AGREEMENT OF REORGANIZATION AND MERGER
BETWEEN
\
FIRST MERCHANTS CORPORATION
AND
UNION NATIONAL BANCORP
THIS AGREEMENT OF REORGANIZATION AND MERGER ("Agreement"), is entered this
24th day of January, 1996, by and between FIRST MERCHANTS CORPORATION ("First
Merchants") and UNION NATIONAL BANCORP ("Union National").
W I T N E S S E T H:
WHEREAS, First Merchants is a corporation duly organized and existing under
the laws of the State of Indiana and a registered bank holding company under the
Bank Holding Company Act of 1956, as amended, with its principal place of
business in Muncie, Delaware County, Indiana.
WHEREAS, Union National is a corporation duly organized and existing under
the laws of the State of Indiana and a registered bank holding company under the
Bank Holding Company Act of 1956, as amended, with its principal place of
business in Liberty, Union County, Indiana.
WHEREAS, The Union County National Bank of Liberty (the "Bank") is a
national bank duly organized and existing under the laws of the United States
and a wholly-owned subsidiary of Union National with its principal banking
office in Liberty, Union County, Indiana.
WHEREAS, it is the desire of First Merchants and Union National to effect a
transaction whereby the Bank will become a wholly-owned subsidiary of First
Merchants through a statutory merger of Union National with and into First
Merchants.
WHEREAS, a majority of the entire Board of Directors of First Merchants and
a majority of the entire Board of Directors of Union National have approved this
Agreement, designated it as a plan of reorganization within the provisions of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"), and authorized its execution.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
agreements herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, First Merchants and Union National
hereby make this Agreement and prescribe the terms and conditions of the merger
of
Union National with and into First Merchants and the mode of carrying the
transaction into effect as follows:
SECTION 1
THE MERGER
Subject to the terms and conditions of this Agreement, on the Effective
Date, as defined in Section 11 hereof, Union National shall be merged into and
under the Articles of Incorporation of First Merchants, which shall be the
"Continuing Company" and which 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 and particularly Indiana Code
chapter 23-1-40 (the "Merger").
SECTION 2
EFFECT OF THE MERGER
Upon the Merger becoming effective:
2.01. GENERAL DESCRIPTION. The separate existence of Union National shall
cease and the Continuing Company shall possess all of the assets of Union
National including all of the issued and outstanding shares of capital stock of
the Bank and all of its rights, privileges, immunities, powers, and franchises
and shall be subject to and assume all of the duties and liabilities of Union
National.
2.02. NAME, OFFICES, AND MANAGEMENT. The name of the Continuing Company
shall continue to be "First Merchants Corporation." Its principal banking
office shall be located at ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇. The Board of
Directors of the Continuing Company, until such time as their successors have
been elected and qualified, shall consist of the current Board of Directors of
First Merchants. The officers of First Merchants immediately prior to the
Effective Date shall continue as the officers of the Continuing Company.
2.03. CAPITAL STRUCTURE. The amount of capital stock of the Continuing
Company shall not be less than the capital stock of First Merchants immediately
prior to the Effective Date increased by the amount of capital stock issued in
accordance with Section 3 hereof.
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2.04. ARTICLES OF INCORPORATION AND BYLAWS. The Articles of Incorporation
and Bylaws of the Continuing Company shall be those of First Merchants
immediately prior to the Effective Date until the same shall be further amended
as provided by law.
2.05. ASSETS AND LIABILITIES. The title to all assets, real estate and
other property owned by First Merchants and Union National shall vest in the
Continuing Company without reversion or impairment. All liabilities of Union
National shall be assumed by the Continuing Company.
SECTION 3
CONSIDERATION TO BE
DISTRIBUTED TO SHAREHOLDERS OF UNION NATIONAL
3.01. CONSIDERATION. Upon and by reason of the Merger becoming effective,
shareholders of Union National of record on the Effective Date who have not
dissented to the Merger in accordance with Indiana Code Chapter 23-1-44 shall be
entitled to receive four and 86/100 (4.86) shares of First Merchants common
stock for each share of Union National common stock held.
3.02. NO FRACTIONAL FIRST MERCHANTS COMMON SHARES. Certificates for
fractional shares of common stock of First Merchants shall not be issued in
respect of fractional interests arising from the exchange ratio, aggregating all
shares of First Merchants common stock to be received by each shareholder of
Union National. Each Union National shareholder who would otherwise have been
entitled to a fraction of a First Merchants share, upon surrender of all of
his/her certificates representing Union National common shares, shall be paid in
cash in an amount equal to the fraction of the average of the closing price of
First Merchants common stock as quoted by NASDAQ for the five trading days
preceding the Effective Date.
3.03. RECAPITALIZATION. If, between the date of this Agreement and the
Effective Date, First Merchants issues a stock dividend with respect to its
shares of common stock, combines, subdivides, or splits up its outstanding
shares or takes any similar recapitalization action, then the number of shares
of First Merchants common stock into which each outstanding Union National share
will be converted under Section 3.01 hereof shall be adjusted so that each Union
National shareholder shall receive such number of First Merchants shares as
represents the same percentage of outstanding shares of First Merchants common
stock at the Effective Date as would have been represented by the number of
shares such shareholder would have received if the recapitalization had not
occurred.
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3.04. DISTRIBUTION OF FIRST MERCHANTS COMMON STOCK AND CASH.
(a) Following the Effective Date, distribution of stock certificates
representing First Merchants common stock and cash payments for fractional
shares shall be made by First Merchants to each former shareholder of Union
National within ten (10) days of such shareholder's delivery of his/her
certificates representing common stock of Union National to the conversion
agent, First Merchants Bank (the "Conversion Agent"). Interest shall not
accrue or be payable with respect to any cash payments.
(b) Following the Effective Date, stock certificates representing
Union National common stock shall be deemed to evidence only the right to
receive ownership of First Merchants common stock (for all corporate
purposes other than the payment of dividends) and cash for fractional
shares, as applicable. No dividends or other distributions otherwise
payable subsequent to the Effective Date on stock of First Merchants shall
be paid to any shareholder entitled to receive the same until such
shareholder has surrendered his/her certificates for Union National common
stock to the Conversion Agent in exchange for certificates representing
First Merchants common stock and cash. Upon surrender, there shall be paid
to the recordholder of the new certificate(s) evidencing shares of First
Merchants common stock, the amount of all dividends and other
distributions, without interest thereon, withheld with respect to such
common stock.
(c) First Merchants shall be entitled to rely upon the stock transfer
books of Union National to establish the persons entitled to receive cash
and shares of common stock of First Merchants, which books, in the absence
of actual knowledge by First Merchants of any adverse claim thereto, shall
be conclusive with respect to the ownership of such stock.
(d) With respect to any certificate for shares of Union National
common stock which has been lost, stolen, or destroyed, First Merchants
shall be authorized to issue common stock to the registered owner of such
certificate upon receipt of an affidavit of lost stock certificate, in form
and substance satisfactory to First Merchants, and upon compliance by the
Union National shareholder with all procedures historically required by
Union National in connection with lost, stolen, or destroyed certificates.
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(e) Stock certificates that name Bank as issuer but represent Union
National common stock shall be deemed stock certificates representing Union
National common stock in connection with the Merger and for the purposes of
rights and obligations under this Agreement.
SECTION 4
DISSENTING SHAREHOLDERS
Shareholders of Union National shall have the rights accorded to dissenting
shareholders under Indiana Code Chapter 23-1-44.
SECTION 5
REPRESENTATIONS AND
WARRANTIES OF UNION NATIONAL
Union National represents and warrants to First Merchants with respect to
itself and the Bank as follows: (For the purposes of this Section, a
"Disclosure Letter" is defined as a letter referencing Section 5 of this
Agreement which shall be prepared and executed by an authorized executive
officer of Union National and delivered to and initialed by an authorized
executive officer of First Merchants contemporaneous with the execution of this
Agreement.)
