Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated to
be
effective as of February 26, 2008, by and among MAINSOURCE
FINANCIAL GROUP, INC.
("MainSource"), 1st INDEPENDENCE FINANCIAL GROUP, INC. ("1st
Independence") and
1st INDEPENDENCE BANK, INC. ("1st Bank").
W I T N E S S E T H:
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, 1st Independence is a Delaware corporation registered as
a
bank holding company under the BHC Act, with its principal office
located in
Louisville, Jefferson County, Kentucky; and
WHEREAS, 1st Bank is a Kentucky chartered commercial bank with
its
principal office located in Louisville, Jefferson County, Kentucky,
and is a
wholly-owned subsidiary of 1st Independence; and
WHEREAS, MainSource and 1st Independence seek to affiliate through
a
corporate reorganization whereby 1st Independence will merge with
and into
MainSource, as a result of which merger 1st Bank 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 merger
provided for
herein and have approved this Agreement, authorized its execution
and designated
this Agreement a plan of reorganization and a plan of merger;
and
WHEREAS, the members of the Board of Directors of 1st Independence
have
each agreed to execute and deliver to MainSource a voting
agreement
substantially in the form attached hereto as Exhibit A.
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 1st Independence with and into
MainSource, and the
mode of carrying such merger into effect as follows:
ARTICLE I
THE MERGER
1.01.
The
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), 1st
Independence shall merge with and into and under the Articles of
Incorporation
of MainSource (the "Merger"). MainSource shall survive the 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 ("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 2105 North State Road 3 Bypass, 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
serving as directors of MainSource 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 Merger. At the Effective Time, the title to
all
assets, real estate and other property owned by 1st Independence
shall vest in
Surviving Corporation as set forth in Indiana Code Section
23-1-40-6, as
amended, without reversion or impairment. At the Effective Time,
all liabilities
of 1st Independence shall be assumed by Surviving Corporation as
set forth in
Indiana Code Section 23-1-40-6, as amended.
(e) Integration. At the Effective Time and subject to the terms
and
conditions of this Agreement, the parties hereto currently intend
to effectuate,
or cause to be effectuated, the Merger, pursuant to Articles of
Merger,
substantially in the form attached hereto as Exhibit 1.01(e)(i),
and a Plan of
Merger, substantially in the form attached hereto as Exhibit
1.01(e)(ii). 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 Merger.
1.02. Reservation of Right to Revise Structure. At MainSource's
election, the Merger may alternatively be structured so that (a)
1st
Independence 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 1st Independence; 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, $0.10 par value, of 1st Independence ("1st Independence
Common Stock") or
options for 1st Independence Common Stock ("1st Independence Stock
Options"),
(y) prevent the parties from obtaining the opinion of Krieg DeVault
LLP referred
to in Sections 7.01 and 7.02 or otherwise cause the transaction to
fail to
qualify for the tax treatment described in Section 1.03, 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.
1.03. Tax Free Reorganization. MainSource, 1st Independence and
1st
Bank intend for the Merger to qualify as a reorganization within
the meaning of
Section 368(a) and related sections of the Internal Revenue Code of
1986, as
amended (the "Code"), and agree to cooperate and to take such
actions as may be
reasonably necessary to assure such result.
ARTICLE II
MANNER AND BASIS OF EXCHANGE OF STOCK
2.01. Consideration.
(a) Subject to the terms and conditions of this Agreement, at
the
Effective Time, each share of 1st Independence Common Stock issued
and
outstanding immediately prior to the Effective Time (other than (i)
shares held
as treasury stock of 1st Independence, (ii) shares held directly or
indirectly
by MainSource, except shares held in a fiduciary capacity or in
satisfaction of
a debt previously contracted, if any, and (iii) Dissenting Shares
(as defined
below)) shall become and be converted into the right to receive in
accordance
with this Article:
(i) $5.475 (the "Cash Consideration"); and
(ii) 0.881036 shares of common stock (the "Exchange Ratio"),
without par value, of MainSource ("MainSource Common Stock")
(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 the provisions
of
Section 5.15 hereof, at the Effective Time: (i) each outstanding
1st
Independence 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 product of (A) the sum of (i)
(x) the Cash
Consideration plus (y) the product of the Average Share Price of
MainSource
Common Stock (as defined below) multiplied by the Exchange Ratio,
less (ii) the
per share exercise price for each share of 1st Independence Common
Stock subject
to such 1st Independence Stock Option, multiplied by (B) the number
of shares of
1st Independence Common Stock subject to such 1st Independence
Stock Option;
provided, however, that the payer shall withhold from such cash
payment those
taxes required to be withheld by applicable law, if any, and (ii)
each 1st
Independence Stock Option to which this paragraph applies
(regardless of whether
such calculation results in a positive or negative number) will be
cancelled and
shall cease to exist by virtue of such payment. No cash payment
will be made to
any holder of a 1st Independence Stock Option if the calculation
pursuant to
this Section 2.01(b) results in a negative number. The Average
Share Price of
MainSource Common Stock shall be equal to the average per share
closing 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.
(c) Each share of 1st Independence Common Stock that, immediately
prior
to the Effective Time, is held as treasury stock of 1st
Independence 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 Merger be canceled and retired and shall cease to exist, and no
exchange or
payment shall be made therefor.
2.02. Adjustment
to Purchase Price Based Upon 1st Independence's
Consolidated Shareholders' Equity.
(a) If as of the last day of the month preceding the month in which
the
Effective Time occurs (the "Computation Date") the 1st Independence
Consolidated
Tangible Shareholders' Equity, as determined in accordance with
Section 2.02(b),
is less than $26,700,000, the Cash Consideration shall be reduced
on a
dollar-for-dollar basis by an amount equal to the difference
between $26,700,000
and the actual 1st Independence Consolidated Tangible Shareholders'
Equity as of
the Computation Date determined in accordance with Section 2.02(b),
divided by
the total number of shares of 1st Independence Common Stock
outstanding on the
Closing Date. Similarly, if as of the Computation Date the 1st
Independence
Consolidated Tangible Shareholders' Equity, as calculated in
accordance with
Section 2.02(b) less (i) any extraordinary or non-recurring items
of income,
(ii) gains whether realized or unrealized related to 1st
Independent's
investment portfolio and (iii) the difference, if any, between the
total
quarterly loan loss reserve provision expense set forth in the
budget presented
to MainSource and the actual total quarterly loan loss reserve
provision expense
taken by 1st Independence between the date of this Agreement and
the Closing
Date, in each case pro rated as necessary, is greater than
$27,200,000, the Cash
Consideration shall be increased on a dollar-for-dollar basis by an
amount equal
to the difference between the actual 1st Independence Consolidated
Tangible
Shareholders' Equity as of the Computation Date determined in
accordance with
Section 2.02(b) and $27,200,000, divided by the total number of
shares of 1st
Independence Common Stock outstanding on the Closing Date.
