.
(c) SEVERABILITY. The invalidity or unenforceability of any provision
of this Agreement shall not effect the validity or enforceability of any
other provision of this Agreement.
(d) TAXES. The Company may withhold from any amounts payable under
this Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) NO WAIVER. Executive's or the Company's failure to insist upon
strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right Executive or the Company may
have hereunder, including, without limitation, the right of the Company to
terminate Executive's employment for Cause pursuant to Section 4(b) of this
Agreement, shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Agreement.
(f) ENTIRE AGREEMENT. This Agreement contains the entire agreement of
Executive and the Company with respect to the subject matter hereof, and all
promises, representations, understandings, arrangements and prior agreements
are merged herein and superseded hereby.
IN WITNESS WHEREOF, Executive and, pursuant to due authorization from its
Board of Directors, the Company have caused this Agreement to be executed as of
the day and year first above written.
INDIANA UNITED BANCORP
By:_____________________________
Robert E. Hoptry, Chairman and
Chief Executive Officer
_____________________________
James L. Saner
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<PAGE>
[LETTERHEAD]
ANNEX B
October 8, 1997
Board of Directors
Indiana United Bancorp
201 N. Broadway
Greensburg, IN 47240
Members of the Board:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders of Indiana United Bancorp ("IUB") of the consideration
to be paid to the stockholders of PTC Bancorp ("PTC") by IUB pursuant to the
terms of the Agreement and Plan of Merger dated as of October 8, 1997 between
IUB and PTC (the "Agreement"). Pursuant to the Agreement, the holder of each
share of common stock of PTC would be entitled to receive 1.075 shares of common
stock of IUB, subject to adjustment as set forth in the Agreement. For the
purposes of our opinion, we have assumed that, for federal income tax purposes,
the merger will qualify as a reorganization under the provisions of Section 368
of the Internal Revenue Code of 1986, as amended. We have also assumed that the
merger shall be recorded for accounting and financial reporting purposes as a
pooling of interests.
Stifel, Nicolaus & Company, Incorporated ("Stifel"), as part of its
investment banking services, is regularly engaged in the independent valuation
of businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. We
are familiar with IUB and PTC and have completed our financial analysis of this
transaction.
In rendering our opinion, we have reviewed the Agreement as well as
financial and other information that was publicly available or furnished to us
by IUB and PTC including information provided during Stifel's discussions with
their respective management. We have conducted conversations with IUB's senior
management regarding recent developments and management's financial projections
for IUB and PTC. In addition, we have spoken to members of IUB's management
regarding factors which affect each entity's business. We have also compared
certain financial and securities data (as appropriate) of IUB and PTC with
various other companies whose securities are traded in public markets, reviewed
the historical stock prices and trading volumes of the common stock of IUB,
reviewed prices and premiums paid in other business combinations and conducted
such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed, without
independent verification, the accuracy and completeness of all of the financial
and other information that was provided to us or that was otherwise reviewed by
us. With respect to the financial projections supplied to us, we have assumed
that they were reasonably prepared on the basis reflecting the best currently
available estimates and judgments of the management of IUB and PTC as to the
future operating and financial performance of IUB and PTC and that they provided
a reasonable basis upon which we could form our opinion. We also assumed that
there were no material changes in the assets, liabilities, financial condition,
results of operations, business or prospects of either IUB or PTC since the date
of the last financial statements made available to us. We
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<PAGE>
did not make or obtain any independent evaluation, appraisal or physical
inspection of IUB's or PTC's assets or liabilities nor did we review loan files
of IUB or PTC. We relied on advice of counsel to IUB as to all legal matters
with respect to IUB, the Agreement and the transactions and other matters
contained or contemplated therein.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. Our opinion is directed to the Board of Directors of
IUB and does not constitute a recommendation to any shareholder as to how such
shareholder should vote on the proposed transaction, nor have we expressed any
opinion as to the prices at which any securities of IUB or PTC might trade in
the future. Except as required by applicable law, including without limitation
federal securities laws, our opinion may not be published or otherwise used or
referred to, nor shall any public reference to Stifel be made, without our prior
consent.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion, as of the date hereof, that the consideration to be paid to the
stockholders of PTC pursuant to the Agreement is fair to the shareholders of IUB
from a financial point of view.
Very truly yours,
/s/ Stifel Nicolaus & Company, Incorporation
STIFEL, NICOLAUS & COMPANY, INCORPORATED
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<PAGE>
ANNEX C
October 9, 1997
Board of Directors
PTC Bancorp
State Rd. & Reservoir Hill Rd.
Brookville, IN 47012
Members of the Board of Directors:
You have requested Traub and Company, Inc. to review and analyze the
financial terms of the proposed acquisition by Indiana United Bancorp ("IUB"),
of your institution and to express an opinion as to the fairness, from a
financial point of view, of the terms of the offer with respect to the
shareholders of PTC Bancorp ("PTC").
The terms of the Agreement and Plan of Merger dated October 8, 1997, states
that each of the shares of PTC Common Stock issued and outstanding immediately
prior to the Effective Time of the Merger shall be converted into 1.075 (such
number being referred to as the "Conversion Ratio") fully paid and non-
assessable shares of common stock of IUB, without par value ("IUB Common
Stock").
In conducting our analysis, we have met with senior officers of PTC to
discuss the financial condition, operation, and prospects of the Bank. We have
talked to the outside counsel and members of the Board of Directors. To reach
our opinion, we have reviewed publicly available information relating to the
financial condition, operations and business of PTC and IUB, and certain
financial and other information furnished to us by the managements of the Bank.
In conducting our analysis, we have considered the Bank in relation to the
historical and current operating cost, economic trends and conditions, industry
trends, regional trends, market area, future potential, competition, bank
management, earnings, asset quality, loan loss reserve, historic bank earnings,
price to earnings, marketability of PTC and their composite rating.
Our opinion is based upon circumstances existing and disclosed to us as of
the date hereof. In our investigation we relied upon financial information
provided to us by the Bank and have assumed its accuracy and completeness, which
we have not independently verified. In addition, we have conducted such other
analyses and examinations as we deemed necessary in arriving at our opinion.
This opinion is based upon the merger in its present form and is necessarily
based upon conditions as they exist and can be evaluated from current data
furnished to us by the institutions on the date hereof.
Based upon the subject of the foregoing, it is Traub and Company's opinion
that the Terms of the Merger are fair to PTC Bancorp and its shareholders from a
financial point of view.
<TABLE>
<S> <C>
Sincerely,
TRAUB AND COMPANY, INC.
/S/ FRANK D. NEESE
--------------------------------------
Frank D. Neese
SENIOR VICE PRESIDENT
</TABLE>
C-1
<PAGE>
ANNEX D
INDIANA CODE
TITLE 23, ARTICLE I, CHAPTER 44
DISSENTERS' RIGHTS
<TABLE>
<CAPTION>
SECTION
- ------------
<S> <C>
23-1-44-1. "Corporation" defined.
23-1-44-2. "Dissenter" defined.
23-1-44-3. "Fair value" defined.
23-1-44-4. "Interest" defined.
23-1-44-5. "Record shareholder" defined.
23-1-44-6. "Beneficial shareholder" defined.
23-1-44-7. "Shareholder" defined.
23-1-44-8. Shareholder dissent.
23-1-44-9. Beneficial shareholder dissent.
23-1-44-10. Notice of dissenters' rights preceding shareholder vote.
23-1-44-11. Notice of intent to dissent.
23-1-44-12. Notice of dissenters' rights following action creating rights.
23-1-44-13. Demand for payment by dissenter.
23-1-44-14. Transfer of shares restricted after demand for payment.
23-1-44-15. Payment to dissenter.
23-1-44-16. Return of shares and release of restrictions.
23-1-44-17. Offer of fair value for shares obtained after first announcement.
23-1-44-18. Dissenter demand for fair value under certain conditions.
23-1-44-19. Effect of failure to pay demand - Commencement of judicial appraisal proceeding.
23-1-44-20. Judicial determination and assessment of costs.
</TABLE>
23-1-44-1. "CORPORATION" DEFINED.
As used in this chapter, "corporation" means the issuer of the shares held
by a dissenter before the corporate action, or the surviving or acquiring
corporation by merger or share exchange of that issuer.
23-1-44-2. "DISSENTER" DEFINED.
As used in this chapter, "dissenter" means a shareholder who is entitled to
dissent from corporate action under section 8 [IC 23-1-44-8] of this chapter and
who exercises that right when and in the manner required by sections 10 through
18 [IC 23-1-44-10 through IC 23-1-44-18] of this chapter.
23-1-44-3. "FAIR VALUE" DEFINED.
As used in this chapter, "fair value," with respect to a dissenter's shares,
means the value of the shares immediately before the effectuation of the
corporate action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion would be
inequitable.
23-1-44-4. "INTEREST" DEFINED.
As used in this chapter, "interest" means interest from the effective date
of the corporate action until the date of payment, at the average rate currently
paid by the corporation on its principal bank loans or, if none, at a rate that
is fair and equitable under all the circumstances.
D-1
<PAGE>
23-1-44-5. "RECORD SHAREHOLDER" DEFINED.
As used in this chapter, "record shareholder" means the person in whose name
shares are registered in the records of a corporation or the beneficial owner of
shares to the extent that treatment as a record shareholder is provided under a
recognition procedure or a disclosure procedure established under IC 23-1-30-4.
23-1-44-6. "BENEFICIAL SHAREHOLDER" DEFINED.
As used in this chapter, "beneficial shareholder" means the person who is a
beneficial owner of shares held by a nominee as the record shareholder.
23-1-44-7. "SHAREHOLDER" DEFINED.
As used in this chapter, "shareholder" means the record shareholder or the
beneficial shareholder.
23-1-44-8. SHAREHOLDER DISSENT.
(a) A shareholder is entitled to dissent from, and obtain payment of the fair
value of the shareholder's shares in the event of, any of the following
corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party if:
(A) Shareholder approval is required for the merger by IC 23-1-40-3 or
the articles of incorporation; and
(B) The shareholder is entitled to vote on the merger.
(2) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan.
(3) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to
court order or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed to
the shareholders within one (1) year after the date of sale.
(4) The approval of a control share acquisition under IC 23-1-42.