5.01. ORGANIZATION AND AUTHORITY. Union National is a corporation duly
organized and validly existing under the laws of the State of Indiana, and Bank
is a national bank duly organized and validly existing under the laws of the
United States. Union National and Bank have the power and authority (corporate
and other) to conduct their respective businesses in the manner and by the means
utilized as of the date hereof. Union National's only subsidiary is Bank, and
Bank has no subsidiaries. Bank is subject to primary federal regulatory
supervision and regulation by the Office of the Comptroller of the Currency.
5.02. AUTHORIZATION.
(a) Union National has the corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder. This
Agreement, when executed and delivered, will have been duly authorized and
will constitute a valid and binding obligation of Union National,
enforceable in accordance with its terms except to the extent limited by
insolvency, reorganization, liquidation,
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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 the consummation of
the transactions contemplated hereby, does or will (i) conflict with,
result in a breach of, or constitute a default under Union National's
Articles of Incorporation or By-Laws; (ii) to the best of its knowledge,
conflict with, result in a breach of, or constitute a default under any
federal, foreign, state or local law, statute, ordinance, rule, regulation
or court or administrative order or decree, or any note, bond, indenture,
mortgage, security agreement, contract, arrangement or commitment, to which
Union National or Bank is subject or bound, which as a result of any of the
foregoing in this subpart (ii) would materially adversely affect the
business or financial condition of Union National or the Bank; (iii) result
in the creation of or give any person, corporation or entity, the right to
create any material lien, charge, encumbrance, security interest, or any
other rights of others or other adverse interest upon any right, property
or asset of Union National or Bank; (iv) terminate or give any person,
corporation or entity, the right to terminate, amend, abandon, or refuse to
perform any note, bond, indenture, mortgage, security agreement, contract,
arrangement or commitment to which Union National or Bank is subject or
bound and which in the aggregate are in excess of $50,000; or (v)
accelerate or modify, or give any party thereto the right to accelerate or
modify, the time within which, or the terms according to which, Union
National or Bank is to perform any duties or obligations or receive any
rights or benefits under any note, bond, indenture, mortgage, security
agreement, contract, arrangement or commitment in the aggregate in excess
of $50,000.
(c) Other than in connection or in compliance with the provisions of
the Bank Holding Company Act of 1956, federal and state securities laws and
applicable Indiana banking and corporate statutes, all as amended, and the
rules and regulations promulgated thereunder, no notice to, filing with,
authorization of, exemption by, or consent or approval of, any public body
or authority is necessary for the consummation by Union National of the
transactions contemplated by this Agreement.
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5.03. CAPITALIZATION.
(a) As of December 31, 1995, Union National had 200,000 shares of
common stock authorized, no par value per share, 193,968 shares of which
were issued and outstanding. Such issued and outstanding shares of Union
National common stock have been duly and validly authorized by all
necessary corporate action of Union National, are validly issued, fully
paid and nonassessable and have not been issued in violation of any
preemptive rights of any shareholders. Union National has no intention or
obligation to authorize or issue additional shares of its common stock.
Union National has not authorized the issuance of any other class of stock.
On a consolidated basis as of December 31, 1995, Union National had total
capital of $15,741,000, which consisted of common stock of $970,000,
capital surplus of $1,957,000, and retained earnings of $12,814,000.
(b) As of December 31, 1995, Bank had 100,000 shares of common stock
authorized, $10 par value per share, all of which shares were issued and
outstanding to Union National. Such issued and outstanding shares of Bank
common stock have been duly and validly authorized by all necessary
corporate action of Bank, are validly issued, fully paid and nonassessable,
and have not been issued in violation of any preemptive rights of any Bank
shareholders. All the issued and outstanding shares of Bank common stock
are owned by Union National free and clear of all liens, pledges, charges,
claims, encumbrances, restrictions, security interests, options and
preemptive rights and of all other rights of any other person, corporation
or entity with respect thereto. As of December 31, 1995, Bank had total
capital of $15,446,000, which consisted of common stock of $1,000,000,
capital surplus of $2,000,000, and undivided profits of $12,446,000.
(c) There are no options, commitments, calls, agreements,
understandings, arrangements or subscription rights regarding the issuance,
purchase or acquisition of capital stock, or any securities convertible
into or representing the right to purchase or otherwise receive the capital
stock or any debt securities, of Union National or Bank by which Union
National or Bank is or may become bound. Neither Union National or Bank
has any outstanding contractual or other obligation to repurchase, redeem
or otherwise acquire any of its respective outstanding shares of capital
stock.
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(d) Except as set forth in the Disclosure Letter, no person or entity
beneficially owns 5% or more of Union National's outstanding shares of
common stock.
5.04. ORGANIZATIONAL DOCUMENTS. The respective Articles of Incorporation
or Association and By-Laws of Union National and Bank have been delivered to
First Merchants and represent true, accurate and complete copies of such
corporate documents of Union National and Bank in effect as of the date of this
Agreement.
5.05. COMPLIANCE WITH LAW. Neither Union National nor Bank has engaged in
any activity nor taken or omitted to take any action which has resulted or, to
the knowledge of Union National could result, in the violation of any local,
state, federal or foreign law, statute, rule, regulation or ordinance or of any
order, injunction, judgment or decree of any court or government agency or body,
the violation of which could materially adversely affect the business,
prospects, condition (financial or otherwise) or results of operations of Union
National or Bank. Union National and Bank possess all licenses, franchises,
permits and other authorizations necessary for the continued conduct of their
respective businesses without material interference or interruption and such
licenses, franchises, permits and authorizations shall be transferred to First
Merchants on the Effective Date without any restrictions or limitations thereon
or the need to obtain any consents of third parties. All agreements and
understandings with, and all orders and directives of, all regulatory agencies
or government authorities with respect to the business or operations of Union
National or Bank, including all correspondence, communications and commitments
related thereto, are set forth in the Disclosure Letter. Bank has received no
inquiries from any regulatory agency or government authority relating to its
material noncompliance with the Bank Secrecy Act, the Truth-in-Lending Act or
the Community Reinvestment Act or any laws with respect to the protection of
the environment or the rules and regulations promulgated thereunder.
5.06. ACCURACY OF STATEMENTS. Neither this Agreement nor any report,
statement, list, certificate or other information furnished or to be furnished
by Union National or Bank to First Merchants in connection with this Agreement
or any of the transactions contemplated hereby (including, without limitation,
any information which has been or shall be supplied by Union National or Bank
with respect to their businesses, operations and financial condition for
inclusion in the proxy statement and registration statement relating to the
Merger) contains or shall contain (in the case of information relating to the
proxy statement at the time it is mailed and for the registration statement at
the time it becomes effective) any untrue statement of a material
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act or omits or shall omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
5.07. LITIGATION AND PENDING PROCEEDINGS. Except as set forth in the
Disclosure Letter, there are no material claims of any kind, nor any material
action, suits, proceedings, arbitrations or investigations pending or, to the
knowledge of Union National or Bank, threatened in any court or before any
government agency or body, arbitration panel or otherwise (nor does Union
National or Bank have any knowledge of a basis for any material claim, action,
suit, proceeding, arbitration or investigation) against, by or materially
adversely affecting Union National or Bank or their respective businesses,
prospects, conditions (financial or otherwise), results of operations or assets,
or which would prevent the performance of this Agreement or declare the same
unlawful or cause the rescission hereof. There are no material uncured
violations, or violations with respect to which material refunds or restitutions
may be required, cited in any compliance report to Union National or Bank as a
result of an examination by any regulatory agency or body.
