<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number: 0-13585
NATIONAL CITY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-1632155
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. BOX 868, EVANSVILLE, INDIANA 47705-0868
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (812) 464-9677
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT November 6, 1998
(Common stock) 14,843,793
<PAGE>
NATIONAL CITY BANCSHARES, INC.
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
Condensed consolidated statements of financial
position-September 30, 1998, December 31, 1997,
and September 30, 1997 1
Condensed consolidated statements of income-
three months and nine months ended
September 30, 1998 and 1997 2
Condensed consolidated statements of cash flows-
nine months ended September 30, 1998 and 1997 3
Notes to condensed consolidated financial
statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 20
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 21
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Unaudited Financial Statements
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
Unaudited Condensed Consolidated Statements of Financial Position
(Dollar Amounts Other Than Share Data in Thousands)
<TABLE>
<CAPTION>
September December September
30 31 30
1998 1997 1997
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 50,270 $ 47,636 $ 44,746
Time deposits in banks 1,749 3,269 4,499
Federal funds sold 64 13,939 15,279
Securities available for sale 322,790 342,726 348,362
Nonmarketable equity securities 15,286 13,854 12,923
Loans 1,343,051 1,121,395 1,105,194
Less: Allowance for loan losses (13,201) (10,625) (10,635)
- ----------------------------------------------------------------------------
Loans-net 1,329,850 1,110,770 1,094,559
Premises and equipment, net 41,791 35,404 34,527
Intangible assets 41,066 22,073 22,039
Other assets 30,770 23,745 24,600
- ----------------------------------------------------------------------------
TOTAL ASSETS $1,833,636 $1,613,416 $1,601,534
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
LIABILITIES
Deposits:
Noninterest-bearing demand $ 190,813 $ 166,372 $ 174,605
Interest-bearing savings and time 1,208,005 1,059,751 1,050,545
- ----------------------------------------------------------------------------
Total deposits 1,398,818 1,226,123 1,225,150
Short-term borrowings 63,483 77,241 75,868
Other borrowings 121,497 112,537 104,795
Guaranteed preferred beneficial interests
in the Corporation's subordinated debenture 34,500 - -
Dividends payable 2,435 1,931 1,815
Deferred income taxes 5,331 4,751 3,244
Other liabilities 16,202 11,402 13,439
- ----------------------------------------------------------------------------
Total liabilities 1,642,266 1,433,985 1,424,311
- ----------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock-1,000,000 shares authorized
None outstanding
Common stock 13,528 13,454 13,047
9/30/98 12/31/97 9/30/97
---------- ---------- ----------
Authorized 29,000,000 20,000,000 20,000,000
Outstanding 13,527,870 13,453,911 13,046,952
Capital surplus 84,441 83,295 75,964
Retained earnings 88,277 78,550 85,346
Accumulated other comprehensive income 5,124 4,132 2,866
- ----------------------------------------------------------------------------
Total shareholders' equity 191,370 179,431 177,223
- ----------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,833,636 $1,613,416 $1,601,534
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
1
<PAGE>
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
Unaudited Condensed Consolidated Statements of Income
(Dollar Amounts Other Than Share Data in Thousands)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30 September 30
- ------------------------------------------------------------------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $30,620 $25,274 $87,984 $72,418
Interest and dividends on securities 4,776 5,344 15,535 16,097
Interest on federal funds sold 59 267 373 612
Interest on other investments 23 59 134 167
- ------------------------------------------------------------------------------
Total interest income 35,478 30,944 104,026 89,294
- ------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits 13,591 11,653 39,399 33,528
Interest on funds borrowed 3,227 2,517 10,089 6,602
- ------------------------------------------------------------------------------
Total interest expense 16,818 14,170 49,488 40,130
- ------------------------------------------------------------------------------
NET INTEREST INCOME 18,660 16,774 54,538 49,164
Provision for loan losses 694 757 2,571 1,527
- ------------------------------------------------------------------------------
Net interest income after
provision for loan losses 17,966 16,017 51,967 47,637
- ------------------------------------------------------------------------------
NONINTEREST INCOME
Trust income 556 483 1,576 1,280
Service charges on deposit accounts 1,723 1,394 4,866 4,009
Securities gains 70 64 1,130 691
Other 1,274 1,180 3,893 3,110
- ------------------------------------------------------------------------------
Total noninterest income 3,623 3,121 11,465 9,090
- ------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits 7,539 5,926 20,098 17,345
Premises and equipment 1,939 1,469 5,284 4,180
Other 5,757 3,097 13,761 9,083
- ------------------------------------------------------------------------------
Total noninterest expense 15,235 10,492 39,143 30,608
- ------------------------------------------------------------------------------
Income before income taxes 6,354 8,646 24,289 26,119
Income taxes 1,964 2,668 7,400 7,996
- ------------------------------------------------------------------------------
NET INCOME 4,390 5,978 16,889 18,123
Other comprehensive income, net of
income taxes:
Unrealized gain (loss) arising
in period 1,942 1,563 1,664 3,267
Reclassification for realized
amount (42) (38) (672) (411)
- -------------------------------------------------------------------------------
Net unrealized gain (loss) recognized
in other comprehensive income 1,900 1,525 992 2,856
COMPREHENSIVE INCOME $ 6,290 $ 7,503 $17,881 $20,979
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Earnings per share:
Basic $.032 $0.45 $1.28 $1.35
Diluted $.032 $0.44 $1.27 $1.34
Weighted average shares outstanding:
Basic 13,514,251 13,373,479 13,199,806 13,375,509
Diluted 13,630,979 13,512,804 13,337,199 13,503,342
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(Dollars Amounts in Thousands)
<TABLE>
<CAPTION>
Nine Months
Ended
September 30
- ----------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 20,190 $ 23,259
- ----------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing time
deposits in banks 1,520 1,193
Proceeds from matured securities held to maturity - 16,524
Proceeds from matured securities available for sale 76,685 47,193
Proceeds from sales of securities held to maturity - 3,509
Proceeds from sales of securities available for sale 37,286 19,821
Proceeds from sales of nonmarketable equity securities - 803
Purchases of securities held to maturity - (31,942)
Purchases of securities available for sale (52,968) (38,727)
Purchases of nonmarketable equity securities (661) (4,985)
(Increase) decrease in federal funds sold 21,955 (5,430)
(Increase) decrease in loans made to customers (115,471) (44,595)
Capital expenditures (5,988) (9,282)
Proceeds from sale of premises and equipment 94 1,997
Proceeds from sale of other real estate owned 350 312
Purchase of subsidiary, net of cash and cash
equivalents acquired 36,952 (5,191)
- ---------------------------------------------------------------------------
Net cash flows provided by (used in)
investing activities (246) (48,800)
- ---------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits $(20,439) $ (3,034)
Net increase (decrease) in short-term borrowings (24,270) 7,712
Proceeds from other borrowings 78,634 125,876
Payments on other borrowings (80,776) (95,056)
Trust preferred securities 34,500 -
Dividends paid (6,178) (5,650)
Repurchase of common stock (8) (13,322)
Sale of common stock 1,227 1,310
Proceeds from exercise of stock options - 534
- ---------------------------------------------------------------------------
Net cash flows provided by (used in)
financing activities (17,310) 18,370
- ---------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 2,634 (7,171)
Cash and cash equivalents at beginning of period 47,636 51,917
- ---------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 50,270 $ 44,746
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows (Continued)
(Dollars Amounts in Thousands)
<TABLE>
<CAPTION>
Nine Months
Ended
September 30
- ----------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCIAL ACTIVITIES
Change in allowance for unrealized gain
(loss) on securities available for sale $ 1,544 $ 4,631
Increase (decrease) in deferred taxes
attributable to securities available for sale 552 1,775
Other real estate acquired in settlement of loans 175 392
Purchase of subsidiaries and branches:
Purchase price $(32,354) $ 6,797
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Assets acquired:
Cash and cash equivalents 4,598 1,606
Securities 39,223 17,460
Federal funds sold 8,080 3,100
Loans 106,536 59,300
Premises and equipment 2,856 930
Other assets 23,700 12,882
Liabilities assumed:
Deposits (193,386) (67,411)
Short-term borrowings (10,510) (200)
Other borrowings (11,100) (4,127)
Deferred taxes payable (71) -
Other liabilities (2,280) (794)
Common stock issued - (15,949)
- ---------------------------------------------------------------------------
$(32,354) $ 6,797
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
The accompanying unaudited condensed consolidated financial statements
include the accounts of National City Bancshares, Inc. and its
subsidiaries (collectively, the "Corporation"). At September 30,
1998, the Corporation had as subsidiaries, fifteen commercial banks,
one savings bank, a leasing corporation, a property management
company, and a Delaware statutory business trust. All significant
intercompany transactions are eliminated in consolidation.
The financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). While
the financial statements are unaudited, they do reflect all
adjustments which, in the opinion of management, are necessary for a
fair statement of the financial position, the results of operations,
and cash flow for the interim periods. All such adjustments are of a
normal recurring nature. Pursuant to SEC rules, certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted from these financial statements unless
significant changes have taken place since the end of the most recent
fiscal year. The accompanying financial statements and notes thereto
should be read in conjunction with the Corporation's supplemental
consolidated financial statements and notes for the year ended
December 31, 1997 included in the Corporation's Supplemental
Consolidated Financial Statements filed on Form 8-K with the SEC, on
October 9, 1998.
Because the results from commercial banking operations are so closely
related and responsive to changes in economic conditions, the results
for any interim period are not necessarily indicative of the results
that can be expected for the entire year.
On June 15, 1998, the FASB issued FAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." FAS 133 established a
new model for accounting for derivatives and hedging activities and
supersedes and amends a number of existing standards. FAS 133 is
effective for fiscal years beginning after June 15, 1999, but earlier
application is permitted as of the beginning of any fiscal quarter
subsequent to June 15, 1998. Upon the statement's initial
application, all derivatives are required to be recognized in the
statement of financial position as either assets or liabilities and
measured at fair value. In addition, all hedging relationships must
be designated, reassessed and documented pursuant to the provisions of
FAS 133. Adoption of FAS 133 is not expected to have a material
financial statement impact on the Corporation's financial position or
operating results.
5
<PAGE>
In October, 1998, the FASB issued SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Banking Enterprise". SFAS No. 134
amends SFAS 65 and SFAS 115. SFAS No. 134 is effective for the first
fiscal quarter beginning after December 15, 1998. Adoption of SFAS
No. 133 is not expected to have a material financial statement impact
on the Corporation's financial position or operating results.
NOTE 2
The Corporation and its subsidiaries are parties to legal actions
which arise in the normal course of their business activities. In the
opinion of management, the ultimate resolution of these matters is not
expected to have a materially adverse effect on the financial position
or on the results of operations of the Corporation and its
subsidiaries.
In the normal course of business, there are outstanding various other
commitments and contingent liabilities which are not reflected in the
accompanying financial statements. The Corporation uses the same
credit policies in making commitments and conditional obligations as
it does for other instruments.
<TABLE>
<CAPTION>
9/30/98 12/31/97
---------------------------------------------------------------
<S> <C> <C>
Standby letters of credit $ 17,114,000 $ 14,217,000
Commitments to extend credit $248,390,000 $178,264,000
</TABLE>
NOTE 3
A five percent stock dividend was paid December 8, 1997 to
shareholders of record November 24, 1997. All weighted average shares
and per share data presented herein have been restated for the effects
of this stock dividend.
NOTE 4
On March 30, 1998, NCBE Capital Trust I ("the Trust"), a Delaware
statutory business trust created by the Corporation, issued $34.5
million of 8.25% Cumulative Trust Preferred Securities ("Securities")
which will mature on March 31, 2028 subject to extension or earlier
redemption in certain events. The principal asset of the Trust is a
$35.6 million subordinated debenture of the Corporation. The
subordinated debenture bears interest at the rate of 8.25% and matures
on March 31, 2028 subject to extension or earlier redemption in
certain events. The Corporation owns all of the common securities of
the Trust.
6
<PAGE>
The Securities, the assets of the Trust, and the common securities
issued by the Trust are redeemable in whole or in part on or after
March 31, 2003, or at any time in whole, but not in part, from the
date of issuance upon the occurrence of certain events. The
Securities are included in Tier I capital for regulatory capital
adequacy determination purposes, subject to certain limitations.
The obligations of the Corporation with respect to the issuance of the
Securities constitute a full and unconditional guarantee by the
Corporation of the Trust's obligation with respect to the Securities.
Subject to certain exceptions and limitations, the Corporation may,
from time to time, defer subordinated debenture interest payments,
which would result in a deferral of distribution payments on the
related Securities and, with certain exceptions, prevent the
Corporation from declaring or paying cash distributions on the
Corporation's common stock or debt securities that rank pari passu or
junior to the subordinated debenture.
NOTE 5
As of January 1, 1998, the Corporation adopted Statement 130,
Reporting Comprehensive Income. Statement 130 established new rules
for the reporting and display of comprehensive income and its
components; however, the adoption of this Statement had no impact on
the Corporation's net income or shareholders' equity. Statement 130
requires unrealized gains or losses on the Corporation's available-
for-sale securities, which prior to adoption were reported separately
in shareholders' equity, to be included in other comprehensive income.
Prior year financial statements have been reclassified to conform to
the requirements of Statement 130.
In February, 1998, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits". SFAS No. 132 standardizes the disclosure
requirements for pensions and other postretirement benefits. This
statement is effective for financial statements for periods beginning
after December 15, 1997. The Corporation adopted the appropriate
provisions of the statements at January 1, 1998. The adoption of the
statement will not have a material effect on the Corporation's
financial position or operating results.
NOTE 6
On March 1, 1997, the Corporation acquired First Federal Savings Bank
of Leitchfield, a $43 million savings bank located in Leitchfield,
Kentucky. This acquisition was accounted for as a purchase, and the
results of operations of First Federal Savings Bank of Leitchfield
since the acquisition have been included in the financial statements.
The excess of the acquisition cost over the fair value of net assets
acquired in the amount of $2,807,000 is being amortized over 25 years
using the straight-line method.
7
<PAGE>
On August 1, 1997, the Corporation issued 374,986 shares of common
stock for all of the common stock of Bridgeport Bancorp, Inc., the
parent company of First National Bank of Bridgeport with total assets
of $39,382,000. This acquisition was accounted for as a purchase.
Accordingly, the results of operations of the acquired entity since
the acquisition have been included in the financial statements. The
excess of the acquisition cost over fair value of net assets acquired
in the amount of $9,377,000 is being amortized over 25 years using the
straight-line method.
On December 31, 1997, the Corporation issued 794,994 shares of common
stock for all of the common stock of Fourth First Bancorp, the parent
company of First Bank of Huntingburg, Huntingburg, Indiana, with total
assets of $108,077,000 and total equity of $12,917,000. This
acquisition was accounted for as a pooling of interests. Accordingly,
the Corporation's financial statements have been retroactively
restated to include the accounts and operations of Fourth First
Bancorp for all periods presented. Certain reclassifications have
been made to Fourth First Bancorp's historical financial statements to
conform to the Corporation's presentation.
On January 8, 1998, the Corporation's subsidiary, First Kentucky Bank,
purchased the former Mayfield, Kentucky, Branch Office of Republic
Bank & Trust Company. First Kentucky assumed $65,639,000 in deposit
liabilities in consideration of a deposit premium of $4,521,000, and
acquired assets and assumed other liabilities of $1,264,000. First
Kentucky also purchased the office facility and certain loans of the
Branch.
On March 6, 1998, the Corporation acquired Vernois Bancshares, Inc. in
a cash transaction for $27,500,000. Vernois Bancshares, Inc. was the
parent company of Bank of Illinois in Mt. Vernon, with total assets of
$179,156,000. This acquisition was accounted for as a purchase.
Accordingly, the results of operations of the acquired entity since
the acquisition have been included in the financial statements. The
excess of the acquisition cost over fair value of net assets acquired
in the amount of $16,551,000 is being amortized over 25 years using
the straight-line method.
