U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-SB
General Form For Registration of Securities of
Small Business Issuers
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
PTC Bancorp
(Name of Small Business Issuer in its charter)
Indiana 35-1606016
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Reservoir Hill Road
9014 State Road 101
P.O. Box 7
Brookville, Indiana 47012
(Address of principal executive offices) (Zip Code)
Issuer's telephone number 765-647-3591
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of class)
<PAGE>
PART I
(Alternative 3)
ITEM 1. DESCRIPTION OF BUSINESS
-----------------------
PTC Bancorp (the "Company") is a one bank holding company engaged in
the commercial banking business through its wholly-owned subsidiary, People's
Trust Company, Brookville, Indiana (the "Bank"), a full service commercial
bank with local branches located in Dearborn, Franklin, Jefferson, Ripley,
Rush, Switzerland, Fayette, Decatur and Wayne counties, Indiana.
The Company was incorporated on April 24, 1984, for the purpose of
becoming a bank holding company and acquiring all of the outstanding stock of
the Bank.
BANKING SERVICES. The Bank is engaged in the general full-service commercial
and consumer banking business. It receives demand and time deposits, makes
and services secured and unsecured loans, performs fiduciary and trust
services, and provides a wide variety of personal and corporate services,
including safe deposit facilities.
The Bank offers various types of checking accounts, including commercial
accounts and minimum balance individual accounts. Various types of savings
accounts, individual retirement accounts, money market accounts, certificates
of deposit, and other time deposit accounts are also offered. The Bank's
lending department makes commercial, agricultural, industrial, consumer, and
real estate loans to individuals and businesses. It also engages in
installment credit lending. Through its trust department, the Bank acts as
custodian, trustee, conservator of estates, executor under wills, and
generally engages in other trust services.
The business of the Bank is not seasonal to any material degree and the
Bank is not dependent upon a single or a few principal customers. The loss of
any single customer or a small group of customers by the Bank would not have a
material adverse effect upon the operations or earnings of the Bank.
MARKET AREA AND COMPETITION. The Bank operates in Dearborn, Franklin,
Jefferson, Ripley, Rush, Fayette, Decatur, Switzerland and Wayne counties in
Indiana. It is the major bank (in terms of asset size) in Franklin and Rush
counties but not the major bank in any of the other counties served. The Bank
competes with a variety of other banks and savings institutions in all
localities.
The banking business in Indiana is highly competitive and the Bank
encounters competition in all phases of its business. The Bank competes with
other banks, as well as with savings banks, savings and loan associations,
credit unions and other financial institutions. Since 1986, bank holding
companies resident in various states have been able to purchase Indiana banks.
Various purchases by non-Indiana bank holding companies have been completed
and, therefore, Indiana banking companies also face competition from out-of-
state banks. See "REGULATION AND SUPERVISION."
The principal methods of competition include loan interest rates,
interest rates paid on deposits, efforts to obtain deposits and types of
service provided.
<PAGE>
LENDING ACTIVITIES.
- ------------------
TYPES OF LOANS. The loan portfolio at the dates indicated is presented
below:
<TABLE>
<CAPTION>
December 31
1996 1995
(in thousands)
------------------------
<S> <C> <C>
Commercial and industrial loans.............................................. $ 22,986 $ 19,574
Real estate loans (includes $ 8,302 and $7,278 secured by farm land)......... 88,110 75,462
Construction loans........................................................... 13,650 9,583
Real estate - non farm, nonresidential....................................... 34,810 28,714
Agricultural production financing and other loans to farmers................. 4,895 5,171
Individuals' loans for household and other personal expenditures............. 24,543 26,330
Tax-exempt loans............................................................. 8,107 7,787
Other loans.................................................................. 207 874
Less: Unearned interest on loans............................................ (345) (316)
---------- ----------
Total loans......................................................... $ 196,963 $ 173,179
========== ==========
</TABLE>
LOAN AND LEASE MATURITY ANALYSIS. The breakdown of types of loans
outstanding as of the dates indicated below is as follows:
<TABLE>
<CAPTION>
December 31, 1996
------------------------------------------------
After One
One Year But Within After
(Dollars in Thousands) or Less Five Years Five Years Total
- ---------------------- ------- ---------- ---------- -----
<S> <C> <C> <C> <C>
Commercial................................... $ 75,189 $ 12,170 $ 11,182 $ 98,541
Mortgage..................................... 58,835 6,097 6,980 71,912
Consumer and other........................... 8,111 17,789 610 26,510
--------- --------- --------- ---------
Total loans.............................. $ 142,135 $ 36,056 $ 18,772 $ 196,963
========= ========= ========= =========
</TABLE>
The amount of loans due after one year which have floating or adjustable
interest rates was $10,350 at December 31, 1996, and the amount which had
pre-determined interest rates was $44,478 as of such date.
The Bank's commercial loan portfolio includes loans to businesses in the
manufacturing, wholesale, retail, transportation, restaurant and hotel
industries. As of December 31, 1996, total loans to any particular group of
customers engaged in similar activities and having similar economic
characteristics did not exceed 10% of total loans. However, a substantial
natural geographic concentration of credit risk exists within the Bank's
market area.
ALLOWANCE FOR LOAN LOSSES. In the banking industry, loan losses are one
of the costs of doing business. Although the Bank emphasizes early detection
and charge-off of loan losses, it is inevitable that at any time certain
losses exist in the portfolio which have not been specifically identified.
Accordingly, the provision for loan losses is charged to earnings on an
anticipatory basis, and recognized loan losses are deducted from the allowance
so established. Over time, all net loan losses must be charged to earnings.
During the year, an estimate of the loss experience for the year serves as a
starting point in determining the appropriate level for the provision.
However, the amount actually provided in any period may be greater or less
than net loan losses, based on management's judgment as to the appropriate
level of the allowance for loan losses. The determination of the provision in
any period is based on management's continuing review and evaluation of the
loan portfolio, and its judgment as to the impact of current economic
conditions on the portfolio. The evaluation by management includes
consideration of
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<PAGE>
past loan loss experience, changes in the composition of the loan portfolio,
and the current condition and amount of loans outstanding. The following table
summarizes the loan loss experience for the periods indicated.
<TABLE>
<CAPTION>
Analysis of the Allowance for Loan Losses
Years Ended December 31
-----------------------------
1996 1995
(in thousands, except ratios)
<S> <C> <C>
Allowance for loan losses:
Balance at January 1......................... $1,722 $1,601
Charge-offs:
Commercial................................... 297 248
Real estate mortgage......................... 10 182
Installment loans............................ 419 425
------ ------
Total charge-offs............................ 726 855
Recoveries:
Commercial................................... 14 60
Real estate mortgage......................... 16 19
Installment.................................. 146 157
------ ------
Total recoveries........................... 176 236
------ ------
Net charge-offs.............................. 550 619
------ ------
Provision for loan losses 828 740
Balance at end of period.......................... $2,000 $1,722
====== ======
Ratios:
Net charge-offs during the
period to average loans and leases
outstanding during the period................ 0.30% 0.36%
</TABLE>
The following table shows an allocation of the allowance for loan
losses and percent of loans in each category to total loans for the periods
indicated.
<TABLE>
<CAPTION>
December 31
-------------------------------------
1996 1996 1995 1995
(in thousands, except percents)
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Commercial............................ $ 674 50.0% $ 132 47.1%
Real estate - mortgage................ 45 37.8 65 37.5
Installment and other................. 328 12.2 336 15.4
Unallocated........................... 953 - 1,189 -
------ ------ ------ ------
$2,000 100.0% $1,722 100.0%
====== ====== ====== ======
</TABLE>
LOAN LOSS CHARGE-OFF PROCEDURES. The Bank has weekly loan committee
meetings at which loan delinquencies, maturities and problems are reviewed and
new loans in excess of authorized officer limits are approved or disapproved.
The Bank Board receives and reviews reports on loans monthly, including
delinquencies.
The Bank Board's Loan Committee meets bi-monthly to approve or
disapprove all new loans in excess of $600,000 and reviews all loans made or
renewed during the preceding month.
All charge-offs are approved by the Bank Board or Loan Committee of the
Board. The Bank charges off loans when a determination is made that all or a
portion of a loan is uncollectible or as a result of examinations by DFI and
FDIC.
3
<PAGE>
NONPERFORMING LOANS. Nonperforming loans are nonaccrual loans,
restructured loans, and loans over 90 days past due. Loans are placed on a
nonaccrual basis generally when in management's judgment the collateral value
and financial condition of the borrower do not justify accruing interest.
Interest previously recorded but not deemed collectible is reversed and
charged against current income. Interest income on these loans is then
recognized when collected.
Restructured loans are loans for which the contractual interest rate has
been reduced or other concessions are granted to the borrower because of a
deterioration in the financial condition of the borrower resulting in the
inability of the borrower to meet the original contractual terms of the loans.
The following table reflects nonperforming loans for the period
indicated:
<TABLE>
<CAPTION>
December 31
-------------------
1996 1995
(in thousands)
<S> <C> <C>
Nonperforming loans:
Nonaccrual loans................................................ $1,794 $ 629
Restructured loans.............................................. 0 0
Accruing loans 90 days or more past due......................... 34 835
------- -------
Total nonperforming loans....................................... 1,828 1,464
Other real estate owned............................................ 24 0
Total nonperforming assets...................................... $1,852 $1,464
Allowance for possible loan and lease losses....................... $2,000 $1,722
Allowance as a percentage of nonperforming loans................... 108.0% 117.6%
Allowance as a percentage of total loans........................... 1.02% 0.99%
Nonperforming loans and other real estate owned
as a percentage of total loans and other real estate owned...... 0.94% 0.84%
Nonperforming loans as a percentage of total loans................. 0.93% 0.84%
======= =======
</TABLE>
In addition to the loans classified as nonperforming, there were other
loans totaling $3,013,255 at December 31, 1996 and $666,745 at December 31,
1995, which management was closely monitoring the borrowers' ability to comply
with payment terms but where conditions did not warrant classification as
nonperforming loans.
INVESTMENT SECURITIES. The Company's investment portfolio is an important
source of liquidity. The following table shows the amortized cost of
securities available for sale at the dates indicated:
4
<PAGE>
Securities Available for Sale
<TABLE>
<CAPTION>
December 31
-------------------
1996 1995
(in thousands)
<S> <C> <C>
U.S. Treasury and government agencies................ $30,066 $27,893
State and political subdivisions..................... 1,971 2,337
Mortgage backed securities........................... 2,583 2,783
Other debt securities................................ 1,906 3,599
Equity securities.................................... 1,521 1,522
------- -------
Total................................................ $38,047 $38,134
======= =======
</TABLE>
The following table shows the amortized cost of securities held to
maturity at the dates indicated:
Securities Held to Maturity
<TABLE>
<CAPTION>
December 31
-------------------
1996 1995
(in thousands)
<S> <C> <C>
U.S. Treasury and government agencies................ $ 168 $ 155
State and political subdivisions..................... 24,188 17,895
Mortgage backed securities........................... 297 951
Other debt securities................................ 566 500
------- -------
Total............................................... $25,219 $19,501
======= =======
</TABLE>
The amortized cost of debt securities at December 31, 1996, by
contractual maturity are show below. Actual maturities will differ from
contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties. Also, mortgage
backed securities are presented by contractual maturity below; however, these
securities typically experience periodic paydowns and prepayments.
5
<PAGE>
The maturity distribution and average yields for the debt securities
available for sale were:
<TABLE>
<CAPTION>
Within 1 Year 1-5 Years 5-10 Years Over 10 Years
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996
U.S. Treasury and
government
agencies........... $4,590 4.99% $24,476 6.39% $1,000 7.73% $ -0- 0.00%
Mortgage-backed
securities......... 110 5.25 783 6.66 529 8.14 1,161 7.58
State and political
subdivision*....... 460 5.20 1,157 9.65 304 8.20 50 9.22
Other debt
securities......... 11 6.62 1,577 6.08 -0- 0.00 318 7.60
------ ----- ------- ----- ------ ----- ------ -----
Totals............. $5,171 5.02% $27,993 6.51% $1,833 7.93% $1,529 7.64%
====== ===== ======= ===== ====== ===== ====== =====
</TABLE>
*Interest yields on state and municipal securities are presented on a fully
taxable equivalent basis using a 34% tax rate.
The maturity distribution and average yields for securities held to
maturity were:
<TABLE>
<CAPTION>
Within 1 Year 1-5 Years 5-10 Years Over 10 Years
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996
U.S. Treasury and
government
agencies........... $ -0- 0.00% $ -0- 0.00% $ -0- 0.00% $ 168 8.13%
Mortgage-backed
securities......... 213 4.75 84 6.90 -0- 0.00 -0- 0.00
State and political
subdivision*....... 3,411 7.49 17,809 6.92 1,958 7.68 1,010 7.08
Other debt
securities......... -0- 0.00 566 5.41 -0- 0.00 -0- 0.00
------ ----- ------- ----- ------ ----- ------ -----
Totals............. $3,624 7.33% $18,459 6.87% $1,958 7.68% $1,178 7.23%
====== ===== ======= ===== ====== ===== ====== =====
</TABLE>
*Interest yields on state and municipal securities are presented on a fully
taxable equivalent basis using a 34% tax rate.
TIME DEPOSITS OVER $100,000. As of December 31, 1996, certificates of deposit
and other time deposits of $100,000 or more mature as follows:
(Dollars in thousands) December 31, 1996
---------------------- -----------------
3 months or less $ 9,234
Over 3 months through 6 months 5,886
Over 6 months through 12 months 6,444
Over 12 months 7,387
--------
Total $ 28,949
========
6
<PAGE>
EMPLOYEES. At December 31, 1996, the Bank employed approximately 115 full-
time and 24 part-time individuals. The Bank provides a variety of employment
benefits and considers relations with its employees to be excellent. The
Company has officers but no employees at the present time.
REGULATION AND SUPERVISION. The Company and the Bank are subject to extensive
regulation under federal and state laws which significantly affect their
respective activities and the competitive environment in which they operate.
BANK HOLDING COMPANY REGULATION. The Company is registered as a bank
holding company is subject to the regulations of the Board of Governors of the
Federal Reserve System ("Federal Reserve") under the Bank Holding Company Act
of 1956, as amended ("BHCA"). Bank holding companies are required to file
periodic reports with and are subject to periodic examination by the Federal
Reserve. The Federal Reserve has issued regulations under the BHCA requiring
a bank holding company to serve as a source of financial and managerial
strength to its subsidiary banks. It is the policy of the Federal Reserve
that, pursuant to this requirement, a bank holding company should stand ready
to use its resources to provide adequate capital funds to its subsidiary banks
during periods of financial stress or adversity. Additionally, under the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), a
bank holding company is required to guarantee the compliance of any insured
depository institution subsidiary that may become "undercapitalized" (as
defined in the statute) with the terms of any capital restoration plan filed
by such subsidiary with its appropriate federal banking agency up to the
lesser of (i) an amount equal to 5% of the institution's total assets at the
time the institution became undercapitalized, or (ii) the amount that is
necessary (or would have been necessary) to bring the institution into
compliance with all applicable capital standards as of the time the
institution fails to comply with such capital restoration plan. Under the
BHCA, the Federal Reserve has the authority to require a bank holding company
to terminate any activity or relinquish control of a nonbank subsidiary (other
than a nonbank subsidiary of a bank) upon the Federal Reserve's determination
that such activity or control constitutes a serious risk to the financial
soundness and stability of any bank subsidiary of the bank holding company.
The Company is prohibited by the BHCA from acquiring direct or indirect
control of more than 5% of the outstanding shares of any class of voting stock
or substantially all of the assets of any bank or merging or consolidating
with another bank holding company without prior approval of the Federal
Reserve. The BHCA also prohibits the Company from acquiring control of any
bank operating outside the State of Indiana unless such action is specifically
authorized by the statutes of the state where the bank to be acquired is
located. Additionally, the Company is prohibited by the BHCA from engaging in
or from acquiring ownership or control of more than 5% of the outstanding
shares of any class of voting stock of any company engaged in a non-banking
business unless such business is determined by the Federal Reserve to be so
closely related to banking as to be a proper incident thereto. The BHCA does
not place territorial restrictions on the activities of such non-banking
related activities.
CAPITAL ADEQUACY GUIDELINES FOR BANK HOLDING COMPANIES. The Federal
Reserve is the federal regulatory and examining authority for bank holding
companies. The Federal Reserve has adopted capital adequacy guidelines for
bank holding companies.
Bank holding companies are required to comply with the Federal Reserve's
risk-based capital guidelines which require a minimum ratio of total capital
to risk-weighted assets (including certain off-balance sheet activities such
as standby letters of credit) of 8%. At least half of the total required
capital must be "Tier 1 capital," consisting principally of common
stockholders' equity, noncumulative perpetual preferred stock, a limited
amount of cumulative perpetual preferred stock and minority interest in the
equity accounts of consolidated subsidiaries, less certain goodwill items. The
remainder ("Tier 2 capital") may consist of a limited amount of subordinated
debt and intermediate-term preferred stock, certain hybrid capital instruments
and other debt securities, cumulative perpetual preferred stock, and a limited
amount of general loan loss allowance. In addition to the risk-based capital
guidelines, the Federal Reserve has adopted a Tier 1 (leverage) capital ratio
under which the bank holding company must maintain a minimum level of Tier 1
capital to total consolidated assets of 3% in the case of
7
<PAGE>
bank holding companies which have the highest regulatory examination ratings
and are not contemplating significant growth or expansion. All other bank
holding companies are expected to maintain a ratio of at least 1% to 2% above
the stated minimum.
The Company and the Bank were in full compliance with all regulatory capital
requirements at December 31, 1996. Regulatory capital ratios for the Company
of December 31, 1996 are shown below:
Tier 1 Capital to Risk-Weighted Assets................. 10.54%
Total Risk Based Capital to Risk-Weighted Assets....... 11.60%
Tier 1 Leverage Ratio.................................. 6.73%
BANK REGULATION. The Bank is organized under the laws of the State of
Indiana and is subject to the supervision of the DFI, whose examiners conduct
periodic examinations of state banks. The Bank is not a member of the Federal
Reserve System, so its principal federal regulator is the FDIC, which also
conducts periodic examinations of the Bank. All of the Bank's deposits are
insured by the Bank Insurance Fund ("BIF") administered by the FDIC and are
subject to the FDIC's rules and regulations respecting the insurance of
deposits. See "REGULATION AND SUPERVISION--DEPOSIT INSURANCE."
Both federal and state law extensively regulate various aspects of the
banking business such as reserve requirements, truth-in-lending and truth-in
savings disclosure, equal credit opportunity, fair credit reporting, trading
in securities and other aspects of banking operations. Current federal law
also requires banks, among other things, to make deposited funds available
within specified time periods.
Insured state-chartered banks are prohibited under FDICIA from engaging
as principal in activities that are not permitted for national banks, unless
(i) the FDIC determines that the activity would pose no significant risk to
the appropriate deposit insurance fund, and (ii) the bank is, and continues to
be, in compliance with all applicable capital standards. These restrictions
have not had a material adverse effect on Bank operations.
FEDERAL HOME LOAN BANK SYSTEM. The Bank has been approved for membership
in the Federal Home Loan Bank ("FHLB") System. FHLB membership will provide
the Bank with a ready source from which to borrow short-term funds from time
to time. The FHLB System consists of 12 regional banks. The Federal Housing
Finance Board ("FHFB"), an independent agency, controls the FHLB System
including the FHLB of Indianapolis, to which the Bank would apply for
membership. The FHLB System provides a central credit facility primarily for
member financial institutions. The Bank is required to hold shares of capital
stock in the FHLB of Indianapolis in an amount at least equal to the greater
of 1% of the aggregate principal amount of its unpaid residential mortgage
loans, home purchase contracts and similar obligations at the end of each
calendar year, 0.3% of its assets or 1/20 (or such greater fraction
established by the FHLB) of outstanding FHLB advances, commitments, lines of
credit and letters of credit. The FHLB's pay dividends on the capital stock
held by their members.
The FHLB of Indianapolis serves as a reserve or central bank for member
institutions within its assigned region. It is funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLB System. It
makes advances to members in accordance with policies and procedures
established by the FHFB and the Board of Directors of the FHLB of
Indianapolis.
All FHLB advances must be fully secured by sufficient collateral as
determined by the FHLB. Eligible collateral includes first mortgage loans
less than 90 days delinquent or securities evidencing interests therein,
securities (including mortgage-backed securities) issued, insured or
guaranteed by the federal government or any agency thereof, FHLB deposits and,
to a limited extent, real estate with readily ascertainable value in which a
perfected security interest may be obtained. All long-term advances must be
used to provide funds for residential home financing and the FHLB has
established standards of community service that members must meet to maintain
access to long-term advances.
8
<PAGE>
Interest rates charged for advances vary depending upon maturity, the
cost of funds to the FHLB of Indianapolis and the purpose of the borrowing.
BANK CAPITAL REQUIREMENTS. The FDIC has adopted risk-based capital
ratio guidelines to which the Bank is subject. The guidelines establish a
systematic analytical framework that makes regulatory capital requirements
more sensitive to differences in risk profiles among banking organizations.
Risk-based capital ratios are determined by allocating assets and specified
off-balance sheet commitments to four risk weighted categories, with higher
levels of capital being required for the categories perceived as representing
greater risk.
Like the capital guidelines established by the Federal Reserve for the
Company, these guidelines divide a banks capital into two tiers. The first
tier (Tier 1) includes common equity, certain non-cumulative perpetual
preferred stock (excluding auction rate issues) and minority interest in
equity accounts of consolidated subsidiaries, less goodwill and certain other
intangible assets (except mortgage servicing rights and purchased credit card
relationships, subject to certain limitations). Supplementary (Tier 2)
capital includes, among other items, cumulative perpetual and long-term
limited-life preferred stock, mandatory convertible securities, certain hybrid
capital instruments, term subordinated debt and the allowance for loan and
lease losses, subject to certain limitations, less required deductions. Banks
are required to maintain a total risk-based capital ratio of 8%, of which 4%
must be Tier 1 capital. The FDIC may, however, set higher capital
requirements when a bank's particular circumstances warrant. Banks
experiencing or anticipating significant growth are expected to maintain
capital ratios, including tangible capital positions, well above the minimum
levels.
In addition, the FDIC established guidelines prescribing a minimum Tier
1 leverage ratio (Tier 1 capital to adjusted total assets as specified in the
guidelines). These guidelines provide for a minimum Tier 1 leverage ratio of
3% for banks that meet certain specified criteria, including that they have
the highest regulatory rating and are not experiencing or anticipating
significant growth. All other banks are required to maintain a Tier 1
leverage ratio of 3% plus an additional cushion of at least 100 to 200 basis
points.
Certain regulatory capital ratios for the Bank at December 31, 1996 are
shown below:
Tier 1 Capital to Risk-Weighted Assets................ 10.40%
Total Risk Based Capital to Risk-Weighted Assets...... 11.46%
Tier 1 Leverage Ratio................................. 6.63%
DIVIDEND LIMITATIONS. Under Federal Reserve supervisory policy, a bank
holding company generally should not maintain its existing rate of cash
dividends on common shares unless (i) the organization's net income available
to common shareholders over the past year has been sufficient to fully fund
the dividends and (ii) the prospective rate or earnings retention appears
consistent with the organization's capital needs, asset quality, and overall
financial condition. The Company's Board of Directors has adopted a policy
consistent with these guidelines. The FDIC also has authority under the
Financial Institutions Supervisory Act to prohibit a bank from paying
dividends if, in its opinion, the payment of dividends would constitute an
unsafe or unsound practice in light of the financial condition of the bank.
Under Indiana law, the Bank may pay dividends so long as its capital is
unimpaired and it has unimpaired retained surplus equal to 25% of capital.
Dividends may not exceed undivided profits on hand (less losses, bad debts and
expenses). The most stringent capital requirement affecting the Bank,
however, are those established by the prompt corrective action provisions of
FDICIA, which are discussed below. The Bank's capital levels at December 31,
1996 exceeded the criteria established to be designated as a "well
capitalized" bank, which requires a total risk-based capital ratio of 10% or
greater, a Tier 1 risk-based capital ratio of 6% or greater and a leverage
ratio of 5% or greater.
LENDING LIMITS. Under Indiana law, the total loans and extension of
credit by an Indiana-chartered bank to a borrower outstanding at one time and
not fully secured may not exceed 15% of such bank's capital and unimpaired
surplus. An additional amount up to 10% of the bank's capital and unimpaired
surplus may be loaned to the same borrower if such loan is fully secured by
readily marketable collateral having a market value, as
9
<PAGE>
determined by reliable and continuously available price quotations, at least
equal to the amount of such additional loans outstanding.
SAFETY AND SOUNDNESS STANDARDS. On February 2, 1995, the federal
banking agencies adopted final safety and soundness standards for all insured
depository institutions. The standards, which were issued in the form of
guidelines rather than regulations, relate to internal controls, information
systems, internal audit systems, loan underwriting and documentation,
compensation and interest rate exposure. In general, the standards are
designed to assist the federal banking agencies in identifying and addressing
problems at insured depository institutions before capital becomes impaired.
If an institution fails to meet these standards, the appropriate federal
banking agency may require the institution to submit a compliance plan.
Failure to submit a compliance plan may result in enforcement proceedings.
Additional standards on earnings and classified assets are expected to be
issued in the near future.
BRANCHES AND AFFILIATES. Establishment of bank branches is subject to
approval of the DFI and FDIC and geographic limits established by state laws.
Indiana's branch banking law permits a bank having its principal place of
business in the State of Indiana to establish branch offices in any county in
Indiana without geographic restrictions and effective after June, 1997 to
established branches outside the State of Indiana. A bank may also merge with
any national or state chartered bank located anywhere in the State of Indiana
without geographic restrictions.
The Bank is subject to Sections 22(h), 23A and 23B of the Federal
Reserve Act, which restrict financial transactions between banks and
affiliated companies. The statute limits credit transactions between a bank
and its executive offices and its affiliates, prescribes terms and conditions
for bank affiliate transactions deemed to be consistent with safe and sound
banking practices, and restricts the types of collateral security permitted in
connection with a bank's extension of credit to an affiliate.
FDICIA. FDICIA requires, among other things, federal bank regulatory
authorities to take "prompt corrective action" with respect to banks which do
not meet minimum capital requirements. For these purposes, FDICIA establishes
five capital tiers: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized. The Bank meets all requirements to be considered as "well
capitalized".
The FDIC adopted regulations to implement the prompt corrective action
provisions of FDICIA, effective as of December 19, 1992. Among other things,
the regulations define the relevant capital measures for the five capital
categories. An institution is deemed to be "well capitalized" if it has a
total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital
ratio of 6% or greater, and a leverage ratio of 5% or greater, and is not
subject to a regulatory order, agreement or directive to meet and maintain a
specific capital level for any capital measure. An institution is deemed to
be "adequately capitalized" if it has a total risk-based capital ratio of 8%
or greater, a Tier 1 risk-based capital ratio of 4% or greater, and generally
a leverage ratio of 4% or greater. An institution is deemed to be
"undercapitalized" if it has a total risk-based capital ratio of less than 8%,
a Tier 1 risk-based capital ratio of less than 4%, or generally a leverage
ratio of less than 4%, and "significantly undercapitalized" if it has a total
risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of
less than 3%, or a leverage ratio of less than 3%. An institution is deemed
to be "critically undercapitalized" if it has a ratio of tangible equity (as
defined in the regulations) to total assets that is equal to or less than 2%.
"Undercapitalized" banks are subject to growth limitations and are
required to submit a capital restoration plan. A bank's compliance with such
plan is required to be guaranteed by any company that controls the
undercapitalized institution as described above. If an "undercapitalized"
bank fails to submit an acceptable plan, it is treated as if it is
significantly undercapitalized. "Significantly undercapitalized" banks are
subject to one or more of a number of requirements and restrictions, including
an order by the FDIC to sell sufficient voting stock to become adequately
capitalized, requirements to reduce total assets and cease receipt of deposits
from correspondent banks, and restrictions on compensation of executive
officers. "Critically undercapitalized" institutions may not, beginning 60
days after becoming "critically undercapitalized", make any payment of
principal or interest on certain subordinated debt or extend credit for a
highly leveraged transaction or enter into
10
<PAGE>
any transaction outside the ordinary course of business. In addition,
"critically undercapitalized" institutions are subject to appointment of a
receiver or conservator.
DEPOSIT INSURANCE. The Bank's deposits are insured up to $100,000 per
insured account, by the Bank Insurance Fund ("BIF"). As an institution whose
deposits are insured by BIF, the Bank is required to pay deposit insurance
premiums to BIF.
The BIF is required to maintain a reserve ratio of 1.25% of estimated
insured deposits, subject to an increase to 1.5% if the FDIC believes there is
a significant risk of substantial future losses. If the FDIC believes that an
increase in the insurance rates is necessary to reach these reserve ratios, it
may increase the insurance premiums applicable to the BIF. If the reserve
ratio is in excess of an amount designated by statute, credits against future
premiums may be granted.
The FDIC is authorized to establish separate annual assessment rates for
deposit insurance for members of the BIF. The FDIC may increase assessment
rates for the fund if necessary to restore the fund's ratio of reserves to
insured deposits to the target level within a reasonable time and may decrease
such rates if such target level has been met. The FDIC has established a
risk-based assessment system for BIF members. Under this system, assessments
vary depending on the risk the institution poses to its deposit insurance
fund. Such risk level is determined based on the institution's capital level
and the FDIC's level of supervisory concern about the institution. Assessment
rates range from 0% for an institution in the highest catagory (i.e. well
capitalized) to .27% for an institution in the lowest catagory (i.e.
undercapitalized and substantial supervisory concern).
ADDITIONAL MATTERS. In addition to the matters discussed above, the
Company and the Bank are subject to additional regulation of their activities,
including a variety of consumer protection regulations affecting their
lending, deposit and collection activities and regulations affecting secondary
mortgage market activities.
The earnings of financial institutions, including the Company and the
Bank, are also affected by general economic conditions and prevailing interest
rates, both domestic and foreign and by the monetary and fiscal policies of
the U.S. Government and its various agencies, particularly the Federal
Reserve.
Additional legislation and administrative actions affecting the banking
industry may be considered by the United States Congress, the Indiana General
Assembly and various regulatory agencies, including those referred to above.
It cannot be predicted with certainty whether such legislation or
administrative action will be enacted or the extent to which the banking
industry in general or the Company and the Bank in particular would be
affected thereby.
11
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
---------------------------------------------------------------------
OF OPERATIONS
-------------
The following discussion and analysis provides information regarding the
Company's consolidated financial condition and results of operations as of and
for the years ended December 31, 1995 and 1996. The discussion should be read
in conjunction with the financial information contained in "Description of
Business" and the consolidated financial statements and notes thereto. All
dollar amounts shown herein are in thousands except per share amounts.
GENERAL
- -------
The business of the Company consists of holding and administering its
interest in the Bank. The principal business of the Bank consists of
attracting deposits from consumer and commercial customers and making loans to
individuals and businesses. The Bank offers various products for depositors,
including checking and savings accounts, certificates of deposit and safe
deposit boxes. Loans consist principally of loans to individuals secured by
mortgage liens on residential properties, consumer loans generally secured by
liens on personal property, and loans to businesses generally secured by liens
on business assets such as inventory, accounts receivable, commercial real
estate and other property. The Bank also offers trust services to individuals,
businesses and institutions.
The Bank operates 17 banking offices in nine eastern and southeastern
counties in Indiana. In 1996, the Bank opened new banking offices in
Greensburg and Connersville area and in the first quarter of 1997 purchased an
office in Hanover. The Bank will continue to take advantage of opportunities
to expand its number of locations if the expansion appears to represent a
profitable opportunity, however, there is no assurance this will occur.
EARNINGS SUMMARY
- ----------------
The Company's net income for 1996 was $3,276 compared with net income
for 1995 of $2,907, an increase of $369 or 12.7%. Earnings per share were
$3.17 in 1996 compared to $2.86 for 1995.
NET INTEREST INCOME
- -------------------
Net interest income is the principal component of net income for the
Company and is determined by the relative size and characteristics of
interest-earnings assets and interest-bearing liabilities. The increase in
net income in 1996 resulted primarily from an increase in net interest income.
For the years ended December 31, 1996 and 1995 net interest income was $10,422
and $9,585 respectively. This represents an increase in 1996 of $840 (8.03%).
Growth in net interest income as drawn primarily from growth in earning
assets. Average earning assets increased to $257,011 in 1996 from $234,731 in
1995, an increase of $22,280 (9.5%). The most significant increase in average
earning assets occurred in average loans which increased $16,943 (10.1%) to
$184,447 in 1996. Increasing loan balances was the primary cause of the
increase in net interest income during 1996. The following table sets forth,
for the periods indicated, information regarding the average balances of
interest-earning assets and interest-bearing liabilities, the dollar amount of
interest income and interest expense, and the resulting yield on average
interest-earning assets and rates on average interest-bearing liabilities.
Average balances are also provided for non-earning assets, non-interest-
bearing liabilities and shareholders' equity.
Net interest income also depends on the rates paid on assets and the
rates paid on liabilities. The net interest margin represents net interest
income as a percent of average earning assets. The net interest margin, or
margin on earning assets, was 4.39% in 1996 and 4.37% in 1995. Interest rates
were low and stable during this time period and the result has been about the
same margins.
12
<PAGE>
<TABLE>
<CAPTION>
RATE/VOLUME ANALYSIS
(Dollars in thousands)
1996 1995
------------------------------- -------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
- --------------
Short-term Investments:
Interest-bearing balances
with Banks $ 2,274 $ 130 5.72% $ 1,034 $ 62 6.00%
Federal Funds Sold 7,317 433 5.92% 7,923 473 5.97
Securities: (1)
Taxable 38,224 2,440 6.38% 39,394 2,498 6.34%
Non-taxable 24,749 1,805 7.29% 18,876 2,424 7.54%
Loans and Leases: (2)
Taxable 176,529 16,658 9.44% 160,915 15,062 9.36%
Non-taxable 7,918 708 .94% 6,589 582 8.83%
-------- ------- ----- -------- ------- -----
Total Earning Assets $257,011 $22,174 8.63% $234,731 $20,101 8.56%
======== ======= ===== ======== ======= =====
Cash and Due from Banks 6,992 6,196
Premises and equipment,net 3,246 2,971
Intangible assets 1,678 1,899
Accrued interest receivable
and other assets 3,384 3,051
Less: Allowance for Loan Loss (1,976) (1,607)
-------- --------
TOTAL ASSETS $270,335 $247,241
======== ========
INTEREST BEARING
- ----------------
LIABILITIES
-----------
Savings and Interest-bearing
Demand Deposits $ 78,529 $ 2,247 2.86% $ 75,087 $ 2,155 2.87%
Time Deposits 148,079 8,590 5.80% 132,604 7,579 5.72%
Notes Payable 782 60 7.67% 1,247 102 8.18%
-------- ------- ----- -------- ------- -----
Total Interest-bearing
Liabilities $227,390 $10,897 4.79% $208,938 $ 9,836 4.71%
======== ======= ===== ======== ======= =====
Demand Deposit Accounts 20,136 18,778
Other Liabilities 2,396 1,879
-------- --------
TOTAL LIABILITIES 249,922 229,595
-------- --------
Shareholders' Equity 20,413 17,646
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $270,335 $247,241
======== ========
Net Interest/Spread $11,277 3.84% $10,265 3.85%
======= ===== ======= =====
Margin 4.39% 4.37%
===== =====
</TABLE>
(1) Effective tax rates were determined as though interest earned on the
Company's investments in municipal bonds and loans was fully taxable.