5.08. FINANCIAL STATEMENTS.
(a) Union National's consolidated balance sheets as of the end of the
three fiscal years ended December 31, 1992, 1993 and 1994 and the nine
months ended September 30, 1995 and the related consolidated statements of
income, shareholders' equity and cash flows for the years or period then
ended (hereinafter collectively referred to as the "Financial Information")
present fairly, in all material respects, the consolidated financial
condition or position of Union National as of the respective dates thereof
and the consolidated results of operations of Union National for the
respective periods covered thereby and have been prepared in conformity
with generally accepted accounting principles applied on a consistent
basis. All required regulatory reports have been filed by Union National
and Bank with their respective primary federal regulators during 1995,
1994, 1993 and 1992, are true, accurate and complete, in all material
respects, and were prepared in conformity with generally accepted
regulatory accounting principles applied on a consistent basis.
(b) Except to the extent that failure to comply with this subsection
does not have a material adverse effect on Union National or the Bank, all
loans reflected in the Financial Information and which have been made,
extended or acquired since September 30, 1995, (i) have been made for good,
valuable and adequate consideration in the ordinary
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course of business; (ii) constitute the legal, valid and binding obligation
of the obligor and any guarantor named therein; (iii) are evidenced by
notes, instruments or other evidences of indebtedness which are true,
genuine and what they purport to be; and (iv) to the extent that Bank has a
security interest in collateral or a mortgage securing such loans, are
secured by perfected security interests or mortgages naming Bank as the
secured party or mortgagee.
5.09. ABSENCE OF CERTAIN CHANGES. Except for events and conditions
relating to the business environment in general or as set forth in the
Disclosure Letter, since September 30, 1995, there has not been any change or
event of any character, actual or to Union National's or Bank's knowledge
threatened, which in the aggregate materially adversely affects Union National's
or Bank's business, prospects, conditions (financial or otherwise), assets or
results of operations.
5.10. ABSENCE OF UNDISCLOSED LIABILITIES. Neither Union National nor Bank
is a party to any agreement, contract, obligation, commitment, arrangement,
liability, lease or license which individually exceeds $10,000 per year or which
may not be terminated within one year from the date of this Agreement, except as
set forth in the Disclosure Letter or reflected in the Financial Information and
except for unfunded loan commitments made in the ordinary course of Bank's
business consistent with past practices, nor to the knowledge of Union National
does there exist any circumstances resulting from transactions effected or to be
effected or 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 any such
agreement, contract, obligation, commitment, arrangement, liability, lease or
license.
5.11. TITLE TO ASSETS. Except as set forth in the Disclosure Letter or
except to the extent that failure to comply with this Section 5.11 does not have
a material adverse effect on Union National or the Bank, Union National and Bank
have good and marketable title in fee simple absolute to all real property
(including, without limitation, all real property used as bank holding company
or bank premises and all other real estate owned) and personal property
reflected in the Financial Information as of September 30, 1995, good and
marketable title to all other properties and assets which Union National or Bank
purport to own, good and marketable title to or right to use by terms of lease
or contract all other property used in Union National's or Bank's business and
good and marketable title to all property and assets acquired since
September 30, 1995, free and clear of all mortgages, liens, pledges,
restrictions, security interests, charges, claims or encumbrances of any nature.
All real property owned by Union National or Bank is in compliance with all
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applicable laws, statutes, rules, regulations and ordinances relating to the
environment, pollution and the treatment, storage, disposal, discharge or
release of chemicals and hazardous or toxic substances or wastes and, in all
material respects, with all applicable zoning law.
5.12. LOANS AND INVESTMENTS.
(a) Except as set forth in the Disclosure Letter, there is no loan of
Bank in excess of $10,000 that has been classified by bank regulatory
examiners as "Other Loans Specially Mentioned," "Substandard," "Doubtful"
or "Loss," nor is there any loan of Bank in excess of $10,000 that has been
identified by accountants or auditors (internal or external) as having a
significant risk of uncollectibility.
Bank's loan watch list and all loans in excess of $10,000 that Bank's
management has determined to be ninety (90) days or more past due with
respect to principal or interest or has placed on nonaccrual status are set
forth in the Disclosure Letter.
(b) Each of the reserves and allowances for possible loan losses and
the carrying value for real estate owned which are shown on the Financial
Information is, in the opinion of Union National and Bank, adequate in all
material respects under the requirements of generally accepted accounting
principles applied on a consistent basis to provide for possible losses on
loans outstanding and real estate owned as of the date of such Financial
Information.
(c) Except as set forth in the Disclosure Letter, none of the
investments reflected in the Financial Information and none of the
investments made by Union National or Bank since September 30, 1995 is
subject to any restrictions, whether contractual or statutory, which
materially impairs the ability of Union National or Bank to dispose freely
of such investment at any time. Except as set forth in the Disclosure
Letter, neither Union National nor Bank are a party to any repurchase
agreements with respect to securities.
5.13. EMPLOYEE BENEFIT PLANS.
(a) The Disclosure Letter contains a list identifying each "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), which (i) is subject to any
provision of ERISA, and (ii) is maintained, administered or contributed to
by Union National or Bank and covers any employee or former employee of
Union National or Bank under which Union
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National or Bank has any liability. Copies of such plans (and, if
applicable, related trust agreements or insurance contracts) and all
amendments thereto and written interpretations thereof have been furnished
to First Merchants together with the three most recent annual reports
prepared in connection with any such plan and the current summary plan
descriptions. Such plans are hereinafter referred to individually as an
"Employee Plan" and collectively as the "Employee Plans." The Employee
Plans which individually or collectively would constitute an "employee
pension benefit plan" as defined in Section 3(2) of ERISA are identified in
the list referred to above.
(b) The Employee Plans comply with and have been operated in
accordance with all applicable laws, regulations, rulings and other
requirements the breach or violation of which could materially affect Union
National, Bank, or an Employee Plan. Each Employee Plan has been
administered in substantial conformance with such requirements and all
reports and information required with respect to each Employee Plan have
been timely given.
(c) No "prohibited transaction," as defined in Section 406 of ERISA
or Section 4975 of the Code, for which no statutory or administrative
exemption exists, and no "reportable event," as defined in Section 4043(b)
of ERISA, has occurred with respect to any Employee Plan. Neither Union
National or Bank has any liability to the Pension Benefit Guaranty
Corporation ("PBGC"), to the Internal Revenue Service ("IRS"), to the
Department of Labor ("DOL") or to an employee or Employee Plan beneficiary
under Section 502 of ERISA.
(d) No "fiduciary," as defined in Section (3)(21) of ERISA, of an
Employee Plan has failed to comply with the requirements of Section 404 of
ERISA.
(e) Each of the Employee Plans which is intended to be qualified
under Code Section 401(a) has been amended to comply in all material
respects with the applicable requirements of the Code, including the Tax
Reform Act of 1986, the Revenue Act of 1987, the Technical and
Miscellaneous Revenue Act of 1988, the Omnibus Budget Reconciliation Act of
1989, the Revenue Reconciliation Act of 1990, the Tax Extension Act of
1991, the Unemployment Compensation Amendments of 1992, the Omnibus Budget
Reconciliation Act of 1993, and the Retirement Protection Act of 1994 and
any rules, regulations or other requirements promulgated thereunder (the
"Acts"). In addition, each such Employee Plan has been and is being
operated in substantial
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conformance with the applicable provisions of ERISA and the Code, as
amended by the Acts. Except as set forth in the Disclosure Letter, Union
National and/or Bank, as applicable, sought and received favorable
determination letters from the IRS within the applicable remedial amendment
periods under Code Section 401(b), and has furnished to First Merchants
copies of the most recent IRS determination letters with respect to any
such Employee Plan.
(f) Except as set forth in the Disclosure Letter, no Employee Plan
owns any security of Union National or Bank.
(g) No Employee Plan has incurred an "accumulated funding
deficiency," as determined under Code Section 412 and ERISA Section 302.
(h) Except as set forth in the Disclosure Letter, no Employee Plan
has been terminated or incurred a partial termination (either voluntarily
or involuntarily).
(i) No claims against an Employee Plan, Union National or Bank, with
respect to an Employee Plan, (other than normal benefit claims) have been
asserted or threatened.