(5) Any corporate action taken pursuant to a shareholder vote to the extent
the articles of incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) This section does not apply to the holders of shares of any class or series
if, on the date fixed to determine the shareholders entitled to receive
notice of and vote at the meeting of shareholders at which the merger, plan
of share exchange, or sale or exchange of property is to be acted on, the
shares of that class or series were:
(1) Registered on a United States securities exchange registered under the
Exchange Act (as defined in IC 23-1-43-9); or
(2) Traded on the National Association of Securities Dealers, Inc. Automated
Quotations System Over-the-Counter Markets--National Market Issues or a
similar market.
(c) A shareholder:
(1) Who is entitled to dissent and obtain payment for the shareholder's
shares under this chapter; or
D-2
<PAGE>
(2) Who would be so entitled to dissent and obtain payment but for the
provisions of subsection (b); may not challenge the corporate action
creating (or that, but for the provisions of subsection (b), would have
created) the shareholder's entitlement
23-1-44-9. BENEFICIAL SHAREHOLDER DISSENT.
(a) A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in the shareholder's name only if the shareholder dissents
with respect to all shares beneficially owned by any one (1) person and
notifies the corporation in writing of the name and address of each person
on whose behalf the shareholder asserts dissenters' rights. The rights of a
partial dissenter under this subsection are determined as if the shares as
to which the shareholder dissents and the shareholder's other shares were
registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares held on
the shareholder's behalf only if:
(1) The beneficial shareholder submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(2) The beneficial shareholder does so with respect to all the beneficial
shareholder's shares or those shares over which the beneficial
shareholder has power to direct the vote.
23-1-44-10. NOTICE OF DISSENTERS' RIGHTS PRECEDING SHAREHOLDER VOTE.
(a) If proposed corporate action creating dissenters' rights under section 8 [IC
23-1-44-8] of this chapter is submitted to a vote at a shareholders'
meeting, the meeting notice must state that shareholders are or may be
entitled to assert dissenters' rights under this chapter.
(b) If corporate action creating dissenters' rights under section 8 of this
chapter is taken without a vote of shareholders, the corporation shall
notify in writing all shareholders entitled to assert dissenters' rights
that the action was taken and send them the dissenters' notice described in
section 12 [IC 23-1-44-12] of this chapter.
23-1-44-11. NOTICE OF INTENT TO DISSENT.
(a) If proposed corporate action creating dissenters' rights under section 8 [IC
23-1-44-8] of this chapter is submitted to a vote at a shareholders'
meeting, a shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written notice
of the shareholder's intent to demand payment for the shareholder's
shares if the proposed action is effectuated; and
(2) Must not vote the shareholder's shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a) is not
entitled to payment for the shareholder's shares under this chapter.
23-1-44-12. NOTICE OF DISSENTERS' RIGHTS FOLLOWING ACTION CREATING RIGHTS.
(a) If proposed corporate action creating dissenters' rights under section 8 [IC
23-1-44-8] of this chapter is authorized at a shareholders' meeting, the
corporation shall deliver a written dissenters' notice to all shareholders
who satisfied the requirements of section 11 [IC 23-1-44-11] of this
chapter.
(b) The dissenters' notice must be sent no later than ten (10) days after
approval by the shareholders, or if corporate action is taken without
approval by the shareholders, then ten (10) days after the corporate action
was taken. The dissenters' notice must:
D-3
<PAGE>
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not the person acquired beneficial
ownership of the shares before that date;
(4) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than thirty (30) nor more than sixty (60)
days after the date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this chapter.
23-1-44-13. DEMAND FOR PAYMENT BY DISSENTER.
(a) A shareholder sent a dissenters' notice described in IC 23-1-42-11 or in
section 12 [IC 23-1-44-12] of this chapter must demand payment, certify
whether the shareholder acquired beneficial ownership of the shares before
the date required to be set forth in the dissenter's notice under section
12(b)(3) [IC 23-1-44-12(b)(3)] of this chapter, and deposit the
shareholder's certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits the shareholder's shares
under subsection (a) retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate
action.
(c) A shareholder who does not demand payment or deposit the shareholder's share
certificates where required, each by the date set in the dissenters' notice,
is not entitled to payment for the shareholder's shares under this chapter
and is considered, for purposes of this article, to have voted the
shareholder's shares in favor of the proposed corporate action.
23-1-44-14. TRANSFER OF SHARES RESTRICTED AFTER DEMAND FOR PAYMENT.
(a) The corporation may restrict the transfer of uncertificated shares from the
date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under section 16 [IC
23-1-44-16] of this chapter.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
cancelled or modified by the taking of the proposed corporate action.
23-1-44-15. PAYMENT TO DISSENTER.
(a) Except as provided in section 17 [IC 23-1-44-17] of this chapter, as soon as
the proposed corporate action is taken, or, if the transaction did not need
shareholder approval and has been completed, upon receipt of a payment
demand, the corporation shall pay each dissenter who complied with section
13 [IC 23-1-44-13] of this chapter the amount the corporation estimates to
be the fair value of the dissenter's shares.
(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year ending
not more than sixteen (16) months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity
for that year, and the latest available interim financial statements, if
any;
D-4
<PAGE>
(2) A statement of the corporation's estimate of the fair value of the
shares; and
(3) A statement of the dissenter's right to demand payment under section 18
[IC 23-1-44-18] of this chapter.
23-1-44-16. RETURN OF SHARES AND RELEASE OF RESTRICTIONS.
(a) If the corporation does not take the proposed action within sixty (60) days
after the date set for demanding payment and depositing share certificates,
the corporation shall return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 12 [IC 23-1-44-12] of this chapter and
repeat the payment demand procedure.
23-1-44-17. OFFER OF FAIR VALUE FOR SHARES OBTAINED AFTER FIRST ANNOUNCEMENT.
(a) A corporation may elect to withhold payment required by section 15 [IC
23-1-44-15] of this chapter from a dissenter unless the dissenter was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under subsection
(a), after taking the proposed corporate action, it shall estimate the fair
value of the shares and shall pay this amount to each dissenter who agrees
to accept it in full satisfaction of the dissenter's demand. The corporation
shall send with its offer a statement of its estimate of the fair value of
the shares and a statement of the dissenter's right to demand payment under
section 18 [IC 23-1-44-18] of this chapter.
23-1-44-18. DISSENTER DEMAND FOR FAIR VALUE UNDER CERTAIN CONDITIONS.
(a) A dissenter may notify the corporation in writing of the dissenter's own
estimate of the fair value of the dissenter's shares and demand payment of
the dissenter's estimate (less any payment under section 15 [IC 23-1-44-15]
of this chapter), or reject the corporation's offer under section 17 [IC
23-1-44-17] of this chapter and demand payment of the fair value of the
dissenter's shares, if:
(1) The dissenter believes that the amount paid under section 15 of this
chapter or offered under section 17 of this chapter is less than the fair
value of the dissenter's shares;
(2) The corporation fails to make payment under section 15 of this chapter
within sixty (60) days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty (60) days after the date
set for demanding payment.
(b) A dissenter waives the right to demand payment under this section unless the
dissenter notifies the corporation of the dissenter's demand in writing
under subsection (a) within thirty (30) days after the corporation made or
offered payment for the dissenter's shares.
23-1-44-19. EFFECT OF FAILURE TO PAY DEMAND--COMMENCEMENT OF JUDICIAL APPRAISAL
PROCEEDING.
(a) If a demand for payment under IC 23-1-42-11 or under section 18 [IC
23-1-44-18] of this chapter remains unsettled, the corporation shall
commence a proceeding within sixty (60) days after receiving the payment
demand and petition the court to determine the fair value of the shares. If
the corporation does not commence the proceeding within the sixty (60) day
period, it shall pay each dissenter whose demand remains unsettled the
amount demanded.
D-5
<PAGE>
(b) The corporation shall commence the proceeding in the circuit or superior
court of the county where a corporation's principal office (or, if none in
Indiana, its registered office) is located. If the corporation is a foreign
corporation without a registered office in Indiana, it shall commence the
proceeding in the county in Indiana where the registered office of the
domestic corporation merged with or whose shares were acquired by the
foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of this
state) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of
the petition. Nonresidents may be served by registered or certified mail or
by publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) is plenary and exclusive. The court may appoint one (1) or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the
order appointing them or in any amendment to it. The dissenters are entitled
to the same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court finds the fair value of the
dissenter's shares, plus interest, exceeds the amount paid by the
corporation; or
(2) For the fair value, plus accrued interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold
payment under section 17 [IC 23-1-44-17] of this chapter.
23-1-44-20. JUDICIAL DETERMINATION AND ASSESSMENT OF COSTS.
(a) The court in an appraisal proceeding commenced under section 19 [IC
23-1-44-19] of this chapter shall determine all costs of the proceeding,
including the reasonable compensation and expenses of appraisers appointed
by the court. The court shall assess the costs against such parties and in
such amounts as the court finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts for
the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of sections 10 through 18 [IC 23-1-44-10 through IC
23-1-44-18] of this chapter; or
(2) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated and that the fees
for those services should not be assessed against the corporation, the court
may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
D-6
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Indiana Business Corporation Law, Registrant may indemnify
directors and officers against liabilities asserted against or incurred by them
while serving as such or while serving at its request as a director, officer,
partner, trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise if
(i) the individual's conduct was in good faith, (ii) the individual believed:
(A) in the case of conduct in the individual's official capacity, that the
individual's conduct was in the corporation's best interests and (B) in all
other cases, that the individual's conduct was at least not opposed to the
corporation's best interests, and (iii) in the case of any criminal proceeding,
the individual either (A) had reasonable cause to believe the individual's
conduct was lawful or (B) had no reasonable cause to believe the individual's
conduct was unlawful. Because its articles of incorporation do not provide
otherwise, Registrant is required under the Indiana Business Corporation Law to
indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding in which the director or officer was
a party because the director or officer was serving the corporation in such
capacity against reasonable expenses incurred in connection with the proceeding.
The articles of incorporation of Registrant require the indemnification of
its directors and officers to the greatest extent permitted by the Indiana
Business Corporation Law.
The Indiana Business Corporation Law also permits Registrant to purchase
and maintain on behalf of its directors and officers insurance against
liabilities asserted against or incurred by an individual in such capacity,
whether or not Registrant otherwise has the power to indemnify the individual
against the same liability under the Indiana Business Corporation Law. Under a
directors' and officers' liability insurance policy, directors and officers of
Registrant are insured against certain liabilities, including certain
liabilities under the Securities Act of 1933, as amended.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The Exhibit Index appearing on the page following the signature page
of this Registration Statement is hereby incorporated by reference.
(b) No financial statement schedules are required to be filed herewith
pursuant to Item 21(b) or (c) of this Form.
