AGREEMENT AND PLAN OF MERGER,

 

 

                                                     Exhibit 2.1

 

                  AGREEMENT AND PLAN OF MERGER

 

     AGREEMENT AND PLAN OF MERGER, dated as of December 17, 2004

("Agreement"), among Peoples Community Bancorp, Inc. ("Bancorp"),

a Maryland corporation, Peoples Community Bank (the "Bank"), a

federally-chartered   savings bank and a wholly-owned subsidiary

of Bancorp, American State Corporation ("ASC"), an Indiana

corporation, and American State Bank ("American"), an Indiana-

chartered commercial bank and wholly-owned subsidiary of ASC.

 

                          WITNESSETH:

 

     WHEREAS, the Boards of Directors of Bancorp, the Bank, ASC

and American have determined that it is in the best interests of

their respective companies and their stockholders to consummate

the business combination transactions provided for herein; and

 

     WHEREAS, the parties desire to provide for certain

undertakings, conditions, representations, warranties and

covenants in connection with the transactions contemplated

hereby; and

 

     WHEREAS, as a condition and inducement to the willingness of

Bancorp to enter into this Agreement, the directors of ASC

Directors are concurrently entering into a Stockholder Agreement

with Bancorp (the "Stockholder Agreement"), in substantially the

form attached hereto as Exhibit A, pursuant to which, among other

things, such directors agree to vote their shares of ASC Capital

Stock (as defined below) in favor of this Agreement and the

transactions contemplated hereby.

 

     NOW, THEREFORE, in consideration of the premises and the

mutual covenants, representations, warranties and agreements

herein contained, the parties hereto agree as follows:

 

                            ARTICLE I

 

                           THE MERGER

 

     1.01 The Merger.   Subject to the terms and conditions of

this Agreement and subject to and in accordance with an Agreement

of Merger, a copy of which is attached hereto as Exhibit B (the

"Agreement of Merger"), between ASC and ASC Acquisition Corp.

("Interim"), an Indiana corporation to be formed as a wholly-

owned subsidiary of the Bank in connection with the transactions

contemplated hereby, at the Effective Time (as defined in Section

1.05 hereof), Interim shall be merged with and into ASC in

accordance with Chapter 40 of the Indiana Business Corporation

Law ("IBCL") (the "Merger"), with ASC as the surviving

corporation (hereinafter sometimes called the "Surviving

Corporation"). Simultaneously with or as soon as practicable

after the Merger, the Surviving Corporation shall be merged with

and liquidated into the Bank (the "Liquidation") in accordance

with a Plan of Complete Liquidation, the form of which is

attached hereto as Exhibit C.   Simultaneously with or immediately

following consummation of the Liquidation, American shall be

merged with and into the Bank, with the Bank as the resulting

institution (the "Bank Merger").

 

 

     1.02 Effect of the Merger.   As of the Effective Time (as

defined in Section 1.05 hereof), the Surviving Corporation shall

be considered the same business and corporate entity as each of

ASC and Interim and thereupon and thereafter, all the property,

rights, powers and franchises of each of ASC and Interim shall

vest in the Surviving Corporation and the Surviving Corporation

shall be subject to and be deemed to have assumed all of the

debts, liabilities, obligations and duties of each of ASC and

Interim and shall have succeeded to all of each of their

relationships, fiduciary or otherwise, as fully and to the same

extent as if such property rights, privileges, powers,

franchises, debts, obligations, duties and relationships had been

originally acquired, incurred or entered into by the Surviving

Corporation.   In addition, any reference to either of ASC and

Interim in any contract or document, whether executed or taking

effect before or after the Effective Time, shall be considered a

reference to the Surviving Corporation if not inconsistent with

the other provisions of the contract or document; and any pending

action or other judicial proceeding to which either of ASC and

Interim is a party, shall not be deemed to have abated or to have

discontinued by reason of the Merger, but may be prosecuted to

final judgment, order or decree in the same manner as if the

Merger had not been made; or the Surviving Corporation may be

substituted as a party to such action or proceeding, and any

judgment, order or decree may be rendered for or against it that

might have been rendered for or against either of ASC and Interim

if the Merger had not occurred.   At the Effective Time, the

directors and officers of the Surviving Corporation shall be the

persons designated in Section 1.04.

 

     1.03 Articles of Incorporation and Bylaws.   As of the

Effective Time, the Articles of Incorporation and Bylaws of ASC

shall be the Articles of Incorporation and Bylaws of the

Surviving Corporation until otherwise amended as provided by law.

