Exhibit 2
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AGREEMENT OF REORGANIZATION AND MERGER
BETWEEN
FIRST MERCHANTS CORPORATION
AND
LAFAYETTE BANCORPORATION
THIS AGREEMENT OF REORGANIZATION AND MERGER (the "Agreement"), is
entered into as of this 14th day of October, 2001, by and between First
Merchants Corporation ("First Merchants") and Lafayette Bancorporation
("Lafayette").
W I T N E S S E T H:
WHEREAS, First Merchants is a corporation duly organized and existing
under the laws of the State of Indiana and a registered bank holding company
under the Bank Holding Company Act of 1956, as amended, with its principal place
of business in Muncie, Delaware County, Indiana;
WHEREAS, Lafayette is a corporation duly organized and existing under
the laws of the State of Indiana and a registered bank holding company under the
Bank Holding Company Act of 1956, as amended, with its principal place of
business in Lafayette, Tippecanoe County, Indiana;
WHEREAS, Lafayette Bank and Trust Company (the "Bank") is a bank duly
organized and existing under the laws of the State of Indiana and a wholly-owned
subsidiary of Lafayette with its principal banking office in Lafayette,
Tippecanoe County, Indiana;
WHEREAS, it is the desire of First Merchants and Lafayette to effect a
transaction whereby the Bank will become a wholly-owned subsidiary of First
Merchants through a statutory merger of Lafayette with and into First Merchants;
and
WHEREAS, a majority of the entire Board of Directors of First Merchants
and a majority of the entire Board of Directors of Lafayette have approved this
Agreement, designated it as a plan of reorganization within the provisions of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"), and authorized its execution.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
agreements herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, First Merchants and Lafayette hereby
make this Agreement and prescribe the terms and conditions of the merger of
Lafayette with and into First Merchants and the mode of carrying the transaction
into effect as follows:
SECTION 1
The Merger
1.01. Merger. Subject to the terms and conditions of this Agreement, on
the Effective Date (as defined in Section 11 hereof), Lafayette shall be merged
into and under the Articles of Incorporation of First Merchants, which shall be
the "Continuing Company" and which shall continue its corporate existence under
the laws of the State of Indiana, pursuant to the provisions of and with the
effect provided in the Indiana Business Corporation Law and particularly Indiana
Code Chapter 23-1-40 (the "Merger").
1.02. Right to Revise Merger. First Merchants may, at any time, change
the method of effecting the Merger if and to the extent First Merchants deems
such change to be desirable; provided, however, that no such change,
modification or amendment shall (a) provide for the merger of the Bank with and
into a subsidiary of First Merchants or another entity; (b) alter or change the
amount or kind of consideration to be received by the shareholders of Lafayette
specified in Section 3 hereof as a result of the Merger, except in accordance
with the terms of Section 3 hereof; (c) adversely affect the tax treatment to
the shareholders of Lafayette; or (d) materially impede or delay receipt of any
approvals referred to in this Agreement or the consummation of the transactions
contemplated by this Agreement.
SECTION 2
Effect Of The Merger
Upon the Merger becoming effective:
2.01. General Description. The separate existence of Lafayette shall
cease and the Continuing Company shall possess all of the assets of Lafayette
including all of the issued and outstanding shares of capital stock of the Bank
and all of its rights, privileges, immunities, powers, and franchises and shall
be subject to and assume all of the duties and liabilities of Lafayette.
2.02. Name, Offices, and Management. The name of the Continuing Company
shall continue to be "First Merchants Corporation." Its principal banking office
shall be located at 200 E. Jackson Street, Muncie, Indiana. Except as otherwise
provided in Section 8.07 hereof, the Board of Directors of the Continuing
Company, until such time as their successors have been elected and qualified,
shall consist of the current Board of Directors of First Merchants. Except as
otherwise provided in Section 8.08 hereof, the officers of First Merchants
immediately prior to the Effective Date shall continue as the officers of the
Continuing Company.
2.03. Capital Structure. The amount of capital stock of the Continuing
Company shall not be less than the capital stock of First Merchants immediately
prior to the Effective Date increased by the amount of capital stock issued in
accordance with Section 3 hereof.
2.04. Articles of Incorporation and Bylaws. The Articles of
Incorporation and the Bylaws of the Continuing Company shall be those of First
Merchants immediately prior to the Effective Date until the same shall be
further amended as provided by law.
2.05. Assets and Liabilities. The title to all assets, real estate and
other property owned by First Merchants and Lafayette shall vest in the
Continuing Company without reversion or impairment. All liabilities of Lafayette
shall be assumed by the Continuing Company.
2.06. Additional Actions. If, at any time after the Effective Date, the
Continuing Company shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable
(a) to vest, perfect or confirm, of record or otherwise, in the Continuing
Company its right, title or interest in, to or under any of the rights,
properties or assets of Lafayette or the Bank, or (b) otherwise carry out the
purposes of this Agreement, Lafayette and the Bank and their respective officers
and directors shall be deemed to have granted to the Continuing Company an
irrevocable power of attorney to execute and deliver all such deeds, assignments
or assurances in law and to do all acts necessary or proper to vest, perfect or
confirm title to and possession of such rights, properties or assets in the
Continuing Company and otherwise to carry out the purposes of this Agreement,
and the officers and directors of the Continuing Company are authorized in the
name of Lafayette or the Bank or otherwise to take any and all such action.
SECTION 3
Consideration To Be
Distributed To Shareholders Of Lafayette
3.01. Consideration. Upon and by reason of the Merger becoming
effective, the shareholders of Lafayette of record on the Effective Date who
have not dissented to the Merger in accordance with Indiana Code ss. 23-1-44, as
amended, shall be entitled to receive in exchange for the shares of Lafayette's
common stock held and at their election (subject to the limitations and
prorations set forth in this Section 3) either (i) 1.11 (the "Conversion Ratio")
shares of First Merchants' common stock for each share of Lafayette's common
stock held ("Option 1"), or (ii) cash in the amount of $30.00 for each share of
Lafayette's common stock held, subject to the provisions and limitations of
Section 3.07 ("Option 2"). A Lafayette shareholder shall be entitled to elect
Option 1 for all shares held of record, Option 2 for all shares held of record
or Option 1 for a portion of the shares held of record and Option 2 for a
portion of the shares held of record. The Conversion Ratio shall be subject to
adjustment as set forth in Sections 3.03 and 3.04.
3.02. No Fractional First Merchants Common Shares. Certificates for
fractional shares of common stock of First Merchants shall not be issued in
respect of fractional interests arising from the Conversion Ratio. Each
Lafayette shareholder who would otherwise have been entitled to a fraction of a
First Merchants share, upon surrender of all of his/her/its certificates
representing Lafayette's common shares, shall be paid in cash (without interest)
in an amount equal to the fraction of the First Merchants Average Price (as
defined below). No such shareholder of Lafayette shall be entitled to dividends,
voting rights or any other rights in respect of any fractional share.
3.03. Recapitalization. If, between the date of this Agreement and the
Effective Date, First Merchants issues a stock dividend with respect to its
shares of common stock, combines, subdivides, or splits up its outstanding
shares or takes any similar recapitalization action, then the Conversion Ratio
shall be adjusted so that each Lafayette shareholder electing Option 1 shall
receive such number of First Merchants shares as represents the same percentage
of outstanding shares of First Merchants common stock at the Effective Date as
would have been represented by the number of shares such shareholder would have
received if the recapitalization had not occurred.
3.04. Conversion Ratio Adjustment.
(a) As used in this Section 3.04, the term "First Merchants
Average Price" shall mean the average of the mid point between the bid
and ask prices of the common stock of First Merchants as reported in
Bloomberg, L.P. for the thirty (30) days that First Merchants common
stock trades on NASDAQ preceding the fifth (5th) calendar day prior to
the Effective Date (the "Determination Date"). The First Merchants
Average Price shall be appropriately and proportionately adjusted to
reflect any share adjustment as contemplated by Section 3.03 hereof.
(b) Lafayette may terminate this Agreement if its Board of
Directors so determines by a vote of a majority of the members of its
entire Board of Directors if the First Merchants Average Price shall be
less than $22.05; subject, however, to the following two provisions. If
Lafayette elects to exercise its right of termination pursuant to the
immediately preceding sentence, it shall give written notice to First
Merchants within twenty-four (24) hours of the Determination Date.
Within two (2) business days after the date of receipt of such notice,
First Merchants shall have the option of adjusting the Conversion Ratio
to equal a number equal to a quotient, the numerator of which is the
product of $22.05 and the Conversion Ratio (as then in effect) and the
denominator of which is the First Merchants Average Price. If First
Merchants makes an election contemplated by the preceding sentence, it
shall give prompt written notice to Lafayette of such election and the
revised Conversion Ratio, whereupon no termination shall have occurred
pursuant to this Section 3.04(b) and this Agreement shall remain in
effect in accordance with its terms (except as the Conversion Ratio
shall have been so modified), and any references in this Agreement to
"Conversion Ratio" shall thereafter be deemed to refer to the
Conversion Ratio as adjusted pursuant to this Section 3.04(b).
(c) First Merchants may terminate this Agreement if its Board
of Directors so determines by a vote of a majority of the members of
its entire Board of Directors if the First Merchants Average Price
shall be greater than $26.95; subject, however, to the following two
provisions. If First Merchants elects to exercise its right of
termination pursuant to the immediately preceding sentence, it shall
give written notice to Lafayette within twenty-four (24) hours of the
Determination Date. Within two (2) business days after the date of
receipt of such notice, Lafayette shall have the option of adjusting
the Conversion Ratio to equal a number equal to a quotient, the
numerator of which is the product of $26.95 and the Conversion Ratio
(as then in effect) and the denominator of which is the First Merchants
Average Price. If Lafayette makes an election contemplated by the
preceding sentence, it shall give prompt written notice to First
Merchants of such election and the revised Conversion Ratio, whereupon
no termination shall have occurred pursuant to this Section 3.04(c) and
this Agreement shall remain in effect in accordance with its terms
(except as the Conversion Ratio shall have been so modified), and any
references in this Agreement to "Conversion Ratio" shall thereafter be
deemed to refer to the Conversion Ratio as adjusted pursuant to this
Section 3.04(c).
3.05. Election. An election form (the "Election Form") shall be mailed
to each record holder of Lafayette's common stock as of the record date fixed
for the special shareholders' meeting at which the Merger will be submitted to a
vote of Lafayette's shareholders (the "Special Record Date"). In addition,
reasonable efforts will be made to make the Election Form available to all
persons who become shareholders of Lafayette between the Special Record Date and
the Election Deadline (as defined below). Lafayette and First Merchants shall
also establish a deadline for receipt of such Election Forms (the "Election
Deadline"), which deadline shall be the close of business on the first day on
which the administrative offices of First Merchants are generally open for
business after the special meeting at which the Merger will be submitted to a
vote of Lafayette's shareholders. The Election Forms shall be mailed to each
record holder of Lafayette's common stock as of the Special Record Date along
with the proxy materials for the special shareholders' meeting at which the
Merger will be submitted to a vote of Lafayette's shareholders. The Election
Form will permit each holder of record of Lafayette's common stock as of the
Special Record Date to elect, subject to Section 3.07, to have all of such
holder's shares converted in the Merger into either Option 1, Option 2 or a
combination of Option 1 and Option 2. The Election Form shall also permit direct
deposit of cash in each holder's account in either the Bank or First Merchants
Bank, National Association. An election shall be duly made by completing the
Election Form and any other required documents in accordance with the
instructions set forth therein and delivering them to the Election Agent (as
defined below) or to such other person or persons mutually agreed upon by
Lafayette and First Merchants to receive elections, to receive outstanding
Lafayette shares, to deliver cash or cash and shares of First Merchants' common
stock and to carry out the other procedures set forth herein.
3.06. Election Agent. First Merchants and Lafayette hereby appoint the
Trust Department of First Merchants Bank, National Association to act as agent
(the "Election Agent") of Lafayette's shareholders for the purposes of mailing
and receiving the Election Forms, tabulating the results and notifying First
Merchants and Lafayette of the results.
3.07. All Cash Payments.
(a) In the event the number of shares of Lafayette common
stock covered by Option 2 elections would entitle Lafayette's
shareholders to receive less than $50,329,248 in cash (including cash
payments for fractional shares and payments to dissenting
shareholders), all Option 1 and Option 2 elections of the holders of
Lafayette's common stock shall be honored (each in its entirety). In
the event that the amount of cash to be received by shareholders of
Lafayette pursuant to the terms of the Agreement would result in cash
payments of $50,329,248 or more (including cash payments for fractional
shares and payments to dissenting shareholders), the Option 2 elections
shall be honored in the following order: the Option 2 election which
covers the largest number of shares of Lafayette's common stock shall
be converted into an Option 1 election first, followed by the election
which covers the next largest number of shares (each in its entirety)
being converted into an Option 1 election and continuing this process
until the total remaining number of outstanding Lafayette's shares
covered by Option 2 elections is such that the Merger will (i) result
in cash payments of no more than $50,329,248 (including cash payments
for fractional shares and payments to dissenting shareholders), and
(ii) satisfy the "continuity of interest" requirement applicable to
tax-free reorganizations under the Code. Option 2 elections which are
not converted into Option 1 elections shall remain as Option 2
elections.
(b) Shares of Lafayette's common stock with respect to which
no Election Form is timely received or ever received or which are the
subject of otherwise invalid elections (the "Non-Electing Shares") will
be treated as if the holders thereof elected Option 1 for all shares
held of record. This Section 3.07(b) shall be given effect prior to the
reallocation provided for in Section 3.07(a).
(c) Lafayette and First Merchants shall mutually determine the
validity of elections submitted by Lafayette's shareholders.
(d) A holder of Lafayette's shares that is a bank, trust
company, security broker-dealer or other recognized nominee, may submit
one or more Election Forms for the persons for whom it holds shares as
nominee provided that such bank, trust company, security broker-dealer
or nominee certifies to the satisfaction of Lafayette and First
Merchants the names of the persons for whom it is so holding shares
(the "Beneficial Owners"). In such case, each Beneficial Owner for whom
an Election Form is submitted shall be treated as a separate owner for
purposes of the election procedure and allocation of shares set forth
herein.
(e) First Merchants and Lafayette may, upon mutual agreement,
apply the adjustments set forth in this Section 3.07 only to such
extent and to such number of Lafayette's shareholders as is necessary
to accomplish the objectives of this Section 3.07 to assure that the
Merger will qualify as a tax-free reorganization.
3.08. Distribution of First Merchants' Common Stock and Cash.
(a) Each share of common stock of First Merchants outstanding
immediately prior to the Effective Date shall remain outstanding
unaffected by the Merger.
