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AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PEOPLES BANCORP OF WASHINGTON
AN INDIANA CORPORATION,
THE PEOPLES NATIONAL BANK AND TRUST COMPANY
A NATIONAL BANKING ASSOCIATION,
GERMAN AMERICAN BANCORP,
AN INDIANA CORPORATION,
GERMAN AMERICAN HOLDINGS CORPORATION,
AN INDIANA CORPORATION,
AND
THE UNION BANK
AN INDIANA BANKING CORPORATION.
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Dated: September 27, 1996
AGREEMENT AND PLAN OF REORGANIZATION
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THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
September 27, 1996, by and among PEOPLES BANCORP OF WASHINGTON, an Indiana
corporation ("Peoples"), THE PEOPLES NATIONAL BANK AND TRUST COMPANY, a national
banking association ("Peoples Bank"), GERMAN AMERICAN HOLDINGS CORPORATION, an
Indiana corporation ("GAHC"), GERMAN AMERICAN BANCORP, an Indiana corporation
("GERMAN AMERICAN"), and THE UNION BANK, an Indiana banking corporation
("Union").
Recitals
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A. Peoples is a corporation duly organized and existing under the Indiana
Business Corporation Law ("IBCL") that is duly registered with the Board of
Governors of the Federal Reserve System ("FRB") as a bank holding company under
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the Bank Holding Company Act of 1956, as amended ("BHC Act"). Peoples owns all
of the outstanding capital stock of Peoples Bank. The principal place of
business of Peoples is Washington, Daviess County, Indiana.
▇. ▇▇▇▇▇▇▇ Bank is a national banking association duly organized and
existing under the National Bank Act, chartered by the Office of the Comptroller
of the Currency ("OCC"), with its principal banking office located in
Washington, Daviess County, Indiana.
C. German American is a corporation duly organized and existing under the
IBCL and that is duly registered as a bank holding company under the BHC Act.
German American owns all of the outstanding capital stock of GAHC and Union.
The principal place of business of German American is Jasper, ▇▇▇▇▇▇ County,
Indiana.
D. GAHC is a corporation duly organized and existing under the IBCL and
that is duly registered as a bank holding company under the BHC Act with its
principal place of business in Jasper, ▇▇▇▇▇▇ County, Indiana. GAHC owns all of
the outstanding stock of Community Trust Bank, which is not a party hereto.
E. Union is a banking corporation duly organized and existing under The
Indiana Financial Institutional Act ("IFIA"), chartered by the Indiana
Department of Financial Institutions ("DFI"), with its principal banking office
in Loogootee, ▇▇▇▇▇▇ County, Indiana.
F. The parties desire to effect a transaction whereby Union will be
merged with and into Peoples Bank and simultaneously Peoples will be merged with
and into GAHC.
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AGREEMENTS
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In consideration of the premises and the mutual terms and provisions set
forth in this Agreement, the parties agree as follows.
ARTICLE ONE
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TERMS OF THE MERGERS & CLOSING
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SECTION 1.01. THE HOLDING COMPANY MERGER. Pursuant to the terms and
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provisions of this Agreement, the IBCL and the Plan of Merger attached hereto as
Appendix A and incorporated herein by reference (the "Holding Company Plan of
Merger"), Peoples shall merge with and into GAHC (the "Holding Company Merger")
simultaneously with the Bank Merger (as defined below). Peoples shall be the
"Merging Holding Company" in the Holding Company Merger and its corporate
identity and existence, separate and apart from GAHC, shall cease on
consummation of the Holding Company Merger. GAHC shall be the "Surviving
Holding Company" in the Holding Company Merger, and its name shall not be
changed pursuant to the Holding Company Merger.
SECTION 1.02. EFFECT OF THE HOLDING COMPANY MERGER. The Holding Company
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Merger shall have all the effects provided by the IBCL.
SECTION 1.03. THE HOLDING COMPANY MERGER - CONVERSION OF SHARES.
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(a) At the Effective Time (as defined below):
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i) Each of the not more than 593,334 shares of common stock, $1.00
stated value, of Peoples ("Peoples Common") that are issued and outstanding
immediately prior to the Effective Time shall thereupon and without further
action be converted into shares of common stock, $10 par value, of German
American ("German American Common") at the Exchange Ratio which shall be
calculated as set forth in this Section 1.03(a)(i). Peoples's shareholders
of record at the time the Merger shall become effective, for the shares of
Peoples Common then held by them, respectively, shall be allocated and
entitled to receive (upon surrender of certificates representing said
shares for cancellation) shares of German American Common, which total
number of shares of German American Common shall have a value (as
hereinafter determined) of $21,100,000 subject, however, to (A) the
provisions of this Section 1.03(a) with respect to the minimum and maximum
exchange ratio and number of shares to be exchanged, (B) the anti-dilution
provisions of Section 1.03(f) of this Agreement, and (C) the provisions of
this Section 1.03(b) with respect to fractional shares. The consideration
payable to Peoples shareholders hereunder is sometimes hereafter referred
to as the "Merger Consideration."
For purposes of establishing the number of shares of German American
Common into which each share of Peoples Common shall be converted at the
Effective Time(the "Exchange Ratio"), each share of German American Common
shall be valued at the average of the lowest closing asked prices and
highest closing bid prices of German American Common as reported by the
NASDAQ National Market System for each of the ten consecutive business days
that end on the second business day preceding the Closing Date (as defined
by Section 1.09 hereof) (the "Valuation Period"). Such value shall then be
divided into the sum of $21,100,000 to establish (to the nearest whole
share) the aggregate number of shares of German American Common into which
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all of the then issued and outstanding shares of Peoples Common (which
shall be not more than 593,334 shares) shall be converted at the Effective
Time, which number of shares of German American Common shall then be
divided by 593,334, with the quotient therefrom (carried to the fourth
figure past the decimal point) being the number of shares of German
American Common into which each share of Peoples Common shall be converted
at the Effective Time; provided, however, that in no event shall the total
number of shares of German American Common into which the 593,334 shares of
Peoples Common shall be converted be more than 659,375 shares or fewer than
586,111 shares; and provided further, that in no event will the Exchange
Ratio be more than 1.1113 or less than 0.9878 shares of German American
Common for each of the 593,334 shares of Peoples Common. The maximum and
minimum Exchange Ratio, and the maximum and minimum number of shares of
German American Common for which the 593,334 shares of Peoples Common shall
be exchanged shall be subject to adjustment in accordance with the anti-
dilution provisions of Section 1.03(f) of this Agreement.
ii) The shares of German American Common issued and outstanding
immediately prior to the Effective Time shall continue to be issued and
outstanding shares of German American.
(b) No fractional shares of German American Common shall be issued and, in
lieu thereof, holders of shares of Peoples Common who would otherwise be
entitled to a fractional share interest (after taking into account all shares of
Peoples Common held by such holder) shall be paid an amount in cash equal to the
product of such fractional share and the average of the highest bid and the
lowest asked price of a share of German American Common as quoted on the NASDAQ
National Market System on the last day of the Valuation Period.
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(c) At the Effective Time, all of the outstanding shares of Peoples
Common, by virtue of the Holding Company Merger and without any action on the
part of the holders thereof, shall no longer be outstanding and shall be
canceled and retired and shall cease to exist, and each holder of any
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Peoples Common (the "Certificates") shall
thereafter cease to have any rights with respect to such shares, except the
right of such holders to receive, without interest, the Merger Consideration
upon the surrender of such Certificate or Certificates in accordance with
Section 1.08.
(d) At the Effective Time, each share of Peoples Common, if any, held in
the treasury of Peoples or by any direct or indirect subsidiary of Peoples
(other than shares held in trust accounts for the benefit of others or in other
fiduciary, nominee or similar capacities) immediately prior to the Effective
Time shall be cancelled.
(e) At the Effective Time, the shares of common stock of Peoples Bank
outstanding immediately prior to the Effective Time shall be unchanged by the
Holding Company Merger and shall be deemed owned by the Surviving Holding
Company.
(f) If (i) German American shall declare a stock dividend or other
distribution of property or securities (other than a cash dividend) upon its
shares of common stock or shall subdivide, split up, reclassify or combine its
shares of common stock, and (ii) the record date for such transaction is prior
to the date on which the Effective Time occurs, appropriate adjustment or
adjustments will be made in the maximum and minimum total number of shares of
German American Common for which the 593,334 shares of Peoples Common are to be
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exchanged and in the maximum and minimum ratio of shares of German American
Common to be exchanged for each share of Peoples Common.
(g) If any holders of Peoples Common dissent from the Holding Company
Merger and demand dissenters' rights under the IBCL, any issued and outstanding
shares of Peoples Common held by such dissenting holders shall not be converted
as described in this Section 1.03 but shall from and after the Effective Time
represent only the right to receive such consideration as may be determined to
be due to such dissenting holders pursuant to the IBCL; provided, however, that
each share of Peoples Common outstanding immediately prior to the Effective Time
and held by a dissenting holder who shall, after the Effective Time, withdraw
his demand for dissenters' rights or lose his right to exercise dissenters'
rights shall have only such rights as provided under the IBCL.
SECTION 1.04. THE BANK MERGER. Pursuant to the terms and provisions of
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this Agreement, the National Bank Act, the IFIA, and the Plan of Merger attached
hereto as Appendix B and incorporated herein by reference (the "Bank Plan of
Merger"), and simultaneously with the Holding Company Merger, Union shall merge
with and into Peoples Bank (the "Bank Merger"). Union shall be the "Merging
Bank" in the Bank Merger and its corporate identity and existence, separate and
apart from Peoples Bank, shall cease on consummation of the Bank Merger.
Peoples Bank shall be the "Surviving Bank" and shall continue its corporate
existence under its charter under the provisions of the National Bank Act, and
the name of Peoples Bank shall not be changed.
SECTION 1.05. EFFECT OF THE BANK MERGER. The Bank Merger shall have all
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of the effects provided by the National Bank Act and the IFIA.
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SECTION 1.06. THE BANK MERGER - NO CONVERSION OF SHARES. At the Effective
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Time (as defined below), the shares of Peoples Bank that were issued and
outstanding immediately prior to the Bank Merger shall continue to be issued and
outstanding, and the shares of Union shall be cancelled.
SECTION 1.07. THE CLOSING. The closing of the Mergers (the "Closing")
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shall take place at the offices of Leagre & ▇▇▇▇▇▇ (or at such other place as
the parties may agree) at 9:00 A.M. Eastern Standard Time on the Closing Date
described in Section 1.09 of this Agreement.
SECTION 1.08. EXCHANGE PROCEDURES; SURRENDER OF CERTIFICATES.
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(h) The German American Bank shall act as Exchange Agent in the Holding
Company Merger (the "Exchange Agent").
