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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
NCF Financial Corporation
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(Name of Issuer)
Common Stock, par value $.10 per share
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(Title of Class of Securities)
628848
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(CUSIP Number)
Robert E. Yates
President and Chief Executive Officer
Community Bank Shares of Indiana, Inc.
202 East Spring Street, P.O. Box 939
New Albany, Indiana 47150
(812) 944-2224
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 17, 1997
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(Date of Event Which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ].
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the
liabilities of that section of the Exchange Act but shall be subject to all
other provisions of the Exchange Act.
The total number of shares reported herein is 150,000 shares, which
constitutes approximately 18.9% of the total number of shares of the issuer
outstanding as of December 17, 1997. Unless otherwise indicated, all
ownership percentages set forth herein assume that as of December 17, 1997,
there were 792,609 shares of the issuer outstanding.
Page 1 of 11 Pages
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CUSIP No. 628848 Page 2 of 11 Pages
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1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Community Bank Shares of Indiana, Inc.
IRS Employer Identification No. 35-1938254
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
Not Applicable (b) / /
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
WC
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(D) OR 2(E) / /
Not applicable
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
Indiana
NUMBER OF 7. SOLE VOTING POWER
SHARES 150,000(1)
BENEFICIALLY -----------------------------------------------
OWNED BY 8. SHARED VOTING POWER
EACH 0
REPORTING -----------------------------------------------
PERSON 9. SOLE DISPOSITIVE POWER
WITH 150,000(1)
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10. SHARED DISPOSITIVE POWER
0
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(1) The Reporting Person disclaims beneficial ownership of these shares
pursuant to Rule 13d-4 under the Exchange Act. See Item 5 of this
Schedule 13D.
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CUSIP No. 628848 Page 3 of 11 Pages
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
150,000(2)
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES / /
Not Applicable
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.9%
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14. TYPE OF REPORTING PERSON
CO, HC
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Item 1. Security and Issuer.
This Schedule 13D relates to the common stock, par value $.10 per share
(the "NCF Common Stock"), of NCF Financial Corporation ("NCF"), a corporation
organized and existing under the laws of the State of Delaware and registered
as a bank holding company under the Bank Holding Company Act of 1956, as
amended (the "BHC Act"). The principal executive offices of NCF are located
at 106A John Rowan Boulevard, Bardstown, Kentucky 40004.
Item 2. Identity and Background.
(a)-(c) and (f) This Schedule 13D is filed by Community Bank Shares of
Indiana, Inc. ("Community"), a corporation organized under the laws of the
State of Indiana and registered as a bank holding company under the BHC Act.
The principal executive offices of Community are located at 202 East Spring
Street, New Albany, Indiana 47250.
Each executive officer and each director of Community is a citizen of
the United States. The name, business address and present principal
occupation of each director and executive officer of Community is set forth
in Exhibit 1 to this Schedule 13D and is specifically incorporated herein by
reference.
(d)-(e) During the last five years, neither Community nor, to the best
of Community's knowledge, any of its executive officers or directors has been
convicted in a
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(2) The Reporting Person disclaims beneficial ownership of these shares
pursuant to Rule 13d-4 under the Exchange Act. See Item 5 of this
Schedule 13D.
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criminal proceeding (excluding traffic violations or similar misdemeanors) or
has been a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction as a result of which Community or such person was
or is subject to a judgment, decree, or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws, or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
Pursuant to a Stock Option Agreement, dated as of December 17, 1997,
between NCF, as issuer, and Community, as grantee (the "Option Agreement"),
NCF has granted Community an irrevocable option to purchase the shares of NCF
Common Stock covered by this Schedule 13D under certain circumstances (the
"Option"). Specifically, the Option grants Community the right to purchase up
to 150,000 shares of NCF Common Stock (the "Option Shares") (which represent
18.9% of the number of shares outstanding on December 17, 1997, without
giving effect to the issuance of any shares pursuant to an exercise of the
Option), subject to certain adjustments, at a price, subject to certain
adjustments, of $14.75 per share. The Option was granted by NCF as a
condition of and in consideration for Community entering into an Agreement
and Plan of Reorganization and related Agreement of Merger, each dated as of
December 17, 1997, between Community and NCF (together, the "Reorganization
Agreement"), which is included hereto as Exhibit 2.
The exercise of the Option for the full number of Option Shares
currently covered thereby would require aggregate funds of approximately $2.2
million. It is anticipated that, should the Option become exercisable and
should Community elect to exercise the Option, Community would obtain the
funds for purchase from working capital.
A copy of the Option Agreement is filed as Exhibit 3 hereto and is
incorporated herein by reference in its entirety.
Item 4. Purpose of Transaction.
On December 17, 1997, Community and NCF entered into the Reorganization
Agreement, pursuant to which NCF will, subject to the conditions and upon the
terms stated therein, merge with and into Community (the "Merger").
The Reorganization Agreement provides, among other things, that as a
result of the Merger each share of NCF Common Stock outstanding immediately
prior to the effective time of the Merger (the "Effective Time") (other than
any dissenting shares under Delaware law and certain other shares) will be
converted into the right to receive .935 of a newly-issued share of common
stock, par value $.10 per share, of Community ("Community Common Stock") (the
"Exchange Ratio"). However, (i) if the Community Market Value, as defined,
is less than $15.00, then the Exchange Ratio shall be one share of Community
Common Stock; or (ii) if the Community Market Value is greater than $25.00,
then the Exchange Ratio shall be .88 of one share of Community Common Stock.
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For purposes of determining the Exchange Ratio, the following
definitions apply: (i) "Community Market Value" means the average of the
Community Market Prices for the twenty (20) consecutive trading days ending
on the trading day preceding the Determination Date; (ii) "Community Market
Price" means, as of any date, the average between the closing high bid and
low asked prices of a share of Community Common stock on the NASDAQ SmallCap
Market System (as reported in The Wall Street Journal, or if not reported
therein, in another authoritative source); and (iii) "Determination Date"
means the date on all approvals of all regulatory authorities required in
connection with the consummation of the Merger have been obtained.
The Merger is subject to customary closing conditions, including, among
other things, approval of the Merger by the shareholders of NCF and
Community, if required, the receipt of all required regulatory approvals of
the Merger, the receipt by the parties' of a favorable legal opinion from
Community's legal counsel with respect to the tax consequences of the
transactions contemplated by the Reorganization Agreement, and the receipt by
the parties' of a letter from Community's independent public accountants to
the effect that the Merger shall be accounted for as a pooling of interests
under generally accepted accounting principles. In addition, the Merger is
conditioned upon the effectiveness of a registration statement to be filed by
Community with the SEC with respect to the shares of Community Common Stock
to be issued in the Merger, as well as other customary conditions. None of
the foregoing approvals has yet been obtained, and there is no assurance as
to if or when such approvals will be obtained.
The Reorganization Agreement contains certain covenants of the parties
regarding the conduct of their respective businesses pending consummation of
the Merger. Pending consummation of the Merger, NCF and its wholly owned
subsidiary, NCF Bank & Trust Co. (the "Bank") generally are required to
conduct their respective businesses in the ordinary course consistent with
past practice and to use their best efforts to preserve their respective
business organizations intact. In addition, NCF shall not, and shall cause
the Bank not to, among other things, (i) change any provision of the
Certificate of Incorporation or other governing instrument or Bylaws of NCF
or the Bank; (ii) except for the issuance of NCF Common Stock pursuant to the
present terms of outstanding stock options, change the number of shares of
its authorized or issued capital stock or issue or grant any option or any
right to purchase any authorized or issued capital stock of NCF or the Bank;
(iii) declare, set aside or pay any dividend or other distribution in
respect of the capital stock of NCF or the Bank, except for regular cash
dividends not in excess of $0.15 per share of NCF Common Stock; (iv) grant
any severance or termination pay (other than pursuant to binding contracts of
NCF in effect) to, or enter into or amend any employment, consulting or
compensation agreement with, any of its directors, officers or employees; or
award any increase in compensation or benefits to its directors, officers or
employees, except, in the case of employees, such as may be granted in the
ordinary course of business and consistent with past practices and policies;
(v) enter into or modify (except as may be required by applicable law or the
Reorganization Agreement) any pension, retirement, stock option, or other
employee benefit plan or arrangement in respect of any of its directors,
officers or
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employees; or make any contributions to NCF's Employee Stock Ownership Plan
or any other defined contribution plan or any defined benefit pension or
retirement plan other than in the ordinary course of business consistent with
past practice; (vi) sell or dispose of any significant assets or incur any
significant liabilities other than in the ordinary course of business
consistent with past practices and policies, or acquire in any manner
whatsoever (other than to realize upon collateral for a defaulted loan) any
business or entity; (vii) make any capital expenditures in excess of
$25,000 in the aggregate, other than pursuant to binding commitments, other
than expenditures necessary to maintain existing assets in good repair and
other than as previously disclosed to Community; (viii) except as previously
disclosed to Community, file any applications or make any contract with
respect to branching or site location or relocation; (ix) make any material
change in its accounting methods or practices, other than changes required by
generally accepted accounting principles, or change any of its methods of
reporting income and deductions for federal income tax purposes, except as
required by changes in laws or regulations; (x) change its lending,
investment, deposit or asset and liability management or other banking
policies in any material respect except as may be required by applicable law;
(xi) engage in any transaction with a "person" or "affiliate," as defined in
the Reorganization Agreement; (xii) enter into any futures contract, option
or other agreement or take any other action for purposes of hedging the
exposure of its interest-earning assets and interest-bearing liabilities to
changes in market rates of interest; (xiii) take any action that would
result in any of its representations and warranties contained in the
Reorganization Agreement not being true and correct in any material respect
at the Effective Time; or (xiv) agree to do any of the foregoing.
The Reorganization Agreement further provides that neither NCF nor the
Bank shall directly or indirectly, encourage or solicit or hold discussions
or negotiations with, or provide any information to, any person, entity or
group (other than Community) concerning any merger, sale of substantial
assets or liabilities not in the ordinary course of business, sale of shares
of capital stock or similar transactions involving NCF or the Bank (an
"Acquisition Transaction"); provided, however, that NCF may provide
information in connection with an unsolicited possible Acquisition
Transaction if the Board of Directors of NCF, after receipt of written advice
of legal counsel to take such action, determines in the exercise of its
fiduciary responsibilities that such information should be furnished.
The Reorganization Agreement may be terminated (a) by mutual written
consent of the parties hereto; (b) by Community or NCF (i) if the Effective
Time shall not have occurred on or prior to September 30, 1998 or (ii) if a
vote of the stockholders of NCF is taken and such stockholders fail to
approve the Reorganization Agreement at the meeting of stockholders (or any
adjournment thereof); (c) by Community or NCF upon written notice to the
other 30 or more days after the date upon which any application for a
regulatory or governmental approval necessary to consummate the Merger shall
have been denied or withdrawn at the request or recommendation of the
applicable regulatory agency or governmental authority, unless within such
30-day period a petition for rehearing or an amended application is filed or
noticed, or 30 or more days after any petition for rehearing
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or amended application is denied; (d) by Community in writing if NCF has,
or by NCF in writing if Community has, breached (i) any covenant or
undertaking contained in the Reorganization Agreement, or (ii) any
representation or warranty contained in the Reorganization Agreement, which
breach would have a material adverse effect on the business, operations,
assets or financial condition of NCF and the Bank or Community and its
subsidiaries, as applicable, taken as a whole, or upon the consummation of
the Merger, in any case if such breach has not been cured by the earlier of
30 days after the date on which written notice of such breach is given to the
party committing such breach or the Effective Time; provided that either
party may terminate the Reorganization Agreement on the basis of any such
material breach of any representation or warranty, notwithstanding any
qualification therein relating to the knowledge of the other party; (e) by
Community or NCF in writing, if any of the applications for prior regulatory
approval are denied or are approved contingent upon the satisfaction of any
condition or requirement which, in the reasonable opinion of the Board of
Directors of Community, would materially impair the value of NCF and the Bank
to Community, and the time period for appeals and requests for
reconsideration has run.
Concurrently with entering into the Reorganization Agreement, Community
and NCF entered into the Option Agreement, pursuant to which NCF granted to
Community the Option.
Under the Option Agreement, the Option will become exercisable, in whole
at any time or in part from time to time, to the extent not previously
exercised, if a Purchase Event (as defined) shall have occurred and be
continuing, provided that to the extent the Option shall not have been
exercised, it shall terminate and be of no further effect, except as to
notices of exercise given prior thereto, on the Termination Date, which shall
be the date on which occurs the earliest of (i) immediately prior to the
Effective Time, (ii) twelve (12) months after the first occurrence of a
Purchase Event, (iii) twelve (12) months following a termination of the
Reorganization Agreement by Community pursuant to a breach of the
Reorganization Agreement by NCF prior to the occurrence of a Purchase Event;
and (iv) twelve (12) months following a termination of the Reorganization
Agreement in accordance with its terms (other than by Community pursuant to a
breach of the Reorganization Agreement by NCF) prior to the occurrence of a
Purchase Event, provided, however, that any purchase of shares upon exercise
of the Option shall be subject to compliance with applicable laws and
regulations.
A "Purchase Event" means any of the following events or transactions
occurring:
(i) NCF or any of its subsidiaries shall have entered into an agreement with
any person (other than Community or any subsidiary thereof) (A) to merge,
consolidate or enter into any similar transaction with such person, (B) for
the disposition, by sale, lease, exchange or otherwise, of all or
substantially all of the consolidated assets or deposits of NCF or any of its
subsidiaries or (C) for the issuance, sale or other disposition (including by
way of merger, consolidation, share exchange or any similar transaction) of
securities (or an option or right to acquire such securities) representing
15% or more of the voting power of NCF or any of
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its subsidiaries; (ii) any person (other than Community or any subsidiary
thereof) shall have acquired beneficial ownership of, or any group of persons
shall have been formed which beneficially owns, 15% or more of the then
outstanding NCF Common Stock (any of the foregoing in (i) or (ii) is
hereinafter referred to as an "Acquisition Transaction"); (iii) any person
(other than Community or any subsidiary thereof) shall have (A) commenced a
tender offer or filed a registration statement under the Securities Act of
1933, as amended ("Securities Act"), with respect to an exchange offer to
purchase or otherwise acquire control of 15% or more of the then outstanding
shares of NCF Common Stock (such offers being referred to herein as a "Tender
Offer" and an "Exchange Offer," respectively); or (iv) the holders of the
outstanding NCF Common Stock shall not have approved the Reorganization
Agreement (including the related Agreement of Merger) at the meeting of such
holders called for such purpose pursuant to the Reorganization Agreement,
such meeting shall not have been held or shall have been cancelled prior to
the termination of the Reorganization Agreement in accordance with its terms,
or NCF's Board of Directors shall have withdrawn or modified in a manner
which is adverse to Community the recommendation of NCF's Board of Directors
with respect to the Reorganization Agreement and the Agreement of Merger, in
each case after it shall have been publicly announced that any person (other
than Community or any subsidiary thereof) shall have (A) commenced a Tender
Offer or filed a registration statement under the Securities Act with respect
to an Exchange Offer, (B) made, or disclosed an intention to make, a proposal
to engage in an Acquisition Transaction, (C) filed an application (or given
notice), whether in draft or final form, under the Bank Holding Company Act
of 1956, the Bank Merger Act or the Change in Bank Control Act of 1978, for
approval to engage in an Acquisition Transaction or (D) any person shall have
solicited proxies in a proxy solicitation subject to Regulation 14A under the
Exchange Act in opposition to approval of the Reorganization Agreement by
NCF's stockholders.
Except as set forth herein or in the Exhibits hereto, to the best of
Community's knowledge, NCF does not have any current plans or proposals that
relate to or would result in:
(A) The acquisition by any person of additional shares of NCF Common Stock
or the disposition of shares of NCF Common Stock;
(B) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving NCF or any of its
subsidiaries;
(C) A sale or transfer of a material amount of assets of NCF or any of its
subsidiaries;
(D) Any change in the present Board of Directors or management of NCF,
including any plans or proposals to change the number or terms of
directors or to fill any existing vacancies on the board;
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(E) Any material change in the present capitalization or dividend policy
of NCF;
(F) Any other material change in NCF's business or corporate structure;
(G) Any changes in NCF's charter, bylaws or instruments corresponding
thereto or other actions which may impede the acquisition of control
of NCF by any person;
(H) Causing a class of securities of NCF to be delisted from a national
securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities
association;
(I) A class of equity securities of NCF becoming eligible for termination
of registration pursuant to Section 12(g)(4) of the Exchange Act; or
(J) Any action similar to any of those enumerated above.
The foregoing descriptions of the Reorganization Agreement and the
Option Agreement are qualified in their entirety by reference to such
documents, copies of which are included hereto as Exhibits 2 and 3,
respectively, and are incorporated herein by reference in their entirety.
Item 5. Interest in Securities of Issuer.
(a)-(b) By reason of its execution of the Option Agreement, pursuant
to Rule 13d-3(d)(1)(i) promulgated under the Exchange Act, Community may be
deemed to have sole voting and sole dispositive power with respect to the NCF
Common Stock subject to the Option and, accordingly, may be deemed to
beneficially own 150,000 shares of NCF Common Stock, or 18.9% of the NCF
Common Stock issued and outstanding as of December 17, 1997, without giving
effect to the issuance of any shares pursuant to an exercise of the Option.
However, because the Option is exercisable only in the circumstances set
forth in Item 4 of this Schedule 13D, none of which has occurred as of the
date hereof, Community expressly disclaims any beneficial ownership of the
150,000 shares of NCF Common Stock which are obtainable by Community upon
exercise of the Option.
Except as set forth above, neither Community nor, to the best of
Community's knowledge, any of the individuals named in Schedule 1 hereto, is
a beneficial owner of any NCF Common Stock.
(c) Except as set forth above, no transactions in NCF Common Stock were
effected during the past 60 days by Community or, to the best of Community's
knowledge, by any of the individuals named in Schedule 1 hereto.
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(d) So long as Community has not purchased the Shares of NCF Common
Stock subject to the Option, Community does not have the right to receive or
the power to direct the receipt of dividends from, or the proceeds from the
sale of, any shares of NCF Common Stock.
