EXHIBIT 2
GERMAN AMERICAN BANCORP
711 MAIN STREET, BOX 810
JASPER, INDIANA 47546
OFFER OF MERGER
July 3, 1996
Board of Directors
Peoples Bancorp of Washington
Washington, Indiana
Gentlemen:
Our Board of Directors has authorized me to present this Offer, which
amends and supersedes the Offer of Merger dated June 21, 1996, for the
affiliation of Peoples Bancorp of Washington (`Peoples'') and its subsidiary,
Peoples National Bank of Washington (`Bank''), with German American Bancorp
(`Company'') and its four affiliated community banks pursuant to a merger of
Peoples with the Company (or subsidiary of the Company) or similar transaction
(`Merger''). Pursuant to the Merger, the Company would issue to the
shareholders of Peoples a number of shares of common stock of the Company at
closing that have an aggregate `Closing Market Value'' (as defined below) of
$21,000,000; provided, however, that the number of shares of Company common
stock to be issued will in no event be more than 659,375 shares (even if the
Closing Market Value is less than $32.00) nor will it be less than 586,111
shares (even if the Closing Market Value is more than $36.00). If the Closing
Market Value is less than $32.00, then Peoples would be entitled to terminate
the Merger. The maximum and minimum number of shares issuable by the Company is
subject to appropriate adjustment on account of any future Company stock
dividends, splits, and the like that are effected as of a record date prior to
the closing date.
For purposes of the Offer, the `Closing Market Value'' of Company common
stock shall be determined by averaging the bid and ask prices as reported by
NASDAQ at the close of each the ten (10) consecutive business days ending on the
second business day prior to such closing.
The following terms and conditions are applicable to this Offer, and will
be contained in the merger agreement along with other mutually agreeable terms
and conditions:
1. The Board of Directors of each of the parties shall have approved a merger
agreement and the parties thereafter shall have executed and delivered the
merger agreement and shall have obtained all the necessary or appropriate
regulatory and shareholder approvals for consummation of the Merger. The
merger agreement will contain such representations, warranties, conditions,
and other terms and conditions as are mutually agreeable and customary in
community bank merger transactions.
2. The consolidated results of operations and financial condition of Peoples
and its subsidiaries, and the Company and its subsidiaries, as described
by the December 31, 1995 and the March 31, 1996 financial statements filed
with supervisory regulatory authorities and made available to shareholders,
shall have been fairly presented in accordance with generally accepted
accounting principles and practices applicable to banks, consistently
applied, including the full and fair disclosures of, or adequate reserves
against, all liabilities, absolute or contingent.
3. The operation and condition (on a consolidated basis) of the business,
properties, prospects and affairs, financial and otherwise, of Peoples and
of the Company, from the date of their respective December 31, 1995
financial statements through the effective date of the Merger, shall have
been continued without changes, except changes in the ordinary course of
business, which individually or in the aggregate shall not have been
materially adverse, and except changes reflected by the March 31, 1996
financial statements of the Bank and of the Company.
4. There shall have been no material change since December 31, 1995, in the
nature of the business, capital structure, compensation arrangements or
dividend policies of Peoples, and no additional stock or other securities
of Peoples (or warrants, options, convertible securities, or other rights
to acquire such stock or other securities) shall have been issued.
5. All currently outstanding common stock of Peoples shall have been duly
authorized, validly issued, fully paid and nonassessable.
6. There shall be no pending or threatened litigation or administrative
proceedings to restrain or invalidate the proposed acquisition or otherwise
relating to or affecting the proposed acquisition, or affecting or relating
to Peoples or the Bank or their business or properties.
7. The affiliation shall be tax-free to the shareholders of Peoples and shall
qualify as a pooling of interests for financial reporting purposes.