(b) Following the Effective Date, First Merchants shall mail
to each Lafayette shareholder a letter of transmittal (the "Letter of
Transmittal") providing instructions as to the transmittal to the
conversion agent, First Merchants Bank, National Association (the
"Conversion Agent"), of certificates representing shares of Lafayette's
common stock and the issuance of shares of First Merchants' common
stock and cash in exchange therefor pursuant to the terms of this
Agreement. Distribution of stock certificates representing First
Merchants' common stock and cash payments for Lafayette's common stock
and for fractional shares shall be made by First Merchants to each
former shareholder of Lafayette within fifteen (15) business days of
the later of the Effective Date or the date of such shareholder's
delivery to the Conversion Agent of his/her/its certificates
representing common stock of Lafayette, accompanied by a properly
completed and executed Letter of Transmittal. Certificates surrendered
for exchange by a person who is deemed to be an "affiliate" (as defined
in Section 7.06 hereof) of Lafayette shall not be exchanged until First
Merchants has received a written agreement from such affiliate as
required pursuant to Section 7.06 hereof. Interest shall not accrue or
be payable with respect to any cash payments.
(c) Following the Effective Date, stock certificates
representing Lafayette's common stock shall be deemed to evidence only
the right to receive cash and/or ownership of First Merchants' common
stock (for all corporate purposes other than the payment of dividends)
and cash for fractional shares, as applicable. No dividends or other
distributions otherwise payable subsequent to the Effective Date on
stock of First Merchants shall be paid to any shareholder entitled to
receive the same until such shareholder has surrendered his/her/its
certificates for Lafayette's common stock to the Conversion Agent in
exchange for certificates representing First Merchants' common stock
and/or cash. Upon surrender or compliance with the provisions of
Section 3.08(f), there shall be paid to the record holder of the new
certificate(s) evidencing shares of First Merchants' common stock the
amount of all dividends and other distributions, without interest
thereon, withheld with respect to such common stock.
(d) At or after the Effective Date, there shall be no
transfers on the stock transfer books of Lafayette of any shares of the
common stock of Lafayette. If, after the Effective Date, certificates
are presented for transfer to Lafayette, such certificates shall be
cancelled and exchanged for the consideration set forth in Section 3.01
hereof, as adjusted pursuant to the terms of this Agreement.
(e) First Merchants shall be entitled to rely upon the stock
transfer books of Lafayette to establish the persons entitled to
receive cash and shares of common stock of First Merchants, which
books, in the absence of actual knowledge by First Merchants of any
adverse claim thereto, shall be conclusive with respect to the
ownership of such stock.
(f) With respect to any certificate for shares of Lafayette's
common stock which has been lost, stolen, or destroyed, First Merchants
shall be authorized to issue common stock to the registered owner of
such certificate upon receipt of an affidavit of lost stock
certificate, in form and substance satisfactory to First Merchants, and
upon compliance by the Lafayette's shareholder with all procedures
historically required by Lafayette in connection with lost, stolen, or
destroyed certificates.
SECTION 4
Dissenting Shareholders
Shareholders of Lafayette shall have the rights accorded to dissenting
shareholders under Indiana Code ss. 23-1-44, as amended. Shareholders of First
Merchants are not entitled to any dissenters' rights under Indiana Code ss.
23-1-44 since First Merchants common stock is quoted and traded on the NASDAQ
National Market System.
SECTION 5
Representations and
Warranties of Lafayette
Lafayette represents and warrants to First Merchants with respect to
itself and the Bank as follows: (For the purposes of this Section, a "Disclosure
Letter" is defined as a letter referencing Section 5 of this Agreement which
shall be prepared and executed by an authorized executive officer of Lafayette
and delivered to and initialed by an authorized executive officer of First
Merchants contemporaneous with the execution of this Agreement.)
5.01. Organization and Authority. Lafayette is a corporation duly
organized and validly existing under the laws of the State of Indiana, and the
Bank is a bank duly organized and validly existing under the laws of the State
of Indiana. Lafayette and the Bank have the power and authority (corporate and
other) to conduct their respective businesses in the manner and by the means
utilized as of the date hereof. Except as set forth in the Disclosure Letter,
Lafayette's only subsidiary is the Bank, and the Bank has no subsidiaries. The
Bank is subject to primary federal regulatory supervision and regulation by the
Federal Deposit Insurance Corporation.
5.02. Authorization.
(a) Lafayette has the corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder subject
to certain required regulatory approvals and Lafayette's shareholder
approval. This Agreement, when executed and delivered, will have been
duly authorized and will constitute a valid and binding obligation of
Lafayette, enforceable in accordance with its terms except to the
extent limited by insolvency, reorganization, liquidation, readjustment
of debt or other laws of general application relating to or affecting
the enforcement of creditors' rights.
(b) Except as set forth in the Disclosure Letter, neither the
execution of this Agreement, nor the consummation of the transactions
contemplated hereby, does or will (i) conflict with, result in a breach
of, or constitute a default under Lafayette's Articles of Incorporation
or By-Laws; (ii) conflict with, result in a breach of, or constitute a
default under any federal, foreign, state or local law, statute,
ordinance, rule, regulation or court or administrative order or decree,
or any note, bond, indenture, loan, mortgage, security agreement,
contract, arrangement or commitment, to which Lafayette or the Bank is
subject or bound, the result of which would materially affect the
business or financial condition of Lafayette or the Bank; (iii) result
in the creation of or give any person, corporation or entity, the right
to create any lien, charge, encumbrance, security interest, or any
other rights of others or other adverse interest upon any right,
property or asset of Lafayette or the Bank; (iv) terminate or give any
person, corporation or entity, the right to terminate, amend, abandon,
or refuse to perform any note, bond, indenture, loan, mortgage,
security agreement, contract, arrangement or commitment to which
Lafayette or the Bank is subject or bound; or (v) accelerate or modify,
or give any party thereto the right to accelerate or modify, the time
within which, or the terms according to which, Lafayette or the Bank is
to perform any duties or obligations or receive any rights or benefits
under any note, bond, indenture, loan, mortgage, security agreement,
contract, arrangement or commitment.
(c) Other than in connection or in compliance with the
provisions of the Bank Holding Company Act of 1956, federal and state
securities laws and applicable Indiana banking and corporate statutes,
all as amended, and the rules and regulations promulgated thereunder,
no notice to, filing with, authorization of, exemption by, or consent
or approval of, any public body or authority is necessary for the
consummation by Lafayette of the transactions contemplated by this
Agreement.
(d) Other than those filings, authorizations, consents and
approvals referenced in Section 5.02(c) above and except as set forth
in the Disclosure Schedule, no notice to, filing with, authorization
of, exemption by, or consent or approval of, any third party is
necessary for the consummation by Lafayette of the transactions
contemplated by this Agreement.
5.03. Capitalization.
(a) The authorized capital stock of Lafayette as of the date
hereof consists, and on the Effective Date will consist, of 5,000,000
shares of common stock, without par value, 3,961,589 shares of which
are issued and outstanding. Such issued and outstanding shares of
Lafayette's common stock have been duly and validly authorized by all
necessary corporate action of Lafayette, are validly issued, fully paid
and nonassessable and have not been issued in violation of any
preemptive rights of any shareholders. Lafayette has no capital stock
authorized, issued or outstanding other than as described in this
Section 5.03(a) and, except as set forth in the Disclosure Letter, has
no intention or obligation to authorize or issue any other shares of
capital stock.
(b) The authorized capital stock of the Bank as of the date
hereof consists, and on the Effective Date will consist, of 2,000
shares of common stock, $100.00 par value per share, all 2,000 shares
of which are issued and outstanding to Lafayette. Such issued and
outstanding shares of Bank common stock have been duly and validly
authorized by all necessary corporate action of the Bank, are validly
issued, fully paid and nonassessable, and have not been issued in
violation of any preemptive rights of any Bank shareholders. All the
issued and outstanding shares of Bank common stock are owned by
Lafayette, free and clear of all liens, pledges, charges, claims,
encumbrances, restrictions, security interests, options and preemptive
rights and of all other rights of any other person, corporation or
entity with respect thereto. The Bank has no capital stock authorized,
issued or outstanding other than as described in this Section 5.03(b)
and has no intention or obligation to authorize or issue any other
shares of capital stock.
(c) Except as set forth in the Disclosure Letter, there are no
options, commitments, calls, agreements, understandings, arrangements
or subscription rights regarding the issuance, purchase or acquisition
of capital stock, or any securities convertible into or representing
the right to purchase or otherwise receive the capital stock or any
debt securities, of Lafayette nor the Bank by which Lafayette or the
Bank is or may become bound. Neither Lafayette nor the Bank has any
outstanding contractual or other obligation to repurchase, redeem or
otherwise acquire any of its respective outstanding shares of capital
stock.
(d) Except as set forth in the Disclosure Letter, to the
knowledge of Lafayette, no person or entity beneficially owns 5% or
more of Lafayette's outstanding shares of common stock.
(e) As of the date hereof, there are 38,104 stock appreciation
rights (an "SAR") granted and unexercised under the Lafayette Officers'
Stock Appreciation Rights Plan. Other than such granted and unexercised
SARs, there are, and at the Effective Date there will be, no other such
rights that have been granted by Lafayette or which could be exercised.
The Base Price (as such term is defined in the Lafayette Officers'
Stock Appreciation Rights Plan) for each such granted and unexercised
SAR is $3.66.
5.04. Organizational Documents. The respective Articles of
Incorporation and By-Laws of Lafayette and the Bank have been delivered to First
Merchants and represent true, accurate and complete copies of such corporate
documents of Lafayette and the Bank in effect as of the date of this Agreement.
5.05. Compliance with Law. Except as set forth in the Disclosure
Letter, neither Lafayette nor the Bank has engaged in any activity nor taken or
omitted to take any action which has resulted or, to the knowledge of Lafayette
could result, in the violation of any local, state, federal or foreign law,
statute, rule, regulation or ordinance or of any order, injunction, judgment or
decree of any court or government agency or body, the violation of which could
materially affect the business, prospects, condition (financial or otherwise) or
results of operations of Lafayette or the Bank. Lafayette and the Bank possess
all licenses, franchises, permits and other authorizations necessary for the
continued conduct of their respective businesses without material interference
or interruption and such licenses, franchises, permits and authorizations shall
be transferred to First Merchants on the Effective Date without any restrictions
or limitations thereon or the need to obtain any consents of third parties. All
agreements and understandings with, and all orders and directives of, all
regulatory agencies or government authorities with respect to the business or
operations of Lafayette or the Bank, including all correspondence,
communications and commitments related thereto, are set forth in the Disclosure
Letter. Except as set forth in the Disclosure Letter, the Bank has received no
inquiries from any regulatory agency or government authority relating to its
compliance with the Bank Secrecy Act, the Truth-in-Lending Act or the Community
Reinvestment Act or any laws with respect to the protection of the environment
or the rules and regulations promulgated thereunder. Except as set forth in the
Disclosure Letter, Lafayette has received no inquiries from any regulatory
agency or government authority relating to its compliance with any securities
laws applicable to Lafayette.
5.06. Accuracy of Statements. Neither this Agreement nor any report,
statement, list, certificate or other information furnished or to be furnished
by Lafayette or the Bank to First Merchants pursuant to or in connection with
this Agreement or the transactions contemplated hereby (including, without
limitation, any information which has been or shall be supplied by Lafayette or
the Bank with respect to their businesses, operations and financial condition
for inclusion in the proxy statement and registration statement relating to the
Merger) contains or shall contain (in the case of information relating to the
proxy statement at the time it is mailed and for the registration statement at
the time it becomes effective) any untrue statement of a material fact or omits
or shall omit to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they are
made, not misleading.
5.07. Litigation and Pending Proceedings. Except as set forth in the
Disclosure Letter, there are no claims of any kind, nor any action, suits,
proceedings, arbitrations or investigations pending or, to the knowledge of
Lafayette or the Bank, threatened in any court or before any government agency
or body, arbitration panel or otherwise (nor does Lafayette or the Bank have any
knowledge of a basis for any claim, action, suit, proceeding, arbitration or
investigation) against, by or materially adversely affecting Lafayette or the
Bank or their respective businesses, prospects, conditions (financial or
otherwise), results of operations or assets, or which would prevent the
performance of this Agreement or declare the same unlawful or cause the
rescission hereof. There are no material uncured violations, or violations with
respect to which material refunds or restitutions may be required, cited in any
compliance report to Lafayette or the Bank as a result of an examination by any
regulatory agency or body.
5.08. Financial Statements.
(a) Lafayette's consolidated balance sheets as of the end of
the two fiscal years ended December 31, 1999 and 2000 and for the six
(6) month period ended June 30, 2001 and the related consolidated
statements of income, shareholders' equity and cash flows for the years
or period then ended (hereinafter collectively referred to as the
"Financial Information") present fairly the consolidated financial
condition or position of Lafayette as of the respective dates thereof
and the consolidated results of operations of Lafayette for the
respective periods covered thereby and have been prepared in conformity
with generally accepted accounting principles applied on a consistent
basis. The Financial Information as of and for the two (2) fiscal years
ended 1999 and 2000 are audited financial statements.
(b) All loans reflected in the Financial Information and which
have been made, extended or acquired since June 30, 2001, (i) have been
made for good, valuable and adequate consideration in the ordinary
course of business; (ii) constitute the legal, valid and binding
obligation of the obligor and any guarantor named therein; (iii) are
evidenced by notes, instruments or other evidences of indebtedness
which are true, genuine and what they purport to be; and (iv) to the
extent that the Bank has a security interest in collateral or a
mortgage securing such loans, are secured by perfected security
interests or mortgages naming the Bank as the secured party or
mortgagee, except for such unperfected security interests or mortgages
naming the Bank as secured party or mortgagee which, on an individual
loan basis, would not materially adversely affect the value of any such
loan and the recovery of payment on any such loan if the Bank is not
able to enforce any such security interest or mortgage.
5.09. Absence of Certain Changes. Except for events and conditions
relating to the business and interest rate environment in general (including
consequences of the terrorist attack on the United States on September 11,
2001), the accrual or payment of Merger-related expenses, or as set forth in the
Disclosure Letter, since June 30 2001, no events or conditions of any character,
whether actual, threatened or contemplated, have occurred, or, to the knowledge
of Lafayette, can reasonably be expected to occur, which materially adversely
affect Lafayette's or the Bank's business, prospects, conditions (financial or
otherwise), assets or results of operations or which have caused, or can
reasonably be expected to cause, Lafayette's or the Bank's business to be
conducted in a materially less profitable manner than prior to June 30, 2001.
