Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated to be
effective as of September 28, 2005, by and among MAINSOURCE FINANCIAL GROUP,
INC. ("MainSource"), PEOPLES OHIO FINANCIAL CORPORATION ("POHF") and PEOPLES
SAVINGS BANK OF TROY ("Peoples Savings").
WITNESSETH:
WHEREAS, MainSource is an Indiana corporation registered as a financial
holding company under the federal Bank Holding Company Act of 1956, as amended
(the "BHC Act"), with its principal office located in Greensburg, Decatur
County, Indiana; and
WHEREAS, POHF is an Ohio corporation registered as a savings and loan
holding company under the Home Owners' Loan Act, as amended ("HOLA"), with its
principal office located in Troy, Miami County, Ohio; and
WHEREAS, POHF's principal operating subsidiary is Peoples Savings, an
Ohio-chartered savings and loan association; and
WHEREAS, MainSource and POHF seek to affiliate through a corporate
reorganization whereby POHF will first merge with and into MainSource and
Peoples Savings will immediately thereafter merge with and into MainSource Bank
- - Ohio ("Merger Corp"), a to-be-formed interim Ohio commercial bank with its
principal offices located in Troy, Miami County, Ohio, and the wholly-owned
subsidiary of MainSource, as a result of which merger Peoples Savings will
become a wholly owned subsidiary of MainSource; and
WHEREAS, the Boards of Directors of each of the parties hereto have
determined that it is in the best interests of their respective corporations or
banks and their respective shareholders to consummate the mergers provided for
herein and have approved this Agreement, authorized its execution and designated
this Agreement a plan of merger.
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby make this Agreement and prescribe the terms and
conditions of the merger of POHF with and into MainSource, and the merger of
Peoples Savings with and into Merger Corp, and the mode of carrying such mergers
into effect as follows:
ARTICLE I
THE COMPANY MERGER
1.01. The Company Merger.
(a) General Description. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Article X hereof), POHF
shall merge with and into and under the Articles of Incorporation of MainSource
(the "Company Merger"). The Company Merger is subject to the Subsidiary Merger
(as defined in Section 2.01 hereof) occurring immediately after the Company
Merger, and if the Subsidiary Merger will not close immediately thereafter, the
Company Merger shall not occur. MainSource shall survive the Company Merger
(sometimes hereinafter referred to as the "Surviving Corporation") and shall
continue its corporate existence under the laws of the State of Indiana pursuant
to the provisions of and with the effect provided in the Indiana Business
Corporation Law, as amended (the "IBCL").
(b) Name, Officers and Directors. The name of the Surviving Corporation
shall be "MainSource Financial Group, Inc." Its principal office shall be
located at 201 North Broadway, Greensburg, Decatur County, Indiana. The officers
of MainSource serving at the Effective Time shall continue to serve as the
officers of the Surviving Corporation, until such time as their successors shall
have been duly elected and have qualified or until their earlier resignation,
death or removal from office. The directors of the Surviving Corporation
following the Effective Time shall be those individuals of MainSource serving as
directors at the Effective Time until such time as their successors have been
duly elected and have qualified or until their earlier resignation, death, or
removal as a director.
(c) Articles of Incorporation and By-Laws. The Articles of Incorporation
and By-Laws of MainSource in existence at the Effective Time shall remain the
Articles of Incorporation and By-Laws of the Surviving Corporation following the
Effective Time, until such Articles of Incorporation and By-Laws shall be
further amended as provided by applicable law.
(d) Effect of the Company Merger. At the Effective Time, the title to all
assets, real estate and other property owned by POHF shall vest in Surviving
Corporation as set forth in Indiana Code Section 23-1-40-6, as amended, and Ohio
Revised Code Section 1701.82, as amended, without reversion or impairment. At
the Effective Time, all liabilities of POHF shall be assumed by Surviving
Corporation.
(e) Integration. At the Effective Time and subject to and upon the terms
and conditions set forth in this Agreement, the parties hereto currently intend
to effectuate, or cause to be effectuated, the Company Merger, pursuant to the
Indiana Articles of Merger, substantially in the form attached hereto as EXHIBIT
1.01(e)(I), a Plan of Merger substantially in the form attached hereto as
EXHIBIT 1.01(e)(II), an Ohio Certificate of Merger, substantially in the form
attached hereto as EXHIBIT 1.01(e)(III), and the applicable provisions of the
IBCL and the Ohio General Corporation Law (the "OGCL"). The parties agree to
cooperate and to take all reasonable actions prior to or following the Effective
Time, including executing all requisite documentation, as may be reasonably
necessary to effect the Company Merger.
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1.02. Reservation of Right to Revise Structure. At MainSource's election,
the Company Merger may alternatively be structured so that (a) POHF is merged
with and into any other direct or indirect wholly owned subsidiary of MainSource
or (b) any direct or indirect wholly owned subsidiary of MainSource is merged
with and into POHF; provided, however, that no such change shall (x) alter or
change the amount or kind of the Merger Consideration (as hereinafter defined)
or the treatment of the holders of common stock, without par value, of POHF
("POHF Common Stock") or options for POHF Common Stock ("POHF Stock Options"),
(y) prevent the parties from obtaining the opinion of Bose McKinney & Evans LLP
referred to in Sections 8.01 and 8.02, or (z) materially impede or delay
consummation of the transactions contemplated by this Agreement. In the event of
such an election, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect such election.
ARTICLE II
THE SUBSIDIARY MERGER
2.01. The Subsidiary Merger.
(a) General Description. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time, Peoples Savings shall merge with and into
and under the Articles of Incorporation of Merger Corp (the "Subsidiary
Merger"). Merger Corp shall survive the Subsidiary Merger (the "Surviving Bank")
and shall continue its corporate existence under the laws of the State of Ohio
pursuant to the provisions of and with the effect provided in Chapters 11 and 17
of the Ohio Revised Code.
(b) Name, Offices, Officers and Directors. The name of the Surviving Bank
shall be "MainSource Bank - Ohio". Its principal office shall be located at 635
South Market Street, Troy, Miami County, Ohio, and its branches shall consist of
the branch offices of Peoples Savings as of the Effective Time. The officers of
Merger Corp at the Effective Time shall continue to serve as the officers of the
Surviving Bank until such time as their successors shall have been duly elected
and have qualified or until their earlier resignation, death or removal from
office. In addition, immediately following the Effective Time, Ronald B. Scott
shall be appointed the Chairman, President and Chief Executive Officer of the
Surviving Bank. The directors of the Surviving Bank following the Effective Time
shall consist of Ronald B. Scott and four (4) other individuals mutually
acceptable to MainSource and POHF, until such time as their successors have been
duly elected and have qualified or until their earlier resignation, death, or
removal as a director.
(c) Articles of Incorporation and Regulations. The Articles of
Incorporation and Code of Regulations of Merger Corp in existence at the
Effective Time shall remain the Articles of Incorporation and Code of
Regulations of the Surviving Bank following the Effective Time, until such
Articles of Incorporation and Code of Regulations shall be further amended as
provided by applicable law.
(d) Effect of the Subsidiary Merger. At the Effective Time, the title to
all assets, real estate and other property owned by Peoples Savings shall vest
in Surviving Bank as set forth in
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Ohio Revised Code Sections 1115.11 and 1701.82, as amended, without reversion or
impairment. At the Effective Time, all liabilities of Peoples Savings shall be
assumed by Surviving Bank.
(e) Integration. At the Effective Time, the parties hereto currently intend
to effectuate, or cause to be effectuated, the Subsidiary Merger, pursuant to an
Ohio Certificate of Merger, substantially in the form attached hereto as EXHIBIT
2.01(E); and the applicable provisions of the IBCL, the OGCL and the Ohio
statutes applicable to mergers of financial institutions. The parties agree to
cooperate and to take all reasonable actions prior to or following the Effective
Time, including executing all requisite documentation, as may be reasonably
necessary to effect the Subsidiary Merger. POHF and Peoples Savings also agree
to cooperate with MainSource and to take all reasonable restructuring steps for
regulatory purposes, as may be reasonably requested by MainSource to effect the
Company Merger and the Subsidiary Merger (collectively, the "Mergers"), or
otherwise consolidate such legal entities to the extent desirable for regulatory
or other reasons.
2.02. Reservation of Right to Revise Structure. At MainSource's election,
the Subsidiary Merger may alternatively be structured so that (a) Peoples
Savings is merged with and into any other direct or indirect wholly owned
subsidiary of MainSource or (b) any direct or indirect wholly owned subsidiary
of MainSource is merged with and into Peoples Savings; provided, however, that
no such change shall (x) alter or change the amount or kind of the Merger
Consideration or the treatment of the holders of POHF Common Stock or POHF Stock
Options, (y) prevent the parties from obtaining the opinion of Bose McKinney &
Evans LLP referred to in Sections 8.01 and 8.02, or (z) materially impede or
delay consummation of the transactions contemplated by this Agreement. In the
event of such an election, the parties agree to execute an appropriate amendment
to this Agreement in order to reflect such election.
ARTICLE III
MANNER AND BASIS OF EXCHANGE OF STOCK
3.01. Consideration. (a) Subject to the terms and conditions of this
Agreement, at the Effective Time, each share of POHF Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares held as
treasury stock of POHF and shares held directly or indirectly by MainSource,
except shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted, if any) shall become and be converted into the right to
receive in accordance with this Article:
(i) An amount of cash equal to the Purchase Price (as such amount is
determined and adjusted in accordance with Section 3.02 below) divided by the
number of shares of POHF Common Stock outstanding as of the Effective Time (such
amount is the "Cash Consideration"), or
(ii) Such number of shares of common stock, without par value but
$0.50 stated value, of MainSource ("MainSource Common Stock") equal to the
quotient (the "Exchange Ratio") arrived at by dividing:
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A. the Cash Consideration, by
B. the average of the daily high and low sales prices of a share of
MainSource Common Stock as quoted on the Nasdaq Stock Market during
the ten trading days preceding the fifth (5th) calendar day preceding
the Effective Time (the "MainSource Average Stock Price"), subject to
adjustment, if any, pursuant to Sections 3.02 and 3.06 hereof (the
"Stock Consideration").
The Cash Consideration and the Stock Consideration are sometimes referred
to herein collectively as the "Merger Consideration."
(b) Subject to any consents required by law and Section 6.15 hereof, at the
Effective Time, outstanding POHF Stock Options will be treated as follows:
(i) With respect to a POHF Stock Option held by any person other than
Ronald B. Scott, such POHF Stock Option, without any action on the part of any
holder thereof, shall be converted into the right to receive from MainSource, at
the Effective Time, an amount in cash equal to the excess of the Cash
Consideration over the per share exercise price for each share of POHF Common
Stock subject to such POHF Stock Option; provided, however, that the payer shall
withhold from such cash payment those taxes required to be withheld by
applicable law, if any. Each POHF Stock Option to which this paragraph applies
will be cancelled and shall cease to exist by virtue of such payment.
(ii) Each POHF Stock Option held by Ronald B. Scott, whether or not
vested, shall be amended (thereafter, an "Amended Option" so that it will
provide for the acquisition of, on the same terms and conditions as were
applicable under such POHF Stock Option (substituting MainSource, where
applicable), a specified number of shares of MainSource Common Stock, at a
specified exercise price per share. In respect of each option outstanding to
Ronald B. Scott, such number shall be determined by multiplying the number of
shares of POHF Common Stock subject to such POHF Stock Option by the Exchange
Ratio and rounding such product to the nearest whole number, and such exercise
price per share shall be determined by dividing the per share exercise price
under such POHF Stock Option by the Exchange Ratio and rounding such quotient to
the nearest whole cent. Notwithstanding the foregoing, each POHF Stock Option
which is intended to be an "incentive stock option" (as defined in Section 422
of the Code) shall be adjusted in accordance with the requirements of Section
424 of the Code. Accordingly, with respect to "incentive stock options,"
fractional shares will be rounded down to the nearest whole number of shares and
where necessary the per share exercise price will be rounded up to the nearest
cent. At the Effective Time, MainSource shall assume all POHF stock option plans
pursuant to which any POHF Stock Options held by Ronald B. Scott were issued. At
all times after the Effective Time, MainSource shall reserve for issuance such
number of shares of MainSource Common Stock as are needed to permit the Amended
Options to be exercised in the manner contemplated by this Agreement and the
instruments pursuant to which such options were granted. MainSource shall file
with the SEC a registration statement on an appropriate form under the
Securities Act with respect to the shares of MainSource Common Stock subject to
the Amended Options (or, if such shares have been included on the registration
statement for the Stock Consideration, shall file a post-effective amendment to
such registration
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statement to maintain its effectiveness with respect to such shares) and shall
use its reasonable best efforts to maintain the current status of the prospectus
contained therein, as well as comply with any applicable state securities or
"blue sky" laws, for so long as such Amended Options remain outstanding.
(c) Each share of POHF Common Stock that, immediately prior to the
Effective Time, is held as treasury stock of POHF or held directly or indirectly
by MainSource (other than shares held in a fiduciary capacity or in satisfaction
of a debt previously contracted) shall by virtue of the Company Merger be
canceled and retired and shall cease to exist, and no exchange or payment shall
be made therefor.
3.02. Purchase Price; Adjustments to Purchase Price.
(a) Purchase Price. Subject to the adjustments in this Section 3.02, the
Purchase Price shall be equal to $41,057,122.
(b) Adjustment Based Upon POHF's Consolidated Shareholders' Equity.
(i) Unless waived by MainSource pursuant to Section 12.02 of this
Agreement, if as of the last business day of the month preceding the month in
which the Effective Time occurs (the "Computation Date") the POHF Consolidated
Shareholders' Equity, as determined by POHF's independent registered public
accounting firm in accordance with Section 3.02(b)(ii), is less than
$23,250,000, the Purchase Price shall be reduced on a dollar-for-dollar basis by
an amount equal to the difference between $23,250,000 and the actual POHF
Consolidated Shareholders' Equity as of the Computation Date determined in
accordance with Section 3.02(b)(ii). If at the Computation Date POHF's
Consolidated Shareholders' Equity is greater than $23,750,000, the Purchase
Price shall be increased on a dollar-for-dollar basis by an amount equal to the
difference between $23,750,000 and the actual POHF Consolidated Shareholders'
Equity as of the Computation Date determined in accordance with Section
3.02(b)(ii).
(ii) The POHF Consolidated Shareholders' Equity shall be determined,
for purposes of this Agreement, based upon the balance sheet of POHF as of the
Computation Date, prepared in accordance with generally accepted accounting
principles consistently applied, adjusted (unless such adjustments were already
made in preparing such balance sheet) for the following items and tax effecting
those adjustments, using a 34% tax rate, where appropriate:
(A) the accrual of any dividends scheduled to be declared after the
Computation Date (including but not limited to a prorated dividend
declared in accordance with Section 6.03(a)(iii);
(B) the accrual of any fees payable to a broker or investment advisor by
POHF as a result of the consummation of the transactions contemplated
herein;
(C) the accrual of the payments contemplated by Section 6.18 hereof;
(D) the funding in full of the POHF defined benefit pension plan upon its
termination;
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(E) the accrual of all compensable vacation and sick days for employees of
POHF as of the Computation Date;
(F) write off of the net book value of POHF's imaging hardware and
software;
(G) the accrual of an additional $750,000 balance in the allowance for
loan loss above the amount calculated in accordance with Section
6.03(xiv); and
(H) any change arising from the purchase, or anticipated purchase, of POHF
Common Stock from the portion of the Peoples Savings Bank of Troy Ohio
401(k) Plan (the "401(k) Plan") that consists of the assets and
liabilities (as adjusted) of the Peoples Savings Bank of Troy Ohio
Employee Stock Ownership Plan that were merged with and into the
401(k) Plan as of July 1, 2003 (the "POHF ESOP") will be disregarded
or reversed.
The application of the adjustments to the POHF Consolidated Shareholders' Equity
as contemplated in subsections (A) through (H) above is illustrated by way of
the example attached hereto as EXHIBIT 3.02(B)(II), which shall be used only to
demonstrate the method for applying such adjustments.
(c) Adjustment Based on Market Price of MainSource Common Stock.
(i) If the MainSource Average Stock Price is less than $16.50 per
share, the Exchange Ratio shall be equal to the Cash Consideration divided by
$16.50 (as further adjusted pursuant to Section 3.06, as necessary).
(ii) If the MainSource Average Stock Price is greater than $21.50 per
share, the Exchange Ratio shall be equal to the Cash Consideration divided by
$21.50 (as further adjusted pursuant to Section 3.06, as necessary).
3.03. Fractional Shares. Notwithstanding any other provision in this
Agreement, no fractional shares of MainSource Common Stock and no certificates
or scrip therefor, or other evidence of ownership thereof, will be issued in the
Company Merger; instead, MainSource shall pay to each holder of POHF Common
Stock who otherwise would be entitled to a fractional share of MainSource Common
Stock an amount in cash (without interest) determined by multiplying such
fraction by the MainSource Average Stock Price.
3.04. Election and Proration Procedures.
(a) An election form and letter of transmittal (the "Election Form") shall
be mailed to each record holder of POHF Common Stock along with the proxy
materials for the special shareholders' meeting at which the Company Merger will
be submitted to a vote of POHF's shareholders. The shareholders of POHF entitled
to receive the Election Form shall be those shareholders of record as of the
record date fixed for the special shareholders' meeting at which the Company
Merger will be submitted to a vote of POHF's shareholders (the "Special Record
Date"). POHF and MainSource shall also establish a deadline for receipt of such
Election Forms (the "Election Deadline"), which deadline shall be the close of
business on the date of the special
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meeting at which the Company Merger will be submitted to a vote of POHF's
shareholders, unless MainSource elects to establish a later Election Deadline
not later than the close of business on the last date that POHF shareholders are
permitted to give notice of their exercise of statutory dissenter's rights.
MainSource shall also use commercially reasonable efforts to provide the
Election Form to shareholders of record who become such after the record date
and before the Election Deadline. The Election Forms POHF shall provide to
MainSource shall include all information reasonably necessary for POHF to
perform its obligations as specified herein.
(b) Each Election Form shall entitle the holder of shares of POHF Common
Stock to:
(i) elect to receive the Cash Consideration for all of such holder's
shares (a "Cash Election");
(ii) elect to receive the Stock Consideration for all of such holder's
shares (a "Stock Election");
(iii) elect to receive the Cash Consideration with respect to some of
such holder's shares and the Stock Consideration with respect to such holder's
remaining shares (a "Mixed Election"); or
(iv) make no election or to indicate that such holder has no
preference as to the receipt of the Cash Consideration or the Stock
Consideration (a "Non-Election").
Shares of POHF Common Stock as to which a Cash Election has been made
(including pursuant to a Mixed Election) are referred to herein as "Cash
Election Shares." Shares of POHF Common Stock as to which a Stock Election has
been made (including pursuant to a Mixed Election) are referred to herein as
"Stock Election Shares." Shares of POHF Common Stock as to which no election has
been made (other than shares as to which the holder has given notice of exercise
of dissenter's rights) are referred to herein as "Non-Election Shares." The
aggregate number of Stock Election Shares and Non-Election Shares are referred
to herein as the "Stock Election Number."
(c) An election shall be duly made by completing the Election Form and any
other required documents in accordance with the instructions set forth therein
and delivering them to MainSource (or, at the election of MainSource, the
Exchange Agent, as defined below) before 5:00 p.m., E.S.T., on the Election
Deadline. An election shall have been properly made only if MainSource shall
have actually received a properly completed Election Form by the Election
Deadline. An Election Form shall be deemed properly completed only if
accompanied by one or more certificates therefor representing POHF Common Stock
("Certificates") (or customary affidavits and, if required by MainSource
pursuant to Section 3.05(g), a bond or other indemnity satisfactory to
MainSource against any claim that may be made with respect to such Certificates
or the guaranteed delivery of such Certificates) representing all shares of POHF
Common Stock covered by such Election Form, together with duly executed
transmittal materials included with the Election Form. Subject to the terms of
this Agreement and of the Election Form, MainSource shall have reasonable
discretion to determine whether any election, revocation, or change has
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been properly or timely made and to disregard immaterial defects in any Election
Form, and any good faith decisions of MainSource regarding such matters shall be
binding and conclusive.
(d) Notwithstanding any other provision contained in this Agreement,
seventy-five percent (75%) of the total number of shares of POHF Common Stock
outstanding at the Effective Time (the "Stock Conversion Number") shall be
converted into the Stock Consideration and the remaining outstanding shares of
POHF Common Stock shall be converted into the Cash Consideration; provided,
however, that for federal income tax purposes, it is intended that the Mergers
will qualify as an integrated plan of reorganization under the provisions of
Section 368(a)(1)(A) and/or (F) of the Code and, notwithstanding anything to the
contrary contained herein, in order that the aforementioned integrated plan of
reorganization will not fail to satisfy continuity of interest requirements
under applicable federal income tax principles relating to reorganizations under
Section 368(a)(1)(A) and/or (F) of the Code, MainSource reserves the right to
increase the number of shares of POHF Common Stock that will be converted into
Stock Consideration and reduce the number of shares of POHF Common Stock that
will be converted into the right to receive the Cash Consideration to ensure
that the Stock Consideration will represent at least fifty percent (50%) of the
value of the total of the aggregate Merger Consideration plus any amount treated
as merger consideration for federal income tax purposes.
(e) Within five (5) business days after the Effective Time, MainSource
shall effect the allocation among holders of POHF Common Stock of rights to
receive the Cash Consideration and the Stock Consideration and to distribute
such consideration as follows:
(i) if the Stock Election Number equals the Stock Conversion Number,
then (A) all Cash Election Shares shall be converted into the right to receive
the Cash Consideration, and (B) all Stock Election Shares and Non-Election
Shares shall be converted into the right to receive the Stock Consideration;
(ii) if the Stock Election Number is less than the Stock Conversion
Number, the Cash Elections shall be eliminated (each in its entirety) and
converted to Stock Elections (each in its entirety) by first eliminating and
converting the Cash Election which covers the largest number of shares of POHF
Common Stock, and then eliminating and converting the Cash Election which covers
the next largest number of shares and continuing this process until the total
remaining number of outstanding POHF shares covered by Cash Elections is such
that seventy-five percent (75%) of the total number of shares of POHF Common
Stock outstanding at the Effective Time shall be converted into the Stock
Consideration, subject to MainSource's reserved right in Section 3.04(d) to
increase the number of shares of POHF Common Stock that will be converted into
Stock Consideration to ensure that the Company Merger is a tax-free
reorganization; and
(iii) if the Stock Election Number exceeds the Stock Conversion
Number, the Non-Elections shall be eliminated (each in its entirety) and
converted to Cash Elections (each in its entirety) by first eliminating and
converting the Non-Election which covers the smallest number of shares of POHF
Common Stock, and then eliminating and converting the Non-Election which covers
the next smallest number of shares and continuing this process until either
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all Non-Elections are converted into the Cash Consideration or the total
remaining number of outstanding POHF shares covered by Non-Elections (when added
to all Stock Elections) is such that 75% of the total number of shares of POHF
Common Stock outstanding at the Effective Time shall be converted into the Stock
Consideration, subject to MainSource's reserved right in Section 3.04(d) to
increase the number of shares of POHF Common Stock that will be converted into
Stock Consideration to ensure that the Company Merger is a tax-free
reorganization. In the event that, following the elimination and conversion of
all Non-Elections to Cash Elections, the Stock Election Number still exceeds the
Stock Conversion Number, the Stock Elections will be eliminated (each in its
entirety) and converted to Cash Elections (each in its entirety) in the same
manner as the Non-Elections in this Section 3.04(e)(iii), until such time as the
total remaining number of POHF Common Shares covered by Stock Elections is such
that 75% of the total number of shares of POHF Common Stock outstanding at the
Effective Time shall be converted into the Stock Consideration, subject to
MainSource's reserved right in Section 3.04(d), as provided herein.