8. The Board of Directors of Peoples (a) shall have approved this Offer by
favorable vote of at least the number of members of the whole Board of
Directors required under applicable law and the governing corporate
documents of Peoples, (b) shall cause the Merger to be submitted for a vote
of the shareholders of Peoples at the earliest possible date, and (c) in
connection with such shareholder vote, the Directors who have approved
this Offer shall recommend (unless in the written opinion of counsel for
Peoples the fiduciary duties of the Board of Directors prohibit such a
recommendation) the Merger to the shareholders of Peoples. In connection
with the recommendation, Peoples shall have received from its financial
adviser a letter, dated the date of mailing of the Prospectus/Proxy
Statement to be mailed to the shareholders of Peoples with respect to the
Merger and included therein, to the effect that, in the opinion of such
financial advisor, the terms of the Merger are fair to the shareholders of
Peoples from a financial point of view. From and after the time of
acceptance of this Offer by Peoples, neither Peoples nor the Bank shall (a)
directly or indirectly solicit, encourage or facilitate (nor shall they
permit any of their respective officers, directors, employees or agents
directly or indirectly to solicit, encourage or facilitate), including by
way of furnishing information other than the fact of the acceptance of the
Offer by Peoples, any inquiries or proposals from third parties for a
merger, consolidation, share exchange or similar transaction involving
Peoples or the Bank or for the acquisition of the stock or substantially
all of the assets or business of Peoples or the Bank, or (b) subject to the
fiduciary duties of the Directors of Peoples as advised by counsel in a
written opinion, discuss with or enter into conversations with any person
concerning any such merger, consolidation, share exchange, acquisition or
other transaction. Peoples shall promptly notify the Company orally (to be
confirmed in writing as soon as practicable thereafter) of all of the
relevant details concerning any inquiries or proposals that it may receive
relating to any such matters, including actions it intends to take with
respect to such matters. In the event that the transactions contemplated
by this Offer terminate because Peoples either willfully fails to perform
its obligations for reasons not contemplated by this Offer or because
Peoples or the Bank enters into a merger, consolidation, or other business
combination with any other party, then (in addition to whatever other legal
rights or remedies to which the Company may be entitled), at the Company's
option Peoples shall (a) pay to the Company a termination fee of $422,000
and (b) reimburse the Company for all of its out-of-pocket costs and
expenses in connection with the Merger incurred from and after the date of
acceptance of the Offer, including its legal, accounting, environmental and
other consulting fees and expenses.
9. In connection with the filings that the Company and/or Peoples may be
required to make in connection with the Merger with banking, securities,
and anti-trust regulatory agencies (`Agencies''), Peoples shall cooperate
with the Company, and each shall use their best efforts to obtain all
necessary approvals of, or clearances from, the Agencies, and shall cause
their agents and advisors to cooperate and use their best efforts in
connection therewith. The Company (or its subsidiaries) shall be
responsible for making the required Merger filings (except to the limited
extent that the applicable law, regulations, or forms specify that Peoples
(or its subsidiary) is the appropriate filing party) with the Agencies, and
for discussing such filings with the Agencies and responding to comments
thereon. If any required filing is disapproved by any of the Agencies, or
any determination is made by any of the Agencies that the Merger cannot be
consummated except on terms and conditions that are materially adverse from
a financial point of view to the Company or to the shareholders of Peoples
(an `Adverse Determination''), then the Company shall promptly advise
Peoples of such Adverse Determination and the Company's intended course of
action with respect thereto. In the event that the Company in its sole
discretion determines to seek a judicial or regulatory appeal or review
(formal or informal) of the Adverse Determination, Peoples (and its agents
and advisors) shall continue to cooperate with such appeal and review
procedure and use its best efforts to assist in connection with obtaining
reversal or modification of such Adverse Determination. In the event that
(a) the Company in its sole discretion elects not to seek an appeal or
review of the Adverse Determination or elects in its sole discretion at any
time after seeking such an appeal or review to discontinue that effort, or
(b) the Company seeks such an appeal or review but all avenues for such
appeal or review are exhausted without the Adverse Determination having
been vacated or overruled or modified in such a manner that the Adverse
Determination is no longer materially adverse (`Relief Determination''),
or (c) the Company seeks such an appeal or review but such appeal or review
remains pending on December 31, 1997, without having resulted in a Relief
Determination, then either the company or Peoples may terminate the Merger
without obligation to the other on account of the Adverse Determination;
provided, however, that the Company shall pay Peoples a termination fee of
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$422,000 within 90 days if (x) the Merger is terminated solely as a result
of an Adverse Determination relating to the Company's eligibility to
account for the Merger under the pooling-of-interests method of accounting
in accordance with this sentence for reasons other than the exercise of
statutory dissenters rights by shareholders of Peoples who would otherwise
be entitled to receive ten percent or more of the Company common stock
issuable in the Merger, and (y) Peoples and its agents and advisors have
abided by their obligations of cooperation and best efforts expressed in
this Paragraph 9.