(b) The 1st Independence Consolidated Tangible Shareholders'
Equity
(i.e., consolidated shareholders' equity less the amount of
goodwill and core
deposit intangibles but excluding the impact of any changes in any
unrealized
gains or losses on available for sale securities) shall be
determined based upon
the balance sheet of 1st Independence as of the Computation Date,
prepared in
accordance with generally accepted accounting principles
consistently applied,
after adjustment for the following amounts (which amounts shall
also be
calculated in accordance with generally accepted accounting
principles
consistently applied and tax effecting those adjustments, using a
35% tax rate,
where appropriate):
(i) the accrual or payment of any payments or other financial
effect of any of the payments, actions or transactions contemplated
by Sections
5.18 and 5.19; and
(ii) the accrual or payments of an amount to terminate 1st
Bank's data processing contracts with Computer Services, Inc. and
Digital
Insights.
Notwithstanding the foregoing, 1st Independence Consolidated
Tangible
Shareholders' Equity as of the Computation Date will not be
increased due to
increases in 1st Independence's capital stock and surplus as a
result of the
exercise of options under the 2004 Option Plan between the date of
this
Agreement and the Effective Time.
2.03. 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
Merger; instead, MainSource shall pay to each holder of 1st
Independence 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 Average Share Price of MainSource Common Stock.
2.04.
Exchange Procedures.
(a) Distributions by MainSource of the Merger Consideration shall
be
made in accordance with Section 2.01. At and after the Effective
Time, each
certificate representing shares of 1st Independence 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 (i) reserve
a
sufficient number of shares of MainSource Common Stock to be issued
as part of
the Merger Consideration, (ii) deposit with MainSource Bank an
estimated amount
of cash to be issued as part of the Merger Consideration and (iii)
mail to each
holder of 1st Independence Common Stock a letter of transmittal
providing
instructions as to the transmittal to MainSource of certificates
representing
shares of 1st Independence Common Stock and the issuance of cash
and shares of
MainSource Common Stock in exchange therefore pursuant to the terms
of this
Agreement.
(c) MainSource shall cause a certificate representing that number
of
whole shares of MainSource Common Stock that each holder of 1st
Independence
Common Stock has the right to receive pursuant to Section 2.01, and
a check in
the amount of any cash that such holder has the right to receive
pursuant to
Section 2.01, 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 shareholder upon delivery (if not previously delivered) to
MainSource of
certificates representing such shares of 1st Independence 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
accompanied by a properly completed and executed letter of
transmittal, as in
the form and substance reasonably satisfactory to MainSource. No
interest will
be paid on any Merger Consideration that any such person shall be
entitled to
receive pursuant to this Article II 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 1st
Independence Common
Stock converted in the 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 2.04. After becoming
so entitled in
accordance with this Section 2.04, 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 1st Independence 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 1st
Independence of any
shares of 1st Independence 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 2.04.
(f) MainSource shall be entitled to rely upon 1st Independence'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
Old 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
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
2.01 hereof.
(h) Notwithstanding the foregoing, neither the Exchange Agent
(as
defined in Section 2.06 below) nor any party hereto shall be liable
to any
former holder of 1st Independence Common Stock for any amount
properly delivered
to a public official pursuant to applicable abandoned property,
escheat or
similar laws.
(i) In the event that the Merger is not completed for any
reason,
MainSource shall cause the Exchange Agent to promptly return any
Old
Certificates and/or any indemnity instruments received from 1st
Independence
shareholders to such shareholders.
2.05. 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
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 1st
Independence would have received if any of the foregoing actions
had not
occurred.
2.06. Exchange Agent. 1st Independence and MainSource agree
that
MainSource Bank or its designee shall be appointed to act as agent
(the
"Exchange Agent") for purposes of distributing the Merger
Consideration pursuant
to the terms and conditions of this Agreement.
2.07. Dissenting Shares. Shares of 1st Independence Common Stock
which
are issued and outstanding immediately prior to the Effective Time
and which are
held by persons who have properly exercised, and not withdrawn or
waived,
appraisal rights with respect thereto (the "Dissenting Shares") in
accordance
with the General Corporation Law of the State of Delaware (the
"GCL"), will not
be converted into the right to receive the Merger Consideration,
and holders of
such shares of 1st Independence Common Stock will be entitled, in
lieu thereof,
to receive payment of the appraised value of such shares of 1st
Independence
Common Stock in accordance with the provisions of the GCL unless
and until such
holders fail to perfect or effectively withdraw or lose their
rights to
appraisal and payment under the GCL. If, after the Effective Time,
any such
holder fails to perfect or effectively withdraws or loses such
right, such
shares of 1st Independence Common Stock will thereupon be treated
as if they had
been converted at the Effective Time into the right to receive the
Merger
Consideration, without any interest thereon. 1st Independence will
give
MainSource prompt notice of any demands received by 1st
Independence for
appraisal of shares of 1st Independence Common Stock. Prior to the
Effective
Time, 1st Independence will not, except with the prior written
consent of
MainSource, make any payment with respect to, or settle or offer to
settle, any
such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
1st INDEPENDENCE AND 1st BANK
On or prior to the date hereof, 1st Independence has delivered
to
MainSource a schedule (the "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 III or to one or more of its covenants contained in Article
V.
