Exhibit 2
AGREEMENT AND PLAN OF
REORGANIZATION
between
THE SOMERSET GROUP, INC.
and
FIRST INDIANA CORPORATION
April 19, 2000
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TABLE OF CONTENTS
Article I....................................................................-1-
Certain Definitions; Interpretation.................................-1-
1.01 Certain Definitions...............................-1-
1.02 Interpretation....................................-7-
Article II...................................................................-7-
The Merger..........................................................-7-
2.01 The Merger........................................-7-
2.02 Reservation of Right to Revise Structure..........-8-
2.03 Effective Time....................................-8-
2.04 Accounting Treatment..............................-9-
Article III..................................................................-9-
Consideration.......................................................-9-
3.01 Consideration.....................................-9-
3.02 Rights as Shareholders; Stock Transfers..........-11-
3.03 Fractional Shares................................-11-
3.04 Exchange Procedures..............................-11-
3.05 Anti-Dilution Adjustments........................-13-
3.06 Stock Options....................................-13-
Article IV..................................................................-14-
Actions Pending the Merger.........................................-14-
4.01 Forbearances of Somerset.........................-14-
4.02 Forbearances of First Indiana....................-17-
Article V...................................................................-17-
Representations and Warranties.....................................-17-
5.01 Disclosure Schedules.............................-17-
5.02 Standard.........................................-18-
5.03 Representations and Warranties of Somerset.......-18-
5.04 Representations and Warranties of First Indiana..-28-
Article VI..................................................................-33-
Covenants..........................................................-33-
6.01 Reasonable Best Efforts..........................-33-
6.02 Shareholder Approvals............................-33-
6.03 Registration Statement...........................-33-
6.04 Press Releases...................................-34-
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6.05 Access; Information..............................-35-
6.06 Acquisition Proposals............................-35-
6.07 Affiliate Agreements.............................-36-
6.08 NASDAQ Listing...................................-36-
6.09 Regulatory Applications..........................-36-
6.10 D & O Indemnification and Insurance..............-37-
6.11 Accountants' Letters.............................-37-
6.12 Notification of Certain Matters..................-38-
6.13 Employee Matters.................................-38-
Article VII.................................................................-39-
Conditions to Consummation of the Merger...........................-39-
7.01 Conditions to Each Party's Obligation to
Effect the Merger...........................-39-
7.02 Conditions to Obligation of Somerset.............-40-
7.03 Conditions to Obligation of First Indiana........-41-
Article VIII................................................................-42-
Termination........................................................-42-
8.01 Termination......................................-42-
8.02 Effect of Termination and Abandonment............-43-
8.03 Termination Fee..................................-43-
Article IX..................................................................-44-
Miscellaneous......................................................-44-
9.01 Survival.........................................-44-
9.02 Waiver; Amendment................................-44-
9.03 Counterparts.....................................-44-
9.04 Governing Law....................................-44-
9.05 Expenses.........................................-44-
9.06 Notices..........................................-44-
9.07 Entire Understanding; No Third
Party Beneficiaries.........................-45-
List of Exhibits............................................................-48
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is dated as
of April 19, 2000, by and between THE SOMERSET GROUP, INC. ("Somerset") and
FIRST INDIANA CORPORATION ("First Indiana"), each Indiana corporations with
their respective headquarters in Indianapolis, Indiana.
W I T N E S S E T H :
A. The parties desire to effect the acquisition by First Indiana of Somerset,
which shall be accomplished through the merger of Somerset with and into First
Indiana Financial Services, Inc. ("Financial Services"), an entity to be
organized as an Indiana corporation that will be wholly owned by First Indiana
and which will be created solely for the purpose of effecting this merger (the
"Merger").
B. The Boards of Directors of Somerset and First Indiana, respectively, each
have determined that it is in the best interests of their respective
corporations and shareholders to effect the Merger.
D. It is the intention of the parties to this Agreement that the business
combination contemplated hereby be treated as a "reorganization" under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants, representations, warranties and agreements contained herein, the
parties agree as follows:
Article I
Certain Definitions; Interpretation
1.01 Certain Definitions. The following terms are used in this Agreement with
the meanings assigned below:
(a) "Acquisition Proposal" has the meaning assigned in Section 6.06.
(b) "Agreement" means this Agreement, as amended or modified from time
to time in accordance with Section 9.02.
(c) "Ancillary Documents" means, when executed and delivered, the
Articles of Merger attached hereto as Exhibit A, the Affiliate
Agreement attached hereto as Exhibit B, the Opinion of First Indiana's
Counsel, Bose ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, attached hereto as Exhibit C, the
Opinion of Somerset's Counsel, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, attached hereto as
Exhibit D, and the Agreement and Plan of Merger by and between
Financial Services and Somerset attached hereto as Exhibit E.
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(d) "Closing Date" has the meaning assigned in Section 2.03.
(e) "Code" has the meaning assigned in the recitals to this Agreement.
(f) "Compensation Plans" has the meaning assigned in Section 5.03(l).
(g) "Consideration" has the meaning assigned in Section 3.01(a).
(h) "Consideration Ratio" has the meaning assigned in Section 3.06.
(i) "Contract" means, with respect to any person, any agreement,
indenture, undertaking, debt instrument, contract, lease or other
commitment to which such person or any of its Subsidiaries is a party
or by which any of them is bound or to which any of their properties is
subject.
(j) "Disclosure Schedule" has the meaning assigned in Section 5.01.
(k) "DOL" means the United States Department of Labor.
(l) "Effective Date" means the date on which the Effective Time occurs.
(m) "Effective Time" means the date and time at which the Merger
becomes effective.
(n) "Environmental Laws" means any federal, state or local law,
regulation, order, decree, permit, authorization, common law or agency
requirement with force of law relating to: (1) the protection or
restoration of the environment, health or safety (in each case as
relating to the environment) or natural resources; or (2) the handling,
use, presence, disposal, release or threatened release of any Hazardous
Substance.
(o) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
(p) "ERISA Affiliate" has, with respect to any person, the meaning
assigned in Section 5.03(l).
(q) "ERISA Affiliate Plan" has the meaning assigned in Section 5.03(l).
(r) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
(s) "Exchange Agent" means ▇▇▇▇▇▇ Trust and Savings Bank or another
bank or trust company selected by First Indiana and reasonably
acceptable to Somerset to effect the payment of the Consideration
pursuant to Section 3.01.
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(t) "Exchange Fund" has the meaning assigned in Section 3.04(a).
(u) "Exchange Ratio" has the meaning assigned in Section 3.01(a).
(v) "Fee" has the meaning assigned in Section 8.03.
(w) "Financial Services" has the meaning assigned in the recitals to
this Agreement.
(x) "Financial Services Articles" means the Articles of Incorporation
of Financial Services.
(y) "Financial Services By-laws" means the By-laws of Financial
Services.
(z) "Financial Services Merger Agreement" means the Agreement and Plan
of Merger by and between Financial Services and Somerset, a form of
which is attached as Exhibit E.
(aa) "First Indiana" has the meaning assigned in the preamble to this
Agreement.
(bb) "First Indiana Articles" means the Articles of Incorporation of
First Indiana.
(cc) "First Indiana Board" means the First Indiana Board of Directors.
(dd) "First Indiana By-Laws" means the By-Laws of First Indiana.
(ee) "First Indiana Common Stock" means the common stock, par value of
$.01 per share, of First Indiana.
(ff) "First Indiana Preferred Stock" means the preferred stock, par
value of $.01 per share, of First Indiana.
(gg) "First Indiana's SEC Documents" has the meaning assigned in
Section 5.04(g).
(hh) "Former Somerset Employees" has the meaning assigned in Section
6.13.
(ii) "Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
(jj) "Hazardous Substance" means any substance in any concentration
that is: (1) listed, classified or regulated pursuant to any
Environmental Law; (2) any petroleum product or by- product,
asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon; or (3) any
other substance which is or may be the subject of regulatory action by
any Governmental Authority pursuant to any Environmental Law.
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(kk) "Indemnified Person" has the meaning assigned in Section 5.03(l).
(ll) "IBCL" means the Indiana Business Corporation Law, I.C. 23-1-17-1
et seq.
(mm) "Insurance Amount" has the meaning assigned in Section 6.10(a).
(nn) "Insurance Policies" has the meaning assigned in Section 5.03(r).
(oo) "IRS" means the United States Internal Revenue Service.
(pp) "KBW" means ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
(qq) "Liens" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
(rr) "Loans" means loans, leases, extensions of credit, commitments to
extend credit and other assets.
(ss) "Market Value" has the meaning, in respect of First Indiana Common
Stock and the Effective Date, assigned in Section 3.06.
(tt) "Material Adverse Effect" means, with respect to First Indiana or
Somerset, any effect that (1) is both material and adverse to the
financial position, results of operations or business of First Indiana
and its Subsidiaries taken as a whole, or Somerset and its Subsidiaries
taken as a whole, respectively, other than (A) the effects of any
change attributable to or resulting from changes in economic
conditions, laws, regulations or accounting guidelines (generally
accepted accounting principles or otherwise) applicable to depository
institutions generally, or in general levels of interest rates, and (B)
payments associated with the Merger as contemplated by this Agreement;
or (2) would materially impair the ability of either First Indiana or
Somerset 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.
(uu) "McDonald" means McDonald Investments Inc.
(vv) "Merger" has the meaning assigned in the recitals to this
Agreement.
(ww) "Multiemployer Plan" means, with respect to any person, a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(xx) "NASDAQ" means The NASDAQ Stock Market.
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(yy) "New Certificates" has the meaning assigned in Section 3.04(b).
(zz) "Old Certificates" has the meaning assigned in Section 3.04().
(aaa) "OTS" means the Office of Thrift Supervision.
(bbb) "PBGC" means the Pension Benefit Guaranty Corporation.
(ccc) "Pension Plan" has the meaning assigned in Section 5.03(l).
(ddd) "Per Share Cash Consideration" has the meaning assigned in
Section 3.01(a).
(eee) "Per Share Stock Consideration" has the meaning assigned in
Section 3.01(a).
(fff) "Person" means any individual, bank, savings bank, corporation,
partnership, association, joint-stock company, business trust or
unincorporated organization.
(ggg) "Previously Disclosed" means, with respect to Somerset or First
Indiana, information set forth in such party's Disclosure Schedule.
(hhh) "Proxy Statements" has the meaning assigned in Section 6.03.
(iii) "Registration Statement" has the meaning assigned in Section
6.03.
(jjj) "Representatives" means, with respect to any person, such
person's directors, officers, employees, legal or financial advisors or
any representatives of such legal or financial advisors.
(kkk) "Replacement Option" has the meaning assigned in Section 3.06.
(lll) "Rights" means, with respect to any person, securities or
obligations convertible into or exercisable or exchangeable for, or
giving any person any right to subscribe for or acquire, or any
options, calls or commitments relating to, or any stock appreciation
right or other instrument the value of which is determined in whole or
in part by reference to the market price or value of, shares of capital
stock of such person.
(mmm) "SEC" means the Securities and Exchange Commission.
(nnn) "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
(ooo) "Somerset" has the meaning assigned in the preamble to this
Agreement.
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(ppp) "Somerset Affiliate" has the meaning assigned in Section 6.07.
(qqq) "Somerset Articles" means the Articles of Incorporation of
Somerset.
(rrr) "Somerset Board" means the Board of Directors of Somerset.
(sss) "Somerset By-Laws" means the By-laws of Somerset, as and if
amended.
(ttt) "Somerset Common Stock" means the common stock, without par value
per share, of Somerset.
(uuu) "Somerset Reports" has the meaning assigned in Section 5.03(i).
(vvv) "Somerset Stock Option" means each option to purchase shares of
Somerset Common Stock which is outstanding under the Somerset Stock
Plans on the date as of which this Agreement is made and which remains
outstanding as of the Effective Time.
(www) "Somerset Stock Plans" means the 1986, 1991, and 1998 Stock
Incentive Plans and the 1991 Directors Stock Option Plan of The
Somerset Group, Inc.
(xxx) "Somerset's SEC Documents" has the meaning assigned in Section
5.03(g).
(yyy) "Subsidiary" and "Significant Subsidiary" have the meanings
assigned to them in Rule 1-02 of Regulation S-X of the SEC; provided
that reference to Subsidiaries of Somerset shall not mean or include
First Indiana or any Subsidiaries of First Indiana.
(zzz) "Superior Proposal" means an Acquisition Proposal made by a third
party after the date hereof which, in the good faith judgment of the
Board of Directors of the corporation receiving the Acquisition
Proposal, taking into account the various legal, financial and
regulatory aspects of the proposal and the person making such proposal,
(1) if accepted, is significantly more likely than not to be
consummated, and (2) if consummated, is reasonably likely to result in
a materially more favorable transaction than the Merger for the
applicable corporation and its shareholders and other relevant
constituencies.
(aaaa) "Surviving Corporation" has the meaning assigned in Section
2.01.