Between the period from June 30, 2001 to the date of this Agreement, Lafayette
and the Bank have carried on their respective businesses in the ordinary and
usual course consistent with their past practices (excluding the incurrence of
fees and expenses of professional advisors related to this Agreement and the
transactions contemplated hereby) and there has not been any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to Lafayette's common stock (other than normal
quarterly cash dividends) or any split, combination or reclassification of any
stock of Lafayette or the Bank or any issuance or the authorization of any
issuance of any securities in respect of, or in lieu of, or in substitution for
shares of Lafayette's common stock.
5.10. Absence of Undisclosed Liabilities. Neither Lafayette nor the
Bank is a party to any agreement, contract, loan, obligation, commitment,
arrangement, liability, lease or license which individually exceeds $50,000 per
year or which may not be terminated within one year from the date of this
Agreement, except as set forth in the Disclosure Letter and except for unfunded
loan commitments made in the ordinary course of the Bank's business consistent
with past practices, nor to the knowledge of Lafayette does there exist any
circumstances resulting from transactions effected or to be effected or events
which have occurred or may occur or from any action taken or omitted to be taken
which could reasonably be expected to result in any such agreement, contract,
loan, obligation, commitment, arrangement, liability, lease or license.
5.11. Title to Assets.
(a) Except as set forth in the Disclosure Letter, Lafayette
and the Bank have good and marketable title in fee simple absolute to
all personal property reflected in the June 30, 2001 Financial
Information, good and marketable title to all other properties and
assets which Lafayette or the Bank purport to own, good and marketable
title to or right to use by terms of any lease or contract all other
property used in Lafayette's or the Bank's business, and good and
marketable title to all property and assets acquired since June 30,
2001, free and clear of all mortgages, liens, pledges, restrictions,
security interests, charges, claims or encumbrances of any nature.
(b) All furniture, fixtures, machinery, equipment, computer
software and hardware, and all other tangible personal property owned
or used by Lafayette or the Bank, including any such items leased as a
lessee, are in good working order and free of known defects, subject
only to normal wear and tear. The operation by Lafayette or the Bank of
such properties and assets is in compliance with all applicable laws,
ordinances, rules and regulations of any governmental authority or
third party having jurisdiction over such use, except for such
noncompliance that would not have a material adverse effect on the
business of Lafayette or the Bank.
5.12. Loans and Investments.
(a) Except as set forth in the Disclosure Letter, there is no
loan of the Bank in excess of $100,000 that has been classified by bank
regulatory examiners as "Other Loans Specially Mentioned,"
"Substandard," "Doubtful" or "Loss," nor is there any loan of the Bank
in excess of $100,000 that has been identified by management,
accountants or auditors (internal or external) as having a significant
risk of uncollectibility. The Bank's loan watch list and all loans in
excess of $100,000 that the Bank's management has determined to be
ninety (90) days or more past due with respect to principal or interest
or has placed on nonaccrual status are set forth in the Disclosure
Letter.
(b) Each of the reserves and allowances for possible loan
losses and the carrying value for real estate owned which are shown on
the Financial Information is, in the opinion of Lafayette and the Bank,
adequate in all material respects under the requirements of generally
accepted accounting principles applied on a consistent basis to provide
for possible losses on loans outstanding and real estate owned as of
the date of such Financial Information.
(c) Except as set forth in the Disclosure Letter, none of the
investments reflected in the Financial Information and none of the
investments made by Lafayette or the Bank since June 30, 2001 is
subject to any restrictions, whether contractual or statutory, which
materially impairs the ability of Lafayette or the Bank to dispose
freely of such investment at any time. Except as set forth in the
Disclosure Letter, neither Lafayette nor the Bank are a party to any
repurchase agreements with respect to securities.
5.13. Employee Benefit Plans.
(a) The Disclosure Letter contains a list identifying each
"employee benefit plan," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which (i)
is subject to any provision of ERISA, and (ii) is maintained,
administered or contributed to by Lafayette or the Bank and covers any
employee, director or former employee or director of Lafayette or the
Bank under which Lafayette or the Bank has any liability. Copies of
such plans (and, if applicable, related trust agreements or insurance
contracts) and all amendments thereto and written interpretations
thereof have been furnished to First Merchants together with the three
most recent annual reports prepared in connection with any such plan
and the current summary plan descriptions. Such plans are hereinafter
referred to individually as an "Employee Plan" and collectively as the
"Employee Plans." The Employee Plans which individually or collectively
would constitute an "employee pension benefit plan" as defined in
Section 3(2)(A) of ERISA are identified in the list referred to above.
(b) The Employee Plans comply with and have been operated in
accordance with all applicable laws, regulations, rulings and other
requirements the breach or violation of which could materially affect
Lafayette, the Bank, or an Employee Plan. Each Employee Plan has been
administered in substantial conformance with such requirements and all
reports and information required with respect to each Employee Plan
have been timely given.
(c) No "prohibited transaction," as defined in Section 406 of
ERISA or Section 4975 of the Code, for which no statutory or
administrative exemption exists, and no "reportable event," as defined
in Section 4043(b) of ERISA, for which a notice is required to be
filed, has occurred with respect to any Employee Plan. Neither
Lafayette nor the Bank has any outstanding liability to the Pension
Benefit Guaranty Corporation ("PBGC"), or any liability to the Internal
Revenue Service ("IRS"), to the Department of Labor ("DOL") or to an
employee or Employee Plan beneficiary under Section 502 of ERISA.
(d) To the best knowledge of Lafayette and the Bank, no
"fiduciary," as defined in Section 3(21) of ERISA, of an Employee Plan
has failed to comply with the requirements of Section 404 of ERISA.
(e) Each of the Employee Plans which is intended to be
qualified under Code Section 401(a) has been amended to comply in all
material respects with the applicable requirements of the Code,
including the Tax Reform Act of 1986, the Revenue Act of 1987, the
Technical and Miscellaneous Revenue Act of 1988, the Omnibus Budget
Reconciliation Act of 1989, the Revenue Reconciliation Act of 1990, the
Tax Extension Act of 1991, the Unemployment Compensation Amendments of
1992, the Omnibus Budget Reconciliation Act of 1993, and the Retirement
Protection Act of 1994 and any rules, regulations or other requirements
promulgated thereunder (the "Acts"). In addition, each such Employee
Plan has been and is being operated in substantial conformance with the
applicable provisions of ERISA and the Code, as amended by the Acts,
including operational compliance with the Uruguay Round Agreements Act,
the Uniformed Services Employment and Reemployment Rights Act of 1994,
the Small Business Job Protection Act of 1996, the Taxpayer Relief Act
of 1997, and the Internal Revenue Service Restructuring and Reform Act
of 1998 (even though actual plan amendments do not have to be made
until the last day of the 2001 plan year). Except as set forth in the
Disclosure Letter, Lafayette and/or the Bank, as applicable, sought and
received favorable determination letters from the IRS within the
applicable remedial amendment periods under Code Section 401(b), and
has furnished to First Merchants copies of the most recent IRS
determination letters with respect to any such Employee Plan.
(f) No Employee Plan owns any security of Lafayette or the
Bank, except the Bank's Employees' Pension Plan which holds 44,781
shares of Lafayette common stock.
(g) Except as set forth in the Disclosure Letter, no Employee
Plan has incurred an "accumulated funding deficiency," as determined
under Code Section 412 and ERISA Section 302.
(h) Except as set forth in the Disclosure Letter, no Employee
Plan has been terminated or incurred a partial termination (either
voluntarily or involuntarily).
(i) No claims against an Employee Plan, Lafayette or the Bank,
with respect to an Employee Plan, (other than normal benefit claims)
have been asserted or, to the best knowledge of Lafayette or the Bank,
threatened.
(j) Except as set forth in the Disclosure Letter, there is no
contract, agreement, plan or arrangement covering any employee,
director or former employee or director of Lafayette or the Bank that,
individually or collectively, could give rise to the payment of any
amount that would not be deductible by reason of Section 280G or
Section 162(a)(1) of the Code.
(k) To the best knowledge of Lafayette and the Bank, no event
has occurred that would cause the imposition of the tax described in
Code Section 4980B. To the best knowledge of Lafayette and the Bank,
all requirements of ERISA Section 601 have been met.
(l) The Disclosure Letter contains a list of each employment,
severance or other similar contract, arrangement or policy and each
plan or arrangement (written or oral) providing for insurance coverage
(including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits or deferred compensation, profit sharing,
bonuses, stock options, stock appreciation rights or other forms of
incentive compensation or post-retirement insurance, compensation or
benefits which (i) is not an Employee Plan, (ii) was entered into,
maintained or contributed to, as the case may be, by Lafayette or the
Bank, and (iii) covers any employee, director or former employee or
director of Lafayette or the Bank. Such contracts, plans and
arrangements as are described above, copies or descriptions of all of
which have been furnished previously to First Merchants, are
hereinafter referred to collectively as the "Benefit Arrangements."
Each of the Benefit Arrangements has been maintained in substantial
compliance with its terms and with the requirements prescribed by any
and all statutes, orders, rules and regulations which are applicable to
such Benefit Arrangements.
(m) Except as set forth in the Disclosure Letter, neither
Lafayette nor the Bank has any present or future liability in respect
of post-retirement health and medical benefits for former employees or
directors of Lafayette or the Bank.
(n) Except as set forth in the Disclosure Letter, there has
been no amendment to, written interpretation or announcement (whether
or not written) by Lafayette or the Bank relating to, or change in
employee participation or coverage under, any Employee Plan or Benefit
Arrangement which would increase materially the expense of maintaining
such Employee Plans or Benefit Arrangements above the level of the
expense incurred in respect thereof for the fiscal year ended December
31, 2000.
(o) For purposes of this Section 5.13, references to Lafayette
or the Bank are deemed to include (i) all predecessors of Lafayette or
the Bank, (ii) any subsidiary of Lafayette or the Bank, (iii) all
members of any controlled group (as determined under Code Section
414(b) or (c)) that includes Lafayette or the Bank, and (iv) all
members of any affiliated service group (as determined under Code
Section 414(m) or (n)) that includes Lafayette or the Bank.
5.14. Obligations to Employees. Except as set forth in the Disclosure
Letter, all accrued obligations and liabilities of Lafayette and the Bank,
whether arising by operation of law, by contract or by past custom, for payments
to trust or other funds, to any government agency or body or to any individual
director, officer, employee or agent (or his heirs, legatees or legal
representative) with respect to unemployment compensation or social security
benefits and all pension, retirement, savings, stock purchase, stock bonus,
stock ownership, stock option, stock appreciation rights or profit sharing plan,
any employment, deferred compensation, consultant, bonus or collective
bargaining agreement or group insurance contract or other incentive, welfare or
employee benefit plan or agreement maintained by Lafayette or the Bank for their
current or former directors, officers, employees and agents have been and are
being paid to the extent required by law or by the plan or contract, and
adequate actuarial accruals and/or reserves for such payments have been and are
being made by Lafayette or the Bank in accordance with generally accepted
accounting and actuarial principles, except where the failure to pay any such
accrued obligations or liabilities or to maintain adequate accruals and/or
reserves for payment thereof would not materially adversely affect Lafayette or
the Bank or their respective businesses, prospects, conditions (financial or
otherwise), results of operations or assets. All obligations and liabilities of
Lafayette and the Bank, whether arising by operation of law, by contract, or by
past custom, for all forms of compensation which are or may be payable to their
current or former directors, officers, employees or agents have been and are
being paid, and adequate accruals and/or reserves for payment therefor have been
and are being made in accordance with generally accepted accounting principles,
except where the failure to pay any such obligations and liabilities or to
maintain adequate accruals and/or reserves for payment thereof would not
materially adversely affect Lafayette or the Bank or their respective
businesses, prospects, conditions (financial or otherwise), results of
operations or assets. All accruals and reserves referred to in this Section 5.14
are correctly and accurately reflected and accounted for in the books,
statements and records of Lafayette and the Bank, except where the failure to
correctly and accurately reflect and account for such accruals and reserves
would not materially adversely affect Lafayette or the Bank or their respective
businesses, prospects, conditions (financial or otherwise), results of
operations or assets.
5.15. Taxes, Returns and Reports. Lafayette and the Bank have (a) duly
filed all federal, state, local and foreign tax returns of every type and kind
required to be filed as of the date hereof, and each return is true, complete
and accurate in all material respects; (b) paid in all material respects all
taxes, assessments and other governmental charges due or claimed to be due upon
them or any of their income, properties or assets; and (c) not requested an
extension of time for any such payments (which extension is still in force).
Except for taxes not yet due and payable, the reserve for taxes on the Financial
Information is adequate to cover all of Lafayette's and the Bank's tax
liabilities (including, without limitation, income taxes and franchise fees)
that may become payable in future years with respect to any transactions
consummated prior to June 30, 2001. Neither Lafayette nor the Bank has, or will
have, any liability for taxes of any nature for or with respect to the operation
of their business, including the assets of any subsidiary, from June 30, 2001,
up to and including the Effective Date, except to the extent reflected on their
Financial Information or on financial statements of Lafayette or the Bank
subsequent to such date and as set forth in the Disclosure Letter. Neither
Lafayette nor the Bank is currently under audit by any state or federal taxing
authority. Except as set forth in the Disclosure Letter, neither the federal,
state, or local tax returns of Lafayette or the Bank have been audited by any
taxing authority during the past five (5) years.
5.16. Deposit Insurance. The deposits of the Bank are insured by the
Federal Deposit Insurance Corporation ("FDIC") in accordance with the Federal
Deposit Insurance Act, and the Bank has paid all premiums and assessments with
respect to such deposit insurance.
5.17. Reports. Since January 1, 1995, each of Lafayette and the Bank
have timely filed all reports, registrations and statements, together with any
required amendments thereto, that it was required to file with (i) the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"), (ii) the
Indiana Department of Financial Institutions, (iii) the FDIC, and (iv) any
federal, state, municipal or local government, securities, banking,
environmental, insurance and other governmental or regulatory authority, and the
agencies and staffs thereof (collectively, the "Regulatory Authorities"), having
jurisdiction over the affairs of either Lafayette or the Bank. All such reports
filed by Lafayette and the Bank complied in all material respects with all the
rules and regulations promulgated by the applicable Regulatory Authorities and
are true, accurate and complete in all material respects and were prepared in
conformity with generally accepted regulatory accounting principles applied on a
consistent basis. Except as set forth in the Disclosure Letter, there is no
unresolved violation, criticism or exception by any of the Regulatory
Authorities with respect to any report or statement filed by, or any
examinations of, Lafayette or the Bank.
5.18. Absence of Defaults. Neither Lafayette nor the Bank is in
violation of its charter documents or By-Laws or in default under any material
agreement, commitment, arrangement, loan, lease, insurance policy or other
instrument, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that, with the
lapse of time or giving of notice or both, would constitute such a default,
except for defaults which would not have a material adverse effect on the
business of Lafayette or the Bank.
