SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ X ] Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-12
FIRST COMMUNITY BANCSHARES, INC.
--------------------------------
(Name of Registrant as Specified In Its Charter)
-------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
1) Title of each class of securities to which transaction applies: Common
Stock
2) Aggregate number of securities to which transaction applies: 1,170,536
shares, 34,700 options, and 90,910 convertible debt securities
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): Each of the
1,044,926 issued and outstanding shares of common stock will, upon
consummation of the merger, be converted into the right to receive
$21.00 per share in cash. With respect to the 34,700 options to
purchase shares of common stock, each holder will receive a cash
payment of $21.00 per share less the exercise price per share of $9.72
(calculated on a weighted average per share basis for purposes
hereof), or $11.28. With respect to the $1,000,000 in convertible debt
securities currently outstanding, which are convertible into 90,910
shares of common stock, each holder of convertible debt will receive a
cash payment of $21.00 per share less the conversion price of $11.00
per share, or $10.00.
4) Proposed maximum aggregate value of transaction: $23,244,718.00
5) Total fee paid: $4,648.94
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule O-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
--------------------------------------
2) Form, Schedule or Registration Statement No.:
--------------------------------------
3) Filing Party:
--------------------------------------
4) Date Filed:
--------------------------------
[It is intended that these proxy materials will be released to shareholders on
or about April 25, 2003.]
FIRST COMMUNITY BANCSHARES, INC.
210 EAST HARRIMAN
BARGERSVILLE, INDIANA 46106
(317) 422-5171
April 25, 2003
Dear First Community Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders
of First Community to be held at 10:00 a.m., Eastern Standard Time, on
Wednesday, May 28, 2003, at the Franklin Parks and Cultural Arts Center, 396
South State Street, Franklin, Indiana.
At the Special Meeting, you will be asked to consider and vote on the
merger of First Community with and into FCBY Merger Corporation, a recently
formed wholly-owned subsidiary of MainSource Financial Group, Inc. with the new
subsidiary being the surviving corporation. If the merger agreement is adopted
by the holders of a majority of the outstanding common shares of First Community
and if certain other conditions are satisfied, you will receive $21.00 in cash
for each common share of First Community you own.
Your Board of Directors has received the opinion from Austin
Associates, LLC, its financial advisor, to the effect that $21.00 is fair to
First Community shareholders from a financial point of view as of the date of
the merger agreement. Your Board of Directors unanimously approved the merger
agreement, believes that the merger is in the best interests of First Community
shareholders and unanimously recommends that you adopt the merger agreement at
the Special Meeting so that the transaction may be completed.
In the materials accompanying this letter, you will find a Notice of
Special Meeting of Shareholders, a proxy statement and a proxy card. These
documents more fully describe the proposed transaction and provide detailed
information regarding MainSource Financial Group, Inc. We encourage you to read
these materials carefully.
Whether or not you plan to attend the Special Meeting, please take the
time to vote by completing, signing and returning to us the enclosed proxy card.
A postage paid envelope is enclosed for your convenience. If you sign, date and
return your proxy card without indicating how you want to vote, your proxy will
be counted as a vote in favor of the transaction. Even if you plan to attend the
Special Meeting, please complete, sign and return your proxy card. By following
certain procedures discussed in the accompanying document, you can later revoke
your proxy if you wish.
PLEASE DO NOT SEND YOUR SHARE CERTIFICATES AT THIS TIME. IF THE MERGER
AGREEMENT IS ADOPTED, YOU WILL RECEIVE WRITTEN INSTRUCTIONS ON HOW TO EXCHANGE
YOUR SHARE CERTIFICATES.
Sincerely,
FIRST COMMUNITY BANCSHARES, INC.
By: /s/ Frank D. Neese
-----------------------------------
Frank D. Neese
its Secretary
FIRST COMMUNITY BANCSHARES, INC.
210 EAST HARRIMAN
BARGERSVILLE, INDIANA 46106
(317) 422-5171
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON May 28, 2003
Notice is hereby given that the Special Meeting of Shareholders of
First Community will be held on Wednesday, May 28, 2003, at 10:00 a.m., Eastern
Standard Time, at the Franklin Parks and Cultural Arts Center, 396 South State
Street, Franklin, Indiana.
At the Special Meeting, the shareholders will be asked to consider and
vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of
March 27, 2003, by and between First Community, MainSource Financial Group,
Inc., and FCBY Merger Corporation, a recently formed wholly-owned subsidiary of
MainSource Financial, and to approve the transactions contemplated by the merger
agreement, including the merger of First Community with and into FCBY
Acquisition with FCBY Acquisition being the surviving entity. A copy of the
merger agreement is attached as Annex A to the proxy statement that accompanies
this notice.
Only holders of First Community common shares of record as of the close
of business on April 24, 2003, are entitled to notice of and to vote at the
Special Meeting and any adjournment or postponement of the Special Meeting.
The merger transaction will not be completed unless the merger
agreement is adopted by the affirmative vote of the holders of a majority of the
First Community common shares outstanding on the record date and entitled to
vote at the Special Meeting.
Whether or not you plan to be present at the Special Meeting, please
complete, date and sign the enclosed proxy card and return it in the enclosed
postage paid envelope. If you plan to attend the Special Meeting, please mark
the appropriate space on the enclosed proxy card.
THE FIRST COMMUNITY BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" THE APPROVAL OF THE MERGER.
By Order of the Board of Directors,
/s/ Frank Neese
Frank D. Neese, Secretary
April 25, 2003
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY. DO NOT SEND ANY
SHARE CERTIFICATES AT THIS TIME.
PROXY STATEMENT
FOR SPECIAL MEETING OF
SHAREHOLDERS OF
FIRST COMMUNITY BANCSHARES, INC.
Subject to the satisfaction of the conditions set forth in the merger
agreement, MainSource Financial Group, Inc. and First Community have agreed to
merge First Community with and into a wholly-owned subsidiary of MainSource
Financial Group, Inc. with the new subsidiary being the surviving corporation.
The merger cannot occur unless the holders of a majority of the
outstanding common shares of First Community adopt the merger agreement. The
First Community Board of Directors has scheduled a Special Meeting of
Shareholders of First Community to vote on the merger agreement as follows:
May 28, 2003
10:00 a.m., Eastern Standard Time
Franklin Parks and Cultural Arts Center
396 South State Street
Franklin, IN 46131
This document provides you with detailed information about the proposed
merger. Please see "WHERE YOU CAN FIND MORE INFORMATION" for additional
information about First Community and MainSource Financial Group, Inc. on file
with the Securities and Exchange Commission.
This document and proxy card are being mailed to shareholders of First
Community beginning on or about April 25, 2003
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS DETERMINED IF THIS DOCUMENT IS ACCURATE OR ADEQUATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
YOU SHOULD BE AWARE THAT THIS IS A COMPLICATED TRANSACTION. WE URGE
FIRST COMMUNITY SHAREHOLDERS TO READ AND CONSIDER CAREFULLY THIS DOCUMENT IN ITS
ENTIRETY.
The date of this document is April 25, 2003.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE MERGER........................................1
SUMMARY.......................................................................3
FIRST COMMUNITY BANCSHARES, INC...............................................7
MAINSOURCE FINANCIAL GROUP, INC...............................................7
THE SPECIAL MEETING...........................................................8
Introduction..................................................................8
Matters to be Considered; Board of Directors Recommendation................8
Record Date and Voting.....................................................8
Vote Required..............................................................9
Securities Ownership Of Management Of First Community......... ...............9
Revocability of Proxies...................................................11
Solicitation of Proxies...................................................11
Dissenters' Rights........................................................11
THE MERGER...................................................................13
General...................................................................13
Background and Reasons for the Merger.....................................13
Opinion of Financial Advisor..............................................16
Conduct of Business if the Merger is not Consummated......................22
Regulatory Filings and Approvals..........................................22
THE MERGER AGREEMENT.........................................................23
Terms of the Merger.......................................................23
Exchange of Certificates..................................................23
Representations and Warranties............................................24
Conduct of Business Pending the Merger....................................25
Additional Agreements.....................................................26
Conditions to the Merger..................................................28
Interests of Directors and Executive Officers.............................30
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.....................................32
WHERE YOU CAN FIND MORE INFORMATION..........................................33
ANNEX A: AGREEMENT AND PLAN OF MERGER
ANNEX B: FAIRNESS OPINION
ANNEX C: DISSENTERS' RIGHTS STATUTE
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHY DO FIRST COMMUNITY AND MAINSOURCE FINANCIAL GROUP, INC. WANT TO MERGE?
A. First Community believes that the consideration offered to its shareholders
is fair and that MainSource Financial Group, Inc. is a sound merger partner.
First Community wants its customers in First Community service areas to be
served effectively and MainSource Financial desires to expand its presence in
those service areas.
Q. HOW WILL I BENEFIT?
A. The First Community Board of Directors believes that you will benefit by
receiving $21.00 in cash in exchange for each common share of First Community
that you own upon the consummation of the merger.
Q. IF I DO NOT FAVOR THE TRANSACTION, WHAT ARE MY RIGHTS?
A. If you are a shareholder of First Community as of the record date and you do
not vote in favor of the merger agreement, you will have the right under Indiana
Code Section 23-1-44-8 to demand the fair value for your common shares of First
Community. The right to make this demand is generally known as "dissenters'
rights." To perfect your dissenters' rights, you must:
o deliver to First Community before the vote is taken a written
notice of your intent to demand payment of the fair value of
your common shares if the merger is effectuated;
o not vote your common shares in favor of the merger; and
o otherwise comply strictly with all of the requirements of
Indiana Code Section 23-1-44-1 and following.
Q. WILL I OWE ANY FEDERAL INCOME TAX AS A RESULT OF THE MERGER?
A. The federal income tax consequences for each shareholder will depend in part
upon your specific situation. No ruling has been or will be sought from the
Internal Revenue Service as to the federal income tax consequences of the
merger. Generally, you will recognize a gain with respect to the cash payment
you receive, depending upon your basis in the First Community shares that you
own.
Q. WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We plan to complete the transaction as soon as possible after the Special
Meeting, assuming the required shareholder approval is obtained. The transaction
is also subject to the approval of federal bank regulatory authorities and the
satisfaction of other closing conditions. We expect the transaction to be
completed in the second quarter of calendar year 2003.
Q. WHEN AND WHERE WILL THE SPECIAL MEETING TAKE PLACE?
A. The Special Meeting will be held at 10:00 a.m., Eastern Standard Time, on May
28, 2003, at the Franklin Parks and Cultural Arts Center, 396 South State
Street, Franklin, Indiana.
1
Q. WHAT DO I NEED TO DO NOW?
A: Just mail your completed, signed and dated proxy card in the enclosed return
envelope as soon as possible so that your First Community shares will be
represented at the Special Meeting.
Q. WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A SHAREHOLDER OF RECORD AND
AS A BENEFICIAL OWNER?
A: Many First Community shareholders hold their shares through a stockbroker,
bank or other nominee rather than directly in their own name. As summarized
below, there are some distinctions between shares held of record and those owned
beneficially.
SHAREHOLDER OF RECORD
If your shares are registered directly in your name with First
Community's transfer agent, you are considered, with respect to those shares,
the shareholder of record and these proxy materials are being sent directly to
you by First Community. As a shareholder of record, you have the right to grant
your proxy directly to First Community or to vote in person at the Special
Meeting. First Community has enclosed a proxy card for your use.
BENEFICIAL OWNER
If your shares are held in a stock brokerage account or by a bank or
other nominee, you are considered the beneficial owner of the shares held in
street name and these proxy materials are being forwarded to you by your broker
or nominee who is considered, with respect to those shares, the shareholder of
record. As the beneficial owner, you have the right to direct your broker on how
to vote. Your broker or nominee has enclosed a voting instruction card for your
use. If you are a First Community shareholder whose shares are not registered in
your own name, you will need additional documentation from your record holder to
attend the Special Meeting and to vote your shares at the Special Meeting.
Q. IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your First Community shares with respect to the merger
agreement only if you provide instructions on how to vote. You should follow the
directions provided by your broker regarding how to instruct your broker to vote
your shares.
Q. MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at the
Special Meeting. If you are the record holder of the shares, you can do this in
three ways. First, you can send First Community a written statement that you
would like to revoke your proxy, if such written notice is received prior to the
date of the Special Meeting. Second, you can send First Community a new signed
and later-dated proxy card, provided that such proxy card is received prior to
the date of the Special Meeting. Third, you can attend the Special Meeting and
vote in person. However, your attendance alone will not revoke your proxy.
2
For shares held beneficially by you, but not as record holder, you may
change your vote by submitting new voting instructions to your broker or
nominee.
Q. HOW CAN I VOTE MY SHARES IN PERSON AT THE MEETING?
A: Shares held directly in your name as the shareholder of record may be voted
in person at the Special Meeting. If you choose to attend, please bring the
enclosed proxy card or proof of identification.
Q. HOW WILL MY SHARES BE VOTED IF I RETURN A BLANK PROXY CARD?
A. If you are the record holder of the shares and you sign and send in your
proxy and do not indicate how you want to vote, your proxy will be counted as a
vote in favor of the merger agreement.
Q. WHAT WILL BE THE EFFECT IF I DO NOT VOTE?
A. Not voting will have the same effect as voting against the merger agreement.
Q. SHOULD I SEND IN MY STOCK CERTIFICATE NOW?
A: No. If the merger is completed, you will receive written instructions for
exchanging your share certificates.
Q. WHO CAN ANSWER MY QUESTIONS ABOUT THE MERGER OR HOW I CAN SUBMIT MY PROXY?
A. If you have more questions about the merger or how to submit your proxy,
please call Albert R. Jackson, III at (317) 346-7241.
SUMMARY
This summary highlights selected information from this document. It
does not contain all of the information that is important to you. To understand
the merger agreement more fully and for a complete description of the legal
terms of the merger agreement, you should read carefully this entire document
and the documents to which we have referred you. Page references are included in
this summary to direct you to a more complete description of certain topics
discussed in this document.
Throughout this document, the term "merger" refers to the proposed
merger of First Community with and into a wholly-owned subsidiary of MainSource
Financial with the wholly-owned subsidiary being the surviving corporation. The
term "merger agreement" refers to the Agreement and Plan of Merger, dated as of
March 27, 2003, by and between MainSource Financial, FCBY Merger Corporation and
First Community, a copy of which is included at the end of this document as
Annex A.
THE SPECIAL MEETING
(PAGE 8)
A Special Meeting of First Community's shareholders will be held on May
28, 2003, at the Franklin Parks and Cultural Arts Center, 396 South State
Street, Franklin, Indiana. At the Special Meeting, the shareholders of First
Community will be asked to consider and vote upon a proposal to adopt the
Agreement and Plan of Merger, dated as of March 27, 2003, by and between
3
MainSource Financial Group, Inc., FCBY Merger Corporation and First Community
Bancshares, Inc. and to approve the transactions contemplated by the merger
agreement, including the merger of First Community with and into a wholly-owned
subsidiary of MainSource Financial.
THE COMPANIES
(PAGE 7)
First Community Bancshares, Inc.
210 East Harriman
Bargersville, Indiana 46106
(317) 422-5171
First Community is a one bank holding company which owns all of the
outstanding shares of stock of First Community Bank & Trust and First Community
Real Estate Management, Inc. First Community Bank & Trust is a state chartered
commercial bank which serves the financial needs of families and local
businesses through its main office in Bargersville and branch offices located in
Greenwood, Franklin, Indianapolis, Trafalgar, Whiteland, Edinburgh and North
Vernon, Indiana. First Community Real Estate Management, Inc. is an Indiana
corporation that owns and leases branch offices to First Community Bank & Trust.
MainSource Financial Group, Inc.
210 North Broadway
Greensburg, Indiana 47240
(812) 663-0157
MainSource Financial Group, Inc., is a community-focused, multibank,
financial services oriented holding company with assets of approximately $1.2
billion. Through its three banking subsidiaries, MainSource Bank, Greensburg,
Indiana; Regional Bank, New Albany, Indiana; and Capstone Bank, Watseka,
Illinois, it operates 42 offices in 18 Indiana counties and seven offices in
three Illinois counties. Through its insurance subsidiary, MainSource Insurance,
it operates five offices in Indiana as well as one in Owensboro, Kentucky.
VOTE REQUIRED
(PAGE 9)
The affirmative vote of the holders of at least a majority of the
outstanding common shares of First Community is required to adopt the merger
agreement. Directors and executive officers of First Community have the power to
vote 348,191 shares, or approximately 30.7% of the outstanding common shares of
First Community.
In connection with the execution of the merger agreement, the directors
of First Community executed voting agreements. Each voting agreement provides
that such director will vote his or her shares in favor of adoption of the
merger agreement.
DISSENTERS' RIGHTS
(PAGE 11)
If you are a shareholder of First Community as of the record date you
will have the right under Indiana Code Section 28-1-44-8 to demand the fair
value for your common shares of First Community. The right to make this
4
demand is generally known as "dissenters' rights." To perfect your dissenters'
rights, you must deliver to First Community a written notice of intent to demand
payment of the fair value of your common shares in the event the merger is
effectuated and not vote for the merger. For additional information on your
dissenters' rights, see the section of this document after this summary entitled
"THE SPECIAL MEETING - Dissenters' Rights."
REASONS FOR THE MERGER
(PAGE 15)
The Boards of Directors of First Community and MainSource Financial
have proposed the merger because each of the Boards of Directors believes the
merger is in the best interests of its corporation and shareholders.
OPINION OF FINANCIAL ADVISOR
(PAGE 16)
In deciding to approve the merger, First Community's Board of Directors
considered, among other things, the opinion of its financial advisor, Austin
Associates, LLC, that the financial consideration to be received by First
Community shareholders in the merger is fair to the shareholders of First
Community from a financial point of view as of the date of the merger agreement.
The written opinion of Austin Associates, LLC, is attached as Annex B to this
document. We encourage you to read the opinion in its entirety.
RECOMMENDATION TO SHAREHOLDERS
(PAGE 16)
The First Community Board of Directors unanimously recommends that
First Community shareholders vote in favor of the adoption of the merger
agreement and approval of the transactions contemplated by the merger agreement,
including the merger, so that the merger may be consummated.
THE MERGER AGREEMENT
(PAGE 23)
In the merger, First Community will merge with and into FCBY Merger
Corporation, a wholly-owned subsidiary of MainSource Financial. Unless you
exercise your statutory dissenter's rights, you will receive $21.00 in cash for
each common share of First Community you own. For a complete description of what
First Community shareholders will receive in the merger, see "THE MERGER
AGREEMENT - Terms of the Merger." We encourage you to read the merger agreement
because it is the legal document that governs the merger.
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS
(PAGE 30)
The directors and executive officers have interests in the merger in
addition to the interests of all other shareholders. Those interests include the
following:
o Each outstanding First Community option, including those held
by directors and executive officers, will be cancelled and
extinguished in exchange for a payment equal to the number of
shares subject to the options multiplied by the difference
between $21.00 and the exercise price of the options.
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o First Community Bank & Trust shall terminate its obligations
under certain Termination Agreements with certain officers.
MainSource Financial shall pay each officer a lump sum cash
payment in consideration for such termination. First Community
Bank & Trust shall enter into a new employment agreement
effective at the time of the merger with each such officer.
o First Community Bank & Trust shall terminate each Deferred
Compensation Agreement it has entered into with the members of
its Board of Directors and with its President. Each member
shall be entitled to receive any amounts accrued pursuant to
such Agreements.
o First Community Bank & Trust shall terminate its Supplemental
Executive Retirement Plan ("SERP"). Pursuant to the merger
agreement, three of the participants shall execute a waiver of
their rights upon a change in control and a consent to
terminate the SERP, two shall execute a consent to terminate
the SERP and accept a cash payment as a change in control
benefit, and the remaining participants shall elect early
retirement pursuant to the SERP and execute a waiver of their
rights upon a change in control.
o MainSource Financial will provide director and officer
liability insurance and indemnification to the former
directors and executive officers of First Community and First
Community Bank & Trust for three years after consummation of
the merger.
CONDITIONS TO COMPLETING THE MERGER
(PAGE 28)
Completion of the merger depends upon the satisfaction of a number of
conditions, including, among others, the following:
o First Community's shareholders must adopt the merger agreement
by a vote of a majority of the outstanding shares; and
o the Board of Governors of the Federal Reserve System, the
Indiana Department of Financial Institutions and any other
applicable regulatory agencies must approve the merger.
To the extent permitted by law, the merger agreement provides that
certain of the closing conditions may be waived by the party entitled to assert
them. The First Community Board of Directors does not currently intend to seek
shareholder approval of any waiver of any condition.
TERMINATION OF THE MERGER AGREEMENT
(PAGE 29)
The merger agreement may be terminated for a number of reasons,
including, among others, the following:
o by mutual agreement of the Boards of Directors of MainSource
Financial and First Community; or
6
o by the Board of Directors of MainSource Financial or First
Community if the merger is not completed on or before June 30,
2003, or if any of the conditions of the merger are not
satisfied.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
(PAGE 32)
First Community shareholders may recognize gain, in certain
circumstances taxable as ordinary income, with respect to the cash consideration
received. No ruling has been or will be sought from the Internal Revenue Service
as to the federal income tax consequences of the merger. The tax consequences of
the merger to you may depend on the facts of your own situation. You should
consult your own tax advisor to understand fully the tax consequences of the
merger to you.
REQUIRED REGULATORY APPROVALS
(PAGE 22)
Consummation of the merger is subject to approval by the Board of
Governors of the Federal Reserve System and the Indiana Department of Financial
Institutions, who may receive comments from other government agencies and
departments.
FIRST COMMUNITY BANCSHARES, INC.
First Community is a one bank holding company which owns all of the
outstanding shares of stock of First Community Bank & Trust and First Community
Real Estate Management, Inc. First Community Bank & Trust is a state chartered
commercial bank which serves the financial needs of families and local
businesses through its main office in Bargersville and branch offices located in
Greenwood, Franklin, Indianapolis, Trafalgar, Whiteland, Edinburgh and North
Vernon, Indiana. First Community Real Estate Management, Inc. is an Indiana
corporation that owns and leases branch offices to First Community Bank & Trust.
First Community common shares are traded over-the-counter and quoted on
the Nasdaq OTC Bulletin Board under the symbol "FCYB.OB." On November 19, 2002,
the last trading day ending prior to the public announcement of the proposed
merger, the Nasdaq sale price for First Community common shares was $8.84. On
April 23, 2003, the last reported sales price for First Community common shares
before the printing of this document was $20.50.
MAINSOURCE FINANCIAL GROUP, INC.
MainSource Financial Group is listed on the NASDAQ Stock Market
(Nasdaq:MSFG), and is a community-focused, multi-bank financial services
oriented holding company with assets of approximately $1.2 billion. Through its
three banking subsidiaries, Capstone Bank, Watseka, Illinois; MainSource Bank,
Greensburg, Indiana; and Regional Bank, New Albany, Indiana; it operates 42
offices in 18 Indiana counties and seven offices in three Illinois counties.
Through its insurance subsidiary, MainSource Insurance, it operates five offices
in Indiana as well as one in Owensboro, Kentucky.
7
THE SPECIAL MEETING
INTRODUCTION
This document is being furnished to the shareholders of First Community
in connection with the solicitation of proxies by the First Community Board of
Directors for use at the Special Meeting of Shareholders of First Community
shareholders to be held on Wednesday, May 28, 2003, at 10:00 a.m., Eastern
Standard Time, at the Franklin Parks and Cultural Arts Center, 396 South State
Street, Franklin, Indiana, and at any adjournments or postponements of the
Special Meeting. Each copy of this document mailed to the shareholders of First
Community is accompanied by a proxy card furnished in connection with the
solicitation of proxies by the First Community Board of Directors for use at the
Special Meeting.
MATTERS TO BE CONSIDERED; BOARD OF DIRECTORS RECOMMENDATION
At the Special Meeting, First Community shareholders will be asked to
vote upon the following resolution:
Resolved, that the Agreement and Plan of Merger, dated as of
March 27, 2003, by and among MainSource Financial Group, Inc., FCBY
Merger Corporation and First Community Bancshares, Inc., a copy of
which is attached to the proxy statement of First Community dated April
25, 2003, and the transactions contemplated thereby, including the
merger of First Community with and into FCBY Merger Corporation, which
is a wholly-owned subsidiary of MainSource Financial, and the
cancellation of each outstanding common share of First Community in
exchange for the right to receive $21.00 cash, be and they hereby are,
adopted and approved.
The Board of Directors knows of no business that will be presented for
consideration at the Special Meeting other than the matters described in this
document.
The First Community Board of Directors has determined that the adoption
of the merger agreement is in the best interests of First Community
shareholders. ACCORDINGLY, THE FIRST COMMUNITY BOARD OF DIRECTORS RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT AND THE
APPROVAL OF THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE
MERGER. SEE "THE MERGER - BACKGROUND AND REASONS FOR THE MERGER."
SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. FAILURE TO RETURN
A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL MEETING WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST ADOPTION OF THE MERGER AGREEMENT.
RECORD DATE AND VOTING
Only the holders of record of First Community common shares as of the
close of business on April 24, 2003, are entitled to notice of and to vote at
the Special Meeting. At the close of business on the record date, there were
1,044,926 common shares of First Community outstanding and entitled to vote,
held by approximately 246 shareholders of record and beneficially by
approximately 250 shareholders. Directors and executive officers of First
Community (as a group) were entitled to vote 348,191 common
8
shares of First Community, or approximately 30.7% of the outstanding votes
entitled to be cast at the Special Meeting, and the directors have executed
agreements to vote their shares in favor of the merger agreement. Holders of
record of First Community common shares as of the close of business on the
record date are entitled to one vote per share on any matter voted on at the
Special Meeting.
The presence, either in person or by proxy, of the holders of a
majority of the outstanding common shares of First Community as of the record
date is necessary to constitute a quorum at the Special Meeting. Abstentions
count for the purpose of determining a quorum at the Special Meeting.
SHAREHOLDERS SHOULD NOT FORWARD ANY SHARE CERTIFICATES WITH THEIR PROXY
CARDS. IF THE MERGER IS CONSUMMATED, SHARE CERTIFICATES SHOULD BE DELIVERED IN
ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A LETTER OF TRANSMITTAL, WHICH WILL BE
SENT TO SHAREHOLDERS BY MAINSOURCE BANK, GREENSBURG, INDIANA, IN ITS CAPACITY AS
THE EXCHANGE AGENT, PROMPTLY AFTER THE MERGER IS EFFECTIVE.
VOTE REQUIRED
The affirmative vote of the holders of at least a majority of the
outstanding common shares of First Community entitled to vote on the matters to
be acted upon is required to adopt the merger agreement. THE FAILURE TO SUBMIT A
PROXY CARD OR VOTE IN PERSON AT THE SPECIAL MEETING HAS THE SAME EFFECT AS A
VOTE AGAINST ADOPTION OF THE MERGER AGREEMENT. ABSTENTIONS AND FAILURES TO VOTE
ON THIS MATTER BY A BROKER ALSO HAVE THE SAME EFFECT AS A VOTE AGAINST THE
MERGER AGREEMENT. BROKERS WHO HOLD COMMON SHARES OF FIRST COMMUNITY AS NOMINEES
WILL NOT HAVE DISCRETIONARY AUTHORITY TO VOTE SHARES WITH RESPECT TO THE MERGER
AGREEMENT ABSENT INSTRUCTIONS FROM THE BENEFICIAL OWNER. THEREFORE, BY NOT
GIVING SUCH INSTRUCTIONS, YOU WILL IN EFFECT BE VOTING AGAINST THE MERGER.
The proxy holders named in the enclosed proxy card will vote all common
shares of First Community represented by proxy cards that are properly signed
and returned by shareholders in accordance with the instructions contained on
the proxy card. You may specify your voting choices by marking the appropriate
boxes on the proxy card. IF YOU PROPERLY SIGN AND RETURN THE PROXY CARD SENT TO
YOU BY FIRST COMMUNITY BUT DO NOT SPECIFY YOUR VOTING CHOICES, YOUR SHARES WILL
BE VOTED "FOR" THE ADOPTION OF THE MERGER AGREEMENT, AS RECOMMENDED BY THE BOARD
OF DIRECTORS.
The First Community Board of Directors is not aware of any matters
other than those set forth in the Notice of Special Meeting of Shareholders of
First Community that may be brought before the Special Meeting. If any other
matters properly come before the Special Meeting, the persons named in the
accompanying proxy will vote the shares represented by all properly executed
proxies on such matters in their discretion.
SECURITIES OWNERSHIP OF MANAGEMENT OF FIRST COMMUNITY
The following table sets forth certain information with respect to the
number of common shares of First Community beneficially owned by each director
of First Community and by all directors and executive officers of First
Community as a group as of April 24, 2003. No other person is known by
management of First Community to own more than 5% of the outstanding common
shares of First Community.
9
Shares Beneficially Owned
Name and Address Number Percent
- ---------------- ------ -------
Albert R. Jackson, III 32,178(1) 3.1%
5675 N. CO RD 200W
North Vernon, Indiana 47265
Albert R. Jackson, Jr.
5745 N CO RD 200W 31,069(2) 2.9%
North Vernon, Indiana 47265
Merrill M. Wesemann, M.D. 104,179(3) 9.9%
251 E Jefferson Street
Franklin, Indiana 46131
Roy Martin Umbarger 49,115(4) 4.7%
5180 W CO RD 300N
Bargersville, Indiana 46106
Frank D. Neese 137,113(5) 12.5%
1705 North Meridian Street
Indianapolis, Indiana 46202
All Officers and Directors as a group (5 persons) 348,191 30.7%
- --------
1 Includes 5,363 shares held jointly with his father, brother and sister as to
which he disclaims voting and dispositive power, currently exercisable options
for 7,500 shares granted under the 1996 Stock Option Plan and a Convertible Note
currently convertible into 909 shares. Mr. Jackson, III is the son of Mr.
Jackson, Jr.
2 Includes 5,363 shares held jointly with two sons and a daughter, 2,135 shares
owned by Mr. Jackson's spouse, currently exercisable options for 3,050 shares
granted under the 1996 Stock Option Plan, Convertible Notes currently
convertible into 5,454 shares, and a Convertible Note owned by his spouse
currently convertible into 909 shares. Mr. Jackson, Jr. is the father of Mr.
Jackson, III.
3 Includes 8,087 shares owned by Dr. Wesemann's spouse, currently exercisable
options for 6,050 shares granted under the 1996 Stock Option Plan, Convertible
Notes currently convertible into 3,636 shares, and a Convertible Note owned by
his spouse currently convertible into 909 shares.
4 Includes 1,465 shares owned by Mr. Umbarger's spouse, 721 shares owned as a
joint-tenant with a son, 214 shares owned by his spouse jointly with his
daughter, currently exercisable options for 6,050 shares granted under the 1996
Stock Option Plan and Convertible Notes currently convertible into 4,545 shares.