For the purpose of this Agreement, and in relation to 1st
Independence,
a "Material Adverse Effect" means any effect that (i) is material
and adverse to
the financial position, results of operations or business of 1st
Independence
and its subsidiaries taken as a whole, or (ii) would materially
impair the
ability of 1st Independence to perform its obligations under this
Agreement or
otherwise materially threaten or materially impede the consummation
of the
Merger and the other transactions contemplated by this Agreement;
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
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 or their
holding
companies generally, (c) any modifications or changes to valuation
policies and
practices in connection with the Merger or restructuring charges
taken in
connection with the Merger, 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 1st Independence's or 1st Bank's
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)
changes resulting from expenses (such as legal, accounting and
investment
bankers' fees) incurred in connection with this Agreement or the
transactions
contemplated herein, including without limitation those provided in
Sections
5.18 and 5.19 of this Agreement and any benefit or retirement plan
disclosed on
the 1st Independence 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
1st Independence and its subsidiaries, and (h) the occurrence of
any military or
terrorist attack within the United States or any of its possessions
or offices;
provided that in no event shall a change in the trading price of
the 1st
Independence Common Stock, by itself, be considered to constitute a
Material
Adverse Effect on 1st Independence and its subsidiaries taken as a
whole (it
being understood that the foregoing proviso shall not prevent or
otherwise
affect a determination that any effect underlying such decline has
resulted in a
Material Adverse Effect).
For the purpose of this Agreement, and in relation to 1st
Independence
and 1st Bank, "knowledge" means the actual knowledge of N. William
White, R.
Michael Wilbourn, Kathy L. Beach, James P. Wheatley, John Barron
and Terry L.
Batson.
Accordingly, 1st Independence and 1st Bank hereby represent and
warrant
to MainSource as follows, except as set forth in its Disclosure
Schedule:
3.01. Organization and Authority. (a) 1st Independence is a
corporation duly organized and validly existing under the laws of
the state of
Delaware and is a registered bank holding company under the BHC
Act. 1st
Independence 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. 1st
Bank is 1st
Independence's only direct or indirect subsidiary and except as set
forth on the
Disclosure Schedule, 1st Independence owns no voting stock or
equity securities
of any corporation, partnership, association or other entity.
(b) 1st Bank is a commercial bank chartered and existing under the
law
of the state of Kentucky. 1st Bank 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 on the Disclosure Schedule, 1st Bank
has no
subsidiaries and owns no voting stock or equity securities of any
corporation,
partnership, association or other entity.
3.02. Authorization. (a) 1st Independence 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 7.02(e) and (f) hereof. As of the date hereof, 1st
Independence is not
aware of any reason why the approvals set forth in Section 7.02(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
7.02(e). This
Agreement and its execution and delivery by 1st Independence have
been duly
authorized and approved by the Board of Directors of 1st
Independence and,
assuming due execution and delivery by MainSource, constitutes a
valid and
binding obligation of 1st Independence, subject to the fulfillment
of the
conditions precedent set forth in Section 7.02 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, 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
Merger contemplated hereby: (i) conflicts with or violates the
Articles of
Incorporation or By-Laws of 1st Independence or the Articles of
Incorporation or
Bylaws of 1st Bank; (ii) conflicts with or violates 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 Merger 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 1st
Independence or 1st
Bank is a party or by which 1st Independence or 1st Bank 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 1st Independence or 1st Bank which would be material to
1st
Independence; 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
1st
Independence or 1st Bank is bound or with respect to which 1st
Independence or
1st Bank is to perform any duties or obligations or receive any
rights or
benefits, except, in the case of clauses (ii) through (v) which
would not
individually or in the aggregate reasonably be expected to have a
Material
Adverse Effect.
(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 Merger by
1st Independence.
3.03. Capitalization. (a) The authorized capital stock of 1st
Independence as of the date hereof consists, and at the Effective
Time will
consist, of 5,000,000 shares of 1st Independence Common Stock,
1,995,774 shares
of which shares are issued and outstanding as of the date hereof.
Additionally,
options to purchase 64,300 shares of 1st Independence Common Stock
are
outstanding under the 2004 Omnibus Stock Option Plan of 1st
Independence ("2004
Option Plan") and no options to purchase shares of 1st Independence
Common Stock
are outstanding under the 1996 Stock Option Plan of 1st
Independence ("1996
Option Plan"). 500,000 shares of preferred stock, $0.10 par value,
are
authorized, none of which preferred shares are issued and
outstanding. Such
issued and outstanding shares of 1st Independence Common Stock have
been duly
and validly authorized by all necessary corporate action of 1st
Independence,
are validly issued, fully paid and nonassessable and have not been
issued in
violation of any pre-emptive rights of any present or former 1st
Independence
shareholder. Except as set forth in the Disclosure Schedule, 1st
Independence
has no capital stock authorized, issued or outstanding other than
as described
in this Section 3.03(a) and has no intention or obligation to
authorize or issue
any other capital stock or any additional shares of 1st
Independence Common
Stock. Each share of 1st Independence Common Stock is entitled to
one vote per
share. A description of the 1st Independence Common Stock is
contained in the
Articles of Incorporation of 1st Independence, as set forth in the
Disclosure
Schedule pursuant to Section 3.04 hereof.
(b) The authorized capital stock of 1st Bank as of the date
hereof
consists, and at the Effective Time will consist, of 1,000 shares
of common
stock, no par value per share, 1,000 of which shares are validly
issued and
outstanding (such issued and outstanding shares are referred to
herein as "1st
Bank Common Stock"). Such validly issued and outstanding shares of
1st Bank
Common Stock have been duly and validly authorized by all necessary
corporate
action of 1st Bank, are validly issued, fully paid and
nonassessable, and have
not been issued in violation of any pre-emptive rights of any
present or former
1st Bank stockholder. All of the issued and outstanding shares of
1st Bank
Common Stock are owned by 1st Independence 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. 1st Bank has no capital
stock
authorized, issued or outstanding other than as described in
this
Section 3.03(b)and has no intention or obligation to authorize or
issue any
other capital stock or any additional shares of 1st Bank Common
Stock.