(e) Inapplicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer.
As described above, the Reorganization Agreement contains certain
customary restrictions on the conduct of the business of NCF, including
certain customary restrictions relating to the NCF Common Stock. Except as
provided in the Reorganization Agreement and the Option Agreement, neither
Community nor, to the best of Community's knowledge, any of the individuals
named in Schedule 1 hereto, has any contracts, arrangements, understandings,
or relationships (legal or otherwise), with any person with respect to any
securities of NCF, including, but not limited to, transfer or voting of any
securities, finder's fees, joint ventures, loan or option arrangements, puts
or calls, guarantees of profits, division of profits or losses or the giving
or withholding of proxies.
Item 7. Material to be Filed as Exhibits.
The following exhibits are filed as part of this Schedule 13D:
Exhibit 1 Name, business address and present principal occupation of each
director and executive officer of Community Bank Shares of
Indiana, Inc.
Exhibit 2 Agreement and Plan of Reorganization and related Agreement of
Merger, each dated as of December 17, 1997, between Community
Bank Shares of Indiana, Inc. and NCF Financial Corporation.
Exhibit 3 Stock Option Agreement, dated as of December 17, 1997, between
NCF Financial Corporation, as issuer, and Community Bank Shares
of Indiana, Inc., as grantee.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete,
and correct.
COMMUNITY BANK SHARES OF INDIANA, INC.
By: /s/ Robert E. Yates
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Robert E. Yates
President and Chief Executive
Officer
January 7, 1998
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EXHIBIT INDEX
Exhibit Description
1 Name, business address and present principal occupation of each
director and executive officer of Community Bank Shares of Indiana,
Inc.
2 Agreement and Plan of Reorganization and related Agreement of Merger,
each dated as of December 17, 1997, between Community Bank Shares of
Indiana, Inc. and NCF Financial Corporation.
3 Stock Option Agreement, dated as of December 17, 1997, between NCF
Financial Corporation, as issuer, and Community Bank Shares of
Indiana, Inc., as grantee.
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Exhibit 1
Name, business address and present principal occupation
of the directors and executive officers
of Community Bank Shares of Indiana, Inc.
Directors
The business address of each director of Community Bank Shares of Indiana,
Inc. is c/o Community Bank Shares of Indiana, Inc., 202 East Spring Street, P.O.
Box 939, New Albany, Indiana 47150.
C. Thomas Young, Chairman of the Board
Partner in law firm of Young, Lind, Endres & Kraft and partner in Shea and
Young, a real estate investment company
Robert J. Koetter, Sr.
part owner of Koetter Construction Company, Floyd Knobs, Indiana; M.E.K.A.,
Inc., a development company in Floyd Knobs, Indiana; and KP Properties
Robert E. Yates
President and Chief Executive Officer of Community Bank Shares of Indiana,
Community Bank of Southern Indiana and Heritage Bank of Southern Indiana
Timothy T. Shea
President and Chief Executive Officer of Vermont American Corp., a manufacturer
and marketer of power tool accessories and home storage products located in
Louisville, Kentucky
Gary L. Libs
President and Chief Executive officer of Libs Paving Co., Inc., Floyd Knobs,
Indiana, and of Asphalt Supply Co., Jeffersonville, Indiana
James W. Robinson
Chairman of Caldwell Tanks, Inc., a tank manufacturer located in Louisville,
Kentucky; Secretary and director of Stem Wood Corp., a lumber and veneer
manufacturer located in New Albany, Indiana
Gordon Huncilman
President and Chief Executive Officer of Bert R. Huncilman & Sons, Inc., a steel
fabricator and manufacturer of light equipment located in New Albany, Indiana
Kerry Stempler
Commercial builder, K.M. Stempler, Inc. New Albany, Indiana
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Dale Orem
Chairman of the Board of Heritage Bank of Southern Indiana, Jeffersonville,
Indiana
Steven Stempler
President of Stempler & Sons, Inc. a plumbing supply company located in
Jeffersonville, Indiana
Executive Officers who are not Directors
The business address of each executive officer of Community Bank Shares
of Indiana, Inc. who is not a director is c/o Community Bank Shares of
Indiana, Inc., 202 East Spring Street, P.O. Box 939, New Albany, Indiana
47150.
James M. Stutsman
Senior Vice President and Chief Financial Officer
M. Diane Murphy
Senior Vice President and Corporate Secretary
Stanley L. Krol
Senior Vice President
Thomas Jones
Vice President
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Exhibit 2
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of December 17, 1997
("Agreement"), between Community Bank Shares of Indiana, Inc. ("Community"), an
Indiana corporation headquartered in New Albany, Indiana, and NCF Financial
Corporation ("NCF"), a Delaware corporation headquartered in Bardstown,
Kentucky.
WITNESSETH:
WHEREAS, the Boards of Directors of Community and NCF have determined that
it is in the best interests of their respective companies and their shareholders
to consummate the business combination transactions provided for herein,
including the merger of NCF with and into Community subject to the terms and
conditions set forth herein; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby; and
WHEREAS, as a condition and inducement to Community's willingness to enter
into this Agreement, (i) NCF is concurrently entering into a Stock Option
Agreement with Community (the "Stock Option Agreement"), in substantially the
form attached hereto as Exhibit A, pursuant to which NCF is granting to
Community the option to purchase shares of NCF Common Stock (as defined herein)
under certain circumstances; (ii) certain stockholders of NCF are concurrently
entering into a Letter Agreement with Community (the "Letter Agreement"), in
substantially the form attached hereto as Exhibit B, pursuant to which, among
other things, such stockholders agree to vote their shares of NCF Common Stock
in favor of this Agreement and the transactions contemplated hereby; and (iii)
A.E. Bowling, President and Chairman of the Board of the NCF is concurrently
entering into a Retirement Agreement (the "Retirement Agreement") in
substantially the form attached hereto as Exhibit C, pursuant to which Community
will provide certain retirement payments to Mr. Bowling subject to the terms and
conditions set forth therein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
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ARTICLE I
THE MERGER
1.01. The Merger.
Subject to the terms and conditions of this Agreement and the Agreement
of Merger, dated as of the date hereof, between Community and NCF, a copy of
which is attached hereto as Appendix A, at the Effective Time (as defined in
Section 1.02 hereof), NCF shall be merged with and into Community in
accordance with the Delaware General Corporation Law ("DGCL") and the
Indiana Business Corporation Law ("IBCL") (the "Merger"), with Community as
the surviving corporation (hereinafter sometimes called the "Surviving
Corporation"). Each share of common stock, par value $.10 per share, of NCF
("NCF Common Stock") outstanding immediately prior to the Effective Time
(other than shares as to which dissenters' rights have been asserted and duly
perfected in accordance with Delaware law (the "NCF Dissenting Shares") and
shares held by NCF (including treasury shares) or Community or any of their
respective wholly owned subsidiaries) shall, by virtue of the Merger and
without any further action by the holder thereof, be converted into and
represent the right to receive shares of common stock, par value $.10 per
share, of Community ("Community Common Stock") ("Merger Consideration"), as
provided in Section 1.03 hereof and subject to the terms, conditions,
limitations and procedures set forth in this Agreement and the Agreement of
Merger. If deemed advisable by Community for regulatory, corporate, or other
reasons, Community may revise the structure of the business combination to
provide for a to-be-organized wholly owned subsidiary of Community to merge
with the Bank in lieu of the merger between Community and NCF.
1.02. Effective Time.
The Merger shall become effective on the date and at the time that
Articles of Merger are filed with the Secretary of State of the State of
Indiana pursuant to the IBCL, unless a later date and time is specified as
the effective time in such Articles of Merger ("Effective Time"). A closing
(the "Closing") shall take place immediately prior to the Effective Time at
10:00 a.m., on the fifth business day following the receipt of all necessary
regulatory or governmental approvals and consents and the expiration of all
statutory waiting periods in respect thereof and the satisfaction or waiver,
to the extent permitted hereunder, of the conditions to the consummation of
the Merger specified in Article V of this Agreement (other than the delivery
of certificates, opinions and other instruments and documents to be delivered
at the Closing), at the offices of Community, 200 East Spring Street, New
Albany, Indiana 47150, or at such other place, at such other time, or on such
other date as the parties may mutually agree upon. At the Closing, there
shall be delivered to Community and NCF the opinions, certificates and other
documents required to be delivered under Article V hereof.
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1.03. Conversion of Shares.
At the Effective Time, by virtue of the Merger and without any action on
the part of a holder of shares of NCF Common Stock:
(a) Each share of Community Common Stock that is issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding and
shall be unchanged by the Merger.
(b) All shares of NCF Common Stock owned by NCF (including treasury
shares) or Community or any of their respective wholly owned subsidiaries shall
be cancelled and retired and shall not represent capital stock of the Surviving
Corporation and shall not be exchanged for shares of Community Common Stock,
cash or other consideration.
(c) Subject to Sections 1.05, 1.06, 1.08 and 1.11, each share of NCF
Common Stock issued and outstanding at the Effective Time (other than shares to
be cancelled in accordance with Section 1.03(b)) shall be converted into, and
shall be cancelled in exchange for, the right to receive (i) if the Community
Market Value is greater than or equal to $15.00 and less than or equal to
$25.00, then .935 of one share of Community Common Stock; (ii) if the Community
Market Value is less than $15.00, then one share of Community Common Stock; or
(iii) if the Community Market Value is greater than $25.00, then .88 of one
share of Community Common Stock.
The applicable formula for conversion of NCF Common Stock to Community Common
Stock, as determined pursuant to any of Section 1.03(c) (i), 1.03((c)(ii) or
1.03(c)(iii), is hereinafter referred to as the "Exchange Ratio."
(d) For purposes of determining the Exchange Ratio, the following
definitions apply:
(i) "Community Market Value" means the average of the Community
Market Prices for the twenty (20) consecutive trading days ending on
the trading day preceding the Determination Date;
(ii) "Community Market Price" means, as of any date, the average
between the closing high bid and low asked prices of a share of
Community Common Stock on the NASDAQ SmallCap Market System (as
reported in THE WALL STREET JOURNAL, or if not reported therein, in
another authoritative source).
(iii) "Determination Date" means the date on all approvals of all
regulatory authorities required in connection with the consummation of
the Merger have been obtained.
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1.04. Shareholder Rights; Stock Transfers
At the Effective Time, each holder of a certificate or certificates
representing outstanding shares of NCF Common Stock (the "Certificates")
shall cease to have any rights with respect thereto, except the right to
receive, upon the surrender of any such Certificates in accordance with
Section 1.07 hereof, certificates representing the number of whole shares of
Community Common Stock, and any cash in lieu of a fractional share interest,
into which such shares of NCF Common Stock shall have been converted pursuant
to Section 1.03 hereof, without interest. After the Effective Time, there
shall be no further registration of transfers on the stock transfer books of
the NCF of shares of NCF Common Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to Community or the Exchange Agent (as defined in Section 1.07
hereof) for any reason, they shall be canceled and exchanged as provided in
Sections 1.06 and 1.07 hereof, as applicable, except as otherwise provided by
law.
1.05. Fractional Shares
(a) No certificates or scrip representing fractional shares of Community
Common Stock shall be issued upon the surrender for exchange of a Certificate or
Certificates, and such fractional share interests shall not entitle the owner
thereof to vote or to any other rights as a shareholder of Community.
(b) Notwithstanding any other provision of this Agreement, each holder of
shares of NCF Common Stock converted into shares of Community Common Stock
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of a share of Community Common Stock (after taking into account all
Certificates delivered by such holder) shall, at the time of surrender of the
Certificate or Certificates representing such holder's shares of NCF Common
Stock receive an amount of cash (without interest) equal to the product arrived
at by multiplying such fraction of a share of Community Common Stock by the
closing price of a share of Community Common Stock on the Nasdaq Stock Market's
SmallCap Market on the business day preceding the Effective Time (as reported in
The Wall Street Journal, or if not reported therein, in another authoritative
source), rounded to the nearest whole cent.
1.06. Dissenting Shares
Each outstanding share of NCF Common Stock the holder of which has
perfected his right to dissent under the Delaware Law and has not effectively
withdrawn or lost such right as of the Effective Time (the "Dissenting Shares")
shall not be converted into or represent a right to receive shares of Community
Common Stock hereunder, and the holder thereof shall be entitled only to such
rights as are granted by the Delaware Law. The NCF shall give Community prompt
notice upon receipt by the NCF of any such written demands for payment of the
fair value of such shares of NCF Common Stock and of withdrawals of such demands
and any other instruments provided pursuant to the Delaware Law (any
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shareholder duly making such demand being hereinafter called a "Dissenting
Shareholder"). If any Dissenting Shareholder shall effectively withdraw or
lose (through failure to perfect or otherwise) his right to such payment at
any time, such holder's shares of NCF Common Stock shall be converted into
the right to receive shares of Community Common Stock in accordance with the
applicable provisions of this Agreement. Any payments made in respect of
Dissenting Shares shall be made by the Surviving Corporation.
1.07. Exchange Procedures
(a) At or after the Effective Time, each holder of a Certificate or
Certificates, upon surrender of the same to an agent, duly appointed by
Community (the "Exchange Agent"), shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of whole shares
of Community Common Stock into which the shares of NCF Common Stock theretofore
represented by the Certificate or Certificates so surrendered shall have been
converted as provided in Section 1.03(c) hereof. As promptly as practicable
after the Effective Time, the Exchange Agent shall mail to each holder of record
of an outstanding Certificate which is to be exchanged for Community Common
Stock as provided in Section 1.03 hereof a form of letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to
such Certificate shall pass, only upon delivery of such Certificate to the
Exchange Agent) advising such holder of the terms of the exchange effected by
the Merger and of the procedure for surrendering to the Exchange Agent such
Certificate in exchange for a certificate or certificates evidencing Community
Common Stock or cash in lieu of any fractional share interest. Notwithstanding
anything in this Agreement to the contrary, Certificates surrendered for
exchange an NCF Affiliate (as defined in Section 2.18(b) hereof) shall not be
exchanged for certificates representing shares of Community Common Stock in
accordance with the terms of this Agreement until Community has received a
written agreement from such person as specified in Section 5.02(e).
(b) No holder of a Certificate shall be entitled to receive any dividends
in respect of the Community Common Stock into which such shares shall have been
converted by virtue of the Merger until the certificate representing such shares
is surrendered in exchange for a certificate or certificates representing shares
of Community Common Stock. In the event that dividends are declared and paid by
Community in respect of Community Common Stock after the Effective Time but
prior to any holder's surrender of Certificates, dividends payable to such
holder in respect of shares of Community Common Stock not then issued shall
accrue (without interest). Any such dividends shall be paid (without interest)
upon surrender of the Certificates. Community shall be entitled, after the
Effective Time, to treat Certificates as evidencing ownership of the number of
whole shares of Community Common Stock into which the shares of NCF Common Stock
represented by such Certificates shall have been converted pursuant to this
Agreement, notwithstanding the failure on the part of the holder thereof to
surrender such Certificates.
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(c) Community shall not be obligated to deliver a certificate or
certificates representing shares of Community Common Stock to which a holder of
NCF Common Stock would otherwise be entitled as a result of the Merger until
such holder surrenders a Certificate or Certificates for exchange as provided in
this Section 1.07, or, in default thereof, an appropriate affidavit of loss and
indemnity agreement and/or a bond in an amount as may be reasonably required in
each case by Community. If any certificate evidencing shares of Community
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the Certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange pay to the Exchange Agent any transfer or other tax required by reason
of the issuance of a certificate for shares of Community Common Stock in any
name other than that of the registered holder of the Certificate surrendered or
otherwise establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not payable.
1.08. Anti-Dilution Provisions
If, between the date hereof and the Effective Time, the shares of Community
Common Stock shall be changed into a different number or class of shares by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or a stock dividend thereon shall be
declared with a record date within said period, the Exchange Ratio shall be
adjusted accordingly.
1.09. Options
(a) At the Effective Time, each option with respect to NCF Common Stock (a
"NCF Stock Option") that has been issued pursuant to NCF's 1995 Stock Option
Plan (the "Stock Option Plan") which is then outstanding, whether or not
exercisable, shall cease to represent a right to acquire shares of NCF Common
Stock and shall be converted automatically into an option to purchase shares of
Community Common Stock, and Community shall assume each Stock Option, in
accordance with the terms of the Stock Option Plan and stock option agreement by
which it is evidenced, except that from and after the Effective Time, (i)
Community and the committee of its Board of Directors which administers
Community's stock benefit plans shall be substituted for the NCF and the
committee of the NCF's Board of Directors (including, if applicable, the entire
Board of Directors of the NCF) administering the Stock Option Plan, (ii) each
Stock Option assumed by Community may be exercised solely for shares of
Community Common Stock, (iii) the number of shares of Community Common Stock
subject to the Stock Option shall be equal to the number of shares of NCF Common
Stock subject to the Stock Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, provided that any fractional shares of
Community Common Stock resulting from such multiplication shall be rounded down
to the nearest share, and (iv) the per share exercise price under each such
Stock Option shall be adjusted by dividing the per share exercise price under
each such Stock Option by the Exchange Ratio, provided that such exercise price
shall be rounded up to the nearest cent.
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Notwithstanding clauses (iii) and (iv) of the preceding sentence, each Stock
Option which is an "incentive stock option" shall be adjusted as required by
Section 424 of the Code, and the regulations promulgated thereunder, so as
not to constitute a modification, extension or renewal of the option within
the meaning of Section 424(h) of the Code. Community and the NCF agree to
take all necessary steps to effect the foregoing provisions of this Section
1.09(a). An example of the application of this formula to outstanding Stock
Options is attached hereto as Schedule 1.09(a).
(b) Within 30 days after the Effective Time, Community shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), with respect to the shares of Community
Common Stock subject to the options referred to in paragraph (a) of this Section
1.09 and shall use its reasonable efforts to maintain the current status of the
prospectus or prospectuses contained therein for so long as such options remain
outstanding in the case of a Form S-8 or, in the case of a Form S-3, until the
shares subject to such options may be sold without a further holding period
under Rule 144 under the Securities Act.