(2) Interest income on loans included fees of $437 and $370 for 1996 and
1995.
13
<PAGE>
The following table presents information regarding the Company's
interest income and interest expense for the periods indicated. The table
presents the amount of change in interest income or interest expense which is
attributable to the change in the average balance (volume) and the amount of
change which is related to change in rates. The net change, attributable to
the combined impact of volume and rate, has been allocated proportionately to
the change due to volume and the change due to rate. Increases in balances
were responsible for an increase in net interest income of $1,058 during 1996,
however, this was offset by a decrease in spread of $46 resulting in a $1,012
increase in net interest income.
<TABLE>
<CAPTION>
(Dollars in thousands)
1996-1995
Change Change
Total Due To Due To
Change Volume Rate
------ ------ ----
<S> <C> <C> <C>
EARNING ASSETS
Short-term Investments
Interest-bearing balances
with Banks $ 68 $ 71 $ (3)
Federal Funds Sold (40) - (40)
Securities:
Taxable (58) (75) 17
Non-taxable 381 430 (49)
Loans and Leases:
Taxable 1,596 1,472 124
Non-taxable 126 119 7
------- ------- -----
Total Earning Assets $2,073 $2,017 $ 56
======= ======= =====
INTEREST BEARING
LIABILITIES
Savings and Interest-Bearing
Demand Deposits $ 92 $ 99 $ (7)
Time Deposits 1,011 896 115
Notes Payable (42) (36) (6)
------- ------- -----
Total Interest-bearing
Liabilities 1,061 959 102
======= ======= =====
Net Interest/Spread $1,012 $1,058 $(46)
======= ======= =====
</TABLE>
NON-INTEREST INCOME
- -------------------
Total non-interest income was $2,349 in 1996 and $1,902 in 1995. This
reflected an increase in 1996 of $447 (23.5%). Service charges on deposit
accounts were relatively flat in 1996 compared to 1995. The amounts were
$1,199 in 1996 compared to $1,192 in 1995.
Mortgage banking revenues included net gains and losses realized when
mortgage loans were sold into the secondary market, service fee revenue earned
from servicing those loans after they were sold and point income generated
from customers at time of closing. Mortgage banking revenue, as reflected in
the Company's financial statements, has not been reduced by the associated
costs, such as compensation expense, which is shown elsewhere within non-
interest expense. Total mortgage banking revenue was $795 in 1996 and $447 in
1995. This reflects an increase in 1996 of $348 (78%). The majority of this
increase is from the Company adopting
14
<PAGE>
FAS 122 which recognizes the income value of servicing rights. This increased
income in mortgage banking $225 in 1996.
The Bank sold its travel agency in April, 1996 so it could concentrate
its focus on additional banking facilities, products and services. As a
result travel commission decreased from $178 in 1995 to $66 in 1996 (62.8%).
The Company does not engage in the purchase and sale of securities with the
intent to generate gains. The Company may sell available-for-sale securities
for liquidity or to manage its asset/liability position. During 1996, such
sales, as well as gains and losses realized when securities were called prior
to their maturity, generated net losses of $104 compared to losses in 1995 of
$76.
NON-INTEREST EXPENSE
- --------------------
Non-interest expense, or overhead, includes the costs of personnel,
occupancy, data processing equipment, insurance, and other costs of sustaining
operations. Overhead for the years ended December, 1996 and 1995 were $7,103
and $6,639, respectively. This reflects increases of $464 (7%) in 1996. More
than half of total non-interest expense was comprised of salaries and employee
benefits. During 1996 and 1995 salaries and employee benefits were $4,137 and
$3,725, respectively. This represents an 11% increase which was due to the
bank opening and staffing two new branches during 1996. The new branches are
expected to have a positive effect on net income by the beginning of 1998.
FDIC insurance expense decreased $249 in 1996 as a result of a decrease
in the premium rates charged to insured banks.
INCOME TAXES
- ------------
The Company's income tax expense was affected primarily by the level of
pre-tax income. As income increased, tax expense did as well. Tax expense
for 1996 increased $364 over 1995. The Company can and does purchase tax-free
investments and originates tax-free loans as a means of generating tax-free
income, effectively mitigating tax expense.
ASSET AND LIABILITY MANAGEMENT
- ------------------------------
The Company engages in a formal process of measuring and defining the
amount of interest rate risk. Interest rate risk is the effect on net
interest income resulting from changes in interest rates. The goal of the
asset and liability management process is to maintain a high, yet stable, net
interest margin by identifying the degree of interest rate risk and developing
tactics and strategies to mitigate the extent to which net interest income
will be affected by changes in interest rates.
The following tables illustrate the repricing opportunities, or "rate
sensitivity" of interest-earning assets and interest bearing liabilities. A
repricing may occur if the rate on the asset or liability changes as interest
rates change, or, when the rate is fixed, at the time they mature. The "gap"
is the difference between rate sensitive assets and rate sensitive liabilities
within a specific time frame. Gap is considered an indicator of the effect a
change in interest may have on net interest income.
As of December 31, 1996, the Company's rate sensitive liabilities
exceeded rate sensitive assets through one year. This would indicate that if
rates increase, net interest income may decrease. In order to determine
accurately the effect of changes in interest rates, the repricing effect of
each type of interest-earning asset and interest-bearing liability must be
measured. Assets and liabilities have different characteristics and the
magnitude of change differs for each. Management continually monitors the
changes to net interest income which may result from changing interest rates.
15
<PAGE>
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY ANALYSIS
(Dollars in thousands)
0-3 4-12 1-5 After Non-interest
months months years 5 years Bearing Total
------ ------ ----- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Rate-sensitive Assets:
Cash and due from banks $ 10,772 $ - $ - $ - $ 2,213 $ 12,985
Fed Funds Sold 13,200 - - - - 13,200
Interest bearing balances - - - - - -
with financial institutions - 898 999 - - 1,897
Securities 3,460 5,538 46,828 7,768 - 63,594
Loans 40,103 100,731 36,897 17,337 1,895 196,963
Allowance for Loan Loss - - - - (2,000) (2,000)
Other assets - - - - 9,936 9,936
-------- -------- -------- -------- -------- --------
Total Assets $ 67,535 $107,167 $ 84,724 $ 25,105 $ 12,044 $296,575
-------- -------- -------- -------- -------- --------
Rate-sensitive Liabilities:
Non-interest bearing deposits $ - $ - $ - $ - $ 32,350 $ 32,350
Passbook Savings - 30,114 - - - 30,114
Interest bearing deposits 57,654 - - - - 57,654
CD's >100M 9,232 12,330 7,388 - - 28,950
CD's >100M 22,296 47,173 39,924 12 - 109,405
IRA's 2,115 3,369 7,169 - - 12,653
Note Payable 500 - - - - 500
Other liabilities - - - - 3,296 3,296
Capital - - - - 21,653 21,653
-------- -------- -------- -------- -------- --------
Total liabilities $ 91,797 $ 92,986 $ 54,481 $ 32,362 $ 57,299 $296,575
-------- -------- -------- -------- -------- --------
Periodic Gap $(24,262) $ 14,181 $ 30,243 $ 25,093 $(12,905)
Cumulative Gap $(24,262) $(10,081) $ 20,162 $ 45,255 $ -
</TABLE>
A significant assumption that creates the large negative gap in the 0 to
3 month category is that all interest-bearing demand accounts are subject to
immediate repricing. While it is true that contractually, those accounts are
subject to immediate repricing, the rates paid on those accounts are not
generally tied to specific indices and are influenced by market conditions and
other factors. Accordingly, a general movement in interest rates, either up
or down, may not have any immediate effect on the rates paid on these deposit
accounts. The foregoing table illustrates only one source of information
about sensitivity to interest rate movements. The core of the Company's asset
and liability management process consists of simulations that take into
account the time that various assets and liabilities may reprice and the
degree to which various categories of such assets and liabilities will respond
to general interest rate movements. Interest rate risk can only be
represented by a measurement of the effects of changing interest rates given
the capacity for, and magnitude of, change on specific assets and liabilities.
16
<PAGE>
LIQUIDITY
- ---------
Liquidity refers to the availability of funds to meet deposit
withdrawals, fund loan commitments and pay expenses. During 1996, the
Company's loan portfolio increased to $197 at December 31, 1996 from $173 at
December 31, 1995, an increase of $24 or 13.7%. Increases in deposits
provided on source of funding for loan growth in 1996. Average interest-
bearing deposits increased $21 (10%) between 1995 and 1996. Additional
funding for loan growth was provided through sales and maturities of
securities.
A common measure of liquidity is the loan to deposit ratio. As of
December 31, the loan to deposit ratio of 72.6% in 1996, and 71.7% in 1995.
Increasing this ratio was an important goal for the Company's management
during 1996, and significantly added to the Company's profitability.
Loan commitments include unfunded portions of lines of credit and
commercial letters of credit. These unfunded commitments may or may not
require funding. At December 31, 1996 and 1995, such commitments totaled $30
and $18, respectively. Loan commitments generate fee income for the Company.
LOAN QUALITY
- ------------
The Company has maintained a high level of quality in the loan
portfolio. Non-performing loans are those loans which are past due more than
90 days and still accruing interest and those loans on which the Company no
longer accrues interest. As of December 31, 1996 and 1995, non-performing
loans totaled $1,828 and $1,464, respectively. As a percent of total loans,
non-performing loans were .93% at December 31, 1996 and .84% at December 31,
1995.
The provision for loan losses is a charge to earnings to provide for
potential loan losses. The provisions for loan losses was $828 in 1996 and
$740 in 1995. Coverage of potential loan losses is provided by the allowance
for loan losses. The adequacy of the allowance for loan losses is evaluated
at least quarterly by the credit review function and management based upon a
review of identified loans with more than a normal degree of risk, historical
loss percentages, and present and forecasted economic conditions affecting
borrowers. At December 31, the allowance for loan losses was $2,000 for 1996
and $1,722 for 1995. As a percent of total loans, the allowance for loan
losses was 1.02% and .99% at those points in time. Management's analysis
indicates that the allowance for loan losses at December 31, 1996, was
adequate to cover potential losses on identified loans with credit problems
and on the remaining portfolio. Contained within the general allowance for
loan loss specific allocations can be made if management can determine a loss.
In the case of the "Bennett Funding" loans management had specifically
reserved $475. Bennett Funding is a Syracuse, New York company which filed
for protection under the bankruptcy code in April, 1996.
Gross loan charge-offs in 1996 and 1995 were $726 and $855 respectively.
As a percentage of average loans, gross loan charge-offs were .39% and .51%
for those periods.
Effective January 1, 1995, the Company was required to adopt Financial
Accounting Standard No. 114 (FAS 114) which required recognition of loan
impairment. Loans are considered impaired if full principal or interest
payments are not anticipated. Impaired loans are carried at the present value
of expected cash flows discounted at the loan's effective interest rate or at
the fair value of the collateral if the loan is collateral dependent. A
portion of the allowance for loan losses is allocated to impaired loans. The
Company's average investment in impaired loans during 1996 was $844. At
December 31, 1996, $1,300 of loans were deemed to be impaired and $475 of the
allowance for loan losses was allocated to those loans. At December 31, 1995,
impaired loans were $129. The large increase in impaired loans was related to
loans to Bennett Funding.
CAPITAL
- -------
In June, 1994, the Company completed a rights offering of its common
shares. The net proceeds after commissions and expenses from the sale of
60,000 shares were approximately $1,480. This rights offering
17
<PAGE>
included options which were exercised in January 1996, resulting in the
issuance of 28,449 shares for a total of $485. In April, 1996, the Company
repurchased 22,632 shares at a market price of $30 per share.
Both the Company and the Bank are required to comply with capital
requirements promulgated by their primary regulators. Those regulations
require the maintenance of specified levels of capital to total assets (the
leverage ratio) and to risk-weighted assets (the risk-based capital ratio).
These regulations require maintaining a leverage ratio of at least 5% for "well
capitalized" entities and a total risk-based capital ratio of at least 10%.
The Company and the Bank were in full compliance with all regulatory
capital requirements at December 31, 1996. The following table indicates the
Company's actual capital levels at the dates indicated.
<TABLE>
<CAPTION>
REGULATORY CAPITAL REQUIREMENTS
Minimum Required
To be Well
Minimum Required Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Regulations
------ ----------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to
Risk
Weighted Assets)
Company $21,836 11.60% $15,055 8.0% $18,819 10.0%
Bank $21,487 11.46% $14,995 8.0% $18,744 10.0%
Tier I Capital (to
Risk
Weighted Assets
Company $19,836 10.54% $ 7,528 4.0% $11,291 6.0%
Bank $19,487 10.40% $ 7,498 4.0% $11,246 6.0%
Tier I Capital (to
Average Assets)
Company $19,836 6.73% $11,795 4.0% $14,744 5.0%
Bank $19,487 6.63% $11,753 4.0% $14,692 5.0%
</TABLE>
The Company and Bank at year-end 1996 were categorized as well
capitalized.
SELECTED FINANCIAL RATIOS
- -------------------------
The following table indicated certain key financial ratios for the
Company for the years indicated:
1996 1995
---- ----
Return on Assets 1.21% 1.18%
Return on Equity 16.05% 16.48%
Dividend Payout 21% 19%
Ratio
Equity to Assets 7.55% 7.14%
Ratio
NEW ACCOUNTING PRONOUNCEMENTS
- -----------------------------
Financial Accounting Standard No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities, was issued by
the Financial Accounting Standards Board in 1996. It revises the accounting
for transfers of financial assets, such as loans and securities, and for
distinguishing between sales and
18
<PAGE>
secured borrowings. It is effective for some transactions in 1997 and others
in 1998. The effect on the financial statements is not expected to be
material.
ITEM 3. DESCRIPTION OF PROPERTY
-----------------------
The Bank's principal office is located in Brookville, Indiana and
fourteen (14) of its branches are owned in fee simple by the Bank. The Bank's
branches at the Marsh Supermarket in Rushville, the Whitewater Valley Shopping
Center in Connersville, and the Jay C Supermarket in Greensburg, Indiana are
leased from third parties. These leases expire in January 31, 2015, February
28, 2012 and February 28, 2020, respectively.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of March 31, 1997,
regarding ownership of Common Stock of the Company by (i) the only persons
known by the Company to own beneficially more than 5% thereof; (ii) the
directors and the chief executive officer of the Company individually and
(iii) all officers and directors of the Company as a group.
NAME AND ADDRESS
- ----------------
OF
--
BENEFICIAL OWNER SHARES PERCENT
- ---------------- ------ -------
Robert S. Dunevant........... 223,535 (1) ............... 21.81%
3402 N. Dearborn Road
West Harrison
In 47060
James L. Saner, Sr........... 10,601 (2) ............... 1.03%
105 S. Mulberry
Batesville
IN 47006
Dale J. Deffner.............. 72,166 (3) ............... 7.04%
11013 Lakeside Terrace
Brookville
IN 47012
Dale E. Smith................ 32,788 (4) ............... 3.20%
13103 N SR 1
Brookville
IN 47012
John E. Back................. 30,833 (5) ............... 3.00%
1072 Fairfield
Brookville
IN 47012
All officers and
directors as a group
(5 people)................. 369,923 ............... 36.1%
1. Includes 95,482 shares owned by Helen Dunevant, his wife and 1,733
shares available under options.
19
<PAGE>
2. Includes 3,320 shares in a self-directed IRA; 532 shares in Mr. Saner's
wife's IRA, 184 shares owed for the benefit of Mr. Saner's sons and
2,662 shares available under options.
3. Includes 35,581 shares owned by Mr. Deffner's wife directly and in an
IRA and 3,225 shares owned by Mr. Deffner in a self-directed IRA.
4. Includes 16,300 shares owned by Mr. Smith's wife and 9,569 shares held
in trust for Mr. Smith's grandchildren for which he is trustee.
5. Includes 23,377 shares owned by Mr. Back's wife.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
------------------------------------------------------------
The directors and executive officers of the Company and the Bank, their
respective ages at March 31, 1997 and their respective positions with the
Company and Bank are listed below:
NAME AGE POSITION
---- --- --------
Robert S. Dunevant 76 Chairman of the Board
of the Company
James L. Saner, Sr. 45 President, Chief
Executive Officer and
Director of the Company
and the Bank
Dale E. Smith 63 Secretary and Director
of the Company and
Director of the Bank
John E. Back 67 Director of the Company
and the Bank
Dale J. Deffner 64 Director of the Company
and Chairman of the Board
of the Bank
Dieter K.H. Johnsen 62 Director of the Bank
Larry A. Johnson 47 Director of the Bank
Norman L. Winkler 59 Director of the Bank
Mark W. Dunevant 41 Senior Vice President
of the Bank
Elaine M. Cook 55 Senior Vice President
of the Bank
John C. Parker 44 Senior Vice President and
Comptroller of the Bank
Lynn T. Gordon 47 Executive Vice President
of the Bank
20
<PAGE>
Lloyd L. Estep III 37 Vice President of the Bank
Robert S. Dunevant has been Chairman of the Board of the Company since
1984. He was President of Farmers and Merchants State Bank of Oldenburg when
it merged with the Bank in 1983 and served as President/CEO of the Bank from
1983 until his retirement in 1988. He lives in West Harrison, Indiana. Robert
Dunevant is the father of Mark Dunevant.
James L. Saner, Sr. has been President, Chief Executive Officer and a
director of the Company and Bank since 1989. He lives in Batesville, Indiana.
Dale E. Smith has been Secretary and a director of the Company and the
Bank since 1983. He is President of Smith Realty and Insurance, Inc. in
Brookville and lives in Franklin County, Indiana.
John E. Back has been a director of the Company and the Bank since 1987.
From 1949 until his retirement in 1990 he was employed by Sperry Rubber &
Plastics most recently as Senior Vice President. He lives in Brookville,
Indiana.
Dale J. Deffner has been a director of the Company since 1984 and a
director of the Bank since 1974. He lives in Brookville, Indiana. He is a
Licensed Public Accountant and has been a partner of Deffner & Tebbe
Accounting Firm in Brookville since 1969.
Dieter K.H. Johnsen has been a director of the Bank since 1989. He owns
Dieter K.H. Johnsen, Inc., a veneering business and has engaged in that
business for more than five years. He lives in Aurora, Indiana.
Larry A. Johnson has been a director of the Bank since 1987. He has
owned a liquor store in Rushville, Indiana since 1991. Prior to that he
worked for a farm implement dealer in Rushville. Mr. Johnson resides in Rush
County, Indiana.
Norman L. Winkler has been a director of the Bank since 1987. He has
been a lifelong farmer and resident of Rush County, Indiana.
Mark W. Dunevant has been Senior Vice President of the Bank since
February, 1995. From 1991 to February, 1995 he served as a Vice President of
the Bank and a regional manager of branches. He has been employed by the Bank
since 1981. Mark Dunevant is the son of Robert Dunevant.
Elaine Cook has been Senior Vice President/Compliance Officer of the
Bank since 1990 and has been with the Bank since 1988 when the Bank of
Versailles was merged with People's Trust Company. She was President of Bank
of Versailles from 1978 until the merger and lives in Versailles, Indiana.
John Parker has been Senior Vice President/Controller of the Bank since
1990 and has been with the Bank since 1988. He was previously employed by
Ripley County Bank in Versailles, Indiana. He resides in Versailles, Indiana.
Lynn T. Gordon was named Executive Vice President on January 1, 1997. He
has been with the Bank since November, 1993 serving as Senior Vice
President/Retail Services. Prior to that he worked for Star Bank for several
years.
Lloyd L. Estep III was named Senior Commercial Lender in December, 1996.
He has been with the Bank since 1987, serving as a commercial lender and Vice
President.
21
<PAGE>
Directors are elected annually by the shareholders. Officers are
elected annually by, and serve at the pleasure of, the Board.
ITEM 6. EXECUTIVE COMPENSATION
----------------------
The following table sets forth the remuneration of James L. Saner, the
Company's Chief Executive Officer and the only executive officer whose total
compensation exceeded $100,000 for the year ended December 31, 1996.
[Rest of this page left intentionally blank]
22
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
All Other
Long Term Compensation Compen-
Annual Compensation Awards Payouts sation
----------------------------------- ----------------------------------- ---------
Other
Annual Restricted Securities
Compen- Stock Underlying LTIP
Name and Salary Bonus sation Award(s) Options Payouts
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James L. Saner, Sr. 1996 127,000 30,000 - -0- -0- -0- -0-
CEO 1995 120,000 25,000 - -0- -0- -0- -0-
1994 110,000 20,000 - -0- -0- -0- -0-
</TABLE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted (#) Fiscal Year $/Sh) Date
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
James L. Saner, Sr. 550 21.27% $27.27 11/1/05
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
4435/ 66,570/
James L. Saner, Sr. -0- -0- 10,186 137,584
</TABLE>
DIRECTORS' FEES. The Bank pays outside directors $3,600 per year, plus
committee fees of $3,000 per year for the Loan Committee and $800 per year for
all other committees. The Company pays outside directors' fees of $10,000 per
year. Neither the Company nor the Bank provides any other benefits to
directors except that each director is provided life insurance coverage of
$10,000 while serving as a board member.
STOCK OPTION PLANS. The Company maintains two stock compensation plans
to provide continuing long-term incentives to selected eligible key employees
and directors of the Company and the Bank, to provide a means of rewarding
outstanding performance by such individuals and to enable the Company and the
Bank to attract and retain key personnel necessary for the continued long-term
growth and profitability of the Company. The
23
<PAGE>
Company's Nonqualified Stock Option Plan (the "Nonqualified Plan") covers an
aggregate of 2,841 shares of Common Stock. The Company's Incentive Stock
Option Plan (the "Incentive Plan") covers an aggregate of 30,288 shares of
Common Stock.
THE NONQUALIFIED PLAN. The Nonqualified Plan is administered by the
Board of Directors (the "Board"). The Board may interpret the Nonqualified
Plan and, subject to its provisions, may prescribe, amend and rescind rules
and make all other determinations necessary or desirable for the
administration of the Nonqualified Plan. Subject to certain limits set forth
in the Nonqualified Plan, the Board has complete discretion to select the
participants, establish the manner in which options are granted and exercised,
cancel or modify options in certain situations, and otherwise prescribe all of
the terms and provisions of options granted under the Nonqualified Plan. All
options granted under the Nonqualified Plan are non-qualified stock options.
As of March 31, 1997, 2841 were outstanding under the Nonqualified Plan
and available for exercise with an effective exercise price of $13.25 per
share (which was 100% of the book value of the shares on the date of grant).
The individuals participating in the Nonqualified Plan incur personal taxable
income and the Company receives a tax deduction for the difference between the
market value and the exercise price upon exercise of the options.
THE INCENTIVE PLAN. The Incentive Plan is administered by a committee
composed of at least three members of the Board of Directors, none of whom are
eligible to participate in the Incentive Plan (the "Committee"). The
Committee may interpret the Incentive Plan and, subject to its provisions, may
prescribe, amend and rescind rules and make all other determinations necessary
or desirable for the administration of the Incentive Plan. Subject to certain
limits set forth in the Incentive Plan, the Committee has complete discretion
to select the participants, establish the manner in which options are granted
and exercised, cancel or modify options in certain situations, and otherwise
prescribe all of the terms and provisions of options granted under the
Incentive Plan.
As of March 31, 1997, options for 30,288 shares of Common Stock had been
granted under the Incentive Plan. Of the 30,288 shares subject to outstanding
options, options for 9,995 shares are fully vested and options for the
remaining 20,293 shares are subject to a four year vesting schedule. The
option exercise prices range from $14.65 to $27.27 per share which was the
Board of Director's determination of the stock's fair market value per share
at the date of grant.
Options under the Incentive Plan may only be "incentive stock options"
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"). The exercise price of incentive stock options granted
under the Incentive Plan may not be less than 100% of the fair market value of
the Common Stock on the date of grant, as determined by the Committee, and the
term of any option may not exceed ten years. With respect to any employee who
owns stock possessing more than 10% of the voting power of the outstanding
stock of the Company, the exercise price of any incentive stock option must be
at least equal to 110% of the fair market value of such shares on the date of
grant, and the term of any option may be no longer than five years. The
aggregate fair market value of the Common Stock (determined at the date of the
option grant) with respect to which incentive stock options are exercisable
for the first time by any individual during any calendar year may not exceed
$100,000.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
From time to time, the Bank makes loans to its directors and officers
and to directors, officers and principal shareholders of the Company. At
December 31, 1996, such loans and extensions of credit totaled, in the
aggregate, $2,139,417. Such loans and all similar loans or advances
outstanding during any of the two prior years, were made on substantially the
same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons and have not involved
more than the normal risk of collectibility or presented other unfavorable
features. All such loans were in the ordinary course of business. The
Company expects the Bank will engage in similar transactions in the future to
the extent permitted by applicable federal and state banking laws.
24
<PAGE>
Dale E. Smith, one of the directors and the Secretary of the Company and
the Bank, is the President and principal shareholder of Smith Insurance and
Real Estate Agency. From time to time, the Company and the Bank utilize the
services provided by that Agency. Such payments were $15,699 in 1995 and
$37,753 in 1996.
ITEM 8. DESCRIPTION OF SECURITIES
-------------------------
The rights of the holders of capital stock of the Company are
established pursuant to the Articles of Incorporation and the By-laws of the
Company. The Articles of Incorporation are subject to amendment from time to
time by a majority vote of the Directors and shareholders of the Company. The
By-laws may be amended by majority vote of the Directors. The foregoing and
following discussion consists of a summary of the terms of the authorized
capital stock of the Company and is qualified in its entirety by the current
terms of the entire Articles of Incorporation of the Company.
The Company is authorized to issue 2,000,000 shares of Common Stock, no
par value, and 1,000,000 shares of Preferred Stock.
COMMON STOCK
------------
As of March 31, 1997, there were 1,024,452 shares of Common Stock
outstanding which were held of record by approximately 544 shareholders. The
holders of shares of Common Stock are entitled to one vote per share upon all
matters coming before the shareholders for a vote, including the election of
directors, but do not have cumulative voting rights or preemptive rights.
Shares of Common Stock are not redeemable, do not have any conversion rights,
and are not liable for assessments. After the payment of preferential
dividends to holders of any series or class of Preferred Stock if created in
the future having a dividend preference as may be determined and authorized by
the Board of Directors, holders of Common Stock are entitled to receive
dividends when and as declared by the Board of Directors from funds legally
available therefor. Upon any liquidation, dissolution or winding up of the
Company, or upon the merger, consolidation, reorganization, or the sale of the
assets of the Company, holders of Common Stock are entitled to receive pro
rata all assets remaining available for distribution to shareholders after
satisfaction of all amounts owed to creditors of the Company and any
preferential rights of the holders of Preferred Stock if any are created in
the future.
PREFERRED STOCK
---------------
The Board of Directors has the authority to issue the Preferred Stock in
one or more series and to fix the rights, voting rights, terms of redemption
prices liquidation preferences and the number of shares constituting any
series or the designation of such series, without further vote or action by
the stockholders. The issuance of preferred stock may have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the shareholders and may adversely affect the voting and
other rights of the holders of the Common Stock. At present, the Company has
no plans to issue any of the Preferred Stock.
INDIANA LAW
-----------
Under the Indiana Business Corporation Law ("IBCL"), several provisions
could affect the acquisition of the shares of or control over the Company. The
IBCL contains a Control Share Acquisition Chapter that may have the effect of
discouraging or making more difficult a hostile takeover of an Indiana
corporation. This provision also may have the effect of discouraging premium
bids for outstanding shares. The Control Share Acquisition Chapter provides
that, unless otherwise provided in a corporation's articles of incorporation
or bylaws, shares acquired in certain acquisitions of the corporation's stock
(which take the acquiror over the successive thresholds of 20%, 33% and 50% of
the corporation's stock) will be accorded voting rights only if a majority of
the disinterested shareholders approves a resolution granting the potential
acquiror the ability to vote such shares. An Indiana corporation is subject
to the Control Share Acquisition Chapter if it has 100 or more shareholders
and its principal place of business is in Indiana. An Indiana corporation
otherwise subject to the Control Share Acquisition Chapter
25
<PAGE>
may elect not to be governed by the statute by so providing in its articles of
incorporation or bylaws. The Company has not made such an election and,
therefore, the Company is subject to the statute.
In addition to the Control Share Acquisition Chapter, the IBCL contains
a Business Combinations Chapter. The Business Combinations Chapter provides
that, unless a company elects not to be governed by that chapter, certain
Indiana corporations and a 10% or greater shareholder may not engage in
certain business combinations, including mergers, sales of assets,
recapitalizations, and reverse stock splits for five years following the date
on which the shareholder obtained a 10% or greater ownership interest, unless
the acquisition has been approved in advance of that date by the Board of
Directors. In addition, if prior approval is not obtained, the Company and
such shareholder may not consummate a business combination unless a majority
of disinterested shareholders approve the transaction or all shareholders
receive a price per share determined in accordance with the Business
Combinations Chapter.
The IBCL specifically authorizes directors, in considering the best
interests of a corporation, to consider the effects of any action on
shareholders, employees, suppliers, and customers of the corporation, the
communities in which offices or other facilities of the corporation are
located, and any other factors the directors consider pertinent. Under the
IBCL, directors are not required to approve a proposed business combination or
other corporation action if the directors determine in good faith, after
considering and weighing as they deem appropriate the effects of such action
on the corporation's constituents, that such approval is not in the best
interest of the corporation. The IBCL explicitly provides that the different
or higher degree of scrutiny imposed in Delaware and certain other
jurisdictions upon director actions taken in response to potential changes in
control are inconsistent with the proper application of the applicable
provisions of the IBCL.
In taking or declining to take any action or in making any
recommendation to a corporation's shareholders with respect to any matter,
directors are authorized under the IBCL to consider both the short-term and
long-term interests of the corporation as well as interests of other
constituencies and other relevant factors. Any determination made with
respect to the foregoing by a majority of disinterested directors shall
conclusively be presumed to be valid unless it can be demonstrated that such
determination was not made in good faith.
Because of the foregoing provisions of the IBCL, the Board has
flexibility in responding to unsolicited proposals to acquire the Company, and
accordingly, it may be more difficult for an acquiror to gain control of the
Company in a transaction not approved by the Board.
The IBCL also imposes restrictions in connection with shareholder
derivative proceedings. The IBCL provides that if a shareholder of the
corporation files a derivative complaint, the corporation's board of directors
may establish a committee of disinterested directors or other disinterested
persons to investigate the complaint. The IBCL authorizes a stay of any court
proceedings on the complaint until the investigation of such committee is
completed. If the committee determines that pursuit of the claim through the
derivative proceeding would not be in the best interests of the corporation,
then the committee can terminate the derivative proceeding. The conclusion of
the committee is determinative unless the shareholder who filed the complaint
can demonstrate that the committee was not disinterested or did not act in
good faith.
REGISTRAR/TRANSFER AGENT
------------------------
The Bank serves as the registrar and transfer agent for the Common
Stock.
26
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
-------------------------------------------------------------------
OTHER SHAREHOLDER MATTERS
-------------------------
Although the shares of common stock have been traded sporadically in the
over-the-counter market, there is no established public trading market for the
shares. Because of the very limited trading, historical bid prices must be
considered somewhat arbitrary and not reflective of any actual value of the
shares or an actual trading range. The only historical bid prices of which
the Company has a record are those provided to the Company upon its request by
the brokers known by the Company to deal in the Company's common stock. As of
March 31, 1997, approximately 1,024,452 shares of common stock were
outstanding held of record by approximately 544 persons, and there were
outstanding options which were exercisable on that date (or within 90 days
thereof) for approximately 4,571 shares of common stock. All of the
outstanding shares are common stock and are eligible for sale pursuant to Rule
144 promulgated under the Securities Act of 1933, as amended.
The principal source of revenue of the Company is dividends from the
Bank. Therefore, the Company is dependent upon the dividends paid by the Bank
for funds to pay dividends on the common stock. The Bank's ability to pay
dividends to the Company, the Company's ability to pay dividends to holders of
the shares and the ability of the Bank to loan funds to the Company are all
restricted and limited as described in "DESCRIPTION OF BUSINESS--REGULATION
AND SUPERVISION." The Company has declared cash dividends on its common stock
as follows: (adjusted for stock dividends in 1995 and 1996)
Cash Dividends
Calendar Quarter Per Common Share
---------------- ----------------
1995:
First Quarter . . . . . . . . . $ .125
Second Quarter . . . . . . . . . .130
Third Quarter . . . . . . . . . .130
Fourth Quarter . . . . . . . . . .145
1996:
First Quarter . . . . . . . . . $ .145
Second Quarter . . . . . . . . . .165
Third Quarter . . . . . . . . . .165
Fourth Quarter . . . . . . . . . .185
The Company currently anticipates paying quarterly cash dividends
although the payment of such dividends is subject to the discretion of the
Board of Directors. The declaration of future dividends will depend on, among
other things, the earnings, financial condition and cash requirements of the
Company at the time such payment is considered, and on the ability of the
Company to receive dividends from the Bank the amount of which is subject to
regulatory limitations. No assurance can be given that any future dividends
will be declared or paid.
ITEM 2. LEGAL PROCEEDINGS
-----------------
The Bank from time to time is a party to routine litigation incidental
to its business. The Company is not currently a party to any material
litigation.
27
<PAGE>
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
---------------------------------------------
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
---------------------------------------
In connection with a rights offering, the Company issued, pursuant
to an exemption under Regulation A, 60,000 shares in June, 1994 and 28,449
shares in January, 1996. In November, 1996, the Company declared a 10% stock
dividend to all shareholders then of record.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The Indiana Business Corporation law, as amended, authorizes Indiana
corporations to indemnify officers and directors from liability for non-
negligent acts and omissions, and permits the purchase of insurance on behalf
of such persons in this regard. In addition, the shareholders of a
corporation may approve the inclusion of other or additional indemnification
provisions in the articles of incorporation and by-laws.
The by-laws of the Registrant require the Registrant to indemnify any
person who is or was a director of officer of the Registrant against any and
all liabilities and reasonable expenses incurred by such person in connection
with or resulting from any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director or officer of the
Registrant, or is or was serving at the request of the Registrant as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, provided that it is determined: (i)
such person's conduct was in good faith; (ii) such person reasonably believed
his or her conduct was in or not opposed to the best interests of the
Registrant; and (iii) in the case of criminal proceedings, such person had no
reasonable cause to believe his or her conduct was unlawful.
28
<PAGE>
PART F/S
P.T.C. BANCORP
Brookville, Indiana
FINANCIAL STATEMENTS
December 31, 1996 and 1995
CONTENTS
REPORT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . F2
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS . . . . . . . . . . . . . . . . . . . . F3
CONSOLIDATED STATEMENTS OF INCOME . . . . . . . . . . . . . . . . . F4
CONSOLIDATED STATEMENTS OF CASH FLOWS . . . . . . . . . . . . . . . F5
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . . F6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . F7
F1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
P.T.C. Bancorp
Brookville, Indiana
We have audited the accompanying consolidated balance sheets of P.T.C. Bancorp
as of December 31, 1996 and 1995, and the related consolidated statements of
income, cash flows, and changes in shareholders' equity for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of P.T.C.
