AGREEMENT AND PLAN OF MERGER

 

Exhibit 10.1

 

 

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated to be effective as of August 23, 2005, by and among MAINSOURCE FINANCIAL GROUP, INC . ("MainSource"), UNION COMMUNITY BANCORP (“UCBC”) and UNION FEDERAL SAVINGS AND LOAN ASSOCIATION ("Union Federal").

 

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, UCBC is an Indiana corporation registered as a savings and loan holding company under the Home Owners’ Loan Act, as amended (“HOLA”), with its principal office located in Crawfordsville, Montgomery County, Indiana; and

 

WHEREAS, Union Federal is a federal savings association with its principal office located in Crawfordsville, Montgomery County, Indiana, and is a wholly-owned subsidiary of UCBC; and

 

WHEREAS, MainSource and UCBC seek to affiliate through a corporate reorganization whereby UCBC will first merge with and into MainSource and Union Federal will immediately thereafter merge with and into MainSource Bank - Crawfordsville (“Merger Corp”), a to-be-formed interim Indiana commercial bank with its principal offices located in Greensburg, Decatur County, Indiana, and the wholly-owned subsidiary of MainSource, as a result of which merger Union Federal 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 UCBC with and into MainSource, and the merger of Union Federal 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), UCBC 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 ("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 UCBC 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 UCBC shall be assumed by Surviving Corporation.

(e) Integration . At the Effective Time, the parties hereto currently intend to effectuate, or cause to be effectuated, the Company 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 it 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.

 

1.02.   Reservation of Right to Revise Structure . At MainSource’s election, the Company Merger may alternatively be structured so that (a) UCBC 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 UCBC; 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 UCBC (“UCBC Common Stock”) or options for UCBC Common Stock (“UCBC 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

 

(a) General Description . Upon the terms and subject to the conditions of this Agreement, at the Effective Time, Union Federal 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 Indiana pursuant to the provisions of and with the effect provided in the Indiana Financial Institutions Act and the IBCL.

(b) Name, Offices, Officers and Directors . The name of the Surviving Bank shall be “MainSource Bank - Crawfordsville”. Its principal office shall be located at 221 East Main Street, Crawfordsville, Montgomery County, Indiana, and its branches shall consist of the branch offices of Union Federal 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, Alan L. Grimble shall be appointed the Chairman of the Board, President, and Chief Executive Officer and J. Lee Walden shall be appointed as an executive officer of the Surviving Bank. The directors of the Surviving Bank following the Effective Time shall consist of Alan L. Grimble and four (4) other individuals mutually acceptable to MainSource and UCBC, 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 Merger Corp in existence at the Effective Time shall remain the Articles of Incorporation and By-Laws of the Surviving Bank 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 Subsidiary Merger . At the Effective Time, the title to all assets, real estate and other property owned by Union Federal shall vest in Surviving Bank as set forth in Indiana Code Section 28-1-7-19, as amended, without reversion or impairment. At the Effective Time, all liabilities of Union Federal 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 Articles of Merger substantially in

 

 

the form attached hereto as Exhibit 2.01(e)(i) and an Agreement and Plan of Merger substantially in the form attached hereto as Exhibit 2.01(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 Subsidiary Merger. UCBC and Union Federal 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) Union Federal 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 Union Federal; 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 UCBC Common Stock or UCBC 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:

 

(a) Each share of UCBC Common stock issued and outstanding immediately prior to the Effective Time (other than shares held as treasury stock of UCBC 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 UCBC 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, of MainSource (“MainSource Common Stock”) equal to the quotient (the “Exchange Ratio”) arrived at by dividing:

 

 

 

 

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, each outstanding option to purchase UCBC Common Stock (“UCBC 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 UCBC Common Stock subject to such UCBC 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 UCBC Stock Option to which this paragraph applies will be cancelled and shall cease to exist by virtue of such payment.

 

(c) Each share of UCBC Common Stock that, immediately prior to the Effective Time, is held as treasury stock of UCBC 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 $52,993,000.

 

(b) Adjustment Based Upon UCBC’s Consolidated Shareholders’ Equity .