(j) There is no contract, agreement, plan or arrangement covering any
employee or former employee of Union National or Bank that, individually or
collectively, could give rise to the payment of any amount that would not
be deductible by reason of Section 280G or Section 162(a)(1) of the Code.
(k) No event has occurred that would cause the imposition of the tax
described in Code Section 4980B. All requirements of ERISA Section 601
have been met.
(l) The Disclosure Letter contains a list of each employment,
severance or other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage (including
any self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits
or deferred compensation, profit sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (i) is not an Employee Plan, (ii)
was entered into, maintained or contributed to, as the case may be, by
Union National or Bank and (iii) covers any employee or former employee of
Union National or Bank. Such contracts, plans and
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arrangements as are described above, copies or descriptions of all of which
have been furnished previously to First Merchants, are hereinafter referred
to collectively as the "Benefit Arrangements." Each of the Benefit
Arrangements has been maintained in substantial compliance with its terms
and with the requirements prescribed by any and all statutes, orders, rules
and regulations which are applicable to such Benefit Arrangements.
(m) Neither Union National nor Bank has any present or future
liability in respect of post-retirement health and medical benefits for
former employees of Union National or Bank.
(n) Except as set forth in the Disclosure Letter, there has been no
amendment to, written interpretation or announcement (whether or not
written) by Union National or Bank relating to, or change in employee
participation or coverage under, any Employee Plan or Benefit Arrangement
which would increase materially the expense of maintaining such Employee
Plans or Benefit Arrangements above the level of the expense incurred in
respect thereof for the fiscal year ended December 31, 1994.
(o) For purposes of this Section 5.13, references to Union National
or Bank are deemed to include (i) all predecessors of Union National or
Bank, (ii) any subsidiary of Union National or Bank, (iii) all members of
any controlled group (as determined under Code Section 414(b) or (c)) that
includes Union National or Bank, and (iv) all members of any affiliated
service group (as determined under Code Section 414(m) or (n)) that
includes Union National or Bank.
5.14 OBLIGATIONS TO EMPLOYEES. Except as set forth in the Disclosure
Letter, all accrued obligations and liabilities of Union National and Bank,
whether arising by operation of law, by contract or by past custom, for payments
to trust or other funds, to any government agency or body or to any individual
director, officer, employee or agent (or his heirs, legatees or legal
representative) with respect to unemployment compensation or social security
benefits and all pension, retirement, savings, stock purchase, stock bonus,
stock ownership, stock option, stock appreciation rights or profit sharing plan,
any employment, deferred compensation, consultant, bonus or collective
bargaining agreement or group insurance contract or other incentive, welfare or
employee benefit plan or agreement maintained by Union National or Bank for
their current or former directors, officers, employees and agents have been and
are being paid to the extent required by law or by the plan or contract. All
obligations and
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liabilities of Union National and Bank, whether arising by operation of law, by
contract, or by past custom, for all forms of compensation which are or may be
payable to their current or former directors, officers, employees or agents have
been and are being paid. All accruals and reserves referred to in this Section
5.14 are correctly and accurately reflected and accounted for in the books,
statements and records of Union National and Bank.
5.15. TAXES, RETURNS AND REPORTS. Union National and Bank have (a) duly
filed all federal, state, local and foreign tax returns of every type and kind
required to be filed as of the date hereof, and each return is true, complete
and accurate in all material respects; (b) paid in all materials respects all
taxes, assessments and other governmental charges due or claimed to be due upon
them 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).
Except for taxes not yet due and payable, the reserve for taxes reflected in the
Financial Information is adequate, in all material respects, to cover all of
Union National's and Bank's tax liabilities (including, without limitation,
income taxes and franchise fees) that may become payable in future years with
respect to any transactions consummated prior to December 31, 1994. Neither
Union National nor Bank has or will have, any material liability for taxes of
any nature for or with respect to the operation of their business, including the
assets of any subsidiary, from December 31, 1994 up to and including the
Effective Date, except to the extent reflected on their Financial Information or
on financial statements of Union National or Bank subsequent to such date and as
set forth in the Disclosure Letter. Neither Union National nor Bank is
currently under audit by any state or federal taxing authority. Except as set
forth in the Disclosure Letter, neither the federal, state, or local tax returns
of Union National or Bank have been audited by any taxing authority during the
past five (5) years.
5.16. DEPOSIT INSURANCE. The deposits of Bank are insured by the Federal
Deposit Insurance Corporation ("FDIC") in accordance with the Federal Deposit
Insurance Act, and Bank has paid all premiums and assessments with respect to
such deposit insurance.
5.17. BROKER'S OR FINDER'S FEES. Except as set forth in the Disclosure
Letter, no agent, broker or other person acting on behalf of Union National or
Bank or under any authority of Union National or Bank is or shall be entitled to
any commission, broker's or finder's fee or any other form of compensation or
payment from any of the parties hereto, other than attorneys' or
Page 15
accountants' fees, in connection with any of the transactions contemplated by
this Agreement.
5.18. BRING DOWN OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of Union National and Bank contained in this Section 5 shall be
true, accurate and correct on and as of the Effective Date except as affected by
the transactions contemplated by and specified within the terms of this
Agreement.
5.19. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in this Section 5 shall expire on the Effective Date,
and thereafter Union National and Bank shall have no further liability with
respect thereto unless a court of competent jurisdiction should determine that
any misrepresentation or breach of a warranty was willfully or intentionally
caused either by action or inaction.
SECTION 6
REPRESENTATIONS AND
WARRANTIES OF FIRST MERCHANTS
First Merchants hereby represents and warrants to Union National as
follows:
6.01. ORGANIZATION AND QUALIFICATION. First Merchants is a corporation
organized and existing under the laws of the State of Indiana and has the
corporate power and authority to conduct its business in the manner and by the
means utilized as of the date hereof.
6.02. AUTHORIZATION.
(a) First Merchants has the corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder subject to
certain required regulatory approvals. The Agreement, when executed and
delivered, will have been duly authorized and will constitute a valid and
binding obligation of First Merchants, enforceable in accordance with its
terms, except to the extent limited by insolvency, reorganization,
liquidation, readjustment of debt, or other laws of general application
relating to or affecting the enforcement of creditor's rights.
(b) Neither the execution of this Agreement, nor the consummation of
the transactions contemplated hereby, does or will (i) conflict with,
result in a breach of, or constitute a default under First Merchant's
Articles of
Page 16
Incorporation or By-laws; (ii) to the best of its knowledge, conflict with,
result in a breach of, or constitute a default under any federal, foreign,
state, or local law, statute, ordinance, rule, regulation, or court or
administrative order or decree, or any note, bond, indenture, mortgage, security
agreement, contract, arrangement, or commitment, to which First Merchants is
subject or bound, which as a result of any of the foregoing in this subpart (ii)
would materially adversely affect the business or financial condition of First
Merchants; (iii) result in the creation of or give any person, corporation or
entity, the right to create any material lien, charge, claim, encumbrance,
security interest, or any other rights of others or other adverse interest upon
any right, property or asset of First Merchants; (iv) terminate or give any
person, corporation or entity, the right to terminate, amend, abandon, or refuse
to perform any note, bond, indenture, mortgage, security agreement, contract,
arrangement, or commitment to which First Merchants is a party or by which First
Merchant is subject or bound and which in the aggregate are in excess of
$50,000; or (v) accelerate or modify, or give any party thereto the right to
accelerate or modify, the time within which, or the terms according to which,
First Merchants is to perform any duties or obligations or receive any rights or
benefits under any note, bond, indenture, mortgage, security agreement,
contract, arrangement, or commitment in the aggregate in excess of $50,000.
(c) Other than in connection or in compliance with the provisions of
the Bank Holding Company Act of 1956, federal and state securities laws,
and applicable Indiana banking and corporate statutes, all as amended, and
the rules and regulations promulgated thereunder, no notice to, filing
with, authorization of, exemption by, or consent or approval of, any public
body or authority is necessary for the consummation by First Merchants of
the transactions contemplated by this Agreement.