5.19. Tax and Regulatory Matters. Neither Lafayette nor the Bank has
taken or agreed to take any action or has any knowledge of any fact or
circumstance that would (i) prevent the transactions contemplated hereby from
qualifying as a reorganization within the meaning of Section 368 of the Code or
(ii) materially impede or delay receipt of any regulatory approval required for
consummation of the transactions contemplated by this Agreement.
5.20. Real Property.
(a) A list of the locations of each parcel of real property
owned by Lafayette or the Bank (other than real property acquired in
foreclosure or in lieu of foreclosure in the course of the collection
of loans and being held by Lafayette or the Bank for disposition as
required by law) is set forth in the Disclosure Letter under the
heading of "Owned Real Property" (such real property being herein
referred to as the "Owned Real Property"). A list of the locations of
each parcel of real property leased by Lafayette or the Bank is also
set forth in the Disclosure Letter under the heading of "Leased Real
Property" (such real property being herein referred to as the "Leased
Real Property"). Lafayette shall update the Disclosure Letter within
ten (10) days after acquiring or leasing any real property after the
date hereof. Collectively, the Owned Real Property and the Leased Real
Property are herein referred to as the "Real Property."
(b) There is no pending action involving Lafayette or the Bank
as to the title of or the right to use any of the Real Property.
(c) Neither Lafayette nor the Bank has any interest in any
other real property except interests as a mortgagee, and except for any
real property acquired in foreclosure or in lieu of foreclosure and
being held for disposition as required by law.
(d) None of the buildings, structures or other improvements
located on the Real Property encroaches upon or over any adjoining
parcel of real estate or any easement or right-of-way or "setback" line
and all such buildings, structures and improvements are located and
constructed in conformity with all applicable zoning ordinances and
building codes. The representation made in the immediately preceding
sentence shall be deemed to have been made to the knowledge of
Lafayette and the Bank, except with respect to the main downtown office
of the Bank located at 133 North Fourth Street, Lafayette, Indiana to
which office such knowledge qualifier shall not be applicable.
(e) None of the buildings, structures or improvements located
on the Real Property are the subject of any official complaint or
notice by any governmental authority of violation of any applicable
zoning ordinance or building code, and there is no zoning ordinance,
building code, use or occupancy restriction or condemnation action or
proceeding pending, or, to the best knowledge of Lafayette, threatened,
with respect to any such building, structure or improvement. The Real
Property is in good condition for its intended purpose, ordinary wear
and tear excepted, and has been maintained in accordance with
reasonable and prudent business practices applicable to like
facilities. The Real Property has been used and operated in compliance
with all applicable laws, statutes, rules, regulations and ordinances
applicable thereto.
(f) Except as may be reflected in the Financial Information or
with respect to such easements, liens, defects or encumbrances as do
not individually or in the aggregate materially adversely affect the
use or value of the Owned Real Property, Lafayette and the Bank have,
and at the Closing Date will have, good and marketable title to their
respective Owned Real Property, free and clear of all liens, mortgages,
security interests, encumbrances and restrictions of any kind or
character.
(g) Neither Lafayette nor the Bank has caused or allowed the
generation, treatment, storage, disposal or release at any Real
Property of any Toxic Substance, except in accordance with all
applicable federal, state and local laws and regulations. "Toxic
Substance" means any hazardous, toxic or dangerous substance,
pollutant, waste, gas or material, including, without limitation,
petroleum and petroleum products, metals, liquids, semi-solids or
solids, that are regulated under any federal, state or local statute,
ordinance, rule, regulation or other law pertaining to environmental
protection, contamination, quality, waste management or cleanup.
(h) Except as disclosed in the Disclosure Letter, there are no
underground storage tanks located on, in or under any Owned Real
Property and no such Owned Real Property has previously contained an
underground storage tank. Neither Lafayette nor the Bank own or operate
any underground storage tank at any Leased Real Property and no such
Leased Real Property has previously contained an underground storage
tank. No Real Property is or has been listed on the CERCLIS.
(i) No Toxic Substance has been released, spilled, discharged
or disposed at, in, on or under any Real Property nor are there any
other conditions or circumstances affecting any Real Property, in each
case, which would pose a significant risk to the environment or the
health or safety of persons or otherwise pose a material risk of
liability for remediation, corrective action or clean-up.
(j) The Real Property is not "property" within the definition
of Indiana Code 13-11-2-174. Neither Lafayette nor the Bank is required
to provide a "disclosure document" to First Merchants as a result of
the Merger pursuant to the Indiana Responsible Property Transfer Law
(I.C. ss. 13-25-3-1 et seq.).
(k) Except as set forth in the Disclosure Letter, there are no
mechanic's or materialman's liens against the Real Property, and no
unpaid claims for labor performed, materials furnished or services
rendered in connection with constructing, improving or repairing the
Real Property in respect of which liens may or could be filed against
the Real Property.
5.21. Securities Law Compliance. Lafayette's common stock is traded on
the over-the-counter bulletin board of the National Association of Securities
Dealers, Inc. under the symbol of "LAYB." Lafayette has complied in all material
respects with all state, federal or foreign securities laws, statutes, rules,
regulations or orders, injunctions or decrees of any government agency relating
thereto. Lafayette has complied in all material respects with all rules,
regulations, orders, injunctions or decrees of the National Association of
Securities Dealers, Inc. and all entities related or affiliated therewith and
has filed all reports and documents required to be filed with such entities.
Lafayette has filed all reports and other documents required to be filed by it
under the Securities Exchange Act of 1934 and the Securities Act of 1933,
including Lafayette's Annual Report on Form 10-K for the year ended December 31,
2000, and Quarterly Report on Form 10-Q for the quarter ended June 30, 2001,
copies of which have previously been delivered to First Merchants. All such
Securities and Exchange Commission filings were true, accurate and complete in
all material respects as of the dates of the filings, and no such filings
contained any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements, at the time and in the light of
the circumstances under which they were made, not false or misleading.
5.22. Broker's or Finder's Fees. Except for Dain Rauscher Wessels, a
division of Dain Rauscher Incorporated, no agent, broker or other person acting
on behalf of Lafayette or the Bank or under any authority of Lafayette or the
Bank is or shall be entitled to any commission, broker's or finder's fee or any
other form of compensation or payment from any of the parties hereto, other than
attorneys' or accountants' fees, in connection with any of the transactions
contemplated by this Agreement.
5.23. Shareholder Rights Plan. Except as otherwise provided in
Lafayette's Articles of Incorporation and By-Laws, Lafayette has no shareholder
rights plan or any other plan, program or agreement involving, restricting,
prohibiting or discouraging a change in control or merger of Lafayette or which
may be considered an anti-takeover mechanism.
5.24. Indemnification Agreements. Except as set forth in the Disclosure
Letter, neither Lafayette nor the Bank is a party to any indemnification,
indemnity or reimbursement agreement, contract, commitment or understanding to
indemnify any present or former director, officer, employee, shareholder or
agent against any liability or hold the same harmless from liability other than
as expressly provided in the Articles of Incorporation or By-Laws of Lafayette
and the Bank.
5.25 Bring Down of Representations and Warranties. All representations
and warranties of Lafayette and the Bank contained in this Section 5 shall be
true, accurate and correct on and as of the Effective Date except as affected by
the transactions contemplated by and specified within the terms of this
Agreement.
5.26. Nonsurvival of Representations and Warranties. The
representations and warranties contained in this Section 5 shall expire on the
Effective Date or the earlier termination of this Agreement, and thereafter
Lafayette and the Bank and all directors and officers of Lafayette and the Bank
shall have no further liability with respect thereto unless a court of competent
jurisdiction should determine that any misrepresentation or breach of a warranty
was willfully or intentionally made or is deemed to be fraudulent.
SECTION 6
Representations and
Warranties of First Merchants
First Merchants hereby represents and warrants to Lafayette as follows.
(For the purposes of this Section, a "Disclosure Letter" is defined as a letter
referencing Section 6 of this Agreement which shall be prepared and executed by
an authorized executive officer of First Merchants and delivered to and
initialed by an authorized executive officer of Lafayette contemporaneous with
the execution of this Agreement).
6.01. Organization and Qualification. First Merchants is a corporation
organized and existing under the laws of the State of Indiana and has the
corporate power and authority to conduct its business in the manner and by the
means utilized as of the date hereof.
6.02. Authorization.
(a) First Merchants has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder
subject to certain required regulatory approvals and First Merchants'
shareholder approval. The Agreement, when executed and delivered, will
have been duly authorized and will constitute a valid and binding
obligation of First Merchants, enforceable in accordance with its
terms, except to the extent limited by insolvency, reorganization,
liquidation, readjustment of debt, or other laws of general application
relating to or affecting the enforcement of creditor's rights.
(b) Neither the execution of this Agreement, nor the
consummation of the transactions contemplated hereby, does or will (i)
conflict with, result in a breach of, or constitute a default under
First Merchants' Articles of Incorporation or By-laws; (ii) conflict
with, result in a breach of, or constitute a default under any federal,
foreign, state or local law, statute, ordinance, rule, regulation, or
court or administrative order or decree, or any note, bond, indenture,
mortgage, security agreement, contract, arrangement, or commitment, to
which First Merchants is subject or bound, the result of which would
materially affect the business or financial condition of First
Merchants; (iii) result in the creation of or give any person,
corporation or entity, the right to create any lien, charge, claim,
encumbrance, security interest, or any other rights of others or other
adverse interest upon any right, property or asset of First Merchants;
(iv) terminate or give any person, corporation or entity the right to
terminate, amend, abandon, or refuse to perform any note, bond,
indenture, mortgage, security agreement, contract, arrangement, or
commitment to which First Merchants is a party or by which First
Merchants is subject or bound; or (v) accelerate or modify, or give any
party thereto the right to accelerate or modify, the time within which,
or the terms according to which, First Merchants is to perform any
duties or obligations or receive any rights or benefits under any note,
bond, indenture, mortgage, security agreement, contract, arrangement,
or commitment.
(c) Other than in connection or in compliance with the
provisions of the Bank Holding Company Act of 1956, federal and state
securities laws, and applicable Indiana banking and corporate statutes,
all as amended, and the rules and regulations promulgated thereunder,
no notice to, filing with, authorization of, exemption by, or consent
or approval of, any public body or authority is necessary for the
consummation by First Merchants of the transactions contemplated by
this Agreement.
(d) Other than those filings, authorizations, consents and
approvals referenced in Section 6.02(c) above and filings and approvals
relating to the listing of the shares of First Merchants common stock
to be issued in the Merger on the National Market System of NASDAQ and
certain other filings and approvals with NASDAQ relating to the change
in the number of shares of First Merchants outstanding as a result of
the Merger, no notice to, filing with, authorization of, execution by,
or consent or approval of, any third party is necessary for the
consummation by First Merchants of the transactions contemplated by
this Agreement.
6.03. Capitalization.
(a) As of October 14, 2001, First Merchants had 50,000,000
shares of common stock authorized, no par value, of which 12,675,468
shares were issued and outstanding. Such issued and outstanding shares
of First Merchants' common stock have been duly and validly authorized
by all necessary corporate action of First Merchants, are validly
issued, fully paid and nonassessable and have not been issued in
violation of any preemptive rights of any shareholders.
(b) First Merchants has 500,000 shares of Preferred Stock
authorized, no par value, no shares of which have been issued and no
commitments exist to issue any of such shares.
(c) The shares of First Merchants' common stock to be issued
pursuant to the Merger will be fully paid, validly issued and
nonassessable.
6.04. Organizational Documents. The Articles of Incorporation and
By-laws of First Merchants in force as of the date hereof have been delivered to
Lafayette. The documents delivered by it represent true, accurate and complete
copies of the corporate documents of First Merchants in effect as of the date of
this Agreement.
6.05. Litigation and Pending Proceedings. Except as set forth in the
Disclosure Letter, there are no claims of any kind, nor any action, suits,
proceedings, arbitrations or investigations pending or, to the knowledge of
First Merchants threatened, in any court or before any government agency or
body, arbitration panel or otherwise (nor does First Merchants have any
knowledge of a basis for any claim, action, suit, proceeding, arbitration or
investigation) against First Merchants or any of its subsidiaries which are
material to the business, prospects, condition (financial or otherwise), results
of operations or assets of First Merchants and its subsidiaries taken as a
whole. There are no material uncured violations, or violations with respect to
which material refunds or restitutions may be required, cited in any compliance
report to First Merchants or its subsidiary, First Merchants Bank, National
Association, as a result of an examination by any regulatory agency or body.
6.06. Financial Statements. First Merchants consolidated balance sheets
as of the end of the two fiscal years ended December 31, 1999 and 2000 and the
six (6) months ended June 30, 2001 and the related consolidated statements of
income, shareholders' equity and cash flows for the years or period then ended
("First Merchants Financial Information") present fairly the consolidated
financial condition or position of First Merchants as of the respective dates
thereof and the consolidated results of operations of First Merchants for the
respective periods covered thereby and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis. The
First Merchants financial statements as of and for the two (2) fiscal years
ended December 31, 1999 and 2000 are audited financial statements.
6.07. Loans and Investments.
(a) Except as set forth in the Disclosure Letter, as of June
30, 2001, there was no loan of First Merchants Bank, National
Association ("Bank Subsidiary") in excess of $100,000 that had been
classified by bank regulatory examiners as "Other Loans Specially
Mentioned," "Substandard," "Doubtful" or "Loss." All loans of First
Merchants Bank, National Association as of June 30, 2001, in excess of
$100,000 that management has determined to be ninety (90) days or more
past due with respect to principal or interest or has placed on
nonaccrual status are set forth in the Disclosure Letter.
(b) Each of the reserves and allowances for possible loan
losses and the carrying value for real estate owned which are shown on
the First Merchants Financial Information is, in the opinion of First
Merchants, adequate in all material respects under the requirements of
generally accepted accounting principles applied on a consistent basis
to provide for possible losses on loans outstanding and real estate
owned as of the date of such First Merchants Financial Information.
(c) Except as set forth in the Disclosure Letter, none of the
investments reflected in the First Merchants Financial Information and
none of the investments made by First Merchants or its subsidiary,
First Merchants Bank, National Association, since June 30, 2001 is
subject to any restrictions, whether contractual or statutory, which
materially impairs the ability of First Merchants or its subsidiary,
First Merchants Bank, National Association, to dispose freely of such
investment at any time. Except as set forth in the Disclosure Letter,
neither First Merchants nor its subsidiary, First Merchants Bank,
National Association, is a party to any repurchase agreements with
respect to securities.