Bancorp as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
Crowe, Chizek and Company LLP
Indianapolis, Indiana
January 23, 1997
F2
<PAGE>
P.T.C. BANCORP
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 26,185,347 $ 24,474,107
Interest bearing balances with financial institutions 1,897,000 2,386,369
Securities available for sale, at fair value 38,375,826 38,426,368
Securities held to maturity 25,218,575 19,500,690
Loans, net of deferred loan fees 196,963,140 173,178,986
Allowance for loan losses (2,000,324) (1,721,947)
------------ ------------
Net loans 194,962,816 171,457,039
Premises and equipment, net 3,511,742 3,066,738
Intangible assets 1,619,480 1,838,483
Accrued interest receivable and other assets 4,805,212 3,561,956
------------ ------------
$296,575,998 $264,711,750
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing deposits $ 32,349,585 $ 19,752,746
Interest bearing deposits 238,777,267 221,981,686
------------ ------------
Total deposits 271,126,852 241,734,432
Notes payable 500,000 1,000,000
Accrued interest payable and other liabilities 3,295,811 2,759,219
------------ ------------
Total liabilities 274,922,663 245,493,651
------------ ------------
Commitments and contingencies
Shareholders' equity
Preferred stock, no par value; 1,000,000 shares
authorized, no shares issued and outstanding
Common stock, $1 stated value: 2,000,000 shares
authorized, 1,024,276 and 924,069 shares issued 1,024,276 924,069
and outstanding
Additional paid-in capital 10,413,146 7,908,794
Retained earnings 10,017,584 10,208,434
Unrealized gain on securities available for sale, net 198,329 176,802
------------ ------------
Total shareholders' equity 21,653,335 19,218,099
------------ ------------
$296,575,998 $264,711,750
============ ============
</TABLE>
F3
<PAGE>
P.T.C. BANCORP
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $17,125,228 $15,446,482
Interest on investment securities
Taxable 2,440,146 2,497,641
Non-taxable 1,190,681 940,240
Interest on balances with financial institutions 129,627 62,347
Interest on federal funds sold 433,394 473,399
----------- -----------
Total interest income 21,319,076 19,420,109
INTEREST EXPENSE
Interest on deposits 10,837,329 9,733,562
Interest on notes payable 59,968 101,717
----------- -----------
Total interest expense 10,897,297 9,835,279
----------- -----------
NET INTEREST INCOME 10,421,779 9,584,830
Provision for loan losses 828,000 740,000
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,593,779 8,844,830
NON-INTEREST INCOME
Service charges on deposit accounts 1,198,556 1,192,275
Mortgage banking income 795,208 446,859
Securities gains/(losses) 103,650 (76,367)
Travel commission income 66,249 177,906
Other income 185,480 161,004
----------- -----------
Total non-interest income 2,349,143 1,901,677
NON-INTEREST EXPENSES
Salaries and employee benefits 4,136,754 3,724,693
Occupancy and equipment expense 832,571 763,126
Data processing expense 372,441 349,613
FDIC assessment 2,000 250,796
Other operating expenses 1,759,694 1,551,058
----------- -----------
Total non-interest expense 7,103,460 6,639,286
----------- -----------
INCOME BEFORE INCOME TAXES 4,839,462 4,107,221
Provision for income taxes 1,563,693 1,199,964
----------- -----------
NET INCOME $ 3,275,769 $ 2,907,257
=========== ===========
Net income per share $ 3.17 $ 2.86
=========== ===========
Weighted average common shares outstanding 1,031,922 1,016,476
=========== ===========
</TABLE>
F4
<PAGE>
P.T.C. BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,275,769 $ 2,907,257
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation 282,456 294,920
Provision for loan losses 828,000 740,000
(Gain)/loss on sale of securities (103,650) 76,367
Amortization of intangible assets 219,003 230,006
Change in accrued interest receivable and other assets (1,257,376) 17,776
Net amortization/(accretion) on securities 115,337 (86,123)
Change in accrued interest payable and other liabilities 536,591 655,718
----------- -----------
Net cash from operating activities 3,896,130 4,835,921
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures (727,460) (633,368)
Loans made to customers and principal collections thereon (24,333,777) (14,701,975)
Proceeds from sales, maturities, and principal paydowns
of securities available for sale 17,658,091 21,903,216
Proceeds from maturities and principal paydowns
of securities held to maturity 7,121,140 5,514,261
Purchases of securities available for sale (17,615,607) (20,898,559)
Purchases of securities held to maturity (12,807,006) (6,712,188)
Net change in deposits with other financial institutions 489,369 (1,102,398)
----------- -----------
Net cash from investing activities (30,215,250) (16,631,011)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposit accounts 29,392,420 19,435,429
Payments on note payable (500,000) (407,500)
Dividends paid (678,929) (542,520)
Redemption of shares of stock (689,590) -
Proceeds from issuance of stock 506,459 -
----------- -----------
Net cash from financing activities 28,030,360 18,485,409
----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 1,711,240 6,690,319
Cash and cash equivalents at beginning of year 24,474,107 17,783,788
----------- -----------
Cash and cash equivalents at end of year $26,185,347 $24,474,107
=========== ===========
Cash paid during the period for:
Interest $10,879,210 $ 9,223,655
Income taxes 1,721,825 1,224,500
</TABLE>
See accompanying notes to financial statements.
F5
<PAGE>
P.T.C. BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Unrealized
Gain/(loss)
Additional on Securities Total
Common Paid-in Retained Treasury Available Shareholders'
Stock Capital Earnings Stock for Sale Equity
----- ------- -------- ----- -------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1995 $ 857,627 $ 6,155,621 $ 9,868,073 $ (204,761) $ (909,344) $15,767,216
Net income 2,907,257 2,907,257
Cash dividends ($.53 per share) (542,520) (542,520)
Cancellation of treasury shares (17,907) (186,854) 204,761 -
10% stock dividend (Note 1) 84,349 1,940,027 (2,024,376) -
Change in unrealized gain/(loss)
on securities 1,086,146 1,086,146
---------- ----------- ----------- ---------- ---------- -----------
BALANCES AT DECEMBER 31, 1995 924,069 7,908,794 10,208,434 - 176,802 19,218,099
Net income 3,275,769 3,275,769
Cash dividends ($.66 per share) (678,929) (678,929)
10% stock dividend (Note 1) 92,923 2,694,767 (2,787,690) -
Redemption of shares (22,634 shares) (22,634) (666,956) (689,590)
Exercised stock options (1,469 shares) 1,469 19,934 21,403
Issuance of shares to existing
shareholders (28,449 shares) 28,449 456,607 485,056
Change in unrealized gain/(loss)
on securities 21,527 21,527
---------- ----------- ----------- ---------- ---------- -----------
BALANCE AT DECEMBER 31, 1996 $1,024,276 $10,413,146 $10,017,584 $ - $ 198,329 $21,653,335
========== =========== =========== ========== ========== -----------
</TABLE>
See accompanying notes to financial statements.
F6
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The consolidated financial statements include the
accounts of P.T.C. Bancorp (Company) and its wholly-owned subsidiary, People's
Trust Company (Bank). All significant intercompany transactions have been
eliminated in consolidation.
Description of Business: P.T.C. Bancorp generates mortgage, commercial, and
installment loans and receives deposits from customers located primarily in
southeastern Indiana. The majority of the Company's loans are secured by
specific items of collateral including business assets, consumer assets and
real property.
Use of Estimates in the Preparation of Financial Statements: The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses. Actual
results could differ from those estimates. Estimates that are more
susceptible to change in the near term include the allowance for loan losses
and fair values of certain securities.
Cash and Cash Equivalents: Cash and cash equivalents include cash on hand,
amounts due from banks and federal funds sold. Generally, federal funds are
sold for one-day periods. The Company reports net cash flows for customer
loan transactions, deposit transactions, and deposits made with other
institutions.
Securities: Securities are classified by management at date of purchase as
available for sale or held to maturity. Securities classified as available
for sale are securities that might be sold in response to changes in interest
rates, changes in prepayment risk, or other similar factors, and which are
carried at fair value. The unrealized gain/(loss) on securities available for
sale is reflected as a separate component of shareholders equity, net of tax.
Securities classified as held to maturity are securities that the Company has
both the ability and positive intent to hold to maturity and are carried at
amortized cost (cost adjusted for amortization of premium or accretion of
discounts). Interest income on securities is recognized using the level yield
basis. Gains and losses on sales of securities are computed on a specific
identification basis.
Loans Held for Sale: During the normal course of business, the Company
originates certain mortgage loans for the purpose of selling them in certain
secondary markets. These loans are carried at the lower of aggregate cost or
market value.
Loans: Loans are reported at the principal balance outstanding, net of
deferred loan fees and costs, the allowance for loan losses, and charge-offs.
Interest income is reported on the interest method and includes amortization
of net deferred loan fees and costs over the loan term.
(Continued)
F7
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Interest income is not reported when full loan repayment is in doubt,
typically when payments are past due over 90 days. Interest received on such
loans is recognized on the cash basis or reported as principal reductions.
Allowance for Loan Losses: The allowance for loan losses is a valuation
allowance, increased by the provision for loan losses and decreased by charge-
offs less recoveries. Management estimates the allowance balance required
based on past loan loss experience, known and inherent risks in the portfolio,
information about specific borrower situations and estimated collateral
values, economic conditions, and other factors. Allocations of the allowance
may be made for specific loans, but the entire allowance is available for any
loan that, in management s judgment, should be charged-off.
Loan impairment is reported when full payment under the loan terms is not
expected. Impairment is evaluated in total for smaller-balance loans of
similar nature such as residential mortgage, consumer, and credit card loans,
and on an individual loan basis for other loans. If a loan is impaired, a
portion of the allowance is allocated so that the loan is reported, net, at
the present value of estimated future cash flows using the loan s existing
rate. Loans are evaluated for impairment when payments are delayed, typically
90 days or more, or when the internal grading system indicates a doubtful
classification.
Servicing Rights: Upon adopting Financial Accounting Standard No. 122 at the
start of 1996, servicing rights represent the allocated value of servicing
rights retained on loans sold. Servicing rights are expensed in proportion
to, and over the period of, estimated net servicing revenues. Impairment is
evaluated based on the fair value of the rights, using groupings of the
underlying loans as to interest rates and term. Any impairment of a grouping
is reported as a valuation allowance.
Premises and Equipment: Premises and equipment are stated at cost, net of
accumulated depreciation. Depreciation is charged to operating expense over
the useful lives of assets and is computed on straight-line and accelerated
methods. Maintenance and repairs are charged to operations as incurred.
Improvements are capitalized and disposals are recorded in the year sold or
abandoned.
Intangible Assets: Intangible assets consist of goodwill and core deposit
intangibles. Goodwill is being amortized on a straight-line method over
fifteen years. The core deposit is being amortized based on the estimated
life of the deposits assumed, which is ten years.
Stock Options: Expenses for compensation under stock option plans is based on
APB Opinion 25, with expense reported only if options are granted below market
price at date of grant. Proforma disclosures of net income and earnings per
share as required by FASB Statement No. 123 are not presented, because the
fair value of options granted during 1996 and 1995 is not material.
(Continued)
F8
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes: Deferred tax liabilities and assets are determined at each
balance sheet date. They are measured by applying enacted tax laws to future
amounts that will result from differences in the financial statement and tax
basis of assets and liabilities. Recognition of deferred tax assets is
limited by the establishment of a valuation reserve unless management
concludes that they are more likely than not going to result in future tax
benefits to the Company. Income tax expense is the amount paid for the
current year income tax liability plus or minus the change in deferred taxes.
Earnings Per Share: Earnings per share is based on the weighted average
common shares outstanding. The Company declared a 10 percent stock dividend
in November, 1995 and 1996. Earnings and dividend per share amounts have been
retroactively restated. Stock options are not materially dilutive for
earnings per share purposes.
NOTE 2 - SECURITIES
The amortized cost and fair values of securities available for sale are as
follows at December 31:
<TABLE>
<CAPTION>
1996
----
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury and government
agency securities $ 30,066,088 $ 255,260 $ (42,771) $ 30,278,577
State and political subdivisions 1,971,500 63,384 (338) 2,034,546
Mortgage-backed and other
asset-backed securities 2,582,657 46,082 (7,177) 2,621,562
Corporate debt securities 1,906,294 38,374 (24,399) 1,920,269
Equity securities 1,520,872 - - 1,520,872
------------ ----------- ---------- ------------
Totals $ 38,047,411 $ 403,100 $ (74,685) $ 38,375,826
============ =========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
1995
----
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury and government
agency securities $ 27,892,354 $ 232,387 $ (51,533) $ 28,073,208
State and political subdivisions 2,336,997 78,183 (4,562) 2,410,618
Mortgage-backed and other
asset-backed securities 2,782,970 50,560 (6,849) 2,826,682
Corporate debt securities 3,599,169 8,896 (14,315) 3,593,750
Equity securities 1,522,110 - - 1,522,110
------------ ----------- ---------- ------------
Totals $ 38,133,600 $ 370,026 $ (77,259) $ 38,426,368
============ =========== ========== ============
</TABLE>
(Continued)
F9
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 2 - SECURITIES (Continued)
The amortized cost and fair values of securities held to maturity are as
follows at December 31:
<TABLE>
<CAPTION>
1996
----
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury and government
agency securities $ 167,763 $ 29,632 $ - $ 197,395
State and political subdivisions 24,187,781 228,516 (50,568) 24,365,729
Mortgage-backed securities 296,915 37,800 (223) 334,492
Other debt securities 566,116 94 (2,846) 563,364
------------ ----------- ----------- ------------
Totals $ 25,218,575 $ 296,042 $ (53,637) $ 25,460,980
============ =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
1995
----
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury and government
agency securities $ 154,914 $ 41,972 $ - $ 196,886
State and political subdivisions 17,895,268 244,728 (32,592) 18,107,406
Mortgage-backed securities 950,508 61,933 - 1,012,441
Other debt securities 500,000 - - 500,000
------------ ----------- ----------- ------------
Totals $ 19,500,690 $ 348,633 $ (32,592) $ 19,816,733
</TABLE>
(Continued)
F10
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 2 - SECURITIES (Continued)
The amortized cost and fair value of securities at December 31, 1996, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Available for Sale Held to Maturity
------------------ ----------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- ----- --------- -----
<S> <C> <C> <C> <C>
Due in one year or less $ 5,061,467 $ 5,065,127 $ 3,411,075 $ 3,432,023
Due after one year through
five years 27,210,079 27,418,423 18,374,449 18,492,951
Due after five years through
ten years 1,303,734 1,344,787 1,957,637 1,977,253
Due after ten years 368,602 405,055 1,178,499 1,224,261
----------- ----------- ----------- -----------
Total fixed maturity debt
securities 33,943,882 34,233,392 24,921,660 25,126,488
Mortgage-backed securities 2,582,657 2,621,562 296,915 334,492
Equity securities 1,520,872 1,520,872 - -
----------- ----------- ----------- -----------
38,047,411 38,375,826 25,218,575 25,460,980
=========== =========== =========== ===========
</TABLE>
Proceeds from sales of securities during 1996 and 1995 were $3,736,825 and
$3,573,149. Gross gains of $122,427 and gross losses of $18,777 were
realized on sales of available for sale securities in 1996. Gross gains of
$8,408 and gross losses of $84,775 were realized on sales of available for
sale securities in 1995.
At December 31, 1996 and 1995, securities carried at $2,263,725 and $5,773,900
were pledged to secure public deposits and for other purposes.
(Continued)
F11
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 3 - LOANS
Loans are comprised of the following classifications:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Real estate-residential $ 74,433,000 $ 61,544,000
Real estate-commercial 43,370,000 36,140,000
Real estate construction 13,650,000 9,583,000
Commercial 41,655,000 39,518,000
Consumer 21,325,000 23,723,000
Other 2,875,000 2,987,000
Deferred loan fees (345,000) (316,000)
------------ ------------
Total loans, net of deferred loan fees $196,963,000 $173,179,000
============ ============
</TABLE>
Residential real estate loans include loans held for sale of $430,000 and
$2,117,000.
Mortgage loans serviced for others are not reported as assets. These loans
totaled $86,495,000 and $69,090,000 at year-end 1996 and 1995. At year-end
1996, mortgage servicing rights were $225,000. Activity during 1996 included
$258,000 of additions and amortization expense of $33,000. There was no
valuation allowance at year-end 1996.
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Beginning balance $ 1,721,947 $ 1,600,551
Provision for loan losses 828,000 740,000
Losses charged to the allowance (725,569) (855,690)
Recoveries credited to the allowance 175,946 237,086
----------- -----------
Ending balance $ 2,000,324 $ 1,721,947
=========== ===========
</TABLE>
Impaired loans were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Year-end loans with no allowance for loan
losses allocated $ - $ 128,797
Year-end loans with allowance for loan
losses allocated 1,300,000 -
Amount of the allowance allocated 475,000 -
Average of impaired loans during the year 844,059 490,179
Interest income recognized during impairment 27,756 -
Cash-basis interest income recognized 27,756 -
</TABLE>
(Continued)
F12
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 5 - PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31 follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land $ 351,916 $ 351,916
Buildings and improvements 3,738,630 3,418,627
Equipment and furniture 2,481,732 2,090,435
---------- ----------
Total 6,572,278 5,860,978
Less accumulated depreciation 3,060,536 2,794,240
---------- ----------
Total premises and equipment, net $3,511,742 $3,066,738
========== ==========
</TABLE>
NOTE 6 - DEPOSITS
Certificates of deposits in denominations of $100,000 or more as of
December 31, 1996 and 1995 were $28,948,860 and $24,318,073.
At year-end 1996, stated maturities of time deposits were:
1997 $ 96,265,835
1998 36,673,139
1999 9,893,852
2000 6,163,774
2001 1,955,978
Thereafter 29,172
------------
$150,981,750
============
NOTE 7 - NOTES PAYABLE
The Company has a note payable maturing on December 31, 1998, which is secured
by 100% of the Bank's common stock. Payments are due each quarter, consisting
of $92,500 principal plus accrued interest. Interest is calculated based on
the LIBOR rate plus 2.85% (7.44% at December 31, 1996).
(Continued)
F13
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 8 - BENEFIT PLANS
The Company maintains a 401(K) profit-sharing plan covering substantially all
employees. Under this plan, employer matching contributions are 50% of
employee contributions, up to 6% of eligible salary, plus a profit sharing
allocation to all eligible employees. Annual contributions are at the
discretion of the Board of Directors. Contributions provided for the 401(K)
plan and charged to operations totaled $157,893 and $148,657 in 1996 and 1995.
The Company maintains a stock option plan covering directors and executive
officers. Options are granted at no less than fair value of the Company s
stock. Accordingly, no compensation cost has been recognized. Options under
the officer plan are generally subject to a 4-year vesting schedule, and
expire five years from date of vesting. There were 5,060 options granted
during 1995, and 2,365 during 1996. At year-end 1996, there were 32,731
options outstanding under the officer plan with a weighted average exercise
price of $16.93, and range of exercise prices of $14.65 - $27.27. There were
no options granted in 1995 or 1996 under the director s plan. At year-end
1996, there were 2,096 options outstanding with an effective price of $13.23
per share.
NOTE 9 - INCOME TAXES
An analysis of the components of income taxes follows:
1996 1995
---- ----
Current income taxes $ 1,551,766 $ 1,354,446
Deferred income taxes 11,927 (154,482)
----------- -----------
Total income taxes $ 1,563,693 $ 1,199,964
=========== ===========
The difference between the financial statement tax provision and amounts
computed by applying the federal income tax rate of 34% to pretax income is
reconciled as follows:
1996 1995
---- ----
Computed expected provision $ 1,645,417 $ 1,396,455
Tax effect of:
Tax-exempt interest income (545,956) (448,220)
Non-deductible interest expense 94,244 74,669
State income tax, net 278,603 231,799
Other items 91,385 (54,739)
----------- -----------
Applicable income tax $ 1,563,693 $ 1,199,964
=========== ===========
(Continued)
F14
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 9 - INCOME TAXES (Continued)
The net deferred tax asset is comprised of the following components:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 549,957 $ 439,692
Deferred compensation 55,737 60,490
Core deposit intangibles 67,258 53,394
Other 5,348 117,030
----------- -----------
678,300 670,606
Deferred tax liabilities:
Unrealized gain on securities available-for-sale (130,085) (115,965)
Depreciation (32,575) (16,113)
Accretion on securities (20,553) (17,394)
----------- -----------
(183,213) (149,472)
Valuation allowance - -
----------- -----------
Net deferred tax asset $ 495,087 $ 521,134
=========== ===========
</TABLE>
NOTE 10 - COMMITMENTS AND CONTINGENCIES
The Company, in the ordinary course of business, has loans, commitments and
contingent liabilities, such as guarantees, commitments to extend credit,
etc., which are not reflected in the accompanying consolidated balance sheets.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial guarantees is represented by the contractual
amounts of those instruments. The Company uses the same credit policy to make
such commitments as it uses for on-balance-sheet items.
The contractual amount of these financial instruments are summarized as
follows:
1996 1995
---- ----
Commitments to extend credit $26,634,000 $15,879,000
Standby letters of credit 2,349,000 2,111,000
The commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established under the contract.
Generally, such commitments are for no more than one year, and most are
variable rate contracts. These commitments are primarily credit card,
overdraft protection, and commercial lines of credit.
(Continued)
F15
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued)
Since many commitments expire without being used, the amounts do not
necessarily represent future cash commitments. Collateral obtained upon
exercise of the commitment is determined using management's credit evaluation
of the borrower, and may include accounts receivable, inventory, property,
land and other items.
At December 31, 1996 and 1995, the Company was required by the Federal Reserve
to have $3,542,000 and $2,704,000 on deposit or as cash in hand. These
reserves do not earn interest.
NOTE 11 - RELATED PARTY TRANSACTIONS
Certain directors, officers and principal shareholders of the Company were
also customers of the Bank. The aggregate amount of loans to these persons
totaled $2,139,417 and $2,520,434 at December 31, 1996 and 1995.
Related party deposits totaled $1,337,157 at year-end 1996.
NOTE 12 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
Cash and Short-Term Investments: For those short-term instruments, the
carrying amount is a reasonable estimate of fair value.
Securities: For securities, fair value equals quoted market price, if
available. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar instruments.
Loans Receivable: The fair value of loans is estimated by discounting future
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities.
Deposit Liabilities: The fair value of demand deposits, savings accounts, and
certain money market deposits is the amount payable on demand at the reporting
date. The fair value of fixed-maturity certificates of deposit is estimated
using the rates currently offered for deposits of similar remaining
maturities.
(Continued)
F16
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 12 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Notes Payable: Carrying value is a reasonable estimate of fair value for this
adjustable rate instrument.
Off-Balance Sheet Items: Carrying value is a reasonable estimate of fair
value. These instruments are short term in nature.
The estimated fair values of financial instruments at December 31 are as
follows:
<TABLE>
<CAPTION>
1996 1996
Carrying Value Fair Value
-------------- ----------
<S> <C> <C>
Financial assets:
Cash and short-term investments $ 28,082,000 $ 28,082,000
Securities available for sale 38,376,000 38,376,000
Securities held to maturity 25,219,000 25,461,000
Loans 196,963,000 196,816,000
Financial liabilities:
Deposits (271,127,000) (271,807,000)
Notes payable (500,000) (500,000)
Off balance sheet items - -
</TABLE>
<TABLE>
<CAPTION>
1995 1995
Carrying Value Fair Value
-------------- ----------
<S> <C> <C>
Financial assets:
Cash and short-term investments $ 26,860,000 $ 26,860,000
Securities available for sale 38,426,000 38,426,000
Securities held to maturity 19,500,000 19,817,000
Loans 171,457,000 172,189,000
Financial liabilities:
Deposits (241,735,000) (242,814,000)
Notes payable (1,000,000) (1,000,000)
Off balance sheet items - -
</TABLE>
NOTE 13 - REGULATORY MATTERS
The Company and Bank are subject to regulatory capital requirements
administered by federal banking agencies. Capital adequacy guidelines and
prompt corrective action regulations involve quantitative measures of assets,
liabilities and certain off-balance-sheet items calculated under regulatory
accounting practices. Capital amounts and classifications are also subject to
qualitative judgments by regulators about components, risk weightings, and
other factors, and the regulators can lower classifications in certain cases.
Failure to meet various capital requirements can initiate regulatory action
that could have a direct material effect on the financial statements.
(Continued)
F17
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 13 - REGULATORY MATTERS (Continued)
The prompt corrective action regulations provide five classifications,
including well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized, although
these terms are not used to represent overall financial condition. If
adequately capitalized, regulatory approval is required to accept brokered
deposits. If undercapitalized, capital distributions are limited, as is asset
growth and expansion, and plans for capital restoration are required. The
minimum requirements are:
<TABLE>
<CAPTION>
Capital to Risk-
Weighted Assets
---------------- Tier 1 Capital
Total Tier 1 to Average Assets
----- ------ -----------------
<S> <C> <C> <C>
Well capitalized 10% 6% 5%
Adequately capitalized 8% 4% 4%
Undercapitalized 6% 3% 3%
</TABLE>
At year end 1996, consolidated actual capital levels (in thousands) and
minimum required levels were:
<TABLE>
<CAPTION>
Minimum Required
To Be Well
Minimum Required Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Regulations
------ ----------------- ------------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk
Weighted Assets)
Consolidated $ 21,836 11.60% $ 15,055 8.0% $ 18,819 10.0%
Bank $ 21,487 11.46% $ 14,995 8.0% $ 18,744 10.0%
Tier I Capital (to Risk
Weighted Assets)
Consolidated $ 19,836 10.54% $ 7,528 4.0% $ 11,291 6.0%
Bank $ 19,487 10.40% $ 7,498 4.0% $ 11,246 6.0%
Tier 1 Capital (to
Average Assets)
Consolidated $ 19,836 6.73% $ 11,795 4.0% $ 14,744 5.0%
Bank $ 19,487 6.63% $ 11,753 4.0% $ 14,692 5.0%
</TABLE>
The Company and Bank at year-end 1996 were categorized as well capitalized.
(Continued)
F18
<PAGE>
P.T.C. BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 14 - PENDING ACCOUNTING CHANGES
Financial Accounting Standard No. 125, Accounting for Transfers and Servicing
of Financial Assets and Extinguishment of Liabilities, was issued by the
Financial Accounting Standards Board in 1996. It revises the accounting for
transfers of financial assets, such as loans and securities, and for
distinguishing between sales and secured borrowings. It is effective for some
transactions in 1997 and others in 1998. The effect on the financial
statements is not expected to be material.
F19
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
Exhibit No. Document Page
- ----------- -------- ----
3.1 Articles of Incorporation of P.T.C. Bancorp
3.2 By-Laws of P.T.C. Bancorp
4.1 Certificate of Common Stock
10.1 Nonstatutory Stock Option Plan
10.2 Form of Nonstatutory Stock Option Agreement
10.3 Incentive Stock Option Plan
10.4 Form of Incentive Stock Option Agreement
10.5 Commercial Installment Note May, 1994. Payable to National
City Bank, Indiana.
10.6 Loan Agreement dated May, 1994 with National City Bank, Indiana
10.7 Stock Pledge Agreement dated May, 1994 with National
City Bank, Indiana
10.8 Advances, Pledge and Security Agreement dated February 13, 1995
with Federal Home Loan Bank.
21.1 Subsidiaries of the Registrant - Peoples Trust Company
27.1 Financial Data Schedule
<PAGE>
SIGNATURE
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized.
P.T.C. BANCORP
By: /s/ James R. Saner, Jr.
-----------------------------
James R. Saner, Jr.
President and Chief
Executive Officer
Exhibit 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
----------------------------------------------
OF
--
PTC BANCORP
-----------
PTC Bancorp (hereinafter referred to as the "Corporation"), existing
pursuant to the Indiana Business Corporation Law, desiring to give notice of
corporate action effectuating these Amended and Restated Articles of
Incorporation, sets forth the following facts:
ARTICLE I
---------
Name
----
The name of the Corporation is PTC Bancorp.
ARTICLE II
----------
The Amended and Restated Articles
---------------------------------
The exact text of the Corporation's Articles of Incorporation now is as
follows:
See Attached Exhibit A
ARTICLE III
-----------
Manner of Adoption and Vote
---------------------------
1. Action by Directors. The Board of Directors of the Corporation, by
unanimous vote at a meeting on March __, 1993, duly adopted a resolution that
the provisions and terms of its Articles of Incorporation be amended and
restated as set forth in these Amended and Restated Articles of Incorporation.
2. Action by Shareholders. The shareholders of the Corporation
entitled to vote in respect of the Amended and Restated Articles of
Incorporation adopted these Amended and Restated Articles of Incorporation. The
Amended and Restated Articles of Incorporation were adopted by vote of the
shareholders during the _______________, 1993 meeting called by the Board of
Directors. The only class of capital stock is common stock with shares
outstanding. The result of such vote is as follows:
SHAREHOLDERS ENTITLED TO VOTE:
SHAREHOLDERS VOTED IN FAVOR:
SHAREHOLDERS VOTED AGAINST:
<PAGE>
3. Compliance with Legal Requirements. The manner of adoption of these
Amended and Restated Articles of Incorporation constitute full legal compliance
with the provisions of the Act, the Articles of Incorporation, and the By-Laws
of the Corporation.
IN WITNESS WHEREOF, the undersigned officer, for and on behalf of the
Corporation, executes the foregoing Amended and Restated Articles of
Incorporation this ___ day of ___________, 1993.
------------------------------
James L. Saner, Sr., President
This instrument prepared by Robert T. Wildman
HENDERSON, DAILY, WITHROW & DEVOE
2600 One Indiana Square
Indianapolis, Indiana 46204
(317) 639-4121
2
<PAGE>
Exhibit A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
----------------------------------------------
OF
--
PTC BANCORP
-----------
ARTICLE I
---------
Name
----
The name of the Corporation is PTC Bancorp (the "Corporation").
ARTICLE II
----------
Purposes
--------
The purposes for which the Corporation is formed are the transaction,
either alone or as a partner, joint venturer or otherwise, of any and all lawful
business for which corporations may be incorporated under the Act and to
otherwise possess, exercise, and enjoy all rights, powers and privileges
conferred upon bank holding companies by the Bank Holding Company Act of 1956,
as amended and as hereafter amended or supplemented, and all other rights and
powers authorized by the laws of the State of Indiana, and the laws of the
United States of America applicable to bank holding companies and the
regulations of the Board of Governors of the Federal Reserve System.
ARTICLE III
-----------
Authorized Shares
-----------------
The total number of shares which the Corporation shall have authority to
issue is 3,000,000 shares, consisting of 2,000,000 shares of common stock with
no par value (the "Common Stock") which have unlimited voting rights and are
entitled to receive the net assets of the Corporation upon dissolution and
1,000,000 shares of preferred stock without par value (the "Preferred Stock")
with respect to which the Board of Directors of the Corporation is authorized to
determine the series and classes of Preferred Stock and determine the rights,
privileges and voting power of the Preferred Stock by amending the Articles of
Incorporation of the Corporation without further shareholder voting consent or
ratification, prior to issuance of preferred stock.
ARTICLE IV
----------
Voting Rights of Shares
-----------------------
Except as otherwise provided in the Act or in these Articles of
Incorporation, every shareholder of the Corporation shall have the right, at
every shareholders' meeting, to one
<PAGE>
vote for each share of stock standing in such shareholder's name on the books of
the Corporation upon all questions, including election of directors, merger,
liquidation and the sale of all or substantially all of the assets of the
Corporation.
ARTICLE V
---------
Incorporator
------------
The name and post office address of the incorporator of the Corporation was
Michael E. Williams, 2800 Indiana National Bank Tower, Indianapolis, Indiana
46204.
This instrument prepared by Robert T. Wildman
HENDERSON, DAILY, WITHROW & DEVOE
2600 One Indiana Square
Indianapolis, Indiana 46204
(317) 639-4121
2
Exhibit 3.2
BY-LAWS
OF
TRUST BANCORP
ARTICLE I
---------
Section 1. Name. The name of the corporation is Trust Bancorp
("Corporation").
Section 2. Principal Office of the Resident Agent. The post-office
address of the principal office of the Corporation is State Road 101 & Reservoir
Bill Rd., Box 7, Brookville, Indiana 47012, and the name and post-office address
of its Resident Agent in charge of such office is Robert S. Dunevant, State Road
101 & Reservoir Hill Rd., Box 7, Brookville, Indiana 47012.
Section 3. Seal. The seal of the Corporation shall be circular in form
and mounted upon a metal die, suitable for impressing the same upon paper. About
the upper periphery of the seal shall appear the words "Trust Bancorp" and about
the lower periphery thereof the word "Indiana". In the center of the seal shall
appear the word "Seal".
ARTICLE II
----------
The fiscal year of the Corporation shall begin each year on the first day
of January and end on the last day of December of the same year.
ARTICLE III
-----------
Capital Stock
-------------
Section 1. Number of Shares and Classes of Capital Stock. The total
number of shares of capital stock which the Corporation shall have authority to
issue shall be as stated in the Articles of Incorporation.
Section 2. Consideration for No Par Value Shares. The shares of stock of
the Corporation without par value shall be issued or sold in such manner and for
such amount of consideration as may be fixed from time to time by the Board of
Directors. Upon payment of the consideration fixed by the Board of Directors,
such shares of stock shall be fully paid and nonassessable.
Section 3. Consideration for No Par Value Shares. Treasury shares may be
disposed of by the Corporation or such consideration as may be determined from
time to time by the Board of Directors.
Section 4. Payment for Shares. The consideration for the issuance of
shares of capital stock of the Corporation may be paid, in whole or in part, in
money, in other property, tangible or intangible, or in labor actually performed
for, or services actually rendered to the Corporation;
<PAGE>
provided, however, that the part of the surplus of the Corporation which is
transferred to stated capital upon the issuance of shares as a share dividend
shall be deemed to be the consideration for the issuance of such shares. When
payment of the consideration for which a share was authorized to be issued shall
have been received by the Corporation, or when surplus shall have been
transferred to stated capital upon the issuance of a share dividend, such share
shall be declared and taken to be fully paid and not liable to any further call
or assessment, and the holder thereof shall not be liable for any further
payments thereon. In the absence of actual fraud in the transaction, the
judgment of the Board of Directors as to the value of such property, labor or
services received as consideration, or the value placed by the Board of
Directors upon the corporate assets in the event of a share dividend, shall be
conclusive. Promissory notes, uncertified checks, or future services shall not
be accepted in payment or part payment of the capital stock of the Corporation,
except as permitted by The Indiana General Corporation Act.