6.03. CAPITALIZATION.
(a) At December 31, 1995 First Merchants had 20,000,000 authorized,
no par value, of which 5,053,901 shares were issued and outstanding. The
5,053,901 shares of common stock are validly issued, fully paid and
nonassessable.
(b) First Merchants has 500,000 shares of Preferred Stock authorized,
no par value, no shares of which have been issued and no commitments exist
to issue any of such shares.
Page 17
(c) Other than in connection with the proposed merger of ▇▇▇▇▇▇▇▇
County Bancorp, Inc. with and into First Merchants and pursuant to First
Merchants Dividend Reinvestment and Stock Purchase Plan, Stock Option Plans
and Employee Stock Purchase Plans, there are no options, commitments, calls
or agreements outstanding regarding the issuance of capital stock or any
securities representing the right to purchase or otherwise receive such
stock, or any debt securities of First Merchants. First Merchants does not
have any outstanding contractual obligation to repurchase, redeem, or
otherwise acquire any of its outstanding shares of capital stock.
(d) The shares of First Merchants' common stock to be issued pursuant
to the Merger will be fully paid, validly issued and nonassessable.
6.04. ORGANIZATIONAL DOCUMENTS. The Articles of Incorporation and By-laws
of First Merchants in force as of the date hereof, have been delivered to Union
National. The documents delivered by it represent complete and accurate copies
of the corporate documents of First Merchants in effect as of the date of this
Agreement.
6.05. ACCURACY OF STATEMENTS. Neither this Agreement nor any report,
statement, list, certificate or other information furnished or to be furnished
by First Merchants to Union National in connection with this Agreement or any of
the transactions contemplated hereby (including, without limitation, any
information which has been or shall be supplied by First Merchants with respect
to its business, operations and financial condition for inclusion in the proxy
statement and registration statement relating to the Merger) contains or shall
contain (in the case of information relating to the proxy statement at the time
it is mailed and to the registration statement at the time it become effective)
any untrue statement of a 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 misleading.
6.06. COMPLIANCE WITH LAW. First Merchants has not engaged in any
activity nor taken or omitted to take any action which has resulted or, to the
knowledge of First Merchants, could result in the violation of any local, state,
federal or foreign law, statute, rule, regulation or ordinance or of any order,
injunction, judgment or decree of any court or government agency or body, the
violation of which could materially adversely affect the business, prospects,
condition (financial or otherwise) or results of operations of First Merchants.
First Merchants possesses all licenses, franchises, permits and other
Page 18
authorizations necessary for the continued conduct of its business without
material interference or interruption. There are no agreements or
understandings with, nor any orders of directives of, any regulatory agencies or
government authorities, which would have a material adverse effect on the
consolidated financial position of First Merchants. First Merchants has
received no written inquiries from any regulatory agency or government authority
relating to its material noncompliance with the Bank Secrecy Act, the
Truth-in-Lending Act or the Community Reinvestment Act.
6.07. FINANCIAL STATEMENTS. First Merchants consolidated balance sheets
as of the end of the three (3) fiscal years ended December 31, 1992, 1993 and
1994 and the nine months ended September 30, 1995 and the related consolidated
statements of income, shareholders' equity and cash flows for the years or
period then ended present fairly, in all material respects, the consolidated
financial condition or position of First Merchants as of the respective dates
thereof and the consolidated results of operations of First Merchants for the
respective periods covered thereby and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis. All
required regulatory reports have been filed by First Merchants with its primary
federal regulator during 1995, 1994, 1993 and 1992, are true, accurate and
complete, in all material respects, and have been prepared in conformity with
generally accepted regulatory accounting principles applied on a consistent
basis.
6.08. ABSENCE OF CERTAIN CHANGES. Except for events and conditions
relating to the business environment in general, since September 30, 1995, there
has not been any change or event of any character, actual or to First Merchants
knowledge threatened, which in the aggregate materially adversely affects First
Merchants consolidated business, prospects, conditions (financial or otherwise),
assets or results of operations.
6.09. FIRST MERCHANTS SECURITIES AND EXCHANGE COMMISSION FILINGS. First
Merchants has filed all reports and other documents required to be filed by it
under the Securities Exchange Act of 1934 and the Securities Act of 1933,
including First Merchants' Annual Report on Form 10-K for the year ended
December 31, 1994, and Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, copies of which have previously been delivered to Union
National (the "Securities Law Filings"). The Securities Law Filings do not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements contained therein not misleading.
Page 19
6.10. BRING DOWN OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of First Merchants contained in this Section 6 shall be true,
accurate and correct on and as of the Effective Date except as affected by the
transactions contemplated by and specified within the terms of this Agreement.
6.11. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in this Section 6 shall expire on the Effective Date,
and thereafter First Merchants shall have no further liability with respect
thereto unless a court of competent jurisdiction should determine that any
misrepresentation or breach of a warranty was willfully or intentionally caused
either by action or inaction.
SECTION 7
COVENANTS OF UNION NATIONAL
Union National covenants and agrees with First Merchants, and covenants and
agrees to cause Bank to act, as follows:
7.01. SHAREHOLDER APPROVAL. Union National shall submit this Agreement to
its shareholders for approval at a meeting to be called and held in accordance
with applicable law and the Articles of Incorporation and By-Laws of Union
National.
7.02. OTHER APPROVALS. Union National and Bank shall proceed
expeditiously, cooperate fully and use reasonable efforts to procure upon
reasonable terms and conditions 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.
7.03. CONDUCT OF BUSINESS.
(a) On and after the date of this Agreement and until the Effective
Date or until this Agreement shall be terminated as herein provided,
neither Union National nor Bank shall, without the prior written consent of
First Merchants, (i) make any material changes in their capital structure;
(ii) authorize a class of stock or issue, or authorize the issuance of,
stock other than or in addition to the outstanding stock as set forth in
Section 5.03 hereof; (iii) declare, distribute or pay any dividends on
their shares of common stock, or authorize a stock split, or make any other
distribution to their shareholders, except for (a) the payment by Union
National prior to the Effective
Page 20
Date of quarterly cash dividends on its common stock in March, June, September
and December, 1996, which dividends shall not exceed thirty-five cents ($.35),
thirty-five cents ($.35), forty cents ($.40), and forty cents ($.40) per share,
respectively, provided that Union National shall not pay any such dividend
during the fiscal quarter in which the Merger shall become effective and in
which Union National shareholders will become entitled to receive dividends on
the shares of First Merchants into which the shares of Union National have been
converted or in any subsequent fiscal quarter (First Merchants shall advise
Union National in writing at least 15 days prior to the Effective Date if it
anticipates a change from its historical practice in establishing the record
date for determining those shareholders entitled to receive a dividend for the
fiscal quarter in which the Merger is to be consummated. Such written notice
shall describe the anticipated change in the record date.), and (b) the payment
by the Bank to Union National of dividends to pay Union National's expenses of
operations and its business and payment of fees and expenses incurred in
connection with the transactions contemplated by this Agreement; (iv) merge,
combine or consolidate with or, other than in the ordinary course of business,
sell their assets or any of their securities to any other person, corporation or
entity, effect a share exchange or enter into any other transaction not in the
ordinary course of business; (v) incur any liability or obligation, make any
commitment, payment or disbursement, enter into any contract, agreement,
understanding or arrangement or engage in any transaction, or acquire or dispose
of any property or asset having a fair market value in excess of $10,000.00
(except for personal or real property acquired or disposed of in connection with
foreclosures on mortgages or enforcement of security interests and loans made or
sold by Bank in the ordinary course of business); (vi) subject any of their
properties or assets to a mortgage, lien, claim, charge, option, restriction,
security interest or encumbrance; (vii) promote or increase or decrease the rate
of compensation (except for promotions and non-material increases in the
ordinary course of business and in accordance with past practices) or enter into
any agreement to promote or increase or decrease the rate of compensation of any
director, officer or employee of Union National or Bank; (viii) execute, create,
institute, modify or amend (except to allow a contribution to the Bank's defined
contribution plan in connection with the period commencing January 1, 1996 and
ending on the Effective Date in an amount based upon the participants'
compensation during such period and the Bank's historical contribution
percentage of participants' compensation as defined in the plan.), any
Page 21
pension, retirement, savings, stock purchase, stock bonus, stock ownership,
stock option, stock appreciation or depreciation right or profit sharing
plan, any employment, deferred compensation, consultant, bonus or
collective bargaining agreement, group insurance contract or other
incentive, welfare or employee benefit plan or agreement for current or
former directors, officers of employees of Union National or Bank, 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; (ix) amend their Articles of Incorporation or By-Laws from
those in effect on the date of this Agreement; (x) modify, amend or
institute new employment policies or practices, or enter into, renew or
extend any employment or severance agreements with respect to any present
or former Union National or Bank directors, officers or employees; (xi)
give, dispose, sell, convey, assign, hypothecate, pledge, encumber or
otherwise transfer or grant a security interest in any common stock of
Bank; and (xii) fail to make additions to Bank's reserve for loan, losses,
or any other reserve account, in the ordinary course of business and in
accordance with sound banking practices.