(bbbb) "Taxes" means all taxes, charges, fees, levies or other
assessments, however denominated, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, goods
and services, capital, transfer, franchise, profits, license,
withholding, payroll, employment, employer health, excise, estimated,
severance, stamp, occupation, property or other taxes, custom duties,
fees, assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts
imposed by any taxing authority whether arising before, on or after the
Effective Date.
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(cccc) "Tax Returns" has the meaning assigned in Section 5.03(o).
(dddd) "TRA" has the meaning assigned in Section 5.03(l).
1.02 Interpretation. When a reference is made in this Agreement to Sections,
Exhibits or Schedules, such reference shall be to a Section of, or Exhibit or
Schedule to, this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and are
not part of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." No rule of construction against the draftsperson
shall be applied in connection with the interpretation or enforcement of this
Agreement. Whenever this Agreement shall require a party to take an action, such
requirement shall be deemed to constitute an undertaking by such party to cause
its Subsidiaries, and to use its reasonable best efforts to cause its other
affiliates, to take appropriate action in connection therewith. References
herein to "transaction contemplated by this Agreement" shall be deemed to
include a reference to the transactions contemplated by the Ancillary Documents.
Article II
The Merger
2.01 The Merger. At the Effective Time, the business combination contemplated by
this Agreement shall occur and in furtherance thereof:
(a) Structure and Effects of the Merger. Somerset shall merge with and
into Financial Services, and the separate corporate existence of
Somerset shall thereupon cease. Financial Services shall be the
surviving corporation in the Merger (sometimes hereinafter referred to
as the "Surviving Corporation") and shall continue to be governed by
the laws of the State of Indiana, and the separate corporate existence
of Financial Services with all its rights, privileges, immunities,
powers and franchises shall continue unaffected by the Merger. The
Merger shall have the effects specified in the IBCL.
(b) Articles of Incorporation. The Financial Services Articles as in
effect immediately prior to the Effective Time shall continue to be the
articles of incorporation of the Surviving Corporation following the
Merger, until duly amended in accordance with the terms thereof and the
IBCL.
(c) By-Laws. The Financial Services By-laws as in effect immediately
prior to the Effective Time shall continue to be the by-laws of the
Surviving Corporation following the Merger, until duly amended in
accordance with the terms thereof and the Financial Services Articles.
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(d) Directors. The directors of Financial Services immediately prior to
the Effective Time shall continue to hold such positions following the
Merger, and such directors shall hold office until such time as their
successors shall be duly elected and qualified. The directors
immediately prior to the Effective Time shall be as follows:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ ▇. Early.
(e) Officers. The officers of Financial Services holding such positions
immediately prior to the Effective Time shall continue to be the
officers of the Surviving Corporation following the Merger. The
officers immediately prior to the Effective Time shall be as follows:
▇▇▇▇▇▇▇ ▇. Early President and Chief Executive Officer
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Chairman
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. Secretary and Treasurer
2.02 Reservation of Right to Revise Structure. At First Indiana's election, the
Merger may alternatively be structured so that (a) Somerset is merged with and
into First Indiana directly, or any direct or indirect wholly owned subsidiary
of First Indiana other than Financial Services or (b) any direct or indirect
wholly owned subsidiary of First Indiana is merged with and into Somerset;
provided, however, that no such change shall (x) alter or change the amount or
kind of the Consideration or the treatment of the holders of Somerset Common
Stock or Somerset Stock Options, (y) prevent the parties from obtaining the
opinions of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ and Bose ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP referred to in
Sections 7.02(d) and 7.03(d), respectively, or (z) materially impede or delay
consummation of the transactions contemplated by this Agreement. In the event of
such an election, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect such election.
2.03 Effective Time. The Merger shall become effective upon the filing, in the
office of the Secretary of State of the State of Indiana, of Articles of Merger
in accordance with IBCL Section 23-1-40-5, or at such later date and time as may
be set forth in such articles, which articles shall be in substantially the same
form as that attached hereto as Exhibit A. Subject to the terms of this
Agreement, the parties shall cause the Merger to become effective (a) on the
date that is the fifth full NASDAQ trading day (the "Closing Date") to occur
after the last of the conditions set forth in Article VII (other than conditions
relating solely to the delivery of documents dated the Effective Date) shall
have been satisfied or waived in accordance with the terms of this Agreement, or
(b) on such date as the parties may agree in writing.
2.04 Accounting Treatment. The acquisition of Somerset by First Indiana, as
effected by the Merger, will be accounted for under the purchase method of
accounting.
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2.05 Treatment of First Indiana Common Stock Held by Somerset. Each share of
First Indiana Common Stock issued, outstanding and held by Somerset immediately
prior to the Effective Time shall be cancelled as of the Effective Time and
certificates representing such shares shall be delivered by Somerset to First
Indiana. Immediately following the Effective Time, all such shares shall be
treated as authorized but unissued shares of First Indiana.
Article III
Consideration
3.01 Consideration.
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time:
(1) Each share of Somerset Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares
held as treasury stock of Somerset and shares held directly or
indirectly by First Indiana, except shares held in a fiduciary
capacity or in satisfaction of a debt previously contracted,
if any) shall become and be converted into the right to
receive, subject to adjustment as set forth in Section 3.05:
(A) 1.21 shares (the "Exchange Ratio") of First
Indiana Common Stock (the "Per Share Stock
Consideration"), or
(B) $24.70, in cash (such sum, the "Per Share Cash
Consideration" and together with the Per Share Stock
Consideration, the "Consideration"); and
provided, that the aggregate number of shares of First Indiana
Common Stock that shall be issued in the Merger shall be not
less than the product of (a) sixty-five percent (65%), of (b)
the Exchange Ratio, times (c) the number of shares of Somerset
Common Stock outstanding as of the Effective Time (the "Stock
Number").
(2) Each share of Somerset Common Stock that, immediately
prior to the Effective Time, is held as treasury stock of
Somerset or held directly or indirectly by First Indiana,
other than shares held in a fiduciary capacity or in
satisfaction of a debt previously contracted, shall by virtue
of the Merger be canceled and retired and shall cease to
exist, and no exchange or payment shall be made therefor.
(b) Subject to the allocation procedures set forth in Section 3.01(c),
each record holder of Somerset Common Stock will be entitled (1) to
elect to receive First Indiana Common Stock for all or some of the
shares of Somerset Common Stock ("Stock Election Shares") held by such
record holder, (2) to elect to receive cash for all or some of the
shares of Somerset Common Stock ("Cash Election Shares") held by such
record holder or (3) to indicate that such holder makes no such
election for all or some of the shares of Somerset
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Common Stock ("No-Election Shares") held by such record holder. All
such elections (each, an "Election") shall be made on a form designed
for that purpose by First Indiana and reasonably acceptable to Somerset
(an "Election Form"). Any shares of Somerset Common Stock with respect
to which the record holder thereof shall not, as of the Election
Deadline (as defined below), have properly submitted to the Exchange
Agent (as defined below) a properly completed Election Form shall be
deemed to be No-Election Shares. A record holder acting in different
capacities or acting on behalf of other persons in any way shall be
entitled to submit an Election Form for each capacity in which such
record holder so acts with respect to each person for which it so acts.
(c) Not later than the 15th day after the Election Deadline, First
Indiana shall cause the Exchange Agent to effect the allocation among
the holders of Somerset Common Stock of rights to receive the Per Share
Stock Consideration or the Per Share Cash Consideration in the Merger
as follows:
(1) Number of Stock Elections Less Than Stock Number. If the
number of Stock Election Shares (on the basis of Election
Forms received as of the Election Deadline) is less than the
Stock Number, then
(A) all Stock Election Shares shall be, as of the
Effective Time, converted into the right to receive
the Per Share Stock Consideration,
(B) the Exchange Agent shall allocate pro rata from
among the No- Election Shares a sufficient number of
No-Election Shares such that the sum of such number
and the number of Stock Election Shares shall equal
as closely as practicable the Stock Number, and all
such selected shares ("Stock- Selected No-Election
Shares") shall be, as of the Effective Time,
converted into the right to receive the Per Share
Stock Consideration, provided that if the sum of all
No-Election Shares and Stock Election Shares is less
than the Stock Number, all No-Election Shares shall
be Stock-Selected No-Election Shares,
(C) if the sum of Stock Election Shares and
No-Election Shares is less than the Stock Number, the
Exchange Agent shall allocate pro rata from among the
Cash Election Shares a sufficient number of Cash
Election Shares such that the sum of such number,
plus the number of Stock Election Shares and the
number of Stock-Selected No-Election Shares, shall
equal as closely as practicable the Stock Number, and
all such selected shares ("Converted Cash Election
Shares") shall be, as of the Effective Time,
converted into the right to receive the Per Share
Stock Consideration, and
(D) the No-Election Shares and Cash Election Shares
that are not Stock- Selected No-Election Shares or
Converted Cash Election Shares (as the case
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may be) shall be, as of the Effective Time, converted
into the right to receive the Per Share Cash
Consideration; or
(2) Number of Stock Elections Greater Than or Equal to Stock
Number. If the number of Stock Election Shares (on the basis
of Election Forms received by the Election Deadline) is
greater than or equal to the Stock Number, then
(A) all Cash Election Shares and No-Election Shares
shall be, as of the Effective Time, converted into
the right to receive the Per Share Cash
Consideration, and
(B) The Stock Election Shares shall be, as of the
Effective Time, converted into the right to receive
the Per Share Stock Consideration.
3.02 Rights as Shareholders; Stock Transfers. At the Effective Time, (a) holders
of Somerset Common Stock shall cease to be, and shall have no rights as,
shareholders of Somerset, other than the right to receive (1) any dividend or
other distribution with respect to such Somerset Common Stock with a record date
occurring prior to the Effective Time and (2) the consideration provided under
this Article III, and (b) holders of Somerset Stock Options shall have no
further or continuing right to receive Somerset Common Stock, First Indiana
Common Stock or any form of consideration other than the consideration provided
under this Article III. After the Effective Time, there shall be no transfers on
the stock transfer books of Somerset or the Surviving Corporation of shares of
Somerset Common Stock, and no attempted or purported exercise of Somerset Stock
Options shall be effective.
3.03 Fractional Shares. Notwithstanding any other provision in this Agreement,
no fractional shares of First Indiana Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger;
instead, First Indiana shall pay to each holder of Somerset Common Stock who
otherwise would be entitled to a fractional share of First Indiana Common Stock
an amount in cash (without interest) determined by multiplying such fraction by
the Per Share Cash Consideration.
3.04 Exchange Procedures.
(a) Not later than the 20th business day prior to the anticipated
Effective Date or such other date as the parties may agree in writing
(the "Mailing Date"), First Indiana shall mail an Election Form and a
letter of transmittal to each holder of record of Somerset Common
Stock. To be effective, an Election Form must be properly completed,
signed and actually received by the Exchange Agent not later than 5:00
p.m., Chicago time, on the 20th calendar day after the Mailing Date
(the "Election Deadline") or such other time and date as the parties
may agree in writing, and in order to be deemed properly completed the
Election Form must be accompanied by one or more certificates (the "Old
Certificates") (or indemnity satisfactory to the Surviving Corporation
and the Exchange Agent, if any of such certificates are lost,
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stolen or destroyed) representing all shares of Somerset Common Stock
covered by such Election Form, together with duly executed transmittal
materials included in or required by the Election Form. First Indiana
shall have reasonable discretion, which it may delegate in whole or in
part to the Exchange Agent, to determine whether Election Forms (and
the accompanying certificates and material) have been properly
completed, signed and timely submitted or to disregard defects in
Election Forms; such decisions of First Indiana (or of the Exchange
Agent) shall be conclusive and binding. Neither First Indiana nor the
Exchange Agent shall be under any obligation to notify any person of
any defect in an Election Form submitted to the Exchange Agent. The
Exchange Agent and First Indiana shall also make all computations
contemplated by Section 3.01 hereof, and, after consultation with
Somerset, all such computations shall be conclusive and binding on the
former holders of Somerset Common Stock absent manifest error. Shares
of Somerset Common Stock covered by an Election Form which is not
effective shall be treated as if no Election had been made with respect
to such shares of Somerset Common Stock. Once an Election is made it
may be amended at any time prior to the Election Deadline, but
thereafter it may not be amended or revoked.
(b) At or prior to the Effective Time, First Indiana shall deposit, or
shall cause to be deposited, with the Exchange Agent, certificates
representing the shares of First Indiana Common Stock ("New
Certificates") and an estimated amount of cash (such cash and New
Certificates, together with any dividends or distributions with a
record date occurring after the Effective Date with respect thereto
(without any interest on any such cash, dividends or distributions),
being hereinafter referred to as the "Exchange Fund") to be issued as
consideration.