Section 5. Certificate for Shares. Each holder of capital stock of the
Corporation shall be entitled to a stock certificate, signed by the President or
a Vice President and the Secretary or any Assistant Secretary of the
Corporation, stating the name of the registered holder, the number of shares
represented by such certificate, the par value of each share of stock or that
such shares of stock are without par value, and that such shares are fully paid
and nonassessable. If such shares are not fully paid, the certificates shall be
legibly stamped to indicate the percent which has been paid, and as further
payments are made, the certificate shall be stamped accordingly. If the
Corporation is authorized to issue shares of more than one class, every
certificate shall state the kind and class of shares represented thereby, and
the relative rights, interests, preferences and restrictions of such class, or a
summary thereof; provided, that such statement may be omitted from the
certificate if it shall be set forth upon the face or back of the certificate
that such statement, in full, will be furnished by the Corporation to any
shareholder upon written request and without charge.
Section 6. Facsimile Signatures. If a certificate is countersigned by the
written signature of a transfer agent other than the Corporation or its
employee, the signatures of the officers of the Corporation may be facsimiles.
If a certificate is countersigned by the written signature of a registrar other
than the Corporation or its employee, the signatures of the transfer agent and
the officers of the Corporation may be facsimiles. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer, transfer agent, or registrar at
the date of its issue.
Section 7. Transfer of Shares. The shares of capital stock of the
Corporation shall be transferable only on the books of the Corporation upon
surrender of the certificate or certificates representing the same, properly
endorsed by the registered holder or by his duly authorized attorney or
accompanied by proper evidence of succession, assignment or authority to
transfer.
Section 8. Cancellation. Every certificate surrendered to the Corporation
for exchange or transfer shall be canceled, and no new certificate or
certificates shall be issued in exchange for
2
<PAGE>
any existing certificate until such existing certificate shall have been so
canceled, except in cases provided for in Section 10 of this Article III.
Section 9. Transfer Agent and Registrar. The Board of Directors may
appoint a transfer agent and a registrar for each class of capital stock of the
Corporation and may require all certificates representing such shares to bear
the signature of such transfer agent and registrar. Shareholders shall be
responsible for notifying the transfer agent and registrar for the class of
stock held by such shareholder in writing of any changes in their addresses from
time to time, and failure so to do shall relieve the Corporation, its
shareholders, directors, officers, transfer agent and registrar of liability for
failure to direct notices, dividends, or other documents or property to an
address other than the one appearing upon the records of the transfer agent and
registrar of the Corporation.
Section 10. Lost Stolen or Destroyed Certificates. The Corporation may
cause a new certificate or certificates to be issued in place of any certificate
or certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Corporation
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or certificates,
or his legal representative, to give the Corporation a bond in such sum and in
such form as it may direct to indemnify against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed or the issuance of such new certificate. The
Corporation, in its discretion, may authorize the issuance of such new
certificates without any bond when in its judgment it is proper to do so.
Section 11. Registered Shareholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of such shares to receive dividends, to vote as such owner, to hold liable for
calls and assessments, and to treat as owner in all other respects, and shall
not be bound to recognize any equitable or other claims to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Indiana.
Section 12. Options to Officers and Employees. The issuance, including
the consideration, of rights or options to directors, officers or employees of
the Corporation, and not to the shareholders generally, to purchase from the
Corporation shares of its capital stock shall be approved by the affirmative
vote of the holders of a majority of the shares entitled to vote thereon or
shall be authorized by and consistent with a plan approved by such a vote of the
shareholders. The price to be received for any shares having a par value, other
than treasury shares to be issued upon the exercise of such rights or options,
shall not be less than the par value thereof.
ARTICLE IV
----------
Meetings of Shareholders
------------------------
3
<PAGE>
Section 1. Place of Meeting. Meetings of shareholders of the Corporation
shall be held at such place, within or without the State of Indiana, as may from
time to time be designated by the Board of Directors, or as may be specified in
the notices or waivers of notice of such meetings.
Section 2. Annual Meeting. The annual meeting of shareholders for the
election of Directors, and for the transaction of such other business as may
properly come before the meeting, shall be held on the second Tuesday in March
of each year, if such day is not a holiday, and if a holiday, then on the first
following day that is not a holiday, or in lieu of such day may be held on such
other day as the Board of Directors may set by resolution, but not later than
the end of the fifth month following the close of the fiscal year of the
Corporation. Failure to hold the annual meeting at the designated time shall
not work any forfeiture or a dissolution of the Corporation, and shall not
affect otherwise valid corporate acts.
Section 3. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Articles of Incorporation, may be called by the Board of Directors or the
President and shall be called by the President or Secretary at the request in
writing of a majority of the Board of Directors, or at the request in writing of
shareholders holding of record not less than one-fourth of all the shares
outstanding and entitled by the Articles of Incorporation to vote on the
business for which the meeting is being called.
Section 4. Notice of Meetings. A written or printed notice, stating the
place, day and hour of the meeting, and in case of a special meeting, or when
required by any other provision of The Indiana General Corporation Act, or of
the Articles of Incorporation, as now or hereafter amended, or these By-Laws,
the purpose or purposes for which the meeting is called, shall be delivered or
mailed by the Secretary, or by the officers or persons calling the meeting, to
each shareholder of record entitled by the Articles of Incorporation, as now or
hereafter amended, and by The Indiana General Corporation Act to vote at such
meeting, at such address as appears upon the records of the Corporation, at
least ten (10) days before the date of the meeting. Notice of any such meeting
may be waived in writing by any shareholder, if the waiver sets forth in
reasonable detail the purpose or purposes for which the meeting is called, and
the time and place thereof. Attendance at any meeting in person, or by proxy,
shall constitute a waiver of notice of such meeting. Each shareholder, who has
in the manner above provided waived notice of a shareholders' meeting, or who
personally attends a shareholders' meeting, or is represented thereat by a proxy
authorized to appear by an instrument of proxy, shall be conclusively presumed
to have been given due notice of such meeting. Notice of any adjourned meeting
of stockholders shall not be required to be given if the time and place thereof
are announced at the meeting at which the adjournment is taken, except as may be
expressly required by law.
Section 5. Addresses of Shareholders. The address of any shareholder
appearing upon the records of the Corporation shall be deemed to be the latest
address of such shareholder appearing on the records maintained by the Transfer
Agent for the class of stock held by such shareholder.
Section 6. Voting at Meetings.
4
<PAGE>
(a) Quorum. The holders of record of a majority of the issued and
outstanding stock of the Corporation entitled to vote at such meeting, present
in person or by proxy, shall constitute a quorum at all meetings of stockholders
for the transaction of business, except where otherwise provided by law, the
Articles of Incorporation or these By-Laws. In the absence of a quorum, any
officer entitled to preside at, or act as secretary of, such meeting shall have
the power to adjourn the meeting from time to time until a quorum shall be
constituted. At any such adjourned meeting at which a quorum shall be present,
any business may be transacted which might have been transacted at the original
meeting, but only those stockholders entitled to vote at the original meeting
shall be entitled to vote at any adjournment or adjournments thereof unless a
new record date is fixed by the Board of Directors for the adjourned meeting.
(b) Voting Rights. Except as otherwise provided by law or by the
provisions of the Articles of Incorporation, every shareholder shall have the
right at every shareholders' meeting to one vote for each share of stock having
voting power, registered in his name on the books of the Corporation on the date
for the determination of shareholders entitled to vote, on all matters coming
before the meeting including the election of directors. At any meeting of the
shareholders, every shareholder having the right to vote shall be entitled to
vote in person, or by proxy executed in writing by the shareholder or a duly
authorized attorney in fact and bearing a date not more than eleven months prior
to its execution, unless a longer time is expressly provided therein.
(c) Required Vote. When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of The Indiana
General Corporation Act or of the Articles of Incorporation or by these By-Laws,
a greater vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 7. Voting List. The Transfer Agent of the Corporation shall make,
at least five days before each election of directors, a complete list of the
shareholders entitled by the Articles of Incorporation, as now or hereafter
amended, to vote at such election, arranged in alphabetical order, with the
address and number of shares so entitled to vote held by each, which list shall
be on file at the principal office of the Corporation and subject to inspection
by any shareholder. Such list shall be produced and kept open at the time and
place of election and subject to the inspection of any shareholder during the
holding of such election. The original stock register or transfer book, or a
duplicate thereof kept in the State of Indiana, shall be the only evidence as to
who are the shareholders entitled to examine such list or the stock ledger or
transfer book or to vote at any meeting of the shareholders.
Section 8. Fixing of Record Date to Determine Shareholders Entitled to
Vote. The Board of Directors may prescribe a period not exceeding 50 days prior
to meetings of the shareholders, during which no transfer of stock on the books
of the Corporation may be made; or, in lieu of prohibiting the transfer of stock
may fix a day and hour not more than 50 days prior to the holding of any meeting
of shareholders as the time as of which shareholders entitled to notice of, and
to vote at, such meeting shall be determined, and all persons who are holders of
record of
5
<PAGE>
voting stock at such time, and no others, shall be entitled to notice of, and to
vote at, such meeting. In the absence of such a determination, such date shall
be 10 days prior to the date of such meeting.
Section 9. Nominations for Director. Nominations for election to the
Board of Directors may be made by the Board of Directors or by any shareholder
of any outstanding class of capital stock of the Corporation entitled to vote
for the election of directors. Nominations, other than those made by or on
behalf of the existing management of the Corporation, shall be made in writing
and shall be delivered or mailed to the president of the Corporation not less
than 10 days nor more than 50 days prior to any meeting of shareholders called
for the election of directors. Such notification shall contain the following
information to the extent known to the notifying shareholder: (a) the name and
address of each proposed nominee; (b) the principal occupation of each proposed
nominee; (c) the total number of shares of capital stock of the Corporation that
will be voted for each proposed nominee; (d) the name and residence address of
the notifying shareholder; and (e) the number of shares of capital stock of the
Corporation owned by the notifying shareholder. Nominations not made in
accordance herewith may, in his discretion, be disregarded by the chairman of
the meeting, and upon his instructions, the vote tellers may disregard all votes
cast for each such nominee.
ARTICLE V
---------
Board of Directors
------------------
Section 1. Election, Number and Term of Office. Directors shall be elected
at the annual meeting of shareholders, or, if not so elected, at a special
meeting of shareholders called for that purpose, by the holders of the shares of
stock entitled by the Articles of Incorporation to elect Directors.
The number of Directors of the Corporation to be elected by the holders of
the shares of stock entitled by the Articles of Incorporation to elect Directors
shall be seven (7) unless changed by amendment of this section.
All Directors elected by the holders of such shares, except in the case of
earlier resignation, removal or death, shall hold office until their respective
successors are chosen and qualified. Directors need not be shareholders of the
Corporation.
Any vacancy on the Board of Directors caused by an increase in the number
of Directors shall be filled by a majority vote of the members of the Board of
Directors, until the next annual or special meeting of the shareholders or, at
the discretion of the Board of Directors, such vacancy may be filled by vote of
the shareholders at a special meeting called for that purpose. No decrease in
the number of Directors shall have the effect of shortening the term of any
incumbent Director.
Section 2. Vacancies. Any vacancy occurring in the Board of Directors
caused by resignation, death or other incapacity shall be filled by a majority
vote of the remaining members
6
<PAGE>
of the Board of Directors, until the next annual meeting of the shareholders. If
the vote of the remaining members of the Board shall result in a tie, such
vacancy, at the discretion of the Board of Directors, may be filled by vote of
the shareholders at a special meeting called for that purpose.
Section 3. Annual Meeting of Directors. The Board of Directors shall meet
each year immediately after the annual meeting of the shareholders, at the place
where such meeting of the shareholders has been held either within or without
the State of Indiana, for the purpose of organization, election of officers, and
consideration of any other business that may properly come before the meeting.
No notice of any kind to either old or new members of the Board of Directors for
such annual meeting shall be necessary.
Section 4. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places, either within or without the State of
Indiana, as may be fixed by the Directors. Such regular meetings of the Board of
Directors may be held without notice or upon such notice as may be fixed by the
Directors. A member of the Board of Directors may participate in a meeting of
the Board by means of a conference telephone or similar communications equipment
by which all persons participating in the meeting can communicate with each
other and participation by these means constitutes presence in person at the
meeting.
Section 5. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, the President, or by not less than a
majority of the members of the Board of Directors. Notice of the time and place,
either within or without the State of Indiana, of a special meeting shall be
served upon or telephoned to each Director at least twenty-four hours, or
mailed, telegraphed or cabled to each Director at his usual place of business or
residence at least forty-eight hours, prior to the time of the meeting.
Directors, in lieu of such notice, may sign a written waiver of notice either
before the time of the meeting, at the meeting or after the meeting. Attendance
by a director in person at any such special meeting shall constitute a waiver of
notice.
Section 6. Quorum. A majority of the actual number of Directors elected
and qualified, from time to time, shall be necessary to constitute a quorum for
the transaction of any business except the filling of vacancies, and the act of
a majority of the Directors present at the meeting, at which a quorum is
present, shall be the act of the Board of Directors, unless the act of a greater
number is required by The Indiana General Corporation Act, by the Articles of
Incorporation, or by these By-Laws. A Director, who is present at a meeting of
the Board of Directors, at which action on any corporate matter is taken, shall
be conclusively presumed to have assented to the action taken, unless (a) his
dissent shall be affirmatively stated by him at and before the adjournment of
such meeting (in which event the fact of such dissent shall be entered by the
secretary of the meeting in the minutes of the meeting), or (b) he shall forward
such dissent by registered mail to the Secretary of the Corporation immediately
after the adjournment of the meeting. The right of dissent provided for by
either clause (a) or clause (b) of the immediately preceding sentence shall not
be available, in respect of any matter acted upon at any meeting, to a Director
who voted at the meeting in favor of such matter and did not change his vote
prior to the time that the result of the vote on such matter was announced by
the chairman of such meeting.
7
<PAGE>
Section 7. Consent Action by Directors. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if prior to such action a written consent to
such action is signed by all members of the Board of Directors or such
committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board of Directors or committee.
Section 8. Removal of Directors. Any or all members of the Board of
Directors may be removed, with or without cause, at a meeting of shareholders
called expressly for that purpose by a vote of the holders of not less than a
majority of the outstanding shares of capital stock then entitled to vote at the
election of directors.
Section 9. Dividends. The Board of Directors shall have power,
subject to any restrictions contained in The Indiana General Corporation Act or
in the Articles of Incorporation and out of funds legally available therefor, to
declare and pay dividends upon the outstanding capital stock of the Corporation
as and when they deem expedient. Before declaring any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time in their absolute discretion
deem proper for working capital, or as a reserve or reserves to meet
contingencies or for such other purposes as the Board of Directors shall deem
conducive to the interests of the Corporation and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
Section 10. Distributions Out of Capital Surplus. The Board of Directors
of the Corporation may from time to time distribute to its shareholders out of
the capital surplus of the Corporation a portion of its assets, in cash or
property, without the assent or vote of the shareholders, provided that with
respect to such distribution the requirements of the Indiana General Corporation
Act other than shareholder approval are satisfied.
Section 11. Fixing of Record Date to Determine Shareholders Entitled to
Receive Corporate Benefits. The Board of Directors may fix a day and hour not
exceeding 50 days preceding the date fixed for payment of any dividend or for
the delivery of evidence of rights, or for the distribution of other corporate
benefits, or for a determination of shareholders for any other purpose, as a
record time-for the determination of the shareholders entitled to receive any
such dividend, rights or distribution, and in such case only shareholders of
record at the time so fixed shall be entitled to receive such dividend, rights
or distribution. If no record date is fixed for the determination of
shareholders entitled to receive payment of a dividend, the end-of the day on
which the resolution of the Board of Directors declaring such dividend is
adopted shall be the record date for such determination.
Section 12. Interest of Directors in Contracts. Any contract or other
transaction between the Corporation or any corporation in which this Corporation
owns a majority of the capital stock shall be valid and binding, notwithstanding
that the directors or officers of this Corporation are identical or that some or
all of the directors or officers, or both, are also directors or officers of
such other corporation.
8
<PAGE>
Any contract or other transaction between the Corporation and one or more
of its directors or members or employees, or between the Corporation and any
firm of which one or more of its directors are members or employees or in which
they are interested, or between the Corporation and any corporation or
association of which one or more of its directors are stockholders, members,
directors, officers, or employees or in which they are interested, shall be
valid for all purposes, notwithstanding the presence of such director of
directors at the meeting of the Board of Directors of the Corporation which acts
upon, or in reference to, such contract or transaction and notwithstanding his
or their participation in such action, if the fact of such interest shall be
disclosed or known to the Board of Directors and the Board of Directors shall
authorize, approve and ratify such contract or transaction by a vote of a
majority of the directors present, such interested director or directors to be
counted in determining whether a quorum is present, but not to be counted in
calculating the majority of such quorum necessary to carry such vote. This
Section shall not be construed to invalidate any contract or other transaction
which would otherwise be valid under the common and statutory law applicable
thereto.
Section 13. Committees. The Board of Directors may, by resolution adopted
by a majority of the actual number of Directors elected and qualified, from time
to time, designate from among its members an executive committee and one or more
other committees, each of which, to the extent provided in the resolution, the
Articles of Incorporation, or these By-Laws, may exercise all of the authority
of the Board of Directors of the Corporation, including, but not limited to, the
authority to issue and sell or prove any contract to issue and sell, securities
or shares of the Corporation or designate the terms of a series of a class of
securities or shares of the Corporation. The terms which may be affixed by each
such committee include, but are not limited to, the price, dividend rate, and
provisions of redemption, a sinking fund, conversion, voting, or preferential
rights or other features of securities or class or series of a class of shares.
Each such committee may have full power to adopt a final resolution which sets
forth those terms-and to authorize a statement of such terms to be filed with
the Secretary of State. However, no such committee has the authority to declare
dividends or distributions, amend the Articles of Incorporation or the By-Laws,
approve a plan of merger or consolidation even if such plan does not require
shareholder approval, reduce earned or capital surplus, authorize or approve the
reacquisition of shares unless pursuant to a general formula or method specified
by the Board of Directors, or recommend to the shareholders a voluntary
dissolution of the Corporation or a revocation thereof. No member of any such
committee shall continue to be a member thereof after he ceases to be a Director
of the Corporation. The calling and holding of meetings of any such committee
and its method of procedure shall be determined by the Board of Directors. A
member of the Board of Directors shall not be liable for any action taken by any
such committee if he is not a member of that committee and has acted in good
faith and in a manner he reasonably believes is in the best interest of the
Corporation.
ARTICLE VI
----------
Officers
--------
9
<PAGE>
Section 1. Principal Officers. The principal officers of the Corporation
shall be a Chairman of the Board, a President, one or more Vice Presidents, a
Treasurer and a Secretary. The Corporation may also have, at the discretion of
the Board of Directors, such other subordinate officers as may be appointed in
accordance with the provisions of these By-Laws. Any two or more offices may be
held by the same person, except the duties of President and Secretary shall not
be performed by the same person. No person shall be eligible for the office of
Chairman of the Board or President who is not a director of the Corporation.
Section 2. Election and Term of Office. The principal officers of the
Corporation shall be chosen annually by the Board of Directors at the annual
meeting thereof. Each such officer shall hold office until his successor shall
have been duly chosen and qualified, or until his death, or until he shall
resign, or shall have been removed in the manner hereinafter provided.
Section 3. Removal. Any principal officer may be removed, either with or
without cause, at any time, by resolution adopted at any meeting of the Board of
Directors by a majority of the actual number of Directors elected and qualified
from time to time.
Section 4. Subordinate Officers. In addition to the principal officers
enumerated in Section 1 of this Article VI, the Corporation may have one or more
Assistant Treasurers, one or more Assistant Secretaries and such other officers,
agents and employees as the Board of Directors may deem necessary, each of whom
shall hold office for such period, may be removed with or without cause, have
such authority, and perform such duties as the President, or the Board of
Directors may from time to time determine. The Board of Directors may delegate
to any principal officer the power to appoint and to remove any such subordinate
officers, agents or employees.
Section 5. Resignations. Any officer may resign at any time by giving
written notice to the Chairman of the Board or to the Board of Directors or to
the President or to the Secretary. Any such resignation shall take effect upon
receipt of such notice or at any later time specified therein, and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 6. Vacancies. Any vacancy in any office for any cause may be
filled for the unexpired portion of the term in the manner prescribed in these
By-Laws for election or appointment to such office for such term.
Section 7. Chairman of the Board. The Chairman of the Board, who shall be
chosen from among the Directors, shall preside at all meetings of shareholders
and at all meetings of the Board of Directors. He shall perform such other
duties and have such other powers as, from time to time, may be assigned to him
by the Board of Directors.
Section 8. President. The President, who shall be chosen from among the
Directors, shall be the chief executive officer of the Corporation and as such
shall have general supervision of the affairs of the Corporation, subject to the
control of the Board of Directors. He shall be an
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<PAGE>
ex officio member of all standing committees. In the absence or disability of
the Chairman of the Board, the President shall preside at all meetings of
shareholders and at all meetings of the Board of Directors. Subject to the
control and direction of the Board of Directors, the President may enter into
any contract or execute and deliver any instrument in the name and on behalf of
the Corporation. In general, he shall perform all duties and have all the
powers incident to the office of President, as herein defined, and all such
other duties and powers as, from time to time, may be assigned to him by the
Board of Directors.
Section 9. Vice Presidents. The Vice Presidents in the order of their
seniority, unless otherwise determined by the Board of Directors, shall, in the
absence or disability of the President and Executive Vice President, perform the
duties and exercise the powers of the President. They shall perform such other
duties and have such other powers as the President or the Board of Directors may
from time to time assign. Section 10. Treasurer. The Treasurer shall have charge
and custody of, and be responsible for, all funds and securities of the
Corporation and shall deposit all such funds in the name of the Corporation in
such banks or other depositories as shall be selected by the Board of Directors.
He shall upon request exhibit at all reasonable times his books of account and
records to any of the directors of the Corporation during business hours at the
office of the Corporation where such books and records shall be kept; shall
render upon request by the Board of Directors a statement of the condition of
the finances of the Corporation at any meeting of the Board of Directors or at
the annual meeting of the shareholders; shall receive, and give receipt for,
moneys due and payable to the Corporation from any source whatsoever; and in
general, shall perform all duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the President or the
Board of Directors. The Treasurer shall give such bond, if any, for the
faithful discharge of his duties as the Board of Directors may require.
Section 11. Secretary. The Secretary shall keep or cause to be kept in
the books provided for that purpose the minutes of the meetings of the
shareholders and of the Board of Directors; shall duly give and serve all
notices required to be given in accordance with the provisions of these By-Laws
and by The Indiana General Corporation Act; shall be custodian of the records
and of the seal of the Corporation and see that the seal is affixed to all
documents, the execution of which on behalf of the Corporation under its seal is
duly authorized in accordance with the provisions of these By-Laws; and, in
general, shall perform all duties incident to the office of Secretary and such
other duties as may, from time to time, be assigned to him by the President or
the Board of Directors.
Section 12. Salaries. The salaries of the principal officers shall be
fixed from time to time by the Board of Directors, and the salaries of any
subordinate officers may be fixed by the President.
Section 13. Voting Corporation's Securities. Unless otherwise ordered by
the Board of Directors, the Chairman of the Board, the President and Secretary,
and each of them, are appointed attorneys and agents of the Corporation, and
shall have full power and authority in the name and on behalf of the
Corporation, to attend, to act, and to vote all stock or other securities
entitled to be voted at any meetings of security holders of corporations, or
associations in which
11
<PAGE>
the Corporation may hold securities, in person or by proxy, as a stockholder or
otherwise, and at such meetings shall possess and may exercise any and all
rights and powers incident to the ownership of such securities, and which as the
owner thereof the Corporation might have possessed and exercised, if present, or
to consent in writing to any action by any such other corporation or
association. The Board of Directors by resolution from time to time may confer
like powers upon any other person or persons.
ARTICLE VII
-----------
Indemnification
---------------
Section 1. Indemnification of Directors, Officers and Employees. Every
person who is or was a director, officer or employee of this Corporation or of
any other corporation for which he is or was serving in any capacity at the
request of this Corporation shall be indemnified by this Corporation against any
and all liability and expense that may be incurred by him in connection with or
resulting from or arising out of any claim, action, suit or proceeding, provided
that such person is wholly successful with respect thereto or acted in good
faith in what he reasonably believed to be in or not opposed to the best
interests of this Corporation or such other corporation, as the case may be,
and, in addition, in any criminal action or proceeding in which he had no
reasonable cause to believe that his conduct was unlawful. As used herein,
"claim, action, suit or proceeding" shall include any claim, action, suit or
proceeding (whether brought by or in the right of this Corporation or such other
corporation or otherwise), civil, criminal, administrative or investigative,
whether actual or threatened or in connection with an appeal relating thereto,
in which a director, officer or employee of this Corporation may become
involved, as a party or otherwise,
(i) by reason of his being or having been a director, officer or
employee of this Corporation or such other corporation or arising
out of his status as such or
(ii) by reason of any past or future action taken or not taken by him in
any such capacity, whether or not he continues to be such at the
time such liability or expense is incurred.
The terms "liability" and "expense" shall include, but shall not be limited to,
attorneys' fees and disbursements, amounts of judgments, fines or penalties, and
amounts paid in settlement by or on behalf of a director, officer or employee,
but shall not in any event include any liability or expenses on account of
profits realized by him in the purchase or sale of securities of the Corporation
in violation of the law. The termination of any claim, action, suit or
proceeding, by judgment, settlement (whether with or without court approval) or
conviction or upon a plea of guilty or of nolo contendere, or its equivalent,
shall not create a presumption that a director, officer or employee did not meet
the standards of conduct set forth in this paragraph. Any such director,
officer or employee who has been wholly successful with respect to any such
claim, action, suit or proceeding shall be entitled to indemnification as a
matter of right. Except as provided in the preceding sentence, any
indemnification hereunder shall be made only if (i) the
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Board of Directors acting by a quorum consisting of Directors who are not
parties to or who have been wholly successful with respect to such claim,
action, suit or proceeding shall find that the director, officer or employee has
met the standards of conduct set forth in the preceding paragraph; or (ii)
independent legal counsel shall deliver to the Corporation their written opinion
that such director, officer or employee has met such standards of conduct. If
several claims, issues or matters of action are involved, any such person may be
entitled to indemnification as to some matters even though he is not entitled as
to other matters.
The Corporation may advance expenses to or, where appropriate, may at its
expense undertake the defense of any such director, officer or employee upon
receipt of an undertaking by or on behalf of such person to repay such expenses
if it should ultimately be determined that he is not entitled to indemnification
hereunder.
The provisions of this Section shall be applicable to claims, actions,
suits or proceedings made or commenced after the adoption hereof, whether
arising from acts or omissions to act during, before or after the adoption
hereof.
The rights of indemnification provided hereunder shall be in addition to
any rights to which any person concerned may otherwise be entitled by contract
or as a matter of law and shall inure to the benefit of the heirs, executors and
administrators of any such person.
The Corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Corporation as a
director, officer, employee or agent of another corporation against any
liability asserted against him and incurred by him in any capacity or arising
out of his status as such, whether or not the Corporation would have the power
to indemnify him against such liability under the provisions of this Section or
otherwise.
ARTICLE VIII
------------
Amendments
----------
The power to make, alter, amend, or repeal these By-Laws is vested in the Board
of Directors, but the affirmative vote of a majority of the actual number of
directors elected and qualified, from time to time, shall be necessary to effect
any alteration, amendment or repeal of these By-Laws.
13
Exhibit 4.1
INCORPORATED UNDER THE LAWS OF
THE STATE OF INDIANA
Number Shares
P.T.C. BANCORP
BROOKVILLE, INDIANA
CAPITAL STOCK
This Certifies that ____________________________________________________is the
registered holder of __________________________________________________ shares
P.T.C. BANCORP, BROOKVILLE, INDIANA
transferable only on the books of the Corporation by the holder hereof in
person or by Attorney upon surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed
this _______________ day of __________________, A.D. 19_____
_________________________________ __________________________________
Secretary President
<PAGE>
CERTIFICATE
FOR
SHARES
OF
P.T.C.
BANCORP
BROOKVILLE, INDIANA
ISSUED TO
____________________
DATED
_____________________
Exhibit 10.1
PTC BANCORP
NONSTATUTORY STOCK OPTION PLAN
------------------------------
ARTICLE I
DEFINITIONS
-----------
SECTION 1.1. "AFFILIATE" means a corporation in which the Company
owns, directly or indirectly, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock of such corporation.
SECTION 1.2. "BOARD OF DIRECTORS" means the Board of Directors of
the Company.
SECTION 1.3. "CODE" means the Internal Revenue Code of 1986, as
amended.
SECTION 1.4. "COMMON SHARES" means the Common Shares, without par
value, of the Company.
SECTION 1.5. "COMPANY" means PTC Bancorp, an Indiana corporation,
and any successor thereto.
SECTION 1.6. "EFFECTIVE DATE" means July 6, 1993.
SECTION 1.7. "ELIGIBLE EMPLOYEE" means any full-time senior
management employee of the Company or an Affiliate.
SECTION 1.8. "ELIGIBLE PERSON" means any Eligible Employee or any
director of the Company or an Affiliate who is not an Eligible Employee.
SECTION 1.9. "OPTION" means an option, granted by the Company
pursuant to the Plan, to purchase shares of Common Stock.
SECTION 1.10. "OPTION AGREEMENT" means a written agreement or
agreements as described in Section 4.3 between the Company and an Eligible
Person evidencing an Option.
SECTION 1.11. "OPTION PRICE" means the price for each share of
Common Stock as determined in Section 4.3(a).
SECTION 1.12. "OPTIONEE" means an Eligible Person to whom an
Option has been granted under the Plan.
SECTION 1.13. "PLAN" means the "PTC Bancorp Nonstatutory Stock
Option Plan" set forth in this document.
SECTION 1.14. "SEPARATION FROM SERVICE" means with respect to an
Eligible Employee any voluntary or involuntary termination of an Eligible
Employee's employment with the Company or an Affiliate for any reason other than
death, but shall not include termination of employment by reason of an Eligible
Employee's transfer of employment between the Company or an Affiliate, and means
with respect to other Eligible Persons, the cessation of such person's service
on the Board of Directors of the Company or an Affiliate
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<PAGE>
for any reason other than death. The effective date for Separation from Service
shall not include any period for which an Eligible Person may receive accrued
vacation or severance benefits in any form for such service.
ARTICLE II
PURPOSE
SECTION 2.1. PURPOSE. The purpose of the Plan is to reward
Eligible Persons for their service to the Company or its Affiliates, to induce
Eligible Persons to remain affiliated with or in the employ of the Company and
to encourage Eligible Persons to obtain or increase, on the terms set forth
herein, stock ownership in the Company. The Board of Directors has determined
that the Plan will promote continuity of management and increased incentive and
personal interest in the welfare of the Company by those who are primarily
responsible for shaping and carrying out the long-range plans of the Company and
securing its continued growth and financial success.
ARTICLE III
ADMINISTRATION
SECTION 3.1. GENERAL. The Plan shall be administered by the
Board of Directors which, subject to the terms and conditions of the Plan, shall
have the authority to determine, in its sole and absolute discretion, all
questions arising under the Plan, including, but not limited to, the selection
of the Eligible Persons to whom grants of Options shall be made, the terms and
conditions of each such grant, the time at which such grants shall be made, the
number of Common Shares to be optioned under each such grant, all questions
related to the exercisability of Options and all questions relating to
adjustments to be made pursuant to Article VI hereof. The Board of Directors
shall also establish and carry out reasonable interpretations and applications
of the Plan and shall perform or cause to be performed such further acts as it
may deem to be necessary, appropriate or convenient in the efficient
administration of the Plan.
SECTION 3.2. CONFLICTS OF INTEREST. A grant of an Option to a
member of the Board of Directors may be made only after approval of such grant
by a majority of disinterested members of the Board of Directors.
SECTION 3.3. DELEGATION OF POWERS. The Board of Directors may,
in its sole and absolute discretion, delegate specified powers and
responsibilities given it under the Plan to a committee, a majority of which
shall be members of the Board of Directors. The Board of Directors shall
appoint the members of such committee, who shall serve at the pleasure of the
Board of Directors.
ARTICLE IV
OPTIONS
SECTION 4.1. ELIGIBILITY. The Board of Directors may grant
Options to any person who is an Eligible Person.
2
<PAGE>
SECTION 4.2. NUMBER OF SHARES SUBJECT TO OPTIONS. The aggregate
number of Common Shares which may be issued upon the exercise of all Options
shall not exceed six thousand (6,000) Common Shares; subject, however, to the
provisions of Article VI hereof. The Common Shares issued upon the exercise of
Options may be authorized but unissued Common Shares or Common Shares issued and
subsequently reacquired by the Company. In the event any Options shall, for any
reason, terminate, expire or be surrendered without having been exercised in
full, the Common Shares subject to such Option (but not purchased thereunder)
shall again be available for Options to be granted.
SECTION 4.3. TERMS AND CONDITIONS OF OPTIONS. Any Option shall
be evidenced by an Option Agreement executed by the Company and the Optionee,
and shall contain such terms and be in such form as the Board of Directors may
from time to time approve subject to the following terms, conditions and
limitations:
(A) OPTION PRICE. The option price per Common Share with respect
to each such Option shall be determined by the Board of Directors at the time of
issuance of the Option but shall be not less than the book value of the shares
at the time the options are issued.
(B) DURATION OF OPTION. Each Option shall expire in accordance
with the provisions of the Plan or, if earlier, the date fixed by the Board of
Directors and set forth in the Option Agreement at the time such Option is
granted.
(C) VESTING OF OPTION. Unless otherwise determined by the Board
of Directors at the time of grant of an Option, the right of an Optionee who is
an Eligible Employee to exercise an Option shall vest and become effective only
to the extent set forth below and after the Optionee has been continuously
employed by the Company or an Affiliate for the time periods specified below:
Aggregate
Percentage Length of Continuous
Vested Employment After Option Grant
---------- -----------------------------
25% After 12 months from date of
Option Grant
50% After 24 months from date of
Option Grant
75% After 36 months from date of
Option Grant
100% After 48 months from date of
Option Grant
For these purposes, an Optionee shall be deemed to have been "continuously
employed" so long as the Optionee receives compensation from the Company or an
Affiliate at customary and regular intervals, without any interruptions, in
accordance with the established payroll policies.
Options granted to directors of the Company or its Affiliates
shall be fully vested at the time of issuance unless otherwise determined by the
Board of Directors at the time of grant of an Option.
3
<PAGE>
The Options granted herein shall become exercisable for the entire
Option Shares (to the extent not previously vested or exercised) immediately
prior to the consummation of any of the following events: (i) the sale or
transfer by the Company or an Affiliate of all or substantially all of its
assets; (ii) the sale or exchange in one transaction of outstanding shares of
the Company having at least two-thirds (2/3) of the total number of votes that
may be cast for the election of the Board of Directors of the Company; (iii) any
cash tender offer or exchange offer, contested election, or any combination of
the foregoing transactions, as a result of which the persons who are Directors
of the Company before the transaction shall cease to constitute a majority of
the Board of Directors of the Company or any successor to the Company; or (iv)
any merger or other business combination or similar action of the Company in
which the Shareholders of the Company receive less than fifty percent (50%)
voting interest in the new continuing entity. In the event and to the extent the
Options are not exercised, upon occurrence of one of these events the Options
shall terminate.