5 Includes 3,000 shares owned by Mr. Neese's spouse, 14,044 shares owned by Mr.
Neese's spouse in an IRA account, 53,877 shares owned in an IRA account, 6,648
shares owned through a 401(k) plan, currently exercisable options for 6,050
shares granted under the 1996 Stock Option Plan and Convertible Notes currently
convertible into 45,454 shares. Mr. Neese disclaims beneficial ownership of the
shares owned by or for the benefit of his spouse.
10
REVOCABILITY OF PROXIES
A shareholder of record may revoke a proxy at any time prior to its
exercise by:
o delivering to First Community Bancshares, Inc., 210 East
Harriman, Bargersville, Indiana 46106, Attention: Albert R.
Jackson, III, a written notice of revocation prior to the
Special Meeting,
o delivering to First Community Bancshares, Inc., 210 East
Harriman, Bargersville, Indiana 46106, Attention: Albert R.
Jackson, III, a duly executed proxy bearing a later date prior
to the Special Meeting, or
o attending the Special Meeting and voting in person.
For shares held beneficially, but not as record holder, a shareholder
may change a previous vote by submitting new voting instructions to the broker
or nominee.
The presence of a shareholder at the Special Meeting will not in and of
itself automatically revoke such shareholder's proxy. If shares are held of
record, you can vote at the Special Meeting. A beneficial holder may not vote or
revoke a proxy at the Special Meeting unless such shareholder has received a
properly executed proxy from the broker or nominee.
SOLICITATION OF PROXIES
All expenses of First Community's solicitation of proxies, including
the cost of mailing this document to you, will be paid by First Community.
Proxies may be solicited from shareholders by directors, officers and
employees by mail, in person or by telephone, facsimile or other means of
communication. Such directors, officers and employees will not receive
additional compensation, but may be reimbursed for their reasonable
out-of-pocket expenses in connection with such solicitation. Arrangements will
be made with brokerage houses, custodians, nominees and fiduciaries for the
forwarding of proxy solicitation materials to beneficial owners of shares held
of record by such brokerage houses, custodians, nominees and fiduciaries, and
First Community will reimburse such brokerage houses, custodians, nominees and
fiduciaries for their reasonable expenses incurred in connection with such
solicitation.
DISSENTERS' RIGHTS
The Indiana Business Corporation Law provides shareholders of merging
corporations with certain dissenters' rights. The dissenters' rights of First
Community shareholders are set forth in Indiana Code Chapter 23-1-44, a copy of
which is attached to this Proxy Statement as Annex C. Shareholders of First
Community will be entitled to dissenters' rights only upon strict compliance
with procedures of the Indiana Business Corporation Law.
The Indiana Business Corporation Law provides that shareholders of
First Community have the right to demand payment for the fair value of their
shares of First Community common stock immediately before the merger becomes
11
effective, excluding any appreciation or depreciation in the value in
anticipation of the merger, unless a court determines that such exclusion would
be inequitable. To claim this right, the shareholder must first:
o Deliver to First Community, before the vote is taken, written
notice of the shareholder's intent to demand payment in cash
for the shareholder's shares if the merger is consummated, and
o Not vote in favor of the merger in person or by proxy.
Dissenting shareholders may send their written notice to Albert R.
Jackson, III, Chief Executive Officer, First Community Bancshares, 34 West
Jefferson Street, P.O. Box 970, Franklin, Indiana 46160.
If the merger is approved by First Community shareholders, MainSource
Financial will send notice of dissenters' rights to those shareholders
satisfying the above conditions no later than ten (10) days after shareholder
approval has occurred. The notice will state the procedures the dissenting
shareholder thereafter must follow to exercise dissenters' rights in accordance
with Indiana law.
A shareholder of First Community who is sent such a notice must then:
o Demand payment for the shareholder's shares of First Community
common stock,
o Certify whether beneficial ownership of the shares of First
Community common stock was acquired before the dates set forth
in such notice; and
o Deposit the shareholder's certificates representing shares of
First Community common stock in accordance with the terms of
such notice.
First Community shareholders who do not demand payment or deposit the
shareholder's certificates representing shares of First Community common stock
as required and within the applicable time period are considered to have voted
such shares of First Community common stock in favor of the merger and are not
entitled to receive payment for such shares under the dissenters' rights
provision of the Indiana Business Corporation Law.
A shareholder who does not comply with the preliminary conditions
described above will not be entitled to dissenters' rights under the Indiana
Business Corporation Law. Shareholders who execute and return the enclosed proxy
but do not specify a choice on the merger proposal will be deemed to have voted
in favor of the merger and accordingly to have waived their dissenters' rights,
unless the shareholder revokes the proxy prior to its being voted.
Upon consummation of the merger, MainSource Financial will pay each
dissenting shareholder who has fully complied with all statutory requirements
and MainSource Financial's notice, and who was the beneficial owner of the First
Community common stock prior to November 20, 2002 (the date that the merger was
first publicly announced), MainSource Financial's estimate of the fair value of
each share of First Community common stock as of the time
12
immediately prior to the merger, excluding any appreciation in value in
anticipation of the merger.
Dissenters who comply with the above procedures can object to the fair
value established by MainSource Financial by stating their estimate of the fair
value and demanding payment of the additional amount claimed as fair value.
MainSource Financial can elect to agree to the dissenters' fair value demand or
can commence an action in the Johnson County Circuit or Superior Court for a
judicial determination of the fair value. The court may appoint appraisers to
determine the fair value. The cost of the proceeding, including compensation and
expenses of the appraisers and counsel for the parties and experts, will be
assessed against all parties to the action in such amounts as the court finds
equitable. Each dissenter made a party to the action will be entitled to receive
the amount, if any, by which the court finds the fair value of the dissenters'
shares, plus interest, exceeds the amount paid by MainSource Financial.
The foregoing summary of the applicable provisions of Chapter 44 of
Title 23 of the Indiana Business Corporation Law is not intended to be a
complete statement of such provisions, and is qualified in its entirety by
reference to such Chapter, a copy of which is attached as Annex C. Any First
Community shareholder who intends to dissent from the merger should review the
text of Annex C carefully and should also consult with an attorney. Any
shareholder who fails to strictly follow the procedures described in the statute
will forfeit dissenters' rights.
THE MERGER
GENERAL
If the merger is consummated, First Community will be acquired by
MainSource Financial Group through the merger of First Community with and into a
wholly-owned subsidiary of MainSource Financial Group, with the wholly-owned
subsidiary being the surviving corporation.
BACKGROUND OF THE MERGER
During the past several years, First Community's Board of Directors has
periodically reviewed and assessed the consolidations occurring in the financial
services industry, particularly among community banks. The Board's goal in
performing these reviews was, and remains, to enhance shareholder value. In
September 2002, following the public announcement of a proposed merger between a
regional bank and a community bank in which the shareholders of the community
bank received an immediate premium on the trading value of their shares, the
Board engaged in a number of informal discussions regarding the proposed terms
of the merger. Soon thereafter, the Board decided to actively explore whether a
transaction with a third party was available and whether such a transaction
would be the best way to maximize shareholder value.
In October 2002, director Frank Neese contacted the president of a
publicly traded financial institution, the Interested Party, to see if there was
interest in an acquisition of First Community. The Interested Party expressed a
desire to discuss a potential merger and a meeting between First Community and
the Interested Party was scheduled for October 22, 2002.
13
On October 16, 2002, at the next regularly scheduled meeting of First
Community's Board of Directors, Mr. Neese informed the Board of his discussions
with the Interested Party. The Board granted permission for Mr. Neese, Chairman
of the Board Merrill Wesemann and Chief Executive Officer Albert R. Jackson,
III, to attend the October 22, 2002 meeting and to engage in informal
discussions regarding a potential merger.
On October 22, 2002, Mr. Neese, Chairman Wesemann and Mr. Jackson
attended the meeting with representatives of the Interested Party. At this
meeting First Community and the Interested Party executed a confidentiality
agreement, after which First Community agreed to provide additional financial
and other information to the Interested Party for its review. Additionally,
First Community and the Interested Party discussed the strategies of the
respective institutions, results of operation, future business plans and the
advantages and disadvantages of integrating the two companies.
On October 29, 2002, Mr. Neese received a telephone call from the
President of the Interested Party in which he indicated that the Interested
Party had a high level of interest in further exploring a potential merger and
that a proposal would be delivered to First Community's Board of Directors at
its next regularly scheduled meeting on November 20, 2002. The Interested Party
further informed Mr. Neese of its preliminary valuation thoughts of $20.00 per
share in an all cash transaction. Mr. Neese reported this telephone call to
Chairman Wesemann and Mr. Jackson. Chairman Wesemann directed Mr. Neese to
contact the President of MainSource Financial, James Saner, to determine whether
MainSource Financial would also have an interest in meeting with representatives
of First Community to discuss a potential merger.
In late October and early November, 2002, Mr. Neese held several
telephone conversations with Mr. Saner of MainSource Financial. During these
conversations, First Community shared substantially the same financial and other
information that had been provided to the Interested Party. Based on its
preliminary due diligence, MainSource Financial indicated its interest in
discussing potential merger opportunities with First Community and a meeting was
scheduled for November 12, 2002 at the offices of Chairman Wesemann. Mr. Neese,
Chairman Wesemann and Mr. Jackson attended the meeting on behalf of First
Community and Mr. Saner and Mr. Don Benziger, the Senior Vice President and
Chief Financial Officer of MainSource Financial, attended the meeting on behalf
of MainSource Financial. At the meeting, the parties discussed the integration
of the two financial institutions and the advantages and disadvantages of such a
transaction. MainSource Financial also expressed a high level of interest in
further pursuing merger discussions and indicated that a proposal for the
acquisition of First Community would be presented to the Board of Directors of
First Community at its November 20, 2002, board meeting.
On November 20, 2002, during the meeting of the First Community Board
of Directors, two proposed letters of intent were presented to the directors.
The proposal from MainSource Financial offered the holder of each share of First
Community common stock $21.00 per share in cash. The proposal from the
Interested Party offered the holder of each share of First Community common
stock a combination of common stock of the Interested Party and cash with a
total valuation less than the offer presented by MainSource Financial. .
Following a discussion of the terms of each proposal, including the type of
consideration to be received from each party, and the duties and
responsibilities of directors in merger transactions of this type, and after
14
the consideration of the factors set forth below under "Reasons for the Merger,"
the First Community Board of Directors voted to accept the MainSource Financial
offer and directed the President of First Community to execute a letter of
intent containing the principle proposed terms of the merger. A joint press
release announcing the execution of the letter of intent was issued on the same
day.
On January 15, 2003, the First Community Board voted to hire Austin
Associates, LLC to perform a financial analysis of the merger consideration to
determine whether the proposed consideration was fair to the shareholders of
First Community from a financial point of view.
During the next several months, MainSource Financial performed
additional due diligence on First Community. Additionally, management of First
Community and its counsel met with management and counsel to MainSource
Financial on several occasions to negotiate provisions of the definitive merger
agreement. The parties exchanged several drafts of the definitive merger
agreement before the Board met to discuss the definitive merger terms.
On February 26, 2003, the Board of Directors of First Community met to
review and comment upon a proposed draft of the definitive merger agreement. The
Board commented on certain issues which remained outstanding from the previous
draft as well as new matters. The Board voted to approve the definitive merger
agreement, subject to obtaining a favorable fairness opinion from Austin
Associates, LLC and subject to the resolution of the remaining issues in the
merger agreement.
On March 27, 2003, following final approval by the boards of directors
of First Community and MainSource Financial, the parties executed the definitive
merger agreement. Under the terms of the merger agreement, First Community will
merge with and into FCBY Acquisition Corp., a wholly-owned subsidiary of
MainSource Financial, with FCBY being the surviving entity. First Community Bank
& Trust will thereby become a wholly-owned subsidiary of FCBY, which is a
wholly-owned subsidiary of MainSource Financial. Each outstanding share of
common stock of First Community will be converted into the right to receive a
cash amount equal to $21.00. In addition, each outstanding option to purchase
First Community common stock will be converted into the right to receive a cash
amount equal to $21.00 less the exercise price of the option.
Reasons for the Merger
In reaching its decision to approve the merger agreement, the First
Community Board consulted with management of First Community, as well as its
financial and legal advisors, and considered a variety of factors, including the
following:
o The First Community Board's knowledge and analysis of the current
environment of the financial services industry, which is characterized
by rapid consolidation, increased opportunities for cross-industry
expansion, evolving trends in technology and increasing nationwide and
Internet competition;
o The First Community Board's belief that the financial terms of the
merger are fair to and in the best interests of First Community as a
whole and First Community's shareholders;
15
o The business, operations, financial condition, earnings and prospects
of First Community and MainSource Financial. In making its
determination, the First Community Board took into account the results
of First Community's due diligence review of MainSource Financial;
o The scale, scope, strength and diversity of operations, product lines
and delivery systems that can be achieved by combining First Community
and MainSource Financial;
o The First Community Board's belief that the merger represents:
a. an opportunity to leverage First Community's management,
infrastructure, products, marketing and business lines over a
larger consumer, business and corporate customer base through
MainSource Financial's geographically diverse network; and
b. the possibility of achieving expense savings and operating
efficiencies through, among other things, the elimination of
duplicative efforts;
o The opinion of Austin Associates, LLC to the First Community Board
that, based upon and subject to the considerations set forth in the
opinion, the conversion price was fair from a financial point of view
to First Community shareholders (see "Proposed Merger--Fairness Opinion
of First Community's Financial Advisor");
o The likelihood of the merger being approved by the appropriate
regulatory authorities;
o Consideration of the effect of the merger on First Community's other
constituencies, including First Community's employees and the customers
and communities served by First Community, including consideration of
the opportunity for training, education and advancement of employees
within MainSource Financial or one of its affiliated companies; and
o The First Community Board's analysis of alternatives to merging with
MainSource Financial, including merging with the Interested Party or
other potential acquirors and its analysis of relevant price
information from recent comparable bank mergers which occurred in the
Midwest and across the United States.
This discussion of the information and factors considered by the First
Community Board is not intended to be exhaustive, but it does include all
material factors considered by the First Community Board. In reaching its
decision to approve and recommend the merger, the First Community Board of
Directors did not assign any relative or specific weights to these factors, and
individual directors may have given differing weights to different factors.
Based upon the foregoing and other factors, the Board of Directors of First
Community concluded that it was in the best interests of First Community and its
shareholders to merge with MainSource Financial.
FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS OF FIRST
COMMUNITY HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AS ADVISABLE AND IN THE
BEST INTERESTS OF FIRST COMMUNITY AND ITS SHAREHOLDERS AND RECOMMENDS
16
THAT THE SHAREHOLDERS OF FIRST COMMUNITY VOTE FOR THE ADOPTION OF THE MERGER
AGREEMENT.
OPINION OF FINANCIAL ADVISOR
First Community retained Austin Associates, LLC ("Austin") to provide a
fairness opinion in connection with the merger. Austin is an investment banking
and consulting firm specializing in community bank mergers and acquisitions.
First Community selected Austin for this opinion on the basis of Austin's
experience and expertise in representing community banks in similar
transactions.
In conjunction with the signing of the merger agreement, Austin
rendered a written opinion to First Community's board of directors that the
terms provided for in the merger agreement were fair, from a financial point of
view, to the shareholders of First Community.
Austin was not directly involved with the solicitation of offers,
negotiations with MainSource Financial or any other party. Austin was not
involved in negotiating any parts of the merger agreement.
The preparation of a fairness opinion involves various determinations
as to the most appropriate methods of financial analysis and the application of
those methods to the particular circumstances. It is, therefore, not readily
susceptible to partial analysis or summary description. Austin believes that a
partial review of the analyses and the facts considered in its analyses could
create an incomplete or inaccurate view of the process used and the conclusions
reached by Austin in rendering its opinion. You should consider the following
when reading the discussion of Austin's opinion:
o the opinion should be read in its entirety for a full
understanding of the procedures followed, assumptions made,
matters considered and qualifications and limitations of the
review undertaken by Austin in connection with its opinion.
The summary of Austin's opinion set forth in this proxy
statement is qualified in its entirety by reference to the
full text of the opinion that is attached as Annex B to this
document.
o Austin's opinion rendered in connection with the merger does
not constitute a recommendation to any First Community
shareholder as to how he or she should vote at the special
meeting.
o no limitations were imposed on Austin by First Community's
board of directors or its management with respect to the
investigations made or the procedures followed by Austin in
rendering its opinion.
In performing its analyses, Austin made numerous assumptions with
respect to industry performance, business and economic conditions, and other
matters, many of which are beyond the control of First Community and MainSource
Financial and may not be realized. Any estimates contained in Austin's analyses
do not purport to be appraisals or necessarily reflect the prices at which the
companies or their securities may actually be sold. Except as described below,
none of the analyses performed by Austin was assigned a greater significance by
Austin than any other. The summaries of
17
financial analyses include information presented in tabular format. The tables
should be read together with the text of those summaries.
Austin has relied, without independent verification, upon the accuracy
and completeness of the information it reviewed for the purpose of rendering its
opinion. Austin did not undertake any independent evaluation or appraisal of the
assets and liabilities of First Community or MainSource Financial. Austin has
not reviewed any individual credit files of First Community or MainSource
Financial and has assumed that First Community's and MainSource Financial's loan
loss reserves are, in the aggregate, adequate to cover losses. Austin's opinion
is based on economic, market and other conditions existing on the date of its
opinion, and on information as of various earlier dates made available to it
which may not necessarily be indicative of current market conditions.
In rendering its opinion, Austin made the following assumptions:
o the merger will be accounted for using purchase accounting in
accordance with generally accepted accounting principles;
o all material governmental, regulatory and other consents and
approvals necessary for the consummation of the merger would
be obtained without any adverse effect on First Community,
MainSource Financial or on the anticipated benefits of the
merger;
o First Community and MainSource Financial have provided all of
the information that might be material to Austin in its
review; and
In connection with its opinion, Austin reviewed:
o the Agreement;
o audited financial statements of MainSource Financial for the
five years ended December 31, 2001 and unaudited financial
statement summaries as of December 31, 2002;
o audited financial statements of First Community for the five
years ended December 31, 2001 and unaudited financial
statement summaries as of December 31, 2002;
In addition, Austin:
o compared the financial terms of the merger with the financial
terms, to the extent publicly available, of other recent
business combinations of financial institutions;
o considered the indication of value for First Community as
determined using a discounted cash flow approach and compared
the results to the MainSource Financial aggregate deal value;
and
o conducted such other studies, analyses, inquiries and
examinations, as Austin deemed appropriate.
The following is a summary of all material analyses performed by Austin
in connection with its opinion provided to the First Community Board
18
of Directors as of March 27, 2003. The summary does not purport to be a complete
description of the analyses performed by Austin.
Summary of Financial Terms of Agreement. Austin reviewed the financial
terms of the proposed transaction, including the form of consideration and the
resulting price per share to First Community common stock holders pursuant to
the proposed merger. Under the terms of the Agreement, each outstanding share of
First Community common stock will receive $21.00 in cash. The Agreement further
provides that stock options and convertible debt previously granted or issued by
First Community be converted into cash in an amount equal to the cash amount
less the exercise price.
Contribution Analysis. Austin compared the market capitalization of
MainSource Financial to First Community's aggregate deal value in the
transaction. Austin then considered First Community's contribution of certain
balance sheet and income statement measures. The following table provides
highlights to this analysis:
First
MainSource Community's
First Community Financial Contribution
--------------- --------- ------------
Market Capitalization ($Mil.) $23.2(1) $169.8 12.0%
First Community's
% Contribution Market Capitalization
-------------- to Selected
Income Statement First Community MainSource Financial Contribution Ratios
---------------- --------------- -------------------- -------------------
2001 Core Net Income 7.3% 92.7% 164%
2002 Net Income (Exc.
Security Gains) 2.8% 97.2% 429%
2002 Core Net Income(2) 9.5% 90.5% 126%
Balance Sheet as of December 31, 2002
Total Assets 10.4% 89.6% 115%
Total Deposits 10.4% 89.6% 115%
Shareholders' Equity 9.5% 90.5% 126%
Tangible Shareholders' Equity 12.3% 87.7% 98%
(1) Represents the transaction value at $21.00 per share plus in-the-money
value of stock equivalents.
(2) First Community's core income adjusted for normalized loan loss
provision expense of $250,000 in 2002
With respect to the contribution of First Community's balance sheet and
income in the pro forma company, each measure would indicate First Community is
receiving a premium for its contribution in the pro forma company with the
exception of tangible book value.
Merger Value. In rendering its opinion on March 27, 2003, Austin
considered the cash value per share to each common shareholder in First
Community. Based on 1,044,926 common shares at First Community, the aggregate
value to common shareholders equaled $21.9 million ($21.00 multiplied by
1,044,926 shares outstanding at First Community).
19
In addition, MainSource Financial agreed to convert the 34,700
outstanding options of First Community into cash. These options are exercisable
at a weighted average price of $9.72 per share. Based on the $21.00 per share
value to First Community shareholders, the "in-the-money" value of the options
measures approximately $391,000 in the aggregate.
First Community also has $1.0 million of convertible debt securities
which are convertible into 90,910 shares of common stock. MainSource Financial
agreed to convert the convertible debt into cash. Based on the $21.00 per share
value to First Community shareholders, the "in-the-money" value of the
convertible debt measures approximately $909,000 in the aggregate.
Therefore, when including the value of consideration for the options
and convertible debt of First Community, the aggregate value of the transaction
at March 27, 2003 was approximately $23.2 million.
Austin Associates calculated that the indicated value of $23.2 million
represented:
o 222 percent of book value at December 31, 2002;
o 224 percent of tangible book value at December 31, 2002;
o 19.6 times core net income for year end 2002;
o 49.2 times stated net income for year end 2002; and
o 8.8 percent premium over tangible equity as a percent of total
assets.
Comparable Transaction Analysis. Austin reviewed certain information
relating to bank sale transactions in the Midwest and nationally announced since
January 1, 2001 with publicly available deal values. The following chart
highlights the criteria used to select guideline transactions for comparison to
the merger.
Midwest National National
Key Seller Criteria Transactions Group 1 Group 2
-------------------- ------------ ------- -------
Seller's Asset Size ($mils) $100 - $300 $100 - $300 $100 - $500
YTD ROAA > 0.0% > 0.0% 0.25% - 1.00%
Announced Date Since 01/01/01 12/31/01 12/31/01
Tangible Equity/Assets - < 10.0% < 10.0%
Return on Average Equity - - < 15.0%
# of Transactions Included 27 27 14
Austin compared the prices paid in these transactions as compared to
the transaction multiples being paid by MainSource Financial for First
Community.
National National MainSource/
Key Median Results Midwest Group 1 Group 2 Grand
------------------ ------- ------- ------- -----
Price/Earnings Multiple 16.3 x 19.9 x 31.6 x 19.6x (1)
Price/Tangible Book Value Ratio 200% 203% 202% 224%
Premium over Tangible Equity/Assets 7.3% 8.3% 7.0% 8.8%
(1) First Community's core net income adjusted for normalized loan loss
provision expense of $250,000 in 2002.
20
Austin concluded that the multiples paid by MainSource Financial for
First Community either approximate or exceed the median multiples paid for
comparable bank transactions based on the dates reviewed.
Discounted Cash Flow Analysis. The discounted cash flow value analysis
is a widely used valuation methodology but relies on numerous assumptions,
including asset and earnings growth rates, implied price to earnings multiples
and discount rates. The analysis does not purport to be indicative of the actual
values or expected values of First Community's common stock and does not
necessarily represent actual cost savings to be realized by MainSource
Financial.
Austin estimated the present value of future cash flows assuming First
Community would be acquired and computed the indication of value based on its
pro forma earnings stream including synergies. Synergies were estimated at 20
percent of First Community's stand-alone overhead expense. Pro forma overhead
expense reductions in the range of 10 to 30 percent are common in bank mergers.
The following chart highlights the key assumptions and results of the
discount cash flow analyses:
First Community's Pro Forma Actual Deal Value to
Discounted Cash Flow Key Assumptions Performance First Community
------------------------------------ ----------- ---------------
First Year Pro Forma Net Income ($000) $1,963
Fifth Year Pro Forma Net Income ($000) $2,359
Discount Rate 13.0%
Implied Price/EPS Multiple 10.0 x
Discounted Cash Flow Value ($Mil.) $19.8 $23.2
Projected cash flows were discounted at rate 13.0 percent. This rate
was selected based on Austin's experience and the expected risk-adjusted rate of
return that an acquirer in First Community would require. Based on the results
from the discounted cash flow analysis, First Community shareholders would
receive an approximate 17.2 percent increase in value with MainSource Financial
as compared to its pro forma discounted cash flow indication of value.
Pro Forma Merger Analysis. Austin performed a pro forma merger analysis
by combining the projected balance sheets and income statements to determine the
financial impact of the merger on MainSource Financial shareholders. Austin made
certain assumptions regarding the accounting treatment, acquisition adjustments
and cost savings to calculate the financial impact the merger would have on key
performance measures of the pro forma company. The pro forma merger analysis was
based in part on published earnings estimates, Austin's long-term estimated
earnings and growth rates, and estimates of the expected cost savings. Austin
assumed the transaction closed on 12/31/02 and included fully phased-in cost
savings in 2003. The following chart highlights the key results:
21
Percentage
Stand-Alone Pro Forma Change to
Pro Forma MainSource MainSource MainSource
2003 Projected Performance Results First Community(1) Financial Financial Financial
- ---------------------------------- ------------------ --------- --------- ---------
ROAA 1.33% 1.18% 1.12% (5.1%)
ROAE - 14.42% 15.34% 6.4%
Net Income ($mils) $2.0 $15.1 $16.2 6.6%
Basic Earnings Per Share - $2.23 $2.38 6.7%
Dividends Per Share - $0.70 $0.70 0%
Book Value Per Share - $16.21 $16.36 0.9%
Tangible Equity Per Share - $12.73 $10.94 (14.1%)
(1) Includes estimated cost savings.
Pro Forma Earnings and Book Value. This analysis indicates that the
merger is expected to increase MainSource Financial's stand-alone 2003 earnings
per share by 6.7 percent. MainSource Financial's pro forma tangible book value
per share would equal $10.94 representing a 14.1 percent decrease to its
stand-alone projection of $12.73. At the purchase price of $23.2 million, it
would take approximately six years for MainSource Financial to recover the
tangible book value dilution.
Additional Limiting Conditions. The opinion expressed by Austin was
based on market, economic and other relevant considerations as they existed and
could be evaluated as of the date of the opinion. Events occurring after the
date of issuance of the opinion, including but not limited to, changes affecting
the securities markets, the results of operations or material changes in the
financial condition of either MainSource Financial or First Community could
materially affect the assumptions used in preparing this opinion.
First Community has agreed to pay Austin a cash fee of $15,000 for the
issuance of its fairness opinion. None of this fee is contingent upon
shareholder approval or closing of the merger. In addition, First Community has
agreed to indemnify Austin against certain liabilities, including liabilities
under securities laws.
CONDUCT OF BUSINESS IF THE MERGER IS NOT CONSUMMATED
If the merger is not consummated, First Community will continue its
current operations. For reasons discussed under the caption, "THE MERGER -
Background and Reasons for the Merger," First Community may continue to explore
strategic alternatives, including a business combination or sale of First
Community, if the merger with MainSource Financial is not consummated.
REGULATORY FILINGS AND APPROVALS
MainSource Financial and First Community have agreed to use their
reasonable best efforts to obtain all regulatory approvals required to
consummate the merger, which include filing applications with the Board of
Governors of the Federal Reserve System and the Indiana Department of Financial
Institutions, AND HAVE MADE THE APPLICABLE REGULATORY FILINGS PRIOR TO THE DATE
OF THIS DOCUMENT. The merger cannot proceed in the absence of these regulatory
approvals. There can be no assurance that these regulatory approvals will be
obtained, and, if obtained, there can be no assurance as to
22
the date of any such approvals or the absence of any litigation challenging such
approvals. MainSource Financial and First Community are not aware of any other
material governmental approvals or actions that are required prior to the
parties' consummation of the merger other than those described above.
THE MERGER AGREEMENT
The description of the merger agreement set forth below is not
complete. For full information, you should read the merger agreement, a copy of
which is attached to this document as Annex A.
TERMS OF THE MERGER
THE MERGER. The merger agreement contemplates the merger of First
Community with and into a wholly-owned subsidiary of MainSource Financial.
Immediately after the merger becomes effective, the wholly-owned subsidiary of
MainSource Financial will be the surviving corporation, and the separate
existence of First Community will cease.
EFFECTIVE TIME. As promptly as practicable after the satisfaction or
waiver of the conditions set forth in the merger agreement, the parties will
complete the merger by filing Articles of Merger with the Secretary of State of
Indiana. The merger will be effective upon the filing of the Articles of Merger
or such later date as specified in the Articles of Merger.
CANCELLATION OF THE COMMON SHARES AND OPTIONS OF FIRST COMMUNITY IN THE
MERGER. If the merger of First Community with the subsidiary of MainSource
Financial closes after the satisfaction or waiver of all of the closing
conditions, the following shall occur:
(i) each outstanding common share of First Community will be cancelled
and extinguished in consideration and exchange for the right to receive $21.00
in cash from MainSource Financial; and
(ii) each unexercised option to purchase First Community's common
shares will be canceled and converted into the right to receive in cash $21.00
per share less the exercise price of such option.
EXCHANGE OF CERTIFICATES
EXCHANGE AGENT. MainSource Bank, Greensburg, Indiana will act as
exchange agent for the exchange of share certificates pursuant to the merger.
EXCHANGE PROCEDURES. As soon as practicable, but not later than one
business day following the effective time of the merger, MainSource Financial
shall deposit an amount of cash sufficient to make payment of the merger
consideration to each record holder of common shares of First Community and each
holder of outstanding unexercised options of First Community that are converted
into the right to receive cash in the merger. As soon as practicable after the
effective time of the merger, the exchange agent shall mail or make available to
each record holder of common shares or options a notice and letter of
23
transmittal disclosing the effectiveness of the merger and the procedure for
exchanging each such record holder's common shares, options or promissory notes.
First Community shareholders will be required to follow the instructions and
surrender their certificates representing First Community common shares,
together with the properly executed letter of transmittal, and any other
required documents, to MainSource Bank. Such shareholders will then be entitled
to receive $21.00 in cash for each First Community common share held and such
option holders will be entitled to receive $21.00 in cash minus the exercise
price of each unexercised option. No interest will be paid on any merger
consideration.
DISSENTING SHARES. Any holder of First Community shares who has
properly exercised dissenters' rights shall be entitled to payment for such
shares pursuant to Indiana law. If, in accordance with Indiana law, any holder
of dissenting shares shall forfeit such right to payment of the fair value of
such shares, such shares shall thereupon be deemed to have been converted into
and to have become exchangeable for, as of the effective time of the merger, the
right to receive $21.00 per share.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, each of MainSource Financial and First
Community provide customary representations and warranties relating to, among
other things:
o organization, standing and power;
o capital structure;
o corporate authority to enter into and perform the merger
agreement;
o conflicts with other agreements;
o securities documents and financial statements;
o changes in the party's business since the date of the most
recent financial statements;
o absence of undisclosed liabilities;
o information provided to the other parties and to the First
Community shareholders; and
o brokers.