II-1
<PAGE>
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and where interim financial information required to be
II-2
<PAGE>
presented by Article 3 of Regulation S-X are not set forth in the prospectus,
to deliver, or cause to be delivered to each person to whom the prospectus is
sent or given, the latest quarterly report that is specifically incorporated
by reference in the prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(b) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day
of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
(c) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Greensburg, State of Indiana, on the 16th day of March, 1998
INDIANA UNITED BANCORP
By: /s/ Robert E. Hoptry
-------------------------------
(Robert E. Hoptry, Chairman,
President and Chief Executive
Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert E. Hoptry his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments, including post-effective
amendments, to this Registration Statement, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME CAPACITY DATE
---- -------- ----
<S> <C> <C>
/s/ Robert E. Hoptry Chairman of the Board, President
- ----------------------- and Chief Executive Officer March 12, 1998
Robert E. Hoptry
Treasurer and Chief Financial
/s/ Jay B. Fager Officer (and Principal March 13, 1998
- ----------------------- Accounting Officer)
Jay B. Fager
/s/ William G. Barron Director March 13, 1998
- -----------------------
William G. Barron
/s/ Philip A. Frantz Director March 13, 1998
- -----------------------
Philip A. Frantz
/s/ Martin G. Wilson Director March 16, 1998
- -----------------------
Martin G. Wilson
/s/ Edward J. Zoeller Director March 13, 1998
- -----------------------
Edward J. Zoeller
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
2 Agreement and Plan of Merger dated as of October 8, 1997 between
Indiana United Bancorp and P.T.C. Bancorp, as amended (included as
Annex A to the Proxy Statement/Prospectus that is part of the
Registration Statement to which this Exhibit Index relates).
3.1 Articles of Incorporation (incorporated by reference to Exhibit 3.1 to
the Registration Statement on Form S-1 of Indiana United Bancorp filed
June 16, 1986 with the Commission (Registration No. 33-06334), as
amended by Articles of Amendment to Articles of Incorporation
incorporated by reference to Exhibit 3(c) to the Annual Report on Form
10-K of Indiana United Bancorp for the fiscal year ended December 31,
1987 filed on or about March 30, 1988 with the Commission (Commission
File No. 0-12422)).
3.2 Bylaws (incorporated by reference to Exhibit 3.2 to the Annual Report
on Form 10-K of Indiana United Bancorp for the fiscal year ended
December 31, 1992 filed on or about March 30, 1993 with the Commission
(Commission File No. 0-12422)).
4.1 Form of Indenture dated as of December 12, 1997 between Indiana United
Bancorp and State Street Bank and Trust Company, as Trustee, with
respect to 8.75% Subordinated Debentures due 2027 (incorporated by
reference to Exhibit 4.1 to the Registration Statement on Form S-2 of
Indiana United Bancorp filed November 19, 1997 with the Commission
(Registration No. 333-40579)).
4.2 Form of Subordinated Debenture Certificate (included as an exhibit to
Exhibit 4.1 to the Registration Statement on Form S-2 of Indiana
United Bancorp filed November 19, 1997 with the Commission
(Registration No. 333-40579)), which is incorporated by reference.
4.3 Form of IUB Capital Trust Amended and Restated Trust Agreement dated
as of December 12, 1997 among Indiana United Bancorp, as Depositor,
State Street Bank and Trust Company, as Property Trustee, Wilmington
Trust Company, as Delaware Trustee and the Administrative Trustees
named therein (incorporated by reference to Exhibit 4.5 to the
Registration Statement on Form S-2 of Indiana United Bancorp filed
November 19, 1997 with the Commission (Registration No. 333-40579)).
4.4 Form of Preferred Securities Guarantee Agreement dated as of December
12, 1997 between Indiana United Bancorp and State Street Bank and
Trust Company (incorporated by
<PAGE>
reference to Exhibit 4.7 to the Registration Statement on Form S-2
of Indiana United Bancorp filed November 19, 1997 with the Commission
(Registration No. 333-40579)).
4.5 Form of Agreement as to Expenses and Liabilities dated as of December
12, 1997 between Indiana United Bancorp and IUB Capital Trust
(included as an exhibit to Exhibit 4.5 to the Registration Statement
on Form S-2 of Indiana United Bancorp filed November 19, 1997 with the
Commission (Registration No. 333-40579)), which is incorporated by
reference.
5 Opinion of David W. Harper, Esq. as to the legality of Indiana United
Bancorp Common Stock.
8.1 Tax opinion of Geo. S. Olive & Co. LLC.
8.2 Tax opinion of Crowe, Chizek and Company LLP.
10.1 Employment Agreement dated as of October 10, 1995 between Indiana
United Bancorp and Michael K. Bauer (incorporated by reference to
Exhibit 10.4 to the Registration Statement on Form S-2 of Indiana
United Bancorp filed November 19, 1997 with the Commission
(Registration No. 333-40579)).
10.2 Form of Employment Agreement between Indiana United Bancorp and James
L. Saner (included as an exhibit to Annex A to the Proxy
Statement/Prospectus that is part of the Registration Statement to
which this Exhibit Index relates).
12 Statement regarding computation of ratio of earnings to fixed charges
(incorporated by reference to Exhibit 12 to the Registration Statement
on Form S-2 of Indiana United Bancorp filed as an exhibit to Amendment
No. 1 to such Registration Statement on December 3, 1997 with the
Commission (Registration No. 333-40579)).
13.1 Annual Report to Shareholders of Indiana United Bancorp (incorporated
by reference to Exhibit 13 to the Annual Report on Form 10-K of
Indiana United Bancorp for the fiscal year ended December 31, 1996
filed on or about March 30, 1997 with the Commission (Commission File
No. 0-12422)).
13.2 Quarterly Report on Form 10-Q (incorporated by reference to such
report filed November 12, 1997 with the Commission (Commission File
No. 0-12422)).
20.1 Form of letter from P.T.C. Bancorp to its shareholders regarding
Special Meeting.
<PAGE>
20.2 Form of letter from Indiana United Bancorp to its shareholders
regarding Special Meeting.
20.3 Form of Notice of Special Meeting of Shareholders of P.T.C. Bancorp.
20.4 Form of Notice of Special Meeting of Shareholders of Indiana United
Bancorp.
20.5 Form of Proxy for Special Meeting of Shareholders of P.T.C. Bancorp.
20.6 Form of Proxy for Special Meeting of Shareholders of Indiana United
Bancorp.
20.7 Fairness opinion of Stifel, Nicolaus & Company, Incorporated,
financial advisor to Indiana United Bancorp (included as Annex B to
the Proxy Statement/Prospectus that is part of the Registration
Statement to which this Exhibit Index relates).
20.8 Fairness opinion of Traub & Co., financial advisor to P.T.C.
Bancorp (included as Annex C to the Proxy Statement/Prospectus that
is part of the Registration Statement to which this Exhibit Index
relates).
21 Subsidiaries of Indiana United Bancorp (incorporated by reference to
Exhibit 21 to the Annual Report on Form 10-K of Indiana United Bancorp
for the fiscal year ended December 31, 1996 (Commission
File No. 0-12422)).
23.1 Consent of David W. Harper, Esq. (included in Exhibit 5).
23.2 Consent of Geo. S. Olive & Co., LLC.
23.3 Consent of Crowe, Chizek and Company LLP.
23.4 Consent of Stifel, Nicolaus & Company Incorporated.
23.5 Consent of Traub & Co.
23.6 Consent of Geo. S Olive & Co., LLC re: tax opinion (included in
Exhibit 8.1)
23.7 Consent of Crowe, Chizek and Company LLP re: tax opinion (included
in Exhibit 8.2).
24 Power of Attorney (included in the signature pages to this
registration statement).
27 Financial Data Schedules.**
99.1 Consent of persons about to become directors of Indiana United
Bancorp.
99.2 Form of "lock-up" agreement among Indiana United Bancorp, P.T.C.
Bancorp and directors of Indiana United Bancorp.
99.3 Form of "lock-up" agreement among Indiana United Bancorp, P.T.C.
Bancorp and directors of P.T.C. Bancorp.
______________________
* To be filed by amendment.
** Schedules are omitted because they are not required or applicable or the
required information is shown in the financial statements or the notes
thereto.
<PAGE>
(EXHIBIT 5 TO S-4)
March 16, 1998
Indiana United Bancorp
201 North Broadway
Greensburg, IN 47240
Gentlemen:
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") being filed by Indiana United Bancorp, an Indiana
corporation (the "Company"), with the Securities and Exchange Commission
under the Securities Act of 1933 (as amended, the "Securities Act"), relating
to the registration of 1,136,417 Common Shares of the Company, without par
value ("Company Common Stock"), issuable in connection with a merger (the
"Merger") of P.T.C. Bancorp ("PTC") into the Company as provided in the
Agreement and Plan of Merger dated as of October 8, 1997 between the Company
and PTC, as amended (the "Merger Agreement"). As a result of the Merger,
holders of common stock of PTC will receive Company Common Stock in exchange
for their shares of PTC Common Stock as set forth in the Merger Agreement.
I am familiar with the proceedings to date with respect to the proposed
issuance of Company Common Stock and the Merger and have examined such
records, documents and questions of law, and satisfied myself as to such
matters of fact as I consider relevant, that are necessary as a basis for
this opinion.
Based on the foregoing, it is my opinion that:
1. The Company is duly incorporated and validly existing under the
laws of the State of Indiana; and
2. The Company Common Stock to be issued in the Merger will be legally
issued, fully paid and nonassessable when: (i) the Registration Statement
shall have become effective under the Securities Act, (ii) the Merger shall
have become effective and (iii) certificates representing such Company Common
Shares shall have been duly executed, countersigned and registered and duly
delivered in accordance with the Merger Agreement. In rendering the opinion
in this paragraph 2., I have assumed without investigation that the Common
Stock of PTC outstanding at the time of effectiveness of the Merger is
legally issued, fully paid and nonassessable.
3. Upon the filing of articles of merger with, and the acceptance by,
the Indiana Secretary of State, the Merger will constitute a "merger" under
the Indiana Business Corporation Law.