(i) As soon as reasonably practicable but in no event more than five days
after the Effective Time, the Exchange Agent shall mail to each record holder of
any Certificate or Certificates whose shares were converted into the right to
receive the Merger Consideration, a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange Agent
and shall be in such form and have such other provisions as German American may
reasonably specify) (each such letter the "Merger Letter of Transmittal") and
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consolidation. As soon as reasonably practical but in no event
more than five days after surrender to the Exchange Agent of a Certificate,
together with a Merger Letter of Transmittal duly executed and any other
required documents, the Exchange Agent shall transmit to the holder of such
Certificate the Merger Consideration. No interest on the Merger Consideration
issuable upon the surrender of the Certificates shall be paid or accrued for the
benefit of holders of Certificates. If the Merger Consideration is to be issued
to a person other than a person in whose name a surrendered Certificate is
registered, it shall be a condition of issuance that the surrendered Certificate
shall be properly endorsed or otherwise in proper form for transfer and that the
person requesting such issuance shall pay to the Exchange Agent any required
transfer or other taxes or establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not applicable. German American reserves the
right in all cases to require that a surety bond on terms and in an amount
satisfactory to German American be provided to German American at the expense of
the Peoples shareholder in the event that such shareholder claims loss of a
Certificate and requests that German American waive the requirement for
surrender of such Certificate.
(j) No dividends that are otherwise payable on shares of German American
Common constituting the Merger Consideration shall be paid to persons entitled
to receive such shares of German American Common until such persons surrender
their Certificates. Upon such surrender, there shall be paid to the person in
whose name the shares of German American Common shall be issued any dividends
which shall have become payable with respect to such shares of German American
Common (without interest and less the amount of taxes, if any, which may have
been imposed thereon), between the Effective Time and the time of such
surrender.
SECTION 1.09. THE CLOSING DATE. The Closing shall take place on January
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31, 1997 or, if later, on the last business day of the month during which each
of the conditions in Sections 6.01(d) and 6.02(d) is satisfied or waived by the
appropriate party, or on such later or earlier date as Peoples and German
American may agree (the "Closing Date"). The Bank Merger shall be effective
upon the issuance of a certificate of merger by the OCC under the National Bank
Act and the Holding Company Merger shall be effective upon the filing of
Articles of Merger with the Secretary of State of the State of Indiana (the
"Effective Time"). The parties shall use their best efforts to cause the
Effective Time of both Mergers to occur as soon as practicable after the Closing
Date.
SECTION 1.10. ACTIONS AT CLOSING.
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(k) At the Closing, Peoples shall deliver to German American:
i) a certified copy of the Articles of Incorporation and Bylaws of
Peoples, as amended, and a certified copy of the Articles of Association
and Bylaws of Peoples Bank, as amended;
ii) a certificate or certificates signed by the chief executive
officer of Peoples and Peoples Bank stating, to the best of his knowledge
and belief, after due inquiry, that (A) each of the representations and
warranties contained in Article Two hereof is true and correct in all
material respects at the time of the Closing with the same force and effect
as if such representations and warranties had been made at Closing, and
(B) Peoples and Peoples Bank have performed and complied in all material
respects, unless waived by German American, with all of their obligations
and agreements required to be performed hereunder prior to the Closing
Date;
iii) certified copies of the resolutions of Peoples's Board of
Directors and shareholders, approving and authorizing the execution of this
Agreement and the Plan of Merger and authorizing the consummation of the
Holding Company Merger;
iv) a certified copy of the resolutions Peoples Bank's Board of
Directors and shareholder, as required for valid approval of the execution
of the Agreement and the consummation of the Bank Merger;
v) a certificate of the Indiana Secretary of State, dated a recent
date, stating that Peoples is duly organized and exists under the IBCL;
vi) a certificate of the OCC, dated a recent date, stating that
Peoples Bank is duly organized and exists under the laws of the United
States of America; and
vii) the legal opinion of Krieg, DeVault, Alexander & Capehart,
counsel for Peoples, to the effect set forth as Exhibit 1.10(a)(vii).
(l) At the Closing, German American shall deliver to Peoples:
i) a certificate signed by the Chief Executive Officer of German
American stating, to the best of his knowledge and belief, after due
inquiry, that (A) each of the representations and warranties contained in
Article Three is true and correct in all material respects at the time of
the Closing with the same force and effect as if such representations and
warranties had been made at Closing and (B) German American and Union have
performed and complied in all material respects, unless waived by Peoples,
with all of its obligations and agreements required to be performed
hereunder prior to the Closing Date;
ii) a certified copy of the resolutions of German American's Board of
Directors authorizing the execution of this Agreement;
iii) a certified copy of the resolutions of GAHC's Board of Director's
authorizing the execution of this Agreement and the consummation of the
Holding Company Merger.
iv) a certified copy of the resolutions of Union's Board of Directors
and shareholder, as required for valid approval of the execution of this
Agreement and the consummation of the Bank Merger;
v) the legal opinion of Leagre & ▇▇▇▇▇▇, counsel for German
American, in the form attached hereto as Exhibit 1.10(b)(v); and
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vi) certificates of the Indiana Secretary of State, dated a recent
date, stating that German American and GAHC exist under the IBCL and that
Union exists under the IFIA.
(m) At the Closing, the parties shall insert the Exchange Ratio determined
in accordance with Section 1.03 of this Agreement into the Plan of Merger, and
shall execute and/or deliver to one another such Plan of Merger and such other
documents and instruments and take such other actions as shall be necessary or
appropriate to consummate the Mergers.
ARTICLE TWO
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REPRESENTATIONS OF PEOPLES AND PEOPLES BANK
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Peoples and Peoples Bank hereby severally make the following
representations and warranties:
SECTION 2.01. ORGANIZATION AND CAPITAL STOCK.
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(n) Peoples is a corporation duly organized and validly existing under the
IBCL and has the corporate power to own all of its property and assets, to incur
all of its liabilities and to carry on its business as now being conducted.
(o) Peoples Bank is a national banking association duly organized and
validly existing under the laws of the United States of America and has the
corporate power to own all of its property and assets, to incur all of its
liabilities and to carry on its business as now being conducted.
(p) Peoples has authorized capital stock of 1,200,000 shares of Peoples
Common, of which 593,334 shares are issued and outstanding. All of the issued
and outstanding shares of Peoples Common are duly and validly issued and
outstanding, fully paid and non-assessable. None of the outstanding shares of
Peoples Common has been issued in violation of any preemptive rights of the
current or past shareholders of Peoples or in violation of any applicable
federal or state securities laws or regulations.
(q) Peoples Bank has authorized capital stock of 34,625 shares of common
stock, $10.00 par value, all of which are issued and outstanding ("Peoples Bank
Common"). All of the issued and outstanding shares of Peoples Bank Common are
duly and validly issued and outstanding and are fully paid and nonassessable.
None of the outstanding shares of Peoples Bank Common has been issued in
violation of any preemptive rights of the current or past shareholders of
Peoples Bank or in violation of any applicable federal or state securities laws
or regulations.
(r) There are no shares of capital stock or other equity securities of
Peoples or Peoples Bank authorized, issued or outstanding (except as set forth
in this Section 2.01) and no outstanding options, warrants, rights to subscribe
for, calls, puts, or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the capital
stock of Peoples or Peoples Bank, or contracts, commitments, understandings or
arrangements by which Peoples or Peoples Bank are or may be obligated to issue
additional shares of its capital stock or options, warrants or rights to
purchase or acquire any additional shares of its capital stock.
SECTION 2.02. AUTHORIZATION; NO DEFAULTS. The Boards of Directors of
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Peoples and Peoples Bank have each, by all appropriate action, approved this
Agreement, the applicable Plan of Merger and the Merger contemplated thereby and
have authorized the execution of this Agreement and the applicable Plan of
Merger on their behalf by their duly authorized officers and the performance by
Peoples and Peoples Bank of its obligations hereunder. Nothing in the Articles
of Incorporation or Bylaws of Peoples, as amended, or the Articles of
Association or Bylaws of Peoples Bank, as amended, or in any material agreement
or instrument, or any decree, proceeding, law or regulation (except as
specifically referred to in or contemplated by this Agreement) by or to which
Peoples or Peoples Bank is bound or subject, would prohibit Peoples or Peoples
Bank from consummating, or would be violated or breached by Peoples's or Peoples
Bank's consummation of, this Agreement and the Mergers and other transactions
contemplated herein on the terms and conditions herein contained. This
Agreement has been duly and validly executed and delivered by Peoples and
Peoples Bank and constitutes a legal, valid and binding obligation of Peoples
and Peoples Bank, enforceable against Peoples and Peoples Bank in accordance
with its terms. Neither Peoples nor Peoples Bank is, nor will be by reason of
the consummation of the transactions contemplated herein, in material default
under or in material violation of any provision of, nor will the consummation of
the transactions contemplated herein afford any party a right to accelerate any
indebtedness under, its articles of incorporation or bylaws, any material
promissory note, indenture or other evidence of indebtedness or security
therefor, or any material lease, contract, or other commitment or agreement to
which it is a party or by which it or its property is bound.
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SECTION 2.03. SUBSIDIARIES. Except as otherwise disclosed in a
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confidential writing delivered by Peoples and Peoples Bank to German American
and executed by all the parties concurrently with the execution of this
Agreement (the "Disclosure Schedule") and except for the ownership by Peoples of
all the capital stock of Peoples Bank and the ownership by Peoples Bank of all
the capital stock of Peoples Investment Center, Inc. ("PIC"), neither Peoples
nor Peoples Bank has (or has had at any time in the last ten years) any direct
or indirect ownership interest in any corporation, partnership, limited
liability company, joint venture or other business. Peoples Bank and PIC shall
be referred to jointly and severally (for purposes of simplicity) as "Peoples
Bank" for the purposes of the remaining provisions of this Agreement, unless the
context otherwise requires.
SECTION 2.04. FINANCIAL INFORMATION.
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(s) Peoples has furnished to German American the consolidated balance
sheet of Peoples as of December 31, 1995 and the related consolidated statements
of income, changes in shareholders' equity and cash flows for the year then
ended. Such financial statements were prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may be
reflected in the notes thereto), and fairly present the consolidated financial
position and the consolidated results of operations, changes in shareholders'
equity and cash flows of Peoples in all material respects as of the date and for
the period indicated.
(t) Peoples Bank has furnished to German American its Consolidated Reports
of Condition and Income as filed with the FFIEC for the quarters ended March 31,
1996 and June 30, 1996 (the "Call Reports"). The Call Reports were prepared in
accordance with the applicable regulatory instructions on a consistent basis
with previous such reports, and fairly present the financial position and
results of operations of Peoples Bank in all material respects as of the dates
and for the periods indicated, subject, however, to normal recurring year-end
adjustments, none of which will be material.
(u) Neither Peoples nor Peoples Bank has any material liability, fixed or
contingent, except to the extent set forth in the financial statements and the
Call Reports described in subsections (a) and (b) of this Section 2.04
(collectively, the "Peoples Financial Statements") or incurred in the ordinary
course of business since the date of the most recent balance sheet of Peoples or
Peoples Bank included in the Peoples Financial Statements.
(v) Peoples does not engage in the lending business (except by and through
Peoples Bank) or any other business or activity other than that which is
incident to its ownership of all the capital stock of Peoples Bank, and does
not own any investment securities (except the capital stock of Peoples Bank).
SECTION 2.05. ABSENCE OF CHANGES. Since December 31, 1995, and except to
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the extent reflected in the Call Reports, there has not been any material
adverse change in the financial condition, the results of operations or the
business of Peoples or Peoples Bank, taken as a whole.
