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EXHIBIT 2
AGREEMENT OF AFFILIATION AND MERGER
THIS AGREEMENT OF AFFILIATION AND MERGER ("Agreement") is made and
entered into effective as of the 8th day of September, 1999, by and between OLD
NATIONAL BANCORP ("ONB") and HERITAGE FINANCIAL SERVICES, INC. ("Heritage").
W I T N E S S E T H:
WHEREAS, ONB is an Indiana corporation registered as a bank holding
company under the federal Bank Holding Company Act of 1956, as amended ("BHC
Act"), with its principal office located in Evansville, Vanderburgh County,
Indiana; and
WHEREAS, Heritage is a Tennessee corporation registered as a bank
holding company under the BHC Act, with its principal office located in
Clarksville, ▇▇▇▇▇▇▇▇▇▇ County, Tennessee; and
WHEREAS, Heritage is the sole owner, directly or indirectly, of all of
the outstanding capital stock of: (i) Heritage Bank (the "Bank") and (ii)
Heritage Investment Center, Inc. (the "Investment Center"), Central Life
Insurance Company ("CLIC"), Advance Credit Company, Inc. (the "Finance Company")
and Heritage Investment Corporation (the "Investment Corporation")
(collectively, the "Subsidiaries"); and
WHEREAS, ONB and Heritage seek to affiliate through a corporate
reorganization whereby Heritage will merge with and into ONB and the Bank will
thereby become a wholly-owned subsidiary of ONB; and
WHEREAS, ONB and Heritage intend that the Merger (as hereinafter
defined) constitute a tax-free reorganization pursuant to Section 368 of the
Internal Revenue Code of 1986, as amended ("Code"); and
WHEREAS, the Board of Directors of each of ONB and Heritage has
determined that it is in the best interests of its respective corporation to
consummate the strategic business combination provided for herein and has
approved this Agreement, authorized its execution and designated this Agreement
a plan of reorganization and a plan of merger.
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, ONB and Heritage hereby make this Agreement and prescribe the
terms and conditions of the affiliation of ONB and Heritage and the mode of
carrying such merger into effect as follows:
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SECTION 1
THE MERGER
1.01. General Description. Upon the terms and subject to the conditions
of this Agreement, at the Effective Time (as defined in Section 10 hereof),
Heritage shall merge with and into and under the Articles of Incorporation of
ONB ("Merger"). ONB shall survive the Merger ("Surviving Corporation") and shall
continue its corporate existence under the laws of the State of Indiana pursuant
to the provisions of and with the effect provided in the Indiana Business
Corporation Law, as amended. Upon consummation of the Merger, the Bank shall
become a wholly-owned subsidiary of ONB.
1.02. Name, Officers, Directors and Management. (a) The name of the
Surviving Corporation shall be "Old National Bancorp." Its principal office
shall be located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
(b) The officers of ONB serving at the Effective Time shall continue to
serve as the officers of the Surviving Corporation, until such time as their
successors shall have been duly elected and have qualified or until their
earlier resignation, death or removal from office.
(c) The directors of ONB as of the Effective Time shall be the
directors of the Surviving Corporation, until such time as their successors have
been duly elected and have been qualified or until their earlier resignation,
death or removal from office.
1.03. Capital Structure. The capital of the Surviving Corporation shall
be not less than the capital of ONB immediately prior to the Effective Time.
1.04. Articles of Incorporation and By-Laws. The Articles of
Incorporation and By-Laws of ONB in existence at the Effective Time shall remain
the Articles of Incorporation and By-Laws of the Surviving Corporation following
the Effective Time, until such Articles of Incorporation and By-Laws shall be
further amended as provided by applicable law.
1.05. Assets and Liabilities. At the Effective Time, the title to all
assets, real estate and other property owned by Heritage shall vest in ONB
without reversion or impairment. At the Effective Time, all liabilities of
Heritage shall be assumed by ONB.
1.06. Tax-Free Reorganization and Accounting Treatment. ONB and
Heritage intend for the Merger to qualify as a reorganization within the meaning
of Section 368 and related sections of the Code, and for the Merger to be
accounted for as a pooling of interests transaction. ONB and Heritage agree to
cooperate and to take such action as may be reasonably necessary to achieve such
results.
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SECTION 2
MANNER AND BASIS OF EXCHANGE OF STOCK
2.01. Exchange Ratio. Upon and by virtue of the Merger becoming
effective at the Effective Time, each issued and outstanding share of Heritage
Common Stock (as defined in Section 4.03 hereof) shall be converted into the
right to receive Three and Fifteen One-Hundredths (3.15) shares of ONB common
stock ("Exchange Ratio"), subject to adjustment, if any, pursuant to the
provisions of Section 2.03 hereof.
2.02. No Fractional Shares. Certificates for fractional shares of ONB
common stock shall not be issued for fractional interests resulting from
application of the Exchange Ratio. Each shareholder of Heritage who would
otherwise have been entitled to a fraction of a share of ONB common stock shall
be paid in cash following the Effective Time an amount equal to such fraction
multiplied by the average of the per share closing price of ONB common stock as
reported on the Nasdaq National Market System for the final five (5) business
days on which shares of ONB common stock were traded immediately preceding the
Effective Time.
2.03. Recapitalization. If, between the date of this Agreement and the
Effective Time, the record date occurs for the distribution or issuance by ONB
of a stock dividend with respect to its shares of common stock, or a
combination, subdivision, reclassification or split of ONB's issued and
outstanding shares of common stock, such that the number of issued and
outstanding shares of ONB common stock is increased or decreased, then the
Exchange Ratio shall be adjusted so that Heritage's shareholders shall receive,
in the aggregate, such number of shares of ONB common stock representing the
same percentage of outstanding shares of ONB common stock at the Effective Time
as would have been represented by the number of shares of ONB common stock such
shareholders would have received if any of the foregoing actions had not
occurred.
2.04. Distribution of ONB Common Stock and Cash. (a) In a reasonable
period of time following the Effective Time, ONB shall mail to each Heritage
shareholder a letter of transmittal providing instructions as to the transmittal
to ONB of certificates representing shares of Heritage Common Stock and the
issuance of shares of ONB common stock in exchange therefor pursuant to the
terms of this Agreement.
(b) Following the Effective Time, distribution of stock certificates
representing shares of ONB common stock and any cash payment, without interest,
for fractional shares, if any, shall be made by ONB to each former shareholder
of Heritage as soon as practical following delivery to ONB of the shareholder's
certificate(s) representing its shares of Heritage Common Stock accompanied by a
properly completed and executed letter of transmittal, all in form and substance
reasonably satisfactory to ONB.
(c) As of the Effective Time, stock certificates representing shares of
Heritage Common Stock shall be deemed to evidence ownership of ONB common stock
for all corporate purposes other
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than the payment of dividends or other distributions. No dividends or other
distributions otherwise payable subsequent to the Effective Time on shares of
ONB common stock shall be paid to any Heritage shareholder entitled to receive
the same until such shareholder has surrendered to ONB his or her certificate or
certificates representing Heritage Common Stock in exchange for a certificate or
certificates representing ONB common stock. Upon surrender of the certificates
representing shares of Heritage Common Stock, there shall be paid in cash to the
record holder of the new certificate or certificates evidencing shares of ONB
common stock the amount of all dividends and other distributions, without
interest thereon, withheld with respect to such shares of ONB common stock.
(d) ONB shall be entitled to rely upon the stock transfer books of
Heritage to establish the persons entitled to receive shares of ONB common stock
pursuant to this Agreement, which books shall be conclusive with respect to the
ownership of shares of Heritage Common Stock.
(e) With respect to any certificate for shares of Heritage Common Stock
which has been lost, stolen or destroyed, ONB shall be authorized to issue
common stock (and to pay cash as to fractional shares) to the registered owner
of such certificate upon receipt by ONB of an agreement to indemnify ONB against
loss from such lost, stolen or destroyed certificate and an affidavit of lost,
stolen or destroyed stock certificate, both in form and substance reasonably
satisfactory to ONB, and upon compliance by the Heritage shareholder with all
other reasonable requirements of ONB in connection with lost, stolen or
destroyed stock certificates.
SECTION 3
DISSENTING SHAREHOLDERS
Shareholders of Heritage who properly exercise and perfect statutory
dissenters' rights shall have the rights accorded to dissenting shareholders
under Chapter 23 of the Tennessee Business Corporation Act, as amended.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF HERITAGE
On or prior to the date hereof, Heritage has delivered to ONB a
schedule (the "Disclosure Schedule") setting forth, among other things, items
the disclosure of which is necessary or appropriate either in response to an
express disclosure requirement contained in a provision hereof or as an
exception to one or more representations or warranties contained in this Section
4 or to one or more of its covenants contained in Section 6; provided, that the
mere inclusion of an item in the Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission by Heritage that
such item represents a material exception or fact, event or circumstance or that
such item is reasonably likely to result in a Material Adverse Effect (as
defined below).
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For the purpose of this Agreement, and in relation to Heritage and the
Subsidiaries, a "Material Adverse Effect" means any effect that (i) is material
and adverse to the financial position, results of operations or business of
Heritage and the Subsidiaries taken as a whole, or (ii) would materially impair
the ability of Heritage to perform its obligations under this Agreement or
otherwise materially threaten or materially impede the consummation of the
Merger and the other transactions contemplated by this Agreement; provided,
however, that Material Adverse Effect shall not be deemed to include the impact
of (a) changes in banking and similar laws of general applicability or
interpretations thereof by courts or governmental authorities, (b) changes in
generally accepted accounting principles or regulatory accounting requirements
applicable to banks and their holding companies generally, (c) any modifications
or changes to valuation policies and practices in connection with the Merger or
restructuring charges taken in connection with the Merger, in each case in
accordance with generally accepted accounting principles, (d) effects of any
action taken with the prior written consent of ONB and (e) changes in general
level of interest rate or conditions or circumstances that affect the banking
industry generally.
No representation or warranty of Heritage contained in this Section 4,
except Section 4.03, shall be deemed untrue, incomplete or incorrect, and
Heritage shall not be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, circumstance or event, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
contained in this Section 4, has had or is reasonably likely to have a Material
Adverse Effect on Heritage.
Heritage accordingly hereby represents and warrants to ONB as follows:
4.01. Organization and Authority. (a) Heritage is a corporation duly
organized and validly existing under the laws of the State of Tennessee.
Heritage has full power and authority (corporate and otherwise) to own and lease
its properties as presently owned and leased and to conduct its business in the
manner and by the means utilized as of the date hereof. Heritage has a class of
stock registered pursuant to Section 12, and is subject to the reporting
requirements, of the Securities Exchange Act of 1934, as amended ("1934 Act").
Except as set forth in the Disclosure Schedule, Heritage's only direct
subsidiary is the Bank and Heritage has no other subsidiaries and owns no voting
stock or equity securities of any corporation, partnership, association or other
entity.
(b) The Bank is a Tennessee state-chartered bank duly organized and
validly existing under the laws of the State of Tennessee. The Bank has no
subsidiaries, except the Bank owns all of the capital stock of: (i) the
Investment Center; (ii) CLIC; (iii) the Finance Company; and (iv) the Investment
Corporation. The Bank is subject to primary regulatory supervision and
examination by the Tennessee Department of Financial Institutions ("TDFI"). The
Bank has full power and authority (corporate and otherwise) to own and lease its
properties as presently owned and leased and to conduct its business in the
manner and by the means utilized as of the date hereof.
(c) The Investment Center is an investment brokerage services provider
duly organized and validly existing under the laws of the State of Tennessee.
The Investment Center has no
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subsidiaries. The Investment Center is subject to primary regulatory supervision
and examination by the Tennessee Department of Commerce and Insurance ("TDCI").
The Investment Center has full power and authority (corporate and otherwise) to
own and lease its properties as presently owned and leased and to conduct its
business in the manner and by the means utilized as of the date hereof.
(d) CLIC is a corporation duly organized and validly existing under the
laws of the State of Tennessee. The Insurance Company has no subsidiaries. The
Insurance Company is subject to primary regulatory supervision and examination
by the TDCI. The Insurance Company has full power and authority (corporate and
otherwise) to own and lease its properties as presently owned and leased and to
conduct its business in the manner and by the means utilized as of the date
hereof.
(e) The Finance Company is a corporation duly organized and validly
existing under the laws of the State of Tennessee. The Finance Company has no
subsidiaries. The Finance Company is subject to primary regulatory supervision
and examination by the TDCI. The Finance Company has full power and authority
(corporate and otherwise) to own and lease its properties as presently owned and
leased and to conduct its business in the manner and by the means utilized as of
the date hereof.
(f) The Investment Corporation is a Tennessee corporation duly
organized and validly existing under the laws of the State of Tennessee. The
Investment Corporation currently has no business operations and has no
subsidiaries. The Investment Corporation has full power and authority (corporate
and otherwise) to own and lease its properties as presently owned and leased and
to conduct its business in the manner and by the means utilized as of the date
hereof.
4.02. Authorization. (a) Heritage has the requisite corporate power and
authority to enter into this Agreement and to perform its obligations hereunder,
subject to the fulfillment of the conditions precedent set forth in Section
8.02(e) and (f) hereof. As of the date hereof, Heritage is not aware of any
reason why the approvals set forth in Section 8.02(e) will not be received in a
timely manner and without the imposition of a condition, restriction or
requirement of the type described in Section 8.02(e). This Agreement, and its
execution and delivery by Heritage, have been duly authorized and approved by
the Board of Directors of Heritage and, assuming due execution and delivery by
ONB, constitutes a valid and binding obligation of Heritage, subject to the
fulfillment of the conditions precedent set forth in Section 8.02 hereof, and is
enforceable in accordance with its terms, except to the extent limited by
general principles of equity and public policy and by bankruptcy, insolvency,
fraudulent transfer, reorganization, liquidation, moratorium, readjustment of
debt or other laws of general application relating to or affecting the
enforcement of creditors' rights.
(b) Except as set forth in the Disclosure Schedule, neither the
execution of this Agreement nor consummation of the Merger contemplated hereby:
(i) conflicts with or violates Heritage's Charter or ByLaws; (ii) conflicts with
or violates any local, state, federal or foreign law, statute, ordinance, rule
or regulation (provided that the approvals of or filings with applicable
government regulatory agencies or authorities required for consummation of the
Merger are obtained) or any
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court or administrative judgment, order, injunction, writ or decree; (iii)
conflicts with, results in a breach of or constitutes a default under any note,
bond, indenture, mortgage, deed of trust, license, lease, contract, agreement,
arrangement, commitment or other instrument to which Heritage or any Subsidiary
is a party or by which Heritage or any Subsidiary is subject or bound; (iv)
results in the creation of or gives any person, corporation or entity the right
to create any lien, charge, claim, encumbrance or security interest, or results
in the creation of any other rights or claims of any other party (other than
ONB) or any other adverse interest, upon any right, property or asset of
Heritage or any Subsidiary; or (v) terminates or gives any person, corporation
or entity the right to terminate, accelerate, amend, modify or refuse to perform
under any note, bond, indenture, mortgage, agreement, contract, lease, license,
arrangement, deed of trust, commitment or other instrument to which Heritage or
any Subsidiary is bound or with respect to which Heritage or any Subsidiary is
to perform any duties or obligations or receive any rights or benefits.
(c) Other than in connection or in compliance with the provisions of
the applicable federal and state banking, securities, and corporation statutes,
all as amended, and the rules and regulations promulgated thereunder, no notice
to, filing with, exemption by or consent, authorization or approval of any
governmental agency or body is necessary for consummation of the Merger by
Heritage or any Subsidiary.
4.03. Capitalization. (a) The authorized capital stock of Heritage as
of the date hereof consists, and at the Effective Time will consist, of
1,000,000 shares of preferred stock, no par value, none of which shares are
issued or outstanding and 3,000,000 shares of common stock, $2.00 par value per
share, 583,439 of which shares are issued and outstanding, which number of
issued shares of Heritage Common Stock is subject to increase to a total of
671,408 shares pursuant to the exercise of options (collectively, the "Stock
Options") granted under the Heritage 1989 Stock Option Plan, the Heritage 1998
Outside Director Stock Option Plan, and the Heritage 1998 Stock Option Plan
(collectively, the "Stock Option Plans") to purchase an aggregate of 87,969
shares of common stock of Heritage (such issued and outstanding shares are
referred to herein as "Heritage Common Stock"). Such issued and outstanding
shares of Heritage Common Stock have been duly and validly authorized by all
necessary corporate action of Heritage, are validly issued, fully paid and
nonassessable and have not been issued in violation of any pre-emptive rights of
any present or former Heritage shareholder. Heritage has no capital stock
authorized, issued or outstanding other than as described in this Section
4.03(a) and has no intention or obligation to authorize or issue any other
capital stock or any additional shares of Heritage Common Stock.