<PAGE>
Indiana United Bancorp
March 16, 1998
Page 2
I hereby consent to the reference to me under the heading "Legal
Matters" and to the inclusion of this opinion as an exhibit to the
Registration Statement. In giving such consent, I do not admit that I come
within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
/s/David W. Harper
David W. Harper
DWH/pgf
<PAGE>
March 16, 1998
Board of Directors
Indiana United Bancorp
201 N. Broadway
P. O. Box 87
Greensburg, IN 47240
Gentlemen:
You have requested that we provide you with our opinion as to certain Federal
income tax consequences to Indiana United Bancorp (IUB) and IUB common
stockholders (collectively, "IUB Shareholders" and individually an "IUB
Shareholder") with respect to the proposed merger. Due to the nature of the
transaction, the tax opinion to IUB and IUB common stockholders can only be
properly analyzed if we also consider the effect to P.T.C. Bancorp (P.T.C.)
and P.T.C. common shareholder (collectively "P.T.C. shareholders" and
individually a "P.T.C. shareholder") with respect to the proposed merger.
Our opinion is based solely upon the factual information contained in the
Agreement and Plan of Merger ("Agreement"), the Indiana United Bancorp and
P.T.C. Bancorp Joint Proxy Statement ("Proxy Statement") contained within a
Registration Statement on Form S-4 filed by IUB with respect to the proposed
merger, and the representations and additional information provided us as set
forth in the sections of this letter entitled "FACTS", "PROPOSED
TRANSACTION," "REPRESENTATIONS" and "BUSINESS PURPOSE." IUB and P.T.C. have
advised us that the Agreement, Proxy Statement and other statements and
representations provide an accurate and complete description of the facts and
circumstances concerning the proposed transaction, and we have made no
independent inquiry into them.
SCOPE OF OPINION
The opinions expressed herein are rendered only with respect to the SPECIFIC
MATTERS discussed herein, and we express no opinion with respect to any other
legal, Federal, or State of Indiana income tax aspect of the transaction. If
any of the facts, circumstances or representations are not entirely complete
or accurate, it is imperative that we be informed immediately, as such an
inaccuracy could have a material effect upon our conclusions. In rendering
our opinion, we are relying upon the relevant provisions of the Internal
Revenue Code of 1986 ("IRC"), as amended, the regulations thereunder and
judicial and administrative interpretations thereof, which are subject to
change or modification by subsequent legislative, regulatory, administrative
or judicial decisions. Such changes could also have an effect on our
opinion. It is possible that the Internal Revenue Service could take a
position contrary to the conclusions we reach herein and that a court might
uphold such a contrary position.
NO OPINION IS EXPRESSED WITH RESPECT TO ISSUES NOT SPECIFICALLY DISCUSSED
HEREIN.
<PAGE>
Indiana United Bancorp
March 16, 1998
Page 2
FACTS
IUB is an Indiana based bank holding company that owns 100% of Union Bank and
Trust of Indiana, Greensburg, Indiana, 100% of Regional Federal Savings Bank of
New Albany, Indiana, 100% of Kentucky United Bancorp, Inc., of Greensburg,
Indiana and 100% of IUB Capital Trust/granter trust of IUB). Regional Federal
Savings Bank of New Albany owns 100% of Regional Pioneer Corporation of New
Albany, Indiana. IUB files consolidated Federal income tax returns with its
wholly-owned subsidiaries on a calendar year basis with the Internal Revenue
Service Center, Cincinnati, Ohio.
IUB's articles of incorporation authorize the issuance of 3,000,000 shares of
IUB common stock of which 1,250,897 are issued and outstanding, as well as
400,000 cumulative preferred shares, no par value, of which no shares are issued
and outstanding. IUB's common stock is listed on the Nasdaq Stock Market. IUB,
as a co-registrant with IUB Capital Trust, has recently issued approximately
$22,000,000 of preferred securities of IUB Capital Trust. IUB has no other
warrants, options, convertible securities or other type of right which can
result in the issuance of additional common stock.
IUB prepares its Federal income tax returns on an accrual accounting method.
IUB does not currently have, nor does it anticipate generating a net
operating loss carryforward (or other tax attribute carryforward) prior to
the proposed transaction described herein.
P.T.C. is a bank holding company which owns 100% of the stock of Peoples
Trust Company of Brookville, Brookville, Indiana. P.T.C. files consolidated
Federal income tax returns with its wholly owned subsidiary on a calendar
year basis with the Internal Revenue Service Center in Cincinnati, Ohio.
P.T.C. prepares its Federal income tax returns on an accrual accounting
method. P.T.C. does not have, nor does it anticipate generating a net
operating loss carryforward (or other tax attribute carryforward) prior to
the proposed transactions described herein.
P.T.C.'s articles of incorporation authorize the issuance of 2,000,000 shares
of P.T.C.'s common stock of which 1,026,401 shares are issued and
outstanding. In addition, 30,731 shares are reserved for issuance in
connection with a stock option plan. Further, P.T.C.'s articles of
incorporation authorize the issuance of 1,000,000 preferred shares, no par
value, of which no preferred shares are issued and outstanding. The
aforementioned P.T.C. common shares are not listed on any established market.
On October 8, 1997, IUB and P.T.C. executed the Agreement and Plan of Merger.
Further, IUB filed Form S-4 Registration Statement concerning the issuance of
common shares and Rights to be issued in exchange for the common stock of
P.T.C. pursuant to the Agreement. Upon the approval by the requisite number
of P.T.C. Shareholders, the IUB common shares (to be issued pursuant to the
Agreement) having been approved for listing on the Nasdaq Stock Market, Inc.
and other conditions of the Agreement being met, P.T.C. will be merged into
IUB. Upon the merger transaction becoming effective, IUB will be the
surviving corporation. People's Trust Company will thereupon become a wholly
owned subsidiary of IUB, and will continue to carry on its historic business
activities.
<PAGE>
Indiana United Bancorp
March 16, 1998
Page 3
PROPOSED TRANSACTION
IUB proposes to acquire P.T.C. by a merger (in accordance with applicable
law) where P.T.C. will merge into IUB and common stock of IUB is given to
present P.T.C. Shareholders as consideration for the acquisition.
The steps to complete and accomplish the merger include:
1. P.T.C. will merge into IUB pursuant to State of Indiana law upon the
Securities and Exchange Commission Form S-4 Registration Statement
(covering the IUB common stock issuable in connection with the
transaction) having been declared effective, the approval of the
merger by the legally required majority of IUB's and P.T.C.'s
shareholders, the approval for listing on Nasdaq (the IUB common
shares issuable in the transaction) and other conditions to the merger
being satisfied. IUB will be the surviving entity, and after the
merger with P.T.C., will continue its historic business activities.
P.T.C. Shareholders will have their P.T.C. stock converted to IUB
common stock by virtue of an exchange ratio. Such exchange ratio is
1.075 shares of IUB stock received for each share of P.T.C. stock
exchanged. Fractional shares will be paid in cash. (Collectively
"Electing P.T.C. Shareholders" and individually a "Electing P.T.C.
Shareholder").
2. By virtue of Section 23-1-44-11 through Section 23-1-44-19, of the
Indiana Business Corporation Law (IBCL), dissenting P.T.C.
shareholders who have properly perfected their dissent shall have the
right to receive payment of the fair value of such P.T.C. common stock
in cash. (Collectively "Dissenting P.T.C. Shareholders" and
individually a "Dissenting P.T.C. Shareholder").
3. Based on the pre-merger outstanding shares of P.T.C. and IUB and
considering the aforementioned exchange ratio, it is anticipated that
shareholders of P.T.C. (as a result of owning stock of P.T.C.)
immediately after the merger transaction, will own approximately 47.6%
of the fair market value of outstanding stock of IUB.
REPRESENTATIONS
In connection with the proposed merger transaction, IUB represents and for
matters relating to P.T.C. has no reason to believe otherwise the following:
1. The fair market value of the IUB common stock to be received by each
P.T.C. Shareholder will be approximately equal to the fair market
value of the P.T.C. stock surrendered in the exchange. The written
opinion of Stifel,
<PAGE>
Indiana United Bancorp
March 16, 1998
Page 4
Nicolaus, and Company, Incorporated has been used in determining the
fairness of the exchange to the holders of IUB common stock.
2. There is no plan or intention by the P.T.C. Shareholders who own 1% or
more of the P.T.C. stock, and to the best of the knowledge of the
management of P.T.C., there is no plan or intention on the part of the
remaining P.T.C. Shareholders to sell, exchange, or otherwise dispose
of a number of shares of IUB stock received in the transaction that
would reduce the P.T.C. Shareholder's ownership of IUB stock to a
number of shares having a value, as of the date of the transaction, of
less than 50% of the value of all of the formerly outstanding stock of
P.T.C. on the same date. For purposes of this representation, shares
of P.T.C. stock exchanged for cash or other property, surrendered by
Dissenting P.T.C. Shareholders, or exchanged for cash in lieu of
fractional shares of P.T.C. stock will be treated as outstanding
P.T.C. stock on the date of the transaction. Moreover, shares of
P.T.C. stock and shares of IUB stock held by P.T.C. Shareholders and
otherwise sold, redeemed, or disposed of prior or subsequent to the
transaction will be considered in making this representation.
3. IUB has no plan or intention to sell or otherwise dispose of any of
the assets of People's Trust Company acquired in the transaction,
except for dispositions in the ordinary course of business or
transfers described in Section 368(a)(2)(C) of the Internal Revenue
Code.
4. IUB has no plan or intention to issue additional shares of its stock
that would result in IUB losing control of People's Trust Company
within the meaning of IRC Section 368(c).
5. IUB has no plan or intention to reacquire any of its stock issued in
the transaction.
6. IUB has no plan or intention to liquidate People's Trust Company; to
merge People's Trust Company with or into another corporation; to sell
or otherwise dispose of the stock of People's Trust Company except for
transfers of stock to corporations controlled by IUB, (or to cause
People's Trust Company to sell or otherwise dispose of any of its
assets or any of the assets acquired from P.T.C.), except for
dispositions made in the ordinary course of business or transfers of
assets to a corporation controlled by IUB.
7. The liabilities of P.T.C. assumed by IUB and the liabilities to which
the transferred assets of P.T.C. are subject were incurred by P.T.C.
in the ordinary course of its business.
8. Following the transaction, IUB will continue the historic business of
P.T.C. or use a significant portion of P.T.C.'s historic business
assets in a business.
<PAGE>
Indiana United Bancorp
March 16, 1998
Page 5
9. I.U.B., P.T.C. and the respective subsidiaries and Shareholders will
pay their respective expenses, if any, incurred in connection with the
transaction.
10. There is no intercorporate indebtedness existing between IUB and
P.T.C. or between the subsidiaries that was issued, acquired, or will
be settled at a discount.