                   

     1.04 Directors and Officers.   As of the Effective Time, the

directors and officers of Interim shall become the directors and

officers of the Surviving Corporation.   If requested by Bancorp,

the directors of ASC and/or American shall resign as of the

Effective Time.

 

     1.05 Effective Time.   The Merger shall become effective upon

the occurrence of the filing of Articles of Merger with the

Secretary of State of the State of Indiana, unless a later date

and time is specified as the effective time in such Articles of

Merger ("Effective Time").   A closing (the "Closing") shall take

place immediately prior to the Effective Time at 10:00 a.m., on

the fifth business day following the receipt of all necessary

regulatory or governmental approvals and consents and the

expiration of all statutory waiting periods in respect thereof

and the satisfaction or waiver, to the extent permitted

hereunder, of the conditions to the consummation of the Merger

specified in Article V of this Agreement (other than the delivery

of certificates and other instruments and documents to be

delivered at the Closing), at the offices of Bancorp or at such

other place, at such other time, or on such other date as the

parties may mutually agree upon.   At the Closing, there shall be

delivered to Bancorp, the Bank, ASC and American the certificates

and other documents required to be delivered under Article V

hereof.

 

     1.06 Modification of Structure.   Notwithstanding any

provision of this Agreement to the contrary, Bancorp, with the

prior written consent of ASC, which consent shall not be

unreasonably withheld, may elect, subject to the filing of all

necessary applications and the receipt of all required regulatory

approvals, to modify the structure of the transactions

contemplated hereby so long as (i) there are no material adverse

federal income tax consequences to the stockholders of ASC as a

result

 

 

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of such modification, (ii) the consideration to be paid to

holders of ASC Common Stock (as defined below) under this

Agreement is not thereby changed in kind or reduced in amount

solely because of such modification and (iii) such modification

will not be likely to materially delay or jeopardize receipt of

any required regulatory approvals or impair or prevent the

satisfaction of any conditions to the Closing.

 

     1.07 Conversion of ASC Capital Stock.   As of the Effective

Time, each share of Class A and Class B common stock, no par

value, of ASC (the "ASC Common Stock"), issued and outstanding

immediately prior to the Effective Time (other than shares (i) as

to which dissenters' rights have been asserted and duly perfected

in accordance with the IBCL ("Dissenting Shares"), and (ii) held

by ASC (including treasury shares) or Bancorp or the Bank other

than in a fiduciary capacity, which shares shall be cancelled)

shall, by virtue of the Merger and without any action on the part

of the holder thereof, be cancelled and by operation of law be

converted into and represent the right to receive from Bancorp,

$4.79 in cash (the "Common Consideration").   In addition, as of

the Effective Time, each share of preferred stock, par value

$1,000 per share, of ASC ("ASC Preferred Stock"), issued and

outstanding immediately prior to the Effective Time shall, by

virtue of the Merger and without any action on the part of the

holder thereof, be cancelled and by operation of law be converted

into and represent the right to receive from the Bank, $1,000 in

cash (the "Preferred Consideration").   The aggregate

consideration to be paid for the conversion of all outstanding

shares of ASC Common Stock and ASC Preferred Stock is hereinafter

referred to as the "Aggregate Merger Consideration." ASC Common

Stock and ASC Preferred Stock are together referred to as "ASC

Capital Stock."

    

     In addition, holders of ASC Common Stock shall have a

proportionate interest in funds, if any, remaining in the escrow

account to be established at Closing in accordance with the

Holdback Escrow Agreement, attached hereto as Exhibit D.

 

     1.08 Exchange Procedures

 

     (a)   As of the Effective Time, Bancorp shall deposit in

trust with an exchange agent designated by Bancorp and reasonably

acceptable to ASC (the "Exchange Agent") cash in an amount equal

to the Aggregate Merger Consideration.   No later than ten

business days following the Effective Time, Bancorp shall cause

the Exchange Agent to mail or make available to each holder of

record of a certificate or certificates which immediately prior

to the Effective Time represented issued and outstanding shares

of ASC Capital Stock a notice and letter of transmittal (which

shall specify that delivery shall be effected and risk of loss

and title to the certificates theretofore representing shares of

ASC Capital Stock shall pass only upon proper delivery of such

certificates to the Exchange Agent) advising such holder of the

effectiveness of the Merger and the procedure for surrendering to

the Exchange Agent such certificate or certificates which

immediately prior to the Effective Time represented issued and

outstanding shares of ASC Capital Stock in exchange for the

consideration set forth in Section 1.07 hereof deliverable in

respect thereof pursuant to this Agreement.   Within five business

days following receipt of surrendered certificates and a properly

completed letter of transmittal, the Exchange Agent shall deliver

the Common Consideration and/or the Preferred Consideration to

each former ASC stockholder.   The Exchange Agent shall accept

such

 

 

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certificates upon compliance with such reasonable terms and

conditions as the Exchange Agent may impose to effect an orderly

exchange thereof in accordance with normal exchange practices.

