EXHIBIT 2.1
PLAN OF REORGANIZATION AND MERGER
THIS PLAN OF REORGANIZATION AND MERGER (this "Agreement") is made and
entered into effective as of the 16th day of December, 2003, by and among
MAINSOURCE FINANCIAL GROUP, INC. ("MainSource"), PEOPLES HOLDINGS, INC. ("Merger
Corp") and PEOPLES FINANCIAL CORP. ("Peoples").
WITNESSETH:
WHEREAS, MainSource is an Indiana corporation registered as a bank
holding company under the federal Bank Holding Company Act of 1956, as amended
(the "BHC Act"), with its principal office located in Greensburg, Decatur
County, Indiana; and
WHEREAS, Merger Corp is an Indiana corporation with its principal
office located in Greensburg, Decatur County, Indiana and is a wholly-owned
subsidiary of MainSource; and
WHEREAS, Peoples is an Indiana corporation registered as a bank holding
company under the BHC Act, with its principal office located in Linton, Xxxxxx
County, Indiana, and is the sole owner of Peoples Trust Company (the "Bank"),
which is an Indiana state banking institution organized and existing under the
laws of the State of Indiana; and
WHEREAS, it is the desire of MainSource and Peoples to affiliate
through an integrated plan of reorganization whereby Merger Corp will be merged
with and into Peoples with Peoples surviving (the "Merger"), and immediately
thereafter Peoples will be merged up and into MainSource with MainSource
surviving (the "Upstream Merger"); and
WHEREAS, the parties hereto intend that the integrated plan of
reorganization in which the Merger will be immediately followed by the Upstream
Merger constitute a single statutory merger of Peoples into MainSource that
qualifies as a tax-free reorganization under Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended (the "Code"), and as recently
illustrated and discussed in Rev. Rul. 2001-46, 2001-42 I.R.B. 321, T.D. 9071
and Regulations Section 1.338(h)(10)-1T(e), Example 11; and
WHEREAS, a majority of the entire Board of Directors of each of
MainSource, Merger Corp and Peoples have approved this Agreement, authorized its
execution and designated this Agreement an integrated plan of reorganization and
a plan of merger.
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, MainSource, Merger Corp and Peoples hereby make this Agreement and
prescribe the terms and conditions of the affiliation of MainSource and Peoples
and the mode of carrying such Merger into effect as follows:
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SECTION 1
THE MERGER
1.01. General Description.
(a) Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 10
hereof), the Merger Corp shall be merged with and into, and
under the Articles of Incorporation of, Peoples (previously
defined as the "Merger"). Peoples shall survive the Merger
(the "Surviving Corporation") and shall continue its corporate
existence under the laws of the State of Indiana pursuant to
the provisions of and with the effect provided in the Indiana
Business Corporation Law, as amended (the "IBCL"). All of the
issued and outstanding shares of common stock of Merger Corp
shall be converted into 10 shares of Peoples Common Stock (as
defined in Section 4.03 hereof). Such shares of Peoples Common
Stock shall not be subject to the provisions of Section 2
hereof.
(b) Upstream Merger. Upon the terms and subject to the conditions
of the agreement attached hereto as Exhibit A, immediately
after the Effective Time, Peoples shall be merged up and into,
and under the Articles of Incorporation of, MainSource
(previously defined as the "Upstream Merger"). Upon
consummation of the Upstream Merger, the Bank shall continue
to be a wholly-owned subsidiary of MainSource.
1.02. Name, Officers, Directors and Management. The name of the
Surviving Corporation shall be "Peoples Financial Corp." Its principal office
shall be located at 0000 Xxxx Xxxxx Xxxx 00, Xxxxxx, Xxxxxxx 00000. The officers
of Merger Corp serving at the Effective Time shall serve as the officers of the
Surviving Corporation, until such time as their successors shall have been duly
elected and have qualified or until their earlier resignation, death or removal
from office. The directors of Merger Corp as of the Effective Time shall serve
as the directors of the Surviving Corporation, until such time as their
successors have been duly elected and have been qualified or until their earlier
resignation, death or removal from office.
1.03. Capital Structure. The capital of the Surviving Corporation shall
be not less than the capital of Peoples immediately prior to the Effective Time.
1.04. Articles of Incorporation and By-Laws. The Articles of
Incorporation and By-Laws of Peoples in existence at the Effective Time shall
remain the Articles of Incorporation and By-Laws of the Surviving Corporation
following the Effective Time, until such Articles of Incorporation and By-Laws
shall be further amended as provided by applicable law.
1.05. Effect of the Merger. The effect of the Merger, at the Effective
Time, shall be as set forth in Indiana Code Section 23-1-40-6, as amended.
1.06. Tax-Free Reorganization. The parties hereto intend that the
integrated plan of reorganization in which the Acquisition Merger will be
immediately followed by the Upstream Merger constitutes a single statutory
merger of Peoples into MainSource that qualifies as a tax-free reorganization
under Section 368(a)(1)(A) of the Code, and as recently illustrated and
discussed in Rev. Rul. 2001-46, 2001-42 I.R.B. 321, T.D. 9071 and Regulations
Section 1.338(h)(10)-1T(e), Example 11. All parties agree to cooperate and to
take such actions as may be reasonably necessary to assure such results.
1.07. Assets and Liabilities. At the Effective Time, the title to all
assets, real estate and other property owned by Merger Corp shall vest in
Peoples without reversion or impairment. At the Effective Time, all liabilities
of Merger Corp shall be assumed by Peoples.
1.08. Additional Actions. If at any time after the Effective Time,
MainSource shall consider or be advised that any further deeds, assignments or
assurances in law or any other acts are necessary or desirable (a) to vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation its
right, title or interest in, to or under
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any of the rights, properties or assets of Peoples or the Bank, or (b) otherwise
carry out the purposes of this Agreement, Peoples and the Bank and their
respective officers and directors shall be deemed to have granted to the
Surviving Corporation an irrevocable power of attorney to execute and deliver
all such deeds, assignments or 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 on the
purposes of this Agreement, and the officers and directors of the Surviving
Corporation are authorized in the name of Peoples or the Bank or otherwise to
take any and all such action.
SECTION 2
MANNER AND BASIS OF EXCHANGE OF STOCK
2.01. Merger Consideration.
(a) Upon and by virtue of the Merger becoming effective at the
Effective Time, each issued and outstanding share of Peoples
Common Stock, other than dissenting shares, shall be converted
into the right to receive in accordance with Section 2.04:
(i) An amount of cash equal to $67.6168 (the "Cash
Consideration"), or
(ii) Such number of shares of common stock of MainSource
("MainSource Common Stock") equal to the quotient
(the "Exchange Ratio") arrived at by dividing:
A. the Cash Consideration, by
B. $29.00 (the "Price Per Share"), subject to
adjustment, if any, pursuant to the
provisions of Sections 2.01(b), 2.02, and
2.03 hereof (the "Stock Consideration").
The Cash Consideration and the Stock Consideration are
sometimes referred to herein collectively as the "Merger
Consideration."
(b) All Stock Consideration shall be newly-issued shares of common
stock of MainSource, issued to the shareholders of Peoples
pursuant to the plan of reorganization in accordance with the
provisions of Treasury Regulation Section 1.1032-2(b).
2.02. No Fractional Shares. Certificates for fractional shares of
MainSource Common Stock shall not be issued for fractional interests resulting
from application of the Stock Consideration. Each shareholder of Peoples who
would otherwise have been entitled to a fraction of a share of MainSource Common
Stock (after taking into account all shares of Peoples Common Stock owned by
such shareholder of Peoples ) shall be paid in cash following the Effective
Time, as provided in Section 2.05 hereof, an amount equal to such fraction
multiplied by the Price Per Share.
2.03. Recapitalization. If, between the date of this Agreement and the
Effective Time, the record date occurs (or, if no record date is established,
the date of the event or transaction occurs) for the distribution or issuance by
MainSource of a stock dividend with respect to shares
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of MainSource Common Stock, or a combination, subdivision, reclassification, or
split of issued and outstanding shares of MainSource Common Stock, such that the
number of issued and outstanding shares of MainSource Common Stock is increased
or decreased, then the Stock Consideration and the Price Per Share shall be
adjusted so the shareholders shall receive, in the aggregate, such number of
shares of MainSource Common Stock representing the same percentage of
outstanding shares of MainSource Common Stock at the Effective Time as would
have been represented by the number of shares of MainSource Common Stock the
shareholders of Peoples would have received if any of the foregoing actions had
not occurred.
2.04. Election and Proration Procedures.
(a) An election form and letter of transmittal (the "Election
Form") shall be mailed to each record holder of Peoples Common
Stock along with the proxy materials for the special
shareholders' meeting at which the Merger will be submitted to
a vote of Peoples shareholders. The shareholders of Peoples
entitled to receive the Election Form shall be those
shareholders of record as of the record date fixed for the
special shareholders' meeting at which the Merger will be
submitted to a vote of Peoples shareholders (the "Special
Record Date"). Peoples and MainSource shall also establish a
deadline for receipt of such Election Forms (the "Election
Deadline"), which deadline shall be the close of business on
the date of the special meeting at which the Merger will be
submitted to a vote of Peoples shareholders. The Election
Forms Peoples shall provide to MainSource all information
reasonably necessary for it to perform its obligations as
specified herein.
(b) Each Election Form shall entitle the holder of shares of
Peoples Common Stock to:
(i) elect to receive the Cash Consideration for all of
such holder's shares (a "Cash Election");
(ii) elect to receive the Stock Consideration for all of
such holder's shares (a "Stock Election");
(iii) elect to receive the Cash Consideration with respect
to some of such holder's shares and the Stock
Consideration with respect to such holder's remaining
shares (a "Mixed Election"); or
(iv) make no election or to indicate that such holder has
no preference as to the receipt of the Cash
Consideration or the Stock Consideration (a
"Non-Election").
Shares of Peoples Common Stock as to which a Cash Election has
been made (including pursuant to a Mixed Election) are
referred to herein as "Cash Election Shares." Shares of
Peoples Common Stock as to which a Stock Election has been
made (including pursuant to a Mixed Election) are referred to
herein as "Stock Election Shares." Shares of Peoples Common
Stock as to which no election has been made are referred to
herein as "Non-Election Shares." The aggregate
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number of Stock Election Shares and Non-Election Shares are
referred to herein as the "Stock Election Number."
(c) An election shall be duly made by completing the Election Form
and any other required documents in accordance with the
instructions set forth therein and delivering them to
MainSource before 5:00 p.m., E.S.T., on the Election Deadline.
An election shall have been properly made only if MainSource
shall have actually received a properly completed Election
Form by the Election Deadline. An Election Form shall be
deemed properly completed only if accompanied by one or more
certificates therefore representing Peoples Common Stock
("Certificates") (or customary affidavits and, if required by
MainSource pursuant to Section 2.05(g), a bond as indemnity
against any claim that may be made with respect to such
Certificates or the guaranteed delivery of such Certificates)
representing all shares of Peoples Common Stock covered by
such Election Form, together with duly executed transmittal
materials included with the Election Form. Subject to the
terms of this Agreement and of the Election Form, MainSource
shall have reasonable discretion to determine whether any
election, revocation, or change has been properly or timely
made and to disregard immaterial defects in any Election Form,
and any good faith decisions of MainSource regarding such
matters shall be binding and conclusive.
(d) Notwithstanding any other provision contained in this
Agreement, at least sixty-five percent (65%) of the total
number of shares of Peoples Common Stock outstanding at the
Effective Time (the "Stock Conversion Number") shall be
converted into the Stock Consideration and the remaining
outstanding shares of Peoples Common Stock (excluding
dissenters' shares) shall be converted into the Cash
Consideration; provided, however, that for federal income tax
purposes, it is intended that the Merger and the Upstream
Merger immediately following will qualify as an integrated
plan of reorganization under the provisions of Section
368(a)(1)(A) of the Code and, notwithstanding anything to the
contrary contained herein, in order that the aforementioned
integrated plan of reorganization will not fail to satisfy
continuity of interest requirements under applicable federal
income tax principles relating to reorganizations under
Section 368(a)(1)(A) of the Code, MainSource shall increase
the number of shares of Peoples Common Stock that will be
converted into Stock Consideration and reduce the number of
shares of Peoples Common Stock that will be converted into the
right to receive the Cash Consideration to ensure that the
Stock Consideration will represent at least fifty percent
(50%) of the value of the total of the aggregate Merger
Consideration plus any amounts treated as merger consideration
for federal income tax purposes, including any distributions
by Peoples pursuant to Section 6.03(a)(iii).
(e) Within five (5) business days after the Effective Time,
MainSource shall effect the allocation among holders of
Peoples Common Stock of rights to receive the Cash
Consideration and the Stock Consideration and to distribute
such consideration as follows:
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(i) if the Stock Election Number equals or exceeds the
Stock Conversion Number, then (A) all Cash Election
Shares shall be converted into the right to receive
the Cash Consideration, and (B) all Stock Election
Shares and Non-Election Shares shall be converted
into the right to receive the Stock Consideration;
(ii) if the Stock Election Number is less than the Stock
Conversion Number, the Cash Elections shall be
eliminated (each in its entirety) and converted to
Stock Elections (each in its entirety) by first
eliminating and converting the Cash Election which
covers the smallest number of shares of Peoples
Common Stock, and then eliminating and converting the
Cash Election which covers the next smallest number
of shares and continuing this process until the total
remaining number of outstanding Peoples shares
covered by Cash Elections is such that the Merger
will (i) result in aggregate cash payments of no more
than 35% of the total Merger Consideration (including
cash payments for fractional shares and payments to
dissenting shareholders), and (ii) satisfy the
"continuity of interest" requirement applicable to
tax-free reorganizations under the Code such that the
Stock Consideration will represent at least fifty
(50%) of the value of the total of the aggregate
Merger Consideration plus any amounts treated as
merger consideration for federal income tax purposes,
including any distributions by Peoples pursuant to
Section 6.03(a)(iii).
For purposes of this Section 2.04(e), if MainSource is
obligated to increase the number of shares of Peoples Common
Stock to be converted into shares of MainSource Common Stock
as a result of the application of the last clause of Section
2.04(d) hereof, then the higher number shall be substituted
for the Stock Conversion Number in the calculations set forth
in this Section 2.04(e).
(f) Notwithstanding anything to the contrary in this Section 2.04,
if (i) a shareholder of Peoples certifies in writing at the
time of filing a Cash Election for all of his or her shares
(the "Certifying Cash Elector"), that his outstanding Peoples
shares are deemed to be constructively owned by another
shareholder of Peoples (the "Constructive Owner") under the
provisions of Section 318(a) of the Code, (ii) the Certifying
Cash Elector supplies such information in support of his
certification to Peoples legal counsel as such counsel may
request and such legal counsel does not disagree with the
certification, and (iii) the Constructive Owner has filed a
valid Cash Election, then the elections of the Certifying Cash
Elector or Electors and the Constructive Owner or Owners shall
be treated as a single election, and their shares shall be
aggregated for purposes of determining priority for conversion
into cash.
(g) A holder of Peoples' shares that is a bank, trust company,
security broker-dealer or other recognized nominee, may submit
one or more Election Forms for the persons for whom it holds
shares as nominee provided that such bank, trust
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company, security broker-dealer or nominee certifies to the
satisfaction of Peoples and MainSource the names of the
persons for whom it is so holding shares (the "Beneficial
Owners"). In such case, each Beneficial Owner for whom an
Election Form is submitted shall be treated as a separate
owner for purposes of the election procedure and allocation of
shares set forth herein.
2.05. Exchange Procedures.
(a) Distributions by MainSource of the Merger Consideration shall
be made in accordance with Section 2.04. At and after the
Effective Time, each Certificate shall represent only the
right to receive the Merger Consideration in accordance with
the terms of this Agreement.
(b) Prior to the Effective Time, MainSource shall:
(i) reserve for issuance a sufficient number of shares of
MainSource Common Stock to provide for payment of the
aggregate Stock Consideration; and
(ii) have available an amount of cash sufficient to pay
the aggregate Cash Consideration.
(c) The Election Form shall, among other things:
(i) specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only
upon delivery of the Certificates to MainSource;
(ii) be in a form and contain any other provisions as
MainSource may reasonably determine; and
(iii) include instructions for use in effecting the
surrender of the Certificates in exchange for the
Merger Consideration.
Upon the proper surrender of the Certificates to MainSource,
together with a properly completed and duly executed Election
Form, the holder of such Certificates shall be entitled to
receive in exchange therefore a certificate representing that
number of whole shares of MainSource Common Stock that such
holder has the right to receive pursuant to Section 2.04, if
any, and a check in the amount equal to the cash that such
holder has the right to receive pursuant to Section 2.04, if
any (including any cash in lieu of fractional shares, if any,
that such holder has the right to receive pursuant to Section
2.02), and any dividends or other distributions to which such
holder is entitled pursuant to Section 2.05(e) hereof.
Certificates so surrendered shall forthwith be canceled.
MainSource shall not be entitled to vote or exercise any
rights of ownership with respect to the shares of MainSource
Common Stock held by it from time to time hereunder, except
that it shall receive and hold, without interest, all
dividends or other
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distributions paid or distributed with respect to such shares
for the account of the persons entitled thereto.
(d) No dividends or other distributions declared or made after the
Effective Time with respect to MainSource Common Stock issued
pursuant to this Agreement shall be remitted to any person
entitled to receive shares of MainSource Common Stock
hereunder until such person surrenders his or her Certificates
in accordance with this Section 2.05. Upon the surrender of
such person's Certificates, such person shall be entitled to
receive any dividends or other distributions, without interest
thereon, that, subsequent to the Effective Time, had become
payable but not paid with respect to shares of MainSource
Common Stock represented by such person's Certificates.
(e) The stock transfer books of Peoples shall be closed
immediately upon the Effective Time and from and after the
Effective Time there shall be no transfers on the stock
transfer records of Peoples of any shares of Peoples Common
Stock. If, after the Effective Time, Certificates are
presented to MainSource, they shall be canceled and exchanged
for the Merger Consideration deliverable in respect thereof
pursuant to this Agreement in accordance with the procedures
set forth in this Section 2.05.