11. In the transaction, shares of P.T.C. stock representing control of
P.T.C., as defined in IRC Section 368(c), will be exchanged solely for
voting stock of IUB.
12. At the time of the transaction, P.T.C. will not have any outstanding
warrants, options, convertible securities, or other type of right
pursuant to which any person could acquire stock in P.T.C. that, if
exercised or converted, will affect IUB's acquisition or retention of
control of P.T.C. as defined in IRC Section 368(c).
13. IUB does not own, nor has it owned during the past five years, any
shares of the stock of P.T.C.
14. No two parties to the transaction are investment companies as defined
in IRC Section 368(a)(2)(F)(iii) and (iv).
15. On the date of the transaction, the fair market value of the assets of
P.T.C. will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets are subject.
16. P.T.C. is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of IRC Section 368(a)(3)(A).
17. IUB's stock to be issued to the former shareholders of P.T.C. in
connection with the transaction is neither putable nor callable.
18. The merger of P.T.C. with and into IUB will qualify as a merger under
the laws of the State of Indiana.
19. It is anticipated that IUB will file a consolidated Federal income tax
return for the year of the acquisition of P.T.C. This consolidated
return will include the operations of People's Trust Company from the
date of acquisition until the year ended December 31, 1998. P.T.C.
and People's Trust Company will be responsible for their own Federal
income tax return for the short period beginning January 1, 1998 and
ending on the date prior to the acquisition date.
<PAGE>
Indiana United Bancorp
March 16, 1998
Page 6
20. No distributions have been or will be made with respect to the stock
of P.T.C. immediately preceding the proposed transaction except for
regular normal distributions.
21. None of the compensation to be received by shareholders/employees of
P.T.C. will be separate consideration for, or allocable to, any of
their shares of P.T.C. stock, and the compensation to be paid to them
will be for services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arms length for similar
services.
22. With respect to any of the above representations that constitute
legal conclusions, IUB has made such representation following
consultation with outside legal counsel regarding such legal
conclusion.
BUSINESS PURPOSE
The Board of Directors of I.U.B. and P.T.C. believe that the merger will
provide the combined operations with a significantly stronger asset and
resource base along with additional managerial resources. This structure
will allow IUB to distribute a wider range of financial services to a larger
market in a more efficient manner. This can be done on a combined basis more
efficiently than either company can do separately. IUB and P.T.C. can expand
financial services (i.e., increase potential lending ability) as a result of
the reorganization. Finally, IUB and P.T.C. believe that the surviving
organization's aggregate operating costs should be reduced via the
elimination of duplicate services/outlays. All the above will also result in
improved access to debt and equity markets. This will provide the
shareholders of the combined entity a higher rate of return on their
investment.
RELEVANT AUTHORITIES
Based on the Agreement and Proxy Statement, the instant transaction conforms
precisely with IRC Section 368 (a)(1)(A) due to the fact that P.T.C. is being
merged into IUB under applicable State of Indiana law with IUB constituting
the surviving corporation. Further, IUB will acquire control of P.T.C.
(within the meaning of IRC Section 368(c)) solely in exchange for its voting
common stock. Finally, immediately after the transaction IUB will hold
substantially all of its own properties and substantially all of the
properties of P.T.C. Accordingly, the merger of P.T.C. with and into IUB
qualifies as a reorganization under IRC Section 368(a)(1)(A).
IRC Section 354(a) states that no gain or loss is recognized to a shareholder
who surrenders his stock in exchange for other stock in an IRC Section 368(a)
transaction (provided the stock surrendered and stock received are shares of
a corporation that is a party to the reorganization). Thus, a P.T.C.
Shareholder exchanging P.T.C. common stock solely for IUB common stock will
recognize no gain or loss in connection with such exchange.
IRC Section 356(a) provides that if IRC Section 354 would apply to an
exchange transaction, but for the fact that the property received in the
exchange consists not only of property permitted by IRC Section 354 but also
of other property or money, then gain, if any, to the recipient shall be
recognized, but in an amount not in excess of the sum of such
<PAGE>
Indiana United Bancorp
March 16, 1998
Page 7
money and the fair market value of such other property. IRC Section
356(a)(2) states that if an exchange (described in IRC Section 356(a)(1)) has
the effect of a dividend distribution (determined by applying IRC Section
318(a)), then there shall be treated as a dividend to each distributee such
amount of the gain recognized under IRC Section 356(a)(1) which is not in
excess of the distributee's ratable share of the corporation's undistributed
earnings and profits accumulated after February 28, 1913. The remainder, if
any, of the gain shall be treated as gain from the exchange of property.
Thus, Electing P.T.C. Shareholders obtaining both cash and IUB stock may
recognize gain to the extent of cash received in the transaction. A portion
of such gain may constitute dividend income.
The United States Supreme Court addressed the application of IRC Section
356(a)(2) in connection with an IRC Section 368(a) reorganization transaction
in COMMISSIONER V. DONALD E. CLARK, 89-1 USTC paragraph 9230. In CLARK, a
taxpayer transferred all of the stock in his wholly owned corporation to the
subsidiary of an acquiring parent entity in exchange for stock of the parent
corporation and cash in a triangular reorganization transaction pursuant to
IRC Section 368(a)(2)(D). The IRS argued the taxpayer's cash remuneration
should be considered as if received from his (wholly owned) corporation (in a
redemption transaction) immediately prior to the reorganization. The Supreme
Court viewed the stock exchange and cash payment from the acquiring Parent
entity as an "integrated whole," characterizing the reorganization as an
exchange of taxpayer-corporation stock solely for acquiring parent
corporation stock, followed by a post-reorganization redemption of a portion
of the taxpayer's stock (received in the exchange transaction/reorganization)
for cash. Thus, based on the Supreme Court's Clark opinion, Electing P.T.C.
Shareholders (that receive both IUB stock and cash) will treat their P.T.C.
shares as having been exchanged solely for IUB voting common stock with a
subsequent deemed repurchase of the newly issued IUB shares (to determine
dividend equivalency).
IRC Section 302(b) describes whether a redemption transaction constitutes a
sale or exchange (versus a dividend). Generally, a redemption transaction
will constitute an exchange, provided the redemption is either not
essentially equivalent to a dividend, or it constitutes a substantially
disproportionate redemption of stock or represents a complete termination of
a shareholder's interest. For purposes of the foregoing, the constructive
stock ownership provisions under IRC Section 318 are applied. Dissenting
P.T.C. Shareholders and Electing P.T.C. Shareholders (obtaining cash for
fractional shares) will be subject to the provisions and limitations of IRC
Section 302 in recognizing their cash consideration.
IRC Section 358(a) describes the income tax basis of property received by a
distributee in IRC Section 354 and 356 transactions. Specifically, the
foregoing provides that where a distributee receives stock in a transaction
to which either Sections 354 or 356 apply, the basis of the property
permitted to be received without recognizing gain or loss shall be the same
income tax basis of that property exchanged:
<PAGE>
Indiana United Bancorp
March 16, 1998
Page 8
A. Decreased by: 1) The fair market value of any
other property (except money)
received by the taxpayer, and
2) The amount of loss to the taxpayer
which was recognized on the exchange.
B. Increased by: 1) The amount which was treated as a
dividend, and
2) The amount of gain to the
taxpayer recognized on such
exchange (not including any
portion of such gain recognized
as a dividend).
Electing P.T.C. Shareholders will apply the foregoing in calculating the basis
of their IUB stock received in the transaction.
IRC Section 1223 addresses the determination of the holding period of property.
Under IRC Section 1223(1), in determining the period for which a taxpayer has
held property (received in an exchange), there shall be included, the period in
which the taxpayer held the property exchanged, if, the property has, for
purposes of determining gain or loss from a sale or exchange, the same basis in
whole or in part in his hands as the property exchanged, provided the exchanged
property (in the case of stock) constitutes a capital asset. Thus, the holding
period of IUB common stock received by P.T.C. Shareholder in exchange for P.T.C.
stock (constituting a capital asset) would include the exchanged P.T.C. stock's
holding period pursuant to IRC Section 1223(1).
OPINION
Based solely on the proposed transaction as delineated in the Agreement, Proxy
Statement, the "FACTS," "REPRESENTATIONS," "PROPOSED TRANSACTION" and "BUSINESS
PURPOSE" as stated above, the Federal and State of Indiana income tax
consequences of the proposed transaction in our view are as follows:
Provided the proposed merger of P.T.C. with and into IUB qualifies under State
of Indiana law, the acquisition by IUB of P.T.C. common stock constituting
control (within the meaning of IRC Section 368(c)) solely in
1) exchange for IUB voting common stock will constitute a reorganization
transaction within the meaning of IRC Section 368(a)(1)(A).
2) P.T.C. and IUB will each be a party to the reorganization within the
meaning of IRC Section 368(b).
<PAGE>
Indiana United Bancorp
March 16, 1998
Page 9
3) No gain or loss will be recognized by IUB upon acquisition by IUB of
substantially all of the assets of P.T.C. in exchange for IUB's common
stock and cash. (Internal Revenue Code Section 1032(a)).
4) The basis of the assets of P.T.C. received by IUB will be the same in
the hands of IUB as the basis of such assets in the hands of P.T.C.
immediately prior to the exchange. (Internal Revenue Code Section
362(b)).
5) The holding periods of the assets of P.T.C. received by IUB will
include the periods for which such assets were held by P.T.C.
(Internal Revenue Code Section 1223(2)).
6) Each IUB Shareholder is not a party to the reorganization transaction
and, therefore, the reorganization transaction has no affect on their
IUB shares owned. In addition, the IUB subsidiaries are also not a
part of the merger and, therefore, there is no tax affect for these
corporations.
7) No gain or loss will be recognized by each P.T.C. Shareholder upon the
exchange of their shares of P.T.C. into solely shares of common stock
of IUB. (IRC Section 354(a)(1)).
8) Each P.T.C. Shareholder exchanging P.T.C. common stock for IUB common
stock and cash, shall recognize gain, if any, to the extent of money
received from IUB and the fair market value of other property received
from IUB (other than IUB voting common stock). (IRC Section 356(a)).
9) For each P.T.C. Shareholder receiving cash and IUB common stock in the
transaction, categorization of such P.T.C. Shareholder's gain under
IRC Section 356(a)(2) as a dividend or exchange gain will be
determined as if such P.T.C. Shareholder exchanged P.T.C. shares
solely in exchange for IUB voting common stock, and subsequently
redeemed such IUB voting common stock for cash. (COMMISSIONER V.