In the merger agreement, First Community also makes additional
representations and warranties relating to, among other things:
o allowance for credit losses;
o environmental matters;
o no default in First Community's charter documents or other
material contracts;
o compliance with licenses, permits and applicable laws;
o actions and proceedings;
o taxes;
o material agreements;
o employee benefit plans;
o subsidiaries;
o agreements with bank regulators;
o applicability of the business combination provisions of
Indiana law;
o vote required;
o title to property;
o corporate documents, books and records;
o insurance;
o potential competing interests of insiders;
24
o software;
o interest rate risk management instruments;
o the due execution and delivery of certain modification and
termination agreements.
MainSource Financial represented and warranted that neither it nor any
of its affiliates or associates beneficially owns more than ten percent (10%) of
First Community's common shares and that it has or has timely access to
sufficient funds to perform its obligations under the merger agreement.
CONDUCT OF BUSINESS PENDING THE MERGER
First Community agreed that until the merger is effective, it will
conduct its business operations in the ordinary and usual course, consistent
with past practice, and will seek to preserve intact its business organization,
keep available the service of its directors, officers and employees, and
preserve its relationships with customers, suppliers and others having business
dealings with it. The merger agreement provides that First Community shall not,
and shall cause its subsidiaries not to, without the prior approval of
MainSource Financial:
o issue, sell, grant, dispose of or otherwise encumber any
shares of capital stock, other than upon the exercise of stock
options or the conversion of convertible debt securities;
o purchase any of First Community's common shares;
o effect any recapitalization, reclassification, stock dividend,
stock split or like change in capitalization;
o declare, set aside, make or pay any dividend or other
distribution, except for regular quarterly cash dividends not
to exceed $0.05 per share;
o adopt a plan of complete or partial liquidation, dissolution,
merger consolidation, restructuring, recapitalization or other
reorganization;
o amend its Articles of Incorporation or Bylaws;
o acquire or dispose of assets or securities, except in the
ordinary course of business;
o incur any indebtedness for borrowed money or make any loans or
investments other than in the ordinary course of a banking
business;
o increase the rate of compensation of any of its directors,
officers or employees;
o pay or agree to pay any pension, retirement allowance,
severance or other employee benefit not required by existing
benefit plans;
o enter into or modify any employment, severance or termination
agreement with any director, officer or employee;
25
o enter into or modify any employee benefit arrangement;
o make or commit to make any capital expenditures;
o make any material changes in its customary methods of
marketing;
o change its method of accounting;
o offer any new deposit, loan or investment product or service
or modify any of its lending or investment policies;
o take any action that would make any of the representations and
warranties made by First Community in the merger agreement
inaccurate in any material respect at the effective time of
the merger; or
o take any action that would adversely affect the ability of
MainSource Financial to obtain regulatory approval for the
merger.
NO SOLICITATION. The merger agreement provides that First Community
shall not initiate, solicit or encourage inquiries or proposals, furnish any
information or participate in any discussions or negotiations with any person in
connection with any merger, acquisition or consolidation, or any acquisition or
purchase of all or a substantial portion of the assets of or equity interests in
First Community. The merger agreement does not, however, prohibit First
Community from furnishing information to, or entering into discussions,
negotiations or an agreement with any person who makes an unsolicited bona fide
proposal for any transaction described above, or from disclosing to First
Community's shareholders a position with respect to the unsolicited proposal, if
the Board of Directors, after consulting with and being advised by legal
counsel, determines in good faith that such actions are required to fulfill its
fiduciary obligations under the law.
First Community is not permitted to enter into such other acquisition
proposal except concurrently with the termination of the merger agreement.
ADDITIONAL AGREEMENTS
ACCESS TO INFORMATION. First Community and its subsidiaries shall
afford MainSource Financial and its representatives reasonable access to its
books, records, properties, personnel and representatives. MainSource Financial
shall hold such information that is non-public in confidence, unless required to
disclose such information by subpoena, civil investigative demand or other
similar process.
SHAREHOLDERS MEETING. First Community shall duly call, give notice of,
convene and hold a meeting of its shareholders for the purpose of voting on the
approval of the merger. The Board of Directors of First Community will recommend
the approval of the merger to the shareholders unless such a recommendation
would violate Indiana law.
REASONABLE EFFORTS. MainSource Financial and First Community will use
all reasonable efforts to take all actions necessary to consummate the
26
merger, including obtaining the approvals or consents by the Board of Governors
of the Federal Reserve System, the Indiana Department of Financial Institutions
and any other governmental agencies as are required.
FINANCIAL STATEMENTS. First Community shall make available to
MainSource Financial copies of:
o any monthly or quarterly unaudited consolidated financial
statements for periods ended after September 30, 2002; and
o any audited consolidated financial statements for any year
ended after September 30, 2002.
EXPENSES. Whether or not the merger is consummated, all costs and
expenses incurred in connection with the merger shall be paid by the party
incurring such expense.
INDEMNIFICATION. For a period of three (3) years after the effective
time of the merger, MainSource Financial shall indemnify, defend and hold
harmless the officers and directors of First Community [and its subsidiaries]
against claims, losses or damages, including expenses in advance of final
disposition, arising out of or based on the merger to the full extent permitted
by First Community's Articles of Incorporation or By-Laws or Indiana law.
EMPLOYEE BENEFIT PLANS. As soon as feasible after the merger,
MainSource Financial shall provide each employee of a First Community subsidiary
with such employee benefits as MainSource Financial provides to employees of its
subsidiaries from time to time, including life, medical, hospitalization and
disability insurance and sick pay, personal leave and retirement plan benefits.
MainSource Financial shall credit such employees for years of service at First
Community prior to the merger for purposes of eligibility to participate,
vesting, eligibility to receive benefits, and benefit accrual.
Directors and officers of First Community's subsidiaries shall be
provided with such directors' and officers' liability insurance as MainSource
Financial provides to the directors and officers of its subsidiaries.
AFFILIATE SHAREHOLDERS' VOTE. Each member of First Community's Board of
Directors shall continue to own and not sell, assign or encumber his shares of
common stock of First Community, except as otherwise provided in the merger
agreement, and shall vote his shares in favor of the merger.
RELEASES. Each member of the Board of Directors of First Community and
its subsidiaries shall execute a general release of all parties to the merger
from any claims against such entities, except for claims arising out of the
merger agreement, claims resulting from moneys on deposit with subsidiaries of
First Community or MainSource Financial, claims for compensation accrued and
vested, and claims arising from deferred compensation or other similar
agreements.
EMPLOYMENT AGREEMENTS. Within 7 days of the execution of the merger
agreement, First Community shall deliver executed employment agreements between
First Community Bank & Trust and certain employees.
27
REDEMPTION OF CONVERTIBLE DEBT. Prior to Closing, First Community shall
cause all outstanding convertible debt securities of First Community to be
cancelled or converted into common stock of the Company in accordance with the
terms of such securities.
CONDITIONS TO THE MERGER
CONDITIONS TO OBLIGATIONS OF MAINSOURCE FINANCIAL AND FIRST COMMUNITY.
The obligations of MainSource Financial and First Community to effect the merger
are subject to the satisfaction or waiver of the following conditions, among
others:
o the merger agreement must be validly adopted by the requisite
vote of the shareholders of First Community;
o all necessary approvals, consents, authorizations, exemptions
or waivers (including any required by any federal or state
governmental body or agency) must be obtained and all waiting
periods required by law must have expired;
o none of the parties shall be subject to any statute, rule,
regulation, injunction or other order or decree which shall
have been enacted by any governmental authority which
prohibits, restricts or makes illegal completion of the merger
and no proceeding initiated by any governmental entity seeking
an order, injunction or decree issued by any court or agency
of competent jurisdiction preventing the completion of the
merger shall be pending; and
o no action shall have been taken or statute or rule enacted
which, in connect with a necessary governmental approval,
imposes any condition or restriction on any party that impacts
the business or economic benefits of the merger such that
consummation of the merger is rendered inadvisable.
CONDITIONS TO OBLIGATIONS OF MAINSOURCE FINANCIAL. The obligations of
MainSource Financial to effect the merger are subject to the satisfaction or
waiver of the following conditions:
o the representations and warranties made by First Community in
the merger agreement are true and correct in all material
respects at the time of the closing;
o First Community and the members of its Board of Directors
shall have complied in all material respects with its
obligations under the merger agreement;
o First Community shall have delivered to MainSource Financial
certain certificates of officers of First Community certifying
that conditions to closing have been satisfied;
o First Community shall have obtained any necessary consents or
approvals to the succession of MainSource Financial to any
obligation, right or interest of First Community; and
28
o First Community Bank & Trust and certain employees shall have
executed and delivered employment agreements within 7 days of
the execution of the merger agreement.
CONDITIONS TO OBLIGATIONS OF FIRST COMMUNITY. The obligations of First
Community to effect the merger shall be subject to the satisfaction or waiver of
the following conditions:
o the representations and warranties made by MainSource
Financial in the merger agreement are true and correct in all
material respects at the time of the closing;
o MainSource Financial and its wholly-owned subsidiary shall
have complied in all material respects with its obligations
under the merger agreement;
o MainSource Financial shall have delivered to First Community
certain certificates of officers of MainSource Financial
certifying that conditions to closing have been satisfied;
o MainSource Financial shall have obtained any consents or
approvals required as a result of the transactions
contemplated by the merger agreement; and
o First Community shall have received an opinion from Austin
Associates, LLC that the merger is fair to the shareholders of
First Community from a financial point of view.
TERMINATION. The merger agreement may be terminated:
o by mutual agreement of MainSource Financial and First
Community;
o by the Board of Directors of MainSource Financial or First
Community if:
(a) the approval of the shareholders of First Community
to the merger is not obtained at a meeting called for
that purpose;
(b) the merger has not been consummated on or before June
30, 2003; provided, however, if such non-occurrence
is due to either party's material breach of the
merger agreement, the Board of Directors of such
breaching party shall not have the right to terminate
the merger agreement;
(c) any court or governmental entity shall have issued an
order or taken any action enjoining or prohibiting
the merger;
(d) the other party has breached a term of the merger
agreement which would give rise to a failure of
condition and such breach cannot be or has not been
cured within thirty (30)days, provided that the
terminating party must not been in breach of any term
of the agreement;
o by the Board of Directors of First Community or MainSource
Financial if any event has occurred or circumstance has arisen
or been discovered
29
that would preclude satisfaction of any of the conditions that
such party is subject to under the merger agreement as of the
date of such determination; or
o by the Board of Directors of First Community if the Board of
Directors of First Community shall have approved, and First
Community shall have entered into, a written agreement to
engage in a merger, consolidation or other business
combination involving First Community with any person other
than MainSource Financial or any affiliate of MainSource
Financial; provided that First Community is not then in breach
of the merger agreement and First Community has complied with
its obligations under the merger agreement in connection with
its receipt of the alterative merger proposal.
BREAK-UP FEE. First Community is required to pay a break-up fee of
$460,000 to MainSource Financial upon termination of the merger agreement by
either First Community or MainSource Financial if, subject to certain
exceptions: (a) the merger agreement is terminated for any of the following
reasons; and (b) within twelve (12) months of such termination First Community
enters into a written agreement to engage in a transaction whereby First
Community is to be acquired by any person other than MainSource Financial or any
affiliate of MainSource Financial:
o the merger agreement is terminated by the mutual written
consent of First Community and MainSource Financial;
o the merger agreement is terminated by First Community or
MainSource Financial because the merger is not consummated on
or before June 30, 2003, if at the time of termination First
Community is in material breach of any of its representations,
warranties or covenants under the merger agreement that would
give rise to a failure of condition and such breach cannot be
cured within 30 days;
o the merger agreement is terminated because a court or
governmental entity has issued an order or taken action
enjoining or prohibiting the merger, if at the time of
termination First Community is in material breach of any of
its representations, warranties or covenants under the merger
agreement that would give rise to a failure of condition and
such breach cannot be cured within 30 days;
o the merger agreement is terminated by MainSource Financial as
a result of a breach by First Community of a representation,
warranty or covenant under the merger agreement that would
give rise to a failure of condition and such breach cannot be
cured within 30 days;
o the merger agreement is terminated by MainSource Financial
because a condition to its obligation to effect the merger is
not capable of being satisfied; or
o the merger agreement is terminated by First Community because
it has approved and entered into a definitive agreement of an
alternative merger transaction.
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS
30
TREATMENT OF STOCK OPTIONS. At the time the merger is effective, each
outstanding option to purchase First Community common shares will be cancelled
and extinguished, and the holders of such stock options will be entitled to
receive cash from MainSource Financial in the amount of the difference between
(a) the product of (i) the difference between $21.00 and the exercise price per
share of such stock option, multiplied by (ii) the number of common shares
subject to such stock option, less (b) applicable federal and state tax
withholding obligations of the holder of such stock option.
As of April 24, 2003, options to purchase 34,700 shares were
outstanding, all of which were held by the directors and executive officers of
First Community. All of the options issued by First Community had exercise
prices less than $21.00 per share and therefore are expected to receive option
cancellation payments.
Each holder of a stock option will be required to execute an option
cancellation agreement in order to receive payment for the option.
TERMINATION AGREEMENTS. Three (3) employees of a subsidiary of First
Community, Albert R. Jackson, III, Keith Lindauer and Dean Jackson, are parties
to Termination Agreements with First Community Bank & Trust dated as of July 28,
1999. Each of the Termination Agreements provides that in the event of a change
in control, which includes the acquisition by another company of 100% of the
voting stock of First Community, and in the event the employment of the employee
is terminated for any reason other than good cause within 180 days of the change
in control, the employee is entitled to receive a lump sum equal to 299% of his
average total compensation for the prior three (3) years. At the effective time
of the merger, and as condition to each party's obligation to close the merger,
each employee shall execute a waiver of his rights under the Termination
Agreements and those agreements shall be terminated. In consideration for this
waiver and termination, MainSource Financial and each employee shall execute
employment agreements effective at the time of the merger and continuing until
December 31, 2004, and MainSource Financial shall pay each employee a lump sum
cash payment of $240,000 for Albert R. Jackson, III, $175,000 for Keith Lindauer
and $144,000 for Dean Jackson. Upon execution of the employment agreements, each
employee shall also receive a $25,000 signing bonus.
DEFERRED COMPENSATION AGREEMENTS. Each member of the Board of Directors
of First Community Bank & Trust, including Albert R. Jackson, Jr., Merrill M.
Wesemann, Frank D. Neese and Roy M. Umbarger, and Albert R. Jackson, III, in his
capacity as an executive officer of First Community Bank & Trust, are parties to
Deferred Compensation Agreements with First Community Bank & Trust. These
agreements permit the deferral by the director or officer of a portion of the
compensation received by such director or officer into an account maintained by
First Community Bank & Trust with an annual interest rate as determined by the
Board of Directors of First Community Bank & Trust. Pursuant to the merger
agreement, all of the Deferred Compensation Agreements will terminate effective
as of the closing of the merger and all amounts accrued thereunder will be paid
to such persons.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. Certain directors and executive
officers of First Community Bank & Trust (8 persons) are participants in the
First Community Bank & Trust Supplemental Executive Retirement Plan ("SERP").
Under the SERP, a participant who has obtained 72 years of age, is serving as a
director or employee at that time, and has
31
completed at least three years of participation in the SERP is entitled to
received annual payments for the rest of his life (or a minimum of ten years)
equal to 100% of the average of the director fees such person received or would
have received had such person been a director each year for the most recent
three-year period. A participant who has completed at least five years of
employment or service as a director with First Community may elect early
retirement on or after attaining age 65. A participant electing early retirement
is entitled to receive the actuarial equivalent (present value) of the normal
retirement benefit described above.
Upon a change in control, the definition of which includes the merger,
each participant in the SERP is deemed to have remained in the employ of First
Community Bank & Trust until his normal retirement age (72 years old), and may
commence receipt of the actuarial equivalent of his normal retirement benefit at
any time after the termination of his employment or service on the Board.
Pursuant to the merger agreement, the participants in the SERP shall execute and
deliver the following at the closing at the merger:
o each of Albert R. Jackson, III, Keith Lindauer and Dean
Jackson shall execute a waiver of their rights upon a change
in control and a consent to terminate the SERP;
o Don Goeb and Roy M. Umbarger shall each execute a consent to
terminate the SERP and accept, as a change in control benefit,
$107,212 for Mr. Goeb and $107,212 for Mr. Umbarger; and
o each of Albert R. Jackson, Jr., Merrill M. Wesemann and Frank
D. Neese shall elect early retirement from the Board of
Directors of First Community Bank & Trust and shall execute a
waiver of their rights upon a change in control.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of material federal income tax consequences
of the merger to First Community shareholders. It is assumed for purposes of
this discussion that the common shares are held as "capital assets" within the
meaning of Section 1221 of the Internal Revenue Code. The tax consequences to
each shareholder will depend in part upon such shareholder's particular
situation. Generally, shareholders will recognize gain, if any, up to the amount
of cash received, depending upon such shareholder's basis in the First Community
common shares that such shareholder owns. Similarly, if a shareholder is a
dissenting shareholder who receives cash in payment for such dissenting
shareholder's common shares, such shareholder will recognize gain, if any, up to
the amount of cash such dissenting shareholder receives, based upon such
dissenting shareholder's basis in the First Community common shares that such
dissenting shareholder owns.
Special tax consequences not described in this document may be
applicable to particular classes of taxpayers, such as financial institutions,
insurance companies, tax-exempt organizations, broker-dealers, traders in
securities that elect to mark to market, persons that hold common shares as part
of a straddle or conversion transaction, persons who are not citizens or
residents of the United States and shareholders who acquired their common shares
through the exercise of an employee stock option or
32
otherwise as compensation. The foregoing disclosure is for general information
only and is based upon the Internal Revenue Code, its legislative history,
existing and proposed regulations thereunder, published rulings and decisions,
all as currently in effect as of the date hereof, and all of which are subject
to change, possibly with retroactive effect. No ruling has been or will be
sought from the Internal Revenue Service on the United States federal income tax
consequences of the merger. Tax consequences under state, local and foreign laws
are not addressed in this document. All shareholders should consult with their
own tax advisors as to the particular tax consequences of the merger, including
the applicability and effect of the alternative minimum tax and any state, local
or foreign income and other tax laws and of changes in such tax laws.
WHERE YOU CAN FIND MORE INFORMATION
First Community and MainSource Financial each file reports, proxy
statements and other information with the Securities and Exchange Commission
("SEC"). You may read and copy any reports, statements or other information that
First Community and MainSource Financial file at the SEC's public reference
rooms in Washington, D.C., New York, New York, and Chicago, Illinois. (The
address of the public reference room in Washington, D.C. is 450 Fifth Street,
N.W., Washington, D.C. 20549). Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. First Community's and MainSource
Financial's public filings are also available to the public from commercial
document retrieval services and at the Internet World Wide Web site maintained
by the SEC at http://www.sec.gov. Reports, proxy statements and other
information regarding MainSource Financial also may be inspected at the offices
of The Nasdaq Stock Market, 9801 Washingtonian Boulevard, Gaithersburg, Maryland
20878.
If you would like to request any documents from First Community or
MainSource Financial, please do so in writing or by telephone by May 27, 2003,
to receive them before the First Community Special Meeting at the following
addresses and telephone numbers:
First Community Bancshares, Inc.
34 West Jefferson
Franklin, Indiana 46106
(317) 346-7230
MainSource Financial Group, Inc.
201 North Broadway
Greensburg, Indiana 47240
(812) 663-4812
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT TO
VOTE YOUR SHARES AT THE SPECIAL MEETING OF SHAREHOLDERS OF FIRST COMMUNITY.
FIRST COMMUNITY AND MAINSOURCE FINANCIAL HAVE NOT AUTHORIZED ANYONE TO PROVIDE
YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS DOCUMENT.
YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS DOCUMENT IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF THIS DOCUMENT, AND THE MAILING OF
THIS DOCUMENT TO SHAREHOLDERS SHALL NOT CREATE ANY IMPLICATION TO THE CONTRARY.
33
ANNEX A
-------
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), made as of March 27,
2003, among MAINSOURCE FINANCIAL GROUP, INC., an Indiana corporation ("Parent"),
FCBY MERGER CORPORATION, an Indiana corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and FIRST COMMUNITY BANCSHARES, INC. , an Indiana
corporation (the "Company"). The members of the Company's Board of Directors,
Albert R. Jackson, Jr., Albert R. Jackson III, Frank D. Neese, Roy Martin
Umbarger and Merrill M. Wesemann, M.D. (the "Affiliate Shareholders"), solely in
their non-fiduciary capacities as shareholders of the Company and as
individuals, join in this Agreement for purposes of making the covenants and
agreements in Sections 5.9 and 5.10.
R E C I T A L S:
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A. The Boards of Directors of Parent, Merger Sub and the Company each
have determined that a business combination involving the merger of the Company
into Merger Sub is in the best interests of their respective companies and
shareholders and presents an opportunity for Parent and the Company and their
respective shareholders to achieve long-term strategic and financial benefits,
and accordingly have agreed to effect the merger provided for herein (the
"Merger") upon the terms and subject to the conditions set forth herein.
B. Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and to prescribe various conditions to the Merger.
C. Each Affiliate Shareholder wishes to join in this Agreement for
purposes of making the covenants and agreements set forth in Sections 5.9 and
5.10 to facilitate the execution of this Agreement and the consummation of the
Merger and the other transactions contemplated hereby, and to acknowledge and
agree that, in consideration for making such covenants and performing such
agreements, he will benefit from a smooth and orderly transition in the
ownership and control of the Company and its Subsidiaries as well as from any
consideration he will be entitled to receive as a shareholder of the Company as
a result of the Merger, and that such consideration is adequate for making such
covenants and performing such agreements. Each Affiliated Shareholder also
wishes to hereby acknowledge and agree that he has carefully read and considered
the provisions of Sections 5.9 and 5.10 with counsel and that such provisions
are fair and reasonable and may be deemed reasonably required by Parent for the
protection of its interests in executing this Agreement, consummating the Merger
and other transactions contemplated hereby, and receiving the economic benefits
from the Merger expected by Parent following the Merger.
A G R E E M E N T:
- - - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 Effective Time of the Merger. Subject to the terms and conditions
of this Agreement and in reliance upon the representations, warranties,
covenants and agreements contained herein, at the Effective Time (as defined
below) the Company will merge with and into Merger Sub (the "Merger"), with
Merger Sub being the surviving corporation in the Merger. (As used in this
Agreement, "Surviving Corporation" shall mean Merger Sub.) The parties will
cause the Merger to be consummated by filing articles of merger or other
appropriate documents (in any such case, the " Articles of Merger") with the
Secretary of State of the State of Indiana in such form as required by, and
executed in accordance with the provisions of, the Indiana Business Corporation
Law ("IBCL"), as soon as practicable on or after the Closing Date (as defined in
Section 1.2). The Merger shall become effective at the time specified in the
Articles of Merger (the time the Merger becomes effective being the "Effective
Time").
1.2 Closing. The closing of the Merger (the "Closing") will take place
at 10:00 a.m. on a date to be specified by the parties, which shall be the first
business day that is five business days after satisfaction of the latest to
occur of the conditions set forth in Sections 6.1, 6.2(b) and 6.3(b) (other than
the delivery of the officers' certificates referred to in Sections 6.2(b) and
6.3(b)), provided that the other closing conditions set forth in Article VI have
been met or waived as provided in Article VI at or prior to the Closing (the
"Closing Date"), at the offices of Parent at 210 N. Broadway, Greensburg,
Indiana, unless another time, date or place is agreed to in writing by the
parties hereto.
1.3 Effects of the Merger. At and after the Effective Time, the Merger
will have the effects set forth in Section 23-1-40-6 of the IBCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, disabilities and duties of the Company
and Merger Sub shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) Articles of Incorporation. At the Effective Time, the
articles of incorporation of Merger Sub as in effect immediately prior to the
Effective Time shall be the articles of incorporation of the Surviving
Corporation until thereafter changed or amended as provided by applicable law
and such articles of incorporation.
(b) Bylaws. The bylaws of Merger Sub as in effect immediately
prior to the Effective Time shall be the bylaws of the Surviving Corporation
until thereafter changed or amended as provided by applicable law, the articles
of incorporation of the Surviving Corporation and such bylaws.
1.5 Directors and Officers. The directors and officers of Merger Sub
shall be the directors and officers of the Surviving Corporation until duly
changed in accordance with applicable law.
ARTICLE II
EFFECT OF THE MERGER ON THE SHARES OF THE COMPANY
AND MERGER SUB; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any common stock,
without par value, of the Company ("Company Common Stock"):
(a) Cancellation of Certain Shares. All Company Common Stock that is
owned by the Company as treasury stock or by Parent, Merger Sub or any other
Subsidiary (as defined in Section 3.1(a)) of Parent (other than shares in trust
accounts, managed accounts and the like that are beneficially owned by third
parties (any such shares, "trust account shares")) shall be canceled and shall
cease to exist and no cash or other consideration shall be delivered in exchange
therefor.
(b) Conversion of Merger Sub Common Stock. Each of the shares of common
stock of Merger Sub ("Merger Sub Common Stock") issued and outstanding
immediately prior to the Effective Time of the Merger shall be converted into
1,000 shares of common stock of the Surviving Corporation, without par value.
(c) Conversion of Company Common Stock. Each of the shares of Company
Common Stock issued and outstanding immediately prior to the Effective Time of
the Merger shall be converted into the right to receive $21.00 (the "Cash
Amount"), all in accordance with Section 2.2.
(d) Cancellation of Options to Acquire Company Common Stock. As of the
Effective Time, each of the options to purchase shares of Company Common Stock
that is outstanding immediately prior to the Effective Time (a "Company Option")
shall be canceled and converted into the right to receive in cash an amount
equal to the Cash Amount less the exercise price of such Company Option
immediately prior to the Effective Time.
(e) Dissenting Shares.
(i) Each outstanding share of Company Common Stock, the holder
of which has demanded and perfected his demand for payment of the fair value of
his shares in accordance with Chapter 44 of the IBCL ("Chapter 44 ") and has not
effectively withdrawn or lost his right to such payment ("Dissenting Shares")
shall not be converted into or represent a right to receive the Cash Amount
pursuant to Section 2.1(c) hereof, and the holder thereof shall be entitled only
to such rights as are granted by Chapter 44. Each holder of Dissenting Shares
who becomes entitled to payment for his Company Common Stock pursuant to Chapter
44 shall receive payment therefor from the Surviving Corporation from funds
provided by Parent (but only after the amount thereof shall have been agreed
upon or finally determined pursuant to Chapter).
(ii) If any holder of Company Common Stock who demands
appraisal of his shares under Chapter 44 shall effectively withdraw or lose
(through failure to perfect or otherwise) his right to payment, such holder
shall be entitled to receive the Cash Amount for each of his shares of Company
Common Stock, without interest.
(iii) The Company shall give Parent (A) prompt notice of any
written demands for payment, withdrawals of demands for payment and any other
instruments served pursuant to Chapter 44 received by the Company, and (B) the
opportunity to participate in all negotiations and proceedings with respect to
demands for appraisal under Chapter 44. The Company will not voluntarily make
any payment with respect to any demands for payment and will not, except with
the prior written consent of Parent, settle or offer to settle any such demands.
Parent will, to the extent necessary, make available to the Surviving
Corporation sufficient funds to enable the Surviving Corporation to pay for the
Dissenting Shares using funds not acquired from the Company.
2.2 Exchange of Company Certificates and Options For Cash.
(a) Exchange Agent. Parent shall authorize MainSource Bank, Greensburg,
Indiana (or such other person or persons as shall be acceptable to Parent and
the Company), to act as exchange agent hereunder (the "Exchange Agent"). As soon
as practicable, but not later than one business day after the Effective Time,
Parent shall deposit with the Exchange Agent, in trust for the holders of
certificates which immediately prior to the Effective Time represented Company
Common Stock converted in the Merger (the "Company Certificates") and the
holders of Company Options, for exchange in accordance with this Article II, an
amount in cash equal to the sum of (i) the Cash Amount multiplied by the number
of shares of Company Common Stock that are converted into the right to receive
cash in the Merger pursuant to Section 2.1(c) and (ii) the Cash Amount
multiplied by the number of shares of Company Common Stock that are subject to
outstanding unexercised Company Options at the Effective Time that are converted
into the right to receive cash in the Merger pursuant to Section 2.1(d), less
the aggregate exercise price for all Company Options (such monies, together with
any dividends or distributions with respect thereto in accordance with Section
2.2(c), being hereinafter referred to as the "Exchange Fund"). As soon as
practicable after the Effective Time, the Exchange Agent shall mail to each
recordholder of a Company Certificate and/or a Company Option a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Company Certificates shall pass, only upon the actual
delivery of such letter of transmittal to the Exchange Agent and shall contain
instructions for use in effecting the surrender of the Company Certificates in
exchange for the consideration described in the next sentence).
(b) Exchange Procedures.
(i) Payment of Cash. At or after the Effective Time and upon
surrender for cancellation to the Exchange Agent by a recordholder of all
Company Certificates representing shares converted into the right to receive
cash pursuant to Section 2.1(c) and Company Options, if any, converted into the
right to receive cash pursuant to Section 2.1(d), together with a letter of
transmittal duly executed and in proper form, such holder shall be entitled to
receive in exchange therefor a check in immediately available Indianapolis,
Indiana funds for an amount equal to the sum of (i) the Cash Amount for each
share of Company Common Stock so converted pursuant to Section 2.1(c) and (ii)
the Cash Amount for each Company Option converted pursuant to Section 2.1(d)
less the exercise price of such option.
(ii) Until Surrender of Company Certificates. Until Company
Certificates and Company Options have been surrendered and exchanged for cash as
herein provided, each outstanding Company Certificate and Company Option shall
be deemed at any time after the Effective Time to represent only the right to
receive upon such surrender cash pursuant to Section 2.2(b). No transfer taxes
shall be payable in connection with any such exchange, except that if any check
is to be issued in a name other than that in which the Company Certificate
and/or Company Option surrendered in exchange therefor is registered, it shall
be a condition of such exchange that the person requesting such exchange shall
pay to the Exchange Agent any transfer or other taxes required by reason of the
issuance of the check in a name other than that of the registered holder of the
Company Certificate and/or Company Option, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Parent or the Exchange Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of Company Common Stock and/or Company Option such amounts as Parent
or the Exchange Agent are required to deduct and withhold under the Internal
Revenue Code of 1986, as amended (the "Code"), or any provision of state, local
or foreign tax law, with respect to the making of such payment. To the extent
that amounts are so withheld by Parent or the Exchange Agent, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the Company Common Stock and/or Company Option in respect of
whom such deduction and withholding was made by Parent or the Exchange Agent. If
outstanding Company Certificates or Company Options are not surrendered or the
right to receive cash payment therefor not claimed prior to six years after the
Effective Time of the Merger (or, in any particular case, prior to such earlier
date on which such cash payment would otherwise escheat to or become the
property of any governmental unit or agency), the amount of the cash payment not
claimed, to the extent permitted by abandoned property or other applicable law,
shall become the property of Parent (and, to the extent not in its possession,
shall be paid over to it), free and clear of all claims or interest of any
person previously entitled thereto.