(b) The authorized capital stock of the Bank as of the date hereof
consists, and at the Effective Time will consist, of 1,000,000 shares of common
stock, $2.00 par value per share, 415,099 of which shares are issued and
outstanding (such issued and outstanding shares are referred to herein as "Bank
Common Stock"). Such issued and outstanding shares of Bank Common Stock have
been duly and validly authorized by all necessary corporate action of the Bank,
are validly issued, fully paid and nonassessable, and have not been issued in
violation of any pre-emptive rights of any present or former Bank shareholder.
All of the issued and outstanding shares of the Bank Common Stock are owned by
Heritage free and clear of all liens, pledges, charges, claims, encumbrances,
restrictions,
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security interests, options and pre-emptive rights and of all other rights or
claims of any other person, corporation or entity with respect thereto. The Bank
has no capital stock authorized, issued or outstanding other than as described
in this Section 4.03(b) and has no intention or obligation to authorize or issue
any other capital stock or any additional shares of Bank Common Stock.
(c) The authorized capital stock of the Investment Center as of the
date hereof consists, and at the Effective Time will consist, of 100 shares of
common stock, $2.00 par value per share, l25 of which shares are issued and
outstanding (such issued and outstanding shares are referred to herein as
"Investment Center Common Stock"). Such issued and outstanding shares of the
Investment Center Common Stock have been duly and validly authorized by all
necessary corporate action of the Investment Center, are validly issued, fully
paid and nonassessable, and have not been issued in violation of any pre-emptive
rights of any present or former Investment Center shareholder. All of the issued
and outstanding shares of Investment Center Common Stock are owned by the Bank
free and clear of all liens, pledges, charges, claims, encumbrances,
restrictions, security interests, options and pre-emptive rights and of all
other rights or claims of any other person, corporation or entity with respect
thereto. The Investment Center has no capital stock authorized, issued or
outstanding other than as described in this Section 4.03(c) and has no intention
or obligation to authorize or issue any other capital stock or any additional
shares of the Investment Center Common Stock.
(d) The authorized capital stock of CLIC as of the date hereof
consists, and at the Effective Time will consist, of 1,000,000 shares of common
stock, $1.00 par value per share, 150,000 of which shares are issued and
outstanding (such issued and outstanding shares are referred to herein as "CLIC
Common Stock"). Such issued and outstanding shares of CLIC Common Stock have
been duly and validly authorized by all necessary corporate action of CLIC, are
validly issued, fully paid and nonassessable, and have not been issued in
violation of any pre-emptive rights of any present or former CLIC shareholder.
All of the issued and outstanding shares of CLIC Common Stock are owned by the
Bank free and clear of all liens, pledges, charges, claims, encumbrances,
restrictions, security interests, options and pre-emptive rights and of all
other rights or claims of any other person, corporation or entity with respect
thereto. CLIC has no capital stock authorized, issued or outstanding other than
as described in this Section 4.03(d) and has no intention or obligation to
authorize or issue any other capital stock or any additional shares of CLIC
Common Stock.
(e) The authorized capital stock of the Finance Company as of the date
hereof consists, and at the Effective Time will consist, of 10,000 shares of
common stock, no par value, 1,000 of which shares are issued and outstanding
(such issued and outstanding shares are referred to herein as "Finance Company
Common Stock"). Such issued and outstanding shares of the Finance Company Common
Stock have been duly and validly authorized by all necessary corporate action of
the Finance Company, are validly issued, fully paid and nonassessable, and have
not been issued in violation of any pre-emptive rights of any present or former
Finance Company shareholder. All of the issued and outstanding shares of Finance
Company Common Stock are owned by the Bank free and clear of all liens, pledges,
charges, claims, encumbrances, restrictions, security interests, options and
pre-emptive rights and of all other rights or claims of any other person,
corporation or entity with respect thereto. The Finance Company has no capital
stock authorized, issued or outstanding other
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than as described in this Section 4.03(e) and has no intention or obligation to
authorize or issue any other capital stock or any additional shares of Finance
Company Common Stock.
(f) The authorized capital stock of the Investment Corporation as of
the date hereof consists, and at the Effective Time will consist, of 100 shares
of common stock, $2.00 par value, 25 of which shares are issued and outstanding
(such issued and outstanding shares are referred to herein as "Investment
Corporation Common Stock"). Such issued and outstanding shares of Investment
Corporation Common Stock have been duly and validly authorized by all necessary
corporate action of the Investment Corporation, are validly issued, fully paid
and nonassessable, and have not been issued in violation of any pre-emptive
rights of any present or former Investment Corporation shareholder. All of the
issued and outstanding shares of Investment Corporation Common Stock are owned
by the Bank free and clear of all liens, pledges, charges, claims, encumbrances,
restrictions, security interests, options and pre-emptive rights and of all
other rights or claims of any other person, corporation or entity with respect
thereto. The Investment Corporation has no capital stock authorized, issued or
outstanding other than as described in this Section 4.03(f) and has no intention
or obligation to authorize or issue any other capital stock or any additional
shares of Investment Corporation Common Stock.
(g) Except as set forth in the Disclosure Schedule and except for
options granted under the Stock Option Plans, there are no options, warrants,
commitments, calls, puts, agreements, understandings, arrangements or
subscription rights relating to any shares of Heritage Common Stock, or any
securities convertible into or representing the right to purchase or otherwise
acquire any common stock or debt securities of Heritage, by which Heritage is or
may become bound. Heritage does not have any outstanding contractual or other
obligation to repurchase, redeem or otherwise acquire any of the issued and
outstanding shares of Heritage Common Stock.
(h) There are no options, warrants, commitments, calls, puts,
agreements, understandings, arrangements or subscription rights relating to any
shares of common stock of the Subsidiaries, or any securities convertible into
or representing the right to purchase or otherwise acquire any common stock or
debt securities of a Subsidiary, by which a Subsidiary is or may become bound.
None of the Subsidiaries has any outstanding contractual or other obligation to
repurchase, redeem or otherwise acquire any of the issued and outstanding shares
of its common stock.
(i) Except as set forth in the Disclosure Schedule, Heritage has no
knowledge of any person or entity which beneficially owns 5% or more of its
outstanding shares of Heritage Common Stock.
(j) Set forth in the Disclosure Schedule is a listing of each affiliate
of Heritage as described in Section 6.05 hereof setting forth the number of
shares of Heritage Common Stock beneficially owned by each affiliate and the
manner in which such shares are owned.
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4.04. Organizational Documents. The respective Charter and By-Laws of
Heritage and each of the Subsidiaries, representing true, accurate and complete
copies of such corporate documents in effect as of the date of this Agreement,
have been delivered to ONB.
4.05. Compliance with Law. (a) Neither Heritage nor any Subsidiary has
engaged in any activity nor taken or omitted to take any action which has
resulted in the violation of any local, state, federal or foreign law, statute,
regulation, rule, ordinance, order, restriction or requirement, nor are they in
violation of any order, injunction, judgment, writ or decree of any court or
government agency or body. Heritage and each Subsidiary possess and hold all
licenses, franchises, permits, certificates and other authorizations necessary
for the continued conduct of their business without interference or
interruption, and such licenses, franchises, permits, certificates and
authorizations are transferable (to the extent required) to ONB at the Effective
Time without any restrictions or limitations thereon or the need to obtain any
consents of government agencies or other third parties other than as set forth
in this Agreement.
(b) Except as set forth in the Disclosure Schedule, neither Heritage
nor any of the Subsidiaries or their property is a party to or is subject to any
order, decree, agreement, memorandum of understanding or similar arrangement
with, or a commitment letter or similar submission to, or extraordinary
supervisory letter from, any federal or state governmental agency or authority
charged with the supervision or regulation of financial institutions or issuers
of securities or engaged in the insurance of deposits (including, without
limitation, the TDFI, the Federal Reserve Board and Federal Deposit Insurance
Corporation) or the supervision or regulation of Heritage or any of its
Subsidiaries. There are no uncured violations, or violations with respect to
which refunds or restitutions may be required, cited in any examination report
of Heritage or any Subsidiary as a result of an examination by any regulatory
agency or body, or set forth in any accountant's or auditor's report to Heritage
or any Subsidiary.
4.06. Accuracy of Statements Made and Materials Provided to ONB. No
representation, warranty in this Section 4 or other statement made, or any
information provided, by Heritage or any Subsidiary in this Agreement or the
Disclosure Schedule (and any update thereto), and no written report, statement,
list, certificate, materials or other information furnished or to be furnished
by Heritage or any Subsidiary to ONB through and including the Effective Time in
connection with this Agreement or the Merger contemplated hereby (including,
without limitation, any written information which has been or shall be supplied
by Heritage and the Subsidiaries with respect to their financial condition,
results of operations, business, assets, capital or directors and officers for
inclusion in the proxy statement-prospectus and registration statement relating
to the Merger), contains or shall contain (in the case of information relating
to the proxy statement-prospectus at the time it is mailed to Heritage's
shareholders) any untrue statement of material fact or omits or shall omit to
state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they are made, not false or
misleading.
4.07. Litigation and Pending Proceedings. (a) Except as set forth in
the Disclosure Schedule and lawsuits involving collection of delinquent
accounts, there are no claims, actions, suits,
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proceedings, mediations, arbitrations or investigations pending or to the best
knowledge of Heritage after due inquiry, threatened in any court or before any
government agency or authority, arbitration panel or otherwise (nor does
Heritage have any knowledge of a basis for any claim, action, suit, proceeding,
litigation, arbitration or investigation) against, by or affecting Heritage or
any Subsidiary or which would prevent the performance of this Agreement, declare
the same unlawful or cause the rescission hereof.
(b) Except as set forth in the Disclosure Schedule, neither Heritage
nor any Subsidiary is: (i) subject to any outstanding judgment, order, writ,
injunction or decree of any court, arbitration panel or governmental agency or
authority; (ii) presently charged with or, to the best knowledge of Heritage
after due inquiry, under governmental investigation with respect to any actual
or alleged violations of any law, statute, rule, regulation or ordinance; or
(iii) the subject of any pending or, to the best knowledge of Heritage after due
inquiry, threatened proceeding by any government regulatory agency or authority
having jurisdiction over its respective business, assets, capital, properties or
operations.
4.08. Financial Statements and Reports. Heritage has delivered to ONB
copies of the following financial statements and reports of Heritage and the
Subsidiaries, including the notes thereto (collectively, the "Heritage Financial
Statements"):
(a) Consolidated Balance Sheets and the related Consolidated Statements
of Income and Consolidated Statements of Changes in Shareholders' Equity of
Heritage as of and for the years ended December 31, 1996, 1997 and 1998, and as
of and for the fiscal quarter ended June 30, 1999;
(b) Consolidated Statements of Cash Flows of Heritage for the years
ended December 31, 1996, 1997 and 1998, and for the fiscal quarter ended June
30, 1999;
(c) Consolidated Statements of Changes in Financial Position of
Heritage for the years ended December 31, 1997 and 1998, and for the fiscal
quarter ended June 30, 1999.
(d) Reports of Condition and Income ("Call Reports") for the Bank as of
close of business on December 31, 1995, 1996, 1997 and 1998; and
(e) Financial Statements of Heritage on Form FRY-9LP and Form FRY-9C
filed with the Board of Governors of the Federal Reserve System at the close of
business on December 31, 1997 and 1998.
The Heritage Financial Statements present fairly the consolidated
financial position of Heritage as of and at the dates shown and the consolidated
results of operations for the periods covered thereby. The Heritage Financial
Statements described in clauses (a), (b) and (c) above for completed fiscal
years are audited financial statements and have been prepared in conformance
with generally accepted accounting principles applied on a consistent basis,
except as may otherwise be indicated in any accountants' notes or reports with
respect to such financial statements. The Heritage
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Financial Statements do not include any assets, liabilities or obligations or
omit to state any assets, liabilities or obligations, absolute or contingent, or
any other facts which inclusion or omission would render any of the Heritage
Financial Statements false, misleading or inaccurate in any respect.
4.09. Properties, Contracts, Employees and Other Agreements. (a) Set
forth in the Disclosure Schedule are a true, accurate and complete copy of the
following:
(i) A brief description and the location of all real property owned
by Heritage and the Subsidiaries and the principal buildings and
structures located thereon and each lease of real property to
which Heritage or any Subsidiary is a party, identifying the
parties thereto, the annual rental payable, the expiration date
of the lease and a brief description of the property covered;
(ii) a list of all agreements, contracts, leases, licenses, lines of
credit, understandings, commitments or obligations of Heritage or
any Subsidiary which individually or in the aggregate:
(A) involve payment or receipt by Heritage or any Subsidiary
(other than as disbursements of loan proceeds to customers,
loan payments by customers or customer deposits) of more
than $50,000;
(B) involve payments based on profits of Heritage or any
Subsidiary;
(C) relate to the purchase of goods, products, supplies or
services in excess of $50,000;
(D) were not made in the ordinary course of business; or
(E) may not be terminated without penalty within one (1) year
from the date of this Agreement; and
(iii) The name and current annual salary of each director, officer
and employee of Heritage or any Subsidiary whose current annual
salary is in excess of $50,000, and the profit sharing, bonus or
other form of compensation (other than salary) paid or payable by
Heritage or any Subsidiary to or for the benefit of each such
person for the year ended December 31, 1998, and any employment,
severance or deferred compensation agreement or arrangement with
respect to each such person.
(b) Each of the agreements, contracts, commitments, leases,
instruments and documents set forth in the Disclosure Schedule relating to this
Section 4.09 is valid and enforceable in accordance with its terms, except to
the extent limited by general principles of equity and public policy or by
bankruptcy, insolvency, fraudulent transfer, readjustment of debt or other laws
of general application relative to or affecting the enforcement of creditor's
rights, and Heritage and the Subsidiaries are, and, to the best knowledge of
Heritage after due inquiry, all other parties thereto
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are, in compliance with the provisions thereof, and Heritage and the
Subsidiaries are not in default in the performance, observance or fulfillment of
any obligation, covenant or provision contained therein. None of the foregoing
requires the consent of any party to its assignment in connection with the
Merger contemplated by this Agreement. Other than as disclosed pursuant to this
Section 4.09, to the best knowledge of Heritage after due inquiry, no
circumstances exist resulting from transactions effected or to be effected, from
events which have occurred or may occur or from any action taken or omitted to
be taken which could reasonably be expected to result in the creation of any
agreement, contract, obligation, commitment, arrangement, lease or document
described in or contemplated by this Section 4.09.
(c) Neither Heritage nor any Subsidiary is, to the best knowledge of
Heritage after due inquiry, in default under or in breach of or, alleged to be
in default under or in breach of, any loan or credit agreement, conditional
sales contract or other title retention agreement, security agreement, bond,
indenture, mortgage, license, contract, lease, commitment or any other
instrument or obligation.
4.10. Absence of Undisclosed Liabilities. Except as provided in the
Heritage Financial Statements, Subsequent Heritage Financial Statements and in
the Disclosure Schedule, except for unfunded loan commitments and obligations on
letters of credit to customers of the Bank and trade payables incurred in the
ordinary course of the Bank's business, and except for the transaction
contemplated by this Agreement, neither Heritage nor any Subsidiary has, nor
will have at the Effective Time, any obligation, agreement, contract,
commitment, liability, lease or license which exceeds $50,000 individually, or
any obligation, agreement, contract, commitment, liability, lease or license
made outside of the ordinary course of business, nor does there exist any
circumstances resulting from transactions effected or events occurring on or
prior to the date of this Agreement or from any action omitted to be taken
during such period which could reasonably be expected to result in any such
obligation, agreement, contract, commitment, liability, lease or license.
4.11. Title to Assets. Except as described in this Section 4.11: (a)
Heritage or the Subsidiaries, as the case may be, has good and marketable title
in fee simple absolute to all real property (including, without limitation, all
real property used as bank premises and all other real estate owned) which is
reflected in the Heritage Financial Statements as of June 30, 1999; good title
to all personal property reflected in the Heritage Financial Statements as of
June 30, 1999, other than personal property disposed of in the ordinary course
of business since June 30, 1999; good title to or right to use by valid and
enforceable lease or contract all other properties and assets (whether real or
personal, tangible or intangible) which Heritage and the Subsidiaries purports
to own or which Heritage or any Subsidiary uses in its business; good title to,
or right to use by terms of a valid and enforceable lease or contract, all other
property used in their respective businesses; and good title to all property and
assets acquired and not disposed of or leased since June 30, 1999. All of such
properties and assets are owned by Heritage or a Subsidiary free and clear of
all land or conditional sales contracts, mortgages, liens, pledges,
restrictions, security interests, charges, claims, rights of third parties or
encumbrances of any nature except: (i) as set forth in the Disclosure Schedule;
(ii) as specifically noted in the Heritage Financial Statements; (iii) statutory
liens for taxes not yet delinquent
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or being contested in good faith by appropriate proceedings; (iv) pledges or
liens required to be granted in connection with the acceptance of government
deposits or granted in connection with repurchase or reverse repurchase
agreements; and (v) easements, encumbrances and liens of record, imperfections
of title and other limitations which are not material in amounts to Heritage on
a consolidated basis and which do not materially detract from the value or
materially interfere with the present or contemplated use of any of the
properties subject thereto or impair the use thereof for the purposes for which
they are held or used. All real property owned or leased by Heritage or any
Subsidiary is in compliance with all applicable zoning and land use laws.