1.10. Additional Actions.
If at any time after the Effective Time the Surviving Corporation shall
consider that any further assignments or assurances in law or any other acts are
necessary or desirable to (i) vest, perfect or confirm, of record or otherwise,
in the Surviving Corporation its rights, title or interest in, to or under any
of the rights, properties or assets of NCF acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger, or (ii)
otherwise carry out the purposes of this Agreement, NCF and its proper officers
and directors shall be deemed to have granted to the Surviving Corporation an
irrevocable power of attorney to execute and deliver all such proper deeds,
assignments and assurances in law and to do all acts necessary or proper to
vest, perfect or confirm title to and possession of such rights, properties or
assets in the Surviving Corporation and otherwise to carry out the purposes of
this Agreement; and the proper officers and directors of the Surviving
Corporation are fully authorized in the name of NCF or otherwise to take any and
all such action.
1.11. Adjustments to Exchange Ratio.
If NCF's stockholder equity does not equal at least $12.25 million as of
December 31, 1997, the Exchange Ratio shall be adjusted in a manner mutually
agreed to by Community and NCF.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF NCF
References to "NCF Disclosure Schedules" shall mean all of the disclosure
schedules required by this Article II, dated as of the date hereof and
referenced to the specific sections and subsections of Article II of this
Agreement, which have been delivered by NCF to Community. NCF hereby represents
and warrants to Community as follows as of the date hereof:
2.01. Corporate Organization.
(a) NCF is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. NCF has the corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted and is duly licensed or qualified to
do business and is in good standing in each jurisdiction in which the nature of
the business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed, qualified or in good standing would
not have a material adverse effect on the business, operations, assets or
financial condition of NCF and the Bank (as defined below) taken as a whole.
NCF is registered as a bank holding company under the Bank Holding Company Act,
as amended, 12 U.S.C. Section 1841, et seq., ("BHC"). NCF Disclosure Schedule
2.01(a) sets forth true and complete copies of the Certificate of Incorporation
or other governing instrument and Bylaws of NCF and the Bank as in effect on the
date hereof.
(b) The only direct or indirect subsidiary of NCF is NCF Bank & Trust Co.
(the "Bank"). The Bank (i) is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, (ii) has the
corporate power and authority to own or lease all of its properties and assets
and to conduct its business as it is now being conducted, and (iii) is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed, qualified or in good standing would not have a material adverse effect
on the business, operations, assets or financial condition of NCF and the Bank,
taken as a whole. NCF and the Bank are in good standing with their appropriate
federal and state banking regulatory agencies and each has satisfied in all
material respects all commitments, financial or otherwise, as may have been
agreed upon with such banking regulatory agencies. Except as set forth in NCF
Disclosure Schedule 2.01(b) and other than the Bank, NCF does not own or
control, directly or indirectly, greater than a 5% equity interest in any
corporation, company, association, partnership, joint venture or other entity.
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2.02. Capitalization.
The authorized capital stock of NCF consists of 1,400,000 shares of NCF
Common Stock, par value $.10, of which 792,609 are issued and outstanding, none
of which are held in treasury as of the date hereof, and 100,000 shares of
preferred stock, par value $.01, of which no shares are issued and outstanding
as of the date hereof. All issued and outstanding shares of capital stock of
NCF, and all issued and outstanding shares of capital stock of the Bank, have
been duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights. All of the outstanding shares of capital stock of
the Bank are owned by NCF free and clear of any liens, encumbrances, charges,
restrictions or rights of third parties of any kind whatsoever, and, except for
options granted to Community pursuant to the Option Agreement and for options to
purchase 57,784 shares of NCF Common Stock which have been granted pursuant to
the Stock Option Plan, and which are outstanding, neither NCF nor the Bank has
or is bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the transfer, purchase or
issuance of any shares of capital stock of NCF or the Bank or any securities
representing the right to purchase or otherwise receive any shares of such
capital stock or any securities convertible into or representing the right to
purchase or subscribe for any such stock.
2.03. Authority; No Violation.
(a) Subject to the approval of this Agreement and the Agreement of Merger
and the transactions contemplated hereby and thereby by the stockholders of NCF,
NCF has full corporate power and authority to execute and deliver this Agreement
and the Agreement of Merger and to consummate the transactions contemplated
hereby and thereby in accordance with the terms hereof and thereof. The
execution and delivery of this Agreement and the Agreement of Merger and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly approved by the Board of Directors of NCF. Except for the approval
of NCF's stockholders of this Agreement and the Agreement of Merger, no other
corporate proceedings on the part of NCF are necessary to consummate the
transactions so contemplated. This Agreement and the Agreement of Merger have
been duly and validly executed and delivered by NCF and constitute valid and
binding obligations of NCF, enforceable against it in accordance with and
subject to their terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, and except that the availability of equitable remedies (including,
without limitation, specific performance) is within the discretion of the
appropriate court.
(b) None of the execution and delivery of this Agreement and the Agreement
of Merger by NCF, nor the consummation by NCF of the transactions contemplated
hereby and thereby in accordance with the terms hereof and thereof, or
compliance by NCF with any of the terms or provisions hereof or thereof, will
(i) violate any provision of the Certificate of Incorporation or other governing
instrument or Bylaws of NCF or the Bank,
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(ii) assuming that the consents and approvals set forth below are duly
obtained, violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to NCF or the Bank or any of
their respective properties or assets, or (iii) except as disclosed in NCF
Disclosure Schedule 2.03(b), violate, conflict with, result in a breach of
any provisions of, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, result in the
termination of, accelerate the performance required by, or result in the
creation of any lien, security interest, charge or other encumbrance upon any
of the respective properties or assets of NCF or the Bank under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to
which NCF or the Bank is a party, or by which any of their respective
properties or assets may be bound or affected, except, with respect to (ii)
and (iii) above, such as individually or in the aggregate will not have a
material adverse effect on the business, operations, assets or financial
condition of NCF and the Bank, taken as a whole, and which will not prevent
or delay the consummation of the transactions contemplated hereby. Except as
set forth in NCF Disclosure Schedule 2.03(b) and for consents and approvals
of or filings or registrations with or notices to the Securities and Exchange
Commission ("Commission"), the Secretary of State of the State of Delaware,
the Board of Governors of the Federal Reserve System (the "Federal Reserve"),
the state banking regulators of the Commonwealth of Kentucky and the
stockholders of NCF, no consents or approvals of or filings or registrations
with or notices to any federal, state, municipal or other governmental or
regulatory commission, board, agency, or non-governmental third party are
required on behalf of NCF in connection with (a) the execution and delivery
of this Agreement and the Agreement of Merger by NCF and (b) the consummation
by NCF of the Merger and the other transactions contemplated hereby and by
the Agreement of Merger.
2.04. Financial Statements.
(a) NCF has previously delivered to Community copies of the consolidated
statements of financial condition of NCF as of June 30, 1997, 1996 and 1995 and
the related consolidated statements of income, changes in stockholders' equity
and cash flows for the years ended June 30, 1997, 1996 and 1995, including such
statements of entities preceding NCF's organization in 1995, in each case
accompanied by the audit reports of either Whelan, Doerr, Pike & Pawley, PSC,
independent public accountants, or Crisp and Hughes, independent public
accountants, as appropriate, as well as the unaudited consolidated statement of
financial condition of NCF as of September 30, 1997 and the related unaudited
consolidated statement of income, changes in stockholders' equity and cash flows
for the three months ended September 30, 1996 and 1995. The consolidated
statements of financial condition of NCF referred to herein (including the
related notes, where applicable), as well as the consolidated financial
statements contained in the reports of NCF to be delivered by NCF pursuant to
Section 4.04 hereof, fairly present or will fairly present, as the case may be,
the consolidated financial condition of NCF as of the respective dates set forth
therein, and the related consolidated statements of income, changes in
stockholders' equity and cash flows (including the related notes, where
applicable) fairly present or will fairly present, as
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the case may be, the results of the consolidated operations, changes in
stockholders' equity and cash flows of NCF for the respective periods or as
of the respective dates set forth therein (it being understood that NCF's
interim financial statements are not audited and are not prepared with
related notes but reflect all adjustments which are, in the opinion of NCF,
necessary for a fair presentation of such financial statements).
(b) Each of the financial statements referred to in this Section 2.04
(including the related notes, where applicable) has been or will be, as the case
may be, prepared in accordance with generally accepted accounting principles
consistently applied during the periods involved. The books and records of NCF
and the Bank are being maintained in material compliance with applicable legal
and accounting requirements and reflect only actual transactions.
(c) Except to the extent reflected, disclosed or reserved against in the
consolidated financial statements referred to in the first sentence of Section
2.04(a) or the notes thereto or liabilities incurred since September 30, 1997 in
the ordinary course of business and consistent with past practice, neither NCF
nor the Bank has any obligation or liability, whether absolute, accrued,
contingent or otherwise, material to the business, operations, assets or
financial condition of NCF and the Bank, taken as a whole.
2.05. Absence of Certain Changes or Events.
(a) There has not been any material adverse change in the business,
operations, prospects, assets or financial condition of NCF and the Bank, taken
as a whole, since September 30, 1997 and to the best knowledge of NCF, no fact
or condition exists which NCF believes will cause such a material adverse change
in the future.
(b) Neither NCF nor the Bank has taken or permitted any of the actions set
forth in Section 4.02 hereof between September 30, 1997 and the date hereof.
2.06. Legal Proceedings.
Except as disclosed in NCF Disclosure Schedule 2.06, neither NCF nor the
Bank is a party to any, and there are no pending or, to the best knowledge of
NCF, threatened legal, administrative, arbitration or other proceedings, claims,
actions or governmental investigations of any nature against NCF or the Bank,
except such proceedings, claims, actions or governmental investigations which in
the good faith judgment of NCF will not have a material adverse effect on the
business, operations, assets or financial condition of NCF and the Bank. taken
as a whole. Neither NCF nor the Bank is a party to any order, judgment or
decree which materially adversely affects the business, operations, assets or
financial condition of NCF and the Bank, taken as a whole.
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2.07. Taxes and Tax Returns.
(a) Each of NCF and the Bank, or the affiliated, combined or unitary group
(within the meaning of applicable federal income tax law) of which any such
corporation is or was a member, as the case may be (individually an "Affiliate"
and collectively, "Affiliates"), has duly filed (and until the Effective Time
will so file) all returns, declarations, reports, information returns and
statements ("Returns") required to be filed or sent by or with respect to them
in respect of any Taxes (as hereinafter defined), and has duly paid (and until
the Effective Time will so pay) all Taxes due and payable other than Taxes or
other charges which (i) are being contested in good faith (and disclosed in
writing to Community) and (ii) have not finally been determined. NCF and its
Affiliates have established (and until the Effective Time will establish) on
their books and records reserves that are adequate for the payment of all Taxes
not yet due and payable, whether or not disputed, accrued or applicable. Except
as set forth in NCF Disclosure Schedule 2.07(a), (i) the federal income tax
returns of NCF and its Affiliates have been examined by the Internal Revenue
Service ("IRS") (or are closed to examination due to the expiration of the
applicable statute of limitations), and (ii) the Kentucky income tax returns of
NCF and its Affiliates have been examined by applicable authorities (or are
closed to examination due to the expiration of the statute of limitations), and
in the case of both (i) and (ii) no deficiencies were asserted as a result of
such examinations which have not been resolved and paid in full. There are no
audits or other administrative or court proceedings presently pending nor any
other disputes pending, or claims asserted for, Taxes or assessments upon NCF or
any of its Affiliates, nor has NCF or any of its Affiliates given any currently
outstanding waivers or comparable consents regarding the application of the
statute of limitations with respect to any Taxes or Returns.
(b) Except as set forth in NCF Disclosure Schedule 2.07(b), none of NCF or
any of its Affiliates (i) has requested any extension of time within which to
file any Return which Return has not since been filed, (ii) is a party to any
agreement providing for the allocation or sharing of Taxes, (iii) is required to
include in income any adjustment pursuant to Section 481(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), by reason of a voluntary change
in accounting method initiated by NCF or any Affiliate (nor does NCF have any
knowledge that the IRS has proposed any such adjustment or change of accounting
method), or (iv) has filed a consent pursuant to Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply.
(c) For purposes of this Agreement, "Taxes" shall mean all taxes, charges,
fees, levies or other assessments, including, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment (including
withholding, payroll and employment taxes required to be withheld with respect
to income paid to employees), excise, estimated, severance, stamp, occupation,
property or other taxes, customs duties, fees, assessments or charges of any
kind whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any taxing authority (domestic or foreign) upon
NCF or any of its Affiliates.
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2.08. Employee Benefit Plans.
(a) Each employee benefit plan or arrangement of NCF or the Bank which is
an "employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), is listed in NCF
Disclosure Schedule 2.08(a) ("NCF Plans"). NCF has previously furnished to
Community true and complete copies of each of the NCF Plans together with (i)
the most recent actuarial and financial reports prepared with respect to any
qualified NCF Plans, (ii) the most recent annual reports filed with any
government agency, and (iii) all rulings and determination letters and any open
requests for rulings or letters that pertain to any qualified NCF Plans.
(b) Each NCF Plan has been operated in compliance in all material respects
with the applicable provisions of ERISA, the Code, all regulations, rulings and
announcements promulgated or issued thereunder, and all other applicable
governmental laws and regulations.
(c) Neither NCF nor the Bank participates in or has incurred any liability
under Section 4201 of ERISA for a complete or partial withdrawal from a
multi-employer plan (as such term is defined in ERISA).
(d) The present value of all accrued benefits under each of the NCF Plans
subject to Title IV of ERISA did not, as of the latest valuation date of each
such Plan, exceed the then current value of the assets of such plans allocable
to such accrued benefits, based upon the actuarial and accounting assumptions
currently utilized for such NCF Plans.
(e) Neither NCF nor the Bank, nor, to the best knowledge of NCF, any
trustee, fiduciary or administrator of an NCF Plan or any trust created
thereunder, has engaged in a "prohibited transaction," as such term is defined
in Section 4975 of the Code, which could subject NCF or the Bank, or, to the
best knowledge of NCF, any trustee, fiduciary or administrator thereof, to the
tax or penalty on prohibited transactions imposed by said Section 4975.
(f) No NCF Plan or any trust created thereunder has been terminated, nor
have there been any "reportable events" with respect to any NCF Plan, as that
term is defined in Section 4043(b) of ERISA.
(g) No NCF Plan or any trust created thereunder has incurred any
"accumulated funding deficiency," as such term is defined in Section 302 of
ERISA.
(h) Each of the NCF Plans which is intended to be a qualified plan within
the meaning of Section 401(a) of the Code has been determined by the IRS to be
so qualified, and NCF is not aware of any fact or circumstance which would
adversely affect the qualified status of any such Plan.
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2.09. Securities Documents and Regulatory Reports.
(a) NCF has previously delivered or made available to Community a complete
copy of each final registration statement, prospectus, annual, quarterly or
current report and definitive proxy statement or other communication (other than
general advertising materials) filed pursuant to the Securities Act of 1933, as
amended ("1933 Act"), or the Securities Exchange Act of 1934, as amended ("1934
Act"), or mailed by NCF to its stockholders as a class since January 1, 1995,
and each such final registration statement, prospectus, annual, quarterly or
current report and definitive proxy statement or other communication, as of its
date, complied in all material respects with all applicable statutes, rules and
regulations and did not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading; provided that information as of a later date
shall be deemed to modify information as of an earlier date.
(b) Each of NCF and the Bank has duly filed with the Federal Reserve, the
Office of Thrift Supervision ("OTS") and the Federal Deposit Insurance
Corporation ("FDIC") and appropriate state banking regulators in correct form
the monthly, quarterly and annual reports required to be filed under applicable
laws and regulations, and NCF has delivered or made available to Community
accurate and complete copies of such reports. NCF Disclosure Schedule 2.09(b)
lists all examinations of NCF or of the Bank conducted by the applicable banking
or thrift regulatory authorities since January 1, 1993 and the dates of any
responses thereto submitted by NCF. In connection with the most recent
examinations of NCF or the Bank by the applicable banking or thrift regulatory
authorities, neither NCF nor the Bank was required to correct or change any
action, procedure or proceeding which NCF or the Bank believes has not been now
corrected or changed as required.
2.10. NCF Information.
None of the information relating to NCF and the Bank to be contained in (i)
the Registration Statement on Form S-4 to be filed by Community in connection
with the issuance of shares of Community Common Stock pursuant to the Merger, as
amended or supplemented (or on any successor or other appropriate form) ("Form
S-4"), will, at the time the Form S-4 becomes effective, contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and (ii) the joint proxy statement/prospectus contained in
the Form S-4, as amended or supplemented, and to be delivered to stockholders of
Community and NCF in connection with the solicitation of their approval of this
Agreement, the Agreement of Merger and the transactions contemplated hereby and
thereby ("Joint Proxy Statement/Prospectus"), as of the date(s) such Joint Proxy
Statement/Prospectus is mailed to stockholders of Community and NCF and up to
and including the date(s) of the meetings of stockholders to which such Joint
Proxy Statement/Prospectus relates, will contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the
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circumstances under which they were made, not misleading, provided that
information as of a later date shall be deemed to modify information as of an
earlier date.
2.11. Compliance with Applicable Law.
(a) Each of the NCF and the Bank has all permits, licenses, certificates
of authority, orders and approvals of, and has made all filings, applications
and registrations with, federal, state, local and foreign governmental or
regulatory bodies that are required in order to permit it to carry on its
business as it is currently being conducted and the absence of which could have
a material adverse effect on the business, operations, assets or financial
condition of NCF and the Bank, taken as a whole; all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect;
and to the best knowledge of NCF and the Bank, no suspension or cancellation of
any of the same is threatened.
(b) Neither NCF nor the Bank is in violation of its respective Certificate
of Incorporation or other governing instrument or Bylaws, or of any applicable
federal, state or local law or ordinance or any order, rule or regulation of any
federal, state, local or other governmental agency or body (including, without
limitation, all banking, securities, municipal securities, safety, health,
zoning, anti-discrimination, antitrust, and wage and hour laws, ordinances,
orders, rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults could have a material adverse effect on the business, operations,
assets or financial condition of NCF and the Bank, taken as a whole; and neither
NCF nor the Bank has received any notice or communication from any federal,
state or local governmental authority asserting that NCF or the Bank is in
violation of any of the foregoing which could have a material adverse effect on
the business, operations, assets or financial condition of NCF and the Bank,
taken as a whole. Neither NCF nor the Bank is subject to any regulatory or
supervisory cease and desist order, agreement, written directive, memorandum of
understanding or written commitment (other than those of general applicability
to all commercial banks issued by governmental authorities), and neither of them
has received any written communication requesting that they enter into any of
the foregoing.