 

(i) Unless waived by MainSource pursuant to Article X 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 UCBC Consolidated Shareholders’ Equity, as determined in accordance with Section 3.02(b)(ii), is less than $30,600,000, the Purchase Price shall be reduced on a dollar-for-dollar basis by an amount equal to the difference between $30,600,000 and the actual UCBC Consolidated Shareholders’ Equity as of the Computation Date determined in accordance with Section 3.02(b)(ii). If at the Computation Date UCBC’s Consolidated Shareholders’ Equity is greater than $31,100,000, the Purchase Price shall be increased on a dollar-for-dollar basis by an amount equal to the difference between $31,100,000 and the actual UCBC Consolidated Shareholders’ Equity as of the Computation Date determined in accordance with Section 3.02(b)(ii).

 

(ii) The UCBC Consolidated Shareholders’ Equity shall be determined based upon the balance sheet of UCBC as of the Computation Date, prepared in accordance with generally accepted accounting principles consistently applied, after making adjustments for the following items and tax effecting those adjustments, using a 39% tax rate, where appropriate:

 

 

(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 UCBC 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 UCBC Common Stock along with the proxy materials for the special shareholders’ meeting at which the Company Merger will be submitted to a vote of UCBC’s shareholders. The shareholders of UCBC 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 UCBC’s shareholders (the “Special Record Date”). UCBC 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 meeting at which the Company Merger will be submitted to a vote of UCBC’s shareholders. 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 UCBC shall provide to MainSource shall include all information reasonably necessary for UCBC to perform its obligations as specified herein.

 

(b) Each Election Form shall entitle the holder of shares of UCBC 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 UCBC 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 UCBC 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 UCBC Common Stock as to which no election has been made 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 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 UCBC Common Stock ("Certificates") (or customary affidavits and, if required by MainSource pursuant to Section 3.05(g), a bond as indemnity against any claim that may be made with respect to such Certificates or the guaranteed delivery of such Certificates) representing all shares of UCBC 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 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, fifty-five percent (55%) of the total number of shares of UCBC Common Stock outstanding at the Effective Time (the "Stock Conversion Number") shall be converted into the Stock Consideration and the remaining outstanding shares of UCBC 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) 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) of the Code, MainSource reserves the right to increase the number of shares of UCBC Common Stock that will be converted into Stock Consideration and reduce the number of shares of UCBC 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 UCBC 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 smallest number of shares of UCBC Common Stock, and then eliminating and converting the Cash Election which covers the next smallest number of shares and continuing this process until the total remaining number of outstanding UCBC shares covered by Cash Elections is such that fifty-five percent (55%) of the total number of shares of UCBC 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 UCBC 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 UCBC Common Stock, and then eliminating and converting the Non-Election which covers the next smallest number of shares and continuing this process until either all Non-Elections are converted into the Cash Consideration or the total remaining number of

 

 

outstanding UCBC shares covered by Non-Elections (when added to all Stock Elections) is such that 55% of the total number of shares of UCBC 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 UCBC 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 UCBC Common Shares covered by Stock Elections is such that 55% of the total number of shares of UCBC 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 UCBC 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) Notwithstanding anything to the contrary in this Section 3.04, if (i) a shareholder of UCBC certifies in writing at the time of filing a Cash Election for all of his shares (the "Certifying Cash Elector"), that his outstanding UCBC shares are deemed to be constructively owned by another shareholder of UCBC (the "Constructive Owner") under the provisions of Section 318(a) of the Code, and (ii) the Constructive Owner has filed a valid Cash Election, then the elections of the Certifying Cash Elector or Electors and the Constructive Owner or Owners shall be treated as a single election, and their shares shall be aggregated for purposes of determining priority for conversion into cash.

 

(g) A holder of UCBC'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 UCBC 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 UCBC 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 UCBC 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 shareholder upon delivery (if not previously delivered) to MainSource of certificates representing such shares of UCBC Common Stock ("Old Certificates") (or bond as 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 UCBC 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 UCBC 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 UCBC of any shares of UCBC 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 UCBC'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 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 UCBC 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 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 UCBC would have received if any of the foregoing actions had not occurred.

 

3.07.   Exchange Agent . UCBC and MainSource agree that Registrar and Transfer Company shall be appointed to act as 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.