(f) MainSource shall be entitled to rely upon Peoples' stock
transfer books to establish the identity of those persons
entitled to receive the Merger Consideration, which books
shall be conclusive with respect thereto. In the event of a
dispute with respect to ownership of stock represented by any
Certificate, MainSource shall be entitled to deposit any
Merger Consideration represented thereby in escrow with an
independent third party and thereafter be relieved with
respect to any claims thereto.
(g) If any Certificate shall have been lost, stolen, or destroyed,
upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen, or destroyed
and, if required by MainSource, the posting by such person of
a bond in such amount as MainSource may reasonably direct as
indemnity against any claim that may be made against it with
respect to such Certificate, MainSource will issue in exchange
for such lost, stolen, or destroyed Certificate the Merger
Consideration deliverable in respect thereof pursuant to
Section 2.04 hereof.
2.06 Exchange Agent. Peoples and MainSource hereby appoint MainSource
Bank to act as agent (the "Exchange Agent") for purposes of mailing and
receiving the Election Forms, tabulating the results and distributing the Merger
Consideration pursuant to the terms and conditions of this Agreement.
2.07 No Liability. Neither MainSource, Merger Corp, nor the Exchange
Agent shall be liable to any holder of Peoples Common Stock for any amount paid
or property delivered in good faith to a public official pursuant to any
applicable abandoned property, escheat or similar law.
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SECTION 3
DISSENTING SHARES
Shareholders of Peoples who properly exercise and perfect statutory
dissenter's rights shall have the rights accorded to dissenting shareholders
under Chapter 44 of the IBCL.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF PEOPLES
On or prior to the date hereof, Peoples has delivered to MainSource a
schedule (the "Disclosure Schedule") setting forth, among other things, items
the disclosure of which is necessary or appropriate either in response to an
express disclosure requirement contained in a provision hereof or as an
exception to one or more representations or warranties contained in this Section
4 or to one or more of its covenants contained in Section 6; provided, that the
mere inclusion of an item in the Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission by Peoples that such
item represents a material exception or fact, event or circumstance or that such
item is reasonably likely to result in a Material Adverse Effect (as defined
below).
For the purpose of this Agreement, and in relation to Peoples and the
Bank, a "Material Adverse Effect" means any effect that (i) is material and
adverse to the financial position, results of operations or business of Peoples
and the Bank taken as a whole, or (ii) would materially impair the ability of
Peoples to perform its obligations under this Agreement or otherwise materially
threaten or materially impede the consummation of the Merger and the other
transactions contemplated by this Agreement; provided, however, that Material
Adverse Effect shall not be deemed to include the impact of (a) changes in
banking and similar laws of general applicability or interpretations thereof by
courts or governmental authorities, (b) changes in generally accepted accounting
principles or regulatory accounting requirements applicable to banks and their
holding companies generally, (c) any modifications or changes to valuation
policies and practices in connection with the Merger or restructuring charges
taken in connection with the Merger, in each case in accordance with generally
accepted accounting principles, (d) effects of any action taken with the prior
written consent of MainSource and (e) changes in general level of interest rates
or conditions or circumstances relating to or that affect the United States
economy, financial or securities markets or the banking industry, generally.
For the purpose of this Agreement, and in relation to Peoples and the
Bank, "knowledge" means (i) the actual knowledge of any officer or director of
Peoples and any other person having supervisory or management responsibilities
with respect to material aspects of the operation of the business of Peoples or
the Bank of a particular fact; and (ii) imputed knowledge of any officer or
director of Peoples or the Bank and any other person having supervisory or
management responsibilities with respect to material aspects of the operation of
the business of Peoples or the Bank of a particular fact. Imputed knowledge of a
particular person with respect to a particular fact means that such person would
have had actual knowledge of such fact except for the fact that such person was
negligent in the performance of such person's responsibilities to Peoples or the
Bank.
Accordingly, Peoples hereby represents and warrants to MainSource with
respect to itself and the Bank, as its wholly-owned subsidiary, as follows:
4.01. Organization and Authority. Peoples is a corporation duly
organized and validly existing under the laws of the State of Indiana. The Bank
is an Indiana state banking institution duly organized, validly existing and in
good standing under the laws of the State of Indiana. Peoples and the Bank have
full power and authority (corporate and otherwise) to own and lease their
properties as presently owned and leased and to conduct their respective
business in the manner and by the means utilized as of the date hereof. Each of
Peoples and the Bank is duly qualified to do business in each jurisdiction in
which the nature of the business conducted or the properties or assets owned or
leased by it make such qualification necessary. Except as set forth in the
Disclosure Schedule, Peoples' only subsidiary is the Bank and it has no other
subsidiaries and owns no voting stock or equity securities of any corporation,
partnership, association or other entity. The Bank has no subsidiaries. The Bank
is subject to primary regulatory supervision and examination by the Federal
Deposit Insurance Corporation and the Indiana Department of Financial
Institutions.
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4.02. Authorization. (a) Peoples has the requisite corporate power and
authority to enter into this Agreement and to perform its obligations hereunder,
subject to the fulfillment of the conditions precedent set forth in Section
8.02(e) and (f) hereof. As of the date hereof, Peoples is not aware of any
reason why the approvals set forth in Section 8.02(e) will not be received in a
timely manner and without the imposition of a condition, restriction or
requirement of the type described in Section 8.02(e). This Agreement and its
execution and delivery by Peoples have been duly authorized and approved by the
Board of Directors of Peoples and, assuming due execution and delivery by
MainSource, constitutes a valid and binding obligation of Peoples, subject to
the fulfillment of the conditions precedent set forth in Section 8.02 hereof,
and is enforceable in accordance with its terms, except to the extent limited by
general principles of equity and public policy and by bankruptcy, insolvency,
fraudulent transfer, reorganization, liquidation, moratorium, readjustment of
debt or other laws of general application relating to or affecting the
enforcement of creditors' rights.
(b) Neither the execution of this Agreement nor consummation of the
Merger contemplated hereby: (i) conflicts with or violates Peoples' or the
Bank's Articles of Incorporation or By-Laws, respectively; (ii) conflicts with
or violates any local, state, federal or foreign law, statute, ordinance, rule
or regulation (provided that the approvals of or filings with applicable
government regulatory agencies or authorities required for consummation of the
Merger are obtained) or any court or administrative judgment, order, injunction,
writ or decree; (iii) conflicts with, results in a breach of or constitutes a
default under any note, bond, indenture, mortgage, deed of trust, license,
lease, contract, agreement, arrangement, commitment or other instrument to which
Peoples or the Bank is a party or by which Peoples or the Bank is subject or
bound; (iv) results in the creation of or gives any person, corporation or
entity the right to create any lien, charge, claim, encumbrance or security
interest, or results in the creation of any other rights or claims of any other
party (other than MainSource) or any other adverse interest, upon any right,
property or asset of Peoples or the Bank which would be material to Peoples on a
consolidated basis; or (v) terminates or gives any person, corporation or entity
the right to terminate, accelerate, amend, modify or refuse to perform under any
note, bond, indenture, mortgage, agreement, contract, lease, license,
arrangement, deed of trust, commitment or other instrument to which Peoples or
the Bank is bound or with respect to which Peoples or the Bank is to perform any
duties or obligations or receive any rights or benefits.
(c) Other than in connection or in compliance with the provisions of
the applicable federal and state banking, securities, antitrust and corporation
statutes, all as amended, and the rules and regulations promulgated thereunder,
no notice to, filing with, exemption by or consent, authorization or approval of
any governmental agency or body is necessary for consummation of the Merger by
Peoples or the Bank.
4.03. Capitalization. (a) The authorized capital stock of Peoples as of
the date hereof consists, and at the Effective Time will consist, of 300,000
shares of common stock, no par value, 188,178 of which shares are issued and
outstanding (such issued and outstanding shares are referred to herein as
"Peoples Common Stock"). Such issued and outstanding shares of Peoples Common
Stock have been duly and validly authorized by all necessary corporate action of
Peoples, are validly issued, fully paid and nonassessable and have not been
issued in violation of any pre-emptive rights of any present or former Peoples
shareholder. Peoples has no capital stock authorized, issued or outstanding
other than as described in this Section 4.03(a) and has no intention or
obligation to authorize or issue any other capital stock or any additional
shares of Peoples Common Stock. On a consolidated basis as of September 30,
2003, Peoples had total capital of approximately $11,565,899, which consisted of
common stock of $9,815,365 less treasury stock of $3,455,162, capital surplus of
$0.00 and undivided profits of $5,205,696, including unrealized gains or losses
on available-for-sale securities. Each share of Peoples Common Stock is entitled
to one vote per share. A description of the Peoples Common Stock is contained in
the Articles of Incorporation of Peoples, as amended, as set forth in the
Disclosure Schedule pursuant to Section 4.04 hereof.
(b) The authorized capital stock of the Bank as of the date hereof
consists, and at the Effective Time will consist, of 300,000 shares of common
stock, $10.00 par value per share, all of which shares are issued and
outstanding (such issued and outstanding shares are referred to herein as "Bank
Common Stock"). Such issued and outstanding shares of the Bank Common Stock have
been duly and validly authorized by all necessary corporate action of the Bank,
are validly issued, fully paid and nonassessable, and have not been issued in
violation of any pre-emptive rights of any present or former Bank shareholder.
Except as provided on the Disclosure Schedule, all of the issued and outstanding
shares of common stock of the Bank are owned by Peoples free and clear of all
liens, pledges, charges, claims, encumbrances, restrictions, security interests,
options and pre-emptive rights and of all other rights or claims of any other
person, corporation or entity with respect thereto. The Bank has no capital
stock
10
authorized, issued or outstanding other than as described in this Section
4.03(b) and has no intention or obligation to authorize or issue any other
capital stock or any additional shares of Bank Common Stock. On a consolidated
basis as of September 30, 2003, the Bank had total capital of approximately
$11,626,000, which consisted of common stock of $3,000,000, capital surplus of
$6,500,000 and undivided profits of $2,126,000, including unrealized gains or
losses on available-for-sale securities. Each share of Bank Common Stock is
entitled to one vote per share. A description of the Bank Common Stock is
contained in the Articles of Association of the Bank, as amended, as set forth
in the Disclosure Schedule pursuant to Section 4.04 hereof.
(c) Except as set forth in the Disclosure Schedule, there are no
options, warrants, commitments, calls, puts, agreements, understandings,
arrangements or subscription rights relating to any shares of Peoples Common
Stock, or any securities convertible into or representing the right to purchase
or otherwise acquire any common stock or debt securities of Peoples, by which
Peoples is or may become bound. Peoples does not have any outstanding
contractual or other obligation to repurchase, redeem or otherwise acquire any
of the issued and outstanding shares of Peoples Common Stock.
(d) There are no options, warrants, commitments, calls, puts,
agreements, understandings, arrangements or subscription rights relating to any
shares of Bank Common Stock, or any securities convertible into or representing
the right to purchase or otherwise acquire any common stock or debt securities
of the Bank, by which the Bank is or may become bound. The Bank does not have
any outstanding contractual or other obligation to repurchase, redeem or
otherwise acquire any of the issued and outstanding shares of Bank Common Stock.
(e) Except as set forth in the Disclosure Schedule, Peoples has no
knowledge of any person or entity which beneficially owns 5% or more of its
outstanding shares of common stock.
4.04. Organizational Documents. The Articles of Incorporation and
By-Laws of Peoples, and the Articles of Incorporation and By-Laws of the Bank,
representing true, accurate and complete copies of such corporate documents in
effect as of the date of this Agreement, have been delivered to MainSource and
are included in the Disclosure Schedule.
4.05. Compliance with Law. (a) Neither Peoples nor the Bank has engaged
in any activity nor taken or omitted to take any action which has resulted in
the violation of any local, state, federal or foreign law, statute, regulation,
rule, ordinance, order, restriction or requirement, nor are they in violation of
any order, injunction, judgment, writ or decree of any court or government
agency or body. Peoples and the Bank possess and hold all licenses, franchises,
permits, certificates and other authorizations necessary for the continued
conduct of their business without interference or interruption, and such
licenses, franchises, permits, certificates and authorizations are transferable
(to the extent required) to MainSource at the Effective Time without any
restrictions or limitations thereon or the need to obtain any consents of
government agencies or other third parties other than as set forth in this
Agreement.
(b) All agreements, understandings and commitments with, and all orders
and directives of, all government regulatory agencies or authorities with
respect to the financial condition, results of operations, business, assets or
capital of Peoples or the Bank which presently are binding upon or require
action by, or at any time during the last five (5) years have been binding upon
or have required action by, Peoples or the Bank, including, without limitation,
all correspondence, written communications and written commitments related
thereto, are set forth in the Disclosure Schedule. There are no refunds or
restitutions required to be paid as a result of any criticism of any regulatory
agency or body cited in any examination report of Peoples or the Bank as a
result of an examination by any regulatory agency or body, or set forth in any
accountant's or auditor's report to Peoples or the Bank.
(c) All of the existing offices and branches of Peoples and the Bank
have been legally authorized and established in accordance with all applicable
federal, state and local laws, statutes, regulations, rules, ordinances, orders,
restrictions and requirements. The Bank has no approved but unopened offices or
branches.
4.06. Accuracy of Statements Made and Materials Provided to MainSource.
(a) No representation, warranty or other statement made, or any information
provided, by Peoples or the Bank in this Agreement or the Disclosure Schedule
(and any update thereto), and no written report, statement, list, certificate,
materials or other information furnished or to be furnished by Peoples or Bank
to MainSource through and including the Effective
11
Time in connection with this Agreement, the Merger contemplated hereby, or
MainSource's due diligence investigation or confidential review of Peoples and
the Bank or otherwise (including, without limitation, any written information
which has been or shall be supplied by Peoples and the Bank with respect to its
financial condition, results of operations, business, assets, capital or
directors and officers for inclusion in the proxy statement-prospectus relating
to the Merger), contains or shall contain (in the case of information relating
to the proxy statement-prospectus at the time it is first mailed to Peoples'
shareholders) any untrue statement of material fact or omits or shall omit to
state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they are made, not false or
misleading, except that no representation or warranty has been made by Peoples
with respect to statements made or incorporated by reference in the Form S-4 or
the proxy statement-prospectus therein based on information supplied by
MainSource specifically for inclusion or incorporation by reference in the Form
S-4 or the proxy statement-prospectus therein.
(b) Any materials or information provided by Peoples or the Bank to
MainSource for use by MainSource in any filing with any state or federal
regulatory agency or authority shall not contain any untrue or misleading
statement of material fact or shall omit to state a material fact necessary to
make the statements contained therein, in light of the circumstances in which
they are made, not false or misleading.
4.07. Litigation and Pending Proceedings. Except as set forth in the
Disclosure Schedule: (a) There are no claims, actions, suits, proceedings,
mediations, arbitrations or investigations pending or, to the best knowledge of
Peoples and the Bank, threatened in any court or before any government agency or
authority, arbitration panel or otherwise (nor does Peoples or the Bank have any
knowledge of a basis for any such claim, action, suit, proceeding, litigation,
arbitration or investigation) against Peoples and/or the Bank.
(b) Neither Peoples nor the Bank is: (i) subject to any outstanding
judgment, order, writ, injunction or decree of any court, arbitration panel or
governmental agency or authority; (ii) presently charged with or, to the best
knowledge of Peoples or the Bank, under governmental investigation with respect
to any actual or alleged violations of any law, statute, rule, regulation or
ordinance; or (iii) the subject of any pending or, to the best knowledge of
Peoples or the Bank, threatened proceeding by any government regulatory agency
or authority having jurisdiction over its respective business, assets, capital,
properties or operations.
4.08. Financial Statements and Reports. Peoples has delivered to
MainSource copies of the following financial statements and reports of Peoples
and the Bank, including the notes thereto (collectively, the "Peoples Financial
Statements"):
(a) Consolidated Balance Sheets and the related Consolidated
Statements of Income and Consolidated Statements of Changes in
Shareholders' Equity of Peoples as of and for the years ended
December 31, 2002, 2001 and 2000, and as of and for the fiscal
quarter ended September 30, 2003;
(b) Consolidated Statements of Cash Flows of Peoples for the years
ended December 31, 2002, 2001 and 2000;
(c) Consolidated Statements of Changes in Financial Position of
Peoples for the years ended December 31, 2002 and 2001;
(d) Reports of Condition and Income ("Call Reports") for the Bank
as of the close of business on December 31, 2002, 2001, 2000
and September 30, 2003; and
(e) Financial Statements of Peoples on Form FRY-9SP filed with the
Board of Governors of the Federal Reserve System at the close
of business on December 31, 2002 and 2001.
The Peoples Financial Statements are true, accurate and complete in all
material respects and present fairly the consolidated financial position of
Peoples and the Bank as of and at the dates shown and the consolidated results
of operations for the periods covered thereby. The Peoples Financial Statements
described in clauses (a), (b) and (c) above for completed fiscal years are
audited financial statements and have been prepared in conformance with
generally accepted accounting principles applied on a consistent basis, except
as may otherwise be indicated in any accountants' notes or reports with respect
to such financial statements. The Peoples Financial Statements do not
12
include any assets, liabilities or obligations or omit to state any assets,
liabilities or obligations, absolute or contingent, or any other facts which
inclusion or omission would render any of the Peoples Financial Statements
false, misleading or inaccurate in any material respect.