For purposes of this Section 3.04(e), if MainSource is obligated to
increase the number of shares of POHF Common Stock to be converted into shares
of MainSource Common Stock as a result of the application of the last clause of
Section 3.04(d) hereof, then the higher number shall be substituted for the
Stock Conversion Number in the calculations set forth in this Section 3.04(e).
(f) A holder of POHF's shares that is a bank, trust company, security
broker-dealer or other recognized nominee, may submit one or more Election Forms
for the persons for whom it holds shares as nominee provided that such bank,
trust company, security broker-dealer or nominee certifies to the satisfaction
of POHF and MainSource the names of the persons for whom it is so holding shares
(the "Beneficial Owners"). In such case, each Beneficial Owner for whom an
Election Form is submitted shall be treated as a separate owner for purposes of
the election procedure and allocation of shares set forth herein.
3.05. Exchange Procedures.
(a) Distributions by MainSource of the Merger Consideration shall be made
in accordance with Section 3.04. At and after the Effective Time, each
certificate representing shares of POHF Common Stock shall represent only the
right to receive the Merger Consideration in accordance with the terms of this
Agreement.
(b) At or prior to the Effective Time, MainSource shall reserve a
sufficient number of shares of MainSource Common Stock to be issued as part of
the Merger Consideration and shall deposit with MainSource Bank an estimated
amount of cash to be issued as part of the Merger Consideration.
(c) MainSource shall cause a certificate representing that number of whole
shares of MainSource Common Stock that each holder of POHF Common Stock has the
right to receive pursuant to Section 3.04, if any, and a check in the amount of
any cash that such holder has the right to receive pursuant to Section 3.04, if
any, including any cash in lieu of fractional shares, or dividends or
distributions which such person shall be entitled to receive, to be delivered to
such
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shareholder upon delivery (if not previously delivered) to MainSource of
certificates representing such shares of POHF Common Stock ("Old Certificates")
(or bond or other indemnity satisfactory to MainSource if any of such
certificates are lost, stolen or destroyed) owned by such shareholder. No
interest will be paid on any Merger Consideration that any such person shall be
entitled to receive pursuant to this Article III upon such delivery.
(d) No dividends or other distributions on MainSource Common Stock with a
record date occurring after the Effective Time shall be paid to the holder of
any unsurrendered Old Certificate representing shares of POHF Common Stock
converted in the Company Merger into the right to receive shares of such
MainSource Common Stock until the holder thereof surrenders such Old
Certificates in accordance with this Section 3.05. After becoming so entitled in
accordance with this Section 3.05, the record holder thereof also shall be
entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to shares of
MainSource Common Stock such holder had the right to receive upon surrender of
the Old Certificate.
(e) The stock transfer books of POHF shall be closed immediately upon the
Effective Time and from and after the Effective Time there shall be no transfers
on the stock transfer records of POHF of any shares of POHF Common Stock. If,
after the Effective Time, Old Certificates are presented to MainSource, they
shall be canceled and exchanged for the Merger Consideration deliverable in
respect thereof pursuant to this Agreement in accordance with the procedures set
forth in this Section 3.05.
(f) MainSource shall be entitled to rely upon POHF's stock transfer books
to establish the identity of those persons entitled to receive the Merger
Consideration, which books shall be conclusive with respect thereto. In the
event of a dispute with respect to ownership of stock represented by any
Certificate, MainSource shall be entitled to deposit any Merger Consideration
represented thereby in escrow with an independent third party and thereafter be
relieved with respect to any claims thereto.
(g) If any Old Certificate shall have been lost, stolen, or destroyed, upon
the making of an affidavit of that fact by the person claiming such Old
Certificate to be lost, stolen, or destroyed and, if required by MainSource, the
posting by such person of a bond or other indemnity satisfactory to MainSource
in such amount as MainSource may reasonably direct as indemnity against any
claim that may be made against it with respect to such Old Certificate,
MainSource will issue in exchange for such lost, stolen, or destroyed Old
Certificate the Merger Consideration deliverable in respect thereof pursuant to
Section 3.04 hereof.
(h) Notwithstanding the foregoing, neither the Exchange Agent nor any party
hereto shall be liable to any former holder of POHF Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
3.06. Anti-Dilution Adjustments. Should MainSource change (or establish a
record date for changing) the number of shares of MainSource Common Stock issued
and outstanding prior to the Effective Time by way of a stock split, stock
dividend, recapitalization or similar transaction with respect to the
outstanding MainSource Common Stock, and the record date
11
therefor shall be prior to the Effective Time, the Stock Consideration shall be
adjusted so the shareholders shall receive, in the aggregate, such number of
shares of MainSource Common Stock representing the same percentage of
outstanding shares of MainSource Common Stock at the Effective Time as would
have been represented by the number of shares of MainSource Common Stock the
shareholders of POHF would have received if any of the foregoing actions had not
occurred.
3.07. Exchange Agent. On or before the date that the registration statement
contemplated by Section 7.02 is declared effective, MainSource shall either
appoint an agent (the "Exchange Agent") for purposes of mailing and receiving
the Election Forms, tabulating the results and distributing the Merger
Consideration pursuant to the terms and conditions of this Agreement or elect to
perform such functions itself.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF POHF
On or prior to the date hereof, POHF has delivered to MainSource a schedule
(the "POHF Disclosure Schedule") setting forth, among other things, items the
disclosure of which is necessary or appropriate either in response to an express
disclosure requirement contained in a provision hereof or as an exception to one
or more representations or warranties contained in this Article IV or to one or
more of its covenants contained in Article VI; provided that the mere inclusion
of an item in the POHF Disclosure Schedule as an exception to a representation
or warranty shall not be deemed an admission by POHF that such item represents a
material exception or fact, event or circumstance or that such item is
reasonably likely to result in a Material Adverse Effect (as defined below).
For the purpose of this Agreement, and in relation to POHF, a "Material
Adverse Effect" means any effect that (i) is material and adverse to the
financial position, results of operations or business of POHF and its
subsidiaries taken as a whole, or (ii) would materially impair the ability of
POHF to perform its obligations under this Agreement or otherwise materially
threaten or materially impede the consummation of the Mergers and the other
transactions contemplated by this Agreement; provided, however, that Material
Adverse Effect shall not be deemed to include the impact of (a) changes in
banking and similar laws of general applicability to banks or savings
associations or their holding companies or interpretations thereof by courts or
governmental authorities, (b) changes in generally accepted accounting
principles or regulatory accounting requirements applicable to banks, savings
associations, or their holding companies generally, (c) any modifications or
changes to valuation policies and practices in connection with the Mergers or
restructuring charges taken in connection with the Mergers, in each case in
accordance with generally accepted accounting principles, (d) effects of any
action taken with the prior written consent of MainSource, (e) changes in the
general level of interest rates (including the impact on POHF's or Peoples
Savings' securities portfolios) or conditions or circumstances relating to or
that affect the United States economy, financial or securities markets or the
banking industry, generally, (f) reasonable and customary expenses incurred in
connection with the Mergers and all expenses related to any employment or
severance contract as provided
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in Section 6.18 and 7.05 of this Agreement and any benefit or retirement plan
disclosed on the POHF Disclosure Schedule, (g) the impact of the announcement of
this Agreement and the transactions contemplated hereby, and compliance with
this Agreement on the business, financial condition or results of operations of
POHF or Peoples Savings, and (h) the occurrence of any military or terrorist
attack within the United States or any of its possessions or offices.
For the purpose of this Agreement, and in relation to POHF, "knowledge"
means the actual knowledge of Ronald B. Scott, Richard J. Dutton, Anne Mercer,
John Wannemacher, Linda Daniel or Richard K. Bender of a particular fact.
Accordingly, POHF and Peoples Savings hereby represent and warrant to
MainSource as follows:
4.01. Organization and Authority. (a) POHF is a corporation duly organized
and validly existing under the laws of the State of Ohio and is a registered
savings and loan holding company under the HOLA. POHF has full power and
authority (corporate and otherwise) to own and lease its properties as presently
owned and leased and to conduct its business in the manner and by the means
utilized as of the date hereof. Except as set forth in the POHF Disclosure
Schedule, Peoples Savings is POHF's only direct or indirect subsidiary and POHF
owns no voting stock or equity securities of any corporation, partnership,
association or other entity.
(b) Peoples Savings is an Ohio savings and loan association duly
incorporated and organized and existing pursuant to the laws of the State of
Ohio. Peoples Savings has full power and authority (corporate and otherwise) to
own and lease its properties as presently owned and leased and to conduct its
business in the manner and by the means utilized as of the date hereof. Except
as set forth in the POHF Disclosure Schedule, Peoples Savings has no
subsidiaries and owns no voting stock or equity securities of any corporation,
partnership, association or other entity.
(c) Each subsidiary listed in the POHF Disclosure Schedule pursuant to
Section 4.01(a) or (b) is a corporation duly organized and validly existing
under the laws of the jurisdiction of its incorporation as listed in the POHF
Disclosure Schedule, with full power and authority (corporate and otherwise) to
own and lease its properties as presently owned and leased and to conduct its
business in the manner and by the means utilized as of the date hereof.
4.02. Authorization. (a) POHF has the requisite corporate power and
authority to enter into this Agreement and to perform its obligations hereunder,
subject to the fulfillment of the conditions precedent set forth in Sections
8.02(d), (e) and (f) hereof. As of the date hereof, POHF is not aware of any
reason why the approvals set forth in Section 8.02(e) will not be received in a
timely manner and without the imposition of a condition, restriction or
requirement of the type described in Section 8.02(e). This Agreement and its
execution and delivery by POHF have been duly authorized and approved by the
Board of Directors of POHF and, assuming due execution and delivery by
MainSource, constitutes a valid and binding obligation of POHF, subject to the
fulfillment of the conditions precedent set forth in Section 8.02 hereof, and is
enforceable in accordance with its terms, except to the extent limited by
general principles of equity and public
13
policy and by bankruptcy, insolvency, fraudulent transfer, reorganization,
liquidation, moratorium, readjustment of debt or other laws of general
application relating to or affecting the enforcement of creditors' rights.
(b) Neither the execution of this Agreement nor consummation of the Mergers
contemplated hereby: (i) conflicts with or violates the Articles of
Incorporation or Code of Regulations of POHF or the Articles of Incorporation or
Code of Regulations of Peoples Savings; (ii) conflicts with or violates in any
material respect any local, state, federal or foreign law, statute, ordinance,
rule or regulation (provided that the approvals of or filings with applicable
government regulatory agencies or authorities required for consummation of the
Mergers are obtained) or any court or administrative judgment, order,
injunction, writ or decree; (iii) conflicts with, results in a breach of or
constitutes a default under any note, bond, indenture, mortgage, deed of trust,
license, lease, contract, agreement, arrangement, commitment or other instrument
to which POHF or Peoples Savings is a party or by which POHF or Peoples Savings
is subject or bound; (iv) results in the creation of or gives any person,
corporation or entity the right to create any lien, charge, claim, encumbrance
or security interest, or results in the creation of any other rights or claims
of any other party (other than MainSource) or any other adverse interest, upon
any right, property or asset of POHF or Peoples Savings which would be material
to POHF; or (v) terminates or gives any person, corporation or entity the right
to terminate, accelerate, amend, modify or refuse to perform under any note,
bond, indenture, mortgage, agreement, contract, lease, license, arrangement,
deed of trust, commitment or other instrument to which POHF or Peoples Savings
is bound or with respect to which POHF or Peoples Savings is to perform any
duties or obligations or receive any rights or benefits.
(c) Other than in connection or in compliance with the provisions of the
applicable federal and state banking, securities, antitrust and corporation
statutes, all as amended, and the rules and regulations promulgated thereunder,
no notice to, filing with, exemption by or consent, authorization or approval of
any governmental agency or body is necessary for consummation of the Mergers by
POHF or Peoples Savings.
4.03. Capitalization. (a) The authorized capital stock of POHF as of the
date hereof consists, and at the Effective Time will consist, of 15,000,000
shares of POHF Common Stock, 7,331,629 of which shares are issued and
outstanding, and 1,000,000 shares of preferred stock, no par value, none of
which preferred shares are issued and outstanding. Such issued and outstanding
shares of POHF Common Stock have been duly and validly authorized by all
necessary corporate action of POHF, are validly issued, fully paid and
nonassessable and have not been issued in violation of any pre-emptive rights of
any present or former POHF shareholder. Except as set forth in the POHF
Disclosure Schedule, POHF has no capital stock authorized, issued or outstanding
other than as described in this Section 4.03(a) and has no intention or
obligation to authorize or issue any other capital stock or any additional
shares of POHF Common Stock. Each share of POHF Common Stock is entitled to one
vote per share. A description of the POHF Common Stock is contained in the
Articles of Incorporation of POHF, as set forth in the POHF Disclosure Schedule
pursuant to Section 4.04 hereof.
(b) The authorized capital stock of Peoples Savings as of the date hereof
consists, and at the Effective Time will consist, of 90,000,000 shares of common
stock, $1.00 par value per
14
share, 7,439,650 of which shares are validly issued and outstanding (such issued
and outstanding shares are referred to herein as "Peoples Savings Common Stock")
and 10,000,000 shares of preferred stock, $1.00 par value per share, none of
which preferred shares are issued and outstanding. Such validly issued and
outstanding shares of Peoples Savings Common Stock have been duly and validly
authorized by all necessary corporate action of Peoples Savings, are validly
issued, fully paid and nonassessable, and have not been issued in violation of
any pre-emptive rights of any present or former Peoples Savings stockholder. All
of the issued and outstanding shares of Peoples Savings Common Stock are owned
by POHF free and clear of all liens, pledges, charges, claims, encumbrances,
restrictions, security interests, options and pre-emptive rights and of all
other rights or claims of any other person, corporation or entity with respect
thereto. Peoples Savings has no capital stock authorized, issued or outstanding
other than as described in this Section 4.03(b) and has no intention or
obligation to authorize or issue any other capital stock or any additional
shares of Peoples Savings Common Stock.
(c) Except as set forth in the POHF Disclosure Schedule, there are no
options, warrants, commitments, calls, puts, agreements, understandings,
arrangements or subscription rights relating to any shares of POHF Common Stock
or Peoples Savings Common Stock, or any securities convertible into or
representing the right to purchase or otherwise acquire any common stock or debt
securities of POHF or Peoples Savings, by which POHF is or may become bound.
POHF does not have any outstanding contractual or other obligation to
repurchase, redeem or otherwise acquire any of the issued and outstanding shares
of POHF Common Stock. To the knowledge of POHF and Peoples Savings, there are no
voting trusts, voting arrangements, buy-sell agreements or similar arrangements
affecting the capital stock of either POHF or Peoples Savings.
(d) Except as set forth in the statements on Schedules 13D and 13G that
have been filed by certain persons with the Securities and Exchange Commission
(the "SEC"), POHF has no knowledge of any person or entity which beneficially
owns 5% or more of its outstanding shares of common stock within the meaning of
the rules of the SEC promulgated under Section 13(d) of the Securities Exchange
Act of 1934, as amended.
4.04. Organizational Documents. The Articles of Incorporation and Code of
Regulations of POHF and of Peoples Savings, representing true, accurate and
complete copies of such corporate documents in effect as of the date of this
Agreement, have been delivered to MainSource and are included in the POHF
Disclosure Schedule.
4.05. Compliance with Law. (a) Neither POHF nor Peoples Savings has engaged
in any activity or taken or omitted to take any action which has resulted in the
violation of any local, state, federal or foreign law, statute, regulation,
rule, ordinance, order, restriction or requirement, and neither is in violation
of any order, injunction, judgment, writ or decree of any court or government
agency or body, except where such activity, omission to act or violation would
not have a Material Adverse Effect. POHF and Peoples Savings possess and hold
all licenses, franchises, permits, certificates and other authorizations
necessary for the continued conduct of their business without interference or
interruption, and such licenses, franchises, permits, certificates and
authorizations are transferable (to the extent required) to MainSource or to
Merger Corp at the Effective Time without any restrictions or limitations
thereon or the need
15
to obtain any consents of government agencies or other third parties other than
as set forth in this Agreement.
(b) POHF has provided MainSource with, or given MainSource access to, all
agreements, understandings and commitments with, and all orders and directives
of, all government regulatory agencies or authorities with respect to the
financial condition, results of operations, business, assets or capital of POHF
or Peoples Savings which presently are binding upon or require action by, or at
any time during the last three (3) years have been binding upon or have required
action by, POHF or Peoples Savings, including, without limitation, all
correspondence, written communications and written commitments related thereto.
All such agreements, understandings, commitments, orders, directives,
correspondence and written communications which presently are binding upon or
require action by, or at any time during the last five (5) years have been
binding upon or have required action by, POHF or Peoples Savings are set forth
in the POHF Disclosure Schedule. There are no refunds or restitutions required
to be paid as a result of any criticism of any regulatory agency or body cited
in any examination report of POHF or Peoples Savings as a result of an
examination by any regulatory agency or body, or set forth in any accountant's
or auditor's report to POHF or Peoples Savings.
(c) All of the existing offices and branches of Peoples Savings have been
legally authorized and established in accordance with all applicable federal,
state and local laws, statutes, regulations, rules, ordinances, orders,
restrictions and requirements, except such as would not have a Material Adverse
Effect. Peoples Savings has no approved but unopened offices or branches.
4.06. Accuracy of Statements Made and Materials Provided to MainSource. No
representation, warranty or other statement made, or any information provided,
by POHF or Peoples Savings in this Agreement or the POHF Disclosure Schedule
(and any update thereto) and no written information which has been or shall be
supplied by POHF or Peoples Savings with respect to its financial condition,
results of operations, business, assets, capital or directors and officers for
inclusion in the proxy statement-prospectus relating to the Mergers, contains or
shall contain (in the case of information relating to the proxy
statement-prospectus at the time it is first mailed to POHF's shareholders) any
untrue statement of material fact or omits or shall omit to state a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they are made, not false or misleading, except that
no representation or warranty has been made by POHF or Peoples Savings with
respect to statements made or incorporated by reference in the Form S-4 or the
proxy statement-prospectus therein based on information supplied by MainSource
specifically for inclusion or incorporation by reference in the Form S-4 or the
proxy statement-prospectus therein.
4.07. Litigation and Pending Proceedings. Except as set forth in the POHF
Disclosure Schedule and except for any lawsuits involving collection by POHF or
Peoples Savings of delinquent accounts as to which no counterclaims are asserted
against POHF or Peoples Savings:
(a) There are no claims, actions, suits, proceedings, mediations,
arbitrations or investigations pending or, to the knowledge of POHF, threatened
in any court or before any government agency or authority, arbitration panel or
otherwise (nor does POHF have any
16
knowledge of a basis for any such claim, action, suit, proceeding, litigation,
arbitration or investigation) against POHF. There are no claims, actions, suits,
proceedings, mediations, arbitrations or investigations pending or, to the
knowledge of POHF, threatened in any court or before any government agency or
authority, arbitration panel or otherwise (nor does POHF have any knowledge of a
basis for any such claim, action, suit, proceeding, litigation, arbitration or
investigation) against Peoples Savings that would result in a Material Adverse
Effect.
(b) Neither POHF nor Peoples Savings is: (i) subject to any outstanding
judgment, order, writ, injunction or decree of any court, arbitration panel or
governmental agency or authority; (ii) presently charged with or, to the
knowledge of POHF, under governmental investigation with respect to any actual
or alleged violations of any law, statute, rule, regulation or ordinance; or
(iii) the subject of any pending or, to the knowledge of POHF, threatened
proceeding by any government regulatory agency or authority having jurisdiction
over their respective business, assets, capital, properties or operations.
4.08. Financial Statements and Reports. (a) POHF has previously delivered
to MainSource copies of the following financial statements and reports of POHF
and Peoples Savings, including the notes thereto (collectively, the "POHF
Financial Statements"):
(i) Consolidated Balance Sheets and the related Consolidated
Statements of Income and Consolidated Statements of Changes in Shareholders'
Equity of POHF as of and for the fiscal years ended June 30, 2005 and 2004;
(ii) Consolidated Statements of Cash Flows of POHF for the fiscal
years ended June 30, 2005 and 2004;
(iii) Thrift financial Reports ("TFRs") for Peoples Savings as of and
for the fiscal years ended the close of business on June 30, 2005 and 2004;
(b) The POHF Financial Statements present fairly the consolidated financial
position of POHF as of and at the dates shown and the consolidated results of
operations for the periods covered thereby and to the knowledge of POHF and
Peoples Savings are complete, correct, represent bona fide transactions, and
have been prepared from the books and records of POHF and its subsidiaries. The
POHF Financial Statements described in clauses (i) and (ii) above for completed
fiscal years are audited financial statements and have been prepared in
conformance with generally accepted accounting principles applied on a
consistent basis, except as may otherwise be indicated in any accountants' notes
or reports with respect to such financial statements.
(c) Since June 30, 2005 on a consolidated basis POHF and its subsidiaries
have not incurred any material liability other than in the ordinary course of
business consistent with past practice.
4.09. Properties, Contracts, Employees and Other Agreements. (a) Set forth
in the POHF Disclosure Schedule are true, accurate and complete copies of the
following:
17
(i) A brief description and the location of all real property owned by
POHF or Peoples Savings (other than Other Real Estate Owned ("OREO")) and the
principal buildings and structures located thereon, together with a legal
description of such real property and, within forty-five (45) days of the date
of this Agreement, a commitment for a title insurance policy (obtained at the
expense of MainSource) insuring the same and a survey drawing (obtained at the
expense of MainSource) of each parcel of real property owned by POHF or Peoples
Savings, and each lease of real property to which POHF or Peoples Savings is a
party, identifying the parties thereto, the annual rental payable, the
expiration date of the lease and a brief description of the property covered;
(ii) All conditional sales contracts or other title retention
agreements relating to POHF or Peoples Savings and agreements for the purchase
of federal funds;
(iii) All agreements, contracts, leases, licenses, lines of credit,
understandings, commitments or obligations of POHF or Peoples Savings which
individually or in the aggregate:
(A) involve payment or receipt by POHF or Peoples Savings (other than as
disbursements of loan proceeds to customers, loan payments by
customers or customer deposits) of more than $25,000;
(B) involve payments based on profits of POHF or Peoples Savings;
(C) relate to the purchase of goods, products, supplies or services in
excess of $15,000;
(D) were not made in the ordinary course of business;
(E) may not be terminated without penalty at will or upon notice of ninety
(90) days or less; or
(F) involve the employment of, or payment to, any present or former
directors, officers, employees or consultants relating to their
services as such with POHF; and
(iv) The name and current annual salary of each director, officer and
employee of POHF or Peoples Savings whose current annual salary is in excess of
$50,000, and the profit sharing, bonus or other form of compensation (other than
salary) paid or payable by POHF or Peoples Savings to or for the benefit of each
such person for the fiscal year ended June 30, 2005, and any employment,
severance or deferred compensation agreement or arrangement with respect to each
such person.