 

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF UCBC

 

On or prior to the date hereof, UCBC 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 IV or to one or more of its covenants contained in Article VI; provided that the mere inclusion of an item in the Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by UCBC 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 UCBC, a "Material Adverse Effect" means any effect that (i) is material and adverse to the financial position, results of operations or business of UCBC and its subsidiaries taken as a whole, or (ii) would materially impair the ability of UCBC 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 UCBC’s or Union Federal’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) reasonable and customary expenses incurred in connection with the Mergers and all expenses related to any employment or severance contract as provided in Section 6.19 and 7.05 of this Agreement and any benefit or retirement plan disclosed on the 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 UCBC or Union Federal, 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 UCBC, "knowledge" means the actual knowledge of any officer or director of UCBC 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 UCBC or its subsidiaries of a particular fact.

 

Accordingly, UCBC and Union Federal hereby represent and warrant to MainSource as follows:

 

4.01.   Organization and Authority . (a) UCBC is a corporation duly organized and validly existing under the laws of the state of Indiana and is a registered savings and loan holding company under the HOLA. UCBC 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. Union Federal is UCBC’s only direct or indirect subsidiary and except as set forth on the Disclosure Schedule, UCBC owns no voting stock or equity securities of any corporation, partnership, association or other entity.

 

(b) Union Federal is a federal savings association duly incorporated and organized and existing pursuant to the laws of the United States. Union Federal 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, Union Federal has no subsidiaries and owns no voting stock or equity securities of any corporation, partnership, association or other entity.

 

4.02.   Authorization . (a) UCBC 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, UCBC 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 UCBC have been duly authorized and approved by the Board of Directors of UCBC and, assuming due execution and delivery by MainSource, constitutes a valid and binding obligation of UCBC, 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 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 By-Laws of UCBC or the Charter or Bylaws of Union Federal; (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 UCBC or Union Federal is a party or by which UCBC or Union Federal 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 UCBC or Union Federal which would be material to UCBC; 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 UCBC or Union Federal is bound or with respect to which UCBC or Union Federal 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 UCBC or Union Federal.

 

4.03.   Capitalization . (a) The authorized capital stock of UCBC as of the date hereof consists, and at the Effective Time will consist, of 5,000,000 shares of UCBC Common Stock, 1,939,000 of which shares are issued and outstanding, and 2,000,000 shares of preferred stock, no par value, none of which preferred shares are issued and outstanding. Such issued and outstanding shares of UCBC Common Stock have been duly and validly authorized by all necessary corporate action of UCBC, are validly issued, fully paid and nonassessable and have not been issued in violation of any pre-emptive rights of any present or former UCBC shareholder. Except as set forth in the Disclosure Schedule, UCBC 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 UCBC Common Stock. Each share of UCBC Common Stock is entitled to one vote per share. A description of the UCBC Common Stock is contained in the Articles of Incorporation of UCBC, as set forth in the Disclosure Schedule pursuant to Section 4.04 hereof.

 

(b) The authorized capital stock of Union Federal as of the date hereof consists, and at the Effective Time will consist, of 1,000 shares of common stock, $.01 par value per share, all of

 

 

which shares are validly issued and outstanding (such issued and outstanding shares are referred to herein as "Union Federal Common Stock"). Such validly issued and outstanding shares of Union Federal Common Stock have been duly and validly authorized by all necessary corporate action of Union Federal, are validly issued, fully paid and nonassessable, and have not been issued in violation of any pre-emptive rights of any present or former Union Federal stockholder. All of the issued and outstanding shares of Union Federal Common Stock are owned by UCBC 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. Union Federal 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 Union Federal 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 UCBC Common Stock or Union Federal Common Stock, or any securities convertible into or representing the right to purchase or otherwise acquire any common stock or debt securities of UCBC or Union Federal, by which UCBC is or may become bound. UCBC does not have any outstanding contractual or other obligation to repurchase, redeem or otherwise acquire any of the issued and outstanding shares of UCBC Common Stock. To the knowledge of UCBC and Union Federal, 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, UCBC has no knowledge of any person or entity which beneficially owns 5% or more of its outstanding shares of common stock.

 

 

4.04.   Organizational Documents . The Articles of Incorporation and By-Laws of UCBC and the Charter and By-Laws of Union Federal, 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.

 

4.05.   Compliance with Law . (a) Neither UCBC nor Union Federal 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. UCBC and Union Federal 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 to obtain any consents of government agencies or other third parties other than as set forth in this Agreement.

 

(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 UCBC or Union Federal 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, UCBC or Union Federal, including, without limitation, all correspondence, written communications and written commitments related thereto, are set forth in the 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 UCBC or Union Federal as a result of an examination by any regulatory agency or body, or set forth in any accountant's or auditor's report to UCBC or Union Federal.