4.09. Properties, Contracts, Employees and Other Agreements.
(a) Set forth in the Disclosure Schedule are true, accurate and
complete copies of the following:
(i) A brief description and the location of all real
property owned by Peoples or the Bank and the
principal buildings and structures located thereon,
together with a legal description of such real
property and, within thirty (30) days of the date of
this Agreement a title insurance policy insuring the
same and a survey drawing of each parcel of real
property owned by Peoples, and each lease of real
property to which Peoples or the Bank is a party,
identifying the parties thereto, the annual rental
payable, the expiration date of the lease and a brief
description of the property covered;
(ii) All conditional sales contracts or other title
retention agreements relating to Peoples or the Bank
and agreements for the purchase of federal funds;
(iii) All agreements, contracts, leases, licenses, lines of
credit, understandings, commitments or obligations of
Peoples or the Bank which individually or in the
aggregate:
A. involve payment or receipt by Peoples or the
Bank (other than as disbursements of loan
proceeds to customers, loan payments by
customers or customer deposits) of more than
$10,000;
B. involve payments based on profits of Peoples
or the Bank;
C. relate to the purchase of goods, products,
supplies or services in excess of $10,000;
D. were not made in the ordinary course of
business; or
E. may not be terminated without penalty within
one (1) year from the date of this
Agreement; and
(iv) The name and current annual salary of each director,
officer and employee of Peoples or the Bank whose
current annual salary is in excess of $50,000, and
the profit sharing, bonus or other form of
compensation (other than salary) paid or payable by
Peoples or the Bank to or for the benefit of each
such person for the year ended December 31, 2002, and
any employment, severance or deferred compensation
agreement or arrangement with respect to each such
person.
(b) Peoples and the Bank have, prior to the date of this Agreement,
provided or given access to MainSource to the files and documentation of all
borrowers of the Bank, or persons or entities that are or may become obligated
to the Bank under an existing letter of credit, line of credit, loan
transaction, loan agreement, promissory note or other commitment of the Bank, in
excess of $10,000 individually or in the aggregate, whether in principal,
interest or otherwise, and including all guarantors of such indebtedness.
(c) Each of the agreements, contracts, commitments, leases, instruments
and documents set forth in the Disclosure Schedule relating to this Section 4.09
is valid and enforceable in accordance with its terms, except to the extent
limited by general principles of equity and public policy or by bankruptcy,
insolvency, fraudulent transfer, readjustment of debt or other laws of general
application relative to or affecting the enforcement of creditor's rights.
Peoples and the Bank are, and to their respective best knowledge, all other
parties thereto are, in material compliance with the provisions thereof, and
Peoples and the Bank are not, and to their respective best knowledge, no
13
other party thereto is, in default in the performance, observance or fulfillment
of any material obligation, covenant or provision contained therein. Except as
set forth in the Disclosure Schedule, none of the foregoing requires the consent
of any party to its assignment in connection with the Merger contemplated by
this Agreement. Other than as disclosed pursuant to this Section 4.09, to the
best knowledge of Peoples and the Bank, no circumstances exist resulting from
transactions effected or to be effected, from events which have occurred or may
occur or from any action taken or omitted to be taken which could reasonably be
expected to result in the creation of any agreement, contract, obligation,
commitment, arrangement, lease or document described in or contemplated by this
Section 4.09.
(d) Neither Peoples nor the Bank is in default under or in breach of
or, to the best knowledge of Peoples, alleged to be in default under or in
breach of, any loan or credit agreement, conditional sales contract or other
title retention agreement, security agreement, bond, indenture, mortgage,
license, contract, lease, commitment or any other instrument or obligation.
4.10. Absence of Undisclosed Liabilities. Except as provided in the
Peoples Financial Statements and in the Disclosure Schedule, except for unfunded
loan commitments and obligations on letters of credit to customers of the Bank
made in the ordinary course of business, except for trade payables incurred in
the ordinary course of Peoples' and the Bank's business (for purposes of this
Section 4, all references to ordinary course of business shall be deemed to be
Peoples' and the Bank's ordinary course of business), and except for the
transaction contemplated by this Agreement and obligations for services rendered
pursuant thereto, neither Peoples nor the Bank has, nor will have at the
Effective Time, any obligation, agreement, contract, commitment, liability,
lease or license which exceeds $10,000 individually, or any obligation,
agreement, contract, commitment, liability, lease or license made outside of the
ordinary course of business, nor does there exist any circumstances resulting
from transactions effected or events occurring on or prior to the date of this
Agreement or from any action omitted to be taken during such period which could
reasonably be expected to result in any such obligation, agreement, contract,
commitment, liability, lease or license. Neither Peoples nor the Bank is
delinquent in the payment of any amount due pursuant to any trade payable, and
each has properly accrued for such payables in accordance with generally
accepted accounting principles.
4.11. Title to Assets. Except as described in this Section 4.11 and the
Disclosure Schedule: (a) Peoples and the Bank have good and marketable title in
fee simple absolute to all real property (including, without limitation, all
real property used as the Bank premises and all other real estate owned) which
is reflected in the Peoples Financial Statements as of September 30, 2003; good
and marketable title to all personal property reflected in the Peoples Financial
Statements as of September 30, 2003, other than personal property disposed of in
the ordinary course of business since September 30, 2003; good and marketable
title to or right to use by valid and enforceable lease or contract all other
properties and assets (whether real or personal, tangible or intangible) which
Peoples and the Bank purports to own or which Peoples or the Bank uses in its
business; good and marketable title to, or right to use by terms of a valid and
enforceable lease or contract, all other property used in their respective
businesses; and good and marketable title to all property and assets acquired
and not disposed of or leased since September 30, 2003. All of such properties
and assets are owned by Peoples or the Bank free and clear of all land or
conditional sales contracts, mortgages, liens, pledges, restrictions, security
interests, charges, claims, rights of third parties or encumbrances of any
nature except: (i) as set forth in the Disclosure Schedule; (ii) as specifically
noted in reasonable detail in the Peoples Financial Statements; (iii) statutory
liens for taxes not yet delinquent or being contested in good faith by
appropriate proceedings; (iv) pledges or liens required to be granted in
connection with the acceptance of government deposits or granted in connection
with repurchase or reverse repurchase agreements; and (v) easements,
encumbrances and liens of record, imperfections of title and other limitations
which are not material in amounts to Peoples on a consolidated basis and which
do not materially detract from the value or materially interfere with the
present or contemplated use of any of the properties subject thereto or
otherwise materially impair the use thereof for the purposes for which they are
held or used. All real property owned or leased by Peoples or the Bank is in
compliance with all applicable zoning and land use laws. All real property,
machinery, equipment, furniture and fixtures owned or leased by Peoples or the
Bank is structurally sound, in good operating condition and has been and is
being maintained and repaired in the ordinary condition of business.
(b) With respect to all real property presently or formerly owned,
leased or used by Peoples and the Bank, Peoples, the Bank and each of the prior
owners, to the best of Peoples' and the Bank's respective knowledge, have
conducted their respective business in compliance with all federal, state,
county and municipal laws, statutes,
14
regulations, rules, ordinances, orders, directives, restrictions and
requirements relating to, without limitation, responsible property transfer,
underground storage tanks, petroleum products, air pollutants, water pollutants
or storm water or process waste water or otherwise relating to the environment,
air, water, soil or toxic or hazardous substances or to the manufacturing,
recycling, handling, processing, distribution, use, generation, treatment,
storage, disposal or transport of any hazardous or toxic substances or petroleum
products (including polychlorinated biphenyls, whether contained or uncontained,
and asbestos-containing materials, whether friable or not), including, without
limitation, the Federal Solid Waste Disposal Act, the Hazardous and Solid Waste
Amendments, the Federal Clean Air Act, the Federal Clean Water Act, the
Occupational Health and Safety Act, the Federal Resource Conservation and
Recovery Act, the Toxic Substances Control Act, the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980 and the Superfund
Amendments and Reauthorization Act of 1986, all as amended, and regulations of
the Environmental Protection Agency, the Nuclear Regulatory Agency, the Army
Corp of Engineers, the Department of Interior, the United States Fish and
Wildlife Service and any state department of natural resources or state
environmental protection agency now or at any time thereafter in effect
(collectively, "Environmental Laws"). There are no pending or, to the best
knowledge of Peoples or the Bank, threatened, claims, actions or proceedings by
any local municipality, sewage district or other governmental entity against
Peoples or the Bank with respect to the Environmental Laws, and there is no
reasonable basis or grounds for any such claim, action or proceeding. No
environmental clearances or other governmental approvals are required for the
conduct of the business of Peoples or the Bank or the consummation of the Merger
contemplated hereby. Neither Peoples nor the Bank is the owner, and has not been
in the chain of title or the operator or lessee, of any property on which any
substances have been used, stored, deposited, treated, recycled or disposed of,
which substances if known to be present on, at or under such property would
require clean-up, removal, treatment, abatement, response costs, or any other
remedial action under any Environmental Law. Neither Peoples nor the Bank has
any liability for any clean-up or remediation under any of the Environmental
Laws with respect to any real property.
4.12. Loans and Investments. (a) Except as set forth in the Disclosure
Schedule, there is no loan by Peoples or the Bank in excess of $10,000 that has
been classified by the Bank regulatory examiners or management as "Other Loans
Specially Mentioned," "Substandard," "Doubtful" or "Loss" or in excess of
$10,000 that has been identified by accountants or auditors (internal or
external) as having a significant risk of uncollectability. The most recent loan
watch list of the Bank and a list of all loans in excess of $10,000 which the
Bank has determined to be thirty (30) days or more past due with respect to
principal or interest payments or has placed on nonaccrual status are set forth
in the Disclosure Schedule.
(b) All loans reflected in the Peoples Financial Statements as of
September 30, 2003 and which have been made, extended, renewed, restructured,
approved, amended or acquired since September 30, 2003: (i) have been made for
good, valuable and adequate consideration in the ordinary course of business;
(ii) constitute the legal, valid and binding obligation of the obligor and any
guarantor named therein, except to the extent limited by general principles of
equity and public policy or by bankruptcy, insolvency, fraudulent transfer,
reorganization, liquidation, moratorium, readjustment of debt or other laws of
general application relative to or affecting the enforcement of creditors'
rights; (iii) are evidenced by notes, instruments or other evidences of
indebtedness which are true, genuine and what they purport to be; and (iv) are
secured, to the extent that Peoples or the Bank has a security interest in
collateral or a mortgage securing such loans, by perfected security interests or
recorded mortgages naming the Bank as the secured party or mortgagee (unless by
written agreement to the contrary).
(c) The reserves, the allowance for possible loan and lease losses and
the carrying value for real estate owned which are shown on the Peoples
Financial Statements are, in the judgment of management of the Bank, adequate in
all material respects under the requirements of generally accepted accounting
principles applied on a consistent basis to provide for possible losses on items
for which reserves were made, on loans and leases outstanding and real estate
owned as of the respective dates.
(d) Except as set forth in the Disclosure Schedule, none of the
investments reflected in the Peoples Financial Statements as of and for the
period ended September 30, 2003 and none of the investments made by Peoples or
the Bank since September 30, 2003 are subject to any restriction, whether
contractual or statutory, which materially impairs the ability of Peoples or the
Bank to dispose freely of such investment at any time. Neither Peoples nor the
Bank is a party to any repurchase agreements with respect to securities. The
liabilities of the Bank do, however, include repurchase agreements secured by
government securities.
15
(e) Set forth in the Disclosure Schedule is a true, accurate and
complete list of all loans in which the Bank has any participation interest or
which have been made with or through another financial institution on a recourse
basis against the Bank.
(f) Except as set forth in the Disclosure Schedule, and except for
customer deposits and ordinary trade payables, neither Peoples nor the Bank has,
nor will they have at the Effective Time, any indebtedness for borrowed money.
4.13. Shareholder Rights Plan and Anti-takeover Mechanisms. Peoples and
the Bank have taken all actions required to exempt MainSource, the Agreement and
the Merger from any provisions of an anti-takeover nature contained in their
organizational documents and the provisions of any "anti-takeover," "fair
price," "moratorium," "control share acquisition" or similar laws or regulations
contained in the IBCL.
4.14. Employee Benefit Plans. (a) With respect to the employee benefit
plans, as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), sponsored or otherwise maintained by Peoples or
the Bank, whether written or oral, in which Peoples or the Bank participates as
a participating employer, to which Peoples or the Bank contributes, with respect
to which Peoples or the Bank acts as administrator, trustee or fiduciary, and
including any such plans which have been terminated, merged into another plan,
frozen or discontinued (collectively, "Peoples Plans") except as set forth in
the Disclosure Schedule:
(i) all such Peoples Plans have, on a continuous basis
since their adoption, been, in all material respects,
maintained in compliance with the requirements
prescribed by all applicable statutes, orders and
governmental rules or regulations, including, without
limitation, ERISA, the Code, and the Department of
Labor ("Department") and Treasury Regulations
promulgated thereunder;
(ii) all Peoples Plans intended to constitute
tax-qualified plans under Section 401(a) of the Code
have complied since their adoption or have been
timely amended to comply in all material respects
with all applicable requirements of the Code and the
Treasury Regulations promulgated thereunder, and
favorable determination and/or opinion letters have
been timely received from the Internal Revenue
Service ("Service") with respect to each such Peoples
Plan stating that each, in its current form (or at
the time of its disposition if it has been
terminated, merged, frozen or discontinued), is
qualified under and satisfies all applicable
provisions of the Code and Treasury Regulations;
(iii) all Peoples Plans intended to constitute tax
qualified plans under Section 401(a) of the Code have
received favorable opinion letters from the Service
with respect to "GUST" (as defined in Section 2 of
Rev. Proc. 2002-6), and the document has been amended
by the adoption of a "good faith EGTRRA amendment" as
that phrase is defined in IRS Notice 2001-42, and
Peoples is not aware of any circumstances likely to
result in revocation of any such favorable opinion
letter;
(iv) except as set forth on the Disclosure Schedule, no
Peoples Plan (or its related trust) holds any stock
or other securities of Peoples or any related or
affiliated person or entity;
16
(v) neither Peoples nor the Bank has any liability to the
Department or the Service with respect to any Peoples
Plan;
(vi) Peoples has not engaged in any transaction that may
subject Peoples or the Bank, or any Peoples Plan, to
a civil penalty imposed by Section 502 of ERISA;
(vii) no prohibited transaction (as defined in Section 406
of ERISA or as defined in Section 4975(c) of the
Code) has occurred with respect to any Peoples Plan;
(viii) each Peoples Plan subject to ERISA or intended to be
qualified under Section 401(a) of the Code has been
and, if applicable, is being operated in all material
respects in accordance with the applicable provisions
of ERISA and the Code and the Department and Treasury
Regulations promulgated thereunder;
(ix) no participant or beneficiary or non-participating
employee has been denied any benefit due or to become
due under any Peoples Plan or has been misled as to
his or her rights under any Peoples Plan;
(x) all obligations required to be performed by Peoples
or the Bank under any provision of any Peoples Plan
have been performed by them in all material respects
and they are not in default under or in violation of
any provision of any Peoples Plan;
(xi) no event has occurred which would constitute grounds
for an enforcement action by any party under Part 5
of Title I of ERISA under any Peoples Plan;
(xii) there are no actions, suits, proceedings or claims
pending (other than routine claims for benefits) or,
to the best knowledge of Peoples and the Bank,
threatened, against Peoples, Bank, any Peoples Plan
or the assets of any Peoples Plan;
(xiii) with respect to any Peoples Plan sponsored,
participated in or contributed to by Peoples or the
Bank, or with respect to which Peoples or the Bank is
responsible for complying with the reporting and
disclosure requirements of ERISA or the Code, there
has been no violation of the reporting and disclosure
requirements imposed either under ERISA or the Code
for which a penalty has been or may be imposed;
(xiv) with respect to any Peoples Plan there has been no
breach of the fiduciary provisions of ERISA and there
is no known outstanding fiduciary liability; and
(xv) any Peoples Plan may be terminated at any time and
this right has always been maintained by Peoples and
the Bank.
17
(b) With regard to any Peoples Plan intended to be qualified under
Section 401(a) of the Code, no director, officer, employee or agent of Peoples
or the Bank has engaged in any action or failed to act in such a manner that, as
a result of such action or failure to act, the Service could revoke or deny that
plan's qualification under Section 401(a) of the Code or the exemption under
Section 501(a) of the Code for any trust related to such Plan.
(c) Peoples has provided to MainSource true, accurate and complete
copies and, in the case of any plan or program which has not been reduced to
writing, a materially complete summary, of all of the following, as applicable
(including all plans and programs which have been terminated):
(i) pension, retirement, profit-sharing, savings, stock
purchase, stock bonus, stock ownership, stock option
and stock appreciation right plans and, if required
under the reporting and disclosure requirements of
ERISA, all amendments thereto and all summary plan
descriptions thereof (including any modifications
thereto);
(ii) all employment, deferred compensation (whether funded
or unfunded), salary continuation, consulting, bonus,
severance and collective bargaining agreements,
arrangements or understandings;
(iii) all executive and other incentive compensation plans,
programs and agreements;
(iv) all group insurance and health insurance contracts,
policies or plans;
(v) all other incentive, welfare or employee benefits
plans, understandings, arrangements or agreements,
maintained or sponsored, participated in, or
contributed to by Peoples or the Bank for its current
or former directors, officers or employees; and
(vi) all reports filed with the Service or Department of
Labor within the preceding three years by Peoples or
the Bank with respect to any Peoples Plan.
(d) Except as set forth on the Disclosure Schedule, no current or
former director, officer or employee of Peoples or the Bank (i) is entitled to
or may become entitled to any benefit under any welfare benefit plans (as
defined in Section 3(1) of ERISA) after termination of employment with Peoples,
except that such individuals may be entitled to continue their group health care
coverage pursuant to Section 4980B of the Code if they pay the cost of such
coverage pursuant to the applicable requirements of that plan or of the Code
with respect thereto, or (ii) is currently receiving, or entitled to receive, a
disability benefit under a long term or short term disability plan maintained by
Peoples or the Bank.
(e) No Peoples Plan is, and neither Peoples nor the Bank has any
liability with respect to any plan that is (i) a defined benefit pension plan
subject to Title IV of ERISA, (ii) a pension plan subject to Section 302 of
ERISA or Section 412 of the Code, or (iii) a multi-employer pension plan (as
that term is defined in Sections 4001(a)(3) and 3(37) of ERISA).