(b) POHF has, prior to the date of this Agreement, provided or given access
to MainSource to the files and documentation of all borrowers of Peoples
Savings, or persons or entities that are or may become obligated to Peoples
Savings under an existing letter of credit, line of credit, loan transaction,
loan agreement, promissory note or other commitment of Peoples
18
Savings, in excess of $15,000 individually or in the aggregate, whether in
principal, interest or otherwise, and including all guarantors of such
indebtedness.
(c) Each of the agreements, contracts, commitments, leases, instruments and
documents set forth in the POHF Disclosure Schedule relating to this Section
4.09 is valid and enforceable in accordance with its terms, except to the extent
limited by general principles of equity and public policy or by bankruptcy,
insolvency, fraudulent transfer, readjustment of debt or other laws of general
application relative to or affecting the enforcement of creditor's rights. POHF
and Peoples Savings are, and to the knowledge of POHF, all other parties thereto
are, in material compliance with the provisions thereof, and neither POHF nor
Peoples Savings is, and to the knowledge of POHF, no other party thereto is, in
default in the performance, observance or fulfillment of any material
obligation, covenant or provision contained therein. Except as set forth in the
POHF Disclosure Schedule, none of the foregoing requires the consent of any
party to its assignment in connection with the Mergers contemplated by this
Agreement. Other than as disclosed pursuant to this Section 4.09, to the
knowledge of POHF, no circumstances exist resulting from transactions effected
or to be effected, from events which have occurred or may occur or from any
action taken or omitted to be taken which could reasonably be expected to result
in the creation of any agreement, contract, obligation, commitment, arrangement,
lease or document described in or contemplated by this Section 4.09.
(d) Neither POHF nor Peoples Savings is in material default under or in
material breach of or, to the knowledge of POHF or Peoples Savings, alleged to
be in material default under or in material breach of, any loan or credit
agreement, conditional sales contract or other title retention agreement,
security agreement, bond, indenture, mortgage, license, contract, lease,
commitment or any other instrument or obligation.
4.10. Absence of Undisclosed Liabilities. Except as provided in the POHF
Financial Statements and in the POHF Disclosure Schedule, except for unfunded
loan commitments and obligations on letters of credit to customers of Peoples
Savings made in the ordinary course of business, except for trade payables
incurred in the ordinary course of Peoples Savings' business, except for the
transactions contemplated by this Agreement and obligations for services
rendered pursuant thereto, and except for liabilities which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect upon POHF or Peoples Savings, neither POHF nor Peoples Savings
has, nor will have at the Effective Time, any obligation, agreement, contract,
commitment, liability, lease or license which exceeds $10,000 individually, or
any obligation, agreement, contract, commitment, liability, lease or license
made outside of the ordinary course of business, nor does there exist any
circumstances resulting from transactions effected or events occurring on or
prior to the date of this Agreement or from any action omitted to be taken
during such period which could reasonably be expected to result in any such
obligation, agreement, contract, commitment, liability, lease or license.
Neither POHF nor Peoples Savings is delinquent in the payment of any amount due
pursuant to any trade payable, and each has properly accrued for such payables
in accordance with generally accepted accounting principles.
4.11. Title to Assets. Except as described in this Section 4.11 or the POHF
Disclosure Schedule:
19
(a) POHF or Peoples Savings, as the case may be, has good and marketable
title in fee simple absolute to all real property (including, without
limitation, all real property used as bank premises and all other real estate
owned) which is reflected in the POHF Financial Statements as of June 30, 2005;
good and marketable title to all personal property reflected in the POHF
Financial Statements as of June 30, 2005, other than personal property disposed
of in the ordinary course of business since June 30, 2005; good and marketable
title to or right to use by valid and enforceable lease or contract all other
properties and assets (whether real or personal, tangible or intangible) which
POHF or Peoples Savings purports to own or which POHF or Peoples Savings uses in
its respective business; good and marketable title to, or right to use by terms
of a valid and enforceable lease or contract, all other property used in its
respective business; and good and marketable title to all property and assets
acquired and not disposed of or leased since June 30, 2005. All of such
properties and assets are owned by POHF or Peoples Savings free and clear of all
land or conditional sales contracts, mortgages, liens, pledges, restrictions,
security interests, charges, claims, rights of third parties or encumbrances of
any nature except: (i) as set forth in the POHF Disclosure Schedule; (ii) as
specifically noted in reasonable detail in the POHF Financial Statements; (iii)
statutory liens for taxes not yet delinquent or being contested in good faith by
appropriate proceedings; (iv) pledges or liens required to be granted in
connection with the acceptance of government deposits or granted in connection
with repurchase or reverse repurchase agreements; and (v) easements,
encumbrances and liens of record, imperfections of title and other limitations
which are not material in amounts to POHF on a consolidated basis and which do
not materially detract from the value or materially interfere with the present
or contemplated use of any of the properties subject thereto or otherwise
materially impair the use thereof for the purposes for which they are held or
used. All real property owned or leased by POHF or Peoples Savings is in
compliance with all applicable zoning and land use laws. All real property,
machinery, equipment, furniture and fixtures owned or leased by POHF or Peoples
Savings is structurally sound, in good operating condition, ordinary wear and
tear excepted, and has been and is being maintained and repaired in the ordinary
condition of business in all material respects.
(b) With respect to all real property presently or formerly owned, leased
or used by POHF or Peoples Savings, POHF and Peoples Savings and to POHF's
knowledge each of the prior owners, have conducted their respective business in
material compliance with all federal, state, county and municipal laws,
statutes, regulations, rules, ordinances, orders, directives, restrictions and
requirements relating to, without limitation, responsible property transfer,
underground storage tanks, petroleum products, air pollutants, water pollutants
or storm water or process waste water or otherwise relating to the environment,
air, water, soil or toxic or hazardous substances or to the manufacturing,
recycling, handling, processing, distribution, use, generation, treatment,
storage, disposal or transport of any hazardous or toxic substances or petroleum
products (including polychlorinated biphenyls, whether contained or uncontained,
and asbestos-containing materials, whether friable or not), including, without
limitation, the Federal Solid Waste Disposal Act, the Hazardous and Solid Waste
Amendments, the Federal Clean Air Act, the Federal Clean Water Act, the
Occupational Health and Safety Act, the Federal Resource Conservation and
Recovery Act, the Toxic Substances Control Act, the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980 and the Superfund
Amendments and Reauthorization Act of 1986, all as amended, and regulations of
20
the Environmental Protection Agency, the Nuclear Regulatory Agency, the Army
Corp of Engineers, the Department of Interior, the United States Fish and
Wildlife Service and any state department of natural resources or state
environmental protection agency now or at any time thereafter in effect
(collectively, "Environmental Laws"). There are no pending or, to the knowledge
of POHF or Peoples Savings, threatened, claims, actions or proceedings by any
local municipality, sewage district or other governmental entity against POHF or
Peoples Savings with respect to the Environmental Laws, and to POHF's knowledge
there is no reasonable basis or grounds for any such claim, action or
proceeding. No environmental clearances or other governmental approvals related
to Environmental Laws are required for the conduct of the business of POHF or
Peoples Savings or the consummation of the Mergers contemplated hereby. To
POHF's knowledge, neither POHF nor Peoples Savings is the owner, or has been in
the chain of title or the operator or lessee, of any property on which any
substances regulated by Environmental Laws have been used, stored, deposited,
treated, recycled or disposed of in violation of Environmental Laws. To POHF's
knowledge, neither POHF nor Peoples Savings has any liability for any clean-up
or remediation under any of the Environmental Laws with respect to any real
property.
4.12. Loans and Investments.
(a) Except as set forth in the POHF Disclosure Schedule, there is no loan
by Peoples Savings in excess of $10,000 that has been classified by regulatory
examiners or management as "Other Loans Specially Mentioned," "Substandard,"
"Doubtful" or "Loss" or in excess of $10,000 that has been identified by
accountants or auditors (internal or external) as having a significant risk of
uncollectability. The most recent loan watch list of Peoples Savings and a list
of all loans in excess of $10,000 which Peoples Savings has determined to be
thirty (30) days or more past due with respect to principal or interest payments
or has placed on nonaccrual status are set forth in the POHF Disclosure
Schedule.
(b) All loans reflected in the POHF Financial Statements as of June 30,
2005, and which have been made, extended, renewed, restructured, approved,
amended or acquired since June 30, 2005: (i) have been made for good, valuable
and adequate consideration in the ordinary course of business; (ii) constitute
the legal, valid and binding obligation of the obligor and any guarantor named
therein, except to the extent limited by general principles of equity and public
policy or by bankruptcy, insolvency, fraudulent transfer, reorganization,
liquidation, moratorium, readjustment of debt or other laws of general
application relative to or affecting the enforcement of creditors' rights; (iii)
are evidenced by notes, instruments or other evidences of indebtedness which are
true, genuine and what they purport to be; and (iv) are secured, to the extent
that Peoples Savings has a security interest in collateral or a mortgage
securing such loans, by perfected security interests or recorded mortgages
naming Peoples Savings as the secured party or mortgagee (unless by written
agreement to the contrary).
(c) The reserves, the allowance for possible loan and lease losses and the
carrying value for real estate owned which are shown on the POHF Financial
Statements are, in the judgment of management of POHF and Peoples Savings,
adequate in all material respects under the requirements of generally accepted
accounting principles applied on a consistent basis to provide for possible
losses on items for which reserves were made, on loans and leases outstanding
and real estate owned as of the respective dates.
21
(d) Except as set forth in the POHF Disclosure Schedule, none of the
investments reflected in the POHF Financial Statements as of and for the period
ended June 30, 2005, and none of the investments made by Peoples Savings since
June 30, 2005 are subject to any restriction, whether contractual or statutory,
which materially impairs the ability of Peoples Savings to dispose freely of
such investment at any time. Peoples Savings is not a party to any repurchase
agreements with respect to securities.
(e) Set forth in the POHF Disclosure Schedule is a true, accurate and
complete list of all loans in which Peoples Savings has any participation
interest or which have been made with or through another financial institution
on a recourse basis against Peoples Savings.
(f) Except as set forth in the POHF Disclosure Schedule, and except for
customer deposits and ordinary trade payables, Peoples Savings has not, nor will
it have at the Effective Time, any indebtedness for borrowed money.
4.13. State Takeover Laws. The Board of Directors of POHF has approved this
Agreement and the transactions contemplated hereby as required to render
inapplicable to such agreements and transactions the provisions of Chapter 1704
and Section 1707.43 of the OGCL, and all other similar "takeover" or "interested
shareholder" laws.
4.14. Employee Benefit Plans.
(a) With respect to the employee benefit plans, as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
sponsored or otherwise maintained by POHF or Peoples Savings, whether written or
oral, in which POHF or Peoples Savings participates as a participating employer,
to which POHF or Peoples Savings contributes, with respect to which POHF or
Peoples Savings acts as administrator, trustee or fiduciary, or any nonqualified
employee benefit plans or deferred compensation, bonus, stock or incentive
plans, or other employee benefit or fringe benefit programs for the benefit of
former or current employees or directors (or their beneficiaries or dependents)
of POHF or Peoples Savings, and including any such plans, to POHF's knowledge,
which have been terminated, merged into another plan, frozen or discontinued
since January 1, 2000 (collectively, "POHF Plans"), except as set forth in the
POHF Disclosure Schedule:
(i) all such POHF Plans have, on a continuous basis since their
adoption, been, in all material respects, maintained and administered in
compliance with applicable POHF Plan documents and with the requirements
prescribed by all applicable statutes, orders and governmental rules or
regulations, including, without limitation, ERISA, the Code, and the Department
of Labor (the "Department") and Treasury Regulations promulgated thereunder;
(ii) all POHF Plans intended to constitute tax-qualified plans under
Section 401(a) of the Code that have not received a "GUST" (as defined in
Section 2 of Rev. Proc. 2002-6) determination letter have received an opinion
letter from the Internal Revenue Service (the "Service") covering the qualified
status of each such POHF Plan in its current form;
22
(iii) all POHF Plans intended to constitute tax qualified plans under
Section 401(a) of the Code have received a favorable determination letter
required from the Service with respect to "GUST" (as defined in Section 2 of
Rev. Proc. 2002-6), and the document has been amended by the adoption of a "good
faith EGTRRA amendment" as that phrase is defined in IRS Notice 2001-42, as well
as amendments incorporating the final Treasury Regulations to Code Section
401(a)(9) and the mandatory distribution provisions of Code Section 401(a)(31),
and POHF is not aware of any circumstances likely to result in revocation of any
such favorable determination letter;
(iv) except for the POHF ESOP, no POHF Plan (or its related trust)
holds any stock or other securities of POHF or any related or affiliated person
or entity;
(v) Neither POHF nor Peoples Savings has any liability to the
Department or the Service with respect to any POHF Plan;
(vi) Neither POHF nor Peoples Savings has engaged in any transaction
that may subject POHF or Peoples Savings, or any POHF Plan, to a civil penalty
imposed by Section 502 or any other provision of ERISA or excise taxes under
Sections 4971, 4975, 4976, 4977, 4979 or 4980B of the Code or for a fine under
Section 502 of ERISA with respect to any POHF Plan;
(vii) no prohibited transaction (as defined in Section 406 of ERISA or
as defined in Section 4975(c) of the Code) has occurred with respect to any POHF
Plan;
(viii) each POHF Plan subject to ERISA or intended to be qualified
under Section 401(a) of the Code has been and, if applicable, is being operated
in all material respects in accordance with the applicable provisions of ERISA
and the Code and the Department and Treasury Regulations promulgated thereunder;
(ix) no participant or beneficiary or non-participating employee has
been denied (in violation of ERISA, the Code, other applicable law or the
applicable POHF Plan document) any benefit due or to become due under any POHF
Plan or has been misled as to his or her rights under any POHF Plan;
(x) all obligations required to be performed by POHF or Peoples
Savings under any provision of any POHF Plan have been performed by it in all
material respects and it is not in default under or in violation of any
provision of any POHF Plan;
(xi) no event has occurred which would constitute grounds for an
enforcement action by any party under Part 5 of Title I of ERISA under any POHF
Plan;
(xii) there are no actions, suits, proceedings or claims pending
(other than routine claims for benefits) or, to the knowledge of POHF or Peoples
Savings, threatened, against POHF or Peoples Savings, any POHF Plan or the
assets of any POHF Plan;
(xiii) with respect to any POHF Plan sponsored, participated in or
contributed to by POHF or Peoples Savings, or with respect to which POHF or
Peoples Savings is responsible
23
for complying with the reporting and disclosure requirements of ERISA or the
Code, there has been no violation of the reporting and disclosure requirements
imposed either under ERISA or the Code for which a penalty has been or may be
imposed;
(xiv) with respect to any POHF Plan there has been no breach of the
fiduciary provisions of ERISA or other applicable federal or state law and there
is no known outstanding fiduciary liability; and
(xv) any POHF Plan may be terminated at any time in accordance the
provisions of ERISA or the Code, and the transactions contemplated by this
Agreement do not eliminate the right of termination except as otherwise
specifically provided herein.
(b) With regard to any POHF Plan intended to be qualified under Section
401(a) of the Code, no director, officer, employee or agent of POHF or Peoples
Savings has engaged in any action or failed to act in such a manner that, as a
result of such action or failure to act, the Service could revoke or deny that
plan's qualification under Section 401(a) of the Code or the exemption under
Section 501(a) of the Code for any trust related to such Plan.
(c) POHF has provided to MainSource true, accurate and complete copies and,
in the case of any POHF Plan which has not been reduced to writing, a materially
complete summary, of all of the following, as applicable:
(i) all POHF Plans, including amendments thereto, and, if subject to
the reporting and disclosure requirements of ERISA, all summary plan
descriptions thereof (including any modifications thereto);
(ii) all employment, salary continuation, consulting, severance and
collective bargaining agreements, arrangements or understandings;
(iii) all group insurance and health insurance contracts and policies;
(iv) all reports filed with the Service or Department of Labor within
the preceding three years by POHF or Peoples Savings with respect to any POHF
Plan;
(v) descriptions of all current participants in POHF Plans and all
participants with benefit entitlements under such POHF Plans; and
(vi) valuations and testings for any POHF Plan that is a defined
benefit plan or defined contribution plan, including the POHF ESOP, as of the
most recent valuation date for that plan.
(d) Except as set forth on the POHF Disclosure Schedule, no current or
former director, officer or employee of POHF or Peoples Savings (i) is entitled
to or may become entitled to any benefit under any POHF Plan that is a welfare
benefit plan (as defined in Section 3(1) of ERISA) after termination of
employment with POHF or Peoples Savings, except that such individuals may be
entitled to continue their group health care coverage pursuant to Section 4980B
of the
24
Code under the applicable POHF Plan if they pay the cost of such coverage
pursuant to the applicable requirements of that plan or of the Code with respect
thereto, or (ii) is currently receiving, or entitled to receive, a disability
benefit under a POHF Plan that is a long term or short term disability plan.
(e) The Peoples Savings Bank of Troy Defined Benefit Pension Plan ("Benefit
Plan") is the only defined benefit pension plan maintained by POHF or Peoples
Savings which is subject to Title IV of ERISA, and such Defined Benefit Plan is
not a multiemployer plan (as that term is defined in Sections 4001(a)(3) and
3(37) of ERISA). Other than the Benefit Plan, no POHF Plan is, and neither POHF
nor Peoples Savings has any liability with respect to any plan that is (i) a
defined benefit pension plan subject to Title IV of ERISA, (ii) a pension plan
subject to Section 302 of ERISA or Section 412 of the Code, or (iii) a
multiemployer pension plan (as that term is defined in Sections 4001(a)(3) and
3(37) of ERISA).
(f) With respect to all POHF Plans that include a group health plan (as
defined in Section 607(1) of ERISA) all applicable provisions of Section 4980B
of the Code and Section 601 of ERISA have been complied with in all material
respects by POHF or Peoples Savings.
(g) Except as otherwise provided in the POHF Disclosure Schedule, there are
no collective bargaining, employment, management, consulting, deferred
compensation, reimbursement, indemnity, retirement, early retirement, severance
or similar plans or agreements, commitments or understandings, or any employee
benefit or retirement plan or agreement, binding upon POHF or Peoples Savings
and no such agreement, commitment, understanding or plan is under discussion or
negotiation by management with any employee or group of employees, any member of
management or any other person.
(h) Except as otherwise provided in the POHF Disclosure Schedule, no
Voluntary Employees' Beneficiary Association ("VEBA") as defined in Code Section
501(c)(9) is sponsored or maintained by POHF or Peoples Savings.
(i) Except as otherwise provided in the POHF Disclosure Schedule, there are
no benefits or liabilities under any employee benefit plan or program that will
be accelerated as a result of the transactions contemplated by the terms of this
Agreement.
(j) Except as may be disclosed in the POHF Disclosure Schedule, POHF and
Peoples Savings are and have been in material compliance with all applicable
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours, including, without limitation, any such laws
respecting employment discrimination and occupational safety and health
requirements.
(k) All liabilities of the POHF Plans have been funded in accordance with
sound actuarial assumptions and practices, and no POHF Plan subject to the
funding requirements of part 3 of ERISA had or has had an accumulated funding
deficiency as of the end of any plan year ending on or after December 31, 2002,
other than as set forth in the POHF Disclosure Schedule. No actuarial
assumptions have been changed since the last written report of actuaries on such
POHF Plans. All insurance premiums (including premiums to the Pension Benefit
Guaranty
25
Corporation) have been paid in full, subject only to normal retrospective
adjustments in the ordinary course. POHF and Peoples Savings have no contingent
or actual liabilities under Title IV of ERISA. No accumulated funding deficiency
(within the meaning of Section 302 of ERISA or Section 412 of the Code) has been
incurred within the past three years with respect to any of the POHF Plans
subject to Section 302 of ERISA or Section 412 of the Code, whether or not
waived, nor does POHF or any of its affiliates have any liability or potential
liability as a result of the underfunding of, or termination of, or withdrawal
from, any plan by POHF or by any person which may be aggregated with POHF for
purposes of Section 412 of the Code. No reportable event (as defined in Section
4043 of ERISA) has occurred with respect to any of the POHF Plans as to which a
notice would be required to be filed with the Pension Benefit Guaranty
Corporation. No claim is pending, or to the knowledge of POHF threatened or
imminent with respect to any POHF Plan (other than a routine claim for benefits
for which plan administrative review procedures have not been exhausted) for
which POHF or Peoples Savings would be liable after June 30, 2005, except as is
reflected on the POHF Financial Statements.
(l) As a result, directly or indirectly, of the transactions contemplated
by this Agreement (including, without limitation, any termination of employment
relating thereto and occurring prior to, at or following the Effective Time),
POHF, Peoples Savings, and their respective successors will not be obligated to
make a payment that would be characterized as an "excess parachute payment" to
an individual who is a "disqualified individual" (as such terms are defined in
Section 280G of the Code). Among the nonexclusive list of payments to be
considered are, to the extent required by Section 280G of the Code, those
payments referred to under Sections 3.01(b), 6.14, 6.15, 6.17, 6.18, 7.03(b),
7.05, and 8.01(i) of the Agreement, as well as any other payments made under the
POHF Plans because of the transactions contemplated herein.
4.15. Obligations to Employees. All accrued obligations and liabilities of
and all payments by POHF or Peoples Savings, whether arising by operation of
law, by contract or by past custom, for payments to trusts or other funds, to
any government agency or authority or to any present or former director,
officer, employee or agent (or his or her heirs, legatees or legal
representatives) have been and are being paid to the extent required by
applicable law or by the plan, trust, contract or past custom or practice, and
adequate actuarial accruals and reserves for such payments have been and are
being made by POHF or Peoples Savings in accordance with generally accepted
accounting principles and applicable law applied on a consistent basis and
actuarial methods with respect to the following: (a) withholding taxes,
unemployment compensation or social security benefits; and (b) all POHF Plans
for its current or former directors, officers, employees and agents, including,
without limitation, all liabilities and obligations to the POHF Plans (as
defined in Section 4.14(a) hereof). All obligations and liabilities of POHF or
Peoples Savings, whether arising by operation of law, by contract or by past
custom or practice, for all other forms of compensation which are or may be
payable to its current or former directors, officers, employees or agents or to
any POHF Plan have been and are being paid to the extent required by applicable
law or by the plan or contract, and adequate actuarial accruals and reserves for
payment therefor have been and are being made by POHF or Peoples Savings in
accordance with generally accepted accounting and actuarial principles applied
on a consistent basis. All accruals and reserves referred to in this Section
4.15 are correctly and accurately reflected and accounted for in all material
respects in the POHF Financial Statements and the books, statements and records
of POHF.
26
4.16. Taxes, Returns and Reports. Except as set forth in the POHF
Disclosure Schedule, each of POHF and Peoples Savings has since January 1, 2000
(a) duly and timely filed all federal, state, local and foreign tax returns of
every type and kind required to be filed, and each such return is true, accurate
and complete in all material respects; (b) paid or otherwise adequately reserved
in accordance with generally accepted accounting principles for all taxes,
assessments and other governmental charges due or claimed to be due upon it or
any of its income, properties or assets; and (c) not requested an extension of
time for any such payments (which extension is still in force). POHF has
established, and shall establish in the Subsequent POHF Financial Statements (as
hereinafter defined), in accordance with generally accepted accounting
principles, a reserve for taxes in the POHF Financial Statements adequate to
cover all of POHF's and Peoples Savings' tax liabilities (including, without
limitation, income taxes, payroll taxes and withholding, and franchise fees) for
the periods then ending. Neither POHF nor Peoples Savings has, nor will either
have, any liability for taxes of any nature for or with respect to the operation
of its business, from the date hereof up to and including the Effective Time,
except to the extent set forth in the Subsequent POHF Financial Statements (as
hereinafter defined) or as accrued or reserved for on the books and records of
POHF or Peoples Savings. Neither POHF nor Peoples Savings is currently under
audit by any state or federal taxing authority. No federal, state or local tax
returns of POHF or Peoples Savings have been audited by any taxing authority
during the past five (5) years.