All real property, machinery, equipment, furniture and fixtures owned
or leased by Heritage or any of the Subsidiaries is structurally sound, in good
operating condition and has been and is being maintained and repaired in the
ordinary condition of business.
(b) Heritage and the Subsidiaries have conducted their respective
businesses in compliance with all federal, state, county and municipal laws,
statutes, regulations, rules, ordinances, orders, directives, restrictions and
requirements relating to, without limitation, responsible property transfer,
underground storage tanks, petroleum products, air pollutants, water pollutants
or storm water or process waste water or otherwise relating to the environment,
air, water, soil or toxic or hazardous substances or to the manufacturing,
recycling, handling, processing, distribution, use, generation, treatment,
storage, disposal or transport of any hazardous or toxic substances or petroleum
products (including polychlorinated biphenyls, whether contained or uncontained,
and asbestos-containing materials, whether friable or not), including, without
limitation, the Federal Solid Waste Disposal Act, the Hazardous and Solid Waste
Amendments, the Federal Clean Air Act, the Federal Clean Water Act, the
Occupational Health and Safety Act, the Federal Resource Conservation and
Recovery Act, the Toxic Substances Control Act, the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980 and the Superfund
Amendments and Reauthorization Act of 1986, all as amended, and the rules and
regulations of the Environmental Protection Agency, the Nuclear Regulatory
Agency, the Army Corp of Engineers, the Department of Interior, the United
States Fish and Wildlife Service and any state department of natural resources
or state environmental protection agency now in effect (collectively,
"Environmental Laws"). Except as set forth in the Disclosure Schedule, there are
no pending or, to the best knowledge of Heritage after due inquiry, threatened,
claims, actions or proceedings by any local municipality, sewage district or
other governmental entity against Heritage or any Subsidiary with respect to the
Environmental Laws. No environmental clearances or other governmental approvals
are required for the conduct of the business of Heritage or any Subsidiary as
presently conducted. Neither Heritage nor any Subsidiary is the owner, and has
not been in the chain of title or the operator or lessee, of any property on
which any substances have been released, which substances if known to be present
on, at or under such property would require clean-up, removal, treatment,
abatement, response costs or any other remedial action under any Environmental
Law, and there is no reasonable basis or grounds for any such claim, action or
proceeding. Heritage and the Subsidiaries own, operate, lease, use and control,
and have owned, operated, leased, used and controlled, all real property in
compliance with the Environmental Laws. Neither Heritage nor any Subsidiary has
any liability for any clean-up or remediation under any of the Environmental
Laws with respect to any real property.
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4.12. Loans. (a) Except as set forth in the Disclosure Schedule, there
is no loan by the Bank in excess of $50,000 that has been classified by bank
regulatory management as "Other Loans Specially Mentioned," "Substandard,"
"Doubtful" or "Loss" or in excess of $50,000 that has been identified by
accountants or auditors (internal or external) as having a significant risk of
uncollectability. The most recent loan watch list of the Bank and a list of all
loans in excess of $50,000 which the Bank has determined to be thirty (30) days
or more past due with respect to principal or interest payments or has placed on
nonaccrual status has been provided to ONB.
(b) All loans reflected in the Heritage Financial Statements as of June
30, 1999 and which have been made, extended, renewed, restructured, approved,
amended or acquired since June 30, 1999: (i) to the best knowledge of Heritage
after due inquiry, constitute the legal, valid and binding obligation of the
obligor and any guarantor named therein, except to the extent limited by general
principles of equity and public policy or by bankruptcy, insolvency, fraudulent
transfer, reorganization, liquidation, moratorium, readjustment of debt or other
laws of general application relative to or affecting the enforcement of
creditors' rights; (ii) are evidenced by notes, instruments or other evidences
of indebtedness which are true, genuine and what they purport to be; and (iii)
are secured, to the extent that Heritage or any Subsidiary has a security
interest in collateral or a mortgage securing such loans, by perfected security
interests or recorded mortgages naming Heritage or a Subsidiary as the secured
party or mortgagee (unless by written agreement to the contrary).
(c) The reserves, the allowance for possible loan and lease losses and
the carrying value for real estate owned which are shown on the Heritage
Financial Statements are adequate in all respects under the requirements of
generally accepted accounting principles applied on a consistent basis to
provide for possible losses on items for which reserves were made, on loans and
leases outstanding and real estate owned as of the respective dates.
4.13. Shareholder Rights Plan. Except as otherwise provided in this
Agreement, the Disclosure Schedule and Heritage's Charter and By-Laws, Heritage
has no shareholder rights plan or any other plan, program or agreement
involving, restricting, prohibiting or discouraging a change in control or
merger of Heritage or which may be considered an anti-takeover mechanism.
4.14. Employee Benefit Plans. (a) With respect to the employee benefit
plans, as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), sponsored or otherwise maintained by Heritage or
any Subsidiary, whether written or oral, in which Heritage or any Subsidiary
participates as a participating employer; to which Heritage or any Subsidiary
contributes and including any such plans which within the preceding six years
have been terminated, merged into another plan of Heritage or any Subsidiary,
frozen or discontinued (collectively, "Heritage Plans") except as set forth on
the Disclosure Schedule: (i) all such Heritage Plans have been, in all respects,
maintained in compliance with the requirements prescribed by all applicable
statutes, orders and governmental rules or regulations, including, without
limitation, ERISA, the Code, and Treasury and Labor Regulations promulgated
thereunder, (ii) all Heritage Plans intended to constitute tax-qualified plans
under Section 401(a) of the Code have received favorable determination letters
from the Internal Revenue Service ("Service") with respect to "TRA"
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(as defined in Section 1 of Rev. Proc. 93-39), and Heritage is not aware of any
circumstances likely to result in revocation of any such favorable determination
letter; (iii) except for the Heritage Common Stock held by its trustee as an
asset of the Heritage ESOP, no Heritage Plan (or its related trust) holds any
stock or other securities of Heritage or any related or affiliated person or
entity; (iv) Heritage has not engaged in any transaction that may subject
Heritage, or any Heritage Plan, to a civil penalty imposed by Section 502 of
ERISA; (v) no prohibited transaction (as defined in Section 406 of ERISA and as
defined in Section 4975(c) of the Code) has occurred with respect to any
Heritage Plan; (vi) there are no actions, suits, proceedings or claims pending
(other than routine claims for benefits) or, to the best knowledge of Heritage
after due inquiry, threatened, against Heritage, any Subsidiary, any Heritage
Plan, any fiduciary of any Heritage Plan or the assets of any Heritage Plan as
to which Heritage or any Subsidiary would have liability.
(b) Heritage has made available to ONB true, accurate and complete
copies of the following (including all plans and programs which have been
terminated): (i) pension, retirement, profit-sharing, savings, stock purchase,
stock bonus, stock ownership, stock option and stock appreciation right plans
and all amendments thereto and all summary plan descriptions thereof (including
any modifications thereto); (ii) all employment, deferred compensation (whether
funded or unfunded), salary continuation, consulting, bonus, severance and
collective bargaining agreements, arrangements or understandings; (iii) all
executive and other incentive compensation plans, programs and agreements; (iv)
all group insurance and health insurance contracts, policies or plans; and (v)
all other incentive, welfare, fringe or benefit plans, or agreements, maintained
or sponsored, participated in, or contributed to by Heritage or any Subsidiary
for its current or former directors, officers or employees.
(c) Except as set forth on the Disclosure Schedule, no current or
former director, officer or employee of Heritage or any Subsidiary is entitled
to any benefit under any welfare benefit plans (as defined in Section 3(1) of
ERISA) after termination of employment with Heritage, except that such
individuals may be entitled to continue their group health care coverage
pursuant to the retiree health coverage provisions of the Heritage Group Health
Plan or pursuant to Section 4980B of the Code if they pay the cost of such
coverage pursuant to the applicable requirements of that plan or the Code with
respect thereto, whichever is applicable.
(d) With respect to any group health plan (as defined in Section 607(1)
of ERISA) sponsored or maintained by Heritage or any Subsidiary, in which
Heritage or any Subsidiary participates as a participating employer or to which
Heritage or any Subsidiary contributes, no director, officer, employee or agent
of Heritage or any Subsidiary has engaged in any action or failed to act in such
a manner that, as a result of such action or failure to act, would cause a tax
to be imposed on Heritage or any Subsidiary under Code Section 4980B(a). With
respect to all such plans, all applicable provisions of Section 4980B of the
Code and Section 601 of ERISA have been complied with in all respects by
Heritage and the Subsidiaries.
(e) Except as set forth on the Disclosure Schedule, there are no
collective bargaining, employment, management, consulting, deferred
compensation, reimbursement, indemnity, retirement,
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early retirement, severance or similar plans or agreements, under discussion or
negotiation by management with any employee or group of employees, any member of
management or any other person.
4.15. Obligations to Employees. All contributions required to be made
under the terms of any Heritage Plan have been timely made or have been
reflected on the Heritage Financial Statements. Neither any Heritage Plan which
is an "employee pension benefit plan" within the meaning of Section 3(2) of
ERISA (a "Pension Plan") nor any single-employer plan or any entity which is
considered one employer with Heritage under Section 4001 of ERISA or Section 414
of the Code (an "ERISA Affiliate") has an "accumulated funding deficiency"
(whether or not waived) within the meaning of Section 412 of the Code or Section
302 of ERISA and no ERISA Affiliate has an outstanding funding waiver. Neither
Heritage nor any of its Subsidiaries have provided, or is required to provide,
security to any Pension Plan or to any single-employer plan of any ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
4.16. Taxes, Returns and Reports. Except as set forth in the Disclosure
Schedule, Heritage and each Subsidiary has since January 1, 1995: (a) duly filed
all federal, state, local and foreign tax returns of every type and kind
required to be filed, and each such return is true, accurate and complete in all
respects; (b) paid or otherwise adequately reserved in accordance with generally
accepted accounting principles for all taxes, assessments and other governmental
charges due or claimed to be due upon Heritage or any Subsidiary or any of their
income, properties or assets; and (c) not requested an extension of time for any
such payments (which extension is still in force). Heritage has established, and
shall establish in the Subsequent Heritage Financial Statements, in accordance
with generally accepted accounting principles, a reserve for taxes in the
Heritage Financial Statements adequate to cover all of Heritage's and the
Subsidiaries' tax liabilities (including, without limitation, income taxes,
payroll taxes and withholding, and franchise fees) for the periods then ending.
Neither Heritage nor any Subsidiary has, nor will have, any liability for taxes
of any nature for or with respect to the operation of their respective
businesses, including the business of any subsidiary, or ownership of their
assets, including the assets of any subsidiary, from the date hereof up to and
including the Effective Time, except to the extent set forth in the Subsequent
Heritage Financial Statements (as hereinafter defined) or as accrued or reserved
for on the books and records of Heritage. Neither Heritage nor any Subsidiary is
currently under audit by any state or federal taxing authority. No federal,
state or local tax returns of Heritage have been audited by any taxing authority
during the past five (5) years.
4.17. Deposit Insurance. The deposits of the Bank are insured by the
FDIC in accordance with the Federal Deposit Insurance Act, as amended, and
Heritage and the Bank have paid or properly reserved or accrued for all current
premiums and assessments with respect to such deposit insurance.
4.18. Insurance. Set forth in the Disclosure Schedule is a list and
brief description of all policies of insurance (including, without limitation,
bankers' blanket bond, directors' and officers' liability insurance, property
and casualty insurance, group health or hospitalization insurance and
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insurance providing benefits for employees) owned or held by Heritage or any
Subsidiary on the date hereof or with respect to which Heritage or any
Subsidiary pays any premiums. Each such policy is in full force and effect and
all premiums due thereon have been paid when due, and a true, accurate and
complete copy thereof has been made available to ONB prior to the date hereof.
4.19. Books and Records. The books and records of Heritage and the
Subsidiaries have been fully, properly and accurately maintained.
4.20. Broker's, Finder's or Other Fees. Except for reasonable fees of
Heritage's attorneys, accountants and investment bankers, all of which shall be
paid by Heritage prior to the Effective Time, no agent, broker or other person
acting on behalf of Heritage or any Subsidiary or under any authority of
Heritage or any Subsidiary is or shall be entitled to any commission, broker's
or finder's fee or any other form of compensation or payment from any of the
parties hereto relating to this Agreement and the Merger contemplated hereby.
4.21. Interim Events. (a) Except as set forth in the Disclosure
Schedule, between the period from June 30, 1999 to the date of this Agreement,
no event has occurred and no fact or circumstance shall have come to exist or
come to be known which, directly or indirectly, individually or taken together
with all other facts, circumstances and events, has had, or is reasonably likely
to have, a Material Adverse Effect.
(b) Except as set forth in the Disclosure Schedule, between the period
from June 30, 1999 to the date of this Agreement, Heritage and the Subsidiaries
have carried on their businesses in the ordinary and usual course consistent
with their past practices (excluding the incurrence of fees and expenses of
professional advisors related to this Agreement and the transactions
contemplated hereby) and there has not been:
(i) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with
respect to Heritage Common Stock; or
(ii) any split, combination or reclassification of any capital
stock of Heritage or any Subsidiary or any issuance or the
authorization of any issuance of any other securities in
respect of, or in lieu of or in substitution for shares of
Heritage Common Stock, except for issuances of Heritage
Common Stock upon the exercise of the Options awarded prior
to the date hereof in accordance with the terms of the Stock
Option Plans.
4.22. Regulatory Filings. Heritage and the Subsidiaries have filed and
will continue to file in a timely manner all required filings with the
Securities and Exchange Commission ("SEC"), including, but not limited to, all
reports on Form 8-K, Form 10-KSB and Form 10-QSB and proxy statements, and with
all appropriate federal and state regulatory agencies and authorities as
required by applicable law. All such filings with the SEC and with all other
appropriate federal and state
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regulatory agencies were and will be true, accurate and complete as of the dates
of the filings and have been complied or will comply in all respects as to form
with the applicable requirements and prepared in conformity with generally
accepted regulatory accounting principles applied on a consistent basis, and no
such filing contained or will contain any untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements, at
the time and in light of the circumstances under which they were made, not false
or misleading.
4.23. Indemnification Agreements. (a) Neither Heritage nor any
Subsidiary is a party to any indemnification, indemnity or reimbursement
agreement, contract, commitment or understanding to indemnify any present or
former director, officer, employee, shareholder or agent against liability or
hold the same harmless from liability other than as expressly provided in the
Charter or By-Laws of Heritage, the Investment Center, CLIC, the Finance Company
and the Investment Corporation.
(b) No claims have been made against or filed with Heritage or any
Subsidiary nor have, to the best knowledge of Heritage after due inquiry, any
claims been threatened against Heritage or any Subsidiary, for indemnification
against liability or for reimbursement of any costs or expenses incurred in
connection with any legal or regulatory proceeding by any present or former
director, officer, shareholder, employee or agent of Heritage or any Subsidiary.
4.24. Year 2000. (a) All devices, systems, machinery, information
technology, computer software and hardware, and other date sensitive technology
(collectively, the "Systems") necessary for Heritage to carry on its business as
presently conducted and as contemplated to be conducted in the future are Year
2000 Compliant or will be Year 2000 Compliant within a period of time calculated
to result in no disruption of any of Heritage's business operations. Neither
Heritage nor any Subsidiary has received, or reasonably expects to receive, a
deficiency notice for any federal or state regulator relating to their failure
to be Year 2000 Compliant. For purposes of this Section 4.24, "Year 2000
Compliant" means that such Systems are designed to be used prior to, during and
after the Gregorian calendar year 2000 A.D. and will operate during each such
time period without error relating to date data, specifically including any
error relating to, or the product of, date data which represents or references
different centuries or more than one century.
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(b) Heritage has:
(i) undertaken a detailed inventory, review, and assessment
of all areas within its business and operations that
could be adversely affected by the failure of Heritage to
be Year 2000 Compliant on a timely basis;
(ii) developed a detailed plan and timeline for becoming Year
2000 Compliant on a timely basis; and
(iii) to date, implemented that plan in accordance with that
timetable.
4.25. Shareholder Approval. The affirmative vote of the holders of a
majority of the Heritage Common Stock (which are issued and outstanding on the
record date relating to the meeting of shareholders) is required for shareholder
approval of this Agreement and the Merger.