On May 29, 1998, the Corporation issued 572,737 shares of common stock
for all of the common stock of Illinois One Bancorp., Inc. ("IOBI"),
the holding company for Illinois One Bank, National Association
("IOB"), a national banking association with offices in Shawneetown,
Elizabethtown, and Golconda, Illinois. As of May 31, 1998, IOB had
total assets of $86.1 million and total shareholders' equity of $11.1
million. This acquisition was accounted for as a pooling of
interests. Accordingly, the Corporation's financial statements have
been retroactively restated to include the accounts and operations of
IOBI for all periods presented. Certain reclassifications have been
made to IOBI's historical financial statements to conform to the
Corporation's presentation.
8
<PAGE>
On August 31, 1998, the Corporation issued 736,278 shares of common
stock for all of the common stock of Trigg Bancorp Inc., the parent
company of Trigg County Farmers Bank, Cadiz, Kentucky. As of August
31, 1998, Trigg County Farmers Bank had assets of $95.0 million and
equity of $8.9 million. This acquisition was accounted for as a
pooling of interests. Accordingly, the Corporation's financial
statements have been retroactively restated to include the accounts
and operations of Trigg Bancorp for all periods presented. Certain
reclassifications have been made to Trigg Bancorp's historical
financial statements to conform to the Corporations's presentation.
On August 31, 1998, the Corporation issued 1,432,202 shares of common
stock for all of the common stock of Community First Financial, Inc.,
the parent company of Community First Bank, N.A., Maysville, Kentucky
and Community First bank of Kentucky, Warsaw, Kentucky. As of August
31, 1998, the two banks had assets of $134.8 million and equity of
$13.4 million. This acquisition was accounted for as a pooling of
interests. Accordingly, the Corporation's financial statements have
been retroactively restated to include the accounts and operations of
Community First. Certain reclassifications have been made to
Community First's historical financial statements to conform to the
Corporation's presentation.
On October 1, 1998, the Corporation issued 289,134 shares of its
common stock for all of the common stock of 1st Bancorp Vienna, Inc.
("Bancorp"), the holding company for First State Bank of Vienna
("FSBV"), an Illinois banking corporation with a single office in
Vienna, Illinois. As of September 30, 1998, FSBV had total assets of
$38.2 million and total shareholders' equity of $5.1 million. The
acquisition is expected to qualify for the pooling of interests method
of accounting.
On October 31, 1998, the Corporation issued 190,000 shares of its
common stock for all of the common stock of Commonwealth Commercial
Corp. ("CCC"), the holding company for Bank of Crittenden ("BC"), a
Kentucky banking corporation with a single office in Crittenden,
Kentucky. As of September 30, 1998, BC had total assets of $23.0
million and total shareholders' equity of $2.7 million. The
acquisition is expected to qualify for the pooling of interests method
of accounting.
On October 31, 1998, the Corporation issued 102,648 shares of its
common stock for all of the common stock of Downstate Banking Co.
("DBC"), the holding company for Downstate National Bank ("DNB"),
which has one office in Brookport, Illinois. As of September 30, 1998
DNB had total assets of $21.6 million and total shareholders' equity
of $1.9 million. The acquisition is expected to qualify for the
pooling of interests method of accounting.
9
<PAGE>
On October 31, 1998, the Corporation issued 729,936 shares of its
common stock for all of the common stock of Hoosier Hills Financial
Corporation ("HHFC"), the holding company for The Ripley County Bank
("RCB"), an Indiana banking corporation, which has offices in Milan,
Osgood, and Versailles, Indiana. As of September 30, 1998, RCB had
total assets of $117.1 million and total shareholders' equity of $10.3
million. The acquisition is expected to qualify for the pooling of
interests method of accounting.
NOTE 7
The Corporation is a party to an Agreement and Plan of Reorganization
dated May 22, 1998, with Princeton Federal Bank, fsb ("PFB"), a
federal savings bank with a single office in Princeton, Kentucky. The
agreement relates to the acquisition of PFB in a transaction in which
PFB would merge with an interim subsidiary of the Corporation, and
approximately 212,600 shares of the Corporation's common stock would
be issued. As of September 30, 1998, PFB had total assets of $31.9
million and total shareholders' equity of $4.6 million. The
acquisition is subject to the approval of shareholders of PFB. The
acquisition is expected to qualify for the pooling of interests method
of accounting. The parties expect to close the merger in the fourth
quarter of 1998.
The Corporation is a party to an Agreement and Plan of Merger dated
July 14, 1998, with Progressive Bancshares, Inc. ("PBI"), the holding
company for The Progressive Bank, National Association ("TPB"), which
has four offices in Lexington, Lawrenceburg, and Owingsville,
Kentucky. The agreement relates to the acquisition of PBI in a merger
transaction in which approximately 975,700 shares of the Corporation's
common stock would be issued. As of September 30, 1998, TPB had total
assets of $144.0 million and total shareholders' equity of $10.7
million. The acquisition is subject to the approval of the
shareholders of PBI. The acquisition is expected to qualify for the
pooling of interests method of accounting. The parties expect to
close the merger in the fourth quarter of 1998.
10
<PAGE>
NOTE 8
The calculation of net earnings per share as of September 30 is
summarized as follows:
<TABLE>
<CAPTION>
Quarter to Date Year to Date
- ------------------------------------------------------------------------------
1998 1997 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $4,390,000 $5,978,000 $16,889,000 $18,123,000
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Basic earnings per share
- ------------------------
Weighted average shares
outstanding 13,514,251 13,373,479 13,199,806 13,375,590
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Basic earnings per share $0.32 $0.45 $1.28 $1.35
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Diluted earnings per share
- --------------------------
Weighted average shares
outstanding 13,514,251 13,373,479 13,199,806 13,375,590
Common stock equivalents
due to stock options 116,728 139,325 137,393 127,833
- ------------------------------------------------------------------------------
Adjusted shares outstanding 11,630,979 13,512,804 13,337,199 13,503,342
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Diluted earnings per share $0.32 $0.44 $1.27 $1.34
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
INTRODUCTION
"Forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995 may be included in this report. A
variety of factors could cause the Corporation's actual results to
differ from those expected at the time of this report including
general and local economic conditions, interest rate changes, risks
associated with acquisitions, credit risks, regulatory risks,
competition, and year 2000 compliance risks.
The Corporation continues to grow rapidly by acquiring community
banks. The financial results of the acquisition can best be assessed
from the Corporation's financial statements on a quarterly, as-
reported basis. After each acquisition accounted for as a pooling of
interests (other than transactions accounted for as immaterial
poolings), the Corporation's financial statements are restated to
include the results of the acquiree. From January 1, 1997 through
September 30, 1998, the Corporation acquired assets of $422,631,000
(measured at the time of each acquisition) in four transactions
accounted for as poolings of interests.
From January 1, 1997 through September 30, 1998, the Corporation has
also acquired $326,750,000 (measured at the time of each acquisition)
in assets through transactions accounted for as purchases. Financial
statements are not restated following a transaction accounted for as a
purchase; instead, the Corporation's financial statements include the
results of each acquired entity following acquisition. Transactions
accounted for as purchases typically result in the Corporation's
recording intangible assets, including goodwill, which the Corporation
amortizes on a straight-line basis. The Corporation has recorded
$31,743,000 (measured at the time of each acquisition) in intangible
assets as the direct result of purchases consummated between January
1, 1997 and September 30, 1998. Note 6 to the condensed consolidated
financial statements contains information regarding the acquisitions
completed since January 1, 1997.
Management expects to evaluate acquisition opportunities as they
arise. Note 7 to the condensed consolidated financial statement
contains information regarding pending acquisitions. However,
management expects the pace of acquisition activity will decline and
the Corporation will devote significant resources in integrating
recently acquired institutions.
12
<PAGE>
NET INCOME
Net income for the quarter ended September 30, 1998 was $4,390,000
compared to $5,978,000 for the third quarter of 1997, reflecting a
$1,588,000 or 26.6% decrease. Basic earnings per share for the third
quarter of 1998 was $0.32 compared to $0.45, on a diluted basis third
quarter earnings per share were $0.32 and $0.44 for 1998 and 1997,
respectively. Net income for the first nine months of 1998 was
$16,889,000, down $1,234,000, or 6.8% from the $18,123,000 attained in
the same period of 1998. Basic earnings per share for the nine months
ended September 30, was $1.28 for 1998 and $1.35 for 1997. Basic
weighted average shares outstanding was 13,514,251 and 13,199,806 for
the three and nine months, respectively, ended September 30, 1998,
compared to 13,373,479 and 13,375,509 during the same periods of the
prior year. The weighted average shares outstanding, assuming
dilution, was 13,630,979 and 13,337,199 for the three and nine months,
respectively, ended September 30, 1998 and 13,512,804 and 13,503,342
during the same periods in the prior year.
The decrease in net income and related earnings per share was,
primarily, the result of expenses associated with acquisition
activities and consolidation of certain operational functions among
the Corporation's subsidiaries, primarily accounting, deposit
processing, and loan processing. For the quarter ended September 30,
1998, the Corporation incurred after tax charges of $742,000 related
to acquisition activities and $1,096,000 related to operational
consolidation. On a year-to-date basis, the Corporation incurred
after tax charges related to acquisition of $1,067,000 related to
acquisition activities and $1,096,000 related to operational
consolidations.
NET INTEREST INCOME
Net interest income, on a taxable equivalent basis, for the quarter
ended September 30, 1998 $20,137,000, reflecting an increase of
$2,015,000 or 11.1% over the same period in 1997. For the nine months
ended September 30, 1998 net interest income, on a taxable equivalent
basis was $59,046,000, $6,031,000 or 11.4% higher than the $53,015,000
earned during the first nine months of 1997.
Average earning assets for the third quarter of 1998 were
$1,686,844,000, $227,235,000 or 13.5% higher than the third quarter of
1997. Average earning assets for the nine months ended September 30,
1998 were $1,642,501,000 compared to $1,418,274,000 for the same
period in 1997. Average loans for the third quarter of 1998 were
$1,329,481,000, reflecting an increase of $239,337,000 or 22.0% over
the third quarter average for 1997 of $1,090,144,000. Average loans
for the first nine months of 1998 were $1,254,003,000 compared to
$1,047,771,000 during the corresponding period in 1997.
13
<PAGE>
Average interest bearing deposits for the third quarter of 1998 were
$1,230,706,000, increasing $170,001,000 or 16.0% over the third
quarter of 1997. Average interest bearing deposits for the first nine
months of 1998 were $1,201,488,000 compared to $1,036,606,000 for the
same period in 1997. Average noninterest bearing deposits for the
third quarter and first nine months of 1998 increased $24,912,000 or
15.6% and $29,349,000 or 19.0%, respectively, over the corresponding
periods in 1997. Growth in average earning assets, loans and deposits
during 1998 was due, primarily, to two acquisitions accounted for as
purchases.
UNDERPERFORMING ASSETS
Listed below is a two-year comparison of underperforming assets.
<TABLE>
<CAPTION>
9/30/98 9/30/97
---------------------------------------------------------------
<S> <C> <C>
Nonaccrual loans $8,324,000 $3,917,000
Restructured loans 191,000 140,000
90 days past due loans 815,000 2,477,000
---------------------------------------------------------------
Total underperforming loans 9,330,000 6,534,000
Nonaccrual securities:
Agency-issued CMO - 21,000
Other real estate held 153,000 155,000
---------------------------------------------------------------
Total underperforming assets $9,483,000 $6,710,000
---------------------------------------------------------------
---------------------------------------------------------------
</TABLE>
Past due 90 days or more, nonaccrual, and renegotiated loans were 0.7
percent of total loans at September 30, 1998, and 0.6 percent of total
loans at September 30, 1997. Of the loans in this category, 57.0 and
60.1 percent were secured by real estate at September 30, 1998 and
1997, respectively. Potential problem loans, other than
underperforming loans, amounted to $45,260,000 at September 30, 1998
and $47,728,000 at September 30, 1997.
PROVISION FOR LOAN LOSSES
The provision for loan losses during the first nine months of 1998 was
$2,571,000 compared to $1,527,000 from the comparable year-ago period.
The provision is based on the quarterly review of the allowance for
loan losses. Some of the factors used in this review include current
economic conditions and forecasts, risk by type of loan, previous loan
loss experience, and evaluation of specific borrowers and collateral.
Management realizes the low loan loss environment that the banking
industry has had in the past may not persist and, therefore, has taken
action to increase the allowance for loan losses. Allowance for loan
losses as a percent of total loans increased from 0.96 percent to 0.98
percent over the past year. As of September 30, 1998, management
considered the allowance for loan losses adequate to provide for
potential losses.
14
<PAGE>
Net charge-offs amounted to $471,000 during the third quarter and
$1,076,000 during the first nine months of 1998, compared to $467,000
during the third quarter and $1,088,000 during the first nine months
of 1997.
NONINTEREST INCOME
Noninterest income for the third quarter of 1998 increased $502,000 or
16.1% and for the first nine months $2,375,000 or 26.1% from the
corresponding periods in the prior year. Service charges on deposit
accounts for the third quarter of 1998 increased $329,000 or 23.6% and
$857,000 or 21.4% for the first nine months of 1998. Other
noninterest income for the third quarter of 1998 increased $94,000 or
8.0% and $783,000, or 25.2% for the first nine months of the year.
Increases in service charges on deposit accounts and other noninterest
income was primarily due to acquisitions accounted for as purchases.
Trust fees for the first nine months of 1998 were $1,576,000
reflecting an increase of $296,000 or 23.1% over 1997. Trust fees
increased as a result of the increase underlying values of assets
under management on which fees are based.
NONINTEREST EXPENSE
Noninterest expense for the nine months ended September 30, 1998 was
$39,143,000 increasing $8,535,000 or 27.9% over 1997. Non-recurring
expenses associated with acquisition activities and operational
consolidation amounted to $3,162,000 or 37.0% of the increase The
increase also includes approximately $3,600,000 of noninterest expense
in 1998 due to banks acquired and accounted for as purchases.
Noninterest expense for the third quarter of 1998 increased $4,743,000
or 45.2% over the same period in 1997. Non-recurring charges in the
third quarter associated with operational consolidation and
acquisition activities amounted to $2,837,000 or 59.8% of the
increase. Salaries and related benefits for 1998 increased
$1,613,000, or 27.2% over the third quarter of 1997 and $2,753,000, or
15.9 % over the first nine months of 1997. During the third quarter
of 1998, the Corporation recorded a charge of $726,000 to reflect the
cost of severance pay associated with operational consolidation.
Increases in salaries and benefits expense due to acquisitions
accounted for using the purchase method of accounting in 1998 were
$518,000 in the quarter and $1,168,000 for the first nine months of
1998. Other noninterest expense for 1998 increased $2,660,000 or
85.9% for the third quarter and $4,678,000 or 51.5% for the nine
months ended September 30, 1998. Other noninterest expense for the
nine months ended September 30, 1998 increased primarily due to
$1,010,000 in goodwill and deposit premium amortization resulting from
acquisitions accounted for as purchases, consulting fees associated
with the operational consolidation of $874,000, and professional fees
associated with acquisition activities of $1,061,000.
15
<PAGE>
FINANCIAL POSITION
Cash and cash equivalents at September 30, 1998 were $50,270,000
reflecting an increase of $5,524,000 or 12.3% over the September 30,
1997 total. Federal funds sold decreased from $15,279,000 at
September 30, 1997 to $64,000 at September 30, 1998. Decreases in the
federal funds sold position and the securities portfolio were used to
fund loan growth.
Available for sale securities at September 30, 1998 decreased
$25,572,000 or 8.5% since September 30, 1997. U. S. Government and
agency securities at September 30 were $68,030,000 and $98,616,000 in
1998 and 1997 reflecting a decrease of $30,586,000 or 31.0%. The
market value adjustment for the securities portfolio at September 30,
1998 increased $3,624,000 over the prior year. Amortized cost and
fair values of securities at September 30, 1998, with dollar amounts
in thousands are presented in the table below.