 

     (b)   Each outstanding certificate which prior to the

Effective Time represented ASC Common Stock (other than

Dissenting Shares) or ASC Preferred Stock and which is not

surrendered to the Exchange Agent in accordance with the

procedures provided for herein shall, except as otherwise herein

provided, until duly surrendered to the Exchange Agent, be deemed

to evidence the right to receive the Common Consideration or the

Preferred Consideration as the case may be.   After the Effective

Time, there shall be no further transfer on the records of ASC of

certificates representing shares of ASC Capital Stock and if such

certificates are presented to ASC for transfer, they shall be

cancelled against delivery of the Common Consideration or the

Preferred Consideration as hereinabove provided.

 

     (c)   Bancorp shall not be obligated to deliver the Common

Consideration or the Preferred Consideration to which a holder of

ASC Common Stock or ASC Preferred Stock would otherwise be

entitled as a result of the Merger until such holder surrenders

the certificate or certificates representing the shares of ASC

Common Stock or ASC Preferred Stock for exchange as provided in

this Section 1.08, or, in lieu thereof, an appropriate affidavit

of loss and indemnity agreement as may be required in each case

by Bancorp.   If payment of the Common Consideration or the

Preferred Consideration is to be made in a name other than that

in which the certificate evidencing ASC Common Stock or ASC

Preferred Stock surrendered in exchange therefor is registered,

it shall be a condition of the issuance thereof that the

certificate so surrendered shall be properly endorsed or

accompanied by an executed form of assignment separate from the

certificate and otherwise in proper form for transfer and that

the person requesting such payment pay to the Exchange Agent in

advance, any transfer or other tax required by reason of the

payment in any name other than that of the registered holder of

the certificate surrendered or otherwise establish to the

satisfaction of the Exchange Agent that such tax has been paid or

is not payable.

    

     (d)   Any portion of either the Common Consideration or the

Preferred Consideration delivered to the Exchange Agent by

Bancorp pursuant to Section 1.07 that remains unclaimed by the

stockholders of ASC for six months after the Effective Time (as

well as any proceeds from any investment thereof) shall be

delivered by the Exchange Agent to Bancorp.   Any stockholders of

ASC who have not exchanged their shares of ASC Common Stock for

the Common Consideration or their shares of ASC Preferred Stock

for Preferred Consideration in accordance with this Agreement

shall thereafter look only to Bancorp for the consideration

deliverable in respect of each share of ASC Common Stock or ASC

Preferred Stock such stockholder holds as determined pursuant to

this Agreement without any interest thereon.   If outstanding

certificates for shares of ASC Common Stock or ASC Preferred

Stock are not surrendered or the payment for them is not claimed

prior to the date on which payment of the Common Consideration or

Preferred Consideration would otherwise escheat to or become the

property of any governmental unit or agency, the unclaimed items

shall, to the extent permitted by abandoned property and any

other applicable law, become the property of Bancorp (and to the

extent not in its possession shall be delivered to it), free and

clear of all claims or interest of any person previously entitled

to such property.   Neither the Exchange Agent nor any party to

this Agreement shall be liable to any holder of stock represented

by any certificate for any consideration paid to a public

official pursuant to applicable abandoned property, escheat or

similar

 

 

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laws.   Bancorp and the Exchange Agent shall be entitled

to rely upon the stock transfer books of ASC to establish the

identity of those persons entitled to receive the Common

Consideration or Preferred Consideration specified in this

Agreement, which books shall be conclusive with respect thereto.

In the event of a dispute with respect to ownership of stock

represented by any certificate, Bancorp and the Exchange Agent

shall be entitled to deposit any consideration represented

thereby in escrow with an independent third party and thereafter

be relieved with respect to any claims thereto.

 

     1.09 Withholding Rights.   Bancorp (through the Exchange

Agent, if applicable) shall be entitled to deduct and withhold

from any amounts otherwise payable pursuant to this Agreement to

any holder of shares of ASC Capital Stock such amounts as Bancorp

is required under the Internal Revenue Code of 1986, as amended

("Code") or any provision of state, local or foreign tax law to

deduct and withhold with respect to the making of such payment.

Any amounts so withheld shall be treated for all purposes of this

Agreement as having been paid to the holder of ASC Common Stock

or ASC Preferred Stock in respect of which such deduction and

withholding was made by Bancorp.