4.26. Nonsurvival of Representations and Warranties. The
representations and warranties of Heritage contained in this Agreement shall
expire at the earlier of the termination of this Agreement and the Effective
Time, and thereafter Heritage and all directors, officers and employees of
Heritage shall have no further liability with respect thereto, except for fraud
or for false or misleading statements made intentionally or knowingly in
connection with such representations and warranties.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF ONB
On or prior to the date hereof, ONB has delivered to Heritage a
schedule (the "ONB Disclosure Schedule") setting forth, among other things,
items the disclosure of which is necessary or appropriate as an exception to one
or more representations or warranties contained in this Section 5 or to one or
more of its covenants contained in Section 7; provided, that the mere inclusion
of an item in the ONB Disclosure Schedule as an exception to a representation or
warranty shall not be deemed an admission by ONB that such item represents a
material exception or fact, event or circumstance or that such item is
reasonably likely to result in a Material Adverse Effect (as defined below). The
items set forth in the Disclosure Schedule establish only those items that
constitute an exception to a representation or warranty which constitutes, or is
reasonably likely to result in, a Material Adverse Effect.
For the purpose of this Agreement, and in relation to ONB and its
subsidiaries, a Material Adverse Effect means any effect that (i) is material
and adverse to the financial position, results of operations or business of ONB
and its subsidiaries taken as a whole, or (ii) would materially impair the
ability of ONB to perform its obligations under this Agreement or otherwise
materially threaten or materially impede the consummation of the Merger and the
other transactions contemplated by this
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Agreement; provided, however, that Material Adverse Effect shall not be deemed
to include the impact of (a) changes in banking and similar laws of general
applicability or interpretations thereof by courts or governmental authorities,
(b) changes in generally accepted accounting principles or regulatory accounting
requirements applicable to banks and their holding companies generally, (c) any
modifications or changes to valuation policies and practices in connection with
the Merger or restructuring charges taken in connection with the Merger, in each
case in accordance with generally accepted accounting principles, and (d)
changes in general level of interest rate or conditions or circumstances that
affect the banking industry generally.
No representation or warranty of ONB contained in this Section 5, shall
be deemed untrue or incorrect, and ONB shall not be deemed to have breached a
representation or warranty, as a consequence of the existence of any fact, event
or circumstance unless such fact, circumstance or event, individually or taken
together with all other facts, events or circumstances inconsistent with any
representation or warranty contained in this Section 5, has had or is reasonably
likely to have a Material Adverse Effect on ONB.
ONB accordingly hereby represents and warrants to Heritage as follows:
5.01. Organization and Authority. ONB is a corporation duly organized
and validly existing under the laws of the State of Indiana, is a registered
bank holding company under the BHC Act, and has full power and authority
(corporate and otherwise) to own and lease its properties as presently owned and
leased and to conduct its business in the manner and by the means utilized as of
the date hereof. ONB's common stock is registered pursuant to Section 12, and
ONB is subject to the reporting requirements, of the 1934 Act. Each of ONB's
direct subsidiaries has been duly organized and is validly existing in good
standing under the laws of the jurisdiction of its organization, and has full
power and authority to own and lease its properties as presently owned and
leased and to conduct its business in the manner and by the means utilized as of
the date hereof.
5.02. Authorization. (a) ONB has the requisite corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder, subject to the fulfillment of the conditions precedent set forth in
Section 8.01 (d), (e) and (f) hereof. As of the date hereof, ONB is not aware of
any reason why the approvals set forth in Section 8.01(e) will not be received
in a timely manner and without the imposition of a condition, restriction or
requirement of the type described in Section 8.01(e). This Agreement and its
execution and delivery by ONB have been duly authorized by its Board of
Directors. Assuming due execution and delivery by Heritage, this Agreement
constitutes a valid and binding obligation of ONB, subject to the conditions
precedent set forth in Section 8.01 hereof, and is enforceable in accordance
with its terms, except to the extent limited by general principles of equity and
public policy and by bankruptcy, insolvency, reorganization, liquidation,
moratorium, readjustment of debt or other laws of general application relating
to or affecting the enforcement of creditors' rights.
(b) Neither the execution of this Agreement nor consummation of the
Merger contemplated hereby: (i) conflicts with or violates ONB's Articles of
Incorporation or By-Laws;
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(ii) conflicts with or violates in any respect any local, state, federal or
foreign law, statute, ordinance, rule or regulation (provided that the approvals
of or filings with applicable government regulatory agencies or authorities
required for consummation of the Merger are obtained) or any court or
administrative judgment, order, injunction, writ or decree; (iii) conflicts
with, results in a breach of or constitutes a default under any note, bond,
indenture, mortgage, deed of trust, license, contract, lease, agreement,
arrangement, commitment or other instrument to which ONB is a party or by which
ONB is subject or bound; (iv) results in the creation of or gives any person,
corporation or entity the right to create any lien, charge, claim, encumbrance
or security interest, or results in the creation of any other rights or claims
of any other party (other than Heritage) or any other adverse interest, upon any
right, property or asset of ONB; or (v) terminates or gives any person,
corporation or entity the right to terminate, accelerate, amend, modify or
refuse to perform under any note, bond, indenture, mortgage, agreement,
contract, lease, license, arrangement, deed of trust, commitment or other
instrument to which ONB is bound or with respect to which ONB is to perform any
duties or obligations or receive any rights or benefits.
(c) Other than in connection or in compliance with applicable federal
and state banking, securities and corporation statutes, all as amended, and the
rules and regulations promulgated thereunder, no notice to, filing with,
exemption by or consent, authorization or approval of any governmental agency or
body is necessary for the consummation by ONB of the Merger contemplated by this
Agreement.
5.03. Capitalization. (a) The authorized capital stock of ONB as of the
date hereof consists of (i) 75,000,000 shares of common stock, no par value per
share, of which approximately 46,158,663 shares were issued and outstanding as
of June 30, 1999, and (ii) 2,000,000 shares of preferred stock, no shares of
which have been or are presently intended to be issued, other than in connection
with any obligations of ONB to issue such preferred stock under its
shareholders' rights plan. Such issued and outstanding shares of ONB capital
stock have been duly and validly authorized by all necessary corporate action of
ONB, are validly issued, fully paid and nonassessable, and have not been issued
in violation of any pre-emptive rights of any present or former ONB shareholder.
All of the issued and outstanding shares of common stock of ONB's subsidiaries
are owned by ONB free and clear of all liens, pledges, charges, claims,
encumbrances, restrictions, security interests, options and pre-emptive rights
and of all other rights or claims of any other person, corporation or entity
with respect thereto. Except as described in this Section 5.03, ONB has no other
authorized capital stock. Except for shares of ONB common stock to be issued in
connection with: (i) ONB's dividend reinvestment and stock purchase plan; (ii)
ONB's outstanding convertible subordinated debentures; (iii) acquisitions by ONB
of other financial institutions or holding companies; and (iv) ONB's restricted
stock plan and other employee benefit plans, ONB has no intention or obligation
to authorize or issue any other capital stock or any additional shares of ONB
capital stock.
(b) Except for shares of ONB common stock beneficially owned by its
trust affiliates, ONB has no knowledge of any person or entity who beneficially
owns 5% or more of its issued and outstanding shares of common stock.
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5.04. Organizational Documents. The Articles of Incorporation and
By-Laws of ONB in force as of the date of this Agreement have been delivered to
Heritage and represent true, accurate and complete copies of such corporate
documents of ONB in effect as of the date of this Agreement.
5.05. Compliance With Law. Neither ONB nor any of its subsidiaries has
engaged in any activity nor taken or omitted to take any action which has
resulted or could result in the violation of any local, state, federal or
foreign law, statute, rule, regulation, ordinance, order, restriction or
requirement or of any order, injunction, judgment, writ or decree of any court
or government agency or body. ONB and each of its subsidiaries possesses and
holds all licenses, franchises, permits, certificates and other authorizations
necessary for the continued conduct of their business without interference or
interruption.
5.06. Regulatory Filings. ONB and each of its subsidiaries have filed
and will continue to file in a timely manner all required filings with the SEC,
including, but not limited to, all reports on Form 8-K, Form 10-K and Form 10-Q
and proxy statements, and with all other federal and state regulatory agencies
as required by applicable law. All filings by ONB with the SEC and with all
other federal and state regulatory agencies complied or will comply in all
respects as to form with the applicable requirements and were and will be true,
accurate and complete in all respects as of the dates of the filings, and no
such filings contained or will contain any untrue statement of a material fact
or omitted to state a material fact necessary in order to make the statements,
at the time and in the light of the circumstances under which they were made,
not false or misleading.
5.07. Litigation and Pending Proceedings. (a) There are no claims,
actions, suits, proceedings, investigations or arbitrations pending or, to the
best knowledge of ONB after due inquiry, threatened in any court or before or by
any government agency or authority, arbitration panel or otherwise (nor is there
any basis for any claim, action, suit, proceeding, litigation, investigation or
arbitration) against, by or affecting ONB or its subsidiaries which would
prevent the performance of this Agreement, declare the same unlawful or cause
the rescission hereof.
(b) Neither ONB nor any of its subsidiaries is: (i) subject to any
outstanding judgment, order, writ, injunction or decree of any court,
arbitration panel or governmental agency or authority; (ii) presently charged
with or, to the best knowledge of ONB, under governmental investigation with
respect to any actual or alleged violations of any law, statute, rule,
regulation or ordinance; or (iii) the subject of any pending or, to the best
knowledge of ONB after due inquiry, threatened proceeding by any government
regulatory agency or authority having jurisdiction over its business, assets,
capital, properties or operations.
5.08. Financial Statements and Reports. (a) ONB or its agents have
delivered to Heritage copies of the following financial statements and reports
of ONB and its subsidiaries, including the notes thereto (collectively, the "ONB
Financial Statements"):
(i) Consolidated Balance Sheets and related Consolidated Statements
of Income and Consolidated Statements of Changes in Shareholders'
Equity of ONB as of and for
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the years ended December 31, 1996, 1997 and 1998, and for the
fiscal quarter ended June 30, 1999; and
(ii) Consolidated Statements of Cash Flows of ONB for the years ended
December 31, 1996, 1997 and 1998 and for the fiscal quarter ended
June 30, 1999.
(b) The ONB Financial Statements present fairly the consolidated
financial position of ONB and its subsidiaries as of and at the dates shown and
the consolidated results of operations for the periods covered thereby. The ONB
Financial Statements described in clauses (i) and (ii) above, which consist of
fiscal year-end information, are audited financial statements and have been
prepared in conformance with generally accepted accounting principles applied on
a consistent basis except as may otherwise be indicated in any accountants'
notes or reports with respect to such financial statements. The ONB Financial
Statements do not include any assets, liabilities or obligations or omit to
state any assets, liabilities or obligations, absolute or contingent, or any
other facts, which inclusion or omission would render any of the ONB Financial
Statements false, misleading or inaccurate in any respect.
5.09. Shares to be Issued in Merger. The shares of ONB common stock
which Heritage shareholders will be entitled to receive upon consummation of the
Merger pursuant to this Agreement will, at the Effective Time, be duly
authorized and will, when issued in accordance with this Agreement, be validly
issued, fully paid and nonassessable and will have been registered under the
Securities Act of 1933, as amended ("1933 Act") and listed for trading on the
Nasdaq National Market System.
5.10. Shareholder Approval. Approval by ONB's shareholders of the
Merger or for any other actions contemplated by this Agreement is not required.
5.11. Accuracy of Statements Made to Heritage. No representation,
warranty or other statement made, or any information provided or to be provided,
by ONB in this Agreement, and no written report, statement, list, certificate,
materials or other information furnished or to be furnished by ONB to Heritage
through and including the Effective Time in connection with this Agreement or
the Merger contemplated hereby (including, without limitation, any written
information which has been or shall be supplied by ONB with respect to its
financial condition, results of operations, business, assets, capital or
directors and officers for inclusion in the proxy statement-prospectus and
registration statement relating to the Merger), contains or shall contain (in
the case of information relating to the proxy statement-prospectus at the time
it is mailed to Heritage's shareholders) any untrue or misleading statement of
material fact or omits or shall omit to state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances in
which they are made, not false or misleading.
5.12. Broker's, Finder's or Other Fees. Except for reasonable fees of
ONB's attorneys and accountants and investment bankers, no agent, broker or
other person acting on behalf of ONB or under any authority of ONB is or shall
be entitled to any commission, broker's or finder's fee or any
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other form of compensation or payment from any of the parties hereto relating to
this Agreement and the Merger contemplated hereby.
5.13. Employee Benefit Plans. (a) With respect to the employee benefit
plans, as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), sponsored or otherwise maintained by ONB or any
of its subsidiaries, whether written or oral, in which ONB or any of its
subsidiaries participates as a participating employer; to which ONB or any of
its subsidiaries contributes and including any such plans which within the
preceding six years have been terminated, merged into another plan of ONB or any
of its subsidiaries, frozen or discontinued (collectively, "ONB Plans"): (i) all
such ONB Plans have been, in all respects, maintained in compliance with the
requirements prescribed by all applicable statutes, orders and governmental
rules or regulations, including, without limitation, ERISA, the Code, and
Treasury and Labor Regulations promulgated thereunder, (ii) all ONB Plans
intended to constitute tax-qualified plans under Section 401(a) of the Code have
received favorable determination letters from the Internal Revenue Service
("Service") with respect to "TRA" (as defined in Section 1 of Rev. Proc. 93-39),
and ONB is not aware of any circumstances likely to result in revocation of any
such favorable determination letter; (iii) except for the ONB common stock held
by its trustee as an asset of the ONB Employee Stock Ownership Plan and the ONB
Employees' Retirement Plan, no ONB Plan (or its related trust) holds any stock
or other securities of ONB or any related or affiliated person or entity; (iv)
ONB has not engaged in any transaction that may subject ONB, or any ONB Plan, to
a civil penalty imposed by Section 502 of ERISA; (v) no prohibited transaction
(as defined in Section 406 of ERISA and as defined in Section 4975(c) of the
Code) has occurred with respect to any ONB Plan; (vi) to the best knowledge of
ONB, there are no actions, suits, proceedings or claims pending (other than
routine claims for benefits) or threatened, against ONB, any of its
subsidiaries, any ONB Plan, any fiduciary of any ONB Plan or the assets of any
ONB Plan as to which ONB would have liability.
(b) ONB has made available to Heritage true, accurate and complete
copies of the following (including all plans and programs which have been
terminated): (i) pension, retirement, profit-sharing, savings, stock purchase,
stock bonus, stock ownership, stock option and stock appreciation right plans
and all amendments thereto and all summary plan descriptions thereof (including
any modifications thereto); (ii) all employment, deferred compensation (whether
funded or unfunded), salary continuation, consulting, bonus, severance and
collective bargaining agreements, arrangements or understandings; (iii) all
executive and other incentive compensation plans, programs and agreements; (iv)
all group insurance and health insurance contracts, policies or plans; and (v)
all other incentive, welfare or employee benefit plans, or agreements,
maintained or sponsored, participated in, or contributed to by ONB or any of its
subsidiaries for its current or former directors, officers or employees.
(c) No current or former director, officer or employee of ONB or any of
its subsidiaries is entitled to any benefit under any welfare benefit plans (as
defined in Section 3(1) of ERISA) after termination of employment with ONB,
except that such individuals may be entitled to continue their group health care
coverage pursuant to the retiree health coverage provisions of the ONB
Corporation Group Health Plan or pursuant to Section 4980B of the Code if they
pay the cost of such
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coverage pursuant to the applicable requirements of the Plan or the Code with
respect thereto, whichever is applicable.
(d) With respect to any group health plan (as defined in Section 607(1)
of ERISA) sponsored or maintained by ONB or any of its subsidiaries, in which
ONB or any of its subsidiaries participates as a participating employer or to
which ONB or any of its subsidiaries contributes, no director, officer, employee
or agent of ONB or any of its subsidiaries has engaged in any action or failed
to act in such a manner that, as a result of such action or failure to act,
would cause a tax to be imposed on ONB or any of its subsidiaries under Code
Section 4980B(a). With respect to all such plans, all applicable provisions of
Section 4980B of the Code and Section 601 of ERISA have been complied with in
all respects by ONB and its subsidiaries.
5.14. Nonsurvival of Representations and Warranties. The
representations and warranties of ONB contained in this Agreement shall expire
at the earlier of the termination of this Agreement and the Effective Time and,
thereafter, ONB and all directors, officers and employees of ONB shall have no
further liability with respect thereto, except for fraud or for false or
misleading statements made intentionally or knowingly in connection with such
representations and warranties.
SECTION 6
COVENANTS OF HERITAGE
Heritage covenants and agrees with ONB, and covenants and agrees to
cause the Subsidiaries, to act as follows:
6.01. Shareholder Approval. Subject to Section 6.06 hereof, Heritage
shall submit this Agreement to its shareholders for approval and adoption at a
meeting to be called and held in accordance with applicable law and the Charter
and By-Laws of Heritage at the earliest possible reasonable date. Subject to
Section 6.06 hereof, the Board of Directors of Heritage shall recommend to
Heritage's shareholders that such shareholders approve and adopt this Agreement
and the Merger contemplated hereby and shall solicit proxies voting in favor of
this Agreement from Heritage's shareholders.