(c) No Further Ownership Rights in Company Common Stock and Company
Options. All cash paid upon conversion of Company Common Stock or Company
Options in accordance with the terms hereof shall be deemed to have been paid in
full satisfaction of all rights pertaining to such Company Common Stock and such
options, subject, however, to the Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record date prior to the
Effective Time that may have been declared or made by the Company on Company
Common Stock in accordance with the terms of this Agreement on or prior to the
Effective Time and which remain unpaid at the Effective Time. At the Effective
Time, the stock transfer books of the Company shall be closed to holders of
Company Common Stock immediately prior to the Effective Time and no transfer of
Company Common Stock by any such holder shall thereafter be made or recognized.
If, after the Effective Time, Company Certificates or Company Options are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article II.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to the shareholders of the Company for six months after
the Effective Time shall be delivered to Parent, upon demand, and any
shareholders or options holders of the Company who have not theretofore complied
with this Article II shall thereafter look only to Parent for payment of their
claim for cash.
(e) No Liability. Neither Parent, Merger Sub, the Company nor the
Surviving Corporation shall be liable to any holder of Company Common Stock for
any amount paid or property delivered in good faith to a public official
pursuant to any applicable abandoned property, escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company
represents and warrants to Parent and Merger Sub that:
(a) Organization, Standing and Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Indiana. Each of the Company's Subsidiaries is a corporation or association duly
organized and validly existing under the laws of the United States or its state
of incorporation or organization. Each of the Company and its Subsidiaries has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted, and is duly qualified and in
good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, except where the failure to be so qualified would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company.
For purposes of this Agreement: "Material Adverse Effect" means, when
used with respect to Parent, the Company or the Surviving Corporation, as the
case may be, any state of facts, change, development, effect, condition or
occurrence (including any state of facts, change, development, effect, condition
or occurrence (i) relating to the economy or financial markets generally or (ii)
relating to the banking industry generally even if not specifically relating to
Parent, the Company or the Surviving Corporation) that is or could reasonably be
expected (so far as can be foreseen at the time) to be material and adverse to
the (A) business, (B) properties, (C) assets, (D) condition (financial or
otherwise), (E) value or (F) results of the operations, of Parent and its
Subsidiaries taken as a whole, the Company and its Subsidiaries taken as a
whole, or the Surviving Corporation and its Subsidiaries taken as a whole, as
the case may be. For purposes of analyzing whether any state of facts, change,
development, effect, condition or occurrence constitutes a "Material Adverse
Effect" under this definition, the parties agree that (aa) materiality shall be
analyzed from the viewpoint of whether there is a significant likelihood that
the disclosure of such state of facts, change, development, effect, condition or
occurrence would be viewed by a reasonable investor (and not Parent in the case
of viewing the Company and its Subsidiaries or the Surviving Corporation, the
Company in the case of viewing Parent and its Subsidiaries, or any other
particular investor) as having significantly altered the total mix of
information available to such investor if the total mix of information about
Parent or the Company, as the case may be, had consisted solely of its SEC
Documents and the representations and warranties made by it in this Agreement
(other than any qualification as to materiality in Section 3.1(e) in the case of
the Company and Section 3.2(e) in the case of Parent), as such party's
representations and warranties are qualified by the Company Letter or Parent
Letter, as the case may be, (bb) the analysis of materiality shall not be
limited to the viewpoint of the long-term investor, (cc) each of the terms
contained in (A) through (F) above are intended to be separate and distinct, and
(dd) the words of the definition of "Material Adverse Effect" are intended to be
read literally without any regard to the holding or reasoning of IBP, Inc. v.
Tyson Foods, Inc., No. 18373, 2001 Del. Ch. LEXIS 81 (Del Ch June 18, 2001); and
"Subsidiary" means any corporation, partnership, joint venture or other
legal entity of which Parent or the Company, as the case may be (either alone or
through or together with any other Subsidiary), owns, directly or indirectly,
50% or more of the capital stock or other equity interest the holders of which
are generally entitled to vote for the election of the board of directors or
other governing body of such corporation, partnership, joint venture or other
legal entity.
(b) Capital Structure.
(i) The authorized capital stock of the Company consists of
4,000,000 shares of Common Stock, without par value ("Company Common Stock"),
and 1,000,000 shares of Preferred Stock, without par value (Company Preferred
Stock). As of the date hereof, there are 1,044,926 shares of Company Common
Stock outstanding, 34,700 shares of Company Common Stock reserved for issuance
under Company Options granted prior to the date of this Agreement, 90,910 shares
of Company Common Stock reserved for issuance under convertible debt securities
and no shares of Company Common Stock held by the Company in its treasury. There
are no shares of Preferred Stock outstanding, reserved for issuance or held by
the Company in its Treasury.
(ii) Except as set forth in the letter dated the date hereof
and delivered to Parent concurrent with the execution of this Agreement (the
"Company Letter"), which relates to this Agreement and is designated therein as
being the Company Letter, or in the Company SEC Documents (as defined in Section
3.1(d)) filed prior to the date of this Agreement, no bonds, debentures, notes
or other indebtedness having the right to vote (or convertible into or
exercisable for securities having the right to vote) on any matters on which
shareholders of the Company may vote ("Voting Debt") are issued or outstanding.
All outstanding shares of Company Common Stock are, and any Company Common Stock
that may be issued pursuant to the exercise of any outstanding stock option or
convertible debt security will be, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights.
(iii) Except as set forth in the Company Letter or the Company
SEC Documents filed prior to the date of this Agreement, there is no option,
warrant, call, right (including any preemptive right), commitment or any other
agreement of any character that the Company or any Subsidiary is a party to, or
may be bound by, requiring it to issue, transfer, sell, purchase or redeem any
shares of capital stock, any Voting Debt, or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe for any
shares of capital stock of the Company or any Subsidiary, or to provide funds
to, or make an investment (in the form of a loan, capital contribution or
otherwise) in, any of the Company's Subsidiaries or (excepting loans made in the
ordinary course of a commercial banking business) any other corporation,
partnership, association, firm, individual, trust or other legal entity (each,
and any group of any two or more of the foregoing, a "Person").
(iv) Except as set forth in the Company Letter or the Company
SEC Documents filed prior to the date of this Agreement, there is no voting
trust or other agreement or understanding to which the Company or any Subsidiary
is a party, or may be bound by, with respect to the voting of the capital stock
of the Company or any Subsidiary.
(v) Since December 31, 2001, except as set forth in the
Company Letter or the Company SEC Documents filed prior to the date of this
Agreement, the Company has not (A) issued or permitted to be issued any shares
of capital stock, or securities exercisable for or convertible into shares of
capital stock, of the Company or any Subsidiary; (B) repurchased, redeemed or
otherwise acquired, directly or indirectly through any Subsidiary, any shares of
capital stock of the Company or any Subsidiary (other than the acquisition of
trust account shares); or (C) declared, set aside, made or paid to shareholders
of the Company dividends or other distributions on the outstanding shares of
capital stock of the Company, other than regular quarterly cash dividends at a
rate not in excess of the regular quarterly cash dividend most recently declared
by the Company prior to January 1, 2003.
(c) Authority.
(i) The Company has all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby (other than the approval
of this Agreement by the shareholders of the Company in accordance with the IBCL
and the Company's articles of incorporation). This Agreement has been duly and
validly executed and delivered by the Company and, assuming this Agreement
constitutes the valid and binding agreement of Parent and Merger Sub,
constitutes the valid and binding agreement of the Company, enforceable in
accordance with its terms, except that the enforcement hereof may be limited by
(A) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect, relating to creditors' rights generally, (B) general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law) and (C) judicial discretion.
(ii) The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated hereby (subject to
approval by the shareholders of the Company of this Agreement) will not,
conflict with or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
amendment, cancellation, acceleration or payment of any obligation or the loss
of a material benefit under, or the creation of a lien, pledge, security
interest, charge or other encumbrance on assets (any such conflict, violation,
default, right of termination, amendment, cancellation, acceleration or payment,
loss or creation, a "Violation") pursuant to, any provision of the certificate
of incorporation or bylaws of the Company or any Subsidiary or, except as set
forth in the Company Letter, and subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and filings
referred to in Subsection (iii) below, result in any Violation of any loan or
credit agreement, note, mortgage, indenture, lease, Benefit Plan (as defined in
Section 3.1(o)) or other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or any Subsidiary or their respective
properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any federal or state court,
administrative agency or commission or other governmental authority or
instrumentality (a "Governmental Entity") is required by or with respect to the
Company or any Subsidiary in connection with the execution and delivery of this
Agreement, or the consummation by the Company of the transactions contemplated
hereby, the failure to obtain which would have a Material Adverse Effect on the
Company, except for (A) the filing by Parent and Merger Sub of an application
with the Board of Governors of the Federal Reserve System (the "Federal
Reserve") under the Bank Holding Company Act of 1956, as amended ("BHC Act"),
and approval of same (B) the filing of an application by Parent with the Indiana
Department of Financial institutions ("IDFI"), and approval thereof, (C) notices
to or filings with the Small Business Administration ("SBA"), or the Internal
Revenue Service (the "IRS") or the Pension Benefit Guaranty Corporation (the
"PBGC") with respect to any Benefit Plans, (D) the filing by the Company of a
Schedule 14A (the "Proxy Statement") with the Securities and Exchange Commission
("SEC") and (E) the filing by Merger Sub of the Articles of Merger with the
Secretary of State of the State of Indiana, and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business.
(d) SEC Documents: Financial Statements. The Company has made available
to Parent each document filed by it with the SEC under the Securities Act or the
Exchange Act since January 1, 1999, including without limitation, (i) the
Company's Annual Report on Form 10-K for the year ended December 31, 2001, (ii)
the Company's Quarterly Report on Form 10-Q for the nine-month period ended
September 30, 2002 and (iii) the Company's definitive proxy statement for its
2002 Annual Meeting of Shareholders held May 29, 2002, each in the form
(including exhibits and any amendments) filed with the SEC (collectively, the
"Company SEC Documents"). As of their respective dates, each of the Company SEC
Documents did not, and each of the Company SEC Documents filed with the SEC
subsequent to the date hereof will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading, provided, that the Company makes no
representation with respect to information supplied by Parent for use in Company
SEC Documents after the date hereof. Each of the consolidated balance sheets
included in or incorporated by reference into the Company SEC Documents
(including their related notes and schedules) fairly presents (or will fairly
present if filed after the date hereof) the consolidated financial condition of
the Company and its consolidated Subsidiaries as of its date and each of the
consolidated statements of income, shareholders' equity and cash flows included
or incorporated by reference into the Company SEC Documents (including any
related notes and schedules) fairly presents (or will fairly present if filed
after the date hereof) the results of operations, shareholders' equity and cash
flows of the Company and its consolidated Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements to normal year-end
adjustments and any other adjustments described therein that individually or in
the aggregate will not be material in amount or effect), in each case in
accordance with generally accepted accounting principals consistently applied
during the periods involved, except as may be noted therein.
(e) Absence of Certain Changes or Events. Except as set forth in the
Company Letter or Company SEC Documents filed prior to the date of this
Agreement, since December 31, 2001, neither the Company nor any Subsidiary has
(i) incurred any material liability or obligation (indirect, direct or
contingent), except in the ordinary course of its business consistent with
past practices and except for the entering into of this Agreement and the
incurring of professional expenses in connection therewith, (ii) taken any of
the prohibited actions set forth in Section 4.1, or (iii) suffered any change,
or any event involving a prospective change, in its business, financial
condition or results of operations that has had, or is reasonably likely to
have, a Material Adverse Effect on the Company.
(f) Absence of Undisclosed Liabilities. Except as set forth in the
Company Letter or reflected or reserved against in the financial statements for
the year ended December 31, 2001 included in the Company's Annual Report on Form
10-K filed with the SEC, neither the Company nor any Subsidiary has any
obligations or liabilities (contingent or otherwise) that might reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company. The Company has set forth in the Company Letter, as of the date
hereof, all interest rate and currency exchange agreements, and all trading
positions regarding any form or type of derivative financial product the value
of which is linked to, or derived from, the value of an underlying asset, rate
or index.
(g) Allowance for Credit Losses. Except as set forth in the Company
Letter or Company SEC Documents filed prior to the date of this Agreement, the
allowance for credit losses (the "Allowance") shown on the consolidated balance
sheets of the Company as of December 31, 2001 included in the financial
statements for the year ended December 31, 2001 included in the Company's Annual
Report on Form 10-K filed with the SEC was, and the Allowance shown in each SEC
Document as of a date subsequent to the execution of this Agreement will be, in
each case as of the dates thereof, determined in accordance with safe and sound
banking practices and the guidelines and policies of the FDIC, and is (and will
be) adequate, in the reasonable judgment of management, to provide for losses
relating to or inherent in the loan and lease portfolios (including accrued
interest receivables) of the Company and its Subsidiaries and other extensions
of credit (including letters of credit and commitments to make loans or extend
credit) by the Company and its Subsidiaries.
(h) Environmental Matters. Except as set forth in the Company Letter or
Company SEC Documents filed prior to the date of this Agreement, neither the
Company nor any Subsidiary has (i) used, stored, manufactured, or suffered to
exist (collectively, "Utilized") any hazardous or toxic substance, material or
constituent (collectively, a "Hazardous Substance") within the meaning of any
applicable Environmental Law on, in or under any of its property, whether
currently or previously owned or leased by the Company or any Subsidiary, or
(ii) transported or disposed, or caused or permitted any Person to transport or
dispose, of any Hazardous Substance, in each case ((i) and (ii) above), other
than in accordance with all Environmental Laws and other than at the locations
identified on Item 3.1(h) of the Company Letter. Except as set forth in the
Company Letter or Company SEC Documents filed prior to the date of this
Agreement, to the knowledge of the Company no Hazardous Substances have been
Utilized at any time on, in or under any of the Company's or any Subsidiary's
property, whether currently or previously owned or leased by either of them,
including without limitation any other real estate owned (OREO) or leased by
them or, to the knowledge of the Company, held by either as collateral for any
loan, financing or other indebtedness. Except as set forth in the Company Letter
or Company SEC Documents filed prior to the date of this Agreement: neither the
Company nor any Subsidiary is subject to any asserted or, to the knowledge of
the Company, unasserted liabilities, nor are any of the properties of the
Company
or any Subsidiary, whether currently or previously owned or leased by the
Company or any Subsidiary, subject to any asserted or, to the knowledge of the
Company, unasserted lien, under any of the Environmental Laws; neither the
Company nor any Subsidiary has ever violated any Environmental Laws in any
material respect, and each of them is presently in compliance in all material
respects with all Environmental Laws (without limiting the generality of the
foregoing, no asbestos, PCBs or other Hazardous Substance or any petroleum
product or constituents thereof is present on, in or under any of the property
of the Company or any Subsidiary, whether currently or previously owned or
leased); to the knowledge of the Company, none of the borrowers of the Company
or any Subsidiary has materially violated any of the Environmental Laws or has
any of its property (whether currently or previously owned or leased) subject to
a lien under any of the Environmental Laws; to the knowledge of the Company,
neither the Company nor any Subsidiary has ever permitted any property currently
or previously owned or leased by any of them to be used as a landfill or dump
site; and to the knowledge of the Company, there are no underground storage
tanks or underground pipelines located on any property owned or leased by the
Company or any Subsidiary, and no underground storage tanks have ever been
located on any property currently or previously owned or leased by any of them.
Except as set forth in the Company Letter or Company SEC Documents filed prior
to the date of this Agreement, to the knowledge of the Company, there are no
actions, suits or proceedings, or demands, claims, notices or, to the knowledge
of the Company, investigations (including notices, demand letters or requests
for information from any environmental agency), instituted or pending, or to the
knowledge of the Company, threatened, relating to the liability of any
properties owned or operated by the Company or any of its Subsidiaries under any
Environmental Law.
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement between the Company
and any Governmental Entity relating to (i) the protection, preservation or
restoration of the environment (including, without limitation, air, water vapor,
surface water, ground water, drinking water supply, surface soil, subsurface
soil, plant and animal life or any other natural resource), and/or (ii) the use,
storage, recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or dangerous,
or otherwise regulated, whether by type or by quantity, including any material
containing any such substance as a component; and includes, without limitation,
the Resource Conservation and Recovery Act, the Clean Air Act, the Federal Water
Pollution Control Act, the Toxic Substances Control Act and the Comprehensive
Environmental Response, Compensation and Liability Act.
(i) Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion in (i) the Proxy Statement to be filed
with the SEC by the Company in connection with the Merger will, at the time the
Proxy Statement is filed with the SEC and at the time it becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (ii) the Proxy Statement of the Company will, at the date of
mailing to shareholders of the Company and at the time of the meeting of
shareholders of the Company to be held in connection with the Merger, contain
any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Proxy Statement
(except for such portions thereof that relate only to Parent and Merger Sub)
will comply as to form in all material respects with the provisions of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations thereunder, to the extent applicable. The information set forth
in the Company Letter by the Company for purposes of this Agreement is true and
accurate in all material respects.
(j) No Default. Except as set forth in the Company Letter, no Violation
exists on the part of the Company or any Subsidiary with respect to any term,
condition or provision of (i) its articles of incorporation or bylaws, (ii) any
note, mortgage, indenture, other evidence of indebtedness, guaranty, license,
agreement or other contract, instrument or contractual obligation to which the
Company or any Subsidiary is now a party or by which it or any of its properties
or assets may be bound, or (iii) any order, writ, injunction or decree
applicable to the Company or any Subsidiary, except for possible Violations
that, individually or in the aggregate, do not, and, insofar as reasonably can
be foreseen, in the future will not, have a Material Adverse Effect on the
Company.
(k) Compliance with Licenses, Permits and Applicable Laws. The Company
and its Subsidiaries have received such certificates, permits, licenses,
franchises, consents, approvals, orders, authorizations and clearances from
appropriate governmental entities (the "Company Permits") as are necessary to
own or lease and operate its properties and to conduct its business as currently
owned or leased and conducted, and all such Company Permits are valid and in
full force and effect. The Company and its Subsidiaries are in compliance in all
material respects with its obligations under the Company Permits, with only such
exceptions as, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on the Company, and no event has
occurred that allows, or after notice of lapse of time, or both, would allow,
revocation or termination of any material Company Permit. Except as set forth in
the Company Letter, the businesses of the Company and its Subsidiaries are not
being conducted in violation of any law, ordinance or regulation of any
Governmental Entity, except for possible violations that individually or in the
aggregate do not, and in the future will not, have a Material Adverse Effect on
the Company. Except for routine examinations by Governmental Entities charged
with the supervision or regulation of savings associations or savings banks or
savings association or thrift holding companies, or the insurance of their
deposits ("Bank Regulators"), as of the date of this Agreement, to the knowledge
of the Company, no investigation by any Governmental Entity with respect to the
Company or any Subsidiary is pending or threatened.
(l) Actions and Proceedings. Except as set forth in the Company Letter,
there are no outstanding orders, judgments, injunctions, awards or decrees of
any Governmental Entity against or affecting the Company or any Subsidiary, any
of its or their current or to its knowledge former directors, employees,
consultants, agents or shareholders, as such, any of its or their properties,
assets or business or any Company Benefit Plan (as defined in Section 3.1(o)).
Except as set forth in the Company Letter, there are no actions, suits or claims
or legal, administrative or arbitration proceedings or, to the knowledge of the
Company, investigations pending or threatened, against or affecting the Company
or any Subsidiary, any of its or their current or former directors, officers,
employees, consultants, agents or
shareholders, as such, any of its or their properties, assets or business, or
any Company Benefit Plan that if brought (if not now pending) would reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company. There are no actions, suits or claims or legal, administrative
or arbitration proceedings or, to the knowledge of the Company, investigations
or labor disputes pending or threatened, against or affecting the Company or any
Subsidiary, any of its or their current or former directors, officers,
employees, consultants, agents or shareholders, as such, any of its or their
properties, assets or business or any Company Benefit Plan relating to the
transactions contemplated by this Agreement.
(m) Taxes. The Company and each of its Subsidiaries have filed all tax
returns required to be filed by any of them and have paid (or the Company has
paid on their behalf), or have set up an adequate liability for the payment of,
all Taxes required to be paid as shown on such returns, and the most recent
Company Financial Statements reflect an adequate liability for all Taxes payable
by the Company and its Subsidiaries accrued through the date of such financial
statements. No material deficiencies for any Taxes have been proposed, asserted
or assessed against the Company or any of its Subsidiaries that are not
adequately accrued. Except with respect to claims for refund, the federal income
tax returns of the Company and each of its Subsidiaries have been examined by
and settled with the IRS, or the statute of limitations with respect to such
years has expired (and no waiver extending the statute of limitations has been
requested or granted), for all years through 1998. For the purpose of this
Agreement, the term "Taxes" (including, with correlative meaning, the term
"tax") shall include, except where the context otherwise requires, all federal,
state, local and foreign income, profits, franchise, gross receipts, payroll,
sales, employment, unemployment (including unemployment insurance premiums or
contributions), use, property, withholding, excise, occupancy, and other taxes,
duties or assessments of any nature whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts.
(n) Certain Agreements. Except as set forth in the Company Letter or
Company SEC Documents filed prior to the date of this Agreement, and except for
this Agreement, as of the date of this Agreement, neither the Company nor any of
its Subsidiaries is a party to any oral or written (i) employment or other
agreement, contract, commitment, program, policy or arrangement requiring the
Company or any Subsidiary to pay compensation (including any salary, bonus,
deferred compensation, incentive compensation, severance, vacation or sick pay,
or any other fringe benefit payment) or any other type of remuneration to any
Person, (ii) agreement or plan, including any stock option plan, any of the
benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement, or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement, (iii) contract or agreement not terminable without penalty on 30
days' or less notice or involving the payment of more than $10,000 in any 12
month period; (iv) contract or agreement that materially limits the ability of
the Company or any of its Subsidiaries to compete in any line of business or
with any Person or in any geographic area or during any period of time, or (v)
contract or agreement with any legal, accounting, investment banking, business
or other advisor or consultant obligating the Company and/or any Subsidiary to
pay, individually or in the aggregate, more than $ 50,000.
(o) Benefit Plans.
(i) The Company has disclosed in the Company Letter each
employee benefit plan (including, without limitation, any "employee benefit
plan," as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended, ("ERISA")) (all the foregoing being herein called "Benefit
Plans"), maintained or contributed to by the Company or any Subsidiary (the
"Company Benefit Plans"). The Company will make available to Parent a true and
correct copy of (a) the most recent annual report (Form 5500) filed with the
IRS, (B) each such Company Benefit Plan, (C) each trust agreement relating to
such Company Benefit Plan, (D) the most recent summary plan description for each
Company Benefit Plan for which a summary plan description is required, (E) the
most recent actuarial report or valuation relating to a Company Benefit Plan
subject to Title IV of ERISA and (F) the most recent determination letter issued
by the IRS with respect to any Company Benefit Plan qualified under Section
401(a) of the Code.
(ii) With respect to the Company Benefit Plans, individually
and in the aggregate, except as set forth in the Company Letter, no event has
occurred and, to the knowledge of the Company, there exists no condition or set
of circumstances, in connection with which the Company or any of its
Subsidiaries could be subject to any liability (except liability for benefits,
claims and funding obligations payable in the ordinary course) under ERISA, the
Code or any other applicable law.
(p) Subsidiaries. First Community Bank & Trust is the sole banking
Subsidiary of the Company ("First Community Bank"). First Community Bank is a
commercial bank and trust company duly organized, validly existing and in good
standing under the laws of the State of Indiana. The deposits of First Community
Bank are insured to the maximum extent permitted by law under the Bank Insurance
Fund of the FDIC. First Community Real Estate Management, Inc. is the only other
Subsidiary of the Company.
(q) Agreements With Bank Regulators. Except as set forth in the Company
Letter, neither the Company nor any Subsidiary is a party to any written
agreement or memorandum of understanding with, or a party to any commitment
letter or similar undertaking to, or subject to any order or directive by, nor
is it a recipient of any extraordinary supervisory letter from, any Bank
Regulator which restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit policies or its management,
nor has the Company been advised by any Bank Regulator that it is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, directive, agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter or similar submission.
(r) Business Combination Provisions of the IBCL Not Applicable. The
provisions of Sections 23-1-43-18 and 23-1-43-19 of the IBCL will not, prior to
the termination of this Agreement, assuming the accuracy of the representations
contained in Section 3.2(i) (without giving effect to the knowledge
qualification thereof), apply to this Agreement, the Merger or the transactions
contemplated hereby and thereby.
(s) Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of Company Common Stock entitled to vote thereon is the
only vote of the holders of any class or series of Company capital stock
necessary to approve this Agreement and the transactions contemplated hereby.
(t) Properties.
(i) Except as set forth in the Company Letter or Company SEC
Documents filed prior to the date of this Agreement, the Company or one of its
Subsidiaries (A) has good, valid and marketable title to all the properties and
assets reflected in the latest audited financial statements included in the
Company Financial Statements as being owned by the Company or one of its
Subsidiaries, or acquired after the date thereof (except properties sold or
otherwise disposed of since the date thereof in the ordinary course of
business), free and clear of all mortgages, pledges, security interests, claims,
liens, charges, options or other encumbrances of any nature whatsoever
(including, without limitation, in the case of real property, easements and
rights-of-way) (collectively, "Liens"), except (x) statutory Liens securing
payments not yet due, (y) Liens on assets of any Subsidiary incurred in the
ordinary course of a banking business and (z) such Liens and imperfections or
irregularities of title that do not materially affect the present use of the
properties or assets subject thereto or affected thereby or otherwise materially
impair business operations at such properties, and (B) is the lessee of all
leasehold estates reflected in the latest audited financial statements included
in the Company SEC Documents or acquired after the date thereof (except for
leases that have expired by their terms since the date thereof) and is in
possession of the properties purported to be leased thereunder, and each such
lease is valid without default thereunder by the lessee or, to the Company's
knowledge, the lessor.
(ii) The Company has set forth in the Company Letter or the
Company SEC Documents the street address of all real property currently owned by
the Company or any Subsidiary, including properties held by the Company or any
Subsidiary as a result of foreclosure or repossession or carried on the
Company's or any Subsidiary's books as "other real estate owned" or similar type
classification ("OREO") (collectively, the "Current Real Properties"). Except as
set forth in the Company Letter, the Current Real Properties except OREO
properties are, and the OREO properties to the knowledge of the Company are,
generally in good condition and have been well maintained in accordance with
reasonable and prudent business practices applicable to like facilities. Except
as set forth in the Company Letter, there are no proceedings, claims, disputes
or conditions affecting any of the Current Real Properties or leasehold
interests of the Company or any Subsidiary that, insofar as reasonably can be
foreseen, may curtail or interfere with the current use of such property (or, in
the case of OREO property, the use of such property at the time of making the
loan secured by such property).
(u) Corporate Documents, Books and Records. The Company has made
available to Parent true and complete copies of the articles of incorporation
and bylaws of the Company and its Subsidiaries. The minute books of the Company
and each of its Subsidiaries contain complete and accurate records in all
material respects of all meetings and other corporate actions of their
respective shareholders and Board of Directors (including committees of the
Board of Directors). The stock transfer records of the Company and each of its
Subsidiaries are, to the knowledge of the Company, complete and accurate in all
material respects.
(v) Insurance. The Company and its Subsidiaries maintain (or the
Company maintains on their behalf) with financially sound and reputable
insurance companies insurance policies and bonds in force in such amounts and
against such liabilities and risks as companies engaged in a similar business,
in accordance with good business practice, customarily would be
insured. Except as set forth in the Company Letter, to the Company's knowledge,
neither the Company nor any Subsidiary is liable for any material, retroactive
premium adjustments. All such insurance policies and bonds are valid,
enforceable and in full force and effect and, except as set forth in the Company
Letter, neither the Company nor any Subsidiary has received any notice of
premium increases or cancellation and, to the Company's knowledge, no grounds
for any cancellation notice exists. Except as set forth in the Company Letter,
since December 31, 2000, neither the Company nor any Subsidiary has failed to
make a timely claim with respect to any matter giving rise to a claim or
potential claim under any such insurance policies and bonds where such failure
to make a timely claim would have a Material Adverse Effect on the Company.
(w) Potential Competing Interests. Except as set forth in the Company
Letter, (i) no director, officer or key employee of the Company or any
Subsidiary or, to the Company's knowledge, any beneficial owner of 5% or more of
any class of capital stock of the Company (a "Five Percent Owner"), or any
"affiliate" or "associate" (as each such term is defined in Rule 12b-2 under the
Exchange Act) of any of the foregoing directly or indirectly beneficially owns a
5% or more interest in any institution (other than the Company and its
Subsidiaries) that is engaged in the business of making loans and/or taking
deposits, (ii) no director, officer or key employee of the Company or any
Subsidiary or, to the Company's knowledge, any Five Percent Owner, or any
affiliate or associate of any of the foregoing, has any interest, direct or
indirect, in any contract or agreement with, commitment or obligation of or to,
or claim against, the Company or any Subsidiary (excluding contracts, agreements
or obligations with respect to monies borrowed from, or claims to deposits
maintained with, First Community Bank in the ordinary course of a banking
business consistent with safe and sound banking practices), and (iii) neither
the Company nor any Subsidiary uses any real or personal property in which any
director, officer or key employee of the Company or any Subsidiary or, to the
Company's knowledge, Five Percent Owner, or any affiliate or associate of any of
the foregoing directly or indirectly beneficially owns a 5% or more interest in
any such real or personal property.
(x) Software. The consummation of the transactions contemplated by this
Agreement will not result in the loss by the Company or any Subsidiary of any
rights to use computer or telecommunication software, including source and
object code and documentation and any other media (including manuals, journals
and reference books), necessary to carry on its business substantially as
currently conducted and the loss of which would have a Material Adverse Effect
on the Company.
(y) Brokers. Except as set forth in the Company Letter, no broker,
investment banker, financial advisor or other Person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or any Subsidiary.
(z) Interest Rate Risk Management Instruments. Neither the Company nor
any Subsidiary is a party or counterparty to any interest rate swaps, caps,
floors or option agreements or other interest rate risk management arrangements,
whether entered into for its account or for the account of a customer.