4.17. Deposit Insurance. The deposits of Peoples Savings are insured by the
Federal Deposit Insurance Corporation in accordance with the Federal Deposit
Insurance Act, as amended, to the fullest extent provided by applicable law, and
POHF or Peoples Savings has paid or properly reserved or accrued for all current
premiums and assessments with respect to such deposit insurance.
4.18. Insurance. Set forth in the POHF Disclosure Schedule is a list and
brief description of all policies of insurance (including, without limitation,
bankers' blanket bond, directors' and officers' liability insurance, property
and casualty insurance, group health or hospitalization insurance and insurance
providing benefits for employees) owned or held by POHF or Peoples Savings on
the date hereof or with respect to which POHF or Peoples Savings pays any
premiums. Each such policy is in full force and effect and all premiums due
thereon have been paid when due, and a true, accurate and complete copy thereof
has been made available to MainSource prior to the date hereof.
4.19. Books and Records. The books and records of POHF are complete and
correct and accurately reflect the basis for the financial condition, results of
operations, business, assets and capital of POHF on a consolidated basis set
forth in the POHF Financial Statements.
4.20. Broker's, Finder's or Other Fees. Except for reasonable fees and
expenses of POHF's attorneys, accountants and investment bankers, all of which
shall be paid by POHF prior to the Effective Time, except as set forth in the
POHF Disclosure Schedule, no agent, broker or other person acting on behalf of
POHF or Peoples Savings or under any authority of POHF or Peoples Savings is or
shall be entitled to any commission, broker's or finder's fee or any other
27
form of compensation or payment from any of the parties hereto relating to this
Agreement and the Mergers contemplated hereby.
4.21. POHF Disclosure Schedule and Documents. All written data, documents,
materials and information referred to in this Agreement and delivered by POHF or
Peoples Savings pursuant to or in connection with the POHF Disclosure Schedule
are true, accurate and complete in all material respects as of the date hereof
and with respect to such items delivered subsequent to the date hereof with any
update to the POHF Disclosure Schedule, will be true, accurate and complete in
all material respects on the date of delivery thereof.
4.22. Interim Events. Except as otherwise permitted hereunder, since June
30, 2005, or as set forth in the POHF Disclosure Schedule, neither POHF nor
Peoples Savings has:
(a) Suffered any changes having an adverse impact on the financial
condition, results of operations, business, assets or capital of POHF on a
consolidated basis in excess of $5,000 individually or in the aggregate;
(b) Suffered any damage, destruction or loss to any of its properties, not
fully paid by insurance proceeds, in excess of $5,000 individually or in the
aggregate;
(c) Declared, distributed or paid any dividend or other distribution to its
shareholders, except for payment of dividends as permitted by Section
6.03(a)(iii) hereof;
(d) Repurchased, redeemed or otherwise acquired shares of its common stock,
issued any shares of its common stock or stock appreciation rights or sold or
agreed to issue or sell any shares of its common stock or any right to purchase
or acquire any such stock or any security convertible into such stock or taken
any action to reclassify, recapitalize or split its stock;
(e) Granted or agreed to grant any increase in benefits payable or to
become payable under any pension, retirement, profit sharing, health, bonus,
insurance or other welfare benefit plan or agreement to employees, officers or
directors of POHF or Peoples Savings except pursuant to the express terms
thereof and except in the ordinary course of business, provided, however, that
POHF shall provide prompt notice to MainSource of any such increase granted or
agreed to be granted on the basis that it is in the ordinary course of business;
(f) Increased the salary of any director, officer or employee, except for
normal increases in the ordinary course of business and in accordance with past
practices, or entered into any employment contract, indemnity agreement or
understanding with any officer or employee or installed any employee welfare,
pension, retirement, stock option, stock appreciation, stock dividend, profit
sharing or other similar plan or arrangement;
(g) Leased, sold or otherwise disposed of any of its assets except in the
ordinary course of business or leased, purchased or otherwise acquired from
third parties any assets except in the ordinary course of business;
28
(h) Except for the Mergers contemplated by this Agreement, merged,
consolidated or sold shares of its common stock, agreed to merge or consolidate
with or into any third party, agreed to sell any shares of its common stock or
acquired or agreed to acquire any stock, equity interest, assets or business of
any third party;
(i) Incurred, assumed or guaranteed any obligation or liability (fixed or
contingent) other than obligations and liabilities incurred in the ordinary
course of business;
(j) Mortgaged, pledged or subjected to a lien, security interest, option or
other encumbrance any of its assets except for tax and other liens which arise
by operation of law and with respect to which payment is not past due and except
for pledges or liens: (i) required to be granted in connection with acceptance
by Peoples Savings of government deposits; or (ii) granted in connection with
repurchase or reverse repurchase agreements;
(k) Except as set forth in the POHF Disclosure Schedule, canceled, released
or compromised any loan, debt, obligation, claim or receivable other than in the
ordinary course of business;
(l) Entered into any transaction, contract or commitment other than in the
ordinary course of business;
(m) Agreed to enter into any transaction for the borrowing or loaning of
monies, other than in the ordinary course of its lending business; or
(n) Conducted its business in any manner other than substantially as it was
being conducted through June 30, 2005.
4.23. POHF Securities and Exchange Commission Filings. Since June 30, 2003,
POHF has filed all reports and other documents required to be filed by it under
the Securities Exchange Act of 1934 and the Securities Act of 1933, including
but not limited to POHF's Annual Report on Form 10-K for the year ended June 30,
2005. All such Securities and Exchange Commission filings were true, accurate
and complete in all material respects as of the dates of the filings, and no
such filings contained any untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements, at the time and
in the light of the circumstances under which they were made, not false or
misleading.
4.24. No Third Party Options. Except as set forth in the POHF Disclosure
Schedule, there are no agreements, options, commitments or rights with, of or to
any third party to acquire any shares of capital stock or assets of POHF or
Peoples Savings.
4.25. Indemnification Agreements.
(a) Other than as set forth in the POHF Disclosure Schedule, neither POHF
nor Peoples Savings is a party to any indemnification, indemnity or
reimbursement agreement, contract, commitment or understanding to indemnify any
present or former director, officer, employee, shareholder or agent against
liability or hold the same harmless from liability other than as
29
expressly provided in the Articles of Incorporation or Code of Regulations of
POHF or of Peoples Savings.
(b) No claims have been made against or filed with POHF or Peoples Savings
nor have, to the knowledge of POHF, any claims been threatened against POHF or
Peoples Savings, for indemnification against liability or for reimbursement of
any costs or expenses incurred in connection with any legal or regulatory
proceeding by any present or former director, officer, shareholder, employee or
agent of POHF or Peoples Savings.
4.26. Shareholder Approval. The affirmative vote of the holders of a
majority of the shares of POHF Common Stock (which are issued and outstanding on
the record date relating to the meeting of shareholders) is required for
shareholder approval of this Agreement and the Company Merger.
4.27. Opinion of Financial Advisor. The Board of Directors of POHF, at a
duly constituted and held meeting at which a quorum was present throughout, has
been informed orally by a reputable financial advisor that the terms of the
Company Merger are fair to the shareholders of POHF from a financial point of
view.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MAINSOURCE
On or prior to the date hereof, MainSource has delivered to POHF a schedule
(the "MainSource Disclosure Schedule") setting forth, among other things, items
the disclosure of which is necessary or appropriate either in response to an
express disclosure requirement contained in a provision hereof or as an
exception to one or more representations or warranties contained in this Article
V or to one or more of its covenants contained in Article VII; provided that the
mere inclusion of an item in the MainSource Disclosure Schedule as an exception
to a representation or warranty shall not be deemed an admission by MainSource
that such item represents a material exception or fact, event or circumstance or
that such item is reasonably likely to result in a Material Adverse Effect (as
defined below).
For the purpose of this Agreement, and in relation to MainSource and its
subsidiaries, a "Material Adverse Effect" on MainSource means any effect that
(i) is material and adverse to the financial position, results of operations or
business of MainSource and its subsidiaries taken as a whole, or (ii) would
materially impair the ability of MainSource to perform its obligations under
this Agreement or otherwise materially threaten or materially impede the
consummation of the Mergers and the other transactions contemplated by this
Agreement; provided, however, that Material Adverse Effect on MainSource shall
not be deemed to include the impact of (a) changes in banking and similar laws
of general applicability to banks or savings associations or their holding
companies or interpretations thereof by courts or governmental authorities, (b)
changes in generally accepted accounting principles or regulatory accounting
requirements applicable to banks, savings associations, or their holding
companies generally, (c) any modifications or changes to valuation policies and
practices in connection with the Mergers or restructuring charges taken in
connection with the Mergers, in each case in accordance with generally
30
accepted accounting principles, (d) changes in general level of interest rate
(including the impact on the securities portfolios of MainSource or its
subsidiaries) or conditions or circumstances that affect the banking industry
generally, (f) reasonable and customary expenses incurred in connection with the
Mergers, (g) the impact of the announcement of this Agreement and the
transactions contemplated hereby, and compliance with this Agreement or the
business, financial condition or results of operations of MainSource and its
subsidiaries, and (h) the occurrence of any military or terrorist attack within
the United States or any of its possessions or offices.
For the purpose of this Agreement, and in relation to MainSource,
"knowledge" means (i) the actual knowledge of any officer or director of
MainSource or any of its subsidiaries and any other person having supervisory or
management responsibilities with respect to material aspects of the operation of
the business of MainSource or its subsidiaries of a particular fact.
Accordingly, MainSource represents and warrants to POHF as follows:
5.01. Organization and Authority. Each of MainSource and its subsidiaries
is an entity duly organized and validly existing under the laws of its
applicable state or country. MainSource and its subsidiaries have full power and
authority (corporate and otherwise) to own and lease its properties as presently
owned and leased and to conduct its business in the manner and by the means
utilized as of the date hereof. Each of MainSource and its subsidiaries is duly
qualified to do business in each jurisdiction in which the nature of the
business conducted or the properties or assets owned or leased by it make such
qualification necessary except where the failure to so qualify would not have a
Material Adverse Effect.
5.02. Authorization.
(a) MainSource has the requisite corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder, and following
its formation Merger Corp will have the requisite corporate power and authority
to carry out its obligations hereunder, subject to the fulfillment of the
conditions precedent set forth in Section 8.01(d), (e) and (f) hereof. As of the
date hereof, MainSource is not aware of any reason why the approvals set forth
in Section 8.02(e) will not be received in a timely manner and without the
imposition of a condition, restriction or requirement of the type described in
Section 8.02(e). This Agreement and its execution and delivery by MainSource has
been duly authorized by the Board of Directors of MainSource. Assuming due
execution and delivery of POHF, this Agreement constitutes a valid and binding
obligation of MainSource and, upon its formation, will constitute a valid and
binding obligation of Merger Corp, subject in both cases to the conditions
precedent set forth in Section 8.01 hereof, and is enforceable in accordance
with its terms, except to the extent limited by general principles of equity and
public policy and by bankruptcy, insolvency, reorganization, liquidation,
moratorium, readjustment of debt or other laws of general application relating
to or affecting the enforcement of creditors' rights.
(b) Neither the execution of this Agreement nor consummation of the Merger
contemplated hereby: (i) conflicts with or violates the Articles of
Incorporation or By-Laws of MainSource or any of its subsidiaries; (ii)
conflicts with or violates in any material respect any local, state, federal or
foreign law, statute, ordinance, rule or regulation (provided that the
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approvals of or filings with applicable government regulatory agencies or
authorities required for consummation of the Merger are obtained) or any court
or administrative judgment, order, injunction, writ or decree; or (iii)
conflicts with, results in a breach of or constitutes a material default under
any note, bond, indenture, mortgage, deed of trust, license, contract, lease,
agreement, arrangement, commitment or other instrument to which MainSource is
subject or bound and which is material to MainSource on a consolidated basis.
(c) Other than in connection or in compliance with applicable federal and
state banking, securities, antitrust and corporation statutes, all as amended,
and the rules and regulations promulgated thereunder, no notice to, filing with,
exemption by or consent, authorization or approval of any governmental agency or
body is necessary for the consummation by MainSource of the Merger contemplated
by this Agreement.
5.03. Capitalization. (a) The authorized capital stock of MainSource as of
the date hereof consists, and at the Effective Time will consist, of 25,000,000
shares of MainSource Common Stock, 13,471,121 of which shares are outstanding
and 400,000 shares of preferred stock, none of which are outstanding. Such
issued and outstanding shares of MainSource Common Stock have been duly and
validly authorized by all necessary corporate action of MainSource, are validly
issued, fully paid and nonassessable and have not been issued in violation of
any pre-emptive rights of any present or former MainSource shareholder.
MainSource has no capital stock authorized, issued or outstanding other than as
described in this Section 5.03(a) and has no intention or obligation to
authorize or issue any other capital stock or any additional shares of
MainSource Common Stock other than in connection with employee and director
stock options under its existing stock option plans or as described in the
MainSource Disclosure Schedule. Each share of MainSource Common Stock is
entitled to one vote per share. MainSource wholly owns the subsidiaries listed
in the MainSource Disclosure Schedule which includes their names and
jurisdictions of organization. The shares of MainSource Common Stock to be
issued pursuant to the Company Merger will be duly authorized and validly issued
and, at the Effective Time, all such shares will be fully paid and nonassessable
and not have been issued in violation of any pre-emptive rights.
(b) Except as set forth on the MainSource Disclosure Schedule, there are no
options, warrants, commitments, calls, puts, agreements, understandings,
arrangements or subscription rights relating to any shares of MainSource Common
Stock, or any securities convertible into or representing the right to purchase
or otherwise acquire any common stock or debt securities of MainSource, by which
MainSource is or may become bound. MainSource does not have any outstanding
contractual or other obligation to repurchase, redeem or otherwise acquire any
of the issued and outstanding shares of MainSource Common Stock.
5.04. Litigation and Pending Proceedings. There are no claims, actions,
suits, proceedings, investigations, mediations or arbitrations pending or, to
the knowledge of MainSource by the officers of MainSource, threatened in any
court or before any government agency or authority, arbitration panel or
otherwise (nor does MainSource have any knowledge of a basis for any claim,
action, suit, proceeding, litigation, investigation or arbitration) against, by
or affecting MainSource which would reasonably be expected to prevent the
performance of this Agreement, declare the same unlawful or cause the rescission
hereof.
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5.05. Organizational Documents. The Articles of Incorporation and By-Laws
of MainSource, representing true, accurate and complete copies of such corporate
documents in effect as of the date of this Agreement, have been delivered to
POHF and are included in the MainSource Disclosure Schedule.
5.06 Accuracy of Statements Made and Materials Provided to POHF. No
representation, warranty or other statement made, or any information provided,
by MainSource in this Agreement, and no written report, statement, list,
certificate, materials or other information furnished or to be furnished by
MainSource to POHF through and including the Effective Time in connection with
this Agreement or the Merger contemplated hereby, contains or shall contain (in
the case of information relating to the proxy statement at the time it is mailed
to POHF's shareholders) any untrue or misleading statement of material fact or
omits or shall omit to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they are
made, not false or misleading, except that no representation or warranty has
been made by MainSource with respect to statements made or incorporated by
reference in the proxy statement based on information supplied by POHF or
Peoples Savings specifically for inclusion or incorporation by reference in such
proxy statement.
5.07 Financial Statements and Reports. (a) MainSource has delivered to POHF
copies of the following financial statements and reports of MainSource,
including the notes thereto (collectively, the "MainSource Financial
Statements"):
(i) Consolidated Balance Sheets and the related Consolidated
Statements of Income and Consolidated Statements of Changes in Shareholders'
Equity of MainSource as of and for the fiscal years ended December 31, 2004 and
2003 and as of and for the six months ended June 30, 2005; and
(ii) Consolidated Statements of Cash Flows of MainSource for the
fiscal years ended December 31, 2004 and 2003 and for the six months ended June
30, 2005;
(b) The MainSource Financial Statements present fairly the consolidated
financial position of MainSource as of and at the dates shown and the
consolidated results of operations for the periods covered thereby and to the
knowledge of MainSource are complete, correct, represent bona fide transactions,
and have been prepared from the books and records of MainSource and its
subsidiaries. The MainSource Financial Statements described in clauses (i) and
(ii) above for completed fiscal years are audited financial statements and have
been prepared in conformance with generally accepted accounting principles
applied on a consistent basis, except as may otherwise be indicated in any
accountants' notes or reports with respect to such financial statements.
5.08 MainSource Securities and Exchange Commission Filings. Since December
31, 2003, MainSource has filed all reports and other documents required to be
filed by it under the Securities Exchange Act of 1934 and the Securities Act of
1933, including but not limited to MainSource's Annual Report on Form 10-K for
the year ended December 31, 2004 and Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005. All such Securities and Exchange
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Commission filings were true, accurate and complete in all material respects as
of the dates of the filings, and no such filings contained any untrue statement
of a material fact or omitted to state a material fact necessary in order to
make the statements, at the time and in the light of the circumstances under
which they were made, not false or misleading.
5.09 Shareholder Approval. Approval by MainSource's shareholders of the
Merger or any other actions contemplated by this Agreement is not required.
5.10 Compliance with Law. (a) Neither MainSource nor any of its
subsidiaries has engaged in any activity nor taken or omitted to take any action
which has resulted in the violation of any local, state, federal or foreign law,
statute, regulation, rule, ordinance, order, restriction or requirement, nor are
they in violation of any order, injunction, judgment, writ or decree of any
court or government agency or body, except where such activity, omission to act
or violation would not have a Material Adverse Effect.
(b) All agreements, understandings and commitments with, and all orders and
directives of, all government regulatory agencies or authorities with respect to
the financial condition, results of operations, business, assets or capital of
MainSource or its subsidiaries which presently are binding upon or require
action by, or at any time during the last five (5) years have been binding upon
or have required action by, MainSource or its subsidiaries, including, without
limitation, all correspondence, communications and commitments related thereto,
are set forth in the MainSource Disclosure Schedule. There are no refunds or
restitutions required to be paid as a result of any criticism of any regulatory
agency or body, cited in any examination report of MainSource or its
subsidiaries as a result of an examination by any regulatory agency or body, or
set forth in any accountant's or auditor's report to MainSource or its
subsidiaries.
(c) All of the existing offices and branches of MainSource or its
subsidiaries have been legally authorized and established in accordance with all
applicable federal, state and local laws, statutes, regulations, rules,
ordinances, orders, restrictions and requirements, except such as would not have
a Material Adverse Effect.
5.11 Absence of Changes. Since June 30, 2005, there has not been any
material change in the financial condition, the results of operations or the
business of MainSource or its subsidiaries.
5.12 Broker's, Finder's or Other Fees. Except for reasonable fees and
expenses of MainSource's attorneys, accountants and investment bankers, all of
which shall be paid by MainSource prior to the Effective Time, and except as set
forth on the MainSource Disclosure Schedule, no agent, broker or other person
acting on behalf of MainSource or its subsidiaries or under any authority of
MainSource or its subsidiaries is or shall be entitled to any commission,
broker's or finder's fee or any other form of compensation or payment from any
of the parties hereto relating to this Agreement and the Merger contemplated
hereby.
5.13. Absence of Undisclosed Liabilities. Except as provided in the
MainSource Financial Statements and in the MainSource Disclosure Schedule,
except for trade payables incurred in the ordinary course of business, except
for the transactions contemplated by this
34
Agreement and obligations for services rendered pursuant thereto, except for
obligations under merger or other acquisition agreements and except for
liabilities which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect upon MainSource or its subsidiaries,
neither MainSource nor any of its subsidiaries have, nor will have at the
Effective Time, any obligation, agreement, contract, commitment, liability,
lease or license which exceeds $250,000 individually, or any obligation,
agreement, contract, commitment, liability, lease or license made outside of the
ordinary course of business, nor does there exist any circumstances resulting
from transactions effected or events occurring on or prior to the date of this
Agreement or from any action omitted to be taken during such period which could
reasonably be expected to result in any such obligation, agreement, contract,
commitment, liability, lease or license. Neither MainSource or any of its
subsidiaries is delinquent in the payment of any amount due pursuant to any
trade payable, and each has properly accrued for such payables in accordance
with generally accepted accounting principles.
5.14 Internal Controls. MainSource and its subsidiaries have devised and
maintain a system of internal accounting controls sufficient to provide
reasonable assurances regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with SEC
rules and generally accepted accounting principles.
ARTICLE VI
COVENANTS OF POHF
POHF covenants and agrees with MainSource and covenants and agrees to cause
Peoples Savings to act as follows:
6.01. Shareholder Approval. (a) POHF will submit this Agreement to its
shareholders for approval and adoption at a meeting to be called and held in
accordance with applicable law and the Articles of Incorporation and Code of
Regulations of POHF at the earliest possible reasonable date. Subject to Section
6.06 hereof, the Board of Directors of POHF shall recommend to POHF's
shareholders that such shareholders approve and adopt this Agreement and the
Company Merger contemplated hereby and will solicit proxies voting in favor of
this Agreement from POHF's shareholders.
(b) Subject to Section 6.06 hereof, Peoples Savings shall submit this
Agreement to POHF, as its sole shareholder, for approval by unanimous written
consent without a meeting in accordance with applicable law and the Articles of
Incorporation and Code of Regulations of Peoples Savings at a date reasonably in
advance of the Effective Time. The Board of Directors of Peoples Savings shall
recommend approval of this Agreement and the Subsidiary Merger to POHF, as the
sole shareholder of Peoples Savings, and POHF as sole shareholder of Peoples
Savings, shall approve this Agreement and the Subsidiary Merger.
6.02. Other Approvals. (a) POHF and Peoples Savings shall proceed
expeditiously, cooperate fully and use their best efforts to assist MainSource
in procuring upon reasonable terms and conditions all consents, authorizations,
approvals, registrations and certificates, in
35
completing all filings and applications and in satisfying all other requirements
prescribed by law which are necessary for consummation of the Mergers on the
terms and conditions provided in this Agreement at the earliest possible
reasonable date.
(b) POHF and Peoples Savings will use commercially reasonable efforts to
obtain any required third party consents to agreements, contracts, commitments,
leases, instruments and documents described in the POHF Disclosure Schedule and
designated therein as material.
(c) Any materials or information provided by POHF or Peoples Savings to
MainSource for use by MainSource in any filing with any state or federal
regulatory agency or authority shall not contain any untrue or misleading
statement of material fact or shall omit to state a material fact necessary to
make the statements contained therein, in light of the circumstances in which
they are made, not false or misleading.