(b) Union National and Bank shall maintain, or cause to be
maintained, in full force and effect insurance on its properties and
operations and fidelity coverage on its directors, officers and employees
in such amounts and with regard to such liabilities and hazards as have
previously been maintained by Union National and Bank.
(c) Union National and Bank shall continue to give to First Merchants
and its employees, accountants, attorneys and other authorized
representatives reasonable access during regular business hours and other
reasonable times to all their premises, properties, statements, books and
records.
7.04. PRESERVATION OF BUSINESS. On and after the date of this Agreement
and until the Effective Date or until this Agreement is terminated as herein
provided. Union National and Bank each shall (a) carry on their business
diligently, substantially in the same manner as heretofore conducted, and in the
ordinary course of business; (b) use their reasonable efforts to preserve their
business organizations intact, to keep their present officers and employees and
to preserve their present relationship with customers and others having business
dealings with them; and (c) not do or fail to do anything which will cause a
material breach of, or material default in, any contract, agreement, commitment,
obligation, understanding, arrangement,
Page 22
lease or license to which they are a party or by which they are or may be
subject or bound.
7.05. OTHER NEGOTIATIONS. Except with the prior written approval of First
Merchants, on and after the date of this Agreement and until the Effective Date,
Union National and Bank shall not, and shall not permit or authorize their
respective directors, officers, employees, agents or representatives to,
directly or indirectly, initiate, solicit, encourage, or engage in discussions
or negotiations with, 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 capital stock (or securities convertible or
exchangeable into or otherwise evidencing, or any agreement or instrument
evidencing the right to acquire, capital stock), tender offer, acquisition of
control of Union National or Bank or similar transaction involving Union
National or Bank (all such transactions hereinafter referred to as "Acquisition
Transactions"). Union National and Bank shall promptly communicate to First
Merchants the terms of any proposal, written or oral, which either may receive
with respect to an Acquisition Transaction and any request by or indication of
interest on the part of any third party with respect to initiation of any
Acquisition Transaction or discussion with respect thereto. The above
provisions of this Section 7.05 notwithstanding, nothing contained in this
Agreement shall prohibit (i) Union National from furnishing information to, or
entering into discussions or negotiations with, any person or entity that makes
an unsolicited proposal of an Acquisition Transaction if and to the extent that
(a) the Board of Directors of Union National, after consultation with and based
upon the written advice of legal counsel, determines in good faith that such
action is required for the directors of Union National to fulfill their
fiduciary duties and obligations to the Union National shareholders and other
constituencies under Indiana law, and (b) prior to furnishing such information
to, or entering into discussions or negotiations with, such person or entity,
Union National provides immediate written notice to First Merchants to the
effect that it is furnishing information to, or entering into discussions or
negotiations with, such person or entity, or (ii) the Board of Directors of
Union National from failing to make, withdrawing or modifying its recommendation
to shareholders regarding the Merger following receipt of a proposal for an
Acquisition Transaction if the Board of Directors of Union National, after
consultation with and based upon the written advice of legal counsel, determines
in good faith that such action is required for the directors of Union National
to fulfill their fiduciary duties and obligations to the Union National
shareholders and other constituencies under Indiana law.
Page 23
7.06. RESTRICTIONS REGARDING AFFILIATES. Union National shall, within 30
days after the date of this Agreement and promptly thereafter until the
Effective Date to reflect any changes, provide First Merchants with a list
identifying each person who may be deemed to be an "affiliate" of Union National
for purposes of Rule 145 under the Securities Act of 1933, as amended ("1933
Act"). Each director, executive officer and other person who is an "affiliate"
of Union National for purposes of the 1933 Act shall deliver to First Merchants
on or prior to the Effective Date hereunder a written agreement, in form and
substance reasonably satisfactory to counsel to First Merchants, providing that
such person will not sell, pledge, transfer, dispose of or otherwise reduce his
market risk with respect to shares of First Merchants common stock to be
received by such person pursuant to this Agreement (a) during the period 30 days
prior to the Effective Date, (b) until such time as financial results covering
at least 30 days of combined operations of First Merchants and Union National
have been published within the meaning of Section 201.01 of the Securities and
Exchange Commission's Codification of Financial Reporting Policies, except that
any such affiliate may pledge the shares of First Merchants common stock
received in connection with the Merger as collateral for other than non-recourse
loans without compliance with this Section 7.06(b) and (c) unless such sales,
pledges, transfers or dispositions are effected pursuant to an effective
registration statement under the 1933 Act or pursuant to Rule 145 of the
Securities and Exchange Commission or another exemption from the registration
requirements set forth in the 1933 Act, or are otherwise not subject to the
registration requirements set forth in the 1993 Act.
7.07. PRESS RELEASE. Neither Union National or Bank shall issue any press
releases or make any other public announcements or disclosures relating to the
Merger without the prior approval of First Merchants.
7.08. DISCLOSURE LETTER UPDATE. Union National shall promptly supplement,
amend and update monthly and as of the Effective Date the Disclosure Letter with
respect to any matters 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 Letter.
7.09. COOPERATION. Union National shall generally cooperate with First
Merchants and its officers, employees, attorneys, accountants and other agents,
and, generally, do such other acts and things in good faith as may be
reasonable, necessary or appropriate to timely effectuate the intents and
purposes of this Agreement and the consummation of the transactions contemplated
hereby. Prior to the Closing (as
Page 24
defined in Section 12), Union National agrees to disclose to First Merchants any
fact or matter that comes to the attention of Union National that might indicate
that any of the representations or warranties of Union National may be untrue,
incorrect, or misleading in any material respect.
SECTION 8
COVENANTS OF FIRST MERCHANTS
First Merchants covenants and agrees with Union National as follows:
8.01. APPROVALS. First Merchants shall proceed expeditiously, cooperate
fully and use reasonable efforts to procure upon reasonable terms and conditions
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. First Merchants shall provide
Union National with copies of proposed regulatory filings in connection with the
Merger and afford Union National the opportunity to offer comment on the filings
before filing. The approval of First Merchants shareholders of the transactions
contemplated by this Agreement is not required.
8.02. EMPLOYEE BENEFIT PLANS. Within one (1) year following the Effective
Date, First Merchants will permit Bank employees to participate in any
tax-qualified retirement plan First Merchants maintains for its employees,
provided that such an employee meets the applicable participation requirements,
in lieu of the Bank's current tax-qualified retirement plan. Until that time,
the Bank's current tax-qualified retirement plan will be maintained at the same
level, with respect to benefit accruals, provided for on the Effective Date.