SECTION 2.06. ABSENCE OF AGREEMENTS WITH BANKING AUTHORITIES. Neither
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Peoples nor Peoples Bank is subject to any order (other than orders applicable
to bank holding companies or banks generally) and neither is a party to any
agreement or memorandum of understanding with any federal or state agency
charged with the supervision or regulation of banks or bank holding companies,
including without limitation the OCC, the Federal Deposit Insurance Company (the
"FDIC"), the FRB, and the IDFI.
SECTION 2.07. TAX MATTERS. Peoples and Peoples Bank have filed all
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federal, state and local tax returns due in respect of any of its business,
income and properties in a timely fashion and has paid or made provision for all
amounts shown due on such returns. All such returns fairly reflect the
information required to be presented therein in all material respects. All
provisions for accrued but unpaid taxes contained in the Peoples Financial
Statements were made in accordance with generally accepted accounting
principles.
SECTION 2.08. ABSENCE OF LITIGATION. There is no material litigation,
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claim or other proceeding pending or, to the knowledge of Peoples, threatened,
before any judicial, administrative or regulatory agency or tribunal, to which
Peoples or Peoples Bank is a party or to which any of their properties are
subject.
SECTION 2.09. EMPLOYMENT MATTERS.
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(w) Neither Peoples nor Peoples Bank is a party to or bound by any
material contract arrangement or understanding (written or otherwise) for the
employment, retention or engagement of any past or present officer, employee,
agent, consultant or other person or entity which, by its terms, is not
terminable by Peoples or Peoples Bank, respectively, on thirty (30) days'
written notice or less without the payment of any amount by reason of such
termination.
(x) Neither Peoples nor Peoples Bank has entered into any collective
bargaining agreement with any labor organizations with respect to any group of
employees of Peoples and Peoples Bank, and to the knowledge of Peoples, there is
no present effort or existing proposal to attempt to unionize any group of
employees of Peoples or Peoples Bank.
(y) Peoples and Peoples Bank are and have been in material compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including, without limitation, any
such laws respecting employment discrimination and occupational safety and
health requirements, and neither Peoples nor Peoples Bank is engaged in any
unfair labor practice; (ii) there is no unfair labor practice complaint against
Peoples or Peoples Bank pending or, to the knowledge of Peoples, threatened
before the National Labor Relations Board; (iii) there is no labor dispute,
strike, slowdown or stoppage actually pending or, to the knowledge of Peoples,
threatened against or directly affecting Peoples or Peoples Bank; and (iv)
neither Peoples nor Peoples Bank has experienced any material work stoppage or
other material labor difficulty during the past five years.
(z) Except as set forth in the Disclosure Schedule, neither the execution
nor the delivery of this Agreement, nor the consummation of any of the
transactions contemplated hereby, will (i) result in any payment (including
without limitation severance, unemployment compensation or golden parachute
payment) becoming due to any director or employee of Peoples or Peoples Bank
from either of such entities, (ii) increase any benefit otherwise payable under
any of their employee plans or (iii) result in the acceleration of the time of
payment of any such benefit. No amounts paid or payable by Peoples or Peoples
Bank to or with respect to any employee or former employee of Peoples of Peoples
Bank will fail to be deductible for federal income tax purposes by reason of
Section 280G of the Internal Revenue Code of 1986, as amended ("Code") or
otherwise.
SECTION 2.10. REPORTS. Since January 1, 1993 Peoples and Peoples Bank
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have filed all reports, notices and other statements, together with any
amendments required to be made with respect thereto, if any, that they were
required to file with (i) the Securities and Exchange Commission ("SEC"), (ii)
the FRB, (iii) the FDIC, (iv) the OCC and (v) any other governmental authority
with jurisdiction over Peoples or Peoples Bank. As of their respective dates,
each of such reports and documents, including the financial statements, exhibits
and schedules thereto, complied in all material respects with the relevant
statutes, rules and regulations enforced or promulgated by the regulatory
authority with which they were filed.
SECTION 2.11. INVESTMENT PORTFOLIO. All United States Treasury
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securities, obligations of other United States Government agencies and
corporations, obligations of States and political subdivisions of the United
States and other investment securities held by Peoples Bank, as reflected in the
Call Reports, are carried on the books of Peoples Bank in accordance with
generally accepted accounting principles, consistently applied. Peoples Bank
does not engage in activities that would require that it establish a trading
account under applicable regulatory guidelines and interpretations.
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SECTION 2.12. LOAN PORTFOLIO. All loans and discounts shown in the Call
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Reports, or which were entered into after June 30, 1996, but before the Closing
Date, were and will be made in all material respects for good, valuable and
adequate consideration in the ordinary course of the business of Peoples Bank,
in accordance in all material respects with Peoples Bank's lending policies and
practices unless otherwise approved by Peoples Bank's Board of Directors, and
are not subject to any material defenses, set offs or counterclaims, including
without limitation any such as are afforded by usury or truth in lending laws,
except as may be provided by bankruptcy, insolvency or similar laws or by
general principles of equity. The notes or other evidences of indebtedness
evidencing such loans and all forms of pledges, mortgages and other collateral
documents and security agreements are and will be, in all material respects,
enforceable, valid, true and genuine and what they purport to be. Peoples Bank
has complied and will through the Closing Date continue to comply with all laws
and regulations relating to such loans, or to the extent there has not been such
compliance, such failure to comply will not materially interfere with the
collection of any such loan. Peoples Bank has not sold, purchased or entered
into any loan participation arrangement except where such participation is on a
pro rata basis according to the respective contributions of the participants to
such loan amount. Peoples has no knowledge that any condition of property in
which Peoples Bank has an interest as collateral to secure a loan or that is
held as an asset of any trust violates the Environmental Laws (defined in
Section 2.15) in any material respect or obligates Peoples, or Peoples Bank, or
the owner or operator of such property to remedy, stabilize, neutralize or
otherwise alter the environmental condition of such property.
SECTION 2.13. ERISA.
------------ -----
22
(aa) Except as disclosed in the Disclosure Schedule, no person participates
in any "employee welfare benefit plan" or "employee pension benefit plan" (as
those terms are respectively defined in Sections 3(1) and 3(2) of the Employee
Retirement Income Security Act of 1974 ("ERISA")), nor may any person reasonably
expect to participate in any such plan, in either case, on account of his or her
past or present employment with Peoples or Peoples Bank. Peoples and Peoples
Bank do not maintain any retirement or deferred compensation plan, savings,
incentive, stock option or stock purchase plan, unemployment compensation plan,
vacation pay, severance pay, bonus or benefit arrangement, insurance or
hospitalization program or any other fringe benefit arrangements (referred to
collectively hereinafter as "fringe benefit arrangements") for any past or
present employee, consultant or agent of Peoples or Peoples Bank, whether
pursuant to contract, arrangement, custom or informal understanding, which does
not constitute an "employee benefit plan" (as defined in Section 3(3) of ERISA),
except as listed in the Disclosure Schedule.
(bb) During the past sixty months, Peoples has not maintained any employee
welfare benefit plans or employee pension benefit plans except for plans listed
on the Disclosure Schedule. There have been no amendments to any of the
employee pension benefit plans, employee welfare benefit plans or fringe benefit
arrangements listed on the Disclosure Schedule since December 31, 1993.
(cc) All employee pension benefit plans, employee welfare benefit plans and
fringe benefit arrangements listed on the Disclosure Schedule comply in form and
in operation in all material respects with all applicable requirements of law
and regulation. All employee pension benefit plans maintained by Peoples and
Peoples Bank comply in form and in operation with all applicable requirements of
Sections 401(a) and 401(k) of the Code. Except as disclosed in the Disclosure
Schedule, neither Peoples nor Peoples Bank has (i) incurred any liability for
tax under Section 4971 of the Code on account of any accumulated funding
deficiency and no plan or arrangement listed in the Disclosure Schedule has
incurred any accumulated funding deficiency within the meaning of Section 412 or
418(B) of the Code; (ii) applied for or obtained a waiver by the IRS of any
minimum funding requirement under Section 412 of the Code; (iii) become subject
to any disallowance of deductions under Sections 419 or 419(A) of the Code; (iv)
incurred any liability for excise tax under Sections 4972, 4975, or 4976 of the
Code or any liability under Section 406 of ERISA; (v) incurred any liability to
the Pension Benefit Guaranty Corporation; (vi) had a reportable event (within
the meaning of Section 4043 of ERISA); or (vii) breached any of the duties or
failed to perform any of the obligations imposed upon the fiduciaries or plan
administrators under Title I or ERISA.
(dd) A true and correct copy of each of the plans and arrangements listed
on the Disclosure Schedule as in effect on the date hereof and each trust
agreement relating to each such plan and arrangement, has been supplied to
German American. A true and correct copy of the annual report (as described in
Section 103 of ERISA) most recently filed for each plan listed in the Disclosure
Schedule has been supplied to German American, and there have been no material
changes in the financial condition in the respective plans from that stated in
the annual reports supplied. In the case of any plan or arrangement which is
not in written form, German American has been supplied with an accurate
description of such plan or arrangement. Peoples and Peoples Bank have provided
to German American a description of any liability or contingent liability which
may be incurred by Peoples or Peoples Bank if any plan or arrangement listed on
the Disclosure Schedule were terminated or if Peoples or Peoples Bank was to
cease its participation therein.
(ee) In the case of each plan or arrangement listed in the Disclosure
Schedule which is a defined benefit plan (within the meaning of Section 3(35) of
ERISA), the net fair market value of the assets held to fund such plan or
arrangement will equal or exceed the present value of all accrued benefits
thereunder, both vested and nonvested, as determined in accordance with an
actuarial costs method acceptable under section 3(31) of ERISA.
(ff) On a timely basis, Peoples and Peoples Bank have made all
contributions or payments to or under each plan or arrangement listed in the
Disclosure Schedule as required pursuant to each such plan or arrangement, any
collective bargaining agreements or other provision for reserves to meet
contributions and payments under such plans or arrangements which have not been
made because they are not yet due.
(gg) None of the plans or arrangements listed in the Disclosure Schedule
owns (or has owned within the past 60 months) any Peoples Common or other
securities of Peoples, Peoples Bank or a related entity.
SECTION 2.14. TITLE TO PROPERTIES; INSURANCE. Peoples and Peoples Bank
------------ ------------------------------
have marketable title, insurable at standard rates, free and clear of all liens,
charges and encumbrances (except taxes which are a lien but not yet payable and
25
liens, charges or encumbrances reflected in the Peoples Financial Statements and
easements, rights-of-way, and other restrictions which are not material and, in
the case of Other Real Estate Owned, as such real estate is internally
classified on the books of Peoples Bank, rights of redemption under applicable
law) to all real properties reflected on the Peoples Financial Statements as
being owned by Peoples or Peoples Bank, respectively. All material leasehold
interests used by Peoples and Peoples Bank in their respective operations are
held pursuant to lease agreements which are valid and enforceable in accordance
with their terms. All such properties comply in all material respects with all
applicable private agreements, zoning requirements and other governmental laws
and regulations relating thereto and there are no condemnation proceedings
pending or, to the knowledge of Peoples, threatened with respect to such
properties. Peoples and Peoples Bank have valid title or other ownership or use
rights under licenses to all material intangible personal or intellectual
property used by Peoples and Peoples Bank in their respective business free and
clear of any claim, defense or right of any other person or entity which is
material to such property, subject only to rights of the licensor pursuant to
applicable license agreements, which rights do not materially adversely
interfere with the use or enjoyment of such property. All insurable properties
owned or held by Peoples or Peoples Bank are insured in such amounts, and
against fire and other risks insured against by extended coverage and public
liability insurance, as is customary with companies of the same size and in the
same business.