(c) The Surviving Corporation shall cause the New Certificates into
which shares of a shareholder's Somerset Common Stock are converted on
the Effective Date and/or any check in respect of any Per Share Cash
Consideration, fractional share interests or dividends or distributions
which such person shall be entitled to receive to be delivered to such
shareholder upon delivery (if not previously delivered) to the Exchange
Agent of certificates representing such shares of Somerset Common Stock
("Old Certificates") (or indemnity satisfactory to the Surviving
Corporation and the Exchange Agent, if any of such certificates are
lost, stolen or destroyed) owned by such shareholder; provided that New
Certificates and/or any such check shall not be issued to any Somerset
Affiliate unless and until such Somerset Affiliate has delivered an
agreement pursuant to Section 6.07. No interest will be paid on any
Consideration that any such person shall be entitled to receive
pursuant to this Article III upon such delivery.
(d) Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to any former holder of Somerset Common
Stock for any amount properly delivered to a public official pursuant
to applicable abandoned property, escheat or similar laws.
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(e) No dividends or other distributions on First Indiana Common Stock
with a record date occurring after the Effective Time shall be paid to
the holder of any unsurrendered Old Certificate representing shares of
Somerset Common Stock converted in the Merger into the right to receive
shares of such First Indiana Common Stock until the holder thereof
shall be entitled to receive New Certificates in exchange therefor in
accordance with this Article III. After becoming so entitled in
accordance with this Article III, the record holder thereof also shall
be entitled to receive any such dividends or other distributions,
without any interest thereon, which theretofore had become payable with
respect to shares of First Indiana Common Stock such holder had the
right to receive upon surrender of the Old Certificate.
(f) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of Somerset for six months after the Effective Time shall
be returned to First Indiana. Any shareholders of Somerset who have not
theretofore complied with this Article III shall thereafter look only
to First Indiana for payment of Per Share Stock Consideration, Per
Share Cash Consideration, cash in lieu of any fractional shares and
unpaid dividends and distributions on First Indiana Common Stock
deliverable in respect of each share of Somerset Common Stock such
shareholder holds as determined pursuant to this Agreement, in each
case, without any interest thereon.
3.05 Anti-Dilution Adjustments. Should First Indiana change (or establish a
record date for changing) the number of shares of First Indiana Common Stock
issued and outstanding prior to the Effective Date by way of a stock split,
stock dividend, recapitalization or similar transaction with respect to the
outstanding First Indiana Common Stock, and the record date therefor shall be
prior to the Effective Date, the Exchange Ratio and the Per Share Cash
Consideration shall be proportionately adjusted.
3.06 Stock Options. At the Effective Time, each Somerset Stock Option shall be
converted into an option (a "Replacement Option") to acquire, on the same terms
and conditions as were applicable under such Somerset Stock Option, a specified
number of shares of First Indiana Common Stock, at a specified exercise price
per share. In respect of each option or set of identical options outstanding to
the same holder, such number shall be determined by multiplying the number of
shares of Somerset Common Stock subject to such Somerset Stock Option or set of
identical Somerset Stock Options by the Exchange Ratio and rounding such product
to the nearest whole number, and such exercise price per share shall be
determined by dividing the per share exercise price under such Somerset Stock
Option or set of identical Somerset Stock Options by the Exchange Ratio and
rounding such quotient to the nearest whole cent. For example, a Somerset Stock
Option to purchase 200 shares of Somerset Common Stock at an exercise price of
$14.52 per share would be converted into an option to purchase 242 shares of
First Indiana Common Stock at an exercise price of $12.00 per share.
Notwithstanding the foregoing, each Somerset Stock Option which is intended to
be an "incentive stock option" (as defined in Section 422 of the Code) shall be
adjusted in accordance with the requirements of Section 424 of the Code.
Accordingly, with respect to "incentive stock options," fractional shares will
be rounded down to the nearest whole number of shares and where necessary the
per share exercise price will be rounded up to the nearest cent. At the
Effective Time, First
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Indiana shall assume the Somerset Stock Plans; provided, however, that such
assumption shall be only in respect of the Replacement Options and that First
Indiana shall have no obligation with respect to any awards under the Somerset
Stock Plans other than the Replacement Options and shall have no obligation to
make any additional grants or awards under such assumed Somerset Stock Plans. At
all times after the Effective Time, First Indiana shall reserve for issuance
such number of shares of First Indiana Common Stock as are needed to permit the
Replacement Options to be exercised in the manner contemplated by this Agreement
and the instruments pursuant to which such options were granted. First Indiana
shall file with the SEC a registration statement on an appropriate form under
the Securities Act with respect to the shares of First Indiana Common Stock
subject to the Replacement Options and shall use its reasonable best efforts to
maintain the current status of the prospectus contained therein, as well as
comply with any applicable state securities or "blue sky" laws, for so long as
such options remain outstanding.
Article IV
Actions Pending the Merger
4.01 Forbearances of Somerset. From the date hereof until the earlier of the
termination of this Agreement or the Effective Time, except as expressly
contemplated by this Agreement or the Disclosure Schedule, without the prior
written consent of First Indiana, Somerset will not, and will cause each of its
Subsidiaries not to:
(a) Ordinary Course. Conduct the business of Somerset and its
Subsidiaries other than in the ordinary and usual course or, to the
extent consistent therewith, fail to use reasonable efforts to preserve
intact their business organizations and assets and maintain their
rights, franchises and existing relations with customers, suppliers,
employees and business associates.
(b) Capital Stock. Other than pursuant to Rights Previously Disclosed
and outstanding on the date hereof, (1) issue, sell or otherwise permit
to become outstanding, or authorize the creation of, any additional
shares of Somerset Common Stock or any Rights with respect to Somerset
Common Stock, (2) permit any additional shares of Somerset Common Stock
to become subject to new grants of employee or director stock options,
other Rights or similar stock-based employee rights, (3) repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of
Somerset Common Stock, (4) effect any recapitalization,
reclassification, stock split or like change in capitalization, or (5)
enter into, or take any action to cause any holders of Somerset Common
Stock to enter into, any agreement, understanding or commitment
relating to the right of holders of Somerset Common Stock to vote any
shares of Somerset Common Stock, or cooperate in any formation of any
voting trust relating to such shares.
(c) Dividends, Etc. Make, declare, pay or set aside for payment any
dividend, other than (1) regular semi-annual cash dividends on Somerset
Common Stock paid with record and
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payment dates consistent with past practice in an amount not to exceed
$.11 per share or in the case of such dividends declared after August
31, 2000, $.17 per share and (2) dividends from wholly owned
Subsidiaries to Somerset or another wholly owned Subsidiary of
Somerset, as applicable (in each case consistent with past practice),
on or in respect of, any shares of its capital stock, or declare or
make any other distribution on any shares of its capital stock, or
split, combine, redeem, reclassify, purchase or otherwise acquire, any
shares of its capital stock.
(d) Compensation; Employment Contracts; Etc. Enter into, amend, modify,
renew or terminate any employment, consulting, severance or similar
Contracts with any directors, officers, or employees of, or independent
contractors with respect to, Somerset or its Subsidiaries, or grant any
salary, wage or other increase or increase any employee benefit
(including incentive or bonus payments), except (1) for normal general
increases in salary to individual, non-officer employees in the
ordinary course of business consistent with past practice, (2) for
other changes that are required by applicable law or this Agreement, or
(3) to satisfy Previously Disclosed Contracts existing on the date
hereof.
(e) Benefit Plans. Enter into, establish, adopt, amend, modify or
terminate any pension, retirement, stock option, stock purchase,
savings, profit sharing, employee stock ownership, deferred
compensation, consulting, bonus, group insurance or other employee or
director benefit, incentive or welfare Contract, plan or arrangement,
or any trust agreement (or similar arrangement) related thereto, or
make any new or increase any outstanding grants or awards under any
such Contract, plan or arrangement, in respect of any current or former
directors, officers, or employees of, or independent contractors with
respect to, Somerset or its Subsidiaries (or any dependent or
beneficiary of any of the foregoing persons), including taking any
action that accelerates the vesting or exercisability of or the payment
or distribution with respect to, stock options, restricted stock or
other compensation or benefits payable thereunder, except, in each such
case, as may be required by applicable law or this Agreement, and
except, as to any or all such outstanding stock options, an amendment
made prior to July 1, 2000, which, subject to such definitions and
additional conditions and limitations as Somerset may deem appropriate,
and subject to First Indiana's approval of the form and substance of
the amendment (which approval shall not be withheld unreasonably),
makes the option exercisable immediately, and for a period of up to six
months after termination of the optionee's continuous service (but in
no event after the expiration of the original life of the option), in
the event, at or within 120 days after the Effective Time, the
optionee's continuous service as a director or employee, including
service with First Indiana and its Subsidiaries after the Merger, (i)
terminates automatically by reason of the Merger or (ii) is terminated
by the employer (including any direct or indirect successor employer),
provided, in a situation to which clause (ii) applies, the employer
characterizes such termination as having resulted from the Merger.
(f) Dispositions. Except as Previously Disclosed, sell, transfer,
mortgage, lease, encumber or otherwise dispose of or discontinue any
material portion of its assets, business
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or properties or sell, transfer, pledge, encumber or otherwise dispose
of any First Indiana Common Stock held by it as of the date of this
Agreement.
(g) Acquisitions. Except (1) pursuant to Previously Disclosed Contracts
existing on the date hereof, (2) for short-term investments for cash
management purposes, (3) pursuant to bona fide hedging transactions, or
(4) by way of foreclosures or otherwise in satisfaction of debts
previously contracted in good faith, in each case in the ordinary and
usual course of business consistent with past practice, acquire any
assets, properties or deposits of another person in any one transaction
or a series of related transactions which otherwise would not be
permitted by this Section 4.01.
(h) Governing Documents. Amend the Somerset Articles, Somerset By-laws
or the articles of incorporation or by-laws (or similar governing
documents) of any of Somerset's Subsidiaries.
(i) Accounting Methods. Implement or adopt any change in the accounting
principles, practices or methods used by Somerset and its Subsidiaries,
other than as may be required by generally accepted accounting
principles, as concurred with by Somerset's independent auditors.
(j) Contracts. Except in the ordinary course of business consistent
with past practice, enter into or terminate any material Contract or
amend or modify in any material respect any of its existing material
Contracts.
(k) Claims. Settle any claim, action or proceeding, except for any
claim, action or proceeding involving solely money damages in an
amount, individually or in the aggregate, that is not material to
Somerset and its Subsidiaries, taken as a whole.
(l) Indebtedness. Without the prior written consent of First Indiana,
other than in the ordinary course of business, (1) incur any
indebtedness for borrowed money, (2) assume, guarantee, endorse or
otherwise as an accommodation become responsible for the obligations of
any other Person, (3) cancel, release, assign or modify any material
amount of indebtedness of any other Person, or (4) make any loan or
advance to any Subsidiary or any third party.
(m) Adverse Actions. (1) Take any action reasonably likely to prevent
or impede the Merger from qualifying as a reorganization within the
meaning of Section 368 of the Code; or (2) take any action that is
intended or is reasonably likely to result in (A) any of its
representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time at or prior to the
Effective Time, (B) any of the conditions to the Merger set forth in
Article VII not being satisfied or (C) a material breach of any
provision of this Agreement; except, in each case, as may be required
by applicable law.
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(n) Commitments. Agree or commit to do, or enter into any Contract
regarding, anything that would be precluded by clauses (a) through (m)
without first obtaining First Indiana's written consent.
4.02 Forbearances of First Indiana. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement, without the prior
written consent of Somerset, First Indiana will not, and will cause each of its
Subsidiaries not to:
(a) Ordinary Course. Conduct the business of First Indiana and its
Subsidiaries other than in the ordinary and usual course or, to the
extent consistent herewith, fail to use reasonable efforts to preserve
intact their business organizations and assets and maintain their
rights, franchises and existing relations with customers, suppliers,
employees and business associates.
(b) Adverse Actions. (1) Take any action reasonably likely to prevent
or impede the Merger from qualifying as a reorganization within the
meaning of Section 368 of the Code; or (2) take any action that is
intended or is reasonably likely to result in (A) any of its
representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time at or prior to the
Effective Time, (B) any of the conditions to the Merger set forth in
Article VII not being satisfied or (C) a material breach of any
provision of this Agreement; except, in each case, as may be required
by applicable law.
(c) Governing Documents. Amend the First Indiana Articles or the First
Indiana By-Laws in a manner that would be materially adverse to the
holders of First Indiana Common Stock.
(d) Commitments. Agree or commit to do, or enter into any Contract
regarding, anything that would be precluded by clauses (a) through (c)
without first obtaining Somerset's consent.
Article V
Representations and Warranties
5.01 Disclosure Schedules. On or prior to the date hereof, Somerset has
delivered to First Indiana and First Indiana has delivered to Somerset a
schedule (respectively, each party's "Disclosure Schedule") setting forth, among
other things, items the disclosure of which is necessary or appropriate either
(a) in response to an express disclosure requirement contained in a provision
hereof or (b) as an exception to one or more representations or warranties
contained in Section 5.03 or 5.04, respectively, or to one or more of its
covenants contained in Article IV.
5.02 Standard. No representation or warranty of Somerset or First Indiana
contained in Section 5.03 or 5.04 shall be deemed untrue or incorrect, and no
party hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, event or circumstance is not Previously Disclosed.