 

(c) All of the existing offices and branches of Union Federal 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. Union Federal 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 UCBC or Union Federal in this Agreement or the Disclosure Schedule (and any update thereto) and no written information which has been or shall be supplied by UCBC or Union Federal 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 UCBC'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 UCBC or Union Federal 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 Disclosure Schedule:

 

(a) There are no material claims, actions, suits, proceedings, mediations, arbitrations or investigations pending or, to the knowledge of UCBC or Union Federal, threatened in any court or before any government agency or authority, arbitration panel or otherwise (nor does UCBC or Union Federal have any knowledge of a basis for any such claim, action, suit, proceeding, litigation, arbitration or investigation) against UCBC or Union Federal.

 

(b) Neither UCBC nor Union Federal is: (i) subject to any material 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 UCBC or Union Federal, under governmental investigation with respect to any actual or alleged material violations of any law, statute, rule, regulation or ordinance; or (iii) the subject of any pending or, to the knowledge of UCBC or Union Federal, 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) UCBC has delivered to MainSource copies of the following financial statements and reports of UCBC and Union Federal, including the notes thereto (collectively, the "UCBC Financial Statements"):

 

(i) Consolidated Balance Sheets and the related Consolidated Statements of Income and Consolidated Statements of Changes in Shareholders' Equity of UCBC 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;

 

(ii) Consolidated Statements of Cash Flows of UCBC for the fiscal years ended December 31, 2004 and 2003 and for the six months ended June 30, 2005;

 

(iii) Thrift financial Reports ("TFRs") for Union Federal as of the close of business on December 31, 2004 and 2003 and for the six months ended June 30, 2005;

 

(b) The UCBC Financial Statements present fairly the consolidated financial position of UCBC as of and at the dates shown and the consolidated results of operations for the periods covered thereby and to the knowledge of UCBC and Union Federal are complete, correct, represent bona fide transactions, and have been prepared from the books and records of UCBC and its subsidiaries. The UCBC 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 UCBC 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 Disclosure Schedule are true, accurate and complete copies of the following:

 

(i) A brief description and the location of all real property owned by UCBC or Union Federal (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, at MainSource’s expense, a title insurance policy insuring the same and a survey drawing of each parcel of real property owned by UCBC or Union Federal, and each lease of real property to which UCBC or Union Federal 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 UCBC or Union Federal and agreements for the purchase of federal funds;

 

 

 

(iii) All agreements, contracts, leases, licenses, lines of credit, understandings, commitments or obligations of UCBC or Union Federal which individually or in the aggregate:

 

(iv) The name and current annual salary of each director, officer and employee of UCBC or Union Federal 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 UCBC or Union Federal to or for the benefit of each such person for the fiscal year ended December 31, 2004, and any employment, severance or deferred compensation agreement or arrangement with respect to each such person.

 

(b) UCBC has, prior to the date of this Agreement, provided or given access to MainSource to the files and documentation of all borrowers of Union Federal, or persons or entities that are or may become obligated to Union Federal under an existing letter of credit, line of credit, loan transaction, loan agreement, promissory note or other commitment of Union Federal, 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 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. UCBC and Union Federal is, and to its knowledge, all other parties thereto are, in material compliance with the provisions thereof, and neither UCBC nor Union Federal 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 Mergers

 

 

contemplated by this Agreement. Other than as disclosed pursuant to this Section 4.09, to the knowledge of UCBC or Union Federal, 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 UCBC nor Union Federal is in material default under or in material breach of or, to the knowledge of UCBC or Union Federal, 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 UCBC Financial Statements and in the Disclosure Schedule, except for unfunded loan commitments and obligations on letters of credit to customers of Union Federal made in the ordinary course of business, except for trade payables incurred in the ordinary course of Union Federal’s business, and except for the transactions contemplated by this Agreement and obligations for services rendered pursuant thereto, neither UCBC nor Union Federal has, nor will have at the Effective Time, any obligation, agreement, contract, commitment, liability, lease or license which exceeds $25,000 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 UCBC nor Union Federal 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 Disclosure Schedule:

 