2.12. Deposit Insurance and Other Regulatory Matters.
(a) The deposit accounts of the Bank are insured by the Savings
Association Insurance Fund administered by the FDIC to the maximum extent
permitted by the Federal Deposit Insurance Act, as amended ("FDIA"), and the
Bank has paid all premiums and assessments required by the FDIA and the
regulations thereunder.
(b) The Bank is a member in good standing of the Federal Home Loan Bank
("FHLB") of Cincinnati and owns the requisite amount of stock in the FHLB of
Cincinnati.
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2.13. Certain Contracts.
(a) Except as disclosed in NCF Disclosure Schedule 2.13(a), neither NCF
nor the Bank is a party to, is bound or affected by, receives, or is obligated
to pay benefits under, (i) any agreement, arrangement or commitment, including
without limitation, any agreement, indenture or other instrument relating to the
borrowing of money by NCF or the Bank or the guarantee by NCF or the Bank of any
obligation, (ii) any agreement, arrangement or commitment relating to the
employment of a consultant or the employment, election or retention in office of
any present or former director or officer of NCF or the Bank, (iii) any
contract, agreement or understanding with a labor union, (iv) any agreement,
arrangement or understanding pursuant to which any payment (whether of severance
pay or otherwise) became or may become due to any director, officer or employee
of NCF or the Bank upon execution of this Agreement or upon or following
consummation of the transactions contemplated by this Agreement (either alone or
in connection with the occurrence of any additional acts or events), (v) any
agreement, arrangement or understanding to which NCF or the Bank is a party or
by which any of the same is bound which limits the freedom of NCF or the Bank to
compete in any line of business or with any person, (vi) any assistance
agreement, supervisory agreement, memorandum of understanding, consent order,
cease and desist order or condition of any regulatory order or decree with or by
the Federal Reserve, the FDIC or any other state or federal regulatory agency,
(vii) any other agreement, arrangement or understanding which would be required
to be filed as an exhibit to NCF's Annual Report on Form 10-K (or Form 10-KSB)
under the 1934 Act and which has not been so filed, or (viii) any other
agreement, arrangement or understanding to which NCF or the Bank is a party and
which is material to the business, operations, assets or financial condition of
NCF and the Bank, taken as a whole (excluding loan agreements or agreements
relating to deposit accounts), in each of the foregoing cases whether written or
oral.
(b) Neither NCF nor the Bank is in default or in non-compliance, which
default or non-compliance would have a material adverse effect on the business,
operations, assets or financial condition of NCF and the Bank, taken as a whole
or the transactions contemplated hereby, under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party or by which its assets, business or operations may be bound or
affected, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that with the
lapse of time or the giving of notice, or both, would constitute such a default
or non-compliance.
2.14. Properties and Insurance.
(a) All real and personal property owned by NCF or the Bank or currently
used by either of them in their respective business is in an adequate condition
(ordinary wear and tear excepted) and is sufficient to carry on the business of
NCF and the Bank in the ordinary course of business consistent with their past
practices. NCF and the Bank have good and, as to owned real property,
marketable title to all material assets and properties, whether real or
personal, tangible or intangible, reflected in NCF's consolidated statement
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of financial condition as of September 30, 1997, or owned and acquired
subsequent thereto (except to the extent that such assets and properties have
been disposed of for fair value in the ordinary course of business since
September 30, 1997), subject to no encumbrances, liens, mortgages, security
interests or pledges, except (i) those items that secure liabilities that are
reflected in said consolidated statement of financial condition or the notes
thereto or have been incurred in the ordinary course of business after the
date of such consolidated statement of financial condition, (ii) statutory
liens for amounts not yet delinquent or which are being contested in good
faith, (iii) such encumbrances, liens, mortgages, security interests, pledges
and title imperfections that are not in the aggregate material to the
business, operations, assets or financial condition of NCF and the Bank,
taken as a whole, and (iv) with respect to owned real property, title
imperfections noted in title reports prior to the date hereof. NCF and the
Bank as lessees have the right under valid and subsisting leases to occupy,
use, possess and control all property leased by them in all material respects
as currently occupied, used, possessed and controlled by NCF and the Bank and
the consummation of the transactions contemplated hereby and by the Agreement
of Merger will not affect any such right. NCF Disclosure Schedule 2.14(a)
sets forth an accurate listing of each lease pursuant to which NCF or the
Bank acts as lessor or lessee, including the expiration date and the terms of
any renewal options which relate to the same.
(b) The business operations and all insurable properties and assets of
NCF and the Bank are insured for their benefit against all risks which, in
the reasonable judgment of the management of NCF, should be insured against,
in each case under valid, binding and enforceable policies or bonds issued by
insurers of recognized responsibility, in such amounts with such deductibles
and against such risks and losses as are in the opinion of the management of
NCF adequate for the business engaged in by NCF and the Bank. As of the date
hereof, neither NCF nor the Bank has received any notice of cancellation or
notice of a material amendment of any such insurance policy or bond or is in
default under such policy or bond, no coverage thereunder is being disputed
and all material claims thereunder have been filed in a timely fashion.
2.15. Environmental Matters.
For purposes of this Agreement, the following terms shall have the
indicated meaning:
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances. The term
Environmental Law includes without limitation (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
Section 9601, et seq; the Resource Conservation and Recovery Act, as
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amended, 42 U.S.C. Section 6901, et seq; the Clean Air Act, as amended, 42
U.S.C. Section 7401, et seq; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. Section 1251, et seq; the Toxic Substances Control Act, as
amended, 15 U.S.C. Section 9601, et seq; the Emergency Planning and Community
Right to Know Act, 42 U.S.C. Section 11001, et seq; the Safe Drinking Water
Act, 42 U.S.C. Section 300f, et seq; and all comparable state and local laws,
and (2) any common law (including without limitation common law that may
impose strict liability) that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Substance.
"Hazardous Substance" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any regulated material containing any such substance as a
component. Hazardous Substances include without limitation petroleum (including
crude oil or any fraction thereof), asbestos, radioactive material, and
polychlorinated biphenyls.
"Loan Portfolio Properties and Other Properties Owned" means those
properties owned, leased or operated by NCF or the Bank or those properties
which serve as collateral for loans owned by NCF or the Bank.
(a) To the best knowledge of NCF and the Bank, neither NCF nor the Bank
has been or is in violation of or liable under any Environmental Law, except any
such violations or liabilities which would not singly or in the aggregate have a
material adverse effect on the business, operations, assets or financial
condition of NCF and the Bank, taken as a whole.
(b) To the best knowledge of NCF and the Bank, none of the Loan Portfolio
Properties and Other Properties Owned by NCF or the Bank has been or is in
violation of or liable under any Environmental Law, except any such violations
or liabilities which singly or in the aggregate would not have a material
adverse effect on the business, operations, assets or financial condition of NCF
and the Bank, taken as a whole.
(c) To the best knowledge of NCF and the Bank, there are no actions,
suits, demands, notices, claims, investigations or proceedings pending or
threatened relating to the liability of the Loan Portfolio Properties and Other
Properties Owned by NCF or the Bank under any Environmental Law, including
without limitation any notices, demand letters or requests for information from
any federal or state environmental agency relating to any such liabilities under
or violations of Environmental Law, except such which would not have or result
in a material adverse effect on the business, operations, assets or financial
condition of NCF and the Bank, taken as a whole.
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2.16. Allowance for Loan Losses and Real Estate Owned.
The allowance for loan losses reflected on NCF's consolidated statements of
financial condition included in the consolidated financial statements referred
to in Section 2.04 hereof is, or will be in the case of subsequently delivered
financial statements, as the case may be, in the opinion of NCF's management
adequate in all material respects as of their respective dates under the
requirements of generally accepted accounting principles to provide for
reasonably anticipated losses on outstanding loans net of recoveries. The real
estate owned reflected on the consolidated statements of financial condition
included in the consolidated financial statements referred to in Section 2.04
hereof is, or will be in the case of subsequently delivered financial
statements, as the case may be, carried at the lower of cost or fair value, or
the lower of cost or net realizable value, as required by generally accepted
accounting principles.
2.17. Minute Books.
Since January 1, 1993, the minute books of NCF and the Bank contain
complete and accurate records of all meetings and other corporate action held or
taken by their respective Boards of Directors (including committees of their
respective Boards of Directors) and stockholders.
2.18. Affiliate Transactions.
(a) Except as disclosed in NCF Disclosure Schedule 2.18(a) or in NCF's
proxy statements, and except as specifically contemplated by this Agreement,
since January 1, 1993, neither NCF nor the Bank has engaged in or agreed to
engage in (whether in writing or orally) any transaction with any "person" or
"affiliate" of the Bank, as such terms are defined in Rule 144 under the 1933
Act.
(b) NCF Disclosure Schedule 2.18(b) sets forth the name and number of
shares of NCF Common Stock owned as of the date hereof beneficially or of record
by any persons NCF considers to be affiliates of NCF ("NCF Affiliates") as that
term is defined for purposes of Rule 145 under the 1933 Act.
2.19. Broker Fees.
Except as set forth in NCF Disclosure Schedule 2.19, none of the NCF, the
Bank or any of the respective directors or officers of such companies has
employed any consultant, broker or finder or incurred any liability for any
consultant's, broker's or finder's fees or commissions in connection with any of
the transactions contemplated by this Agreement.
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2.20. Disclosures.
No representation or warranty contained in Article II of this Agreement,
and no statement contained in the NCF Disclosure Schedules, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein not misleading.
2.21. Fairness Opinion.
NCF has received a written opinion from Ferguson & Company to the effect
that, as of the date hereof, the consideration to be received by shareholders of
NCF pursuant to this Agreement is fair, from a financial point of view, to such
shareholders.
2.22. Amendment to Employee Stock Ownership Plan.
NCF has taken all necessary action in order to amend the NCF employee stock
ownership plan ("NCF ESOP") in order to ensure that the Merger or any
combination of the NCF ESOP and the Community employee stock ownership plan
("Community ESOP") does not accelerate (other than as required by law or
regulation) or materially increase the benefits available to any participant in
the NCF ESOP.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMMUNITY
References to "Community Disclosure Schedules" shall mean all of the
disclosure schedules required by this Article III, dated as of the date hereof
and referenced to the specific sections and subsections of Article III of this
Agreement, which have been delivered by Community to NCF. Community hereby
represents and warrants to NCF as follows as of the date hereof:
3.01. Corporate Organization.
(a) Community is a corporation duly organized, validly existing and in
good standing under the laws of the State of Indiana. Community has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted and is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed, qualified
or in good standing would not have a material adverse effect on the business,
operations, assets or financial condition of Community and the Community
Subsidiaries (as defined below) taken as a whole. Community is registered as a
bank holding company under the BHC. Community Disclosure Schedule 3.01(a) sets
forth true and complete copies of the Articles of
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Incorporation or other governing instrument and Bylaws of Community and the
Community Subsidiaries as in effect on the date hereof.
(b) The only direct or indirect subsidiaries of Community are Community
Bank of Southern Indiana and Heritage Bank of Southern Indiana (together the
"Community Subsidiaries"). Each of the Community Subsidiaries (i) is duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation, (ii) has the corporate power and
authority to own or lease all of its properties and assets and to conduct its
business as it is now being conducted, and (iii) is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which the nature
of the business conducted by it or the character or location of the properties
and assets owned or leased by it makes such licensing or qualification
necessary, except where the failure to be so licensed, qualified or in good
standing would not have a material adverse effect on the business, operations,
assets or financial condition of Community and the Community Subsidiaries, taken
as a whole. Community and the Community Subsidiaries are in good standing with
their appropriate federal and state banking regulatory agencies and each has
satisfied in all material respects all commitments, financial or otherwise, as
may have been agreed upon with such banking regulatory agencies. Other than the
Community Subsidiaries, Community does not own or control, directly or
indirectly, greater than a 5% equity interest in any corporation, company,
association, partnership, joint venture or other entity.
3.02. Capitalization.
The authorized capital stock of Community consists of 10,000,000 shares of
Community Common Stock, par value $.10, of which 1,983,722 are issued and
outstanding as of the date hereof, and 5,000,000 shares of preferred stock, no
par value, of which no shares are issued and outstanding as of the date hereof.
All issued and outstanding shares of capital stock of Community, and all issued
and outstanding shares of capital stock of each of the Community Subsidiaries,
have been duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights. All of the outstanding shares of capital stock
of each of the Community Subsidiaries are owned by Community free and clear of
any liens, encumbrances, charges, restrictions or rights of third parties of any
kind whatsoever, and, except for options to purchase 198,372 shares of Community
Common Stock which have been granted pursuant to Community's 1997 Stock
Incentive Plan (or options granted by Community pursuant thereto after the date
hereof), none of Community or any of the Community Subsidiaries has or is bound
by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the transfer, purchase or issuance of
any shares of capital stock of Community or any of the Community Subsidiaries or
any securities representing the right to purchase or otherwise receive any
shares of such capital stock or any securities convertible into or representing
the right to purchase or subscribe for any such stock.
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3.03. Authority; No Violation.
(a) Subject to the approval of this Agreement and the Agreement of Merger
and the transactions contemplated hereby and thereby by the stockholders of
Community, Community has full corporate power and authority to execute and
deliver this Agreement and the Agreement of Merger and to consummate the
transactions contemplated hereby and thereby in accordance with the terms hereof
and thereof. The execution and delivery of this Agreement and the Agreement of
Merger and the consummation of the transactions contemplated hereby and thereby
have been duly and validly approved by the Board of Directors of Community and,
except for the approval of Community's stockholders of this Agreement and the
Agreement of Merger, no other corporate proceedings on the part of Community
are necessary to consummate the transactions so contemplated. This Agreement
and the Agreement of Merger have been duly and validly executed and delivered by
Community and constitute valid and binding obligations of Community, enforceable
against it in accordance with and subject to their terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally, and except that the availability of
equitable remedies (including, without limitation, specific performance) is
within the discretion of the appropriate court.
(b) None of the execution and delivery of this Agreement and the Agreement
of Merger by Community, nor the consummation by Community of the transactions
contemplated hereby and thereby in accordance with the terms hereof and thereof,
or compliance by Community with any of the terms or provisions hereof or
thereof, will (i) violate any provision of the Articles of Incorporation or
other governing instrument or Bylaws of Community or any of the Community
Subsidiaries, (ii) assuming that the consents and approvals set forth below are
duly obtained, violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Community or any of the
Community Subsidiaries or any of their respective properties or assets, or (iii)
violate, conflict with, result in a breach of any provisions of, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or other encumbrance upon any of the respective properties or
assets of Community or any of the Community Subsidiaries under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which Community
or any of the Community Subsidiaries is a party, or by which any of their
respective properties or assets may be bound or affected, except, with respect
to (ii) and (iii) above, such as individually or in the aggregate will not have
a material adverse effect on the business, operations, assets or financial
condition of Community and the Community Subsidiaries, taken as a whole and
which will not prevent or delay the consummation of the transactions
contemplated hereby. Except for consents and approvals of or filings or
registrations with or notices to the Commission, the Secretary of State of the
State of Indiana, the Federal Reserve, the state banking regulators of the State
of Indiana and the stockholders of Community, no consents or approvals of or
filings or registrations with or notices to any federal, state, municipal or
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other governmental or regulatory commission, board, agency or non-governmental
third party are required on behalf of Community in connection with (a) the
execution and delivery of this Agreement and the Agreement of Merger by
Community and (b) the consummation by Community of the transactions contemplated
hereby and by the Agreement of Merger.
3.04. Financial Statements.
(a) Community has previously delivered to NCF copies of the consolidated
statements of financial condition of Community as of December 31, 1996, 1995 and
1994, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the years ended December 31, 1996, 1995
and 1994, (including such statements of entities preceding Community's
organization in 1995) in each case accompanied by the audit reports of Monroe,
Shine & Co., Inc., independent public accountants, as well as the unaudited
consolidated statement of financial condition of Community as of September 30,
1997 and the related unaudited consolidated statements of income, changes in
stockholders' equity and cash flows for the nine months ended September 30, 1996
and 1995. The consolidated statements of financial condition of Community
referred to herein (including the related notes, where applicable), as well as
the consolidated financial statements contained in the reports of Community to
be delivered by Community pursuant to Section 4.04 hereof, fairly present or
will fairly present, as the case may be, the consolidated financial condition of
Community as of the respective dates set forth therein, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows (including the related notes, where applicable) fairly present or will
fairly present, as the case may be, the results of the consolidated operations,
changes in stockholders' equity and cash flows of Community for the respective
periods or as of the respective dates set forth therein (it being understood
that Community's interim financial statements are not audited and are not
prepared with related notes but reflect all adjustments which are, in the
opinion of Community, necessary for a fair presentation of such financial
statements).
(b) Each of the financial statements referred to in this Section 3.04
(including the related notes, where applicable) has been or will be, as the case
may be, prepared in accordance with generally accepted accounting principles
consistently applied during the periods involved. The books and records of
Community and the Community Subsidiaries are being maintained in material
compliance with applicable legal and accounting requirements and reflect only
actual transactions.
(c) Except to the extent reflected, disclosed or reserved against in the
consolidated financial statements referred to in the first sentence of this
Section 3.04 or the notes thereto or liabilities incurred since September 30,
1997 in the ordinary course of business and consistent with past practice, none
of Community or any of the Community Subsidiaries has any obligation or
liability, whether absolute, accrued, contingent or otherwise, material to the
business, operations, assets or financial condition of Community and the
Community Subsidiaries, taken as a whole.
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3.05. Absence of Certain Changes or Events.
There has not been any material adverse change in the business, operations,
prospects, assets or financial condition of Community and the Community
Subsidiaries, taken as a whole, since September 30, 1997 and to the best
knowledge of Community, no fact or condition exists which Community believes
will cause such a material adverse change in the future.