6.03. Conduct of Business. (a) On and after the date of this Agreement and
until the Effective Time or until this Agreement is terminated as herein
provided, neither POHF nor Peoples Savings will, without the prior written
consent of MainSource:
(i) make any changes in its capital stock accounts (including, without
limitation, any stock issuance, stock split, stock dividend, recapitalization or
reclassification);
(ii) authorize a class of stock or issue, or authorize the issuance
of, securities other than or in addition to the issued and outstanding common
stock as set forth in Section 4.03 hereof;
(iii) distribute or pay any dividends on its shares of common stock,
or authorize a stock split, or make any other distribution to its shareholders,
except that (A) Peoples Savings may pay cash dividends to POHF in the ordinary
course of business for payment of reasonable and necessary business and
operating expenses of POHF and to provide funds for POHF's dividends to its
shareholders in accordance with this Agreement, and (B) POHF may pay to its
shareholders its usual and customary cash dividend of no greater than $.07 per
share for any semi-annual period, provided that any dividend paid for the
semi-annual period in which the Mergers are scheduled to be consummated or
consummated must be prorated for the portion of such period prior to the
Effective Time and must be paid prior to the Effective Time;
(iv) redeem any of its outstanding shares of common stock;
(v) merge, combine or consolidate or effect a share exchange with or
sell its assets or any of its securities to any other person, corporation or
entity or enter into any other similar transaction not in the ordinary course of
business;
(vi) purchase any assets or securities or assume any liabilities of a
bank holding company, bank, corporation or other entity, except in the ordinary
course of business necessary to manage its investment portfolio;
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(vii) make any loan or commitment to lend money, issue any letter of
credit or accept any deposit, except in the ordinary course of business in
accordance with its existing banking practices;
(viii) except as provided in the POHF Disclosure Schedule and for the
acquisition or disposition in the ordinary course of business of other real
estate owned, acquire or dispose of any real or personal property or fixed asset
constituting a capital investment in excess of $10,000 individually or $25,000
in the aggregate;
(ix) make any investment subject to any restrictions, whether
contractual or statutory, which materially impairs the ability of POHF or
Peoples Savings to dispose freely of such investment at any time; subject any of
their properties or assets to a mortgage, lien, claim, charge, option,
restriction, security interest or encumbrance, except for tax and other liens
which arise by operation of law and with respect to which payment is not past
due or is being contested in good faith by appropriate proceedings, pledges or
liens required to be granted in connection with acceptance by POHF or Peoples
Savings of government deposits and pledges or liens in connection with FHLB
borrowings;
(x) promote to a new position or increase the rate of compensation
(except for promotions and compensation increases in the ordinary course of
business and in accordance with past practices), or enter into any agreement to
promote to a new position or increase the rate of compensation, of any director,
officer or employee of POHF or Peoples Savings, modify, amend or institute new
employment policies or practices, or enter into, renew or extend any employment,
indemnity, reimbursement, consulting, compensation or severance agreements with
respect to any present or former directors, officers or employees of POHF or
Peoples Savings;
(xi) except as contemplated by this Agreement, execute, create,
institute, modify, amend or terminate any pension, retirement, savings, stock
purchase, stock bonus, stock ownership, stock option, stock appreciation or
depreciation right or profit sharing plans; any employment, deferred
compensation, consulting, bonus or collective bargaining agreement; any group
insurance or health contract or policy; or any other incentive, retirement,
welfare or employee welfare benefit plan, agreement or understanding for current
or former directors, officers or employees of POHF or Peoples Savings; or change
the level of benefits or payments under any of the foregoing or increase or
decrease any severance or termination of pay benefits or any other fringe or
employee benefits other than as required by law or regulatory authorities or the
terms of any of the foregoing.
(xii) amend, modify or restate POHF's or Peoples Savings'
organizational documents from those in effect on the date of this Agreement and
as delivered to MainSource hereunder;
(xii) give, dispose of, sell, convey or transfer; assign, hypothecate,
pledge or encumber, or grant a security interest in or option to or right to
acquire any shares of common stock or substantially all of the assets of POHF or
Peoples Savings, or enter into any agreement or commitment relative to the
foregoing;
37
(xiv) fail to maintain POHF's reserve for loan losses at the greater
of either $725,090 or 0.42% of total gross loans outstanding unless doing so
would be inconsistent with generally accepted accounting principles;
(xv) fail to accrue, pay, discharge and satisfy all debts,
liabilities, obligations and expenses, including, but not limited to, trade
payables, incurred in the regular and ordinary course of business as such debts,
liabilities, obligations and expenses become due;
(xvi) issue, or authorize the issuance of, any securities convertible
into or exchangeable for any shares of the capital stock of POHF or Peoples
Savings;
(xvii) except for obligations disclosed within this Agreement or the
Disclosure Statement, FHLB advances, trade payables and similar liabilities and
obligations incurred in the ordinary course of business and the payment,
discharge or satisfaction in the ordinary course of business of liabilities
reflected in the POHF Financial Statements or the Subsequent POHF Financial
Statements, borrow any money or incur any indebtedness including, without
limitation, through the issuance of debentures, or incur any liability or
obligation (whether absolute, accrued, contingent or otherwise), in an aggregate
amount exceeding $10,000;
(xiii) open, close, move or, in any material respect, expand,
diminish, renovate, alter or change any of its offices or branches;
(xix) pay or commit to pay any management or consulting or other
similar type of fees; or
(xx) enter into any contract, agreement, lease, commitment,
understanding, arrangement or transaction or incur any liability or obligation
(other than as contemplated by Section 6.03(a)(vii) hereof and legal, accounting
and fees related to the Mergers) requiring payments by POHF or Peoples Savings
which exceed $10,000, whether individually or in the aggregate, or that is not a
trade payable or incurred in the ordinary course of business.
(b) On and after the date of this Agreement and until the Effective Time or
until this Agreement is terminated as herein provided, each of POHF and Peoples
Savings shall: (i) carry on its business diligently, substantially in the manner
as is presently being conducted and in the ordinary course of business; (ii) use
commercially reasonable best efforts to preserve its business organization
intact, keep available the services of the present officers and employees and
preserve its present relationships with customers and persons having business
dealings with it; (iii) maintain all of the properties and assets that it owns
or utilizes in the operation of its business as currently conducted in good
operating condition and repair, reasonable wear and tear excepted; (iv) maintain
its books, records and accounts in the usual, regular and ordinary manner, on a
basis consistent with prior years and in compliance in all material respects
with all statutes, laws, rules and regulations applicable to them and to the
conduct of its business; (v) maintain a rating of at least two (2) from its
latest safety and soundness and compliance examination; (vi) maintain a CRA
rating of satisfactory; (vii) timely file all documents and reports required to
be filed pursuant to the Securities Exchange Act of 1934, as amended; and (viii)
not knowingly do or fail to do anything which will cause a breach of, or default
in, any
38
contract, agreement, commitment, obligation, understanding, arrangement, lease
or license to which it is a party or by which it is or may be subject or bound
which would reasonably be expected to have a Material Adverse Effect on the
financial condition, results of operations, business, assets, or capital of POHF
or Peoples Savings.
6.04. Insurance. POHF and Peoples Savings shall maintain, or cause to be
maintained, in full force and effect, insurance on its assets, properties and
operations, fidelity coverage and directors' and officers' liability insurance
in such amounts and with regard to such liabilities and hazards as are currently
insured by POHF or Peoples Savings as of the date of this Agreement.
6.05. Affiliate Agreements. Within thirty (30) days after the date of this
Agreement and promptly thereafter until the Effective Time to reflect any
changes, POHF will provide MainSource with a list identifying each person who
may be deemed to be an affiliate of POHF for purposes of Rule 145 under the
Securities Act of 1933 (the "1933 Act"). On or before the date on which such
initial list of affiliates is provided to MainSource, and thereafter as may be
required for a person who may be deemed an affiliate of POHF following such
date, POHF shall use its best efforts to obtain from each director, executive
officer and other person who may be deemed to be such an affiliate of POHF to
deliver to MainSource on or prior to the Effective Time a written agreement,
substantially in the form as attached hereto as EXHIBIT 6.05.
6.06. Acquisition Proposals. (a) On and after the date of this Agreement
and until the Effective Time or until this Agreement is terminated as herein
provided, except with the prior written approval of MainSource, neither POHF nor
Peoples Savings shall permit or authorize its directors, officers, employees,
agents or representatives to, directly or indirectly, initiate, solicit or
encourage, or provide information to, any corporation, association, partnership,
person or other entity or group concerning any merger, consolidation, share
exchange, combination, purchase or sale of substantial assets, sale of shares of
common stock (or securities convertible or exchangeable into or otherwise
evidencing, or any agreement or instrument evidencing the right to acquire,
capital stock) or similar transaction relating to POHF or Peoples Savings or to
which POHF or Peoples Savings may become a party (all such transactions are
hereinafter referred to as "Acquisition Transactions").
(b) POHF shall promptly communicate to MainSource the terms of any proposal
or offer which POHF or Peoples Savings may receive with respect to an
Acquisition Transaction. Notwithstanding anything to the contrary elsewhere in
this Agreement, POHF may, in response to an unsolicited written proposal with
respect to an Acquisition Transaction from a third party, furnish information
to, and negotiate, explore or otherwise engage in substantive discussions with
such third party, and enter into any such agreement, arrangement or
understandings, in each case, only if POHF's Board of Directors determines in
good faith by majority vote, after consultation with its financial advisors and
outside legal counsel, that failing to take such action would be a breach of the
fiduciary duties of POHF's Board of Directors in connection with seeking an
Acquisition Transaction.
(c) In the event POHF's Board of Directors, after consultation with its
financial advisors and outside legal counsel, determines in good faith that it
would result in a violation of its fiduciary duties under applicable law to
recommend this Agreement and the Company Merger to
39
POHF's shareholders for their approval, then in submitting this Agreement to the
shareholders at the meeting of shareholders, POHF may submit this Agreement
without recommendation of approval, in which case the Board of Directors may
communicate the basis for its lack of a recommendation of approval to the
shareholders in the proxy statement or an appropriate amendment or supplement
thereto to the extent required by law.
(d) This Section 6.06 shall not authorize POHF or Peoples Savings, or any
of their directors, officers, employees, agents or representatives, to initiate
any discussions or negotiations with respect to an Acquisition Transaction with
a third party.
6.07. Press Releases. Neither POHF nor Peoples Savings will issue any press
or news releases or make any other public announcements or disclosures relating
to the Mergers without first providing a final copy of such press or news
release to MainSource and providing MainSource with a reasonable opportunity to
comment on such press or news release.
6.08. Material Changes to Disclosure Schedules. POHF and Peoples Savings
shall promptly submit to MainSource supplements, amendments and updates, upon
the occurrence of any change prior to the Effective Time, and as of the
Effective Time, to the POHF Disclosure Schedule with respect to any matters or
events hereafter arising which, if in existence or having occurred as of the
date of this Agreement, would have been required to be set forth or described in
the Disclosure Schedule or this Agreement and including, without limitation, any
fact which, if existing or known as of the date hereof, would have made any of
the representations or warranties of POHF or Peoples Savings contained herein
materially incorrect, untrue or misleading. No such supplement, amendment or
update shall become part of the Disclosure Schedule unless MainSource shall have
first consented in writing with respect thereto.
6.09. Access; Information. (a) MainSource and its representatives and
agents, shall, at all times during normal business hours prior to the Effective
Time, have full and continuing access to the properties, facilities, operations,
books and records of POHF and Peoples Savings. MainSource, and its
representatives and agents may, prior to the Effective Time, make or cause to be
made such reasonable investigation of the operations, books, records and
properties of POHF and Peoples Savings and their subsidiaries and of their
financial and legal condition as deemed necessary or advisable to familiarize
themselves with such operations, books, records, properties and other matters;
provided, however, that such access or investigation shall not interfere
unnecessarily with the normal business operations of POHF or Peoples Savings.
Upon request, POHF will furnish MainSource or its representatives or agents, its
attorneys' responses to external auditors requests for information, management
letters received from its external auditors and such financial, loan and
operating data and other information reasonably requested by MainSource which
has been or is developed by POHF, its auditors, accountants or attorneys
(provided with respect to attorneys, such disclosure would not result in the
waiver by POHF of any claim of attorney-client privilege), and will permit
MainSource or its representatives or agents to discuss such information directly
with any individual or firm performing auditing or accounting functions for POHF
or Peoples Savings, as applicable, and such auditors and accountants will be
directed to furnish copies of any reports or financial information as developed
to MainSource or its representatives or agents, as applicable. No investigation
by MainSource shall affect the representations and warranties made by POHF or
Peoples Savings
40
herein. Any confidential information or trade secrets received by MainSource or
its representatives or agents in the course of such examination will be treated
confidentially, and any correspondence, memoranda, records, copies, documents
and electronic or other media of any kind containing such confidential
information or trade secrets or both shall be destroyed by MainSource, or at
POHF's request, returned to POHF in the event this Agreement is terminated as
provided in Article IX hereof. This Section 6.09 will not require the disclosure
of any information to MainSource which would be prohibited by law. The ability
of MainSource to consult with any tax advisor (including a tax advisor
independent from all other entities involved in the transactions contemplated
hereby) shall not be limited by this Agreement in any way, provided that any
such tax advisor is otherwise subject to and is bound by this Section 6.09.
Notwithstanding anything herein to the contrary (other than the preceding
sentence), except as reasonably necessary to comply with applicable securities
laws, MainSource (and each employee, representative or agent of MainSource) may
disclose to any and all persons, without limitation of any kind, the tax
treatment (as defined in Treas. Reg. Section 1.6011-4) of the transactions
contemplated hereby and all materials of any kind (including opinions or other
tax analyses) that are or have been provided to MainSource relating to such tax
structure, provided that, in the case of any materials that contain information
other than the tax treatment or tax structure of the transactions contemplated
hereby (including, but not limited to, any information relating to the pricing
or any cost of the transactions contemplated hereby or the identity of any party
to the transactions contemplated hereby), this sentence shall apply to such
materials only to the extent that such materials contain the tax treatment or
tax structure of the transactions contemplated hereby and MainSource shall take
all action necessary to prevent the disclosure of such other information as
otherwise provided herein. The immediately preceding sentence shall not be
effective until the earliest of (a) the date of the public announcement of
discussions relating to any of the transactions contemplated hereby, (b) the
date of the public announcement of any of the transactions contemplated hereby
or (c) the date of the execution of an agreement, with or without conditions, to
enter into any of the transactions contemplated hereby.
(b) Beginning on the date of this Agreement, James L. Saner, President of
MainSource, or his designees, shall be entitled to receive notice of and to
attend all regular and special meetings of the board of directors and all
committees of POHF and Peoples Savings, including, without limitation, the loan
committee, investment committee, the executive committee, the personnel
committee, and any other committee of POHF and Peoples Savings, except that any
such person shall be excluded from the portion of any meeting where this
Agreement or the transactions contemplated by this Agreement are being
discussed.
6.10. Financial Statements. As soon as reasonably available after the date
of this Agreement, POHF will deliver to MainSource any additional audited
consolidated financial statements which have been prepared on its behalf or at
its direction, the monthly consolidated unaudited balance sheets and profit and
loss statements of POHF prepared for its internal use, Peoples Savings's TFRs
for each quarterly period completed prior to the Effective Time, and all other
financial reports or statements submitted to regulatory authorities after the
date hereof, to the extent permitted by law (collectively, "Subsequent POHF
Financial Statements"). The Subsequent POHF Financial Statements will be
prepared on a basis consistent with past accounting practices and generally
accepted accounting principles applied on a consistent basis to the extent
applicable and shall present fairly the financial condition and results of
operations
41
as of the dates and for the periods presented. The Subsequent POHF Financial
Statements, including the notes thereto, will not include any assets,
liabilities or obligations or omit to state any assets, liabilities or
obligations, absolute or contingent, or any other facts, which inclusion or
omission would render such financial statements inaccurate, incomplete or
misleading in any material respect.
6.11. Environmental. If requested by MainSource, POHF and Peoples Savings
will provide reasonable access to an environmental consulting firm designated by
MainSource in connection with the conduct by such firm of a phase one
environmental site assessment (a "Phase I") on all real property owned or leased
by POHF or Peoples Savings as of the date of this Agreement, and any real
property acquired or leased by POHF or Peoples Savings after the date of this
Agreement, and POHF and Peoples Savings will reasonably respond to inquiries
made by such environmental consulting firm necessary to complete the Phase I's.
In the event MainSource requests a phase two environmental site assessment (a
"Phase II") on any real property owned or leased by POHF or Peoples Savings as
of the date of this Agreement or acquired or leased by POHF or Peoples Savings
after the date of this Agreement, POHF and Peoples Savings will provide
reasonable access to the environmental firm designated by MainSource in
connection with the conduct by such firm of the Phase II. MainSource shall
promptly provide to POHF and Peoples Savings, upon request, copies of any such
Phase I and Phase II prepared at MainSource's request and all data related
thereto. MainSource agrees to protect, defend, indemnify and hold harmless POHF
and Peoples Savings with respect to any loss, cost, damage or liability arising
out of or related to the Phase I and/or Phase II activities. MainSource agrees
to repair any property damage caused by the Phase I and/or Phase II and properly
remove any groundwater wells or other investigation or monitoring devices upon
completion of the Phase I and Phase II activities. MainSource agrees to keep all
reports, data and findings related to the Phase I and Phase II confidential and
shall not disclose such information to any third person other than MainSource's
attorneys and agents, without the prior written consent of POHF or Peoples
Savings. MainSource also agrees to not unreasonably interfere with the business
conducted by POHF or Peoples Savings as part of the Phase I and Phase II
activities. Further, any Phase II activities shall be conducted, to the extent
possible, outside the business hours of the location on which the Phase II is
being conducted.
In the event that the cost of taking all remedial or other corrective
actions and measures (i) required by applicable law, or (ii) reasonably
recommended or suggested by such report or reports or (iii) reasonably
considered by MainSource to be prudent in light of serious life, health or
safety concerns, exceed the sum of $150,000, in the aggregate, as reasonably
estimated by such environmental firm, or if the cost of such actions and
measures cannot be so reasonably estimated by such environmental firm to be such
amount or less with any reasonable degree of certainty, then MainSource shall
have the right pursuant to Section 9.01(b) hereof, for a period of 15 business
days following receipt of such estimate or indication that the cost of such
actions and measures cannot be so reasonably estimated, to terminate this
Agreement, which shall be MainSource's sole remedy in such event. MainSource
agrees to pay the costs of any Phase I or Phase II investigation prepared or
conducted at MainSource's request pursuant to this Section 6.11.
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6.12. Governmental Reports. Promptly upon its becoming available, POHF
shall furnish to MainSource one (1) copy of each financial statement, report,
notice, or proxy statement sent by POHF or Peoples Savings to any Governmental
Authority or to POHF's shareholders generally and of each regular or periodic
report, registration statement or prospectus filed by POHF with the SEC or any
successor agency, and of any order issued by any Governmental Authority in any
proceeding to which POHF or Peoples Savings is a party. For purposes of this
provision and Section 7.11, "Governmental Authority" means any government (or
any political subdivision or jurisdiction thereof), court, bureau, agency or
other governmental entity having or asserting jurisdiction over the applicable
party or its business, operations or properties.
6.13. Adverse Actions. Neither POHF nor Peoples Savings shall knowingly
take any action that is intended or is reasonably likely to result in (w) any of
their representations and warranties set forth in this Agreement being or
becoming untrue in any respect at any time at or prior to the Effective Time,
(x) any of the conditions to the Mergers set forth in Article VIII not being
satisfied, (y) a material violation of any provision of this Agreement or (z) a
delay in the consummation of the Mergers except, in each case, as may be
required by applicable law or regulation.
6.14. ESOP Component of 401(k) Plan. POHF shall take any such actions as
are necessary to ensure that (i) all POHF employees who are participants in the
POHF ESOP portion of the 401(k) Plan, to the extent POHF Common Stock is held in
their accounts, have the opportunity to complete an Election Form and to vote
with respect to the Company Merger, (ii) the 401(k) Plan trustee has the
authority necessary to sell or exchange the POHF stock held by the 401(k) Plan
and to otherwise participate in the transactions contemplated by this Agreement,
and (iii) no violation of ERISA or the Code occurs in the POHF ESOP's sale or
exchange of the POHF stock held by the 401(k) Plan, or the transactions
contemplated by this Agreement. Additionally, POHF shall take any such actions
as are necessary to ensure that, as of the Effective Time or as soon as
practicable thereafter, all shares of POHF Common Stock held by the 401(k) Plan
shall be converted into rights to receive the Merger Consideration in respect
thereof, to the extent consistent with the applicable provisions governing the
401(k) Plan, all outstanding indebtedness of the POHF ESOP shall be repaid
using: (i) unallocated POHF shares held by the 401(k) Plan or the Cash
Consideration received for such unallocated shares, to the extent allowed by
applicable law, (ii) all amounts held in the suspense account, and (iii) finally
with such other payments as determined appropriate by POHF and MainSource, any
assets remaining in the suspense fund under the 401(k) Plan after payment of all
outstanding indebtedness and other liabilities of the 401(k) Plan shall be
allocated to the accounts of the POHF employees who are participants in the
401(k) Plan, as provided by the 401(k) Plan and applicable laws. POHF shall make
no contributions to the POHF ESOP portion of the 401(k) Plan between the date
hereof and the Effective Time other than such as may be required to maintain the
tax-qualified status of the 401(k) Plan or to enable the 401(k) Plan to make
required payments on the exempt loans currently outstanding to it.
With respect to POHF stock allocated to the accounts of each 401(k) Plan
participant, said participants shall be entitled to vote on the approval and
adoption of this Agreement and shall be entitled to select the Merger
Consideration, similar to any other shareholder of POHF.
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Unallocated POHF stock held by the 401(k) Plan shall be voted as provided in the
provisions governing the POHF ESOP portion of the 401(k) Plan; however, only
Cash Consideration shall be paid for the unallocated POHF stock held by the
401(k) Plan.
Before the adoption of any amendment to the 401(k) Plan, POHF shall first
submit the amendment to MainSource for its review and approval. Subsequent to
the Effective Time, MainSource shall be the successor of POHF with respect to
the POHF ESOP to the extent it is a successor of POHF with respect to the 401(k)
Plan, and MainSource shall hold all authority necessary to terminate or
otherwise dispose of the POHF ESOP as otherwise provided herein.
6.15. POHF Stock Option Plans. Within forty-five (45) days of the date of
this Agreement, POHF shall use its best efforts to obtain written consents from
each holder to whom a POHF Stock Option is outstanding consenting to the
disposition of such option in accordance with the provisions of Section 3.01
above, and agreeing not to exercise such option on or before the Effective Date
unless (A) this Agreement is terminated and the Company Merger is abandoned
pursuant to Article IX or (B) such exercise is made not more than one week
before the date on which the option otherwise would cease to be exercisable;
provided, however, that POHF shall obtain such consents from the members of the
Board of Directors of POHF who hold such POHF Stock Options.
6.16. Defined Contribution Plan. On and after the date of this Agreement,
and until the plan is merged or disposed of in a legal manner, or participation
in the plan is otherwise discontinued, and at a time to be determined by
MainSource or until this Agreement shall be terminated as herein provided:
(i) POHF shall continue to sponsor, maintain and administer the 401(k)
Plan in accordance with its terms and conditions, as set forth in its plan and
trust document as of the date of this Agreement, and in accordance with
applicable law;
(ii) POHF or Peoples Savings shall continue to fund all employee and
employer contributions to the 401(k) Plan which are required during this time
period. However, POHF and Peoples Savings may only make discretionary employer
contributions after receipt of written approval from MainSource, which approval
shall not be unreasonably withheld if the amount of any discretionary employer
contributions are not in excess of the discretionary employer contributions made
by POHF or Peoples Savings to the 401(k) Plan during the last Plan Year; and
(iii) neither POHF nor Peoples Savings shall amend, or cause an
amendment of, the 401(k) Plan without the prior written consent of MainSource,
except for any amendment which is necessary to maintain the qualification of the
401(k) Plan and its related employee benefit trust for favorable income tax
treatment under Sections 401(a) and 501(a) of the Code, respectively, or as
otherwise required by law, regulations, the Service or the Department of Labor,
or as permitted under Section 6.14 above.