6.02. Other Approvals. (a) Heritage and the Subsidiaries shall proceed
expeditiously, cooperate fully and use its best efforts to assist ONB in
procuring upon reasonable terms and conditions all consents, authorizations,
approvals, registrations and certificates, in completing all filings and
applications and in satisfying all other requirements prescribed by law which
are necessary for consummation of the Merger on the terms and conditions
provided in this Agreement at the earliest possible reasonable date.
(b) Any materials or information provided by Heritage or any Subsidiary
to ONB for use by ONB in any filing with any state or federal regulatory agency
or authority shall not contain any
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untrue or misleading statement of material fact or shall omit to state a
material fact necessary to make the statements contained therein, in light of
the circumstances in which they are made, not false or misleading.
6.03. Conduct of Business. (a) On and after the date of this Agreement
and until the Effective Time or until this Agreement shall be terminated as
herein provided, neither Heritage nor any Subsidiary shall, without the prior
written consent of ONB:
(i) make any changes in its capital stock accounts (including,
without limitation, any stock split, stock dividend,
recapitalization or reclassification), except for the
issuance of up to 87,969 shares of Heritage Common Stock
under the Stock Option Plans;
(ii) authorize a class of stock or issue, or authorize the
issuance of, securities other than or in addition to
the issued and outstanding common stock as set forth in
Section 4.03 hereof;
(iii) distribute or pay any dividends on its shares of common
stock, or make any other distribution to its shareholders
except that (A) the Bank may pay cash dividends to
Heritage in the ordinary course of business for payment of
reasonable and necessary business and operating expenses
of Heritage and to provide funds for Heritage's dividends
to its shareholders in accordance with this Agreement, (B)
Heritage may pay to its shareholders its usual and
customary annual cash dividend of no greater than One
Dollar and 50/100 Dollars ($1.50) per share to be paid to
shareholders of Heritage prior to December 31, 1999, and
(C) if ONB declares a cash dividend in the first quarter
of 2000 and the Merger has not been consummated prior to
the record date of such cash dividend, then Heritage may
declare and pay a cash dividend for each issued and
outstanding share of Heritage Common Stock in an amount
equal to the ONB cash dividend (on a per share of ONB
common stock basis) multiplied by the Exchange Ratio.
(iv) redeem any of its outstanding shares of common stock;
(v) merge, combine or consolidate or effect a share exchange
with or sell its assets or any of its securities to any
other person, corporation or entity or enter into any
other similar transaction not in the ordinary course of
business;
(vi) purchase any assets or securities or assume any
liabilities of another bank holding company, bank,
corporation or other entity, except in the ordinary course
of business necessary to manage their investment
portfolios;
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(vii) make any loan or commitment to lend money, issue any
letter of credit or accept any deposit, except in the
ordinary course of business in accordance with its
existing banking practices;
(viii) except for the acquisition or disposition in the ordinary
course of business of other real estate owned, acquire or
dispose of any real or personal property (excluding the
investment portfolio of the Bank) or fixed asset
constituting a capital investment in excess of $50,000
individually or $100,000 in the aggregate;
(ix) subject any of its properties or assets to a mortgage,
lien, claim, charge, option, restriction, security
interest or encumbrance, except for tax and other liens
which arise by operation of law and with respect to which
payment is not past due or is being contested in good
faith by appropriate proceedings and except for pledges or
liens: (i) required to be granted in connection with
acceptance by Heritage or any Subsidiary of government
deposits; (ii) granted in connection with repurchase or
reverse repurchase agreements; or (iii) otherwise incurred
in the ordinary course of the conduct of its business;
(x) promote to a new position or increase the rate of
compensation or enter into any agreement to promote to a
new position or increase the rate of compensation, of any
director, officer or employee of Heritage or any
Subsidiary (except for promotions and compensation
increases in the ordinary course of business and in
accordance with past practices and established employment
policies of Heritage and the Subsidiaries and other than
pursuant to an employee retention program, which has been
disclosed to ONB);
(xi) execute, create, institute, modify, amend or terminate
(except with respect to any amendments to the Heritage
Plans required by law, rule or regulation) any pension,
retirement, savings, stock purchase, stock bonus, stock
ownership, stock option, stock appreciation or
depreciation rights or profit sharing plans; any
employment, deferred compensation, consulting, bonus or
collective bargaining agreement; any group insurance or
health contract or policy; or any other incentive,
retirement, welfare or employee welfare benefit plan,
agreement or understanding for current or former
directors, officers or employees of Heritage or any
Subsidiary; or change the level of benefits or payments
under any of the foregoing or increase or decrease any
severance or termination of pay benefits or any other
fringe or employee benefits other than as required by
law or regulatory authorities or the terms of any of the
foregoing;
(xii) modify, amend or institute new employment policies or
practices, or enter into, renew or extend any employment,
indemnity, reimbursement, consulting,
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compensation or severance agreements with respect to any
present or former directors, officers or employees of
Heritage or any Subsidiary;
(xiii) hire or employ any new or additional employees of Heritage
or any Subsidiary, except those which are reasonably
necessary for the proper operation of their respective
businesses;
(xiv) elect or appoint any executive officers or directors
of Heritage or any Subsidiary who are not presently
serving in such capacities;
(xv) amend, modify or restate Heritage's or any of the
Charters or By-Laws from those in effect on the date of
this Agreement and as delivered to ONB hereunder;
(xvi) give, dispose of, sell, convey or transfer; assign,
hypothecate, pledge or encumber; or grant a security
interest in or option to or right to acquire any shares of
common stock or substantially all of the assets of
Heritage or any Subsidiary, or enter into any agreement or
commitment relative to the foregoing;
(xvii) fail to continue to make additions to in accordance
with the Bank's past practices and to otherwise maintain
in all respects the Bank's reserve for loan and lease
losses, or any other reserve account, in accordance with
safe, sound, and prudent banking practices and in
accordance with generally accepted accounting principles
applied on a consistent basis;
(xviii) fail to accrue, pay, discharge and satisfy all debts,
liabilities, obligations and expenses, including, but
not limited to, trade payables, incurred in the regular
and ordinary course of business as such debts,
liabilities, obligations and expenses become due;
(xix) except for obligations disclosed within this Agreement or
the Disclosure Statement, trade payables and similar
liabilities and obligations incurred in the ordinary
course of business and the payment, discharge or
satisfaction in the ordinary course of business of
liabilities reflected in the Heritage Financial Statements
or the Subsequent Heritage Financial Statements, (A)
borrow any money (except for capital purposes related to
the Subsidiaries), (B) incur any indebtedness including,
without limitation, through the issuance of debentures, or
(C) incur any liability or obligation (whether absolute,
accrued, contingent or otherwise), in an aggregate amount
exceeding $50,000 (other than as contemplated by Section
6.03(a)(vii) hereof and legal, accounting and fees related
to the Merger);
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(xx) open, close, move or, in any material respect, expand,
diminish, renovate, alter or change any of its offices or
branches; or
(xxi) pay or commit to pay any management or consulting or
other similar type of fees other than in the ordinary
course of business.
(b) Heritage and the Subsidiaries shall maintain, or cause to be
maintained, in full force and effect, insurance on their assets, properties and
operations, fidelity coverage and directors' and officers' liability insurance
on their directors, officers and employees in such amounts and with regard to
such liabilities and hazards as are currently insured by Heritage and the
Subsidiaries as of the date of this Agreement.
6.04. Preservation of Business. On and after the date of this Agreement
and until the Effective Time or until this Agreement is terminated as herein
provided, Heritage and the Subsidiaries shall: (a) carry on their business
substantially in the manner as is presently being conducted and in the ordinary
course of business; (b) use their reasonable best efforts to preserve their
business organization intact, keep available the services of the present
officers and employees and preserve their present relationships with customers
and persons having business dealings with it; (c) maintain all of the properties
and assets that each of them owns or utilizes in good operating condition and
repair, reasonable wear and tear excepted, and maintain insurance upon such
properties and assets in amounts and kinds comparable to that in effect on the
date of this Agreement; (d) maintain their books, records and accounts in the
usual, regular and ordinary manner, on a basis consistent with prior years and
in compliance with all material respects with all statutes, laws, rules and
regulations applicable to them and to the conduct of their business; and (e) not
knowingly do or fail to do anything which will cause a breach of, or default in,
any contract, agreement, commitment, obligation, understanding, arrangement,
lease or license to which any one of them is a party or by which any one of them
is or may be subject or bound.
6.05. Restrictions Regarding Affiliates. Heritage shall, within thirty
(30) days after the date of this Agreement and promptly thereafter until the
Effective Time to reflect any changes, provide ONB with a list identifying each
person who may be deemed to be an affiliate of Heritage for purposes of Rule 145
under the 1933 Act. On or prior to the date of this Agreement, and thereafter as
may be required for a person who may be deemed an affiliate of Heritage
following the date of this Agreement, Heritage shall obtain from each director,
executive officer and other person who may be deemed to be such an affiliate of
Heritage to deliver to ONB on or prior to the date of this Agreement, and
thereafter as may be required for any other person who may be deemed an
affiliate of Heritage following the date of this Agreement, a written agreement,
substantially in the form as attached hereto as Exhibit A. On or prior to the
Effective Time, Heritage shall use its best efforts to obtain from each
director, executive officer and other person who may be deemed to be an
affiliate of Heritage for purposes of Rule 145 under the 1933 Act to deliver to
ONB at the Effective Time a certificate signed by each such person certifying to
the effect that such person has complied with the terms and conditions of their
written agreement delivered to ONB pursuant to this Section 6.05.
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6.06. Other Negotiations. (a) On and after the date of this Agreement
and until the Effective Time or until this Agreement is terminated as herein
provided, except with the prior written approval of ONB, neither Heritage nor
any Subsidiary shall permit nor authorize their respective directors, officers,
employees, agents or representatives to, directly or indirectly, initiate,
solicit or encourage, or provide information to, any corporation, association,
partnership, person or other entity or group concerning any merger,
consolidation, share exchange, combination, purchase or sale of substantial
assets, sale of shares of common stock (or securities convertible or
exchangeable into or otherwise evidencing, or any agreement or instrument
evidencing the right to acquire, capital stock) or similar transaction relating
to Heritage or any Subsidiary or to which Heritage or any Subsidiary may become
a party (all such transactions are hereinafter referred to as "Acquisition
Transactions").
(b) Heritage and the Subsidiaries shall promptly communicate to ONB the
terms of any proposal or offer which any one of them may receive with respect to
an Acquisition Transaction. Heritage or any Subsidiary may, in response to an
unsolicited written proposal with respect to an Acquisition Transaction from a
third party, furnish information to, and negotiate, explore or otherwise engage
in substantive discussions with such third party, and enter into any such
agreement, arrangement or understandings, in each case, only if Heritage's Board
of Directors determines in good faith by majority vote, after consultation with
its financial advisors and outside legal counsel, that failing to take such
action would be a breach of the fiduciary duties of Heritage's Board of
Directors in connection with seeking an Acquisition Transaction, and that is
substantially more favorable to the shareholders of Heritage than the terms of
the Merger.
(c) This Section 6.06 shall not authorize Heritage or any Subsidiary,
or any of their directors, officers, employees, agents or representatives, to
initiate any discussions or negotiations with respect to an Acquisition
Transaction with a third party.
6.07. Press Releases. Except as required by law, neither Heritage nor
any Subsidiary shall issue any news or press releases or make any other public
announcements or disclosures relating to the Merger without the prior consent of
ONB, which consent shall not be unreasonably withheld.
6.08. Disclosure Schedule Update. Heritage shall promptly supplement,
amend and update, upon the occurrence of any change prior to the Effective Time,
and as of the Effective Time, the Disclosure Schedule with respect to any
matters or events hereafter arising which, if in existence or having occurred as
of the date of this Agreement, would have been required to be set forth or
described in the Disclosure Schedule or this Agreement and including, without
limitation, any fact which, if existing or known as of the date hereof, would
have made any of the representations or warranties of Heritage contained herein
incorrect, untrue or misleading.
6.09. Information, Access Thereto, Confidentiality. ONB and its
respective representatives and agents shall, on reasonable notice and during
normal business hours prior to the Effective Time, have full and continuing
access to the properties, facilities, operations, books and records of Heritage
and the Subsidiaries. ONB and its respective representatives and agents may,
prior to the Effective Time, make or cause to be made such reasonable
investigation of the operations, books, records and
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properties of Heritage and the Subsidiaries and of their financial and legal
condition as deemed necessary or advisable to familiarize themselves with such
operations, books, records, properties and other matters; provided, however,
that such access or investigation shall not interfere with the normal business
operations of Heritage and the Subsidiaries. Upon request, Heritage and the
Subsidiaries shall furnish ONB or its respective representatives or agents,
their attorneys' responses to external auditors requests for information,
management letters received from their external auditors and such financial,
loan and operating data and other information reasonably requested by ONB which
has been or is developed by Heritage or any Subsidiary, their auditors,
accountants or attorneys (provided with respect to attorneys, such disclosure
would not result in the waiver by Heritage or any Subsidiary of any claim of
attorney-client privilege), and will permit ONB and its respective
representatives or agents to discuss such information directly with any
individual or firm performing auditing or accounting functions for Heritage and
the Subsidiaries, and such auditors and accountants shall be directed to furnish
copies of any reports or financial information as developed to ONB or its
respective representatives or agents. No investigation by ONB shall affect the
representations and warranties made by Heritage herein. ONB shall not use any
such information obtained pursuant to this Agreement for any purpose unrelated
to the Merger. Any confidential information or trade secrets received by ONB or
its representatives or agents in the course of such examination (whether
conducted prior to or after the date of this Agreement) shall be treated
confidentially, and any correspondence, memoranda, records, copies, documents
and electronic or other media of any kind containing such confidential
information or trade secrets or both shall be destroyed by ONB or, at Heritage's
request, returned to Heritage in the event this Agreement is terminated as
provided in Section 9 hereof. This Section 6.09 shall not require the disclosure
of any information to ONB which would be prohibited by law.
6.10. Subsequent Heritage Financial Statements. As soon as reasonably
available after the date of this Agreement, Heritage shall deliver to ONB the
monthly unaudited consolidated balance sheets and profit and loss statements of
Heritage prepared for its internal use, Call Reports of the Banks for each
quarterly period completed prior to the Effective Time, and all other financial
reports or statements submitted to regulatory authorities after the date hereof,
to the extent permitted by law (collectively, "Subsequent Heritage Financial
Statements"). The Subsequent Heritage Financial Statements shall be prepared on
a basis consistent with past accounting practices and generally accepted
accounting principles applied on a consistent basis to the extent applicable and
shall present fairly the financial condition and results of operations as of the
dates and for the periods presented, subject to year end audit adjustments and
the absence of footnotes for interim statements. The Subsequent Heritage
Financial Statements, including the notes thereto, will not include any assets,
liabilities or obligations or omit to state any assets, liabilities or
obligations, absolute or contingent, or any other facts, which inclusion or
omission would render such financial statements inaccurate, incomplete or
misleading in any respect.
6.11. Employee Benefits. Neither the terms of Section 7.03 hereof nor
the provision of any employee benefits by ONB or any of its subsidiaries to
employees of Heritage shall: (a) create any
employment contract, agreement or understanding with or employment rights for,
or constitute a commitment or obligation of employment to, any of the officers
or employees of Heritage; or
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(b) prohibit or restrict ONB or its subsidiaries, whether before or after the
Effective Time, from changing, amending or terminating any employee benefits
provided to its employees from time to time.