(c) Except as set forth in the Disclosure Schedule, there are
no
options, warrants, commitments, calls, puts, agreements,
understandings,
arrangements or subscription rights relating to any shares of 1st
Independence
Common Stock or 1st Bank Common Stock, or any securities
convertible into or
representing the right to purchase or otherwise acquire any common
stock or debt
securities of 1st Independence or 1st Bank, by which 1st
Independence is or may
become bound. 1st Independence does not have any outstanding
contractual or
other obligation to repurchase, redeem or otherwise acquire any of
the issued
and outstanding shares of 1st Independence Common Stock. To the
knowledge of 1st
Independence and 1st Bank, there are no voting trusts, voting
arrangements,
buy-sell agreements or similar arrangements affecting the capital
stock of
either of them.
(d) Except as set forth in the Disclosure Schedule, 1st
Independence
has no knowledge of any person or entity which beneficially owns
(as defined in
Rule 13d-3 under the 1934 Act) 5% or more of its outstanding shares
of common
stock.
3.04. Organizational Documents. The Articles of Incorporation
and
By-Laws of 1st Independence and the Articles of Incorporation and
By-Laws of 1st
Bank, 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 Disclosure Schedule.
3.05. Compliance with Law. (a) Neither 1st Independence nor 1st
Bank
is currently in violation of, and since January 1, 2002, neither
has been in
violation of, 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 violation would not have a
Material Adverse
Effect. 1st Independence and 1st Bank possess and hold all
licenses, franchises,
permits, certificates and other authorizations necessary for the
continued
conduct of their business without interference or interruption,
except where the
failure to possess and hold the same would not have a Material
Adverse Effect,
and to the knowledge of 1st Independence, such licenses,
franchises, permits,
certificates and authorizations are transferable (to the extent
required) to
MainSource at the Effective Time without any restrictions or
limitations thereon
or the need to obtain any consents of government agencies or other
third parties
other than as set forth in this Agreement.
(b) Set forth on the Disclosure Schedule is a list of 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
1st
Independence or 1st Bank 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, 1st Independence or 1st Bank, and all documents
relating
thereto have been made available to MainSource, including, without
limitation,
all correspondence, written communications and written commitments
related
thereto. 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 1st Independence or 1st Bank as a result of an examination by
any regulatory
agency or body, or set forth in any accountant's or auditor's
report to 1st
Independence or 1st Bank.
(c) Since the enactment of the Sarbanes-Oxley Act, 1st
Independence
has been and is in compliance in all material respects with the
applicable
provisions of the Sarbanes-Oxley Act. The Disclosure Schedule sets
forth, as of
the date hereof, a schedule of all officers and directors of 1st
Independence
who have outstanding loans from 1st Independence or 1st Bank, or
any other
subsidiary of either, and there has been no default on, or
forgiveness or waiver
of, in whole or in part, any such loan during the two (2) years
immediately
preceding the date hereof.
(d) All of the existing offices and branches of 1st Bank 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. 1st Bank has no approved but unopened offices or
branches.
3.06. Accuracy of Statements Made and Materials Provided to
MainSource. No representation, warranty or other statement made, or
any
information provided, by 1st Independence or 1st Bank in this
Agreement or the
Disclosure Schedule (and any update thereto) and no written
information which
has been or shall be supplied by 1st Independence or 1st Bank 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 Merger, contains or shall contain (in the case of
information relating to
the proxy statement-prospectus at the time it is first mailed to
1st
Independence'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
1st Independence or 1st Bank 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.
3.07. Litigation and Pending Proceedings. Except as set forth in
the
Disclosure Schedule:
(a) Except for lawsuits involving collection of delinquent
accounts,
there are no claims, actions, suits, proceedings, mediations,
arbitrations or
investigations pending and served against 1st Independence or 1st
Bank or, to
the knowledge of 1st Independence or 1st Bank, threatened in any
court or before
any government agency or authority, arbitration panel or otherwise
against 1st
Independence or 1st Bank. 1st Independence does not have knowledge
of a basis
for any claim, action, suit, proceeding, litigation, arbitration
or
investigation against 1st Independence or 1st Bank.
(b) Neither 1st Independence nor 1st Bank 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 1st Independence or 1st Bank, 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 1st Independence or 1st Bank, threatened
proceeding by any
government regulatory agency or authority having jurisdiction over
their
respective business, assets, capital, properties or operations.
3.08. Financial Statements and Reports. (a) 1st Independence
has
delivered to MainSource copies of the following financial
statements and reports
of 1st Independence and 1st Bank, including the notes thereto
(collectively, the
"1st Independence Financial Statements"):
(i) Consolidated Balance Sheets and the related Consolidated
Statements of Income and Consolidated Statements of Changes in
Shareholders'
Equity of 1st Independence as of and for the fiscal years ended
December 31,
2006 and 2005 and as of and for the nine months ended September 30,
2007;
(ii)Consolidated Statements of Cash Flows of 1st Independence
for the fiscal years ended December 31, 2006 and 2005 and for the
nine months
ended September, 2007;
(iii)Call Reports ("Call Reports") for 1st Bank as of the close
of business on December 31, 2006 and 2005 and for the twelve months
ended
December 31, 2007;
(b) The 1st Independence Financial Statements present fairly
the
consolidated financial position of 1st Independence as of and at
the dates shown
and the consolidated results of operations for the periods covered
thereby and
are complete, correct, represent bona fide transactions, and have
been prepared
from the books and records of 1st Independence and its
subsidiaries. The 1st
Independence 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 September 30, 2007 on a consolidated basis 1st
Independence
and its subsidiaries have not incurred any material liability other
than in the
ordinary course of business consistent with past practice.