(aa) Modification Agreements. With respect to (i) the Waiver and
Termination Agreements between First Community Bank , on the one hand, and
respectively Messrs. Albert R. Jackson, III, Keith Lindauer and William Dean
Jackson on the other hand, (ii) the Acknowledgement of Amendment instruments
executed by First Community Bank, on the one hand, and respectively by each of
the Affiliated Shareholders and Messrs. Keith Lindauer, Donald Goeb and William
Dean Jackson, on the other hand, and (iii) the Resignation and Election of Early
Retirement instruments respectively executed by Messrs. Albert R. Jackson, Jr.,
Frank D. Neese and Merrill M. Wesemann (collectively, the " Modification
Agreements"): each of the parties respectively executing and delivering the
Modification Agreements has all requisite personal capacity (or in the case of
First Community Bank, corporate power and authority) to execute and deliver the
Modification Agreements to which he or it is a party and to effect the waivers,
acknowledgments and other actions respectively contemplated thereby. The Company
has delivered true and complete copies of such signed Modification Agreements to
Parent prior to the execution of this Agreement by Parent.
3.2 Representations and Warranties of Parent and Merger Sub. Each of
Parent and Merger Sub jointly and severally represent and warrant to the Company
as follows:
(a) Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Indiana. Each of Parent's Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation or
organization. Each of Parent and its Subsidiaries has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so qualified would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Parent.
(b) Capital Structure.
(i) The authorized capital stock of Parent consists of
10,000,000 Common Shares, without par value ("Parent Common Stock"), and 400,000
Preferred Shares, without par value ("Parent Preferred Stock"), of which on the
date hereof 6,717,715 shares of Parent Common Stock are outstanding , 350,000
shares of Parent Common Stock are reserved for issuance under Parent's 2003
Stock Option Plan and 56,910 shares of Parent Common Stock are held by Parent in
its treasury. There are on the date hereof no shares of Parent Preferred Stock
outstanding, reserved for issuance or held by Parent in its treasury.
(ii) No Voting Debt of Parent is issued or outstanding. All
outstanding shares of Parent Common Stock are duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights.
(iii) Except as set forth in the Parent SEC Documents (as
defined in Section 3.2(d)) or a letter, if any, dated the date hereof and
delivered to the Company concurrent with the execution of this Agreement (the
"Parent Letter"), which relates to this Agreement and is designated therein as
the Parent Letter, there is no option, warrant, call, right (including any
preemptive right), commitment or any other agreement of any character that
Parent or any Subsidiary is a party to, or may be bound by, requiring it to
issue, transfer, sell, purchase or redeem any shares of capital stock, any
Voting Debt, or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for any shares of capital stock of Parent or
any Subsidiary, or to provide funds to, or make an investment (in the form of a
loan, capital contribution or otherwise) in, any of Parent's Subsidiaries or
(excepting loans made in the ordinary course of a commercial banking business)
any other Person.
(iv) Except as set forth in the Parent SEC Documents or the
Parent Letter, and except for this Agreement, there is no voting trust or other
agreement or understanding to which Parent or any Subsidiary is a party, or may
be bound by, with respect to the voting of the capital stock of Parent or any
Subsidiary.
(v) Since December 31, 2002, except as set forth in the Parent
SEC Documents or the Parent Letter, Parent has not (A) issued or permitted to be
issued any shares of capital stock, or securities exercisable for or convertible
into shares of capital stock, of Parent or any Subsidiary; (B) repurchased,
redeemed or otherwise acquired, directly or indirectly through any Subsidiary,
any shares of capital stock of Parent or any Subsidiary (other than the
acquisition of trust account shares); or (C) declared, set aside, made or paid
to shareholders of Parent dividends or other distributions on the outstanding
shares of capital stock of Parent, other than regular quarterly cash dividends.
(c) Authority.
(i) Each of Parent and Merger Sub has all requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement and the consummation by Parent
and Merger Sub of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Parent and Merger Sub, and by
Parent as the shareholder of Merger Sub, and no other corporate proceedings on
the part of Parent or Merger Sub are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Parent and Merger Sub, and assuming this
Agreement constitutes the valid and binding agreement of the Company,
constitutes the valid and binding agreement of Parent and Merger Sub,
enforceable in accordance with its terms, except that the enforcement hereof may
be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect, relating to creditors' rights
generally, (B) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law) and (C)
judicial discretion.
(ii) The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated hereby will not, create
any Violation under any provisions of the articles of incorporation or bylaws of
Parent or any Subsidiary or, except as set forth in the Parent Letter and
subject to obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in Subsection (iii) below,
result in any Violation of any loan or credit agreement, note, mortgage,
indenture, lease, Benefit Plan (as defined in Section 3.1(o)) or other
agreement, obligation, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Parent or any Subsidiary or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Parent or any Subsidiary in connection with the execution and
delivery of this Agreement, or the consummation by Parent and Merger Sub of the
transactions contemplated hereby, the failure to obtain which would have a
Material Adverse Effect on Parent, except for (A) the filing by Parent and
Merger Sub of an application with the Federal Reserve under the BHC Act, and
approval of same, (B) the filing of an application by Parent with the IDFI, and
approval thereof, (C) notices to or filings with the SBA, or the IRS or the PBGC
with respect to any Benefit Plans, (D) the filing by the Company of a Proxy
Statement with the SEC, and (G) the filing by Merger Sub of the Articles of
Merger with the Secretary of State of the State of Indiana, and appropriate
documents with the relevant authorities of other states in which the Company is
qualified to do business.
(d) SEC Documents: Financial Statements. Parent has made available to
the Company each document filed by it since December 31, 1999 with the SEC under
the Securities Act or the Exchange Act, including (i) Parent's Annual Report on
Form 10-K for the year ended December 31, 2001, (ii) Parent's Quarterly Report
on Form 10-Q for the period ended September 30, 2002, and (iii) Parent's
definitive proxy statement for its 2003 Annual Meeting of Shareholders to be
held April 23, 2003, each in the form (including exhibits and any amendments)
filed with the SEC (collectively, the "Parent SEC Documents"). As of their
respective dates, each of the Parent SEC Documents did not, and each of the
Parent SEC Documents filed with the SEC subsequent to the date hereof will not,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances in which they were made, not misleading, provided,
that Parent makes no representation with respect to information supplied by the
Company for use in Parent SEC Documents after the date hereof. Each of the
consolidated balance sheets included in or incorporated by reference into the
Parent SEC Documents (including their related notes and schedules) fairly
presents (or will fairly present if filed after the date hereof) the
consolidated financial condition of Parent and its consolidated Subsidiaries as
of its date and each of the consolidated statements of income, shareholders'
equity and cash flows included or incorporated by reference into the Parent SEC
Documents (including any related notes and schedules) fairly presents (or will
fairly present if filed after the date hereof) the results of operations,
shareholders' equity and cash flows of Parent and its consolidated Subsidiaries
for the periods set forth therein (subject, in the case of unaudited statements
to normal year-end adjustments and any other adjustments described therein which
individually or in the aggregate will not be material in amount or effect), in
each case in accordance with generally accepted accounting principals
consistently applied during the periods involved, except as may be noted
therein.
(e) Absence of Certain Changes or Events. Except as set forth in the
Parent Letter or Parent SEC Documents filed prior to the date of this Agreement,
since December 31, 2002, neither Parent nor any Subsidiary has incurred any
material liability or obligation (indirect, direct or contingent), except in the
ordinary course of its business consistent with past practices, or suffered any
change, or any event involving a prospective change, in its business, financial
condition or results of operations that has had, or is reasonably likely to
have, a Material Adverse Effect on Parent.
(f) Absence of Undisclosed Liabilities. Except as set forth in the
Parent Letter or Parent SEC Documents filed prior to the date of this Agreement,
neither Parent nor any Subsidiary has any obligations or liabilities (contingent
or otherwise) that might reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent. Parent has set forth in the
Parent Letter, as of the date hereof, all interest rate and currency exchange
agreements, and all trading positions regarding any form or type of derivative
financial product the value of which is linked to, or derived from, the value of
an underlying asset, rate or index.
(g) Information Supplied. None of the information supplied or to be
supplied by Parent for inclusion in the Proxy Statement to be filed with the SEC
by the Company and mailed to shareholders of the Company in connection with the
Merger will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The information set forth in the Parent Letter by Parent for
purposes of this Agreement is true and accurate in all material respects.
(h) Brokers. No broker, investment banker, financial advisor or other
Person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent or any
Subsidiary.
(i) Ownership of Company Stock. As of the date hereof, neither Parent
nor, to its knowledge, any of its affiliates or associates (as such terms are
defined under the Exchange Act), (i) beneficially owns, directly or indirectly,
or (ii) are parties to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of, in each case, shares of
capital stock of the Company that, in the aggregate, represent 10% or more of
the outstanding shares of capital stock of the Company entitled to vote
generally in the election of directors (other than trust account shares).
(j) Resources Subject to the Requisite Regulatory Approvals
contemplated in Section 6.01(b) , Parent has on hand or has timely access to
capital funds sufficient to enable Parent to (i) satisfy the capital adequacy
guidelines and requirements of the Federal Reserve and any other applicable
federal or state regulator or agency as those guidelines are applied to Parent
and the Merger, and (ii) pay the consideration for the Company Common Stock and
the Company Options provided for in Section 2.1.
ARTICLE IV
CONDUCT OF THE COMPANY PRIOR TO CLOSING
4.1 Conduct of Business.
(a) Except as set forth in the Company Letter, the Company agrees that
during the period from the date of this Agreement to the Effective Time (unless
Parent shall otherwise agree in writing and except as otherwise contemplated by
this Agreement), the Company will, and will cause each of its Subsidiaries to,
conduct their respective business operations in the ordinary
and usual course of business consistent with past practice and, to the extent
consistent therewith, with no less diligence and effort than would be applied in
the absence of this Agreement, seek to preserve intact its respective current
business organization, keep available the service of its respective current
directors, officers and employees and preserve its respective relationships with
customers, suppliers and others having business dealings with it to the end that
goodwill and ongoing business shall not be impaired in any material aspect at
the Effective Time. Without limiting the generality of the foregoing, and except
as otherwise permitted in this Agreement prior to the Effective Time or except
as set forth in the Company Letter, the Company will not, and it will cause each
Subsidiary not to, without the prior written consent of Parent:
(i) issue, sell, grant, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, sale, disposition or pledge or
other encumbrance of (A) any additional shares of capital stock of any class
(including shares of Company Common Stock), or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe for any
shares of capital stock, or any rights, warrants, options, calls, commitments or
any other agreements of any character to purchase or acquire any shares of
capital stock or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest), other
than the issuance of Company Common Stock upon the exercise of Company Options
or the conversion of convertible debt securities identified in Section
3.1(b)(i), or (B) any other securities in respect of, in lieu of, or in
substitution for, shares of Company Common Stock or Company Options outstanding
on the date hereof;
(ii) redeem, purchase or otherwise acquire, or propose to
redeem, purchase or otherwise acquire, any of its outstanding shares of Company
Common Stock (except for the acquisition of trust account shares);
(iii) split, combine, subdivide or reclassify any shares of
Company Common Stock or declare, set aside for payment or pay any dividend, or
make any other actual, constructive or deemed distribution, whether in cash,
stock, property or otherwise, in respect of any shares of Company Common Stock
or otherwise make any payments to shareholders in their capacity as such, except
(A) the Company may continue the declaration and payment of the regular
quarterly cash dividend for the first fiscal quarter of 2003 not in excess of
$0.05 per share of Company Common Stock, with the usual record and payment date
for such dividend in accordance with past dividend practice, and (B) for
dividends by a wholly owned Subsidiary;
(iv) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company (other than the Merger);
(v) adopt any amendments to its articles of incorporation
or bylaws;
(vi) make any acquisition or disposition of assets or
securities, except in the ordinary course of business consistent with past
practices and except for the acquisition and prepayment of its outstanding
convertible debt securities as contemplated by Section 5.12;
(vii) incur any indebtedness for borrowed money or guarantee
any such indebtedness or make any loans, advances or capital contributions to,
or investments in, any other Person, other than in the ordinary course of a
banking business consistent with past practices, it being understood and agreed
that the incurrence of indebtedness in the ordinary course of a banking business
shall include the creation of deposit liabilities, purchases of federal funds,
sales of certificates of deposit and entering into repurchase agreements;
(viii) offer any new deposit, loan or investment product or
service or change its lending, investment, liability management, loan loss
provision, loan loss charge-off or other material banking policies;
(ix) grant any increases in the compensation of any of its
directors, officers or employees, except as may be required by any contract or
agreement disclosed in the Company Letter pursuant to Section 3.1(n) or in the
ordinary course of business and in accordance with past practice, or as may be
approved on a case by case basis by Parent;
(x) pay or agree to pay any pension, retirement allowance,
severance or other employee benefit not required or contemplated by any of the
existing Company Benefit Plans or any agreements or arrangements as in effect on
the date hereof to any such director, officer or employee, whether past or
present;
(xi) enter into any new or amend any existing employment or
severance or termination agreement with any director, officer or employee;
(xii) except in the ordinary course of business consistent
with past practice or as may be required to comply with applicable law, become
obligated under any new Benefit Plan or amend any Company Benefit Plan in
existence on the date hereof if such amendment would have the effect of
materially enhancing any benefits thereunder;
(xiii) make any capital expenditures or commitments for any
capital expenditures, other than capital expenditures or commitments for any
capital expenditures set forth in the Company Letter;
(xiv) make any material changes in its customary methods of
marketing;
(xv) take, or agree to commit to take, any action that would
make any representation or warranty of the Company contained herein inaccurate
in any material respect at, or as of any time prior to, the Effective Time; or
(xvi) change its method of accounting in effect at December
31, 2001, except as required by changes in generally accepted accounting
principles as concurred in by each party's independent auditors, or change its
fiscal year;
(xvii) take any action that would, or reasonably might be
expected to, adversely affect the ability of Parent to obtain any of the
Requisite Regulatory Approvals (as defined in Section 6.1(b)) without imposition
of a condition or restriction of the type referred to in Section 6.1(e);
(xviii) authorize, recommend, propose or announce an intention
to do any of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
4.2 Acquisition Proposals.
(a) The Company shall not, and the Company shall direct and cause its
officers, directors, employees, agents and representatives (including without
limitation any attorney, accountant, investment banker or other advisor retained
by it) not to, initiate, solicit or encourage, directly or indirectly, any
inquiries or the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its shareholders) with respect to a
merger, acquisition, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or any equity
securities of, the Company (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal") or engage in any negotiations or
discussions with, or furnish any information or data to, any third party
relating to an Acquisition Proposal. The Company and its officers, directors,
employees, agents and representatives shall immediately cease any existing
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal.
(b) Notwithstanding anything to the contrary contained in this Section
4.2, the Company and the Board of Directors of the Company (A) may furnish
information to, and participate in discussions or negotiations with any third
party that after the date hereof submits an unsolicited bona fide written
Acquisition Proposal to the Company if the Company's Board of Directors
determines in good faith, based upon the written advice of outside legal
counsel, that the failure to furnish such information or participate in such
discussions or negotiations may reasonably constitute a breach of the Board's
fiduciary duties under applicable law, and (B) shall be permitted to (y) take
and disclose to the Company's shareholders a position with respect to the Merger
or an Acquisition Proposal, or amend or withdraw such position, or (z) make
disclosure to the Company's shareholders, in each case either with respect to or
as a result of an Acquisition Proposal, if the Company's Board of Directors
determines in good faith, based upon the written advice of outside legal
counsel, that the failure to take such action may reasonably constitute a breach
of the Board's fiduciary duties under applicable law; provided, that the Company
shall not enter into any acquisition agreement with respect to any Acquisition
Proposal except concurrently with the termination of this Agreement in
accordance with the provisions of Section 7.1(d) and shall not enter into any
other agreements with respect to an Acquisition Proposal except concurrently
with such termination unless, and only to the extent that, such other agreements
would facilitate the process of providing information to, or conducting
discussions or negotiations with, the parties submitting such an Acquisition
Proposal, such as confidentiality and standstill agreements.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Access to Information. Upon reasonable notice, the Company shall
(and the Company shall cause its Subsidiaries to) afford to the officers,
directors, employees, accountants, counsel and other authorized representatives
of Parent ("Representatives") reasonable access, during normal business hours
throughout the period prior to the Effective Time, to its books and records,
properties, officers, directors, employees, counsel, accountants and other
representatives, and, during such period, shall (and shall cause its
Subsidiaries to) make available to such Representatives of Parent (i) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of federal
securities laws or federal or state banking laws (other than reports or
documents that such party is not permitted to disclose under applicable law) and
(ii) all other information concerning its business, properties and personnel and
all financial operating and other data as may reasonably be requested. Parent
will hold (and cause its Representatives to hold) any such information that is
non-public in confidence and, without limitation on its obligations under the
preceding clause, Parent will hold (and cause its Representatives to hold) any
such information in confidence until such time that such information is or
becomes generally available to the public other than as a result of a disclosure
by Parent or any of its Representatives; provided, however, that this sentence
shall not prohibit disclosure of such information to the extent required or
reasonably contemplated by any subpoena, civil investigative demand or other
similar process, following 48-hours' prior notice to the Company of such
intended disclosure if reasonably possible under the circumstances. No
investigation by either Parent or Merger Sub shall affect the representations
and warranties of the Company , except to the extent such representations and
warranties are by their terms qualified by information set forth in the Company
Letter.
5.2 Shareholder Meeting. The Company shall duly call, give notice of,
convene and hold a meeting of its shareholders to be held for the purpose of
voting upon the approval and adoption of this Agreement and the transactions
contemplated hereby (the "Shareholders' Meeting"). Unless the Company has
determined to recommend an Acquisition Proposal in accordance with Section
4.2(b), the Company will, through its Board of Directors, recommend to its
shareholders approval and adoption of this Agreement and the transactions
contemplated hereby, except where such recommendation would violate the IBCL.
The Company shall cooperate with Parent with respect to the timing of the
Shareholders' meeting and shall use its best efforts to hold such meeting as
soon as reasonably practicable after the expiration of 45 days from the date on
which the Proxy Statement has been filed with and cleared by the SEC.
5.3 Reasonable Efforts. Each of the Company and Parent shall, and the
Company and Parent shall cause its Subsidiaries to, use all reasonable efforts
to take, or cause to be taken, all actions necessary, proper or advisable to
comply promptly with all legal requirements that may be imposed on such party or
its Subsidiaries with respect to the Merger and to consummate and make effective
the transactions contemplated by this Agreement, subject to the appropriate vote
of shareholders of the Company described in Section 3.1(s), including using all
reasonable efforts (i) to obtain (and to cooperate with the other party to
obtain) any necessary or appropriate consent, authorization, order or approval
of, or any exemption by, any Governmental Entity and/or any other public or
private third party in connection with the Merger and the transactions
contemplated by this Agreement, (ii) to effect all necessary registrations,
filings and submissions and (iii) to lift any injunction or other legal bar to
the Merger (and, in such case, to proceed with the Merger as expeditiously as
possible), subject, however, to the requisite vote of the shareholders of the
Company.
5.4 Post-September 30, 2002 Company Financial Statements. The Company
shall make available to Parent true and complete copies of the following:
(a) Unaudited Financial Statements. Any monthly and quarterly unaudited
consolidated balance sheet and the related consolidated statements of income,
shareholders' equity and cash flows of the Company for any monthly or quarterly
period ended subsequent to September 30, 2002 and prior to the Effective Time;
and
(b) Audited Financial Statements. Any audited consolidated balance
sheet and the related consolidated statements of income, shareholders' equity
and cash flows of the Company for any year ended after September 30, 2002 and
prior to the Effective Time.
5.5 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense, except as
expressly provided herein and except that expenses incurred in connection with
printing and mailing the Proxy Statement shall be shared equally by Parent and
the Company.
5.6 Additional Agreements. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of either of
the Company or Merger Sub, the proper officers and directors of the Company and
Merger Sub shall take all such necessary action.
5.7 Indemnification.
(a) Indemnification. Subject to the last sentence of this Section
5.7(a), for a period of three years after the Effective Time, Parent shall
indemnify, defend and hold harmless each person who is now or who becomes prior
to the Effective Time, an officer or director of the Company or any Subsidiary
(each, an "Indemnified Party" and, collectively, the "Indemnified Parties")
against (i) all losses, claims, damages, costs, expenses, liabilities or
judgments or amounts that are paid in settlement with the approval of Parent
(which approval shall not be unreasonably withheld) of or in connection with any
claim, action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person is or was a
director, officer or employee of the Company or any Subsidiary, whether
pertaining to any matter existing or occurring at or prior to the Effective Time
and whether asserted or claimed prior to, or at or after, the Effective Time
("Indemnified Liabilities") and (ii) all Indemnified Liabilities based in whole
or in part on, or arising in whole or in part out of, or pertaining to this
Agreement or the transactions contemplated hereby, in each case to the full
extent the Company of any Subsidiary would have been permitted under Indiana law
and its articles of incorporation and bylaws to indemnify such person (and
Parent shall pay expenses in advance of the final disposition of any such action
or proceeding to each Indemnified Party to the full extent permitted by law if
the determination that indemnification is not precluded contemplated by Section
23-1-37-10(a)(3) of the IBCL is made and the undertaking required by the IBCL is
provided. Without limiting the foregoing, in the event any such claim, action,
suit, proceeding or investigation is brought against Indemnified Parties
(whether arising before or after the Effective Time), (i) any counsel retained
by the Indemnified Parties for any period after the Effective Time shall be
reasonably satisfactory to Parent; (ii) after the Effective Time, Parent shall
pay all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; and (iii) after the Effective
Time, Parent will use all reasonable efforts to assist in the vigorous defense
of any such matter, provided that Parent shall not be liable for any settlement
of any claim effected without its written consent, which consent, however, shall
not be unreasonably withheld. Any Indemnified Party wishing to claim
indemnification under this Section 5.7, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify Parent (but the failure
so to notify Parent shall not relieve it from any liability which it may have
under this Section 5.7 except to the extent such failure materially prejudices
Parent), and shall deliver to Parent the undertaking, if any, required by the
IBCL. The Indemnified Parties as a group may retain only one law firm to
represent them with respect to each such matter unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties. In any case
in which the approval by the Surviving Corporation is required to effectuate any
indemnification, Parent shall cause the Surviving Corporation to direct, at the
election of any Indemnified Party (or, if more than one Indemnified Party, a
majority of the Indemnified Parties), that the determination of any such
approval shall be made by independent counsel mutually satisfactory to the
Surviving Corporation and the Indemnified Party (or, if applicable, a majority
of the Indemnified Parties). Notwithstanding anything to the contrary contained
elsewhere herein, Parent's agreement to indemnify as set forth above shall be
limited to cover claims only to the extent that those claims are not covered
under the Company's directors' and officers' insurance policies (or any
substitute policies permitted by Section 5.7(b)).
(c) Benefit. The provisions of this Section 5.7 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party, his heirs
and his representatives.
5.8 Employee Benefit Plans. As soon as administratively feasible after
the Effective Time, and subject to any provisions to the contrary that may be
set forth in any employment agreement referenced in Section 5.11, the employees
of the Company's Subsidiaries shall be provided with such employee benefits as
Parent, directly or through its Subsidiaries, generally provides to employees of
its Subsidiaries from time to time, including life, medical, hospitalization and
disability insurance and sick pay, personal leave and retirement plan benefits,
on a non-discriminatory and substantially similar basis. For purposes of
providing such benefits to employees of the Company's Subsidiaries after the
Effective Time, and subject to any provisions to the contrary that may be set
forth in any employment agreement referenced in Section 5.11, Parent shall
credit such employees for years of service at the Company prior to the Effective
Time for purposes of (i) eligibility to participate, vesting and eligibility to
receive benefits under any Parent Benefit Plan and (ii) benefit accrual under
any sickness, personal leave or vacation pay plan. At and after the Effective
Time, the directors and officers of the Company's Subsidiaries shall be provided
with such directors' and officers' liability insurance coverage as Parent from
time to time determines to provide to the directors and officers of its
Subsidiaries.
5.9 Affiliate Shareholders' Vote. Each Affiliate Shareholder shall (a)
continue to own and shall not assign, transfer, or otherwise dispose of, or in
any way from the date hereof further encumber, his shares of Company Common
Stock except as contemplated by this Agreement or set forth in the Company
Letter, and shall at all times from the date hereof, through the Shareholders'
Meeting, have the full right, power and authority to vote his shares of Company
Common Stock free of restrictions, arrangements or
limitations thereon, and (b) except with respect to any shares assigned,
transferred or disposed of as set forth in the Company Letter, vote, or cause to
be voted at the Shareholders' Meeting and at any annual or special meeting of
shareholders of the Company where such matters arise, all shares of Company
Common Stock held of record or beneficially owned by him on the date hereof and
any additional shares that he may hold or beneficially own after the date hereof
(i) in favor of the approval of this Agreement, the Merger and the other
transactions contemplated hereby, and (ii) against (A) approval of any
Acquisition Proposal other than the Merger, or any other proposal made in
opposition to or in competition with the Merger or any of the other transactions
contemplated by this Agreement and (B) any other action that may reasonably be
expected to impede, interfere with, delay, postpone or attempt to discourage the
Merger or any of the other transactions contemplated by this Agreement or result
in a breach of any of the covenants, representations, warranties or other
obligations or agreements of the Company or any Affiliate Shareholder that would
materially and adversely affect the Company or its ability to consummate the
transactions contemplated by this Agreement.
5.10 Releases. At the Closing, each of the directors of the Company and
its Subsidiaries shall execute a written general release (in form and substance
reasonably satisfactory to Parent ) that releases Parent, Merger Sub, the
Surviving Corporation, the Company and each of the Company's Subsidiaries from
any and all claims of any type, contractual or otherwise, known or unknown,
contingent or direct or indirect, that he may have against Parent, Merger Sub,
the Surviving Corporation, the Company or any Subsidiary of the Company as of
the Closing Date, whether as a director, officer or employee of the Company or
any Subsidiary or otherwise, provided that such general release shall expressly
state that there shall be no release effected of (i) claims arising under this
Agreement and the transactions contemplated hereby, (ii) claims arising out of
monies on deposit with any banking Subsidiary of the Company or Parent , (iii)
claims for compensation accrued and vested but not yet payable as reflected on
the books and records of the Company or any Subsidiary made available to Parent
and (iv) claims under any deferred compensation or other type agreement
specifically identified with respect to such individual and this Section 5.10 in
the Company Letter.
5.11 Employment Agreements. Within 7 days from the date of this
Agreement, the Company shall cause First Community Bank & Trust to offer to
respectively execute and deliver an employment agreement with Albert R.
Jackson III, Keith Lindauer and William Dean Jackson in the forms respectively
attached as Exhibits 5.11.1, 5.11.2 and 5.11.3., and if acceptable to such
individuals, to execute such agreements within such time period.
5.12 Redemption of Unconverted Convertible Debt Securities. The Company
shall take all necessary actions in sufficient time prior to the Closing to
cause all outstanding convertible debt securities to either be redeemed and
cancelled or converted into Company Common Stock concurrent with the Closing in
accordance with the terms of the redemption and cancellation, or conversion, of
such convertible debt securities in effect on the date of the issuance of such
securities.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) Shareholder Approval. This Agreement shall have been respectively
approved and adopted by the affirmative vote of the holders of the outstanding
shares of Company Common Stock.
(b) Other Approvals. Other than the filing of the Articles of Merger
provided for by Section 1.1, all authorizations, consents, orders or approvals
of, or declarations or filings with, and all expirations of waiting periods
imposed by, any Governmental Entity (all of the foregoing, "Consents") that are
necessary for the consummation of the Merger, other than immaterial Consents the
failure to obtain which would not have a significant adverse effect on the
consummation of the Merger or on Parent and its Subsidiaries, taken as a whole,
after consummation of the Merger, shall have been filed, occurred or been
obtained (all such permits, approvals, filings and consents and the lapse of all
such waiting periods being referred to as the "Requisite Regulatory Approvals")
and all such Requisite Regulatory Approvals shall be in full force and effect.
(c) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding by any Governmental Entity seeking any of the foregoing be pending.
There shall not be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Merger, which makes the
consummation of the Merger illegal.
(d) Burdensome Condition. There shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, by any Governmental Entity which, in connection with
the grant of a Requisite Regulatory Approval, imposes any condition or
restriction upon Parent or its Subsidiaries, the Company or the Surviving
Corporation that would so materially adversely impact the economic or business
benefits of the transactions contemplated by this Agreement as to render
inadvisable the consummation of the Merger.
6.2 Conditions to Obligations of Parent and Merger Sub. The obligations
of Parent and Merger Sub to effect the Merger are subject to the satisfaction of
the following conditions or waiver by Parent on or prior to the Closing Date:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement that are qualified as to materiality
shall be true and correct, and the representations and warranties of the Company
set forth in this Agreement that are not so qualified shall be true and correct
in all material respects, in each case as of the date of this Agreement, and as
of the Closing Date as though made on and as of the Closing Date, except to the
extent such representation or warranty expressly relates to an earlier date (in
which case as of such date), and Parent shall have received a certificate signed
on behalf of the
Company by the Chief Executive Officer and the Chief Financial Officer of the
Company to such effect; and further, the representations and warranties of the
Company in this Agreement that are qualified by the Company's knowledge shall be
true and correct without regard to any such knowledge qualification, and if not
true and correct, the inaccuracy or incorrectness of any such representation and
warranty (after disregarding any knowledge qualification solely for purposes of
this Section 6.2(a)) shall not in Parent's good faith determination be
reasonably likely to have a Material Adverse Effect on the Company prior to the
Merger or Parent or the Surviving Corporation after consummation of the Merger.
(b) Performance of Obligations of the Company and Affiliated
Shareholders. The Company and the Affiliated Shareholders shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and Parent shall have received a
certificate signed on behalf of the Company by the Chief Executive Officer and
the Chief Financial Officer of the Company with respect to the Company to such
effect.
(c) Consents Under Agreements. The Company shall have obtained the
consent or approval of each person (other than the Governmental Entities
referred to in Section 6.1(b)) whose consent or approval shall be required in
order to permit the succession by the Surviving Corporation pursuant to the
Merger to any obligation, right or interest of the Company under any loan or
credit agreement, note, mortgage, indenture, lease, license or other agreement
or instrument, except those for which failure to obtain such consents and
approvals would not, in the reasonable opinion of Parent, individually or in the
aggregate, have a Material Adverse Effect on the Surviving Corporation or upon
the consummation of the transactions contemplated hereby.
(d) Employment Agreements. Each of the employment agreements
contemplated by Section 5.11 shall have been respectively executed and delivered
within 7 days from the date of this Agreement.