6.12. Transition of Heritage 401(k)/ESOP. As soon as administratively
feasible after the Effective Time, the assets and liabilities under the Heritage
Bank Profit Sharing, 401(k) Savings and Employee Stock Ownership Plan and Trust
("Heritage 401(k)/ESOP") attributable to the 401(k) portion of such plan shall
be merged with and into the ONB Savings Plan. All account balances maintained
under the Heritage 401(k)/ESOP shall become fully vested and nonforfeitable at
the Effective Time. From the date of this Agreement through the Effective Time,
Heritage and the Subsidiaries may continue to make contributions to the Heritage
401(k)/ESOP. (including participant "deferral" contributions and discretionary
employer contributions), so long as such contributions are comparable in amount,
on a prorated basis, to recent past contributions to that plan. In addition,
Heritage shall take, or cause to be taken, all actions necessary to cause the
fiduciaries of the 401(k)/ESOP to take all of the following actions:
(i) Implement a written confidential pass through voting
procedure pursuant to which the participants under the
Heritage 401(k)/ESOP and their beneficiaries shall direct
the trustee under the Heritage 401(k)/ESOP to vote the
shares of Heritage Common Stock allocated to their
Heritage 401(k)/ ESOP accounts with respect to the Merger;
(ii) Provide the Heritage 401(k)/ESOP participants and their
beneficiaries with a written notice regarding the
existence of and provisions for such confidential pass
through voting procedures, as well as the same written
materials to be provided to the shareholders of Heritage
in connection with the Merger;
(iii) Obtain a written opinion from a qualified, independent
financial advisor to the trustee of the Heritage
401(k)/ESOP to the effect that the shares of ONB common
stock to be received by the Heritage 401(k)/ESOP in the
Merger in exchange for the shares of Heritage Common Stock
will constitute "adequate consideration" as defined in
Section 3(18) of ERISA, and that the Merger, including the
disposition of the Heritage 401(k)/ESOP in connection
therewith, are fair to the Heritage 401(k)/ESOP and its
participants from a financial point of view. The identity
of the financial advisor and the contents of its written
opinion referred to in the preceding sentence must be
acceptable in form and content to ONB and its counsel; and
(iv) Take any and all additional actions necessary to satisfy
the requirements of ERISA applicable to the Heritage
401(k)/ESOP fiduciaries in connection with the Merger.
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Effective as of the last day of the month in which the Effective Time occurs,
the "employee stock ownership plan" portion of the Heritage 401(k)/ESOP (that
is, the portion of that plan that (i) is not attributable to the 401(k) portion
and therefore (ii) is not being merged into the ONB Savings Plan) shall be
terminated and all benefits thereunder distributed as soon as practicable
following that date. Prior to the distribution of any ESOP accounts in
connection with such termination, Heritage shall have obtained a determination
letter from the Service to the effect that the termination will not affect the
tax qualified status of the ESOP.
6.13. Termination of Group Health Plan. The Heritage Bank Group Health
Plan ("Heritage Group Health Plan") shall be terminated as of the last day of
the calendar month in which the Effective Time occurs. From the date of this
Agreement through the date as of which the Heritage Group Health Plan
terminates, Heritage and the Subsidiaries shall continue to pay the insurance
premiums necessary to continue the Heritage Group Health Plan benefits.
6.14. Termination of Group Dental Plan. The Heritage Bank Group Dental
Plan ("Heritage Dental Plan") shall be terminated as of the last day of the
calendar month in which the Effective Time occurs. From the date of this
Agreement through the date as of which the Heritage Dental Plan terminates,
Heritage and the Subsidiaries shall continue to pay the insurance premiums
necessary to continue the Heritage Dental Plan benefits.
6.15. Termination of Group LTD Plan. The Heritage Bank Group Long Term
Disability Plan ("Heritage LTD Plan") shall be terminated as of the Effective
Time, or as soon as administratively feasible thereafter, but such termination
shall not affect the benefits payable to any covered former Heritage employee
who became entitled to a disability benefit under the Heritage LTD Plan prior to
the termination of said plan. From the date of this Agreement through the date
as of which the Heritage LTD Plan terminates, Heritage and the Subsidiaries
shall continue to pay the insurance premiums necessary to continue the Heritage
LTD Plan benefits.
6.16. Termination of Cafeteria Plan. The Heritage Fringe Benefit Plan
("Heritage Cafeteria Plan") shall be terminated as of same date the Heritage
Health Plan is terminated. From the date of this Agreement through the date as
of which the Heritage Cafeteria Plan terminates, Heritage and the Subsidiaries
shall continue to contribute to such plan the pre-tax amounts which the Heritage
Cafeteria Plan participants elect to defer from compensation As of the date of
termination, the balances in the health and dependent care flexible spending
accounts under the Heritage Cafeteria Plan shall be transferred to the ONB
"cafeteria" plan. Elections in effect at that time shall be continued under the
ONB plan, subject to change as provided in the ONB plan. All benefit payments
relating to the transferred balances shall be made in accordance with the ONB
plan.
6.17. Termination of Group Life and ADD Plan. The Heritage Bank Group
Term Life and ADD Insurance Plan ("Heritage Life Plan") shall be terminated as
of the end of the month coincident with or next following the Effective Time.
From the date of this Agreement through the date on which the Heritage Life
Plan terminates, Heritage and the Subsidiaries shall continue to pay the
insurance premiums necessary to continue the death benefits provided by such
plan.
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6.18. Termination of Cancer Policies. The payment of premiums to
provide voluntary cancer insurance shall cease as of the Effective Time.
6.19. Termination of Executive Life and Disability Policies. The
payment of premiums to provide executives of Heritage and/or its Subsidiaries
with individual life and/or disability insurance coverage shall cease as of the
Effective Time. The executives may then exercise at their discretion whatever
conversion rights they may have, if any, with respect to those insurance
policies.
6.20. Termination of the Heritage Directors' Deferred Compensation
Plan. The Heritage Financial Services, Inc. Directors' Unfunded Deferred
Compensation Plan (the "Heritage Directors' Deferred Compensation Plan"), and
all participation agreements in effect thereunder, shall be terminated as of the
Effective Time. From the date of this Agreement through the date on which the
Heritage Directors' Deferred Compensation Plan is terminated, Heritage and the
Subsidiaries may continue to allow participants thereunder to elect to defer the
receipt of all or a portion of the director fees he or she would otherwise
receive and to credit such fees to the director's individual account under the
plan. Upon the termination of the Heritage Directors' Plan, the balance in each
individual account thereunder shall be distributed in a lump sum payment to the
participant entitled thereto. The Board of Directors of Heritage, and the Board
of Directors of each of the Subsidiaries which is participating in the Heritage
Directors' Deferred Compensation Plan, shall, prior to the day on which the
Effective Time occurs, amend or cause the amendment of such plan to provide that
upon the termination of such plan the accrued benefits thereunder shall be
immediately paid in a lump sum payment to the individuals entitled to such
accrued benefits. Notwithstanding the foregoing, if ONB adopts a deferred
compensation plan for its directors and/or the directors of its subsidiaries,
then the Heritage Directors' Deferred Compensation Plan shall be "frozen" as of
the Effective Time and the accumulated benefit obligations under the Heritage
Directors' Deferred Compensation Plan shall be transferred to, and become
benefit obligations under, the ONB plan. Such transferred benefits shall
thereafter accrue "earnings," be paid and generally be administered pursuant to
the terms of the ONB plan. Prior to the Effective Time, Heritage shall use its
best efforts to obtain acknowledgments and consents from each Heritage
Directors' Deferred Compensation Plan participant as to the foregoing
disposition of his or her plan benefit.
6.21. Termination of Heritage Severance Policy. The Heritage Bank
Severance Policy, shall be terminated as of the Effective Time. With respect to
an individual covered by such severance policy on the date of its termination,
in the event that he or she incurs, within twelve months from the Effective
Time, an involuntary termination of employment for reasons other than cause, he
or she shall be entitled to receive a severance benefit. The severance benefit
shall be a salary continuation the amount of which shall be the amount payable
to such individual under the salary continuation provisions of the ONB Severance
Policy, if any, then applicable to such individual. An individual who is
entitled to a benefit under the ONB Severance Policy shall also be entitled to a
continuation of employee benefits as determined solely by the applicable
provisions of the ONB Severance Policy.
6.22. Disposition of Heritage Stock Option Plans. At or prior to the
Effective Time, Heritage shall use its best efforts, including using its best
efforts to obtain any necessary consents
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from optionees, with respect to the Heritage Bank 1989 Employees Stock Option
Plan and the Heritage Financial Services, Inc. 1998 Stock Option Plan ("Heritage
Stock Option Plans") to permit the conversion of each outstanding option to
acquire shares of common stock of Heritage which was properly granted pursuant
to a stock option agreement executed in accordance with the provisions of a
Heritage Stock Option Plan by ONB pursuant to Section 7.04 of this Agreement,
and to permit ONB to assume the sponsorship and administration of the Heritage
Stock Option Plans. Heritage shall not grant any additional options under a
Heritage Stock Option Plans after the date of this Agreement and shall also take
all actions necessary to amend the Heritage Stock Option Plans to eliminate
additional automatic or discretionary grants or awards under such plans
subsequent to the Effective Time. Heritage shall amend the Heritage Bank 1989
Employees Stock Option Plan, or cause such plan to be amended, to eliminate any
rights to receive cash in lieu of stock under the plan. Finally, Heritage shall
take all actions needed to terminate the Heritage Financial Services, Inc. 1998
Outside Directors' Stock Option Plan as of the Effective Time. No grants of
options shall be made under that plan on or after the date of this Agreement. In
addition, all unexercised options previously granted under that plan shall lapse
and become unexercisable on and after the Effective Time.
6.23. Break-up Fee. (a) Heritage hereby acknowledges and agrees that
ONB has committed and will commit substantial time, effort, resources and
expenses, and will forgo other acquisition opportunities, in pursuing the
Merger. Heritage further agrees that it shall pay to ONB a break-up fee in the
amount of Two Million Dollars ($2,000,000), plus out-of-pocket expenses
(collectively, the "Break-up Fee"), in the event that:
(i) The Board of Directors of Heritage fails to recommend
to shareholders of Heritage that such shareholders should
approve this Agreement and the Merger; or
(ii) The Board of Directors of Heritage withdraws, modifies or
conditions its recommendation to shareholders of Heritage
to approve this Agreement and the Merger or is silent with
respect to the approval of this Agreement and the Merger;
or
(iii) Heritage approves, enters into or executes a definitive
agreement, letter of intent (whether binding or
non-binding), term sheet or understanding relating to an
Acquisition Transaction with a party other than ONB or an
affiliate of ONB; or
(iv) Heritage terminates this Agreement pursuant to Section
9.01(c)(vi) hereof.
(b) The Break-up Fee shall, be paid to ONB within thirty (30) days of
the occurrence of any of the events specified in Section 6.23(a) hereof. If the
Break-up Fee is not paid as provided, then ONB shall be entitled to recover
interest at the highest prime rate set forth in The Wall Street Journal (Midwest
Edition) under the section entitled "Money Rates" on the unpaid amount of the
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Break-up Fee from the time the Break-up Fee is due until paid-in-full, together
with all costs of collection thereof, including reasonable attorneys' fees and
expenses.
(c) ONB and Heritage hereby acknowledge and agree that the Break-up Fee
shall compensate ONB for (i) the value of the lost business opportunity which
would have inured to ONB if the Merger had been consummated, (ii) expenses
incurred for attorneys, accountants, financial advisors and consultants of ONB
in developing the Merger and drafting this Agreement, (iii) ONB's management
time and expense in investigating, analyzing, developing and pursuing the
Merger, (iv) expenses relating to ONB's due diligence efforts and (v) the value
of the acquisition opportunities lost by ONB in pursuing the Merger instead of
other acquisitions. Heritage further acknowledges and agrees that the amount of
the Break-up Fee is fair, reasonable and not a penalty and that its obligation
to pay the Break-up Fee shall survive any termination of this Agreement by ONB.
6.24. Year 2000. Heritage shall:
(a) Additional Information. Furnish such additional information,
statements and other reports with respect to Heritage's Year 2000 compliance
(and its approach to and progress towards achieving compliance) discussed in
Section 4.24 hereof as ONB may reasonably request from time to time.
(b) Notice of Changes. In the event of any change in circumstances that
causes or will likely cause any of Heritage's representations and warranties set
forth in Section 4.24 hereof ("Year 2000 Compliance") to no longer be true and
would result in a Material Adverse Effect (hereinafter referred to as a "Change
in Circumstances"), then Heritage shall promptly, and in any event within ten
(10) days of receipt of information regarding a Change in Circumstances, provide
ONB with written notice ("Notice") that describes in reasonable detail the
Change in Circumstances and how such Change in Circumstances caused or will
likely cause Heritage's representations and warranties set forth in Section 4.24
hereof to no longer be true. Heritage shall, within ten (10) days of a request,
also provide ONB with any additional information ONB reasonably requests of
Heritage in connection with the Notice and/or a Change in Circumstances.
(c) Audits. Give any representative of ONB reasonable access during all
business hours to, and permit such representative to examine, copy or make
excerpts from, any and all books, records and documents in the possession of
Heritage and the Subsidiaries and relating to their affairs, and to inspect any
of the properties and Systems of Heritage and the Subsidiaries, and to project
test the Systems to determine if they are Year 2000 Compliant in an integrated
environment, all at the sole cost and expense of ONB.
6.25. Reports. Promptly upon its becoming available, furnish to ONB one
(1) copy of each financial statement, report, notice, or proxy statement sent by
Heritage to its shareholders generally and of each regular or periodic report,
registration statement or prospectus filed by Heritage with the SEC or any
successor agency, and of any order issued by any Governmental Authority in any
proceeding to which Heritage is a party. For purposes of this provision,
"Governmental Authority"
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shall mean any government (or any political subdivision or jurisdiction
thereof), court, bureau, agency or other governmental entity having or asserting
jurisdiction over Heritage or any of its business, operations or properties.
6.26. Adverse Actions. Heritage shall not (a) take any action while
knowing that such action would, or is reasonably likely to, prevent or impede
the Merger from qualifying (i) for "pooling of interests" accounting treatment
or (ii) as a reorganization within the meaning of Section 368 of the Code; or
(b) knowingly take any action that is intended or is reasonably likely to result
in (i) any of its representations and warranties set forth in this Agreement
being or becoming untrue, subject to the standard set out in the second
paragraph to Section 4, in any respect at any time at or prior to the Effective
Time, (ii) any of the conditions to the Merger set forth in Section 8 not being
satisfied, (iii) a material violation of any provision of this Agreement or (iv)
a delay in the consummation of the Merger except, in each case, as may be
required by applicable law or regulation.
SECTION 7
COVENANTS OF ONB
ONB covenants and agrees with Heritage as follows:
7.01. Approvals. ONB shall have primary responsibility for the
preparation, filing and costs of all bank holding company and bank regulatory
applications required for consummation of the Merger. ONB shall file all bank
holding company and bank regulatory applications as soon as practicable after
the execution of this Agreement. ONB shall provide to Heritage's legal counsel a
reasonable opportunity to review such applications prior to their filing and
shall provide to Heritage's legal counsel copies of all applications filed and
copies of all material written communications with all state and federal bank
regulatory agencies relating to such applications. ONB shall proceed
expeditiously, cooperate fully and use its best efforts to procure, upon terms
and conditions reasonably acceptable to ONB, all consents, authorizations,
approvals, registrations and certificates, to complete all filings and
applications and to satisfy all other requirements prescribed by law which are
necessary for consummation of the Merger on the terms and conditions provided in
this Agreement at the earliest possible reasonable date.
7.02. SEC Registration. (a) ONB shall file with the SEC as soon as
practicable after the execution of this Agreement a Registration Statement on an
appropriate form under the 1933 Act covering the shares of ONB common stock to
be issued pursuant to this Agreement and shall use its best efforts to cause the
same to become effective and thereafter, until the Effective Time or termination
of this Agreement, to keep the same effective and, if necessary, amend and
supplement the same. Such Registration Statement and any amendments and
supplements thereto are referred to in this Agreement as the "Registration
Statement". The Registration Statement shall include a proxy
statement-prospectus reasonably acceptable to ONB and Heritage, prepared for use
in connection with the meeting of shareholders of Heritage referred to in
Section 6.01 hereof, all in accordance with the rules and regulations of the
SEC. ONB shall, as soon as practicable after filing
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the Registration Statement, make all filings required to obtain all Blue Sky
exemptions, authorizations, consents or approvals required for the issuance of
ONB common stock. In advance of filing the Registration Statement and all other
filings described in Section 7.01 hereof, ONB shall provide Heritage and its
counsel with a copy of the Registration Statement and each such other filing and
provide an opportunity to comment thereon.
(b) Any materials or information provided by ONB in any filing with any
state or federal regulatory agency or authority shall not contain any untrue or
misleading statement of material fact or shall omit to state a material fact
necessary to make the statements contained therein, in light of the
circumstances in which they are made, not false or misleading.
(c) All filings by ONB with the SEC and with all other federal and
state regulatory agencies shall be true, accurate and complete in all material
respects as of the dates of the filings, and no such filings shall contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements, at the time and in light of the circumstances
under which they were made, not false or misleading.
(d) ONB will use reasonable best efforts to list for trading on the
Nasdaq National Market System (subject to official notice of issuance) prior to
the Effective Time, the shares of ONB common stock to be issued in the Merger.
7.03. Employee Benefit Plans. (a) As of the Effective Time, ONB will
make available to the employees of Heritage and the Subsidiaries who continue as
employees of ONB or any subsidiary of ONB after the Effective Time, subject to
Section 7.03(b) and (c) hereof, substantially the same employee benefits on
substantially the same terms and conditions as ONB offers to similarly situated
officers and employees. Until such time as the employees of Heritage and the
Subsidiaries become covered by the ONB welfare benefit plans, the employees of
Heritage and the Subsidiaries shall remain covered by the Heritage Plans which
cover such employees, subject to the terms of such plans. Except as otherwise
provided in Sections 6.11 through 6.22, ONB will honor in accordance with their
terms (i) all employee benefit obligations to current and former officers and
employers and employees of Heritage and the Subsidiaries accrued as of the
Effective Time and (ii) to the extent set forth in the Disclosure Schedule, all
employee severance plans in existence on the date hereof and all employment or
severance agreements entered into prior to the date hereof to the extent set
forth in the Disclosure Schedule.