Following the Effective Date, Bank employees will otherwise receive employee
benefits that in the aggregate provide substantially equivalent economic value
in comparison to the employee benefits provided to those employees by Union
National or the Bank on the Effective Date. For purposes of determining a Union
National or Bank employee's eligibility and vesting service under a First
Merchants employee benefit plan that the employee is permitted to enter, service
with Union National or Bank will be treated as service with First Merchants;
provided, however, that service with Union National and Bank will not be treated
as service with First Merchants for purposes of benefit accrual.
8.03. FIRST MERCHANTS BOARD OF DIRECTORS. In connection with the first
annual meeting of the shareholders of First
Page 25
Merchants following the Effective Date, First Merchants shall cause all
necessary action to be taken to cause two (2) of the current members of the
Board of Directors of Union National to be nominated for election as members of
the First Merchants' Board of Directors for three (3)-year terms.
8.04. PRESS RELEASE. Except as required by law, First Merchants shall not
issue any press release to any national wire service relating solely to the
Merger without the prior approval of Union National.
8.05. CONFIDENTIALITY. First Merchants shall, and shall use its best
efforts to cause its officers, employees, and authorized representatives to,
hold in strict confidence all confidential data and information obtained by it
from Union National or Bank, unless such information (i) was already known to
First Merchants, (ii) becomes available to First Merchants from other sources,
(iii) is independently developed by First Merchants, (iv) is disclosed outside
of First Merchants with and in accordance with the terms of prior written
approval of Union National or Bank , or (v) is or becomes readily ascertainable
from public or published information or trade sources or public disclosure of
such information is required by law or requested by a court or other
governmental agency, commission, or regulatory body. First Merchants further
agrees that in the event the Agreement is terminated, it will return to Union
National all information obtained by First Merchants regarding Union National or
Bank, including all copies made of such information by First Merchants.
8.06. COVENANTS REGARDING THE BANK. Upon consummation of the Merger, the
Bank shall be a bank organized under the laws of the State of Indiana and the
officers and directors of the Bank in office immediately prior to the
consummation of the Merger shall be the officers and directors of the Bank at
the Effective Date subject to the provisions of the Bank's Articles of
Incorporation and By-Laws. Thereafter, the Bank directors who desire to
continue serve in that capacity shall do so for at least the remainder of the
one (1) year terms to which they have been elected. The Bank directors will be
subject to First Merchants' policy of mandatory retirement at age seventy (70);
provided, however, the policy of mandatory retirement will not apply to any of
the Bank's current directors until twelve (12) months after the Effective Date.
First Merchants intends to continue to operate the Bank as an operating
subsidiary of First Merchants under the name "The Union County National Bank of
Liberty" with no changes in the number or locations of branches.
8.07. REGISTRATION STATEMENT; NASDAQ LISTING. First Merchants shall use
reasonable efforts to prepare and file with
Page 26
the Securities and Exchange Commission under the Securities Act of 1933, as
amended, a registration statement on Form S-4 or other appropriate registration
form to register the shares of common stock of First Merchants to be used in
connection with the Merger (the "Registration Statement") and to cause the
Registration Statement to be declared effective. First Merchants shall take all
such action as is reasonably necessary to qualify the shares of common stock of
First Merchants to be issued in connection with the Merger for quotation in the
National Association of Securities Dealers Automated Quotation System - National
Market System ("NASDAQ-NMS").
8.08 COOPERATION. First Merchants shall generally cooperate with Union
National and its officers, employees, attorneys, accountants and other agents,
and, generally, do such other acts and things in good faith as may be
reasonable, necessary or appropriate to timely effectuate the intents and
purposes of this Agreement and the consummation of the transactions contemplated
hereby. Prior to the Closing (as defined in Section 12), First Merchants agrees
to disclose to Union National any fact or matter that comes to the attention of
First Merchants that might indicate that any of the representations or
warranties of First Merchants may be untrue, incorrect, or misleading in any
material respect.
SECTION 9
CONDITIONS PRECEDENT TO THE MERGER
The obligation of each of the parties hereto to consummate the transaction
contemplated by this Agreement is subject to the satisfaction and fulfillment of
each of the following conditions on or prior to the Effective Date:
9.01. SHAREHOLDER APPROVAL. The shareholders of Union National shall have
approved, ratified and confirmed this Agreement as required by applicable law.
9.02. REGISTRATION STATEMENT EFFECTIVE. First Merchants shall have
registered its shares of common stock to be issued to shareholders of Union
National in accordance with this Agreement with the Securities and Exchange
Commission pursuant to the 1933 Act, and all state securities and "blue sky"
approvals and authorizations required to offer and sell such shares shall have
been received by First Merchants. The registration statement with respect
thereto shall have been declared effective by the Securities and Exchange
Commission and no stop order shall have been issued or threatened. The shares
of common stock of First
Page 27
Merchants to be issued in connection with the Merger shall be eligible for
quotation in NASDAQ-NMS upon notice of issuance.
9.03. TAX OPINION. The parties shall have obtained an opinion of counsel
which shall be in form and content reasonably satisfactory to counsel for all
parties hereto, to the effect that the Merger effected pursuant to this
Agreement shall constitute a tax-free transaction (except to the extent cash is
received) to each party hereto and to the shareholders of each party. Such
opinion shall be based upon factual representations received by such counsel
from the parties, which representations may take the form of written
certifications.
9.04. AFFILIATE AGREEMENTS. First Merchants shall have obtained (a) from
Union National, a list identifying each affiliate of Union National and (b) from
each affiliate of Union National, the agreements contemplated by Section 7.06
hereof.
9.05. REGULATORY APPROVALS. The Board of Governors of the Federal Reserve
System and the Indiana Department of Financial Institutions shall have
authorized and approved the Merger and the transactions related thereto. In
addition, all appropriate orders, consents, approvals and clearances from all
other regulatory agencies and governmental authorities whose orders, consents,
approvals or clearances are required by law for consummation of the transactions
contemplated by this Agreement shall have been obtained.
9.06. OFFICER'S CERTIFICATE. First Merchants and Union National shall
have delivered to each other a certificate signed by their Chairman or President
and their Secretary, dated the Effective Date, certifying that (a) all the
representations and warranties of their respective corporations are true,
accurate and correct on and as of the Effective Date; (b) all the covenants of
their respective corporations have been complied with from the date of the
Agreement through and as of the Effective Date; and (c) their respective
corporations have satisfied and fully complied with all conditions necessary to
make this Agreement effective as to them.
9.07. FAIRNESS OPINION. Union National shall have obtained an opinion
from an investment banker of its choosing to the effect that the terms of the
Merger are fair to the shareholders of Union National from a financial
viewpoint. Such opinion shall be (a) in form and substance reasonably
satisfactory to Union National, (b) dated as of a date not later than the
mailing date of the Proxy Statement relating to the Merger and (c) included in
the Proxy Statement.
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9.08. POOLING OF INTERESTS. First Merchants shall have obtained from its
independent accountants, Geo. S. Olive & Co. LLC, or from a nationally
recognized accounting firm, in First Merchants sole discretion, a letter to the
effect that based upon their review of such documents and information as they
deemed relevant, such firm is currently unaware of any reason why the Merger
cannot be accounted for as a "pooling of interests."