(f) With respect to any group health plan (as defined in Section 607(1)
of ERISA) sponsored or maintained by Peoples or the Bank, in which Peoples or
the Bank participates as a participating employer or to which Peoples or the
Bank contributes, no director, officer, employee or agent of Peoples or the Bank
has engaged in any action or failed to act in such a manner that, as a result of
such action or failure to act, would cause a tax to be imposed on Peoples or the
Bank under Code Section 4980B(a). With respect to all such plans, all applicable
18
provisions of Section 4980B of the Code and Section 601 of ERISA have been
complied with in all material respects by Peoples and Bank.
(g) Except as otherwise provided in the Disclosure Schedule, there are
no collective bargaining, employment, management, consulting, deferred
compensation, reimbursement, indemnity, retirement, early retirement, severance
or similar plans or agreements, commitments or understandings, or any employee
benefit or retirement plan or agreement, binding upon Peoples or the Bank and no
such agreement, commitment, understanding or plan is under discussion or
negotiation by management with any employee or group of employees, any member of
management or any other person.
(h) Except as otherwise provided in the Disclosure Schedule, no
Voluntary Employees' Beneficiary Association ("VEBA") as defined in Code Section
501(c)(9) is sponsored or maintained by Peoples or the Bank.
(i) Except as otherwise provided in the Disclosure Schedule, there are
no benefits or liabilities under any employee benefit plan or program that will
be accelerated as a result of the transactions contemplated by the terms of this
Agreement.
4.15. Obligations to Employees. All accrued obligations and liabilities
of and all payments by Peoples and the Bank, and all Peoples Plans, whether
arising by operation of law, by contract or by past custom, for payments to
trusts or other funds, to any government agency or authority or to any present
or former director, officer, employee or agent (or his or her heirs, legatees or
legal representatives) have been and are being paid to the extent required by
applicable law or by the plan, trust, contract or past custom or practice, and
adequate actuarial accruals and reserves for such payments have been and are
being made by Peoples and the Bank in accordance with generally accepted
accounting principles and applicable law applied on a consistent basis and
actuarial methods with respect to the following: (a) withholding taxes,
unemployment compensation or social security benefits; (b) all pension,
profit-sharing, savings, stock purchase, stock bonus, stock ownership, stock
option and stock appreciation rights plans and agreements; (c) all employment,
deferred compensation (whether funded or unfunded), salary continuation,
consulting, retirement, early retirement, severance, reimbursement, bonus or
collective bargaining plans and agreements; (d) all executive and other
incentive compensation plans, programs, or agreements; (e) all group insurance
and health contracts, policies and plans; and (f) all other incentive, welfare
(including, without limitation, vacation and sick pay), retirement or employee
benefit plans or agreements maintained or sponsored, participated in, or
contributed to by Peoples or Bank for its current or former directors, officers,
employees and agents, including, without limitation, all liabilities and
obligations to the Peoples Plans (as defined in Section 4.14(a) hereof). All
obligations and liabilities of Peoples and the Bank, whether arising by
operation of law, by contract or by past custom or practice, for all other forms
of compensation which are or may be payable to their current or former
directors, officers, employees or agents or to any Peoples Plan have been and
are being paid to the extent required by applicable law or by the plan or
contract, and adequate actuarial accruals and reserves for payment therefor have
been and are being made by Peoples and the Bank in accordance with generally
accepted accounting and actuarial principles applied on a consistent basis. All
accruals and reserves referred to in this Section 4.15 are correctly and
accurately reflected and accounted for in all material respects in the Peoples
Financial Statements and the books, statements and records of Peoples and the
Bank.
4.16. Taxes, Returns and Reports. Except as set forth in the Disclosure
Schedule, Peoples has since January 1, 1997 (a) duly and timely filed all
federal, state, local and foreign tax returns of every type and kind required to
be filed, and each such return is true, accurate and complete in all material
respects; (b) paid or otherwise adequately reserved in accordance with generally
accepted accounting principles for all taxes, assessments and other governmental
charges due or claimed to be due upon it and the Bank or any of their income,
properties or assets; and (c) not requested an extension of time for any such
payments (which extension is still in force). Peoples has established, and shall
establish in the Subsequent Peoples Financial Statements, in accordance with
generally accepted accounting principles, a reserve for taxes in the Peoples
Financial Statements adequate to cover all of Peoples' and the Bank's tax
liabilities (including, without limitation, income taxes, payroll taxes and
withholding, and franchise fees) for the periods then ending. Neither Peoples
nor the Bank has, nor will either of them have, any liability for taxes of any
nature for or with respect to the operation of their respective businesses,
including the business of any subsidiary, or ownership of their assets,
including the assets of any subsidiary, from the date hereof up to and including
the Effective Time, except to the extent set forth in the Subsequent Peoples
Financial Statements (as hereinafter defined) or as accrued or reserved for on
the books and records of Peoples. Neither Peoples nor the
19
Bank is currently under audit by any state or federal taxing authority. No
federal, state or local tax returns of Peoples have been audited by any taxing
authority during the past five (5) years.
4.17. Deposit Insurance. The deposits of the Bank are insured by the
Federal Deposit Insurance Corporation in accordance with the Federal Deposit
Insurance Act, as amended, to the fullest extent provided by applicable law and
Peoples and the Bank have paid or properly reserved or accrued for all current
premiums and assessments with respect to such deposit insurance.
4.18. Insurance. Set forth in the Disclosure Schedule is a list and
brief description of all policies of insurance (including, without limitation,
bankers' blanket bond, directors' and officers' liability insurance, property
and casualty insurance, group health or hospitalization insurance and insurance
providing benefits for employees) owned or held by Peoples or the Bank on the
date hereof or with respect to which Peoples or the Bank pays any premiums. Each
such policy is in full force and effect and all premiums due thereon have been
paid when due, and a true, accurate and complete copy thereof has been made
available to MainSource prior to the date hereof.
4.19. Books and Records. The books and records of Peoples and the Bank
are complete and correct and accurately reflect the basis for the financial
condition, results of operations, business, assets and capital of Peoples and
the Bank set forth in the Peoples Financial Statements.
4.20. Broker's, Finder's or Other Fees. Except for reasonable fees and
expenses of Peoples' attorneys, accountants and investment bankers, all of which
shall be paid by Peoples prior to the Effective Time, no agent, broker or other
person acting on behalf of Peoples or the Bank or under any authority of Peoples
or the Bank is or shall be entitled to any commission, broker's or finder's fee
or any other form of compensation or payment from any of the parties hereto
relating to this Agreement and the Merger contemplated hereby.
4.21. Disclosure Schedule and Documents. All written data, documents,
materials and information referred to in this Agreement and delivered by Peoples
or the Bank pursuant to or in connection with the Disclosure Schedule are true,
accurate and complete in all material respects as of the date hereof and with
respect to such items delivered subsequent to the date hereof or with any update
to the Disclosure Schedule, will be true, accurate and complete in all material
respects on the date of delivery thereof.
4.22. Interim Events. Except as otherwise permitted hereunder, since
September 30, 2003, neither Peoples nor the Bank has:
(a) Suffered any changes having an adverse impact on the
financial condition, results of operations, business, assets or capital
of Peoples or the Bank in excess of $5,000 individually or in the
aggregate;
(b) Suffered any damage, destruction or loss to any of its
properties, not fully paid by insurance proceeds, in excess of $5,000
individually or in the aggregate;
(c) Declared, distributed or paid any dividend or other
distribution to its shareholders, except for payment of dividends as
permitted by Section 6.03(a)(iii) hereof;
(d) Repurchased, redeemed or otherwise acquired shares of its
common stock, issued any shares of its common stock or stock
appreciation rights or sold or agreed to issue or sell any shares of
its common stock or any right to purchase or acquire any such stock or
any security convertible into such stock or taken any action to
reclassify, recapitalize or split its stock;
(e) Granted or agreed to grant any increase in benefits
payable or to become payable under any pension, retirement, profit
sharing, health, bonus, insurance or other welfare benefit plan or
agreement to employees, officers or directors of Peoples or the Bank
except pursuant to the express terms thereof;
(f) Increased the salary of any director, officer or employee,
except for normal increases in the ordinary course of business and in
accordance with past practices, or entered into any employment
20
contract, indemnity agreement or understanding with any officer or
employee or installed any employee welfare, pension, retirement, stock
option, stock appreciation, stock dividend, profit sharing or other
similar plan or arrangement;
(g) Leased, sold or otherwise disposed of any of its assets
except in the ordinary course of business or leased, purchased or
otherwise acquired from third parties any assets except in the ordinary
course of business;
(h) Except for the Merger contemplated by this Agreement,
merged, consolidated or sold shares of its common stock, agreed to
merge or consolidate with or into any third party, agreed to sell any
shares of its common stock or acquired or agreed to acquire any stock,
equity interest, assets or business of any third party;
(i) Incurred, assumed or guaranteed any obligation or
liability (fixed or contingent) other than obligations and liabilities
incurred in the ordinary course of business;
(j) Mortgaged, pledged or subjected to a lien, security
interest, option or other encumbrance any of its assets except for tax
and other liens which arise by operation of law and with respect to
which payment is not past due and except for pledges or liens: (i)
required to be granted in connection with acceptance by Peoples or the
Bank of government deposits; or (ii) granted in connection with
repurchase or reverse repurchase agreements;
(k) Except as set forth in the Disclosure Schedule, canceled,
released or compromised any loan, debt, obligation, claim or receivable
other than in the ordinary course of business;
(l) Entered into any transaction, contract or commitment other
than in the ordinary course of business;
(m) Agreed to enter into any transaction for the borrowing or
loaning of monies, other than in the ordinary course of its lending
business; or
(n) Conducted its business in any manner other than
substantially as it was being conducted through September 30, 2003.
4.23. Regulatory Filings. All filings with all federal and state
regulatory agencies were and will be true, accurate and complete as of the dates
of the filings and have been complied or will comply in all respects as to form
with the applicable requirements and prepared in conformity with generally
accepted regulatory accounting principles applied on a consistent basis, and no
such filing contained or will contain any untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements, at
the time and in light of the circumstances under which they were made, not false
or misleading.
4.24. Contracts. Neither Peoples nor the Bank is in default under or in
breach of or, to the best knowledge of Peoples or the Bank, alleged to be in
default under or in breach of, any loan or credit agreement, conditional sales
contract or other title retention agreement, security agreement, bond,
indenture, mortgage, license, contract, lease, commitment or any other
instrument or obligation.
4.25. No Third Party Options. Except as set forth in the Disclosure
Schedule, there are no agreements, options, commitments or rights with, of or to
any third party to acquire any shares of capital stock or assets of Peoples or
the Bank.
4.26. Indemnification Agreements. (a) Neither Peoples nor the Bank is a
party to any indemnification, indemnity or reimbursement agreement, contract,
commitment or understanding to indemnify any present or former director,
officer, employee, shareholder or agent against liability or hold the same
harmless from liability other than as expressly provided in the Articles of
Incorporation or By-Laws of Peoples and the Articles of Incorporation and
By-Laws of the Bank.
21
(b) No claims have been made against or filed with Peoples or the Bank
nor have, to the best knowledge of Peoples and Bank, any claims been threatened
against Peoples or the Bank, for indemnification against liability or for
reimbursement of any costs or expenses incurred in connection with any legal or
regulatory proceeding by any present or former director, officer, shareholder,
employee or agent of Peoples or the Bank.
4.27. Shareholder Approval. The affirmative vote of the holders of a
majority of the Peoples Common Stock (which are issued and outstanding on the
record date relating to the meeting of shareholders) is required for shareholder
approval of this Agreement and the Merger.
4.28. Trust Administration. The Bank has properly administered all
accounts for which it acts as a fiduciary or agent, custodian, personal
representative, guardian, conservator or investment adviser in accordance with
the terms of the governing documents and applicable state and federal law.
Neither Peoples, the Bank nor any director, officer or employee of Peoples or
the Bank acting on behalf of the Bank has committed any breach of trust with
regard to any such fiduciary or agency account, and the accountings for each
such fiduciary or agency account are true and correct in all material respects
and accurately reflect the assets of such fiduciary or agency account.
4.29. Absence of Changes. Since September 30, 2003, there has not been
any change in the financial condition, the results of operations or the business
of Peoples or the Bank.
4.30. Opinion of Financial Advisor. The Board of Directors of Peoples,
at a duly constituted and held meeting at which a quorum was present throughout,
has been informed orally by a reputable financial advisor that the terms of the
Merger are fair to the shareholders of Peoples from a financial point of view.
4.31. Representations and Warranties at the Effective Time. All
representations and warranties of Peoples and the Bank contained herein shall be
true, accurate and complete in all material respects on and as of the Effective
Time as though made or given at such time.
4.32. Nonsurvival of Representations and Warranties. The
representations and warranties of Peoples and Bank contained in this Agreement
shall expire at the Effective Time, and thereafter Peoples and Bank, and all
directors, officers and employees of Peoples and Bank shall have no further
liability with respect thereto, except for fraud or for false or misleading
statements made intentionally or knowingly in connection with such
representations and warranties or except as otherwise provided by law, whether
statutory, common law or otherwise.
4.33. Qualification as a Reorganization. With respect to the integrated
plan of reorganization by and among the parties, MainSource has agreed to cause
the Upstream Merger of Peoples with and into MainSource to be effectuated
immediately following the Merger. As such, neither Peoples nor the Bank or
affiliate has taken, agreed to take or failed to take any action, or knows of
any fact or circumstance, that could prevent the transactions from qualifying as
a "reorganization" under Section 368(a)(1)(A) of the Code.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF MAINSOURCE
For the purpose of this Agreement, and in relation to MainSource and
its subsidiaries, a Material Adverse Effect on MainSource means any effect that
(i) is material and adverse to the financial position, results of operations or
business of MainSource and its subsidiaries taken as a whole, or (ii) would
materially impair the ability of MainSource to perform its obligations under
this Agreement or otherwise materially threaten or materially impede the
consummation of the Merger and the other transactions contemplated by this
Agreement; provided, however, that Material Adverse Effect on MainSource shall
not be deemed to include the impact of (a) changes in banking and similar laws
of general applicability or interpretations thereof by courts or governmental
authorities, (b) changes in generally accepted accounting principles or
regulatory accounting requirements applicable to banks and their holding
companies generally, (c) any modifications or changes to valuation policies and
practices in connection with the Merger or restructuring charges taken in
connection with the Merger, in each case in accordance with generally accepted
accounting principles, and (d) changes in general level of interest rate or
conditions or circumstances that affect the banking industry generally.
22
Accordingly, MainSource represents and warrants to Peoples as follows:
5.01. Organization and Authority. Each of MainSource and its
subsidiaries is an entity duly organized and validly existing under the laws of
its applicable state or country. MainSource and its subsidiaries have full power
and authority (corporate and otherwise) to own and lease its properties as
presently owned and leased and to conduct its business in the manner and by the
means utilized as of the date hereof. Each of MainSource and its subsidiaries is
duly qualified to do business in each jurisdiction in which the nature of the
business conducted or the properties or assets owned or leased by it make such
qualification necessary.
5.02. Authorization. MainSource and Merger Corp have the requisite
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder, subject to the fulfillment of the conditions precedent
set forth in Section 8.01(d), (e) and (f) hereof. This Agreement and its
execution and delivery by MainSource and Merger Corp have been duly authorized
by the Board of Directors of MainSource and Merger Corp, respectively. Assuming
due execution and delivery of Peoples, this Agreement constitutes a valid and
binding obligation of MainSource and Merger Corp, subject to the conditions
precedent set forth in Section 8.01 hereof, and is enforceable in accordance
with its terms, except to the extent limited by general principles of equity and
public policy and by bankruptcy, insolvency, reorganization, liquidation,
moratorium, readjustment of debt or other laws of general application relating
to or affecting the enforcement of creditors' rights.
(b) Neither the execution of this Agreement nor consummation of the
Merger contemplated hereby: (i) conflicts with or violates the Articles of
Incorporation or By-Laws of MainSource or any of its subsidiaries; (ii)
conflicts with or violates in any material respect any local, state, federal or
foreign law, statute, ordinance, rule or regulation (provided that the approvals
of or filings with applicable government regulatory agencies or authorities
required for consummation of the Merger are obtained) or any court or
administrative judgment, order, injunction, writ or decree; or (iii) conflicts
with, results in a breach of or constitutes a material default under any note,
bond, indenture, mortgage, deed of trust, license, contract, lease, agreement,
arrangement, commitment or other instrument to which MainSource is subject or
bound and which is material to MainSource on a consolidated basis.
(c) Other than in connection or in compliance with applicable federal
and state banking, securities, antitrust and corporation statutes, all as
amended, and the rules and regulations promulgated thereunder, no notice to,
filing with, exemption by or consent, authorization or approval of any
governmental agency or body is necessary for the consummation by MainSource of
the Merger contemplated by this Agreement.
5.03. Capitalization. (a) The authorized capital stock of MainSource as
of the date hereof consists, and at the Effective Time will consist, of
25,000,000 shares of common stock, no par value, 6,729,256 of which shares are
issued and outstanding (such issued and outstanding shares are referred to
herein as "MainSource Common Stock"). Such issued and outstanding shares of
MainSource Common Stock have been duly and validly authorized by all necessary
corporate action of MainSource, are validly issued, fully paid and nonassessable
and have not been issued in violation of any pre-emptive rights of any present
or former MainSource shareholder. MainSource has no capital stock authorized,
issued or outstanding other than as described in this Section 5.03(a) and has no
intention or obligation to authorize or issue any other capital stock or any
additional shares of MainSource Common Stock, except for approximately 337,000
shares of MainSource Common Stock to be issued in connection with a stock
dividend on January 9, 2004. On a consolidated basis as of September 30, 2003,
MainSource had total capital of approximately $101,910,000, which consisted of
common stock of $3,414,000, capital surplus of $40,819,000 and undivided profits
of $57,677,000, including unrealized gains or losses on available-for-sale
securities. Each share of MainSource Common Stock is entitled to one vote per
share.