CLARK, 89-2 USTC paragraph 9230).
10) Where cash is received by a Dissenting P.T.C. Shareholder or Electing
P.T.C. Shareholder in lieu of fractional shares, the cash remittance
will be treated as having been distributed in redemption of such
shareholder's stock subject to the provisions and limitations of IRC
Section 302.
11) The basis of the common stock of IUB received by a P.T.C. Shareholder
will be the same as the basis of the P.T.C. stock exchanged therefore;
decreased by the amount of other property and money received by such
P.T.C. Shareholder and any loss recognized in the exchange, and
increased by the amount of gain and dividend income recognized by such
P.T.C. Shareholder in the transaction (IRC Section 358(a)(1)).
<PAGE>
Indiana United Bancorp
March 16, 1998
Page 10
12) The holding period of the common stock of IUB received by a P.T.C.
Shareholder will include the period during which the P.T.C. stock
surrendered and exchanged therefore was held, provided the P.T.C.
stock was a capital asset in the hands of such P.T.C. Shareholder on
the date of the exchange (IRC Section 1223(1)).
13) Based upon the aforementioned treatment for federal income tax
purposes, the treatment for the State of Indiana income tax purposes
for IUB, P.T.C. and P.T.C. Shareholders will be identical to the
Federal tax treatment. The transaction will be treated for the State
of Indiana purposes as also qualifying as a reorganization transaction
under the principles of IRC Section 368 (a)(1)(A).
* * * * * * *
We hereby consent to the filing of this Opinion, or copies hereof, as an
Exhibit to the Registration Statement on Form S-4 to be issued by IUB (the
"Registration Statement") pursuant to the Agreement and to the statement made
regarding our Firm under the caption "Summary - Certain Federal Tax
Consequences" and "The Merger--Certain Federal Income Tax Consequences" in
the Proxy Statement constituting part of the Registration Statement.
The foregoing highlights certain Federal and State of Indiana income tax
consequences to IUB and applicable IUB Shareholders. We would be pleased to
discuss our conclusions further with the Board of Directors at a mutually
convenient time.
Sincerely,
/s/ Douglas E. Born, CPA
- ---------------------------
Douglas E. Born, CPA
Firm Member
(317) 383-3680
<PAGE>
Exhibit 8.2
March 16, 1998
Board of Directors
P.T.C. Bancorp
1250 Franklin Avenue
Brookville, IN 47012
Re: Federal Tax Consequences of the Merger of P.T.C. Bancorp
with and into Indiana United Bancorp
To the Members of the Board:
You have requested our opinion with respect to the federal income tax
consequences of the proposed merger of P.T.C. Bancorp (PTC), an Indiana
corporation, with and into Indiana United Bancorp (United), an Indiana
corporation (the "Merger"), pursuant to the Agreement and Plan of Merger (the
"Plan of Reorganization") dated as of October 8, 1997 which provides for a
statutory merger under Indiana law between PTC and United. Upon consummation
of the Merger, the separate existence of PTC shall cease and United will be
the continuing and surviving corporation.
The proposed transaction and the parties are described in the Plan of
Reorganization. We have made such inquiries and have examined such documents
and records as we have deemed appropriate for the purpose of this opinion.
In rendering this opinion, we have received certain standard representations
of PTC, and are relying upon certain standard representations of United
contained in the opinion issued by Geo S. Olive & Co. LLC in connection with
this same Plan of Reorganization. These representations are required to be
furnished prior to the execution and delivery of this letter. We will rely
upon the accuracy of the representations of PTC and United and the statements
of fact contained in the examined documents, particularly the Plan of
Reorganization. We have also assumed the authenticity of all signatures, the
legal capacity of all natural persons and the conformity to the originals of
all documents submitted to us as copies. Each capitalized term used herein,
unless otherwise defined, has the meaning set forth in the Plan of
Reorganization. We have assumed that the transaction will be consummated
strictly in accordance with the terms of the Plan of Reorganization.
<PAGE>
The Plan of Reorganization (including exhibits) and the PTC and United Joint
Proxy Statement filed with the Securities and Exchange Commission contain
detailed descriptions of the parties to the Merger and the Merger itself.
These documents as well as the representations to be provided by PTC and
United are incorporated in this letter as part of the statement of the facts.
In order to effect the Merger, each share of the common stock, without par
value, of PTC (PTC Common Stock) issued and outstanding immediately prior to
the Effective Time other than Dissenting Shares, shall be converted into the
right to receive 1.075 shares of United Common Stock, without par value.
Fractional shares shall be paid in cash. Dissenting Shareholders will
receive cash equal to the fair market value of their shares of PTC Common
Stock.
Opinion
Based upon the facts set forth above and in the Plan of Reorganization, the
representations discussed above, and assuming that the Merger is effected in
accordance with the terms of the Plan of Reorganization between PTC and
United as well as in conformity with applicable law, rules and regulations,
and taking into consideration the limitations discussed in this opinion, it
is our opinion that under current federal law pursuant to the Internal
Revenue Code of 1986, as amended ("Code"):
1. Provided the proposed Merger of PTC and United qualifies as a
statutory merger under Indiana law and United States law, the proposed Merger
of PTC and United will be a reorganization within the meaning of section
368(a)(1)(A) of the Code. PTC and United will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code.
<PAGE>
2. No gain or loss will be recognized by the shareholders of PTC who
receive shares of United Common Stock in exchange for all of their shares of
PTC Common Stock, except to the extent of any cash received, including cash
received in lieu of a fractional share of United Common Stock (section
354(a)(1) of the Code). Gain, if any, will be recognized by holders of the
shares of PTC Common Stock who receive both United Common Stock and cash, but
not in excess of the amount of cash received (section 356(a)(1) of the Code).
If the exchange has the effect of the distribution of a dividend (determined
with the application of section 318(a) of the Code), then the amount of the
gain recognized that is not in excess of shareholder's ratable share of
undistributed earnings and profits will be treated as a dividend. The
determination of whether the exchange has the effect of a dividend will be
made in accordance with the principles set forth in Commissioner v. Clark,
489 U.S. 726 (1989). No loss shall be recognized pursuant to section 356(c)
of the Code.
3. The basis of the United Common Stock received by shareholders of PTC
in the Merger will be the same as the basis of the PTC Common Stock
surrendered in exchange therefor, decreased by the amount of any cash
received, and increased by the amount of any gain recognized in the exchange
(section 358(a) of the Code).
4. The holding period of the United Common Stock received by PTC
shareholders will include the holding period of the PTC Common Stock
surrendered therefor, provided that the PTC Common Stock was, in each
instance, held as a capital asset in the hands of the shareholders of PTC at
the Effective Time of the Merger (section 1223(1) of the Code).
5. The basis of the assets of PTC to be received by United will be the
same as the basis of those assets in the hands of PTC immediately prior to
the Merger (section 362(b) of the Code).
6. The holding period of the assets of PTC to be received by United will
include the holding period of those assets in the hands of PTC immediately
prior to the Merger (section 1223(2) of the Code).
7. Dissenting shareholders of PTC receiving cash in exchange for their
shares will be treated as if they received such cash as a distribution in
redemption of their stock, subject to the provisions and limitation of
section 302 of the Code.
<PAGE>
8. A PTC shareholder who receives cash in the Merger in lieu of a
fractional share of United Common Stock will be treated as if the fractional
share had been received in the Merger and then redeemed by United in return
for the cash. The receipt of such cash will cause the recipient to recognize
capital gain or loss equal to the difference between the amount of cash
received and the portion of such holder's adjusted tax basis in the shares of
United Common Stock allocable to the fractional share section (section 302(a)
of the Code).
LIMITATIONS OF OPINION
Our opinion expressed herein is based solely upon current provisions of the
Code including applicable regulations thereunder and current judicial and
administrative authority. Any future amendment to the Code or applicable
regulations, or new judicial decisions or administrative interpretations, any
of which could be retroactive in effect, could cause us to modify our
opinion. Our opinion is not binding on the Internal Revenue Service, and the
Internal Revenue Service could disagree with the conclusions reached in the
opinion. In the event of such disagreement, there can be no assurance that
the Internal Revenue Service would not prevail in a judicial proceeding,
although we believe that the positions expressed in our opinion would prevail
if the matters are challenged. Further, no opinion is expressed under the
provisions of any of the other sections of the Code including applicable
regulations which may also be applicable thereto, or to the tax treatment of
any conditions existing at the time of, or effects resulting from, the
transaction which are not specifically covered by the opinion set forth above.
If any fact or assumption contained in this opinion letter changes, it is
imperative we be notified to determine the effect, if any, on the conclusions
reached herein.
* * * * *
We consent to the inclusion of this opinion as an exhibit to the Form S-4
Registration Statement, to be filed by Indiana United Bancorp, and the
references to and summary of this opinion in such documents.
Respectfully submitted,
/s/ Crowe, Chizek and Company LLP
- ---------------------------------
Crowe, Chizek and Company LLP
<PAGE>
[EXHIBIT 20.1 TO S-4]
[PTC LETTERHEAD]
Dear Fellow Shareholder:
We are pleased to enclose information relating to a Special Meeting of
Shareholders of P.T.C. Bancorp to be held on Tuesday, April 28, 1998, at 1:00
p.m. Eastern Standard Time at the Batesville branch of People's Trust Company
located at 1049 State Road 229, Batesville, Indiana.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve the Agreement and Plan of Merger dated as of October 8,
1997, as amended, between Indiana United and P.T.C. Bancorp. Under the terms
of this Agreement, P.T.C. Bancorp will be merged with and into Indiana United
Bancorp, Greensburg, Indiana (the "Merger") and each outstanding share of
Common Stock of P.T.C. Bancorp will be converted into the right to receive
1.075 Common Shares of Indiana United Bancorp (and cash, without interest, in
lieu of fractional shares).
We believe the Merger will provide you with the opportunity to
participate as a shareholder in a combined company with financial and
managerial resources that will be able to compete more effectively in the
rapidly changing marketplace for banking and financial services, and that
will be better able to take advantage of opportunities that would not be
reasonably available to Indiana United without the Merger.
YOUR BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY. The enclosed
Proxy Statement/Prospectus explains in detail the terms of the proposed
Merger and related matters. Please carefully review and consider all of this
information.
Consummation of the Merger is subject to certain conditions, including
but not limited to approval of the Merger by the requisite vote of the
shareholders of both Indiana United Bancorp and P.T.C. Bancorp, and approval
of the Merger by various regulatory authorities.