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5.03 Representations and Warranties of Somerset. Except as Previously Disclosed,
Somerset hereby represents and warrants to First Indiana:
(a) Organization, Standing and Authority. Somerset is duly organized,
validly existing and in good standing under the laws of the State of
Indiana, and is duly qualified to do business and is in good standing
in all the jurisdictions where its ownership or leasing of property or
assets or the conduct of its business requires it to be so qualified.
(b) Somerset Stock. As of the date hereof, the authorized capital stock
of Somerset consists solely of 4,000,000 shares of Somerset Common
Stock, of which 2,807,231 shares are outstanding as of the date hereof.
As of the date hereof, 101,984 shares of Somerset Common Stock are held
in treasury by Somerset. The outstanding shares of Somerset Common
Stock have been duly authorized and are validly issued, fully paid and
nonassessable, and subject to no preemptive rights (and were not issued
in violation of any preemptive rights). As of the date hereof, except
as Previously Disclosed, there are no shares of Somerset Common Stock
authorized and reserved for issuance, Somerset does not have any Rights
issued or outstanding with respect to Somerset Common Stock, and
Somerset does not have any commitment to authorize, issue or sell any
Somerset Common Stock or Rights, except pursuant to this Agreement. The
Disclosure Schedule sets forth the number of shares of Somerset Common
Stock which are issuable and reserved for issuance upon exercise of
Somerset Stock Options as of the date hereof and the exercise price of
such Somerset Stock Options.
(c) Subsidiaries.
(1) (A) The Disclosure Schedule sets forth all of Somerset's
Subsidiaries together with the jurisdiction of organization of
each such Subsidiary, (B) Somerset owns, directly or
indirectly, all the issued and outstanding equity securities
of each of its Subsidiaries, (C) no equity securities of any
of Somerset's Subsidiaries are or may become required to be
issued (other than to it or its Subsidiaries) by reason of any
Rights, (D) there are no contracts, commitments,
understandings or arrangements by which any of such
Subsidiaries is or may be bound to sell or otherwise transfer
any equity securities of any such Subsidiaries (other than to
it or its Subsidiaries), (E) there are no contracts,
commitments, understandings, or arrangements relating to
Somerset's rights to vote or to dispose of such securities
(other than to Somerset or its Subsidiaries), and (F) all the
equity securities of each such Subsidiary held by Somerset or
its Subsidiaries are fully paid and nonassessable and are
owned by Somerset or its Subsidiaries free and clear of any
Liens.
(2) The Disclosure Schedule describes all equity securities
and interests in a partnership or joint venture of any kind in
which Somerset owns, directly or indirectly, a beneficial
interest, and Somerset has provided to First Indiana all
material information or agreements pertaining to such
interests.
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(3) Each of Somerset's Subsidiaries has been duly organized
and is validly existing and in good standing under the laws of
the jurisdiction of its organization, and is duly qualified to
do business and in good standing in all the jurisdictions
where its ownership or leasing of property or assets or the
conduct of its business requires it to be so qualified.
(d) Corporate Power. Somerset and each of its Subsidiaries has the
requisite power and authority to carry on its business as it is now
being conducted and to own all its properties and assets, and Somerset
has the corporate power and authority to execute, deliver and perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby.
(e) Corporate Authority and Action. Somerset has the requisite
corporate power and authority, and has taken all corporate action
necessary, in order (A) to authorize the execution and delivery of, and
performance of its obligations under, this Agreement, and (B) subject
only to receipt of the approval of the plan of merger contained in this
Agreement by the holders of a majority of the outstanding shares of
Somerset Common Stock, to consummate the Merger. This Agreement and the
Ancillary Documents to which Somerset is a party each constitute and/or
will constitute the valid and legally binding obligation of Somerset,
enforceable in accordance with its terms (except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization and
similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles).
(f) Regulatory Filings; No Defaults.
(1) No consents or approvals of, or filings or registrations
with, any Governmental Authority or with any third party are
required to be made or obtained by Somerset or any of its
Subsidiaries in connection with the execution, delivery or
performance by Somerset of this Agreement, or to consummate
the Merger and the other transactions contemplated hereby,
except for (A) the filing with, and declaration of
effectiveness by, the SEC of the Registration Statement, (B)
the filing of applications and receipt of approval thereof
from the OTS with respect to the Merger, (C) the filing of
articles of merger with the Secretary of State of the State of
Indiana pursuant to the IBCL, (D) the filing of a notice with
the NASDAQ with respect to the listing for trading of the
shares of First Indiana Common Stock to be issued in the
Merger on the National Market System, and (E) such other
filings, approvals, consents or waivers as are required under
applicable law in connection with the transactions
contemplated by this Agreement. As of the date hereof,
Somerset is not aware of any reason why the approvals of all
Governmental Authorities necessary to permit consummation of
the transactions contemplated by this Agreement will not be
received without the imposition of a condition or requirement
described in Section 7.01(b).
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(2) Subject to receipt of the regulatory approvals referred to
in the preceding paragraph and the making of required filings
under federal and state securities laws, the execution,
delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby do not
and will not (A) constitute a breach or violation of, or a
default under, or give rise to any Lien, any acceleration of
remedies or any right of termination under, any law, rule or
regulation or any judgment, decree, order, governmental permit
or license, or Contract of Somerset or of any of its
Subsidiaries or to which Somerset or any of its Subsidiaries
or properties is subject or bound, (B) constitute a breach or
violation of, or a default under, the Somerset Articles or the
Somerset By-laws, or (C) require any consent or approval under
any such law, rule, regulation, judgment, decree, order,
governmental permit or license or Contract.
(g) SEC Documents; Financial Statements.
(1) Somerset's Annual Reports on Form 10-K and proxy
statements on Form 14-A for the fiscal years ended December
31,1997, 1998 and 1999, quarterly reports on Form 10-Q for the
fiscal years ended December 31, 1998 and 1999, and all other
reports, registration statements, definitive proxy statements
or information statements filed or to be filed by Somerset or
any of its Subsidiaries subsequent to December 31, 1999 under
the Securities Act, or under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act, in the form filed or to be filed
(collectively, "Somerset's SEC Documents") with the SEC, as of
the date filed, (A) complied or will comply with the
applicable requirements under the Securities Act or the
Exchange Act, as the case may be, and (B) did not (or if
amended or superseded by a filing prior to the date of this
Agreement, then as of the date of such filing) and will not
contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
each of the balance sheets contained in or incorporated by
reference into any such Somerset's SEC Document (including the
related notes and schedules thereto) fairly presents, or will
fairly present, the financial position of Somerset and its
Subsidiaries as of its date, and each of the statements of
income and changes in shareholders' equity and cash flows or
equivalent statements in such of Somerset's SEC Documents
(including any related notes and schedules thereto) fairly
presents, or will fairly present, the results of operations,
changes in shareholders' equity and changes in cash flows, as
the case may be, of Somerset and its Subsidiaries for the
periods to which they relate, in each case in accordance with
generally accepted accounting principles consistently applied
during the periods involved, except in each case as may be
noted therein, subject to normal year-end audit adjustments in
the case of unaudited statements.
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(2) Since December 31, 1999 on a consolidated basis Somerset
and its Subsidiaries have not incurred any liability other
than in the ordinary course of business consistent with past
practice.
(3) Since December 31, 1999 (A) Somerset and its Subsidiaries
have conducted their respective businesses in the ordinary and
usual course consistent with past practice and (B) no event
has occurred or circumstance arisen that, individually or
taken together with all other facts, events and circumstances
(described in any paragraph of Section 5.03 or otherwise), has
had or is reasonably likely to have a Material Adverse Effect
with respect to Somerset.
(h) Litigation. Except as disclosed in Somerset's SEC Documents filed
before the date hereof, no litigation, claim or other proceeding before
any court, arbitrator or Governmental Authority is pending against
Somerset or any of its Subsidiaries and, to Somerset's knowledge, no
such litigation, claim or other proceeding has been threatened which
would have a Material Adverse Effect with respect to Somerset.
(i) Compliance with Laws. Somerset and each of its Subsidiaries:
(1) conducts its business in compliance in all material
respects with all applicable federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees
conducting such businesses;
(2) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and
registrations with, all Governmental Authorities required in
order to permit them to own or lease their properties and to
conduct their businesses as presently conducted; all such
permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to Somerset's
knowledge, no suspension or cancellation of any of them is
threatened;
(3) has received, since December 31, 1997, no notification or
communication from any Governmental Authority (A) asserting
that Somerset or any of its Subsidiaries is not in compliance
with any of the statutes, regulations, or ordinances that such
Governmental Authority enforces or (B) threatening to revoke
any license, franchise, permit, or governmental authorization
(nor, to Somerset's knowledge, do grounds for any of the
foregoing exist), or (C) restricting or disqualifying their
activities (except for restrictions generally imposed by rule,
regulation or administrative policy on accounting
professionals generally);
(4) is not aware of any pending or threatened investigation,
review or disciplinary proceedings by any Governmental
Authority against Somerset, any of its Subsidiaries or any
officer, director or employee thereof;
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(5) is not subject to any order or decree issued by, or a
party to any agreement or memorandum of understanding with, or
a party to any commitment letter or similar undertaking to, or
subject to any order or directive by, a recipient of any
supervisory letter from or has adopted any board resolutions
at the request of any Governmental Authority, or been advised
by any Governmental Authority that it is considering issuing
or requesting any such agreement or other action or have
knowledge of any pending or threatened regulatory
investigation; and
(6) since December 31, 1996, has timely filed all reports,
registrations and statements, together with any amendments
required to be made with respect thereto, that were required
to be filed under any applicable law, regulation or rule, with
any applicable Governmental Authority (collectively, the
"Somerset Reports"). As of their respective dates, the
Somerset Reports complied in all material respects with the
applicable statutes, rules, regulations and orders enforced or
promulgated by the regulatory authority with which they were
filed.
(j) Material Contracts; Defaults. The Disclosure Schedule sets forth a
complete and accurate list of the following categories of material
Contracts to which Somerset or any of its Subsidiaries is a party:
(1) any Contract that (A) is not terminable at will both
without cost or other liability to Somerset or any of its
Subsidiaries and upon notice of ninety (90) days or less and
(B) which provides for fees or other payments by Somerset or
its Subsidiaries in excess of $30,000 per annum or in excess
of $50,000 for the remaining term of the Contract;
(2) any Contract with a term beyond the Effective Time under
which Somerset or any of its Subsidiaries created, incurred,
assumed, or guaranteed (or may create, incur, assume, or
guarantee) indebtedness for borrowed money (including
capitalized lease obligations) in an amount in excess of
$30,000;
(3) any Contract restricting the conduct of business by
Somerset or any of its Subsidiaries;
(4) any Contract to which Somerset or any of its Subsidiaries
is a party, on the one hand, and under which any affiliate,
officer, director, employee, or any person who owns more than
10% of the outstanding Somerset Common Stock or the common
stock of any of its Subsidiaries, on the other hand, is a
party or beneficiary;
(5) any Contract with respect to the employment of, or payment
to, any present or former directors, officers, employees or
consultants relating to their services as such with Somerset
or any Subsidiary; and
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(6) any Contract involving the purchase or sale of assets with
a book value greater than $50,000 entered into since December
31, 1999.
Neither Somerset nor any of its Subsidiaries nor, to Somerset's
knowledge, any other party thereto, is in default under any such
Contract and there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a default.
(k) Properties. Except as disclosed in the financial statements filed
in Somerset's SEC Documents on or before the date hereof, Somerset and
its Subsidiaries have good and marketable title, free and clear of all
Liens (other than Liens for current taxes not yet delinquent, or Liens
held by Somerset or its Subsidiaries) to all of the material properties
and assets, tangible or intangible, reflected in such financial
statements as being owned by Somerset and its Subsidiaries as of the
dates thereof. All buildings and all fixtures, equipment, and other
property and assets which are material to its business and are held
under leases or subleases by any of Somerset and its Subsidiaries are
held under valid leases or subleases enforceable in accordance with
their respective terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights generally and to general equity
principles).
(l) Employee Benefit Plans.
(1) Somerset's Disclosure Schedule contains a complete list of
all bonus, vacation, deferred compensation, commission-based
compensation, pension, retirement, profit- sharing, thrift,
savings, employee stock ownership, stock bonus, stock
purchase, restricted stock, stock appreciation and stock
option plans, all employment or severance contracts, all
medical, dental, disability, severance, health and life
insurance plans, all other employee benefit and fringe benefit
plans, contracts or arrangements and any "change of control"
or similar provisions in any plan, contract or arrangement
maintained or contributed to by Somerset or any of its
Subsidiaries for the benefit of current or former officers,
employees or directors or the beneficiaries or dependents of
any of the foregoing (collectively, Somerset's "Compensation
Plans").