26
SECTION 2.15. ENVIRONMENTAL MATTERS.
------------ ---------------------
(hh) As used in this Agreement, "Environmental Laws" means all local, state
and federal environmental, health and safety laws and regulations in all
jurisdictions in which Peoples or Peoples Bank has done business or owned
property, including, without limitation, the Federal Resource Conservation and
Recovery Act, the Federal Comprehensive Environmental Response, Compensation and
Liability Act, the Federal Clean Water Act, the Federal Clean Air Act, and the
Federal Occupational Safety and Health Act.
27
(ii) Neither (i) the conduct by Peoples and Peoples Bank of operations at
any property, nor (ii) any condition of any property owned by Peoples or Peoples
Bank within the past ten (10) years and used in their business operations, nor
(iii) to the knowledge of Peoples the condition of any property owned by them
within the past ten (10) years but not used in their business operations, nor
(iv) to the knowledge of Peoples the condition of any property held by them as a
trust asset within the past ten (10) years, violates or violated Environmental
Laws in any material respect, and no condition or event has occurred with
respect to any such property that, with notice or the passage of time, or both,
would constitute a material violation of Environmental Laws or obligate (or
potentially obligate) Peoples or Peoples Bank to remedy, stabilize, neutralize
or otherwise alter the environmental condition of any such property. Neither
Peoples nor Peoples Bank has received any notice from any person or entity that
Peoples or Peoples Bank or the operation of any facilities or any property owned
by either of them, or held as a trust asset, are or were in violation of any
Environmental Laws or that either of them is responsible (or potentially
responsible) for the cleanup of any pollutants, contaminants, or hazardous or
toxic wastes, substances or materials at, on or beneath any such property.
SECTION 2.16. COMPLIANCE WITH LAW. Peoples and Peoples Bank each have all
------------ -------------------
material licenses, franchises, permits and other governmental authorizations
that are legally required to enable it to conduct their respective businesses as
presently conducted and are in compliance in all material respects with all
applicable laws and regulations, the violation of which would be material.
SECTION 2.17. BROKERAGE. Except as set forth in the Disclosure Schedule,
------------ ---------
there are no claims, agreements, arrangements, or understandings (written or
otherwise) for brokerage commissions, finders' fees or similar compensation in
connection with the Mergers payable by Peoples or Peoples Bank.
SECTION 2.18. MATERIAL CONTRACTS. Except as set forth in the Disclosure
------------ ------------------
Schedule, neither Peoples nor Peoples Bank is a party to or bound by any oral or
written (i) material agreement, contract or indenture under which it has
borrowed or will borrow money (not including federal funds and money deposited,
including without limitation, checking and savings accounts and certificates of
deposit and borrowings from the FHLBB and the FRB); (ii) material guaranty of
any obligation for the borrowing of money or otherwise, excluding endorsements
made for collection and guarantees made in the ordinary course of business and
letters of credit issued in the ordinary course of business; (iii) contract,
arrangement or understanding with any present or former officer, director or
shareholder (except for deposit or loan agreements entered into in the ordinary
course of business); (iv) material license, whether as licensor or licensee; (v)
contract or commitment for the purchase of materials, supplies or other real or
personal property in an amount in excess of $10,000 or for the performance of
services over a period of more than thirty days and involving an amount in
excess of $10,000; (vi) joint venture or partnership agreement or arrangement;
(vii) contract arrangement or understanding with any present or former
consultant, advisor, investment banker, broker, attorney or accountant; or
(viii) contract, agreement or other commitment not made in the ordinary course
of business.
SECTION 2.19. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT. (a) To the
------------ -----------------------------------------------
best of Peoples's knowledge, Peoples and Peoples Bank and their respective
properties (including those held by either of them in a fiduciary capacity) are
in compliance with all applicable provisions of the Americans with Disabilities
Act (the "ADA"), and (b) no action under the ADA against Peoples, Peoples Bank
or any of its properties has been initiated nor, to the best of Peoples's
knowledge, has been threatened or contemplated.
29
SECTION 2.20. STATEMENTS TRUE AND CORRECT. None of the information
------------ ---------------------------
supplied or to be supplied by Peoples or Peoples Bank for inclusion in any
documents to be filed with the FRB, the OCC, the SEC, the IDFI, or any other
regulatory authority in connection with the Mergers will, at the respective
times such documents are filed, be false or misleading with respect to any
material fact or omit to state any material fact necessary in order to make the
statements therein not misleading.
SECTION 2.21. PEOPLES'S KNOWLEDGE. With respect to representations and
------------ -------------------
warranties herein that are made or qualified as being made "to the knowledge of
Peoples" or words of similar import, it is understood and agreed that matters
within the knowledge of the directors and the officers of Peoples and Peoples
Bank shall be considered to be within the knowledge of Peoples.
ARTICLE THREE
-------------
REPRESENTATIONS OF GERMAN AMERICAN, GAHC AND UNION
--------------------------------------------------
German American, GAHC and Union hereby severally make the following
representations and warranties:
SECTION 3.01. ORGANIZATION AND CAPITAL STOCK.
------------ ------------------------------
30
(jj) German American is a corporation duly incorporated and validly
existing under the IBCL and has the corporate power to own all of its property
and assets, to incur all of its liabilities and to carry on its business as now
being conducted.
(kk) GAHC is a corporation duly incorporated and validly existing under the
IBCL and has the corporate power to own all of its property and assets, to incur
all of its liabilities and to carry on its business as now being conducted.
(ll) Union is a corporation duly incorporated and validly existing under
the IFIA and has the corporate power to own all of its property and assets, to
incur all of its liabilities and to carry on its business as now being
conducted.
(mm) German American has authorized capital stock of (i) 5,000,000 shares
of German American Common, of which, as of the date of this Agreement, 1,827,546
shares are issued and outstanding, and (ii) 500,000 shares of preferred stock,
$10.00 par value per share, of which no shares are issued and outstanding. All
of the issued and outstanding shares of German American Common are duly and
validly issued and outstanding, fully paid and non-assessable.
(nn) GAHC has authorized capital stock of 200,000 shares of common stock,
$1 par value per share (the "GAHC Common"), and 12,000 shares of preferred
stock, $1 par value. As of the date of this Agreement, 9,999 of the issued and
outstanding shares of GAHC Common are duly and validly issued and outstanding,
fully paid and non-assessable, and none of the shares of GAHC preferred stock
are issued or outstanding.
(oo) Union has authorized capital stock of 4,800 shares of common stock,
$100 par value per share (the "Union Common"). As of the date of this
Agreement, all of the shares of Union Common are duly and validly issued and
outstanding, fully paid, and owned by German American.
(pp) The shares of German American Common that are to be issued to the
shareholders of Peoples pursuant to the Holding Company Merger have been duly
authorized and, when issued in accordance with the terms of this Agreement, will
be validly issued and outstanding, fully paid and non-assessable.
SECTION 3.02. AUTHORIZATION. The Boards of Directors of German American,
------------ -------------
GAHC and Union have each, by all appropriate action, approved this Agreement and
the Mergers and authorized the execution hereof on their behalf by their duly
authorized officers and the performance by each such entity of its obligations
hereunder. Nothing in the Articles of Incorporation or Bylaws of German
American, GAHC or Union, as amended, or any other agreement, instrument, decree,
proceeding, law or regulation (except as specifically referred to in or
contemplated by this Agreement) by or to which either of them or any of their
subsidiaries is bound or subject would prohibit German American, GAHC or Union
from entering into and consummating this Agreement and the Mergers on the terms
and conditions herein contained. This Agreement has been duly and validly
executed and delivered by German American, GAHC and Union and constitutes a
legal, valid and binding obligation of German American, GAHC and Union
enforceable against German American, GAHC and Union in accordance with its terms
and no other corporate acts or proceedings are required to be taken by German
American, GAHC or Union to authorize the execution, delivery and performance of
this Agreement. Except for any requisite approvals of the FRB, OCC and IDFI and
the filing of a registration statement with the SEC and certain state securities
regulatory agencies, no notice to, filing with, authorization by, or consent or
approval of, any federal or state regulatory authority is necessary for the
execution and delivery of this Agreement or the consummation of the Mergers by
German American, GAHC or Union.
32
SECTION 3.03. SUBSIDIARIES. Each of German American's subsidiaries is
------------ ------------
duly organized and validly existing under the laws of the jurisdiction of its
incorporation and has the corporate power to own its respective properties and
assets, to incur its respective liabilities and to carry on its respective
business as now being conducted.
SECTION 3.04. FINANCIAL INFORMATION. The consolidated balance sheet of
------------ ---------------------
German American and its subsidiaries as of December 31, 1995 and related
consolidated statements of income, changes in shareholders' equity and cash
flows for the year then ended together with the notes thereto, included in
German American's most recent Annual Report on Form 10-K, as filed with the SEC
(the "10-K"), and the unaudited consolidated balance sheets of German American
and its subsidiaries as of March 31 and June 30, 1996, and the related unaudited
consolidated statements of income, changes in shareholders' equity and cash
flows for the periods then ended included in German American's Quarterly Reports
on Form 10-Q for the quarters ended March 31 and June 30, 1996 as filed with the
SEC (the "10-Q Reports") (collectively the financial statements and notes
thereto included in the 10-Q Reports and the 10-K are sometimes referred to as
the "German American Financial Statements"), have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
(except as disclosed therein) and fairly present the consolidated financial
position and the consolidated results of operations, changes in shareholders'
equity and cash flows of German American and its consolidated subsidiaries as of
the dates and for the periods indicated (subject, in the case of interim
financial statements, to normal recurring year-end adjustments, none of which
will be material).
33
SECTION 3.05. ABSENCE OF CHANGES. Since December 31, 1995 (and except to
------------ ------------------
the extent reflected in the 10-Q Reports), there has not been any material
adverse change in the consolidated financial condition or the consolidated
results of operations or the business of German American and its subsidiaries,
taken as a whole.
SECTION 3.06. REPORTS. Since January 1, 1993 (or, in the case of
------------ -------
subsidiaries of German American, the date of acquisition thereof by German
American, if later), German American and each of its subsidiaries have filed all
reports, notices and other statements, together with any amendments required to
be made with respect thereto, that it was required to file with (i) the SEC,
(ii) the FRB, (iii) the FDIC, (iv) the IDFI, (v) any applicable state securities
or banking authorities, and (vi) any other governmental authority with
jurisdiction over German American or any of its subsidiaries. As of their
respective dates, each of such reports and documents, as amended, including the
financial statements, exhibits and schedules thereto, complied in all material
respects with the relevant statutes, rules and regulations enforced or
promulgated by the regulatory authority with which they were filed. None of the
information included in such reports or documents was, at their respective dates
of filing, false or misleading with respect to any material fact, or omitted to
state any material fact necessary in order to make the statements therein not
misleading, on a consolidated basis, taking into account the circumstances under
which such reports or documents were filed and considering the total mix of
information that was at the time publicly available concerning German American
and its subsidiaries.