6.3 Conditions to Obligations of the Company. The obligations of the
Company to effect the Merger are subject to the satisfaction or waiver by the
Company on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties of
Parent and Merger Sub set forth in this Agreement that are not so qualified
shall be true and correct in all material respects, in each case as of the date
of this Agreement and as of the Closing Date as though made on and as of the
Closing Date, except to the extent such representation or warranty expressly
relates to another date (in which case as of such date), and the Company shall
have received a certificate signed on behalf of Parent and Merger Sub by the
Chief Executive Officer and the Chief Financial Officer of Parent and Merger Sub
to such effect.
(b) Performance of Obligations of Parent and Merger Sub. Parent and
Merger Sub shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the Closing
Date, and the Company shall have received a certificate signed on behalf of
Parent and Merger Sub by the Chief Executive Officer and the Chief Financial
Officer of Parent and Merger Sub to such effect.
(c) Consents Under Agreements. Parent and Merger Sub shall have
obtained the consent or approval of each person (other than the Governmental
Entities referred to in Section 6.1(b)) whose consent or approval shall be
required in connection with the transactions contemplated hereby under any loan
or credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument, except those for which failure to obtain such consents
and approvals would not, in the reasonable opinion of the Company, individually
or in the aggregate, have a Material Adverse Effect on Parent or upon the
consummation of the transactions contemplated hereby.
(d) Fairness Opinion. The Company shall have received an opinion from
Austin and Associates, dated as of the date of the Proxy Statement and in form
and substance reasonably satisfactory to the Company, that the Merger is fair to
the shareholders of the Company from a financial point of view.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time of the Merger, whether before or after the approval of this
Agreement by the shareholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if, at a duly held shareholders meeting of the Company or
any adjournment thereof at which approval of this Agreement is voted upon, the
approval of the shareholders of the Company shall not have been obtained;
(ii) if the Merger shall not have been consummated on or
before June 30, 2003, unless the failure to consummate the Merger is the result
of a willful and material breach of this Agreement by the party seeking to
terminate this Agreement;
(iii) if any court of competent jurisdiction or other
Governmental Entity shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become final
and non-appealable;
(iv) in the event of a breach by the other party of any
representation, warranty, covenant or other agreement contained in this
Agreement which (A) would give rise to the failure of a condition set forth in
Section 6.2(a) or 6.2(b) or Section 6.3(a) or 6.3(b), as applicable, and (B)
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching party of such breach ("Material Breach") (provided that
the terminating party is not then in breach of any representation, warranty,
covenant or other agreement that would give rise to a failure of a condition
described in clause (A) above);
(c) by either Parent or the Company in the event that (i) all the
conditions to the obligation of such party to effect the Merger set forth in
Section 6.1 shall have been satisfied and (ii) any condition to the obligation
of such party to effect the Merger set forth in Section 6.2 (in
the case of Parent) or Section 6.3 ( in the case of the Company) is not capable
of being satisfied prior to the date on which this Agreement may be terminated
pursuant to Section 7.1(b)(ii); and
(d) by the Company, subject to Section 7.5(b), if the Board of
Directors of the Company shall concurrently approve, and the Company shall
concurrently enter into, a definitive agreement providing for the implementation
of the transactions contemplated by an Acquisition Proposal; provided, however,
that (i) the Company is not then in breach of Section 4.2 or in breach of any
other representation, warranty, covenant or agreement that would give rise to a
failure of a condition set forth in Section 6.2(a) or 6.2(b); (ii) the Board of
Directors of the Company shall have complied with Section 7.5(b) in connection
with such Acquisition Proposal and (iii) no termination pursuant to this Section
7.1(d) shall be effective unless the Company shall simultaneously make the
payment required by Section 7.2(a).
7.2 Effect of Termination.
(a) In the event that any person shall make an Acquisition Proposal
with respect to the Company and thereafter (i) this Agreement is terminated (A)
pursuant to Section 7.1(b)(i), (B) pursuant to Section 7.1(b)(ii) (if at the
time of termination (x) the Company is in breach of any representation,
warranty, covenant or other agreement that would give rise to a failure of a
condition set forth in Section 6.2(a) or 6.2(b) and (y) such breach cannot be or
has not been cured within 30 days after the Company becomes aware of such breach
or such shorter period that may elapse between the date the Company becomes
aware of such breach and the time of termination), (C) pursuant to Section
7.1(b)(iii) (if at the time of termination (x) the Company is in breach of any
representation, warranty, covenant or other agreement that would give rise to a
failure of a condition set forth in Section 6.2(a) or 6.2(b) and (y) such breach
cannot be or has not been cured within 30 days after the Company becomes aware
of such breach or such shorter period that may elapse between the date the
Company becomes aware of such breach and the time of termination), (D) by Parent
pursuant to Section 7.1(b)(iv), (E) by Parent pursuant to Section 7.1(c) unless
the termination relates to the failure of a condition set forth in Section 6.2
(c) or (d), or (F) by the Company pursuant to Section 7.1(d), and (ii) a
definitive agreement with respect to an Acquisition Proposal is executed, or an
Acquisition Proposal is consummated, at or within 12 months after such
termination, then Parent shall be paid a fee of $460,000, which amount shall be
payable by wire transfer of same day funds on the date such agreement is
executed, or such Acquisition Proposal is consummated, as applicable. The
Company acknowledges that the agreements contained in this Section 7.2(a) are an
integral part of the transactions contemplated by this Agreement, and that
without these agreements, Parent would not enter into this Agreement;
accordingly, if the Company fails to promptly pay the amount due pursuant to
this Section 7.2(a), and, in order to obtain such payment, Parent commences a
suit that results in a judgment against the Company for the fees set forth in
this Section 7.2(a), the Company shall also pay to Parent its costs and expenses
(including reasonable attorneys' fees) in connection with such suit.
(b) In the event of termination of this Agreement by either Parent or
the Company as provided in Section 7.1, this Agreement shall forthwith become
void and have no effect, without any liability or obligation on the part of
Parent, Merger Sub or the Company, other than the provisions of Section 5.1
(penultimate sentence), Section 5.7, this Section 7.2 and Article VIII and
except to the extent that such termination results from the willful and material
breach by a party of any its representations, warranties, covenants or other
agreements set forth in this Agreement.
7.3 Amendment. This Agreement may be amended by the parties at any time
before or after the approval of this Agreement by the shareholders of the
Company; provided, however, that after such approval by the shareholders of the
Company, there shall be made no amendment that pursuant to the IBCL requires
further approval by the shareholders of the Company without the further approval
of such shareholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties.
7.4 Extension; Waiver. At any time prior to the Effective Time of the
Merger, the parties may (i) extend the time for the performance of any of the
obligations or other acts of the other parties; (ii) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement; or (iii) subject to the proviso
of Section 7.3, waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
7.5 Procedure for Termination, Amendment, Extension or Waiver.
(a) A termination of this Agreement pursuant to Section 7.1, an
amendment of this Agreement pursuant to Section 7.3 or an extension or waiver
pursuant to Section 7.4 shall, in order to be effective, require, in the case of
Parent, Merger Sub or the Company, action by its Board of Directors or, in the
case of an extension or waiver pursuant to Section 7.4, the duly authorized
designee of its Board of Directors.
(b) The Company shall provide to Parent written notice prior to any
termination of this Agreement pursuant to Section 7.1(d) advising Parent (i)
that the Board of Directors of the Company in the exercise of its good faith
judgment as to its fiduciary duties to the shareholders of the Company under
applicable law, after receipt of written advice of outside legal counsel, has
determined (on the basis of such Acquisition Proposal and the terms of this
Agreement, as then in effect) that such termination is required in connection
with an Acquisition Proposal that is more favorable to the shareholders of the
Company than the transactions contemplated by this Agreement (taking into
account all terms of such Acquisition Proposal and this Agreement, including all
conditions) and (ii) as to the material terms of any such Acquisition Proposal.
At any time after five business days following receipt of such notice, the
Company may terminate this Agreement as provided in Section 7.1(d) only if the
Board of Directors of the Company determines that such Acquisition Proposal is
more favorable to the shareholders of the Company than the transactions
contemplated by this Agreement (taking into account all terms of such
Acquisition Proposal and this Agreement, including all conditions, and which
determination shall be made in light of any revised proposal made by Parent
prior to the expiration of such five business day period) and concurrently
enters into a definitive agreement providing for the implementation of the
transactions contemplated by such Acquisition Proposal.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time of the Merger. This
Section 8.1 shall not limit any covenant or agreement of the parties that by its
terms contemplates performance after the Effective Time of the Merger.
8.2 Notices. All notices and other communications required or sought to
be given hereunder shall be in writing and shall be deemed given upon (i)
transmitter's confirmation of receipt of a facsimile transmission, (ii)
confirmed delivery by a standard overnight carrier or when delivered by hand or
(iii) the expiration of five business days after the day when mailed by
certified or registered mail, postage prepaid, addressed to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to Parent or
Merger Sub, to: MainSource Financial Group, Inc.
201 N. Broadway
Greensburg, Indiana 47240
Attn: Donald A. Benziger,
Senior Vice President and Chief
Financial Officer
Telecopy No. (812) 663-4812
With a copy (which
shall not constitute
notice) to: David W. Harper, Esq.
The Summit Suite 110
4350 Brownsboro Road
Louisville, Kentucky 40207
Telecopy No. (502) 893-4503
(b) If to the Company, to: First Community Bancshares, Inc.
34 W. Jefferson Street
P.O. Box 970
Franklin, Indiana 46106
Attn: Albert R. Jackson, III,
Chief Executive Officer
Telecopy No. (317) 346-7210
With a copy (which
shall not constitute
notice) to: O. Wayne Davis, Esq.
Henderson Daily Withrow and DeVoe
2600 One Indiana Square
Indianapolis, Indiana 46204-2071
Telecopy No. (317) 639-0191
and
(d) If to any Affiliated Shareholder,
to: [Name of Noticed Affiliate Shareholder]
[Address of Record on Company's Books]
8.3 Interpretation. Unless the context otherwise requires, words
describing the singular number shall include the plural and vice versa, and
words denoting any gender shall include all genders and words denoting natural
persons shall include corporations and other entities and vice versa. Any table
of contents, index of terms, headings and captions contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When a reference is made in this Agreement to
any "Section, "Annex," "Exhibit" or "Schedule," such reference shall be to a
section, annex, exhibit or schedule to this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." Whenever the words "or any Subsidiary", "or any Subsidiaries," "nor
any Subsidiary" or "nor any Subsidiaries" are used in this Agreement in
connection with a preceding reference to a party to this Agreement, they shall
be deemed to refer to a Subsidiary or Subsidiaries of that party. The phrase
"made available" in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom such information is to
be made available, and the correlative phrase "make available" shall mean that
such information shall be promptly made available if so requested. The phrases
"the date of this Agreement," "the date hereof" and terms of similar import,
unless the context otherwise requires, shall be deemed to refer to March 27,
2003. The "knowledge" of Parent, Merger Sub or the Company for purposes of
certain provisions of this Agreement qualified by the knowledge of any of such
party shall mean the actual knowledge, without additional inquiry, of any one or
more of the directors and executive officers of that party and its direct and
indirect Subsidiaries.
8.4 Assignment; Binding Effect; Benefit. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Article II and Sections 5.7 and 5.8 (collectively, the "Third Party
Provisions"), nothing in this Agreement, express or implied, is intended to
confer on any person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement. The Third Party
Provisions may be enforced on behalf of the Company or the other respective
beneficiaries thereof by those individuals who were the directors of the Company
immediately prior to the Effective Time and also by the holder of Company Common
Stock converted in the Merger, the Indemnified Party or the officer or employee
that such provisions respectively are intended to benefit and their respective
heirs and representatives. Parent shall pay all expenses, including attorneys'
fees, that may be incurred by such directors or other persons in enforcing the
Third Party Provisions.
8.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
8.6 Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. Each
counterpart may consist of a number of copies hereof each signed by less than
all, but together signed by all of the parties hereto. It shall not be
necessary, in making proof of this Agreement or any counterpart hereof, to
produce or account for any of the other counterparts.
8.7 Severability. Any term or provision of this Agreement that is
invalid or unenforceable shall be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
8.8 Incorporation of Documents. The Company Letter, Parent Letter, and
all Annexes, Exhibits and Schedules, if any, attached hereto and referred to
herein are incorporated into this Agreement and made a part hereof for all
purposes as if fully set forth herein.
8.9 Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with its specific terms or were otherwise breached. It is accordingly
agreed that the parties shall be entitled to seek an injunction or injunctions
to prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any court of the United States located in the
State of Indiana or in Indiana state court, this being in addition to any other
remedy to which a party is entitled at law or in equity.
8.10 Waivers. Except as provided in this Agreement or in any waiver
pursuant to Section 7.4, no action taken pursuant to this Agreement, including
any investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any other
provision hereunder.
8.11 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
[Signature page follows]
IN WITNESS WHEREOF, each of the corporate parties has caused this
Agreement to be signed on its behalf by its officers thereunto duly authorized,
and each of the Affiliated Shareholders has signed this Agreement, in each case
as of the date first set out in the first paragraph of this Agreement.
("Parent")
MAINSOURCE FINANCIAL GROUP, INC.
By: /s/ James L. Saner, Sr.
----------------------------------
James L. Saner, Sr., President and
Chief Executive Officer
("Merger Sub")
FCBY MERGER CORPORATION
By: /s/ James L. Saner, Sr.
----------------------------------
James L. Saner, Sr., President and
Chief Executive Officer
(the "Company")
FIRST COMMUNITY BANCSHARES, INC.
By: /s/ Albert R. Jackson, III
----------------------------------
Albert R. Jackson, III,
Chief Executive Officer
(the "Affiliated Shareholders")
/s/ Albert R. Jackson, Jr.
---------------------------------
Albert R. Jackson, Jr.
/s/ Albert R. Jackson, III
---------------------------------
Albert R. Jackson, III
/s/ Frank D. Neese
---------------------------------
Frank D. Neese
/s/ Roy Martin Umbarger
---------------------------------
Roy Martin Umbarger
/s/ Merrill M. Wesemann, M. D.
---------------------------------
Merrill M. Wesemann, M. D.
ANNEX 5.11.1.
-------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), effective as of the date on
which the Effective Time of the Merger (as defined in the Merger Agreement
referenced in Recital B below) occurs (the "Effective Date"), and executed on
the 31st day of March 2003, by and between FIRST COMMUNITY BANCSHARES, INC, an
Indiana corporation (together with its successors and assigns permitted under
this Agreement, the "Company"), and ALBERT R. JACKSON, III (the "Executive").
FIRST COMMUNITY BANK & TRUST (the "Bank"), a direct subsidiary of the Company,
joins in this Agreement for the purposes expressed herein.
R E C I T A L S:
- - - - - - - -
A. Executive is currently serving as President of the Bank without any
employment agreement and as an "at will" employee.
B. The Company has agreed to be acquired by MainSource Financial Group,
Inc. ("MSFG") on the terms and conditions of that certain Agreement and Plan of
Merger dated as of March 27, 2003 (the "Merger Agreement") among MSFG, FCBY
Merger Corporation ("Merger Sub"), the Company and the directors of the Company.
Pursuant to the Merger Agreement, the Company will merge with and into Merger
Sub (the "Merger"), the Company will become a direct subsidiary of MSFG and the
Bank will become an indirect wholly owned subsidiary of MSFG.
C. Section 5.11 of the Merger Agreement provides for the execution of
this Agreement in connection with the closing of the Merger because MSFG, in
connection with the negotiation of the Merger Agreement, has insisted that
following the Merger it be assured of Executive's continued employment and
services on the terms of this Agreement.
D. The Bank wishes to join this Agreement to evidence its consent to
this Agreement and its agreement to perform those provisions of this Agreement
where performance by the Bank is contemplated or required.
E. Executive desires to enter into this Agreement and to continue as
President of the Bank after the Merger, subject to the terms and provisions of
this Agreement.
F. The parties intend certain capitalized terms not otherwise defined
to have the meanings given them in Section 24 of this Agreement.
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company, the Bank and the Executive
(individually a "Party" and collectively the "Parties") agree as follows:
1. Term of Employment. The Company hereby agrees to cause the Bank to
employ Executive, and Executive hereby accepts and agrees to such employment
with the Bank, for the period commencing on the Effective Date of this Agreement
and continuing until the earlier of (i) December 31, 2004 or (ii) the
termination of his employment in accordance with the terms of this Agreement. If
the Merger is not consummated for any reason whatsoever and the Merger Agreement
is terminated as provided therein, this Agreement shall be deemed cancelled and
of no force and effect.
2. Position, Duties and Responsibilities.
(a) During the Term of Employment, Executive shall be employed
by the Bank as its President and Chief Executive Officer responsible for the
general management of the Bank's affairs, and Executive shall faithfully,
industriously perform all duties from time to time assigned him by MSFG's chief
executive officer or the Bank Board to the best of his abilities. It is the
intention of the Parties that during the term of Employment Executive shall be
elected to and serve as a member of the Bank Board.
(b) Anything herein to the contrary notwithstanding, nothing
shall preclude Executive from (i) serving on the boards of directors of a
reasonable number of other trade associations and/or civic or charitable
organizations, (ii) engaging in charitable activities and community affairs and
(iii) managing his personal investments and affairs, provided that such
activities do not materially interfere with the proper performance of his duties
and responsibilities as the Bank's President and Chief Executive Officer.
3. Base Salary; Director Compensation. During the Term of Employment,
Executive shall be paid an annualized Base Salary, payable in accordance with
the regular payroll practices of the Bank, of $118,000. The Base Salary shall be
reviewed no less frequently than annually for increase in the discretion of the
Bank Board. Executive shall not be entitled to receive any fees or other
remuneration for serving on the Bank Board.
4. Signing Bonus; Bonus Award. On the Effective Date, Executive shall
be paid a signing bonus of $25,000. During the Term of Employment occurring in
2004, Executive shall be entitled to participate in MSFG's Executive
Compensation Bonus Plan and any other bonus, incentive and similar type plans
and programs, if any, made available by the Company to officers of its banking
subsidiaries. Prior to January 1, 2004, Executive shall have no right to
participate in any such plans and programs.
5. Employee Benefit Programs. During the Term of Employment, Executive
shall be entitled to participate in all employee pension and welfare benefit
plans and programs made available by the Company to officers of its banking
subsidiaries or to employees generally, as such plans or programs may be in
effect from time to time, including without limitation, pension, profit-sharing,
savings and other retirement plans or programs, medical, dental,
hospitalization, short-term and long-term disability and life insurance plans,
accidental death and dismemberment protection, travel accident insurance, and
any other pension or retirement plans or programs and any other employee welfare
benefit plans or programs that may be sponsored by MSFG for such officers of
banking subsidiaries or employees generally from time to time, including any
plans that supplement the above-listed types of plans or programs, whether
funded or unfunded. Notwithstanding the foregoing, nothing in this Section 5
shall be interpreted to grant Executive any right to receive an executive
severance agreement providing for certain payments or benefits upon a change in
control of MSFG.
6. Automobile; Reimbursement of Business Expenses.
(a) Automobile. The Bank shall provide to Executive for his
exclusive use an automobile, comparable in type and style to the automobile
provided Executive on the date of this Agreement, consistent with the policies
of MSFG regarding the provision of automobiles to officers of its bank
subsidiaries. The Bank shall reimburse Executive for all reasonable expenses
incurred in the use and maintenance of such automobile, subject to documentation
in accordance with MSFG's policies regarding such expenses. During the Term of
Employment ownership of such automobile shall remain with the Bank and Executive
shall deliver such automobile to the Bank in good condition, reasonable wear and
tear excepted, upon termination of his employment.
(b) Reimbursement of Other Expenses. Executive is authorized
to incur reasonable expenses in carrying out his duties and responsibilities
under this Agreement and the Bank shall promptly reimburse him for all business
expenses incurred in connection with carrying out the business of the Bank,
subject to documentation in accordance with the Bank's policy.
7. Termination of Employment.
(a) Termination Due to Death. In the event Executive's
employment is terminated due to his death, his estate or his beneficiaries, as
the case may be, shall be entitled to:
(i) Base Salary through the date of death;
(ii) any bonus or payment awarded or earned under Section
4 that has not yet been paid and is payable under the terms of the
plan;
(iii) any amounts earned, accrued or owing but not yet
paid under Sections 5 or 6; and
(iv) other or additional benefits in accordance with
applicable plans and programs of MSFG, the Company and/or the Bank.
(b) Termination Due to Disability. In the event Executive's
employment is terminated due to his Disability, he shall be entitled to:
(i) Base Salary through the date of Disability;
(ii) any bonus or payment awarded or earned under Section
4 that has not yet been paid and is payable under the terms of the
plan;
(iii) any amounts earned, accrued or owing but not yet
paid under Sections 5 or 6 above; and
(iv) other or additional benefits in accordance with
applicable plans and programs of MSFG, the Company and/or the Bank.
In no event shall a termination of Executive's employment for
Disability occur unless the Company or the Bank gives written notice to
Executive in accordance with Section 20 below.
(c) Termination for Cause.
(i) A termination for Cause shall not take effect
unless the provisions of this paragraph (i) are complied with.
Executive shall be given written notice by the Company Board of the
intention to terminate him for Cause, such notice (A) to state in
detail the particular act or acts or failure or failures to act that
constitute the grounds on which the proposed termination for Cause is
based and (B) to be given within two months of the Company Board's
learning of such act or acts or failure or failures to act. Executive
shall have 30 days after the date that such written notice has been
given to Executive in which to cure such conduct, to the extent such
cure is possible. If he fails to cure such conduct, Executive shall
then be entitled to a hearing before the Company Board. Such hearing
shall be held within 15 days of such notice to Executive, provided he
requests such hearing within 10 days of the written notice from the
Bank Board of the intention to terminate him for Cause. If, within five
days following such hearing, Executive is furnished written notice by
the Company Board confirming that, in its judgment, grounds for Cause
on the basis of the original notice exist, he shall thereupon be
terminated for Cause.
(ii) In the event Executive's employment is terminated for
Cause, he shall be entitled, subject to the right of the Company or the
Bank to exercise a right of offset, to:
(A) the Base Salary through the date of the
termination of his employment for Cause;
(B) any bonus or payment awarded or earned under
Section 4 that has not yet been paid and is payable under the
terms of the plan;
(C) any amounts earned, accrued or owing but not yet
paid under Sections 5 or 6 above; and
(D) other or additional benefits in accordance with
applicable plans or programs of MSFG, the Company and/or the
Bank.
(d) Termination Without Cause or Constructive Termination
Without Cause. Executive may be terminated without Cause. In the event
Executive's employment is terminated without Cause, other than due to Disability
or death, or in the event there is a Constructive Termination Without Cause,
Executive shall be entitled to:
(i) the Base Salary to the date of termination of
Executive's employment;
(ii) the Base Salary, at the annualized rate in effect on
the date of termination of Executive's employment (or in the
event a reduction in Base Salary is the basis for a
Constructive Termination Without Cause, then the Base Salary
in effect immediately prior to such reduction), for the period
commencing the date of termination of Executive's employment
and ending December 31, 2004, payable in accordance with the
payroll practices of the Bank;
(iii) any bonus or payment awarded or earned under Section
4 that has not yet been paid and is payable under the terms of
the plan;
(iv) any amounts earned, accrued or owing but not yet paid
under Sections 5 or 6 above; and
(v) other or additional benefits in accordance with
applicable plans and programs of MSFG, the Company and/or the
Bank.
(e) Nature of Payments. Any amounts due under this Section 7
are in the nature of severance payments considered to be reasonable by the
Company and the Bank and are not in the nature of a penalty.
8. Confidential Information and Removal of Documents
(a) Confidential Information. Executive shall hold in a
fiduciary capacity for the benefit of the Company and the Bank all trade
secrets, confidential information, and knowledge or data relating to the Company
and the Bank and their respective businesses or business prospects or relating
to any customer or client of the Bank, which shall have been obtained by
Executive during Executive's employment by the Company or the Bank, including
such information with respect to any software, products, systems, programs,
improvements, formulas, designs, manuals, styles, processes, procedures,
services, customers, suppliers, marketing techniques, methods, future plans or
operating practices ("Confidential Information"); provided, however, that
Confidential Information shall not include any information known generally to
the public (other than as a result of unauthorized disclosure by Executive) or
any specific information or type of information generally not considered
confidential by persons engaged in financial services business, or information
disclosed by the Company or any officer thereof to a third party without
restrictions on the disclosure of such information. Except as may be required or
appropriate in connection with his carrying out his duties under this Agreement,
Executive shall not, without the prior written consent of the Company or as may
otherwise be required by law or legal process, communicate or divulge any such
Confidential Information to anyone other than the Company, the Bank and those
designated by the Company or the Bank.
(b) Removal of Documents. All records, files, drawings,
documents, models and the like relating to the business of the Company or the
Bank that Executive prepares, uses or comes into contact with and which contain
Confidential Information shall not be removed by Executive from the premises of
the Bank (without the prior written consent of the Company) during or after the
Term of Employment unless such removal shall be required or appropriate in
connection with his carrying out his duties under this Agreement, and, if so
removed by Executive, shall be returned to the Company immediately upon
termination of Executive's employment hereunder.
(c) Remedies. In the event of a breach or threatened breach of
this Section 8, Executive agrees that the Company shall be entitled to apply for
injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Executive acknowledging that damages would be
inadequate and insufficient.
(d) Continuing Operation. Any termination of Executive's
employment or of this Agreement shall have no effect on the continuing operation
of this Section 8.
9. Effect of Agreement on Other Benefits. Except as specifically
provided in this Agreement, the existence of this Agreement shall not prohibit
or restrict Executive's entitlement to full participation in the employee
benefit and other plans or programs in which officers of the Bank are eligible
to participate.
10. Non-Competition; Non-Solicitation.
(a) Restrictions. In the event Executive's employment is
terminated hereunder, then (subject to the following proviso if the termination
is without Cause or a Constructive Termination Without Cause) until the later of
(i) January 1, 2005 or (ii) one year following the date of termination of
Executive's employment (the "Restricted Period"), Executive shall not directly
or indirectly be employed by, serve as a director of, act as an agent, advisor
or consultant to, or hold any ownership interest in (excluding a less than 1%
ownership interest in any publicly held company whose securities are registered
under Section 12 of the Securities Exchange Act of 1934, as amended) any person
or legal entity that is engaged in a commercial banking or financial services
business through, among other locations, if any, any office(s) located in the
Indian counties of Bartholomew, Jennings or Johnson.; provided, however, that
notwithstanding anything above to the contrary, in no event shall the Restricted
Period extend beyond December 31, 2004 if Executive's employment is terminated
without Cause or as a result of a Constructive Termination Without Cause .
During the Restricted Period, Executive also shall not directly or indirectly
solicit, for himself or on behalf of another, any of the Bank's employees for
the purpose of hiring them or inducing or encouraging them in any way to leave
their employment with the Bank. During the Restricted Period, Executive also
shall not directly or indirectly solicit, for himself or on behalf of another,
any of the Bank's customers, or any potential customers with whom Executive or
the Bank's employees have had contact either directly or indirectly of which
Executive has knowledge.
(b) Tolling of Limited Period. The running of the one year
Restricted Period prescribed in subparagraph (a) above shall be tolled and
suspended by the length of time Executive is directly or indirectly involved in
circumstances that a court of competent jurisdiction subsequently finds to
violate the terms of Section 10(a).
(c) Injunctive Relief. Executive acknowledges that it would be
difficult to compensate the Company or the Bank fully for damages for any
violation of the provisions of Section 10(a) of this Agreement, and that in any
such violation the Company and the Bank will not have an adequate remedy at law.
Accordingly, the Company and the Bank shall be entitled to injunctive relief,
both pendente lite and permanently, against Executive, and Executive hereby
consents to any initiation by the Company and/or the Bank in a court of
appropriate jurisdiction of any action to enjoin immediately any anticipatory,
continuing or future breach of Section 10(a). Executive hereby releases the
Company and the Bank from the requirement of posting any bond in connection with
temporary or interlocutory injunctive relief, to the extent permitted by law.
This Section 10(c) with respect to injunctive relief shall not, however,
diminish the right of the Company and/or the Bank to claim and recover damages
in addition to injunctive relief.
(d) Judicial Modification. If any of the provisions of this
Section 10 is held to be unenforceable because of the scope, duration or area of
its applicability, or otherwise, the court or other body having jurisdiction
over the matter making such determination shall have the power to modify such
scope, duration or area or other matter, or all of them, and such provisions
shall then be applicable in such modified form; and Executive agrees that this
Section 10, as so amended, shall be valid and binding as though any invalid or
unenforceable provision had not been included herein.
(e) Continuing Operation. Any termination of Executive's
employment or of this Agreement shall have no effect on the continuing operation
of this Section 10.
11. Assignability; Binding Nature. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors, heirs
(in the case of Executive) and assigns. No rights or obligations of the Company
or the Bank under this Agreement shall be assigned or transferred by the Company
or the Bank except that (i) such rights or obligations shall be assigned or
transferred to Merger Sub in the Merger pursuant to the Merger Agreement and
(ii) such rights or obligations may be assigned or transferred pursuant to a
merger or consolidation in which the Company, Merger Sub, or the Bank is not the
continuing entity, or the sale or liquidation of all or substantially all of the
assets of the Company, Merger Sub or the Bank, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company, Merger Sub or the Bank, and such assignee or transferee assumes the
liabilities, obligations and duties of the Company, Merger Sub and the Bank or
any obligated assignee thereof, as contained in this Agreement, either
contractually or as a matter of law. The Company and the Bank further agree
that, in the event of a sale of assets or liquidation as described in the
preceding sentence, each shall take whatever action it legally can cause such
assignee or transferee to expressly assume the liabilities, obligations and
duties of the Company and the Bank hereunder. No rights or obligations of
Executive under this Agreement may be assigned or transferred by Executive other
than his rights to compensation and benefits, which may be transferred only by
will or operation of law, except as provided in Section 17 below.
12. Representation. The Company represents and warrants that the
Company is fully authorized and empowered to enter into this Agreement and that
the performance of obligations under this Agreement will not violate any
agreement between it and any other person, firm or organization.
13. Entire Agreement. This Agreement contains the entire understanding
and agreement between the Parties concerning the subject matter hereof and
supersedes all prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the Parties with respect thereto.
14. Amendment or Waiver. No provision in this Agreement may be amended
unless such amendment is agreed to in writing and signed by Executive and an
authorized officer of the Company and the Bank. No waiver by any Party of any
breach by another Party of any condition or provision contained in this
Agreement to be performed by such other Party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same or any prior or
subsequent time. Any waiver must be in writing and signed by
Executive or an authorized officer of the Company or the Bank, as the case may
be.
15. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law.
16. Survivorship. The respective rights and obligations of the Parties
hereunder shall survive any termination of Executive's employment to the extent
necessary to the intended preservation of such rights and obligations.
17. Beneficiaries/References. Executive shall be entitled to select
(and change, to the extent permitted under any applicable law) a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder following
Executive's death by giving the Company written notice thereof. In the event of
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative.
18. Governing Law/Jurisdiction. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the United States and
the State of Indiana without reference to principles of conflict of laws.