Securities available for sale:
<TABLE>
<CAPTION>
As of: September 30, 1998
-------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and
agency securities $ 68,030 $ 630 $ 4 $ 68,656
Taxable municipals 2,943 126 - 3,069
Tax-exempt municipals 180,178 7,683 102 187,759
Corporate securities 6,746 155 - 6,901
Mortgage-backed securities 50,457 545 144 50,858
Marketable equity
securities 6,165 - 618 5,547
- ----------------------------------------------------------------------
Total available for sale $314,519 $9,139 $868 $322,790
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
</TABLE>
Total loans at September 30, 1998 were $1,343,051,000 compared to
1,105,194,000 at the same date in 1997. The increase in loans over
the prior year was $237,857,000 or 21.5%. Approximately $107,000,000
of this increase is a result of acquisitions accounted for as
purchases. Loans secured by real estate increased $123,066,000 or
19.28%; commercial and industrial loans increased $92,612,000 or
43.1%; all other categories of loans increased $22,179,000, or 2.0%
Total deposits at September 30, 1998 increased $173,668,000 or 14.2%
over the prior year. Acquisitions accounted for as purchases
accounted for substantially all of this growth. Noninterest bearing
deposits increased $16,208,000 or 9.3% and interest bearing deposits
increased $157,460,000 or 15.0% during the past year.
16
<PAGE>
SHAREHOLDERS' EQUITY
The Corporation and each subsidiary bank have capital ratios which
substantially exceed all regulatory requirements. The Corporation's
regulatory capital ratios are shown below.
<TABLE>
<CAPTION>
Minimum
Requirements 9/30/98 9/30/97
-------------------------------------------------------------
<S> <C> <C> <C>
Tier I capital to
risk-based assets 4.00% 13.36% 17.73%
Total capital to
risk-based assets 8.00% 14.34% 18.65%
Tangible equity to
tangible assets 3.00% 10.32% 13.09%
</TABLE>
YEAR 2000 COMPLIANCE
The year 2000 poses a unique set of challenges to those industries
reliant on information technology. As a result of methods employed by
early programmers, many software applications and operational programs
may be unable to distinguish the year 2000 from the year 1900. If not
effectively addressed, this problem could result in the production of
inaccurate data, or, in the worst cases, the inability of the systems
to continue to function altogether. Financial institutions are
particularly vulnerable due to the industry's dependence on electronic
data processing systems.
To address the potential adverse year 2000-related consequences, the
banking regulatory authorities, working cooperatively through the
Federal Financial Institutions Examination Council (FFIEC), have
issued a number of specific guidelines designed to guide financial
institutions in their year 2000 compliance efforts. The Corporation
has developed a year 2000 compliance program that it believes is
consistent with these guidelines.
The Corporation and its banking subsidiaries are subject to
examination with respect to their year 2000 compliance by various
state and federal agencies, including the Federal Reserve Board, the
Comptroller of the Currency, the Office of Thrift Supervision, the
Federal Deposit Insurance Corporation, and state banking agencies. If
a regulatory agency issues a rating of less than "satisfactory" with
respect to an organization's year 2000 compliance efforts, the
organization's ability to obtain regulatory approval of certain
actions, such as proposed acquisitions, may be adversely affected.
The Corporation's acquisition plans are not presently under any such
restriction.
17
<PAGE>
The Corporation has established a year 2000 team to monitor progress
with achieving year 2000 compliance. The team reports its progress to
the Corporation's Board of Directors on a monthly bases. In addition,
the Corporation is utilizing an external consulting firm to assist
with its year 2000 compliance. The Corporation's expects that the
projects will be substantially complete by December 31, 1998.
The Corporation's year 2000 project involves five phases: 1.
Awareness; 2. Assessment; 3. Renovation; 4. Validation; and 5.
Implementation. The Corporation has completed the awareness and
assessment phases. Major aspects of the renovation phase have been
completed and the Corporation expects to complete the remainder of
this phase by December 31, 1998. The validation and implementation
phases are expected to be substantially complete by December 31, 1998.
The Corporation is currently preparing its contingency and business
resumption plans following FFIEC guidelines. The Corporation expects
to complete its contingency planning before the FFIEC deadline of
December 31, 1998.
Management expects total additional out-of-pocket expenditures to be
approximately $500,000. This includes fees to outside consulting
firms, costs to upgrade equipment specifically for the purpose of year
2000 compliance, and certain administrative expenditures. Some
amounts are being expense as incurred and are not expected to be
material to the Corporation's financial condition or results of
operations.
Management believes the organization has a effective corporate year
2000 compliance program in place and that additional expenditures
required to bring its systems into compliance will not have a
materially adverse effect on the Corporation's operations, cash flow,
or financial condition. However, the year 2000 problem is pervasive
and complex and can potentially affect any computer process. The
Corporation is dependent upon certain key suppliers to achieve year
2000 compliance. Accordingly, no assurance can be given that year
2000 compliance can be achieved without additional unanticipated
expenditures and uncertainties that might affect future financial
results.
IMPACT OF ACCOUNTING PRONOUNCEMENTS
In February, 1998, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits". SFAS No. 132 standardizes the disclosure
requirements for pensions and other postretirement benefits. This
statement is effective for financial statements for periods beginning
after December 15, 1997. The Corporation plans to adopt the
appropriate provisions of the statements at January 1, 1998, and does
not currently believe that the future adoption of this statement will
have a material effect on the Corporation's financial position or
operating results.
18
<PAGE>
On June 15, 1998, the FASB issued FAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." FAS 133 established a
new model for accounting for derivatives and hedging activities and
supersedes and amends a number of existing standards. FAS 133 is
effective for fiscal years beginning after June 15, 1999, but earlier
application is permitted as of the beginning of any fiscal quarter
subsequent to June 15, 1998. Upon the statement's initial
application, all derivatives are required to be recognized in the
statement of financial position as either assets or liabilities and
measured at fair value. In addition, all hedging relationships must
be designated, reassessed and documented pursuant to the provisions of
FAS 133. Adoption of FAS 133 is not expected to have a material
financial statement impact on the Corporation's financial position or
operating results.
In October, 1998, the FASB issued SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Banking Enterprise". SFAS No. 134
amends SFAS 65 and SFAS 115. SFAS No. 134 is effective for the first
fiscal quarter beginning after December 15, 1998. Adoption of SFAS
No. 133 is not expected to have a material financial statement impact
on the Corporation's financial position or operating results.
19
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in market risk exposures that
affect the quantitative and qualitative disclosures presented in the
Corporation's supplemental consolidated financial statements filed on
Form 8-K for the year ended December 31, 1997 which were filed with
the SEC on October 9, 1998.
20
<PAGE>
NATIONAL CITY BANCSHARES, INC. and Subsidiaries
PART II - OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
The following exhibits are submitted herewith:
10.1 Termination Benefits Agreement dated September 16,
1998 between Registrant and Michael F. Elliott
10.2 Termination Benefits Agreement dated September 16,
1998 between Registrant and Robert A. Keil
10.3 Termination Benefits Agreement dated September 16,
1998 between Registrant and Curtis D. Ritterling
10.4 Termination Benefits Agreement dated September 16,
1998 between Registrant and Stephen C. Byelick, Jr.
11 Computation of Per Share Earnings (incorporated
by reference to Note 8 to the Corporation's
unaudited interim consolidated financial statements
included herein)
27 Financial Data Schedule (Electronic Filing Only)
REPORTS ON FORM 8-K
A CURRENT REPORT dated August 7, 1998, for the events of July 29,
1998, and August 6, 1998, was filed reporting under Item 5 news
releases announcing earnings and announcing its back office
restructuring and product standardization plans. The report also
included the two news releases as exhibits under Item 7.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
NATIONAL CITY BANCSHARES, INC.
(Registrant)
By /s/ STEPHEN C. BYELICK, JR.
----------------------------
Stephen C. Byelick, Jr.
Secretary and Treasurer
(On behalf of the registrant
and in his capacity as Chief
Accounting Officer.)
November 13, 1998
21
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
- -------------- --------------------------------------------------
10.1 Termination Benefits Agreement dated September 16,
1998 between Registrant and Michael F. Elliott
10.2 Termination Benefits Agreement dated September 16,
1998 between Registrant and Robert A. Keil
10.3 Termination Benefits Agreement dated September 16,
1998 between Registrant and Curtis D. Ritterling
10.4 Termination Benefits Agreement dated September 16,
1998 between Registrant and Stephen C. Byelick, Jr.
11 Computation of Per Share Earnings (incorporated
by reference to Note 8 to the Corporation's
unaudited interim consolidated financial
statements included herein)
27 Financial Data Schedule (Electronic Filing Only)
22
<PAGE>
<PAGE>
TERMINATION BENEFITS AGREEMENT
This Termination Benefits Agreement ("Agreement") is made
and entered into as of September 16, 1998, by and between National
City Bancshares, Inc., an Indiana corporation (hereinafter referred
to as the "Corporation") and Michael F. Elliott, a resident of the
State of Indiana (hereinafter referred to as "Employee").
W I T N E S S E T H
WHEREAS, Employee is now serving as an executive officer
of the Corporation with the titles of Chairman and Chief Executive
officer; and
WHEREAS, the Corporation believes that Employee has made
valuable contributions to the productivity and profitability of the
Corporation; and
WHEREAS, the Corporation desires to encourage Employee to
continue to make such contributions and not to seek or accept
employment elsewhere; and
WHEREAS, the Corporation, therefore, desires to assure
Employee of certain benefits in case of any termination or
significant redefinition of the terms of his employment with the
Corporation subsequent to any Change in Control of the Corporation;
NOW, THEREFORE, in consideration of the foregoing and of
the mutual covenants herein contained and the mutual benefits
herein provided, the Corporation and Employee hereby agree as
follows:
1. The term of this Agreement shall be from the date
hereof through December 31, 2000; provided, however, that such term
shall be automatically extended for an additional year on
December 31, 1998, and on December 31 of each year thereafter
unless either party hereto gives written notice to the other party
not to so extend prior to November 30 of the year for which notice
is given, in which case no further automatic extension shall occur
and the term of this Agreement shall end on December 31 two (2)
years subsequent to the date of the latest preceding automatic
extension. Notwithstanding the foregoing, if a Change in Control
of the Corporation (as defined in Section 2 below) shall occur
prior to the expiration of the original term or any extensions of
the term of this Agreement, then the term of this Agreement shall
automatically become a term of two (2) years commencing on the date
of any such Change in Control.
2. As used in this Agreement, "Change in Control" of
the Corporation means:
(A) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act as in effect from time to time) of twenty-
five percent (25%) or more of either (i) the then
outstanding shares of common stock of the Corporation or
(ii) the combined voting power of the then outstanding
voting securities of the Corporation entitled to vote
generally in the election of directors; provided,
however, that the following acquisitions shall not
constitute an acquisition of control: (i) any
acquisition directly from the Corporation (excluding an
acquisition by virtue of the exercise of a conversion
privilege), (ii) any acquisition by the Corporation,
(iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Corporation
or any corporation controlled by the Corporation, or
(iv) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following
such reorganization, merger or consolidation, the
conditions described in clauses (i), (ii) and (iii) of
subsection (C) of this Section 2 are satisfied;
(B) Individuals who, as of the date hereof,
constitute the Board of Directors of the Corporation (the
"Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors of the
Corporation (the "Board"); provided, however, that any
individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Corporation's shareholders, was approved by a vote of at
least a majority of the directors then comprising the
Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(C) Approval by the shareholders of the Corporation
of a reorganization, merger or consolidation, in each
case, unless, following such reorganization, merger or
consolidation, (i) more than sixty percent (60%) of,
respectively, the then outstanding shares of common stock
of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of
the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or
indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the outstanding Corporation common stock
and outstanding Corporation voting securities immediately
prior to such reorganization, merger or consolidation in
substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or
consolidation, of the outstanding Corporation stock and
outstanding Corporation voting securities, as the case
may be, (ii) no Person (excluding the Corporation, any
employee benefit plan or related trust of the Corporation
or such corporation resulting from such reorganization,
merger or consolidation and any Person beneficially
owning, immediately prior to such reorganization, merger
or consolidation, directly or indirectly, twenty-five
percent (25%) or more of the outstanding Corporation
common stock or outstanding voting securities, as the
case may be) beneficially owns, directly or indirectly,
twenty-five percent (25%) or more of, respectively, the
then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of such corporation
entitled to vote generally in the election of directors
and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such
reorganization, merger or consolidation were members of
the Incumbent Board at the time of the execution of the
initial agreement providing for such reorganization,
merger or consolidation; or
(D) Approval by the shareholders of the Corporation
of (i) a complete liquidation or dissolution of the
Corporation or (ii) the sale or other disposition of all
or substantially all of the assets of the Corporation,
other than to a corporation with respect to which
following such sale or other disposition (a) more than
sixty percent (60%) of, respectively, the then
outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote
generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
outstanding Corporation common stock and outstanding
Corporation voting securities immediately prior to such
sale or other disposition in substantially the same
proportion as their ownership, immediately prior to such
sale or other disposition, of the outstanding Corporation
common stock and outstanding Corporation voting
securities, as the case may be, (b) no Person (excluding
the Corporation and any employee benefit plan or related
trust of the Corporation or such corporation and any
Person beneficially owning, immediately prior to such
sale or other disposition, directly or indirectly,
twenty-five percent (25%) or more of the outstanding
Corporation common stock or outstanding Corporation
voting securities, as the case may be) beneficially owns,
directly or indirectly, twenty-five percent (25%) or more
of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power
of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (c) at least a majority of the members of
the board of directors of such corporation were members
of the Incumbent Board at the time of the execution of
the initial agreement or action of the Board providing
for such sale or other disposition of assets of the
Corporation.
3. The Corporation shall provide Employee with the
benefits set forth in Section 6 of this Agreement upon any
termination of Employee's employment by the Corporation following
a Change in Control for any reason except the following:
(A) Termination by reason of Employee's death.
(B) Termination by reason of Employee's
"disability." For purposes hereof, "disability" shall be
defined as Employee's inability by reason of illness or
other physical or mental disability to perform the duties
required by his employment for any consecutive One
Hundred Eighty (180) day period, provided that notice of
any termination by the Corporation because of Employee's
"disability" shall have been given to Employee prior to
the resumption by him of the performance of such duties.
(C) Termination upon Employee reaching his normal
retirement date, which for purposes of this Agreement
shall be deemed to be the end of the month during which
employee reaches sixty-five (65) years of age.
(D) Termination for "cause." As used in this
Agreement, the term "cause" means fraud, dishonesty,
theft of corporate assets, or other gross misconduct by
Employee. Notwithstanding the foregoing, Employee shall
not be deemed to have been terminated for cause unless
and until there shall have been delivered to him a copy
of a resolution duly adopted by the affirmative vote of
not less than a majority of the entire membership of the
Corporation's Board at a meeting called and held for the
purpose (after reasonable notice to him and an
opportunity for him, together with his counsel, to be
heard before such Board), finding that, in the good faith
opinion of such Board, Employee was guilty of conduct
constituting "cause" and specifying the particulars
thereof in detail.
4. The Corporation shall also provide Employee with the
benefits set forth in Section 6 of this Agreement upon any
termination of Employee's employment with the Corporation at
Employee's option if any one of the following events occurs within
six (6) months prior to or within two (2) years following a Change
in Control:
(A) Without Employee's express written consent, the
assignment of Employee to any duties which, in Employee's
reasonable judgment, are materially inconsistent with his
positions, duties, responsibilities or status with the
Corporation immediately prior to the earlier of
termination of employment or the Change in Control or a
substantial reduction of his duties or responsibilities
which, in Employee's reasonable opinion, does not
represent a promotion from his position, duties or
responsibilities immediately prior to the earlier of
termination of employment or the Change in Control.
(B) A reduction by the Corporation in Employee's
salary from the level of such salary immediately prior to
the earlier of termination of employment or the Change in
Control or the Corporation's failure to increase (within
twelve (12) months of Employee's last increase in base
salary) Employee's base salary after a Change in Control
in an amount which at least equals, on a percentage
basis, the average percentage increase in base salary for
all executive and senior officers of the Corporation
effected in the preceding twelve (12) months.