6.08. Employee Benefit Plans.
(a) The Disclosure Letter contains a list identifying each
"employee benefit plan," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which (i)
is subject to any provision of ERISA, and (ii) is maintained,
administered or contributed to by First Merchants or its subsidiaries
and covers any employee, director or former employee or director of
First Merchants or its subsidiaries under which First Merchants or any
of its subsidiaries has any liability. Copies of such plans (and, if
applicable, related trust agreements or insurance contracts) and all
amendments thereto and written interpretations thereof have been
furnished to Lafayette together with the three most recent annual
reports prepared in connection with any such plan and the current
summary plan descriptions. Such plans are hereinafter referred to
individually as a "First Merchants Employee Plan" and collectively as
the "First Merchants Employee Plans." The First Merchants Employee
Plans which individually or collectively would constitute an "employee
pension benefit plan" as defined in Section 3(2)(A) of ERISA are
identified in the list referred to above.
(b) The First Merchants Employee Plans comply with and have
been operated in accordance with all applicable laws, regulations,
rulings and other requirements the breach or violation of which could
materially affect First Merchants, any of its subsidiaries, or a First
Merchants Employee Plan. Each First Merchants Employee Plan has been
administered in substantial conformance with such requirements and all
reports and information required with respect to each First Merchants
Employee Plan have been timely given.
(c) No "prohibited transaction," as defined in Section 406 of
ERISA or Section 4975 of the Code, for which no statutory or
administrative exemption exists, and no "reportable event," as defined
in Section 4043(b) of ERISA, for which a notice is required to be
filed, has occurred with respect to any First Merchants Employee Plan.
Neither First Merchants nor any of its subsidiaries has any outstanding
liability to the Pension Benefit Guaranty Corporation ("PBGC"), or any
liability to the Internal Revenue Service ("IRS"), to the Department of
Labor ("DOL") or to an employee or First Merchants Employee Plan
beneficiary under Section 502 of ERISA.
(d) To the best knowledge of First Merchants, no "fiduciary,"
as defined in Section 3(21) of ERISA, of a First Merchants Employee
Plan has failed to comply with the requirements of Section 404 of
ERISA.
(e) Each of the First Merchants Employee Plans which is
intended to be qualified under Code Section 401(a) has been amended to
comply in all material respects with the applicable requirements of the
Code, including the Tax Reform Act of 1986, the Revenue Act of 1987,
the Technical and Miscellaneous Revenue Act of 1988, the Omnibus Budget
Reconciliation Act of 1989, the Revenue Reconciliation Act of 1990, the
Tax Extension Act of 1991, the Unemployment Compensation Amendments of
1992, the Omnibus Budget Reconciliation Act of 1993, and the Retirement
Protection Act of 1994 and any rules, regulations or other requirements
promulgated thereunder (the "Acts"). In addition, each such First
Merchants Employee Plan has been and is being operated in substantial
conformance with the applicable provisions of ERISA and the Code, as
amended by the Acts, including operational compliance with the Uruguay
Round Agreements Act, the Uniformed Services Employment and
Reemployment Rights Act of 1994, the Small Business Job Protection Act
of 1996, the Taxpayer Relief Act of 1997, and the Internal Revenue
Service Restructuring and Reform Act of 1998 (even though actual plan
amendments do not have to be made until the last day of the 2001 plan
year). Except as set forth in the Disclosure Letter, First Merchants
and/or its subsidiaries, as applicable, sought and received favorable
determination letters from the IRS within the applicable remedial
amendment periods under Code Section 401(b), and have furnished to
Lafayette copies of the most recent IRS determination letters with
respect to any such First Merchants Employee Plan.
(f) No First Merchants Employee Plan has incurred an
"accumulated funding deficiency," as determined under Code Section 412
and ERISA Section 302.
(g) No First Merchants Employee Plan has been terminated or
incurred a partial termination (either voluntarily or involuntarily).
(h) No claims against a First Merchants Employee Plan, First
Merchants, or any of its subsidiaries, with respect to a First
Merchants Employee Plan (other than normal benefit claims), have been
asserted or, to the best knowledge of First Merchants, threatened.
(i) To the best knowledge of First Merchants, no event has
occurred that would cause the imposition of the tax described in Code
Section 4980B. To the best knowledge of First Merchants, all
requirements of ERISA Section 601 have been met.
(j) Except as set forth in the Disclosure Letter, there has
been no amendment to, written interpretation or announcement (whether
or not written) by First Merchants or any of its subsidiaries relating
to, or change in employee participation or coverage under, any First
Merchants Employee Plan which would increase materially the expense of
maintaining such First Merchants Employee Plans above the level of the
expense incurred in respect thereof for the fiscal year ended December
31, 2000.
(k) For purposes of this Section 6.08, references to First
Merchants or its subsidiaries are deemed to include (i) all
predecessors of First Merchants or its subsidiaries, (ii) all members
of any controlled group (as determined under Code Section 414(b) or
(c)) that includes First Merchants or any of its subsidiaries, and
(iii) all members of any affiliated service group (as determined under
Code Section 414(m) or (n)) that includes First Merchants or any of its
subsidiaries.
6.09. Taxes, Returns and Reports. First Merchants and its subsidiaries
have (a) duly filed all federal, state, local and foreign tax returns of every
type and kind required to be filed as of the date hereof, and each return is
true, complete and accurate in all material respects; (b) paid in all material
respects all taxes, assessments and other governmental charges due or claimed to
be due upon them or any of their income, properties or assets; and (c) not
requested an extension of time for any such payments (which extension is still
in force). Except for taxes not yet due and payable, the reserve for taxes on
the First Merchants Financial Information is adequate to cover all of First
Merchants' and its subsidiaries' tax liabilities (including, without limitation,
income taxes and franchise fees) that may become payable in future years with
respect to any transactions consummated prior to June 30, 2001. Neither First
Merchants not any of its subsidiaries has, or will have, any liability for taxes
of any nature for or with respect to the operation of their business, including
the assets of any subsidiary, from June 30, 2001, up to and including the
Effective Date, except to the extent reflected on their First Merchants
Financial Information or on financial statements of First Merchants subsequent
to such date and as set forth in the Disclosure Letter. Neither First Merchants
nor any of its subsidiaries is currently under audit by any state or federal
taxing authority. Except as set forth in the Disclosure Letter, neither the
federal, state, or local tax returns of First Merchants or its subsidiaries have
been audited by any taxing authority during the past five (5) years.
6.10. Reports. Since January 1, 1995, First Merchants and its
subsidiaries have timely filed all reports, registrations and statements,
together with any required amendments thereto, that it was required to file with
the Regulatory Authorities having jurisdiction over the affairs of either First
Merchants or its subsidiaries. All such reports filed by First Merchants and its
subsidiaries complied in all material respects with all the rules and
regulations promulgated by the applicable Regulatory Authorities and are true,
accurate and complete in all material respects and were prepared in conformity
with generally accepted regulatory accounting principles applied on a consistent
basis. Except as set forth in the Disclosure Letter, there is no unresolved
violation, criticism or exception by any of the Regulatory Authorities with
respect to any report or statement filed by, or any examinations of, First
Merchants or its subsidiary, First Merchants Bank, National Association.
6.11. Absence of Defaults. First Merchants is not in violation of its
charter documents or By-Laws or in default under any material agreement,
commitment, arrangement, loan, lease, insurance policy or other instrument,
whether entered into in the ordinary course of business or otherwise and whether
written or oral, and there has not occurred any event that, with the lapse of
time or giving of notice or both, would constitute such a default, except for
defaults which would not have a material adverse effect on the business of First
Merchants or its subsidiaries.
6.12. Accuracy of Statements. Neither this Agreement nor any report,
statement, list, certificate or other information furnished or to be furnished
by First Merchants to Lafayette pursuant to or in connection with this Agreement
or the transactions contemplated hereby (including, without limitation, any
information which has been or shall be supplied by First Merchants with respect
to its business, operations and financial condition for inclusion in the proxy
statement and registration statement relating to the Merger) contains or shall
contain (in the case of information relating to the proxy statement at the time
it is mailed and to the registration statement at the time it becomes effective)
any untrue statement of a material fact or omits or shall omit to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.
6.13. Compliance With Law. First Merchants has not engaged in any
activity nor taken or omitted to take any action which has resulted or, to the
knowledge of First Merchants, could result in the violation of any local, state,
federal or foreign law, statute, rule, regulation or ordinance or of any order,
injunction, judgment or decree of any court or government agency or body, the
violation of which could materially adversely affect the business, prospects,
condition (financial or otherwise) or results of operations of First Merchants.
First Merchants possesses all licenses, franchises, permits and other
authorizations necessary for the continued conduct of its business without
material interference or interruption. There are no agreements or understandings
with, nor any orders or directives of, any regulatory agencies or government
authorities, which would have a material adverse effect on the consolidated
financial position of First Merchants. First Merchants has received no written
inquiries from any regulatory agency or government authority relating to its
compliance with the Bank Secrecy Act, the Truth-in-Lending Act or the Community
Reinvestment Act or any laws with respect to the protection of the environment
or the rules and regulations promulgated thereunder. First Merchants has
received no inquiries from any regulatory agency or government authority
relating to its compliance with any securities laws applicable to First
Merchants.
6.14. Absence of Certain Changes. Except for events and conditions
relating to the business and interest rate environment in general (including
consequences of the terrorist attack on the United States on September 11, 2001)
and the accrual or payment of Merger-related expenses, since June 30, 2001, no
events or conditions of any character, whether actual, threatened or
contemplated, have occurred, or can reasonably be expected to occur, which
materially adversely affect First Merchants consolidated business, prospects,
conditions (financial or otherwise), assets or results of operations or which
have caused, or can reasonably be expected to cause, First Merchants business,
on a consolidated basis, to be conducted in a materially less profitable manner
than prior to June 30, 2001.
6.15. First Merchants Securities and Exchange Commission Filings. First
Merchants has complied in all material respects with all state, federal or
foreign securities laws, statutes, rules, regulations or orders, injunctions or
decrees of any government agency relating thereto. First Merchants has filed all
reports and other documents required to be filed by it under the Securities
Exchange Act of 1934 and the Securities Act of 1933, including First Merchants'
Annual Report on Form 10-K for the year ended December 31, 2000, and Quarterly
Report on Form 10-Q for the quarter ended June 30, 2001, copies of which have
previously been delivered to Lafayette. All such Securities and Exchange
Commission ("SEC") filings were true, accurate and complete in all material
respects as of the dates of the filings, and no such filings contained any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements, at the time and in the light of the
circumstances under which they were made, not false or misleading.
6.16. Environmental Matters.
(a) Neither First Merchants nor any of its subsidiaries has
caused or allowed the generation, treatment, storage, disposal or
release at any real property owned or leased by them of any Toxic
Substance, except in accordance with all applicable federal, state and
local laws and regulations.
(b) Except as disclosed in the Disclosure Letter, there are no
underground storage tanks located on, in or under any real property
owned by First Merchants or any of its subsidiaries and no such owned
real property has previously contained an underground storage tank.
Neither First Merchants nor any of its subsidiaries own or operate any
underground storage tank at any real property leased by them and no
such leased real property has previously contained an underground
storage tank. No such owned or leased real property is or has been
listed on the CERCLIS.
(c) No Toxic Substance has been released, spilled, discharged
or disposed at, in, on or under any real property owned or leased by
First Merchants or any of its subsidiaries nor are there any other
conditions or circumstances affecting any real property owned or leased
by First Merchants or any of its subsidiaries, in each case, which
would pose a significant risk to the environment or the health or
safety of persons or otherwise pose a material risk of liability for
remediation, corrective action or clean-up.
6.17. Bring Down of Representations and Warranties. All representations
and warranties of First Merchants contained in this Section 6 shall be true,
accurate and correct on and as of the Effective Date except as affected by the
transactions contemplated by and specified within the terms of this Agreement.
6.18. Nonsurvival of Representations and Warranties. The
representations and warranties contained in this Section 6 shall expire on the
Effective Date or the earlier termination of this Agreement, and thereafter
First Merchants and all directors and officers of First Merchants shall have no
further liability with respect thereto unless a court of competent jurisdiction
should determine that any misrepresentation or breach of a warranty was
willfully or intentionally made or is deemed to be fraudulent.
SECTION 7
Covenants of Lafayette
Lafayette covenants and agrees with First Merchants, and covenants and
agrees to cause the Bank to act, as follows:
7.01. Shareholder Approval. Lafayette shall submit this Agreement to
its shareholders for approval at a meeting to be called and held in accordance
with applicable law and the Articles of Incorporation and By-Laws of Lafayette
at the earliest possible reasonable date, and, subject to Section 7.05 hereof,
the Board of Directors of Lafayette shall recommend to the shareholders of
Lafayette that such shareholders approve this Agreement and shall not thereafter
withdraw or modify its recommendation. The Board of Directors of Lafayette shall
use its best efforts to obtain any vote of its shareholders necessary for the
approval of this Agreement.
7.02. Other Approvals. Lafayette and the Bank shall proceed
expeditiously, cooperate fully and use their best efforts to procure upon
reasonable terms and conditions all consents, authorizations, approvals,
registrations and certificates, to complete all filings and applications and to
satisfy all other requirements prescribed by law which are necessary for
consummation of the Merger on the terms and conditions provided in this
Agreement at the earliest possible reasonable date.