(iv) POHF and Peoples Savings shall not terminate or agree to the
termination of the appointment of any fiduciary as defined in ERISA with respect
to the 401(k) Plan without the
44
prior written consent of MainSource, which consent shall not be unreasonably
withheld, except for any termination attributable to a breach by such fiduciary
of any fiduciary duty imposed on the fiduciary under ERISA; and
(v) neither POHF nor Peoples Savings shall terminate, agree to the
termination of, or cause the termination of any agreement with any service
provider providing services to the 401(k) Plan as of the date of this Agreement
without the prior written consent of MainSource, which consent shall not be
unreasonably withheld, except for any termination attributable to a breach by
such service provider of its service agreement.
6.17. Defined Benefit Plan. Prior to the Effective Time, the Board of
Directors of POHF shall take the following actions with respect to the Defined
Benefit Plan: (a) amend the Defined Benefit Plan to (i) discontinue any further
accrual of benefit under the Defined Benefit Plan by a POHF director or employee
participating in the Defined Benefit Plan ("POHF Participant") as of the date of
execution of this Agreement and (ii) terminate and otherwise discontinue the
Defined Benefit Plan on or before the Effective Time; (b) deposit funds
sufficient to pay from the Defined Benefit Plan to each POHF Participant the
present value of his accrued benefit; (c) calculate the present value of each
POHF Participant's accrued benefit based on the mortality tables contained in
the Defined Benefit Plan and using the highest applicable interest rate provided
by the Defined Benefit Plan and as permitted by applicable law and the Pension
Benefit Guaranty Corporation and as otherwise determined by the actuary for the
Defined Benefit Plan; and (d) pay from the Defined Benefit Plan the amount
referred to in (c) to each POHF Participant, in a single sum in cash or, if
elected by the payee, a paid up annuity contract, on or before the Effective
Time. POHF shall take any actions necessary to effectuate the foregoing,
including filing appropriate applications with the Service necessary to comply
with the provisions of this Section 6.17, but otherwise subject to MainSource's
prior review and approval of such actions and applications. In addition, prior
to the adoption of any amendment to the Defined Benefit Plan, MainSource shall
be allowed to first review and approve such amendment, and MainSource shall be
promptly copied on any correspondence between the Benefit Plan and POHF or
POHF's counsel. Subsequent to the Effective Time, MainSource shall be the
successor of POHF with respect to the Defined Benefit Plan and MainSource shall
hold all authority necessary to comply with the provisions of this Section 6.17.
6.18. Employment, Change of Control and Severance Agreements.
(a) Prior to the Effective Time, Ronald B. Scott will continue to be paid
the compensation provided for in his employment agreement with POHF and Peoples
Savings dated as of November 1, 2004, and will continue participating in the
employee benefit, retirement, and compensation plans and other perquisites
provided for in such Agreement. Any benefits payable under insurance, health,
retirement and bonus plans through the Effective Date will be paid when due
under those plans. At the Effective Time, Mr. Scott's employment agreement with
POHF and Peoples Savings shall terminate, and POHF shall pay to Mr. Scott, in
consideration of such termination, a cash sum equal to the amount payable to Mr.
Scott under such agreement as a result of the Mergers. POHF shall obtain from
Mr. Scott, within thirty (30) days after the date as of which this Agreement is
dated, a binding written commitment, in the event the Company Merger is
consummated, to accept the amounts payable under this Section 6.18(a) in lieu of
(i)
45
any amounts that otherwise would be payable, and benefits to which he would be
entitled, under his employment agreement with POHF and (ii) any right to receive
payments under the MainSource severance policy if his employment is terminated
during the one-year period after the Effective Time.
(b) Prior to the Effective Time, Richard J. Dutton will continue to be paid
the compensation provided for in his employment agreement with POHF and Peoples
Savings dated as of November 1, 2004, and will continue participating in the
employee benefit, retirement, and compensation plans and other perquisites
provided for in such Agreement. Any benefits payable under insurance, health,
retirement and bonus plans through the Effective Date will be paid when due
under those plans. At the Effective Time, Mr. Dutton's employment agreement with
POHF and Peoples Savings shall terminate, and Peoples Savings shall pay to Mr.
Dutton, in consideration of such termination, a cash sum equal to the amount
payable to Mr. Dutton under such agreement as a result of the Mergers. POHF
shall obtain from Mr. Dutton, within thirty (30) days after the date as of which
this Agreement is dated, a binding written commitment, in the event the Company
Merger is consummated, to accept the amounts payable under this Section 6.18(b)
in lieu of (i) any amounts that otherwise would be payable, and benefits to
which he would be entitled, under his employment agreement and (ii) any right to
receive payments under the MainSource severance policy if his employment is
terminated during the one-year period after the Effective Time.
(c) Prior to the Effective Time, John Wannemacher will continue to be paid
the compensation provided for in his employment agreement with Peoples Savings
dated as of September 28, 2005, and will continue participating in the employee
benefit, retirement, and compensation plans and other perquisites provided for
in such Agreement. Any benefits payable under insurance, health, retirement and
bonus plans through the Effective Date will be paid when due under those plans.
At the Effective Time, Mr. Wannemacher's employment agreement with Peoples
Savings shall terminate, and Peoples Savings shall pay to Mr. Wannemacher, in
consideration of such termination, a cash sum equal to the amount payable to Mr.
Wannemacher under such agreement as a result of the Mergers. Peoples Savings
shall obtain from Mr. Wannemacher, within thirty (30) days after the date as of
which this Agreement is dated, a binding written commitment, in the event the
Company Merger is consummated, to accept the amounts payable under this Section
6.18(c) in lieu of (i) any amounts that otherwise would be payable, and benefits
to which he would be entitled, under his employment agreement and (ii) any right
to receive payments under the MainSource severance policy if his employment is
terminated during the one-year period after the Effective Time.
(d) Prior to the Effective Time, the change in control agreements and
severance agreements between POHF or Peoples Savings, as applicable, and the
employees listed in the POHF Disclosure Schedule as being party to such
agreements shall terminate, and POHF or Peoples Savings, as applicable, shall
pay to such employees, in consideration of such termination, such amounts as may
be required by such agreements to be paid or as may be acceptable to such
employees to permit the termination of such agreements. POHF shall obtain from
each of such employees, within thirty (30) days after the date as of which this
Agreement is dated, a binding written commitment, in the event the Company
Merger is consummated, to accept the amounts so payable in lieu of (i) any
amounts that otherwise would be payable, and
46
benefits to which he or she would be entitled, under such change in control
agreements or severance agreements and (ii) any right to receive payments under
the MainSource severance policy if his employment is terminated during the
one-year period after the Effective Time.
6.19 Short-Swing Trading Exception. POHF's board of directors shall adopt
such resolutions as are necessary to cause any shares of POHF Common Stock or
POHF Stock Options owned by executive officers and directors of POHF and
canceled in the Company Merger to qualify for the exemptions provided in Rule
16b-3(d) under the Securities Exchange Act of 1934, as amended.
ARTICLE VII
COVENANTS OF MAINSOURCE
MainSource covenants and agrees with POHF and Peoples Savings as follows:
7.01. Approvals. MainSource shall have primary responsibility for the
preparation, filing and costs of all bank holding company and bank regulatory
applications required for consummation of the Mergers, and shall file such
applications as promptly as practicable and in the most expeditious manner
practicable, and in any event, within thirty (30) days after the execution of
this Agreement. MainSource shall provide to POHF's counsel copies of all
applications filed and copies of all material written communications with all
state and federal bank regulatory agencies relating to such applications.
MainSource shall proceed expeditiously, cooperate fully and use its best efforts
to procure, upon terms and conditions reasonably acceptable to MainSource, all
consents, authorizations, approvals, registrations and certificates, to complete
all filings and applications and to satisfy all other requirements prescribed by
law which are necessary for consummation of the Mergers on the terms and
conditions provided in this Agreement at the earliest possible reasonable date.
7.02. SEC Registration. (a) MainSource shall file with the SEC as promptly
as practicable and in the most expeditious manner practicable, and in any event,
within forty-five (45) days after the execution of this Agreement, a
Registration Statement on an appropriate form under the 1933 Act covering the
shares of MainSource Common Stock to be issued pursuant to this Agreement and
shall use its best efforts to cause the same to become effective and thereafter,
until the Effective Time or termination of this Agreement, to keep the same
effective and, if necessary, amend and supplement the same. Such Registration
Statement and any amendments and supplements thereto are referred to in this
Agreement as the "Registration Statement". The Registration Statement shall
include a proxy statement-prospectus reasonably acceptable to MainSource and
POHF, prepared for use in connection with the meeting of shareholders of POHF
referred to in Section 6.01 hereof, all in accordance with the rules and
regulations of the SEC. MainSource shall, as soon as practicable after filing
the Registration Statement, make all filings required to obtain all blue sky
exemptions, authorizations, consents or approvals required for the issuance of
MainSource common stock. MainSource shall bear all expenses involved in the
printing and mailing of the proxy statement-prospectus to the shareholders of
POHF in accordance with the rules and regulations of the SEC and the election
and proration procedures set forth in Section 3.04.
47
7.03. Employee Benefit Plans.
(a) As soon as practicable following the Effective Time (subject to the
terms and conditions of the applicable benefit plan), MainSource will make
available to the officers and employees of POHF and Peoples Savings who continue
as employees of Merger Corp or any subsidiary of MainSource after the Effective
Time, subject to Section 7.03(c) hereof, substantially the same employee
benefits on substantially the same terms and conditions as MainSource offers to
similarly situated officers and employees. POHF's and Peoples Savings's
employees will receive full credit for prior service with POHF or Peoples
Savings or their predecessors, for purposes of eligibility, vesting and period
of service requirements under these employee benefit plans of MainSource and its
subsidiaries. Those employees of POHF or Peoples Savings who become employees of
MainSource or its subsidiaries at the Effective Time ("Former POHF Employees")
shall become eligible to participate in MainSource's employee benefit plans as
soon as reasonably practicable after the Effective Time, and shall not be
subject to any waiting periods or pre-existing condition limitations under the
medical, dental and health plans of MainSource or its subsidiaries in which they
are eligible to participate at the Effective Time, unless otherwise required by
the insurance company or other vendor offering the particular benefit.
(b) As soon as reasonably practicable following the Effective Time, subject
to applicable law and the requirements of the MainSource Financial Group, Inc.
401(k) Plan ("MainSource 401(k) Plan"), MainSource shall succeed POHF as the
participating employer in the POHF 401(k) Plan, thereafter discontinue
participation in the POHF 401(k) Plan, as otherwise provided in the POHF 401(k)
Plan document, and amend as necessary the MainSource 401(k) Plan so that, (i)
from and after the Effective Time, employees of POHF who become employees of the
Surviving Corporation will accrue benefits pursuant to the MainSource 401(k)
Plan, and (ii) from and after the merger of those plans, former POHF employees
participating in the MainSource 401(k) Plan shall receive credit for eligibility
and vesting purposes, for the service of such employees with POHF and Peoples
Savings or their predecessors prior to the Effective Time as if such service
were with MainSource or its subsidiaries; provided, however, that the benefit of
any such former POHF employee in respect of service prior to the Effective Time
shall be determined under the contribution formulae under the POHF 401(k) Plan
as in effect from time to time prior to the Effective Time and the benefit of
any such former POHF employee in respect of service from and after the Effective
Time shall be determined under the contribution formulae under the MainSource
401(k) Plan as in effect from time to time from and after the Effective Time.
(c) Neither the terms of this Section 7.03 nor the provision of any
employee benefits by MainSource or any of its subsidiaries to employees of POHF
or Peoples Savings shall:
(i) create any employment contract, agreement or understanding with or
employment rights for, or constitute a commitment or obligation of employment
to, any of the officers or employees of POHF or Peoples Savings; or
48
(ii) prohibit or restrict MainSource, whether before or after the
Effective Time, from changing, amending or terminating any employee benefits
provided to its employees from time to time, provided such change, amendment or
termination does not affect the qualified status of such employee benefits or
violate applicable law or regulations.
7.04. Adverse Actions. MainSource shall not knowingly take any action that
is intended or is reasonably likely to result in (i) any of its representations
and warranties set forth in this Agreement being or becoming untrue in any
respect at any time at or prior to the Effective Time, (ii) any of the
conditions to the Merger set forth in Article VIII not being satisfied, (iii) a
material violation of any provision of this Agreement or (iv) a delay in the
consummation of the Mergers except, in each case, as may be required by
applicable law or regulation.
7.05. Severance. With the exception of Ronald B. Scott, Richard J. Dutton,
John Wannemacher and the employees listed in the POHF Disclosure Schedule as
being party to change in control agreements or severance agreements, those
employees of POHF or its subsidiaries as of the Effective Time whom MainSource
or its subsidiaries elect not to employ after the Effective Time or who are
terminated other than for cause within one year after the Effective Time or
voluntarily resign within one year after the Effective Time after being notified
that, as a condition of employment, they must work at a location more than 50
miles from their former location of employment or that their salary will be
materially decreased, shall be entitled to severance benefits on substantially
the same terms and conditions as MainSource offers to similarly situated
officers and employees. Nothing in this Section 7.05 shall be deemed to limit or
modify MainSource's at will employment policy.
7.06. D &O Insurance/Indemnification.
(a) For a period of three (3) years from the Effective Time, MainSource
shall use its reasonable best efforts to obtain an endorsement to its director's
and officer's liability insurance policy to cover the present and former
officers and directors of POHF and Peoples Savings (determined as of the
Effective Time) with respect to claims against such directors and officers
arising from facts or events which occurred before the Effective Time, which
insurance shall contain at least the same coverage and amounts, and contain
terms and conditions no less advantageous, as that coverage currently provided
by POHF; provided, however, that if MainSource is unable to obtain such
endorsement, then POHF may purchase tail coverage under its existing director
and officer liability insurance policy for such claims; provided, further, that
in no event shall MainSource be required to expend in the aggregate during such
three-year period more than three (3) times the current annual amount spent by
POHF (the "Insurance Amount") to maintain or procure its current directors' and
officers' insurance coverage; provided, further, that if MainSource is unable to
maintain or obtain the insurance called for by this Section 7.06, MainSource
shall use its reasonable best efforts to obtain as much comparable insurance as
is available for the Insurance Amount; provided, further, that officers and
directors of POHF or Peoples Savings may be required to make application and
provide customary representations and warranties to MainSource's insurance
carrier for the purpose of obtaining such insurance.
49
(b) For six (6) years after the Effective Time, MainSource shall indemnify,
defend and hold harmless the present and former officers and directors of POHF
and Peoples Savings against all losses, expenses (including attorneys' fees),
claims, damages or liabilities arising out of actions or omission occurring on
or prior to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement) to the full extent then permitted under the IBCL
and by MainSource's Articles of Incorporation as in effect on the date hereto,
including provisions relating to advances of expenses incurred in the defense of
any action or suit. Such indemnification shall be limited to the excess of such
losses, expenses, claims, damages or liabilities over the amount paid by any
insurance in force pursuant to Section 7.06(a).
(c) If MainSource shall consolidate with or merge into any other entity and
shall not be the continuing or surviving entity of such consolidation or merger
or shall transfer all or substantially all of its assets to any entity, then and
in each case, proper provision shall be made so that the successors and assigns
of MainSource shall assume the obligations set forth in this Section 7.06.
7.07 Short-Swing Trading Exemption. Prior to the Effective Date, the board
of directors of MainSource shall adopt such resolutions as necessary to cause
any shares of MainSource Common Stock to be received by executive officers and
directors of POHF as part of the Merger Consideration to qualify for the
exemptions provided in Rule 16b-3(d) under the Securities Exchange Act of 1934,
as amended.
7.08 Formation of MergerCorp and Execution of Agreement and Plan of Merger.
MainSource agrees to file the necessary regulatory applications to organize
MergerCorp promptly after the execution of this Agreement. MainSource shall
cause MergerCorp to execute the Agreement for Subsidiary Merger attached as
EXHIBIT 2.01(E)(II) as soon as practicable after it has been organized.
7.09 Access; Information. (a) POHF, and its representatives and agents,
shall, at all times during normal business hours prior to the Effective Time,
have full and continuing access to the properties, facilities, operations, books
and records of MainSource. POHF, and its representatives and agents may, prior
to the Effective Time, make or cause to be made such reasonable investigation of
the operations, books, records and properties of the other party and its
subsidiaries and of its financial and legal condition as deemed necessary or
advisable to familiarize themselves with such operations, books, records,
properties and other matters; provided, however, that such access or
investigation shall not interfere unnecessarily with the normal business
operations of MainSource or its subsidiaries. Upon request, MainSource will
furnish POHF, or its representatives or agents, its attorneys' responses to
external auditors' requests for information, management letters received from
its external auditors and such financial, loan and operating data and other
information reasonably requested by POHF which has been or is developed by
MainSource, its auditors, accountants or attorneys (provided with respect to
attorneys, such disclosure would not result in the waiver by MainSource of any
claim of attorney-client privilege), and will permit POHF or its representatives
or agents to discuss such information directly with any individual or firm
performing auditing or accounting functions for MainSource, and such auditors
and accountants will be directed to furnish copies of any reports or financial
information as developed to POHF or its representatives or agents, as
50
applicable. No investigation by POHF shall affect the representations and
warranties made by MainSource herein. Any confidential information or trade
secrets received by POHF or its representatives or agents in the course of such
examination will be treated confidentially, and any correspondence, memoranda,
records, copies, documents and electronic or other media of any kind containing
such confidential information or trade secrets or both shall be destroyed by
POHF, or at MainSource's request, returned to MainSource in the event this
Agreement is terminated as provided in Article IX hereof. This Section 7.09 will
not require the disclosure of any information to POHF which would be prohibited
by law. The ability of POHF to consult with any tax advisor (including a tax
advisor independent from all other entities involved in the transactions
contemplated hereby) shall not be limited by this Agreement in any way, provided
that any such tax advisor is otherwise subject to and is bound by this Section
7.09. Notwithstanding anything herein to the contrary (other than the preceding
sentence), except as reasonably necessary to comply with applicable securities
laws, POHF (and each employee, representative or agent of POHF) may disclose to
any and all persons, without limitation of any kind, the tax treatment (as
defined in Treas. Reg. Section 1.6011-4) of the transactions contemplated hereby
and all materials of any kind (including opinions or other tax analyses) that
are or have been provided to POHF relating to such tax structure, provided that,
in the case of any materials that contain information other than the tax
treatment or tax structure of the transactions contemplated hereby (including,
but not limited to, any information relating to the pricing or any cost of the
transactions contemplated hereby or the identity of any party to the
transactions contemplated hereby), this sentence shall apply to such materials
only to the extent that such materials contain the tax treatment or tax
structure of the transactions contemplated hereby and POHF shall take all action
necessary to prevent the disclosure of such other information as otherwise
provided herein. The immediately preceding sentence shall not be effective until
the earliest of (a) the date of the public announcement of discussions relating
to any of the transactions contemplated hereby, (b) the date of the public
announcement of any of the transactions contemplated hereby or (c) the date of
the execution of an agreement, with or without conditions, to enter into any of
the transactions contemplated hereby.
7.10 Financial Statements. As soon as internally available after the date
of this Agreement, MainSource will deliver to POHF any additional audited
consolidated financial statements which have been prepared on its behalf or at
its direction and the quarterly consolidated unaudited balance sheets and profit
and loss statements of MainSource (collectively, "Subsequent MainSource
Financial Statements"). The Subsequent MainSource Financial Statements will be
prepared on a basis consistent with past accounting practices and generally
accepted accounting principles applied on a consistent basis to the extent
applicable and shall present fairly the financial condition and results of
operations as of the dates and for the periods presented. The Subsequent
MainSource Financial Statements, including the notes thereto, will not include
any assets, liabilities or obligations or omit to state any assets, liabilities
or obligations, absolute or contingent, or any other facts, which inclusion or
omission would render such financial statements inaccurate, incomplete or
misleading in any material respect.
7.11 Governmental Reports. Promptly upon its becoming publicly available,
MainSource shall furnish to POHF one (1) copy of each financial statement,
report, notice, or proxy statement sent by MainSource to any Governmental
Authority or to MainSource's shareholders generally and of each regular or
periodic report, registration statement or prospectus
51
filed by MainSource with the SEC or any successor agency, and of any order
issued by any Governmental Authority in any proceeding to which MainSource is a
party.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE MERGERS
8.01. MainSource. The obligation of MainSource to consummate the Mergers is
subject to the satisfaction and fulfillment of each of the following conditions
on or prior to the Effective Time, unless waived in writing by MainSource:
(a) Representations and Warranties at Effective Time. Each of the
representations and warranties of POHF and Peoples Savings contained in this
Agreement shall be true, accurate and correct in all material respects at and as
of the Effective Time as though such representations and warranties had been
made or given on and as of the Effective Time (except that representations and
warranties that by their express terms speak as of the date of this Agreement or
some other date shall be true and correct only as of such date); provided that
no representation or warranty of POHF or Peoples Savings shall be deemed untrue,
inaccurate or incorrect for purposes hereunder as a consequence of the existence
of any fact, event or circumstance inconsistent with such representation or
warranty, unless such fact, event or circumstance, individually or taken
together with all other facts, events or circumstances inconsistent with any
representations or warranty of POHF or Peoples Savings, has had or would result
in a Material Adverse Effect on POHF.
(b) Covenants. Each of the covenants and agreements of POHF and Peoples
Savings shall have been fulfilled or complied with in all material respects from
the date of this Agreement through and as of the Effective Time.
(c) Deliveries at Closing. MainSource shall have received from POHF at the
Closing the items and documents, in form and content reasonably satisfactory to
MainSource, set forth in Section 11.02(b) hereof.
(d) Registration Statement Effective. MainSource shall have registered its
shares of MainSource Common Stock to be issued to shareholders of POHF in
accordance with this Agreement with the SEC pursuant to the 1933 Act, and all
state securities and blue sky approvals, authorizations and exemptions required
to offer and sell such shares shall have been received by MainSource. The
Registration Statement with respect thereto shall have been declared effective
by the SEC and no stop order shall have been issued or threatened.
(e) Regulatory Approvals. All regulatory approvals required to consummate
the transactions contemplated hereby, shall have been obtained and shall remain
in full force and effect and all statutory waiting periods in respect thereof
shall have expired and no such approvals shall contain any conditions,
restrictions or requirements which the Board of Directors of MainSource
reasonably determines in good faith would (i) following the Effective Time, have
a Material Adverse Effect on MainSource or (ii) reduce the benefits of the
transactions
52
contemplated hereby to such a degree that MainSource would not have entered into
this Agreement had such conditions, restrictions or requirements been known at
the date hereof.
(f) Shareholder Approval. The shareholders of POHF shall have approved and
adopted this Agreement as required by applicable law and its Articles of
Incorporation.
(g) Officers' Certificate. POHF shall have delivered to MainSource a
certificate signed by its President and its Secretary, dated as of the Effective
Time, certifying that: (i) to the effect set out in Section 8.01(a), the
representations and warranties of POHF and Peoples Savings contained in Article
IV are true, accurate and correct in all material respects on and as of the
Effective Time; (ii) all the covenants of POHF and Peoples Savings have been
complied with in all material respects from the date of this Agreement through
and as of the Effective Time; and (iii) POHF and Peoples Savings have satisfied
and fully complied with all conditions necessary to make this Agreement
effective as to it.