(b) Except as set forth on the Disclosure Schedule, there are no
options, warrants, commitments, calls, puts, agreements, understandings,
arrangements or subscription rights relating to any shares of MainSource Common
Stock, or any securities convertible into or representing the right to purchase
or otherwise acquire any common stock or debt securities of MainSource, by which
MainSource is or may become bound. MainSource does not have any outstanding
contractual or other obligation to repurchase, redeem or otherwise acquire any
of the issued and outstanding shares of MainSource Common Stock.
23
5.04. Litigation and Pending Proceedings. There are no claims, actions,
suits, proceedings, investigations, mediations or arbitrations pending or, to
the best knowledge of MainSource by the officers of MainSource, threatened in
any court or before any government agency or authority, arbitration panel or
otherwise (nor does MainSource have any knowledge of a basis for any claim,
action, suit, proceeding, litigation, investigation or arbitration) against, by
or affecting MainSource which would reasonably be expected to prevent the
performance of this Agreement, declare the same unlawful or cause the rescission
hereof.
5.05. Accuracy of Statements Made and Materials Provided to Peoples. No
representation, warranty or other statement made, or any information provided,
by MainSource in this Agreement, and no written report, statement, list,
certificate, materials or other information furnished or to be furnished by
MainSource to Peoples through and including the Effective Time in connection
with this Agreement or the Merger contemplated hereby, contains or shall contain
(in the case of information relating to the proxy statement at the time it is
mailed to Peoples' shareholders) any untrue or misleading statement of material
fact or omits or shall omit to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances in which
they are made, not false or misleading.
5.06. MainSource Securities and Exchange Commission Filings. MainSource
has filed all reports and other documents required to be filed by it under the
Securities Exchange Act of 1934 and the Securities Act of 1933, including
MainSource's Annual Report on Form 10-K for the year ended December 31, 2002 and
Quarterly Report on Form 10-Q for the quarter ended September 30, 2003. All such
Securities and Exchange Commission filings were true, accurate and complete in
all material respects as of the dates of the filings, and no such filings
contained any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements, at the time and in the light of
the circumstances under which they were made, not false or misleading.
5.07. Representations and Warranties at the Effective Time. All
representations and warranties of MainSource contained herein shall be true,
accurate and complete in all material respects on and as of the Effective Time
as though made or given at such time.
5.08. Nonsurvival of Representations and Warranties. The
representations and warranties of MainSource contained in this Agreement shall
expire at the Effective Time and, thereafter, neither MainSource nor its
directors, officers and employees shall have any further liability with respect
thereto, except for fraud or for false or misleading statements made
intentionally or knowingly in connection with such representations and
warranties or except as otherwise provided by law, whether statutory, common law
or otherwise.
5.09. Shareholder Approval. Approval by MainSource's shareholders of
the Merger or any other actions contemplated by this Agreement is not required.
5.10. Compliance with Law. (a) Neither MainSource nor any of its
subsidiaries has engaged in any activity nor taken or omitted to take any action
which has resulted in the violation of any local, state, federal or foreign law,
statute, regulation, rule, ordinance, order, restriction or requirement, nor are
they in violation of any order, injunction, judgment, writ or decree of any
court or government agency or body.
(b) All agreements, understandings and commitments with, and all orders
and directives of, all government regulatory agencies or authorities with
respect to the financial condition, results of operations, business, assets or
capital of MainSource or its subsidiaries which presently are binding upon or
require action by, or at any time during the last five (5) years have been
binding upon or have required action by, MainSource or its subsidiaries,
including, without limitation, all correspondence, communications and
commitments related thereto, are set forth in the Disclosure Schedule. There are
no refunds or restitutions required to be paid as a result of any criticism of
any regulatory agency or body, cited in any examination report of MainSource or
its subsidiaries as a result of an examination by any regulatory agency or body,
or set forth in any accountant's or auditor's report to MainSource or its
subsidiaries.
(c) All of the existing offices and branches of MainSource or its
subsidiaries have been legally authorized and established in accordance with all
applicable federal, state and local laws, statutes, regulations, rules,
ordinances, orders, restrictions and requirements. MainSource has no approved
but unopened offices or branches.
24
5.11. Absence of Changes. Since September 30, 2003, there has not been
any change in the financial condition, the results of operations or the business
of MainSource or its subsidiaries.
5.12. Broker's, Finder's or Other Fees. Except for reasonable fees and
expenses of MainSource's attorneys, accountants and investment bankers, all of
which shall be paid by MainSource prior to the Effective Time, no agent, broker
or other person acting on behalf of MainSource or its subsidiaries or under any
authority of MainSource or its subsidiaries is or shall be entitled to any
commission, broker's or finder's fee or any other form of compensation or
payment from any of the parties hereto relating to this Agreement and the Merger
contemplated hereby.
5.13. Qualification as a Reorganization. With respect to the integrated
plan of reorganization by and among the parties, MainSource has agreed to cause
the Upstream Merger of Peoples with and into MainSource to be effectuated
immediately following the Merger. As such, neither MainSource nor any subsidiary
or affiliate has taken, agreed to take or failed to take any action, or knows of
any fact or circumstance, that could prevent the transactions from qualifying as
a "reorganization" under Section 368(a)(1)(A) of the Code.
5.14. Employee Benefit Plan Liability. MainSource does not have any
material employee benefit plan liability or other material off-balance sheet
liability.
5.15. Taxes, Returns and Reports. Except as set forth in the Disclosure
Schedule, MainSource has since January 1, 1997 (a) duly and timely filed all
federal, state, local and foreign tax returns of every type and kind required to
be filed, and each such return is true, accurate and complete in all material
respects; (b) paid or otherwise adequately reserved in accordance with generally
accepted accounting principles for all taxes, assessments and other governmental
charges due or claimed to be due upon it and any of its subsidiaries or any of
their income, properties or assets; and (c) not requested an extension of time
for any such payments (which extension is still in force).
5.16. Merger Corp. Merger Corp is a newly formed wholly owned
subsidiary corporation of MainSource and was formed solely for the purpose of
acquiring the assets and liabilities of Peoples pursuant to the Merger and the
Upstream Merger.
SECTION 6
COVENANTS OF PEOPLES
Peoples covenants and agrees with MainSource as follows:
6.01. Shareholder Approval. Peoples will submit this Agreement to its
shareholders for approval and adoption at a meeting to be called and held in
accordance with applicable law and the Articles of Incorporation and By-Laws of
Peoples at the earliest possible reasonable date. Subject to Section 6.06
hereof, the Board of Directors of Peoples shall recommend to Peoples'
shareholders that such shareholders approve and adopt this Agreement and the
Merger contemplated hereby and will solicit proxies voting in favor of this
Agreement from Peoples' shareholders.
6.02. Other Approvals. (a) Peoples shall proceed expeditiously,
cooperate fully and use its best efforts to assist MainSource in procuring upon
reasonable terms and conditions all consents, authorizations, approvals,
registrations and certificates, in completing all filings and applications and
in satisfying all other requirements prescribed by law which are necessary for
consummation of the Merger on the terms and conditions provided in this
Agreement at the earliest possible reasonable date.
(b) Peoples will use commercially reasonable efforts to obtain any
required third party consents to agreements, contracts, commitments, leases,
instruments and documents described in the Disclosure Schedule and designated
therein as material.
(c) Any materials or information provided by Peoples or the Bank to
MainSource for use by MainSource in any filing with any state or federal
regulatory agency or authority shall not contain any untrue or
25
misleading statement of material fact or shall omit to state a material fact
necessary to make the statements contained therein, in light of the
circumstances in which they are made, not false or misleading.
6.03. Conduct of Business. (a) Except as set forth in the Disclosure
Schedule, on and after the date of this Agreement and until the Effective Time
or until this Agreement will be terminated as herein provided, Peoples will not,
without the prior written consent of MainSource:
(i) make any changes in its capital stock accounts
(including, without limitation, any stock issuance,
stock split, stock dividend, recapitalization or
reclassification);
(ii) authorize a class of stock or issue, or authorize the
issuance of, securities other than or in addition to
the issued and outstanding common stock as set forth
in Section 4.03 hereof;
(iii) distribute or pay any dividends on its shares of
common stock, or authorize a stock split, or make any
other distribution to its shareholders; provided,
however, that Peoples may make a pre-closing
distribution to its shareholders in an amount equal
to the excess equity above $8,462,000. Excess equity
of Peoples shall be calculated after Peoples and the
Bank provide for the following four items:
(x) Maintaining the allowance for loan losses at
$1,531,000 or 1.84% of total gross loans
outstanding, whichever is greater. For
purposes of these calculations, any
additional charges-offs or additional
provisions for the allowances for loan
losses related to a change in the status or
condition of Peoples' commercial credits
with balances greater than $100,000 shall be
excluded;
(y) Any payment made by Peoples in connection
with the termination of those certain
Revenue Neutral Agreements, as contemplated
by Section 8.01(l) hereof, that certain 1987
life insurance policy covering the life of
Xxxxxx X. Xxxx, as contemplated in Section
6.03(a)(xi) hereof and the termination or
transfer of that certain life insurance
policy covering the life of Xxxxx Xxxxxxxx
Xxxxx, as contemplated by Section
6.03(a)(xi); and;
(z) The payment of all fees and expenses of
Peoples' attorneys, accountants and
investment bankers as contemplated in
Section 4.20 of this Agreement.
(iv) redeem any of its outstanding shares of common stock;
(v) merge, combine or consolidate or effect a share
exchange with or sell its assets or any of its
securities to any other person, corporation or entity
or enter into any other similar transaction not in
the ordinary course of business;
(vi) purchase any assets or securities or assume any
liabilities of another bank holding company, bank,
corporation or other entity, except in the ordinary
course of business necessary to manage its investment
portfolio;
(vii) make any loan or commitment to lend money, issue any
letter of credit or accept any deposit, except in the
ordinary course of business in accordance with its
existing banking practices;
(viii) except for the acquisition or disposition in the
ordinary course of business of other real estate
owned, acquire or dispose of any real or personal
property or fixed asset constituting a capital
investment in excess of $10,000 individually or
$25,000 in the aggregate;
(ix) make any investment subject to any restrictions,
whether contractual or statutory, which materially
impairs the ability of Peoples or the Bank to dispose
freely of such investment at any time; subject any of
its properties or assets to a mortgage, lien, claim,
charge, option,
26
restriction, security interest or encumbrance, except
for tax and other liens which arise by operation of
law and with respect to which payment is not past due
or is being contested in good faith by appropriate
proceedings and except for pledges or liens required
to be granted in connection with acceptance by
Peoples of government deposits;
(x) promote to a new position or increase the rate of
compensation (except for promotions and compensation
increases in the ordinary course of business and in
accordance with past practices), or enter into any
agreement to promote to a new position or increase
the rate of compensation, of any director, officer or
employee of Peoples or the Bank, modify, amend or
institute new employment policies or practices, or
enter into, renew or extend any employment,
indemnity, reimbursement, consulting, compensation or
severance agreements with respect to any present or
former directors, officers or employees of Peoples or
the Bank. It is understood and agreed that the
directors shall receive, during 2004, in addition to
normal 2004 Board of Directors' fees, a retainer fee,
paid in accordance with normal past practices, but
prorated through the anticipated Closing Date of this
transaction as set forth in Section 11 hereof. Should
the Closing, by agreement of the parties, occur at a
later date, the appropriate additional prorated
retainer amount for the time period of Board service
from the anticipated Closing Date through the date of
Closing shall be paid to the directors on or before
the date of Closing;
(xi) execute, create, institute, modify, amend or
terminate any pension, retirement, savings, stock
purchase, stock bonus, stock ownership, stock option,
stock appreciation or depreciation right or profit
sharing plans; any employment, deferred compensation,
consulting, bonus or collective bargaining agreement;
any group insurance or health contract or policy; or
any other incentive, retirement, welfare or employee
welfare benefit plan, agreement or understanding for
current or former directors, officers or employees of
Peoples or the Bank; or change the level of benefits
or payments under any of the foregoing or increase or
decrease any severance or termination of pay benefits
or any other fringe or employee benefits other than
as required by law or regulatory authorities or the
terms of any of the foregoing.
Notwithstanding the foregoing, it is
understood and agreed that Xxx Xxxx has
collaterally assigned certain death benefits
to the Bank associated with that certain
1987 life insurance policy which Xx. Xxxx
owns and that such assignment shall have
been terminated on an arms' length basis on
or before the date of Closing.
It is also understood and agreed that each
of Peoples and the Bank owns certain life
insurance policies insuring the lives of
Xxxx Xxxxxxxxxxx, Xxxxx Xxxxxxxx Xxxxx,
Xxxxx Xxxx and Xxx Xxxx and that the
premiums on such policies have been fully
paid. Furthermore, the parties agree that
MainSource shall, or shall cause the Bank,
post-Closing, to retain such policies for
the life of the insured and to maintain in
effect for the applicable period those
certain Split Dollar Life Insurance
Agreements dated April 29, 1999, (as they
may be amended prior to the Closing Date,
consistent with the terms of this
Agreement), with accompanying endorsements
(considered together, the "Split Dollar
Agreement") with each of the named
individuals.
Pursuant to the endorsements appended to
such agreements, MainSource, or the Bank, as
applicable, shall be entitled to the greater
of the (i) cash surrender value of the
policy or (ii) the aggregate premiums paid
on the Policy by the Company less any
outstanding indebtedness to the insurer,
while the individuals' respective named
beneficiaries will receive the net death
benefit associated with such respective
policy as set forth in Sections 1 and 2 of
the applicable Split Dollar Agreement. It is
understood that neither MainSource nor the
Bank shall owe any additional premiums with
respect to the insurance policies underlying
the Split Dollar Agreements. It is also
understood that the insureds shall continue
to receive, as long as the Split Dollar
Agreements are in effect, a Form W-2 that
includes the resulting imputed income to the
individual.
27
It is also understood and agreed that
Peoples owns a life insurance policy
insuring the life of Xxxxx Xxxxxxxx Xxxxx,
for which Peoples has been paying annual
premiums and that such policy shall be
either terminated on an arms' length basis
or transferred to Xxxxx Xxxxxxxx Xxxxx on or
before the date of Closing.
Notwithstanding the foregoing, Peoples shall
terminate those certain Revenue Neutral
Agreements, dated April 1, 1999, as
described in Section 8.01(l) hereof.
Notwithstanding the foregoing, Peoples may
make any amendments to the Peoples Plans
required by law, rule, regulation, the
Service or the Department of Labor; and
(xii) PROMOTE TO A NEW POSITION OR INCREASE THE RATE OF
COMPENSATION (EXCEPT FOR PROMOTIONS AND COMPENSATION
INCREASES IN THE ORDINARY COURSE OF BUSINESS AND IN
ACCORDANCE WITH PAST PRACTICES), OR ENTER INTO ANY
AGREEMENT TO PROMOTE TO A NEW POSITION OR INCREASE
THE RATE OF COMPENSATION, OF ANY DIRECTOR, OFFICER OR
EMPLOYEE OF PEOPLES OR THE BANK.
(xiii) amend, modify or restate Peoples' or the Bank's
respective organizational documents from those in
effect on the date of this Agreement and as delivered
to MainSource hereunder;
(xiv) give, dispose of, sell, convey or transfer; assign,
hypothecate, pledge or encumber; or grant a security
interest in or option to or right to acquire any
shares of common stock or substantially all of the
assets, of Peoples or the Bank, or enter into any
agreement or commitment relative to the foregoing;
(xv) fail to maintain Peoples' or the Bank's reserve for
loan losses at the greater of either $1,531,000 or
1.84% of total gross loans outstanding; provided,
however, that such amounts will be increased to the
extent necessary to adequately reserve for those
credits with a principal balance greater than
$100,000 set forth on Schedule 6.03(a)(xvii) of the
Disclosure Schedule;
(xvi) fail to accrue, pay, discharge and satisfy all debts,
liabilities, obligations and expenses, including, but
not limited to, trade payables, incurred in the
regular and ordinary course of business as such
debts, liabilities, obligations and expenses become
due;
(xvii) issue, or authorize the issuance of, any securities
convertible into or exchangeable for any shares of
the capital stock of Peoples or the Bank;
(xviii) except for obligations disclosed within this
Agreement or the Disclosure Statement, trade payables
and similar liabilities and obligations incurred in
the ordinary course of business and the payment,
discharge or satisfaction in the ordinary course of
business of liabilities reflected in the Peoples
Financial Statements or the Subsequent Peoples
Financial Statements, borrow any money or incur any
indebtedness including, without limitation, through
the issuance of debentures, or incur any liability or
obligation (whether absolute, accrued, contingent or
otherwise), in an aggregate amount exceeding $10,000;
(xix) open, close, move or, in any material respect,
expand, diminish, renovate, alter or change any of
its offices or branches;
(xx) pay or commit to pay any management or consulting or
other similar type of fees; or
(xxi) enter into any contract, agreement, lease,
commitment, understanding, arrangement or transaction
or incur any liability or obligation (other than as
contemplated by Section 6.03(a)(vii) hereof and
legal, accounting and fees related to the Merger)
requiring payments by Peoples which exceed $10,000,
whether individually or in the aggregate, or that is
not a trade payable or incurred in the ordinary
course of business.
28
(b) Peoples shall maintain, or cause to be maintained, in full force
and effect, insurance on its and the Bank's assets, properties and operations,
fidelity coverage and directors' and officers' liability insurance in such
amounts and with regard to such liabilities and hazards as are currently insured
by Peoples and/or the Bank as of the date of this Agreement.