(C) The failure by the Corporation to continue in
effect any incentive, bonus or other compensation plan in
which Employee participates, including but not limited to
the Corporation's stock option plans, unless an equitable
arrangement (embodied in an ongoing substitute or
alternative plan), with which Employee has consented, has
been made with respect to such plan in connection with
the Change in Control, or the failure by the Corporation
to continue Employee's participation therein, or any
action by the Corporation which would directly or
indirectly materially reduce Employee's participation
therein.
(D) The failure by the Corporation to continue to
provide Employee with benefits substantially similar to
those enjoyed by Employee or to which Employee was
entitled under any of the Corporation's principal
pension, profit sharing, life insurance, medical, dental,
health and accident, or disability plans in which
Employee was participating immediately prior to the
earlier of the termination of employment or the Change in
Control, the taking of any action by the Corporation
which would directly or indirectly materially reduce any
of such benefits or deprive Employee of any material
fringe benefit enjoyed by Employee or to which Employee
was entitled immediately prior to the earlier of the
termination of employment or the Change in Control, or
the failure by the Corporation to provide Employee with
the number of paid vacation and sick leave days to which
Employee is entitled on the basis of years of service or
position with the Corporation in accordance with the
Corporation's normal vacation policy in effect on the
date hereof.
(E) The Corporation's requiring Employee to be
based anywhere other than the metropolitan area where the
Corporation office at which he was based immediately
prior to the earlier of the termination of employment or
the Change in Control was located, except for required
travel on the Corporation's business in accordance with
the Corporation's past management practices.
(F) Any failure of the Corporation to obtain the
assumption of the obligation to perform this Agreement by
any successor as contemplated in Section 10 hereof.
(G) Any failure by the Corporation or its
shareholders, as the case may be, to reappoint or reelect
Employee to a corporate office held by him immediately
prior to the earlier of the termination of employment or
the Change in Control or his removal from any such office
including any seat held at such time on the Corporation's
Board of Directors.
(H) The effectiveness of a resignation, tendered at
any time, either before or after a Change in Control and
regardless of whether formally characterized as voluntary
or otherwise, by Employee of any corporate office held by
him immediately prior to the Change in Control or of any
seat held at such time on the Corporation's Board of
Directors, at the request of the Corporation or at the
request of the person obtaining control of the
Corporation in such Change in Control.
(I) Any purported termination of the Employee's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 5
hereof (and, if applicable, Section 3(D) hereof); and for
purposes of this Agreement, no such purported termination
shall be effective.
(J) Any request by the Corporation that Employee
participate in an unlawful act or take any action
constituting a breach of Employee's professional standard
of conduct.
(K) Any breach by the Corporation of any of the
provisions of this Agreement or any failure by the
Corporation to carry out any of its obligations
hereunder.
Notwithstanding anything in this Section 4 to the contrary,
Employee's right to terminate Employee's employment pursuant to
this Section 4 shall not be affected by Employee's incapacity due
to physical or mental illness.
5. Any termination of Employee's employment with the
Corporation as contemplated by Section 3 hereof (except
subsection 3(A)) or by Employee as contemplated by Section 4 hereof
shall be communicated by written "Notice of Termination" to the
other party hereto. Any "Notice of Termination" given by Employee
pursuant to Section 4 or given by the Corporation in connection
with a termination as to which the Corporation believes it is not
obligated to provide Employee with benefits set forth in Section 6
hereof shall indicate the specific provisions of this Agreement
relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such termination.
6. Subject to the conditions and exceptions set forth
in Section 3 and Section 4 hereof, the following benefits, less any
amounts required to be withheld therefrom under any applicable
federal, state or local income tax, other tax, or social security
laws or similar statutes, shall be paid to Employee upon any
termination of his employment within six (6) months before or
within two (2) years after any Change in Control:
(A) Within thirty (30) days following such a
termination or, if later, such a Change in Control,
Employee shall be paid, at his then-effective salary, for
services performed through the date of his termination.
In addition, any earned but unpaid amount of any bonus or
incentive payment (which, for purposes of this Agreement,
shall mean that amount computed in a fashion consistent
with the manner in which Employee's bonus or incentive
plan for the year preceding the year of termination was
computed, if Employee received a bonus or incentive
payment during such preceding year in accordance with a
plan or program of the Corporation, or, if not, then the
total bonus or incentive payment received by the Employee
during such preceding year, in either case prorated
through the date of termination) shall be paid to
Employee within thirty (30) days following the
termination of his employment or, if later, such a Change
in Control.
(B) Within thirty (30) days following such a
termination, Employee shall be paid a lump sum payment of
an amount equal to two and nine-tenths (2.9) times
Employee's "Base Amount." For purposes hereof, Base
Amount is defined as Employee's average includable
salary, bonus, incentive payments and similar
compensation paid by the Corporation for the five (5)
most recent taxable years ending before the date on which
the Change in Control occurs (or such shorter period of
time that the Employee has been employed by the
Corporation). The definition, interpretation and
calculation of the dollar amount of Base Amount shall be
in a manner consistent with and as required by the
provisions of Section 280G of the Internal Revenue Code
of 1986, as amended ("Code"), and the regulations and
rulings of the Internal Revenue Service promulgated
thereunder. The payments to the Employee under this
Section 6(B) shall be reduced by the full amount that
such payment, when added to all other payments or
benefits of any kind to the Employee by reason of the
Change in Control, constitutes an "excess parachute
payment" within the meaning of Section 280G of the Code.
(C) Employee acknowledges and agrees that payment
in accordance with subsections 6(A), 6(B) and 6(C) shall
be deemed to constitute a full settlement and discharge
of any and all obligations of the Corporation to Employee
arising out of his employment with the Corporation and
the termination thereof, except for any vested rights
Employee may then have under any insurance, pension,
supplemental pension, thrift, employee stock ownership,
or stock option plans sponsored or made available by the
Corporation.
7. The Corporation is aware that upon the occurrence of
a Change in Control the Board of Directors or a shareholder of the
Corporation may then cause or attempt to cause the Corporation to
refuse to comply with its obligations under this Agreement, or may
cause or attempt to cause the Corporation to institute, or may
institute, litigation seeking to have this Agreement declared
unenforceable, or may take or attempt to take other action to deny
Employee the benefits intended under this Agreement. In these
circumstances, the purpose of this Agreement could be frustrated.
It is the intent of the Corporation that Employee not be required
to incur the expenses associated with the enforcement of his rights
under this Agreement by litigation or other legal action, nor be
bound to negotiate any settlement of his rights hereunder, because
the cost and expense of such legal action or settlement would
substantially detract from the benefits intended to be extended to
Employee hereunder. Accordingly, if following a Change in Control
it should appear to Employee that the Corporation has failed to
comply with any of its obligations under this Agreement or in the
event that the Corporation or any other person takes any action to
declare this Agreement void or unenforceable, or institutes any
litigation or other legal action designed to deny, diminish or to
recover from Employee the benefits entitled to be provided to the
Employee hereunder, and that Employee has complied with all of his
obligations under this Agreement, the Corporation irrevocably
authorizes Employee from time to time to retain counsel of his
choice, at the expense of the Corporation as provided in this
Section 7, to represent Employee in connection with the initiation
or defense of any litigation or other legal action, whether such
action is by or against the Corporation or any director, officer,
shareholder, or other person affiliated with the Corporation, in
any jurisdiction. Notwithstanding any existing or prior attorney-
client relationship between the Corporation and such counsel, the
Corporation irrevocably consents to Employee entering into an
attorney-client relationship with such counsel, and in that
connection the Corporation and Employee agree that a confidential
relationship shall exist between Employee and such counsel. The
reasonable fees and expenses of counsel selected from time to time
by Employee as hereinabove provided shall be paid or reimbursed to
Employee by the Corporation on a regular, periodic basis upon
presentation by Employee of a statement or statements prepared by
such counsel in accordance with its customary practices, up to a
maximum aggregate amount of One Hundred Thousand Dollars
($100,000). Any legal expenses incurred by the Corporation by
reason of any dispute between the parties as to enforceability of
or the terms contained in this Agreement as provided by this
Section 7, notwithstanding the outcome of any such dispute, shall
be the sole responsibility of the Corporation, and the Corporation
shall not take any action to seek reimbursement from Employee for
such expenses. Notwithstanding any limitation contained in this
Section 7 to the contrary, Employee shall be entitled to payment or
reimbursement of legal expenses in excess of One Hundred Thousand
Dollars ($100,000) if the expenses were incurred as a result of a
dispute under this Agreement in which Employee obtains a final
judgment in his favor from a court of competent jurisdiction or his
claim is settled by the Corporation prior to the rendering of a
judgment by such a court.
8. Employee is not required to mitigate the amount of
benefit payments to be made by the Corporation pursuant to this
Agreement by seeking other employment or otherwise, nor shall the
amount of any benefit payments provided for in this Agreement be
reduced by any compensation earned by Employee as a result of
employment by another employer or which might have been earned by
Employee had Employee sought such employment, after the date of
termination of his employment with the Corporation or otherwise.
9. In order to induce the Corporation to enter into
this Agreement, Employee hereby agrees as follows:
(A) He will keep confidential and not improperly
divulge for the benefit of any other party any of the
Corporation's confidential information and business
secrets including, but not limited to, confidential
information and business secrets relating to such matters
as the Corporation's finances and operations. All of the
Corporation's confidential information and business
secrets shall be the sole and exclusive property of the
Corporation.
(B) For a period of two years after Employee's
employment with the Corporation ceases, Employee shall
not either on his own account or for any other person,
firm or company solicit or endeavor to cause any employee
of the Corporation to leave his employment or to induce
or attempt to induce any such employee to breach any
employment agreement with the Corporation.
In the event of a breach or threatened breach by Employee of the
provisions of this Section 9, the Corporation shall be entitled to
an injunction restraining Employee from committing or continuing
such breach. Nothing herein contained shall be construed as
prohibiting the Corporation from pursuing any other remedies
available to it for such breach or threatened breach including the
recovery of damages from Employee. The covenants of this Section
9
shall run not only in favor of the Corporation and its successors
and assigns, but also in favor of its subsidiaries and their
respective successors and assigns and shall survive the termination
of this Agreement.
10. The Corporation 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 Corporation, by agreement in form and substance
satisfactory to Employee, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession
had taken place. Failure of the Corporation to obtain such
agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Employee to
compensation from the Corporation in the same amount and on the
same terms as Employee would be entitled hereunder if he were to
terminate his employment pursuant to Section 4 hereof, except that
for purposes of implementing the foregoing, the date on which
succession becomes effective shall be deemed the date of
termination of Employee's employment with the Corporation. As used
in this Agreement, "Corporation" shall mean the Corporation as
hereinbefore defined and any successor to the business or assets of
it as aforesaid which executes and delivers the agreement provided
for in this Section 10 or which otherwise becomes bound by all of
the terms and provisions of this Agreement by operation of law.
11. Should Employee die while any amounts are payable to
him hereunder, this Agreement shall inure to the benefit of and be
enforceable by Employee's executors, administrators, heirs,
distributees, devisees and legatees and all amounts payable
hereunder shall be paid in accordance with the terms of this
Agreement to Employee's devisee, legatee or other designee or if
there be no such designee, to his estate.
12. For purposes of this Agreement, notices and all
other communications provided for herein shall be in writing and
shall be deemed to have been given when delivered or mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Employee:
Michael F. Elliott
National City Bancshares, Inc.
227 Main Street
Evansville, Indiana 47705
If to the Corporation:
National City Bancshares, Inc.
227 Main Street
P. O. Box 868
Evansville, Indiana 47705-0868
Attention: Corporate Secretary
or to such other address as any party may have furnished to the
other party in writing in accordance herewith, except that notices
of change of address shall be effective only upon receipt.
13. The validity, interpretation, and performance of
this Agreement shall be governed by the laws of the State of
Indiana. The parties agree that all legal disputes regarding this
Agreement will be resolved in Evansville, Indiana, and irrevocably
consent to service of process in such City for such purpose.
14. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge
is agreed to in writing signed by Employee and the Corporation. No
waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time. No agreements or
representation, oral or otherwise, express or implied, with respect
to the subject matter hereof have been made by any party which are
not set forth expressly in this Agreement.
15. The invalidity or unenforceability of any provisions
of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in
full force and effect.
16. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same Agreement.
17. This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign
or transfer this Agreement or any rights or obligations hereunder,
except as provided in Section 10 and Section 11 above. Without
limiting the foregoing, Employee's right to receive payments
hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than a
transfer by his Will or by the laws of descent and distribution as
set forth in Section 11 hereof, and in the event of any attempted
assignment or transfer contrary to this Section 17, the Corporation
shall have no liability to pay any amount so attempted to be
assigned or transferred.
Any benefits payable under this Agreement shall be paid
solely from the general assets of the Corporation. Neither
Employee nor Employee's beneficiary shall have interest in any
specific assets of the Corporation under the terms of this
Agreement. This Agreement shall not be considered to create an
escrow account, trust fund or other funding arrangement of any kind
or a fiduciary relationship between Employee and the Corporation.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed and delivered as of the day and year first
above set forth.
NATIONAL CITY BANCSHARES, INC.
("Corporation")
By: /S/ LAURENCE R. STEENBERG
--------------------------
Laurence R. Steenberg,
Member of the Compensation
Committee
and Member of the Board of
Directors
/S/ MICHAEL F. ELLIOTT
-----------------------
Michael F. Elliott ("Employee")
<PAGE>
<PAGE>
TERMINATION BENEFITS AGREEMENT
This Termination Benefits Agreement ("Agreement") is made
and entered into as of September 16, 1998, by and between National
City Bancshares, Inc., an Indiana corporation (hereinafter referred
to as the "Corporation") and Robert A. Keil, a resident of the
State of Indiana (hereinafter referred to as "Employee").
W I T N E S S E T H
WHEREAS, Employee is now serving as an executive officer
of the Corporation with the title of President; and
WHEREAS, the Corporation believes that Employee has made
valuable contributions to the productivity and profitability of the
Corporation; and
WHEREAS, the Corporation desires to encourage Employee to
continue to make such contributions and not to seek or accept
employment elsewhere; and
WHEREAS, the Corporation, therefore, desires to assure
Employee of certain benefits in case of any termination or
significant redefinition of the terms of his employment with the
Corporation subsequent to any Change in Control of the Corporation;
NOW, THEREFORE, in consideration of the foregoing and of
the mutual covenants herein contained and the mutual benefits
herein provided, the Corporation and Employee hereby agree as
follows:
1. The term of this Agreement shall be from the date
hereof through December 31, 2000; provided, however, that such term
shall be automatically extended for an additional year on
December 31, 1998, and on December 31 of each year thereafter
unless either party hereto gives written notice to the other party
not to so extend prior to November 30 of the year for which notice
is given, in which case no further automatic extension shall occur
and the term of this Agreement shall end on December 31 two (2)
years subsequent to the date of the latest preceding automatic
extension. Notwithstanding the foregoing, if a Change in Control
of the Corporation (as defined in Section 2 below) shall occur
prior to the expiration of the original term or any extensions of
the term of this Agreement, then the term of this Agreement shall
automatically become a term of two (2) years commencing on the date
of any such Change in Control.