(2) With respect to each Compensation Plan, if applicable,
Somerset has provided or made available to First Indiana, true
and complete copies of existing: (A) Compensation Plan
documents and amendments thereto; (B) trust instruments and
insurance contracts; (C) the most recent Form 5500 filed with
the IRS; (D) the most recent actuarial report and financial
statement; (E) the most recent summary plan description; (F)
forms filed with the PBGC (other than for premium payments);
(G) the most recent determination letter issued by the IRS;
and (H) any Form 5310 or Form 5330 filed with the IRS. Each
Form 5500, actuarial report and financial statement referred
to in the preceding sentence accurately reflects the
contributions, liabilities and funding levels of the
applicable Compensation Plan.
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(3) Each of the Compensation Plans has been administered and
operated in all material respects in accordance with the terms
thereof and with applicable law, including ERISA, the Code and
the Securities Act. Neither Somerset, any of its Subsidiaries
nor any other person for whom indemnification by Somerset or
any of its Subsidiaries could apply ("Indemnified Person") has
incurred or is likely to incur fiduciary liability under Part
4 of Title I of ERISA with respect to any Compensation Plan.
Each of the Compensation Plans which is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA
("Pension Plan") and which is intended to be qualified under
Section 401(a) of the Code has received a favorable
determination letter from the IRS with respect to "TRA" (as
defined in Section 1 of IRS Revenue Procedure 93-39), and,
except as Previously Disclosed, Somerset is not aware of any
circumstances that would likely result in the revocation or
denial of any such favorable determination letter. None of
Somerset, any of its Subsidiaries or an Indemnified Person has
engaged in any transaction or taken any action with respect to
any Compensation Plan that has subjected, or could, to
Somerset's knowledge, subject Somerset or any of its
Subsidiaries or any Indemnified Person to a tax or penalty
imposed by either Section 4975 of the Code or Section 502 of
ERISA. There is no pending or, to Somerset's knowledge,
threatened litigation or governmental audit, examination or
investigation relating to Somerset's Compensation Plans.
(4) No liability under Title IV of ERISA (other than premiums
to the PBGC) has been or is reasonably expected to be incurred
by Somerset or any of its Subsidiaries with respect to any
"single-employer plan" (within the meaning of Section
4001(a)(15) of ERISA) or Multiemployer Plan currently or
formerly maintained or contributed to by any of them, or the
single-employer plan or Multiemployer Plan of any entity (an
"ERISA Affiliate") which is considered one employer with
Somerset under Section 4001(a)(14) of ERISA or Section 414(b)
or (c) of the Code (an "ERISA Affiliate Plan"). No notice of a
"reportable event," within the meaning of Section 4043 of
ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Pension Plan or
any ERISA Affiliate within the 12-month period ending on the
date hereof. The PBGC has not instituted proceedings to
terminate any Pension Plan or ERISA Affiliate Plan and, to
Somerset's knowledge, no condition exists that presents a
material risk that such proceedings will be instituted. To the
knowledge of Somerset, there is no pending investigation or
enforcement action by the PBGC, the DOL or IRS or any other
governmental agency with respect to any Compensation Plan.
(5) All contributions, premiums and payments required to have
been made under the terms of any of the Compensation Plans or
applicable law have been timely made or reflected in
Somerset's SEC Documents and made in accordance with generally
accepted accounting principles. Neither any of the Pension
Plans nor ERISA Affiliate Plans has an "accumulated funding
deficiency" (whether or not waived) within the
-24-
meaning of Section 412 of the Code or Section 302 of ERISA.
None of Somerset, any of its Subsidiaries or any ERISA
Affiliate has provided, or is required to provide, security
to, nor are there any circumstances requiring, or which can
reasonably be expected to result in, the imposition of any
lien on the assets of Somerset or any of its Subsidiaries with
respect to, any Pension Plan or any ERISA Affiliate Plan
pursuant to Section 401(a)(29) or Section 412(n) of the Code
or pursuant to ERISA.
(6) To Somerset's knowledge, under each Pension Plan, as of
the last day of the most recent plan year ended prior to the
date hereof, the actuarially determined present value of all
"benefit liabilities" attributable to the participant therein
of Somerset and its Subsidiaries did not exceed the then
current value of the assets of such plan attributable to the
participation therein of Somerset and its Subsidiaries. For
this purpose, "benefit liabilities" shall be determined in
accordance with Section 4001(a)(16) of ERISA on the basis of
the actuarial assumptions contained in the Plan's most recent
actuarial valuation.
(7) Except as set forth in Somerset's Disclosure Schedule or
as required by COBRA, no Compensation Plan provides benefits,
including death or medical benefits, with respect to any
employees or former employees of Somerset or any of its
Subsidiaries (or their spouses, beneficiaries, or dependents)
beyond the retirement or other termination of service of any
such employee. There has been no communication to employees,
former employees or their spouses, beneficiaries or dependents
by Somerset or any of its Subsidiaries that promised or
guaranteed such employees retiree health or life insurance or
other retiree death benefits on a permanent basis or promised
or guaranteed that any such benefits could not be modified,
eliminated or terminated.
(8) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby
including, without limitation, as a result of any termination
of employment prior to, at or following the Effective Time,
will (A) result in any increase in compensation or any payment
(including, without limitation, severance, golden parachute or
otherwise) becoming due to any current or former director,
officer or employee of Somerset or any of its Subsidiaries
under any Compensation Plan or otherwise from Somerset or any
of its Subsidiaries, (B) increase any benefits otherwise
payable under any Compensation Plan, or (C) result in any
acceleration of the time of payment, funding or vesting of any
such benefit.
(9) Neither Somerset nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments
under which are not or would not reasonably be expected to be
deductible as a result of the limitations under Section 162(m)
of the Code and the regulations issued thereunder. None of
Somerset, the Surviving Corporation or any of their respective
Subsidiaries will be obligated to make a payment as a result,
directly or indirectly, of the transactions contemplated by
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this Agreement that would not reasonably be expected to be
deductible as a result of the limitations under Section 162(m)
of the Code and the regulations issued thereunder.
(10) As a result, directly or indirectly, of the transactions
contemplated by this Agreement (including, without limitation,
as a result of any termination of employment prior to, at or
following the Effective Time), neither Somerset nor the
Surviving Corporation, or any of their respective Subsidiaries
will be obligated to make a payment that would be
characterized as an "excess parachute payment" to an
individual who is a "disqualified individual" (as such terms
are defined in Section 280G of the Code)in respect of
Somerset, without regard to whether such payment is reasonable
compensation for personal services performed or to be
performed in the future.
(m) Labor Matters. Neither Somerset nor any of its Subsidiaries is a
party to or is bound by any collective bargaining Contract or
understanding with a labor union or labor organization, nor is Somerset
or any of its Subsidiaries the subject of a proceeding asserting that
it or any such Subsidiary has committed an unfair labor practice
(within the meaning of the National Labor Relations Act) or seeking to
compel Somerset or any such Subsidiary to bargain with any labor
organization as to wages or conditions of employment, nor is there any
strike or other labor dispute involving it or any of its Subsidiaries
pending or, to Somerset's knowledge, threatened, nor is Somerset aware
of any activity involving it or any of its Subsidiaries' employees
seeking to certify a collective bargaining unit or engaging in other
organizational activity.
(n) Environmental Matters. (1) To Somerset's knowledge, Somerset and
each of its Subsidiaries has complied in all material respects at all
times with applicable Environmental Laws; (2) to Somerset's knowledge,
no property (including buildings and any other structures) currently or
formerly owned or operated by Somerset or any of its Subsidiaries has
been contaminated with, or has had any release of, any Hazardous
Substance except as Previously Disclosed; (3) to Somerset's knowledge,
neither Somerset nor any of its Subsidiaries would reasonably be
expected to be ruled to be the owner or operator under any
Environmental Law of any property in which it has currently or formerly
held a Lien; (4) to Somerset's knowledge, neither Somerset nor any of
its Subsidiaries is subject to liability for any Hazardous Substance
disposal or contamination on any other third-party property; (5)
neither Somerset nor any of its Subsidiaries has received any notice,
demand letter, claim or request for information alleging any violation
of, or liability under, any Environmental Law; (6) neither Somerset nor
any of its Subsidiaries is subject to any order, decree, injunction or
other agreement with any Governmental Authority or any third party
relating to any Environmental Law; (7) to Somerset's knowledge, there
are no circumstances or conditions involving Somerset or any of its
Subsidiaries or any currently or formerly owned or operated property
(including the presence of asbestos, underground storage tanks, lead
products, polychlorinated biphenyls or gas station sites) that could
result in any claims, liability or
-26-
investigations or result in any restrictions on the ownership, use, or
transfer of any property pursuant to any Environmental Law; and (8)
Somerset has delivered to First Indiana copies of all environmental
reports, studies, sampling data, correspondence, filings and other
environmental information in its possession or reasonably available to
it relating to Somerset, any of its Subsidiaries, any currently or
formerly owned or operated property or any property in which Somerset
or any of its Subsidiaries has held a Lien.
(o) Tax Matters. (1) All returns, declarations, reports, estimates,
information returns and statements required to be filed on or before
the Effective Date under federal, state, local or any foreign tax laws
("Tax Returns") with respect to Somerset or any of its Subsidiaries,
have been or will be timely filed, or requests for extensions have been
timely filed and have not expired; (2) all Tax Returns filed by
Somerset and its Subsidiaries are complete and accurate in all material
respects; (3) all Taxes shown to be due and payable (without regard to
whether such Taxes have been assessed) on such Tax Returns (or, with
respect to Tax Returns for which an extension has been timely filed,
will be required to be shown as due and payable when such Tax Returns
are filed) have been paid or adequate reserves have been established
for the payment of such Taxes; (4) no audit or examination or refund
litigation with respect to any such Tax Return is pending or, to
Somerset's knowledge, has been threatened; (5) all deficiencies
asserted or assessments made as a result of any examination of a Tax
Return of Somerset or any of its Subsidiaries have been paid in full;
(6) no waivers of statutes of limitation have been given by or
requested with respect to any Taxes of Somerset or its Subsidiaries;
(7) Somerset and its Subsidiaries have never been a member of an
affiliated, combined, consolidated or unitary Tax group for purposes of
filing any Tax Return (other than a consolidated group of which
Somerset was the common parent); (8) no closing agreements, private
letter rulings, technical advice memoranda or similar agreement or
rulings have been entered into or issued by any taxing authority with
respect to Somerset or any of its Subsidiaries; (9) no tax is required
to be withheld pursuant to Section 1445 of the Code as a result of the
transfer contemplated by this Agreement; (10) Somerset and its
Subsidiaries are not bound by any tax indemnity, tax sharing or tax
allocation agreement or arrangement; and (11) Somerset and its
Subsidiaries have withheld and paid all Taxes that they are required to
withhold from compensation income of their employees.
(p) Risk Management. All swaps, caps, floors, option agreements,
futures and forward contracts and other similar risk management
arrangements, whether entered into for Somerset's own account, or for
the account of one or more of Somerset's Subsidiaries or their
customers, were entered into (1) in accordance with prudent business
practices and all applicable laws, rules, regulations and regulatory
policies and (2) with counterparties believed to be financially
responsible at the time; and each of them constitutes the valid and
legally binding obligation of Somerset or one of its Subsidiaries,
enforceable in accordance with its terms (except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general
equity principles), and are in full force and effect. Neither Somerset
nor its Subsidiaries, nor to Somerset's knowledge any other
-27-
party thereto, is in breach of any of its material obligations under
any such agreement or arrangement.
(q) Books and Records. The books and records of Somerset and its
Subsidiaries have been fully, properly and accurately maintained in all
material respects, and there are no material inaccuracies or
discrepancies of any kind contained or reflected therein, and they
fairly present the financial position of Somerset and its Subsidiaries.
(r) Insurance. Somerset's Disclosure Schedule sets forth all of the
insurance policies, binders, or bonds maintained by Somerset or its
Subsidiaries ("Insurance Policies"). Somerset and its Subsidiaries are
insured with reputable insurers against such risks and in such amounts
as is prudent in accordance with industry practices. All of the
Insurance Policies are in full force and effect; Somerset and its
Subsidiaries are not in material default thereunder; and all claims
thereunder have been filed in due and timely fashion.
(s) No Brokers. No action has been taken by Somerset that would give
rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the
transactions contemplated by this Agreement, excluding a fee to be paid
by Somerset to McDonald in an amount and on terms Previously Disclosed.
(t) Disclosure. The information Previously Disclosed or otherwise
provided to First Indiana in connection with this Agreement does not
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements contained
therein, in the light of the circumstances in which they are being
made, not misleading. The copies of all documents furnished to First
Indiana hereunder are true and complete.
5.04 Representations and Warranties of First Indiana. Except as Previously
Disclosed in a paragraph of its Disclosure Schedule corresponding to the
relevant paragraph below, First Indiana hereby represents and warrants to
Somerset as follows:
(a) Organization, Standing and Authority. First Indiana is duly
organized, validly existing and in good standing under the laws of the
State of Indiana, and is duly qualified to do business and is in good
standing in the jurisdictions where its ownership or leasing of
property or assets or the conduct of its business requires it to be so
qualified.
(b) First Indiana Stock.