7.03. Conduct of Business.
(a) On and after the date of this Agreement and until the
Effective Date or until this Agreement shall be terminated as herein
provided, neither Lafayette nor the Bank shall, without the prior
written consent of First Merchants, (i) make any material changes in
their capital structure; (ii) authorize a class of stock or issue, or
authorize the issuance of, stock other than or in addition to the
outstanding stock as set forth in Section 5.03 hereof; (iii) declare,
distribute or pay any dividends on their shares of common stock, or
authorize a stock split, or make any other distribution to their
shareholders, except for (a) the payment by Lafayette prior to the
Effective Date of quarterly cash dividends on its common stock in the
amount of $.11 per share plus a year-end special dividend of up to $.05
per share (provided the declaration of the last dividend by Lafayette
prior to the Effective Date and the payment thereof shall be
coordinated with First Merchants so that the holders of Lafayette
common stock do not receive dividends on both Lafayette common stock
and First Merchants common stock received in the Merger in respect of
such quarter or fail to receive a dividend on at least one of the
Lafayette common stock or First Merchants common stock received in the
Merger in respect of such quarter), and (b) the payment by the Bank to
Lafayette of dividends to pay Lafayette's expenses of operations and
its business and payment of fees and expenses incurred in connection
with the transactions contemplated by this Agreement; (iv) except as
set forth in the Disclosure Letter, merge, combine or consolidate with
or sell their assets or any of their securities to any other person,
corporation or entity, effect a share exchange or enter into any other
transaction not in the ordinary course of business; (v) except as set
forth in the Disclosure Letter, incur any liability or obligation, make
any commitment, payment or disbursement, enter into any contract,
agreement, understanding or arrangement or engage in any transaction,
or acquire or dispose of any property or asset having a fair market
value in excess of $10,000.00 (except for personal or real property
acquired or disposed of in connection with foreclosures on mortgages or
enforcement of security interests and loans made or sold by the Bank in
the ordinary course of business); (vi) subject any of their properties
or assets to a mortgage, lien, claim, charge, option, restriction,
security interest or encumbrance; (vii) promote or increase or decrease
the rate of compensation or enter into any agreement to promote or
increase or decrease the rate of compensation of any director, officer
or employee of Lafayette or the Bank (except for year end bonuses in an
aggregate amount not to exceed $550,000, and promotions and
non-material increases in the ordinary course of business and in
accordance with past practices); (viii) except as set forth in the
Disclosure Letter, execute, create, institute, modify or amend any
pension, retirement, savings, stock purchase, stock bonus, stock
ownership, stock option, stock appreciation or depreciation right or
profit sharing plans, any employment, deferred compensation,
consultant, bonus or collective bargaining agreement, group insurance
contract or other incentive, welfare or employee benefit plan or
agreement for current or former directors, officers or employees of
Lafayette or the Bank, change the level of benefits or payments under
any of the foregoing or increase or decrease any severance or
termination pay benefits or any other fringe or employee benefits other
than as required by law or regulatory authorities or specifically
provided for in this Agreement; (ix) amend their Articles of
Incorporation or By-Laws from those in effect on the date of this
Agreement; (x) modify, amend or institute new employment policies or
practices, or enter into, renew or extend any employment or severance
agreements with respect to any present or former Lafayette or Bank
directors, officers or employees; (xi) give, dispose, sell, convey,
assign, hypothecate, pledge, encumber or otherwise transfer or grant a
security interest in any common stock of the Bank; (xii) fail to make
additions to the Bank's reserve for loan losses, or any other reserve
account, in the ordinary course of business and in accordance with
sound banking practices; (xiii) other than in the ordinary course of
business consistent with past practice, incur any indebtedness for
borrowed money or assume, guarantee, endorse or otherwise as an
accommodation become responsible or liable for the obligations of any
other individual, corporation or other entity; and (xiv) agree in
writing or otherwise to take any of the foregoing actions.
(b) Lafayette and the Bank shall maintain, or cause to be
maintained, in full force and effect insurance on its properties and
operations and fidelity coverage on its directors, officers and
employees in such amounts and with regard to such liabilities and
hazards as customarily are maintained by other companies operating
similar businesses.
(c) Lafayette and the Bank shall continue to give to First
Merchants and its employees, accountants, attorneys and other
authorized representatives reasonable access during regular business
hours and other reasonable times to all their premises, properties,
statements, books and records.
7.04. Preservation of Business. On and after the date of this Agreement
and until the Effective Date or until this Agreement is terminated as herein
provided, Lafayette and the Bank each shall (a) carry on their business
diligently, substantially in the same manner as heretofore conducted, and in the
ordinary course of business; (b) use their best efforts to preserve their
business organizations intact, to keep their present officers and employees and
to preserve their present relationship with customers and others having business
dealings with them; and (c) not do or fail to do anything which will cause a
material breach of, or material default in, any contract, agreement, commitment,
obligation, understanding, arrangement, lease or license to which they are a
party or by which they are or may be subject or bound.
7.05. Other Negotiations. On and after the date of this Agreement and
until the Effective Date, Lafayette and the Bank shall not, and shall not permit
or authorize their respective directors, officers, employees, agents or
representatives to, directly or indirectly, initiate, solicit, encourage, or
engage in discussions or negotiations with, or provide information to, any
corporation, association, partnership, person or other entity or group
concerning any proposal by such corporation, association, partnership, person or
other entity or group for a merger, consolidation, share exchange, combination,
purchase or sale of substantial assets, sale of shares of capital stock (or
securities convertible or exchangeable into or otherwise evidencing, or any
agreement or instrument evidencing the right to acquire, capital stock), tender
offer, acquisition of control of Lafayette or the Bank or similar transaction
involving Lafayette or the Bank (all such transactions hereinafter referred to
as an "Acquisition Transaction"). Lafayette and the Bank shall promptly
communicate to First Merchants the terms of any proposal, written or oral, which
either may receive with respect to an Acquisition Transaction and any request by
or indication of interest on the part of any third party with respect to
initiation of any Acquisition Transaction or discussion with respect thereto.
The above provisions of this Section 7.05 notwithstanding, nothing contained in
this Agreement shall prohibit (i) Lafayette from furnishing information to, or
entering into discussions or negotiations with, any person or entity that makes
an unsolicited proposal of an Acquisition Transaction if and to the extent that
(a) the Board of Directors of Lafayette, after consultation with legal counsel
and its investment banker, determines in good faith that such action is required
for the directors of Lafayette to fulfill their fiduciary duties and obligations
to Lafayette's shareholders and other constituencies under Indiana law, and (b)
prior to furnishing such information to, or entering into discussions or
negotiations with, such person or entity, Lafayette provides immediate written
notice to First Merchants to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such person or entity, or (ii)
notwithstanding the provisions of Section 7.01, the Board of Directors of
Lafayette from failing to make, withdrawing or modifying its recommendation to
shareholders regarding the Merger following receipt of a proposal for an
Acquisition Transaction if the Board of Directors of Lafayette, after
consultation with and based upon the advice of legal counsel and its investment
banker, determines in good faith that such action is required for the directors
of Lafayette to fulfill their fiduciary duties and obligations to Lafayette's
shareholders and other constituencies under Indiana law.
7.06. Restrictions Regarding Affiliates. Lafayette shall, within thirty
(30) days after the date of this Agreement and promptly thereafter until the
Effective Date to reflect any changes or upon the reasonable request of First
Merchants, provide First Merchants with a list identifying each person who may
reasonably be deemed to be an "affiliate" of Lafayette within the meaning of
such term as used in Rule 145 under the Securities Act of 1933, as amended (the
"1933 Act"). Each director, executive officer and other person who is an
"affiliate" of Lafayette for purposes of the 1933 Act shall deliver to First
Merchants, at least thirty-one (31) days prior to the Effective Date, a written
agreement, in form and substance satisfactory to counsel to First Merchants,
regarding compliance by each such person with the provisions of such Rule 145.
7.07. Press Release. Except as required by law, neither Lafayette nor
the Bank shall issue any press releases or make any other public announcements
or disclosures relating to the Merger without the prior approval of First
Merchants, which approval will not be unreasonably withheld.
7.08. Disclosure Letter. Lafayette shall promptly supplement, amend and
update monthly and as of the Effective Date the Disclosure Letter with respect
to any matters hereafter arising which, if in existence or having occurred as of
the date of this Agreement, would have been required to be set forth or
described in the Disclosure Letter.
7.09 Confidentiality. Lafayette agrees to abide by the terms of the
Confidentiality Agreement between Lafayette and First Merchants executed as of
August 28, 2001. This provision shall survive the Effective Date or the earlier
termination of this Agreement.
7.10. Cooperation. Lafayette shall generally cooperate with First
Merchants and its officers, employees, attorneys, accountants and other agents,
and, generally, do such other acts and things in good faith as may be
reasonable, necessary or appropriate to timely effectuate the intents and
purposes of this Agreement and the consummation of the transactions contemplated
hereby, including, without limitation, (i) Lafayette shall cooperate and assist
First Merchants in preparation of and/or filing of all regulatory applications,
the registration statement for registration of First Merchants' shares, and all
other documentation required to be prepared for consummation of the Merger and
obtaining all necessary approvals, and (ii) Lafayette shall furnish First
Merchants with all information concerning itself and the Bank that First
Merchants may request in connection with the preparation of the documentation
referenced above. Prior to the Closing (as defined in Section 12 hereof),
Lafayette agrees to disclose to First Merchants any fact or matter that comes to
the attention of Lafayette that might indicate that any of the representations
or warranties of Lafayette may be untrue, incorrect, or misleading in any
material respect.
7.11. Letter to Lafayette's Shareholders. Within five (5) business days
after execution of this Agreement by Lafayette and First Merchants, Lafayette
shall deposit in the United States mail a letter to each of the shareholders of
record of Lafayette as of the date of execution of this Agreement informing each
shareholder about the execution of this Agreement and the proposed Merger. The
terms of such letter to the shareholders of Lafayette shall be in a form
mutually agreed to by First Merchants and Lafayette.
7.12. Exercise of Options and Stock Appreciation Rights. Lafayette
shall cause the stock options disclosed pursuant to Section 5.03(c) hereof to be
exercised and the related shares of Lafayette's common stock to be issued on or
immediately before the Effective Date. Lafayette commits that no cash shall be
paid to option holders in connection with the exercise of such options and that
immediately prior to the Effective Date of the Merger, Lafayette shall have no
more than 4,194,104 shares of common stock outstanding. Thereafter, each option
to which this Section 7.12 applies will be exercised and cease to exist. Prior
to the Effective Date, Lafayette shall take all action necessary to cause each
SAR outstanding at the Effective Date under Lafayette's Officers' Stock
Appreciation Rights Plan as disclosed pursuant to Section 5.03(e), without any
action on the part of the holder thereof, to be converted into the right to
receive from Lafayette, at the Effective Date, cash equal to the difference
between the Base Price and $30.00 times the number of shares of Lafayette common
stock to which such SAR relates; provided, however, that the payer shall
withhold from such cash payment any taxes required to be withheld by applicable
law. Each SAR to which this Section 7.12 applies will be canceled and cease to
exist by virtue of such payment. On or prior to the Effective Date, Lafayette
shall take all action necessary to terminate all stock option and SAR plans of
Lafayette. From and after the date hereof, Lafayette covenants that no
additional stock options or SARs shall be granted by Lafayette under any stock
option or SAR plans of Lafayette or otherwise.
7.13. SEC and Other Reports. Promptly upon its becoming available,
Lafayette shall furnish to First Merchants one (1) copy of each financial
statement, report, notice, or proxy statement sent by Lafayette to its
shareholders generally and of each regular or periodic report, registration
statement or prospectus filed by Lafayette with NASDAQ or the SEC or any
successor agency, of any order issued by any Governmental Authority in any
proceeding to which Lafayette is a party, and of any notice or communication
received by Lafayette from NASDAQ or the SEC. For purposes of this provision,
"Governmental Authority" shall mean any government (or any political subdivision
or jurisdiction thereof), court, bureau, agency or other governmental entity
having or asserting jurisdiction over Lafayette or any of its respective
businesses, operations or properties.
7.14. Adverse Actions. Lafayette shall not (a) take any action while
knowing that such action would, or is reasonably likely to, prevent or impede
the Merger from qualifying as a reorganization within the meaning of Section 368
of the Code; or (b) knowingly take any action that is intended or is reasonably
likely to result in (i) any of its representations and warranties set forth in
this Agreement being or becoming untrue in any respect at any time at or prior
to the Effective Date, (ii) any of the conditions to the Merger set forth in
Section 9 not being satisfied, (iii) a material violation of any provision of
this Agreement, or (iv) a delay in the consummation of the Merger except, in
each case, as may be required by applicable law or regulation.
SECTION 8
Covenants of First Merchants
First Merchants covenants and agrees with Lafayette as follows:
8.01. Shareholder Approval. First Merchants shall submit this Agreement
to its shareholders for approval at a meeting to be called and held in
accordance with applicable law and the Articles of Incorporation and By-Laws of
First Merchants at the earliest possible reasonable date, and the Board of
Directors of First Merchants shall recommend to the shareholders of First
Merchants that such shareholders approve this Agreement and shall not thereafter
withdraw or modify its recommendation. The Board of Directors of First Merchants
shall use its best efforts to obtain any vote of its shareholders necessary for
the approval of this Agreement.
8.02. Approvals. First Merchants shall proceed expeditiously, cooperate
fully and use its best efforts to procure upon reasonable terms and conditions
all consents, authorizations, approvals, registrations and certificates, to
complete all filings and applications and to satisfy all other requirements
prescribed by law which are necessary for consummation of the Merger on the
terms and conditions provided in this Agreement at the earliest possible
reasonable date. First Merchants agrees to use its best efforts to raise any
additional capital which might be required to obtain any required regulatory
approvals of the Merger. First Merchants shall provide Lafayette with copies of
proposed regulatory filings in connection with the Merger and afford Lafayette
the opportunity to offer comment on the filings before filing. Not in limitation
of the foregoing, First Merchants agrees to prepare a registration statement on
Form S-4 (the "Registration Statement"), to be filed by First Merchants with the
SEC in connection with the issuance of First Merchants common stock in the
Merger (including the proxy statements and prospectus and other proxy
solicitation materials of Lafayette and First Merchants constituting a part
thereof (the "Proxy Statement") and all related documents). The Proxy Statement
shall fully disclose that Lafayette's shareholders have dissenters' rights under
IND. CODE ss. 23-1-44 et. seq. First Merchants agrees to advise Lafayette,
promptly after First Merchants 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 Merchants 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. First Merchants agrees to
use its reasonable best efforts to list, prior to the Effective Date, on the
National Market System of NASDAQ (subject to official notice of issuance), the
shares of First Merchants common stock to be issued to the holders of Lafayette
common stock in the Merger.
8.03. Employee Benefit Plans.
(a) General. Except as otherwise provided in this Section
8.03, on a date no later than January 1, 2004 (the "Entry Date"), First
Merchants will make available to the employees of Lafayette and the
Bank who continue as employees of First Merchants or any subsidiary of
First Merchants no less favorable employee benefits than First
Merchants offers to similarly situated employees of its banking
subsidiaries from time to time. Except as otherwise provided in this
Section 8.03, as of the Entry Date, First Merchants will amend or cause
to be amended each employee benefit plan of First Merchants and its
subsidiaries in which former Lafayette or Bank employees are eligible
to participate, to the extent necessary, so that as of such date (i)
such plans take into account for purposes of eligibility, vesting, and
benefit accrual, the service of such employees with Lafayette and the
Bank as if such service were with First Merchants and its subsidiaries,
to the same extent that such service was credited under a comparable
plan of Lafayette and the Bank, (ii) former Lafayette and Bank
employees are not subject to any waiting periods or pre-existing
condition limitations under the medical, dental and health plans of
First Merchants or its subsidiaries in which they are eligible to
participate and may commence participation in such plans on the
specified date, (iii) former Lafayette and Bank employees will retain
credit for unused sick leave and vacation pay which has been accrued as
of the Entry Date, and (iv) for purposes of determining the entitlement
of former Lafayette and Bank employees to sick leave and vacation pay
following the Entry Date, the service of such employees with Lafayette
and the Bank shall be treated as if such service were with First
Merchants. Until such time as the employees of Lafayette or the Bank
become covered by First Merchants employee benefit plans, they will
remain covered by the benefit plans of Lafayette or the Bank, subject
to the terms of such plans.