2. As used in this Agreement, "Change in Control" of
the Corporation means:
(A) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act as in effect from time to time) of twenty-
five percent (25%) or more of either (i) the then
outstanding shares of common stock of the Corporation or
(ii) the combined voting power of the then outstanding
voting securities of the Corporation entitled to vote
generally in the election of directors; provided,
however, that the following acquisitions shall not
constitute an acquisition of control: (i) any
acquisition directly from the Corporation (excluding an
acquisition by virtue of the exercise of a conversion
privilege), (ii) any acquisition by the Corporation,
(iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Corporation
or any corporation controlled by the Corporation, or
(iv) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following
such reorganization, merger or consolidation, the
conditions described in clauses (i), (ii) and (iii) of
subsection (C) of this Section 2 are satisfied;
(B) Individuals who, as of the date hereof,
constitute the Board of Directors of the Corporation (the
"Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors of the
Corporation (the "Board"); provided, however, that any
individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Corporation's shareholders, was approved by a vote of at
least a majority of the directors then comprising the
Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(C) Approval by the shareholders of the Corporation
of a reorganization, merger or consolidation, in each
case, unless, following such reorganization, merger or
consolidation, (i) more than sixty percent (60%) of,
respectively, the then outstanding shares of common stock
of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of
the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or
indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the outstanding Corporation common stock
and outstanding Corporation voting securities immediately
prior to such reorganization, merger or consolidation in
substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or
consolidation, of the outstanding Corporation stock and
outstanding Corporation voting securities, as the case
may be, (ii) no Person (excluding the Corporation, any
employee benefit plan or related trust of the Corporation
or such corporation resulting from such reorganization,
merger or consolidation and any Person beneficially
owning, immediately prior to such reorganization, merger
or consolidation, directly or indirectly, twenty-five
percent (25%) or more of the outstanding Corporation
common stock or outstanding voting securities, as the
case may be) beneficially owns, directly or indirectly,
twenty-five percent (25%) or more of, respectively, the
then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of such corporation
entitled to vote generally in the election of directors
and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such
reorganization, merger or consolidation were members of
the Incumbent Board at the time of the execution of the
initial agreement providing for such reorganization,
merger or consolidation; or
(D) Approval by the shareholders of the Corporation
of (i) a complete liquidation or dissolution of the
Corporation or (ii) the sale or other disposition of all
or substantially all of the assets of the Corporation,
other than to a corporation with respect to which
following such sale or other disposition (a) more than
sixty percent (60%) of, respectively, the then
outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote
generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
outstanding Corporation common stock and outstanding
Corporation voting securities immediately prior to such
sale or other disposition in substantially the same
proportion as their ownership, immediately prior to such
sale or other disposition, of the outstanding Corporation
common stock and outstanding Corporation voting
securities, as the case may be, (b) no Person (excluding
the Corporation and any employee benefit plan or related
trust of the Corporation or such corporation and any
Person beneficially owning, immediately prior to such
sale or other disposition, directly or indirectly,
twenty-five percent (25%) or more of the outstanding
Corporation common stock or outstanding Corporation
voting securities, as the case may be) beneficially owns,
directly or indirectly, twenty-five percent (25%) or more
of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power
of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (c) at least a majority of the members of
the board of directors of such corporation were members
of the Incumbent Board at the time of the execution of
the initial agreement or action of the Board providing
for such sale or other disposition of assets of the
Corporation.
3. The Corporation shall provide Employee with the
benefits set forth in Section 6 of this Agreement upon any
termination of Employee's employment by the Corporation following
a Change in Control for any reason except the following:
(A) Termination by reason of Employee's death.
(B) Termination by reason of Employee's
"disability." For purposes hereof, "disability" shall be
defined as Employee's inability by reason of illness or
other physical or mental disability to perform the duties
required by his employment for any consecutive One
Hundred Eighty (180) day period, provided that notice of
any termination by the Corporation because of Employee's
"disability" shall have been given to Employee prior to
the resumption by him of the performance of such duties.
(C) Termination upon Employee reaching his normal
retirement date, which for purposes of this Agreement
shall be deemed to be the end of the month during which
employee reaches sixty-five (65) years of age.
(D) Termination for "cause." As used in this
Agreement, the term "cause" means fraud, dishonesty,
theft of corporate assets, or other gross misconduct by
Employee. Notwithstanding the foregoing, Employee shall
not be deemed to have been terminated for cause unless
and until there shall have been delivered to him a copy
of a resolution duly adopted by the affirmative vote of
not less than a majority of the entire membership of the
Corporation's Board at a meeting called and held for the
purpose (after reasonable notice to him and an
opportunity for him, together with his counsel, to be
heard before such Board), finding that, in the good faith
opinion of such Board, Employee was guilty of conduct
constituting "cause" and specifying the particulars
thereof in detail.
4. The Corporation shall also provide Employee with the
benefits set forth in Section 6 of this Agreement upon any
termination of Employee's employment with the Corporation at
Employee's option if any one of the following events occurs within
six (6) months prior to or within two (2) years following a Change
in Control:
(A) Without Employee's express written consent, the
assignment of Employee to any duties which, in Employee's
reasonable judgment, are materially inconsistent with his
positions, duties, responsibilities or status with the
Corporation immediately prior to the earlier of
termination of employment or the Change in Control or a
substantial reduction of his duties or responsibilities
which, in Employee's reasonable opinion, does not
represent a promotion from his position, duties or
responsibilities immediately prior to the earlier of
termination of employment or the Change in Control.
(B) A reduction by the Corporation in Employee's
salary from the level of such salary immediately prior to
the earlier of termination of employment or the Change in
Control or the Corporation's failure to increase (within
twelve (12) months of Employee's last increase in base
salary) Employee's base salary after a Change in Control
in an amount which at least equals, on a percentage
basis, the average percentage increase in base salary for
all executive and senior officers of the Corporation
effected in the preceding twelve (12) months.
(C) The failure by the Corporation to continue in
effect any incentive, bonus or other compensation plan in
which Employee participates, including but not limited to
the Corporation's stock option plans, unless an equitable
arrangement (embodied in an ongoing substitute or
alternative plan), with which Employee has consented, has
been made with respect to such plan in connection with
the Change in Control, or the failure by the Corporation
to continue Employee's participation therein, or any
action by the Corporation which would directly or
indirectly materially reduce Employee's participation
therein.
(D) The failure by the Corporation to continue to
provide Employee with benefits substantially similar to
those enjoyed by Employee or to which Employee was
entitled under any of the Corporation's principal
pension, profit sharing, life insurance, medical, dental,
health and accident, or disability plans in which
Employee was participating immediately prior to the
earlier of the termination of employment or the Change in
Control, the taking of any action by the Corporation
which would directly or indirectly materially reduce any
of such benefits or deprive Employee of any material
fringe benefit enjoyed by Employee or to which Employee
was entitled immediately prior to the earlier of the
termination of employment or the Change in Control, or
the failure by the Corporation to provide Employee with
the number of paid vacation and sick leave days to which
Employee is entitled on the basis of years of service or
position with the Corporation in accordance with the
Corporation's normal vacation policy in effect on the
date hereof.
(E) The Corporation's requiring Employee to be
based anywhere other than the metropolitan area where the
Corporation office at which he was based immediately
prior to the earlier of the termination of employment or
the Change in Control was located, except for required
travel on the Corporation's business in accordance with
the Corporation's past management practices.
(F) Any failure of the Corporation to obtain the
assumption of the obligation to perform this Agreement by
any successor as contemplated in Section 10 hereof.
(G) Any failure by the Corporation or its
shareholders, as the case may be, to reappoint or reelect
Employee to a corporate office held by him immediately
prior to the earlier of the termination of employment or
the Change in Control or his removal from any such office
including any seat held at such time on the Corporation's
Board of Directors.
(H) The effectiveness of a resignation, tendered at
any time, either before or after a Change in Control and
regardless of whether formally characterized as voluntary
or otherwise, by Employee of any corporate office held by
him immediately prior to the Change in Control or of any
seat held at such time on the Corporation's Board of
Directors, at the request of the Corporation or at the
request of the person obtaining control of the
Corporation in such Change in Control.
(I) Any purported termination of the Employee's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 5
hereof (and, if applicable, Section 3(D) hereof); and for
purposes of this Agreement, no such purported termination
shall be effective.
(J) Any request by the Corporation that Employee
participate in an unlawful act or take any action
constituting a breach of Employee's professional standard
of conduct.
(K) Any breach by the Corporation of any of the
provisions of this Agreement or any failure by the
Corporation to carry out any of its obligations
hereunder.
Notwithstanding anything in this Section 4 to the contrary,
Employee's right to terminate Employee's employment pursuant to
this Section 4 shall not be affected by Employee's incapacity due
to physical or mental illness.
5. Any termination of Employee's employment with the
Corporation as contemplated by Section 3 hereof (except
subsection 3(A)) or by Employee as contemplated by Section 4 hereof
shall be communicated by written "Notice of Termination" to the
other party hereto. Any "Notice of Termination" given by Employee
pursuant to Section 4 or given by the Corporation in connection
with a termination as to which the Corporation believes it is not
obligated to provide Employee with benefits set forth in Section 6
hereof shall indicate the specific provisions of this Agreement
relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such termination.
6. Subject to the conditions and exceptions set forth
in Section 3 and Section 4 hereof, the following benefits, less any
amounts required to be withheld therefrom under any applicable
federal, state or local income tax, other tax, or social security
laws or similar statutes, shall be paid to Employee upon any
termination of his employment within six (6) months before or
within two (2) years after any Change in Control:
(A) Within thirty (30) days following such a
termination or, if later, such a Change in Control,
Employee shall be paid, at his then-effective salary, for
services performed through the date of his termination.
In addition, any earned but unpaid amount of any bonus or
incentive payment (which, for purposes of this Agreement,
shall mean that amount computed in a fashion consistent
with the manner in which Employee's bonus or incentive
plan for the year preceding the year of termination was
computed, if Employee received a bonus or incentive
payment during such preceding year in accordance with a
plan or program of the Corporation, or, if not, then the
total bonus or incentive payment received by the Employee
during such preceding year, in either case prorated
through the date of termination) shall be paid to
Employee within thirty (30) days following the
termination of his employment or, if later, such a Change
in Control.
(B) Within thirty (30) days following such a
termination, Employee shall be paid a lump sum payment of
an amount equal to two and nine-tenths (2.9) times
Employee's "Base Amount." For purposes hereof, Base
Amount is defined as Employee's average includable
salary, bonus, incentive payments and similar
compensation paid by the Corporation for the five (5)
most recent taxable years ending before the date on which
the Change in Control occurs (or such shorter period of
time that the Employee has been employed by the
Corporation). The definition, interpretation and
calculation of the dollar amount of Base Amount shall be
in a manner consistent with and as required by the
provisions of Section 280G of the Internal Revenue Code
of 1986, as amended ("Code"), and the regulations and
rulings of the Internal Revenue Service promulgated
thereunder. The payments to the Employee under this
Section 6(B) shall be reduced by the full amount that
such payment, when added to all other payments or
benefits of any kind to the Employee by reason of the
Change in Control, constitutes an "excess parachute
payment" within the meaning of Section 280G of the Code.
(C) Employee acknowledges and agrees that payment
in accordance with subsections 6(A), 6(B) and 6(C) shall
be deemed to constitute a full settlement and discharge
of any and all obligations of the Corporation to Employee
arising out of his employment with the Corporation and
the termination thereof, except for any vested rights
Employee may then have under any insurance, pension,
supplemental pension, thrift, employee stock ownership,
or stock option plans sponsored or made available by the
Corporation.
7. The Corporation is aware that upon the occurrence of
a Change in Control the Board of Directors or a shareholder of the
Corporation may then cause or attempt to cause the Corporation to
refuse to comply with its obligations under this Agreement, or may
cause or attempt to cause the Corporation to institute, or may
institute, litigation seeking to have this Agreement declared
unenforceable, or may take or attempt to take other action to deny
Employee the benefits intended under this Agreement. In these
circumstances, the purpose of this Agreement could be frustrated.
It is the intent of the Corporation that Employee not be required
to incur the expenses associated with the enforcement of his rights
under this Agreement by litigation or other legal action, nor be
bound to negotiate any settlement of his rights hereunder, because
the cost and expense of such legal action or settlement would
substantially detract from the benefits intended to be extended to
Employee hereunder. Accordingly, if following a Change in Control
it should appear to Employee that the Corporation has failed to
comply with any of its obligations under this Agreement or in the
event that the Corporation or any other person takes any action to
declare this Agreement void or unenforceable, or institutes any
litigation or other legal action designed to deny, diminish or to
recover from Employee the benefits entitled to be provided to the
Employee hereunder, and that Employee has complied with all of his
obligations under this Agreement, the Corporation irrevocably
authorizes Employee from time to time to retain counsel of his
choice, at the expense of the Corporation as provided in this
Section 7, to represent Employee in connection with the initiation
or defense of any litigation or other legal action, whether such
action is by or against the Corporation or any director, officer,
shareholder, or other person affiliated with the Corporation, in
any jurisdiction. Notwithstanding any existing or prior attorney-
client relationship between the Corporation and such counsel, the
Corporation irrevocably consents to Employee entering into an
attorney-client relationship with such counsel, and in that
connection the Corporation and Employee agree that a confidential
relationship shall exist between Employee and such counsel. The
reasonable fees and expenses of counsel selected from time to time
by Employee as hereinabove provided shall be paid or reimbursed to
Employee by the Corporation on a regular, periodic basis upon
presentation by Employee of a statement or statements prepared by
such counsel in accordance with its customary practices, up to a
maximum aggregate amount of One Hundred Thousand Dollars
($100,000). Any legal expenses incurred by the Corporation by
reason of any dispute between the parties as to enforceability of
or the terms contained in this Agreement as provided by this
Section 7, notwithstanding the outcome of any such dispute, shall
be the sole responsibility of the Corporation, and the Corporation
shall not take any action to seek reimbursement from Employee for
such expenses. Notwithstanding any limitation contained in this
Section 7 to the contrary, Employee shall be entitled to payment or
reimbursement of legal expenses in excess of One Hundred Thousand
Dollars ($100,000) if the expenses were incurred as a result of a
dispute under this Agreement in which Employee obtains a final
judgment in his favor from a court of competent jurisdiction or his
claim is settled by the Corporation prior to the rendering of a
judgment by such a court.
8. Employee is not required to mitigate the amount of
benefit payments to be made by the Corporation pursuant to this
Agreement by seeking other employment or otherwise, nor shall the
amount of any benefit payments provided for in this Agreement be
reduced by any compensation earned by Employee as a result of
employment by another employer or which might have been earned by
Employee had Employee sought such employment, after the date of
termination of his employment with the Corporation or otherwise.
9. In order to induce the Corporation to enter into
this Agreement, Employee hereby agrees as follows:
(A) He will keep confidential and not improperly
divulge for the benefit of any other party any of the
Corporation's confidential information and business
secrets including, but not limited to, confidential
information and business secrets relating to such matters
as the Corporation's finances and operations. All of the
Corporation's confidential information and business
secrets shall be the sole and exclusive property of the
Corporation.
(B) For a period of two years after Employee's
employment with the Corporation ceases, Employee shall
not either on his own account or for any other person,
firm or company solicit or endeavor to cause any employee
of the Corporation to leave his employment or to induce
or attempt to induce any such employee to breach any
employment agreement with the Corporation.
In the event of a breach or threatened breach by Employee of the
provisions of this Section 9, the Corporation shall be entitled to
an injunction restraining Employee from committing or continuing
such breach. Nothing herein contained shall be construed as
prohibiting the Corporation from pursuing any other remedies
available to it for such breach or threatened breach including the
recovery of damages from Employee. The covenants of this Section
9
shall run not only in favor of the Corporation and its successors
and assigns, but also in favor of its subsidiaries and their
respective successors and assigns and shall survive the termination
of this Agreement.
10. The Corporation 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 Corporation, by agreement in form and substance
satisfactory to Employee, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession
had taken place. Failure of the Corporation to obtain such
agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Employee to
compensation from the Corporation in the same amount and on the
same terms as Employee would be entitled hereunder if he were to
terminate his employment pursuant to Section 4 hereof, except that
for purposes of implementing the foregoing, the date on which
succession becomes effective shall be deemed the date of
termination of Employee's employment with the Corporation. As used
in this Agreement, "Corporation" shall mean the Corporation as
hereinbefore defined and any successor to the business or assets of
it as aforesaid which executes and delivers the agreement provided
for in this Section 10 or which otherwise becomes bound by all of
the terms and provisions of this Agreement by operation of law.
11. Should Employee die while any amounts are payable to
him hereunder, this Agreement shall inure to the benefit of and be
enforceable by Employee's executors, administrators, heirs,
distributees, devisees and legatees and all amounts payable
hereunder shall be paid in accordance with the terms of this
Agreement to Employee's devisee, legatee or other designee or if
there be no such designee, to his estate.