(a) UCBC or Union Federal, 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 UCBC Financial Statements as of June 30, 2005; good and marketable title to all personal property reflected in the UCBC 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 UCBC or Union Federal purports to own or which UCBC or Union Federal 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 UCBC or Union Federal 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 Disclosure Schedule; (ii) as specifically noted in reasonable detail in the UCBC 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 UCBC 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 UCBC or Union Federal is in compliance with all applicable zoning and land use laws. All real property, machinery, equipment, furniture and fixtures owned or leased by UCBC or Union Federal is structurally sound, in good operating condition 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 UCBC or Union Federal, UCBC and Union Federal and to UCBC’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 UCBC or Union Federal, threatened, claims, actions or proceedings by any local municipality, sewage district or other governmental entity against UCBC or Union Federal with respect to the Environmental Laws, and to UCBC’s knowledge there is no reasonable basis or grounds for any such claim, action or proceeding. No environmental clearances or other governmental approvals are required for the conduct of the business of UCBC or Union Federal or the consummation of the Mergers contemplated hereby. To UCBC’s knowledge, neither UCBC nor Union Federal 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 UCBC’s knowledge, neither UCBC nor Union Federal 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 Disclosure Schedule, there is no loan by Union Federal 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 Union Federal and a list of all loans in excess of $10,000 which Union Federal 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 UCBC 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 Union Federal has a security interest in collateral or a mortgage securing such loans, by perfected security interests or recorded mortgages naming Union Federal 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 UCBC Financial Statements are, in the judgment of management of UCBC and Union Federal, 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 UCBC Financial Statements as of and for the period ended June 30, 2005, and none of the investments made by Union Federal since June 30, 2005 are subject to any restriction, whether contractual or statutory, which materially impairs the ability of Union Federal to dispose freely of such investment at any time. Union Federal 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 Union Federal has any participation interest or which have been made with or through another financial institution on a recourse basis against Union Federal.

 

(f) Except as set forth in the Disclosure Schedule, and except for customer deposits and ordinary trade payables, Union Federal has not, nor will it have at the Effective Time, any indebtedness for borrowed money.

 

 

 

4.13.   Shareholder Rights Plan and Anti-takeover Mechanisms . UCBC has taken all actions required to exempt MainSource, the Agreement and the Mergers 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 UCBC is subject.

 

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 UCBC or Union Federal, whether written or oral, in which UCBC or Union Federal participates as a participating employer, to which UCBC or Union Federal contributes, with respect to which UCBC or Union Federal 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 UCBC or Union Federal, and including any such plans, to UCBC’s knowledge, which have been terminated, merged into another plan, frozen or discontinued since January 1, 2000 (collectively, "UCBC Plans"), except as set forth in the Disclosure Schedule:

 

(i) all such UCBC 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, the Code, and the Department of Labor ("Department") and Treasury Regulations promulgated thereunder;

 

(ii) all UCBC 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, and, to the extent available, favorable determination and/or opinion letters have been timely received from the Internal Revenue Service ("Service") with respect to each such UCBC Plan stating that each, in its current form (or at the time of its disposition if it has been terminated, merged, frozen or discontinued), is qualified under and satisfies all applicable provisions of the Code and Treasury Regulations;

 

(iii) all UCBC Plans intended to constitute tax qualified plans under Section 401(a) of the Code have received any favorable opinion letters 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 UCBC is not aware of any circumstances likely to result in revocation of any such favorable opinion letter;

 

(iv) except for the UCBC Employee Stock Ownership Plan (the “UCBC ESOP”),

 

 

no UCBC Plan (or its related trust) holds any stock or other securities of UCBC or any related or affiliated person or entity;

 

(v) Neither UCBC nor Union Federal has any liability to the Department or the Service with respect to any UCBC Plan;

 

(vi) Neither UCBC nor Union Federal has engaged in any transaction that may subject UCBC or Union Federal, or any UCBC 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 UCBC 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 UCBC Plan;

 

(viii) each UCBC 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 any benefit due or to become due under any UCBC Plan or has been misled as to his or her rights under any UCBC Plan;

 

(x) all obligations required to be performed by UCBC or Union Federal under any provision of any UCBC 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 UCBC 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 UCBC Plan;

 

(xii) there are no actions, suits, proceedings or claims pending (other than routine claims for benefits) or, to the knowledge of UCBC or Union Federal, threatened, against UCBC or Union Federal, any UCBC Plan or the assets of any UCBC Plan;

 

(xiii) with respect to any UCBC Plan sponsored, participated in or contributed to by UCBC or Union Federal, or with respect to which UCBC or Union Federal is responsible 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 UCBC Plan there has been no breach of the fiduciary provisions of ERISA and there is no known outstanding fiduciary liability; and

 

(xv) any UCBC Plan may be terminated at any time and this right has always been maintained by UCBC or Union Federal.