(1) As of the date hereof, the authorized capital stock of
First Indiana consists solely of 33,000,000 shares of First
Indiana Common Stock, of which 12,625,856 shares are
outstanding, and 2,000,000 shares of First Indiana Preferred
Stock, of which no shares are outstanding as of the date
hereof. As of the date hereof, except as Previously Disclosed,
there are no shares of First Indiana Common Stock authorized
and reserved for issuance, First Indiana does not have any
Rights issued
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or outstanding with respect to First Indiana Common Stock, and
First Indiana does not have any commitment to authorize, issue
or sell any First Indiana Common Stock or Rights, except
pursuant to this Agreement. The number of shares of First
Indiana Common Stock which are issuable and reserved for
issuance upon exercise of First Indiana Stock Options as of
the date hereof and the exercise price of such First Indiana
Stock Options are Previously Disclosed.
(2) The shares of First Indiana Common Stock to be issued as
Consideration, when issued in accordance with the terms of
this Agreement, will be duly authorized, validly issued, fully
paid and nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof.
(c) Subsidiaries. Each of First Indiana's Subsidiaries has been duly
organized and is validly existing and in good standing under the laws
of the jurisdiction of its organization, and is duly qualified to do
business and in good standing in the jurisdictions where its ownership
or leasing of property or the conduct of its business requires it to be
so qualified.
(d) Corporate Power. First Indiana and each of its Subsidiaries has the
requisite power and authority to carry on its business as it is now
being conducted and to own all its properties and assets; First Indiana
has the corporate power and authority to execute, deliver and perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby; and as of the Closing Date Financial Services will
have the requisite power and authority to execute, perform and deliver
its obligations and to consummate the transactions contemplated hereby.
(e) Corporate Authority and Action. First Indiana has the requisite
corporate power and authority, and has taken all corporate action
necessary, in order (A) to authorize the execution and delivery of, and
performance of its obligations under, this Agreement, and (B) subject
only to (i) receipt of the approval by the holders of a majority of the
outstanding shares of First Indiana Common Stock of the plan of merger
contained in this Agreement and (ii) the registration and issuance of
the First Indiana Common Stock to be provided as part of the
Consideration, to consummate the Merger. This Agreement and the
Ancillary Documents to which First Indiana and/or Financial Services is
a party each constitute and/or will constitute the valid and legally
binding obligation thereof, enforceable in accordance with its terms
(except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization and similar laws of general applicability
relating to or affecting creditors' rights or by general equity
principles).
(f) Regulatory Approvals; No Defaults.
(1) No consents or approvals of, or filings or registrations
with, any Governmental Authority or with any third party are
required to be made or obtained by First Indiana or any of its
Subsidiaries in connection with the execution, delivery
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or performance by First Indiana or Financial Services of this
Agreement, or to consummate the Merger and the other
transactions contemplated hereby, except for (A) the filing
with, and declaration of effectiveness by, the SEC of the
Registration Statement, (B) the filing of applications with
and receipt of approval thereof from the OTS, with respect to
the Merger, (C) the filing of articles of merger with the
Secretary of State of the State of Indiana pursuant to the
IBCL, (D) the filing of a notice with the NASDAQ with respect
to the listing for trading of the shares of First Indiana
Common Stock to be issued in the Merger on the National Market
System, and (E) such other filings, approvals, consents or
waivers as are required under applicable law in connection
with the transactions contemplated by this Agreement. As of
the date hereof, First Indiana is not aware of any reason why
the approvals of all Governmental Authorities necessary to
permit consummation of the transactions contemplated by this
Agreement will not be received without the imposition of a
condition or requirement described in Section 7.01(b).
(2) Subject to receipt of the regulatory approvals referred to
in the preceding paragraph and the making of required filings
under federal and state securities laws, the execution,
delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby do not
and will not (A) constitute a breach or violation of, or a
default under, or give rise to any Lien, any acceleration of
remedies or any right of termination under, any law, rule or
regulation or any judgment, decree, order, governmental permit
or license, or Contract of First Indiana or of any of its
Subsidiaries or to which First Indiana or any of its
Subsidiaries or properties is subject or bound, (B) constitute
a breach or violation of, or a default under, the First
Indiana Articles or the First Indiana By-laws, or as of the
Closing Date, constitute a breach or violation of, or a
default under, the Financial Services Articles or the
Financial Services By-laws, or (C) require any consent or
approval under any such law, rule, regulation, judgment,
decree, order, governmental permit or license or Contract.
(g) SEC Documents; Financial Statements.
(1) First Indiana's Annual Reports on Form 10-K and proxy
statements on Form 14-A for the fiscal years ended December
31, 1997, 1998 and 1999, quarterly reports on Form 10-Q filed
during the fiscal year ended December 31, 1999, and all other
reports, registration statements, definitive proxy statements
or information statements filed or to be filed by First
Indiana or any of its Subsidiaries subsequent to December 31,
1999 under the Securities Act, or under Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act, in the form filed or to be
filed (collectively, the "First Indiana's SEC Documents") with
the SEC, as of the date filed, (A) complied or will comply
with the applicable requirements under the Securities Act or
the Exchange Act, as the case may be, and (B) did not (or if
amended or superseded by a filing prior to the date of this
Agreement, then as of the date of such filing) and will not
contain any untrue statement of a material fact or omit to
state a material fact required to be stated
-30-
therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; and each of the balance sheets contained in or
incorporated by reference into any such First Indiana SEC
Document (including the related notes and schedules thereto)
fairly presents, or will fairly present, the financial
position of First Indiana and its Subsidiaries as of its date,
and each of the statements of income and changes in
shareholders' equity and cash flows or equivalent statements
in such of First Indiana's SEC Documents (including any
related notes and schedules thereto) fairly presents, or will
fairly present, the results of operations, changes in
shareholders' equity and changes in cash flows, as the case
may be, of First Indiana and its Subsidiaries for the periods
to which they relate, in each case in accordance with
generally accepted accounting principles consistently applied
during the periods involved, except in each case as may be
noted therein, subject to normal year-end audit adjustments in
the case of unaudited statements.
(2) Since December 31, 1999 on a consolidated basis First
Indiana and its Subsidiaries have not incurred any liability
other than in the ordinary course of business consistent with
past practice.
(3) Since December 31, 1999 (A) First Indiana and its
Subsidiaries have conducted their respective businesses in the
ordinary and usual course consistent with past practice and
(B) no event has occurred or circumstance arisen that,
individually or taken together with all other facts, events
and circumstances (described in any paragraph of Section 5.04
or otherwise), has had or is reasonably likely to have a
Material Adverse Effect with respect to First Indiana.
(h) Litigation. Except as disclosed in First Indiana's SEC Documents
filed before the date hereof, no litigation, claim or other proceeding
before any court, arbitrator or Governmental Authority is pending
against First Indiana or any of its Subsidiaries and, to First
Indiana's knowledge, no such litigation, claim or other proceeding has
been threatened.
(i) Compliance with Laws. First Indiana and each of its Subsidiaries:
(1) conducts its business in compliance with all applicable
federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable
thereto or to the employees conducting such businesses,
including, without limitation, the Equal Credit Opportunity
Act, the Fair Housing Act, the Community Reinvestment Act, the
Home Mortgage Disclosure Act and all other applicable fair
lending laws and other laws relating to discriminatory
business practices;
(2) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and
registrations with, all Governmental Authorities that are
required in order to permit them to conduct their businesses
substantially as presently conducted; all such permits,
licenses, certificates of authority, orders and approvals
-31-
are in full force and effect and, to the best of its
knowledge, no suspension or cancellation of any of them is
threatened;
(3) has received, since December 31, 1997 no notification or
communication from any Governmental Authority (A) asserting
that First Indiana or any of its Subsidiaries is not in
compliance with any of the statutes, regulations or ordinances
that such Governmental Authority enforces; (B) threatening to
revoke any license, franchise, permit or governmental
authorization (nor, to First Indiana's knowledge, do any
grounds for any of the foregoing exist) or (C) restricting or
disqualifying their activities (except for restrictions
generally imposed by rule, regulation or administrative policy
on banking organizations generally); and
(4) is not subject to any order or decree issued by, or a
party to any agreement or memorandum of understanding with, or
a party to any commitment letter or similar undertaking to, or
subject to any order or directive by, a recipient of any
supervisory letter from or has adopted any board resolutions
at the request of any Governmental Authority, or been advised
by any Governmental Authority that it is considering issuing
or requesting any such agreement or other action or have
knowledge of any pending or threatened regulatory
investigation.
(j) No Brokers. No action has been taken by First Indiana that would
give rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the
transactions contemplated by this Agreement, excluding a fee to be paid
by First Indiana to KBW.
(k) Disclosure. The information Previously Disclosed or otherwise
provided to Somerset in connection with this Agreement does not contain
any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements contained therein, in
the light of the circumstances in which they are being made, not
misleading. The copies of all documents furnished to Somerset hereunder
are true and complete.
Article VI
Covenants
6.01 Reasonable Best Efforts. Subject to the terms and conditions of this
Agreement, each of Somerset and First Indiana agrees to use its reasonable best
efforts in good faith to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or desirable, or advisable under
applicable laws, so as to permit consummation of the Merger as promptly as
practicable and otherwise to enable consummation of the transactions
contemplated hereby and shall cooperate fully with the other party hereto to
that end.
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6.02 Shareholder Approvals. Each of Somerset and First Indiana agrees to take,
in accordance with applicable law, applicable stock exchange rules, and their
respective articles of incorporation and by-laws, all action necessary to
convene appropriate meetings of their shareholders to consider and vote upon the
approval and adoption of this Agreement and the consummation of the actions and
transactions contemplated hereby, and to solicit shareholder approval and
adoption, as promptly as practicable after the Registration Statement is
declared effective. The Somerset Board and the First Indiana Board each is
recommending and, unless either board of directors, after having consulted with
and considered the advice of outside counsel and its investment banking firm,
has determined in good faith that to do so would result in a failure by the
directors to discharge properly their fiduciary duties in accordance with
Indiana law, the Somerset Board and First Indiana Board will continue to
recommend to the shareholders of Somerset and First Indiana, respectively, that
they approve this Agreement and take any other action required to permit
consummation of the transactions contemplated hereby. First Indiana agrees to
take all action necessary to cause the Board of Directors of Financial Services
to approve and have executed the Financial Services Merger Agreement, and First
Indiana agrees to approve such agreement and the transactions contemplated
thereby in its capacity as sole shareholder of Financial Services.
6.03 Registration Statement.
(a) First Indiana agrees to prepare a registration statement on Form
S-4 (the "Registration Statement"), to be filed by First Indiana with
the SEC in connection with the issuance of First Indiana Common Stock
in the Merger (including the proxy statement and prospectus and other
proxy solicitation materials of First Indiana and Somerset constituting
a part thereof (the "Proxy Statements") and all related documents).
Somerset agrees to cooperate, and to cause its Subsidiaries to
cooperate, with First Indiana, its counsel and its accountants, in
preparation of the Registration Statement and the Proxy Statements;
and, provided that Somerset and its Subsidiaries have cooperated as
required above, First Indiana agrees to file the Registration Statement
with the SEC as promptly as reasonably practicable after the date
hereof. Each of Somerset and First Indiana agrees to use its reasonable
best efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as reasonably
practicable after filing thereof. First Indiana also agrees to use all
reasonable best efforts to obtain all necessary state securities law or
"Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement. Somerset agrees to furnish to First
Indiana all information concerning Somerset, its Subsidiaries,
officers, directors and shareholders as may be reasonably requested in
connection with the foregoing.
(b) Each of Somerset and First Indiana agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied
by it for inclusion or incorporation by reference in (1) the
Registration Statement will, at the time the Registration Statement and
each amendment or supplement thereto, if any, becomes effective under
the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and (2) the
Proxy Statements and any amendment or supplement thereto will, at the
date of mailing to
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shareholders and at the time of the shareholders meetings for the
respective corporations, contain any untrue statement which, at the
time and in the light of the circumstances under which such statement
is made, is false or misleading with respect to any material fact, or
omit to state any material fact necessary in order to make the
statements therein not false or misleading or necessary to correct any
statement in any earlier statement in the Proxy Statement or any
amendment or supplement thereto. Each of Somerset and First Indiana
further agrees that if it shall become aware prior to the Effective
Date of any information furnished by it that would cause any of the
statements in the Proxy Statement to be false or misleading with
respect to any material fact, or to omit to state any material fact
necessary to make the statements therein not false or misleading, to
promptly inform the other party thereof and to take the necessary steps
to correct the Proxy Statements.
(c) First Indiana agrees to advise Somerset, promptly after First
Indiana receives notice thereof, of the time when the Registration
Statement has become effective or any supplement or amendment has been
filed, of the issuance of any stop order or the suspension of the
qualification of First Indiana Common Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any
such purpose, or of any request by the SEC for the amendment or
supplement of the Registration Statement or for additional information.
6.04 Press Releases. Each of Somerset and First Indiana agrees that it will not,
without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby (except for any release or statement that, in the written
opinion of outside counsel to such party, is required by law or regulation and
as to which such party has used its best efforts to discuss with the other party
in advance, provided that such release or statement has not been caused by, or
is not the result of, a previous disclosure by or at the direction of such party
or any of its representatives that was not permitted by this Agreement).