(b) Subject to the provisions of subsection (c) hereof, years of
service (as defined in the applicable ONB plan) of an officer or employee of
Heritage or any Subsidiary prior to the Effective Time shall be credited,
effective as of the date on which such employees become covered by a particular
ONB plan, to each such officer or employee eligible for coverage under Section
7.03(a) hereof for purposes of: (i) eligibility under ONB's employee welfare
benefit plans; (ii) eligibility and vesting, but not for purposes of benefit
accrual or contributions, under the ONB Employees' Retirement Plan ("ONB Pension
Plan") or under the ONB Employees' Savings and Profit Sharing Plan ("ONB Profit
Sharing Plan"); and (iii) eligibility and vesting, but not for purposes of
benefit
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accrual or contributions, under the ONB Employee Stock Ownership Plan ("ESOP").
Those officers and employees of Heritage or any Subsidiary who otherwise meet
the eligibility requirements of the ONB Profit Sharing Plan and ESOP, based on
their age and years of service to Heritage or any Subsidiary, shall become
participants thereunder at the Effective Time. Those officers and employees of
Heritage or any Subsidiary who otherwise meet the eligibility requirements of
the ONB Pension Plan, based upon their age and years of Heritage or any
Subsidiary service, shall become participants thereunder no later than the
January 1st which coincides with or next follows the Effective Time. Those
officers or employees who do not meet the eligibility requirements of the ONB
Pension Plan, ONB Profit Sharing Plan or ESOP on such dates shall become
participants thereunder on the first plan entry date under the ONB Pension Plan,
the ONB Profit Sharing Plan or ESOP, as the case may be, which coincides with or
next follows the date on which such eligibility requirements are satisfied.
(c) In accordance with the provisions of the Health Insurance
Portability and Accountability Act ("HIPAA") and the terms of the ONB group
health plan, officers and employees of Heritage or any Subsidiary who become
participants in the ONB group health plan will be given "creditable coverage"
credit for their coverage under the Heritage Group Health Plan under the ONB
group health plan's pre-existing condition limitation provisions. In addition,
if a condition was not a "pre-existing condition" for a participant in the
Heritage Group Health Plan, it shall not be considered to be a pre-existing
condition under the ONB group health plan.
(d) Neither the terms of this Section 7.03 nor the provision of any
employee benefits by ONB or any of its subsidiaries to employees of Heritage or
any Subsidiary shall: (i) create any employment contract, agreement or
understanding with or employment rights for, or constitute a commitment or
obligation of employment to, any of the officers or employees of Heritage or any
Subsidiary; or (ii) prohibit or restrict ONB or its subsidiaries, whether before
or after the Effective Time, from changing, amending or terminating any employee
benefits provided to its employees from time to time.
(e) ONB shall take any and all actions reasonably necessary to
effectuate the disposition of the Heritage Plans provided by Section 6.12
through 6.22.
7.04. Stock Options. (a) At the Effective Time, the obligations of
Heritage with respect to each outstanding option to purchase shares of Heritage
Common Stock ("Stock Options") which was properly granted pursuant to a stock
option agreement executed in accordance with a Heritage Stock Option Plan shall
be assumed by ONB as hereinafter provided. In connection therewith, each Stock
Option shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Stock Option at the Effective Time,
that number of shares of ONB common stock, rounded to the nearest
whole share, as the holder of such Stock Option would have been entitled to
receive pursuant to the Merger had such holder exercised such Option in full
(after giving effect to accelerated vesting) immediately prior to the Effective
Time and, immediately thereafter, exchanged such shares solely for ONB common
stock based upon the Exchange Ratio at an exercise price per share equal to (A)
the aggregate exercise price for Heritage Common Stock otherwise purchasable
pursuant to such Stock Option divided by (B) the number of shares of ONB
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common stock, rounded to the nearest whole share, deemed purchasable pursuant to
such Stock Option; provided, however, that in the case of any Stock Option to
which Section 422 of the Code applies, the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise of
such option shall be determined in accordance with the foregoing, subject to
such adjustments as are necessary in order to satisfy the requirements of
Section 424(a) of the Code. By way of example and illustration only, if any
option holder has been granted and is vested in options to acquire 1,000 shares
of Heritage Common Stock for $10.00 per share, then after the Effective Time,
such option holder's same option would be converted into the option to acquire,
3,154 shares of ONB common stock at $3.17 per share. In no event shall ONB be
required to issue fractional shares of ONB common stock pursuant to the Stock
Options.
(b) As soon as practicable after the Effective Time, ONB shall deliver
to each holder of a Stock Option an appropriate notice or agreement which sets
forth such holder's rights pursuant to the Stock Option, and the agreements
evidencing the grants of such Stock Options shall continue in effect on the same
terms and conditions (subject to the conversion required by this Section 7.04
after giving effect to the Merger and the assumption by ONB as set forth above);
provided, however, to the extent necessary to effectuate the provisions of this
Section 7.04, ONB may deliver new or amended Stock Option agreements which
reflect the terms of each Stock Option assumed by ONB. With respect to each
Stock Option, the optionee shall be solely responsible for any and all tax
liability (other than the employer's one-half share of any employment taxes)
which may be imposed upon the optionee as a result of the provisions of this
Section 7.04 and as a result of the grant and exercise of such Stock Options.
(c) As soon as practicable after the Effective Time, ONB shall file
with the SEC a registration statement on an appropriate form with respect to the
shares of ONB common stock subject to such options and shall use its best
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses with respect thereto) for so long as such options remain
outstanding.
7.05. Press Releases. Except as required by law, ONB shall not issue
any news or press releases or make any other public announcements or disclosures
relating primarily to Heritage with respect to the Merger without the prior
consent of Heritage, which consent shall not be unreasonably withheld.
7.06. Indemnification. (a) From and after the Effective Time, ONB shall
indemnify, defend and hold harmless to the fullest extent permitted by
applicable federal and state law each person who is on the date hereof, or has
been at any time prior to the date hereof or who becomes prior to the Effective
Time, a director or officer of Heritage or was serving at the request of
Heritage as a director or officer of any domestic or foreign corporation, joint
venture, trust, employee benefit plan or other enterprise (collectively, the
"Indemnitees") arising out of Heritage's Charter or By-Laws in effect at the
Effective Time against any and all losses in connection with or arising out of
any claim which is based upon, arises out of or in any way relates to any actual
or alleged act or omission occurring at or prior to the Effective Time in the
Indemnitee's capacity as a director or officer (whether elected
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or appointed), of Heritage. Indemnification of officers and directors of the
Subsidiaries following the Effective Time will be provided to the same extent it
is provided from time to time to other persons working in similar capacities for
ONB or its subsidiaries following the Effective Time.
(b) In the event ONB or any of its successors or assigns (i)
consolidates with or merges into any other corporation or entity and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any person or entity, then, and in each case, to the extent
necessary, proper provision shall be made so that the successors and assigns of
ONB assume the obligations set forth in this Section 7.06.
(c) ONB shall maintain in effect for not less than two (2) years from
the Effective Time the policies of directors' and officers' liability insurance
most recently maintained by Heritage; provided, however, that ONB may substitute
therefor policies with reputable and financially sound carriers for
substantially similar coverage containing terms and conditions which are no less
advantageous for so long as such substitution does not result in gaps or lapses
in coverage with respect to claims arising from or relating to matters occurring
prior to the Effective Time. ONB shall pay all expenses, including attorneys'
fees, that may be incurred by any Indemnitee in enforcing the indemnity and
other obligations provided for in this Section 7.06.
(d) The provisions of this Section 7.06 are intended to be for the
benefit of, and shall be enforceable by, each Indemnitee and their respective
heirs and representatives.
7.07 Adverse Actions. ONB shall not (a) take any action while knowing
that such action would, or is reasonably likely to, prevent or impede the Merger
from qualifying (i) for "pooling of interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368 of the Code; or (b) knowingly
take any action that is intended or is reasonably likely to result in (i) any of
its representations and warranties set forth in this Agreement being or becoming
untrue, subject to the standard set out in the second paragraph to Section 5, in
any respect at any time at or prior to the Effective Time, (ii) any of the
conditions to the Merger set forth in Section 8 not being satisfied, (iii) a
material violation of any provision of this Agreement or (iv) a delay in the
consummation of the Merger except, in each case, as may be required by
applicable law or regulation.
SECTION 8
CONDITIONS PRECEDENT TO THE MERGER
8.01. ONB. The obligation of ONB to consummate the Merger is subject to
the satisfaction and fulfillment of each of the following conditions on or prior
to the Effective Time, unless waived in writing by ONB:
(a) Representations and Warranties at Effective Time. Each of the
representations and warranties of Heritage with respect to itself and the
Subsidiaries contained in this Agreement shall,
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subject to the standard set out in the second paragraph to Section 4, be true,
and correct at and as of the Effective Time as though such representations and
warranties had been made or given on and as of the Effective Time.
(b) Covenants. Each of the covenants and agreements of Heritage shall
have been fulfilled or complied with from the date of this Agreement through and
as of the Effective Time.
(c) Deliveries at Closing. ONB shall have received from Heritage at the
Closing (as hereinafter defined) the items and documents, in form and content
reasonably satisfactory to ONB, set forth in Section 11.02(b) hereof.
(d) Registration Statement Effective. ONB shall have registered its
shares of common stock to be issued to shareholders of Heritage in accordance
with this Agreement with the SEC pursuant to the 1933 Act, and all state
securities and Blue Sky approvals, authorizations and exemptions required to
offer and sell such shares shall have been received by ONB. The Registration
Statement with respect thereto shall have been declared effective by the SEC and
no stop order shall have been issued or threatened.
(e) Regulatory Approvals. All regulatory approvals required to
consummate the transactions contemplated hereby, shall have been obtained and
shall remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired and no such approvals shall contain any
conditions, restrictions or requirements which the board of directors of ONB
reasonably determines in good faith would (i) following the Effective Time, have
a Material Adverse Effect on ONB and its subsidiaries taken as a whole or (ii)
reduce the benefits of the transactions contemplated hereby to such a degree
that ONB would not have entered into this Agreement had such conditions,
restrictions or requirements been known at the date hereof.
(f) Shareholder Approval. The shareholders of Heritage shall have
approved and adopted this Agreement as required by applicable law and its
Charter.
(g) Officers' Certificate. Heritage shall have delivered to ONB a
certificate signed by its Chairman or President and its Secretary, dated as of
the Effective Time, certifying: (i) to the effect set out in Section 8.01(a);
(ii) that all the covenants of Heritage have been complied with from the date of
this Agreement through and as of the Effective Time; and (iii) that Heritage has
satisfied and fully complied with all conditions necessary to make this
Agreement effective as to Heritage.
(h) Tax Opinion. The Board of Directors of ONB shall have received a
written opinion of the law firm of ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP,
dated as of the Effective Time, in form and content satisfactory to ONB, to the
effect that the Merger to be effected pursuant to this Agreement will constitute
a tax-free reorganization under the Code (as described in Section 1.06 hereof)
to each party hereto and to the shareholders of Heritage, except with respect to
cash received by Heritage's shareholders for fractional shares resulting from
application of the Exchange Ratio.
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In rendering such opinion, counsel may require and rely upon customary
representation letters of ONB and Heritage and rely upon customary assumptions.
(i) Pooling of Interests Opinion. The Board of Directors of ONB shall
have received a written opinion from its independent auditors, dated as of the
Effective Time, in form and content satisfactory to ONB, to the effect that the
Merger to be effected pursuant to this Agreement will qualify for pooling of
interests accounting treatment for ONB.
(j) Fairness Opinion. Heritage's investment banker shall have issued
(as of the date not later than the mailing date of the proxy
statement-prospectus relating to the Merger to be mailed to the shareholders of
Heritage) its fairness opinion stating that the Exchange Ratio relating to the
Merger is fair to the shareholders of Heritage from a financial point of view;
provided, that this condition precedent shall apply only in the event that
Heritage waives its condition precedent in Section 8.02(i) hereof.
8.02. Heritage. The obligation of Heritage to consummate the Merger is
subject to the satisfaction and fulfillment of each of the following conditions
on or prior to the Effective Time, unless waived in writing by Heritage:
(a) Representations and Warranties at Effective Time. Each of the
representations and warranties of ONB contained in this Agreement shall, subject
to the standards set out in the second paragraph of Section 5, be true and
correct on and as of the Effective Time as though the representations and
warranties had been made or given at and as of the Effective Time.
(b) Covenants. Each of the covenants and agreements of ONB shall have
been fulfilled or complied with from the date of this Agreement through and as
of the Effective Time.
(c) Deliveries at Closing. Heritage shall have received from ONB at the
Closing the items and documents, in form and content reasonably satisfactory to
Heritage, listed in Section 11.02(a) hereof.
(d) Registration Statement Effective. ONB shall have registered its
shares of common stock to be issued to shareholders of Heritage in accordance
with this Agreement with the SEC pursuant to the 1933 Act, and all state
securities and Blue Sky approvals, authorizations and exemptions required to
offer and sell such shares shall have been received by ONB. The Registration
Statement with respect thereto shall have been declared effective by the SEC and
no stop order shall have been issued or threatened. In addition, such shares of
ONB common stock shall be listed on the Nasdaq National Market System.
(e) Regulatory Approvals. All regulatory approvals required to
consummate the transactions contemplated hereby, shall have been obtained and
shall remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired and no such approvals shall contain any
conditions, restrictions or requirements which the board of directors of
Heritage
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reasonably determines in good faith would (i) following the Effective Time, have
a Material Adverse Effect on Heritage or (ii) reduce the benefits of the
transactions contemplated hereby to such a degree that Heritage would not have
entered into this Agreement had such conditions, restrictions or requirements
been known at the date hereof.
(f) Shareholder Approval. The shareholders of Heritage shall have
approved and adopted this Agreement as required by applicable law and its
Charter.
(g) Officers' Certificate. ONB shall have delivered to Heritage a
certificate signed by its Chairman or President and its Secretary, dated as of
the Effective Time, certifying that: (i) to the effect set out in Section
8.02(a); (ii) that all the covenants of ONB have been complied with from the
date of this Agreement through and as of the Effective Time; and (iii) ONB has
satisfied and fully complied with all conditions necessary to make this
Agreement effective as to it.
(h) Tax Opinion. The Board of Directors of Heritage shall have received
a written opinion of the law firm of ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP,
dated as of the Effective Time, in form and content satisfactory to Heritage, to
the effect that the Merger to be effected pursuant to this Agreement will
constitute a tax-free reorganization under the Code (as described in Section
1.06 hereof) to each party hereto and to the shareholders of Heritage, except
with respect to cash received by Heritage's shareholders for fractional shares
resulting from application of the Exchange Ratio. In rendering such opinion,
counsel may require and rely upon customary representation letters of ONB and
Heritage and rely upon customary assumptions.
(i) Fairness Opinion. Heritage's investment banker shall have issued
(as of a date not later than the mailing date of the proxy statement-prospectus
relating to the Merger to be mailed to the shareholders of Heritage) its
fairness opinion stating that the Exchange Ratio relating to the Merger is fair
to the shareholders of Heritage from a financial point of view.
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SECTION 9
TERMINATION OF MERGER
9.01. Manner of Termination. This Agreement and the Merger may be
terminated at any time prior to the Effective Time by written notice delivered
by ONB to Heritage, or by Heritage to ONB as follows:
(a) By ONB or Heritage, if:
(i) the Merger contemplated by this Agreement has not been
consummated by June 30, 2000; or
(ii) the respective Boards of Directors of ONB and Heritage
mutually agree to terminate this Agreement.