12. For purposes of this Agreement, notices and all
other communications provided for herein shall be in writing and
shall be deemed to have been given when delivered or mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Employee:
Robert A. Keil
2100 N. Lombard
Evansville, Indiana 47714
If to the Corporation:
National City Bancshares, Inc.
227 Main Street
P. O. Box 868
Evansville, Indiana 47705-0868
Attention: Corporate Secretary
or to such other address as any party may have furnished to the
other party in writing in accordance herewith, except that notices
of change of address shall be effective only upon receipt.
13. The validity, interpretation, and performance of
this Agreement shall be governed by the laws of the State of
Indiana. The parties agree that all legal disputes regarding this
Agreement will be resolved in Evansville, Indiana, and irrevocably
consent to service of process in such City for such purpose.
14. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge
is agreed to in writing signed by Employee and the Corporation. No
waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time. No agreements or
representation, oral or otherwise, express or implied, with respect
to the subject matter hereof have been made by any party which are
not set forth expressly in this Agreement.
15. The invalidity or unenforceability of any provisions
of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in
full force and effect.
16. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same Agreement.
17. This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign
or transfer this Agreement or any rights or obligations hereunder,
except as provided in Section 10 and Section 11 above. Without
limiting the foregoing, Employee's right to receive payments
hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than a
transfer by his Will or by the laws of descent and distribution as
set forth in Section 11 hereof, and in the event of any attempted
assignment or transfer contrary to this Section 17, the Corporation
shall have no liability to pay any amount so attempted to be
assigned or transferred.
Any benefits payable under this Agreement shall be paid
solely from the general assets of the Corporation. Neither
Employee nor Employee's beneficiary shall have interest in any
specific assets of the Corporation under the terms of this
Agreement. This Agreement shall not be considered to create an
escrow account, trust fund or other funding arrangement of any kind
or a fiduciary relationship between Employee and the Corporation.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed and delivered as of the day and year first
above set forth.
NATIONAL CITY BANCSHARES, INC.
("Corporation")
By: /S/ LAURENCE R. STEENBERG
-------------------------
Laurence R. Steenberg,
Member of the Compensation
Committee
and Member of the Board of
Directors
/S/ ROBERT A. KEIL
--------------------
Robert A. Keil ("Employee")
<PAGE>
<PAGE>
TERMINATION BENEFITS AGREEMENT
This Termination Benefits Agreement ("Agreement") is made
and entered into as of September 16, 1998, by and between National
City Bancshares, Inc., an Indiana corporation (hereinafter referred
to as the "Corporation") and Curtis D. Ritterling, a resident of
the State of Indiana (hereinafter referred to as "Employee").
W I T N E S S E T H
WHEREAS, Employee is now serving as an executive officer
of the Corporation with the title of Executive Vice President; and
WHEREAS, the Corporation believes that Employee has made
valuable contributions to the productivity and profitability of the
Corporation; and
WHEREAS, the Corporation desires to encourage Employee to
continue to make such contributions and not to seek or accept
employment elsewhere; and
WHEREAS, the Corporation, therefore, desires to assure
Employee of certain benefits in case of any termination or
significant redefinition of the terms of his employment with the
Corporation subsequent to any Change in Control of the Corporation;
NOW, THEREFORE, in consideration of the foregoing and of
the mutual covenants herein contained and the mutual benefits
herein provided, the Corporation and Employee hereby agree as
follows:
1. The term of this Agreement shall be from the date
hereof through December 31, 2000; provided, however, that such term
shall be automatically extended for an additional year on
December 31, 1998, and on December 31 of each year thereafter
unless either party hereto gives written notice to the other party
not to so extend prior to November 30 of the year for which notice
is given, in which case no further automatic extension shall occur
and the term of this Agreement shall end on December 31 two (2)
years subsequent to the date of the latest preceding automatic
extension. Notwithstanding the foregoing, if a Change in Control
of the Corporation (as defined in Section 2 below) shall occur
prior to the expiration of the original term or any extensions of
the term of this Agreement, then the term of this Agreement shall
automatically become a term of two (2) years commencing on the date
of any such Change in Control.
2. As used in this Agreement, "Change in Control" of
the Corporation means:
(A) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act as in effect from time to time) of twenty-
five percent (25%) or more of either (i) the then
outstanding shares of common stock of the Corporation or
(ii) the combined voting power of the then outstanding
voting securities of the Corporation entitled to vote
generally in the election of directors; provided,
however, that the following acquisitions shall not
constitute an acquisition of control: (i) any
acquisition directly from the Corporation (excluding an
acquisition by virtue of the exercise of a conversion
privilege), (ii) any acquisition by the Corporation,
(iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Corporation
or any corporation controlled by the Corporation, or
(iv) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following
such reorganization, merger or consolidation, the
conditions described in clauses (i), (ii) and (iii) of
subsection (C) of this Section 2 are satisfied;
(B) Individuals who, as of the date hereof,
constitute the Board of Directors of the Corporation (the
"Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors of the
Corporation (the "Board"); provided, however, that any
individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Corporation's shareholders, was approved by a vote of at
least a majority of the directors then comprising the
Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(C) Approval by the shareholders of the Corporation
of a reorganization, merger or consolidation, in each
case, unless, following such reorganization, merger or
consolidation, (i) more than sixty percent (60%) of,
respectively, the then outstanding shares of common stock
of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of
the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or
indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the outstanding Corporation common stock
and outstanding Corporation voting securities immediately
prior to such reorganization, merger or consolidation in
substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or
consolidation, of the outstanding Corporation stock and
outstanding Corporation voting securities, as the case
may be, (ii) no Person (excluding the Corporation, any
employee benefit plan or related trust of the Corporation
or such corporation resulting from such reorganization,
merger or consolidation and any Person beneficially
owning, immediately prior to such reorganization, merger
or consolidation, directly or indirectly, twenty-five
percent (25%) or more of the outstanding Corporation
common stock or outstanding voting securities, as the
case may be) beneficially owns, directly or indirectly,
twenty-five percent (25%) or more of, respectively, the
then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of such corporation
entitled to vote generally in the election of directors
and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such
reorganization, merger or consolidation were members of
the Incumbent Board at the time of the execution of the
initial agreement providing for such reorganization,
merger or consolidation; or
(D) Approval by the shareholders of the Corporation
of (i) a complete liquidation or dissolution of the
Corporation or (ii) the sale or other disposition of all
or substantially all of the assets of the Corporation,
other than to a corporation with respect to which
following such sale or other disposition (a) more than
sixty percent (60%) of, respectively, the then
outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote
generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
outstanding Corporation common stock and outstanding
Corporation voting securities immediately prior to such
sale or other disposition in substantially the same
proportion as their ownership, immediately prior to such
sale or other disposition, of the outstanding Corporation
common stock and outstanding Corporation voting
securities, as the case may be, (b) no Person (excluding
the Corporation and any employee benefit plan or related
trust of the Corporation or such corporation and any
Person beneficially owning, immediately prior to such
sale or other disposition, directly or indirectly,
twenty-five percent (25%) or more of the outstanding
Corporation common stock or outstanding Corporation
voting securities, as the case may be) beneficially owns,
directly or indirectly, twenty-five percent (25%) or more
of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power
of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (c) at least a majority of the members of
the board of directors of such corporation were members
of the Incumbent Board at the time of the execution of
the initial agreement or action of the Board providing
for such sale or other disposition of assets of the
Corporation.
3. The Corporation shall provide Employee with the
benefits set forth in Section 6 of this Agreement upon any
termination of Employee's employment by the Corporation following
a Change in Control for any reason except the following:
(A) Termination by reason of Employee's death.
(B) Termination by reason of Employee's
"disability." For purposes hereof, "disability" shall be
defined as Employee's inability by reason of illness or
other physical or mental disability to perform the duties
required by his employment for any consecutive One
Hundred Eighty (180) day period, provided that notice of
any termination by the Corporation because of Employee's
"disability" shall have been given to Employee prior to
the resumption by him of the performance of such duties.
(C) Termination upon Employee reaching his normal
retirement date, which for purposes of this Agreement
shall be deemed to be the end of the month during which
employee reaches sixty-five (65) years of age.
(D) Termination for "cause." As used in this
Agreement, the term "cause" means fraud, dishonesty,
theft of corporate assets, or other gross misconduct by
Employee. Notwithstanding the foregoing, Employee shall
not be deemed to have been terminated for cause unless
and until there shall have been delivered to him a copy
of a resolution duly adopted by the affirmative vote of
not less than a majority of the entire membership of the
Corporation's Board at a meeting called and held for the
purpose (after reasonable notice to him and an
opportunity for him, together with his counsel, to be
heard before such Board), finding that, in the good faith
opinion of such Board, Employee was guilty of conduct
constituting "cause" and specifying the particulars
thereof in detail.
4. The Corporation shall also provide Employee with the
benefits set forth in Section 6 of this Agreement upon any
termination of Employee's employment with the Corporation at
Employee's option if any one of the following events occurs within
six (6) months prior to or within two (2) years following a Change
in Control:
(A) Without Employee's express written consent, the
assignment of Employee to any duties which, in Employee's
reasonable judgment, are materially inconsistent with his
positions, duties, responsibilities or status with the
Corporation immediately prior to the earlier of
termination of employment or the Change in Control or a
substantial reduction of his duties or responsibilities
which, in Employee's reasonable opinion, does not
represent a promotion from his position, duties or
responsibilities immediately prior to the earlier of
termination of employment or the Change in Control.
(B) A reduction by the Corporation in Employee's
salary from the level of such salary immediately prior to
the earlier of termination of employment or the Change in
Control or the Corporation's failure to increase (within
twelve (12) months of Employee's last increase in base
salary) Employee's base salary after a Change in Control
in an amount which at least equals, on a percentage
basis, the average percentage increase in base salary for
all executive and senior officers of the Corporation
effected in the preceding twelve (12) months.
(C) The failure by the Corporation to continue in
effect any incentive, bonus or other compensation plan in
which Employee participates, including but not limited to
the Corporation's stock option plans, unless an equitable
arrangement (embodied in an ongoing substitute or
alternative plan), with which Employee has consented, has
been made with respect to such plan in connection with
the Change in Control, or the failure by the Corporation
to continue Employee's participation therein, or any
action by the Corporation which would directly or
indirectly materially reduce Employee's participation
therein.
(D) The failure by the Corporation to continue to
provide Employee with benefits substantially similar to
those enjoyed by Employee or to which Employee was
entitled under any of the Corporation's principal
pension, profit sharing, life insurance, medical, dental,
health and accident, or disability plans in which
Employee was participating immediately prior to the
earlier of the termination of employment or the Change in
Control, the taking of any action by the Corporation
which would directly or indirectly materially reduce any
of such benefits or deprive Employee of any material
fringe benefit enjoyed by Employee or to which Employee
was entitled immediately prior to the earlier of the
termination of employment or the Change in Control, or
the failure by the Corporation to provide Employee with
the number of paid vacation and sick leave days to which
Employee is entitled on the basis of years of service or
position with the Corporation in accordance with the
Corporation's normal vacation policy in effect on the
date hereof.
(E) The Corporation's requiring Employee to be
based anywhere other than the metropolitan area where the
Corporation office at which he was based immediately
prior to the earlier of the termination of employment or
the Change in Control was located, except for required
travel on the Corporation's business in accordance with
the Corporation's past management practices.
(F) Any failure of the Corporation to obtain the
assumption of the obligation to perform this Agreement by
any successor as contemplated in Section 10 hereof.
(G) Any failure by the Corporation or its
shareholders, as the case may be, to reappoint or reelect
Employee to a corporate office held by him immediately
prior to the earlier of the termination of employment or
the Change in Control or his removal from any such office
including any seat held at such time on the Corporation's
Board of Directors.
(H) The effectiveness of a resignation, tendered at
any time, either before or after a Change in Control and
regardless of whether formally characterized as voluntary
or otherwise, by Employee of any corporate office held by
him immediately prior to the Change in Control or of any
seat held at such time on the Corporation's Board of
Directors, at the request of the Corporation or at the
request of the person obtaining control of the
Corporation in such Change in Control.
(I) Any purported termination of the Employee's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 5
hereof (and, if applicable, Section 3(D) hereof); and for
purposes of this Agreement, no such purported termination
shall be effective.
(J) Any request by the Corporation that Employee
participate in an unlawful act or take any action
constituting a breach of Employee's professional standard
of conduct.
(K) Any breach by the Corporation of any of the
provisions of this Agreement or any failure by the
Corporation to carry out any of its obligations
hereunder.
Notwithstanding anything in this Section 4 to the contrary,
Employee's right to terminate Employee's employment pursuant to
this Section 4 shall not be affected by Employee's incapacity due
to physical or mental illness.
5. Any termination of Employee's employment with the
Corporation as contemplated by Section 3 hereof (except
subsection 3(A)) or by Employee as contemplated by Section 4 hereof
shall be communicated by written "Notice of Termination" to the
other party hereto. Any "Notice of Termination" given by Employee
pursuant to Section 4 or given by the Corporation in connection
with a termination as to which the Corporation believes it is not
obligated to provide Employee with benefits set forth in Section 6
hereof shall indicate the specific provisions of this Agreement
relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such termination.
6. Subject to the conditions and exceptions set forth
in Section 3 and Section 4 hereof, the following benefits, less any
amounts required to be withheld therefrom under any applicable
federal, state or local income tax, other tax, or social security
laws or similar statutes, shall be paid to Employee upon any
termination of his employment within six (6) months before or
within two (2) years after any Change in Control:
(A) Within thirty (30) days following such a
termination or, if later, such a Change in Control,
Employee shall be paid, at his then-effective salary, for
services performed through the date of his termination.
In addition, any earned but unpaid amount of any bonus or
incentive payment (which, for purposes of this Agreement,
shall mean that amount computed in a fashion consistent
with the manner in which Employee's bonus or incentive
plan for the year preceding the year of termination was
computed, if Employee received a bonus or incentive
payment during such preceding year in accordance with a
plan or program of the Corporation, or, if not, then the
total bonus or incentive payment received by the Employee
during such preceding year, in either case prorated
through the date of termination) shall be paid to
Employee within thirty (30) days following the
termination of his employment or, if later, such a Change
in Control.
(B) Within thirty (30) days following such a
termination, Employee shall be paid a lump sum payment of
an amount equal to two and nine-tenths (2.9) times
Employee's "Base Amount." For purposes hereof, Base
Amount is defined as Employee's average includable
salary, bonus, incentive payments and similar
compensation paid by the Corporation for the five (5)
most recent taxable years ending before the date on which
the Change in Control occurs (or such shorter period of
time that the Employee has been employed by the
Corporation). The definition, interpretation and
calculation of the dollar amount of Base Amount shall be
in a manner consistent with and as required by the
provisions of Section 280G of the Internal Revenue Code
of 1986, as amended ("Code"), and the regulations and
rulings of the Internal Revenue Service promulgated
thereunder. The payments to the Employee under this
Section 6(B) shall be reduced by the full amount that
such payment, when added to all other payments or
benefits of any kind to the Employee by reason of the
Change in Control, constitutes an "excess parachute
payment" within the meaning of Section 280G of the Code.
(C) Employee acknowledges and agrees that payment
in accordance with subsections 6(A), 6(B) and 6(C) shall
be deemed to constitute a full settlement and discharge
of any and all obligations of the Corporation to Employee
arising out of his employment with the Corporation and
the termination thereof, except for any vested rights
Employee may then have under any insurance, pension,
supplemental pension, thrift, employee stock ownership,
or stock option plans sponsored or made available by the
Corporation.
7. The Corporation is aware that upon the occurrence of
a Change in Control the Board of Directors or a shareholder of the
Corporation may then cause or attempt to cause the Corporation to
refuse to comply with its obligations under this Agreement, or may
cause or attempt to cause the Corporation to institute, or may
institute, litigation seeking to have this Agreement declared
unenforceable, or may take or attempt to take other action to deny
Employee the benefits intended under this Agreement. In these
circumstances, the purpose of this Agreement could be frustrated.