SECTION 3.07. ABSENCE OF LITIGATION. There is no material litigation,
------------ ---------------------
claim or other proceeding pending or, to the knowledge of German American,
34
threatened, before any judicial, administrative or regulatory agency or tribunal
against German American or any of its subsidiaries, or to which the property of
German American or any of its subsidiaries is subject, which is required to be
disclosed in SEC reports under Item 103 of Regulation S-K, and which has not
been so disclosed.
SECTION 3.08. ABSENCE OF AGREEMENTS WITH BANKING AUTHORITIES. Neither
------------ ----------------------------------------------
German American nor any of its subsidiaries is subject to any order (other than
orders applicable to bank holding companies or banks generally) or is a party to
any agreement or memorandum of understanding with any federal or state agency
charged with the supervision or regulation of banks or bank holding companies,
including without limitation the FDIC, the DFI and the FRB.
SECTION 3.09. COMPLIANCE WITH LAW. German American and its subsidiaries
------------ -------------------
have all material licenses, franchises, permits and other governmental
authorizations that are legally required to enable them to conduct their
respective businesses as presently conducted and are in compliance in all
material respects with all applicable laws and regulations, the violation of
which would be material.
ARTICLE FOUR
------------
COVENANTS OF PEOPLES AND PEOPLES BANK
-------------------------------------
SECTION 4.01. CONDUCT OF BUSINESS.
------------ -------------------
(qq) Peoples and Peoples Bank shall continue to carry on their respective
businesses, and shall discharge or incur obligations and liabilities, only in
35
the ordinary course of business as heretofore conducted and, by way of
amplification and not limitation with respect to such obligation, neither
Peoples nor Peoples Bank will, without the prior written consent of German
American:
36
i) declare or pay any dividend or make any other distribution to
shareholders, whether in cash, stock or other property, except as provided
in Section 4.09 of this Agreement; or
ii) issue (or agree to issue) any common or other capital stock or
any options, warrants or other rights to subscribe for or purchase common
or any other capital stock or any securities convertible into or
exchangeable for any capital stock; or
iii) directly or indirectly redeem, purchase or otherwise acquire (or
agree to redeem, purchase or acquire) (except for shares acquired in
satisfaction of a debt previously contracted) any of their own common or
any other capital stock; or
iv) effect a split, reverse split, reclassification, or other similar
change in, or of, any common or other capital stock or otherwise reorganize
or recapitalize; or
v) change the Articles of Incorporation or Bylaws of Peoples or the
Articles of Association or Bylaws of Peoples Bank; or
vi) pay or agree to pay, conditionally or otherwise, any bonus (other
than year end bonuses up to a maximum of $120,000 in accordance with
existing plans and policies consistent with past practice, provided that
the income base used for purposes of calculating bonuses shall exclude net
gain from the sale of investment securities, loans and other assets even if
past bonus practice would not have excluded such net gain), additional
compensation (other than ordinary and normal salary increases consistent
with past practices) or severance benefit or otherwise make any changes out
of the ordinary course of business with respect to the fees or compensation
payable or to become payable to consultants, advisors, investment bankers,
brokers, attorneys, accountants, directors, officers or employees or,
except as required by law, adopt or make any change in any Employee Plan or
other arrangement or payment made to, for or with any of such consultants,
advisors, investment bankers, brokers, attorneys, accountants, directors,
officers or employees; provided, however, that Peoples and Peoples Bank may
pay the fees, expenses and other compensation of consultants, advisors,
investment bankers, brokers, attorneys and accountants when, if, and as
earned in accordance with the terms of the contracts, arrangements or
understandings of Peoples or Peoples Bank specifically disclosed on the
Disclosure Schedule;
vii) borrow or agree to borrow any material amount of funds except in
the ordinary course of business, or directly or indirectly guarantee or
agree to guarantee any material obligations of others except in the
ordinary course of business or pursuant to outstanding letters of credit;
or
viii) make or commit to make any new loan or issue or commit to
issue any new letter of credit or any new or additional discretionary
advance under any existing line of credit, or purchase or agree to purchase
any interest in a loan participation, in aggregate principal amounts (A) in
excess of $250,000 to any one borrower (or group of affiliated borrowers)
or (B) that would cause Peoples Bank's credit extensions or commitments to
any one borrower (or group of affiliated borrowers) to exceed $750,000
(German American's consent to credit extensions in the ordinary course of
business will not be unreasonably withheld); or
ix) other than U.S. Treasury obligations or asset-backed securities
issued or guaranteed by United States governmental agencies or financial
institution certificates of deposit insured by the FDIC, in either case
having an average remaining life of five years or less (except that
38
maturities may extend to seven years on variable-rate securities), purchase
or otherwise acquire any investment security for their own accounts, or
sell any investment security owned by either of them which is designated as
held-to-maturity, or engage in any activity that would require the
establishment of a trading account for investment securities; or
x) increase or decrease the rate of interest paid on time deposits,
or on certificates of deposit, except in a manner and pursuant to policies
consistent with past practices; or
xi) enter into or amend any agreement, contract or commitment out of
the ordinary course of business; or
xii) except in the ordinary course of business, place on any of their
assets or properties any mortgage, pledge, lien, charge, or other
encumbrance; or
(xiii) except in the ordinary course of business, cancel, release,
compromise or accelerate any material indebtedness owing to Peoples or
Peoples Bank, or any claims which either of them may possess, or
voluntarily waive any material rights with respect thereto; or
xiv) sell or otherwise dispose of any real property or any material
amount of any personal property other than properties acquired in
foreclosure or otherwise in the ordinary course of collection of
indebtedness to Peoples or Peoples Bank; or
xv) foreclose upon or otherwise take title to or possession or
control of any real property without first obtaining a phase one
39
environmental report thereon, prepared by a reliable and qualified person
or firm acceptable to German American, which indicates that the property is
free of pollutants, contaminants or hazardous or toxic waste materials;
provided, however, that neither Peoples nor Peoples Bank shall be required
to obtain such a report with respect to single family, non-agricultural
residential property of one acre or less to be foreclosed upon unless it
has reason to believe that such property might contain such materials or
otherwise might be contaminated; or
xvi) commit any act or fail to do any act which will cause a material
breach of any material agreement, contract or commitment; or
xvii) violate any law, statute, rule, governmental regulation or
order, which violation might have a material adverse effect on its
business, financial condition, or earnings; or
xviii) purchase any real or personal property or make any other
capital expenditure where the amount paid or committed therefor is in
excess of $50,000 other than purchases of property made in the ordinary
course of business in connection with loan collection activities or
foreclosure sales in connection with any of Peoples's or Peoples Bank's
loans, or
xix) issue certificate(s) for shares of Peoples Common to any Peoples
shareholder in replacement of certificate(s) claimed to have been lost or
destroyed without first obtaining from such shareholder(s), at the expense
of such shareholder(s), a surety bond from a recognized insurance company
in an amount that would indemnify Peoples (and its successors) against lost
certificate(s) but not less than $50 per share of Peoples Common, and
40
obtaining a usual and customary affidavit of loss and indemnity agreement
from such shareholder(s); provided, however, that Peoples may waive the
surety bond requirement in connection with the issuance of replacement
certificates to any shareholder if the number of shares of Peoples Common
so reissued (together with the number of shares previously reissued since
July 3, 1996 to such shareholder and all other shareholders who are
affiliated or associated with such shareholder) does not exceed an
aggregate of 300 shares.
(rr) Neither Peoples nor Peoples Bank shall, without the prior written
consent of German American, engage in any transaction or take any other action
that would render untrue in any material respect any of the representations and
warranties of Peoples or Peoples Bank contained in Article Two hereof if such
representations and warranties were given as of the date of such transaction or
action.
(ss) Peoples shall promptly notify German American in writing of the
occurrence of any matter or event known to Peoples or Peoples Bank that is, or
is likely to become, materially adverse to the business, operations, properties,
assets or condition (financial or otherwise) of Peoples or Peoples Bank taken as
a whole.
(tt) Neither Peoples nor Peoples Bank shall (a) directly or indirectly
solicit, encourage or facilitate (nor shall they permit any of their respective
officers, directors, employees or agents directly or indirectly to solicit,
encourage or facilitate), including by way of furnishing information other than
the terms of this Agreement, any inquiries or proposals from third parties for a
merger, consolidation, share exchange or similar transaction involving Peoples
or Peoples Bank or for the acquisition of the stock or substantially all of the
41
assets or business of peoples or Peoples Bank, or (b) subject to the fiduciary
duties of the Directors of Peoples as advised by counsel in a written opinion,
discuss with or enter into conversations with any person concerning any such
merger, consolidation, share exchange, acquisition or other transaction.
Peoples shall promptly notify German American orally (to be confirmed in writing
as soon as practicable thereafter) of all of the relevant details concerning any
inquiries or proposals that it may receive relating to any such matters,
including actions it intends to take with respect to such matters.
SECTION 4.02. BREACHES. Peoples shall, in the event it has knowledge of
------------ --------
the occurrence of any event or condition which would cause or constitute a
breach (or would have caused or constituted a breach had such event occurred or
been known prior to the date of this Agreement) of any of its or Peoples Bank's
representations or agreements contained or referred to in this Agreement, give
prompt notice thereof to German American and use its best efforts to prevent or
promptly remedy the same.
SECTION 4.03. SUBMISSION TO SHAREHOLDERS. Peoples shall cause to be duly
------------ --------------------------
called and held, on a date mutually selected by German American and Peoples, a
special meeting of its shareholders (the "Peoples Shareholders' Meeting") for
submission of this Agreement and the Holding Company Merger for approval of
Peoples shareholders as required by the IBCL. In connection with the Peoples
Shareholders' Meeting, (i) Peoples shall cooperate with and assist German
American in preparing and filing a Proxy Statement/Prospectus (the "Proxy
Statement/Prospectus") with the SEC in accordance with SEC requirements and
Peoples shall mail it to its shareholders, (ii) Peoples shall furnish German
American all information concerning itself that German American may reasonably
request in connection with such Proxy Statement/Prospectus, and (iii) the Board
42
of Directors of Peoples shall (unless in the written opinion of counsel for
Peoples the fiduciary duties of the Board of Directors prohibit such a
recommendation, in which event the individual members of the Board of Directors
shall nevertheless remain personally obligated to support the Agreement and the
Holding Company Merger pursuant to their personal undertakings on the signature
page of this Agreement) unanimously recommend to its shareholders the approval
of this Agreement and the Holding Company Merger contemplated hereby and use its
best efforts to obtain such shareholder approval.
SECTION 4.04. FINANCIAL INFORMATION. Peoples will, at its expense,
------------ ---------------------
commence preparation of financial statements, Guide 3 statistical data, selected
financial data, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" (Items 301, 302, 303 and 304(b) of SEC Regulation S-
K) ("MD&A") in compliance with SEC requirements for inclusion in the
Registration Statement, including unaudited financial statements and related
Guide 3 and MD&A as of and for the appropriate quarterly and year-to-date
periods ending September 30, 1996, and Peoples shall use its best efforts to
provide such financial statements and data and MD&A to German American in ▇▇▇▇▇
format as soon as practicable but in no event later than October 21, 1996.