SECTION 10
TERMINATION OF MERGER
10.01. MANNER OF TERMINATION. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Effective Date by
written notice delivered by First Merchants to Union National or by Union
National to First Merchants:
(a) By Union National or First Merchants, if there has been a
material misrepresentation, breach of warranty or failure to comply with
any covenant on the part of any party in the representations, warranties,
and covenants set forth herein; provided the party in default shall have no
right to terminate for its own default;
(b) By Union National or First Merchants, if it shall have reasonably
determined that the transactions contemplated by this Agreement have become
inadvisable or impracticable by reason of commencement or threat of
material litigation or proceedings against any of the parties;
(c) By Union National or First Merchants if there have been any
changes or events of any character, actual or threatened, since September
30, 1995, which in the aggregate materially adversely affect First
Merchant's (on the one hand) or Union National's or the Bank's (on the
other hand) business, prospects, condition (financial or otherwise), assets
or results of operations (excluding events and conditions relating to the
business environment in general and those set forth in the Disclosure
Letter);
(d) By Union National or First Merchants, if the transaction
contemplated herein has not been consummated by December 31, 1996;
(e) By First Merchants if any of the items, events or information set
forth in any update to the Disclosure Letter has had or, in the reasonable
discretion of First Merchants,
Page 29
may have a material adverse effect on the financial condition, results of
operations, business, or prospects of Union National or Bank;
(f) By First Merchants or Union National if, in the opinion of
counsel to First Merchants or Union National, the Merger will not
constitute a tax-free reorganization under the Code;
(g) By Union National if First Merchants or any of its subsidiary
banks is acquired by a third party in a merger, consolidation, share
exchange, stock transaction or asset transaction; if First Merchants enters
into an agreement containing the terms and conditions of such a
transaction; or if the terms and conditions of such a transaction are
publicly disclosed;
(h) By Union National if between the date of this Agreement and the
Effective Date, (i) First Merchants issues, grants, sells or redeems any of
its capital stock, or issues, grants, sells or redeems any security,
option, warrant or other right that provides for the purchase of capital
stock of First Merchants or that is convertible or exercisable into shares
of the capital stock of First Merchants, or makes or sets a record date for
a distribution of any kind to holders of the capital stock of First
Merchants other than regular quarterly cash dividends (excluding shares of
First Merchants capital stock and options therefor issued in connection
with the proposed merger of ▇▇▇▇▇▇▇▇ County Bancorp, Inc. with and into
First Merchants or pursuant to First Merchants Dividend Reinvestment and
Stock Purchase Plan, Stock Option Plans or Employee Stock Purchase Plans
(collectively, an "Equity Transaction"), or enters into an agreement,
contract or arrangement of any kind relating to an Equity Transaction, and
(ii) such Equity Transaction, after giving effect to the Merger, would
decrease the projected earnings per share or book value per share
attributable to the shares to be received by the shareholders of Union
National in connection with the Merger;
(i) By First Merchants if the Merger cannot be accounted for as a
"pooling of interests;"
(j) By Union National, if the appropriate discharge of the fiduciary
duties of the Board of Directors of Union National consistent with Section
7.05 requires that Union National terminate this Agreement; or
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(k) By First Merchants if it receives written notice under Section
7.05 that Union National intends to furnish information to or enter into
discussions or negotiations with a third party in connection with a
proposed Acquisition Transaction, if Union National fails to give any such
written notice as required in Section 7.05 or if Union National's Board of
Directors fails to make, withdraws or modifies its recommendation to Union
National shareholders to vote in favor of the Merger.
10.02. EFFECT OF TERMINATION. Except as set forth in this Section 10.02,
upon termination by written notice, as provided in this Section, this Agreement
shall be void and of no further force or effect and there shall be no obligation
on the part of Union National or First Merchants or their respective officers,
directors, employees, agents, or shareholders, except for payment of their
respective expenses and First Merchants obligations under Section 8.05.
Notwithstanding the foregoing, in the event of termination by First Merchants in
accordance with Section 10.01(k) or by Union National in accordance with Section
10.01(j), Union National shall pay First Merchants the sum of Five Hundred
Thousand Dollars ($500,000.00) as liquidated damages. Such payment shall be
made within ten (10) days of the date of notice of termination. Union National
acknowledges the reasonableness of such amount in light of the considerable time
and expense invested and to be invested by First Merchants and its
representatives in furtherance of the Merger. Such amount was agreed upon by
First Merchants and Union National as compensation to First Merchants for its
time and expense and not as a penalty to Union National, it being impossible to
ascertain the exact value of the time and expense to be invested. First
Merchants shall also be entitled to recover from Union National its reasonable
attorney's fees incurred in the enforcement of this Section.
SECTION 11
EFFECTIVE DATE OF MERGER
Subject to the terms and upon satisfaction of all requirements of law and
the conditions specified in this Agreement, the Merger shall become effective at
the close of business on the day specified in the Articles of Merger of Union
National with and into First Merchants as filed with the Secretary of State of
Indiana ("Effective Date"). The Effective Date shall occur no later than the
last business day of the month in which that thirty (30) day period following
the last approval of the Merger by a federal regulatory agency or governmental
authority expires.
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SECTION 12
CLOSING
12.01. CLOSING DATE AND PLACE. The closing of the Merger ("Closing")
shall take place at the main office of First Merchants on the Effective Date.
12.02. ARTICLES OF MERGER. Subject to the provisions of this Agreement,
on the Effective Date, the Articles of merger shall be duly filed with the
Secretary of State of the State of Indiana.
12.03. OPINIONS OF COUNSEL. At the Closing, Union National shall deliver
an opinion of its counsel, Ice ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇, to First Merchants, and
First Merchants shall deliver an opinion of its counsel, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ &
▇▇▇▇▇▇▇, to Union National, dated as of the date of the Closing and in form
reasonably satisfactory to the other party and their counsel.
SECTION 13
MISCELLANEOUS
13.01. EFFECTIVE AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but none of the provisions thereof shall inure to the benefit
of any other person, firm, or corporation whomsoever. Neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be assigned or
transferred by either party hereto without the prior written consent of the
other party.
13.02. WAIVER; AMENDMENT.
(a) First Merchants and Union National may, by an instrument in
writing executed in the same manner as this Agreement: (i) extend the time
for the performance of any of the covenants or agreements of the other
party under this Agreement; (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 non-satisfaction
or nonfulfillment of which is a condition to the right of the party so
waiving to terminate this
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Agreement. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any other or
subsequent breach hereunder.
(b) Notwithstanding approval by the shareholders of Union National,
this Agreement may be amended, modified, or supplemented by the written
agreement of Union National and First Merchants without further approval of
such shareholders, except that no such amendment, modification, or
supplement shall result in a decrease in the consideration specified in
Section 3 hereof or shall materially adversely affect the rights of
shareholders of Union National without the further approval of such
shareholders.
13.03. NOTICES. Any notice required or permitted by this Agreement shall
be deemed to have been duly given if delivered in person, receipted for or sent
by certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to First Merchants: With a copy to:
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Indianapolis, Indiana 46204-2982
President Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
If to Union National: With a copy to:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Ice ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇
P. O. ▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
Liberty, IN 47353 ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
President
or such substituted address as any of them have given to the other in writing.
13.04. HEADINGS. The headings in this Agreement have been inserted solely
for the ease of reference and should not be considered in the interpretation or
construction of this Agreement.
13.05. 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
Page 33
construed as if such invalid, illegal, or unenforceable provision or provisions
had never been contained herein.
13.06. 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.
13.07. GOVERNING LAW. This Agreement is executed in and shall be
construed in accordance with the laws of the State of Indiana.
13.08. ENTIRE AGREEMENT. This Agreement supersedes any other agreement,
whether oral or written, between First Merchants and Union National relating to
the matters contemplated hereby, and constitutes the entire agreement between
the parties hereto.
13.09. EXPENSES. First Merchants and Union National shall each pay their
own expenses incidental to the transactions contemplated hereby. It is
understood that the cost of the fairness opinion referenced in Section 9.07
shall be borne by Union National whether or not the Merger is consummated.
IN WITNESS WHEREOF, First Merchants and Union National have made and
entered into this Agreement as of the day and year first above written and have
caused this Agreement to be executed and attested by their duly authorized
officers.
FIRST MERCHANTS CORPORATION
ATTEST:
/S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------- -----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Secretary ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
UNION NATIONAL BANCORP
ATTEST:
/S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ By /S/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
----------------------------- -----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Secretary ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, President
Page 34