It is the intent of the Corporation that Employee not be required
to incur the expenses associated with the enforcement of his rights
under this Agreement by litigation or other legal action, nor be
bound to negotiate any settlement of his rights hereunder, because
the cost and expense of such legal action or settlement would
substantially detract from the benefits intended to be extended to
Employee hereunder. Accordingly, if following a Change in Control
it should appear to Employee that the Corporation has failed to
comply with any of its obligations under this Agreement or in the
event that the Corporation or any other person takes any action to
declare this Agreement void or unenforceable, or institutes any
litigation or other legal action designed to deny, diminish or to
recover from Employee the benefits entitled to be provided to the
Employee hereunder, and that Employee has complied with all of his
obligations under this Agreement, the Corporation irrevocably
authorizes Employee from time to time to retain counsel of his
choice, at the expense of the Corporation as provided in this
Section 7, to represent Employee in connection with the initiation
or defense of any litigation or other legal action, whether such
action is by or against the Corporation or any director, officer,
shareholder, or other person affiliated with the Corporation, in
any jurisdiction. Notwithstanding any existing or prior attorney-
client relationship between the Corporation and such counsel, the
Corporation irrevocably consents to Employee entering into an
attorney-client relationship with such counsel, and in that
connection the Corporation and Employee agree that a confidential
relationship shall exist between Employee and such counsel. The
reasonable fees and expenses of counsel selected from time to time
by Employee as hereinabove provided shall be paid or reimbursed to
Employee by the Corporation on a regular, periodic basis upon
presentation by Employee of a statement or statements prepared by
such counsel in accordance with its customary practices, up to a
maximum aggregate amount of One Hundred Thousand Dollars
($100,000). Any legal expenses incurred by the Corporation by
reason of any dispute between the parties as to enforceability of
or the terms contained in this Agreement as provided by this
Section 7, notwithstanding the outcome of any such dispute, shall
be the sole responsibility of the Corporation, and the Corporation
shall not take any action to seek reimbursement from Employee for
such expenses. Notwithstanding any limitation contained in this
Section 7 to the contrary, Employee shall be entitled to payment or
reimbursement of legal expenses in excess of One Hundred Thousand
Dollars ($100,000) if the expenses were incurred as a result of a
dispute under this Agreement in which Employee obtains a final
judgment in his favor from a court of competent jurisdiction or his
claim is settled by the Corporation prior to the rendering of a
judgment by such a court.
8. Employee is not required to mitigate the amount of
benefit payments to be made by the Corporation pursuant to this
Agreement by seeking other employment or otherwise, nor shall the
amount of any benefit payments provided for in this Agreement be
reduced by any compensation earned by Employee as a result of
employment by another employer or which might have been earned by
Employee had Employee sought such employment, after the date of
termination of his employment with the Corporation or otherwise.
9. In order to induce the Corporation to enter into
this Agreement, Employee hereby agrees as follows:
(A) He will keep confidential and not improperly
divulge for the benefit of any other party any of the
Corporation's confidential information and business
secrets including, but not limited to, confidential
information and business secrets relating to such matters
as the Corporation's finances and operations. All of the
Corporation's confidential information and business
secrets shall be the sole and exclusive property of the
Corporation.
(B) For a period of two years after Employee's
employment with the Corporation ceases, Employee shall
not either on his own account or for any other person,
firm or company solicit or endeavor to cause any employee
of the Corporation to leave his employment or to induce
or attempt to induce any such employee to breach any
employment agreement with the Corporation.
In the event of a breach or threatened breach by Employee of the
provisions of this Section 9, the Corporation shall be entitled to
an injunction restraining Employee from committing or continuing
such breach. Nothing herein contained shall be construed as
prohibiting the Corporation from pursuing any other remedies
available to it for such breach or threatened breach including the
recovery of damages from Employee. The covenants of this Section
9
shall run not only in favor of the Corporation and its successors
and assigns, but also in favor of its subsidiaries and their
respective successors and assigns and shall survive the termination
of this Agreement.
10. The Corporation 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 Corporation, by agreement in form and substance
satisfactory to Employee, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession
had taken place. Failure of the Corporation to obtain such
agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Employee to
compensation from the Corporation in the same amount and on the
same terms as Employee would be entitled hereunder if he were to
terminate his employment pursuant to Section 4 hereof, except that
for purposes of implementing the foregoing, the date on which
succession becomes effective shall be deemed the date of
termination of Employee's employment with the Corporation. As used
in this Agreement, "Corporation" shall mean the Corporation as
hereinbefore defined and any successor to the business or assets of
it as aforesaid which executes and delivers the agreement provided
for in this Section 10 or which otherwise becomes bound by all of
the terms and provisions of this Agreement by operation of law.
11. Should Employee die while any amounts are payable to
him hereunder, this Agreement shall inure to the benefit of and be
enforceable by Employee's executors, administrators, heirs,
distributees, devisees and legatees and all amounts payable
hereunder shall be paid in accordance with the terms of this
Agreement to Employee's devisee, legatee or other designee or if
there be no such designee, to his estate.
12. For purposes of this Agreement, notices and all
other communications provided for herein shall be in writing and
shall be deemed to have been given when delivered or mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Employee:
Curtis D. Ritterling
4553 Bridgestone Road
Newburgh, Indiana 47630
If to the Corporation:
National City Bancshares, Inc.
227 Main Street
P. O. Box 868
Evansville, Indiana 47705-0868
Attention: Corporate Secretary
or to such other address as any party may have furnished to the
other party in writing in accordance herewith, except that notices
of change of address shall be effective only upon receipt.
13. The validity, interpretation, and performance of
this Agreement shall be governed by the laws of the State of
Indiana. The parties agree that all legal disputes regarding this
Agreement will be resolved in Evansville, Indiana, and irrevocably
consent to service of process in such City for such purpose.
14. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge
is agreed to in writing signed by Employee and the Corporation. No
waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time. No agreements or
representation, oral or otherwise, express or implied, with respect
to the subject matter hereof have been made by any party which are
not set forth expressly in this Agreement.
15. The invalidity or unenforceability of any provisions
of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in
full force and effect.
16. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same Agreement.
17. This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign
or transfer this Agreement or any rights or obligations hereunder,
except as provided in Section 10 and Section 11 above. Without
limiting the foregoing, Employee's right to receive payments
hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than a
transfer by his Will or by the laws of descent and distribution as
set forth in Section 11 hereof, and in the event of any attempted
assignment or transfer contrary to this Section 17, the Corporation
shall have no liability to pay any amount so attempted to be
assigned or transferred.
Any benefits payable under this Agreement shall be paid
solely from the general assets of the Corporation. Neither
Employee nor Employee's beneficiary shall have interest in any
specific assets of the Corporation under the terms of this
Agreement. This Agreement shall not be considered to create an
escrow account, trust fund or other funding arrangement of any kind
or a fiduciary relationship between Employee and the Corporation.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed and delivered as of the day and year first
above set forth.
NATIONAL CITY BANCSHARES, INC.
("Corporation")
By: /S/ LAURENCE R. STEENBERG
-------------------------
Laurence R. Steenberg,
Member of the Compensation
Committee
and Member of the Board of
Directors
/S/ CURTIS D. RITTERLING
--------------------------
Curtis D. Ritterling ("Employee")
<PAGE>
<PAGE>
TERMINATION BENEFITS AGREEMENT
This Termination Benefits Agreement ("Agreement") is made
and entered into as of September 16, 1998, by and between National
City Bancshares, Inc., an Indiana corporation (hereinafter referred
to as the "Corporation") and Stephen C. Byelick, Jr., a resident of
the State of Indiana (hereinafter referred to as "Employee").
W I T N E S S E T H
WHEREAS, Employee is now serving as an executive officer
of the Corporation with the titles of Secretary and Treasurer; and
WHEREAS, the Corporation believes that Employee has made
valuable contributions to the productivity and profitability of the
Corporation; and
WHEREAS, the Corporation desires to encourage Employee to
continue to make such contributions and not to seek or accept
employment elsewhere; and
WHEREAS, the Corporation, therefore, desires to assure
Employee of certain benefits in case of any termination or
significant redefinition of the terms of his employment with the
Corporation subsequent to any Change in Control of the Corporation;
NOW, THEREFORE, in consideration of the foregoing and of
the mutual covenants herein contained and the mutual benefits
herein provided, the Corporation and Employee hereby agree as
follows:
1. The term of this Agreement shall be from the date
hereof through December 31, 2000; provided, however, that such term
shall be automatically extended for an additional year on
December 31, 1998, and on December 31 of each year thereafter
unless either party hereto gives written notice to the other party
not to so extend prior to November 30 of the year for which notice
is given, in which case no further automatic extension shall occur
and the term of this Agreement shall end on December 31 two (2)
years subsequent to the date of the latest preceding automatic
extension. Notwithstanding the foregoing, if a Change in Control
of the Corporation (as defined in Section 2 below) shall occur
prior to the expiration of the original term or any extensions of
the term of this Agreement, then the term of this Agreement shall
automatically become a term of two (2) years commencing on the date
of any such Change in Control.
2. As used in this Agreement, "Change in Control" of
the Corporation means:
(A) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act as in effect from time to time) of twenty-
five percent (25%) or more of either (i) the then
outstanding shares of common stock of the Corporation or
(ii) the combined voting power of the then outstanding
voting securities of the Corporation entitled to vote
generally in the election of directors; provided,
however, that the following acquisitions shall not
constitute an acquisition of control: (i) any
acquisition directly from the Corporation (excluding an
acquisition by virtue of the exercise of a conversion
privilege), (ii) any acquisition by the Corporation,
(iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Corporation
or any corporation controlled by the Corporation, or
(iv) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following
such reorganization, merger or consolidation, the
conditions described in clauses (i), (ii) and (iii) of
subsection (C) of this Section 2 are satisfied;
(B) Individuals who, as of the date hereof,
constitute the Board of Directors of the Corporation (the
"Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors of the
Corporation (the "Board"); provided, however, that any
individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Corporation's shareholders, was approved by a vote of at
least a majority of the directors then comprising the
Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(C) Approval by the shareholders of the Corporation
of a reorganization, merger or consolidation, in each
case, unless, following such reorganization, merger or
consolidation, (i) more than sixty percent (60%) of,
respectively, the then outstanding shares of common stock
of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of
the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or
indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the outstanding Corporation common stock
and outstanding Corporation voting securities immediately
prior to such reorganization, merger or consolidation in
substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or
consolidation, of the outstanding Corporation stock and
outstanding Corporation voting securities, as the case
may be, (ii) no Person (excluding the Corporation, any
employee benefit plan or related trust of the Corporation
or such corporation resulting from such reorganization,
merger or consolidation and any Person beneficially
owning, immediately prior to such reorganization, merger
or consolidation, directly or indirectly, twenty-five
percent (25%) or more of the outstanding Corporation
common stock or outstanding voting securities, as the
case may be) beneficially owns, directly or indirectly,
twenty-five percent (25%) or more of, respectively, the
then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of such corporation
entitled to vote generally in the election of directors
and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such
reorganization, merger or consolidation were members of
the Incumbent Board at the time of the execution of the
initial agreement providing for such reorganization,
merger or consolidation; or
(D) Approval by the shareholders of the Corporation
of (i) a complete liquidation or dissolution of the
Corporation or (ii) the sale or other disposition of all
or substantially all of the assets of the Corporation,
other than to a corporation with respect to which
following such sale or other disposition (a) more than
sixty percent (60%) of, respectively, the then
outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote
generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
outstanding Corporation common stock and outstanding
Corporation voting securities immediately prior to such
sale or other disposition in substantially the same
proportion as their ownership, immediately prior to such
sale or other disposition, of the outstanding Corporation
common stock and outstanding Corporation voting
securities, as the case may be, (b) no Person (excluding
the Corporation and any employee benefit plan or related
trust of the Corporation or such corporation and any
Person beneficially owning, immediately prior to such
sale or other disposition, directly or indirectly,
twenty-five percent (25%) or more of the outstanding
Corporation common stock or outstanding Corporation
voting securities, as the case may be) beneficially owns,
directly or indirectly, twenty-five percent (25%) or more
of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power
of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (c) at least a majority of the members of
the board of directors of such corporation were members
of the Incumbent Board at the time of the execution of
the initial agreement or action of the Board providing
for such sale or other disposition of assets of the
Corporation.
3. The Corporation shall provide Employee with the
benefits set forth in Section 6 of this Agreement upon any
termination of Employee's employment by the Corporation following
a Change in Control for any reason except the following:
(A) Termination by reason of Employee's death.
(B) Termination by reason of Employee's
"disability." For purposes hereof, "disability" shall be
defined as Employee's inability by reason of illness or
other physical or mental disability to perform the duties
required by his employment for any consecutive One
Hundred Eighty (180) day period, provided that notice of
any termination by the Corporation because of Employee's
"disability" shall have been given to Employee prior to
the resumption by him of the performance of such duties.
(C) Termination upon Employee reaching his normal
retirement date, which for purposes of this Agreement
shall be deemed to be the end of the month during which
employee reaches sixty-five (65) years of age.
(D) Termination for "cause." As used in this
Agreement, the term "cause" means fraud, dishonesty,
theft of corporate assets, or other gross misconduct by
Employee. Notwithstanding the foregoing, Employee shall
not be deemed to have been terminated for cause unless
and until there shall have been delivered to him a copy
of a resolution duly adopted by the affirmative vote of
not less than a majority of the entire membership of the
Corporation's Board at a meeting called and held for the
purpose (after reasonable notice to him and an
opportunity for him, together with his counsel, to be
heard before such Board), finding that, in the good faith
opinion of such Board, Employee was guilty of conduct
constituting "cause" and specifying the particulars
thereof in detail.
4. The Corporation shall also provide Employee with the
benefits set forth in Section 6 of this Agreement upon any
termination of Employee's employment with the Corporation at
Employee's option if any one of the following events occurs within
six (6) months prior to or within two (2) years following a Change
in Control:
(A) Without Employee's express written consent, the
assignment of Employee to any duties which, in Employee's
reasonable judgment, are materially inconsistent with his
positions, duties, responsibilities or status with the
Corporation immediately prior to the earlier of
termination of employment or the Change in Control or a
substantial reduction of his duties or responsibilities
which, in Employee's reasonable opinion, does not
represent a promotion from his position, duties or
responsibilities immediately prior to the earlier of
termination of employment or the Change in Control.
(B) A reduction by the Corporation in Employee's
salary from the level of such salary immediately prior to
the earlier of termination of employment or the Change in
Control or the Corporation's failure to increase (within
twelve (12) months of Employee's last increase in base
salary) Employee's base salary after a Change in Control
in an amount which at least equals, on a percentage
basis, the average percentage increase in base salary for
all executive and senior officers of the Corporation
effected in the preceding twelve (12) months.
(C) The failure by the Corporation to continue in
effect any incentive, bonus or other compensation plan in
which Employee participates, including but not limited to
the Corporation's stock option plans, unless an equitable
arrangement (embodied in an ongoing substitute or
alternative plan), with which Employee has consented, has
been made with respect to such plan in connection with
the Change in Control, or the failure by the Corporation
to continue Employee's participation therein, or any
action by the Corporation which would directly or
indirectly materially reduce Employee's participation
therein.
(D) The failure by the Corporation to continue to
provide Employee with benefits substantially similar to
those enjoyed by Employee or to which Employee was
entitled under any of the Corporation's principal
pension, profit sharing, life insurance, medical, dental,
health and accident, or disability plans in which
Employee was participating immediately prior to the
earlier of the termination of employment or the Change in
Control, the taking of any action by the Corporation
which would directly or indirectly materially reduce any
of such benefits or deprive Employee of any material
fringe benefit enjoyed by Employee or to which Employee
was entitled immediately prior to the earlier of the
termination of employment or the Change in Control, or
the failure by the Corporation to provide Employee with
the number of paid vacation and sick leave days to which
Employee is entitled on the basis of years of service or
position with the Corporation in accordance with the
Corporation's normal vacation policy in effect on the
date hereof.