(D) EXERCISE RIGHTS. Each Option shall be exercisable by the
Optionee (or his or her successors if Section 4.3(f) is applicable) only to the
extent the Option is vested. Notwithstanding the foregoing, no Option granted
under the Plan shall be exercisable if the Optionee is in violation of, or has
violated, any agreement between the Optionee and the Company.
(E) EXERCISE OF OPTION. On and after the date any portion of the
Option becomes exercisable pursuant to Section 4.3(d) the Optionee with respect
to such Option may only exercise such Option to the extent vested by written
exercise and subscription agreement which shall:
(i) state the election to exercise the Option, the number of Common
Shares in respect of which it is being exercised, the person(s) in whose name(s)
the stock certificate(s) for such shares is (are) to be registered, including
pertinent address(es) and social security number(s);
(ii) contain such representations and agreements, if any, as may be
required by the Company related to the Optionee's investment intent regarding
the acquisition of such Common Shares and other provisions related to applicable
exemptions from Federal or state securities law registration requirements;
(iii) contain such agreement, if any, as may be required by the
Company related to restrictions on the transferability of such Common Shares;
(iv) be signed by the Optionee; and
(v) be in writing and delivered in person or by mail to the
President of the Company.
Notwithstanding anything in the Plan to the contrary, no Option
shall be exercised if the issuance of the Common Shares upon such exercise would
constitute a violation of any applicable Federal or state securities laws or
other laws or regulations.
(F) DEATH OF OPTIONEE. If an Optionee dies while in the employ
of the Company or any Affiliate, an Option granted to such deceased Optionee may
be exercised (to the extent vested) by the personal representative, executor, or
administrator of such deceased Optionee's estate, or by the person or persons to
whom the Option has been transferred under the Optionee's last will and
testament or the applicable laws of descent and distribution, for a period of
twelve (12) months after the Optionee's death provided, however, such right of
exercise shall not effect the earlier expiration of such Option as provided in
the Plan or the
4
<PAGE>
applicable Option Agreement. Options granted to an Optionee shall automatically
expire twelve (12) months after such Optionee's death. The Company shall be
under no obligation to honor any notice of exercise or to deliver certificates
representing the Common Shares purchased pursuant to any exercise until the
Company is satisfied as to the authority of the person or persons exercising the
Option.
(G) DISABILITY OF OPTIONEE. Notwithstanding other terms and
provisions of this Plan, in the event an Optionee ceases to be employed with the
Company as a result of such Optionee's total and permanent disability, such
Optionee may, but only within six (6) months (or such other period of time not
exceeding twelve (12) months as is determined by the Board, with such
determination being made at the time of grant of the Option and reflected in the
Option Agreement) from the date of such termination (but in no event later than
the date of expiration of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent such Optionee was entitled to
exercise it at the date of such termination. To the extent such Optionee was
not entitled to exercise the Option at the date of termination, or if such
Optionee does not exercise such Option which such Optionee was entitled to
exercise within the time specified herein, the Option shall terminate.
(H) PAYMENT UPON EXERCISE OF OPTION. Payment of the option price
by the Optionee shall be made in cash or by a check drawn on a United States
bank and tendered to the Company on the date of exercise or by such other
consideration which is acceptable to the Board of Directors.
(I) NONTRANSFERABILITY OF OPTIONS. No Option shall be
transferable or assignable, in whole or in part, by an Optionee, except to the
extent exercise is permitted upon the death of the Optionee pursuant to Section
4.3(f) hereof. Each Option shall be exercisable, during the Optionee's
lifetime, only by the Optionee. No Option shall be pledged or hypothecated in
any way and no Option shall be subject to execution, attachment or similar
process or to any claim or interest of a spouse upon divorce from an Optionee or
pursuant to community property laws. Any attempt by an Optionee to transfer,
assign, pledge or hypothecate any Option, or any execution, attachment or
similar process against any such Option, shall cause the immediate expiration of
such Option.
(J) SEPARATION FROM SERVICE. Unless otherwise determined by the
Board of Directors at the time of grant, upon an Optionee's Separation from
Service all unexercised Options held by the Optionee shall expire upon the date
of his or her Separation from Service.
(K) NO OBLIGATION TO MAKE OPTIONS EXERCISABLE. The establishment
of the Plan does not create an obligation which would in any way require the
Company or Board of Directors to engage in any action which would result in the
Options becoming exercisable.
ARTICLE V
AMENDMENT, SUSPENSION OR TERMINATION
SECTION 5.1. GENERAL. The Board of Directors may from time to
time suspend or terminate the Plan or may amend it from time to time in such
respects as the Board of Directors may in its sole and absolute discretion deem
advisable.
SECTION 5.2. EFFECT OF AMENDMENT, SUSPENSION OR TERMINATION OF
EXISTING OPTIONS. Except as provided in the Plan, no amendment, suspension or
termination of the Plan, without an Optionee's consent, shall materially impair
any of the rights or
5
<PAGE>
obligations of the Company or the Optionee with respect to any Option
theretofore granted to such Optionee.
SECTION 5.3. AUTOMATIC TERMINATION OF PLAN. The Plan shall
automatically terminate and all Options granted hereunder shall expire on
December 31, 2002.
ARTICLE VI
ADJUSTMENTS
SECTION 6.1. RECAPITALIZATION. In the event that the issued and
outstanding Common Shares are, at any time after the Effective Date of the Plan,
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or an Affiliate by reason of a
recapitalization, reclassification, stock split-up, combination of shares or
dividend or other distribution payable in capital stock, appropriate adjustment
shall be made by the Board of Directors in the number and kind of shares for the
purchase of which Options may be granted under the Plan. In addition, the Board
of Directors shall make appropriate adjustment in the number and kind of shares
as to which outstanding Options, or portions thereof then unexercised, shall be
exercisable. Such adjustment in outstanding Options shall be made without
change in the total price applicable to the unexercised portion of the Option
and with a corresponding adjustment in the option price per share.
SECTION 6.2. DISSOLUTION OR LIQUIDATION. In the event of the
dissolution or complete liquidation of the Company, any Option shall terminate
as of a date to be fixed by the Board of Directors; provided, however, that not
less than thirty (30) days' written notice of the date so fixed shall be given
to each Optionee and each such Optionee shall have the right during such period
to exercise his or her Option as to all or any part of the Common Shares covered
thereby to the extent vested.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. RESTRICTIONS ON ISSUING COMMON SHARES. The Common
Shares shall not be issued pursuant to the exercise of an Option unless the
transferability of the Common Shares so issued and/or the actual issuance of the
Common Shares comply with all relevant provisions of law, including, but not
limited to, the (i) restrictions, if any, imposed by the Indiana Securities Law,
as amended, (ii) restrictions, if any, imposed by the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated by the United States Securities and Exchange Commission
thereunder, and (iii) requirements of any stock exchange upon which the Common
Shares may then be listed. The Board of Directors, shall, in its sole
discretion, determine if such restrictions or such issuance of Common Shares so
complies with all relevant provisions of law.
SECTION 7.2. LEGENDS. Certificates for Common Shares issued upon
exercise of an Option shall carry a legend indicating that transfer is subject
to compliance with applicable securities laws.
SECTION 7.3. WITHHOLDING, ETC. Common Shares shall not be issued
upon the exercise of any Option unless and until withholding obligations with
respect to any Federal or state taxes, if any, or other withholding obligations,
if any, imposed by any governmental
6
<PAGE>
entity have, in the opinion of the Board of Directors, been satisfied by the
Company or the Optionee or provisions for their satisfaction have been made by
the Company or the Optionee.
SECTION 7.4. OTHER RESTRICTIONS. The Board of Directors may, in
any Option Agreement with an Optionee, or at the time certificates representing
Common Shares are actually issued pursuant to the exercise of an Option, place
such further restrictions on the transferability of any Common Shares to be
issued to the Optionee or upon the exercise of the Option as the Board of
Directors may, in its sole and absolute discretion, determine to be reasonable,
appropriate or necessary and may require the Optionee to agree to certain
repurchase rights.
SECTION 7.5. USE OF PROCEEDS. The proceeds received by the
Company from the sale of Common Shares pursuant to the exercise of Options shall
be added to the Company's general funds and used for general corporate purposes.
SECTION 7.6. RIGHTS AS A SHAREHOLDER. An Optionee shall have no
rights as a shareholder with respect to Common Shares covered by any Option
until the date of issuance by the Company of the applicable stock certificates.
No adjustment shall be made for cash dividends or other rights not specifically
provided for in the Plan for which the record date is prior to the date of such
issuance of the applicable stock certificates.
Adopted by Board - July 6, 1993
7
Exhibit 10.2
PTC BANCORP
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT, is made and entered into as of the ___ day of
_____, ___ by and between PTC BANCORP, an Indiana corporation (the "Company"),
and XXXXXXXXXXX (the "Optionee"), pursuant to the terms, conditions and
limitations contained in the PTC Bancorp Nonstatutory Stock Option Plan (the
"Plan"), a copy of which is attached hereto and made a part hereof as Exhibit A;
WITNESSETH:
WHEREAS, the Board of Directors of the Company has determined that
it is in the best interests of the Company for the Company to grant to the
Optionee an option to purchase Common Shares of the Company pursuant to the
terms, conditions and limitations of the Plan and this Agreement; and
WHEREAS, the Optionee desires to have the option to purchase
Common Shares of the Company pursuant to the terms, conditions and limitations
of the Plan and this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Optionee
hereby agree as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee
the right and option to purchase, pursuant to the terms, conditions and
limitations contained herein and in the Plan, all or any part of an aggregate of
YYYYYYY (yyyyy) Common Shares of the Company (the "Option"). The Option shall
expire to the extent then unexercised on July 6, 1998; subject, however, to
earlier expiration as provided in the Plan. Upon expiration of the Option this
Agreement shall terminate.
2. OPTION PRICE. The Option exercise price is, subject to
Article VI of the Plan, $23.48 per Common Share, which shall be paid upon
exercise of the Option.
3. METHOD OF EXERCISE. The Option shall be exercised by
written notice directed to the Company in substantially the form attached hereto
as Exhibit "B", accompanied by a check or other consideration acceptable to the
Board in full payment of the Option Price for the specified number of shares
purchased. The Company shall make prompt delivery of the certificate or
certificates for such shares, provided that if any law or regulation requires
the Company to take any action with respect to the shares specified in such
notice before the issuance thereof, then the date of delivery of such shares
shall be extended for the period necessary to take such action. Neither
Optionee nor any person claiming under or through Optionee shall have any rights
as a shareholder of the Company with respect to any of the Option Shares until
full payment of the Option Price and delivery to Optionee of certificates for
such shares as provided herein.
4. OPTION SUBJECT TO THE PLAN. This Agreement incorporates the
provisions of the Plan by reference, and all rights and privileges contained in
this Agreement, are subject to all of the terms, conditions and limitations
imposed or required to be imposed thereon under the Plan. In the event of any
conflict between the provisions of this Agreement and the provisions of the
Plan, the provisions of the Plan shall supersede the provisions of this
Agreement and shall in all respect be deemed to be controlling.
<PAGE>
5. NONTRANSFERABILITY OF OPTION. The Option shall not be
transferable or assignable, in whole or in part, by the Optionee. The Option
shall be exercisable during the Optionee's lifetime only by the Optionee, and in
the event of the death of the Optionee the Option shall be exercisable only in
accordance with Section 4.3(f) of the Plan. The Option shall not be pledged or
hypothecated in any way and shall not be subject to execution, attachment or
similar process, or to any claim or interest of a spouse upon divorce from the
Optionee. Any attempted transfer, assignment, pledge, hypothecation or other
disposition of the Option or any execution, attachment or similar process upon
the Option, shall be null, void and without effect and shall cause the immediate
expiration of the Option.
6. EFFECT OF AMENDMENT, SUSPENSION OR TERMINATION OF EXISTING
OPTIONS. Except as provided in the Plan, no amendment, suspension or
termination of the Plan shall, without the Optionee's consent, materially impair
any of the rights or obligations of the Company or the Optionee with respect to
the Option.
7. RESTRICTIONS ON ISSUING COMMON SHARES. The Common Shares
subject to issuance upon exercise of the Option shall not be issued pursuant to
the exercise of the Option unless the transferability of the Common Shares so
issued and/or the actual issuance of the Common Shares comply with all relevant
provisions of law, including, but not limited to, the (i) restrictions, if any,
imposed by the Indiana Securities Law, as amended, (ii) restrictions, if any,
imposed by the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated by the United
States Securities and Exchange Commission thereunder, and (iii) requirements of
any stock exchange upon which the Common Shares may then be listed. The Board
of Directors of the Company shall, in its sole and absolute discretion,
determine if such restrictions or such issuance of shares so complies with all
relevant provisions of law. Each certificate for shares issued pursuant to this
Option shall carry a legend reflecting applicable transfer restrictions and the
Company's repurchase rights.
8. INVESTMENT INTENT. The Optionee represents to the Company
that the Option and the Common Shares to be acquired pursuant to the exercise
thereof is being or will be acquired by the Optionee for investment only and not
for resale or distribution thereof to any other person. The Optionee
acknowledges that neither the Option nor the Common Shares to be acquired
pursuant to the exercise of the Option have been registered under the Securities
Act of 1933, as amended, or any state securities law, and that neither the
Option nor the Common Shares may be sold, transferred, pledged, or hypothecated
unless first registered under such laws, or unless counsel for the Company has
given an opinion that registration under such laws is not required. The
Optionee agrees to the placement of a legend to that effect upon any certificate
evidencing the Common Shares acquired through the exercise of the Option.
9. NO RIGHTS VESTED AS A SHAREHOLDER. The Optionee shall not
have any of the rights of a shareholder of the Company by reason of the grant of
the Option until such Option is exercised in accordance with the Plan and
certificates representing the Common Shares are actually issued to the Optionee
pursuant to such exercise of the Option.
10. NO EMPLOYMENT RIGHTS. Neither the establishment of the
Plan nor the grant of any Option shall give the Optionee any right to continued
employment or a board position with the Company or an Affiliate as defined in
the Plan.
11. ACKNOWLEDGMENT. The Optionee hereby (a) acknowledges
receipt of a copy of the Plan, (b) represents that he or she is familiar with
the terms, conditions and limitations of the Plan, and (c) accepts the Option
subject to all the terms, conditions and
2
<PAGE>
limitations of the Plan. The Optionee agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board of Directors of the
Company upon any determinations or questions arising under the Plan or this
Agreement.
12. PRIOR AGREEMENTS SUPERSEDED. This Agreement expresses the
entire understanding of the parties with respect to the Option and the
Optionee's right to purchase stock of the Company, and supersedes all prior oral
and written communications between the parties with respect thereto, which prior
oral and written communications shall have no further force or effect.
13. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana.
IN WITNESS WHEREOF, the Company, by its authorized representative,
and the Optionee have entered into this Agreement as of the date first written
above.
PTC BANCORP
_________________ By: __________________
Witness Printed: _____________
Title: _______________
OPTIONEE
_________________ ______________________
Witness
3
Exhibit 10.3
PTC BANCORP
INCENTIVE STOCK OPTION PLAN
---------------------------
1. PURPOSES OF THE PLAN. The purposes of this Incentive Stock Option Plan
are to attract and retain the best available personnel, to provide additional
incentive to the Employees of PTC Bancorp (the "Company") and to promote the
success of the Company's business.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON SHARES" shall mean the Common Shares, without par value,
of the Company.
(d) "COMPANY" shall mean PTC Bancorp, an Indiana corporation.
(e) "EMPLOYEE" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(f) "INCENTIVE STOCK OPTION" shall mean an Option intended to qualify
as an incentive stock option within the meaning of Section 422A of the Code.
(g) "OPTION" shall mean a stock option granted pursuant to the Plan.
(h) "OPTION AGREEMENT" shall mean a written agreement or agreements
between the Company and an Employee evidencing the terms of an Option.
(i) "OPTION PRICE" means the price for each Common Share which is the
subject of an Option as determined in accordance with Section 7.
(j) "OPTION SHARES" shall mean the Common Shares subject to an
Option.
(k) "OPTIONEE" shall mean an Employee who receives an Option.
(l) "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 425(e) of the Code.
(m) "PLAN" shall mean this PTC Bancorp Incentive Stock Option Plan.
(n) "SHARE" shall mean a Common Share, as adjusted in accordance with
Section 10 of the Plan.
(o) "SUBSIDIARY" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 425(f) of the Code.
<PAGE>
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 10 of
the Plan, the maximum aggregate number of Shares under the Plan is 19,000 Common
Shares. The Shares may be authorized, but unissued, or reacquired Common
Shares. If any Option should expire or become unexercisable for any reason
without having been exercised in full, then the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant or sale under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE. The Plan shall be administered by the Board of
Directors of the Company.
(b) POWERS OF THE BOARD. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion: (i) to grant Incentive Stock
Options; (ii) to determine, upon review of relevant information and in
accordance with Section 7 of the Plan, the fair market value of the Common
Shares; (iii) to determine the Option Price per Share of Options to be granted,
which Option Price shall be determined in accordance with Section 7 of the Plan;
(iv) to determine the Employees to whom, and the time or times at which, Options
shall be granted and the number of shares to be represented by each Option; (v)
to interpret the Plan; (vi) to prescribe, amend and rescind rules and
regulations relating to the Plan; (vii) to determine the terms and provisions of
each Option granted (which need not be identical) and, with the consent of the
holder thereof, modify or amend each Option; (viii) to accelerate or defer (with
the consent of the Optionee) the exercise date of any Option, consistent with
the provisions of Section 5 of the Plan; (ix) to authorize any person to execute
on behalf of the Company any instrument required to effectuate the grant of an
Option previously granted by the Board; and (x) to make all other determinations
deemed necessary or advisable for the administration of the Plan.
(c) VESTING OF OPTION. Unless otherwise determined by the Board at the
time of grant of an Option, the right of an Optionee to exercise an Option shall
vest and become effective only to the extent set forth below and after the
Optionee has been continuously employed by the Company or a Parent or Subsidiary
of the Company for the time periods specified below:
Aggregate
Percentage Length of Continuous
Vested Employment After Option Grant
---------- -----------------------------
25% After 12 months from date of
Option Grant
50% After 24 months from date of
Option Grant
75% After 36 months from date of
Option Grant
100% After 48 months from date of
Option Grant
For these purposes, an Optionee shall be deemed to have been "continuously
employed" so long as the Optionee receives compensation from the Company or a
Parent or Subsidiary of the Company at customary and regular intervals, without
any interruptions, in accordance with the established payroll policies.
2
<PAGE>
The Options granted herein shall become exercisable for the entire Option
Shares (to the extent not previously vested or exercised) immediately prior to
the consummation of any of the following events: (i) the sale or transfer by
the Company or a Parent or Subsidiary of the Company of all or substantially all
of its assets; (ii) the sale or exchange in one transaction of outstanding
shares of the Company having at least two-thirds (2/3) of the total number of
votes that may be cast for the election of the Board of the Company; (iii) any
cash tender offer or exchange offer, contested election, or any combination of
the foregoing transactions, as a result of which the persons who are Directors
of the Company before the transaction shall cease to constitute a majority of
the Board of Directors of the Company or any successor to the Company; or (iv)
any merger or other business combination or similar action of the Company in
which the Shareholders of the Company receive less than fifty percent (50%)
voting interest in the new continuing entity. In the event and to the extent
the Options are not exercised, upon occurrence of one of these events the
Options shall terminate.
(d) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees. An
Employee who has been granted an Option may, if such Employee is otherwise
eligible, be granted additional Option(s).
(b) No Incentive Stock Option may be granted to an Employee which,
when aggregated with all other incentive stock options granted to such Employee
by the Company or any Parent or Subsidiary, would result in Shares having an
aggregate fair market value (determined for each Share as of the date of grant
of the Option covering such Share) in excess of $100,000 becoming first
available to purchase upon exercise of one or more Incentive Stock Options
during any calendar year.
(c) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment by the Company, nor shall it interfere in
any way with his or her right or the Company's right to terminate his or her
employment or services at any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 12 of the Plan.
7. OPTION PRICE AND CONSIDERATION.
(a) The Option Price for Shares to be issued pursuant to exercise of
an Option shall be such price as is determined by the Board, but shall be
subject to the following in the case of an Incentive Stock Option:
(i) if granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the Option Price shall be no less than 110% of the fair market value
per Share on the date of grant; or
3
<PAGE>
(ii) if granted to any other Employee, the Option Price shall be
no less than 100% of the fair market value per Share on the date of grant.
(b) The fair market value shall be determined by the Board in its
discretion; provided, however, that where there is a public market for the
Common Shares, the fair market value per Share shall be the mean of the bid and
asked prices [or the closing price per Share if the Common Shares are listed on
the National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System] of the Common Shares for the date of grant, as reported
in THE WALL STREET JOURNAL (or, if not so reported, as otherwise reported by the
NASDAQ System) or, in the event the Common Shares are listed on a stock
exchange, the fair market value per Share shall be the closing price on such
exchange on the date of grant of the Option, as reported in THE WALL STREET
JOURNAL.
(c) The consideration to be paid for the Shares to be issued upon exercise
of an Option, including the method of payment, shall be determined by the Board
and may consist entirely of cash, check, promissory note, other Common Shares
having a fair market value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised, or any
combination of such methods of payment, or such other consideration and method
of payment for the issuance of Shares to the extent permitted under the Indiana
Business Corporation Law, as amended.
8. OPTIONS.
(a) TERM OF OPTION. The term of each Incentive Stock Option shall be
ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement. However, in the case of an Option granted to
an Employee who, at the time the Option is granted, owns stock representing more
than ten percent (l0%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant thereof or such shorter time as may be provided in
the Option Agreement.
(b) EXERCISE OF OPTION.
(i) EXERCISE RIGHTS. Each Option shall be exercisable by the Optionee (or
his or her successors if Section 8(b)(iii) is applicable) only to the extent the
Option is vested. Notwithstanding the foregoing, no Option granted under the
Plan shall be exercisable if the Optionee is in violation of, or has violated,
any agreement between the Optionee and the Company.
(ii) EXERCISE OF OPTION. On and after the date any portion of the Option
becomes exercisable pursuant to Section 8(b)(i) the Optionee with respect to
such Option may only exercise such Option to the extent vested by written
exercise and subscription agreement which shall:
(A) state the election to exercise the Option, the number of
Common Shares in respect of which it is being exercised, the person(s) in whose
name(s) the stock certificate(s) for such shares is (are) to be registered,
including pertinent address(es) and social security number(s);
(B) contain such representations and agreements, if any, as may be
required by the Company related to the Optionee's investment intent regarding
the acquisition of such Common Shares and other provisions related to applicable
exemptions from Federal or state securities law registration requirements;
4
<PAGE>
(C) contain such agreement, if any, as may be required by the
Company related to restrictions on the transferability of such Common Shares;
(D) be signed by the Optionee; and
(E) be in writing and delivered in person or by mail to the
President of the Company.
Notwithstanding anything in the Plan to the contrary, no Option shall be
exercised if the issuance of the Common Shares upon such exercise would
constitute a violation of any applicable Federal or state securities laws or
other laws or regulations.
(iii) DEATH OF OPTIONEE. If an Optionee dies while in the employ of the
Company or any Parent or Subsidiary of the Company, an Option granted to such
deceased Optionee may be exercised (to the extent vested) by the personal
representative, executor, or administrator of such deceased Optionee's estate,
or by the person or persons to whom the Option has been transferred under the
Optionee's last will and testament or the applicable laws of descent and
distribution, for a period of twelve (12) months after the Optionee's death
provided, however, such right of exercise shall not effect the earlier
expiration of such Option as provided in the Plan or the applicable Option
Agreement. Options granted to an Optionee shall automatically expire twelve
(12) months after such Optionee's death. The Company shall be under no
obligation to honor any notice of exercise or to deliver certificates
representing the Common Shares purchased pursuant to any exercise until the
Company is satisfied as to the authority of the person or persons exercising the
Option.
(iv) DISABILITY OF OPTIONEE. Notwithstanding other terms and provisions
of this Plan, in the event an Optionee ceases to be employed with the Company as
a result of such Optionee's total and permanent disability (as defined in
Section 22(e)(3) of the Code), such Optionee may, but only within six (6) months
(or such other period of time not exceeding twelve (12) months as is determined
by the Board, with such determination being made at the time of grant of the
Option and reflected in the Option Agreement) from the date of such termination
(but in no event later than the date of expiration of the term of such Option as
set forth in the Option Agreement), exercise the Option to the extent such
Optionee was entitled to exercise it at the date of such termination. To the
extent such Optionee was not entitled to exercise the Option at the date of
termination, or if such Optionee does not exercise such Option which such
Optionee was entitled to exercise within the time specified herein, the Option
shall terminate.
(v) TERMINATION OF STATUS AS AN EMPLOYEE. In the event an Optionee ceases
to be continuously employed as an Employee, the Option granted to such Employee
shall immediately terminate unless otherwise determined by the Board of
Directors.
9. NON-TRANSFERABILITY OF OPTIONS. The Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised during the
lifetime of the Optionee only by the Optionee.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION AND DISSOLUTION OR
LIQUIDATION. Subject to any required action by the shareholders of the Company,
the number of Common Shares covered by each outstanding Option and the number of
Common Shares which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an
5
<PAGE>
Option, as well as the Option Price of Common Shares covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued Common Shares resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Shares of the Company or the payment of a stock dividend with respect to
the Common Shares or any other increase or decrease in the number of issued
Common Shares effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Common
Shares subject to an Option.
In the event of the dissolution or complete liquidation of the Company,
any Option shall terminate as of a date to be fixed by the Board of Directors;
provided, however, that not less than thirty (30) days' written notice of the
date so fixed shall be given to each Optionee and each such Optionee shall
have the right during such period to exercise his or her Option as to all or
any part of the Common Shares covered thereby to the extent vested.
11. TIME OF GRANT. The date of grant of an Option shall, for all
purposes, be the date on which the Board makes the determination granting such
Option. Notice of the determination shall be given to each Employee to whom an
Option is so granted within a reasonable time after the date of such grant.
12. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided that the following revisions or amendments shall require approval of
the shareholders of the Company:
(i) any increase in the number of Shares subject to the Plan,
other than in connection with an adjustment under Section 10 of the Plan;
(ii) any change in the designation of the class of persons
eligible to be granted Options; or
(iii) if the Company has a class of equity securities registered
under Section 12 of the Securities Exchange Act of 1934 (the "Exchange Act") at
the time of such revision or amendment, any material increase in the benefits
accruing to participants under the Plan.
(b) SHAREHOLDER APPROVAL. If any amendment requiring shareholder
approval under Section 12(a) of the Plan is made subsequent to the first
registration of any class of equity securities by the Company under Section 12
of the Exchange Act, such shareholder approval shall be solicited as described
in Section 16 of the Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
6
<PAGE>
13. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
14. RESERVATION OF SHARES. The Company, during the terms of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
15. OPTION AGREEMENTS. Options shall be evidenced by Option Agreements in
such form as the Board shall approve.
16. SHAREHOLDER APPROVAL.
(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the date
the Plan is adopted.
(b) If and in the event that the Company registers any class of
equity securities pursuant to Section 12 of the Exchange Act, any required
approval of the shareholders of the Company obtained after such registration
shall be solicited substantially in accordance with Section 14(a) of the
Exchange Act and the rules and regulations promulgated thereunder.
17. INFORMATION TO OPTIONEES. The Company shall provide to each Optionee,
during the period for which such Optionee has one or more Options outstanding,
copies of all annual reports and other information which are provided to all
shareholders of the Company. The Company shall not be required to provide such
information if the issuance of Options under the Plan is limited to key
employees whose duties in connection with the Company assure their access to
equivalent information.
Date of Adoption by the Board - July 6, 1993
Date of Approval by the Shareholders - _________
7
Exhibit 10.4
PTC BANCORP
-----------
INCENTIVE STOCK OPTION AGREEMENT
--------------------------------
THIS AGREEMENT is made and entered into as of the 6th day of July, 1993
(the "Option Grant Date"), by and between PTC BANCORP, an Indiana corporation
(the "Company"), and XXXXXXXXXXX ("Employee").
RECITALS:
A. Employee is an executive employee of the Company, and is in a position
to contribute significantly to the Company's long term growth and strategic
goals.
B. As an added incentive to advance the interests of the Company, the
Company, by its Board of Directors (the "Board"), desires to grant to Employee
an Incentive Stock Option to purchase Common Shares of the Company in accordance
with the Incentive Stock Option Plan originally adopted by the Board on July 6,
1993 (the "Plan") and attached hereto as Exhibit "A" and incorporated herein by
reference. All capitalized terms not defined herein shall have the meanings
ascribed to such terms in the Plan, unless the context requires otherwise.
AGREEMENT:
In consideration of these recitals, the parties hereby agree as follows:
1. GRANT OF OPTION. The Company hereby grants to Employee the right,
privilege and option to purchase YYYYYYYYYYYY (yyyyyy) Common Shares of the
Company (the "Option Shares") at the purchase price of ZZZZZZ Dollars ($zzzzz)
per share (the "Option"), in the manner and subject to the terms and conditions
provided in this Agreement and the Plan. The parties acknowledge that the
Option is intended to qualify as an incentive stock option within the meaning of
Section 422A of the Code.
2. VESTING OF OPTION. The right of the Employee to exercise an Option
shall vest and become effective only to the extent set forth below and after the
Employee has been continuously employed by the Company or a Parent or Subsidiary
of the Company for the time periods specified below:
Aggregate
Percentage Length of Continuous
Vested Employment After Option Grant Date
---------- ----------------------------------
25% After 12 months from
Option Grant Date
50% After 24 months from
Option Grant Date
75% After 36 months from
Option Grant Date
100% After 48 months from
Option Grant Date
<PAGE>
For these purposes, the Employee shall be deemed to have been "continuously
employed" so long as the Employee receives compensation from the Company or a
Parent or Subsidiary of the Company at customary and regular intervals, without
any interruptions, in accordance with the established payroll policies.
3. TIME AND EXERCISE OF OPTIONS. Subject to the terms of the Plan, at
such time as the Option becomes exercisable pursuant to Section 2, the Option
may be exercised in whole or in part, from time to time, prior to July 6, 2002;
subject, however, to earlier expiration as provided in the Plan. Upon
expiration of the Option this Agreement shall terminate.
4. METHOD OF EXERCISE. The Option shall be exercised by written notice
directed to the Company in substantially the form attached hereto as Exhibit
"B", accompanied by a check or other consideration acceptable to the Board in
full payment of the Option Price for the specified number of shares purchased.
The Company shall make prompt delivery of the certificate or certificates for
such shares, provided that if any law or regulation requires the Company to take
any action with respect to the shares specified in such notice before the
issuance thereof, then the date of delivery of such shares shall be extended for
the period necessary to take such action. Neither Employee nor any person
claiming under or through Employee shall have any rights as a shareholder of the
Company with respect to any of the Option Shares until full payment of the
Option Price and delivery to Employee of certificates for such shares as
provided herein.
5. NON-TRANSFERABILITY OF OPTION. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised during the
lifetime of Employee only by Employee.
6. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
Employee to represent and warrant at the time of any such exercise that the
Shares are being purchased only for investment and without any present intention
to sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.
7. RIGHT TO TERMINATE EMPLOYMENT. Nothing contained in this Agreement
shall restrict the right of the Company to terminate the employment of Employee
at any time.
8. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana.
10. OPTION SUBJECT TO THE PLAN. This Agreement incorporates the
provisions of the Plan by reference, and all rights and privileges contained in
this Agreement,
2
<PAGE>
are subject to all of the terms, conditions and limitations imposed or required
to be imposed thereon under the Plan. In the event of any conflict between the
provisions of this Agreement and the provisions of the Plan, the provisions of
the Plan shall supersede the provisions of this Agreement and shall in all
respect be deemed to be controlling.
11. ACKNOWLEDGMENT. The Employee hereby (a) acknowledges receipt of a
copy of the Plan, (b) represents that he or she is familiar with the terms,
conditions and limitations of the Plan, and (c) accepts the Option subject to
all the terms, conditions and limitations of the Plan. The Employee agrees to
accept as binding, conclusive and final all decisions or interpretations of the
Board of Directors of the Company upon any determinations or questions arising
under the Plan or this Agreement.
12. PRIOR AGREEMENTS SUPERSEDED. This Agreement expresses the entire
understanding of the parties with respect to the Option and the Employee's right
to purchase stock of the Company, and supersedes all prior oral and written
communications between the parties with respect thereto, which prior oral and
written communications shall have no further force or effect.
IN WITNESS WHEREOF, the parties hereby have caused this Incentive Stock
Option Agreement to be executed as of the day and year first above written.
PTC BANCORP
________________ By: ____________________
Witness Printed: _______________
Title: _________________
"COMPANY"
________________ ___________________________
Witness XXXXXXXXXXX
"EMPLOYEE"
3
Exhibit 10.5
COMMERCIAL INSTALLMENT NOTE FOR BANK USE ONLY
- --------------------------- Debtor Name: P.T.C. BANCORP, INC.
Debtor #
Obligation #
Office: 101 W. Washington St.
Amount: City, State: Date:
$2,600,000.00 Indianapolis, IN May 18, 1994
FOR VALUE RECEIVED, the undersigned ("Debtor") promises to pay to the order of
NATIONAL CITY BANK, INDIANA ("Bank"), which has its principal place of business
at 101 West Washington Street, Indianapolis, IN 46255, Two Million Six Hundred
Thousand and No/100 Dollars ($2,600,000.00) in lawful money of the United
States. Debtor shall pay an initial principal payment in the amount of Seven
Hundred Fifty Thousand and No/100 Dollars ($750,000.00) on September 30, 1994.
The remaining principal, together with interest, shall be repaid in equal
consecutive quarterly instalments, commencing on December 31, 1994, and
continuing to be due and payable on the last day of each calendar quarter
thereafter, until September 30, 1999, when the total outstanding balance of this
note shall be due and payable. Each quarterly installment shall consist of
principal in the amount of Ninety-Two Thousand Five Hundred and No/100 Dollars
($92,500.00), plus accrued interest.
Prior to maturity, principal and any overdue interest shall bear interest
computed daily (on the basis of a 360-day year and actual days elapsed) at a
fluctuating rate which is equal to the Reference Rate. At the Debtors option
from time to time during the term of the Loan, the balance of the Loan may bear
interest at a fixed rate per annum (based upon a 360-day year and the actual
number of days elapsed) equal to the LIBOR Rate plus 185 basis points for
periods of thirty (30), sixty (60), ninety (90), one hundred twenty (120), or
one hundred eighty (180) days, as Debtor elects. Debtor must confirm the
election of any option in writing which must be received by Bank: at least one
(1) Business Day before the elected effective date. Such writing shall contain
all necessary details of the elected option and shall be signed by a duly
authorized officer of Debtor. Once elected, a fixed rate option shall be
irrevocable and may not be prepaid. Unless otherwise duly elected, advances
bearing interest at a fixed rate option shall automatically convert to bearing
interest at the Reference Rate upon expiration of the elected interest period.