3.06. Legal Proceedings.
None of Community or any of the Community Subsidiaries is a party to any,
and there are no pending or, to the best knowledge of Community, threatened
legal, administrative, arbitration or other proceedings, claims, actions or
governmental investigations of any nature against Community or any of the
Community Subsidiaries, except such proceedings, claims actions or governmental
investigations which in the good faith judgment of Community will not have a
material adverse effect on the business, operations, assets or financial
condition of Community and the Community Subsidiaries, taken as a whole. None
of Community or any of the Community Subsidiaries is a party to any order,
judgment or decree which materially adversely affects the business, operations,
assets or financial condition of Community and the Community Subsidiaries, taken
as a whole.
3.07. Taxes and Tax Returns.
(a) Each of Community and the Community Subsidiaries, or the affiliated,
combined or unitary group (within the meaning of applicable federal income tax
law) of which any such corporation is or was a member, as the case may be
(individually an "Affiliate" and collectively, "Affiliates"), has duly filed
(and until the Effective Time will so file) all returns, declarations, reports,
information returns and statements ("Returns") required to be filed or sent by
or with respect to them in respect of any Taxes, and has duly paid (and until
the Effective Time will so pay) all Taxes due and payable other than Taxes or
other charges which (i) are being contested in good faith (and disclosed in
writing to NCF and (ii) have not finally been determined. Community and its
Affiliates have established (and until the Effective Time will establish) on
their books and records reserves that are adequate for the payment of all Taxes
not yet due and payable, whether or not disputed, accrued or applicable. Except
as set forth in Community Disclosure Schedule 3.07(a), (i) the federal income
tax returns of Community and its Affiliates have been examined by the IRS (or
are closed to examination due to the expiration of the applicable statute of
limitations), and (ii) the Indiana income tax returns of Community and its
Affiliates have been examined by applicable authorities (or are closed to
examination due to the expiration of the statute of limitations), and in the
case of both (i) and (ii) no deficiencies were asserted as a result of such
examinations which have not been resolved and paid in full. There are no audits
or other administrative or court proceedings presently pending nor any other
disputes pending, or claims asserted for, Taxes or assessments upon Community or
any of its Affiliates, nor has Community or any of its Affiliates given any
currently outstanding waivers or
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comparable consents regarding the application of the statute of limitations
with respect to any Taxes or Returns.
(b) Except as set forth in Community Disclosure Schedule 3.07(b), none of
Community or any of its Affiliates (i) has requested any extension of time
within which to file any Return which Return has not since been filed, (ii) is a
party to any agreement providing for the allocation or sharing of Taxes, (iii)
is required to include in income any adjustment pursuant to Section 481(a) of
the Code, by reason of a voluntary change in accounting method initiated by
Community or any Affiliate (nor does Community have any knowledge that the IRS
has proposed any such adjustment or change of accounting method), or (iv) has
filed a consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply.
3.08. Employee Benefit Plans.
(a) Each employee benefit plan or arrangement of Community or either of
the Community Subsidiaries which is an "employee benefit plan" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), is listed in Community Disclosure Schedule 3.08(a)
("Community Plans"). Community has previously furnished or made available to
NCF true and complete copies of each of the Community Plans together with (i)
the most recent actuarial and financial reports prepared with respect to any
qualified Community Plans, (ii) the most recent annual reports filed with any
government agency, and (iii) all rulings and determination letters and any open
requests for rulings or letters that pertain to any qualified Community Plans.
(b) Each Community Plan has been operated in compliance in all material
respects with the applicable provisions of ERISA, the Code, all regulations,
rulings and announcements promulgated or issued thereunder, and all other
applicable governmental laws and regulations.
(c) Neither Community nor any Community Subsidiary participates in or has
incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA).
(d) The present value of all accrued benefits under each of the Community
Plans subject to Title IV of ERISA did not, as of the latest valuation date of
each such Plan, exceed the then-current value of the assets of such plans
allocable to such accrued benefits, based upon the actuarial and accounting
assumptions currently utilized for such Community Plans.
(e) Neither Community nor any of the Community Subsidiaries, nor, to the
best knowledge of Community, any trustee, fiduciary or administrator of a
Community Plan or any trust created thereunder, has engaged in a "prohibited
transaction," as such term is defined in Section 4975 of the Code, which could
subject Community or any of the
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Community Subsidiaries, or, to the best knowledge of Community, any trustee,
fiduciary or administrator thereof, to the tax or penalty on prohibited
transactions imposed by said Section 4975.
(f) No Community Plan or any trust created thereunder has been terminated,
nor have there been any "reportable events" with respect to any Community Plan,
as that term is defined in Section 4043(b) of ERISA.
(g) No Community Plan or any trust created thereunder has incurred any
"accumulated funding deficiency," as such term is defined in Section 302 of
ERISA.
(h) Each of the Community Plans which is intended to be a qualified plan
within the meaning of Section 401(a) of the Code has been determined by the IRS
to be so qualified, and Community is not aware of any fact or circumstance which
would adversely affect the qualified status of any such Plan.
3.09. Securities Documents and Regulatory Reports.
(a) Community has previously delivered or made available to NCF a complete
copy of each final registration statement, prospectus, annual, quarterly or
current report and definitive proxy statement or other communication (other than
general advertising materials) filed pursuant to the 1933 Act or the 1934 Act or
mailed by Community to its stockholders as a class since January 1, 1995, and
each such final registration statement, prospectus, annual, quarterly or current
report and definitive proxy statement or other communication, as of its date,
complied in all material respects with all applicable statutes, rules and
regulations and did not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading; provided that information as of a later date
shall be deemed to modify information as of an earlier date.
(b) Community and each of the Community Subsidiaries has duly filed with
the Federal Reserve, the OTS, the FDIC and appropriate state banking authorities
in correct form the monthly, quarterly and annual reports required to be filed
under applicable laws and regulations, and Community has delivered or made
available to NCF accurate and complete copies of such reports. Community
Disclosure Schedule 3.09(b) lists all examinations of Community or of the
Community Subsidiaries conducted by the applicable banking or thrift regulatory
authorities since January 1, 1995 and the dates of any responses thereto
submitted by Community. In connection with the most recent examinations of
Community or the Community Subsidiaries by the applicable banking or thrift
regulatory authorities, neither Community nor any Community Subsidiary was
required to correct or change any action, procedure or proceeding which
Community or such Community Subsidiary believes has not been now corrected or
changed as required.
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3.10. Community Information.
None of the information relating to Community and the Community
Subsidiaries to be contained in (i) the Form S-4 will, at the time the Form
S-4 becomes effective, contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
(ii) the Joint Proxy Statement/Prospectus, as of the date(s) such Joint Proxy
Statement/Prospectus is mailed to stockholders of Community and NCF and up to
and including the date(s) of the meetings of stockholders to which such Joint
Proxy Statement/Prospectus relates, will contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, provided that information as of a later date shall be deemed
to modify information as of an earlier date.
3.11. Compliance with Applicable Law.
(a) Community and each of the Community Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made
all filings, applications and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are required in order to
permit it to carry on its business as it is presently being conducted and the
absence of which could have a material adverse effect on the business,
operations, assets or financial condition of Community and the Community
Subsidiaries, taken as a whole; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect; and, to the
best knowledge of Community and the Community Subsidiaries, no suspension or
cancellation of any of the same is threatened.
(b) Neither Community nor any of the Community Subsidiaries is in
violation of its respective Articles of Incorporation or other governing
instrument or Bylaws, or of any applicable federal, state or local law or
ordinance or any order, rule or regulation of any federal, state, local or
other governmental agency or body (including, without limitation, all
banking, securities, municipal securities, safety, health, zoning,
anti-discrimination, antitrust, and wage and hour laws, ordinances, orders,
rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults could have a material adverse effect on the business, operations,
assets or financial condition of Community and the Community Subsidiaries,
taken as a whole; and neither Community nor any Community Subsidiary has
received any notice or communication from any federal, state or local
governmental authority asserting that Community or any Community Subsidiary
is in violation of any of the foregoing which could have a material adverse
effect on the business, operations, assets or financial condition of
Community and the Community Subsidiaries, taken as a whole. Neither Community
nor any Community Subsidiary is subject to any regulatory or supervisory
cease and desist order, agreement, written directive, memorandum of
understanding or written commitment (other than those of general
applicability to all commercial banks issued by governmental authorities),
and
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none of them has received any written communication requesting that they
enter into any of the foregoing.
3.12. Deposit Insurance and Other Regulatory Matters.
(a) The deposit accounts of the Community Subsidiaries are insured by
the Savings Association Insurance Fund administered by the FDIC to the
maximum extent permitted by the FDIA, and each of the Community Subsidiaries
has paid all premiums and assessments required by the FDIA and the
regulations thereunder.
(b) Each of the Community Subsidiaries is a member in good standing of
the FHLB of Indianapolis and owns the requisite amount of stock in the FHLB
of Indianapolis.
3.13. Properties and Insurance.
(a) All real and personal property owned by Community or any of the
Community Subsidiaries or presently used by any of them in their respective
business is in an adequate condition (ordinary wear and tear excepted) and is
sufficient to carry on the business of Community and the Community
Subsidiaries in the ordinary course of business consistent with their past
practices. Community and the Community Subsidiaries have good and, as to
owned real property, marketable title to all material assets and properties,
whether real or personal, tangible or intangible, reflected in Community's
consolidated statement of financial condition as of September 30, 1997, or
owned and acquired subsequent thereto (except to the extent that such assets
and properties have been disposed of for fair value in the ordinary course of
business since September 30, 1997), subject to no encumbrances, liens,
mortgages, security interests or pledges, except (i) those items that secure
liabilities that are reflected in said consolidated statement of financial
condition or the notes thereto or have been incurred in the ordinary course
of business after the date of such consolidated statement of financial
condition, (ii) statutory liens for amounts not yet delinquent or which are
being contested in good faith, (iii) such encumbrances, liens, mortgages,
security interests, pledges and title imperfections that are not in the
aggregate material to the business, operations, assets or financial condition
of Community and the Community Subsidiaries, taken as a whole, and (iv) with
respect to owned real property, title imperfections noted in title reports
prior to the date hereof. Community and the Community Subsidiaries as
lessees have the right under valid and subsisting leases to occupy, use,
possess and control all property leased by them in all material respects as
currently occupied, used, possessed and controlled by Community and the
Community Subsidiaries and the consummation of the transactions contemplated
hereby and by the Agreement of Merger will not affect any such right.
(b) The business operations and all insurable properties and assets of
Community and the Community Subsidiaries are insured for their benefit
against all risks which, in the reasonable judgment of the management of
Community, should be insured against, in each case under valid, binding and
enforceable policies or bonds issued by insurers of recognized
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responsibility, in such amounts with such deductibles and against such risks
and losses as are in the opinion of the management of Community adequate for
the business engaged in by Community and the Community Subsidiaries. As of
the date hereof, neither Community nor either of the Community Subsidiaries
has received any notice of cancellation or notice of a material amendment of
any such insurance policy or bond or is in default under such policy or bond,
no coverage thereunder is being disputed and all material claims thereunder
have been filed in a timely fashion.
3.14. Environmental Matters.
(a) To the best knowledge of Community and the Community Subsidiaries,
neither Community nor any of the Community Subsidiaries has been or is in
violation of or liable under any Environmental Law, except any such
violations or liabilities which would not singly or in the aggregate have a
material adverse effect on the business, operations, assets or financial
condition of Community and Community Subsidiaries, taken as a whole.
(b) To the best knowledge of Community and the Community Subsidiaries,
none of the Loan Portfolio Properties and Other Properties Owned by Community
or the Community Subsidiaries has been or is in violation of or liable under
any Environmental Law, except any such violations or liabilities which singly
or in the aggregate would not have a material adverse effect on the business,
operations, assets or financial condition of Community and the Community
Subsidiaries, taken as a whole.
(c) To the best knowledge of Community and the Community Subsidiaries,
there are no actions, suits, demands, notices, claims, investigations or
proceedings pending or threatened relating to the liability of the Loan
Portfolio Properties and Other Properties Owned by Community or the Community
Subsidiaries under any Environmental Law, including without limitation any
notices, demand letters or requests for information from any federal or state
environmental agency relating to any such liabilities under or violations of
Environmental Law, except such which would not have or result in a material
adverse effect on the business, operations, assets or financial condition of
Community and the Community Subsidiaries, taken as a whole.
3.15. Allowance for Loan Losses and Real Estate Owned.
The allowance for loan losses reflected on Community's consolidated
statements of financial condition included in the consolidated financial
statements referred to in Section 3.04 hereof is, or will be in the case of
subsequently delivered financial statements, as the case may be, in the
opinion of Community's management adequate in all material respects as of
their respective dates under the requirements of generally accepted
accounting principles to provide for reasonably anticipated losses on
outstanding loans net of recoveries. The real estate owned reflected on the
consolidated statements of financial condition included in the consolidated
financial statements referred to in Section 3.04 hereof is, or will be in the
case of subsequently delivered financial statements, as the case may be,
carried
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at the lower of cost or fair value, or the lower of cost or net realizable
value, as required by generally accepted accounting principles.
3.16. Minute Books.
Since January 1, 1993, the minute books of Community and the Community
Subsidiaries contain complete and accurate records of all meetings and other
corporate action held or taken by their respective Boards of Directors
(including committees of their respective Boards of Directors) and
stockholders.
3.17. Broker Fees.
Except as set forth in Community Disclosure Schedule 3.17, neither
Community nor any of its directors or officers has employed any consultant,
broker or finder or incurred any liability for any consultant's, broker's or
finder's fees or commissions in connection with any of the transactions
contemplated by this Agreement.
3.18. Disclosures.
No representation or warranty contained in Article III of this
Agreement, and no statement contained in the Community Disclosure Schedules,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein not
misleading.
ARTICLE IV
COVENANTS OF THE PARTIES
4.01. Conduct of the Business of NCF.
During the period from the date hereof to the Effective Time, NCF shall,
and shall cause the Bank to, conduct its businesses and engage in
transactions permitted hereunder or only in the ordinary course and
consistent with past practice, except with the prior written consent of
Community, which consent shall not be unreasonably withheld. NCF shall use
its best efforts to (i) preserve its business organization and that of the
Bank intact, (ii) keep available to itself and Community the current services
of the employees of NCF and the Bank, and (iii) preserve for itself and
Community the goodwill of the customers of itself and the Bank and others
with whom business relationships exist.
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4.02. Negative Covenants.
NCF agrees that from the date hereof to the Effective Time, except as
otherwise approved by Community in writing or as permitted or required by
this Agreement, NCF will not, nor will NCF permit any of the Bank to:
(i) change any provision of the Certificate of Incorporation or other
governing instrument or Bylaws of NCF or the Bank;
(ii) except for the issuance of NCF Common Stock pursuant to the present
terms of stock options which are outstanding as of the date hereof (and
identified on NCF Disclosure Schedule 4.02) and compliance with the terms of
the Option Agreement of even date herewith, change the number of shares of
its authorized or issued capital stock or issue or grant any option, warrant,
call, commitment, subscription, award, right to purchase or agreement of any
character relating to the authorized or issued capital stock of NCF or the
Bank, or any securities convertible into shares of such capital stock, or
split, combine or reclassify any shares of its capital stock, or redeem or
otherwise acquire any shares of such capital stock;
(iii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
the capital stock of NCF or the Bank, except for regular cash dividends not
in excess of $0.15 per share of NCF Common Stock (but NCF shall not alter its
practices as to payment and record dates without Community's consent);
(iv) grant any severance or termination pay (other than pursuant to
binding contracts of NCF in effect on the date hereof and disclosed to
Community on NCF Disclosure Schedule 2.13(a)) to, or enter into or amend any
employment, consulting or compensation agreement with, any of its directors,
officers or employees; or award any increase in compensation or benefits to
its directors, officers or employees, except, in the case of employees, such
as may be granted in the ordinary course of business and consistent with past
practices and policies;
(v) enter into or modify (except as may be required by applicable law
or as may be required by Section 4.12 hereof, with the prior written consent
of Community, which shall not be unreasonably withheld) any pension,
retirement, stock option, stock purchase, stock grant, stock appreciation
right, savings, profit sharing, deferred compensation, consulting, bonus,
group insurance or other employee benefit, incentive or welfare contract,
plan or arrangement, or any trust agreement related thereto, in respect of
any of its directors, officers or employees; or make any contributions to
NCF's Employee Stock Ownership Plan or any other defined contribution plan or
any defined benefit pension or retirement plan other than in the ordinary
course of business consistent with past practice;
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(vi) sell or dispose of any significant assets or incur any significant
liabilities other than in the ordinary course of business consistent with
past practices and policies, or acquire in any manner whatsoever (other than
to realize upon collateral for a defaulted loan) any business or entity;
(vii) make any capital expenditures in excess of $25,000 in the
aggregate, other than pursuant to binding commitments existing on the date
hereof, other than expenditures necessary to maintain existing assets in good
repair and other than as set forth in NCF Disclosure Schedule 4.02(vii);
(viii) except as set forth on NCF Disclosure Schedule 4.02(viii),
file any applications or make any contract with respect to branching or site
location or relocation;
(ix) make any material change in its accounting methods or practices,
other than changes required by generally accepted accounting principles, or
change any of its methods of reporting income and deductions for federal
income tax purposes, except as required by changes in laws or regulations;
(x) change its lending, investment, deposit or asset and liability
management or other banking policies in any material respect except as may be
required by applicable law;
(xi) engage in any transaction with an "person" or "affiliate," in each
case as defined in Section 2.18(a) hereof;
(xii) enter into any futures contract, option or other agreement or
take any other action for purposes of hedging the exposure of its
interest-earning assets and interest-bearing liabilities to changes in market
rates of interest;
(xiii) take any action that would result in any of its
representations and warranties contained in Article II of this Agreement not
being true and correct in any material respect at the Effective Time; or
(xiv) agree to do any of the foregoing.