(c) Preservation of Business. On and after the date of this Agreement
and until the Effective Time or until this Agreement is terminated as herein
provided, Peoples shall: (a) carry on its business diligently, substantially in
the manner as is presently being conducted and in the ordinary course of
business; (b) use commercially reasonable best efforts to preserve its business
organization intact, keep available the services of the present officers and
employees and preserve its present relationships with customers and persons
having business dealings with it; (c) maintain all of the properties and assets
that it owns or utilizes in the operation of its business as currently conducted
in good operating condition and repair, reasonable wear and tear excepted, and
maintain insurance upon such properties and assets in amounts and kinds
comparable to that in effect on the date of this Agreement; (d) maintain its
books, records and accounts in the usual, regular and ordinary manner, on a
basis consistent with prior years and in compliance with all material respects
with all statutes, laws, rules and regulations applicable to them and to the
conduct of its business; (e) maintain a rating of at least two (2) from its
latest safety and soundness and compliance examination; (f) maintain a CRA
rating of satisfactory; and (g) not knowingly do or fail to do anything which
will cause a breach of, or default in, any contract, agreement, commitment,
obligation, understanding, arrangement, lease or license to which it is a party
or by which it is or may be subject or bound which would reasonably be expected
to have a material adverse effect on the financial condition, results of
operations, business, assets, or capital of Peoples.
(d) Restrictions Regarding Affiliates. Peoples shall, within thirty
(30) days after the date of this Agreement and promptly thereafter until the
Effective Time to reflect any changes, provide MainSource with a list
identifying each person who may be deemed to be an affiliate of Peoples for
purposes of Rule 145 under the Securities Act of 1933 (the "1933 Act"). On or
prior to the date of this Agreement, and thereafter as may be required for a
person who may be deemed an affiliate of Peoples following the date of this
Agreement, Peoples shall obtain from each director, executive officer and other
person who may be deemed to be such an affiliate of Peoples to deliver to
MainSource on or prior to the Effective Time a written agreement, substantially
in the form as attached hereto as Exhibit B.
(e) Other Negotiations. (a) On and after the date of this Agreement and
until the Effective Time or until this Agreement is terminated as herein
provided, except with the prior written approval of MainSource, neither Peoples
nor the Bank shall permit nor authorize their respective directors, officers,
employees, agents or representatives to, directly or indirectly, initiate,
solicit or encourage, or provide information to, any corporation, association,
partnership, person or other entity or group concerning any merger,
consolidation, share exchange, combination, purchase or sale of substantial
assets, sale of shares of common stock (or securities convertible or
exchangeable into or otherwise evidencing, or any agreement or instrument
evidencing the right to acquire, capital stock) or similar transaction relating
to Peoples or the Bank or to which Peoples or the Bank may become a party (all
such transactions are hereinafter referred to as "Acquisition Transactions").
(b) Peoples shall promptly communicate to MainSource the terms of any
proposal or offer which Peoples or the Bank may receive with respect to an
Acquisition Transaction. Peoples or the Bank may, in response to an unsolicited
written proposal with respect to an Acquisition Transaction from a third party,
furnish information to, and negotiate, explore or otherwise engage in
substantive discussions with such third party, and enter into any such
agreement, arrangement or understandings, in each case, only if Peoples' Board
of Directors determines in good faith by majority vote, after consultation with
its financial advisors and outside legal counsel, that failing to take such
action would be a breach of the fiduciary duties of Peoples' Board of Directors
in connection with seeking an Acquisition Transaction.
(c) In the event Peoples' Board of Directors, after consultation with
its financial advisors and outside legal counsel, determines in good faith that
it would result in a violation of its fiduciary duties under applicable law to
recommend this Agreement and the Merger to Peoples' shareholders for their
approval, then in submitting this Agreement to the shareholders at the meeting
of shareholders, Peoples may submit this Agreement without recommendation of
approval, in which case the Board of Directors may communicate the basis for its
lack of a
29
recommendation of approval to the shareholders in the proxy statement or an
appropriate amendment or supplement thereto to the extent required by law.
(d) This Section 6.06 shall not authorize Peoples or the Bank, or any
of their directors, officers, employees, agents or representatives, to initiate
any discussions or negotiations with respect to an Acquisition Transaction with
a third party.
(f) Press Releases. Peoples will not issue any press or news releases
or make any other public announcements or disclosures relating to the Merger
without the prior consent of MainSource or MainSource following delivery of a
final copy of such press or news release, which consent shall not be
unreasonably withheld.
(g) Disclosure Schedule Update. Peoples shall promptly supplement,
amend and update, upon the occurrence of any change prior to the Effective Time,
and as of the Effective Time, the Disclosure Schedule with respect to any
matters or events hereafter arising which, if in existence or having occurred as
of the date of this Agreement, would have been required to be set forth or
described in the Disclosure Schedule or this Agreement and including, without
limitation, any fact which, if existing or known as of the date hereof, would
have made any of the representations or warranties of Peoples contained herein
materially incorrect, untrue or misleading. No such supplement, amendment or
update shall become part of the Disclosure Schedule unless MainSource shall have
first consented in writing with respect thereto.
(h) Information, Access Thereto, Confidentiality. MainSource and its
representatives and agents shall, at all times during normal business hours
prior to the Effective Time, have full and continuing access to the properties,
facilities, operations, books and records of Peoples. MainSource and its
representatives and agents may, prior to the Effective Time, make or cause to be
made such reasonable investigation of the operations, books, records and
properties of Peoples and the Bank and of its financial and legal condition as
deemed necessary or advisable to familiarize themselves with such operations,
books, records, properties and other matters; provided, however, that such
access or investigation shall not interfere unnecessarily with the normal
business operations of Peoples. Upon request, Peoples will furnish MainSource or
its representatives or agents, their attorneys' responses to external auditors
requests for information, management letters received from their external
auditors and such financial, loan and operating data and other information
reasonably requested by MainSource which has been or is developed by Peoples,
its auditors, accountants or attorneys (provided with respect to attorneys, such
disclosure would not result in the waiver by Peoples of any claim of
attorney-client privilege), and will permit MainSource or its representatives or
agents to discuss such information directly with any individual or firm
performing auditing or accounting functions for Peoples, and such auditors and
accountants will be directed to furnish copies of any reports or financial
information as developed to MainSource or its representatives or agents. No
investigation by MainSource shall affect the representations and warranties made
by Peoples herein. Any confidential information or trade secrets received by
MainSource or its representatives or agents in the course of such examination
will be treated confidentially, and any correspondence, memoranda, records,
copies, documents and electronic or other media of any kind containing such
confidential information or trade secrets or both shall be destroyed by
MainSource or, at Peoples' request, returned to Peoples in the event this
Agreement is terminated as provided in Section 9 hereof. This Section 6.09 will
not require the disclosure of any information to MainSource which would be
prohibited by law. The ability of MainSource to consult with any tax advisor
(including a tax advisor independent from all other entities involved in the
transactions contemplated hereby) shall not be limited by this Agreement in any
way, provided that any such tax advisor is otherwise subject to and is bound by
this Section 6.09. Notwithstanding anything herein to the contrary (other than
the preceding sentence), except as reasonably necessary to comply with
applicable securities laws, MainSource (and each employee, representative or
agent of MainSource) may disclose to any and all persons, without limitation of
any kind, the tax treatment (as defined in Treas. Reg. Section 1.6011-4) of the
transactions contemplated hereby and all materials of any kind (including
opinions or other tax analyses) that are or have been provided to MainSource
relating to such tax structure, provided that, in the case of any materials that
contain information other than the tax treatment or tax structure of the
transactions contemplated hereby (including, but not limited to, any information
relating to the pricing or any cost of the transactions contemplated hereby or
the identity of any party to the transactions contemplated hereby), this
sentence shall apply to such materials only to the extent that such materials
contain the tax treatment or tax structure of the transactions contemplated
hereby and MainSource shall take all action necessary to prevent the disclosure
of such other information as otherwise provided herein. The immediately
preceding sentence shall not be effective until the earliest of (a) the date of
the public announcement of discussions relating to any of the transactions
contemplated
30
hereby, (b) the date of the public announcement of any of the transactions
contemplated hereby or (c) the date of the execution of an agreement, with or
without conditions, to enter into any of the transactions contemplated hereby.
(i) Subsequent Peoples Financial Statements. As soon as reasonably
available after the date of this Agreement, Peoples will deliver to MainSource
any additional audited financial statements which have been prepared on its
behalf or at its direction, the monthly unaudited consolidated balance sheets
and profit and loss statements of Peoples prepared for its internal use, the
Bank's Call Reports for each quarterly period completed prior to the Effective
Time, and all other financial reports or statements submitted to regulatory
authorities after the date hereof, to the extent permitted by law (collectively,
"Subsequent Peoples Financial Statements"). The Subsequent Peoples Financial
Statements will be prepared on a basis consistent with past accounting practices
and generally accepted accounting principles applied on a consistent basis to
the extent applicable and shall present fairly the financial condition and
results of operations as of the dates and for the periods presented. The
Subsequent Peoples Financial Statements, including the notes thereto, will not
include any assets, liabilities or obligations or omit to state any assets,
liabilities or obligations, absolute or contingent, or any other facts, which
inclusion or omission would render such financial statements inaccurate,
incomplete or misleading in any material respect.
(j) Break-up Fee. (a) Peoples hereby acknowledges and agrees that
MainSource has committed and will commit substantial time, effort, resources and
expenses, and will forgo other acquisition opportunities, in pursuing the
Merger. Peoples further agrees that it shall pay to MainSource a break-up fee in
the amount of Five Hundred Thousand Dollars ($500,000), plus out-of-pocket
expenses up to an amount of Two Hundred Thousand Dollars ($200,000)
(collectively, the "Break-up Fee"), in the event that:
(i) MainSource terminates this Agreement pursuant to
Sections 9.01(b)(i), 9.01(b)(ii), 9.01(b)(iv), or
9.01(b)(v) hereof; or
(ii) The Board of Directors of Peoples fails to recommend
to shareholders of Peoples that such shareholders
should approve this Agreement and the Merger; or
(iii) The Board of Directors of Peoples withdraws, modifies
or conditions its recommendation to shareholders of
Peoples to approve this Agreement and the Merger or
is silent with respect to the approval of this
Agreement and the Merger; or
(iv) Peoples approves, enters into or executes a
definitive agreement, letter of intent (whether
binding or non-binding), term sheet or understanding
relating to an Acquisition Transaction with a party
other than MainSource or an affiliate of MainSource;
or
(v) Peoples terminates this Agreement pursuant to Section
9.01(c)(iv) hereof.
(b) The Break-up Fee shall be paid to MainSource within thirty (30)
days of the occurrence of any of the events specified in Section 6.11(a) hereof.
If the Break-up Fee is not immediately paid as provided, then MainSource shall
be entitled to recover interest at the highest prime rate set forth in The Wall
Street Journal (Midwest Edition) under the section entitled "Money Rates" on the
unpaid amount of the Break-up Fee from the time the Break-up Fee is due until
paid-in-full, together with all costs of collection thereof, including
reasonable attorneys' fees and expenses.
31
(c) MainSource and Peoples hereby acknowledge and agree that the
Break-up Fee shall compensate MainSource for (i) the value of the lost business
opportunity which would have inured to MainSource if the Merger had been
consummated, (ii) expenses incurred for attorneys, accountants, financial
advisors and consultants of MainSource in developing the Merger and drafting
this Agreement, (iii) MainSource's management time and expense in investigating,
analyzing, developing and pursuing the Merger, (iv) expenses relating to
MainSource's due diligence efforts and (v) the value of the acquisition
opportunities lost by MainSource in pursuing the Merger instead of other
acquisitions. Peoples further acknowledges and agrees that the amount of the
Break-up Fee is fair, reasonable and not a penalty and that its obligation to
pay the Break-up Fee shall survive any termination of this Agreement by
MainSource. MainSource further acknowledges that the Break-up Fee constitutes
MainSource's sole and complete remedy for a termination of this Agreement under
the circumstances enumerated in this Section 6.11.
(k) Peoples Employee Benefit Plans. After the Effective Time, in the
discretion of MainSource, the employee benefit plans sponsored by Peoples will
be disposed of in a legal manner and at a time ("Disposition Date") to be
determined by MainSource.
(a) Profit Sharing/401(k) Plan. On and after the date of this
Agreement, and until the applicable Disposition Date or until this Agreement
shall be terminated as herein provided:
(i) Peoples shall continue to sponsor, maintain and
administer the Peoples Trust Company Retirement
Savings Plan (the "401(k) Plan") in accordance with
its terms and conditions, as set forth in its plan
and trust document as of the date of this Agreement,
and in accordance with applicable law;
(ii) Peoples or the Bank shall continue to fund all
employee and employer contributions to the 401(k)
Plan which are required during this time period, and
may continue to fund any discretionary employer
contributions in amounts not in excess of the
discretionary employer contributions previously made
by Peoples or the Bank to the 401(k) Plan;
(iii) neither Peoples nor the Bank shall amend, or cause an
amendment of, the 401(k) Plan without the prior
written consent of MainSource, except for any
amendment which is necessary to maintain the
qualification of the 401(k) Plan and its related
employee benefit trust for favorable income tax
treatment under Sections 401(a) and 501(a) of the
Code, respectively, or as otherwise required by law,
regulations, the Service or the Department of Labor;
(iv) Peoples and the Bank shall not terminate the
appointment of any fiduciary as defined in ERISA with
respect to the 401(k) Plan without the prior written
consent of MainSource, except for any termination
attributable to a breach by such fiduciary of any
fiduciary duty imposed on the fiduciary under ERISA;
and
(v) neither Peoples nor the Bank shall terminate, or
cause the termination of, any agreement with any
service provider providing services to the 401(k)
Plan as of the date of this Agreement without the
prior written consent of MainSource, except for any
termination attributable to a breach by such service
provider of its service agreement.
32
(b) Welfare Plans. On and after the date of this Agreement, and until
the applicable Disposition Date or until this Agreement shall be terminated as
herein provided:
(i) Peoples or the Bank shall continue to sponsor,
maintain and administer the Indiana Financial
Institution Group Health Insurance Plan, the Sun Life
of Canada Life Plan, the Indiana Financial
Institution Group Life and Accidental Death and
Dismemberment Insurance Plan, the CNA Accidental
Death Insurance Plan, the Sun Life of Canada Long
Term Disability Insurance Plan, and the Indiana
Financial Institution Group Short Term Disability
Insurance Plan (collectively, the "Welfare Plans") in
accordance with their respective terms and
conditions, as set forth in the applicable plan
document and/or policy of insurance, as of the date
of this Agreement, and in accordance with applicable
law;
(ii) Peoples and the Bank shall continue to pay all
insurance premiums and other costs necessary to
continue the Welfare Plans and their related
insurance policy or policies without interruption or
lapse which accrue during this time period;
(iii) neither Peoples nor the Bank shall amend, or cause an
amendment of, the Welfare Plans without the prior
written consent of MainSource, except for any
amendment which is otherwise required by law,
regulations, the Service or the Department of Labor;
(iv) neither Peoples nor the Bank shall reduce, or cause a
reduction of, the portion of the total cost of the
Welfare Plans which covered employees and
beneficiaries are required by Peoples and the Bank to
pay as of the date of this Agreement, without the
prior written consent of MainSource ;
(v) Peoples and the Bank shall not terminate the
appointment of any fiduciary as defined in ERISA with
respect to the Welfare Plans without the prior
written consent of MainSource , except for any
termination attributable to a breach by such
fiduciary of any fiduciary duty imposed on the
fiduciary under ERISA; and
(vi) neither Peoples nor the Bank shall terminate, or
cause the termination of, any agreement with any
insurer or service provider providing insurance or
other services to the Welfare Plans as of the date of
this Agreement without the prior written consent of
MainSource, except for any termination attributable
to a breach by such service provider of its service
agreement.
(c) Section 125 Cafeteria Plan. On and after the date of this
Agreement, and until the applicable Disposition Date or until this Agreement
shall be terminated as herein provided:
(i) Peoples or the Bank shall continue to sponsor,
maintain and administer, and shall continue to pay
eligible claims presented for payment under, the
Indiana Financial Institution Group Cafeteria Plan
(the "Cafeteria Plan")
33
in accordance with its terms and conditions, as set
forth in its plan document and/or related policies of
insurance, as of the date of this Agreement, and in
accordance with applicable law;
(ii) Peoples and the Bank shall continue to fund all
salary reduction contributions to the Cafeteria Plan
which accrue during this time period;
(iii) neither Peoples nor the Bank shall amend, or cause an
amendment of, the Cafeteria Plan without the prior
written consent of MainSource, except for any
amendment which is necessary to maintain the
qualification of the Cafeteria Plan under Section 125
of the Code or as otherwise required by law,
regulations, the Service or the Department of Labor;
(iv) Peoples and the Bank shall not terminate the
appointment of any fiduciary as defined in ERISA with
respect to those portions of the Cafeteria Plan which
constitute an employee welfare benefit plan as
defined in ERISA without the prior written consent on
MainSource, except for any termination attributable
to a breach by such fiduciary of any fiduciary duty
imposed on the fiduciary under ERISA; and
(v) neither Peoples nor the Bank shall terminate, or
cause the termination of, any agreement with any
service provider or insurer providing insurance or
other services to the Cafeteria Plan as of the date
of this Agreement without the prior written consent
of MainSource, except for any termination
attributable to a breach by such service provider of
its service agreement.
(d) On and after the date of this Agreement, and until the applicable
Disposition Date or until this Agreement shall be terminated as herein provided,
Peoples and the Bank shall continue to sponsor, maintain and administer all
supplemental retirement programs, nonqualified deferred compensation programs
and any other similar benefit programs or plans.
(l) Employee Benefits. Neither the terms of this Agreement nor the
provision of any employee benefits by MainSource to employees of Peoples or the
Bank will: (a) create any employment contract, agreement or understanding with
or employment rights for, or constitute a commitment or obligation of employment
to, any of the officers or employees of Peoples or the Bank; or (b) prohibit or
restrict MainSource, whether before or after the Effective Time, from changing,
amending or terminating any employee benefits provided to its employees from
time to time; provided such change, amendment or termination does not affect the
qualified status of such employee's benefits or violate applicable law or
regulation.