We contemplate that Peoples National Bank would lead the Company's Daviess
County banking operations under the direction of its present management and
Board of Directors without loss of its separate corporate identity. In contrast
to the staffing reductions that are usually associated with cross-town mergers
and the negative impact these job losses have on the people involved and the
community as a whole, our proposal offers continuity of local employment. The
employees of all of our affiliate banks are welcomed into our organization on an
equal basis, and your employees will receive full vesting and eligibility credit
under our defined contribution retirement plans for their years of service to
Peoples. Furthermore, cross-town mergers present the issues of combining the
Boards of Directors and management philosophies with the uncertainty of
compatibility. Finally, cross-town mergers could raise significant anti-trust
issues which we are confident, based upon the findings of an independent study,
are not a factor under our Offer.
Our offer further contemplates that Peoples may, in its discretion, form a
non-profit charitable foundation, managed by People's Board of Directors, for
the benefit of the communities served by the Bank. Initial funding for the
Foundation would be an amount not less than $28,000, the amount of your 1996
budgeted charitable contributions, and subsequent years' fundings would be at
levels not less than your Bank's past charitable contributions practices. In
this way, the Merger will result in a tangible benefit to the community in
addition to the intangible benefits that flow from the preservation of the
identity and local management of the Bank. Through this Foundation, local Board
members can be assured that continued community support, which we believe is
critical to a community bank's identity, will remain as a cornerstone in Peoples
National Bank's well established history of enriching the local community
through its charitable giving.
The Company's policy is to provide substantial operational autonomy for
each of its bank subsidiaries. In light of the important role that Peoples
National Bank will have in the organization, we anticipate (in accordance with
our long-standing policy) that all Directors of the Bank would continue to serve
after the closing of the Merger indefinitely, subject of course to the Bank's
mandatory retirement age policy as in force from time to time. We have never
requested any members of the boards of directors of any of our affiliate banks
to resign their positions. In addition to the appointment of your chairman to
the Company's Board of Directors, we will also invite a second representative of
Peoples, who is mutually acceptable to the Peoples Board and the Company Board,
to join the Company's Board promptly following the closing of the Merger.
Except as specified by paragraph 8 above, each party will bear all of the
expenses it incurs in connection with this letter and the transactions
contemplated hereby.
This Offer, when accepted by Peoples, shall constitute a legally-binding
agreement enforceable against Peoples and the Company in accordance with its
terms, and shall constitute a `Definitive Agreement'' as that term is used in
the letter to the Chairman of the Company from Austin Associates, Inc., dated
May 2, 1996, and accepted by the Company.
If you desire to accept this Offer on behalf of Peoples, and work toward
the completion of the Merger as described in this letter, kindly indicate your
acceptance below and return the executed copy to our Chairman or President.
Yours very truly,
GERMAN AMERICAN BANCORP
By:/s/ George W. Astrike
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George W. Astrike
Chairman and Chief Executive Officer
Peoples Bancorp of Washington, by unanimous action of its Board of Directors,
hereby accepts the above Offer of Merger this 9th day of July, 1996.
PEOPLES BANCORP OF WASHINGTON
By:/s/ David Graham
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