4.03. No Solicitation.
Neither NCF nor the Bank shall, nor shall NCF or the Bank authorize or
permit any of its directors, officers or employees or any investment banker,
financial advisor, attorney, accountant or other representative of NCF or the
Bank to, directly or indirectly, encourage or solicit or hold discussions or
negotiations with, or provide any information to, any person, entity or group
(other than Community) concerning any merger, sale of substantial assets or
liabilities not in the ordinary course of business, sale of shares of
capital stock or similar transactions involving NCF or the Bank (an
"Acquisition Transaction"); provided, however, that NCF may provide
information in connection with an unsolicited possible Acquisition
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Transaction if the Board of Directors of NCF, after receipt of written advice
of legal counsel to take such action, determines in the exercise of its
fiduciary responsibilities that such information should be furnished. NCF
will promptly communicate to Community the terms of any proposal which it may
receive in respect of any such Acquisition Transaction and shall provide
Community with copies of (i) the written legal advice provided to the Board
of Directors of NCF, (ii) all such written inquiries or proposals and (iii)
an accurate and complete written synopsis of all such oral inquiries or
proposals.
4.04. Current Information.
During the period from the date hereof to the Effective Time, each party
will cause one or more of its designated representatives to confer on a
monthly or more frequent basis with representatives of the other party
regarding its business, operations, prospects, assets and financial condition
and matters relating to the completion of the transactions contemplated
hereby. As soon as reasonably available, but in no event more than 45 days
after the end of each calendar quarter (other than the last quarter of each
calendar year) ending after the date of this Agreement, each party will
deliver to the other party its quarterly report on Form 10-Q (or Form 10-QSB)
under the 1934 Act, and, as soon as reasonably available, but in no event
more than 90 days after the end of each fiscal year, each party will deliver
to the other party its Annual Report on Form 10-K (or Form 10-KSB). Within
25 days after the end of each month, each party shall provide the other party
with a consolidated statement of financial condition and a consolidated
statement of operations, without related notes, for such month prepared in
accordance with generally accepted accounting principles.
4.05. Access to Properties and Records; Confidentiality.
(a) NCF shall permit Community and its representatives reasonable
access to its properties and those of the Bank, and shall disclose and make
available to Community all books, papers and records relating to the assets,
stock ownership, properties, operations, obligations and liabilities of NCF
and the Bank, including, but not limited to, all books of account (including
the general ledger), tax records, minute books of directors' and
stockholders' meetings, organizational documents, bylaws, material contracts
and agreements, filings with any regulatory authority, accountants' work
papers, litigation files, plans affecting employees, and any other business
activities or prospects in which Community may have a reasonable interest.
Neither NCF nor the Bank shall be required to provide access to or to
disclose information where such access or disclosure would violate or
prejudice the rights of any customer or would contravene any law, rule,
regulation, order or judgment. NCF will use its best efforts to obtain
waivers of any such restriction and in any event make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply. NCF and the Bank shall make their respective
directors, officers, employees and agents and authorized representatives
(including counsel and independent public accountants) available to confer
with Community and its representatives, provided that such access shall be
reasonably related to the transactions
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contemplated hereby and not unduly interfere with normal operations. Similar
access shall be provided by Community to NCF and its representatives to the
extent necessary to enable NCF to satisfy its due diligence obligations with
respect to Community.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be
treated as the sole property of the party furnishing the information until
consummation of the Merger and, if such Merger shall not occur, the party
receiving the information shall, at the request of the party which furnished
such information, either return to the party which furnished such information
or destroy all documents or other materials containing, reflecting or
referring to such information; shall use its best effort to keep confidential
all such information; shall use such information only for the purpose of
consummating the transactions contemplated by this Agreement; and shall not
directly or indirectly use such information for any competitive or commercial
purposes. The obligation to keep such information confidential shall
continue for three years from the date the proposed Merger is abandoned but
shall not apply to (i) any information which (A) the party receiving the
information can establish by convincing evidence was already in its
possession prior to the disclosure thereof to it by the party furnishing the
information; (B) was then generally known to the public; (C) became known to
the public through no fault of the party receiving the information; or (D)
was disclosed to the party receiving the information by a third party not
bound by an obligation of confidentiality; or (ii) disclosures pursuant to a
legal requirement or in accordance with an order of a court of competent
jurisdiction.
(c) From the date hereof until the earlier of the Effective Time or the
termination of this Agreement in accordance with the terms hereof, NCF may
invite one person (to be designated by Community) to attend all meetings of
the Board of Directors of NCF and the Bank.
4.06. Regulatory Matters.
(a) The parties hereto will cooperate with each other and use their
best efforts to prepare all necessary documentation (including without
limitation the Form S-4 and the Joint Proxy Statement/Prospectus), to effect
all necessary filings and to obtain all necessary permits, consents,
approvals and authorizations of all third parties and governmental bodies
necessary to consummate the transactions contemplated by this Agreement as
soon as practicable. The parties shall each have the right to review and
approve in advance all information relating to the other, as the case may be,
and any of their respective subsidiaries, which appears in any filing made
with, or written material submitted to, any third party or governmental body
in connection with the transactions contemplated by this Agreement.
(b) Each of the parties will furnish each other with all information
concerning themselves, their subsidiaries, directors, officers and
stockholders and such other matters as may be necessary or advisable in
connection with any statement or application made by or
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on behalf of them, or any of their respective subsidiaries to any
governmental body in connection with the Merger and the other transactions,
applications or filings contemplated by this Agreement.
(c) Each of the parties will promptly furnish each other with copies of
written communications received by them or any of their respective
subsidiaries from, or delivered by any of the foregoing to, any governmental
body in connection with the Merger and the other transactions, applications
or filings contemplated by this Agreement.
4.07. Approval of Stockholders.
Community (if required by applicable law or otherwise) and NCF will (a)
take all steps (including, without limitation, the preparation of the Form
S-4 and Joint Proxy Statement/Prospectus in accordance with all applicable
requirements) necessary to duly call, give notice of, convene and hold a
meeting of its stockholders as soon as reasonably practicable for the
purposes of securing the approval of such stockholders of this Agreement and
the Agreement of Merger, (b) recommend to its stockholders the approval of
this Agreement and the Agreement of Merger and the transactions contemplated
hereby and thereby, and use its best efforts to obtain, as promptly as
practicable, such approvals, and (c) cooperate and consult with the other
party with respect to the foregoing matters.
4.08. Further Assurances.
Subject to the terms and conditions herein provided, each of the parties
hereto agrees to use its best efforts to take, or cause to be taken, all
reasonable action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to satisfy the
conditions to closing contained herein and to consummate and make effective
the transactions contemplated by this Agreement and the Agreement of Merger.
In case at any time after the Effective Time any further action is necessary
or desirable to carry out the purposes of this Agreement, the proper officers
and directors of each party to this Agreement shall take all such necessary
action. Nothing in this section shall be construed to require any party to
participate in any threatened or actual legal, administrative or other
proceedings (other than proceedings, actions or investigations to which it is
a party or subject or threatened to be made a party or subject) in connection
with consummation of the transactions contemplated by this Agreement unless
such party shall consent in advance and in writing to such participation and
the other party agrees to reimburse and indemnify such party for and against
any and all costs and damages related thereto.
4.09. Disclosure Supplements.
From time to time prior to the Effective Time, each party will promptly
supplement or amend its respective Disclosure Schedules delivered pursuant
hereto with respect to any matter hereafter arising which, if existing,
occurring or known as of the date hereof, would have been required to be set
forth or described in such Schedules or which is necessary to
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correct any information in such Schedules which has been rendered inaccurate
thereby. No supplement or amendment to such Schedules shall have any effect
for the purpose of determining satisfaction of the conditions set forth in
Article V or the compliance by NCF with the covenants set forth in Section
4.01 hereof.
4.10. Public Announcements.
The parties hereto shall approve in advance the substance of and
cooperate with each other in the development and distribution of all news
releases and other public disclosures with respect to this Agreement or any
of the transactions contemplated hereby, except as may be otherwise required
by law or regulation and as to which the parties releasing such information
have used their best efforts to discuss with the other parties in advance.
4.11. Failure to Fulfill Conditions.
In the event that either of the parties hereto determines that a
condition to its respective obligations to consummate the transactions
contemplated hereby cannot be fulfilled on or prior to September 30, 1998 and
that it will not waive that condition, it will promptly notify the other
party. Community and NCF will promptly inform the other of any facts
applicable to them, or their respective directors or officers, that would be
likely to prevent or materially delay approval of the Merger by any
governmental authority or which would otherwise prevent or materially delay
completion of the Merger.
4.12. Certain Post-Merger Agreements.
The parties hereto agree to the following arrangements following the
Effective Time:
(a) Board of Directors of Community. Upon consummation of the Merger,
the Board of Directors of Community shall continue to consist of its current
members.
(b) Board of Directors of the Bank. Upon consummation of the Merger,
the Board of Directors of the Bank shall continue to consist of its current
members, except for A. E. Bowling who shall resign effective as of the
Effective Time.
(c) Officers and Employees of the Bank. The current Chairman of the
Board and President of the Bank, A. E. Bowling, will retire effective as of
the Effective Date, and Mr. Bowling will thereupon be entitled to, and
Community agrees to provide, the payments and benefits reflected on NCF
Disclosure Schedule 2.13(a), including the Retirement Agreement between Mr.
Bowling and Community of even date herewith. After the Effective Time, the
Bank shall not hire any additional employees without the prior consent of
Community.
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(d) Employee Benefit Plans.
(1) Subject to the provisions of this Section 4.12, all employees of
NCF or the Bank immediately prior to the Effective Time who are employed by
Community or the Bank (the "Employers") immediately following the Effective
Time ("Transferred Employees") will be covered by Employers' employee benefit
plans on substantially the same basis as any employee of the Employers in a
comparable position. Notwithstanding the foregoing, Community may determine
to continue any of the NCF benefit plans for Transferred Employees in lieu of
offering participation in the Employers' benefit plans providing similar
benefits (e.g., medical and hospitalization benefits), to terminate any of
NCF's benefit plans, or to merge any such benefit plans with the Employers'
benefit plans, provided the result is the provision of benefits to
Transferred Employees that are substantially similar to the benefits provided
to the Employers' employees generally. Except as specifically provided in
this Section 4.12 and as otherwise prohibited by law, Transferred Employees'
service with NCF or the Bank shall be recognized as service with the
Employers for purposes of eligibility to participate and vesting, if
applicable (but not for purposes of benefit accrual) under the Employers'
benefit plans, subject to applicable break-in-service rules. Notwithstanding
anything herein to the contrary, after the Effective Time, (x) any amendment
to, or grant of additional benefits under, any NCF or Bank benefit plan,
including stock-based plans, which continues to exist subsequent to the
Effective Time, shall require the prior consent of the Community, and (y)
Community may cause any of the NCF or the Bank benefit plans which continue
to exist, including stock-based plans, to be amended in order to provide that
employees of Community or the Community Subsidiaries may be participants in
such plans.
(2) On or after the Effective Time, the NCF ESOP may, at Community's
discretion, be combined with the Community ESOP, terminated, frozen or held
separately.
(e) Directors Consultation and Retirement Plan. Upon consummation of
the Merger, all directors of the Bank prior to the Effective Time who
continue as directors of the Bank immediately following the Effective Time
will be covered by the Directors Consultation and Retirement Plan.
4.13. Indemnification.
Community agrees that all rights to indemnification and all limitations
on liability existing in favor of NCF and the Bank as provided in their
respective Certificate of Incorporation, Bylaws or similar governing
documents as in effect as of the date hereof with respect to matters
occurring prior to the Effective Time shall survive the Merger and shall
continue in full force and effect, and shall be honored by Community, the
Community Subsidiaries or their respective successors as if they were the
indemnifying party thereunder, without any amendment thereto, for a period of
six years from the Effective Time; provided, however, that all rights to
indemnification in respect of any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
incurred
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in connection with any claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative (a "Claim"),
asserted or made within such period shall continue until the final
disposition of such Claim.
ARTICLE V
CLOSING CONDITIONS
5.01. Conditions to the Parties' Obligations Under This Agreement.
The respective obligations of the parties under this Agreement shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) All necessary regulatory or governmental approvals and consents
(including without limitation any required approval of the Federal Reserve,
FDIC and banking regulators of the State of Indiana and the Commonwealth of
Kentucky required to consummate the transactions contemplated hereby) shall
have been obtained without any term or condition which would materially
impair the value of NCF and the Bank to Community; all conditions required to
be satisfied prior to the Effective Time by the terms of such approvals and
consents shall have been satisfied; and all waiting periods in respect
thereof shall have expired.
(b) All corporate action necessary to authorize the execution and
delivery of this Agreement and consummation of the transactions contemplated
hereby and by the Agreement of Merger shall have been duly and validly taken
by Community and NCF, including approval by the requisite vote of the
stockholders of NCF of this Agreement and the Agreement of Merger.
(c) No order, judgment or decree shall be outstanding against a party
hereto or a third party that would have the effect of preventing completion
of the Merger; no suit, action or other proceeding shall be pending or
threatened by any governmental body in which it is sought to restrain or
prohibit the Merger; and no suit, action or other proceeding shall be pending
before any court or governmental agency in which it is sought to restrain or
prohibit the Merger or obtain other substantial monetary or other relief
against one or more of the parties hereto in connection with this Agreement
and which Community or NCF determines in good faith, based upon the advice of
their respective counsel, makes it inadvisable to proceed with the Merger
because any such suit, action or proceeding has a significant potential to be
resolved in such a way as to deprive the party electing not to proceed of any
of the material benefits to it of the Merger.
(d) The Form S-4 shall have become effective under the 1933 Act, and
Community shall have received all state securities laws or "blue sky" permits
and other authorizations
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or there shall be exemptions from registration requirements necessary to
issue the Community Common Stock in connection with the Merger, and neither
the Form S-4 nor any such permit, authorization or exemption shall be subject
to a stop order or threatened stop order by the Commission or any state
securities authority.
(e) The parties shall have received, in form and substance reasonably
satisfactory to them, an opinion of Elias, Matz, Tiernan & Herrick to the
effect that, for federal income tax purposes, the Merger will qualify as a
"reorganization" under Section 368(a) of the Code; no taxable gain will be
recognized by Community or NCF (i) upon the transfer of NCF's assets to
Community in exchange for Community Common Stock, cash and the assumption of
NCF's liabilities or (ii) upon the distribution of such Community Common
Stock and cash to NCF stockholders.
5.02. Conditions to the Obligations of Community Under This
Agreement.
The obligations of Community under this Agreement shall be further
subject to the satisfaction, at or prior to the Effective Time, of the
following conditions, any one or more of which may be waived by Community:
(a) Each of the obligations of NCF required to be performed by it at or
prior to the Closing pursuant to the terms of this Agreement shall have been
duly performed and complied with in all material respects and the
representations and warranties of NCF contained in this Agreement shall have
been true and correct as of the date hereof and as of the Effective Time as
though made at and as of the Effective Time, except (i) as to any
representation or warranty which specifically relates to an earlier date or
(ii) where the facts which caused the failure of any representation or
warranty to be so true and correct would not, either individually or in the
aggregate, constitute a material adverse change in the business, operations,
assets or financial condition of NCF and the Bank, taken as a whole, and
Community shall have received a certificate to that effect signed by the
President and Chief Executive Officer of NCF.
(b) All permits, consents, waivers, clearances, approvals and
authorizations of all regulatory or governmental authorities or third parties
which are necessary in connection with the consummation of the Merger shall
have been obtained, and none of such permits, consents, waivers, clearances,
approvals and authorizations shall contain any term or condition which would
materially impair the value of NCF and the Bank to Community.
(c) Community shall have received, in form and substance satisfactory
to it, a letter dated the date of the Closing, from Monroe, Shine & Co., Inc.
to the effect that the Merger will qualify for pooling-of-interest accounting
treatment.
(d) Holders of NCF Common Stock who dissent from the Merger pursuant to
Delaware law by meeting the requirements set forth in the DGCL shall not hold
more than 15% of the NCF Common Stock immediately prior to the Effective Time.
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(e) Each stockholder of NCF who is an NCF Affiliate shall have executed
and delivered a commitment and undertaking to the effect that (i) such
stockholder will dispose of the shares of Community Common Stock received by
him in connection with the Merger only in accordance with the provisions of
paragraph (d) of Rule 145 under the 1933 Act; (ii) such stockholder will not
dispose of any of such shares until Community has received an opinion of
counsel acceptable to it that such proposed disposition is in compliance with
the provisions of paragraph (d) of Rule 145 under the 1933 Act, which opinion
shall be rendered promptly following counsel's receipt of such stockholder's
written notice of its intention to sell shares of Community Common Stock; and
(iii) the certificates representing said shares may bear a legend referring
to the foregoing restrictions.
(f) NCF shall have furnished Community with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in this Section 5.02 as Community may reasonably request.
5.03. Conditions to the Obligations of NCF Under this Agreement.
The obligations of NCF under this Agreement shall be further subject to
the satisfaction, at or prior to the Effective Time, of the following
conditions, any one or more of which may be waived by NCF:
(a) Each of the obligations of Community required to be performed by it
at or prior to the Closing pursuant to the terms of this Agreement shall have
been duly performed and complied with in all material respects and the
representations and warranties of Community contained in this Agreement shall
have been true and correct as of the date hereof and as of the Effective Time
as though made at and as of the Effective Time, except (i) as to any
representation or warranty which specifically relates to an earlier date or
(ii) where the facts which caused the failure of any representation or
warranty to be so true and correct would not, either individually or in the
aggregate, constitute a material adverse change in the business, operations,
assets or financial condition of Community, and the Community Subsidiaries,
taken as a whole, and NCF shall have received a certificate to that effect
signed by the President and Chief Executive Officer of Community.
(b) Community shall have furnished NCF with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in this Section 5.03 as NCF may reasonably request.
40
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ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER, ETC.