3.09. Properties, Contracts, Employees and Other Agreements. (a)
Set
forth in the Disclosure Schedule are true, accurate and complete
copies of the
following:
(i) A brief description and the location of all real property
owned by 1st Independence or 1st Bank (other than Other Real Estate
Owned
("OREO")), together with a legal description of such real property
and, within
sixty (60) days of the date of this Agreement, 1st Independence
will make
available to MainSource a title insurance policy insuring the same,
a survey
drawing of any parcel of real property owned by 1st Independence or
1st Bank and
an appraisal of such property, the fees for which shall be paid by
MainSource
prior to the Closing Date;
(ii) All conditional sales contracts or other title retention
agreements relating to 1st Independence or 1st Bank and agreements
for the
purchase of federal funds;
(iii)All agreements, contracts, leases, licenses, lines of
credit, understandings, commitments or obligations of 1st
Independence or 1st
Bank which individually or in the aggregate:
(A)
involve payment or receipt by 1st Independence or 1st Bank
(other
than as disbursements of loan proceeds to customers, loan payments
by customers
or customer deposits and other customer loan and deposit
transactions) of more
than $50,000;
(B)
involve payments based on profits of 1st Independence or 1st
Bank;
(C) relate to the purchase of goods, products, supplies or services
in
excess of $25,000;
(D) were not made in the ordinary course of business and
involve
payment or receipt by 1st Independence or 1st Bank of more than
$25,000;
(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 1st Independence; and
(iv)The name and current annual salary of each director,
officer
and employee of 1st Independence or 1st Bank 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 1st Independence or 1st Bank
to or for
the benefit of each such person for the fiscal year ended December
31, 2007, and
any employment, severance or deferred compensation agreement or
arrangement with
respect to each such person.
(b) 1st Independence has, prior to the date of this Agreement,
provided
or given access to MainSource to the files and documentation in its
possession
relating to all borrowers of 1st Bank, or persons or entities that
are or may
become obligated to 1st Bank under an existing letter of credit,
line of credit,
loan transaction, loan agreement, promissory note or other
commitment of 1st
Bank, in excess of $25,000 individually or in the aggregate with
respect to such
borrower, 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 Disclosure Schedule relating to this
Section 3.09
is valid and enforceable against 1st Independence or 1st Bank, as
the case may
be, 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. 1st Independence
and 1st Bank
is, and to its knowledge, all other parties thereto are, in
material compliance
with the provisions thereof, and neither 1st Independence nor 1st
Bank is, and
to its knowledge, 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 Disclosure Schedule,
none of the
foregoing requires the consent of any party to its assignment in
connection with
the Merger contemplated by this Agreement.
(d) Neither 1st Independence nor 1st Bank is in default under or
in
breach of or, to the knowledge of 1st Independence or 1st Bank,
alleged to be in
default under or in breach of, any material 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.
(e) The Disclosure Schedule sets forth a good faith estimate by
1st
Bank of the expected costs to terminate 1st Bank's data processing
contracts
with Computer Services, Inc. and Digital Insights assuming such
contracts are
terminated as of October 31, 2008.
3.10. Absence of Undisclosed Liabilities. Except as provided in
the
1st Independence Financial Statements or in the Disclosure
Schedule, except for
unfunded loan commitments and obligations on letters of credit to
customers of
1st Bank made in the ordinary course of business, except for trade
payables
incurred in the ordinary course of 1st Bank's business, and except
for the
transactions contemplated by this Agreement and obligations for
services
rendered pursuant thereto, or any other transactions which would
not result in a
material liability, neither 1st Independence nor 1st Bank has, nor
will have at
the Effective Time, any obligation, agreement, contract,
commitment, liability,
lease or license which exceeds $50,000 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 1st Independence
nor 1st Bank
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.
3.11. Title to Assets. Except as described in this Section 3.11
or
the Disclosure Schedule:
(a) 1st Independence or 1st Bank, 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 1st Independence Financial
Statements as of
September 30, 2007; good and marketable title to all personal
property reflected
in the 1st Independence Financial Statements as of September 30,
2007, other
than personal property disposed of in the ordinary course of
business since
September 30, 2007; 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 1st Independence or 1st
Bank purports to
own or which 1st Independence or 1st Bank uses in its respective
business and
which are in either case material to 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 to
the extent
material thereto; and good and marketable title to all material
property and
assets acquired and not disposed of or leased since September 30,
2007. All of
such properties and assets are owned by 1st Independence or 1st
Bank free and
clear of all land or conditional sales contracts, mortgages, liens,
pledges,
restrictions, options, security, interests, charges, claims, rights
of third
parties or encumbrances of any nature except: (i) as set forth in
the Disclosure
Schedule; (ii) as specifically noted in reasonable detail in the
1st
Independence 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 1st Independence on a consolidated basis and which do not
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, to 1st
Independence's knowledge, leased by 1st Independence or 1st Bank is
in
compliance in all material respects with all applicable zoning and
land use
laws. All real property, machinery, equipment, furniture and
fixtures owned or
leased by 1st Independence or 1st Bank that is material to their
respective
businesses 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.
(b) With respect to all real property presently or formerly
owned,
leased or used by 1st Independence or 1st Bank, 1st Independence
and 1st Bank
and to 1st Independence's knowledge each of the prior owners, have
conducted
their respective business in 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 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 1st Independence or 1st Bank, threatened, claims, actions or
proceedings by
any local municipality, sewage district or other governmental
entity against 1st
Independence or 1st Bank with respect to the Environmental Laws,
and to 1st
Independence's knowledge there is no reasonable basis or grounds
for any such
claim, action or proceeding. No environmental clearances are
required for the
conduct of the business of 1st Independence or 1st Bank as
currently conducted
or the consummation of the Merger contemplated hereby. To 1st
Independence's
knowledge, neither 1st Independence nor 1st Bank is the owner, or
has been in
the chain of title or the operator or lessee, of any property on
which any
substances have been used, stored, deposited, treated, recycled or
disposed of,
which substances if known to be present on, at or under such
property would
require clean-up, removal, treatment, abatement, response costs, or
any other
remedial action under any Environmental Law. To 1st Independence's
knowledge,
neither 1st Independence nor 1st Bank has any liability for any
clean-up or
remediation under any of the Environmental Laws with respect to any
real
property.
3.12.
Loans and Investments.
(a) Except as set forth in the Disclosure Schedule, there is no
loan by
1st Bank in excess of $25,000 that has been classified by
regulatory examiners
or management as "Other Loans Specially Mentioned," "Substandard,"
"Doubtful" or
"Loss" or in excess of $25,000 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 1st Bank and a
list of all
loans in excess of $25,000 which 1st Bank 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 Disclosure Schedule.