Concurrently with any prepayment of the principal of this note, Debtor shall pay
the unpaid interest accrued on the principal being prepaid, and each prepayment
shall be applied to the outstanding installments of this note in the inverse
order of their respective due dates.
If Debtor fails to pay an installment in frill within ten (10) days after its
due date, Debtor, in each case, will incur and shall pay a late fee equal to the
greater of twenty dollars ($20.00) or five percent (5%) of the unpaid amount.
The payment of a late charge will not cure or constitute a waiver of any Event
of Default under this note.
Except as otherwise agreed in writing, payments will be applied first to
installments in the order of their respective due dates and then to late charges
in the order of their respective due dates; provided, however, that if a payment
so applied would pay the principal of this note in full, but leave
<PAGE>
late charges outstanding, such payment will instead be applied to late charges
prior to being applied to the principal portion of the final installment. Each
payment of an installment shall be applied first to accrued but unpaid interest
and then to principal.
In its discretion, Bank may, from time to time, unilaterally change any
provision for the application of payments and installments by mailing a written
notice to Debtor of the change. The notice shall be mailed to the address
indicated herein or such other address that Debtor may furnish in writing to an
appropriate officer of Bank: and shall be mailed not less than fifteen (15) days
prior to the effective date of such change.
If this note is not paid in full at maturity (whether by lapse of time,
acceleration of maturity or otherwise); the interest rate otherwise in effect
hereunder shall be increased by three percent (3%) per annum, provided that in
no event shall the principal of and interest on this note bear interest after
maturity at a rate less than the interest rate actually in effect hereunder
immediately after maturity.
The occurrence of any of the following shall constitute an EVENT OF DEFAULT
hereunder; (a) Debtor's Bank: Debt or any part thereof shall not be paid in
frill promptly when due (whether by lapse of time, acceleration of maturity or
otherwise); (b) any Obligor shall die or be dissolved; (c) any representation or
warranty made by an Obligor in this note or any Related Writing shall be false
or erroneous in any material respect; (d) any Obligor shall fail or omit to
perform or observe any agreement made by that Obligor in this note or any
Related Writing; (e) a judgment shall be entered against any Obligor in any
court of record; (f) any deposit account of any Obligor is attached or levied
upon; (g)any voluntary petition by or involuntary petition against any Obligor
shall be filed pursuant to any chapter of any bankruptcy code or any Obligor
shall make an assignment for the benefit of creditors, or there shall be any
other marshalling of the assets and liabilities of any Obligor for the benefit
of the Obligor's creditors; (h) any Obligor enters into any merger or
consolidation or sells, leases or otherwise disposes of all or substantially all
of such Obligor's assets in any manner other than in the ordinary course of
business; or (i) any Obligor's Bank: Debt or any part thereof shall not be paid
in full immediately when due (whether by lapse, of time, acceleration of
maturity or otherwise). Upon the occurrence of an Event of Default, the holder
of this note may, in its sole discretion, declare this note to be due and
payable, and the principal of and interest on this note shall thereupon become
immediately payable in frill, without any presentment, demand or notice of any
kind, which Debtor hereby waives. Debtor will pay to Bank: all costs and
expenses of collection of this note, including, without limitation attorneys'
fees.
In this note, (a) DEBT means, collectively, all monetary liabilities, and any
charges or expenses incurred in connection therewith, now or
hereafter owing by the Person or Persons in question,
including, without limitation, every such liability whether
owing by such Person or one (1) of such Persons alone or
jointly, severally or jointly and severally, whether owing
absolutely or contingently, or directly or indirectly, and
whether created by loan,
2
<PAGE>
overdraft, guaranty or other contract or by quasi-contract,
tort, statute or other operation of law; (b) BANK DEBT means
Debt payable to Bank, whether initially payable to Bank or
acquired by Bank by purchase, pledge or otherwise and whether
assigned to or participated to or from Bank in whole or in
part; (c) PRIME RATE means the fluctuating rate of interest
which is publicly announced from time to time by Bank at its
principal place of business as being its "prime rate" or
"base rate" thereafter in effect, with each change in the
Prime Rate automatically, immediately and without notice
changing the fluctuating interest rate thereafter applicable
hereunder, it being agreed that the Prime Rate is not
necessarily the lowest rate of interest then available from
Bank on fluctuating rate loans; (d) OBLIGOR means any Person
who is or shall become obligated or whose property is or
shall serve as collateral for the payment of Debtor's Bank
Debt or any part thereof in any manner and, in addition to
Debtor, includes, without limitation, any maker, endorser,
guarantor, subordinating creditor, assignor, pledgor,
mortgagor or hypothecator of property; (e) RELATED WRITING
means a writing of any form or substance signed by any
Obligor (whether as principal or agent) or by any attorney,
accountant or other representative of any Obligor and
received by Bank in respect of Debtor's Bank Debt or any part
thereof, including, without limitation, any credit
application, credit agreement, reimbursement agreement,
financial statement, promissory note, guaranty, indenture,
mortgage, security agreement, authorization, subordination
agreement, certificate, opinion or any similar writing, but
shall not include any commitment letter issued by Bank,
without regard to whether Debtor or any other Person signed
or acknowledged receipt thereof; (f) PERSON means a natural
person or entity of any kind, including, without limitation,
any corporation, partnership,
3
<PAGE>
trust, governmental body or any other form or kind of entity;
(g) BUSINESS DAY means a day on which Bank's main office is
open to the public for carrying on substantially all of its
banking functions, but shall not include Saturdays, Sundays
or legal holidays; (h) REFERENCE RATE shall mean the rate in
effect on any given day that is the higher of either (a)
Bank's Prime Rate or (b) a rate equal to one-half of one
percent (0.50%) above the Federal Funds Rate; and, (i) LIBOR
RATE shall mean that rate of interest as quoted by Bank:
which shall be based upon the rate offered to Bank through
leading banks in the London Interbank Market for U.S. Dollar
deposits on immediately available funds for the interest rate
period elected by Borrower plus the cost of any reserve
requirements that may be imposed upon Bank for such deposits
if Bank elects to match funds.
Debtor certifies to Bank that all fluids disbursed under this note will be used
for business or commercial purposes.
Debtor and the undersigned guarantors, if any, hereby authorize Bank to share
all credit and financial information relating to Debtor and the undersigned
guarantors, if any, with Bank's parent company, and with any subsidiary or
affiliate company of Bank or of Bank's parent company.
In no event shall the interest rate in effect on this note exceed the maximum
rate permissible under the law governing this note.
If Debtor consists of more than one Person, Debtor shall be jointly and
severally liable on this note.
Any holder's delay or omission in the exercise of any right under this note
shall not operate as a waiver of that right or of any other right under this
note.
If any provision of this note is determined by a court of competent jurisdiction
to be invalid, illegal or unenforceable, that determination shall not affect any
other provision of this note, and each such other provision shall be construed
and enforced as if the invalid, illegal or unenforceable provision were not
contained herein.
This note and the Related Writings set forth the entire agreement between the
parties regarding the transactions contemplated hereby, and supersede all prior
agreements, commitments, discussions, representations and understandings,
whether written or oral, and any and all contemporaneous oral
4
<PAGE>
agreements, commitments, discussions, representations and understandings between
the parties relating to the subject matter hereof.
No amendment, modification or supplement to this note or any Related Writing
shall be binding unless executed in writing by all parties thereto, and this
provision shall not be subject to waiver by any party and shall be strictly
enforced.
This note shall be governed by the law of the state in which Bank has its
principal place of business.
IN ORDER TO AVOID DELAYS AND MINIMIZE EXPENSE, BANK, BY ITS ACCEPTANCE OF THIS
NOTE, AND DEBTOR EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHT TO TRIAL BY WRY IN RESPECT OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY RELATED WRITING OR
ANY AMENDMENT THERETO, WHETHER NOW EXISTING OR HEREINAFTER ARISING AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE, AND EACH PARTY HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY A COURT TRIAL WITHOUT A JURY, AND A COPY OF THIS NOTE MAY BE FILED WITH ANY
COURT AS EVIDENCE OF THE CONSENT OF EACH OF THE PARTIES HERETO TO THEE WAIVER OF
ITS RIGHT TO TRIAL BY JURY.
"DEBTOR"
Address: State Road 101 and P.T.C.BANCORP, INC., an Indiana
Reservoir Hill Road corporation
Brookville, Indiana 47012
Telephone #: 317-647-3591
TIN #: 35-1606016 By: /s/ James L. Saner Sr.
---------------------------
James L.Saner
President
Bank Officer as Witness:
- -----------------------------
Brent A.Holmes
Vice President
5
LOAN AGREEMENT
--------------
THIS LOAN AGREEMENT, is entered into this 18th day of May, 1994, by
and between P.T.C. BANCORP, INC., an Indiana corporation, having its principal
office located at the junction of State Road 101 and Reservoir Hill Road,
Brookville, Indiana 47012, (hereinafter referred to as ("Debtor") and NATIONAL
CITY BANK, INDIANA, a national banking association, having its principal
offices at 101 West Washington Street, Indianapolis, Indiana 46255
(hereinafter referred to as "Bank").
WITNESSETH:
WHEREAS, Debtor is engaged in business as a bank holding company; and
WHEREAS, Debtor desires to obtain from Bank a Two Million Six Hundred Thousand
($2,600,000.00) secured term loan (the "Loan") to refinance the balance of an
existing short term loan from Bank to Debtor Such funds were used to refinance
the balance of a loan from Fifth-Third Bank and to provide capital funds for
Debtor's Subsidiary bank; and
WHEREAS, Bank is willing to provide said financing subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of these premises and the
undertakings of the parties hereto, Debtor and Bank hereby agree as follows:
1. Definitions. Definitions of certain of the terms used in this
Agreement are set out as follows:
(a) "Bank Debt" shall mean Debt payable to Bank, whether
initially payable to Bank or acquired by Bank by
purchase, pledge or otherwise and whether assigned to
or participated to or from Bank in whole or in part.
(b) "Cash Flow" shall mean net income plus depreciation,
amortization, interest expense, and income taxes.
(c) "Debt" shall mean collectively, all monetary
liabilities, and any charges or expenses incurred in
connection therewith, now or hereafter owing by the
<PAGE>
Person or Persons in question, including, without
limitation, every such liability whether owing by such
Person or one (1) of such Persons alone or jointly,
severally or jointly and severally, whether owing
absolutely or contingently, or directly or indirectly,
and whether created by loan, overdraft, guaranty or
other contract or quasi-contract, tort, statute or
other operation of law .
(d) "Federal Funds Rate" shall mean a floating rate per
annum equal to the Federal Funds Rate plus fifty (50)
basis points.
(e) "LIBOR Rate" shall mean that rate of interest as
quoted by Bank which shall be based upon the rate
offered to Bank through leading banks in the London
Interbank Market for U.S. Dollar deposits on
immediately available funds for the interest rate
period elected by Borrower plus the cost of any
reserve requirements that may be imposed upon Bank for
such deposits if Bank elects to match funds.
(f) "Nonperforming Assets" shall mean the aggregate sum of
(i) Loans that are past due ninety (90) days or more,
plus (ii) Non accrual loans, plus (iii) Other Real
Estate Owned, as reported in the quarterly Call
Reports of Bank Subsidiary.
(g) "Obligor" shall mean any person who is or shall become
obligated or whose property is or shall serve as
collateral for the payment of Debtor's Bank Debt or
any part thereof in any manner and, in addition to
Debtor, includes, without limitation, any maker,
endorser, guarantor, subordinating creditor, assignor,
pledgor, mortgagor or hypothecator of property.
(h) "Person" shall mean a natural person or entity of any
kind, including, without limitation, any corporation,
partnership, trust, governmental body or any other
form of entity.
2
<PAGE>
(i) "Primary Capital " shall mean the aggregate sum
of (i) Total equity, plus (ii) Loan loss
reserve, as reported in the quarterly Call
Reports of Bank Subsidiary.
(j) "Prime Rate" shall mean the fluctuating rate of
interest which is publicly announced from time
to time by Bank at its principal place of
business as being its "prime rate" or "base
rate" thereafter in effect, with each change in
the Prime Rate automatically, immediately and
without notice changing the fluctuating interest
rate thereafter applicable hereunder, it being
agreed that the Prime Rate is not necessarily
the lowest rate of interest then available from
Bank on fluctuating rate loans.
(k) "Reference Rate" shall mean the rate in effect
on any given day that is the higher of either
(a) Bank's Prime Rate or (b) Federal Funds Rate.
(l) "Related Writing" shall mean a writing of any
form or substance signed by any Obligor (whether
as principal or agent) or by any attorney,
accountant or other representative of any
Obligor and received by Bank in respect of
Debtor's Bank Debt or any part thereof,
including, without limitation, any credit
application, credit agreement, reimbursement
agreement, financial statement, promissory note,
guaranty, indenture, mortgage, security
agreement, certificate, opinion or any similar
writing, but shall not include any commitment
letter issued by Bank, without regard to whether
Debtor or any other Person signed or
acknowledged receipt thereof.
(m) "Return on Assets" shall mean (i) Net Income
divided by (ii) Total Assets, as reported in the
quarterly Call Reports of Bank Subsidiary.
(n) "Underperforming Loans" shall mean the aggregate
sum of (i) Non Accrual Loans, plus (ii) Loans
that are past due ninety (90) days or more, as
reported in the quarterly Call Reports of Bank
Subsidiary.
3
<PAGE>
Other Definitions: Rules of Construction. Terms defined in this
Section, as well as terms defined throughout this Agreement, shall include
both the singular and plural forms thereof and shall be construed accordingly.
All computations required hereunder and all financial terms used herein shall
be made or construed in accordance with generally accepted accounting
principles unless such principles are inconsistent with the express
requirements of this Agreement.
2. Term Loan. Bank shall, subject to the terms and conditions of
this Agreement, allow Debtor to refinance the outstanding balance of its
existing term loan from Bank under a secured term loan in the principal amount
of Two Million Six Hundred Thousand and No/100 Dollars ($2,600,000.00) (the
"Loan"). The Loan shall bear interest at a fluctuating rate (based upon a
360-day year and the actual number of days elapsed) equal to the Reference
Rate. At the Debtor's option from time to time during the term of the Loan,
the balance of the Loan may bear interest at a fixed rate per annum (based
upon a 360-day year and the actual number of days elapsed) equal to the LIBOR
Rate plus 185 basis points for periods of thirty (30), sixty (60), ninety
(90), one hundred twenty (120), or one hundred eighty (180) days, as Debtor
elects. Debtor must confirm the election of any option in writing which must
be received by Bank at least one (1) Business Day before the elected effective
date. Such writing shall contain all necessary details of the elected option
and shall be signed by a duly authorized officer of Debtor. Once elected, a
fixed rate option shall be irrevocable and may not be prepaid. Unless
otherwise duly elected, advances bearing interest at a fixed rate option shall
automatically convert to bearing interest at the Reference Rate upon
expiration of the elected interest period. Debtor shall pay an initial
principal payment in the amount of Seven Hundred Fifty Thousand and No/l00
Dollars ($750,000.00) on September 30, 1994. The remaining principal balance
of the Loan shall be repaid in equal quarterly installments of principal, each
in the amount of Ninety-Two Thousand Five Hundred and No/100 Dollars
($92,500.00), plus accrued interest, commencing December 31, 1994, and
continuing to be due and payable on the last day of each calendar quarter
thereafter until September 30, 1999, when the total outstanding balance of
unpaid principal, accrued interest, and charges provided for herein shall
become due and payable.
4
<PAGE>
The Loan shall be evidenced by a Commercial Installment Note (the "Loan Note")
in the form attached hereto as Exhibit "A", the terms of which are
incorporated herein. The account records of Bank shall be a prima facie
evidence of transactions between Debtor and Bank for the purpose of the Loan.
3. Collateral. The Loan granted hereunder and the performance of
all liabilities and covenants of Debtor in favor of Bank shall be secured, and
a first lien is hereby granted to Bank in on hundred percent (100%) of the
issued and outstanding shared of stock (the "Stock") of People's Trust
Company, Brookville, Indiana, an Indiana state bank, (the "Bank Subsidiary"),
pursuant to a Pledge Agreement, of even date herewith, the form of which is
attached hereto as Exhibit "B", the terms of which are incorporated herein.
4. Conditions Precedent. The following shall be conditions
precedent to the advancement of any portion of the Loan by Bank to Debtor:
(a) Debtor shall execute and deliver, or cause to be
delivered to Bank the Note, Pledge-Agreement, and
other documents required hereunder;
(b) Debtor shall furnish to Bank evidence, satisfactory to
Bank, that there are no other liens or encumbrances of
any kind upon the collateral pledged by Debtor to Bank
hereunder;
(c) Debtor shall furnish to Bank certified copies of
resolutions of the Board of Directors of Debtor
approving and authorizing the borrowings from Bank and
the execution and delivery of all documents in
connection therewith;
(d) Debtor shall furnish or cause to be furnished to Bank
a copy of Debtor's and Bank Subsidiary's respective
Articles of Incorporation, and its By-Laws, with all
amendments thereto, and a Certificate of Existence,
currently certified respectively by their respective
corporate secretaries and the Secretary of State of
Indiana;
5
<PAGE>
(e) Debtor shall furnish to Bank a certificate of
incumbency for Debtor's officers together with
specimen signatures thereof;
(f) Debtor shall furnish to Bank upon request a
certification that the warranties and representations
set forth in this Agreement are true and correct and
that there has been full compliance with the covenants
set forth in this Agreement;
(g) Debtor shall furnish to Bank an opinion of Debtor's
counsel, which is acceptable to Bank and its counsel,
to the effect that:
(i) Debtor and Bank Subsidiary are a bank holding
corporation and a state banking corporation,
respectively, duly organized, validly existing
and in good standing under the laws of the
State of Indiana and have the power, authority
and necessary licenses to carry on their
respective businesses as now conducted or
proposed to be conducted;
(ii) This Agreement and all documents and
instruments required hereunder or in
connection herewith have been duly authorized
by all corporate action necessary on the part
of Debtor and have been executed and delivered
by the duly authorized officers of Debtor, and
such instruments constitute legal, valid and
binding instruments in accordance with their
terms;
(iii) There is no material litigation or proceeding
pending, or, to the knowledge of counsel,
threatened against or otherwise affecting
Debtor, Bank Subsidiary, or any of their
respective properties or assets before any
court or before or by any governmental agency;
and
6
<PAGE>
(iv) Neither the execution nor the consummation of
the transactions contemplated by this
Agreement nor compliance with the terms and
provisions of the other documents referred to
above conflict with, result in a breach of or
constitute a default under, the terms,
conditions or provisions of the Articles of
Incorporation of Debtor or Bank Subsidiary,
any material contract or agreement of either
Debtor or Bank Subsidiary, or any law,
regulation, order, writ, injunction or decree
of any court or governmental instrumentality
having jurisdiction;
(h) Debtor shall furnish evidence to Bank, in form and
substance acceptable to Bank, that Debtor and Bank
Subsidiary are properly and adequately insured against
all risks and liabilities for which they can
reasonably be insured and for which companies in
similar businesses are insured. Such evidence shall
include but not be limited to, certificates of
insurance or certified insurance binders, or originals
or certified copies of insurance policies;
(l) Before being required to make any advance hereunder,
Bank may require Debtor to submit to Bank such
evidence and information to enable Bank to determine,
to Bank's satisfaction that: (1) there has been no
material deterioration of Debtor's financial position
since the execution of this Agreement and (2) that
Debtor has the financial capacity and is otherwise
able to repay all amounts owing or to be owed by
Debtor hereunder in accordance with the terms herein.
All documents required to be executed and delivered under this
paragraph shall be satisfactory in form and substance to Bank and its counsel.
Any of the foregoing conditions may be
7
<PAGE>
waived by Bank at the time of any advancement. In addition to all of the terms
and conditions to be performed by Debtor under this Agreement, Debtor shall
deliver or cause to be delivered to Bank such other documents as may from time
to time be required by Bank to carry out the terms and provisions of this
Agreement.
5. Representations and Warranties. Debtor represents and warrants
to Bank that:
(a) Debtor and Bank Subsidiary are a bank holding
corporation and a state banking corporation,
respectively, duly organized, validly existing and in
good standing under the laws of the State of Indiana
and has full corporate power under their respective
Articles of Incorporation, as amended, under all
applicable provisions of the law to procure the Loan,
grant the security interests and to consummate all
transactions connected with the Loan;
(b) Debtor and Bank Subsidiary have full corporate power
and authority to conduct business in the State of
Indiana;
(c) The procurement of the Loan and the consummation of
all transactions connected with the Loan have been
duly authorized by all necessary corporate action on
the part of the Debtor;
(d) All required federal, state and other tax returns have
been filed by Debtor and Bank Subsidiary, and the
taxes in connection therewith paid to date and no
additional taxes or assessments have been asserted or
are anticipated;
(e) There is no material litigation or proceeding pending,
or to the knowledge of Debtor, threatened against or
otherwise affecting Debtor, the Bank Subsidiary, or
any of their respective properties or assets before
any court or before or by any governmental agency;
8
<PAGE>
(f) The Stock is now solely owned by Debtor and is not
subject to any prior liens, security interests,
encumbrances or restrictions on transfer or
assignment;
(g) All information heretofore furnished to Bank by Debtor
is true, accurate and correct;
(h) There are no governmental authorizations, permits,
certificates, licenses, filings, registrations,
approvals or consents which must be obtained, received
or made by Debtor for Debtor lawfully to (i) make,
execute and deliver this Agreement; (ii) perform all
of Debtor's obligations under this Agreement; or (iii)
conduct Debtor's business as contemplated hereunder;
(i) Neither Debtor nor Bank Subsidiary are in material
violation of any local, state or federal law including
but not Limited to any health, labor or environmental
rules or regulations, and neither Debtor nor Bank
Subsidiary own any property which has been previously
used as a landfill, dump or disposal site for garbage
or refuse or for activities involving, directly or
indirectly, the generation, treatment, or disposal of
any Hazardous Materials;
(j) Debtor is in material compliance with the Employee
Retirement Income Security Act of 1974 ("ERISA")
insofar as such Act applies. No condition exists or
event or transaction has occurred in connection with
any plan, as defined in Section 3 of ERISA, maintained
by the Debtor, which could result in the incurrence of
any material liability, fine or penalty to the Debtor
for any such unfunded pension plan;
(k) Debtor is not now engaged principally, or as one of
Debtor's important activities, in the business of
extending credit for the purpose of purchasing or
carrying any margin stock (within the meaning of
Regulation U of the
9
<PAGE>
Board of Governors of the Federal Reserve System). No
part of the proceeds of the Credit and/or Loan
hereunder have been or will be used to purchase or
carry any such margin stock or to extend credit to
others for the purpose of purchasing or carrying any
such margin stock. If requested by Bank, Debtor will
furnish to Bank a statement in conformity with the
requirements of Federal Reserve Form U-1. No part of
the proceeds of the Loan have been or will be used for
purpose that violates, or which is inconsistent with
the provisions of Regulations G, U or X of said Board
of Governors; and
(l) Debtor further warrants to Bank that (a) none of the
written statements, representations or warranties
furnished by Debtor to Bank in connection with this
Agreement contains or will contain any untrue
statement or omits or will omit a material fact
necessary to make the statements contained therein or
herein, in light of the circumstances when made,
misleading; and (b) there is no fact which Debtor has
not disclosed to Bank which materially affects
adversely, or as far as Debtor presently can foresee,
will have a material adverse effect on the properties,
business, or condition (financial or otherwise) of
Debtor or the ability of Debtor to fully perform
Debtor's obligations under this Agreement.
All representations and warranties made by Debtor under or in
connection with this Agreement or in any other document delivered by Debtor to
Bank in connection with this Agreement shall survive the making of the Loan
and issuance and delivery of the Note to the Bank, notwithstanding any
investigation made by Bank or on Bank's behalf. All statements contained in
any certificate or financial statement delivered by Debtor to Bank under his
Agreement shall constitute representations and warranties made by Debtor
hereunder.
10
<PAGE>
6. Covenants. Debtor covenants to Bank that so long as the Loan
shall remain unpaid Debtor will:
(a) Promptly pay and discharge all taxes, assessments and
governmental charges which may be lawfully levied)
imposed or assessed upon Debtor, the Bank Subsidiary,
or their respective properties, assets, income or
profits; provided, however, that they shall have the
right to contest in good faith any such tax,
assessment) charge or levy by appropriate proceeding
after providing adequate reserves therefor;
(b) Keep accurate and complete books and records and
maintain the same at Debtor's principal offices;
(c) Furnish Bank with the following financial statements
and other information at the following times:
(i) As soon as available and in any event within
thirty (30) days after the end of each
calendar quarter, one (1) copy of the
consolidated balance sheet and statements of
income and retained earnings of Debtor as of
and for each such period, all in reasonable
detail, prepared in accordance with generally
accepted accounting principles applied on a
consistent basis throughout the periods
involved, and certified by a financial officer
of Debtor and which is otherwise in a form
acceptable to Bank;
(ii) As soon as available and in any event within
thirty (30) days after the end of each
calendar quarter, one (1) copy of a
Sensitivity Analysis on Bank Subsidiary,
certified by a financial officer of Debtor and
which is otherwise in a form acceptable to
Bank,
11
<PAGE>
(iii) As soon as available and in any event within
thirty (30) days after the end of each
calendar quarter, one (1) copy of the
quarterly Call Report of Bank Subsidiary, as
reported to the Federal Financial Institutions
Examinations Council, certified by a financial
officer of Bank Subsidiary, and which is
otherwise in a form acceptable to Bank,
(iv) As soon as available and in any event no less
than semi-annually, one (1) copy of the
current FRY9SP of Debtor, as reported to the
Federal Reserve Bank of Chicago for parent
company only financial statements for bank
holding companies with total consolidated
assets of less than One Hundred Fifty Million
and No/100 Dollars ($150,000,000.00),
certified by a financial officer of Debtor,
and which is otherwise in a form acceptable to
Bank,
(v) As soon as available and in any event within
one hundred twenty (120) days after the end of
each fiscal year, one (1) copy of the annual
consolidated and consolidating balance sheet
and statements of income and retained earnings
of Debtor and Bank Subsidiary, as of and for
the year then ended, all in reasonable detail,
including a statement of contingent
liabilities, and stating in comparative form
the figures for the corresponding date and
period in the previous fiscal year plus a
statement of cash flows, audited by an
independent certified public accountant
selected by Debtor and Bank Subsidiary, which
is otherwise in a form acceptable to Bank;
12
<PAGE>
(vi) As soon as available, one (1) copy of all
reports submitted to Debtor's shareholders or
any governmental agency;
(vii) Immediately upon the occurrence of any event
of default or event which upon the lapse of
time may become an event of default under this
Agreement, a certificate of Debtor stating the
specific nature of the default, the Debtor's
intended actions to cure such default and the
time period in which such cure is to occur;
(viii) From time to time upon request by Bank, as
Bank may require, such further information
regarding the business affairs and financial
condition of Debtor or Bank Subsidiary,
including, but not limited to, accounting and
management recommendations and certificates of
no default under the Loan by the independent
certified public accountant selected by Debtor
and acceptable to Bank.
(e) Permit any authorized representative of Bank and its
attorneys and accountants to inspect, examine and make
copies and extracts of the books of account, records
and inventory of Debtor or Bank Subsidiary at
reasonable times during normal business hours,
including, but not limited to, periodic field
examinations by Bank accounting staff, the reasonable
expense of which shall be reimbursed to Bank by
Debtor;
(f) Defend and give prompt written notice to Bank of any
process or action taken or pending whereby a third
party is claiming any money damages or any interest in
the assets of Debtor or Bank Subsidiary which in a
total aggregate amount exceeds Two Hundred Fifty
Thousand and No/100 Dollars ($250,000.00);
13
<PAGE>
(g) Insure and keep insured by fire and extended coverage
and valuable papers coverage the assets of Debtor in
an amount at least equal to the full value thereof
against loss by fire and other risks customarily
insured against by companies engaged in similar
business, including but not limited to comprehensive
property and casualty, public liability and workmen's
compensation insurance, with insurance companies
acceptable to Bank, which shall be in amounts and
under coverages acceptable to Bank. Debtor shall
furnish evidence of such insurance coverage;
(h) Maintain its corporate existence in good standing in
the State of Indiana;
(i) Maintain on a consolidated basis the ratio of (i) Cash
Flow to (ii) annual principal payments, interest
expense, and dividends of no less than 1.25:1;
(j) Bank Subsidiary shall maintain a minimum Loan Loss
Reserve to Underperforming Loan ratio of 1.2:1;
(k) Bank Subsidiary shall maintain a minimum Loan Loss
Reserve to Total Loans ratio of .01:1;
(l) Bank Subsidiary shall maintain a minimum Primary
Capital to Assets Ratio 0.07:1;
(m) Bank Subsidiary shall maintain a minimum Return on
Assets ratio of 0.80:1;
(n) Bank Subsidiary shall maintain a maximum Nonperforming
Assets to Total Loans plus Other Real Estate Owned
(OREO) ratio of 1.50:1;
(o) Bank Subsidiary shall maintain maximum Commercial Real
Estate Loans to Total Loans ratio of 0.3:1;
(p) Maintain Debtor and Subsidiary in compliance with all
local, state and federal laws, including but not
limited to, all environmental, health, labor, and
banking rules and regulations.
14
<PAGE>
7. Negative Covenants. In addition, Debtor covenants to Bank that
so by Loan shall remain unpaid it will not nor will Debtor allow Bank
Subsidiary to, without prior written consent of Bank:
(a) Create or permit to exist any mortgage, pledge,
security interest, title retention device or other
encumbrance on any property, rights or assets owned or
hereafter acquired by Debtor except for liens of taxes
and assessments not delinquent or contested in good
faith, those liens incurred in the ordinary course of
banking and the security held by Bank;
(b) Incur or permit to exist any indebtedness for borrowed
money or otherwise on a deferred payment basis to any
other lender;
(c) Enter into any consolidation or merger with any other
corporation or sell or lease all or any substantial
part of its property;
(d) Assume, guarantee or otherwise become liable as a
guarantor or surety for the obligations of any person,
firm, corporation or any other entity, except as
required in the ordinary course of banking;
(e) Remove any of Debtor's present executive officers from
the management of Debtor's affairs without prior
written notice to Bank;
(f) Allow an event to occur or permit a condition to exist
which has or could have a materially adverse effect
upon the financial condition of Debtor or Debtor's
ability to repay the obligation when due;
(g) Use any funds borrowed hereunder for any purpose other
than bona fide corporate purposes of Debtor in the
ordinary course of its current business practices; and
(h) Make any changes in the scope or nature of Debtor's
business activities.
8. Default. The occurrence of any of the following shall
constitute an event of default (an "Event of Default") hereunder; (a) Debtor's
Bank Debt or any part thereof shall not be paid in full
15
<PAGE>
promptly when due (whether by lapse of time, acceleration of maturity or
otherwise); (b) any Obligor shall die or be dissolved; (c) any representation
or warranty made by any Obligor in this Agreement or any Related Writing shall
be false or erroneous in any material respect; (d) any Obligor shall fail or
omit to perform or observe any agreement made by that Obligor in this
Agreement or any Related Writing; if not cured within 30 days of obligor's
discovery thereof (e) a judgment shall be entered against any Obligor in any
court of record; (f) any deposit account of any Obligor is attached or levied
upon; (g) any voluntary petition by or involuntary petition against any
Obligor shall be filed pursuant to any chapter of any bankruptcy code or any
Qbligor shall make an assignment for the benefit of creditors, or there shall
be any other marshaling of the assets and liabilities of any Obligor for the
benefit of the Obligor's creditors; (h) any Obligor enters into any merger or
consolidation or sells, leases or otherwise disposes of all or substantially
all of such Obligor's assets in any manner other than in the ordinary course
of business; or (i) any Obligor's Bank Debt or any part thereof shall not be
paid in frill immediately when due (whether by lapse of time, acceleration of
maturity or otherwise). Upon the occurrence of an Event of Default, Bank may,
in its sole discretion, declare any and all flank Debt to be due and payable
and, if applicable, that Debtor no longer be permitted to obtain advances; and
all principal of and interest shall thereupon become immediately payable in
frill, without any presentment, demand or notice of any kind, which Debtor
hereby waives. Debtor will pay to Bank all costs and expenses of collection of
this Bank Debt, including, without limitation, attorneys' fees.
9. Indemnification. Debtor agrees to indemnify Bank against any
losses, liabilities, fines, costs, charges, damages, injuries, penalties,
expenses and claims of any nature whatsoever (including response costs) paid,
incurred or suffered by Bank as a result of any environmental liability in
connection with this Agreement including but not limited to, any and all
environmental liability from the presence, disposal or release of Hazardous
Materials on or from Debtor's property, and all costs and expenses incurred by
Bank in anticipation of foreclosure for environmental assessment and testing
of Debtor's property. Further, Debtor hereby agrees to cooperate with the Bank
and give Bank access to Debtor's property during normal business hours to
conduct such environmental
16
<PAGE>
assessment and testing that Bank deems reasonably necessary, and should there
be a spill or other environmental problem or occurrence arising in connection
with Debtor's property, Debtor shall (1) conduct and complete all
investigations, studies, sampling, and testing and all remedial, removal, and
other actions necessary to clean up and remove all Hazardous Materials on,
from, or affecting the property occupied, (a) to the satisfaction of Bank and
(b) in accordance with the orders and directives of all federal, state, and
local governmental authorities, and (2) defend, indemnify, and hold harmless
Bank, its employees, agents, officers, and directors, from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs,
or expenses (including, without limitation, attorney and consultant fees,
investigation and laboratory fees, court costs, and litigation expenses) of
whatever kind or nature, known or unknown, contingent or otherwise; arising
out of or in any way related to (a) the presence, disposal release, or
threatened release of Hazardous Materials which are on, from or affecting the
soil, water, vegetation, buildings, personal property, persons, animals, or
otherwise; (b) any personal injury (including wrongful death) or property
damage (real or personal) arising out of or related to such Hazardous
Materials; (c) any lawsuit brought or threatened, settlement reached, or
government order relating to such Hazardous Materials, and/or (d) any
violations of laws, orders, regulations, requirements, or demand of government
authorities, or any policies or requirements of Bank, which are based upon or
in any way related to such Hazardous Materials.
10. General. No waiver by Bank of any requirement or of the breach
of any term, condition, warranty, representation, covenant or agreement
contained herein or in the documents delivered pursuant to this Agreement
shall be considered as a waiver of the same in the future or any other
requirement or default and no delay or omission by Bank in exercising any
right or remedy hereunder shall impair any such right or remedy or be
construed as a waiver of any default. Any modification of or amendment of this
Agreement shall be ineffective unless in writing and signed by the duly
authorized officers of Debtor and Bank. Any notices required hereunder shall
be deemed sufficient when mailed, first class with postage prepaid, to Debtor
and Bank (at its Corporate
17
<PAGE>
Banking Department) at the address first above written or to such other
address as either Debtor or Bank may from time to time specify by written
notice to the other. Debtor and Bank severally, each for itself, acknowledges
and agrees that, except as expressly provided herein with respect to Debtor's
obligations to maintain depository account(s) (if any) with Bank, the
extension(s) of credit provided for herein are neither conditioned upon nor
have the interest rates and fees therefor been set based upon Debtor's
agreement to purchase any other product or service from Bank. Further, Debtor
and Bank severally, each for itself, acknowledges and agrees that Bank has not
offered these extension(s) of credit or offered to reduce the interest rate(s)
or fee(s) therefor except as provided herein.