6.01. Termination.
This Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of this Agreement and the Agreement of
Merger by the stockholders of Community and/or NCF:
(a) by mutual written consent of the parties hereto;
(b) by Community or NCF (i) if the Effective Time shall not have
occurred on or prior to September 30, 1998 or (ii) if a vote of the
stockholders of NCF is taken and such stockholders fail to approve this
Agreement and the Agreement of Merger at the meeting of stockholders (or any
adjournment thereof) of NCF contemplated by Section 4.07 hereof; unless in
each case the failure of such occurrence shall be due to the failure of the
party seeking to terminate this Agreement to perform or observe its
agreements set forth herein to be performed or observed by such party at or
before the Effective Time;
(c) by Community or NCF upon written notice to the other 30 or more
days after the date upon which any application for a regulatory or
governmental approval necessary to consummate the Merger and the other
transactions contemplated hereby shall have been denied or withdrawn at the
request or recommendation of the applicable regulatory agency or governmental
authority, unless within such 30-day period a petition for rehearing or an
amended application is filed or noticed, or 30 or more days after any
petition for rehearing or amended application is denied;
(d) by Community in writing if NCF has, or by NCF in writing if
Community has, breached (i) any covenant or undertaking contained herein or
in the Agreement of Merger, or (ii) any representation or warranty contained
herein, which breach would have a material adverse effect on the business,
operations, assets or financial condition of NCF and the Bank or Community
and the Community Subsidiaries, as applicable, taken as a whole, or upon the
consummation of the transactions contemplated hereby, in any case if such
breach has not been cured by the earlier of 30 days after the date on which
written notice of such breach is given to the party committing such breach or
the Effective Time; provided that it is understood and agreed that either
party may terminate this Agreement on the basis of any such material breach
of any representation or warranty contained herein, notwithstanding any
qualification therein relating to the knowledge of the other party;
(e) by Community or NCF in writing, if any of the applications for
prior approval referred to in Section 4.06 hereof are denied or are approved
contingent upon the satisfaction of any condition or requirement which, in
the reasonable opinion of the Board
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of Directors of Community, would materially impair the value of NCF and the
Bank to Community, and the time period for appeals and requests for
reconsideration has run.
6.02. Effect of Termination.
In the event of termination of this Agreement by either Community or NCF as
provided above, this Agreement shall forthwith become void (other than
Sections 4.05(b) and 7.01 hereof, which shall remain in full force and
effect) and there shall be no further liability on the part of the parties or
their respective officers or directors except for the liability of the
parties under Sections 4.05(b) and 7.01 hereof and except for liability for
any breach of this Agreement.
6.03. Amendment, Extension and Waiver.
Subject to applicable law, at any time prior to the consummation of the
Merger, whether before or after approval thereof by the stockholders of
Community and/or NCF, the parties may (a) amend this Agreement and the
Agreement of Merger, (b) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (c) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, or (d) waive compliance with any of the
agreements or conditions contained herein; provided, however, that after any
approval of the Merger by the stockholders of Community and/or NCF, there may
not be, without further approval of such stockholders, any amendment or
waiver of this Agreement or the Agreement of Merger which modifies either the
amount or the form of the Merger Consideration to be delivered to
stockholders of NCF. This Agreement and the Agreement of Merger may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. Any agreement on the part of a party hereto to any extension
or waiver shall be valid only if set forth in an instrument in writing signed
on behalf of such party, but such waiver or failure to insist on strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE VII
MISCELLANEOUS
7.01. Expenses.
(a) All costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby (including without limitation legal,
accounting, investment banking and printing expenses) shall be borne by the
party incurring such costs and expenses, provided that Community shall bear
all costs of printing, mailing and filing the
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Form S-4 and Joint Proxy Statement/Prospectus and all other registration and
filing fees relating to the Merger.
(b) Notwithstanding any provision in this Agreement to the contrary, in
the event that either of the parties shall default in its obligations
hereunder, the non-defaulting party may pursue any remedy available at law or
in equity to enforce its rights and shall be paid by the defaulting party for
all damages, costs and expenses, including without limitation legal,
accounting, investment banking and printing expenses, incurred or suffered by
the non-defaulting party in connection herewith or in the enforcement of its
rights hereunder.
7.02. Survival.
The respective representations, warranties and covenants of the parties
to this Agreement shall not survive the Effective Time but shall terminate as
of the Effective Time, except for the provisions of Section 4.12 hereof.
7.03. Notices.
All notices or other communications hereunder shall be in writing and
shall be deemed given if delivered personally, sent by overnight express or
mailed by prepaid registered or certified mail (return receipt requested) or
by cable, telegram or telex addressed as follows:
(a) If to Community, to:
Community Bank Shares of Indiana, Inc.
202 East Spring Street
New Albany, Indiana 47250
Attn: Robert E. Yates
Copy to:
Elias, Matz, Tiernan & Herrick, L.L.P.
734 - 15th Street, N.W.
Washington, D.C. 20005
Attn: John P. Soukenik, Esq.
(b) If to NCF, to:
NCF Financial Corp.
106A John Rowan Boulevard
Bardstown, Kentucky 40004
Attn: A. E. Bowling
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Copy to:
Malizia, Spidi, Sloane & Fisch, P.C.
1301 K Street, N.W., Suite 700 East
Washington, D.C. 20005
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the
date so mailed.
7.04. Parties in Interest.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns; provided,
however, that neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other party and, except as otherwise expressly
provided herein, that nothing in this Agreement is intended to confer,
expressly or by implication, upon any other person any rights or remedies
under or by reason of this Agreement.
7.05. Complete Agreement.
This Agreement and the Agreement of Merger, including the documents and
other writings referred to herein or therein or delivered pursuant hereto or
thereto, contain the entire agreement and understanding of the parties with
respect to their subject matter and shall supersede all prior agreements and
understandings between the parties, both written and oral, with respect to
such subject matter. There are no restrictions, agreements, promises,
representations, warranties, covenants or undertakings between the parties
other than those expressly set forth herein or therein.
7.06. Counterparts.
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement and each of which shall be
deemed an original.
7.07. Governing Law.
This Agreement shall be governed by the laws of the State of Indiana,
without giving effect to the principles of conflicts of laws thereof.
7.08. Headings.
The Article and Section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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IN WITNESS WHEREOF, Community and NCF have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
COMMUNITY BANK SHARES OF INDIANA, INC.
Attest:
/s/ M. Diane Murphy By: /s/ Robert E. Yates
- ---------------------------- ----------------------------------
M. Diane Murphy Robert E. Yates
Secretary President and Chief Executive Officer
NCF FINANCIAL CORPORATION
Attest:
/s/ Patricia H. Thomas By: /s/ A.E. Bowling
- ---------------------------- ----------------------------------
Patricia H. Thomas A.E. Bowling
Secretary Chairman of the Board
45
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APPENDIX A
AGREEMENT OF MERGER
This Agreement of Merger is dated as of December 17, 1997, by and
between Community Bank Shares of Indiana, Inc. ("Community"), an Indiana
corporation, and NCF Financial Corporation ("NCF"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, Community and NCF have entered into an Agreement and Plan of
Reorganization, dated as of the date hereof (the "Reorganization Agreement");
and
WHEREAS, pursuant to the Reorganization Agreement and this Agreement of
Merger, and subject to the terms and conditions set forth therein and herein,
NCF shall be merged with and into Community, with Community the surviving
corporation of such merger;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and in the Reorganization
Agreement, the parties hereto do mutually agree as follows:
ARTICLE I
DEFINITIONS
Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
1.1 "Effective Time" shall mean the date and time at which the Merger
contemplated by this Agreement of Merger becomes effective as provided in
Section 2.2 of this Agreement of Merger.
1.2 "Community Common Stock" shall mean the common stock, par value
$.10 per share, of Community.
1.3 "Merger" shall refer to the multi-step merger of NCF with and into
Community as provided in Section 2.1 of this Agreement of Merger.
1.4 "Merging Corporations" shall collectively refer to Community and
NCF.
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1.5 "NCF Common Stock" shall mean the common stock, par value $.10 per
share, of NCF.
1.6 "Stockholder Meetings" shall mean the respective meetings of the
stockholders of Community and NCF held pursuant to Section 4.07 of the
Agreement.
1.7 "Surviving Corporation" shall mean Community as the surviving
corporation of the Merger.
ARTICLE II
TERMS OF THE MERGER
2.1 The Merger. Subject to the terms and conditions set forth in the
Reorganization Agreement, at the Effective Time, NCF shall be merged with and
into Community pursuant to the applicable provisions of the Indiana Business
Coroporation Law ("IBCL") and the Delaware General Corporation Law ("DGCL").
Community shall be the Surviving Corporation of the Merger and shall continue
to be governed by the laws of the State of Indiana. At the Effective Time,
the separate existence and corporate organization of NCF shall cease, and
Community shall thereupon and thereafter possess all the rights, privileges,
powers and franchises of a public as well as of a private nature of each of
NCF and Community; and be subject to all the restrictions, disabilities and
duties of each of NCF and Community; and all and singular, the rights,
privileges, powers and franchises of each of NCF and Community, and all
property, real, personal and mixed, and all debts due to either NCF or
Community on whatever account, as well for stock subscriptions and all other
things in action or belonging to each of NCF and Community shall be vested in
the Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as
effectually the property of the Surviving Corporation as they were of,
respectively, NCF and Community, and the title to any real estate vested by
deed or otherwise, under the laws of the State of Indiana or elsewhere in
either NCF or Community shall not revert or be in any way impaired by reason
of the Merger, but all rights of creditors and all liens upon any property of
either of NCF or Community shall be preserved unimpaired, and all debts,
liabilities and duties of NCF and Community shall thenceforth attach to the
Surviving Corporation and may be enforced against it to the same extent as if
said debts, liabilities and duties had been incurred or contracted by it.
2.2 Effective Time. The Merger shall become effective on the date and
at the time that Articles of Merger are executed and filed with the Secretary
of State of the State of Indiana pursuant to IBCL, unless a later date and
time is specified as the Effective Time in such Articles of Merger.
2
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2.3 Name of the Surviving Corporation. The name of the Surviving
Corporation shall be "Community Bank Shares of Indiana, Inc."
2.4 Articles of Incorporation. On and after the Effective Time, the
Articles of Incorporation of Community shall be the Articles of Incorporation
of the Surviving Corporation until amended in accordance with applicable law.
2.5 Bylaws. On and after the Effective Time, the Bylaws of Community
shall be the Bylaws of the Surviving Corporation until amended in accordance
with applicable law.
ARTICLE III
CONVERSION OF SHARES
3.1 Conversion of NCF Common Stock and Options to Purchase NCF Common
Stock.
(a) Subject to Section 3.2 hereof, each share of NCF Common Stock
outstanding immediately prior to the Effective Time, other than (i) shares
held by NCF (including Treasury shares) or Community or any of their
respective wholly owned subsidiaries and (ii) NCF Dissenting Shares (as
hereinafter defined), shall be converted into the number of shares of
Community Common Stock equal to the Exchange Ratio (as defined in the
Reorganization Agreement) in accordance with the terms of Section 1.03 of the
Reorganization Agreement.
(b) Notwithstanding any other provision hereof, no fractional shares of
Community Common Stock shall be issued to holders of NCF Common Stock. In
lieu thereof, each holder of shares of NCF Common Stock entitled to a
fraction of a share of Community Common Stock shall, at the time of surrender
of the certificate or certificates representing such holder's shares, receive
an amount of cash in accordance with the terms of Section 1.05 of the
Reorganization Agreement. No such holder shall be entitled to dividends,
voting rights or any other rights in respect of any fractional share.
(c) At or immediately prior to the Effective Time, each option to
purchase NCF Common Stock issued pursuant to NCF's 1995 Stock Option Plan
shall be cancelled, and each holder of any such option, whether or not then
vested or exercisable, shall be entitled to receive from Community or NCF a
new option to acquire shares of Community Common Stock a cash amount
determined in accordance with Section 1.03 of the Reorganization Agreement.
The payment of the consideration referred to in this Section 3.1(c) to
holders of options to purchase NCF Common Stock shall be subject to the
execution by any such holder of such instruments of cancellation as Community
may reasonably deem appropriate.
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3.2 Exchange of Certificates for Stock and/or Cash.
After the Effective Time, each holder of a certificate for theretofore
outstanding shares of NCF Common Stock, shall be surrendered and exchanged
for cash or stock consideration in the manner provided in Section 1.04 of the
Reorganization Agreement.
3.3 Dissenting Shares. Notwithstanding anything in this Agreement of
Merger to the contrary, shares of NCF Common Stock which are outstanding
immediately prior to the Effective Time and which are held by stockholders
(other than Community or any wholly owned subsidiary thereof) who shall not
have voted such shares in favor of the Agreement and this Agreement of Merger
and who shall have satisfied all of the applicable requirements of Section
262 of the DGCL ("NCF Dissenting Shares"), shall not be converted into the
right to receive, or be exchangeable for, shares of Community Common Stock or
cash as set forth in Section 3.1 hereof, but the holders thereof shall be
entitled to payment of the fair value of such shares in accordance with said
Section 262 of the DGCL, subject to the procedures and the conditions
specified in such provision of the DGCL, unless and until such holders shall
have failed to perfect or shall have effectively withdrawn or lost their
right to appraisal and payment under such law. If any such holder shall have
failed to perfect or shall have effectively withdrawn or lost such right of
appraisal, the shares of NCF Common Stock held by such holder shall thereupon
be deemed to have been converted into the right to receive, or be
exchangeable at the Effective Time for, cash as provided in 1.06 of the
Reorganization Agreement. Community hereby agrees to make, or cause to be
made, payment in cash for any Dissenting Shares.
3.4 Community Common Stock. Each share of Community Common Stock
issued and outstanding immediately prior to the Effective Time shall, on and
after the Effective Time, continue to be issued and outstanding as an
identical share of Community Common Stock.
ARTICLE IV
MISCELLANEOUS
4.1 Conditions Precedent. The respective obligations of each party
under this Agreement of Merger shall be subject to the satisfaction, or
waiver by the party permitted to do so, of the conditions set forth in
Article V of the Reorganization Agreement.
4.2 Termination. This Agreement of Merger shall be terminated
automatically without further act or deed of either of the parties hereto in
the event of the termination of the Reorganization Agreement in accordance
with Section 6.01 thereof.
4.3 Amendments. To the extent permitted by the IBCL, this Agreement of
Merger may be amended by a subsequent writing signed by each of the parties
hereto upon
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the approval of the Board of Directors of each of the parties hereto;
provided, however, that the provisions of Article III of this Agreement of
Merger relating to the consideration to be paid for the shares of NCF Common
Stock shall not be amended after either of the Stockholder Meetings so as to
modify either the amount or the form of such consideration or to otherwise
materially adversely affect the shareholders of Community or NCF without the
approval of the stockholders of Community and NCF who are so affected.
4.4 Successors. This Agreement of Merger shall be binding on the
successors of Community and NCF.
IN WITNESS WHEREOF, Community and NCF have caused this Agreement of
Merger to be executed by their duly authorized officers as of the day and
year first above written.
COMMUNITY BANK SHARES OF INDIANA, INC.
Attest:
/s/ M. Diane Murphy By: /s/ Robert E. Yates
- ----------------------------- -------------------------------------
M. Diane Murphy Robert E. Yates
Secretary President and Chief Executive Officer
NCF FINANCIAL CORPORATION
Attest:
/s/ Patricia H. Thomas By: /s/ A.E. Bowling
- ---------------------------- ----------------------------------
Patricia H. Thomas A.E. Bowling
Secretary Chairman of the Board
5
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Exhibit 3
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 17, 1997, by and between
Community Bank Shares of Indiana, Inc. ("Community"), an Indiana corporation,
and NCF Financial Corporation ("NCF"), a Delaware corporation (the "Agreement").
WITNESSETH
WHEREAS, Community and NCF have entered into an Agreement and Plan of
Reorganization and related Agreement of Merger, each dated as of December 17,
1997 (collectively, the "Reorganization Agreement");
WHEREAS, Community has requested the execution of this Agreement by NCF in
order to increase the likelihood that the transactions contemplated by the
Reorganization Agreement will be consummated in accordance with its terms and as
a condition to Community's obligation to complete the transactions contemplated
by the Reorganization Agreement and, in consideration for such obligation, NCF
has agreed to issue to Community an option entitling Community to purchase
shares of its common stock upon the terms and subject to the conditions set
forth herein; and
NOW, THEREFORE, in consideration of the execution of the Reorganization
Agreement and the premises therein and herein contained, the parties agree as
follows:
1. Grant of Option.
Subject to the terms and conditions hereof, NCF irrevocably grants to
Community as of December 17, 1997 the option ("Option") to purchase at one time
or from time to time anaggregate of 150,000 shares of common stock, par value
$.10 per share, of NCF ("Common Stock") at a price per share equal to $14.75
(the price per share is referred to below as the "Purchase Price" and the price
when used with respect to a number of shares is referred to below as the
"aggregate Purchase Price" for such shares). As used in this Agreement, the
term "Shares" means the shares of Common Stock subject to the Option.
2. Exercise of Option.
(a) Subject to the terms and conditions hereof, Community may exercise the
Option, in whole at any time or in part from time to time, to the extent not
previously exercised, if a Purchase Event (as defined below) shall have occurred
and be continuing, provided that to the extent the Option shall not have been
exercised, it shall terminate and be of no further effect, except as to notices
of exercise given prior thereto, on the Termination Date, which shall be the
date on which occurs the earliest of (i) immediately prior to the Effective Time
as defined in
<PAGE>
Section 1.02 of the Reorganization Agreement, (ii) twelve (12) months after
the first occurrence of a Purchase Event, (iii) twelve (12) months following
a termination of the Reorganization Agreement by Community pursuant to
Section 6.01(d) thereof prior to the occurrence of a Purchase Event; and (iv)
twelve (12) months following a termination of the Reorganization Agreement in
accordance with its terms (other than by Community pursuant to Section
6.01(d) thereof) prior to the occurrence of a Purchase Event, provided,
however, that any purchase of shares upon exercise of the Option shall be
subject to compliance with applicable laws and regulations.