 

     1.10 Dissenting Shares.   Each outstanding share of ASC

Capital Stock the holder of which has perfected his right to

dissent under the IBCL and has not effectively withdrawn or lost

such rights as of the Effective Time shall not be converted into

or represent a right to receive the Common Consideration or

Preferred Consideration, as applicable, and the holder thereof

shall be entitled only to such rights as are granted by the IBCL.

ASC shall give Bancorp prompt notice upon receipt by ASC of any

such written demands for payment of their fair value of such

shares of ASC Capital Stock and of withdrawals of such demands

and any other instruments provided pursuant to the IBCL (any

stockholder duly making such demand being hereinafter called a

"Dissenting Stockholder").   Any payments made in respect of

Dissenting Shares shall be made by Bancorp.   If any Dissenting

Stockholder shall effectively withdraw or lose (through failure

to perfect or otherwise) his right to such payment at or prior to

the Effective Time, such holder's shares of ASC Capital Stock

shall be converted into a right to receive the Common

Consideration or Preferred Consideration, as applicable, in

accordance with the applicable provisions of this Agreement.

    

     1.11 Additional Actions.   If at any time after the Effective

Time the Surviving Corporation shall consider that any further

assignments or assurances in law or any other acts are necessary

or desirable to (i) vest, perfect or confirm, of record or

otherwise, in the Surviving Corporation its rights, title or

interest in, to or under any of the rights, properties or assets

of ASC acquired or to be acquired by the Surviving Corporation as

a result of, or in connection with, the Merger, or (ii) otherwise

carry out the purposes of this Agreement, ASC and its proper

officers and directors shall be deemed to have granted to the

Surviving Corporation an irrevocable power of attorney to execute

and deliver all such proper deeds, assignments and assurances in

law and to do all acts necessary or proper to vest, perfect or

confirm title to and possession of such rights, properties or

assets in the Surviving Corporation and otherwise to carry out

the purposes of this Agreement; and the proper officers and

directors of the Surviving Corporation are fully authorized in

the name of ASC or otherwise to take any and all such action.

 

     1.12 Interim Shares.   Each outstanding share of common stock

of Interim, $.01 par value per share ("Interim Common Stock"), on

the Effective Time shall be converted automatically and without

any action on the part of the holder thereof into an equal number

of shares of the Surviving

 

 

 

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Corporation, which shall constitute all of the outstanding common

stock of the Surviving Corporation.

 

 

                           ARTICLE II

 

             REPRESENTATIONS AND WARRANTIES OF ASC

                          AND AMERICAN

 

     References to "ASC Disclosure Schedules" shall mean all of

the disclosure schedules required by this Article II and Article

IV hereof, dated as of the date hereof and referenced to the

specific sections and subsections of this Agreement, which have

been delivered by ASC to Bancorp. ASC and American hereby

represent and warrant to Bancorp and the Bank as follows as of

the date hereof:

 

     2.01 Corporate Organization.

    

     (a)   ASC is a corporation duly organized and validly

existing under the laws of the State of Indiana.   ASC has the

corporate power and authority to own or lease all of its

properties and assets and to carry on its business as it is now

being conducted and is duly licensed or qualified to do business

and is in good standing (if and to the extent the concept of good

standing is recognized in such jurisdiction) in each jurisdiction

in which the nature of the business conducted by it or the

character or location of the properties and assets owned or

leased by it makes such licensing or qualification necessary,

except where the failure to be so licensed, qualified or in good

standing would not have a Material Adverse Effect (as defined

below).   ASC is registered as a bank holding company under the

Bank Holding Company Act of 1956 ("BHCA").   ASC Disclosure

Schedule 2.01(a) sets forth true and complete copies of the

Articles of Incorporation and Bylaws of ASC as in effect on the

date hereof.

 

     For the purposes of this Agreement, the term "Material

Adverse Effect" shall mean any effect that (i) is material and

adverse to the financial condition, results of operations or

business of ASC and American, either individually or considered

as one enterprise and results in a substantial diminution of

value of ASC and American, either individually or considered as

one enterprise or (ii) materially impairs the ability of ASC

and/or American to consummate the transactions contemplated by

this Agreement and the Agreement of Merger, provided, however,

that the term "Material Adverse Effect" shall not be deemed to

include (i) the impact of changes in (a) laws, regulations, or

policies of any Federal or state court, administrative agency,

commission or other governmental authority or interpretations

thereof; (b) generally accepted accounting principles; or (c)

interest rates, that in each case are generally applicable to the

banking industry,   (ii) actions taken or to be taken by ASC or

American upon the written request of Bancorp pursuant to this

Agreement or the Agreement of Merger, (iii) any adverse effect

resulting from or relating to the announcement or pendency of the

Merger, pursuant to Section 4.10 below or (iv) any losses related

to the assets listed in Appendix A to the Holdback Escrow

Agreement.