(m) Environmental Reports. If requested by MainSource, Peoples and the
Bank will cooperate with an environmental consulting firm designated by
MainSource in connection with the conduct, at Peoples' expense, by such firm of
a phase one environmental investigation on all real property owned or leased by
Peoples as of the date of this Agreement, and any real property acquired or
leased by Peoples after the date of this Agreement. In the event MainSource
requests a phase two environmental investigation on any real property owned or
leased by Peoples as of the date of this Agreement or acquired or leased by
Peoples after the date of this Agreement, Peoples will cooperate with the
environmental firm designated by MainSource, at MainSource's expense, in
connection with the conduct by such firm of a phase two environmental
investigation.
(n) Reports. Promptly upon its becoming available, Peoples shall
furnish to MainSource one (1) copy of each financial statement, report, notice,
or proxy statement sent by Peoples to its any Governmental
34
Authority or to its shareholders generally and of each regular or periodic
report, registration statement or prospectus filed by Peoples with the SEC or
any successor agency, and of any order issued by any Governmental Authority in
any proceeding to which Peoples is a party. For purposes of this provision,
"Governmental Authority" shall mean any government (or any political subdivision
or jurisdiction thereof), court, bureau, agency or other governmental entity
having or asserting jurisdiction over Peoples, the Bank or any of Peoples' or
the Bank's respective businesses, operations or properties.
(o) Adverse Actions. Peoples shall not (a) take any action while
knowing that such action would, or is reasonably likely to, prevent or impede
the Merger from qualifying as a reorganization within the meaning of Section 368
of the Code; or (b) knowingly take any action that is intended or is reasonably
likely to result in (i) any of its representations and warranties set forth in
this Agreement being or becoming untrue, subject to the standard set out in the
second paragraph to Section 4, in any respect at any time at or prior to the
Effective Time, (ii) any of the conditions to the Merger set forth in Section 8
not being satisfied, (iii) a material violation of any provision of this
Agreement or (iv) a delay in the consummation of the Merger except, in each
case, as may be required by applicable law or regulation.
SECTION 7
COVENANTS OF MAINSOURCE
MainSource covenants and agrees with Peoples as follows:
7.01. Approvals. (a) MainSource shall have primary responsibility for
the preparation, filing and costs of all bank holding company and bank
regulatory applications required for consummation of the Merger, and shall file
such applications as promptly as practicable and in the most expeditious manner
practicable, and in any event, within thirty (30) days after the execution of
this Agreement. MainSource shall provide to Peoples' counsel copies of all
applications filed and copies of all material written communications with all
state and federal bank regulatory agencies relating to such applications.
MainSource shall proceed expeditiously, cooperate fully and use its best efforts
to procure, upon terms and conditions reasonably acceptable to MainSource, all
consents, authorizations, approvals, registrations and certificates, to complete
all filings and applications and to satisfy all other requirements prescribed by
law which are necessary for consummation of the Merger on the terms and
conditions provided in this Agreement at the earliest possible reasonable date.
7.02. SEC Registration. (a) MainSource shall file with the SEC as
promptly as practicable and in the most expeditious manner practicable, and in
any event, within forty-five (45) days after the execution of this Agreement, a
Registration Statement on an appropriate form under the 1933 Act covering the
shares of MainSource Common Stock to be issued pursuant to this Agreement and
shall use its best efforts to cause the same to become effective and thereafter,
until the Effective Time or termination of this Agreement, to keep the same
effective and, if necessary, amend and supplement the same. Such Registration
Statement and any amendments and supplements thereto are referred to in this
Agreement as the "Registration Statement". The Registration Statement shall
include a proxy statement-prospectus reasonably acceptable to MainSource and
Peoples, prepared for use in connection with the meeting of shareholders of
Peoples referred to in Section 6.01 hereof, all in accordance with the rules and
regulations of the SEC. MainSource shall, as soon as practicable after filing
the Registration Statement, make all filings required to obtain all blue sky
exemptions, authorizations, consents or approvals required for the issuance of
MainSource common stock.
7.03. Press Releases. Except as required by law, MainSource shall not
issue any press releases or make any other public announcements or disclosures
relating primarily to Peoples with respect to the Merger without the prior
consent of Peoples, which consent shall not be unreasonably withheld.
7.04. Employee Benefit Plans.
(a) Following the Effective Time, at a time to be determined by
MainSource in its sole discretion, MainSource will make available to the
officers and employees of Peoples and the Bank who continue as employees of
Peoples and the Bank or any subsidiary of MainSource after the Effective Time,
subject to Section 7.04(b) hereof,
35
substantially the same employee benefits on substantially the same terms and
conditions as MainSource offers to similarly situated officers and employees.
Peoples' employees will receive full credit for prior service with Peoples for
purposes of eligibility, vesting and period of service requirement.
(b) Neither the terms of this Section 7.04 nor the provision of any
employee benefits by MainSource or any of its subsidiaries to employees of
Peoples or the Bank shall:
(i) create any employment contract, agreement or
understanding with or employment rights for, or
constitute a commitment or obligation of employment
to, any of the officers or employees of Peoples or
the Bank; or
(ii) prohibit or restrict MainSource or the Bank, whether
before or after the Effective Time, from changing,
amending or terminating any employee benefits
provided to its employees from time to time, provided
such change, amendment or termination does not affect
the qualified status of such employee benefits or
violate applicable law or regulations.
7.05. Adverse Actions. MainSource shall not (a) take any action while
knowing that such action would, or is reasonably likely to, prevent or impede
the Merger from qualifying as a reorganization within the meaning of Section 368
of the Code; or (b) knowingly take any action that is intended or is reasonably
likely to result in (i) any of its representations and warranties set forth in
this Agreement being or becoming untrue, subject to the standard set out in the
second paragraph to Section 5, in any respect at any time at or prior to the
Effective Time, (ii) any of the conditions to the Merger set forth in Section 8
not being satisfied, (iii) a material violation of any provision of this
Agreement or (iv) a delay in the consummation of the Merger except, in each
case, as may be required by applicable law or regulation.
7.06. Employment of Peoples' Employees. After the Effective Time, in
the event that MainSource eliminates a position, other than any position held by
Xxxx Xxxxxxxxxxx or Xxxxx Xxxxxxxx Xxxxx, and no alternative employment with
comparable level of responsibility and pay is offered to that individual,
MainSource shall negotiate a severance payment to that individual based on the
individual's length of service and level of responsibility with Peoples and
MainSource.
7.07. Tax Returns.
(a) Tax Periods Ending on or Before Closing Date. MainSource shall
prepare or cause to be prepared and file or cause to be filed all tax returns
for Peoples and its subsidiaries for all periods ending on or prior to the date
of Closing which are filed after the date of Closing ("Pre-Closing Tax
Returns"). MainSource shall permit Xxxxxx & Company, Inc., as representative of
the shareholders of Peoples (the "Representative") to review and comment on each
such Pre-Closing Tax Return and MainSource shall make or cause to be made such
revisions to such Pre-Closing Tax Returns as are reasonably requested by the
Representative.
(b) Cooperation on Tax Matters. MainSource and Peoples shall cooperate
fully, as and to the extent reasonably requested by the Representative, in
connection with the filing of Pre-Closing Tax Returns and any audit, litigation
or other proceeding with respect to taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information reasonably relevant to any such audit, litigation, or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. MainSource and Peoples agree (i) to retain all books and records with
respect to tax matters pertinent to Peoples and its subsidiaries relating to any
taxable period beginning before the date of Closing until expiration of the
statute of limitations (and, to the extent notified by the Representative, any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (B) to
give the Representative reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the Representative
so requests, MainSource shall allow the Representative to take possession of
such books and records. Representative shall be
36
entitled to engage attorneys and/or accountants to assist the Representative in
its review and comment on the Pre-Closing Tax Returns. The Representative shall
pay all reasonable costs and expenses incurred by Representative in connection
with such review and comment.
SECTION 8
CONDITIONS PRECEDENT TO THE MERGER
8.01. MainSource. The obligation of MainSource to consummate the Merger
is subject to the satisfaction and fulfillment of each of the following
conditions on or prior to the Effective Time, unless waived in writing by
MainSource:
(a) Representations and Warranties at Effective Time. Each of the
representations and warranties of Peoples with respect to itself and the Bank
contained in this Agreement shall be true, accurate and correct in all material
respects at and as of the Effective Time as though such representations and
warranties had been made or given on and as of the Effective Time; provided that
no representation or warranty of Peoples shall be deemed untrue, inaccurate or
incorrect for purposes hereunder as a consequence of the existence of any fact,
event or circumstance inconsistent with such representation or warranty, unless
such fact, event or circumstance, individually or taken together with all other
facts, events or circumstances inconsistent with any representations or warranty
of Peoples, has had or would result in a Material Adverse Effect on Peoples.
(b) Covenants. Each of the covenants and agreements of Peoples shall,
subject to the standard set out in the second and third paragraphs to Section 4,
have been fulfilled or complied with in all material respects from the date of
this Agreement through and as of the Effective Time.
(c) Deliveries at Closing. MainSource shall, subject to the standard
set out in the second and third paragraphs to Section 4, have received from
Peoples at the Closing the items and documents, in form and content reasonably
satisfactory to MainSource, set forth in Section 11.02(b) hereof.
(d) Registration Statement Effective. MainSource shall have registered
its shares of common stock to be issued to shareholders of Peoples in accordance
with this Agreement with the SEC pursuant to the 1933 Act, and all state
securities and blue sky approvals, authorizations and exemptions required to
offer and sell such shares shall have been received by MainSource. The
Registration Statement with respect thereto shall have been declared effective
by the SEC and no stop order shall have been issued or threatened.
(e) Regulatory Approvals. All regulatory approvals required to
consummate the transactions contemplated hereby, shall have been obtained and
shall remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired and no such approvals shall contain any
conditions, restrictions or requirements which the Board of Directors of
MainSource reasonably determines in good faith would (i) following the Effective
Time, have a Material Adverse Effect on MainSource or (ii) reduce the benefits
of the transactions contemplated hereby to such a degree that MainSource would
not have entered into this Agreement had such conditions, restrictions or
requirements been known at the date hereof.
(f) Shareholder Approval. The shareholders of Peoples shall have
approved and adopted this Agreement as required by applicable law and its
Articles of Incorporation.
(g) Officers' Certificate. Peoples shall have delivered to MainSource a
certificate signed by its President and its Secretary, dated as of the Effective
Time, certifying that: (i) to the effect set out in Section 8.01(a) that the
representations and warranties of Peoples contained in Section 4 are true,
accurate and correct in all material respects on and as of the Effective Time;
(ii) all the covenants of Peoples have been complied with in all material
respects from the date of this Agreement through and as of the Effective Time;
and (iii) Peoples has satisfied and fully complied with all conditions necessary
to make this Agreement effective as to it.
(h) Tax Opinion. The Board of Directors of MainSource shall have
received a written opinion of the law firm of Xxxxx XxXxxxx LLP, dated as of the
Effective Time, in form and content satisfactory to MainSource,
37
to the effect that the integrated plan of reorganization constituted by the
Merger to be effected pursuant to this Agreement and the Upstream Merger will
constitute a tax-free reorganization under the Code hereof to each party hereto.
In rendering such opinion, counsel may require and rely upon customary
representation letters of MainSource and Peoples and rely upon customary
assumptions.
(i) Fairness Opinion. Peoples' investment banker shall have issued (as
of a date not later than the mailing date of the proxy statement-prospectus
relating to the Merger to be mailed to the shareholders of Peoples) its fairness
opinion stating that the Merger Consideration relating to the Merger is fair to
the shareholders of Peoples from a financial point of view.
(j) Employment Agreements. Xxxxx X. Xxxx and Xxxxxx X. Xxxx shall each
have entered into an employment agreement with Peoples Trust Company and a
severance agreement with MainSource, effective as of the Closing Date, in
substantially the forms attached hereto as Exhibits C and D for the employment
agreements and Exhibits E and F for the severance agreements.
(k) Voting Agreements. On or before the special meeting of shareholders
of Peoples, MainSource shall have received a voting agreement , in the form
attached hereto as Exhibit G, executed by each of those shareholders of the
Company identified on Schedule 8.02(k), each of whom is a director of Peoples.
(l) Revenue Neutral Agreements. Effective as of the dates set forth
below, each Revenue Neutral Agreement ("RNA") to which Peoples is a party shall
have been frozen and terminated, pursuant to an amendment to each such RNA
executed by the parties thereto, which amendments shall be reviewed and approved
by MainSource and its counsel. The amendment to each RNA shall also provide that
the amounts set forth below shall be paid to affected individuals as of the
applicable dates, in lieu of any other benefit payments provided for in the RNAs
and as full payment of such benefits:
(i) Xxxx Xxxxxxxxxxx - At his election, Xxxx
Xxxxxxxxxxx'x RNA shall be frozen and terminated,
either as of December 31, 2003 or as of the Closing
Date. If his RNA is terminated as of December 31,
2003, Peoples shall pay to Xx. Xxxxxxxxxxx the
lump-sum amount of $121,311. If his RNA is terminated
as of the Closing Date, Peoples shall pay to Xx.
Xxxxxxxxxxx, in a lump sum, the amount as shall have
been accrued by Peoples through the Closing Date,
based upon calculations of Xxxxx Consulting.
(ii) Xxxxx Xxxxxxxx Xxxxx - At her election, Xxxxx
Xxxxxxxx Xxxxx'x RNA shall be frozen and terminated
either as of December 31, 2003 or as of the Closing
Date. If her RNA is terminated as of December 31,
2003, Peoples shall pay to Xx. Xxxxxxxx the lump sum
amount of $103,938. If her RNA is terminated as of
the Closing Date, Peoples shall pay to Xx. Xxxxxxxx,
in a lump sum, the amount as shall have been accrued
by Peoples through the Closing Date, based upon
calculations of Xxxxx Consulting.
(iii) Xxxxx Xxxx and Xxx Xxxx - Xxxxx Xxxx'x and Xxx Xxxx'x
RNAs shall be frozen and terminated as of the Closing
Date. Peoples shall pay to each of Messrs. Xxxx and
Long, respectively, in a lump sum, the amounts as
shall have been accrued by Peoples through the
Closing Date, based upon calculations of Xxxxx
Consulting.
8.02. Peoples. The obligation of Peoples to consummate the Merger is
subject to the satisfaction and fulfillment of each of the following conditions
on or prior to the Effective Time, unless waived in writing by Peoples:
(a) Representations and Warranties at Effective Time. Each of the
representations and warranties of MainSource contained in this Agreement shall
be true, accurate and correct in all material respects on and as of the
Effective Time as though the representations and warranties had been made or
given at and as of the Effective Time; provided that no representation or
warranty of MainSource shall be deemed untrue, inaccurate or incorrect for
purposes hereunder as a consequence of the existence of any fact, event or
circumstance inconsistent with such representation or warranty, unless such
fact, event or circumstance, individually or taken together with all other
38
facts, events or circumstances inconsistent with any representations or warranty
of MainSource, has had or would result in a Material Adverse Effect on
MainSource.
(b) Covenants. Each of the covenants and agreements of MainSource shall
have been fulfilled or complied with in all material respects from the date of
this Agreement through and as of the Effective Time.
(c) Deliveries at Closing. Peoples shall, subject to the standard set
out in the first paragraph to Section 5, have received from MainSource at the
Closing the items and documents, in form and content reasonably satisfactory to
Peoples, listed in Section 11.02(a) hereof.
(d) Registration Statement Effective. MainSource shall have registered
its shares of common stock to be issued to shareholders of Peoples in accordance
with this Agreement with the SEC pursuant to the 1933 Act, and all state
securities and Blue Sky approvals, authorizations and exemptions required to
offer and sell such shares shall have been received by MainSource. The
Registration Statement with respect thereto shall have been declared effective
by the MainSource and no stop order shall have been issued or threatened.
(e) Regulatory Approvals. All regulatory approvals required to
consummate the transactions contemplated hereby, shall have been obtained and
shall remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired and no such approvals shall contain any
conditions, restrictions or requirements which the Board of Directors of Peoples
reasonably determines in good faith would (i) following the Effective Time, have
a Material Adverse Effect or (ii) reduce the benefits of the transactions
contemplated hereby to such a degree that Peoples would not have entered into
this Agreement had such conditions, restrictions or requirements been known at
the date hereof.
(f) Shareholder Approval. The shareholders of Peoples shall have
approved and adopted this Agreement as required by applicable law and Peoples'
Articles of Incorporation.
(g) Officers' Certificate. MainSource shall have delivered to Peoples a
certificate signed by its Chairman or President and its Secretary, dated as of
the Effective Time, certifying that: (i) to the effect set out in Section
8.01(a) that the representations and warranties of MainSource contained in
Section 5 are true, accurate and correct in all material respects on and as of
the Effective Time; (ii) all the covenants of MainSource have been complied with
in all material respects from the date of this Agreement through and as of the
Effective Time; and (iii) MainSource has satisfied and fully complied with all
conditions necessary to make this Agreement effective as to it.
(h) Fairness Opinion. Peoples' investment banker shall have issued (as
of a date not later than the mailing date of the proxy statement-prospectus
relating to the Merger to be mailed to the shareholders of Peoples) its fairness
opinion stating that the Merger Consideration relating to the Merger is fair to
the shareholders of Peoples from a financial point of view; provided, however,
that this condition precedent is effective only in the event that MainSource
waives its condition precedent in Section 8.
SECTION 9
TERMINATION OF MERGER
9.01. Manner of Termination. This Agreement and the Merger may be
terminated at any time prior to the Effective Time by written notice delivered
by MainSource to Peoples, or by Peoples to MainSource, as follows:
(a) By MainSource or Peoples, if:
(i) the Merger contemplated by this Agreement has not
been consummated by May 31, 2004, if the Registration
Statement filed by MainSource with the Securities and
Exchange Commission (the "SEC") is not subject to the
SEC's review, or June 30, 2004,
39
if the Registration Statement filed by MainSource
with the SEC is subject to the SEC's review;
provided, however, that a party hereto in willful
breach of or willful default hereunder shall have no
right to terminate this Agreement pursuant to this
Section 9.01(a)(i); or
(ii) the Agreement and the Merger are not approved by the
requisite vote of the shareholders of Peoples at the
Special Meeting of Shareholders of Peoples; or
(iii) the respective Boards of Directors of MainSource and
Peoples mutually agree to terminate this Agreement.