11. Entire Agreement and Severability. This Agreement contains the
entire understanding between and among the parties hereto and supersedes any
prior understandings and agreements between or among them respecting the
subject matter of this Agreement. The invalidity or unenforceability of any
provision of this Agreement in a particular respect shall not affect the
validity or enforceability of any other provisions of this Agreement or of the
same provision in any other respect, and all other provisions or terms of this
Agreement shall remain in full force and effect and shall be enforceable as if
the unenforceable or invalid provision or term had never been a part hereof.
12. Successors and Assigns. The covenants, representations,
warranties and provisions herein set forth shall be binding upon Debtor and
Debtor's successors and assigns; however, because Bank has entered into this
Agreement in reliance upon Debtor and its present shareholders, officers and
directors, any transfer, assignment or alienation (except to Bank) of any
rights of Debtor hereunder or of any right or interest in Debtor shall not be
effective without the prior written consent of Bank.
16. Jurisdiction Venue and Law. This Agreement and the Related
Writings executed in association herewith, and the rights and obligations of
the parties hereunder and thereunder shall be governed by, and construed and
interpreted in accordance with, the laws of the State of Indiana without
regard to any conflict of laws provisions. The Debtor hereby irrevocably and
18
<PAGE>
unconditionally: (a) submits for itself and its respective property in any
legal action or proceeding commenced by Bank relating to this Agreement or any
security interest hereto, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of Indiana, the courts of the United States of America for the
Southern District of Indiana, and appellate courts from any thereof; (b)
consents that any such action or proceeding may be brought in such courts, and
waives any objection that it may now or hereafter have to the venue of any
such action or proceeding in any such court or that such action or proceeding
was brought in an inconvenient court and agrees not to plead or claim the
same; (c) agrees that the service of process any such action or proceeding may
be effected by mailing a copy thereof by registered or certified mall (or any
substantially similar form of mail), postage prepaid, to the Debtor at its
address set forth above or at such other address of which Bank has been
notified in writing; and (d) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction.
13. Jury Trial Waiver. IN ORDER TO AVOID DELAYS AND MINIMIZE
EXPENSE, BANK AND DEBTOR EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT TO TRIAL BY JURY IN RESPECT OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR
ANY RELATED WRITING OR ANY AMENDMENT THERETO, WHETHER NOW EXISTING OR
HEREINAFTER ARISING AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE, AND
EACH PARTY HEREBY AGREES AND CONSENTS TRAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY, AND A COPY
OF THIS AGREEMENT MAY BE FILED WITH ANY COURT AS EVIDENCE OF THE CONSENT OF
EACH OF THE PARTIES HERETO TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the day and in the year first above written.
P.T.C. BANCORP, INC.
By: /s/ JAMES L. SANER
-------------------------
James L. Saner
President
NATIONAL CITY BANK, INDIANA
By:
-------------------------
Brent A. Holmes
Vice President
20
Exhibit 10.7
STOCK PLEDGE AGREEMENT
----------------------
COMES NOW, P.T.C. BANCORP, INC., an Indiana bank holding corporation, (the
"Undersigned") having its principal office located at the junction of State Road
101 and Reservoir Hill Road, Brookville, Indiana 47012, hereby assigns, pledges
and grants to NATIONAL CITY BANK, INDIANA ("Bank") a first security interest
free and clear from all other liens or encumbrances in the following securities:
twenty-seven thousand five hundred (27,500) shares of common stock of PEOPLE'S
TRUST COMPANY, BROOKVILLE, INDIANA an Indiana state bank: (the "Bank
Subsidiary") which constitutes one hundred percent (100%) of the issued and
outstanding shares of stock of the Bank Subsidiary, as evidenced by Certificate
No.561, together with all rights relating thereto, including, but not limited
to, all dividends and distributions, and all proceeds thereof (collectively the
"Collateral").
IN CONSIDERATION OF THESE PREMISES, and for other good and valuable
consideration received, the sufficiency of which is hereby acknowledged, the
Collateral shall secure the payment when due of any and all liabilities of
P.T.C. BANCORP, INC., an Indiana Corporation, to Bank, howsoever created,
evidenced or arising, whether direct or indirect, absolute or contingent, now or
hereafter existing, or due (the "Liabilities") including, but not limited to,
those under a Loan Agreement and a Commercial Installment Note in the principal
amount of Two Million Six Hundred Thousand and No/100 Dollars ($2,600,000.00),
both of even date herewith, executed by P.T.C. BANCORP, INC. to Bank:, and all
renewals, extensions, amendments or replacements thereof.
THE UNDERSIGNED ACKNOWLEDGES AND AGREES to the following terms and
conditions of this Pledge Agreement:
1. Any securities certificates of the Collateral subject to this
Agreement shall be delivered to Bank with stock powers executed in blank, the
form of which is attached hereto as an Exhibit.
<PAGE>
2. Until such time as Bank shall notify the Undersigned of the
revocation of such authority, the Undersigned may vote, collect cash dividends
and exercise all other rights of ownership in the Collateral not inconsistent
with Bank's interest hereunder.
3. Any or all of the Liabilities of the Undersigned to Bank shall, at
the option of Bank and notwithstanding any time or credit allowed by an
instrument evidencing a Liability, be immediately due and payable, without
notice or demand upon the occurrence of any of the following events of default:
(a) a default hereunder or in the payment or performance, when due or
payable, of any Liability and the failure to cure within any
applicable cure periods;
(b) the making by the Undersigned of any misrepresentations to Bank for
the purpose of obtaining credit or an extension of credit;
(c) failure of the Undersigned within a reasonable period of time after
request by Bank to furnish financial information or to permit the
inspection of books or records;
(d) calling of a meeting of creditors, appointment of a committee of
creditors or liquidating agents, or offering of a composition or
extension to creditors by, for, or of the Undersigned; or
(e) the insolvency of the Undersigned or Bank Subsidiary.
4. Upon the occurrence of any of the above events of default and at any
time thereafter (such default not having previously been cured) Bank shall have,
in addition to all other rights and remedies, the remedies of a secured party
under the Uniform Commercial Code, as adopted by the State of Indiana,
including, without limitation, the right to accelerate the maturity of any or
all of the Liabilities, at the Bank's option and discretion, the right to take,
transfer any instruments, securities or other property constituting the
Collateral into its own name or that of its nominees and receive the income
thereon and hold the same as security for Liabilities, apply it on principal or
interest due on Liabilities or otherwise dispose of the
2
<PAGE>
Collateral. Bank shall give to the Obligor at least ten (10) days' prior written
notice of the time and place of any public or private sale of the Collateral.
5. The Undersigned shall at all reasonable times allow Bank, its
officers, attorneys and accountants to examine, inspect or make abstracts from
the Undersigned's books and records and shall do, make and deliver all such
additional and further acts, things, deeds, assurances and instruments as Bank
may require to further protect its interest in or rights to the Collateral.
6. The Undersigned waives demand, notice, protest, notice of acceptance
of this Agreement, notice of credit extended, or other action taken in reliance
hereon and all other demands and notices of any description. With respect to
Liabilities and after an event of default under the terms of this Agreement
with respect to the Collateral, the Undersigned assents to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange, or release of the Collateral to the addition or release
of any part or person primarily or secondarily liable, to the acceptance of
partial payments thereon and the settlement, compromising or adjusting of any
thereof, all in such manner and at such time or times as Bank may deem
advisable. Bank shall have no duty as to the protection of the Collateral or
any income thereon, or as to the preservation of rights against prior parties,
or as to the preservation of any rights pertaining thereto beyond the safe
custody thereof. Bank may exercise all rights and remedies it has regarding the
Liabilities or the Collateral whether evidenced hereby or by any other
instrument or papers. Such rights and remedies shall be cumulative and may be
exercised singularly or concurrently.
7. The Undersigned shall pay to Bank on demand any and all costs and
expenses, including reasonable attorneys' fees, incurred or paid by Bank in
protecting or enforcing its rights upon or under the Collateral. After
deducting all of such costs and expenses, the residue of any proceeds of
collection or sale of Liabilities or the Collateral shall be applied to the
Liabilities, in an order and manner in Bank's discretion, and after proper
allowance for retention of Collateral for remaining Liabilities not then due,
any excess, as determined by
3
<PAGE>
Bank in its discretion, any excess shall be returned to the Undersigned. If
there is no excess, the Undersigned shall remain liable for any deficiency.
8. Any demand upon or notice to the Undersigned that Bank may elect to
give shall be effective if sent by certified mail or delivered to the
Undersigned at the address of Undersigned previously specified, or if the
Undersigned has notified the Bank in writing of a change of address, to the
Undersigned's last address to notified. Demands or notices addressed to the
Undersigned's address at which Bank customarily communicates with the
Undersigned shall also be effective. This Agreement and all rights and
obligations hereunder, including matters of construction, validity and
performance, shall be governed by the Uniform Commercial Code and other
applicable laws of the State of Indiana without regard to conflict of laws
provisions. Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
9. The security interest of Bank shall extend to and exist in any
securities now or hereafter issued to Bank on account of the securities then
subject to the terms and conditions of this Pledge and Agreement. In addition,
the Undersigned agrees to do such other acts and things and deliver or cause to
be delivered such other documents as Bank may deem necessary to establish and
maintain a valid interest in the Collateral (free of all other liens and claims)
to secure the payment of the Liabilities.
10. The Undersigned does hereby appoint Bank its true and lawful
attorney, coupled with an interest, and in the name, place and stead of
Undersigned, Bank shall have the right to demand, sue for or otherwise pursue or
exercise any and all rights of the Undersigned in connection with the
Collateral, including, but not limited to, the right to sell, transfer, assign
the Collateral, and endorse all Collateral certificates or other Collateral
documents in the name of the Undersigned, all to the same extent as Undersigned
might do on his own behalf. The
4
<PAGE>
within appointment is irrevocable and continuing and such rights, powers and
privileges shall be exclusive to Bank, its successors and assigns.
11. The Undersigned hereby irrevocably and unconditionally: (a) submits
for the Undersigned and the Undersigned's property in any legal action of
proceeding commenced by Bank relating to the enforcement of this Agreement, or
for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the court of the State of Indiana, the
courts of the United States of America for the Southern District of Indiana, and
appellate courts from any thereof; (b) consents that any such action or
proceeding may be brought in such courts, and waives any objection that the
Grantor may now or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same; (c) agrees that
services or process in any such action or proceeding may be effected by mailing
a copy thereof by registered or certified mail (or any substantially similar
form of mail), postage prepaid, to the Undersigned at its address set forth
above or at such other address of which Bank shall have been notified in
writing; and (d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Agreement as of the 18 day of May, 1994.
the "Undersigned"
P.T.C. BANCORP, INC.
By: /s/ James L. Saner Sr.
----------------------------
James L. Saner
President
5
<PAGE>
State of Indiana )
) SS:
County of______ )
Before me, the undersigned, a Notary Public, in and for said County and
State, this ___ of May, 1994, personally appeared James L. Saner, as president
of PTC BANCORP, INC., an Indiana corporation, and acknowledged the execution of
the foregoing Stock Pledge Agreement to be his voluntary act and deed.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
official seal.
/s/ Jean Wilson
-----------------------------
Notary Public
My commission expires:
12/19/97
- -------------------------
Residing in said county:
FRANKLIN
- -------------------------
6
LOGO of
Federal Home Loan Bank
of Indianapolis
ADVANCES, PLEDGE, AND SECURITY AGREEMENT
This Advances, Pledge, and Security Agreement (the "Advances Agreement"),
dated as of this 13th day of February, 1995 is between People's Trust Company
with its principal place of business at S.R. 101 & Reservoir Hill Road,
Brookville, IN 47012 (the "Member") and the Federal Home Loan Bank of
Indianapolis, with its principal place of business at 8250 Woodfield Crossing
Boulevard, Indianapolis, Indiana 46240, and mailing address at P.O. Box 60,
Indianapolis, Indiana 46206 (the "Bank").
WHEREAS, the Bank, subject to the provisions of the Federal Home Loan Bank Act
("Bank Act"), the Rules and Regulations of the Federal Housing Finance Board
or its legal successor ("FHFB Regulations"), the policies of the FHFB and the
Bank's Credit Policies (as hereinafter defined) is authorized to make
available Advances and Other Credit Products to its members: and
WHEREAS, Member desires from time to time to apply for such Advances and Other
Credit Products that may be available to it: and
WHEREAS, the Bank requires that such Advances and Other Credit Products
provided by the bank be secured pursuant to this Advances Agreement, and
Member agrees to provide such security as requested by the Bank by the means
set forth in this Advances Agreement.
NOW THEREFORE, intending to be legally bound, the Member and the Bank agree as
follows:
1. GENERAL.
SECTION 1.01. DEFINITIONS.
As used herein, the following terms shall have the following meanings:
"ADVANCES" means any and all loans or other extensions of credit now or
hereafter granted by the Bank to the Member, including all loans or extensions
of credit by the Bank to the Member prior to the date hereof.
"ADVICE OF CREDIT" means one or more written confirmations to be executed by
the Member and the Bank specifying the type or category of advance made, the
terms of repayment, the interest rate (which may be fixed or variable), and
any other pertinent terms and conditions, which shall evidence an advance.
"APPLICATION FOR ADVANCE" means one or more written or telephonic requests for
an advance, in such form or forms as shall be specified by the Bank from time
to time, and which if executed by the Bank shall evidence an Advance.
"BANK DEPOSITS" shall mean all deposit accounts maintained by the Member with
the Bank (excluding safekeeping accounts expressly held for the benefit of a
third-party), all money, cash and checks, drafts, notices, bills, bills of
exchange and bonds deposited therein or credited thereto, including any
increases, renewals, extensions, substitutions and replacements, whether or
not such instruments have been posted to any such deposit account, and all
statements, certificates, passbooks and instruments representing any such
deposit account.
"CAPITAL STOCK" means all of the capital stock of the Bank owned by the
Member, and all payments which have been or hereafter are made on account of
subscriptions to, and all unpaid dividends on, such Capital Stock.
Form APSP-A-Standard Page 1 of 16 April 1994
<PAGE>
"COLLATERAL" means all assets of the Member of any kind or nature whatsoever,
whether tangible or intangible, including without limitation, all Capital
Stock, Bank Deposits, Mortgage Collateral, Securities Collateral, and Other
Collateral, all cash and cash equivalents, all insurance proceeds, all tax
refunds, all proceeds of any of the foregoing, and all collections on any and
all of the foregoing, which are now or hereafter pledged to the Bank pursuant
to Section 3.01 hereof. It also means, including without limitation, any of
the foregoing which have previously been assigned, transferred or pledged to
the Bank by the Member as collateral for loans or other extensions of credit
prior to the date hereof, all of such assets in which a security interest is
granted pursuant to the terms hereof or in which a security interest is
hereafter assigned, transferred, granted, or pledged pursuant to the terms
hereof.
"COLLATERAL POLICY" shall mean the Bank's Collateral Policy as stated in the
Credit Policy Manual, policy statement or operating circulars of the Bank, as
in effect from time to time.
"COLLATERAL REQUIREMENT" means such aggregate Market Value (or unpaid
principal balance) of Eligible Collateral as is specified in the Bank's
Collateral Policy or as may be otherwise specified in writing by the Bank from
time to time as being the collateral maintenance level the Member must
maintain hereunder. The Bank may increase or decrease the Collateral
Requirement at any time for, including without limitation, specific collateral
listings, physical possession requirements, and where applicable, blanket
collateral requirements.
"CREDIT POLICIES" shall mean the Bank's Credit Policy Manual, policy
statements, or operating circulars relating to Advances and Other Credit
Products offered by the Bank, all as in effect from time to time.
"ELIGIBLE COLLATERAL" means Collateral other than Capital Stock which: (I)
meets the definition of Eligible Collateral under the Bank's Collateral
Policy, including without limitation one-to-four family whole mortgage loans,
government and agency securities, private mortgage-backed securities, and Bank
Deposits; (II) is owned by the Member free and clear of any liens,
encumbrances or other interests other than the assignment to the Bank
hereunder; (III) has not been in default within the most recent 12-month
period provided that in the case of Mortgage Collateral, mortgage payments
that are overdue by more than sixty (60) days shall not be included within
Eligible Collateral; (IV) in the case of Mortgage Collateral, relates to
residential real property which is covered by fire, hazard, and where
applicable, flood insurance in an amount at least sufficient to discharge the
mortgage loan in full in case of loss and as to which all real estate taxes
are current; and (V) in the case of Mortgage Collateral, does not secure an
indebtedness on which any director, officer, employee, attorney or agent of
the Member or of any Federal Home Loan Bank is personally liable. The Bank may
change the definition of Eligible Collateral from time to time, and the Bank's
determination of Eligible Collateral shall be conclusive.
"INDEBTEDNESS" means all obligations, liabilities or indebtedness of the
Member to the Bank, due or to become due, direct or indirect, absolute or
contingent, joint or several, now existing or hereafter at any time created,
arising or incurred under this Advances Agreement, or any Advice of Credit,
Application for Advance, Other Credit Product Agreements, Advances, Other
Credit Products, Bank Deposits, including any overdrafts or other charges in
connection therewith. Indebtedness also means any obligations for any other
services (including without limitation, safekeeping, operating and other
correspondence services) provided by the Bank, including any applications,
commitments, other agreements or documents relating to the foregoing, any
amendments to any of the foregoing agreements or documents and any obligations
under indemnification provisions in any such agreements or documents, and any
renewal, extension or substitution of any such obligations, liabilities and
indebtedness, including attorneys' fees of the Bank in the collection thereof
and the enforcement of any remedies with respect to any Collateral.
"MARKET VALUE" means the market value of Collateral determined in a manner as
specified by the Bank from time to time. The Bank may change the method of
determining Market Value at any time which shall be consistently applied to
substantially all borrowers. The Bank's determination of Market Value shall be
conclusive.
"MORTGAGE COLLATERAL" means whole mortgage loans, Mortgage Documents and all
security agreements, guaranties, insurance policies, certificates, binders,
commitments or reports relating thereto, including title insurance, private
mortgage insurance and hazard and liability insurance, surveys, bonds,
participations, purchase commitments, hedge contracts or other agreements to
purchase, guaranty or insure any mortgage loans or securities to be issued by
the Member. Mortgage Collateral also means any other agreement, instrument or
document pertaining to, affecting or obtained by the Member in connection with
the loans covered by the Mortgage Documents, financing statements perfecting
the Mem-
Form APS P-A-Standard Page 2 of 16 April 1994
<PAGE>
ber's security interest in any of the foregoing, certificates, evidences of
recordation, applications, underwriting materials, appraisals, notices,
opinions of counsel, loan servicing data, files, correspondence, computer
pro-grams, tapes, discs, cards, account records and all other electronically
stored or written records or materials relating to the loans covered by the
Mortgage Documents, including any and all rig his, claims, and choses in
action against or with respect to any person or entity which has provided
services to the Member in connection with any other Mortgage Collateral,
including without limitation, surveyors, appraisers, environmental engineers,
environmental assessment firms, contractors, and architects. Unless otherwise
authorized by the Bank, Mortgage Collateral shall not include mortgage
securities or loan participations.
"MORTGAGE DOCUMENTS" means mortgages, deeds of trust or other security deeds
in land and interests in real property and the improvements and fixtures
located thereon (herein "mortgages") and all notes, bonds or other instruments
evidencing loans secured thereby (herein "mortgage notes") and any endorsement
and assignments thereof to the Member.
"OTHER COLLATERAL" means such items of tangible and intangible property, other
than Capital Stock, Bank Deposits, Mortgage Collateral, and Securities
Collateral, which are offered as collateral by the Member to the Bank and
which the Bank in its discretion expressly accepts by written notice delivered
to the Member as collateral for Advances and Other Credit Products.
"OTHER CREDIT PRODUCT AGREEMENT" means a writing or electronic transmission in
such form as shall be specified by the Bank, executed by the Bank and the
Member and setting forth the obligations of the Bank and Member, including
without limitation, any Affordable Housing Program transaction, any service
confirmation, service contract, reimbursement agreement, interest rate swap
agreement, transaction, confirmation, applications, notices, advice or other
instruments between the Bank and the Member.
"OTHER CREDIT PRODUCTS" means any and all commitments or obligations under
which the Bank agrees to make Advances to the Member or payments on behalf of
or for the account of the Member, including without limitation, letters of
credit, guarantees, demand or CMS account transactions, NOW account
processing, deposit overdrafts, item processing services, coin and currency
services, safekeeping services (including security lending programs),
Affordable Housing Program transactions, correspondent banking service debits
or services charges, or other arrangements intended to facilitate transactions
between or among the Bank, the Member and third parties, or under which the
Bank enters into a credit or financial accommodation agreement or other
arrangement with the Member, including without limitation, repurchase
agreements and interest rate exchange transactions (such as interest rate swap
agreements, cap, collar and floor agreements) and such other products or
services as may be offered by the Bank from time to time pursuant to its
Credit Policies and irrespective of whether the Bank's obligation is
contingent or conditional.
"OUTSTANDING COMMITMENTS" means, at any point in time, the maximum aggregate
principal amount of Advances or payments which the Bank may be obligated to
make to the Member (or other parties) under Advance Applications or Other
Credit Product Agreements then in effect.
"SECURITIES COLLATERAL" means all securities or certificates evidencing a
direct or indirect interest in a loan or a group of loans secured by
mortgages, including without limitation, mortgage-backed securities,
collateralized mortgage obligations and real estate mortgage investment
conduits, including Federal Home Loan Mortgage Corporation mortgage
participation certificates, Federal National Mortgage Association mortgage
pass-through mortgage-backed certificates and Government National Mortgage
Association modified pass-through mortgage-backed certificates, and all
Mortgage Documents and items of Mortgage Collateral owned or otherwise
acquired by the Member relating to the loans underlying such securities or
certificates; consolidated obligations of the Federal Home Loan Bank System;
obligations of or guaranteed by the United States; and obligations of or
guaranteed by agencies or instrumentalities of the United States.
2. ADVANCES DOCUMENTATION.
SECTION 2.01. APPLICATION FOR ADVANCES.
The Member may apply for Advances or commitments by completing and submitting
an Application for Advance or requesting Other Credit Product services. The
preceding sentence notwithstanding, the Bank may in its discretion make an
Advance, make a commitment, or deliver Other Credit Products to the Member
pursuant to the Bank Act, FHFB Regulations, Credit Policies, and other Bank
procedures in effect from time to time, and by either (I) the receipt of an
oral or written application which is executed by the Bank without change, or
(II) in the case of an
Form APS P-A-Standard Page 3 of 16 April 1994
<PAGE>
application received, completed or modified by the Bank pursuant to a
telephonic or other unsigned communication by the Member, by an Advice of
Credit writing generated by the Bank. The Member shall be estopped from
asserting any claim or defense with respect to the terms applicable to an
Advance, commitment, or Other Credit Product entered into pursuant to a
telephone application or other unsigned communication unless, within two (2)
business days of receipt of the Bank's advice, the Member delivers to the Bank
a written notice specifying the disputed term(s) or condition(s). The Bank
shall have the absolute right to rely upon the procedures established hereby
or pursuant to the terms hereof and shall have no liability to the Member for
any actions taken or omitted to be taken in connection with such procedures.
The Member agrees that it will hold the Bank and each of its employees,
officers, directors, agents, and representatives harmless from any loss,
liability or damage which the Member may suffer, including without limitation,
lost profits and attorneys' fees and disbursements, arising out of or in
connection with such procedures, absent fraud, willful misconduct, or
recklessness on the part of the Bank.
SECTION 2.02. BANK'S RECEIPT OF WRITTEN CONFIRMATIONS AND FINDINGS.
Within five (5) business days of receipt, Member agrees to execute and return
any Advice of Credit, confirmation, or Other Credit Product Agreement to the
Bank. Upon request of the Bank, the Member shall sign and deliver to the Bank
a promissory note or notes in such form as the Bank may reasonably require
evidencing any Advance. Unless otherwise requested by the Member and approved
by the Bank, each Advance shall be funded by crediting the Member's CMS
account(s) with the Bank.
SECTION 2.03. INTEREST COMPUTATIONS AND REPAYMENT OF ADVANCE~ AND OTHER CREDIT
PRODUCTS.
The Member agrees to repay each Advance or Other Credit Product in accordance
with this Advances Agreement and the terms and conditions of the Advice of
Credit or Other Credit Product Agreement. Each Advance, Advice of Credit,
Application for Advance, Other Credit Product and Other Credit Product
Agreement shall be subject to the terms of the Credit Policies and applicable
laws, regulations, and limitations, all as in effect from time to time,
including the Bank Act, the FHFB Regulations and the statements of policy and
guidelines of the FHFB, which shall be deemed to be incorporated by reference
into this Advances Agreement. Unless otherwise specified in the Bank's Credit
Policies or as may be otherwise specified in writing by the Bank from time to
time, interest shall be paid at the time of each payment of all of the
principal of each Advance on the amount of principal so repaid, and shall be
paid on the fifteenth (15th) day of each month (or the Bank's next business
day if the Bank is not open for business on the fifteenth (15th)) on the daily
outstanding principal amount of each Advance since the previous interest
payment date (other than principal amounts which have been repaid in full
since such interest payment date), in each case at the rate applicable to such
Advance as stated in the related Advice of Credit. The Member shall pay to the
Bank, immediately and without demand, interest on any past due amount owing on
any Advance or Other Credit Product at the rate in effect and being charged by
the Bank from time to time on defaults. The default rate on past due payments
of principal and interest may, at the option of the Bank, be at a rate of five
percent (5%) per annum in addition to the then highest current rate being
charged by the Bank for advances, not to exceed the highest legal interest
rate allowed under Indiana law. The Member shall maintain in the Member's CMS
account with the Bank an amount at least equal to the amounts then currently
due and payable to the Bank on outstanding Advances and Other Credit Products.
The Member hereby authorizes the Bank to debit the Member's CMS account with
the Bank for all amounts due and payable on any Advance or Other Credit
Product and for all other amounts due and payable hereunder. in the event that
the amount in the Member's CMS account is, at any time, insufficient to pay
such due and payable amounts, the Bank may without notice to the Member apply
any Bank Deposits then in the possession of the Bank to the payment of such
due and payable amounts.
SECTION 2.04. PAYMENT OF PREPAYMENT CHARGES.
Any prepayment fees or charges for which provision is made, whether under the
Advice of Credit, Other Credit Product Agreement, or otherwise, shall be
payable at the time of any voluntary or involuntary payment of the principal
of such Advance or Other Credit Product prior to the originally scheduled
maturity thereof, including without limitation, payments that are made as a
part of a liquidation of the Member or that become due as a result of an
acceleration pursuant to Section 4.01 hereof, and whether such payment is made
by the Member, by a conservator, receiver, liquidator or trustee of or for the
Member, or by any successor to or any assignee of the Member. The method of
computation for the prepayment fee, unless expressly provided for in the
applicable credit documentation, is set forth in the Credit Policies of the
Bank and may be subject to change from time to time with advance notice to the
Member.
Form APSP-A-Standard Page 4 of 16 April 1994
<PAGE>
SECTION 2.05. RIGHT OF BANK TO MAKE PAYMENTS WITH RESPECT TO OUTSTANDING
COMMITMENTS.
In the event that there are one or more Outstanding Commitments at the time of
an Event of Default under Section 4.01 hereof, the Bank may, at its option,
make any payments due thereunder from time to time by crediting a special
account with the Bank over which the Bank has sole dominion and control.
Amounts credited to such special accounts shall be deemed to have satisfied
the Bank's obligations under the Outstanding Commitments. When all such
obligations have been satisfied, the Bank shall disburse the balance, if any,
in such account first to the satisfaction of any amounts then due and owing by
the Member to the Bank and then to the Member or its successors in interest.
Payments made pursuant to this section shall be payable on demand and shall
bear interest at the rate specified for each applicable Advance (or if such
rate is not specified, at the rate in effect and being charged by the Bank
from time to time on variable rate advances), and shall include applicable
prepayment fees.
The Bank shall not fund outstanding commitments previously made to the Member
whose access to advances is restricted by its primary federal regulator. In
addition, the Bank shall not fund outstanding commitments previously made to
the Member whose access to advances is subsequently restricted because it does
not have positive tangible capital or if the Bank deems itself insecure for
any reason as determined by the Bank in its sole discretion. The Bank shall
not honor any outstanding commitments to the Member if the Member is a savings
association that fails to maintain its status as a Qualified Thrift Lender as
such rule is defined under the applicable federal law and federal regulations
as may be in effect from time to time.
3. SECURITY AGREEMENT.
SECTION 3.01. CREATION OF SECURITY INTEREST.
As security for all indebtedness, including without limitation, all Advances
and Other Credit Products, the Member hereby assigns, transfers, and pledges
to the Bank and grants to the Bank a security interest in all Collateral, now
or hereafter owned by the Member, and all proceeds thereof, provided, however,
that Collateral that is encumbered or disposed of by the Member in conformity
with the requirements of Section 3.03(a) hereof shall not be subject to the
security interest created hereunder. Without limitation of the foregoing, all
tangible and intangible property heretofore assigned, transferred or pledged
by the Member to the Bank as Collateral for Advances and Other Credit Products
prior to the date hereof is hereby assigned, transferred and pledged to Bank
as Collateral hereunder.
SECTION 3.02. MEMBER'S REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL.
The Member represents and warrants to the Bank, as of the date hereof and as
of the date of all future Advances or Other Credit Products secured hereunder,
the following:
(a) The Member owns and has marketable title to the Collateral and has the
right and authority to grant a security interest in the Collateral and to
subject all of the Collateral to this Advances Agreement;
(b) The information contained in any certification, status report, schedule,
or other information given from time to time by the Member as to each item of
Collateral is true, accurate and complete in all material respects;
(c) The Member maintains Eligible Collateral which has a Market Value (or
unpaid principal balance) that is at least equal to the then current
Collateral Requirement and which meets the standards and requirements from
time to time established by the Bank's Collateral Policy, the Bank Act and the
FHFB Regulations, and all other applicable laws and regulations;
(d) The Member has not conveyed or otherwise created, and there does not
otherwise exist, any participation interest or other direct, indirect, legal,
or beneficial interest in any Collateral pledged under Sections 3.01,3.03(a),
and 3.04 on the part of any person or entity other than the Bank and the
Member;
(e) Except as may be approved in writing by the Bank, no account debtor or
other obligor owing any obligation to the Member with respect to any item of
Mortgage Collateral or Other Collateral has or will have any defenses,
offsetting claims, or other rights affecting the right of the Member or the
Bank to enforce such mortgage, mortgage note or promissory obligation, and no
defaults (or conditions that, with the passage of time or the giving of notice
or both, would constitute a default) exist under any such writings; and
(f) No part of any real property or interest in real property that is the
subject of Collateral contains or is subject to the effects of toxins or
hazardous materials or other hazardous substances (including those defined in
any applicable state or local law; or applicable federal law,
Form APSP-A-Standard Page 5 of 16 April 1994
<PAGE>
including the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 USC 9601 et seq.; the Hazardous Materials
Transportation Act, 49 USC 1801 et seq.; the Resource Conservation and
Recovery Act, 42 USC 6901 et seq.; and in the regulations adopted and
publications promulgated pursuant to said laws), the presence of which could
subject the Bank to any liability under applicable state or Federal law or
local ordinance either at any lime that such property is pledged to the Bank
or upon the enforcement by the Bank of its security interest therein.
SECTION 3.03. COLLATERAL MAINTENANCE REQUIREMENT FOR BLANKET LIENS AND
SPECIFIC LISTINGS.
(a) The Member shall at all times maintain an amount of Eligible Collateral
which has a Market Value (or unpaid principal balance, if so required by the
Bank) that is at least equal to the then current Collateral Requirement. The
Member shall not assign, pledge, transfer, create any security interest in,
sell, or otherwise dispose of any Collateral if (I) such Collateral is held by
or on behalf of the Bank pursuant to Section 3.04 hereof, (II) such Collateral
has been provided in a specific listing of Eligible Collateral pursuant to
Section 3.03(e), (III) the Bank has otherwise perfected its security interest
in such Collateral, or (IV) at the time of or immediately after such action,
Member is not or would not be in compliance with the collateral maintenance
requirements of the first sentence of this Section 3.03(a) or is or would be
otherwise in default under this Advances Agreement. So long as Member is not
in default under this Agreement, Member shall be at liberty to sell, use,
commingle, and dispose of the Collateral or the proceeds of such Collateral
without being required to account for the proceeds or replace the Collateral,
subject only to its obligation to maintain the Collateral as herein provided.
(b) Collateral shall be held by the Member in trust for the benefit of the
Bank and subject to the Bank's direction and control, will not be commingled
with assets of the Member which are not Collateral, and will be physically
safeguarded by the Member in accordance with usual, customary and prudent
commercial practices but in any event with not less than the same degree of
care which the Member uses in physically safeguarding its other property and
assets of like kind and nature. Without limitation of the foregoing, Member
shall take all action necessary or desirable to protect and preserve the
Collateral and the Bank's interest therein, including without limitation, the
maintaining of insurance on property securing mortgages constituting
Collateral (such policies and certificates of insurance or guaranty relating
to such mortgages are herein called "insurance"), the collection of payments
under all mortgages and under all insurance, and otherwise assuring that the
loans comprising the Mortgage Collateral are serviced in accordance with the
standards of a reasonable and prudent mortgagee. The Member (or its agent),
acting on behalf of the Bank, shall collect all payments when due on all
Collateral. If the Bank requires under Section 3.12, the Member shall hold
such collections separate from its other monies and apply them to the
reduction of Indebtedness as it becomes due; otherwise, the Member shall be
entitled to use and dispose of all such collections in the ordinary course of
its business and in compliance with all laws, rules, and regulations.
(c) if any Collateral that was Eligible Collateral ceases to be Eligible
Collateral, the Member shall promptly notify the Bank in writing of that fact
and, if so requested by the Bank, of the reason that the Collateral has ceased
to be Eligible Collateral. The Member shall promptly specify, or deliver, as
the case may be, other Eligible Collateral having at least the same Market
Value as the Collateral so requested to be withdrawn.
(d) The Bank may review the form and sufficiency of all documents pertaining
to the Collateral. Such documents must be satisfactory to the Bank and, if
not, such Collateral may not be acceptable as Eligible Collateral or may have
a Market Value applied thereto that is less than the Market Value otherwise
applicable under the Bank's Collateral Policy, or as the Bank may specify. The
Bank may require that the Member make any or all documents pertaining to the
Collateral available to the Bank br its inspection and approval.
(e) if so requested by the Bank, Member agrees to (I) provide a specific
listing of the Eligible Collateral to Bank, (II) physically segregate Mortgage
Documents and Other Collateral which are a part of such specified Collateral
from all other property of the Member in a manner satisfactory to the Bank,
and/or (Ill) hold each Mortgage Document which is a part of Mortgage
Collateral in a separate file folder with each file folder clearly labeled
with the loan identification number and the name of the borrower(s).