SECTION 4.05. CONSUMMATION OF AGREEMENT. Peoples shall use its best
------------ -------------------------
efforts to perform and fulfill all conditions and obligations on its part to be
performed or fulfilled under this Agreement and to effect the Mergers in
accordance with the terms and provisions hereof. Peoples shall furnish to
German American in a timely manner all information, data and documents in the
possession of Peoples or Peoples Bank requested by German American as may be
required to obtain any necessary regulatory or other approvals of the Mergers
(including the application of Peoples Bank to the OCC under the Bank Merger Act
43
with respect to the Bank Merger) or to file with the SEC a registration
statement on Form S-4 (the "Registration Statement") relating to the shares of
German American Common to be issued to the shareholders of Peoples pursuant to
the Mergers and this Agreement, and shall otherwise cooperate fully with German
American to carry out the purpose and intent of this Agreement.
SECTION 4.06. ENVIRONMENTAL REPORTS. Except as German American shall
------------ ---------------------
otherwise consent with respect to any residential real estate (which consent
will not be unreasonably withheld by German American), Peoples shall, at German
American's expense, cooperate with an environmental consulting firm designated
by German American in connection with the conduct by such firm of a phase one
environmental investigation on all real property owned or leased by Peoples or
its subsidiaries as of the date of this Agreement, and any real property
acquired or leased by Peoples or its subsidiaries after the date of this
Agreement, except as otherwise provided in Section 4.01(a)(xv). If further
investigation procedures are required as to any property by the report of the
phase one investigation in German American's reasonable opinion, Peoples shall
as soon as practicable, at Peoples's expense, commission the taking of such
further procedures and provide a report of the results of such further
procedures to German American. German American shall have fifteen (15) business
days from the receipt of any such investigation report to notify Peoples of any
objection to the contents of any such report. Should the cost of taking all
remedial and corrective actions and measures (i) required by applicable law, or
(ii) recommended or suggested by such report or reports and prudent in light of
the findings of such report, in the aggregate, exceed the sum of $100,000, as
reasonably estimated by the environmental expert retained for such purpose by
German American and reasonably acceptable to Peoples, or if the cost of such
actions and measures cannot be so reasonably estimated by such expert with any
reasonable degree of certainty, then German American shall have the right
44
pursuant to Section 7.03 hereof, for a period of 10 business days following
receipt of such estimate or indication that the cost of such actions and
measures cannot be so reasonably estimated, to terminate this Agreement without
further obligation to Peoples, which shall be German American's sole remedy in
such event.
SECTION 4.07. RESTRICTION ON RESALES. Peoples shall obtain and deliver to
------------ ----------------------
German American, at least thirty (30) days prior to the Closing Date, signed
representations, in form reasonably acceptable to German American, of each
shareholder who may reasonably be deemed an "affiliate" of Peoples as of the
date of the Shareholders' Meeting within the meaning of such term as used in
Rule 145 under the Securities Act of 1933, as amended (the "Securities Act"),
regarding their prospective compliance with the provisions of such Rule 145.
Peoples shall also obtain and deliver to German American at least 30 days prior
to the Closing Date, the signed agreements of each shareholder who may
reasonably be deemed an "affiliate" (as such term is described in the preceding
sentence) of Peoples as of the date of the Shareholders' Meeting agreeing not to
sell any shares of German American Common or otherwise reduce his or her risk
relative to such shares, until such time as financial results covering at least
thirty (30) days of post-Merger combined operations have been filed by German
American with the SEC in a quarterly report on Form 10-Q or in an annual report
on Form 10-K.
SECTION 4.08. ACCESS TO INFORMATION. Peoples shall permit German American
------------ ---------------------
reasonable access, in a manner which will avoid undue disruption or interference
with Peoples's normal operations, to its and Peoples Bank's properties and shall
disclose and make available to German American all books, documents, papers and
records relating to its and Peoples Bank's assets, stock, ownership, properties,
45
operations, obligations and liabilities, including, but not limited to, all
books of account (including general ledgers), tax records, minute books of
directors' and shareholders' meetings, organizational documents, material
contracts and agreements, loan files, filings with any regulatory authority,
accountants' workpapers, litigation files, plans affecting employees, and any
other business activities or prospects in which German American may have an
interest in light of the transactions contemplated by this Agreement. During the
period from the date of this Agreement to the Effective Time, Peoples will cause
one or more of it or Peoples Bank's designated representatives to confer on a
regular basis with the President of German American, or any other person
designated in a written notice given to Peoples by German American pursuant to
this Agreement, to report the general status of the ongoing operations of
Peoples and Peoples Bank. Peoples will promptly notify German American of any
material change in the normal course of the operation of its business or
properties and of any regulatory complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or the institution
or the threat of litigation involving Peoples or Peoples Bank, and will keep
German American fully informed of such events. German American will hold any
such information which is nonpublic in confidence in accordance with the
provisions of Section 8.01 hereof.
SECTION 4.09. DIVIDENDS. Notwithstanding Section 4.01(a) of this
------------ ---------
Agreement, Peoples may (in the absence of any material adverse change in its
consolidated financial condition, results of operations, or business other than
the adverse change that is expected to result from the expenses associated with
the Mergers), continue to declare and pay quarterly cash dividends (during
September and December 1996 for the respective quarters ending September 30 and
December 31, 1996 and during the third month of each subsequent calendar quarter
with respect to that calendar quarter) to Peoples shareholders in a quarterly
46
amount not exceeding $.07 per share of Peoples Common, or an aggregate of not
more than $.28 per share for 1996.
German American typically considers the declaration of cash dividends on
German American Common at meetings of its Board of Directors held the first
month of each calendar quarter, and typically declares any such dividends to be
payable to holders of record of German American Common as of a subsequent date
that is within the same calendar month as the month of declaration. In order to
assure that Peoples shareholders will be entitled to receive, at the end of each
calendar quarter, a dividend with respect to his or her Peoples Common, or a
dividend with respect to the German American Common to be exchanged therefor
pursuant to the Holding Company Merger, but not both, Peoples shall (commencing
with its dividend for the first quarter of 1997 expected to be considered at the
March 1997 meeting of the Peoples Board if the Effective Time has for any reason
not then occurred) declare its quarterly dividends to be payable to its
shareholders of record as of a date that is after the date in the following
month that is established by German American as the record date for the
following month's cash dividend with respect to German American Common.
ARTICLE FIVE
------------
COVENANTS OF GERMAN AMERICAN AND UNION
--------------------------------------
SECTION 5.01. REGULATORY APPROVALS AND REGISTRATION STATEMENT.
------------ -----------------------------------------------
47
(uu) German American shall file (or cause GAHC and Union to file or
cooperate with Peoples and Peoples Bank in filing) all regulatory applications
required in order to consummate the Mergers, including all necessary
applications for the prior approvals of the FRB, the OCC, and the IDFI. German
American shall use its best efforts to cause such banking agency regulatory
applications to be filed on or before September 16, 1996. German American shall
keep Peoples reasonably informed as to the status of such applications and
promptly send or deliver copies of such applications, and of any supplementally
filed materials, to counsel for Peoples.
(vv) German American shall file with the SEC the Registration Statement
relating to the shares of German American Common to be issued to the
shareholders of Peoples pursuant to this Agreement, and shall use its best
efforts to file such Registration Statement by November 7, 1996 and shall use
its best efforts to cause the Registration Statement to become effective as soon
as practicable. At the time the Registration Statement becomes effective, the
form of the Registration Statement shall comply in all material respects with
the provisions of the Securities Act and the published rules and regulations
thereunder, and shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not false or misleading. At the time of the mailing
thereof to the shareholders of Peoples and German American and at the time of
the Peoples Shareholders' Meeting, and the German American Shareholder Meeting
the Proxy Statement/Prospectus included as part of the Registration Statement,
as amended or supplemented by any amendment or supplement, shall not contain any
untrue statement of a material fact or omit to state any material fact regarding
German American or the Holding Company Merger necessary to make the statements
therein not false or misleading. German American shall timely file all
documents required to obtain all necessary Blue Sky permits and approvals, if
any, required to carry out the Merger shall pay all expenses incident thereto
and shall use its best efforts to obtain such permits and approvals on a timely
basis. German American shall promptly and properly prepare and file any other
filings required under the Securities Exchange Act of 1934 (the "Exchange Act")
relating to the Mergers, or otherwise required of it under the Exchange Act
prior to the Effective Time, and shall deliver copies thereof to Peoples's
counsel promptly upon the filing thereof with the SEC.
SECTION 5.02. BREACHES. German American shall, in the event it has
------------ --------
knowledge of the occurrence of any event or condition which would cause or
constitute a breach (or would have caused or constituted a breach had such event
occurred or been known prior to the date of this Agreement) of any of its
representations or agreements contained or referred to in this Agreement, give
prompt notice thereof to Peoples and use its best efforts to prevent or promptly
remedy the same.
SECTION 5.03. CONSUMMATION OF AGREEMENT. German American shall use its
------------ -------------------------
best efforts to perform and fulfill all conditions and obligations to be
performed or fulfilled under this Agreement and to effect the Mergers in
accordance with the terms and conditions of this Agreement, and use its best
efforts to cause the Closing to occur on January 31, 1997 or as soon thereafter
as practicable.
SECTION 5.04. DIRECTORS' AND OFFICERS' INDEMNIFICATION.
------------ ----------------------------------------
(ww) Following the Effective Time, German American will provide the
directors and officers of Peoples and Peoples Bank from time to time with the
same directors' and officers' liability insurance coverage that German American
provides to directors and officers of its other banking subsidiaries.
49
(xx) For six (6) years after the Effective Time, German American shall (and
shall cause the Surviving Bank to) indemnify, defend and hold harmless the
present and former officers and directors of Peoples and Peoples Bank (each, an
"Indemnified Party") against all losses, expenses, claims, damages or
liabilities arising out of actions or omissions (arising from their present or
former status as officers or directors) occurring on or prior to the Effective
Time to the full extent then permitted under the applicable provisions of the
IBCL and the National Bank Act and public policy.
(yy) If during the six (6) year period after the Effective Time German
American or the Surviving Bank or any of its or their successors or assigns (i)
shall consolidate with or merge into any other corporation or entity and shall
not be the continuing or surviving corporation or entity of such consolidation
or merger or (ii) shall transfer all or substantially all of its properties and
assets to any individual, corporation or other entity, then and in each such
case, proper provision shall be made so that the successors and assigns of
German American and/or the Surviving Bank shall assume the obligations set forth
in this Section 5.04.
SECTION 5.05. BOARD OF DIRECTORS REPRESENTATION. German American shall
------------ ---------------------------------
cause the Chairman of the Board of Peoples and one other mutually acceptable
representative of the Board of Peoples (as it is constituted immediately prior
to the Effective Time) to be appointed to the Board of Directors of German
American promptly after the Effective Time.
SECTION 5.06. PRESERVATION OF BUSINESS. German American shall: (a)
------------ ------------------------
conduct its business substantially in the manner as is presently being conducted
and in the ordinary course of business and not amend its articles of
incorporation in any manner that requires the approval of shareholders of German
American under the IBCL; (b) file, and cause its subsidiaries to file, all
required reports with applicable regulatory authorities; (c) comply with all
laws, statutes, ordinances, rules or regulations applicable to it and to the
conduct of its business, the noncompliance with which results or could result in
a material adverse effect on the financial condition, results of operations,
business, assets or capitalization of German American on a consolidated basis;
and (d) comply in all material respects with each contract, agreement,
commitment, obligation, understanding, arrangement, lease or license to which it
is a party by which it is or may be subject or bound, the breach of which could
result in a material adverse effect on the financial condition, results of
operations, business, assets or capitalization of German American on a
consolidated basis.