 

 

 

(b) With regard to any UCBC Plan intended to be qualified under Section 401(a) of the Code, no director, officer, employee or agent of UCBC or Union Federal 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) UCBC has provided 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 (including all plans and programs which have been terminated since January 1, 2000):

 

(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 UCBC for its current or former directors, officers or employees;

 

(vi) all reports filed with the Service or Department of Labor within the preceding three years by UCBC or Union Federal with respect to any UCBC 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 for any defined benefit plan or defined contribution plan, including the UCBC ESOP, as of the most recent date.

 

(d) Except as set forth on the Disclosure Schedule, no current or former director, officer or employee of UCBC or Union Federal (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 UCBC or Union Federal, except that such individuals may be entitled to continue their group health care coverage pursuant to Section 4980B of the Code 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 long term or short term disability plan maintained by UCBC or Union Federal.

 

 

 

(e) The UCBC Financial Institutions Retirement Fund (“Benefit Plan”) is the only defined benefit pension plan maintained by UCBC or Union Federal which is subject to Title IV of ERISA. Other than the Benefit Plan, no UCBC Plan is, and neither UCBC nor Union Federal 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).

 

(f) With respect to any group health plan (as defined in Section 607(1) of ERISA) sponsored or maintained by UCBC or Union Federal, in which UCBC or Union Federal participates as a participating employer or to which UCBC or Union Federal contributes, no director, officer, employee or agent of UCBC or Union Federal 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 UCBC or Union Federal under Code Section 4980B(a). With respect to all such plans, all applicable provisions of Section 4980B of the Code and Section 601 of ERISA have been complied with in all material respects by UCBC or Union Federal.

 

(g) 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 UCBC or Union Federal 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 Disclosure Schedule, no Voluntary Employees' Beneficiary Association ("VEBA") as defined in Code Section 501(c)(9) is sponsored or maintained by UCBC or Union Federal.

 

(i) Except as otherwise provided in the 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 Disclosure Schedule, UCBC and Union Federal 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 UCBC Plans have been funded on the basis of consistent methods in accordance with sound actuarial assumptions and practices, and no UCBC Plan, at the end of any plan year, had or has had an accumulated funding deficiency. No actuarial assumptions have been changed since the last written report of actuaries on such UCBC Plans. 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. UCBC and Union Federal 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 UCBC Plans, whether or not waived, nor does UCBC 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 UCBC or by any person which may be aggregated with UCBC 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 UCBC 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 UCBC threatened or imminent with respect to any UCBC Plan (other than a routine claim for benefits for which plan administrative review procedures have not been exhausted) for which UCBC or Union Federal would be liable after June 30, 2005, except as is reflected on the UCBC 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), UCBC, Union Federal, 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 3.01(b), 6.14, 6.15, 6.16, 6.18, 6.19, 7.03(b), 7.05, and 8.01(i) of the Agreement, as well as any other payments made under the UCBC Plans because of the transactions contemplated herein.

 

4.15.   Obligations to Employees . All accrued obligations and liabilities of and all payments by UCBC or Union Federal and all UCBC 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 UCBC or Union Federal 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 UCBC or Union Federal for its current or former directors, officers, employees and agents, including, without limitation, all liabilities and obligations to the UCBC Plans (as defined in Section 4.14(a) hereof). All obligations and liabilities of UCBC or Union Federal, 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 UCBC 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 UCBC or Union Federal 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 UCBC Financial Statements and the books, statements and records of UCBC.

 

4.16.   Taxes, Returns and Reports . Except as set forth in the Disclosure Schedule, each of UCBC and Union Federal 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). UCBC has established, and shall establish in the Subsequent UCBC Financial Statements (as hereinafter defined), in accordance with generally accepted accounting principles, a reserve for taxes in the UCBC Financial Statements adequate to cover all of UCBC's and Union Federal’s tax liabilities (including, without limitation, income taxes, payroll taxes and withholding, and franchise fees) for the periods then ending. Neither UCBC nor Union Federal 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 UCBC Financial Statements (as hereinafter defined) or as accrued or reserved for on the books and records of UCBC or Union Federal. Neither UCBC nor Union Federal is currently under audit by any state or federal taxing authority. No federal, state or local tax returns of UCBC or Union Federal have been audited by any taxing authority during the past five (5) years.