(b) All loans reflected in the 1st Independence Financial
Statements as
of September 30, 2007, and which have been made, extended,
renewed,
restructured, approved, amended or acquired since September 30,
2007: (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 1st Bank has a security
interest in
collateral or a mortgage securing such loans, by perfected security
interests or
recorded mortgages naming 1st Bank 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 1st
Independence
Financial Statements are, in the judgment of management of 1st
Independence and
1st Bank, adequate in all material respects under the requirements
of generally
accepted accounting principles applied on a consistent basis to
provide for
possible losses on items for which reserves were made, on loans and
leases
outstanding and real estate owned as of the respective dates.
(d) Except as set forth in the Disclosure Schedule, none of the
investments reflected in the 1st Independence Financial Statements
as of and for
the period ended September 30, 2007, and none of the investments
made by 1st
Bank since September 30, 2007 are subject to any restriction,
whether
contractual or statutory, which materially impairs the ability of
1st Bank to
dispose freely of such investment at any time. 1st Bank is not a
party to any
repurchase agreements with respect to securities.
(e) Set forth in the Disclosure Schedule is a true, accurate
and
complete list of all loans in which 1st Bank has any participation
interest in
excess of $125,000 or which have been made with or through another
financial
institution on a recourse basis against 1st Bank.
(f) Except as set forth in the Disclosure Schedule, and except
for
customer deposits and ordinary trade payables, 1st Bank has not,
nor will it
have at the Effective Time, any indebtedness for borrowed
money.
3.13. Shareholder Rights Plan and Anti-takeover Mechanisms. 1st
Independence has taken all actions required to exempt MainSource,
the Agreement
and the Merger from any provisions of an anti-takeover nature
contained in its
organizational documents, any shareholder rights plan or similar
plan, and the
provisions of any "anti-takeover," "fair price," "moratorium,"
"control share
acquisition" or similar laws or regulations to which 1st
Independence is
subject.
3.14.
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 1st Independence or
1st Bank,
whether written or oral, in which 1st Independence or 1st Bank
participates as a
participating employer, or to which 1st Independence or 1st Bank
contributes, 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 1st Independence or 1st Bank, and including any such
plans, to
1st Independence's knowledge, which have been terminated, merged
into another
plan, frozen or discontinued since January 1, 2001 (collectively,
"1st
Independence Plans"), except as set forth in the Disclosure
Schedule:
(i) all such 1st Independence Plans have, on a continuous basis
since their adoption, been, in all material respects, maintained in
compliance
with the requirements prescribed by all applicable statutes, orders
and
governmental rules or regulations, including, without limitation,
ERISA and the
Department of Labor ("Department") Regulations promulgated
thereunder and the
Code and Treasury Regulations promulgated thereunder;
(ii) all 1st Independence Plans intended to constitute
tax-qualified plans under Section 401(a) of the Code have complied
since their
adoption or have been timely amended to comply in all material
respects with all
applicable requirements of the Code and the Treasury Regulations
promulgated
thereunder;
(iii) except for the 1st Independence Employee Stock Ownership
and 401(k) Plan (the "1st Independence KSOP"), no 1st Independence
Plan (or its
related trust) holds any stock or other securities of 1st
Independence;
(iv) neither 1st Independence nor 1st Bank nor, to the
knowledge
of 1st Independence, any other fiduciary of any 1st Independence
Plan has
engaged in any transaction that may subject 1st Independence or 1st
Bank, or any
1st Independence 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 with respect to any 1st Independence Plan;
(v) all obligations required to be performed by 1st
Independence
or 1st Bank under any provision of any 1st Independence 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 1st Independence Plan;
(vi) to the knowledge of 1st Independence, no event has
occurred
which would constitute grounds for an enforcement action by any
party under
Part 5 of Title I of ERISA with respect to any 1st Independence
Plan;
(vii) there are no examinations, audits, enforcement actions or
proceedings, or any other investigations, pending, threatened or
currently in
process by any governmental agency involving any 1st Independence
Plan;
(viii) there are no actions, suits, proceedings or claims
pending
(other than routine claims for benefits) or, to the knowledge of
1st
Independence or 1st Bank, threatened, against 1st Independence or
1st Bank in
connection with any 1st Independence Plan or the assets of any 1st
Independence
Plan;
(ix) any 1st Independence Plan may be terminated at any time
and
this right has always been maintained by 1st Independence or 1st
Bank.
(b) 1st Independence has provided or made available to MainSource
true,
accurate and complete copies and, in the case of any plan or
program which has
not been reduced to writing, a materially complete summary, of all
of the
following, as applicable:
(i) pension, retirement, profit-sharing, savings, stock
purchase, stock bonus, stock ownership, stock option and stock
appreciation
right plans, all amendments thereto, and, if required under the
reporting and
disclosure requirements of ERISA, all amendments thereto and all
summary plan
descriptions thereof (including any modifications thereto);
(ii) all employment, deferred compensation (whether funded or
unfunded), salary continuation, consulting, bonus, severance and
collective
bargaining, agreements, arrangements or understandings;
(iii) all executive and other incentive compensation plans,
programs and agreements;
(iv) all group insurance and health insurance contracts,
policies
or plans;
(v) all other incentive, welfare or employee benefits plans,
understandings, arrangements or agreements, maintained or
sponsored,
participated in, or contributed to by 1st Independence for its
current or former
directors, officers or employees;
(vi) all reports filed with the Internal Revenue Service
("Service") or the Department within the preceding three years by
1st
Independence or 1st Bank with respect to any 1st Independence
Plan;
(vii) descriptions of all current participants in such plans
and
programs and all participants with benefit entitlements under such
plans and
programs; and
(viii) valuations or allocation reports for any defined
contribution
plan, including the 1st Independence KSOP, as of the most recent
date.
(c) Except as set forth on the Disclosure Schedule, no current
or
former director, officer or employee of 1st Independence or 1st
Bank (i) is
entitled to or may become entitled to any benefit under any welfare
benefit
plans (as defined in Section 3(1) of ERISA) after termination of
employment with
1st Independence or 1st Bank, except to the extent that such
individuals may be
entitled to continue their group health care coverage pursuant to
Section 4980B
of the Code, or (ii) is currently receiving, or entitled to
receive, a
disability benefit under a long-term or short-term disability plan
maintained by
1st Independence or 1st Bank.