(b) Employees' Salary Savings Plan. Following the Effective
Date, First Merchants agrees to cause the Bank, or any successor in
interest to the Bank, to maintain and honor all obligations (including
the Bank's matching contributions to the Lafayette employees at no less
than its current level of 50% of up to 4% of employee compensation
contributed by employees) under the Bank's Employees' Salary Savings
Plan (the "Lafayette 401(k) Plan"). Notwithstanding the foregoing,
First Merchants may amend or merge the Lafayette 401(k) Plan with its
existing 401(k) Plan provided it continues an employer match at a level
no less than the level set forth above for former Lafayette employees
for at least five years following the Effective Date, to the extent it
is permitted to do so under ERISA or the Code.
(c) Group Insurance. Following the Effective Date, First
Merchants agrees to cause the Bank, or any successor in interest to the
Bank, to honor all obligations under the Bank's group insurance program
for health, life, dental and accident and disability insurance (the
"Bank Insurance Program"), including obligations owed under such plan
to present retirees, to employees of the Bank who retire before January
1, 2005, and to two former directors and a widow of a former director
of the Bank ("Retirees"). Notwithstanding the foregoing, First
Merchants may replace the Bank Insurance Program with its own program,
subject to modifications it deems appropriate, provided that it agrees
(and agrees to cause any successor in interest to agree) to continue in
effect for all Retirees a comparable level of insurance coverage at no
greater cost (as determined by the same methodology as currently being
used by the Bank) than that being received or paid by such Retirees at
the Effective Date.
(d) Employees' Pension Plan. On the Entry Date, the Bank's
Employees' Pension Plan (the "Bank Pension Plan") will be frozen, and
all accrued benefits of participants in that Bank Pension Plan,
including cost of living increases provided for in the Plan as of the
date of freezing of such Plan, shall thereupon be fully vested and
shall become payable at the times and in the amounts provided for under
that Plan. No amendments except those required by law shall be made to
the Bank Pension Plan prior to the Entry Date. All Lafayette and Bank
employees satisfying eligibility requirements of such plan as of the
Entry Date will be entitled to become eligible to participate in First
Merchants retirement plan on the Entry Date, receiving credit for past
service with Lafayette and the Bank for vesting, eligibility and
benefit purposes under the First Merchants retirement plan. Benefits
payable under the First Merchants retirement plan to former Lafayette
or Bank employees shall be offset (but not below zero) by actuarial
equivalent present values (as determined using the actuarial factors
set forth in the Bank Pension Plan) of the accrued benefit payable to
them under the Bank Pension Plan (excluding any cost of living
adjustments accruing on or after the Entry Date). First Merchants shall
be responsible for freezing of the Bank Pension Plan and for making any
required or appropriate application to the IRS for a determination
letter to the effect that such freezing will not adversely affect the
tax-qualified status of such plan and for providing any notices to the
Pension Benefit Guaranty Corporation or other governmental entity
regarding the withdrawal.
(e) Director Emeritus Supplemental Retirement Benefits Plan.
As of the Effective Date, First Merchants agrees to honor all
obligations (and to cause any successor in interest to First Merchants
to honor all obligations) to the following individuals participating in
Lafayette's Director Emeritus Supplemental Retirement Benefits Plan
(the "SDRP"): Robert T. Jeffares, Roy D. Meeks, Vernon N. Furrer,
Joseph A. Bonner, Wilbur L. Hancock, Eric P. Meister, Robert J. Weeder,
Richard A. Boehning, Jeffrey L. Kessler, Gordon G. Beemer, George H.
DeVault, and Charles E. Maki; provided, however, that subject to
obtaining the necessary consents to such action by Mr. Beemer, Mr.
DeVault and Mr. Maki, the SDRP shall be amended on or before the
Effective Date to provide for the payment to each participant therein
of the present value of future director fees payable to such
participant under the SDRP based on the directors fees payable at the
Effective Date as to directors of the Bank who have not yet retired
from the Board and based on the life expectancies of the participants
in the SDRP. In determining the present value and life expectancies,
the same actuarial assumptions currently used by the actuaries
administering the Bank Pension Plan shall be used. Such present value
amount as determined for each participant as of the Effective Date
shall be paid in three substantially equal annual installments
commencing with the first payment payable 30 days after the Effective
Date. The unpaid installments shall bear interest at an annual rate
equal to the discount rate applied in determining the present value of
the benefits.
(f) Director Deferred Compensation Plan. Following the
Effective Date, First Merchants agrees to cause the Bank, or any
successor in interest to the Bank, to honor all obligations to the
following individuals participating in the Director Deferred
Compensation Plan of the Bank, until the obligations are paid in full
thereunder to such individuals or their beneficiaries: Robert T.
Jeffares, Roy D. Meeks, Vernon N. Furrer, Joseph A. Bonner, Wilbur L.
Hancock, Eric P. Meister, Robert J. Weeder, and Richard A. Boehning.
(g) Severance. First Merchants does not intend to terminate
any employees of Lafayette or the Bank in connection with the Merger.
However, should it decide to do so, it shall consult with the President
and Chief Executive Officer of the Bank about appropriate severance
benefits payable in connection with any such termination. Nothing in
this Section 8.03(g) shall be deemed to limit or modify First
Merchants' at will employment policy.
(h) COBRA. First Merchants shall be responsible for providing
COBRA continuation coverage to any qualified employee or former
employee of Lafayette or the Bank and to their respective qualified
beneficiaries, on and after the Effective Date, regardless of when the
qualifying event occurred.
8.04. Press Release. Except as required by law, First Merchants shall
not issue any press releases or make any other public announcements or
disclosures relating to the Merger without the prior approval of Lafayette,
which approval will not be unreasonably withheld.
8.05. Confidentiality. First Merchants agrees to abide by the terms of
the Confidentiality Agreement between Lafayette and First Merchants executed as
of August 28, 2001. This provision shall survive the Effective Date or the
earlier termination of this Agreement.
8.06. Covenants Regarding the Bank. Upon consummation of the Merger,
the Bank shall be a state bank organized under the laws of the State of Indiana
and the directors of the Bank in office immediately prior to the consummation of
the Merger shall be the directors of the Bank at the Effective Date and entitled
to directors fees that are no lower than the directors fees in effect at the
Effective Date. Thereafter, the Bank directors who desire to continue to serve
in that capacity shall do so for at least the remainder of the terms to which
they have been elected, subject to First Merchants' policy of mandatory
retirement as described below. First Merchants will cause these directors to be
renominated to the Board of the Bank for additional terms which would extend to
at least a date five (5) years following the Effective Date, subject to First
Merchants' policy of mandatory retirement as described in the next sentence. The
Bank directors will be subject to First Merchants' policy of mandatory
retirement at age seventy (70); provided, however, the policy of mandatory
retirement will not apply to any of the Bank's current directors until
twenty-four (24) months after the Effective Date. First Merchants shall continue
to operate the Bank as an operating subsidiary of First Merchants under the name
"Lafayette Bank and Trust Company" or a name substantially similar thereto for a
period of at least five (5) years following the Effective Date.
8.07 Board of Directors of First Merchants. First Merchants shall cause
all necessary action to be taken to cause Richard A. Boehning and Robert T.
Jeffares, or such other replacements for such persons as shall be agreed to by
First Merchants and Lafayette, to either (i) be nominated for election as
members of the First Merchants' Board of Directors for a three (3) year term at
the first annual meeting of the shareholders of First Merchants following the
Effective Date; or (ii) to be appointed as members of the First Merchants' Board
of Directors at the next meeting of the First Merchants' Board of Directors
following the Effective Date to serve until the first annual meeting of the
shareholders of First Merchants following the Effective Date and then to be
nominated for election as members of the First Merchants' Board of Directors for
a three (3) year term at the first annual meeting of the shareholders of First
Merchants following the Effective Date, whichever can be effected first
depending on the timing of the occurrence of the Effective Date. The two (2)
individuals from the Board of Directors of Lafayette elected to the Board of
Directors of First Merchants shall be subject to First Merchants' policy of
mandatory retirement at age seventy (70); provided, however, the policy of
mandatory retirement will not apply to such individuals until twenty-four (24)
months after the Effective Date. First Merchants shall cause one of the two (2)
individuals from the Board of Directors of Lafayette elected to the Board of
Directors of First Merchants to be elected as the Vice Chairman of the Executive
Committee of First Merchants. In addition, First Merchants agrees that it shall
make a good faith effort to expand the size of the Board of Directors of the
Bank and the Board of Directors of First Merchants within one (1) year following
the Effective Date to add two (2) additional members to each such board. The
same two (2) individuals shall be added to both the Board of Directors of First
Merchants and the Board of Directors of the Bank. Such individuals must be
residents of Tippecanoe County, Indiana. The Bank may recommend the names of
potential candidates to be elected to the Board of Directors of First Merchants
and the Bank; provided, however, that First Merchants shall have the ultimate
authority to choose the two (2) individuals to be added to such boards in its
sole discretion. If First Merchants is unable to appoint (2) individuals who are
residents of Tippecanoe County to serve as Board members of the Bank and of
First Merchants within one (1) year following the Effective Date, it agrees to
appoint two of the Bank's directors of its choosing not currently on the First
Merchants Board to those positions on the Board of First Merchants.
8.08 Officers of the Bank and First Merchants. At the Effective Date,
the officers of the Bank in effect immediately prior to the Effective Date shall
remain the officers of the Bank. Robert J. Weeder, currently President and Chief
Executive Officer of the Bank, shall remain in such position earning
compensation no less than what he is earning at the Effective Date (subject to
normal and customary increases and bonuses) until he attains 65 years of age.
Effective upon Joseph A. Bonner's retirement as Chairman of the Board of the
Bank, First Merchants shall use its best efforts to cause the Bank's Board of
Directors to select Robert J. Weeder as Chairman of the Board of the Bank to
serve in such position, at compensation and customary bonuses of no less than
that which was being received at the Effective Date by Joseph A. Bonner, until
Mr. Weeder attains 70 years of age. Consideration will be given for the chief
executive officer replacement for Mr. Weeder upon his attainment of age 65 to
all qualified candidates, both internal and external. At the Effective Date,
Robert J. Weeder shall also be appointed Senior Vice President of First
Merchants and in that capacity shall be invited to attend all First Merchants
Board of Directors meetings.
8.09. Directors and Officers Insurance.
(a) For a period of at least three years from the Effective
Date, First Merchants shall use its reasonable best efforts to obtain
an endorsement to its director's and officer's liability insurance
policy to cover the present and former officers and directors of
Lafayette and the Bank (determined as of the Effective Date) with
respect to claims against such directors and officers arising from
facts or events which occurred before the Effective Date, 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 Lafayette; provided however, that if First
Merchants is unable to obtain such endorsement, then Lafayette may
purchase tail coverage under its existing director and officer
liability insurance policy for such claims; provided further that in no
event shall First Merchants be required to expend in the aggregate
during each such three-year period more than one and one-half times the
current annual amount spent by Lafayette (the "Insurance Amount") to
maintain or procure its current directors' and officers' insurance
coverage; provided further, that if First Merchants is unable to
maintain or obtain the insurance called for by this Section 8.09, First
Merchants 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 Lafayette or the Bank
may be required to make application and provide customary
representations and warranties to First Merchants' insurance carrier
for the purpose of obtaining such insurance.
(b) For six years after the Effective Date, the Continuing
Company shall indemnify, defend and hold harmless the present and
former officers and directors of Lafayette and the Bank against all
losses, expenses (including attorneys' fees), claims, damages or
liabilities arising out of actions or omissions occurring on or prior
to the Effective Date (including, without limitation, the transactions
contemplated by this Agreement) to the full extent then permitted under
the Indiana Business Corporation Law and by First Merchants' or
Lafayette's Articles of Incorporation as in effect on the date hereof
(whichever is more favorable to the officers and directors of Lafayette
and the Bank), including provisions relating to advances of expenses
incurred in the defense of any action or suit.
(c) Following the Effective Date, First Merchants will provide
any Lafayette or Bank officers, directors and employees who become
officers, directors and employees of the Continuing Company or its
subsidiaries with the same directors and officers liability insurance
coverage and indemnification protections that First Merchants provides
to other officers, directors and employees of First Merchants or its
subsidiaries.
(d) If First Merchants 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 (a "Change of Control"), then and in each
case, proper provision shall be made so that the successors and assigns
of First Merchants shall assume the obligations set forth in this
Section 8.09.
8.10. SEC and Other Reports. Promptly upon its becoming available,
First Merchants shall furnish to Lafayette one (1) copy of each financial
statement, report, notice, or proxy statement sent by First Merchants to its
shareholders generally and of each regular or periodic report, registration
statement or prospectus filed by First Merchants with the SEC or any successor
agency, of any order issued by any Governmental Authority in any proceeding to
which First Merchants is a party, and of any notice or communication received by
First Merchants from the SEC. For purposes of this provision, "Governmental
Authority" shall mean any government (or any political subdivision or
jurisdiction thereof), court, bureau, agency or other governmental entity having
or asserting jurisdiction over First Merchants or any of its respective
businesses, operations or properties.
8.11. Disclosure Letter. First Merchants shall promptly supplement,
amend and update monthly and as of the Effective Date the Disclosure Letter with
respect to any matters hereafter arising which, if in existence or having
occurred as of the date of this Agreement, would have been required to be set
forth or described in the Disclosure Letter.
8.12. Adverse Actions. First Merchants shall not (a) take any action
while knowing that such action would, or is reasonably likely to, prevent or
impede the Merger from qualifying as a reorganization within the meaning of
Section 368 of the Code; or (b) knowingly take any action that is intended or is
reasonably likely to result in (i) any of its representations and warranties set
forth in this Agreement being or becoming untrue in any respect at any time at
or prior to the Effective Date, (ii) any of the conditions to the Merger set
forth in Section 9 not being satisfied, (iii) a material violation of any
provision of this Agreement, or (iv) a delay in the consummation of the Merger
except, in each case, as may be required by applicable law or regulation.
SECTION 9
Conditions Precedent To The Merger
The obligation of each of the parties hereto to consummate the
transactions contemplated by this Agreement is subject to the satisfaction and
fulfillment of each of the following conditions on or prior to the Effective
Date:
9.01. Shareholder Approval. The shareholders of Lafayette and First
Merchants shall have approved, ratified and confirmed this Agreement as required
by applicable law.