(b) By ONB, if:
(i) the Merger will not qualify for pooling of interests
accounting treatment for ONB; or
(ii) at any time prior to the Effective Time, ONB's Board of
Directors so determines, in the event of either
(A) a breach by Heritage of any representation or
warranty contained herein, which breach cannot be or
has not been cured within thirty (30) days after the
giving of written notice to Heritage of such breach;
provided, however, that any such cure may not result
in a Material Adverse Effect; or
(B) a breach by Heritage of any of the covenants or
agreements contained herein, which breach cannot be
or has not been cured within thirty (30) days after
the giving of written notice to Heritage of such
breach; provided that a breach under this clause (B)
would be reasonably likely, individually or in the
aggregate with other breaches, to result in a
Material Adverse Effect; provided, however, that any
such cure may not result in a Material Adverse
Effect; or
(iii) it shall reasonably determine that the Merger contemplated
by this Agreement has become impracticable by reason of
commencement or threat of any claim, litigation or
proceeding against ONB, Heritage, any Subsidiary, or any
subsidiary of ONB, or any director or officer of any of
such entities relating to this Agreement or the Merger; or
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(iv) there has been a material adverse change in the business,
assets, capitalization, financial condition or results of
operations of Heritage and its Subsidiaries taken as a
whole as of the Effective Time as compared to that in
existence as of the date of this Agreement other than any
change resulting primarily by reason of changes in banking
laws or regulations (or interpretations thereof), changes
in banking laws of general applicability or interpretations
thereof by courts or governmental authorities, changes in
generally accepted accounting principles or regulatory
accounting requirements applicable to banks and their
holding companies generally, any modifications or changes
to valuation policies and practices in connection with the
Merger or restructuring charges taken in connection with
the Merger, in each case in accordance with generally
accepted accounting principles, effects of any action taken
with the prior written consent of ONB and changes in the
general level of interest rate or conditions or
circumstances that affect the banking industry generally;
or
(v) Heritage fulfills the requirements of Section 6.01 hereof
but the shareholders of Heritage do not approve and adopt
the Merger and this Agreement; or
(vi) in the event that dissenters' rights are exercised
pursuant to Section 3 hereof, and the aggregate amount of
cash payable to dissenting shareholders exceeds ten percent
(10%) of the value of the total consideration to be paid
with respect to the Merger.
(c) By Heritage, if:
(i) at any time prior to the Effective Time, Heritage's Board of
Directors so determines, in the event of either
(A) a breach by ONB of any representation or warranty
contained herein, which breach cannot be or has not
been cured within thirty (30) days after the giving of
written notice to ONB of such breach; or
(B) a breach by ONB of any of the covenants or agreements
contained herein, which breach cannot be or has not
been cured within thirty (30) days after the giving of
written notice to ONB of such breach; provided that
a breach under this clause (B) would be reasonably
likely, individually or in the aggregate with other
breaches, to result in a Material Adverse Effect; or
(ii) there has been a material adverse change in the financial
condition, results of operations, business, assets or
capitalization of ONB on a consolidated basis as of the
Effective Time as compared to that in existence on June 30,
1999, other than any change resulting primarily by reason of
changes in banking laws
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or regulations (or interpretations thereof), changes in
banking and similar laws of general applicability or
interpretations thereof by courts or governmental
authorities, changes in generally accepted accounting
principles or regulatory accounting requirements applicable
to banks and their holding companies generally, any
modifications or changes to valuation policies and practices
in connection with the Merger or restructuring charges taken
in connection with the Merger, in each case in accordance
with generally accepted accounting principles, effects of
any action taken with the prior written consent of Heritage
and changes in the general level of interest rate or
conditions or circumstances that affect the banking industry
generally; or
(iii) it shall reasonably determine that the Merger contemplated
by this Agreement has become impracticable by reason of
commencement or threat of any material claim, litigation or
proceeding against ONB (A) relating to this Agreement or the
Merger or (B) which is likely to have a Material Adverse
Effect on ONB; or
(iv) Heritage fulfills the requirements of Section 6.01 hereof
but the shareholders of Heritage do not approve and adopt
the Merger and this Agreement; or
(v) at any time during the five-day period commencing with the
Determination Date if both of the following conditions are
satisfied:
(A) the number obtained by dividing the Average Closing Price by
the Starting Price (the "ONB Ratio") shall be less than 0.80; and
(B) the ONB Ratio shall be less than the number obtained by
dividing the Final Index Value by the Index Value on the Starting Date
and subtracting 0.15 from the quotient in this clause (B) (such number
being referred to herein as the "Index Ratio");
subject, however, to the following three sentences. If Heritage elects to
exercise its termination right pursuant to this Section 9.01(c)(v), it shall
give written notice to ONB (provided that such notice of election to terminate
may be withdrawn at any time within the below-mentioned five-day period). During
the five-day period commencing with its receipt of such notice, ONB shall have
the option to increase the consideration to be received by the holders of
Heritage Common Stock hereunder, by adjusting the Exchange Ratio (calculated to
the nearest one one-thousandth) to equal the lesser of (x) a number (rounded to
the nearest thousandth) obtained by dividing (A) the product of the Starting
Price, 0.80 and the Exchange Ratio (as then in effect) by (B) the Average
Closing Price and (y) a number (rounded to the nearest one one-thousandth)
obtained by dividing (A) the product of the Index Ratio and the Exchange Ratio
(as then in effect) by (B) the ONB Ratio. If ONB so elects within such five-day
period, it shall give prompt written notice to Heritage of such election and the
revised Exchange Ratio. Whereupon no termination shall have occurred pursuant to
this Section
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9.01(c)(v) and this Agreement shall remain in effect in accordance with its
terms (except as the Exchange Ratio shall have been so modified).
For purposes of Section 9.01(c)(v), the following terms shall have the
meanings indicated:
"Average Closing Price" shall mean the average of the closing
price of a share of ONB Common Stock on the Nasdaq National Market
System (as reported in The Wall Street Journal, or if not reported
therein, in another authoritative source) during the period of 20
consecutive trading days ending on the trading day prior to the
Determination Date, rounded to the nearest whole cent.
"Determination Date" shall mean the date on which the last
required approval required under Section 8.01(e) and 8.02(e) hereof is
obtained, without regard to any requisite waiting period in respect
thereof.
"Final Index Value" shall mean the average of the Index Value
for the 20 consecutive trading days ending on the trading day prior to
the Determination Date.
"Index Value," on a given date, shall mean the index value on
such date of the Nasdaq Bank Index, as such index value is reported by
Bloomberg News Service on such date.
"Starting Date" shall mean the last trading day immediately
preceding the date of the first public announcement of entry to this
Agreement.
"Starting Price" shall mean the closing price of a share of
ONB common stock on the Nasdaq National Market System (as reported in
The Wall Street Journal, or if not reported therein, in another
authoritative source) on the Starting Date.
(vi) prior to the approval by the shareholders of Heritage of the
Merger contemplated by this Agreement, if, without breaching
6.06, Heritage shall contemporaneously enter into a definitive
agreement with a third party providing for an Acquisition
Transaction on terms determined in good faith by the Board of
Directors of Heritage, after consulting with and considering
the advice of Heritage's independent counsel and financial
advisors, to be substantially more favorable to the
shareholders of Heritage than the Merger and with respect to
which the Board of Directors has determined after such
consultation and consideration that to proceed with the Merger
would violate the fiduciary duties of the Board of Directors
to the Heritage shareholders.
9.02. Effect of Termination. Upon termination by written notice, this
Agreement shall be of no further force or effect, and there shall be no further
obligations or restrictions on future activities on the part of ONB or Heritage
and their respective directors, officers, employees, agents and shareholders,
except as provided in compliance with: (i) the confidentiality provisions of
this Agreement set forth in Section 6.09 hereof and the Confidentiality
Agreement dated June 10, 1999
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by and between ONB and Heritage (the "Confidentiality Agreement"); (ii) the
payment of expenses set forth in Section 12.09 hereof; and (iii) the payment of
the Break-Up Fee as provided by Section 6.23 hereof; provided, however, that
termination will not in any way release a breaching party from liability for any
willful breach of this Agreement giving rise to such termination. The obligation
to pay the Break-Up Fee in accordance with Section 6.23 hereof will survive any
termination of this Agreement.
SECTION 10
EFFECTIVE TIME OF THE MERGER
Upon the terms and subject to the conditions specified in this
Agreement, the Merger shall become effective at the close of business on the day
and at the time specified in the Articles of Merger of Heritage with and into
ONB as filed with the Indiana Secretary of State and the Tennessee Secretary of
State ("Effective Time"). Unless otherwise mutually agreed to by the parties
hereto, the Effective Time shall occur on the later of (i) January 31, 2000 or
(ii) the last business day of the month following (a) the fulfillment of all
conditions precedent to the Merger set forth in Section 8 of this Agreement and
(b) the expiration of all waiting periods in connection with the bank regulatory
applications filed for the approval of the Merger.
SECTION 11
CLOSING
11.01. Closing Date and Place. So long as all conditions precedent set
forth in Section 8 hereof have been satisfied and fulfilled, the closing of the
Merger ("Closing") shall take place on the Effective Time at the law offices of
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
11.02. Deliveries. (a) At the Closing, ONB shall deliver to Heritage
the following:
(i) the officers' certificate contemplated by Section 8.02(g)
hereof;
(ii) copies of all approvals by government regulatory agencies
necessary to consummate the Merger;
(iii) copies of the resolutions of the Board of Directors of ONB
certified by the Secretary of ONB, relative to the
approval of this Agreement and the Merger;
(iv) an opinion of its counsel dated as of the Effective Time
and substantially in form set forth in Exhibit B attached
hereto; and
(v) such other documents as Heritage or its legal counsel may
reasonably request.
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(b) At the Closing, Heritage shall deliver to ONB the following:
(i) the officers' certificate contemplated by Section 8.01(g)
hereof;
(ii) a list of Heritage's shareholders as of the Effective Time
certified by the President and Secretary of Heritage;
(iii) copies of the resolutions adopted by the Board of Directors
of Heritage certified by the Secretary of Heritage, relative
to the approval of this Agreement and the Merger;
(iv) an opinion of its counsel dated as of the Effective Time and
substantially in form set forth in Exhibit C attached hereto;
and
(v) such other documents as ONB or its legal counsel may
reasonably request.
SECTION 12
MISCELLANEOUS
12.01. Effective Agreement. This Agreement shall be binding upon and
inure to the benefit of the respective parties hereto and their respective
successors and assigns; provided, however, that this Agreement may not be
assigned by any party hereto without the prior written consent of the other
parties hereto; provided, further, that no such extension, waiver or amendment
agreed to after authorization of this Agreement by the shareholders of Heritage
shall affect the rights of such shareholders in any manner which is materially
adverse to such shareholders. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto and their successors and assigns, and they shall not be construed as
conferring any rights on any other persons except as specifically set forth in
Sections 7.03, 7.04, and 7.06 hereof.
12.02. Waiver; Amendment. (a) The parties hereto may by an instrument
in writing: (i) extend the time for the performance of or otherwise amend any of
the covenants, conditions or agreements of the other parties under this
Agreement, except that the consideration to be received by the Heritage
shareholders shall not be decreased by such an amendment following the adoption
and approval of the Merger and this Agreement by the Heritage shareholders; (ii)
waive any inaccuracies in the representations or warranties of the other party
contained in this Agreement or in any document delivered pursuant hereto or
thereto; (iii) waive the performance by the other party of any of the covenants
or agreements to be performed by it or them under this Agreement; or (iv) waive
the satisfaction or fulfillment of any condition, the nonsatisfaction or
nonfulfillment of which is a condition to the right of the party so waiving to
consummate the Merger. The waiver by any party hereto of a breach of or
noncompliance with any provision of this Agreement shall not operate or be
construed as a continuing waiver or a waiver of any other or subsequent breach
or noncompliance hereunder.
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(b) This Agreement may be amended, modified or supplemented only by a
written agreement executed by the parties hereto.
12.03. Notices. All notices, requests and other communications
hereunder shall be in writing (which shall include telecopier communication) and
shall be deemed to have been duly given if delivered by hand and receipted for,
sent by certified United States Mail, return receipt requested, first class
postage pre-paid, delivered by overnight express receipted delivery service or
telecopied if confirmed immediately thereafter by also mailing a copy of such
notice, request or other communication by certified United States Mail, return
receipt requested, with first class postage pre-paid as follows:
If to ONB: with a copy to (which shall not
constitute notice):
Old National Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ATTN: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
ATTN: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Secretary Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
and General Counsel Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to Heritage: with a copy to (which shall not
constitute notice):
Heritage Financial Services, Inc. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇, P.A.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 2800 SunTrust Financial Center
▇.▇. ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ATTN: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
ATTN: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III, President Telephone: (615) 259-142
and Chief Executive Officer Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
or such substituted address or person as any of them have given to the other in
writing. All such notices, requests or other communications shall be effective:
(a) if delivered by hand, when delivered; (b) if mailed in the manner provided
herein, five (5) business days after deposit with the United States Postal
Service; (c) if delivered by overnight express delivery service, on the next
business day after deposit with such service; and (d) if by telecopier, on the
next business day if also confirmed by mail in the manner provided herein.
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12.04. Headings. The headings in this Agreement have been inserted
solely for ease of reference and should not be considered in the interpretation
or construction of this Agreement.
12.05. Severability. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein.
12.06. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same instrument.
12.07. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Indiana and applicable federal laws,
without regard to principles of conflicts of law.
12.08. Entire Agreement. This Agreement supersedes, terminates and
renders of no further force or effect all other prior or contemporaneous
understandings, commitments, representations, negotiations or agreements,
whether oral or written, among the parties hereto relating to the Merger or
matters contemplated herein and constitutes the entire agreement between the
parties hereto, except for the Confidentiality Agreement, which shall continue
in full force and effect following the date hereof. The parties hereto agree
that each party and its counsel reviewed and revised this Agreement and that the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement or any amendments or exhibits hereto.
12.09. Expenses. ONB shall pay its expenses incidental to the Merger
contemplated hereby. Heritage shall pay its expenses incidental to the Merger
contemplated hereby.
12.10. Certain References. Whenever in this Agreement a singular word
is used, it also shall include the plural wherever required by the context and
vice-versa. Except expressly stated otherwise, all references in this Agreement
to periods of days shall be construed to refer to calendar, not business, days.
The term "business day" shall mean any day except Saturday and Sunday when Old
National Bank in Evansville, the lead bank of ONB, is open for the transaction
of business.
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IN WITNESS WHEREOF, ONB and Heritage have made and entered into this
Agreement as of the day and year first above written and have caused this
Agreement to be executed, attested in counterparts and delivered by their duly
authorized officers.
OLD NATIONAL BANCORP
By:
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President and
Chief Operating Officer
ATTEST:
By:
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Corporate Secretary
HERITAGE FINANCIAL SERVICES, INC.
By:
-----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III, President and
Chief Executive Officer
ATTEST:
By:
----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Secretary
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SCHEDULE OF EXHIBITS
Exhibit A - Form of Undertaking and Agreement of Affiliate
Exhibit B - Legal Opinion of Krieg, DeVault, Alexander & ▇▇▇▇▇▇▇▇, LLP
(To be filed at a later date)
Exhibit C - Legal Opinion of ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇, P.A.
(To be filed at a later date)
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Exhibit A
UNDERTAKING AND AGREEMENT OF AFFILIATE
In connection with the affiliation of Heritage Financial Services, Inc.
("Heritage") and Old National Bancorp ("ONB") pursuant to the merger of Heritage
into ONB ("Merger"), as contemplated by that certain Agreement of Affiliation
and Merger, dated September 8th, 1999 ("Agreement"), by and between ONB and
Heritage, the undersigned may be an affiliate of Heritage for purposes of Rule
145 under the Securities Act of 1933, as amended ("Act"). In consideration of
the issuance to the undersigned of shares of ONB common stock in connection with
the Merger and in accordance with the terms of the Agreement, each of the
undersigned hereby undertakes, covenants and agrees that he or she: (a) shall
not sell, pledge, transfer, dispose of or otherwise reduce his or her market
risk (collectively, a "Sale") with respect to the shares of Heritage common
stock directly or indirectly owned or held by the undersigned during the thirty
(30) day period prior to the effective date of the Merger; (b) shall deliver a
written certificate to ONB as of the effective date of the Merger certifying to
effect that the undersigned has complied with the terms and conditions of this
Agreement; (c) shall not sell, pledge, transfer, dispose of or otherwise reduce
his or her market risk with respect to the shares of ONB common stock to be
received by the undersigned pursuant to the Agreement; (d) shall, within thirty
(30) days following the date hereof, transfer all shares of Heritage common
stock held in "street name" to "record holder"ownership and shall not transfer
any shares of Heritage common stock held as a "record holder" to "street name";
and (e) shall not make any sale or exchange of Heritage common stock which would
prevent or impede the Merger from qualifying (i) for "pooling of interests"
accounting treatment or (ii) as a reorganization within the meaning of Section
368 of the Code: (i) until such time as financial results covering at least
thirty (30) days of combined operations of ONB and Heritage have been published
within the meaning of Section 201.01 of the Securities and Exchange Commission's
Codification of the Financial Reporting Policies; and (ii) unless any and all
Sales of such shares of ONB common stock are made in a manner and to the extent
permitted by Rule 145 under the Act or are made pursuant to an effective
registration statement under, or an exemption from the registration requirements
of, the Act.
IN WITNESS WHEREOF, the undersigned has executed this Undertaking and
Agreement of Affiliate as of this ______ day of __________________, 1999.
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(Signature)
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(Printed Name)
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(Signature - Spouse)
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(Printed Name)