 

 

                               6

 

     (b)   The only direct or indirect subsidiaries of ASC are

American and American State Advisory Group Corp. ("Advisory").

Advisory is an Indiana corporation and a wholly-owned subsidiary

of American.   Disclosure Schedule 2.01(b)(i) sets forth true and

complete copies of the Articles of Incorporation and Bylaws of

American and Advisory as in effect on the date hereof.   American

and Advisory (i) are duly organized and validly existing under

the laws of the State of Indiana, (ii) have the corporate power

and authority to own or lease all of their respective properties

and assets, and (iii) are duly licensed or qualified to do

business and are in good standing (if and to the extent the

concept of good standing is recognized in such jurisdiction) in

each jurisdiction in which the nature of the business

respectively conducted by them or the character or location of

the respective properties and assets owned or leased by them

makes such licensing or qualification necessary, except where the

failure to be so licensed, qualified or in good standing would

not have a Material Adverse Effect.   ASC and American have

satisfied in all material respects all commitments, financial or

otherwise, as may have been agreed upon with their state and/or

federal regulatory agencies.   Other than American and Advisory,

and except as set forth in ASC Disclosure Schedule 2.01(b)(ii),

ASC does not own or control, directly or indirectly, greater than

a 5% equity interest in any corporation, company, association,

partnership, joint venture or other entity.

 

     2.02 Capitalization.   The authorized capital stock of ASC

consists of   10,000,000 shares of ASC Common Stock, of which

1,469,062 are issued and outstanding as of the date hereof, and

100,000 shares of ASC Preferred Stock, of which 700 shares are

issued and outstanding as of date hereof.   All issued and

outstanding shares of ASC Capital Stock have been duly authorized

and validly issued and are fully paid, nonassessable and free of

preemptive rights.   ASC does not have and is not bound by any

outstanding subscriptions, options, warrants, calls, commitments

or agreements of any character calling for the transfer, purchase

or issuance of any shares of capital stock of ASC or any

securities representing the right to purchase or otherwise

receive any shares of such capital stock or any securities

convertible into or representing the right to purchase or

subscribe for any such stock.

 

     2.03 Authority; No Violation.

 

     (a)   Subject to the approval of this Agreement by the

stockholders of ASC Capital Stock, ASC and American have full

corporate power and authority to execute and deliver this

Agreement and to consummate the transactions contemplated hereby

in accordance with the terms hereof.   The execution and delivery

of this Agreement and the consummation of the transactions

contemplated hereby have been duly and validly approved by the

boards of directors of ASC and American.   Except for the adoption

of this Agreement by the holders of ASC Capital Stock, no other

corporate proceedings on the part of ASC or American are

necessary to consummate the Merger.   This Agreement has been duly

and validly executed and delivered by ASC and American and

constitutes the valid and binding obligation of ASC and American,

enforceable against them in accordance with and subject to its

terms, except as limited by applicable bankruptcy, insolvency,

reorganization, moratorium or other similar laws affecting

creditors' rights generally, and except that the availability of

equitable remedies (including, without limitation, specific

performance) is within the discretion of the appropriate court.

 

 

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      (b)   Subject to the approval of this Agreement by the

stockholders of ASC Capital   Stock, ASC has full corporate power

and authority to execute and deliver the Agreement of Merger and

to consummate the transactions contemplated thereby in accordance

with the terms thereof.   The execution and delivery of the

Agreement of Merger by ASC and the consummation of the

transactions contemplated thereby have been duly and validly

approved by the Board of Directors of ASC.   The Agreement of

Merger, upon its execution and delivery by ASC, will constitute a

valid and binding obligation of ASC, enforceable against it in

accordance with and subject to its terms, except as limited by

applicable bankruptcy, insolvency, reorganization, moratorium or

other similar laws affecting creditors' rights generally, and

except that the availability of equitable remedies (including,

without limitation, specific performance) is within the

discretion of the appropriate court.