9.02. Registration Statement Effective. First Merchants shall have
registered its shares of common stock to be issued to shareholders of Lafayette
in accordance with this Agreement with the SEC pursuant to the 1933 Act, and all
state securities and "blue sky" approvals and authorizations required to offer
and sell such shares shall have been received by First Merchants. The
registration statement with respect thereto shall have been declared effective
by the SEC and no stop order shall have been issued or threatened. The shares of
First Merchants common stock shall have been listed for trading on the Nasdaq
National Market System (subject to official notice of issuance).
9.03. Tax Opinion. The parties shall have obtained an opinion of
Bingham Summers Welsh & Spilman, LLP, dated on or about the Effective Date,
which shall be in form and content satisfactory to counsel for all parties
hereto, to the effect that the Merger effected pursuant to this Agreement shall
constitute a tax-free transaction (except to the extent cash or boot is
received) to each party hereto and to the shareholders of each party, and that
no gain or loss will be recognized by shareholders of Lafayette to the extent
they receive shares of First Merchants common stock in the Merger in exchange
for their shares of Lafayette common stock. Such opinion shall be based upon
factual representations received by such counsel from the parties, which
representations may take the form of written certifications.
9.04. Affiliate Agreements. First Merchants shall have obtained (a)
from Lafayette, a list identifying each affiliate of Lafayette and (b) from each
affiliate of Lafayette, the agreements contemplated by Section 7.06 hereof.
9.05. Regulatory Approvals. The Federal Reserve Board and the Indiana
Department of Financial Institutions shall have authorized and approved the
Merger and the transactions related thereto. In addition, all appropriate
orders, consents, approvals and clearances from all other regulatory agencies
and governmental authorities whose orders, consents, approvals or clearances are
required by law for consummation of the transactions contemplated by this
Agreement shall have been obtained.
9.06. Officer's Certificate. First Merchants and Lafayette shall have
delivered to each other a certificate signed by their Chairman or President and
their Secretary, dated the Effective Date, certifying that (a) all the
representations and warranties of their respective corporations are true,
accurate and correct on and as of the Effective Date; (b) all the covenants of
their respective corporations have been complied with from the date of this
Agreement through and as of the Effective Date; and (c) their respective
corporations have satisfied and fully complied with all conditions necessary to
make this Agreement effective as to them.
9.07. Fairness Opinion. Lafayette shall have obtained an opinion from
Dain Rauscher Wessels, a division of Dain Rausher Incorporated, to the effect
that the consideration paid in the Merger is fair to the shareholders of
Lafayette from a financial viewpoint. Such opinion shall be (a) in form and
substance reasonably satisfactory to Lafayette, (b) dated as of a date not later
than the mailing date of the Proxy Statement relating to the Merger and (c)
included in the Proxy Statement.
9.08. No Judicial Prohibition. Neither Lafayette, the Bank nor First
Merchants shall be subject to any order, decree or injunction of a court or
agency of competent jurisdiction which enjoins or prohibits the consummation of
the Merger.
9.09. Other Consents and Approvals. All consents and other approvals
required for the transfer of any contracts, agreements, leases, loans, etc. as a
result of the Merger shall have been obtained.
9.10 Options. All of the options disclosed in Section 5.03(c) of the
Disclosure Letter shall have been exercised pursuant to Section 7.12 hereof and
Lafayette shall have no more than 4,194,104 shares of common stock issued and
outstanding. Lafayette shall have no commitment to issue any additional shares
of common stock. All stock option plans of Lafayette shall have been terminated.
9.11 SARs. All of the SARs disclosed in Section 5.03(e) hereof shall
have been exercised pursuant to Section 7.12 hereof and such SARs shall be
canceled and cease to exist. All SAR plans of Lafayette shall have been
terminated.
SECTION 10
Termination of Merger
10.01. Manner of Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Effective Date by
written notice delivered by First Merchants to Lafayette or by Lafayette to
First Merchants only for the following reasons:
(a) By Lafayette or First Merchants, if there has been a
material breach of any representation, warranty or covenant on the part
of any party in the representations, warranties, and covenants set
forth 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; provided that the party in default shall have no right to
terminate for its own default;
(b) By Lafayette or First Merchants, if it shall determine in
its sole discretion that the transactions contemplated by this
Agreement have become inadvisable or impracticable by reason of
commencement or credible threat of material litigation or proceedings
against any of the parties;
(c) By Lafayette or First Merchants, if the financial
condition, business, assets, or results of operations of the other
party shall have been materially and adversely changed from that in
existence at June 30, 2001 (for reasons other than events and
conditions relating to the business and interest rate environment in
general (including consequences of the terrorist attack on the United
States on September 11, 2001), the accrual or payment of Merger-related
expenses, or matters set forth in the parties' Disclosure Letters);
(d) By Lafayette or First Merchants, if the transaction
contemplated herein has not been consummated by June 30, 2002 (provided
that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained
herein);
(e) By First Merchants if any of the items, events or
information set forth in any update to the Disclosure Letter provided
by Lafayette has had or may have (as determined by First Merchants in
good faith) a material adverse effect on the financial condition,
results of operations, business, or prospects of Lafayette or the Bank;
(f) By Lafayette if any of the items, events or information
set forth in any update to the Disclosure Letter provided by First
Merchants has had or may have (as determined by Lafayette in good
faith) a material adverse effect on the financial condition, results of
operations, business, or prospects of First Merchants and its
subsidiaries, on a consolidated basis.
(g) By First Merchants or Lafayette if, in the opinion of
counsel to First Merchants or Lafayette, the Merger will not constitute
a tax-free reorganization under the Code;
(h) By First Merchants or Lafayette pursuant to their
respective termination rights set forth in Section 3.04 hereof;
(i) By Lafayette if the appropriate discharge of the fiduciary
duties of the Board of Directors of Lafayette consistent with Section
7.05 requires that Lafayette terminate this Agreement;
(j) By First Merchants if it receives written notice under
Section 7.05 that Lafayette intends to furnish information to or enter
into discussions or negotiations with a third party in connection with
a proposed Acquisition Transaction, if Lafayette fails to give any such
written notice as required in Section 7.05 or if Lafayette's Board of
Directors fails to make, withdraws or modifies its recommendation to
Lafayette's shareholders to vote in favor of the Merger following
receipt of a proposal for an Acquisition Transaction; or
(k) By either party (provided that the terminating party is
not then in material breach of any representation or warranty contained
in this Agreement or in material breach of any covenant or other
agreement contained in this Agreement) in the event that any of the
conditions precedent to the obligations of such party to consummate the
Merger cannot be satisfied or fulfilled by the date specified in
Section 10.1(d) of this Agreement.
10.02. Effect of Termination. Except as provided below, in the event
that this Agreement is terminated pursuant to the provisions of Section 10.01
hereof, no party shall have any liability to any other party for costs,
expenses, damages or otherwise; provided, however, that notwithstanding the
foregoing, in the event that this Agreement is terminated pursuant to Section
10.01(a) hereof on account of a willful breach of any of the representations and
warranties set forth herein or any breach of any of the agreements set forth
herein, then the non-breaching party shall be entitled to recover appropriate
damages from the breaching party, including, without limitation, reimbursement
to the non-breaching party of its costs, fees and expenses (including
attorneys', accountants' and advisors' fees and expenses) incident to the
negotiation, preparation and execution of this Agreement and related
documentation; provided, however, that nothing in this proviso shall be deemed
to constitute liquidated damages for the willful breach by a party of the terms
of this Agreement or otherwise limit the rights of the non-breaching party.
Notwithstanding the foregoing, in the event of termination by First Merchants in
accordance with Section 10.01(j) or by Lafayette in accordance with Section
10.01(i), Lafayette shall pay First Merchants the sum of $2,500,000 as
liquidated damages. Such liquidated damages shall be in lieu of costs, expenses
and damages otherwise recoverable under the first sentence of this Section
10.02. Such payment shall be made within ten (10) days of the date of notice of
termination. Lafayette acknowledges the reasonableness of such amount in light
of the considerable time and expense invested and to be invested by First
Merchants and its representatives in furtherance of the Merger. Such amount was
agreed upon by First Merchants and Lafayette as compensation to First Merchants
for its time and expense and not as a penalty to Lafayette, it being impossible
to ascertain the exact value of the time and expense to be invested. First
Merchants shall also be entitled to recover from Lafayette its reasonable
attorneys' fees incurred in the enforcement of this Section.
SECTION 11
Effective Date Of Merger
Subject to the terms and upon satisfaction of all requirements of law
and the conditions specified in this Agreement, the Merger shall become
effective at the close of business on the day specified in the Articles of
Merger of Lafayette with and into First Merchants as filed with the Secretary of
State of the State of Indiana (the "Effective Date"). The Effective Date shall
occur no later than the last business day of the month in which any waiting
period following the last approval of the Merger by a state or federal
regulatory agency or governmental authority expires, unless otherwise agreed to
by First Merchants and Lafayette.
SECTION 12
Closing
12.01. Closing Date and Place. The closing of the Merger (the
"Closing") shall take place at the main office of First Merchants on the
Effective Date or at such other place as mutually agreed to by First Merchants
and Lafayette.
12.02. Articles of Merger. Subject to the provisions of this Agreement,
on or prior to the Effective Date, the Articles of Merger shall be duly filed
with the Secretary of State of the State of Indiana specifying that the Merger
shall be effective as of the Effective Date.
12.03. Opinions of Counsel. At the Closing, Lafayette shall deliver an
opinion of its counsel, Barnes & Thornburg, to First Merchants, and First
Merchants shall deliver an opinion of its counsel, Bingham Summers Welsh &
Spilman, LLP, to Lafayette, dated as of the date of the Closing. The form of
such opinions shall be as mutually agreed to by the parties hereto and their
respective counsel.
SECTION 13
Miscellaneous
13.01. Effective Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns but, except for Sections 8.03, 8.06, 8.07, 8.08 and 8.09
(which are intended to be for the benefit of those present and former officers,
directors and employees of Lafayette and the Bank affected thereby and may be
enforced by such persons), none of the provisions thereof shall inure to the
benefit of any other person, firm, or corporation whomsoever. Neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned or transferred by either party hereto without the prior written consent
of the other party.
13.02. Waiver; Amendment.
(a) First Merchants and Lafayette may, by an instrument in
writing executed in the same manner as this Agreement: (i) extend the
time for the performance of any of the covenants or agreements of the
other party under this Agreement; (ii) waive any inaccuracies in the
representations or warranties of the other party contained in this
Agreement or in any document delivered pursuant hereto or thereto;
(iii) waive the performance by the other party of any of the covenants
or agreements to be performed by it or them under this Agreement; or
(iv) waive the satisfaction or fulfillment of any condition the
nonsatisfaction or nonfulfillment of which is a condition to the right
of the party so waiving to terminate this Agreement. The waiver by any
party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other or subsequent breach
hereunder.
(b) Notwithstanding the prior approval by the shareholders of
Lafayette or First Merchants, this Agreement may be amended, modified
or supplemented by the written agreement of Lafayette and First
Merchants without further approval of such shareholders, except that no
such amendment, modification or supplement shall result in a decrease
in the consideration specified in Section 3 hereof, except in
accordance with the terms of Section 3 hereof, or shall materially
adversely affect the rights of the shareholders of Lafayette or First
Merchants without the further approval of such shareholders.
13.03. Notices. Any and all notices or other communications required or
permitted under this Agreement shall be in writing and shall be deemed to be
given (i) when delivered in person, or (ii) on the day of transmission if sent
via facsimile transmission to the facsimile number given below, provided
telephonic confirmation of receipt is obtained promptly after completion of
transmission, or (iii) on the fifth (5th) day after sent by certified or
registered mail, postage prepaid, return receipt requested, addressed as
follows:
If to First Merchants: With a copy to:
200 E. Jackson Street, Box 792 Bingham Summers Welsh & Spilman, LLP
Muncie, IN 47305 2700 Market Tower
Attn: Larry L. Helms, 10 West Market Street
Senior Vice President and Indianapolis, Indiana 46204-2982
General Counsel Attn: David R. Prechtel, Esq.
(765) 741-7283 (317) 236-9907
If to Lafayette: With a copy to:
133 North 4th Street Barnes & Thornburg
P.O. Box 1130 11 South Meridian Street
Lafayette, IN 47902 Indianapolis, IN 46204
Attn: Robert J. Weeder, Attn: Claudia V. Swhier, Esq.
President and Chief (317) 231-7433
Executive Officer
(765) 423-7137
or to such substituted address as any of them have given to the other in
writing. Notwithstanding the foregoing, all notices required to be given
pursuant to Sections 3.04(b) and 3.04(c) hereof shall be given in the time
periods specified in such sections by either hand delivery or facsimile
transmission to the specified parties.
13.04. Headings. The headings in this Agreement have been inserted
solely for the ease of reference and should not be considered in the
interpretation or construction of this Agreement.
13.05. Severability. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal, or unenforceable provision or
provisions had never been contained herein.
13.06. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same instrument. In addition, this Agreement and
the documents to be delivered hereunder may be executed by the parties hereto
either manually or by facsimile signatures, each of which shall constitute an
original signature.
13.07. Governing Law. This Agreement is executed in and shall be
construed in accordance with the laws of the State of Indiana, without regard to
choice of law principles.
13.08. Entire Agreement. This Agreement and the Confidentiality
Agreement supersedes any other agreement, whether oral or written, between First
Merchants and Lafayette relating to the matters contemplated hereby, and
constitutes the entire agreement between the parties hereto.
13.09. Expenses. First Merchants and Lafayette shall each pay their own
expenses incidental to the transactions contemplated hereby. It is understood
that the fees of Dain Rauscher Wessels, including the cost of the fairness
opinion referenced in Section 9.07, shall be borne by Lafayette whether or not
the Merger is consummated. This provision shall survive the Effective Date or
the earlier termination of this Agreement.
13.10. Survival of Contents. The provisions of Sections 7.09, 8.05,
10.02, 13.09 and this Section 13.10 shall survive beyond the termination of this
Agreement. The provisions of Sections 7.09, 8.03, 8.05, 8.06, 8.07, 8.08, 8.09,
13.09 and this Section 13.10 shall survive beyond the Effective Date.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, First Merchants and Lafayette have made and entered
into this Agreement as of the day and year first above written and have caused
this Agreement to be executed and attested by their duly authorized officers.
FIRST MERCHANTS CORPORATION
ATTEST:
/s/ Larry R. Helms By:/s/ Michael L. Cox
--------------------------------- -----------------------------------
Larry R. Helms, Secretary Michael L. Cox, President and Chief
Executive Officer
LAFAYETTE BANCORPORATION
ATTEST:
/s/ Michelle D. Turnpaugh By:/s/ Robert J. Weeder
--------------------------------- -----------------------------------
Michelle D. Turnpaugh, Secretary Robert J. Weeder,
President and Chief Executive Officer