(d) The Financial Institutions Retirement Fund ("Benefit Plan") is
the
only defined benefit pension plan maintained by 1st Independence or
1st Bank or
their predecessor which is subject to Title IV of ERISA. Other than
the Benefit
Plan, no 1st Independence Plan is, and neither 1st Independence nor
1st Bank 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 multi-employer pension
plan (as
that term is defined in Sections 4001(a)(3) and 3(37) of
ERISA).
(e) With respect to any group health plan (as defined in
Section 607(1) of ERISA) sponsored or maintained by 1st
Independence or 1st
Bank, no director, officer, employee or agent of 1st Independence
or 1st Bank
has engaged in any action or failed to act in such a manner that,
as a result of
such action or failure to act, would cause a tax to be imposed on
1st
Independence or 1st Bank under Code Section 4980B(a). With respect
to all such
plans, all applicable provisions of Section 4980B of the Code
and
Sections 601-606 of ERISA have been complied with in all material
respects by
1st Independence or 1st Bank.
(f) Except as otherwise provided in the 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 1st
Independence or 1st
Bank 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.
(g) Except as otherwise provided in the Disclosure Schedule, no
Voluntary Employees' Beneficiary Association ("VEBA") as defined in
Code
Section 501(c)(9) is sponsored or maintained by 1st Independence or
1st Bank.
(h) Except as otherwise provided in the Disclosure Schedule or
as
contemplated in this Agreement, 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.
(i) Except as may be disclosed in the Disclosure Schedule, 1st
Independence and 1st Bank 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 Benefit Plan have been funded on the
basis
of consistent methods in accordance with sound actuarial
assumptions and
practices, and at the end of any plan year, the Benefit Plan does
not and has
not previously had an accumulated funding deficiency. No actuarial
assumptions
have been changed since the last written report of actuaries on the
Benefit
Plan. All insurance premiums (including premiums to the Pension
Benefit Guaranty
Corporation) have been paid in full, subject only to normal
retrospective
adjustments in the ordinary course. 1st Independence and 1st Bank
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 with respect to any of the 1st Independence
Plans,
whether or not waived, nor does 1st Independence have any liability
or potential
liability as a result of the under funding of, or termination of
any plan by 1st
Independence or by any person which may be aggregated with 1st
Independence for
purposes of Section 412 of the Code. No reportable event (as
defined in
Section 4043 of ERISA) has occurred with respect to the Benefit
Plan as to which
a notice would be required to be filed with the Pension Benefit
Guaranty
Corporation.
(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), 1st Independence, 1st Bank, 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 those payments referred to
under Sections
2.01(b), 5.14, 5.15, 5.16, 5.18, 5.19, 6.03(b), and 6.05 of the
Agreement, as
well as any other payments made under the 1st Independence Plans
because of the
transactions contemplated herein.
3.15. Obligations to Employees. All accrued obligations and
liabilities of and all payments by 1st Independence or 1st Bank and
all 1st
Independence Plans, 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 1st Independence or 1st
Bank 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; (b) all pension, profit-sharing, savings, stock purchase,
stock bonus,
stock ownership, stock option and stock appreciation rights plans
and
agreements; (c) all employment, deferred compensation (whether
funded or
unfunded), salary continuation, consulting, retirement, early
retirement,
severance, reimbursement, bonus or collective bargaining plans and
agreements;
(d) all executive and other incentive compensation plans, programs,
or
agreements; (e) all group insurance and health contracts, policies
and plans;
and (f) all other incentive, welfare (including, without
limitation, vacation
and sick pay), retirement or employee benefit plans or agreements
maintained or
sponsored, participated in, or contributed to by 1st Independence
or 1st Bank
for its current or former directors, officers, employees and
agents, including,
without limitation, all liabilities and obligations to the 1st
Independence
Plans (as defined in Section 3.14(a) hereof). All obligations and
liabilities of
1st Independence or 1st Bank, 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 1st Independence 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 therefore have been and are being
made by 1st
Independence or 1st Bank in accordance with generally accepted
accounting and
actuarial principles applied on a consistent basis. All accruals
and reserves
referred to in this Section 3.15 are correctly and accurately
reflected and
accounted for in all material respects in the 1st Independence
Financial
Statements and the books, statements and records of 1st
Independence.
3.16. Taxes, Returns and Reports. Except as set forth in the
Disclosure Schedule, each of 1st Independence and 1st Bank has
since January 1,
2003 (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). 1st
Independence has established, and shall establish in the Subsequent
1st
Independence Financial Statements (as hereinafter defined), in
accordance with
generally accepted accounting principles, a reserve for taxes in
the 1st
Independence Financial Statements adequate to cover all of 1st
Independence's
and 1st Bank's tax liabilities (including, without limitation,
income taxes,
payroll taxes and withholding, and franchise fees) for the periods
then ending.
Neither 1st Independence nor 1st Bank has, nor will either have,
any liability
for material 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 1st Independence Financial
Statements (as
hereinafter defined) or as accrued or reserved for on the books and
records of
1st Independence or 1st Bank. To the knowledge of 1st Independence,
neither 1st
Independence nor 1st Bank is currently under audit by any state or
federal
taxing authority. No federal, state or local tax returns of 1st
Independence or
1st Bank have been audited by any taxing authority during the past
five
(5) years.
3.17. Deposit Insurance. The deposits of 1st Bank 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
1st Independence or 1st Bank has paid or properly reserved or
accrued for all
current premiums and assessments with respect to such deposit
insurance.
3.18. Insurance. Set forth in the 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 1st Independence
or 1st Bank
on the date hereof or with respect to which 1st Independence or 1st
Bank 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.
3.19. Books and Records. The books and records of 1st
Independence
are, in all material respects, complete, correct and accurately
reflect the
basis for the financial condition, results of operations, business,
assets and
capital of 1st Independence on a consolidated basis set forth in
the 1st
Independence Financial Statements.
3.20. Broker's,
Finder's or Other Fees. Except for reasonable fees
and expenses of 1st Independence' attorneys, accountants and
investment bankers,
all of which shall be paid by 1st Independence at or prior to the
Effective
Time, except as set forth in the Disclosure Schedule, no agent,
broker or other
person acting on behalf of 1st Independence or 1st Bank or under
any authority
of 1st Independence or 1st Bank is or shall be entitled to any
commission,
broker's or finder's fee or any other form of compensation or
payment from any
of the parties hereto relating to this Agreement and the Merger
contemplated
hereby.