SECTION 5.07. SECURITIES AND EXCHANGE COMMISSION FILINGS. German American
------------ ------------------------------------------
will provide Peoples with copies of all filings made by German American with the
SEC under the Securities Exchange Act of 1934 ("1934 Act"), and the Securities
Act of 1933 ("1933 Act") and the respective rules and regulations of the SEC
thereunder as soon as practicable after such filings are made at any time prior
to the Effective Time.
SECTION 5.08. RULE 144(C) INFORMATION. For not less than the two-year
------------ -----------------------
period immediately following the Effective Time, German American shall make
available adequate current public information about itself as that terminology
is used in and as required by Rule 144(c) of the SEC under the 1933 Act.
SECTION 5.09. AUTHORIZATION OF COMMON STOCK. On the Effective Time and on
------------ -----------------------------
such subsequent dates when the former shareholders of Peoples surrender their
Peoples share certificates for cancellation, the shares of German American
Common to be exchanged with former shareholders of Peoples shall have been duly
51
authorized and validly issued by German American and shall be fully paid and
non-assessable and subject to no pre-emptive rights.
SECTION 5.10. PAST SERVICE CREDIT. Employees of Peoples Bank shall
------------ -------------------
receive full vesting and eligibility credit under German American's defined
contribution retirement plans for their years of service to Peoples Bank.
SECTION 5.11. COMMUNITY FOUNDATION. If Peoples Bank determines following
------------ --------------------
the Effective Time to form a non-profit foundation, managed by its Board of
Directors for the benefit of the communities served by Peoples Bank, German
American will support the initial year's funding by Peoples Bank of such
foundation of at least $28,000 and future years' fundings at levels not less
than Peoples Bank's past charitable contributions practices.
ARTICLE SIX
-----------
CONDITIONS PRECEDENT TO THE MERGERS
-----------------------------------
SECTION 6.01. CONDITIONS OF GERMAN AMERICAN'S AND UNION'S OBLIGATIONS.
------------ -------------------------------------------------------
German American's and Union's obligations to effect the Mergers shall be subject
to the satisfaction (or waiver by German American, GAHC and Union) prior to or
on the Closing Date of the following conditions:
(zz) The representations and warranties made by Peoples and Peoples Bank in
this Agreement shall be true in all material respects on and as of the Closing
Date with the same effect as though such representations and warranties had been
made or given on and as of the Closing Date.
52
(aaa) Peoples and Peoples Bank shall have performed and complied in all
material respects with all of its obligations and agreements required to be
performed on or prior to the Closing Date under this Agreement.
(bbb) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other legal restraint or prohibition preventing the consummation of the Mergers
shall be in effect, nor shall any proceeding by any bank regulatory authority,
governmental agency or other person seeking any of the foregoing be pending.
There shall not be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Mergers which makes the
consummation of the Mergers illegal.
(ccc) All necessary regulatory approvals, consents, authorizations and
other approvals required by law for consummation of the Mergers shall have been
obtained and all waiting periods required by law shall have expired.
(ddd) German American shall have received the environmental reports
required by Sections 4.06 and 4.01(a)(xv) hereof and shall not have elected,
pursuant to Section 4.06 hereof, to terminate and cancel this Agreement.
(eee) German American shall have received all documents required to be
received from Peoples or Peoples Bank on or prior to the Closing Date, all in
form and substance reasonably satisfactory to German American.
(fff) German American shall have received a letter, dated as of the
Effective Time, from ▇▇▇▇▇, ▇▇▇▇▇▇ & Co., its independent public accountants, to
the effect that the Mergers will qualify for pooling of interests accounting
treatment under Accounting Principles Board Opinion No. 16 if closed and
consummated in accordance with this Agreement.
(ggg) The Registration Statement shall be effective under the
Securities Act and no stop orders suspending the effectiveness of the
Registration Statement shall be in effect or proceedings for such purpose
pending before or threatened by the SEC.
(hhh) German American shall have received from its counsel, Leagre &
▇▇▇▇▇▇, an opinion to the effect that if the Mergers are consummated in
accordance with the terms set forth in this Agreement, (i) the Holding Company
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code; (ii) no gain or loss will be recognized by the holders of shares of
Peoples Common upon receipt of the Merger consideration (except for cash
received in lieu of fractional shares); (iii) the basis of shares of German
American Common received by the shareholders of Peoples will be the same as the
basis of shares of Peoples Common exchanged therefor; and (iv) the holding
period of the shares of German American Common received by the shareholders of
Peoples will include the holding period of the shares of Peoples Common
exchanged therefor, provided such shares were held as capital assets as of the
Effective Time.
SECTION 6.02. CONDITIONS OF PEOPLES'S AND PEOPLES BANK'S OBLIGATIONS.
------------ ------------------------------------------------------
Peoples's and Peoples Bank's obligations to effect the Mergers shall be subject
to the satisfaction (or waiver by Peoples and Peoples Bank) prior to or on the
Closing Date of the following conditions:
(iii) The representations and warranties made by German American, GAHC
and Union in this Agreement shall be true in all material respects on and as of
the Closing Date with the same effect as though such representations and
warranties had been made or given on the Closing Date.
54
(jjj) German American, GAHC and Union shall each have performed and
complied in all material respects with all of its obligations and agreements
required to be performed prior to the Closing Date under this Agreement.
(kkk) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Mergers shall
be in effect, nor shall any proceeding by any bank regulatory authority, other
governmental agency or other person seeking any of the foregoing be pending.
There shall not be any action taken, or any statute, rule, regulation or order
enacted, enforced or deemed applicable to the Mergers which makes the
consummation of the Mergers illegal.
(lll) All necessary regulatory approvals, consents, authorizations and
other approvals required by law for consummation of the Mergers, including the
requisite approval of the Mergers by the shareholders of Peoples, shall have
been obtained and all waiting periods required by law shall have expired.
(mmm) Peoples shall have received all documents required to be received
from German American, GAHC and Union on or prior to the Closing Date, all in
form and substance reasonably satisfactory to Peoples.
(nnn) The Registration Statement shall be effective under the
Securities Act and no stop orders suspending the effectiveness of the
Registration Statement shall be in effect or proceedings for such purpose
pending before or threatened by the SEC.
(ooo) Peoples shall have received from counsel for German American,
Leagre & ▇▇▇▇▇▇, an opinion reasonably satisfactory to Peoples to the effect
that if the Mergers are consummated in accordance with the terms set forth in
this Agreement, (i) the Holding Company Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code; (ii) no gain or loss will be
recognized by the holders of shares of Peoples Common upon receipt of the Merger
Consideration (except for cash received in lieu of fractional shares); (iii) the
basis of German American Common received by the shareholders of Peoples will be
the same as the basis of Peoples Common exchanged therefor; and (iv) the holding
period of the shares of German American Common received by the shareholders of
Peoples will include the holding period of the shares of Peoples Common
exchanged therefor, provided such shares were held as capital assets as of the
Effective Time.
(ppp) Peoples shall have received an opinion of Austin Associates,
Inc., or another qualified investment banking firm or other qualified financial
expert, to the effect that, as of the date of the mailing of the Proxy
Statement/Prospectus to the shareholders of Peoples, the Holding Company Merger
was fair to the shareholders of Peoples from a financial point of view.
(qqq) Peoples shall have received a letter, dated as of the Effective
Time, from ▇▇▇▇▇, ▇▇▇▇▇▇ & Co., its independent public accountants, to the
effect that the Mergers will qualify for pooling of interests accounting
treatment under Accounting Principles Board Opinion No. 16 if closed and
consummated in accordance with this Agreement.
(rrr) The German American Common to be exchanged for the Peoples Common
pursuant to the Holding Company Merger shall have an aggregate value (as
measured by the per share average value of the German American Common during the
Valuation Period that is utilized to determine the Exchange Ratio pursuant to
Section 1.03(a)) of at least $21,100,000.
56
ARTICLE SEVEN
-------------
TERMINATION OR ABANDONMENT
--------------------------
SECTION 7.01. MUTUAL AGREEMENT. This Agreement may be terminated by the
------------ ----------------
mutual written agreement of the parties approved by their respective Boards of
Directors at any time prior to the Effective Time, regardless of whether
shareholder approval of this Agreement and the Mergers by the shareholders of
Peoples shall have been previously obtained.
SECTION 7.02. BREACH OF REPRESENTATIONS, WARRANTIES OR COVENANTS.
------------ --------------------------------------------------
(sss) In the event that there is a material breach in any of the
representations and warranties or covenants of the parties, which breach is not
cured within thirty (30) days after notice to cure such breach is given by the
non-breaching party, then the Board of Directors of the non-breaching party,
regardless of whether approval by the shareholders of this Agreement and the
Mergers shall have been previously obtained, and in addition to any other
remedies to which the non-breaching party may be entitled, may terminate and
cancel this Agreement effective immediately by providing written notice thereof
to the other party hereto.
57
(ttt) In the event that this Agreement is terminated (i) as a result of
the wilful failure of Peoples or Peoples Bank to perform its obligations in
violation of this Agreement or (ii) as the result of the making by any other
person or entity not a party to this Agreement of a proposal to Peoples or
Peoples Bank contemplating a merger, consolidation, plan of stock exchange, sale
of all or substantially all assets, or other business combination with Peoples
or Peoples Bank, then, in addition to whatever other legal rights or remedies to
which German American may be entitled, Peoples shall, upon German American's
demand, (x) pay to German American a termination fee of $422,000 within two
business days of termination and (y) reimburse German American for all its out-
of-pocket costs and expenses in connection with the Mergers incurred from and
after July 3, 1996, including its legal, accounting, environmental and other
consulting fees and expenses. If German American is entitled to collect the
termination fee, Peoples shall, in addition thereto, pay to German American all
costs, charges, expenses (including without limitation the fees and expenses of
counsel) and other amounts expended by German American in connection with or
arising out of the obligations of Peoples to pay all or a portion of the fee.
SECTION 7.03. ADVERSE ENVIRONMENTAL REPORTS. German American may
------------ -----------------------------
terminate this Agreement as provided by Section 4.06 by giving written notice
thereof to Peoples.
SECTION 7.04. FAILURE OF CONDITIONS. In the event any of the conditions
------------ ---------------------
to the obligations of either party are not satisfied or waived on or prior to
the Closing Date, and if any applicable cure period provided in Section 7.02
hereof has lapsed, then the Board of Directors of such party may, regardless of
whether approval by its shareholders of this Agreement and the Mergers shall
have been previously obtained, terminate and cancel this Agreement on the
Closing Date by delivery of written notice thereof to the other party on such
date.
SECTION 7.05. TERMINATION UPON ADVERSE REGULATORY DETERMINATION.