 

4.17.   Deposit Insurance . The deposits of Union Federal 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 UCBC or Union Federal 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 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 UCBC or Union Federal on the date hereof or with respect to which UCBC or Union Federal 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 UCBC are complete and correct and accurately reflect the basis for the financial condition, results of operations, business, assets and capital of UCBC on a consolidated basis set forth in the UCBC Financial Statements.

 

4.20.   Broker's, Finder's or Other Fees . Except for reasonable fees and expenses of UCBC' attorneys, accountants and investment bankers, all of which shall be paid by UCBC prior to the Effective Time, except as set forth in the Disclosure Schedule, no agent, broker or other person acting on behalf of UCBC or Union Federal or under any authority of UCBC or Union Federal 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 Mergers contemplated hereby.

 

4.21.   Disclosure Schedule and Documents . All written data, documents, materials and

 

 

information referred to in this Agreement and delivered by UCBC or Union Federal pursuant to or in connection with the 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 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 Disclosure Schedule, neither UCBC nor Union Federal has:

 

(a) Suffered any changes having an adverse impact on the financial condition, results of operations, business, assets or capital of UCBC 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 UCBC or Union Federal except pursuant to the express terms thereof;

 

(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 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 Union Federal 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 June 30, 2005.

 

4.23.   UCBC Securities and Exchange Commission Filings . UCBC 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 UCBC’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 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 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 UCBC or Union Federal.

 

4.25.   Indemnification Agreements .

 

(a) Other than as set forth in the Disclosure Schedule, neither UCBC nor Union Federal 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 UCBC or the Charter or Bylaws of Union Federal.

 

(b) No claims have been made against or filed with UCBC or Union Federal nor have, to the knowledge of UCBC, any claims been threatened against UCBC or Union Federal, 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 UCBC or Union Federal.

 

 

 

4.26.   Shareholder Approval . The affirmative vote of the holders of a majority of the UCBC 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 UCBC, 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 UCBC from a financial point of view.

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES OF MAINSOURCE

 

On or prior to the date hereof, MainSource has delivered to UCBC 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 V or to one or more of its covenants contained in Article VII; provided that the mere inclusion of an item in the 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 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 UCBC 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 UCBC, 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 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, 13,471,128 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 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.

 

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.

 

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 UCBC and are included in the Disclosure Schedule.

 

5.06   Accuracy of Statements Made and Materials Provided to UCBC . 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 UCBC 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 UCBC'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.

 

5.07   Financial Statements and Reports . (a) MainSource has delivered to UCBC 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 . 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 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 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 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 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.

 

ARTICLE VI

 

COVENANTS OF UCBC

 

UCBC covenants and agrees with MainSource and covenants and agrees to cause Union Federal to act as follows:

 

6.01.   Shareholder Approval . (a) UCBC 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 By-Laws of UCBC at the earliest possible reasonable date. Subject to Section 6.06 hereof, the Board of Directors of UCBC shall recommend to UCBC'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 UCBC's shareholders.

 

(b) Subject to Section 6.06 hereof, Union Federal shall submit this Agreement to UCBC, as its sole shareholder, for approval by unanimous written consent without a meeting in

 

 

accordance with applicable law and the Charter and By-laws of Union Federal at a date reasonably in advance of the Effective Time. The Board of Directors of Union Federal shall recommend approval of this Agreement and the Subsidiary Merger to UCBC, as the sole shareholder of Union Federal, and UCBC as sole shareholder of Union Federal, shall approve this Agreement and the Subsidiary Merger.

 

6.02.   Other Approvals . (a) UCBC and Union Federal 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 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) UCBC and Union Federal will use commercially reasonable efforts to obtain any required third party consents to agreements, contracts, commitments, leases, instruments and documents described in the Disclosure Schedule and designated therein as material.