(E) The Corporation's requiring Employee to be
based anywhere other than the metropolitan area where the
Corporation office at which he was based immediately
prior to the earlier of the termination of employment or
the Change in Control was located, except for required
travel on the Corporation's business in accordance with
the Corporation's past management practices.
(F) Any failure of the Corporation to obtain the
assumption of the obligation to perform this Agreement by
any successor as contemplated in Section 10 hereof.
(G) Any failure by the Corporation or its
shareholders, as the case may be, to reappoint or reelect
Employee to a corporate office held by him immediately
prior to the earlier of the termination of employment or
the Change in Control or his removal from any such office
including any seat held at such time on the Corporation's
Board of Directors.
(H) The effectiveness of a resignation, tendered at
any time, either before or after a Change in Control and
regardless of whether formally characterized as voluntary
or otherwise, by Employee of any corporate office held by
him immediately prior to the Change in Control or of any
seat held at such time on the Corporation's Board of
Directors, at the request of the Corporation or at the
request of the person obtaining control of the
Corporation in such Change in Control.
(I) Any purported termination of the Employee's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 5
hereof (and, if applicable, Section 3(D) hereof); and for
purposes of this Agreement, no such purported termination
shall be effective.
(J) Any request by the Corporation that Employee
participate in an unlawful act or take any action
constituting a breach of Employee's professional standard
of conduct.
(K) Any breach by the Corporation of any of the
provisions of this Agreement or any failure by the
Corporation to carry out any of its obligations
hereunder.
Notwithstanding anything in this Section 4 to the contrary,
Employee's right to terminate Employee's employment pursuant to
this Section 4 shall not be affected by Employee's incapacity due
to physical or mental illness.
5. Any termination of Employee's employment with the
Corporation as contemplated by Section 3 hereof (except
subsection 3(A)) or by Employee as contemplated by Section 4 hereof
shall be communicated by written "Notice of Termination" to the
other party hereto. Any "Notice of Termination" given by Employee
pursuant to Section 4 or given by the Corporation in connection
with a termination as to which the Corporation believes it is not
obligated to provide Employee with benefits set forth in Section 6
hereof shall indicate the specific provisions of this Agreement
relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such termination.
6. Subject to the conditions and exceptions set forth
in Section 3 and Section 4 hereof, the following benefits, less any
amounts required to be withheld therefrom under any applicable
federal, state or local income tax, other tax, or social security
laws or similar statutes, shall be paid to Employee upon any
termination of his employment within six (6) months before or
within two (2) years after any Change in Control:
(A) Within thirty (30) days following such a
termination or, if later, such a Change in Control,
Employee shall be paid, at his then-effective salary, for
services performed through the date of his termination.
In addition, any earned but unpaid amount of any bonus or
incentive payment (which, for purposes of this Agreement,
shall mean that amount computed in a fashion consistent
with the manner in which Employee's bonus or incentive
plan for the year preceding the year of termination was
computed, if Employee received a bonus or incentive
payment during such preceding year in accordance with a
plan or program of the Corporation, or, if not, then the
total bonus or incentive payment received by the Employee
during such preceding year, in either case prorated
through the date of termination) shall be paid to
Employee within thirty (30) days following the
termination of his employment or, if later, such a Change
in Control.
(B) Within thirty (30) days following such a
termination, Employee shall be paid a lump sum payment of
an amount equal to two and nine-tenths (2.9) times
Employee's "Base Amount." For purposes hereof, Base
Amount is defined as Employee's average includable
salary, bonus, incentive payments and similar
compensation paid by the Corporation for the five (5)
most recent taxable years ending before the date on which
the Change in Control occurs (or such shorter period of
time that the Employee has been employed by the
Corporation). The definition, interpretation and
calculation of the dollar amount of Base Amount shall be
in a manner consistent with and as required by the
provisions of Section 280G of the Internal Revenue Code
of 1986, as amended ("Code"), and the regulations and
rulings of the Internal Revenue Service promulgated
thereunder. The payments to the Employee under this
Section 6(B) shall be reduced by the full amount that
such payment, when added to all other payments or
benefits of any kind to the Employee by reason of the
Change in Control, constitutes an "excess parachute
payment" within the meaning of Section 280G of the Code.
(C) Employee acknowledges and agrees that payment
in accordance with subsections 6(A), 6(B) and 6(C) shall
be deemed to constitute a full settlement and discharge
of any and all obligations of the Corporation to Employee
arising out of his employment with the Corporation and
the termination thereof, except for any vested rights
Employee may then have under any insurance, pension,
supplemental pension, thrift, employee stock ownership,
or stock option plans sponsored or made available by the
Corporation.
7. The Corporation is aware that upon the occurrence of
a Change in Control the Board of Directors or a shareholder of the
Corporation may then cause or attempt to cause the Corporation to
refuse to comply with its obligations under this Agreement, or may
cause or attempt to cause the Corporation to institute, or may
institute, litigation seeking to have this Agreement declared
unenforceable, or may take or attempt to take other action to deny
Employee the benefits intended under this Agreement. In these
circumstances, the purpose of this Agreement could be frustrated.
It is the intent of the Corporation that Employee not be required
to incur the expenses associated with the enforcement of his rights
under this Agreement by litigation or other legal action, nor be
bound to negotiate any settlement of his rights hereunder, because
the cost and expense of such legal action or settlement would
substantially detract from the benefits intended to be extended to
Employee hereunder. Accordingly, if following a Change in Control
it should appear to Employee that the Corporation has failed to
comply with any of its obligations under this Agreement or in the
event that the Corporation or any other person takes any action to
declare this Agreement void or unenforceable, or institutes any
litigation or other legal action designed to deny, diminish or to
recover from Employee the benefits entitled to be provided to the
Employee hereunder, and that Employee has complied with all of his
obligations under this Agreement, the Corporation irrevocably
authorizes Employee from time to time to retain counsel of his
choice, at the expense of the Corporation as provided in this
Section 7, to represent Employee in connection with the initiation
or defense of any litigation or other legal action, whether such
action is by or against the Corporation or any director, officer,
shareholder, or other person affiliated with the Corporation, in
any jurisdiction. Notwithstanding any existing or prior attorney-
client relationship between the Corporation and such counsel, the
Corporation irrevocably consents to Employee entering into an
attorney-client relationship with such counsel, and in that
connection the Corporation and Employee agree that a confidential
relationship shall exist between Employee and such counsel. The
reasonable fees and expenses of counsel selected from time to time
by Employee as hereinabove provided shall be paid or reimbursed to
Employee by the Corporation on a regular, periodic basis upon
presentation by Employee of a statement or statements prepared by
such counsel in accordance with its customary practices, up to a
maximum aggregate amount of One Hundred Thousand Dollars
($100,000). Any legal expenses incurred by the Corporation by
reason of any dispute between the parties as to enforceability of
or the terms contained in this Agreement as provided by this
Section 7, notwithstanding the outcome of any such dispute, shall
be the sole responsibility of the Corporation, and the Corporation
shall not take any action to seek reimbursement from Employee for
such expenses. Notwithstanding any limitation contained in this
Section 7 to the contrary, Employee shall be entitled to payment or
reimbursement of legal expenses in excess of One Hundred Thousand
Dollars ($100,000) if the expenses were incurred as a result of a
dispute under this Agreement in which Employee obtains a final
judgment in his favor from a court of competent jurisdiction or his
claim is settled by the Corporation prior to the rendering of a
judgment by such a court.
8. Employee is not required to mitigate the amount of
benefit payments to be made by the Corporation pursuant to this
Agreement by seeking other employment or otherwise, nor shall the
amount of any benefit payments provided for in this Agreement be
reduced by any compensation earned by Employee as a result of
employment by another employer or which might have been earned by
Employee had Employee sought such employment, after the date of
termination of his employment with the Corporation or otherwise.
9. In order to induce the Corporation to enter into
this Agreement, Employee hereby agrees as follows:
(A) He will keep confidential and not improperly
divulge for the benefit of any other party any of the
Corporation's confidential information and business
secrets including, but not limited to, confidential
information and business secrets relating to such matters
as the Corporation's finances and operations. All of the
Corporation's confidential information and business
secrets shall be the sole and exclusive property of the
Corporation.
(B) For a period of two years after Employee's
employment with the Corporation ceases, Employee shall
not either on his own account or for any other person,
firm or company solicit or endeavor to cause any employee
of the Corporation to leave his employment or to induce
or attempt to induce any such employee to breach any
employment agreement with the Corporation.
In the event of a breach or threatened breach by Employee of the
provisions of this Section 9, the Corporation shall be entitled to
an injunction restraining Employee from committing or continuing
such breach. Nothing herein contained shall be construed as
prohibiting the Corporation from pursuing any other remedies
available to it for such breach or threatened breach including the
recovery of damages from Employee. The covenants of this Section
9
shall run not only in favor of the Corporation and its successors
and assigns, but also in favor of its subsidiaries and their
respective successors and assigns and shall survive the termination
of this Agreement.
10. The Corporation 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 Corporation, by agreement in form and substance
satisfactory to Employee, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession
had taken place. Failure of the Corporation to obtain such
agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Employee to
compensation from the Corporation in the same amount and on the
same terms as Employee would be entitled hereunder if he were to
terminate his employment pursuant to Section 4 hereof, except that
for purposes of implementing the foregoing, the date on which
succession becomes effective shall be deemed the date of
termination of Employee's employment with the Corporation. As used
in this Agreement, "Corporation" shall mean the Corporation as
hereinbefore defined and any successor to the business or assets of
it as aforesaid which executes and delivers the agreement provided
for in this Section 10 or which otherwise becomes bound by all of
the terms and provisions of this Agreement by operation of law.
11. Should Employee die while any amounts are payable to
him hereunder, this Agreement shall inure to the benefit of and be
enforceable by Employee's executors, administrators, heirs,
distributees, devisees and legatees and all amounts payable
hereunder shall be paid in accordance with the terms of this
Agreement to Employee's devisee, legatee or other designee or if
there be no such designee, to his estate.
12. For purposes of this Agreement, notices and all
other communications provided for herein shall be in writing and
shall be deemed to have been given when delivered or mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Employee:
Stephen C. Byelick, Jr.
3099 Valley Brook Court
Newburgh, Indiana 47630
If to the Corporation:
National City Bancshares, Inc.
227 Main Street
P. O. Box 868
Evansville, Indiana 47705-0868
Attention: Corporate Secretary
or to such other address as any party may have furnished to the
other party in writing in accordance herewith, except that notices
of change of address shall be effective only upon receipt.
13. The validity, interpretation, and performance of
this Agreement shall be governed by the laws of the State of
Indiana. The parties agree that all legal disputes regarding this
Agreement will be resolved in Evansville, Indiana, and irrevocably
consent to service of process in such City for such purpose.
14. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge
is agreed to in writing signed by Employee and the Corporation. No
waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the
same or any prior or subsequent time. No agreements or
representation, oral or otherwise, express or implied, with respect
to the subject matter hereof have been made by any party which are
not set forth expressly in this Agreement.
15. The invalidity or unenforceability of any provisions
of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in
full force and effect.
16. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same Agreement.
17. This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign
or transfer this Agreement or any rights or obligations hereunder,
except as provided in Section 10 and Section 11 above. Without
limiting the foregoing, Employee's right to receive payments
hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than a
transfer by his Will or by the laws of descent and distribution as
set forth in Section 11 hereof, and in the event of any attempted
assignment or transfer contrary to this Section 17, the Corporation
shall have no liability to pay any amount so attempted to be
assigned or transferred.
Any benefits payable under this Agreement shall be paid
solely from the general assets of the Corporation. Neither
Employee nor Employee's beneficiary shall have interest in any
specific assets of the Corporation under the terms of this
Agreement. This Agreement shall not be considered to create an
escrow account, trust fund or other funding arrangement of any kind
or a fiduciary relationship between Employee and the Corporation.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed and delivered as of the day and year first
above set forth.
NATIONAL CITY BANCSHARES, INC.
("Corporation")
By: /S/ LAURENCE R. STEENBERG
--------------------------
Laurence R. Steenberg,
Member of the Compensation
Committee
and Member of the Board of
Directors
/S/ STEPHEN C. BYELICK, JR.
----------------------------
Stephen C. Byelick, Jr. ("Employee")
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 50270
<INT-BEARING-DEPOSITS> 1749
<FED-FUNDS-SOLD> 64
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 338076
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1343051
<ALLOWANCE> 13201
<TOTAL-ASSETS> 1833636
<DEPOSITS> 1398818
<SHORT-TERM> 63483
<LIABILITIES-OTHER> 23968
<LONG-TERM> 155997
0
0
<COMMON> 13528
<OTHER-SE> 177842
<TOTAL-LIABILITIES-AND-EQUITY> 1833636
<INTEREST-LOAN> 87984
<INTEREST-INVEST> 15535
<INTEREST-OTHER> 507
<INTEREST-TOTAL> 104026
<INTEREST-DEPOSIT> 39399
<INTEREST-EXPENSE> 10089
<INTEREST-INCOME-NET> 54538
<LOAN-LOSSES> 2571
<SECURITIES-GAINS> 1130
<EXPENSE-OTHER> 39143
<INCOME-PRETAX> 24289
<INCOME-PRE-EXTRAORDINARY> 24289
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16889
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 1.27
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 47636
<INT-BEARING-DEPOSITS> 3269
<FED-FUNDS-SOLD> 13939
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 356580
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1121395
<ALLOWANCE> 10625
<TOTAL-ASSETS> 1613416
<DEPOSITS> 1226123
<SHORT-TERM> 77241
<LIABILITIES-OTHER> 18084
<LONG-TERM> 112537
0
0
<COMMON> 13454
<OTHER-SE> 165977
<TOTAL-LIABILITIES-AND-EQUITY> 1613416
<INTEREST-LOAN> 98089
<INTEREST-INVEST> 21345
<INTEREST-OTHER> 965
<INTEREST-TOTAL> 120399
<INTEREST-DEPOSIT> 45418
<INTEREST-EXPENSE> 8898
<INTEREST-INCOME-NET> 66083
<LOAN-LOSSES> 2185
<SECURITIES-GAINS> 798
<EXPENSE-OTHER> 42759
<INCOME-PRETAX> 33353
<INCOME-PRE-EXTRAORDINARY> 33353
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23583
<EPS-PRIMARY> 1.76
<EPS-DILUTED> 1.74
<YIELD-ACTUAL> 4.19
<LOANS-NON> 3917
<LOANS-PAST> 2477
<LOANS-TROUBLED> 140
<LOANS-PROBLEM> 47728
<ALLOWANCE-OPEN> 9679
<CHARGE-OFFS> 2827
<RECOVERIES> 1072
<ALLOWANCE-CLOSE> 10625
<ALLOWANCE-DOMESTIC> 8459
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2166
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 44746
<INT-BEARING-DEPOSITS> 4499
<FED-FUNDS-SOLD> 15279
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 361285
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1105194
<ALLOWANCE> 10635
<TOTAL-ASSETS> 1601534
<DEPOSITS> 1225150
<SHORT-TERM> 75868
<LIABILITIES-OTHER> 18498
<LONG-TERM> 104795
0
0
<COMMON> 13047
<OTHER-SE> 164176
<TOTAL-LIABILITIES-AND-EQUITY> 1601534
<INTEREST-LOAN> 72418
<INTEREST-INVEST> 16097
<INTEREST-OTHER> 779
<INTEREST-TOTAL> 89294
<INTEREST-DEPOSIT> 33528
<INTEREST-EXPENSE> 6602
<INTEREST-INCOME-NET> 49164
<LOAN-LOSSES> 1527
<SECURITIES-GAINS> 691
<EXPENSE-OTHER> 30608
<INCOME-PRETAX> 26119
<INCOME-PRE-EXTRAORDINARY> 26119
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18123
<EPS-PRIMARY> 1.35
<EPS-DILUTED> 1.34
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