 

     (c)   None of the execution and delivery of this Agreement by

ASC and American, the execution and delivery of the Agreement of

Merger by ASC, the consummation by ASC and American of the

transactions contemplated hereby in accordance with the terms

hereof, the consummation by ASC of the transactions contemplated

by the Agreement of Merger in accordance with the terms thereof,

compliance by ASC and American with any of the terms or

provisions hereof or compliance by ASC with any terms or

provisions of the Agreement of Merger, will (i) violate any

provision of the Articles of Incorporation, Charter or Bylaws of

ASC or American, (ii) assuming that the consents and approvals

set forth below are duly obtained, violate any statute, code,

ordinance, rule, regulation, judgment, order, writ, decree or

injunction applicable to ASC or American or any of their

respective properties or assets, or (iii) except as disclosed in

Disclosure Schedule 2.03(c), violate, conflict with, result in a

breach of any provisions of, constitute a default (or an event

which, with notice or lapse of time, or both, would constitute a

default) under, result in the termination of, accelerate the

performance required by, or result in the creation of any lien,

security interest, charge or other encumbrance upon any of the

properties or assets of ASC or American under any of the terms,

conditions or provisions of any note, bond, mortgage, indenture,

deed of trust, license, lease, agreement or other instrument or

obligation to which ASC or American are a party, or by which any

of their respective properties or assets may be bound or

affected, except, with respect to (ii) and (iii) above, such as

individually or in the aggregate will not have a Material Adverse

Effect and which will not prevent or delay the consummation of

the transactions contemplated hereby.   Except as set forth in

Disclosure Schedule 2.03(c) and for consents and approvals of or

filings or registrations with or notices to the Board of

Governors of the Federal Reserve System (the "FRB")), the

Department of Financial Institutions of the State of Indiana (the

"Department"), the Federal Deposit Insurance Corporation ("FDIC")

the Secretary of State of the State of Indiana, and the

stockholders of ASC, no consents or approvals of or filings or

registrations with or notices to any federal, state, municipal or

other governmental or regulatory commission, board, agency, or

non-governmental third party are required on behalf of ASC in

connection with (a) the execution and delivery of this Agreement

by ASC and American or the execution and delivery of the

Agreement of Merger by ASC, and (b) the completion by ASC and

American of the transactions contemplated hereby or the

completion by ASC of the transactions contemplated by the

Agreement of Merger.

 

     (d)   As of the date hereof, neither ASC nor American is

aware of any reasons relating to ASC or American why all consents

and approvals shall not be procured from all regulatory agencies

having jurisdiction over the transactions contemplated by this

Agreement as shall be necessary for consummation of the

transactions contemplated hereby.

 

 

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     2.04 Financial Statements.

 

     (a)   ASC has previously delivered to Bancorp copies of the

consolidated statements of financial condition of ASC as of

December 31, 2003 and 2002 and the related consolidated

statements of operations, consolidated income (loss),

stockholders' equity and cash flows for the years ended December

31, 2003, 2002 and 2001, in each case accompanied by the

respective audit report of Clifton Gunderson, LLP or Crowe Chizek

and Company, LLC, independent public accountants, as well as the

unaudited consolidated statements of financial condition of ASC

as of September 30, 2004 and the related unaudited consolidated

statements of operations, consolidated income (loss) and

stockholders' equity for the nine months ended September 30, 2004

and 2003.   The consolidated balance sheets of ASC referred to

herein, as well as the financial statements to be delivered

pursuant to Section 4.04 hereof,   (including the related notes,

where applicable) fairly present or will fairly present, as the

case may be, the consolidated financial condition of ASC as of

the respective dates set forth therein, and the related

consolidated statements of income and stockholders' equity

(including the related notes, where applicable) fairly present or

will fairly present, as the case may be, the results of the

consolidated income and stockholders' equity for the respective

periods or as of the respective dates set forth therein (it being

understood that ASC's interim financial statements are not

audited and are not prepared with all related notes but have

been, or will be, prepared in compliance with all applicable

legal and regulatory accounting requirements and reflect all

adjustments which are, in the opinion of ASC, necessary for a

fair presentation of such financial statements).

 

     (b)   Each of the audited financial statements referred to in

this Section 2.04 (including the related notes, where applicable)

has been prepared in accordance with generally accepted

accounting principles consistently applied during the periods

involved.   The books and records of ASC are being maintained in

material compliance with applicable legal and accounting

requirements.

 

     (c)   Except to the extent reflected, disclosed or reserved

against in the consolidated financial statements referred to in

the first sentence of Section 2.04(a) or the notes thereto, and

except for liabilities incurred since September 30, 2004 in the

ordinary course of business and consistent with past practice,

ASC does not have any obligation or liability, whether absolute,

accrued, contingent or otherwise, material to the business,

results of operations, assets or financial condition of ASC and

American taken as a whole.