It is very important that your shares are represented at the Special
Meeting, whether or not you plan to attend in person. The affirmative vote
of the holders of a majority of the Common Shares of Indiana United present
and voting at the Special Meeting, assuming the presence of a quorum, is
required for approval of the
<PAGE>
Merger. Your failure to vote for approval of the Merger will have the same
effect as a vote against the Merger. In order to ensure that your vote is
represented at the Special Meeting, please sign, date and mail the proxy card
in the enclosed envelope.
Thank you for your cooperation and continued support.
JAMES L. SANER
President and Chief
Executive Officer
2
<PAGE>
[EXHIBIT 20.2 TO S-4]
[IUB LETTERHEAD]
Dear Fellow Shareholder:
We are pleased to enclose information relating to a Special Meeting of
Shareholders of Indiana United Bancorp to be held on Tuesday, April 28, 1998,
at 10:00 a.m., Eastern Standard Time at the Conference Center on the second
floor of Indiana United's headquarters at 201 N. Broadway, Greensburg,
Indiana.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve the Agreement and Plan of Merger dated as of October 8,
1997, as amended, between Indiana United and P.T.C. Bancorp, Brookville,
Indiana. Under the terms of this Agreement, P.T.C. Bancorp will be merged
with and into Indiana United (the "Merger") and each outstanding share of
Common Stock of P.T.C. Bancorp will be converted into the right to receive
1.075 Common Shares of Indiana United (and cash, without interest, in lieu of
fractional shares).
We believe the Merger will provide you with the opportunity to
participate as a shareholder in a combined company with financial and
managerial resources that will be able to compete more effectively in the
rapidly changing marketplace for banking and financial services, and that
will be better able to take advantage of opportunities that would not be
reasonably available to Indiana United without the Merger.
YOUR BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY. The enclosed
Proxy Statement/Prospectus explains in detail the terms of the proposed
Merger and related matters. Please carefully review and consider all of this
information.
Consummation of the Merger is subject to certain conditions, including
but not limited to approval of the Merger by the requisite vote of the
shareholders of both Indiana United and P.T.C. Bancorp, and approval of the
Merger by various regulatory authorities.
It is very important that your shares are represented at the Special
Meeting, whether or not you plan to attend in person. The affirmative vote
of the holders of a majority of the Common Shares of Indiana United present
and voting at the Special Meeting, assuming the presence of a quorum, is
required for approval of the
<PAGE>
Merger. Your failure to vote for approval of the Merger will have the same
effect as a vote against the Merger. In order to ensure that your vote is
represented at the Special Meeting, please sign, date and mail the proxy card
in the enclosed envelope.
Thank you for your cooperation and continued support.
ROBERT E. HOPTRY
Chairman of the Board,
President and Chief
Executive Officer
2
<PAGE>
[EXHIBIT 20.3 TO S-4]
P.T.C. BANCORP
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 1998
To the Shareholders of P.T.C. Bancorp:
A special meeting of the shareholders ("Special Meeting") of P.T.C.
Bancorp ("the Company") will be held on Tuesday, April 28, 1998, at 1:00 p.m.
(EST) at the Batesville branch of People's Trust Company located at 1049
State Road 229, Batesville, Indiana for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Merger dated as of October 8, 1997, as amended, (the "Merger
Agreement") between Indiana United Bancorp ("IUB") and the Company,
and the consummation of the transactions contemplated thereby,
pursuant to which PTC would be merged with and into IUB (the
"Merger"). A conformed copy of the Merger Agreement is attached to
the accompanying Proxy Statement/Prospectus as Annex A. Subject to
the terms and conditions of the Merger Agreement, each share of Common
Stock of the Company outstanding at the Effective Time of the Merger
(other than certain shares owned directly or indirectly by IUB or the
Company, which will be cancelled, and certain shares owned by holders
of Common Stock of the Company properly exercising dissenters' rights)
will be converted into the right to receive 1.075 Common Shares of IUB
(subject to certain provisions in the Merger Agreement providing for
the payment of cash in lieu of the issuance of fractional shares).
Only holders of Common Stock of the Company of record at the close of
business on March 6, 1998 are entitled to receive notice of and to vote at
the Special Meeting.
Each shareholder is invited to attend the Special Meeting. Whether or
not you expect to attend the Special Meeting, please promptly mark, sign and
date the enclosed proxy and return it in the enclosed envelope. No postage
is required if mailed within the United States. Your proxy may be revoked at
any time by (i) filing with the Secretary of the Company at or before the
taking of the vote at the Special Meeting a written notice of revocation
bearing a later date than the proxy, (ii) duly executing a later dated proxy
relating to the same shares and delivering it to the
<PAGE>
Secretary of the Company before the taking of the vote at the Special Meeting
or (iii) attending the Special Meeting and voting in person (although
attendance at the Special Meeting will not in and of itself constitute a
revocation of a proxy.
By Order of the Board of Directors,
Dale E. Smith, Secretary
March 20, 1998
ASSUMING THE PRESENCE OF A QUORUM, THE AFFIRMATIVE VOTE OF THE HOLDERS
OF A MAJORITY OF THE SHARES OF COMMON STOCK OF THE COMPANY PRESENT AND VOTING
THEREON IS REQUIRED TO APPROVE THE MERGER AGREEMENT.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING, PLEASE
MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY PROMPTLY.
YOU SHOULD NOT SEND IN YOUR CERTIFICATES EVIDENCING COMMON STOCK OF THE
COMPANY WHEN RETURNING YOUR PROXY. IF THE MERGER IS CONSUMMATED, YOU WILL BE
NOTIFIED AND PROVIDED WITH INSTRUCTIONS FOR EXCHANGE OF YOUR CERTIFICATES.
2
<PAGE>
[EXHIBIT 20.4 TO S-4]
INDIANA UNITED BANCORP
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 1998
To the Shareholders of Indiana United Bancorp:
A special meeting of the shareholders ("Special Meeting") of Indiana
United Bancorp ("the Company") will be held on Tuesday, April 28, 1998, at
10:00 a.m. (EST) at the Conference Center on the second floor of the
Company's headquarters at 201 N. Broadway, Greensburg, Indiana for the
following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Merger dated as of October 8, 1997, as amended, (the "Merger
Agreement") between the Company and P.T.C. Bancorp ("PTC"), and the
consummation of the transactions contemplated thereby, pursuant to
which PTC would be merged with and into the Company (the "Merger"). A
conformed copy of the Merger Agreement is attached to the accompanying
Proxy Statement/Prospectus as Annex A. Subject to the terms and
conditions of the Merger Agreement, each share of Common Stock of PTC
("PTC Common Stock") outstanding at the Effective Time of the Merger
(other than certain shares owned directly or indirectly by the Company
or PTC, which will be cancelled, and certain shares owned by holders
of PTC Common Stock properly exercising dissenters' rights) will be
converted into the right to receive 1.075 Common Shares of the Company
(subject to certain provisions in the Merger Agreement providing for
the payment of cash in lieu of the issuance of fractional shares).
Only holders of Common Shares of the Company of record at the close of
business on March 6, 1998 are entitled to receive notice of and to vote at
the Special Meeting.
Each shareholder is invited to attend the Special Meeting. Whether or
not you expect to attend the Special Meeting, please promptly mark, sign and
date the enclosed proxy and return it in the enclosed envelope. No postage
is required if mailed within the United States. Your proxy may be revoked at
any time by (i) filing with the Secretary of the Company at or before the
taking of the vote at the Special Meeting a written notice of revocation
bearing a later date than the proxy, (ii) duly executing a later dated proxy
relating to the same shares and delivering it to the
<PAGE>
Secretary of the Company before the taking of the vote at the Special Meeting
or (iii) attending the Special Meeting and voting in person (although
attendance at the Special Meeting will not in and of itself constitute a
revocation of a proxy.
By Order of the Board of Directors,
Sue Fawbush, Secretary
March 20, 1998
ASSUMING THE PRESENCE OF A QUORUM, THE AFFIRMATIVE VOTE OF THE HOLDERS
OF A MAJORITY OF THE COMMON SHARES OF THE COMPANY PRESENT AND VOTING THEREON
IS REQUIRED TO APPROVE THE MERGER AGREEMENT.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING, PLEASE
MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY PROMPTLY.
2
<PAGE>
P.T.C. BANCORP
PROXY FORM FOR SPECIAL MEETING OF SHAREHOLDERS
(PLEASE MARK, SIGN, DATE AND RETURN IMMEDIATELY)
THIS PROXY FORM IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder of P.T.C. Bancorp (the "Company") hereby
appoints Dale J. Deffner, Robert S. Dunevant and James L. Saner, or any one of
them (with full power to act alone), my proxies, with full power of
substitution, to represent me and vote all of the shares of Common Stock of the
Company held of record by me or which I am otherwise entitled to vote, at the
close of business on March 6, 1998, at the Special Meeting of the Company's
shareholders to be held on April 28, 1998 at 1:00 p.m., Eastern Standard Time,
and at adjournments of that meeting, with all the powers I would possess if
personally present, as follows:
1. MERGER. A proposal to approve the Agreement and Plan of Merger dated as of
October 8, 1997, as amended, between Indiana United Bancorp and P.T.C.
Bancorp, and the consummation of the transactions contemplated thereby,
pursuant to which P.T.C. Bancorp would be merged with and into Indiana
United Bancorp, upon the terms and subject to the conditions set forth in
such Agreement and Plan of Merger.
/ / FOR / / AGAINST / / ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1.
(SIGN AND DATE ON THE BACK)
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED AS
SPECIFIED IN ACCORDANCE WITH THE ACCOMPANYING PROXY STATEMENT/ PROSPECTUS. IF NO
INSTRUCTION IS INDICATED, THEN THE ABOVE-NAMED PROXIES OR ANY OF THEM WILL VOTE
THE SHARES REPRESENTED HEREBY "FOR" APPROVAL OF ITEM 1 AND IN ACCORDANCE WITH
THEIR DISCRETION ON ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE SPECIAL
MEETING.
Please mark, sign and date this proxy form and return it immediately in the
enclosed envelope.
<TABLE>
<S> <C>
Dated:, 1998 Signature
Additional signature, if necessary.
All joint owners 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.