(h) Fairness Opinion. POHF's investment banker shall have issued (as of a
date not later than the mailing date of the proxy statement-prospectus relating
to the Merger to be mailed to the shareholders of POHF) its fairness opinion
stating that the Merger Consideration relating to the Company Merger is fair to
the shareholders of POHF from a financial point of view.
(i) Employment Agreements. Ronald B. Scott shall have entered into an
employment agreement with the Surviving Corporation, effective as of the
Effective Time, in substantially the form attached hereto as EXHIBIT 8.01(i)(1).
(j) Financing. MainSource shall have obtained financing sufficient to pay
the cash portion of the Total Purchase Price on such terms as are acceptable to
MainSource and enable MainSource to 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 MainSource.
(k) Tax Opinion of MainSource's Counsel. MainSource shall have received an
opinion of Bose McKinney & Evans LLP, counsel to MainSource, dated the Closing
Date, to the effect that the Company Merger constitutes a "reorganization"
within the meaning of Section 368 of the Code.
(l) Opinion of POHF's Counsel. MainSource shall have received an opinion of
Squire Sanders & Dempsey L.L.P., counsel to POHF, dated the Closing Date, in
substantially the form of the opinion attached hereto as EXHIBIT 8.01(l).
(m) MainSource Average Stock Price. The MainSource Average Stock Price is
no lower than $14.00 and no higher than $24.00.
(n) 280G Opinion. MainSource shall have received a letter of tax advice, in
a form satisfactory to MainSource, from POHF's outside, independent certified
public accountants to the effect that any amounts that are paid by POHF or
Peoples Savings before the Effective Time, or required under POHF's Plans or
this Agreement to be paid at or after the Effective Time, to
53
persons who are disqualified individuals in respect of POHF, Peoples Savings or
their successors, and that otherwise should be allowable as deductions for
federal income tax purposes, should not be disallowed as deductions for such
purposes by reason of Section 280G of the Code. Among the nonexclusive list of
payments to be considered are those payments referred to under Sections 3.01(b),
6.14, 6.15, 6.17, 6.18, 7.03(b), 7.05, and 8.01(i) of the Agreement, as well as
any other payments made under the POHF Plans because of the transactions
contemplated herein. For purposes of this letter, the basic compensation payable
to Mr. Scott under the employment agreement referred to in Section 8.01(i) may
be deemed to be reasonable compensation for services rendered by those
individuals after the Effective Time; however, such payments shall still be
considered for purposes of the excess parachute payment determination defined in
Section 280G of the Code.
(o) Nasdaq Trading. MainSource shall have filed with Nasdaq any required
notices to permit the MainSource Common Stock issued as the Stock Consideration
to be eligible for quotation and trading on the Nasdaq National Market on the
same basis as other outstanding shares of MainSource Common Stock.
8.02. POHF. The obligation of POHF to consummate the Mergers is subject to
the satisfaction and fulfillment of each of the following conditions on or prior
to the Effective Time, unless waived in writing by POHF:
(a) Representations and Warranties at Effective Time. Each of the
representations and warranties of MainSource contained in this Agreement shall
be true, accurate and correct in all material respects on and as of the
Effective Time as though the representations and warranties had been made or
given at and as of the Effective Time (except that representations and
warranties that by their express terms speak as of the date of this Agreement or
some other date shall be true and correct only as of such date); provided that
no representation or warranty of MainSource shall be deemed untrue, inaccurate
or incorrect for purposes hereunder as a consequence of the existence of any
fact, event or circumstance inconsistent with such representation or warranty,
unless such fact, event or circumstance, individually or taken together with all
other facts, events or circumstances inconsistent with any representations or
warranty of MainSource, has had or would result in a Material Adverse Effect on
MainSource.
(b) Covenants. Each of the covenants and agreements of MainSource shall
have been fulfilled or complied with in all material respects from the date of
this Agreement through and as of the Effective Time.
(c) Deliveries at Closing. POHF shall have received from MainSource at the
Closing the items and documents, in form and content reasonably satisfactory to
POHF, listed in Section 11.02(a) hereof.
(d) Registration Statement Effective. MainSource shall have registered its
shares of MainSource Common Stock to be issued to shareholders of POHF in
accordance with this Agreement with the SEC pursuant to the 1933 Act, and all
state securities and Blue Sky approvals, authorizations and exemptions required
to offer and sell such shares shall have been
54
received by MainSource. The Registration Statement with respect thereto shall
have been declared effective by the MainSource and no stop order shall have been
issued or threatened.
(e) Regulatory Approvals. All regulatory approvals required to consummate
the transactions contemplated hereby, shall have been obtained and shall remain
in full force and effect and all statutory waiting periods in respect thereof
shall have expired and no such approvals shall contain any conditions,
restrictions or requirements which the Board of Directors of POHF reasonably
determines in good faith would (i) following the Effective Time, have a Material
Adverse Effect or (ii) reduce the benefits of the transactions contemplated
hereby to such a degree that POHF would not have entered into this Agreement had
such conditions, restrictions or requirements been known at the date hereof.
(f) Shareholder Approval. The shareholders of POHF shall have approved and
adopted this Agreement as required by applicable law and POHF's Articles of
Incorporation.
(g) Officers' Certificate. MainSource shall have delivered to POHF a
certificate signed by its Chairman or President and its Secretary, dated as of
the Effective Time, certifying that: (i) to the effect set out in Section
8.02(a) that the representations and warranties of MainSource contained in
Article V are true, accurate and correct in all material respects on and as of
the Effective Time; (ii) all the covenants of MainSource have been complied with
in all material respects from the date of this Agreement through and as of the
Effective Time; and (iii) MainSource has satisfied and fully complied with all
conditions necessary to make this Agreement effective as to it.
(h) Fairness Opinion. POHF's investment banker shall have issued (as of a
date not later than the mailing date of the proxy statement-prospectus relating
to the Company Merger to be mailed to the shareholders of POHF) its fairness
opinion stating that the Merger Consideration relating to the Merger is fair to
the shareholders of POHF from a financial point of view.
(i) Tax Opinion of MainSource's Counsel. POHF shall have received an
opinion of Bose McKinney & Evans LLP, counsel to MainSource, to the effect that
(1) the Company Merger constitutes a "reorganization" within the meaning of
Section 368 of the Code and (2) no gain or loss will be recognized by
shareholders of POHF to the extent they receive shares of MainSource Common
Stock as part of the Merger Consideration.
(j) Payments Required by Section 6.18. The payments required by Section
6.18shall have been made.
(k) Opinion of MainSource's Counsel. POHF shall have received an opinion of
Bose McKinney & Evans LLP, counsel to MainSource, dated the Closing Date, in
substantially the form of the opinion attached hereto as EXHIBIT 8.02(l).
(l) MainSource Average Stock Price. The MainSource Average Stock Price is
no lower than $14.00 and no higher than $24.00.
55
(m) Nasdaq Trading. MainSource shall have filed with Nasdaq any required
notices to permit the MainSource Common Stock issued as the Stock Consideration
to be eligible for quotation and trading on the Nasdaq National Market on the
same basis as other outstanding shares of MainSource Common Stock.
ARTICLE IX
TERMINATION OF MERGERS
9.01. Manner of Termination. This Agreement and the Mergers may be
terminated at any time prior to the Effective Time by written notice delivered
by MainSource to POHF, or by POHF to MainSource, as follows:
(a) By MainSource or POHF, if:
(i) the Mergers contemplated by this Agreement have not been
consummated by June 30, 2006; provided, however, that a party hereto in willful
breach of or willful default hereunder shall have no right to terminate this
Agreement pursuant to this Section 9.01(a)(i); or
(ii) the Agreement and the Company Merger are not approved by the
requisite vote of the shareholders of POHF at the Special Meeting of
Shareholders of POHF; or
(iii) the respective Boards of Directors of MainSource and POHF
mutually agree to terminate this Agreement.
(b) By MainSource if:
(i) at any time prior to the Effective Time, MainSource's Board of
Directors so determines, in the event of either:
(A) a breach by POHF of any representation or warranty contained herein
that would be reasonably likely, individually or in the aggregate with
other breaches to result in a Material Adverse Effect, unless the
breach is cured within thirty (30) days from the giving of written
notice to POHF of such breach and the same does not result in a
Material Adverse Effect; or
(B) a breach by POHF of any of the covenants or agreements contained
herein that would be reasonably likely, individually or in the
aggregate with other breaches to result in a Material Adverse Effect,
unless the breach is cured within thirty (30) days from the giving of
written notice to POHF of such breach and the same does not result in
a Material Adverse Effect; or
(ii) it shall reasonably determine that the Mergers contemplated by
this Agreement have become impracticable by reason of commencement or threat of
any claim,
56
litigation or proceeding against MainSource, POHF, Peoples Savings, or any
subsidiary of MainSource, or any director or officer of any of such entities
relating to this Agreement or the Mergers; or
(iii) there has been a Material Adverse Effect in the business,
assets, capitalization, financial condition or results of operations of POHF or
Peoples Savings as of the Effective Time, as compared to that in existence as of
the date of this Agreement; or
(iv) POHF's Board of Directors submits, or intends to submit, this
Agreement to the shareholders without recommending the approval of this
Agreement or fails to solicit proxies for approval of this Agreement; or
(v) POHF fulfills the requirements of Section 6.01 hereof but the
shareholders of POHF do not approve and adopt the Company Merger and this
Agreement; or
(vi) in the event that POHF fails to maintain a composite rating of at
least two (2) from its latest safety and soundness and compliance examination,
or fails to maintain a CRA rating of satisfactory or better; or
(vii) MainSource elects to exercise its right of termination pursuant
to Section 6.11 hereof;
(c) By POHF, if:
(i) at any time prior to the Effective Time, POHF's Board of Directors
so determines, in the event of either:
(A) a breach by MainSource of any representation or warranty contained
herein that would be reasonably likely, individually or in the
aggregate with other breaches to result in a Material Adverse Effect,
unless the breach is cured within thirty (30) days from the giving of
written notice to POHF of such breach and the cure does not result in
a Material Adverse Effect; or
(B) a breach by MainSource of any of the covenants or agreements contained
herein that would be reasonably likely, individually or in the
aggregate with other breaches, to result in a Material Adverse Effect
on MainSource, unless the breach is cured within thirty (30) days
after the giving of written notice to MainSource of such breach and
any such cure would not result in a Material Adverse Effect; or
(ii) there has been a change constituting a Material Adverse Effect in
the financial condition, results of operations, business, assets or
capitalization of MainSource on a consolidated basis as of the Effective Time,
as compared to that in existence on June 30, 2005; or
(iii) it shall reasonably determine that the Mergers contemplated by
this Agreement have become impracticable by reason of commencement or threat of
any claim, litigation or proceeding against MainSource, POHF or Peoples Savings
or any subsidiary of
57
MainSource or any director or officer of any such entities (A) relating to this
Agreement or the Mergers or (B) which is likely to have a Material Adverse
Effect on MainSource; or
(iv) POHF fulfills the requirements of Section 6.01 hereof but the
shareholders of POHF do not approve and adopt the Company Merger and this
Agreement.
9.02. Effect of Termination. Upon termination by written notice, this
Agreement shall be of no further force or effect, and there shall be no further
obligations or restrictions on future activities on the part of MainSource or
POHF and their respective directors, officers, employees, agents and
shareholders, except as provided in compliance with: (i) the confidentiality
provisions of this Agreement set forth in Sections 6.09 and 7.09 hereof; and
(ii) the payment of expenses set forth in Section 12.11 hereof, provided,
however, that termination will not in any way release a breaching party from
liability for any willful breach of this Agreement giving rise to such
termination; and (iii) the payment of the Termination Fee as provided by Section
9.03 hereof. The obligation to pay the Termination Fee in accordance with
Section 9.03 hereof will survive any termination of this Agreement.
9.03 Termination Fee. In recognition of the efforts, expenses and other
opportunities foregone by MainSource and POHF while structuring and pursuing the
Mergers, the parties agree that a termination fee of $1,000,000 plus
out-of-pocket expenses in the aggregate amount of $200,000 (collectively, the
"Termination Fee") shall be paid by the applicable party if this Agreement is
terminated:
(i) by MainSource pursuant to Section 9.01 (b)(i) or (iv) above and
MainSource is not in breach of this Agreement, in which case POHF shall pay the
Termination Fee to MainSource.
(ii) by POHF pursuant to Section 9.01 (c)(i) above and POHF is not in
breach of this Agreement, in which case MainSource shall pay the Termination Fee
to POHF.
Each party acknowledges that the agreements contained in this Section 9.03
are an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, each party would not have entered into this
Agreement; accordingly, if a party fails promptly to pay the amount due pursuant
to this Section 9.03, and, in order to obtain such payment, the other party
commences an action which results in a judgment against the other party for the
Termination Fee, the payor party shall pay to the payee party its costs and
expenses (including attorneys' fees and expenses) in connection with such
action, together with interest on the amount of the Termination Fee at the rate
of six percent (6%) per annum.
ARTICLE X
EFFECTIVE TIME OF THE MERGERS
Upon the terms and subject to the conditions specified in this Agreement,
the Mergers will become effective on the day and at the time (the "Closing
Date") specified in the Certificate of Merger of Merger Corp and Peoples Savings
filed with the Ohio Division of Financial Institutions, and the Articles of
Merger of MainSource and POHF as filed with the Indiana
58
Secretary of State and Ohio Secretary of State (the "Effective Time"). Unless
otherwise mutually agreed to by the parties hereto, the Effective Time will
occur on the tenth full Nasdaq trading day immediately following the date on
which the last of the conditions set forth in Article VIII (other than the
delivery of certificates, opinions and other instruments and documents to be
delivered at the Closing, but subject to the delivery at the Closing of such
certificates, opinions and other instruments and documents) is fulfilled or
waived following (a) the fulfillment of all conditions precedent to the Mergers
set forth in Article VIII of this Agreement and (b) the expiration of all
waiting periods in connection with the bank regulatory applications filed for
the approval of the Mergers, and in no event will the Effective Time occur later
than June 30, 2006.
ARTICLE XI
CLOSING
11.01. Closing Date and Place. So long as all conditions precedent set
forth in Article VIII hereof have been satisfied and fulfilled, the closing of
the Mergers (the "Closing") will take place at the Effective Time at a location
to be reasonably determined by MainSource.
11.02. Deliveries. (a) At the Closing, MainSource will deliver to POHF the
following:
(i) the officers' certificate contemplated by Section 8.02(g) hereof;
(ii) copies of all approvals by government regulatory agencies
necessary to consummate the Mergers;
(iii) copies of (A) the resolutions adopted by the Board of Directors
of MainSource certified by the Secretary of MainSource relative to the approval
of this Agreement and the Company Merger; and (b) the resolution adopted by the
Board of Directors and sole shareholder of Merger Corp certified by the
Secretary of Merger Corp relative to the approval of this Agreement and the
Subsidiary Merger;
(iv) the tax opinion required by Section 8.01(k) hereof;
(v) the opinion required by Section 8.02(k) hereof; and
(iv) such other documents as POHF or its legal counsel may reasonably
request.
(b) At the Closing, POHF will deliver to MainSource the following:
(i) the officers' certificate contemplated by Section 8.01(g) hereof;
(ii) copies of (A) the resolutions adopted by the Board of Directors
and shareholders of POHF certified by the Secretary of POHF relative to the
approval of this Agreement and the Company Merger; and (B) the resolutions
adopted by the Board of Directors and sole shareholder of Peoples Savings
certified by the Secretary of Peoples Savings relative to the adoption of this
Agreement and Subsidiary Merger;
59
(iii) such other documents as MainSource or its legal counsel may
reasonably request;
(iv) the fairness opinion required by Sections 8.01(h) and 8.02(h)
hereof;
(v) the affiliate agreements required by Section 6.05 hereof;
(vi) the opinion required by Section 8.01(l) hereof; and
(vii) the employment agreements required by Section 8.01(i) hereof.
(c) As soon as possible after the Closing, POHF will deliver to MainSource
a list of POHF's shareholders as of the Effective Time certified by the
President and Secretary of POHF.
ARTICLE XII
MISCELLANEOUS
12.01. Effective Agreement. This Agreement and the recitals hereof shall be
binding upon and inure to the benefit of and be enforceable by the respective
parties hereto and their respective successors and assigns; provided, however,
that neither this Agreement nor any of the rights, interests or obligations of
the respective parties hereto under this Agreement may not be assigned by any
party hereto without the prior written consent of the other parties hereto. The
representations, warranties, covenants and agreements contained in this
Agreement, as well as the documents and instruments referred to herein, are for
the sole benefit of the parties hereto and their successors and assigns, and
they will not be construed as conferring any rights on any other persons, except
for Sections 6.14, 6.17, 7.03, 7.05 and 7.06 hereof (which are intended for the
benefit of those present and former officers and directors of POHF and Peoples
Savings affected thereby and may be enforced by such persons).
12.02. Waiver; Amendment. (a) The parties hereto may by an instrument in
writing: (i) extend the time for the performance of or otherwise amend any of
the covenants, conditions or agreements of the other parties under this
Agreement; (ii) waive any inaccuracies in the representations or warranties of
the other parties contained in this Agreement or in any document delivered
pursuant hereto or thereto; (iii) waive the performance by the other parties of
any of the covenants or agreements to be performed by it or them under this
Agreement; or (iv) waive the satisfaction or fulfillment of any condition, the
nonsatisfaction or nonfulfillment of which is a condition to the right of the
party so waiving to consummate the Mergers. The waiver by any party hereto of a
breach of or noncompliance with any provision of this Agreement will not operate
or be construed as a continuing waiver or a waiver of any other or subsequent
breach or noncompliance hereunder.
(b) This Agreement may be amended, modified or supplemented only by a
written agreement executed by the parties hereto.
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12.03. Notices. All notices, requests and other communications hereunder
will be in writing (which will include telecopier communication) and will be
deemed to have been duly given if delivered by hand and receipted for, sent by
certified United States Mail, return receipt requested, first class postage
pre-paid, delivered by overnight express receipted delivery service or
telecopied if confirmed immediately thereafter by also mailing a copy of such
notice, request or other communication by certified United States Mail, return
receipt requested, with first class postage pre-paid as follows:
If to MainSource or Merger Corp: with a copy to (which will not
constitute notice):
MainSource Financial Group, Inc. Bose McKinney & Evans LLP
201 North Broadway 2700 First Indiana Plaza
Greensburg, Indiana 47240 135 North Pennsylvania Street
ATTN: James L. Saner, Sr., Indianapolis, Indiana 46204
President and Chief Executive Officer ATTN: Karen Ball Woods
Telephone: (812) 663-0157 Telephone: (317) 684-5376
Fax: (812) 663-4812 Fax: (317) 223-0376
If to POHF: with copies to (which will not
constitute notice):
Peoples Ohio Financial Corporation Squire Sanders & Dempsey, L.L.P.
635 South Market Street 1300 Huntington Center
Troy, Ohio 45373 41 South High Street
ATTN: Ronald B. Scott Columbus, Ohio 43215
Chief Executive Officer ATTN: Fred A. Summer
Telephone: (937) 339-5000 Telephone: (614) 365-2743
Fax: (937) 339-3297 Fax: (614) 365-2499
and
Dungan & LeFevre Co., L.P.A.
210 West Main Street
Troy, Ohio 45373
ATTN: William J. McGraw, III
Telephone: (937) 339-0511
Fax: (937) 335-5802
or such substituted address or person as any of them have given to the other in
writing. All such notices, requests or other communications will be effective:
(a) if delivered by hand, when delivered; (b) if mailed in the manner provided
herein, five (5) business days after deposit with the United States Postal
Service; (c) if delivered by overnight express delivery service, on the next
business day after deposit with such service; and (d) if by telecopier, on the
next business day if also confirmed by mail in the manner provided herein.
61
12.04. Headings. The headings in this Agreement have been inserted solely
for ease of reference and should not be considered in the interpretation or
construction of this Agreement.
12.05. Severability. In case any one or more of the provisions contained
herein will, for any reason, be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability will not affect any
other provision of this Agreement, but this Agreement will be construed as if
such invalid, illegal or unenforceable provision or provisions had never been
contained herein.
12.06. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original, but such counterparts will
together constitute one and the same instrument, and facsimile signatures to
this Agreement shall be considered the same as an original.
12.07. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Indiana and applicable federal laws,
without regard to principles of conflicts of law. Subject to Section 12.13, the
parties hereto hereby agree that all claims, actions, suits and proceedings
between the parties hereto relating to this Agreement shall be filed, tried and
litigated only in the Circuit or Superior Courts of Decatur County, Indiana or
the United States District Court for the Southern District of
Indiana--Indianapolis Division. In connection with the foregoing, the parties
hereto consent to the jurisdiction and venue of such courts and expressly waive
any claims or defenses of lack of personal jurisdiction of or proper venue by
such courts.
12.08. Indemnification. (a) All rights to indemnification and exculpation
from liabilities for acts or omissions occurring at or prior to the Effective
Time now existing in favor of the current or former directors or officers of
POHF or Peoples Savings as provided in either of their charters or by-laws (or
comparable organizational documents) and any existing indemnification agreements
or arrangements of POHF or Peoples Savings, all of which indemnification
agreements or arrangements are described in the Disclosure Schedule, shall
survive the Merger and shall continue in full force and effect in accordance
with their terms to the extent permitted by law, and shall not be amended,
repealed or otherwise modified for a period of three (3) years after the
Effective Time in any manner that would adversely affect the rights thereunder
of such individuals for acts or omissions occurring at or prior to the Effective
Time.
(b) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action suit, proceeding or
investigation in which any individual who is now, or has been at any time prior
to the date of this Agreement, or who becomes prior to the Effective Time, a
director or officer of POHF or Peoples Savings (the "Indemnified Parties"), is,
or is threatened to be, made a party based in whole or in part on, or arising in
whole or in part out of, or pertaining to (i) the fact that he is or was a
director, officer or employee of POHF or Peoples Savings or its predecessors or
(ii) this Agreement or any of the transactions contemplated hereby, whether in
any case asserted or arising before or after the Effective Time, the parties
hereto agree to cooperate and use their best efforts to defend against and
respond thereto.
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(c) MainSource shall cause any successor, whether by consolidation, merger
or transfer of substantially all of its properties or assets, to comply with its
obligations under this Article. The provisions of this Article shall survive the
Effective Time and are intended to be for the benefit of, and shall be
enforceable by, each Indemnified Party and other person named herein and his or
her heirs and representatives.
12.09. Entire Agreement. This Agreement and the Exhibits hereto supersede
all other prior or contemporaneous understandings, commitments, representations,
negotiations or agreements, whether oral or written, among the parties hereto
relating to the Merger or matters contemplated herein and constitute the entire
agreement between the parties hereto, except as otherwise provided herein. Upon
the execution of this Agreement by all the parties hereto, any and all other
prior writings of either party relating to the Mergers, will terminate and will
be rendered of no further force or effect. The parties hereto agree that each
party and its counsel reviewed and revised this Agreement and that the normal
rule of construction to the effect that any ambiguities are to be resolved
against the drafting party will not be employed in the interpretation of this
Agreement or any amendments or exhibits hereto.