3.21. Disclosure Schedule and Documents. All written data,
documents,
materials and information referred to in this Agreement and
delivered by 1st
Independence or 1st Bank pursuant to the Disclosure Schedule which
were prepared
by 1st Independence or 1st Bank, and with respect to any such data,
documents,
materials and information that have been prepared by third parties,
to the
knowledge of 1st Independence and 1st Bank such written data,
documents,
materials and information, are true, accurate and complete in all
material
respects as of the date hereof and with respect to such items
prepared by 1st
Independence or 1st Bank and delivered subsequent to the date
hereof with any
updates to the Disclosure Schedule, will be true, accurate and
complete in all
material respects on the date of delivery thereof.
3.22. Interim Events. Except as otherwise permitted hereunder,
since
September 30, 2007, or as set forth in the Disclosure Schedule,
neither 1st
Independence nor 1st Bank has:
(a) Suffered any changes having a Material Adverse Effect;
(b) Suffered any damage, destruction or loss to any of its
properties, not fully paid by insurance proceeds, in excess of
$10,000
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 5.03(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 1st Independence or 1st Bank except
pursuant to the
express terms thereof or otherwise 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;
(h) Except for the Merger 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 1st Bank of government deposits; or
(ii) granted
in connection with repurchase or reverse repurchase agreements;
(k) Except as set forth in the 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 September 30,
2007.
3.23. 1st Independence Securities and Exchange Commission
Filings.
1st Independence 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 1st Independence's Annual Report on Form 10-K for the
year ended
December 31, 2006 and Quarterly Report on Form 10-Q for the quarter
ended
September 30, 2007. 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.
3.24. Insider Transactions. Except as set forth on the
Disclosure
Schedule, since December 31, 2004, no officer or director of 1st
Independence or
1st Bank or member of the "immediate family" or "related interests"
(as such
terms are defined in Regulation O) of any such officer or
director
(collectively, "1st Independence Insiders"), has currently, or has
had during
such time period, any direct or indirect interest in any property,
assets,
business or right which is owned, leased, held or used by 1st
Independence and
1st Bank or in any liability, obligation or indebtedness of 1st
Independence or
1st Bank.
3.25.
Indemnification Agreements.
(a) Other than as set forth in the Disclosure Schedule, neither
1st
Independence nor 1st Bank is a party to any indemnification,
indemnity or
reimbursement agreement, contract, commitment or understanding to
indemnify any
present or former director, officer, employee, shareholder or agent
against
liability or hold the same harmless from liability other than as
expressly
provided in the Articles of Incorporation or By-Laws of 1st
Independence or the
Articles of Incorporation or Bylaws of 1st Bank.
(b) Since January 1, 2002, no claims have been made against or
filed
with 1st Independence or 1st Bank nor have, to the knowledge of
1st
Independence, any claims been threatened against 1st Independence
or 1st Bank,
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 1st
Independence or 1st Bank.
3.26. Shareholder Approval. The affirmative vote of the holders of
a
majority of the 1st Independence 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 Merger.
3.27. Opinion of Financial Advisor. The Board of Directors of
1st
Independence, at a duly constituted and held meeting at which a
quorum was
present throughout, has been informed orally by Sandler O'Neil +
Partners, L.P.
that the terms of the Merger are fair to the shareholders of 1st
Independence
from a financial point of view.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MAINSOURCE
On or prior to the date hereof, MainSource has delivered to 1st
Independence a schedule (the "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.
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 Merger 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 Merger or restructuring charges
taken in
connection with the Merger, in each case in accordance with
generally 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, (e) 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 MainSource and its subsidiaries, (f)
changes
resulting from expenses (such as legal, accounting and investment
bankers' fees)
incurred in connection with this Agreement or the transactions
contemplated
herein, and (g) the occurrence of any military or terrorist attack
within the
United States or any of its possessions or offices; provided that
in no event
shall a change in the trading price of the MainSource Common Stock,
by itself,
be considered to constitute a Material Adverse Effect on MainSource
and its
subsidiaries taken as a whole (it being understood that the
foregoing proviso
shall not prevent or otherwise affect a determination that any
effect underlying
such decline has resulted in a Material Adverse Effect).
For the purpose of this Agreement, and in relation to
MainSource,
"knowledge" means the actual knowledge of Robert Hoptry, James
Anderson, Jeffrey
Smith, Jack Parker, Daryl Tressler, Brent Hoptry and David
Dippold.
Accordingly, MainSource represents and warrants to 1st Independence
as
follows, except as set forth in its Disclosure Schedule:
4.01. 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 on MainSource.
4.02.
Authorization.
(a) MainSource has the requisite corporate power and authority to
enter
into this Agreement and to carry out its obligations hereunder,
subject to the
fulfillment of the conditions precedent set forth in Section
7.01(e) and
(f) hereof. As of the date hereof, MainSource is not aware of any
reason why the
approvals set forth in Section 7.01(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 7.02(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 by 1st Independence and 1st
Bank, this
Agreement constitutes a valid and binding obligation of MainSource,
subject to
the conditions precedent set forth in Section 7.01 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 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.
4.03. 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, 18,570,139 of which
shares are
outstanding as of the date hereof, plus options to purchase a total
of 275,837
shares of MainSource Common Stock as of December 31, 2007, 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 4.03(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 Disclosure Schedule. Each
share of
MainSource Common Stock is entitled to one vote per share.
MainSource wholly
owns the subsidiaries listed in the Disclosure Schedule which
includes their
names and jurisdictions of organization.
(b) Except as set forth on the 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.
(c) The shares of MainSource Common Stock issued as part of the
Merger
Consideration shall be when issued duly and validly authorized,
validly issued,
fully paid and non-assessable shares of MainSource Common Stock and
will not be
issued in violation of any pre-emptive rights of any present or
former
MainSource shareholder.
4.04. Litigation and Pending Proceedings. Except as set forth in
the
Disclosure Schedule:
(a) Except for lawsuits involving collection