------------ -------------------------------------------------
59
In connection with the filings that the German American, GAHC, Union,
Peoples and/or Peoples Bank may be required to make in connection with the
Mergers with banking, securities, and antitrust regulatory agencies
("Agencies"), each party shall use their best efforts to obtain all necessary
approvals of, or clearances from, the Agencies, and shall cause their respective
agents and advisors to cooperate and use their best efforts in connection
therewith. German American (or its subsidiaries) shall be responsible for
making the required Merger filings (except to the limited extent that the
applicable law, regulations, or forms specify that Peoples (or Peoples Bank) is
the appropriate filing party) with the Agencies, and for discussing such filings
with the Agencies and responding to comments thereon. If any required filing is
disapproved by any of the Agencies, or any determination is made by any of the
Agencies that either of the Mergers cannot be consummated except on terms and
conditions that are materially adverse from a financial point of view to German
American or to the shareholders of Peoples (an "Adverse Determination"), then
German American shall promptly advise Peoples of such Adverse Determination and
German American's intended course of action with respect thereto. In the event
that German American in its sole discretion determines to seek a judicial or
regulatory appeal or review (formal or informal) of the Adverse Determination,
Peoples and Peoples Bank (and their agents and advisors) shall continue to
cooperate with such appeal and review procedure and use its best efforts to
assist in connection with obtaining reversal or modification of such Adverse
Determination. In the event that (a) German American in its sole discretion
elects not to seek an appeal or review of the Adverse Determination or elects in
its sole discretion at any time after seeking such an appeal or review to
discontinue that effort, or (b) German American seeks such an appeal or review
but all avenues for such appeal or review are exhausted without the Adverse
Determination having been vacated or overruled or modified in such a manner that
the Adverse Determination is no longer materially adverse ("Relief
Determination"), or (c) German American seeks such an appeal or review but such
appeal or review remains pending on June 30, 1997, without having resulted in a
Relief Determination, then either German American or Peoples may terminate this
Agreement without obligation to the other on account of the Adverse
Determination; provided, however, that German American shall pay Peoples a
-------- -------
termination fee of $422,000 within 90 days of any such termination if (x) the
Agreement is terminated in accordance with this sentence solely as a result of
an Adverse Determination relating to German American's eligibility to account
for the Holding Company Merger under the pooling-of-interests method of
accounting for reasons other than the exercise of statutory dissenters rights by
shareholders of Peoples who would otherwise be entitled to receive ten percent
or more of the German American Common issuable in the Merger, and (y) Peoples
and Peoples Bank and their respective agents and advisors have abided by their
obligations of cooperation and best efforts expressed in this Section 7.05.
SECTION 7.06. SHAREHOLDER APPROVAL DENIAL. If this Agreement and
------------ ---------------------------
consummation of the Holding Company Merger is not approved by the shareholders
of Peoples at the Shareholders' Meeting, then either party may terminate this
Agreement by giving written notice thereof to the other party.
SECTION 7.07. REGULATORY ENFORCEMENT MATTERS. In the event that Peoples
------------ ------------------------------
or Peoples Bank shall become a party or subject to any memorandum of
understanding, cease and desist order, or civil money penalties imposed by any
federal or state agency charged with the supervision or regulation of banks or
bank holding companies after the date of this Agreement, then German American
may terminate this Agreement by giving written notice thereof to Peoples.
SECTION 7.08. LAPSE OF TIME. If the Closing Date does not occur on or
------------ -------------
prior to June 30, 1997, then this Agreement may be terminated by the Board of
Directors of either Peoples or German American by giving written notice thereof
to the other party.
61
ARTICLE EIGHT
-------------
GENERAL PROVISIONS
------------------
SECTION 8.01. CONFIDENTIAL INFORMATION. The parties acknowledge the
------------ ------------------------
confidential and proprietary nature of "Information" (as hereinafter described)
which has heretofore been exchanged and which will be received from each other
hereunder and agree to hold and keep the same confidential. Such Information
will include any and all financial, technical, commercial, marketing, customer
or other information concerning the business, operations and affairs of a party
that may be provided to the other, irrespective of the form of the
communications, by such party's employees or agents. Such Information shall not
include information which is or becomes generally available to the public other
than as a result of a disclosure by a party or its representatives in violation
of this Agreement. The parties agree that the Information will be used solely
for the purposes contemplated by this Agreement and that such Information will
not be disclosed to any person other than employees and agents of a party who
are directly involved in evaluating the transaction contemplated herein. The
Information shall not be used in any way detrimental to a party, including use
directly or indirectly in the conduct of the party's business or any business or
enterprise in which such party may have an interest, now or in the future, and
whether or not now in competition with such other party.
SECTION 8.02. RETURN OF DOCUMENTS. Upon termination of this Agreement
------------ -------------------
without the Mergers becoming effective, each party shall deliver to the other
originals and all copies of all Information made available to such party and
62
will not retain any copies, extracts or other reproductions in whole or in part
of such Information.
SECTION 8.03. LIABILITIES. In the event that this Agreement is terminated
------------ -----------
or the Mergers are abandoned pursuant to the provisions of Article Seven hereof,
no party hereto shall have any liability to any other party for costs, expenses,
damages, termination fees, or otherwise except to the extent specifically set
forth in Section 7.02(b) or the last proviso clause of Section 7.05. Directors,
officers and employees of each party hereto shall have no personal liability
under this Agreement with respect to the representations and warranties of their
respective parties except for fraud or for their personal intentional and
knowing participation in the making of false or misleading statements in such
representation and warranties.
SECTION 8.04. NOTICES. Any notice or other communication hereunder shall
------------ -------
be in writing and shall be deemed to have been given or made (a) on the date of
delivery, in the case of hand delivery, or (b) three (3) business days after
deposit in the United States Registered or Certified Mail, with mailing receipt
postmarked by the Postal Service to show date of mailing, postage prepaid, or
(c) upon actual receipt if transmitted during business hours by facsimile (but
only if receipt of a legible copy of such transmission is confirmed by the
recipient); addressed (in any case) as follows:
(uuu) If to German American, GAHC or Union:
63
German American Bancorp
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chairman of the Board
with a copy to:
Leagre & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
P. O. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
and
(vvv) If to Peoples or Peoples Bank:
Peoples Bancorp of Washington
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
or to such other address as any party may from time to time designate by notice
to the other.
SECTION 8.05. NON-SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. No
------------ ----------------------------------------------
representation, warranty or covenant contained in this Agreement shall survive
(and no claims for the breach or nonperformance thereof may be brought after)
the Effective Time except the covenants of German American in Sections 5.04,
5.05, 5.08, 5.09, 5.10 and 5.11 which shall survive the Effective Time. No
representation, warranty or covenant contained in this Agreement shall survive
(and no claims for the breach or nonperformance thereof may be brought after)
the termination of this Agreement pursuant to Article Seven hereof except those
matters addressed in Sections 8.01, 8.02 and 8.03 hereof. The obligations of
the parties hereto in accordance with the terms and provisions hereof shall
survive, and shall continue to be enforceable after, the Effective Time.
SECTION 8.06. ENTIRE AGREEMENT. This Agreement constitutes the entire
------------ ----------------
agreement between the parties and supersedes and cancels any and all prior
discussions, negotiations, undertakings and agreements between the parties
relating to the subject matter hereof, including, without limitation, the Offer
of Merger dated July 3, 1996 of German American accepted by Peoples and the
letter agreement dated May 2, 1996 between German American and Austin
Associates, Inc., as agent of Peoples.
SECTION 8.07. HEADINGS AND CAPTIONS. The captions of Articles and
------------ ---------------------
Sections hereof are for convenience only and shall not control or affect the
meaning or construction of any of the provisions of this Agreement.
SECTION 8.08. WAIVER, AMENDMENT OR MODIFICATION. The conditions of this
------------ ---------------------------------
Agreement which may be waived may only be waived by written notice specifically
waiving such condition addressed to the party claiming the benefit of the
65
waiver. The failure of any party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such party at a
later time to enforce the same. This Agreement may not be amended or modified
except by a written document duly executed by the parties hereto.
SECTION 8.09. RULES OF CONSTRUCTION. Unless the context otherwise
------------ ---------------------
requires (a) a term used herein has the meaning assigned to it, and (b) an
accounting term not otherwise defined has the meaning assigned to it in
accordance with generally accepted accounting principles.
SECTION 8.10. COUNTERPARTS. This Agreement may be executed in two or more
------------ ------------
counterparts, each of which shall be deemed an original and all of which shall
be deemed one and the same instrument.
SECTION 8.11. SUCCESSORS. This Agreement shall be binding upon and inure
------------ ----------
to the benefit of the parties hereto and their respective successors. There
shall be no third party beneficiaries hereof.
SECTION 8.12. GOVERNING LAW; ASSIGNMENT. This Agreement shall be governed
------------ -------------------------
by the laws of the State of Indiana and, with respect to the Bank Merger, the
National Bank Act. This Agreement may not be assigned by any of the parties
hereto.
66
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written, with the unanimous approval of their
respective Boards of Directors.
GERMAN AMERICAN BANCORP
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman of the Board and
Chief Executive Officer
APPROVED BY THE MEMBERS OF THE BOARD OF DIRECTORS OF GERMAN AMERICAN BANCORP:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇*
------------------------- ---------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇* ▇▇▇▇▇▇▇ ▇. ▇▇▇▇*
------------------------- ---------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇* SKIP PLACE*
------------------------- ---------------------------
▇▇▇▇ ▇. ▇▇▇▇▇ Skip Place
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇* ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇*
------------------------- ---------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇* ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇*
------------------------- ---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
*By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
as Attorney-In-Fact
GERMAN AMERICAN HOLDINGS
CORPORATION
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
APPROVED BY THE MEMBERS OF THE BOARD OF DIRECTORS OF THE GERMAN AMERICAN
HOLDINGS CORPORATION:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇*
------------------------- -----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
*By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
as Attorney-In-Fact
68
THE UNION BANK
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
President
APPROVED BY THE MEMBERS OF THE BOARD OF DIRECTORS OF THE UNION BANK:
▇▇▇▇ ▇▇▇▇▇▇* /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------ ---------------------------
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇* ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇*
------------------------ ---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇ ▇▇▇▇* ▇▇▇▇▇▇▇ ▇. ▇▇▇▇*
------------------------ ---------------------------
J. ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇*
------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
*By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
as Attorney-In-Fact
PEOPLES BANCORP OF WASHINGTON
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Its President
---------------------------
APPROVED BY THE MEMBERS OF THE BOARD OF DIRECTORS OF PEOPLES BANCORP OF
WASHINGTON:
The undersigned Directors of Peoples Bancorp of Washington hereby (a) evidence
their approval of this Agreement and the Mergers contemplated hereby and (b)
agree to vote the shares of Peoples Common that are registered in their personal
names (and agree to use their best efforts to cause all additional shares of
Peoples Common over which they have voting control or influence to be voted) in
favor of the Holding Company Merger at the Peoples Shareholders Meeting.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------- ---------------------------
70
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------- ---------------------------
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------- ---------------------------
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------- ----------------------------
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------- ----------------------------
THE PEOPLES NATIONAL BANK ND
TRUST COMPANY
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Its President
--------------------------
71
APPROVED BY THE MEMBERS OF THE BOARD OF DIRECTORS OF THE PEOPLES NATIONAL BANK
AND TRUST COMPANY:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------- ------------------------------
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------- ------------------------------
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------- ------------------------------
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------- ------------------------------
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------- -----------------------------
0014\16\MERGER.AGR