6.05 Access; Information.
(a) Each of Somerset and First Indiana agrees that upon reasonable
notice and subject to applicable laws relating to the exchange of
information, it shall afford the other party and the other party's
officers, employees, counsel, accountants and other authorized
representatives, such access during normal business hours throughout
the period prior to the Effective Time to the books, records
(including, without limitation, tax returns and work papers of
independent auditors), properties, personnel and to such other
information as any party may reasonably request and, during such
period, it shall furnish promptly to such other party (1) a copy of
each material report, schedule and other document filed by it pursuant
to the requirements of federal or state securities or banking laws, and
(2) all other information concerning the business, properties and
personnel of it as the other may reasonably request.
(b) Each of Somerset and First Indiana agrees that it will not, and
will cause its representatives not to, use any information obtained
pursuant to this Section 6.05 for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement.
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Subject to the requirements of law, each party will keep confidential,
and will cause its representatives to keep confidential, all
information and documents obtained pursuant to this Section 6.05 in
accordance with that certain Confidentiality Agreement dated as of
January 7, 2000 by and between First Indiana and Somerset. In the event
that this Agreement is terminated or the transactions contemplated by
this Agreement shall otherwise fail to be consummated, each party shall
promptly cause all copies of documents or extracts thereof containing
information and data as to another party hereto to be returned to the
party which furnished the same.
(c) No investigation by either party of the business and affairs of the
other shall affect or be deemed to modify or waive any representation,
warranty, covenant or agreement in this Agreement, or the conditions to
either party's obligation to consummate the transactions contemplated
by this Agreement.
6.06 Acquisition Proposals. Somerset agrees that it shall not, and shall cause
its Subsidiaries and its and its Subsidiaries' officers, directors, agents,
advisors and affiliates not to, solicit or encourage inquiries or proposals with
respect to, or engage in any negotiations concerning, or provide any
confidential information to, or have any discussions with, any person relating
to, any tender or exchange offer, proposal for a merger, consolidation or other
business combination involving Somerset or any of its Subsidiaries or any
proposal or offer to acquire in any manner a substantial equity interest in, or
a substantial portion of the assets or deposits of, Somerset or any of its
Subsidiaries, other than the transactions contemplated by this Agreement (any of
the foregoing, an "Acquisition Proposal"); provided however, that if Somerset is
not otherwise in violation of this Section 6.06, the Somerset Board may provide
information to, and may engage in such negotiations or discussions with, a
person with respect to an Acquisition Proposal, directly or through
representatives, if the Somerset Board, after consultation with its outside
counsel and McDonald, determines in good faith that its failure to engage in any
such negotiations or discussions would constitute a failure to discharge
properly the fiduciary duties of such directors in accordance with Indiana law.
Somerset shall promptly (within 24 hours) advise First Indiana following the
receipt by it of any Acquisition Proposal and the substance thereof (including
the identity of the person making such Acquisition Proposal and a copy of such
Acquisition Proposal), and advise First Indiana of any developments with respect
to such Acquisition Proposal immediately upon the occurrence thereof.
6.07 Affiliate Agreements. Not later than the 15th day prior to the mailing of
the Proxy Statements, Somerset shall deliver to First Indiana a schedule of each
person that, to Somerset's knowledge, is or is reasonably likely to be, as of
the date of the Somerset shareholders' meeting, deemed to be an "affiliate" of
it (each, a "Somerset Affiliate") as that term is used in Rule 145 under the
Securities Act. Somerset agrees to use its reasonable best efforts to cause each
person who may be deemed to be a Somerset Affiliate to execute and deliver to
Somerset and First Indiana on or before the date of mailing of the Proxy
Statement an agreement in the form attached hereto as Exhibit B.
6.08 NASDAQ Listing. First Indiana agrees to use its best efforts to list, prior
to the Effective Date, on the National Market System of NASDAQ, subject to
official notice of issuance, the shares
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of First Indiana Common Stock to be issued to the holders of Somerset Common
Stock in the Merger.
6.09 Regulatory Applications.
(a) First Indiana and Somerset and their respective Subsidiaries shall
cooperate and use their respective reasonable best efforts to prepare
all documentation, to effect all filings and to obtain all permits,
consents, approvals and authorizations of all third parties and
Governmental Authorities necessary to consummate the transactions
contemplated by this Agreement. Each of First Indiana and Somerset
agrees that it will consult with the other party hereto with respect to
the obtaining of all material permits, consents, approvals and
authorizations of all third parties and Governmental Authorities
necessary or advisable to consummate the transactions contemplated by
this Agreement and each party will keep the other party appraised of
the status of material matters relating to completion of the
transactions contemplated hereby. Copies of applications and
correspondence with such Governmental Authorities promptly shall be
provided to the other party.
(b) Each of First Indiana and Somerset agrees, upon request, to furnish
the other party with all information concerning itself, its
Subsidiaries, directors, officers and shareholders and such other
matters as may be reasonably necessary or advisable in connection with
any filing, notice or application made by or on behalf of such other
party or any of its Subsidiaries to any third party or Governmental
Authority.
6.10 D & O Indemnification and Insurance.
(a) For a period of two years from the Effective Time, First Indiana
shall use its reasonable best efforts obtain an endorsement to its
directors' and officers' liability insurance policy to cover the
present and former officers and directors of Somerset or any of its
Subsidiaries (determined as of the Effective Time) with respect to
claims against such directors and officers arising from facts or events
which occurred before the Effective Time, which insurance shall contain
at least the same coverage and amounts, and contain terms and
conditions no less advantageous, as that coverage currently provided by
Somerset; provided however, that if First Indiana is unable to obtain
such endorsement, then First Indiana may purchase run-off coverage
under Somerset's existing directors' and officers' liability insurance
policy for such claims; provided further, that in no event shall First
Indiana be required to expend each year during such two-year period
more than one and one-half times the current annual amount spent by
Somerset (the "Insurance Amount") to maintain or procure its current
directors' and officers' liability insurance coverage; provided
further, that if First Indiana is unable to maintain or obtain the
insurance called for by this Section 6.10(a), First Indiana shall use
its reasonable best efforts to obtain as much comparable insurance as
is available for the Insurance Amount; provided, further, that officers
and directors of Somerset or any Subsidiary may be required to make
application and provide customary representations and warranties to
First Indiana's insurance carrier for the purpose of obtaining such
insurance.
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(b) For six years after the Effective Time, the Surviving Corporation
shall indemnify, defend and hold harmless the present and former
officers and directors of Somerset and its Subsidiaries against all
losses, expenses (including attorneys' fees), claims, damages or
liabilities arising out of actions or omissions occurring on or prior
to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement) to the full extent then permitted under
the IBCL and by First Indiana's Articles of Incorporation as in effect
on the date hereof, including provisions relating to advances of
expenses incurred in the defense of any action or suit.
(c) If First Indiana shall consolidate with or merge into any other
entity and shall not be the continuing or surviving entity of such
consolidation or merger or shall transfer all or substantially all of
its assets to any entity, then and in each case, proper provision shall
be made so that the successors and assigns of First Indiana shall
assume the obligations set forth in this Section 6.10.
6.11 Accountants' Letters. Each of Somerset and First Indiana shall use its
reasonable best efforts to cause to be delivered to the other party, and such
other party's directors and officers who sign the Registration Statement, with
the consent of KPMG, LLP, independent auditors, letters of KPMG, LLP dated (a)
the date on which the Registration Statement shall become effective and (b) a
date shortly prior to the Effective Date, and addressed to such other party, and
such directors and officers, in form and substance customary for "comfort"
letters delivered by independent accountants in accordance with Statement of
Accounting Standards No. 72.
6.12 Notification of Certain Matters. Each of Somerset and First Indiana shall
give prompt notice to the other of any fact, event or circumstance known to it
that (a) is reasonably likely, individually or taken together with all other
facts, events and circumstances known to it, to result in any Material Adverse
Effect with respect to it or (b) would cause or constitute a material breach of
any of its representations, warranties, covenants or agreements contained
herein.
6.13 Employee Matters. First Indiana agrees that those employees of Somerset or
its Subsidiaries who become employees of First Indiana or its Subsidiaries on
the Effective Date ("Former Somerset Employees"), while they remain employees of
First Indiana or its Subsidiaries after the Effective Date will be provided with
benefits under employee benefit plans during their period of employment which
are no less favorable in the aggregate than those provided by First Indiana to
similarly situated employees of First Indiana and its Subsidiaries or to those
currently provided by Somerset. At the Effective Time, First Indiana will amend
or cause to be amended each employee benefit plan of First Indiana and its
Subsidiaries in which Former Somerset Employees are eligible to participate, to
the extent necessary, so that as of the Effective time (i) such plans take into
account for purposes of eligibility, vesting and benefit accrual, the service of
such employees with Somerset and its Subsidiaries as if such service were with
First Indiana and its Subsidiaries, to the same extent that such service was
credited under a comparable plan of Somerset and its Subsidiaries, (ii) Former
Somerset Employees and their dependents who were covered immediately prior to
the Effective Time
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under any medical benefit plan of Somerset are not subject to any waiting
periods or pre-existing condition limitations under the comparable medical
benefit plans of First Indiana or its Subsidiaries in which they are eligible to
participate (other than waiting periods and pre-existing condition limitations
no longer or more limiting than those to which they were subject under such
medical benefit plan of Somerset) and may commence participation in such plans
on the Effective Date, (iii) Former Somerset Employees will retain credit for
unused sick leave and vacation pay which has been accrued as of the Effective
Time, and (iv) for purposes of determining the entitlement of Former Somerset
Employees to sick leave and vacation pay following the Effective Time, the
service of such employees with Somerset and its Subsidiaries shall be treated as
if such service were with First Indiana and its Subsidiaries. Notwithstanding
the foregoing, it is contemplated that Financial Services will not adopt and
maintain for its employees the qualified defined benefit pension plan currently
maintained by First Indiana and its other Subsidiaries for their respective
employees. Further, it is contemplated that Financial Services may cover its
employees under the 401(k) and medical benefit plans now maintained by Somerset
rather than under the 401(k) and medical benefit plans now maintained by First
Indiana and its other Subsidiaries and that such 401(k) plan of Somerset will
continue to be in effect until at least January 1, 2001. It is also contemplated
that Financial Services may cover its employees under the employee stock
purchase plan now maintained by Somerset and that such plan will continue to be
in effect until at least January 1, 2001, except that such plan would relate to
First Indiana Common Stock instead of Somerset Common Stock. Financial Services
will honor the employment agreements of Somerset which have been disclosed to
First Indiana in the Disclosure Schedule of Somerset.
Article VII
Conditions to Consummation of the Merger
7.01 Conditions to Each Party's Obligation to Effect the Merger. The respective
obligation of each of First Indiana and Somerset to consummate the Merger is
subject to the fulfillment or written waiver by First Indiana and Somerset prior
to the Effective Time of each of the following conditions:
(a) Shareholder Approval. This Agreement and the actions and
transactions contemplated hereby shall have been duly adopted by the
affirmative vote of the holders of the requisite number of the
outstanding shares of Somerset Common Stock and First Indiana Common
Stock entitled to vote thereon in accordance with applicable law, the
Somerset Articles and the Somerset By-laws, and the First Indiana
Articles and First Indiana By-Laws, as applicable and the actions and
transactions contemplated by this Agreement shall have been adopted by
the Board of Directors and sole shareholder of Financial Services.
(b) Governmental and Regulatory Consents. All approvals and
authorizations of, filings and registrations with, and notifications
to, all Governmental Authorities required for the consummation of the
Merger, and for the prevention of any termination of any material
right, privilege, license or agreement of either First Indiana or
Somerset or their respective
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Subsidiaries, shall have been obtained or made and shall be in full
force and effect and all waiting periods required by law shall have
expired; provided, however, that none of the preceding shall be deemed
obtained or made if it shall be subject to any condition or restriction
the effect of which would have been such that First Indiana would not
reasonably have entered into this Agreement had such condition or
restriction been known as of the date hereof.
(c) Third Party Consents. All consents or approvals of all persons,
other than Governmental Authorities, required for or in connection with
the execution, delivery and performance of this Agreement and the
consummation of the Merger shall have been obtained and shall be in
full force and effect, unless the failure to obtain any such consent or
approval is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on First Indiana or the Surviving
Corporation.
(d) No Injunction. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and
prohibits consummation of the transactions contemplated by this
Agreement.
(e) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending
the effectiveness of the Registration Statement shall have been issued
and no proceedings for that purpose shall have been initiated or
threatened by the SEC.
(f) Blue Sky Approvals. All permits and other authorizations under the
federal and state securities laws (other than that referred to in
Section 7.01(e)) and other authorizations necessary to consummate the
transactions contemplated hereby and to issue the shares of First
Indiana Common Stock to be issued in the Merger shall have been
received and be in full force and effect.