(b) As used herein, a "Purchase Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) NCF or any of its subsidiaries shall have entered into an
agreement with any person (other than Community or any subsidiary thereof)
(A) to merge, consolidate or enter into any similar transaction with such
person, (B) for the disposition, by sale, lease, exchange or otherwise, of
all or substantially all of the consolidated assets or deposits of NCF or
any of its subsidiaries or (C) for the issuance, sale or other disposition
(including by way of merger, consolidation, share exchange or any similar
transaction) of securities (or an option or right to acquire such
securities) representing 15% or more of the voting power of NCF or any of
its subsidiaries;
(ii) any person (other than Community or any subsidiary thereof) shall
have acquired beneficial ownership of, or any group of persons shall have
been formed which beneficially owns, 15% or more of the then outstanding
Common Stock (any of the foregoing in Section 2(b)(i) or (ii) is
hereinafter referred to as an "Acquisition Transaction");
(iii) any person (other than Community or any subsidiary thereof)
shall have (A) commenced a tender offer or filed a registration statement
under the Securities Act of 1933, as amended ("Securities Act"), with
respect to an exchange offer to purchase or otherwise acquire control of
15% or more of the then outstanding shares of Common Stock (such offers
being referred to herein as a "Tender Offer" and an "Exchange Offer,"
respectively); or
(iv) the holders of the outstanding Common Stock shall not have
approved the Reorganization Agreement (including the related Agreement of
Merger) at the meeting of such holders called for such purpose pursuant to
the Reorganization Agreement, such meeting shall not have been held or
shall have been cancelled prior to the termination of the Reorganization
Agreement in accordance with its terms, or NCF's Board of Directors shall
have withdrawn or modified in a manner which is adverse to Community the
recommendation of NCF's Board of Directors with respect to the
Reorganization Agreement and the Agreement of Merger, in each case after it
shall have been publicly announced that any person (other than Community or
any subsidiary thereof) shall have (A) commenced a Tender Offer or filed a
registration statement under the Securities Act
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with respect to an Exchange Offer, (B) made, or disclosed an intention
to make, a proposal to engage in an Acquisition Transaction, (C) filed
an application (or given notice), whether in draft or final form, under
the Bank Holding Company Act of 1956, the Bank Merger Act or the Change
in Bank Control Act of 1978, for approval to engage in an Acquisition
Transaction or (D) any person shall have solicited proxies in a proxy
solicitation subject to Regulation 14A under the Securities Exchange
Act of 1934, as amended ("Exchange Act"), in opposition to approval of
the Reorganization Agreement by NCF's stockholders.
(c) As used in this Agreement, (i) "beneficial ownership," "person" and
"group of persons" shall have the meanings conferred thereon by Section 13(d) of
the Exchange Act and the regulations promulgated thereunder and (ii) "commenced"
shall have the meaning conferred thereon by Rule 14d-2 under the Exchange Act.
(d) NCF shall promptly give written notice to Community of the occurrence
of a Purchase Event known to NCF. However, the giving of such notice by NCF
shall not be a condition to the right of Community to exercise the Option. If
more than one transaction or event giving rise to a Purchase Event is undertaken
or effected, then all such transactions shall give rise to only one Purchase
Event, which Purchase Event shall be deemed continuing for all purposes
hereunder until all such transactions or events are abandoned.
(e) Notwithstanding the foregoing, NCF shall not be obligated to issue
Shares upon exercise of the Option (i) in the absence of any required
governmental, regulatory or stockholder approval or consent necessary for NCF to
issue the Shares or for Community to exercise the Option or prior to the
expiration or termination of any waiting period required by law, or (ii) so long
as any injunction or other order, decree or ruling issued by any federal or
state court of competent jurisdiction is in effect which prohibits the sale or
delivery of the Shares. If the Option is otherwise exercisable but cannot be
exercised prior to termination as specified in Section 2(a) hereof solely
because of any injunction, order or similar restraint issued by a court of
competent jurisdiction, the Option shall continue and will expire on the
twentieth business day after such injunction, order or restraint shall have been
dissolved or when such injunction, order or restraint shall have become
permanent and no longer subject to appeal, as the case may be.
3. Notice of Exercise; Payment and Delivery of Shares.
(a) In the event that Community desires to exercise the Option, Community
shall send a written notice (the date of which being herein referred to as the
"Notice Date") to NCF specifying the total number of Shares it will purchase and
a place and date for the closing of such purchase, which date shall be not later
than 60 calendar days nor earlier than three business days from the date such
notice is given, unless additional time is needed to give notification to or to
obtain approval from any governmental or regulatory authority and, if so
required, three business days from the date on which the required notification
period has expired or been terminated or such approval has been obtained and any
requisite waiting period with respect thereto shall have passed.
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(b) At any closing hereunder, (a)(i) Community shall make payment to NCF
of the aggregate Purchase Price for the Shares to be purchased by delivery to
NCF of a certified, cashier's or bank check payable to the order of NCF in such
amount or, if mutually agreed, by wire transfer of funds in such amount to an
account designated in writing by NCF, or (ii) if requested by Community, in lieu
of the payment set forth in (a)(i) above, NCF shall issue to Community a number
of whole Shares determined by (A) multiplying the excess, if any, of the closing
price of the Common Stock on the Notice Date over the Purchase Price by the
number of Shares with respect to which the Option is being exercised, and (B)
dividing such product by the Purchase Price; and (b) NCF shall deliver to
Community a certificate or certificates representing the Shares so purchased,
registered in the name of Community or its designee. NCF shall pay any and all
federal, state and local taxes, or other charges that may be imposed upon
Community in connection with the preparation, issuance and delivery of stock
certificates hereunder.
4. Representations and Warranties of NCF.
NCF hereby represents and warrants to Community as follows:
(a) This Agreement has been duly authorized, executed and delivered by NCF
and constitutes a valid and binding agreement of NCF, enforceable against NCF in
accordance with its terms, except to the extent that the obligations of NCF set
forth in Section 8(a) and (d) hereof may be unenforceable under applicable
federal and state securities laws.
(b) NCF has taken all necessary corporate and other action (excluding any
required governmental or stockholder approvals) to authorize and reserve and to
permit it to issue, and at all times from the date hereof until such time as the
obligation to deliver Shares upon the exercise of the Option terminates, will
have reserved for issuance, upon any exercise of the Option, the number of
Shares subject to the Option (less the number of Shares previously issued upon
any partial exercise of the Option or as to which the Option may no longer be
exercised). All of the Shares to be issued pursuant to the Option are duly
authorized and, upon issuance and delivery thereof pursuant to this Agreement,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all claims, liens, charges, encumbrances and security interests, and will not
have been issued in violation of, and will not be subject to, any preemptive
rights of any stockholders of NCF.
(c) The execution, delivery and performance by NCF of this Agreement and
the consummation of the transactions contemplated hereby (excluding any required
governmental approvals) do not contravene, or constitute a default under, (i)
the Certificate of Incorporation or Bylaws of NCF or (ii) any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
binding upon NCF or any of its subsidiaries.
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5. Representations and Warranties of Community.
Community hereby represents and warrants to NCF as follows:
(a) This Agreement has been duly authorized, executed and delivered by
Community and constitutes a valid and binding agreement of Community,
enforceable against Community in accordance with its terms, except to the extent
that the obligations of Community set forth in Section 8(b) and (d) hereof may
be unenforceable under applicable federal and state securities laws.
(b) Community is acquiring the Option for the purpose set forth in the
second Whereas clause of this Agreement and hereby acknowledges that (i) the
Option has not been, and the Shares may not be, registered under the Securities
Act or any other applicable securities registration requirements and (ii) the
Option and the Shares may not be transferred except in compliance with
applicable registration requirements or an available exemption therefrom.
6. Adjustment Upon Change in Capitalization, Etc.
In the event of any change in the Common Stock by reason of stock
dividends, stock splits, mergers, consolidations, recapitalizations,
combinations, conversions, exchanges of shares, extraordinary or liquidating
dividends, or other changes in the corporate or capital structure of NCF which
would have the effect of diluting or changing Community's rights hereunder, the
number and kind of shares or securities subject to the Option and the Purchase
Price (but not the aggregate Purchase Price of the Shares) shall be
appropriately and equitably adjusted so that Community shall receive upon
exercise of the Option the number and class of shares or other securities or
property that Community would have received in respect of the Shares that could
have been purchased upon exercise of the Option if the Option could have been
and had been exercised immediately prior to such event or the record date
therefor, as applicable. In the event that after the date hereof NCF issues any
additional shares of Common Stock other than pursuant to any event described in
the preceding sentence or pursuant to the exercise of the Option, the number of
shares of Common Stock which can be purchased pursuant to the Option shall be
increased by an amount so that after such issuance the number of shares of
Common Stock subject to the Option, less any shares previously acquired upon
exercise of the Option, shall equal 19.9% of the number of shares of Common
Stock then issued and outstanding, without giving effect to any shares which may
be issued pursuant to the Option. NCF shall take such steps in connection with
any consolidation, merger, liquidation or other such action as may be necessary
to ensure that the provisions hereof shall thereafter apply as nearly as
possible to any securities or property thereafter deliverable upon exercise of
the Option.
7. Registration of the Shares.
(a) If Community requests NCF in writing to register under the Securities
Act or any other applicable securities registration requirements Shares which
have been purchased by Community hereunder, NCF will use its best efforts to
cause the Shares so specified in such
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request to be registered as soon as practicable so as to permit the sale or
other distribution by Community of such Shares (and to keep such registration
in effect for a period of at least 180 days) and in connection therewith
shall prepare and file as promptly as reasonably possible (but in no event
later than 45 days from receipt of Community's request) a registration
statement under the Securities Act to effect such registration on an
appropriate form, which would permit the sale of the Shares by Community in
the manner specified by Community in its request. In connection with such
registration, NCF shall use its best efforts to cause to be delivered to
Community (and any other holder whose Shares are the subject of such
registration) such certificates, opinions, accountants' letters and other
documents as Community (or any such other holder) shall reasonably request
and are customarily rendered in connection with the registration of
securities under the Securities Act. Community shall provide all information
reasonably requested by NCF for inclusion in any documents to be prepared
hereunder. All expenses incurred by NCF in complying with the provisions of
this Section 7, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel for NCF and blue
sky fees and expenses shall be paid by NCF. Underwriting discounts and
commissions to brokers and dealers relating to the Shares, fees and
disbursements of counsel to Community and any other expenses incurred by
Community in connection with such registration shall be borne by Community.
NCF shall not be obligated to make effective more than two registration
statements pursuant to this Section 7(a).
(b) NCF shall notify Community in writing not less than ten business days
prior to filing a registration statement under the Securities Act with respect
to any Common Stock (other than a filing on Form S-4 or Form S-8) of NCF's
intention so to file. If Community wishes to have any portion of its Shares
purchased hereunder included in such registration statement, it shall advise NCF
in writing to that effect within five business days following receipt of such
notice from NCF pursuant to the preceding sentence, and NCF will thereupon
include the number of shares indicated by Community under such registration
statement, provided, however, that if the managing underwriter determines and
advises NCF and Community in writing that the inclusion in the registration
statement of the number of shares indicated by Community would interfere with
the successful marketing of the Common Stock proposed to be registered and sold
by NCF, then the number of shares indicated by Community to be included in the
underwriting shall be reduced or eliminated pro rata among all holders of shares
of Common Stock requesting such registration, and further provided, however,
that nothing herein shall prevent NCF from, at any time, abandoning or delaying
any registration.
(c) The rights provided under this Section 7 shall expire upon the third
annual anniversary of the first acquisition of Shares by Community hereunder.
8. Indemnification.
(a) In connection with any registration under the provisions of Section 7
hereof, NCF shall indemnify and hold harmless Community and any underwriter (as
defined in the Securities Act) for Community and each person who controls
Community or such underwriter within the meaning of the Securities Act, from and
against any and all loss, damage, liability, cost and
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expense to which Community or any such underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
damages, liabilities, costs or expenses are caused by or arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in such registration statement, any preliminary or final
offering prospectus contained therein or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were
made, not misleading; provided, however, that NCF will not be liable in any
such case to the extent that any such loss, damage, liability, cost or
expense arises out of or is based upon an untrue statement or omission so
made in conformity with information furnished by Community, such underwriter
or such controlling persons in writing specifically for use in the
preparation thereof.
(b) Community will indemnify and hold harmless NCF, any underwriter for
NCF and each person who controls NCF or such underwriter within the meaning of
the Securities Act, from and against any and all loss, damage, liability, cost
and expense to which NCF or any such underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
damages, liabilities, costs or expenses are caused by or arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any preliminary or final offering
prospectus contained therein or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or omission was so made in conformity with information furnished by Community in
writing specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of Section 8(a) or (b) of notice of the commencement of any action
involving the subject matter of the foregoing indemnity provisions, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party pursuant to the provisions of Section 8(a) or (b), promptly
notify the indemnifying party of the commencement thereof; except to the extent
of any actual prejudice to the indemnifying party, the omission to so notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise hereunder. In case such action is brought
against any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, that if the
defendants in any action include both the indemnified party and the indemnifying
party and there is a conflict of interests which would prevent counsel for the
indemnifying party from also representing the indemnified party, the indemnified
party or parties shall have the right to select one separate counsel to
participate in the defense of such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will
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not be liable to such indemnified party pursuant to the provisions of Section
8(a) or (b) for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless (i) the indemnified party shall
have employed counsel in accordance with the provisions of the preceding
sentence, (ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after the notice of the commencement of the
action, or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party.
(d) If recovery is not available under the foregoing indemnification
provisions, for any reason other than as expressly specified therein, the
parties entitled to indemnification by the terms thereof shall be entitled to
contribution to liabilities and expenses, except to the extent that contribution
is not permitted under Section 11(f) of the Securities Act. In determining the
amount of contribution to which the respective parties are entitled, there shall
be considered the parties' relative fault, knowledge and access to information
concerning the matter with respect to which the claim was asserted, the
opportunity to correct and/or prevent any statement or omission, and any other
equitable considerations appropriate under the circumstances.
9. Quotation.
If the Common Stock or any other securities to be acquired upon exercise of
the Option are then authorized for quotation or trading or listing on the Nasdaq
Stock Market or any securities exchange, NCF, upon the request of Community
after the occurrence of a Purchase Event, will promptly file an application, if
required, to authorize for quotation or trading or listing the Shares of Common
Stock (or other securities to be acquired upon exercise of the Option pursuant
to the terms of Section 6 hereof) on the Nasdaq Stock Market or such other
securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
10. Further Assurances.
NCF agrees to execute and deliver such documents and instruments and take
such further actions as may be necessary or appropriate or as Community may
reasonably request in order to ensure that Community receives the full benefits
of this Agreement (including, without limitation, the prompt filing of any
required notice or application for approval with any applicable federal or state
regulatory agency and the expeditious processing of the same). Prior to the
Termination Date, NCF will refrain from taking any action which would have the
effect of preventing or interfering with the delivery by NCF of the Shares (or
other securities deliverable pursuant to Section 6 hereof) to Community upon any
exercise of the Option or from otherwise performing its obligations under this
Agreement.
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11. Remedies.
The parties agree that Community would be irreparably damaged if for any
reason NCF failed to issue any of the Shares (or other securities deliverable
pursuant to Section 6 hereof) upon exercise of the Option or to perform any of
its other obligations under this Agreement, and that Community would not have an
adequate remedy at law in such event. Accordingly, Community shall be entitled
to specific performance and injunctive and other equitable relief to enforce the
performance of this Agreement by NCF. This provision is without prejudice to
any other rights that Community may have against NCF for any failure to perform
its obligations under this Agreement.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
(b) Notices. All notices or other communications hereunder shall be in
writing and shall be deemed given if delivered personally, sent by overnight
express or mailed by prepaid registered or certified mail (return receipt
requested) or by cable, telegram, telecopy or telex addressed as follows:
(i) If to Community, to:
Community Bank Shares of Indiana, Inc.
202 East Spring Street
New Albany, Indiana 47150
ATTN: Robert E. Yates
Copy to:
Elias, Matz, Tiernan and Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
ATTN: Raymond A. Tiernan, Esq.
(ii) If to NCF, to:
NCF Financial Corporation
106A John Rowan Boulevard
Bardstown, Kentucky 40004
ATTN: A.E. Bowling
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Copy to:
Malizia, Spidi, Sloane & Fish, P.C.
1301 K Street, N.W., Suite 700 East
Washington, D.C. 20005
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
(c) Severability. If any term, provision, covenant or restriction of this
Agreement is held to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
If for any reason any court or regulatory agency determines that the Option
will not permit the holder to acquire the full number of Shares, it is the
express intention of NCF to allow the holder to acquire such lesser number of
shares as may be permissible, without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana without giving effect to the
principles of conflicts of laws thereof.
(e) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(f) Headings. The section headings herein are for convenience only and
shall not affect the construction hereof.
(g) Assignment. Community may assign this Agreement to any wholly owned
subsidiary of Community. Community may not, without the prior written consent
of NCF, assign this Agreement to any other person in whole or in part, provided
that upon the occurrence of and following a Purchase Event, Community may sell,
transfer, assign or otherwise dispose of its rights and obligations hereunder in
whole or in part without such consent. In the case of any permitted sale,
transfer, assignment or disposition in part of this Option, NCF shall do all
things necessary to facilitate the same and the person to whom this Option is
sold, transferred assigned or disposed of shall agree in writing to the terms
and conditions hereof. This Agreement shall not be assignable by NCF except by
operation of law. Subject to the foregoing, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
(h) Parties in Interest. This Agreement shall be binding upon and inure
solely to the
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benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to confer upon any other person (other than an assignee
or transferee of Community pursuant to Section 12(g) hereof) any rights or
remedies of any nature whatsoever under or by any reason of this Agreement.
13. Entire Agreement.
This Agreement, including the documents and other writings referred to
herein or delivered pursuant hereto, contains the entire agreement and
understanding of the parties with respect to its subject matter. There are no
restrictions, agreements, promises, warranties, covenants or undertakings
between the parties other than those expressly set forth herein or therein.
This Agreement supersedes all prior agreements and understandings between the
parties, both written and oral, with respect to its subject matter.
IN WITNESS WHEREOF, Community and NCF have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
COMMUNITY BANK SHARES OF INDIANA, INC.
Attest:
/s/ M. Diane Murphy By: /s/ Robert E. Yates
- ------------------------ ----------------------------------
M. Diane Murphy Robert E. Yates
Secretary President and Chief Executive Officer
NCF FINANCIAL CORPORATION
Attest:
/s/ Patricia H. Thomas By: /s/ A.E. Bowling
- ------------------------ ----------------------------------
Patricia H. Thomas A.E. Bowling
Secretary Chairman of the Board
11