 

(c) Any materials or information provided by UCBC or Union Federal 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 UCBC nor Union Federal 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) Union Federal may pay cash dividends to UCBC in the ordinary course of business for payment of reasonable and necessary business and operating expenses of UCBC and to provide funds for UCBC's dividends to its shareholders in accordance with this Agreement, and (B) UCBC may pay to its shareholders its usual and customary cash dividend of no greater than $.15 per share for any quarterly period, provided that no dividend may be paid for the quarterly period in which the Mergers are scheduled to be consummated or consummated if, during such period, UCBC shareholders will become entitled to receive dividends on their shares of MainSource Common Stock received pursuant to this Agreement;

 

(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;

 

(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 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 $15,000 individually or $50,000 in the aggregate;

 

(ix) make any investment subject to any restrictions, whether contractual or statutory, which materially impairs the ability of UCBC or Union Federal 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 UCBC or Union Federal 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 UCBC or Union Federal, 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 UCBC or Union Federal;

 

(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 UCBC or Union Federal; 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 UCBC's or Union Federal’s 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 UCBC or Union Federal, or enter into any agreement or commitment relative to the foregoing;

 

(xiv) fail to maintain UCBC's reserve for loan losses at the greater of either $1,020,000 or .45% 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 UCBC or Union Federal;

 

(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 UCBC Financial Statements or the Subsequent UCBC 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 $25,000;

 

(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 UCBC or Union Federal which exceed $25,000, 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 UCBC and Union Federal 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 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 UCBC or Union Federal.

 

6.04.   Insurance . UCBC and Union Federal 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 UCBC or Union Federal as of the date of this Agreement.

 

6.05.   Affiliate Agreements . UCBC shall, within thirty (30) days after the date of this Agreement and promptly thereafter until the Effective Time to reflect any changes, provide MainSource with a list identifying each person who may be deemed to be an affiliate of UCBC 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 UCBC following such date, UCBC shall obtain from each director, executive officer and other person who may be deemed to be such an affiliate of UCBC 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 UCBC nor Union Federal 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 UCBC or Union Federal or to which UCBC or Union Federal may become a party (all such transactions are hereinafter referred to as "Acquisition Transactions").

 

(b) UCBC shall promptly communicate to MainSource the terms of any proposal or offer which UCBC or Union Federal may receive with respect to an Acquisition Transaction. Notwithstanding anything to the contrary elsewhere in this Agreement, UCBC 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 UCBC'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 UCBC's Board of Directors in connection with seeking an Acquisition Transaction.

 

(c) In the event UCBC'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 UCBC's shareholders for their approval, then in submitting this Agreement to the shareholders at the meeting of shareholders, UCBC 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 UCBC or Union Federal, 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 UCBC nor Union Federal nor MainSource will issue any press or news releases or make any other public announcements or disclosures relating to the Mergers without providing a final copy of such press or news release to the other party and providing such party with a reasonable opportunity to comment on such press or news release.

 

6.08.   Material Changes to Disclosure Schedules . UCBC and Union Federal shall promptly supplement, amend and update, upon the occurrence of any change prior to the Effective Time, and as of the Effective Time, the 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 UCBC or Union Federal 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 UCBC, and their 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 the other party. MainSource and UCBC, and their 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 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 UCBC, Union Federal or MainSource. Upon request, UCBC and MainSource will furnish the other party or its representatives or agents, their attorneys' responses to external auditors requests for information,

 

 

management letters received from their external auditors and such financial, loan and operating data and other information reasonably requested by MainSource or UCBC which has been or is developed by the other party, its auditors, accountants or attorneys (provided with respect to attorneys, such disclosure would not result in the waiver by the other party of any claim of attorney-client privilege), and will permit MainSource or UCBC or their representatives or agents to discuss such information directly with any individual or firm performing auditing or accounting functions for UCBC or MainSource, as applicable, and such auditors and accountants will be directed to furnish copies of any reports or financial information as developed to MainSource or UCBC or its representatives or agents, as applicable. No investigation by MainSource or UCBC shall affect the representations and warranties made by UCBC, Union Federal or MainSource herein. Any confidential information or trade secrets received by MainSource, UCBC or their 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 UCBC, as applicable, or at MainSource’s or UCBC's request, returned to MainSource or UCBC, as applicable, 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 or UCBC which would be prohibited by law. The ability of MainSource or UCBC 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 UCBC (and each employee, representative or agent of MainSource and UCBC) may disclose to any and all persons, without limitation of any kind, the tax treatment (as defined in Treas. Reg. § 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 or UCBC 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 and UCBC 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 UCBC and Union Federal, including, without limitation, the loan committee, investment committee, the executive committee, the personnel committee, and any other committee of UCBC and Union Federal, 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, UCBC 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 UCBC prepared for its internal use, Union Federal’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,