19. Resolution of Disputes. Any disputes arising under or in connection
with this Agreement shall, at the election of Executive, be resolved by binding
arbitration, to be held in Indianapolis, Indiana, in accordance with the rules
and procedures of the American Arbitration Association. Judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof. The Company and the Bank, on the one hand, and Executive, on the other
hand, shall bear their own respective costs and expenses (including attorneys'
fees) with respect to any such arbitration and litigation.
20. Notices. All notices and other communications required to be given
hereunder shall be in writing and shall be deemed given upon (i) transmitter's
confirmation of receipt of a facsimile transmission, (ii) confirmed delivery by
a standard overnight carrier or when delivered by hand or (iii) the expiration
of two business days after the day when mailed by certified or registered mail,
postage prepaid, addressed to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
If to the Company
or the Bank: First Community Bancshares, Inc
[or First Community Bank & Trust, as applicable]
c/o MainSource Financial Group, Inc.
201 N. Broadway
Greensburg, Indiana 47240
Attn: Chief Executive Officer
Telecopy No. (812) 663-4812
(with a copy to:) David W. Harper, Esq.
The Summit Suite 110
4350 Brownsboro Road
Louisville, Kentucky 40207
Telecopy No. (502) 893-4503
If to Executive: Albert R. Jackson III
5675 North C.R. 200 West
North Vernon, Indiana 47265
21. Headings. The headings of the sections contained in this Agreement
are for convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
22. Counterparts. This Agreement may be executed in two or more
counterparts.
23. Bank as Party. The Bank joins this Agreement for the purpose of
agreeing to pay or perform those obligations to Executive under this Agreement
where performance by the Bank is contemplated or required, including, without
limitation, the obligations to Executive set forth in Sections 2, 3, 4, 5, 6, 7,
9, and 11. The Company, as the sole shareholder of the Bank, shall take all
action that may be necessary or appropriate to cause the Bank (including the
Bank Board) to pay or perform all such obligations to Executive under this
Agreement. Should the Bank, for whatever reason, fail or be unable to pay or
perform any obligation to Executive under this Agreement (including, without
limitation, any failure or inability to pay or perform arising from any law,
regulation, judicial decision or any order, letter or directive from any bank
regulatory agency), the Company shall pay or perform all such obligations to
Executive under this Agreement as direct obligations of the Company.
24. Definitions.
(a) "Bank Board" shall mean the Board of Directors of the
Bank.
(b) "Base Salary" shall mean the salary provided for in
Section 3 or any increased salary granted to Executive pursuant to
Section 3.
(c) "Cause" shall mean:
(i) Executive is convicted, pleads guilty, or enters a plea of
nolo contendere to any felony, or any non-felony crime involving theft,
embezzlement, conversion or similar type crime involving dishonesty; or
(ii) Executive is guilty of gross neglect or gross
misconduct in carrying out his duties under this Agreement, resulting,
in either case, in material economic harm to the Bank;
(d) "Company Board" shall mean the Board of Directors of the
Company.
(e) "Constructive Termination Without Cause" shall mean a
termination of Executive's employment at his initiative as provided in
Section 7(d) following the occurrence, without Executive's prior
written consent, of one or more of the following events (except in
consequence of a prior termination):
(i) a reduction in Executive's then-current Base Salary
or the termination or material reduction of any employee benefit or
perquisite enjoyed by him (other than as part of an across-the-board
reduction applicable and comparable to all presidents of MSFG's banking
subsidiaries);
(ii) the failure to elect or re-elect Executive to any of
the positions described in Section 2 above or removal of him from any
such position, or a substantial decrease in Executive's
responsibilities in such positions except where such decrease is
consistent with a comparable decrease in the responsibilities granted
by MSFG to its bank subsidiary presidents from time to time; and
(iii) the failure of the Company and the Bank or any
subsequent obligated assignee to obtain the assumption in writing of
their obligations to perform this Agreement by any successor to all or
substantially all of the assets of the Company or the Bank within 30
days after a merger, consolidation, sale or similar transaction.
(f) "Disability" shall mean Executive's inability to
substantially perform his duties and responsibilities under this Agreement for a
period of 90 consecutive days as a result of physical or mental impairment.
(g) "Subsidiary" of the Company or the Bank shall mean any
corporation of which the Company or the Bank owns, directly or indirectly, more
than 50% of the Voting Stock.
(h) "Term of Employment" shall mean the period specified in
Section 1 above.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
FIRST COMMUNITY BANCSHARES, INC.
(the "Company")
By: /s/ Merrill M. Wesemann, MD.
Merrill M. Wesemann, MD., Chairman of the Board
/s/ Albert R. Jackson, III
Albert R. Jackson, III
("Executive")
FIRST COMMUNITY BANK & TRUST
{the "Bank")
By: /s/ Merrill M. Wesemann, MD.
Merrill M. Wesemann, MD., Chairman of the Board
ANNEX 5.11.2.
-------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), effective as of the date on
which the Effective Time of the Merger (as defined in the Merger Agreement
referenced in Recital B below) occurs (the "Effective Date"), and executed on
the 31st day of March, 2003, by and between FIRST COMMUNITY BANCSHARES, INC, an
Indiana corporation (together with its successors and assigns permitted under
this Agreement, the "Company"), and KEITH LINDAUER (the "Executive"). FIRST
COMMUNITY BANK & TRUST (the "Bank"), a direct subsidiary of the Company, joins
in this Agreement for the purposes expressed herein.
R E C I T A L S:
- - - - - - - -
A. Executive is currently serving as an Executive Vice President of the
Bank without any employment agreement and as an "at will" employee.
B. The Company has agreed to be acquired by MainSource Financial Group,
Inc. ("MSFG") on the terms and conditions of that certain Agreement and Plan of
Merger dated as of March 27, 2003 (the "Merger Agreement") among MSFG, FCBY
Merger Corporation ("Merger Sub") , the Company and the directors of the
Company. Pursuant to the Merger Agreement, the Company will merge with and into
Merger Sub (the "Merger"), the Company will become a direct subsidiary of MSFG
and the Bank will become an indirect wholly owned subsidiary of MSFG.
C. Section 5.11 of the Merger Agreement provides for the execution of
this Agreement in connection with the closing of the Merger because MSFG, in
connection with the negotiation of the Merger Agreement, has insisted that
following the Merger it be assured of Executive's continued employment and
services on the terms of this Agreement.
D. The Bank wishes to join this Agreement to evidence its consent to
this Agreement and its agreement to perform those provisions of this Agreement
where performance by the Bank is contemplated or required.
E. Executive desires to enter into this Agreement and to continue as an
Executive Vice President of the Bank after the Merger, subject to the terms and
provisions of this Agreement.
F. The parties intend certain capitalized terms not otherwise defined
to have the meanings given them in Section 24 of this Agreement.
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company, the Bank and the Executive
(individually a "Party" and collectively the "Parties") agree as follows:
1. Term of Employment. The Company hereby agrees to cause the Bank to
employ Executive, and Executive hereby accepts and agrees to such employment
with the Bank, for the period commencing on the Effective Date of this Agreement
and continuing until the earlier of (i) December 31, 2004 or (ii) the
termination of his employment in accordance with the terms of this Agreement. If
the Merger is not consummated for any reason whatsoever and the Merger Agreement
is terminated as provided therein, this Agreement shall be deemed cancelled and
of no force and effect.
2. Position, Duties and Responsibilities.
(a) During the Term of Employment, Executive shall be employed
by the Bank as an Executive Vice President and Executive shall faithfully,
industriously perform all duties from time to time assigned him by the Bank's
chief executive officer or the Bank Board to the best of his abilities.
(b) Anything herein to the contrary notwithstanding, nothing
shall preclude Executive from (i) serving on the boards of directors of a
reasonable number of other trade associations and/or civic or charitable
organizations, (ii) engaging in charitable activities and community affairs and
(iii) managing his personal investments and affairs, provided that such
activities do not materially interfere with the proper performance of his duties
and responsibilities as an Executive Vice President of the Bank.
3. Base Salary. During the Term of Employment, Executive shall be paid
an annualized Base Salary, payable in accordance with the regular payroll
practices of the Bank, of $87,620. The Base Salary shall be reviewed no less
frequently than annually for increase in the discretion of the Bank Board.
4. Signing Bonus; Bonus Award. On the Effective Date, Executive shall
be paid a signing bonus of $25,000. During the Term of Employment occurring in
2004, Executive shall be entitled to participate in MSFG's Executive
Compensation Bonus Plan and any other bonus, incentive and similar type plans
and programs, if any, made available by the Company to officers of its banking
subsidiaries. Prior to January 1, 2004, Executive shall have no right to
participate in any such plans and programs.
5. Employee Benefit Programs. During the Term of Employment, Executive
shall be entitled to participate in all employee pension and welfare benefit
plans and programs made available by the Company to officers of its banking
subsidiaries or to employees generally, as such plans or programs may be in
effect from time to time, including without limitation, pension, profit-sharing,
savings and other retirement plans or programs, medical, dental,
hospitalization, short-term and long-term disability and life insurance plans,
accidental death and dismemberment protection, travel accident insurance, and
any other pension or retirement plans or programs and any other employee welfare
benefit plans or programs that may be sponsored by MSFG for such officers of
banking subsidiaries or employees generally from time to time, including any
plans that supplement the above-listed types of plans or programs, whether
funded or unfunded. Notwithstanding the foregoing, nothing in this Section 5
shall be interpreted to grant Executive any right to receive an executive
severance agreement providing for certain payments or benefits upon a change in
control of MSFG.
6. Reimbursement of Business and Other Expenses. Executive is
authorized to incur reasonable expenses in carrying out his duties and
responsibilities under this Agreement and the Bank shall promptly reimburse him
for all business expenses incurred in connection with carrying out the business
of the Bank, subject to documentation in accordance with the Bank's policy.
7. Termination of Employment.
(a) Termination Due to Death. In the event Executive's employment is
terminated due to his death, his estate or his beneficiaries, as the case may
be, shall be entitled to:
(i) Base Salary through the date of death;
(ii) any bonus or payment awarded or earned under Section 4
that has not yet been paid and is payable under the terms of the plan;
(iii) any amounts earned, accrued or owing but not yet paid
under Sections 5 or 6; and
(iv) other or additional benefits in accordance with
applicable plans and programs of MSFG, the Company and/or the Bank.
(b) Termination Due to Disability. In the event Executive's employment
is terminated due to his Disability, he shall be entitled to:
(i) Base Salary through the date of Disability;
(ii) any bonus or payment awarded or earned under Section 4
that has not yet been paid and is payable under the terms of the plan;
(iii) any amounts earned, accrued or owing but not yet paid
under Sections 5 or 6 above; and
(iv) other or additional benefits in accordance with
applicable plans and programs of MSFG, the Company and/or the Bank.
In no event shall a termination of Executive's employment for
Disability occur unless the Company or the Bank gives written notice to
Executive in accordance with Section 20 below.
(c) Termination for Cause.
(i) A termination for Cause shall not take effect
unless the provisions of this paragraph (i) are complied with.
Executive shall be given written notice by the Company Board of the
intention to terminate him for Cause, such notice (A) to state in
detail the particular act or acts or failure or failures to act that
constitute the grounds on which the proposed termination for Cause is
based and (B) to be given within two
months of the Company Board's learning of such act or acts or failure
or failures to act. Executive shall have 30 days after the date that
such written notice has been given to Executive in which to cure such
conduct, to the extent such cure is possible. If he fails to cure such
conduct, Executive shall then be entitled to a hearing before the
Company Board. Such hearing shall be held within 15 days of such notice
to Executive, provided he requests such hearing within 10 days of the
written notice from the Bank Board of the intention to terminate him
for Cause. If, within five days following such hearing, Executive is
furnished written notice by the Company Board confirming that, in its
judgment, grounds for Cause on the basis of the original notice exist,
he shall thereupon be terminated for Cause.
(ii) In the event Executive's employment is terminated for
Cause, he shall be entitled, subject to the right of the Company or the
Bank to exercise a right of offset, to:
(A) the Base Salary through the date of the
termination of his employment for Cause;
(B) any bonus or payment awarded or earned
under Section 4 that has not yet been paid and is
payable under the terms of the plan;
(C) any amounts earned, accrued or owing but
not yet paid under Sections 5 or 6 above; and
(D) other or additional benefits in
accordance with applicable plans or programs of MSFG,
the Company and/or the Bank.
(d) Termination Without Cause or Constructive Termination
Without Cause. Executive may be terminated without Cause. In the event
Executive's employment is terminated without Cause, other than due to Disability
or death, or in the event there is a Constructive Termination Without Cause,
Executive shall be entitled to:
(i) the Base Salary to the date of termination of
Executive's employment;
(ii) the Base Salary, at the annualized rate in effect on
the date of termination of Executive's employment (or in the
event a reduction in Base Salary is the basis for a
Constructive Termination Without Cause, then the Base Salary
in effect immediately prior to such reduction), for the period
commencing the date of termination of Executive's employment
and ending December 31, 2004, payable in accordance with the
payroll practices of the Bank;
(iii) any bonus or payment awarded or earned under Section
4 that has not yet been paid and is payable under the terms of
the plan;
(iv) any amounts earned, accrued or owing but not yet paid
under Sections 5 or 6 above; and
(v) other or additional benefits in accordance with
applicable plans and programs of MSFG, the Company and/or the
Bank.
(e) Nature of Payments. Any amounts due under this Section 7
are in the nature of severance payments considered to be reasonable by the
Company and the Bank and are not in the nature of a penalty.
8. Confidential Information and Removal of Documents
(a) Confidential Information. Executive shall hold in a
fiduciary capacity for the benefit of the Company and the Bank all trade
secrets, confidential information, and knowledge or data relating to the Company
and the Bank and their respective businesses or business prospects or relating
to any customer or client of the Bank, which shall have been obtained by
Executive during Executive's employment by the Company or the Bank, including
such information with respect to any software, products, systems, programs,
improvements, formulas, designs, manuals, styles, processes, procedures,
services, customers, suppliers, marketing techniques, methods, future plans or
operating practices ("Confidential Information"); provided, however, that
Confidential Information shall not include any information known generally to
the public (other than as a result of unauthorized disclosure by Executive) or
any specific information or type of information generally not considered
confidential by persons engaged in financial services business, or information
disclosed by the Company or any officer thereof to a third party without
restrictions on the disclosure of such information. Except as may be required or
appropriate in connection with his carrying out his duties under this Agreement,
Executive shall not, without the prior written consent of the Company or as may
otherwise be required by law or legal process, communicate or divulge any such
Confidential Information to anyone other than the Company, the Bank and those
designated by the Company or the Bank.
(b) Removal of Documents. All records, files, drawings,
documents, models and the like relating to the business of the Company or the
Bank that Executive prepares, uses or comes into contact with and which contain
Confidential Information shall not be removed by Executive from the premises of
the Bank (without the prior written consent of the Company) during or after the
Term of Employment unless such removal shall be required or appropriate in
connection with his carrying out his duties under this Agreement, and, if so
removed by Executive, shall be returned to the Company immediately upon
termination of Executive's employment hereunder.
(c) Remedies. In the event of a breach or threatened breach of
this Section 8, Executive agrees that the Company shall be entitled to apply for
injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Executive acknowledging that damages would be
inadequate and insufficient.
(d) Continuing Operation. Any termination of Executive's
employment or of this Agreement shall have no effect on the continuing operation
of this Section 8.
9. Effect of Agreement on Other Benefits. Except as specifically
provided in this Agreement, the existence of this Agreement shall not prohibit
or restrict Executive's entitlement to full participation in the
employee benefit and other plans or programs in which officers of the Bank are
eligible to participate.
10. Non-Competition; Non-Solicitation.
(a) Restrictions. In the event Executive's employment is
terminated hereunder, then (subject to the following proviso if the termination
is without Cause or a Constructive Termination Without Cause) until the later of
(i) January 1, 2005 or (ii) one year following the date of termination of
Executive's employment (the "Restricted Period"), Executive shall not directly
or indirectly be employed by, serve as a director of, act as an agent, advisor
or consultant to, or hold any ownership interest in (excluding a less than 1%
ownership interest in any publicly held company whose securities are registered
under Section 12 of the Securities Exchange Act of 1934, as amended) any person
or legal entity that is engaged in a commercial banking or financial services
business through, among other locations, if any, any office(s) located in the
Indiana counties of Bartholomew, Jennings or Johnson.; provided, however, that
notwithstanding anything above to the contrary, in no event shall the Restricted
Period extend beyond December 31, 2004 if Executive's employment is terminated
without Cause or as a result of a Constructive Termination Without Cause .
During the Restricted Period, Executive also shall not directly or indirectly
solicit, for himself or on behalf of another, any of the Bank's employees for
the purpose of hiring them or inducing or encouraging them in any way to leave
their employment with the Bank. During the Restricted Period, Executive also
shall not directly or indirectly solicit, for himself or on behalf of another,
any of the Bank's customers, or any potential customers with whom Executive or
the Bank's employees have had contact either directly or indirectly of which
Executive has knowledge.
(b) Tolling of Limited Period. The running of the one year
Restricted Period prescribed in subparagraph (a) above shall be tolled and
suspended by the length of time Executive is directly or indirectly involved in
circumstances that a court of competent jurisdiction subsequently finds to
violate the terms of Section 10(a).
(c) Injunctive Relief. Executive acknowledges that it would be
difficult to compensate the Company or the Bank fully for damages for any
violation of the provisions of Section 10(a) of this Agreement, and that in any
such violation the Company and the Bank will not have an adequate remedy at law.
Accordingly, the Company and the Bank shall be entitled to injunctive relief,
both pendente lite and permanently, against Executive, and Executive hereby
consents to any initiation by the Company and/or the Bank in a court of
appropriate jurisdiction of any action to enjoin immediately any anticipatory,
continuing or future breach of Section 10(a). Executive hereby releases the
Company and the Bank from the requirement of posting any bond in connection with
temporary or interlocutory injunctive relief, to the extent permitted by law.
This Section 10(c) with respect to injunctive relief shall not, however,
diminish the right of the Company and/or the Bank to claim and recover damages
in addition to injunctive relief.
(d) Judicial Modification. If any of the provisions of this
Section 10 is held to be unenforceable because of the scope, duration or area of
its applicability, or otherwise, the court or other body having jurisdiction
over the matter making such determination shall have the power to modify such
scope, duration or area or other matter, or all of them, and such provisions
shall then be applicable in such modified form; and Executive agrees that this
Section 10, as so amended, shall be valid and binding as though any invalid or
unenforceable provision had not been included herein.
(e) Continuing Operation. Any termination of Executive's
employment or of this Agreement shall have no effect on the continuing operation
of this Section 10.
11. Assignability; Binding Nature. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors, heirs
(in the case of Executive) and assigns. No rights or obligations of the Company
or the Bank under this Agreement shall be assigned or transferred by the Company
or the Bank except that (i) such rights or obligations shall be assigned or
transferred to Merger Sub in the Merger pursuant to the Merger Agreement and
(ii) such rights or obligations may be assigned or transferred pursuant to a
merger or consolidation in which the Company, Merger Sub, or the Bank is not the
continuing entity, or the sale or liquidation of all or substantially all of the
assets of the Company, Merger Sub or the Bank, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company, Merger Sub or the Bank, and such assignee or transferee assumes the
liabilities, obligations and duties of the Company, Merger Sub and the Bank or
any obligated assignee thereof, as contained in this Agreement, either
contractually or as a matter of law. The Company and the Bank further agree
that, in the event of a sale of assets or liquidation as described in the
preceding sentence, each shall take whatever action it legally can cause such
assignee or transferee to expressly assume the liabilities, obligations and
duties of the Company and the Bank hereunder. No rights or obligations of
Executive under this Agreement may be assigned or transferred by Executive other
than his rights to compensation and benefits, which may be transferred only by
will or operation of law, except as provided in Section 17 below.
12. Representation. The Company represents and warrants that the
Company is fully authorized and empowered to enter into this Agreement and that
the performance of obligations under this Agreement will not violate any
agreement between it and any other person, firm or organization.
13. Entire Agreement. This Agreement contains the entire understanding
and agreement between the Parties concerning the subject matter hereof and
supersedes all prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the Parties with respect thereto.
14. Amendment or Waiver. No provision in this Agreement may be amended
unless such amendment is agreed to in writing and signed by Executive and an
authorized officer of the Company and the Bank. No waiver by any Party of any
breach by another Party of any condition or provision contained in this
Agreement to be performed by such other Party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same or any prior or
subsequent time. Any waiver must be in writing and signed by Executive or an
authorized officer of the Company or the Bank, as the case may be.
15. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect to the fullest
extent permitted by law.
16. Survivorship. The respective rights and obligations of the Parties
hereunder shall survive any termination of Executive's employment to the extent
necessary to the intended preservation of such rights and obligations.
17. Beneficiaries/References. Executive shall be entitled to select
(and change, to the extent permitted under any applicable law) a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder following
Executive's death by giving the Company written notice thereof. In the event of
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative.
18. Governing Law/Jurisdiction. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the United States and
the State of Indiana without reference to principles of conflict of laws.
19. Resolution of Disputes. Any disputes arising under or in connection
with this Agreement shall, at the election of Executive, be resolved by binding
arbitration, to be held in Indianapolis, Indiana, in accordance with the rules
and procedures of the American Arbitration Association. Judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof. The Company and the Bank, on the one hand, and Executive, on the other
hand, shall bear their own respective costs and expenses (including attorneys'
fees) with respect to any such arbitration and litigation.
20. Notices. All notices and other communications required to be given
hereunder shall be in writing and shall be deemed given upon (i) transmitter's
confirmation of receipt of a facsimile transmission, (ii) confirmed delivery by
a standard overnight carrier or when delivered by hand or (iii) the expiration
of two business days after the day when mailed by certified or registered mail,
postage prepaid, addressed to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
If to the Company
or the Bank: First Community Bancshares, Inc
[or First Community Bank & Trust, as applicable]
c/o MainSource Financial Group, Inc.
201 N. Broadway
Greensburg, Indiana 47240
Attn: Chief Executive Officer
Telecopy No. (812) 663-4812
(with a copy to:) David W. Harper, Esq.
The Summit Suite 110
4350 Brownsboro Road
Louisville, Kentucky 40207
Telecopy No. (502) 893-4503
If to Executive: Keith Lindauer
3660 Shoreline
Greenwood, Indiana 46143
21. Headings. The headings of the sections contained in this Agreement
are for convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
22. Counterparts. This Agreement may be executed in two or more
counterparts.
23. Bank as Party. The Bank joins this Agreement for the purpose of
agreeing to pay or perform those obligations to Executive under this Agreement
where performance by the Bank is contemplated or required, including, without
limitation, the obligations to Executive set forth in Sections 2, 3, 4, 5, 6, 7,
9, and 11. The Company, as the sole shareholder of the Bank, shall take all
action that may be necessary or appropriate to cause the Bank (including the
Bank Board) to pay or perform all such obligations to Executive under this
Agreement. Should the Bank, for whatever reason, fail or be unable to pay or
perform any obligation to Executive under this Agreement (including, without
limitation, any failure or inability to pay or perform arising from any law,
regulation, judicial decision or any order, letter or directive from any bank
regulatory agency), the Company shall pay or perform all such obligations to
Executive under this Agreement as direct obligations of the Company.
24. Definitions.
(a) "Bank Board" shall mean the Board of Directors of the
Bank.
(b) "Base Salary" shall mean the salary provided for in
Section 3 or any increased salary granted to Executive pursuant to Section 3.
(c) "Cause" shall mean:
(i) Executive is convicted, pleads guilty, or enters a plea of
nolo contendere to any felony, or any non-felony crime involving theft,
embezzlement, conversion or similar type crime involving dishonesty; or
(ii) Executive is guilty of gross neglect or gross
misconduct in carrying out his duties under this Agreement, resulting,
in either case, in material economic harm to the Bank;
(d) "Company Board" shall mean the Board of Directors of the
Company.
(e) "Constructive Termination Without Cause" shall mean a
termination of Executive's employment at his initiative as provided in
Section 7(d) following the occurrence, without Executive's prior
written consent, of one or more of the following events (except in
consequence of a prior termination):
(i) a reduction in Executive's then-current Base Salary
or the termination or material reduction of any employee
benefit or perquisite enjoyed by him, other than as part of an
across-the-board reduction applicable and comparable to all executive
vice presidents (or senior vice presidents of comparable
responsibilities if a bank does not have an executive vice president)
of MSFG's banking subsidiaries;
(ii) the failure to elect or re-elect Executive to the
position described in Section 2 above or removal of him from any such
position, or a substantial decrease in Executive's responsibilities in
such positions except where such decrease is consistent with a
comparable decrease in the responsibilities granted by MSFG to all
executive vice presidents (or senior vice presidents of comparable
responsibilities if a bank does not have an executive vice president)
of its banking subsidiaries from time to time; and
(iii) the failure of the Company and the Bank or any
subsequent obligated assignee to obtain the assumption in writing of
their obligations to perform this Agreement by any successor to all or
substantially all of the assets of the Company or the Bank within 30
days after a merger, consolidation, sale or similar transaction.
(f) "Disability" shall mean Executive's inability to
substantially perform his duties and responsibilities under this Agreement for a
period of 90 consecutive days as a result of a physical or mental impairment.
(g) "Subsidiary" of the Company or the Bank shall mean any
corporation of which the Company or the Bank owns, directly or indirectly, more
than 50% of the Voting Stock.
(h) "Term of Employment" shall mean the period specified in
Section 1 above.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
FIRST COMMUNITY BANCSHARES, INC.
(the "Company")
By:_/s/ Merrill M. Wesemann, MD
Merrill M. Wesemann, MD , Chairman of the Board
/s/ Keith Lindauer
Keith Lindauer
("Executive")
FIRST COMMUNITY BANK & TRUST
(the "Bank")
By:/s/ Merrill M. Wesemann, MD.
Merrill M. Wesemann, MD., Chairman of the Board
ANNEX 5.11.3.
-------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), effective as of the date on
which the Effective Time of the Merger (as defined in the Merger Agreement
referenced in Recital B below) occurs (the "Effective Date"), and executed on
the 31st day of March, 2003, by and between FIRST COMMUNITY BANCSHARES, INC, an
Indiana corporation (together with its successors and assigns permitted under
this Agreement, the "Company"), and WILLIAM DEAN JACKSON (the "Executive").
FIRST COMMUNITY BANK & TRUST (the "Bank"), a direct subsidiary of the Company,
joins in this Agreement for the purposes expressed herein.
R E C I T A L S:
- - - - - - - -
A. Executive is currently serving as an Executive Vice President of the
Bank without any employment agreement and as an "at will" employee.
B. The Company has agreed to be acquired by MainSource Financial Group,
Inc. ("MSFG") on the terms and conditions of that certain Agreement and Plan of
Merger dated as of March 27, 2003 (the "Merger Agreement") among MSFG, FCBY
Merger Corporation ("Merger Sub") , the Company and the directors of the
Company. Pursuant to the Merger Agreement, the Company will merge with and into
Merger Sub (the "Merger"), the Company will become a direct subsidiary of MSFG
and the Bank will become an indirect wholly owned subsidiary of MSFG.
C. Section 5.11 of the Merger Agreement provides for the execution of
this Agreement in connection with the closing of the Merger because MSFG, in
connection with the negotiation of the Merger Agreement, has insisted that
following the Merger it be assured of Executive's continued employment and
services on the terms of this Agreement.
D. The Bank wishes to join this Agreement to evidence its consent to
this Agreement and its agreement to perform those provisions of this Agreement
where performance by the Bank is contemplated or required.
E. Executive desires to enter into this Agreement and to continue as an
Executive Vice President of the Bank after the Merger, subject to the terms and
provisions of this Agreement.
F. The parties intend certain capitalized terms not otherwise defined
to have the meanings given them in Section 24 of this Agreement.
A G R E E M E N T:
- - - - - - - - -
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is
mutually acknowledged, the Company, the Bank and the Executive (individually a
"Party" and collectively the "Parties") agree as follows:
1. Term of Employment. The Company hereby agrees to cause the Bank to
employ Executive, and Executive hereby accepts and agrees to such employment
with the Bank, for the period commencing on the Effective Date of this Agreement
and continuing until the earlier of (i) December 31, 2004 or (ii) the
termination of his employment in accordance with the terms of this Agreement. If
the Merger is not consummated for any reason whatsoever and the Merger Agreement
is terminated as provided therein, this Agreement shall be deemed cancelled and
of no force and effect.
2. Position, Duties and Responsibilities.
(a) During the Term of Employment, Executive shall be employed
by the Bank as an Executive Vice President and Executive shall faithfully,
industriously perform all duties from time to time assigned him by the Bank's
chief executive officer or the Bank Board to the best of his abilities.
(b) Anything herein to the contrary notwithstanding, nothing
shall preclude Executive from (i) serving on the boards of directors of a
reasonable number of other trade associations and/or civic or charitable
organizations, (ii) engaging in charitable activities and community affairs and
(iii) managing his personal investments and affairs, provided that such
activities do not materially interfere with the proper performance of his duties
and responsibilities as an Executive Vice President of the Bank.
3. Base Salary. During the Term of Employment, Executive shall be paid
an annualized Base Salary, payable in accordance with the regular payroll
practices of the Bank, of $66,820. The Base Salary shall be reviewed no less
frequently than annually for increase in the discretion of the Bank Board.
4. Signing Bonus; Bonus Award. On the Effective Date, Executive shall
be paid a signing bonus of $25,000. During the Term of Employment occurring in
2004, Executive shall be entitled to participate in MSFG's Executive
Compensation Bonus Plan and any other bonus, incentive and similar type plans
and programs, if any, made available by the Company to officers of its banking
subsidiaries. Prior to January 1, 2004, Executive shall have no right to
participate in any such plans and programs.
5. Employee Benefit Programs. During the Term of Employment, Executive
shall be entitled to participate in all employee pension and welfare benefit
plans and programs made available by the Company to officers of its banking
subsidiaries or to employees generally, as such plans or programs may be in
effect from time to time, including without limitation, pension, profit-sharing,
savings and other retirement plans or programs, medical, dental,
hospitalization, short-term and long-term disability and life insurance plans,
accidental death and dismemberment protection, travel accident insurance, and
any other pension or retirement plans or programs and any other employee welfare
benefit plans or programs that may be sponsored by MSFG for such officers of
banking subsidiaries or employees generally from time to time, including any
plans that supplement the above-listed types of plans or programs, whether
funded or unfunded. Notwithstanding the foregoing, nothing in this Section 5
shall be interpreted to grant Executive any right to receive an executive
severance agreement providing for certain payments or benefits upon a change in
control of MSFG.
6. Reimbursement of Business Expenses. Executive is authorized to incur
reasonable expenses in carrying out his duties and responsibilities under this
Agreement and the Bank shall promptly reimburse him for all business expenses
incurred in connection with carrying out the business of the Bank, subject to
documentation in accordance with the Bank's policy.