(g) Listing. The shares of First Indiana Common Stock to be issued in
the Merger shall have been approved for listing on the National Market
System of NASDAQ, subject to official notice of issuance.
7.02 Conditions to Obligation of Somerset. The obligation of Somerset to
consummate the Merger is also subject to the fulfillment or written waiver by
Somerset prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of First Indiana set forth in this Agreement shall be true and correct
as of the date of this Agreement and as of the Effective Date as though
made on and as of the Effective Date (except that representations and
warranties that by their terms speak as of the date of this Agreement
or some other date shall be true and correct only as of such date), and
Somerset shall have
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received a certificate, dated the Effective Date, signed on behalf of
First Indiana by a senior executive officer and the Treasurer of First
Indiana to such effect.
(b) Performance of Obligations of First Indiana. First Indiana shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time,
and Somerset shall have received a certificate, dated the Effective
Date, signed on behalf of First Indiana by the Chairman and the
President of First Indiana to such effect.
(c) Opinion of Counsel. Somerset shall have received an opinion, dated
the Effective Date, of Bose ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel to First
Indiana, in substantially the same form as that attached hereto as
Exhibit C.
(d) Tax Opinion of Somerset's Counsel. Somerset shall have received an
opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel to Somerset, to the effect that
(1) the Merger constitutes a "reorganization" within the meaning of
Section 368 of the Code and (2) no gain or loss will be recognized by
shareholders of Somerset to the extent they receive shares of First
Indiana Common Stock as Consideration in exchange for shares of
Somerset Common Stock.
(e) Accountants' Letters. Somerset shall have received the letters
referred to in Section 6.11 from KPMG, LLP, First Indiana's independent
auditors.
(f) McDonald Fairness Opinion. Somerset shall have received the opinion
of McDonald, dated the date of the Proxy Statement (which shall be
appended as an exhibit thereto), to the effect that the Consideration
to be received in the Merger by the shareholders of Somerset is fair to
the shareholders of Somerset from a financial viewpoint.
7.03 Conditions to Obligation of First Indiana. The obligation of First Indiana
to consummate the Merger is also subject to the fulfillment or written waiver by
First Indiana prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Somerset set forth in this Agreement shall be true and correct as of
the date of this Agreement and as of the Effective Date as though made
on and as of the Effective Date (except that representations and
warranties that by their terms speak as of the date of this Agreement
or some other date shall be true and correct only as of such date) and
First Indiana shall have received a certificate, dated the Effective
Date, signed on behalf of Somerset by the Chief Executive Officer and
the Chief Financial Officer of Somerset to such effect.
(b) Performance of Obligations of Somerset. Somerset shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time,
and First Indiana shall have received a certificate, dated the
Effective Date,
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signed on behalf of Somerset by the Chief Executive Officer and the
Chief Financial Officer of Somerset to such effect.
(c) Opinion of Counsel. First Indiana shall have received an opinion,
dated the Effective Date, of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, Counsel to Somerset,
in substantially the same form as that attached hereto as Exhibit D.
(d) Tax Opinion of First Indiana's Counsel. First Indiana shall have
received an opinion of Bose ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel to First
Indiana, dated the Effective Date, to the effect that the Merger
constitutes a "reorganization" within the meaning of Section 368 of the
Code.
(e) Accountants' Letters. First Indiana and its directors and officers
who sign the Registration Statement shall have received the letters
referred to in Section 6.11from KPMG, LLP, Somerset's independent
auditors.
(f) KBW Fairness Opinion. First Indiana shall have received the opinion
of KBW, dated the date of the Proxy Statement (which shall be appended
as an exhibit thereto), to the effect that the consideration to be
received in the Merger by the shareholders of First Indiana is fair to
the shareholders of First Indiana from a financial viewpoint.
Article VIII
Termination
8.01 Termination. This Agreement may be terminated and the Merger may be
abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of First Indiana and Somerset, if the Board of Directors
of each so determines by vote of a majority of the members of its
entire Board.
(b) Breach. At any time prior to the Effective Time, by First Indiana
or Somerset, in each case if its Board of Directors so determines by
vote of a majority of the members of its entire Board, in the event of
either: (1) a breach by the other party of any representation or
warranty contained herein, which breach cannot be or has not been cured
within 30 days after the giving of written notice to the breaching
party of such breach; or (2) a breach by the other party of any of the
covenants or agreements contained herein, which breach cannot be or has
not been cured within 30 days after the giving of written notice to the
breaching party of such breach and which breach would be reasonably
likely, individually or in the aggregate, to have a Material Adverse
Effect on the breaching party.
(c) Delay. At any time prior to the Effective Time, by First Indiana or
Somerset, in each case if its Board of Directors so determines by vote
of a majority of the members of its entire
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Board, in the event that the Merger is not consummated by December 31,
2000, except to the extent that the failure of the Merger then to be
consummated arises out of or results from the action or inaction of the
party seeking to terminate pursuant to this Section 8.01(c).
(d) No Approval. By Somerset or First Indiana, in each case if its
Board of Directors so determines by a vote of a majority of the members
of its entire Board, in the event (1) the approval of any Governmental
Authority required for consummation of the Merger and the other
transactions contemplated by this Agreement shall have been denied by
final non- appealable action of such Governmental Authority or (2) any
shareholder approval contemplated by Section 6.02 herein is not
obtained.
(e) Failure to Recommend, Etc. By either party, if (1) prior to the
effectiveness of the Registration Statement, the Board of Directors of
the other party shall not have recommended adoption and approval of
this Agreement to its shareholders, or (2) at any time prior to the
receipt of the approval of the other party's shareholders contemplated
by Section 7.01(a), the other party's Board of Directors shall have
withdrawn such recommendation or modified or changed such
recommendation in a manner adverse to the interests of the other party
(whether in accordance with Section 6.02 or otherwise).
(f) Acceptance of Superior Proposal. By Somerset, if, without breaching
Section 6.06, Somerset shall contemporaneously enter into a definitive
agreement with a third party providing for an Acquisition Proposal on
terms determined in good faith by the Somerset Board, after consulting
with and considering the written advice of Somerset's outside counsel
and financial advisors, to constitute a Superior Proposal; provided,
that the right to terminate this Agreement under this Section 8.01(f)
shall not be available to Somerset unless it delivers to First Indiana
(1) written notice of Somerset's intention to terminate at least five
days prior to termination and (2) simultaneously with such termination,
the Fee referred to in Section 8.03.
(g) Share Price Performance. By Somerset, if the average of the closing
prices of First Indiana Common Stock for the thirty (30) trading days
ending five (5) trading days before the Effective Time is less than
$14.40 per share.
8.02 Effect of Termination and Abandonment. In the event of termination of this
Agreement and the abandonment of the Merger pursuant to this Article VIII, no
party to this Agreement shall have any liability or further obligation to any
other party hereunder except (a) as set forth in Sections 8.03 and 9.01 and (b)
that termination will not relieve a breaching party from liability for any
willful breach of this Agreement giving rise to such termination.
8.03 Termination Fee. If (1) First Indiana terminates this Agreement pursuant to
(i) Section 8.01(e) (at a time when Somerset could not also terminate pursuant
to Section 8.01(e)) or (ii) Section 8.01(f), then, within five business days of
such termination, Somerset shall pay First Indiana by wire transfer in
immediately available funds a fee of One Million Dollars ($1,000,000) (the
"Fee"). If Somerset
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terminates this Agreement pursuant to Section 8.01(e) (at a time when First
Indiana could not also do so pursuant to Section 8.01(e), then, within five
business days of such termination, First Indiana shall pay the Fee to Somerset
by wire transfer in immediately available funds. If Somerset terminates this
Agreement solely by reason of the failure of Somerset to receive shareholder
approval of the Merger, and if, within twelve months of the date of such
termination by Somerset, a change in control of Somerset is consummated, then
Somerset shall pay the Fee to First Indiana by wire transfer in immediately
available funds. (For purposes of this Section 8.03, a "change in control" shall
be deemed to have taken place if: (w) any person or entity, including a "group"
as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, other
than Somerset or First Indiana, or a group consisting of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, or a Subsidiary of Somerset, or a Subsidiary of First Indiana,
or any employee benefit plan of Somerset or First Indiana or any of their
respective Subsidiaries, is or becomes the beneficial owner, directly or
indirectly, of securities representing fifty percent (50%) or more of the
then-issued and outstanding common stock of Somerset or the combined voting
power of the then-outstanding securities of Somerset, whether through a tender
offer or otherwise; (x) there occurs any consolidation or merger in which
Somerset is not the continuing or surviving corporation (except for a merger in
which the holders of Somerset's common and/or other voting stock immediately
prior to the merger have the same proportionate ownership of common and/or other
voting stock of the surviving corporation immediately after the merger); (y)
there occurs any consolidation or merger in which Somerset is the surviving
corporation but in which shares of its common and/or other voting stock would be
converted into cash or securities of any other corporation or other property; or
(z) there occurs any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially all of the assets
of Somerset.) Notwithstanding the foregoing, no Fee shall be required to be paid
if First Indiana or Somerset terminates this Agreement solely because of the
failure of either party to obtain shareholder approval of this Agreement and the
actions and transactions contemplated hereby.
Article IX
Miscellaneous
9.01 Survival. None of the representations, warranties, covenants and other
agreements in this Agreement or in any instrument delivered pursuant to this
Agreement, other than those contained in Sections 6.05(b), 8.02, and 8.03 and in
this Article IX, shall survive the termination of this Agreement if this
Agreement is terminated prior to the Effective Time. None of the
representations, warranties, covenants and other agreements in this Agreement or
in any instrument delivered pursuant to this Agreement, including any rights
arising out of any breach of such representations, warranties, covenants and
other agreements, shall survive the Effective Time, except for those covenants
and agreements contained in Section 6.10 which by their terms apply or are to be
performed in whole or in part after the Effective Time and this Article IX.
9.02 Waiver; Amendment. Prior to the Effective Time, any provision of this
Agreement may be (a) waived by the party benefitted by the provision, or (b)
amended or modified at any time, by an agreement in writing executed by both
parties, except that, after approval of the Merger by the
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shareholders of Somerset, no amendment may be made which under applicable law
requires further approval of such shareholders without obtaining such required
further approval.
9.03 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to constitute an original.
9.04 Governing Law. This Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of Indiana applicable to contracts made
and to be performed entirely within such State.
9.05 Expenses. Subject to Section 8.03, each party hereto will bear all expenses
incurred by it in connection with this Agreement and the transactions
contemplated hereby, except that printing and postage expenses relating to the
Somerset stockholder meeting and SEC registration fees shall be shared equally
between Somerset and First Indiana.
9.06 Notices. All notices, requests and other communications hereunder to a
party shall be in writing and shall be deemed given (a) on the date of delivery,
if personally delivered or telecopied (with confirmation), (b) on the first
business day following the date of dispatch, if delivered by a recognized
next-day courier service, or (c) on the third business day following the date of
mailing, if mailed by registered or certified mail (return receipt requested),
in each case to such party at its address or telecopy number set forth below or
such other address or numbers as such party may specify by notice to the parties
hereto.
If to Somerset, to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Chief Executive Officer
The Somerset Group, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
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If to First Indiana, to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chairman
First Indiana Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Bose ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
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9.07 Entire Understanding; No Third Party Beneficiaries. This Agreement
(together with the Disclosure Schedules and the Exhibits hereto) represents the
entire understanding of the parties hereto with reference to the transactions
contemplated hereby and this Agreement supersedes any and all other oral or
written agreements heretofore made. Except for Section 6.10 hereof (which are
intended to be for the benefit of those present and former officers and
directors of Somerset and its Subsidiaries affected thereby and may be enforced
by such persons), nothing in this Agreement, expressed or implied, is intended
to confer upon any person, other than the parties hereto or their respective
successors and permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
THE SOMERSET GROUP, INC. FIRST INDIANA CORPORATION
("Somerset") ("First Indiana")
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Printed: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Printed: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer Title: Chairman
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Each of the undersigned directors of Somerset hereby (a) agrees in his
capacity as a director to recommend to Somerset's shareholders the approval of
this Agreement and the Merger, and (b) agrees in his individual capacity to vote
his shares of Somerset common stock that are registered in his personal name
(and agrees to use his best efforts to cause all additional shares of Somerset
common stock owned jointly with any other person or by his spouse or over which
he has voting influence or control to be voted) in favor of this Agreement and
the Merger. In addition, each of the undersigned directors hereby agrees not to
make any transfers of shares of Somerset with the purpose of avoiding his
agreements set forth in the preceding sentence.
Dated this 19th day of April, 2000.
/s/ ▇▇▇▇▇▇▇ ▇. Early
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▇▇▇▇▇▇▇ ▇. Early
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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/s/ ▇▇▇▇ ▇. Light
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▇▇▇▇ ▇. Light
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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List of Exhibits
Exhibit Title
A Form of Articles of Merger
B Form of Affiliate Agreement
C Form of Opinion of First Indiana's Counsel
D Form of Opinion of Somerset's Counsel
E Form of Financial Services Merger Agreement