Immediately upon the written request of the Bank, the Member further agrees to
clearly and legibly mark or stamp each Mortgage Document and each file folder
containing Mortgage Documents with the following statement (or a substantially
similar statement which has been approved in writing by the Bank): "The
Mortgage/Deed Of Trust And Note Relating To This Loan Have Been Assigned To
And Represent Collateral Of The Federal Home Loan Bank Of Indianapolis And Its
Successors And Assigns and such other statement as may be required by
Form APSP-A-Standard Page 6 of 16 April 1994
<PAGE>
the Bank from time to time.
SECTION 3.04. DELIVERY OF COLLATERAL; PHYSICAL POSSESSION REQUIREMENTS.
(a) At any time upon the Bank's oral or written request, or at any time that
the Member becomes subject to any mandatory collateral delivery requirements
pursuant to the Collateral Policy or that may be otherwise established in
writing by the Bank, the Member shall promptly on a schedule acceptable to the
Bank deliver to the Bank, or to a custodian designated by the Bank, all
Collateral including such Eligible Collateral as may be necessary so that the
Market Value of Eligible Collateral held by the Bank, or such custodian, meets
or exceeds the Collateral Requirement at all times, and take any and all other
action as may be specified by the Bank to further evidence the perfection of
the Bank's security interest in the Collateral and to otherwise effectuate the
transactions contemplated hereby, including the signature and filing of
financing statements. Collateral delivered to the Bank shall be endorsed or
assigned in recordable form by the Member to the Bank as directed by the Bank.
With respect to Mortgage Collateral that is to be delivered hereunder, the
Member shall deliver the Mortgage Documents with necessary endorsements and
assignments relating thereto unless otherwise directed by the Bank.
Concurrently with the initial delivery of Collateral and at such other times
as provided in the Collateral Policy or as the Bank may otherwise request, the
Member will deliver to the Bank a status report and accompanying schedules,
all in form and substance satisfactory to the Bank and dated as of the then
most recent valuation date, describing the Collateral held by the Bank or its
custodian.
(b) The Member authorizes the Bank to execute and file one or more financing
statements, this Agreement, and any other documents instruments, or statements
of any kind on its behalf and without the signature of the Member in those
public offices deemed necessary by the Bank in its sole discretion to perfect
and continue the perfection of its security interest in the Collateral and to
protect, defend and further assure the grant, validity and perfection thereof.
In addition, the Member will, at its expense, deliver or cause to be delivered
such other documents as the Bank may request to secure the indebtedness
referred to herein or to further perfect, protect, and defend the security
interest granted herein.
(c) With respect to uncertificated securities pledged to the Bank as
Securities Collateral or Other Collateral hereunder, the delivery requirements
contained in this Advances Agreement shall be satisfied by the transfer of
such securities to the Bank, such transfer to be effected in such manner and
to be evidenced by such documents as shall be specified by the Bank.
(d) The Member agrees to pay to the Bank such reasonable fees and charges as
may be assessed by the Bank to cover the Bank's overhead and other costs
relating to the receipt, holding, redelivery and reassignment of Collateral
and to reimburse the Bank upon request for all recording fees and advances
incurred or made by the Bank in connection therewith (including the reasonable
compensation and the expenses and disbursements of any custodian that may be
appointed by the Bank hereunder, and the agents and legal counsel of the Bank
and of such custodian).
(e) The Member shall, upon request of the Bank, immediately take such other
actions as the Bank shall deem necessary or appropriate to perfect the Bank's
security interest in the Collateral or otherwise to obtain, preserve, protect,
enforce or collect the Collateral.
SECTION 3.05. WITHDRAWAL OR REASSIGNMENT OF COLLATERAL.
Upon receipt by the Bank of writings in form and substance satisfactory to the
Bank constituting (I) a request from the Member for the withdrawal or
reassignment of Collateral which has been delivered pursuant to Section 3.04
hereof, or as to which the Bank has otherwise perfected its security interest,
and (II) a detailed listing of the Collateral to be withdrawn or reassigned,
provided that the Bank's valuation of such delivered Collateral confirms that
the Member's Collateral Requirement will be satisfied after such withdrawal or
reassignment, then the Bank shall redeliver or reassign to the Member the
Collateral specified in Member's request. Notwithstanding anything to the
contrary herein contained, while an Event of Default hereunder shall have
occurred and be continuing, or at any time that the Bank in good faith deems
itself insecure, the Member may not obtain any such withdrawal or
reassignment. Further, Member agrees for specific listings provided under
Section 3.03(e) to follow the withdrawal procedures provided (or under this
Section 3.05 or as otherwise specified by the Bank.
SECTION 3.06. ADDITIONAL COLLATERAL.
The Bank may at anytime require the Member to maintain and deliver to the Bank
additional Collateral over that amount of Eligible Collateral required to meet
the Member's Collateral Requirement or substitutions of Collateral. The Member
expressly agrees to maintain and
Form APSP-A-Standard Page 7 of 16 April 1994
<PAGE>
deliver such additional Collateral or substitutions of Collateral as the Bank
shall require.
SECTION 3.07. REPORTS; COLLATERAL AUDIT; ACCESS.
(a) in accordance with the Collateral Policy and at such other times as the
Bank may request, the Member shall furnish to the Bank, in a format
satisfactory to the Bank, a report so that the Bank may verify that the Member
maintains Eligible Collateral with a Market Value (or unpaid principal
balance, if so required by the Bank) sufficient to meet the Collateral
Requirement. if the Market Value or unpaid principal balance of Eligible
Collateral owned by the Member, free and clear of any liens or encumbrances,
shall at any time fall below the Collateral Requirement, the Member shall
immediately notify the Bank.
(b) The Member shall provide annually an audit report prepared by the
Member's external independent auditor in accordance with generally accepted
auditing standards (and in a format acceptable to the Bank) certifying that
the Member owns, free and clear of any liens or encumbrances (except for
Bank's), Eligible Collateral with a Market Value (or unpaid principal balance,
if so required by the Bank) at least equal to the Collateral Requirement, and
deliver such report to the Bank within ninety (90) days of each fiscal
year-end of the Member, including an explanation for any exceptions or
qualifications in the report or any failure to obtain such report. The Bank
reserves the right to waive the audit report requirement if Member's
Collateral is in the physical possession of the Bank or in the Bank's sole
discretion based on particular circumstances.
(c) The Member agrees that the Bank shall have access at all reasonable times
to the Collateral in the Member's possession or control and to the Member's
books and records of account relating to such Collateral. The Member shall
permit the Bank to examine, inspect, audit and take copies or make extracts
from its books and records and to discuss its affairs with its independent
auditor (or other representative) as often as the Bank may reasonably request.
(d) The Member agrees that examination reports prepared by local, state or
federal authorities may be furnished by such authorities to the Bank upon its
request, and by this Agreement, the Member authorizes and directs such
authorities to deliver such reports to the Bank and waives any objections or
restrictions thereto which it may lawfully waive. Member agrees that upon
request of the Bank, it will take any and all steps necessary to assist the
Bank in obtaining such reports from such authorities. The Bank agrees that to
the extent such reports or the information contained therein are confidential,
the Bank will use the same degree of care in keeping such reports confidential
as it applies to the Bank's own confidential information and will not
knowingly disclose any confidential information contained therein unless
required to do so by law, rules, regulations, or judicial or regulatory
process applicable to the Bank.
(e) if requested by the Bank, the Member shall furnish to the Bank a written
report covering such matters regarding the Collateral as the Bank may require,
including listing of mortgages, securities, and unpaid principal balances
thereof, and certifications concerning the status of payments on mortgages and
of taxes and insurance on property securing mortgages.
(f) The Member agrees to promptly report to the Bank any event which reduces
the principal balance of any mortgage or security by ten percent (10%) or
more, whether by prepayment, foreclosure sale, property-casualty insurance or
guaranty payment or otherwise.
(g) All Collateral and the satisfaction by the Member of the Collateral
Requirement shall be subject to audit and verification by or on behalf of the
Bank. Such audits and verifications may occur without notice during the
Member's normal business hours or upon reasonable notice at such other times
as the Bank may reasonably request. The Member shall provide to the
representatives or agents of the Bank for purposes of such audits and
verifications, access to all books and records related to transactions whether
made or contemplated under this Agreement Further, Member shall provide
adequate working facilities, at Member's expense for the Bank to conduct such
audits or verifications. The Member agrees to pay to the Bank such reasonable
fees and charges as may be assessed by the Bank to cover overhead and other
costs relating to such audit and verification. The Member further agrees that
it will prepare and deliver promptly upon request of the Bank inquiries to
Member's outside auditors, outside counsel, customers (including depositors or
borrowers), and any other person that the Bank may reasonably request, to
provide such information to the Bank as it may reasonably request in
connection with such audit and verification.
SECTION 3.08. ADDITIONAL DOCUMENTATION AND STATUS REPORTS.
The Member shall at its expense make, execute, record and deliver to the Bank
such financing statements, as-
Form APSP-A-Standard Page 8 of 16 April 1994
<PAGE>
signments, listings, powers, notices and other documents with respect to the
Collateral and the Bank's security interest therein as directed by the Bank
and in form and substance satisfactory to the Bank Upon request, Member
agrees to give Bank verbal or written reports concerning the financial
condition or status of any regulatory action maintained against the Member,
its holding company, or any affiliated entity or affiliated person.
SECTION 3.09. BANK'S RESPONSIBILITIES AS TO COLLATERAL.
The Bank's duty as to the Collateral shall be solely to use reasonable care in
the custody and preservation of the Collateral in its possession, which shall
not include any steps necessary to preserve rights against prior parties nor
the duty to send notices, perform services, or take any action in connection
with the management of the Collateral. The Bank shall not have any
responsibility or liability for the form, sufficiency, correctness,
genuineness or legal effect of any instrument or document constituting a part
of the Collateral, or any signature thereon or the description or
misdescription, or value of property represented, or purported to be
represented, by any such document or instrument. The Member agrees that any
and all Collateral may be removed by the Bank from the state or location where
situated, and may there be dealt with by the Bank as provided in this Advances
Agreement.
SECTION 3.10. BANK'S RIGHTS AS TO COLLATERAL; POWER OF ATTORNEY.
At any time or times, at the expense of the Member, the Bank may, at its
discretion, before or after the occurrence of an Event of Default as defined
in Section 4.01 hereof, in its own name or in the name of its nominee or of
the Member, do any or all things and take any and all actions that are
pertinent to the protection of the Bank's interests hereunder and which are
lawful under the laws of the State of Indiana, or the laws of any jurisdiction
under which the Bank may be exercising its rights hereunder, including the
following:
(a) Terminate any consent given hereunder:
(b) With advance notice to Member (or its legal successor), notify obligors
on any Collateral to make payments thereon directly to the Bank;
(c) Endorse any Collateral in the Member's name;
(d) Enter into any extension, compromise, settlement, or other agreement
relating to or affecting any Collateral;
(e) Take any action the Member is required to take or which is otherwise
necessary to: (i) sign and record a financing statement or otherwise perfect a
security interest in any or all of the Collateral; or (ii) obtain, preserve,
protect, enforce or collect the Collateral;
(f) Take control of any funds or other proceeds generated by the Collateral
and use the same to reduce Indebtedness as it becomes due; and
(g) Cause the Collateral to be transferred to its name or the name of its
nominee.
The Member hereby appoints the Bank as its true and lawful attorney, with full
power of substitution, for and on behalf of the Member and in its name, place
and stead, to prepare, execute and record endorsements and assignments to the
Bank of all or any item of Collateral, giving or granting to the Bank, as such
attorney, full power and authority to do or perform every lawful act necessary
or proper in connection therewith as fully as the Member might or could do.
The Member hereby ratifies and confirms all that the Bank shall lawfully do or
cause to be done by virtue of this special power of attorney. This special
power of attorney is granted for a period commencing on the date hereof and
continuing until the discharge of all Indebtedness and all obligations of the
Member hereunder regardless of any default by the Member, is coupled with an
interest and is irrevocable for the period granted.
SECTION 3.11. SUBORDINATION OF OTHER LOANS TO MORTGAGE COLLATERAL.
The Member hereby agrees that all mortgage notes which are part of the
Mortgage Collateral and any notes secured by personal property ("personalty
notes") which may become part of the Other Collateral shall have priority in
right and remedy over any claims, however evidenced, for other loans, whether
made before or after the date of such mortgage or personalty notes which are
secured by the mortgages or security agreements securing such mortgage or
personalty notes but are not part of the Collateral, and shall be satisfied
out of the property covered by such mortgages or security agreements before
recourse to such property may be obtained for the repayment of such other
loans. To this end, the Member hereby subordinates the lien of such mortgages
and security agreements with respect to such other loans to the lien of such
mortgages and security agreements with respect to such mortgage and personalty
notes. The Member further agrees to retain possession of any promissory notes
evidencing such other loans and not to pledge assign or
Form APSP-A-Standard Page 9 of 16 April 1994
<PAGE>
transfer the same, except that the same may be pledged to the Bank as part of
the Collateral. The Member, for itself and for any other person or entity
claiming by or through the Member, waives any and all rights which it or such
other person or entity may have to require the Bank to marshal the assets of
the Member or to otherwise prioritize or sequence any class or category of
Collateral with respect to which the Bank may pursue its rights and remedies.
SECTION 3.12. PROCEEDS OF COLLATERAL.
The Member shall collect all payments when due on all Collateral. If the Bank
so requires, the Member, as the Bank's agent, shall hold such collections
separate from its other monies in one or more designated cash collateral
accounts maintained at the Bank and apply them to the reduction of
Indebtedness as it becomes due; otherwise, the Member shall be entitled to use
and dispose of all such collections in the ordinary course of its business and
in compliance with all laws, rules, and regulations.
4. DEFAULT; REMEDIES.
SECTION 4.01. EVENTS OF DEFAULT; ACCELERATION.
In the event of the occurrence of any of the following events or conditions of
default ("Event of Default"), the Bank may at its option, by a notice to the
Member, declare all Indebtedness and accrued interest thereon, including any
prepayment tees (including without limitation, those fees charged pursuant to
Section 2.03 and 2.04), or charges which are payable in connection with the
payment prior to the originally scheduled maturity of any Indebtedness, to be
immediately due and payable without presentment, demand, protest or any
further notice:
(a) Failure of the Member to pay when due any interest on, or principal of,
any Advance or any amount payable in connection with any Other Credit Product;
or
(b) Failure of the Member to timely perform any promise or obligation or to
satisfy any condition or liability contained herein, in an Application for
Advance, Advice of Credit, or in any Other Credit Product Agreement to which
the Member and the Bank are parties; or
(c) Any representation, statement, or warranty made or furnished in any
manner to the Bank by or on behalf of the Member in connection with any
Advance or Other Credit Product or any certification of the Market Value (or
unpaid principal balance, if so required by the Bank) of Eligible Collateral
shall have been false or misleading in any material respect when made or
furnished; or
(d) Failure of the Member to maintain Eligible Collateral which has a Market
Value (or unpaid principal balance, if so required by the Bank) that is at
least equal to the then current Collateral Requirement under the applicable
blanket lien/specific listing requirements of Section 3.03 or physical
possession requirements of Section 3.04, free of any encumbrances or claims as
required herein; or
(e) The issuance of any tax levy, seizure, attachment, garnishment, levy of
execution, or other process with respect to the Collateral; or
(f) Any failure to pay or suspension of payment by the Member to any
creditor of sums due or the occurrence of any event which results in another
creditor having the right to accelerate the maturity of any indebtedness of
the Member under any security agreement, indenture, loan agreement, or
comparable undertaking; or
(g) Application for or appointment of a conservator, receiver, or trustee for
the Member or of any affiliate or subsidiary of the Member or the Member's
property, entry of a judgment or decree adjudicating the Member or any
affiliate or subsidiary of Member insolvent or bankrupt, or an assignment by
the Member or any affiliate or subsidiary of the Member for the benefit of
creditors; or
(h) Sale by the Member of all or a material part of the Member's assets or
the taking of any other action by the Member to liquidate or dissolve; or
(i) Termination of the Member's membership in the Bank, or the Member's
ceasing to be a type of financial institution that is eligible under the Bank
Act to borrow or apply for membership in the Bank; or
(j) Merger, consolidation or other combination of the Member with an entity
which is not a member of the Bank if the nonmember entity is the surviving
entity; or
(k) With respect to Advances made pursuant to Section 11 (g)(4) of the Bank
Act (12 USC 1431(g)), if the creditor liabilities of the Member, excepting
liabilities to the Bank, are increased in any manner to an amount exceeding
five percent (5%) of the Member's net assets; or
(l) Member threatens or initiates legal action to challenge an otherwise
legally enforceable provision under this Advances Agreement in an attempt to
make the Bank insecure under this Advances Agreement; or
Form APSP-A-Standard Page 10 of 16 April 1994
<PAGE>
(m) The Bank in good faith determines that a material adverse change has
occurred in the financial condition of the Member (including its holding
company or other affiliates), or the Member fails to comply with the Bank's
Credit Policies or other applicable policies including the requirement of
creditworthiness as determined by the Bank at its sole discretion.
SECTION 4.02. REMEDIES; SET OFF; SPECIFIC PERFORMANCE.
(a) Upon the occurrence of any Event of Default, the Bank shall have all of
the rights and remedies provided by applicable law, which shall include, but
not be limited to, all of the remedies of a secured party under the Uniform
Commercial Code as in effect in the State of Indiana, Section 10 of the Bank
Act (12 USC 1430), and other applicable federal law. In addition, the Bank may
take immediate possession of any of the Collateral or any part thereof
wherever the same may be found without judicial process. The Bank may require
the Member to assemble the Collateral and make it available to the Bank at a
place designated by the Bank which is reasonably convenient to both parties.
The Bank may sell, assign and deliver the Collateral or any part thereof at
public or private sale for such price as the Bank deems appropriate without
any liability for any loss due to decrease in the market value of the
Collateral during the period held The Bank shall have the right to purchase
all or part of the Collateral at such sale. If the Collateral includes
insurance or securities which will be redeemed by the issuer upon surrender,
or any accounts or deposits in the possession of the Bank, the Bank may
realize upon such Collateral without notice to the Member. If any notification
of intended disposition of any of the Collateral is required by applicable
law, such notification shall be deemed reasonable and properly given if
mailed, postage prepaid, at least five (5) days before any such disposition to
the address of the Member appearing on the records of the Bank. The proceeds
of any sale shall be applied in the order that the Bank, in its sole
discretion, may choose. The Member agrees to pay all the costs and expenses of
the Bank in the collection of the Indebtedness and enforcement of the Bank's
rights and remedies in case of default, including, without limitation,
reasonable attorneys' fees. The Bank shall, to the extent required bylaw,
apply any surplus after (I) payment of the Indebtedness, (II) provision for
repayment to the Bank of any amounts to be paid or advanced under Outstanding
Commitments, and (III) all costs of collection and enforcement, to third
parties claiming a secondary or other security interest in the Collateral,
with any remaining surplus paid to the Member. The Member shall be liable to
the Bank for any deficiency remaining.
(b) If the Indebtedness, accrued interest thereon and other amounts or
charges owing by the Member shall have become due and payable (by acceleration
or otherwise), the Bank shall have the right, at any time or from time to time
to the fullest extent permitted by law, in addition to all other rights and
remedies available to it, without prior notice to the Member, to set off
against and to appropriate and apply to such due and payable amounts any debt
owing to, and any other funds held in any manner for the account of, the
Member by the Bank, including without limitation, all Bank Deposits now or
hereafter maintained by the Member with the Bank. Such right shall exist
whether or not such debt owing to, or funds held for the account of, the
Member is matured by its terms or is accelerated by the Bank, and regardless
of the existence or adequacy of any collateral, guaranty or any other
security, right or remedy available to the Bank. The Member hereby consents to
and confirms the foregoing arrangements and confirms the Bank's rights of
banker's lien and set off. Nothing in this Advances Agreement shall be deemed
a waiver or prohibition of or restriction on the Bank's rights of banker's
lien or set off.
(c) The Member acknowledges that the breach by the Member of the provisions
of this Agreement and in particular Section 3.04 hereof would cause
irreparable injury to the Bank and that remedies at law for any such breach
will be inadequate, and consents and agrees that the Bank shall be entitled,
without the necessity of proof of actual damage, to specific performance of
the terms of this Agreement and to injunctive relief in any proceedings which
may be brought to enforce the provisions of this Agreement. The Member waives
the right to assert the defense that such breach or violation can be
compensated adequately in damages in an action of law.
5. MISCELLANEOUS.
SECTION 5.01. GENERAL REPRESENTATIONS, QTL REPORTING, WARRANTIES AND
INDEMNIFICATIONS BY THE MEMBER.
The Member hereby represents and warrants that, as of the date hereof and the
date of each Advance or Other Credit Product hereunder:
(a) The Member, if a savings association, will truly and accurately represent
and warrant its status as a Qualified Thrift Lender ("QTL") as defined by
applicable federal law on any Application for Advance or Other Credit Product
Agreement between Member and the Bank. If the Member is a savings association
and it tails the QTL test as set forth by the Office of Thrift Supervision
Regulations now in effect or as amended, and becomes ineligible
Form APSP-A.Standard Page 11 of 16 April 1994
<PAGE>
under applicable federal law for Bank advances, the savings association Member
shall immediately provide the Bank with written notification of its
ineligibility for Bank advances. If a non-QTL member, the Member warrants that
Advances made under Section 10(a) of the Bank Act (12 USC 1430(a)), shall be
for the purposes of housing finance.
(b) The Member will truly and accurately represent and warrant the purpose of
any Advance or Other Credit Product on any Application for Advance or Other
Credit Product Agreement between Member and the Bank.
(c) The Member will promptly furnish any financial, collateral or other
information requested by the Bank in connection with any Advance or Other
Credit Product.
(d) The Member is not, and neither the execution of nor the performance of
any transactions or obligations of the Member under any Advice of Credit,
Application for Advance, Other Credit Product Agreement or this Advances
Agreement shall, with the passage of tine, the giving of notice or otherwise,
cause the Member to be: (I) in violation of its charter or articles of
incorporation, bylaws, the Bank Act, the FHFB Regulations, any other law or
administrative regulation, agreement, or any court decree; or (II) in default
or in breach of any indenture, contract, or other instrument or agreement to
which the Member is a party or by which it or any of its property is bound or
any default under, breach of, or failure to comply with any judgment, order,
decree, regulatory directive, or other process of any court or agency having
jurisdiction of or which is binding upon the Member.
(e) The Member is not in default under any Advice of Credit or Other
Credit Product Agreement with the Bank.
(f) The Member has full power and authority and has received all corporate
and governmental authorizations and approvals (including without limitation,
those required under the Bank Act and the FHFB Regulations) as maybe required
to enter into and perform its obligations under any Advice of Credit,
Application for Advance, Other Credit Product Agreement or this Advances
Agreement, and to obtain Advances and Other Credit Products.
(g) The information given by the Member in any writing provided, electronic
transmission or in any oral statement made, in connection with any Application
for Advance or Other Credit Product Agreement, is at all relevant limes true,
accurate and complete in all material respects.
(h) The Member will at all times maintain and accurately reflect the terms
of this Advances Agreement (including the Bank's security interest in the
Collateral) and all Advances and Other Credit Products hereunder on its books
and records, including evidence of necessary authorizations to effectuate
transactions under this Agreement.
(i) The Member and its successors and assigns (collectively referred to in
this Section 5.01(i) as "Member") shall indemnify and hold the Bank harmless
from and against any and all costs, claims, expenses, damages, and liabilities
with respect to any action which may be instituted by any person or entity
against the Bank as a result of any transaction, including without limitation,
Bank credit extensions, services, and Other Credit Products contemplated by
this Advances Agreement or action or nonaction arising from this Advances
Agreement, except where the same results solely from the recklessness or
willful misconduct of the Bank. In addition, the Member shall indemnify and
hold the Bank harmless from and against any and all costs, claims, expenses,
damages, and liabilities resulting in any way from the presence or effects of
any toxic or hazardous substances or materials in, on, or under any real
property or interest in real property that is subject to or included in the
Collateral. The Member also agrees to reimburse the Bank for such reasonable
fees and charges as may be assessed by the Bank to cover overhead and other
cost, including reasonable attorneys' fees, incurred either under this
indemnification provision or in the administration of this Advances Agreement,
any Advice of Credit or Other Credit Product Agreement.
SECTION 5.02. ASSIGNMENT.
The Bank may assign or negotiate to any other Federal Home Loan Bank or to any
other person or entity, with or without recourse, any Indebtedness of the
Member or participations therein, and the Bank may assign or transfer all or
any part of the Bank's right, title, and interest in and to this Advances
Agreement and may assign and deliver the whole or any part of the Collateral
to the transferee, which shall succeed to all the powers and rights and duties
of the Bank in respect thereof, and the Bank shall thereafter be forever
relieved and fully discharged from any liability or responsibility with
respect to the transferred Collateral. The Member may not assign or transfer
any of its rights or obligations hereunder (by operation of law, the
appointment of a receivership, or otherwise) without the express prior written
consent of the Bank.
SECTION 5.03. DISCRETION OF BANK TO GRANT OR DENY
Form APSP-A-Standard Page 12 of 16 April 1994
<PAGE>
ADVANCES AND OTHER CREDIT PRODUCTS.
Nothing contained herein or in any documents or oral representations
describing or setting forth the Bank's credit programs or Credit Policies
shall be construed as an agreement or commitment on the part of the Bank to
grant Advances or extend Other Credit Products hereunder, the right and power
of the Bank in its discretion to either grant or deny any Advance or Other
Credit Product requested hereunder being expressly reserved.
SECTION 5.04. AMENDMENT; WAIVERS.
No modification, amendment or waiver of any provision of this Advances
Agreement or consent to any departure therefrom shall be effective unless
executed by the party against whom such change is asserted and shall be
effective only in the specific instance and for the purpose for which given.
No notice to or demand on the Member in any case shall entitle the Member to
any other or further notice or demand in the same, or similar or other
circumstances. Any forbearance, failure or delay by the Bank in exercising any
right, power or remedy hereunder shall not be deemed to be a waiver thereof,
and any single or partial exercise by the Bank of any right, power or remedy
hereunder shall not preclude the further exercise thereof. Every right, power
and remedy of the Bank shall continue in full force and effect until
specifically waived by the Bank in writing.
SECTION 5.05. JURISDICTION; LEGAL FEES.
In any action or proceeding brought by the Bank or the Member in order to
enforce any right or remedy under this Advances Agreement, the parties hereby
consent to, and agree that they will submit to, the jurisdiction of the United
States District Court for the Southern District of Indiana or, if such action
or proceeding may not be brought in federal court, the jurisdiction of the
courts of the State of Indiana located in Marion County. The Member agrees
that, if any action or proceeding is brought by the Member seeking to obtain
any legal or equitable relief against the Bank under or arising out of this
Advances Agreement or any transaction contemplated hereby, and such relief is
not granted by the final decision, after any and all appeals, of a court of
competent jurisdiction, the Member shall promptly pay upon demand all
attorneys' fees and other costs incurred by the Bank in connection therewith.
Further, the Member agrees that if any action or proceeding is brought by the
Bank in connection with the successful enforcement of any of the Bank's rights
or remedies hereunder or otherwise or if the services of legal counsel are
required in connection with the administration of the credit facilities
contemplated hereby, the Member shall pay promptly upon demand all attorneys'
fees and other costs incurred by the Bank in connection therewith.
SECTION 5.06. WAIVER OF JURY TRIAL.
To the extent allowed by law, the Member hereby waives the right to a jury
trial in any action or proceeding brought by or against the Member regarding
this Agreement, the Collateral, Other Credit Products, or the credit
facilities contemplated hereby.
SECTION 5.07. NOTICES.
Except as provided in the last sentence of this Section 5.07, any written
notice, advice, request, consent or direction given, made or withdrawn
pursuant to this Agreement shall be either in writing or transmitted
electronically and reproduced mechanically by the addressee and shall be given
by first class mail, postage prepaid, or by telecopy or other facsimile
transmission, or by private courier or delivery service. Except for notices
made under Section 4.02, all non-oral notices shall be deemed given when
actually received at the principal office of the Bank or the Member, as
appropriate. All notices shall be designated to the attention of an office or
section of the Bank or of the Member if the Bank or the Member has made a
request for the notice to be so addressed. Any notice by the Bank to the
Member pursuant to Sections 2.01, 3.03, 3.04 or 3.05 hereof may be oral and
shall be deemed to have been duly given to and received by the Member at the
time of the oral communication.
SECTION 5.08. SIGNATURES OF MEMBER; ACCEPTANCE BY BANK.
(a) For purposes of this Advances Agreement, documents shall be deemed signed
by the Member when a signature of an authorized signatory or an authorized
facsimile thereof appears on the document. The Bank may rely on any signature
or facsimile thereof which reasonably appears to the Bank to be the signature
of an authorized person, including signatures appearing on documents
transmitted electronically to and reproduced mechanically at the Bank. The
Secretary, the Cashier, the Assistant Secretaries, or the Assistant Cashiers
of the Member shall from time to time certify to the Bank on forms provided by
the Bank the names and titles of the persons authorized to apply on behalf of
the Member to the Bank for Advances and Other Credit Products. Such
certifications are incorporated herein and made a part of this Advances
Agreement and shall continue in effect until expressly revoked by the Member
notwithstanding that
Form APSP-A-Standard Page 13 of 16 April 1994
<PAGE>
subsequent certifications may authorize additional persons to act for and on
behalf of Member.
(b) This Agreement shall only be binding upon the Bank when accepted and
executed by the Bank by two duly authorized officers and shall be deemed
accepted by and delivered to the Bank at its home office in Indianapolis,
Indiana.
SECTION 5.09. APPLICABLE LAW; SEVERABILITY.
In addition to the terms and conditions specifically set forth herein and in
any Advice of Credit or Other Credit Product Agreement between the Bank and
the Member, this Advances Agreement and all Advances and Other Credit Products
extended hereunder shall be governed by the statutory and common law of the
United States and, to the extent federal law incorporates or defers to state
law, the laws (exclusive of the choice of law provisions) of the State of
Indiana, including the Uniform Commercial Code as in effect in the State of
Indiana. In the event that any portion of this Advances Agreement conflicts
with applicable law or the Credit Policies, such conflict shall not affect
other provisions of this Advances Agreement which can be given effect without
the conflicting provisions, and to this end the provisions of this Advances
Agreement are declared to be severable.
SECTION 5.10. INTEREST RATE LIMITATIONS.
Notwithstanding anything contained herein to the contrary, the obligation of
the Member to make payments of interest shall be subject to the limitation
that payments of interest shall not be required to be made to the Bank to the
extent that its receipt thereof would not be permissible under the law or laws
applicable to the Bank limiting rates of interest which may be charged or
collected by the Bank. Any such payments of interest which are not made as a
result of the limitation referred to in the preceding sentence shall be made
by the Member to the Bank on the earliest interest payment date or dates on
which the receipt thereof would be permissible under the laws applicable to
the Bank limiting rates of interest which may be charged or collected by the
Bank.
SECTION 5.11. SUCCESSORS AND ASSIGNS.
This Advances Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the Member and the Bank, provided that the Member
may not assign any of its rights or obligations hereunder (by operation of
law, the appointment of a receivership, or other) without the prior written
consent of the Bank. The Bank may sell, transfer or assign or grant
participations in Advances or Other Credit Products.
SECTION 5.12. REMEDIES CUMULATIVE.
All rights and remedies provided herein or otherwise at law or in equity shall
be cumulative, and are in addition to, and not exclusive of, any rights or
remedies provided by law, including without limitation, the rights and
remedies of a secured party under federal law and the Uniform Commercial Code
as it is in effect from time to time in Indiana, including the right of the
Bank to retain the Collateral in satisfaction of the Indebtedness. The
exercise of one or more thereof shall not preclude, or be deemed an election
of remedies against, any other remedy, right or privilege contained herein or
provided to the Bank by law, rule, or regulation or at equity.
SECTION 5.13. RECORDS OF BANK PRESUMED ACCURATE.
The books and records of the Bank with respect to the Indebtedness, the
Member's accounts or any other obligations of the Member hereunder or
otherwise owing to the Bank shall be presumed to be accurate, complete, and
binding upon the Member, absent fraud or willful misconduct on the part of the
Bank with respect to such account or obligation.
SECTION 5.14. ENTIRE AGREEMENT.
This Advances Agreement and the other documents referenced herein relating to
Advances and Other Credit Products embody the entire Agreement and
understanding between the parties hereto relating to the subject matter
hereof. This Advances Agreement amends, restates and supersedes all prior
agreements between such parties which relate to such subject matter, and all
Advances and Other Credit Products made by the Bank to the Member prior to the
execution of this Advances Agreement shall be governed by the terms of this
Advances Agreement and not by the terms of the prior agreement. The Agreement
and the other documents contemplated hereby or delivered in connection
herewith shall be construed consistently with each other in order to best
effectuate the intent of the Member and the Bank in entering into the
relationships contemplated by all these agreements. The agreements referenced
herein constitute the sole and entire agreement of the parties and no
statement or promise has been made with respect to the subject matter of these
agreements other than as expressed herein. In the event of a conflict between
the terms of this Agreement and any of the other such documents, the
provisions of this Agreement shall con-
Form APSP-A-Standard Page 14 of 16 April 1994
<PAGE>
trol, except with respect to any note, whose respective terms shall control.
IN WITNESS WHEREOF, the Member and the Bank have caused this Advances
Agreement to be signed in their names by their duly authorized officers as of
the date first above mentioned.
People's Trust Company FEDERAL HOME LOAN BANK OF INDIANAPOLIS
- --------------------------------
(Full Name of Member)
By: /s/ JAMES L. SANER SR. By:
----------------------------- ----------------------------
Its: President Its:
----------------------------- ----------------------------
By: /s/ JOHN C. PARKER By:
----------------------------- ----------------------------
Its: Sr. Vice President/Controller Its:
----------------------------- ----------------------------
Form APSP-A-Standard Page 15 of 16 April 1994
<PAGE>
FEDERAL HOME LOAN BANK OF INDIANAPOLIS
--------------------------------------
MEMBER ACKNOWLEDGMENT
AND NOTARIZATION
State of Indiana )
) SS:
County of Franklin )
On this 13th day of February, 1995, before me personally came James L.
Saner, Sr. and John C. Parker, to me known, who, being by me duly sworn, did
depose and state that they are the President and Sr. Vice President/Controller
of said Member; and that they signed their names thereto by order of the Board
of Directors or other governing body of said Member and that said President
and Sr. Vice President/Controller are duly authorized and acknowledge the
execution of said instrument to be the voluntary act and deed of said member.
/s/ Maurica Lyn Allen (SEAL)
- ------------------------------
Notary Public Signature ----------------------
Maurica Lyn Allen
- ------------------------------
Printed Name
My Commission expires: 1/26/96
-------------
My County of Residence: Franklin
------------
Form APSP-A-Standard Page 16 of 16 April 1994
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
Name Place of Incorporation
---- ----------------------
Peoples Trust Company Indiana chartered bank
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 26,185,347
<INT-BEARING-DEPOSITS> 1,897,000
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0
0
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<INTEREST-DEPOSIT> 10,837,329
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</TABLE>