7. Termination of Employment.
(a) Termination Due to Death. In the event Executive's
employment is terminated due to his death, his estate or his
beneficiaries, as the case may be, shall be entitled to:
(i) Base Salary through the date of death;
(ii) any bonus or payment awarded or earned under
Section 4 that has not yet been paid and is payable under the
terms of the plan;
(iii) any amounts earned, accrued or owing but not
yet paid under Sections 5 or 6; and
(iv) other or additional benefits in accordance with
applicable plans and programs of MSFG, the Company and/or the
Bank.
(b) Termination Due to Disability. In the event Executive's
employment is terminated due to his Disability, he shall be entitled
to:
(i) Base Salary through the date of Disability;
(ii) any bonus or payment awarded or earned under
Section 4 that has not yet been paid and is payable under the
terms of the plan;
(iii) any amounts earned, accrued or owing but not
yet paid under Sections 5 or 6 above; and
(iv) other or additional benefits in accordance with
applicable plans and programs of MSFG, the Company and/or the
Bank.
In no event shall a termination of Executive's employment for
Disability occur unless the Company or the Bank gives written notice to
Executive in accordance with Section 20 below.
(c) Termination for Cause.
(i) A termination for Cause shall not take effect
unless the provisions of this paragraph (i) are complied with.
Executive shall be given written notice by the Company Board of the
intention to terminate him for Cause, such notice (A) to state in
detail the particular act or acts or failure or failures to act that
constitute the grounds on which the proposed termination for Cause is
based and (B) to be given within two months of the Company Board's
learning of such act or acts or failure or failures to act. Executive
shall have 30 days after the date that such written notice has been
given to Executive in which to cure such conduct,
to the extent such cure is possible. If he fails to cure such conduct,
Executive shall then be entitled to a hearing before the Company Board.
Such hearing shall be held within 15 days of such notice to Executive,
provided he requests such hearing within 10 days of the written notice
from the Bank Board of the intention to terminate him for Cause. If,
within five days following such hearing, Executive is furnished written
notice by the Company Board confirming that, in its judgment, grounds
for Cause on the basis of the original notice exist, he shall thereupon
be terminated for Cause.
(ii) In the event Executive's employment is terminated for
Cause, he shall be entitled, subject to the right of the Company or the
Bank to exercise a right of offset, to:
(A) the Base Salary through the date of the
termination of his employment for Cause;
(B) any bonus or payment awarded or earned under
Section 4 that has not yet been paid and is payable under the
terms of the plan;
(C) any amounts earned, accrued or owing but not yet
paid under Sections 5 or 6 above; and
(D) other or additional benefits in accordance with
applicable plans or programs of MSFG, the Company and/or the
Bank.
(d) Termination Without Cause or Constructive Termination
Without Cause. Executive may be terminated without Cause. In the event
Executive's employment is terminated without Cause, other than due to Disability
or death, or in the event there is a Constructive Termination Without Cause,
Executive shall be entitled to:
(i) the Base Salary to the date of termination of
Executive's employment;
(ii) the Base Salary, at the annualized rate in effect on
the date of termination of Executive's employment (or in the
event a reduction in Base Salary is the basis for a
Constructive Termination Without Cause, then the Base Salary
in effect immediately prior to such reduction), for the period
commencing the date of termination of Executive's employment
and ending December 31, 2004, payable in accordance with the
payroll practices of the Bank;
(iii) any bonus or payment awarded or earned under Section
4 that has not yet been paid and is payable under the terms of
the plan;
(iv) any amounts earned, accrued or owing but not yet paid
under Sections 5 or 6 above; and
(v) other or additional benefits in accordance with
applicable plans and programs of MSFG, the Company and/or the
Bank.
(e) Nature of Payments. Any amounts due under this Section 7
are in the nature of severance payments considered to be reasonable by the
Company and the Bank and are not in the nature of a penalty.
8. Confidential Information and Removal of Documents
(a) Confidential Information. Executive shall hold in a
fiduciary capacity for the benefit of the Company and the Bank all trade
secrets, confidential information, and knowledge or data relating to the Company
and the Bank and their respective businesses or business prospects or relating
to any customer or client of the Bank, which shall have been obtained by
Executive during Executive's employment by the Company or the Bank, including
such information with respect to any software, products, systems, programs,
improvements, formulas, designs, manuals, styles, processes, procedures,
services, customers, suppliers, marketing techniques, methods, future plans or
operating practices ("Confidential Information"); provided, however, that
Confidential Information shall not include any information known generally to
the public (other than as a result of unauthorized disclosure by Executive) or
any specific information or type of information generally not considered
confidential by persons engaged in financial services business, or information
disclosed by the Company or any officer thereof to a third party without
restrictions on the disclosure of such information. Except as may be required or
appropriate in connection with his carrying out his duties under this Agreement,
Executive shall not, without the prior written consent of the Company or as may
otherwise be required by law or legal process, communicate or divulge any such
Confidential Information to anyone other than the Company, the Bank and those
designated by the Company or the Bank.
(b) Removal of Documents. All records, files, drawings,
documents, models and the like relating to the business of the Company or the
Bank that Executive prepares, uses or comes into contact with and which contain
Confidential Information shall not be removed by Executive from the premises of
the Bank (without the prior written consent of the Company) during or after the
Term of Employment unless such removal shall be required or appropriate in
connection with his carrying out his duties under this Agreement, and, if so
removed by Executive, shall be returned to the Company immediately upon
termination of Executive's employment hereunder.
(c) Remedies. In the event of a breach or threatened breach of
this Section 8, Executive agrees that the Company shall be entitled to apply for
injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Executive acknowledging that damages would be
inadequate and insufficient.
(d) Continuing Operation. Any termination of Executive's
employment or of this Agreement shall have no effect on the continuing operation
of this Section 8.
9. Effect of Agreement on Other Benefits. Except as specifically
provided in this Agreement, the existence of this Agreement shall not prohibit
or restrict Executive's entitlement to full participation in the employee
benefit and other plans or programs in which officers of the Bank are eligible
to participate.
10. Non-Competition; Non-Solicitation.
(a) Restrictions. In the event Executive's employment is
terminated hereunder, then (subject to the following proviso if the termination
is without Cause or a Constructive Termination Without Cause) until the later of
(i) January 1, 2005 or (ii) one year following the date of termination of
Executive's employment (the "Restricted Period"), Executive shall not directly
or indirectly be employed by, serve as a director of, act as an agent, advisor
or consultant to, or hold any ownership interest in (excluding a less than 1%
ownership interest in any publicly held company whose securities are registered
under Section 12 of the Securities Exchange Act of 1934, as amended) any person
or legal entity that is engaged in a commercial banking or financial services
business through, among other locations, if any, any office(s) located in the
Indiana counties of Bartholomew, Jennings or Johnson.; provided, however, that
notwithstanding anything above to the contrary, in no event shall the Restricted
Period extend beyond December 31, 2004 if Executive's employment is terminated
without Cause or as a result of a Constructive Termination Without Cause .
During the Restricted Period, Executive also shall not directly or indirectly
solicit, for himself or on behalf of another, any of the Bank's employees for
the purpose of hiring them or inducing or encouraging them in any way to leave
their employment with the Bank. During the Restricted Period, Executive also
shall not directly or indirectly solicit, for himself or on behalf of another,
any of the Bank's customers, or any potential customers with whom Executive or
the Bank's employees have had contact either directly or indirectly of which
Executive has knowledge.
(b) Tolling of Limited Period. The running of the one year
Restricted Period prescribed in subparagraph (a) above shall be tolled and
suspended by the length of time Executive is directly or indirectly involved in
circumstances that a court of competent jurisdiction subsequently finds to
violate the terms of Section 10(a).
(c) Injunctive Relief. Executive acknowledges that it would be
difficult to compensate the Company or the Bank fully for damages for any
violation of the provisions of Section 10(a) of this Agreement, and that in any
such violation the Company and the Bank will not have an adequate remedy at law.
Accordingly, the Company and the Bank shall be entitled to injunctive relief,
both pendente lite and permanently, against Executive, and Executive hereby
consents to any initiation by the Company and/or the Bank in a court of
appropriate jurisdiction of any action to enjoin immediately any anticipatory,
continuing or future breach of Section 10(a). Executive hereby releases the
Company and the Bank from the requirement of posting any bond in connection with
temporary or interlocutory injunctive relief, to the extent permitted by law.
This Section 10(c) with respect to injunctive relief shall not, however,
diminish the right of the Company and/or the Bank to claim and recover damages
in addition to injunctive relief.
(d) Judicial Modification. If any of the provisions of this
Section 10 is held to be unenforceable because of the scope, duration or area of
its applicability, or otherwise, the court or other body having jurisdiction
over the matter making such determination shall have the power to modify such
scope, duration or area or other matter, or all of them, and such provisions
shall then be applicable in such modified form; and Executive agrees that this
Section 10, as so amended, shall be valid and binding as though any invalid or
unenforceable provision had not been included herein.
(e) Continuing Operation. Any termination of Executive's
employment or of this Agreement shall have no effect on the continuing operation
of this Section 10.
11. Assignability; Binding Nature. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors, heirs
(in the case of Executive) and assigns. No rights or obligations of the Company
or the Bank under this Agreement shall be assigned or transferred by the Company
or the Bank except that (i) such rights or obligations shall be assigned or
transferred to Merger Sub in the Merger pursuant to the Merger Agreement and
(ii) such rights or obligations may be assigned or transferred pursuant to a
merger or consolidation in which the Company, Merger Sub, or the Bank is not the
continuing entity, or the sale or liquidation of all or substantially all of the
assets of the Company, Merger Sub or the Bank, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company, Merger Sub or the Bank, and such assignee or transferee assumes the
liabilities, obligations and duties of the Company, Merger Sub and the Bank or
any obligated assignee thereof, as contained in this Agreement, either
contractually or as a matter of law. The Company and the Bank further agree
that, in the event of a sale of assets or liquidation as described in the
preceding sentence, each shall take whatever action it legally can cause such
assignee or transferee to expressly assume the liabilities, obligations and
duties of the Company and the Bank hereunder. No rights or obligations of
Executive under this Agreement may be assigned or transferred by Executive other
than his rights to compensation and benefits, which may be transferred only by
will or operation of law, except as provided in Section 17 below.
12. Representation. The Company represents and warrants that the
Company is fully authorized and empowered to enter into this Agreement and that
the performance of obligations under this Agreement will not violate any
agreement between it and any other person, firm or organization.
13. Entire Agreement. This Agreement contains the entire understanding
and agreement between the Parties concerning the subject matter hereof and
supersedes all prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the Parties with respect thereto.
14. Amendment or Waiver. No provision in this Agreement may be amended
unless such amendment is agreed to in writing and signed by Executive and an
authorized officer of the Company and the Bank. No waiver by any Party of any
breach by another Party of any condition or provision contained in this
Agreement to be performed by such other Party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same or any prior or
subsequent time. Any waiver must be in writing and signed by Executive or an
authorized officer of the Company or the Bank, as the case may be.
15. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law.
16. Survivorship. The respective rights and obligations of the Parties
hereunder shall survive any termination of Executive's employment to the extent
necessary to the intended preservation of such rights and obligations.
17. Beneficiaries/References. Executive shall be entitled to select
(and change, to the extent permitted under any applicable law) a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder following
Executive's death by giving the Company written notice thereof. In the event of
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative.
18. Governing Law/Jurisdiction. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the United States and
the State of Indiana without reference to principles of conflict of laws.
19. Resolution of Disputes. Any disputes arising under or in connection
with this Agreement shall, at the election of Executive, be resolved by binding
arbitration, to be held in Indianapolis, Indiana, in accordance with the rules
and procedures of the American Arbitration Association. Judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof. The Company and the Bank, on the one hand, and Executive, on the other
hand, shall bear their own respective costs and expenses (including attorneys'
fees) with respect to any such arbitration and litigation.
20. Notices. All notices and other communications required to be given
hereunder shall be in writing and shall be deemed given upon (i) transmitter's
confirmation of receipt of a facsimile transmission, (ii) confirmed delivery by
a standard overnight carrier or when delivered by hand or (iii) the expiration
of two business days after the day when mailed by certified or registered mail,
postage prepaid, addressed to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
If to the Company
or the Bank: First Community Bancshares, Inc
[or First Community Bank & Trust, as applicable]
c/o MainSource Financial Group, Inc.
201 N. Broadway
Greensburg, Indiana 47240
Attn: Chief Executive Officer
Telecopy No. (812) 663-4812
(with a copy to:) David W. Harper, Esq.
The Summit Suite 110
4350 Brownsboro Road
Louisville, Kentucky 40207
Telecopy No. (502) 893-4503
If to Executive: William Dean Jackson
3740 N. CTY 295 W.
North Vernon, Indiana 47265
21. Headings. The headings of the sections contained in this Agreement
are for convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
22. Counterparts. This Agreement may be executed in two or more
counterparts.
23. Bank as Party. The Bank joins this Agreement for the purpose of
agreeing to pay or perform those obligations to Executive under this Agreement
where performance by the Bank is contemplated or required, including, without
limitation, the obligations to Executive set forth in Sections 2, 3, 4, 5, 6, 7,
9, and 11. The Company, as the sole shareholder of the Bank, shall take all
action that may be necessary or appropriate to cause the Bank (including the
Bank Board) to pay or perform all such obligations to Executive under this
Agreement. Should the Bank, for whatever reason, fail or be unable to pay or
perform any obligation to Executive under this Agreement (including, without
limitation, any failure or inability to pay or perform arising from any law,
regulation, judicial decision or any order, letter or directive from any bank
regulatory agency), the Company shall pay or perform all such obligations to
Executive under this Agreement as direct obligations of the Company.
24. Definitions.
(a) "Bank Board" shall mean the Board of Directors of the
Bank.
(b) "Base Salary" shall mean the salary provided for in
Section 3 or any increased salary granted to Executive pursuant to
Section 3.
(c) "Cause" shall mean:
(i) Executive is convicted, pleads guilty, or enters a plea of
nolo contendere to any felony, or any non-felony crime involving theft,
embezzlement, conversion or similar type crime involving dishonesty; or
(ii) Executive is guilty of gross neglect or gross
misconduct in carrying out his duties under this Agreement, resulting,
in either case, in material economic harm to the Bank;
(d) "Company Board" shall mean the Board of Directors of the
Company.
(e) "Constructive Termination Without Cause" shall mean a
termination of Executive's employment at his initiative as provided in
Section 7(d) following the occurrence, without Executive's prior
written consent, of one or more of the following events (except in
consequence of a prior termination):
(i) a reduction in Executive's then-current Base Salary
or the termination or material reduction of any employee benefit or
perquisite enjoyed by him, other than as part of an across-the-board
reduction applicable and comparable to all executive vice presidents
(or senior vice presidents of comparable responsibilities if a bank
does not have an executive vice president) of MSFG's banking
subsidiaries;
(ii) the failure to elect or re-elect Executive to the
position described in Section 2 above or removal of him from any such
position, or a substantial decrease in Executive's responsibilities in
such positions except where such decrease is consistent with a
comparable decrease in the responsibilities granted by MSFG to all
executive vice presidents (or senior vice presidents of comparable
responsibilities if a bank does not have an executive vice president)
of its banking subsidiaries from time to time; and
(iii) the failure of the Company and the Bank or any
subsequent obligated assignee to obtain the assumption in writing of
their obligations to perform this Agreement by any successor to all or
substantially all of the assets of the Company or the Bank within 30
days after a merger, consolidation, sale or similar transaction.
(f) "Disability" shall mean Executive's inability to
substantially perform his duties and responsibilities under this
Agreement for a period of 90 consecutive days as a result of a physical
or mental impairment.
(g) "Subsidiary" of the Company or the Bank shall mean any
corporation of which the Company or the Bank owns, directly or
indirectly, more than 50% of the Voting Stock.
(h) "Term of Employment" shall mean the period specified in
Section 1 above.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
FIRST COMMUNITY BANCSHARES, INC.
(the "Company")
By: /s/ Merrill M. Wesemann, MD
Merrill M. Wesemann, MD., Chairman of the Board
/s/ William Dean Jackson
William Dean Jackson
("Executive")
FIRST COMMUNITY BANK & TRUST
{the "Bank")
By: /s/ Merrill M. Wesemann, MD.
Merrill M. Wesemann, MD, Chairman of the Board
ANNEX B
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March 27, 2003
Personal & Confidential
Board of Directors
First Community Bancshares, Inc.
136 East Harriman
Bargersville, IN 46106
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to First Community Bancshares, Inc. ("First Community") and its
shareholders, of the terms of the Agreement and Plan of Merger dated as of March
27, 2003 (the "Agreement") by and among MainSource Financial Group
("MainSource"), FCBY Merger Corporation and First Community. The terms of the
Agreement provide that MainSource will pay $21.00 per share in cash ("Cash
Amount") in exchange for each outstanding common share of First Community.
Holders of stock options will receive cash for the in-the-money value calculated
by taking the difference between the Cash Amount and the exercise price. Holders
of the convertible debt will convert to common shares prior to closing and will
receive the Cash Amount.
Austin Associates, LLC ("Austin Associates"), as part of its investment banking
practice, is customarily engaged in the valuation of businesses and securities
in connection with mergers and acquisitions, and valuations for estate,
corporate and other purposes. In connection with rendering our opinion set forth
herein, we have among other things:
(i) Reviewed the audited financial statements of First Community
for each of the years ended 1997 through 2001 and the
unaudited financial statements of First Community for year end
December 31, 2002;
(ii) Reviewed the audited financial statements of MainSource for
the years ended 1997 through 2001 and the unaudited financial
statements of MainSource for year ended December 31, 2002;
(iii) Reviewed certain other internal information, primarily
financial in nature, relating to the respective businesses,
earnings, assets and prospects of First Community provided to
us or publicly available for purposes of our analysis;
(iv) Compared the results and financial condition of First
Community with that of certain companies, which we deemed
relevant for purposes of this opinion;
(v) Reviewed the terms, to the extent publicly available, of
certain other transactions, which we deemed relevant for
purposes of this opinion; and,
(vi) Reviewed the Agreement.
In our review and analysis, we relied upon and assumed the accuracy and
completeness of the information provided to us or publicly available, and have
not attempted to verify the same. We have made no independent verification as to
the status and value of First Community or MainSource's assets, and have instead
relied upon representations and information concerning assets of both companies
in the aggregate. In rendering our opinion, we have assumed that the transaction
will be taxable at the shareholder level. In addition, we have assumed in the
course of obtaining the necessary approvals for the transaction, no condition
will be imposed that will have a material adverse effect on the contemplated
benefits of the transaction to First Community and its shareholders.
This opinion is based on economic and market conditions and other circumstances
existing on, and information made available as of, the date hereof. This opinion
is limited to the fairness, from a financial point of view, of the terms of the
Agreement, and does not address the underlying business decision by First
Community's Board of Directors to effect the Merger and does not constitute a
recommendation to any First Community shareholder as to how such shareholder
should vote with respect to the Merger.
Austin Associates was not directly involved with the solicitation of offers,
negotiations with MainSource or any other party. Austin Associates was not
involved in negotiating any parts of the Agreement.
Austin Associates reserves the right to review all disclosures in the proxy
materials and consent to the characterization of our fairness opinion. For our
services in rendering this opinion, First Community will pay us a fee. The fee
received by Austin Associates is not contingent upon the consummation of the
Merger. First Community has agreed to indemnify us against certain liabilities.
Based upon our analysis and subject to the qualifications described herein, we
believe that as of the date of this letter, the terms of the Agreement are fair,
from a financial point of view, to First Community and its shareholders.
Respectfully,
/s/ Austin Associates, LLC
Austin Associates, LLC
ANNEX C
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DISSENTERS' RIGHTS STATUTE
IC 23-1-44
Chapter 44. Dissenters' Rights
IC 23-1-44-1
"Corporation" defined
Sec. 1. As used in this chapter, "corporation" means the issuer of the
shares held by a dissenter before the corporate action, or the surviving or
acquiring corporation by merger or share exchange of that issuer. As added by
P.L.149-1986, SEC.28.
IC 23-1-44-2
"Dissenter" defined
Sec. 2. As used in this chapter, "dissenter" means a shareholder who is
entitled to dissent from corporate action under section 8 of this chapter and
who exercises that right when and in the manner required by sections 10 through
18 of this chapter.
As added by P.L.149-1986, SEC.28.
IC 23-1-44-3
"Fair value" defined
Sec. 3. As used in this chapter, "fair value", with respect to a dissenter's
shares, means the value of the shares immediately before the effectuation of the
corporate action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion would be
inequitable. As added by P.L.149-1986, SEC.28.
IC 23-1-44-4
"Interest" defined
Sec. 4. As used in this chapter, "interest" means interest from the
effective date of the corporate action until the date of payment, at the average
rate currently paid by the corporation on its principal bank loans or, if none,
at a rate that is fair and equitable under all the circumstances.
As added by P.L.149-1986, SEC.28.
IC 23-1-44-5
"Record shareholder" defined
Sec. 5. As used in this chapter, "record shareholder" means the person in
whose name shares are registered in the records of a corporation or the
beneficial owner of shares to the extent that treatment as a record shareholder
is provided under a recognition procedure or a disclosure procedure established
under IC 23-1-30-4. As added by P.L.149-1986, SEC.28.
IC 23-1-44-6
"Beneficial shareholder" defined
Sec. 6. As used in this chapter, "beneficial shareholder" means the person
who is a beneficial owner of shares held by a nominee as the record shareholder.
As added by P.L.149-1986, SEC.28.
IC 23-1-44-7
"Shareholder" defined
Sec. 7. As used in this chapter, "shareholder" means the record shareholder
or the beneficial shareholder. As added by P.L.149-1986, SEC.28.
IC 23-1-44-8
Right to dissent and obtain payment for shares
Sec. 8. (a) A shareholder is entitled to dissent from, and obtain payment of
the fair value of the shareholder's shares in the event of, any of the following
corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party if:
(A) shareholder approval is required for the merger by IC
23-1-40-3 or the articles of incorporation; and
(B) the shareholder is entitled to vote on the merger.
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan.
(3) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
(1) year after the date of sale.
(4) The approval of a control share acquisition under IC 23-1-42.
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
(b) This section does not apply to the holders of shares of any class
or series if, on the date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting of shareholders at which the merger,
plan of share exchange, or sale or exchange of property is to be acted on, the
shares of that class or series were:
(1) registered on a United States securities exchange registered under
the Exchange Act (as defined in IC 23-1-43-9); or
(2) traded on the National Association of Securities Dealers, Inc.
Automated Quotations System Over-the-Counter Markets _ National Market Issues or
a similar market.
(c) A shareholder:
(1) who is entitled to dissent and obtain payment for the shareholder's
shares under this chapter; or
(2) who would be so entitled to dissent and obtain payment but for the
provisions of subsection (b); may not challenge the corporate action creating
(or that, but for the provisions of subsection (b), would have created) the
shareholder's entitlement. As added by P.L.149-1986, SEC.28. Amended by
P.L.107-1987, SEC.19.
IC 23-1-44-9
Dissenters' rights of beneficial shareholder
Sec. 9. (a) A record shareholder may assert dissenters' rights as to fewer
than all the shares registered in the shareholder's name only if the shareholder
dissents with respect to all shares beneficially owned by any one (1) person and
notifies the corporation in writing of the name and address of each person on
whose behalf the shareholder asserts dissenters' rights. The rights of a partial
dissenter under this subsection are determined as if the shares as to which the
shareholder dissents and the shareholder's other shares were registered in the
names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares held
on the shareholder's behalf only if:
(1) the beneficial shareholder submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(2) the beneficial shareholder does so with respect to all the
beneficial shareholder's shares or those shares over which the beneficial
shareholder has power to direct the vote. As added by P.L.149-1986, SEC.28.
IC 23-1-44-10
Proposed action creating dissenters' rights; notice
Sec. 10. (a) If proposed corporate action creating dissenters' rights under
section 8 of this chapter is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be entitled to assert
dissenters' rights under this chapter.
(b) If corporate action creating dissenters' rights under section 8 of this
chapter is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in section 12 of this
chapter. As added by P.L.149-1986, SEC.28. Amended by P.L.107-1987, SEC.20.
IC 23-1-44-11
Proposed action creating dissenters' rights; assertion of dissenters' rights
Sec. 11. (a) If proposed corporate action creating dissenters' rights under
section 8 of this chapter is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights:
(1) must deliver to the corporation before the vote is taken written
notice of the shareholder's intent to demand payment for the shareholder's
shares if the proposed action is effectuated; and
(2) must not vote the shareholder's shares in favor of the proposed
action.
(b) A shareholder who does not satisfy the requirements of subsection (a) is
not entitled to payment for the shareholder's shares under this chapter. As
added by P.L.149-1986, SEC.28.
IC 23-1-44-12
Dissenters' notice; contents
Sec. 12. (a) If proposed corporate action creating dissenters' rights under
section 8 of this chapter is authorized at a shareholders' meeting, the
corporation shall deliver a written dissenters' notice to all shareholders who
satisfied the requirements of section 11 of this chapter.
(b) The dissenters' notice must be sent no later than ten (10) days after
approval by the shareholders, or if corporate action is taken without approval
by the shareholders, then ten (10) days after the corporate action was taken.
The dissenters' notice must:
(1) state where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not the person acquired beneficial ownership of the shares
before that date;
(4) set a date by which the corporation must receive the payment demand,
which date may not be fewer than thirty (30) nor more than sixty (60) days after
the date the subsection (a) notice is delivered; and
(5) be accompanied by a copy of this chapter.
As added by P.L.149-1986, SEC.28.
IC 23-1-44-13
Demand for payment and deposit of shares by shareholder
Sec. 13. (a) A shareholder sent a dissenters' notice described in IC
23-1-42-11 or in section 12 of this chapter must demand payment, certify whether
the shareholder acquired beneficial ownership of the shares before the date
required to be set forth in the dissenter's notice under section 12(b)(3) of
this chapter, and deposit the shareholder's certificates in accordance with the
terms of the notice.
(b) The shareholder who demands payment and deposits the shareholder's
shares under subsection (a) retains all other rights of a shareholder until
these rights are cancelled or modified by the taking of the proposed corporate
action.
(c) A shareholder who does not demand payment or deposit the shareholder's
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for the shareholder's shares under this
chapter and is considered, for purposes of this article, to have voted the
shareholder's shares in favor of the proposed corporate action.
As added by P.L.149-1986, SEC.28.
IC 23-1-44-14
Uncertificated shares; restriction on transfer; dissenters' rights
Sec. 14. (a) The corporation may restrict the transfer of uncertificated
shares from the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under section 16 of this
chapter.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
cancelled or modified by the taking of the proposed corporate action. As added
by P.L.149-1986, SEC.28.
IC 23-1-44-15
Payment to dissenter
Sec. 15. (a) Except as provided in section 17 of this chapter, as soon as
the proposed corporate action is taken, or, if the transaction did not need
shareholder approval and has been completed, upon receipt of a payment demand,
the corporation shall pay each dissenter who complied with section 13 of this
chapter the amount the corporation estimates to be the fair value of the
dissenter's shares.
(b) The payment must be accompanied by:
(1) the corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for that
year, and the latest available interim financial statements, if any;
(2) a statement of the corporation's estimate of the fair value of the
shares; and
(3) a statement of the dissenter's right to demand payment under section
18 of this chapter.
As added by P.L.149-1986, SEC.28. Amended by P.L.107-1987, SEC.21.
IC 23-1-44-16
Failure to take action; return of certificates; new action by corporation
Sec. 16. (a) If the corporation does not take the proposed action within
sixty (60) days after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates
and release the transfer restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 12 of this chapter and repeat the payment
demand procedure.
As added by P.L.149-1986, SEC.28.
IC 23-1-44-17
Withholding payment by corporation; corporation's estimate of fair value;
after-acquired shares
Sec. 17. (a) A corporation may elect to withhold payment required by section
15 of this chapter from a dissenter unless the dissenter was the beneficial
owner of the shares before the date set forth in the dissenters' notice as the
date of the first announcement to news media or to shareholders of the terms of
the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares and shall pay this amount to each dissenter who
agrees to accept it in full satisfaction of the dissenter's demand. The
corporation shall send with its offer a statement of its estimate of the fair
value of the shares and a statement of the dissenter's right to demand payment
under section 18 of this chapter.
As added by P.L.149-1986, SEC.28.
IC 23-1-44-18
Dissenters' estimate of fair value; demand for payment; waiver
Sec. 18. (a) A dissenter may notify the corporation in writing of the
dissenter's own estimate of the fair value of the dissenter's shares and demand
payment of the dissenter's estimate (less any payment under section 15 of this
chapter), or reject the corporation's offer under section 17 of this chapter and
demand payment of the fair value of the dissenter's shares, if:
(1) the dissenter believes that the amount paid under section 15 of this
chapter or offered under section 17 of this chapter is less than the fair value
of the dissenter's shares;
(2) the corporation fails to make payment under section 15 of this
chapter within sixty (60) days after the date set for demanding payment; or
(3) the corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions imposed
on uncertificated shares within sixty (60) days after the date set for demanding
payment.
(b) A dissenter waives the right to demand payment under this section unless
the dissenter notifies the corporation of the dissenter's demand in writing
under subsection (a) within thirty (30) days after the corporation made or
offered payment for the dissenter's shares.
As added by P.L.149-1986, SEC.28.
IC 23-1-44-19
Court proceeding to determine fair value; judicial appraisal
Sec. 19. (a) If a demand for payment under IC 23-1-42-11 or under section 18
of this chapter remains unsettled, the corporation shall commence a proceeding
within sixty (60) days after receiving the payment demand and petition the court
to determine the fair value of the shares. If the corporation does not commence
the proceeding within the sixty (60) day period, it shall pay each dissenter
whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the circuit or superior
court of the county where a corporation's principal office (or, if none in
Indiana, its registered office) is located. If the corporation is a foreign
corporation without a registered office in Indiana, it shall commence the
proceeding in the county in Indiana where the registered office of the domestic
corporation merged with or whose shares were acquired by the foreign corporation
was located.
(c) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) is plenary and exclusive. The court may appoint one (1) or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them or in any amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment:
(1) for the amount, if any, by which the court finds the fair value of
the dissenter's shares, plus interest, exceeds the amount paid by the
corporation; or
(2) for the fair value, plus accrued interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold payment
under section 17 of this chapter. As added by P.L.149-1986, SEC.28.
IC 23-1-44-20
Costs; fees; attorney's fees
Sec. 20. (a) The court in an appraisal proceeding commenced under section 19
of this chapter shall determine all costs of the proceeding, including the
reasonable compensation and expenses of appraisers appointed by the court. The
court shall assess the costs against such parties and in such amounts as the
court finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the requirements
of sections 10 through 18 of this chapter; or
(2) against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
As added by P.L.149-1986, SEC.28.