(b) By MainSource if:
(i) at any time prior to the Effective Time, MainSource's
Board of Directors so determines, in the event of
either
(A) a breach by Peoples of any representation or
warranty contained herein, which breach
cannot be or has not been cured within
thirty (30) days after the giving of written
notice to Peoples of such breach; provided,
that a breach under this clause (A) would be
reasonably likely, individually or in the
aggregate with other breaches to result in a
Material Adverse Effect; provided, however,
that any such cure may not result in a
Material Adverse Effect and Sections 4.03
and 4.06(b) hereof are not subject to cure;
or
(B) a breach by Peoples of any of the covenants
or agreements contained herein, which breach
cannot be or has not been cured within
thirty (30) days after the giving of written
notice to Peoples of such breach; provided
that a breach under this clause (B) would be
reasonably likely, individually or in the
aggregate with other breaches, to result in
a Material Adverse Effect; provided,
however, that any such cure may not result
in a Material Adverse Effect; or
(ii) it shall reasonably determine that the Merger
contemplated by this Agreement has become
impracticable by reason of commencement or threat of
any claim, litigation or proceeding against
MainSource, Peoples, the Bank, or any subsidiary of
MainSource, or any director or officer of any of such
entities relating to this Agreement or the Merger; or
(iii) there has been a Material Adverse Effect in the
business, assets, capitalization, financial condition
or results of operations of Peoples and the Bank,
taken as a whole, as of the Effective Time, as
compared to that in existence as of the date of this
Agreement; or
(iv) Peoples' Board of Directors submits, or intends to
submit, this Agreement to the shareholders without
recommending the approval of this Agreement; or
(v) Peoples fulfills the requirements of Section 6.01
hereof but the shareholders of Peoples do not approve
and adopt the Merger and this Agreement; or
(vi) in the event that Peoples to maintain a composite
rating of at least two (2) from its latest safety and
soundness and compliance examination, or fails to
maintain a CRA rating of satisfactory or better; or
40
(vii) in the event that Peoples does not provide title
insurance policies and survey drawings for each
parcel of real property owned by Peoples within
thirty (30) days of the date of this Agreement as
provided in Section 4.09(a)(i) hereof; provided,
however, that Peoples may have five (5) days to
provide any policies or surveys not previously
provided to MainSource after receiving written notice
to Peoples of any deficiency.
(c) By Peoples, if:
(i) at any time prior to the Effective Time, Peoples'
Board of Directors so determines, in the event of
either
(A) a breach by MainSource of any representation
or warranty contained herein, which breach
cannot be or has not been cured within
thirty (30) days after the giving of written
notice to MainSource of such breach; or
(B) a breach by MainSource of any of the
covenants or agreements contained herein,
which breach cannot be or has not been cured
within thirty (30) days after the giving of
written notice to MainSource of such breach;
provided that a breach under this clause (B)
would be reasonably likely, individually or
in the aggregate with other breaches, to
result in a Material Adverse Effect on
MainSource; provided, however, that any such
cure may not result in a Material Adverse
Effect on MainSource; or
(ii) there has been a Material Adverse Effect in the
financial condition, results of operations, business,
assets or capitalization of MainSource on a
consolidated basis as of the Effective Time, as
compared to that in existence on September 30, 2003;
or
(iii) it shall reasonably determine that the Merger
contemplated by this Agreement have become
impracticable by reason of commencement or threat of
any material claim, litigation or proceeding against
MainSource (A) relating to this Agreement or the
Merger or (B) which is likely to have a Material
Adverse Effect on MainSource; or
(iv) Peoples fulfills the requirements of Section 6.01
hereof but the shareholders of Peoples do not approve
and adopt the Merger and this Agreement.
9.02. Effect of Termination. Upon termination by written notice, this
Agreement shall be of no further force or effect, and there shall be no further
obligations or restrictions on future activities on the part of MainSource or
Peoples and their respective directors, officers, employees, agents and
shareholders, except as provided in compliance with: (i) the confidentiality
provisions of this Agreement set forth in Section 6.09 hereof; and (ii) the
payment of expenses set forth in Section 12.11 hereof, provided, however, that
termination will not in any way release a breaching party from liability for any
willful breach of this Agreement giving rise to such termination; and (iii) the
payment of the Break-up Fee as provided by Section 6.11 hereof. The obligation
to pay the Break-up Fee in accordance with Section 6.11 hereof will survive any
termination of this Agreement.
41
SECTION 10
EFFECTIVE TIME OF THE MERGER
Upon the terms and subject to the conditions specified in this
Agreement, the Merger will become effective at the close of business on the day
and at the time specified in the Articles of Merger of Merger Corp and Peoples
as filed with the Indiana Secretary of State (the "Effective Time"). Unless
otherwise mutually agreed to by the parties hereto, the Effective Time will
occur on the fifth business day immediately following the date on which the last
of the conditions set forth in Section 8 (other than the delivery of
certificates, opinions and other instruments and documents to be delivered at
the Closing, but subject to the delivery at the Closing of such certificates,
opinions and other instruments and documents) is fulfilled or waived following
(a) the fulfillment of all conditions precedent to the Merger set forth in
Section 8 of this Agreement and (b) the expiration of all waiting periods in
connection with the bank regulatory applications filed for the approval of the
Merger, and in no event will the Effective Time occur later than May 31, 2004,
if the Registration Statement filed by MainSource with the SEC is not subject to
the SEC's review, or June 30, 2004, if the Registration Statement filed by
MainSource with the SEC is subject to the SEC's review.
SECTION 11
CLOSING
11.01. Closing Date and Place. So long as all conditions precedent set
forth in Section 8 hereof have been satisfied and fulfilled, the closing of the
Merger (the "Closing") will take place on the Effective Time at a location to be
reasonably determined by MainSource.
11.02. Deliveries. (a) At the Closing, MainSource will deliver to
Peoples the following:
(i) the officers' certificate contemplated by Section
8.02(g) hereof;
(ii) copies of all approvals by government regulatory
agencies necessary to consummate the Merger;
(iii) copies of the resolutions of the Board of Directors
of MainSource certified by the Secretary of
MainSource and Merger Corp, respectively, relative to
the approval of this Agreement and the Merger;
(iv) such other documents as Peoples or its legal counsel
may reasonably requests; and
(v) an opinion of its legal counsel in the form attached
as Exhibit H and dated as of the Effective Time.
(b) At the Closing, Peoples will deliver to MainSource the
following:
(i) the officers' certificate contemplated by Section
8.01(g) hereof;
(ii) a list of Peoples' shareholders as of the Effective
Time certified by the President and Secretary of
Peoples;
(iii) copies of the resolutions adopted by the Board of
Directors and shareholders of Peoples certified by
the Secretary of Peoples relative to the approval of
this Agreement and the Merger;
(iv) such other documents as MainSource or its legal
counsel may reasonably request;
(v) an opinion of its legal counsel in the form attached
hereto as Exhibit I and dated as of the Effective
Time;
(vi) the fairness opinion required by Sections 8.01(i) and
8.02(h) hereof;
42
(vii) the affiliate agreements required by Section 6.05
hereof;
(viii) documentation, subject to MainSource's approval,
which shall not be unreasonably withheld, evidencing
the termination of the following agreements: t) that
certain Right of First Refusal Agreement, dated as of
July 15, 1999, by and among X.X. Xxxxxxxxxxx, Xxxx X.
Xxxxxxxxxxx, Xxxxx X. Xxxxxxxx, Peoples Financial
Corp. and Stone City Bancshares, Inc. (or an
amendment sufficient to remove the stock of Peoples
from the coverage under such agreement); (u) that
certain Shareholders' Agreement, dated as of December
22, 2000, by and among Peoples Financial Corp. and
its shareholders; (v) that certain Employment
Agreement, dated March 7, 2003, by and between Xxxxx
X. Xxxx and Peoples Trust Company; and (w) that
certain Employment Agreement, dated March 7, 2003, by
and between Xxxxxx X. Xxxx and Peoples Trust Company;
and (x) that certain 1987 life insurance policy
covering the life of Xxxxxx X. Xxxx; (y) those
certain Revenue Neutral Agreements, dated April, 1999
as contemplated in Section 8.01(l) hereof; and (z)
that certain life insurance policy covering the life
of Xxxxx Xxxxxxxx Xxxxx (or documentation evidencing
the transfer of such policy to Xxxxx Xxxxxxxx Xxxxx);
and
(ix) the employment and severance agreements required by
Section 8.01(j) hereof.
SECTION 12
MISCELLANEOUS
12.01. Effective Agreement. This Agreement and the recitals hereof
shall be binding upon and inure to the benefit of and be enforceable by the
respective parties hereto and their respective successors and assigns; provided,
however, that neither this Agreement nor any of the rights, interests or
obligations of the respective parties hereto under this Agreement may not be
assigned by any party hereto without the prior written consent of the other
parties hereto;. The representations, warranties, covenants and agreements
contained in this Agreement, as well as the documents and instruments referred
to herein, are for the sole benefit of the parties hereto and their successors
and assigns, and they will not be construed as conferring any rights on any
other persons.
12.02. Waiver; Amendment. (a) The parties hereto may by an instrument
in writing: (i) extend the time for the performance of or otherwise amend any of
the covenants, conditions or agreements of the other parties under this
Agreement; (ii) waive any inaccuracies in the representations or warranties of
the other parties contained in this Agreement or in any document delivered
pursuant hereto or thereto; (iii) waive the performance by the other parties of
any of the covenants or agreements to be performed by it or them under this
Agreement; or (iv) waive the satisfaction or fulfillment of any condition, the
nonsatisfaction or nonfulfillment of which is a condition to the right of the
party so waiving to consummate the Merger. The waiver by any party hereto of a
breach of or noncompliance with any provision of this Agreement will not operate
or be construed as a continuing waiver or a waiver of any other or subsequent
breach or noncompliance hereunder.
(b) This Agreement may be amended, modified or supplemented only by a
written agreement executed by the parties hereto.
12.03. Notices. All notices, requests and other communications
hereunder will be in writing (which will include telecopier communication) and
will be deemed to have been duly given if delivered by hand and receipted for,
sent by certified United States Mail, return receipt requested, first class
postage pre-paid, delivered by overnight express receipted delivery service or
telecopied if confirmed immediately thereafter by also mailing a copy of such
notice, request or other communication by certified United States Mail, return
receipt requested, with first class postage pre-paid as follows:
43
If to MainSource or Merger Corp: with a copy to (which will not
constitute notice):
MainSource Financial Group, Inc. Xxxxx XxXxxxx LLP
000 Xxxxx Xxxxxxxx Xxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxx 00000 Xxxxxxxxxxxx, Xxxxxxx 00000-0000
ATTN: Xxxxxx X. Xxxxxxxx, Senior Vice President ATTN: Xxxx X. Xxxxxxxx
and Chief Financial Officer Telephone: (000) 000-0000
Telephone: (000) 000-0000 Fax: (000) 000-0000
Fax: (000) 000-0000
If to Peoples: with a copy to (which will not
constitute notice):
Peoples Financial Corp. Jenkens & Xxxxxxxxx
0000 Xxxx Xxxxx Xxxx 54 0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx
Xxxxxx, Xxxxxxx 00000 75202
ATTN: Xxxxx X. Xxxx ATTN: Xxxxxxx X. Xxxxx
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
or such substituted address or person as any of them have given to the other in
writing. All such notices, requests or other communications will be effective:
(a) if delivered by hand, when delivered; (b) if mailed in the manner provided
herein, five (5) business days after deposit with the United States Postal
Service; (c) if delivered by overnight express delivery service, on the next
business day after deposit with such service; and (d) if by telecopier, on the
next business day if also confirmed by mail in the manner provided herein.
12.04. Headings. The headings in this Agreement have been inserted
solely for ease of reference and should not be considered in the interpretation
or construction of this Agreement.
12.05. Severability. In case any one or more of the provisions
contained herein will, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
will not affect any other provision of this Agreement, but this Agreement will
be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein.
12.06. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original, but such counterparts will
together constitute one and the same instrument.
12.07. Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of Indiana and applicable federal laws,
without regard to principles of conflicts of law. The parties hereto hereby
agree that all claims, actions, suits and proceedings between the parties hereto
relating to this Agreement shall be filed, tried and litigated only in the
Circuit or Superior Courts of Decatur County, Indiana or the United States
District Court for the Southern District of Indiana - Indianapolis Division. In
connection with the foregoing, the parties hereto consent to the jurisdiction
and venue of such courts and expressly waive any claims or defenses of lack of
personal jurisdiction of or proper venue by such courts.
12.08. Indemnification.
(a) All rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or
prior to the Effective Time now existing in favor of
the current or former directors or officers of
Peoples and its subsidiaries as provided in their
respective articles of incorporation or by-laws (or
comparable organizational documents) and any existing
indemnification agreements or arrangements of Peoples
and its subsidiaries shall survive
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the Merger and shall continue in full force and
effect in accordance with their terms, and shall not
be amended, repealed or otherwise modified for a
period of three (3) years after the Effective Time in
any manner that would adversely affect the rights
thereunder of such individuals for acts or omissions
occurring at or prior to the Effective Time.
(b) In the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether
civil, criminal or administrative, including, without
limitation, any such claim, action suit, proceeding
or investigation in which any individual who is now,
or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective
Time, a director or officer of Peoples or any of its
subsidiaries (the "Indemnified Parties"), is, or is
threatened to be, made a party based in whole or in
part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he is or was a
director, officer or employee of Peoples or any of
its subsidiaries or their respective predecessors or
(ii) this Agreement or any of the transactions
contemplated hereby, whether in any case asserted or
arising before or after the Effective Time, the
parties hereto agree to cooperate and use their best
efforts to defend against and respond thereto.
(c) For three (3) years after the Effective Time,
MainSource shall maintain in effect Peoples' current
directors' and officers' liability insurance covering
acts or omissions occurring prior to the Effective
Time with respect to those persons who are currently
covered by Peoples' directors' and officers'
liability insurance policy on terms with respect to
such coverage and amount no less favorable to
Peoples' directors and officers currently covered by
such insurance than those of such policy in effect on
the date hereof; provided, that MainSource may
substitute therefor policies of its subsidiaries
(including self insurance) containing terms with
respect to coverage and amount no less favorable to
such directors or officers.
(d) MainSource shall cause any successor, whether by
consolidation, merger or transfer of substantially
all of its properties or assets, to comply with its
obligations under this Section. The provisions of
this Section shall survive the Effective Time and are
intended to be for the benefit of, and shall be
enforceable by, each Indemnified Party and other
person named herein and his or her heirs and
representatives.
12.09. Entire Agreement. This Agreement and the Exhibits hereto
supersede all other prior or contemporaneous understandings, commitments,
representations, negotiations or agreements, whether oral or written, among the
parties hereto relating to the Merger or matters contemplated herein and
constitute the entire agreement between the parties hereto, except as otherwise
provided herein. Upon the execution of this Agreement by all the parties hereto,
any and all other prior writings of either party relating to the Merger, will
terminate and will be rendered of no further force or effect. The parties hereto
agree that each party and its counsel reviewed and revised this Agreement and
that the normal rule of construction to the effect that any ambiguities are to
be resolved against the drafting party will not be employed in the
interpretation of this Agreement or any amendments or exhibits hereto.
12.10. Survival of Representations, Warranties or Covenants. Except as
set forth in the following sentence, none of the representations, warranties or
covenants of the parties will survive the Effective Time or the earlier
termination of this Agreement, and thereafter MainSource, Merger Corp, Peoples,
and all the respective directors, officers and employees of MainSource, Merger
Corp and Peoples will have no further liability with respect thereto, except for
fraud or for false or misleading statements made intentionally and knowingly in
connection with such representations, warranties and covenants or except as
otherwise provided by law, whether statutory, common law or otherwise. The
covenants contained in Sections 6.09 (regarding confidentiality), 9.02, 12.07,
12.09, 12.10 and 12.11 shall survive termination of this Agreement. The
covenants contained in Sections 6.09 (regarding confidentiality), 7.06, 12.07,
12.08, 12.09, 12.10 and 12.11 shall survive the Effective Time.
12.11. Expenses. Each party to this Agreement shall pay its own
expenses incidental to the Merger contemplated hereby.
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12.12. Certain References. (a) Whenever in this Agreement a singular
word is used, it also will include the plural wherever required by the context
and vice-versa. Except expressly stated otherwise, all references in this
Agreement to periods of days shall be construed to refer to calendar, not
business, days. The term "business day" will mean any day except Saturday and
Sunday when MainSource Bank, in Greensburg, Indiana, a wholly-owned subsidiary
of MainSource, is open for the transaction of business.
(b) References contained herein to the knowledge of any of the parties
hereto shall refer to the actual knowledge of directors, executive officers and
key employees of such party or parties, as the case may be.
12.13. Disclosure Schedules. The Disclosure Schedules attached hereto
are intended to be and hereby are specifically made a part of this Agreement.
******
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IN WITNESS WHEREOF, MainSource, Merger Corp and Peoples have made and
entered into this Agreement as of the day and year first above written and have
caused this Agreement to be executed, attested in counterparts and delivered by
their duly authorized officers.
MAINSOURCE FINANCIAL GROUP, INC.
By: /s/ Xxxxx X. Xxxxx, Xx.
------------------------------------
Xxxxx X. Xxxxx, Xx., President and
Chief Executive Officer
PEOPLES HOLDINGS, INC.
By: /s/ Xxxxx X. Xxxxx, Xx.
------------------------------------
Xxxxx X. Xxxxx, Xx, President and
Chief Executive Officer
PEOPLES FINANCIAL CORP.
By: /s/ Xxxx X. Xxxxxxxxxx
------------------------------------
Xxxx X. Xxxxxxxxxxx, Chairman
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