 

     2.05 Absence of Certain Changes or Events.   Except as set

forth in ASC Disclosure Schedule 2.05, since September 30, 2004,

(i) ASC and American have conducted their businesses in the

ordinary and usual course and (ii) no event has occurred or

circumstances arisen that, individually or in the aggregate, has

had or is reasonably likely to have a Material Adverse Effect.

 

     2.06 Legal Proceedings.   Except as disclosed in ASC

Disclosure Schedule 2.06, neither ASC nor American is a party to

any, and there are no pending or, to the knowledge of ASC and

American, threatened legal, administrative, arbitration or other

proceedings, claims, actions or governmental investigations of

any nature against ASC or American, except such proceedings,

claims, actions or governmental investigations which in the good

faith judgment of ASC and

 

 

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American will not have a Material Adverse Effect.

Neither ASC nor American is a party to any

order, judgment or decree which has or could reasonably be

expected to have a Material Adverse Effect.

 

     2.07 Taxes and Tax Returns.

 

     (a)   ASC and American have duly filed (and until the

Effective Time will so file) all returns, declarations, reports,

information   returns and statements ("Returns") required to be

filed or sent by or with respect to them in respect of any Taxes

(as hereinafter defined), and have duly paid (and until the

Effective Time will so pay) all Taxes due and payable other than

Taxes or other charges which (i) are being contested in good

faith (and disclosed in writing to Bancorp) and (ii) have not

finally been determined.   ASC has established (and until the

Effective Time will establish) on its books and records reserves

that are adequate for the payment of all Taxes not yet due and

payable for periods ending on or prior to the Effective Time,

whether or not disputed or accrued.   Except as set forth in ASC

Disclosure Schedule 2.07(a), (i) the federal income tax returns

of ASC have been examined by the Internal Revenue Service

("IRS"), and (ii) the Indiana income tax returns of ASC have been

examined by applicable authorities, and in the case of both (i)

and (ii) no deficiencies were asserted as a result of such

examinations which have not been resolved and paid in full.

There are no audits or other administrative or court proceedings

presently pending nor any other disputes pending, or claims

asserted for, Taxes or assessments upon ASC or American, nor has

ASC given any currently outstanding waivers or comparable

consents regarding the application of the statute of limitations

with respect to any Taxes or Returns.

 

     (b)   Except as set forth in ASC Disclosure Schedule 2.07(b),

ASC (i) has not requested any extension of time within which to

file any Return which Return has not since been filed, (ii) is

not a party to any agreement providing for the allocation or

sharing of Taxes, (iii) is not required to include in income any

adjustment pursuant to Section 481(a) of the Code, by reason of a

voluntary change in accounting method initiated by ASC (nor does

ASC have any knowledge that the IRS has proposed any such

adjustment or change of accounting method), or (iv) has not filed

a consent pursuant to Section 341(f) of the Code or agreed to

have Section 341(f)(2) of the Code apply.

 

     (c)   For purposes of this Agreement, "Taxes" shall mean all

taxes, charges, fees, levies or other assessments, including,

without limitation, all net income, gross income, gross receipts,

sales, use, ad valorem, transfer, franchise, profits, license,

withholding, payroll, employment (including withholding, payroll

and employment taxes required to be withheld with respect to

income paid to employees), excise, estimated, severance, stamp,

occupation, property or other taxes, customs duties, fees,

assessments or charges of any kind whatsoever, together with any

interest and any penalties, additions to tax or additional

amounts imposed by any taxing authority (domestic or foreign)

upon ASC.

 

     2.08 Employee Benefit Plans.

 

     (a)   ASC Disclosure Schedule 2.08(a) sets forth all benefit

and compensation plans, contracts, policies or arrangements

covering current or former employees of ASC and American (the

"Employees") and current or former directors of ASC and American

including, but not limited to,

 

 

                               10

 

"employee benefit plans" within the meaning of Section 3(3) of the

Employee Retirement Income Security Act of 1974, as amended ("ERISA"),

and deferred compensation, stock option, stock purchase, stock

appreciation rights, stock based, incentive and bonus plans (the

"Benefits Plans").   True and complete copies of all Benefit Plans

including, but not limited to, any trust instruments and

insurance contracts forming a part of any Benefit Plans and all

amendments thereto have been provided or otherwise made available

to Bancorp.