12.10. Survival of Representations, Warranties or Covenants. Except as set
forth in the following sentence, none of the representations, warranties or
covenants of the parties will survive the Effective Time or the earlier
termination of this Agreement, and thereafter MainSource, Merger Corp, POHF,
Peoples Savings, and all the respective directors, officers and employees of
MainSource, Merger Corp, POHF and Peoples Savings will have no further liability
with respect thereto. The covenants contained in Sections 6.09 and 7.09
(regarding confidentiality), 9.02, 9.03, 12.07, 12.09, 12.10 and 12.11 shall
survive termination of this Agreement. The covenants contained in Sections 6.09
and 7.09 (regarding confidentiality), 6.14, 6.17, 7.03, 7.05, 7.06, 12.07,
12.08, 12.09, 12.10 and 12.11 shall survive the Effective Time.
12.11. Expenses. Except as provided in Sections 7.02 and 9.03 hereof, each
party to this Agreement shall pay its own expenses incidental to the Mergers
contemplated hereby.
12.12. Certain References. Whenever in this Agreement a singular word is
used, it also will include the plural wherever required by the context and
vice-versa, and the masculine or neuter gender shall include the masculine,
feminine and neuter genders. Except expressly stated otherwise, all references
in this Agreement to periods of days shall be construed to refer to calendar,
not business, days. The term "business day" means any day except Saturday and
Sunday when MainSource Bank, in Greensburg, Indiana, a wholly-owned subsidiary
of MainSource, is open for the transaction of business.
12.13 Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by the parties by means
of arbitration in Greensburg, Indiana (or such other location as the parties
mutually agree) in accordance with the then prevailing Commercial Arbitration
Rules of the American Arbitration Association, and judgment upon the award
rendered by the arbitrator(s) shall be final and binding upon the parties and
may be entered and enforced as a judgment in any court having jurisdiction
thereof. Any party may demand that a disputed matter be submitted to arbitration
by giving written notice to the other
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parties specifying the nature of the dispute and demanding arbitration. An
arbitrator shall be chosen in accordance with the prevailing Commercial
Arbitration Rules of the AAA. The arbitrator shall permit or prohibit discovery
in his sole discretion and may admit or exclude evidence in his sole discretion.
The expense of any arbitration or any related court proceedings shall be
allocated to and borne by the parties as determined by the arbitrator in his
sole discretion; provided, however, that each party shall bear and pay for the
cost of its own experts, witnesses, evidence and counsel and any other cost in
connection with the arbitration and presentation of its case.
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IN WITNESS WHEREOF, MainSource, POHF and Peoples Savings have made and
entered into this Agreement as of the day and year first above written and have
caused this Agreement to be executed, attested in counterparts and delivered by
their duly authorized officers.
MAINSOURCE FINANCIAL GROUP, INC.
By: /s/ James. L. Saner, Sr.
------------------------------------
James. L. Saner, Sr.,
President and CEO
PEOPLES OHIO FINANCIAL CORPORATION
By: /s/ Ronald B. Scott
------------------------------------
Ronald B. Scott,
President, Chief Executive Officer
PEOPLES SAVINGS AND LOAN ASSOCIATION
By: /s/ Ronald B. Scott
------------------------------------
Ronald B. Scott,
President, Chief Executive Officer
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INDEX OF EXHIBITS
Exhibit 1.01(e)(i) Indiana Articles of Merger (Company Merger)
Exhibit 1.01(e)(ii) Plan of Merger (Company Merger)
Exhibit 1.01(e)(iii) Ohio Certificate of Merger (Company Merger)
Exhibit 2.01(e) Ohio Certificate of Merger (Subsidiary Merger)
Exhibit 3.02(b)(ii) POHF Consolidated Shareholders' Equity Adjustment Example
Exhibit 6.05 Form of Affiliate Agreement
Exhibit 8.01(i)(1) Employment Agreement with Ronald B. Scott
Exhibit 8.01(l) Form of Opinion of Counsel to POHF
Exhibit 8.02(l) Form of Opinion of Counsel to MainSource
EXHIBIT 8.01(i)(1)
EMPLOYMENT AGREEMENT
This Employment Agreement, effective as of _________________, 20___ (the
"Effective Date"), among MainSource Bank-Ohio, an Ohio commercial bank (the
"Bank"), Ronald B. Scott ("Employee") and MainSource Financial Group, Inc., an
Indiana corporation ("Parent").
RECITALS
A. The Bank is engaged in the business of commercial banking, including but
not limited to the promotion of savings through the solicitation of deposits
from the general public, the promotion of home ownership through the origination
of mortgage loans primarily to finance the purchase, construction or improvement
of residential real estate and the origination of loans for automobile
purchases, commercial and personal purposes (the "Business").
B. The Bank desires to retain, by contract, a qualified individual to serve
as President and Chief Executive Officer of the Bank ("Management Position").
C. Employee has knowledge and experience to serve in such capacity and the
parties wish to confirm their employment relationship pursuant to the terms and
conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, and other good and valuable consideration, the parties agree
as follows:
1. EMPLOYMENT. The Bank hereby employs Employee in a Management Position
and Employee hereby accepts employment, upon the terms and conditions
hereinafter set forth.
2. TERM. Subject to the provisions for termination as provided in
paragraphs 10 and 12 hereof, the term of this Agreement shall commence on the
Effective Date hereof and continue until December 31, 2006. The term of the
Agreement may not be extended by election of Employee.
3. DUTIES. During the term hereof, Employee shall serve in a Management
Position of the Bank and shall to the best of his efforts manage, direct and
administer the operations of the Bank including, but not limited to, such
matters as budgeted net income, asset quality, employee involvement in the
community, growth of loans and deposits, and various other functions as assigned
from time to time. Employee shall report to the President of Parent. The precise
services, duties and authority of Employee may be further defined, extended or
curtailed from time to time at the discretion of the President of Parent;
provided, however, that such services, duties and authority shall always be
consistent with those which are customary for his position with the Bank. The
Employee shall exercise his duties of employment in a manner consistent with and
in compliance with the requirements of all applicable statutes of the United
1
States of America and the State of Ohio and of the administrative rules and
regulations issued thereunder and of the procedures, rules and regulations of
the applicable regulatory agencies of the United States of America and the State
of Ohio. Similarly, Employee shall exercise his supervision and control over the
employees of the Bank that report to him in such a manner as to encourage them
to exercise their duties of employment so as to meet the standards provided by
the previous sentence of this paragraph.
4. EXTENT OF SERVICES. Employee, subject to the control of the President of
Parent, shall have the power and authority commensurate and necessary to his
position with the Bank. Employee shall devote his entire employable time,
attention and best efforts to the Business of the Bank and shall not, without
the consent of the President of Parent, during the term of this Agreement, be
actively engaged in any other business activity, whether or not such business
activity is pursued for gain, profit or other pecuniary advantage; but this
shall not be construed as preventing Employee from investing his personal assets
in such form or manner as will not require any services on the part of Employee
in the operation of the affairs of the enterprise in which such investments are
made. Employee shall be a full-time employee of the Bank and shall devote at
least forty (40) hours per week (excused absences and vacation periods counted
as hours worked for this purpose) to the affairs of the Bank, unless the
President of Parent consents to a shorter work period. During the term of his
employment hereunder, the Employee shall not provide any banking or bank-related
services or solicit or engage in any banking or bank-related business otherwise
than on behalf of the Bank or an affiliate of the Bank.
5. BOARD MEMBER. So long as the Bank exists as a separate entity and is not
merged or consolidated into another entity, and so long as Employee remains
employed by the Bank pursuant to the terms of this Agreement, including any
extensions hereof, Parent shall cause Employee to be elected as a member of the
Bank's Board of Directors and in accordance with the Code of Regulations of the
Bank. While serving as a director of the Bank, Employee shall be entitled to
receive director fees at any time that it is the policy of the Parent or any of
its subsidiaries to pay directors who are also employees such fees. Upon the
termination of this Agreement, unless the Parent otherwise consents to his
retention on the Board, Employee shall take any actions necessary to remove
himself from the Board of Directors of the Bank.
6. COMPENSATION. Employee shall be compensated for services rendered
hereinunder during the term hereof as follows:
(a) As an incentive for Employee to enter into this Agreement for the term
hereof, the Bank, within sixty (60) days following the execution of this
Agreement, shall pay Employee, in a lump sum, Thirty-Five Thousand Dollars
($35,000.00), subject to withholding of taxes and other customary amounts.
(b) Employee shall receive an annualized base salary of One Hundred Forty
Thousand Dollars ($140,000.00). Base salary hereunder shall be payable in equal
periodic installments consistent with the Bank's payroll practices and subject
to withholding of taxes and other customary amounts.
(c) Employee shall not be eligible to participate in the Bank's Executive
Performance Bonus Plan for calendar year 2006 (payable in 2007).
2
7. FRINGE BENEFITS.
(a) Subject to Employee's payment of the employee portion of the costs of
coverage, Employee shall be entitled to participate in the employee benefit and
welfare plans, retirement plans and insurance programs offered by the Bank, or
which it may adopt from time to time, in accordance with the terms and
conditions of any such plans and programs, for its management or supervisory
personnel generally. Nothing herein shall be construed so as to prevent the Bank
from modifying or terminating any employee benefit or welfare plans or programs
or employee fringe benefits it may adopt from time to time.
(b) Employee shall be entitled to paid time off during the term hereof in
accordance with the Bank's policies.
(c) The Bank shall reimburse Employee for all reasonable expenses he may
incur for promoting the Business, including expenses for entertainment, travel,
and similar items, subject to such limits and conditions as the Bank or Parent
may reasonably establish. The Bank shall also pay for Employee's membership in a
local country club during the term of this Agreement.
(d) During the term of this Agreement, the Bank shall furnish Employee a
non-luxury automobile made by an American manufacturer suitable to the nature of
his position and adequate for the performance of his employment. The Bank will
maintain, insure and provide fuel for operation of such automobile in accordance
with policies or practice established from time to time by Parent.
8. DISABILITY. If Employee shall become physically or mentally disabled
during the term of this Agreement to the extent that he shall be unable to
perform his duties and services for and on behalf of the Bank, the Bank shall
continue to make payment of a portion of Employee's base salary in the amount
and for the duration as set forth in Parent's policies or practices established
from time to time by Parent for executive managers of its bank subsidiaries. A
copy of Parent's disability policy has been provided to Employee.
9. CONFIDENTIALITY.
(a) The Bank possesses and will continue to possess information which
has been created, discovered, developed by or otherwise become known to the Bank
(including information discovered or made available by subsidiaries, affiliates
or joint ventures of the Bank or in which property rights have been assigned or
otherwise conveyed to the Bank) which information (whether in print or
electronic format) has commercial value to the Bank, including but not limited
to trade secrets, innovations, processes, computer codes, data, know how,
improvements, discoveries, developments, techniques, marketing plans,
strategies, costs, customers, and client lists, or any information Employee has
reason to know the Bank would like to treat as confidential for any purpose,
such as maintaining a competitive advantage or avoiding undesired publicity,
whether or not developed by Employee ("Confidential Information"). Unless
previously authorized in writing or instructed in writing by the Bank, Employee
will not, at any time, disclose to others, or use, or allow anyone else to
disclose or use any Confidential Information (except as may be necessary in the
performance of Employee's employment with the Bank), unless and until and then
only to the extent that, such Confidential Information has
3
become ascertainable or obtained from public or published sources or was
available to the Bank on a non-confidential basis prior to any disclosure,
provided that the source of such material is or was not bound by any obligation
of confidentiality to the Bank.
(b) Upon termination of employment to the extent he has not already
done so, the Employee will deliver to the Bank any and all Information and
Property (as herein defined) then in his possession or subject to his control.
For purposes of this sub-section, the term "Information and Property" means and
includes (i) all files, records, reports, memoranda and other documents, whether
written or electronic, that the Employee received, prepared, helped prepare,
directed the preparation of, maintained or kept in connection with his services
as a director, officer or employee of the Bank or any of its affiliates; (ii)
all door and file keys, identification cards or badges, credit cards, computer
hardware, computer software, computer printers, computer access codes and
similar items issued or made available to the Employee in connection with his
service as a director, officer or employee of the Bank or any of its affiliates;
(iii) all documents, whether written or electronic, containing any trade secrets
(as defined below) of the Bank or any of its affiliates; and (iv) all documents,
whether written or electronic, containing non-public information regarding the
Bank or any of its affiliates or its customers or employees, the use or
disclosure of which might be adverse to the best interests of such entity or its
business. The Employee expressly agrees and promises that he will not retain any
copies, duplicates, reproductions, or excerpts of any Information and Property.
The Employee acknowledges that this obligation is continuing and agrees promptly
to deliver to the Bank any subsequently discovered Information and Property and
any subsequently discovered copies, duplicates or reproductions of, or excerpts
from, Information and Property. In the case of electronic data contained in
files residing on the Employee's personally-owned computers, the Employee shall
permit access to such computers to Bank representatives to delete all such files
(including any drives or disks associated therewith) that can be located easily
and delete all other such files (including any drives or disks associated
therewith) as and when they are discovered. Notwithstanding anything else in
this subparagraph (i), the Employee may retain documents concerning any benefit
plans or employment policies from which he may be or become entitled to benefits
and documents concerning his rights under this Agreement. As used herein, "trade
secret" means information, including a formula, pattern, compilation, program,
device, method, technique, or process, that (A) derives independent economic
value, actual or potential, from not being generally known to, and not being
readily ascertainable by proper means by, other persons who can obtain economic
value from its disclosure or use; and (B) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
10. TERMINATION.
(a) The Bank may terminate this Agreement during the term hereof for
just cause upon written notice to Employee.
(b) This Agreement may also be terminated (i) whenever the Bank and
Employee shall mutually agree to a termination in writing, (ii) upon the
resignation or death of Employee, (iii) pursuant to paragraph 12, or (iv) upon
expiration of the term hereof.
(c) Upon the termination of this Agreement by the Bank for just cause
as defined in subparagraph (d), or pursuant to paragraph 12, or upon the
resignation or death of
4
Employee, Employee or his personal representative shall be entitled to receive
only the compensation accrued but unpaid as of the date of the termination
hereof and shall not be entitled to any compensation following the termination
date or additional compensation except as expressly provided in this Agreement.
(d) Just cause shall include, but not be limited to:
(i) Employee's misuse or conviction of embezzlement of funds
belonging to the Bank, conviction of, or plea by Employee of nolo contendre to,
any felony or crime involving fraud or moral turpitude, or use of alcohol or
drugs or other conduct in such a manner as will injure or adversely effect the
Bank or its employees, customers, agents, officers or directors;
(ii) Employee's absence from his employment for a period in
excess of paid time off as provided in paragraph 7(b) for any reasons other than
family and medical leave under the Bank's policies;
(iii) Employee's absence from employment or inability to perform
his duties hereunder as a result of physical or mental disability for a period
in excess of the period for which salary is continued pursuant to paragraph 8 or
in excess of family and medical leave under the Bank's policies;
(iv) Employee's failure to perform substantially his duties with
the Bank, his intentional breach of the provisions of this Agreement, his gross
negligence or willful malfeasance in discharging his obligations hereunder and
such acts and their consequences are not remedied within ten (10) days (or such
longer reasonable period of time designated by the Bank) after written notice
hereof has been given to Employee.
11. NON-COMPETITION. Employee acknowledges that the services he will render
to the Bank under this Agreement will be of a special and unusual character,
with a unique value to the Bank. Employee has served in an executive management
position with and was a shareholder of the holding company for the banking
entity merged into the Bank and has acquired unique and invaluable information
about and developed relationships with customers who will continue to use the
services of the Bank and for which he will continue to receive benefit. Employee
further acknowledges the scope of the Bank's Business and that any limitations
on his post-employment activities are necessary to protect the Bank's Business
because of its scope. In view of the unique value to the Bank of the services of
Employee, his prior relationship with the predecessor of the Bank, because of
the confidential information of the Bank obtained by or disclosed to Employee,
and as a material inducement to the Bank to enter into this Agreement and to
provide Employee the compensation and benefits stated herein, including the
signing bonus, and other good and valuable consideration, Employee covenants and
agrees that for the period of two (2) years following the date of termination of
employment with the Bank for any reason, Employee will not, directly or
indirectly, either as a principal, agent, manager, partner, director, officer,
consultant or shareholder, on his behalf or on behalf of any other entity:
5
(a) in Miami County Ohio, or the counties in the State of Ohio which
are contiguous to Miami County, Ohio, own, manage, operate, control, be employed
by, participate in, render assistance to or be connected in any manner with the
ownership, management, representation, operation or control of any entity which
competes with the Business of the Bank at the time of termination of employment
with the Bank;
(b) solicit, entice or encourage any employee of the Bank to leave
employment with the Bank and to not hire or employ (or cause and/or assist,
whether directly or indirectly any third party to hire or employ) any such
employee; and
(c) contact, solicit, encourage or induce any customers of the Bank to
obtain business and/or services from any entity (other than the Bank) which is
engaged in any activity competitive with the Business of the Bank.
The term "customer" shall mean any person or entity to which the Bank has
provided services during the one (1) year period prior to the date of
termination or persons or entities targeted by the Bank or contacted for the
purpose of selling such goods or services during such one (1) year period.
12. REGULATORY PROVISIONS.
(a) If the Employee is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
1818(e)(3) and (g)(1)), the Bank's obligations under this Agreement shall be
suspended as of the date of service unless stayed by appropriate proceedings. If
the charges in the notice are dismissed, the Bank shall (i) pay the Employee all
or part of the compensation withheld while its contract obligations were
suspended, and (ii) reinstate (in whole or in part) any of its obligations which
were suspended.
(b) If the Employee is removed and/or permanently prohibited from
participation in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
1818(e)(4) or (g)(1)), the employment of Employee and all obligations of the
Bank under this Agreement shall terminate as of the effective date of the order.
(c) If the Bank is in default (as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act), the employment of Employee and all obligations
of the Bank under this Agreement shall terminate as of the date of default.
(d) The employment of Employee and all obligations of the Bank under
this Agreement may be terminated, except to the extent it is determined that
continuation of this Agreement is necessary for the continued operation of the
Bank: (i) by the Director of the Federal Deposit Insurance Corporation (the
"Director") or his or her designee, at the time the Federal Deposit Insurance
Corporation enters into an agreement to provide assistance to or on behalf of
the Bank under the authority contained in Section 13(c) of the Federal Deposit
Insurance Act; or (ii) by the Director or his or her designee at the time the
Director or his or her designee approves a supervisory merger to resolve
problems related to operation of the Bank or when the Bank is determined by the
Director to be in an unsafe or unsound condition.
6
13. REMEDIES. Given the important nature of the services Employee will
provide to the Bank, the scope and nature of the Bank's business and the
sensitive nature of the information and functions Employee will have with the
Bank, Employee acknowledges that the limitations contained herein in paragraphs
9 and 11 are reasonable. In the event of an actual or threatened breach by
Employee of the provisions of paragraphs 9 and 11, the Bank shall be entitled to
an injunction restraining Employee from such breach in addition to recovery of
monetary damages together with the costs and expenses and reasonable attorney's
fees and expenses incurred by Bank in seeking and enforcement such provisions in
paragraphs 9 and 11. If Employee violates any covenants contained in paragraphs
9 and 11, the terms and the covenants violated shall be automatically extended
to a like period of time from the date on which Employee ceases such violation
or from the date of entry by a court of competent jurisdiction of any order or
judgment enforcing such covenant, whichever period is later.
14. TAX LIABILITY. It is the intention of Bank and Employee that any and
all payments Employee receives pursuant to this Agreement are reasonable
compensation for services provided by Employee to Bank during the term hereof,
and together with any other payments due to Employee from Bank or its successor
("other payments"), shall not constitute "excess parachute payments" within the
meaning of Sections 280G and 4999 of the Internal Revenue Code of 1986, as
amended. If the Internal Revenue Service or the independent accountants acting
as auditors for Bank or its successor determine that the compensation by itself
or together with other payments constitute "excess parachute payments," the
payments hereunder shall be reduced to the maximum amount which may be paid
without constituting the payments as "excess parachute payments." If, regardless
of the aforesaid adjustment, the Internal Revenue Service determines that the
payments constitute "excess parachute payments" under Sections 280G and 4999 of
the Code, the Bank shall assume responsibility for the loss of any tax
deductions, and Employee shall assume responsibility for payment of any income
and excise taxes attributable to the excess parachute payment.
15. SUCCESSORS AND ASSIGNS. The Bank may assign this Agreement or any part
hereof; but Employee shall not assign this Agreement or any part hereof. This
Agreement shall be binding upon and inure to the benefit of any successor,
assign, heir or personal representative of either party hereto.
16. COVENANTS AND PROMISES SURVIVE TERMINATION OF EMPLOYMENT. Employee
agrees that the obligations, duties and covenants contained in paragraphs 9, 11
and 14 shall survive termination of this Agreement and employment.
17. SEVERABILITY. The parties agree that each and every paragraph,
sentence, clause, term, word and provisions of this Agreement is severable and
that, in the event any portion of this Agreement is adjudged to be invalid or
unenforceable, the remaining portions thereof shall remain in full force and
effect to the fullest extent permitted by law. If any part of paragraph 11 of
this Agreement is for any reason excessively broad as to time duration or
geographic scope, activity or subject, it will be construed by a court by
limiting or reducing it so as to be enforceable to the extent compatible with
applicable law as it then exists.
18. MISCELLANEOUS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, and all of such
together shall constitute one and
7
the same instrument. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
19. GOVERNING LAW. This Agreement shall be interpreted in accordance with
and be governed exclusively by the laws of the State of Ohio. The parties
expressly agree that any and all actions concerning any dispute arising from
this Agreement shall be filed and maintained only in a state court of competent
jurisdiction sitting in Miami County, State of Ohio or the federal U.S. District
Court, Southern District of Ohio, Western Division of Dayton, and each party
consents to such jurisdiction.
20. WAIVER. No waiver by the Bank, of any breach hereunder by Employee
shall be deemed or construed as a waiver of any other breach or of any
subsequent breach. Employee acknowledges that the Bank for business reasons or
otherwise, may waive a breach by another individual of provisions similar to the
provisions agreed to by Employee in this Agreement. Employee acknowledges that
no waiver by the Bank, of any other individuals' breach of provisions similar to
the provisions in this Agreement shall be construed as a waiver of any breach by
the Employee of this Agreement.
21. NOTICES. All notices required to be given under the terms of this
Agreement shall be in writing and shall be deemed to be given when delivered
personally or sent by registered or certified mail, facsimile transmission, or
electronic mail to the last known residence address Employee has on file with
the Bank, or in case of Bank, to the business address of the Bank.
22. ENTIRE AGREEMENT. This Agreement constitutes the complete agreement
between the parties with regard to the subject matter addressed herein, shall
supersede any and all previous agreements and/or commitments, whether oral or
written, between the parties and shall not be amended or modified absent an
agreement signed by both parties. The parties further agree that no verbal or
other statements, discussions, or impressions, other than those provisions
contained in this Agreement, have been relied upon by either party in executing
this Agreement.
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8
IN WITNESS WHEREOF, the parties have signed, or caused a duly authorized
agent thereof to sign, this Agreement on their behalf and thereby acknowledge
their intent to be bound by its terms and conditions.
MAINSOURCE BANK-OHIO
By: By:
--------------------------------- ------------------------------------
Ronald B. Scott Name:
----------------------------------
Title:
---------------------------------
Date: Date:
------------------------------- ----------------------------------
"Employee" "Bank"
MAINSOURCE FINANCIAL GROUP, INC.
By:
------------------------------------
James L. Saner, Sr., President
Date:
----------------------------------
"Parent"
9