</TABLE>
<PAGE>
INDIANA UNITED BANCORP
PROXY FORM FOR SPECIAL MEETING OF SHAREHOLDERS
(PLEASE MARK, SIGN, DATE AND RETURN IMMEDIATELY)
THIS PROXY FORM IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder of Indiana United Bancorp (the "Company") hereby
appoints William G. Barron, Philip A. Frantz and Robert E. Hoptry, or any one of
them (with full power to act alone), my proxies, with full power of
substitution, to represent me and vote all of the Common Shares of the Company
held of record by me or which I am otherwise entitled to vote, at the close of
business on March 6, 1998, at the Special Meeting of the Company's shareholders
to be held on April 28, 1998 at 10:00 a.m., Eastern Standard Time, and at
adjournments of that meeting, with all the powers I would possess if personally
present, as follows:
1. MERGER. A proposal to approve the Agreement and Plan of Merger dated as of
October 8, 1997, as amended, between Indiana United Bancorp and P.T.C.
Bancorp, and the consummation of the transactions contemplated thereby,
pursuant to which P.T.C. Bancorp would be merged with and into Indiana
United Bancorp, upon the terms and subject to the conditions set forth in
such Agreement and Plan of Merger.
/ / FOR / / AGAINST / / ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1.
(SIGN AND DATE ON THE BACK)
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED AS
SPECIFIED IN ACCORDANCE WITH THE ACCOMPANYING PROXY STATEMENT/ PROSPECTUS. IF NO
INSTRUCTION IS INDICATED, THEN THE ABOVE-NAMED PROXIES OR ANY OF THEM WILL VOTE
THE SHARES REPRESENTED HEREBY "FOR" APPROVAL OF ITEM 1 AND IN ACCORDANCE WITH
THEIR DISCRETION ON ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE SPECIAL
MEETING.
Please mark, sign and date this proxy form and return it immediately in the
enclosed envelope.
<TABLE>
<S> <C>
Dated:, 1998 Signature
Additional signature, if necessary.
All joint owners 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.
</TABLE>
<PAGE>
EXHIBIT 23.2 TO S-4
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference and the inclusion of our report
dated February 3, 1997 on the consolidated financial statements of Indiana
United Bancorp included and incorporated by reference herein and to the
reference to our firm under the heading "Experts" in the Registration Statement
on Form S-4 by Indiana United Bancorp with the Securities and Exchange
Commission.
/s/ GEO. S. OLIVE & CO., LLC
--------------------------------------
GEO. S. OLIVE & CO., LLC
Indianapolis, Indiana
March 16, 1998
<PAGE>
EXHIBIT 23.3 TO S-4
CONSENT OF INDEPENDENT AUDITOR
Board of Directors
P.T.C. Bancorp
Brookville, Indiana
We consent to the inclusion in the Registration Statement on Form S-4, to be
filed by Indiana United Bancorp, of our report dated January 23, 1997 on the
consolidated financial statements of P.T.C. Bancorp as of December 31, 1996 and
1995, and for the years then ended, appearing in the Prospectus, which is part
of the Registration Statement. We also consent to the use of our name under the
heading "Experts" in the Prospectus.
/s/ CROWE, CHIZEK AND COMPANY LLP
--------------------------------------
CROWE, CHIZEK AND COMPANY LLP
Indianapolis, Indiana
March 16, 1998
<PAGE>
(EXHIBIT 23.4 TO S-4)
CONSENT OF FINANCIAL ADVISOR
We consent to the use of our opinion dated October 8, 1997 and included
as Annex B to the Proxy Statement/Prospectus included in the Registration
Statement on Form S-4 relating to the proposed merger of P.T.C. Bancorp into
Indiana United Bancorp, and to the reference to our firm name under the
captions "Summary - Opinion of Financial Advisor to IUB" and "The Merger -
Opinion of Financial Advisor to IUB" in such Proxy Statement/Prospectus. In
giving such consent we do not admit and we disclaim that we come within the
category of persons whose consent is required under Section 7 of the
Securities Act of 1933 and the rules and regulations issued thereunder.
/s/Stifel, Nicolaus & Company,
Incorporated
STIFEL, NICOLAUS & COMPANY,
INCORPORATED
March 6, 1998
St. Louis, Missouri
<PAGE>
(EXHIBIT 23.5 TO S-4)
CONSENT OF FINANCIAL ADVISOR
We consent to the use of our opinion dated October 9, 1997 and included
as Annex C to the Proxy Statement/Prospectus included in the Registration
Statement on Form S-4 relating to the proposed merger of P.T.C. Bancorp into
Indiana United Bancorp, and to the reference to our firm name under the
captions "Summary - Opinion of Financial Advisor to PTC" and "The Merger -
Opinion of Financial Advisor to PTC" in such Proxy Statement/Prospectus. In
giving such consent we do not admit and we disclaim that we come within the
category of persons whose consent is required under Section 7 of the
Securities Act of 1933 and the rules and regulations issued thereunder.
/s/ John C. Bradshaw
--------------------------------------
John C. Bradshaw, Treasurer
TRAUB & COMPANY, INC.
March 6, 1998
Indianapolis, Indiana
<PAGE>
[EXHIBIT 99.1 TO S-4]
CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS
Pursuant to Rule 438 of the Securities Act of 1933, as amended, each of
the undersigned hereby consents to being named as an individual about to
become a director of Indiana United Bancorp in the Registration Statement on
Form S-4 filed by Indiana United Bancorp in connection with the registration
of its Common Shares to be issued in a merger transaction in which P.T.C.
Bancorp will merge with and into Indiana United Bancorp.
March 5, 1998
/s/John E. Back
-------------------------------
John E. Back
/s/Dale J. Deffner
-------------------------------
Dale J. Deffner
/s/Robert S. Dunevant
-------------------------------
Robert S. Dunevant
/s/James L. Saner
-------------------------------
James L. Saner
/s/Dale E. Smith
-------------------------------
Dale E. Smith
<PAGE>
[EXHIBIT 99.2 TO S-4]
October 8, 1997
Indiana United Bancorp
201 N. Broadway
Greensburg, IN 47240
P.T.C. Bancorp
1250 Franklin Avenue
Brookville, IN 47012
Gentlemen:
In my capacity as a shareholder of Indiana United Bancorp ("IUB"), and not
in my capacity as a current director or officer of IUB, I hereby confirm my
agreement made with each of you to induce you to execute respectively the
Agreement and Plan of Merger (the "Agreement") dated as of October 8, 1997
between P.T.C. Bancorp ("PTC") and IUB. Our agreement is as follows:
1. At any meeting of the shareholders of IUB:
(a) I will vote all of my shares of IUB Common Stock ("Shares") in
favor of the transactions contemplated by the Agreement;
(b) I will vote my Shares against any action or agreement that would
result in a breach in any material respect of any covenant,
representation or warranty or any other obligation of PTC under
the Agreement; and
(c) I will vote my Shares against any action or agreement that would
impede, interfere with or attempt to discourage the consummation
of the transactions contemplated by the Agreement, including, but
not limited to:
(i) any extraordinary corporate transaction (other than the
merger contemplated by the Agreement), such as a merger,
consolidation, business combination, share exchange,
reorganization, recapitalization or
<PAGE>
October 8, 1997
Page 2
liquidation involving IUB;
(ii) a sale or transfer of a material amount of assets of IUB;
(iii)any change in the management or board of directors of IUB,
except as otherwise agreed to in writing by you; or
(iv) any other material change in IUB's corporate structure or
business.
2. Until termination of the Agreement in accordance with its terms:
(a) I will maintain full voting power over all of the Shares over
which I have such power at the date of this agreement; and
(b) I will not solicit or enter into any negotiations with, or
furnish or cause to be furnished any information concerning the
business or assets of IUB to, any person or entity (other than
IUB or PTC in connection with the Agreement) and I will promptly
communicate to you any solicitation or inquiry I receive.
It is understood and acknowledged that nothing contained in our agreement
is intended to restrict me from voting on any matter, or otherwise from acting,
in my capacity as a director or officer of IUB with respect to any matter,
including but not limited to, the management or operation of IUB.
Very truly yours,
[*]
----------------------------------
[*] Signed by the following directors of Indiana United Bancorp, comprising all
members of its Board: William G. Barron, Philip A. Frantz, Robert E.
Hoptry, Martin G. Wilson and Edward J. Zoeller.
<PAGE>
[EXHIBIT 99.3 TO S-4]
October 8, 1997
P.T.C. Bancorp
1250 Franklin Avenue
Brookville, IN 47012
Indiana United Bancorp
201 N. Broadway
Greensburg, IN 47240
Gentlemen:
In my capacity as a shareholder of P.T.C. Bancorp ("PTC"), and not in my
capacity as a current director or officer of PTC, I hereby confirm my agreement
made with each of you to induce you to execute respectively the Agreement and
Plan of Merger (the "Agreement") dated as of October 8, 1997 between Indiana
United Bancorp ("IUB") and PTC. Our agreement is as follows:
1. At any meeting of the shareholders of PTC:
(a) I will vote all of my shares of PTC Common Stock ("Shares") in
favor of the transactions contemplated by the Agreement;
(b) I will vote my Shares against any action or agreement that would
result in a breach in any material respect of any covenant,
representation or warranty or any other obligation of IUB under
the Agreement; and
(c) I will vote my Shares against any action or agreement that would
impede, interfere with or attempt to discourage the consummation
of the transactions contemplated by the Agreement, including, but
not limited to:
(i) any extraordinary corporate transaction (other than the
merger contemplated by the Agreement), such as a merger,
consolidation, business combination, share exchange,
reorganization, recapitalization or liquidation involving
PTC;
<PAGE>
October 8, 1997
Page 2
(ii) a sale or transfer of a material amount of assets of PTC;
(iii)any change in the management or board of directors of PTC,
except as otherwise agreed to in writing by you; or
(iv) any other material change in PTC's corporate structure or
business.
2. Until termination of the Agreement in accordance with its terms:
(a) I will maintain full voting power over all of the Shares over
which I have such power at the date of this agreement; and
(b) I will not solicit or enter into any negotiations with, or
furnish or cause to be furnished any information concerning the
business or assets of PTC to, any person or entity (other than
PTC or IUB in connection with the Agreement) and I will promptly
communicate to you any solicitation or inquiry I receive.
It is understood and acknowledged that nothing contained in our agreement
is intended to restrict me from voting on any matter, or otherwise from acting,
in my capacity as a director or officer of PTC with respect to any matter,
including but not limited to, the management or operation of PTC.
Very truly yours,
[*]
-----------------------------------
[*] Signed by the following directors of P.T.C. Bancorp, comprising all members
of its Board: John E. Back, Dale J. Deffner, Robert S. Dunevant, James L.
Saner and Dale E. Smith.