 

     (b)   All Benefits Plans other than "multiemployer plans"

within the meaning of Section 3(37) of ERISA, covering Employees,

to the extent subject to ERISA, are in substantial compliance

with ERISA. Each Benefit Plan which is an "employee pension

benefit plan" within the meaning of Section 3(2) of ERISA

("Pension Plan") and which is intended to be qualified under

Section 401(a) of the Code, has received a favorable

determination letter from the IRS, and ASC is not aware of any

circumstances likely to result in revocation of any such

favorable determination letter or the loss of the qualification

of such Pension Plan under Section 401(a) of the Code. There is

no material pending or, to ASC's knowledge, threatened litigation

relating to the Benefits Plans. Neither ASC nor American has

engaged in a transaction with respect to any Benefit Plan or

Pension Plan that, assuming the taxable period of such

transaction expired as of the date hereof, could subject ASC or

American to a tax or penalty imposed by either Section 4975 of

the Code or Section 502(i) of ERISA in an amount which would be

material.

 

     (c)   No liability under Subtitle C or D of Title IV of ERISA

has been or is expected to be incurred by ASC or American with

respect to any ongoing, frozen or terminated "single-employer

plan," within the meaning of Section 4001(a)(15) of ERISA,

currently or formerly maintained by any of them, or the single-

employer plan of any entity which is considered one employer with

ASC under Section 4001 of ERISA or Section 414 of the Code (an

"ERISA Affiliate").   Neither ASC nor American has incurred, and

neither expects to incur, any withdrawal liability with respect

to a multiemployer plan under Subtitle E of Title IV of ERISA

(regardless of whether based on contributions of an ERISA

Affiliate).   No notice of a "reportable event," within the

meaning of Section 4043 of ERISA for which the 30-day reporting

requirement has not been waived, has been required to be filed

for any Pension Plan or by any ERISA Affiliate within the 12 -

month period ending on the date hereof or will be required to be

filed in connection with the transactions contemplated by this

Agreement.

 

     (d)   All contributions required to be made under the terms

of any Benefit Plan have been timely made or have been reflected

on the financial statements of ASC.   Neither any Pension Plan nor

any single-employer plan of an ERISA Affiliate has an

"accumulated funding deficiency" (whether or not waived) within

the meaning of Section 412 of the Code or Section 302 of ERISA

and no ERISA Affiliate has an outstanding funding waiver.

Neither ASC nor American has provided, or is required to provide,

security to any Pension Plan or to any single-employer plan of an

ERISA Affiliate pursuant to Section 401(a)(29) of the Code.

 

     (e)   Under each Pension Plan which is a single-employer

plan, as of the last day of the most recent plan year ended prior

to the date hereof, the actuarially determined present value of

all "benefit liabilities," within the meaning of Section

4001(a)(16) of ERISA (as determined on the basis of the actuarial

assumptions contained in the Pension Plan's most recent actuarial

valuation), did not exceed the then current value of the assets

of such Pension Plan, and there has been no material

 

 

                              11

 

change in the financial condition of such Plan since the last

day of the most recent plan year.

 

     (f)   Neither ASC nor American has any obligations for

retiree health and life benefits under any Benefit Plan other

than as may be required under Section 4980B of the Code or Part 6

of Title I of ERISA, or under the continuation of coverage

provisions of the laws of any state or locality.   ASC or American

may amend or terminate any such Benefit Plan at any time without

incurring any liability thereunder.

 

     (g)   Except as set forth on ASC Disclosure Schedule 2.08(g),

none of the execution of this Agreement, stockholder approval of

this Agreement or consummation of the transactions contemplated

hereby will (A) entitle any employees of ASC or American to

severance pay or any increase in severance pay upon any

termination of employment after the date hereof, (B) accelerate

the time of payment or vesting or trigger any payment or funding

(through a grantor trust or otherwise) of compensation or

benefits under, increase the amount payable or trigger any other

material obligation pursuant to, any of the Benefit Plans, (C)

result in any breach or violation of, or a default under, any of

the Benefit Plans or (D) result in any payment that would be a

"parachute payment" to a "disqualified individual" as those terms

are defined in Section 280G of the Code, without regard to

whether such payment is reasonable compensation for personal

services performed or to be performed in the future.

 

     2.09 Regulatory Reports.   Since January 1, 2001, ASC and

American have duly filed with the FRB, the FDIC and the

Department in correct form the monthly, quarterly and annual

reports required to be filed under applicable laws and

regulations, and ASC has delivered or made available to Bancorp

accurate and complete copies of such reports.   ASC Disclosure

Schedule 2.09 lists all examinations of ASC or American conducted

by the applicable regulatory authorities since January 1, 2001

and the dates of any responses thereto submitted by ASC or

American.   Except as set forth in ASC Disclosure Schedule 2.09,

in connection with the most recent examinations of ASC or

American by the applicable regulatory authorities, neither ASC

nor American were required to correct or change any action,

procedure or proceeding which ASC or American believe has not

been now corrected or changed as required other than corrections

or changes which, if not made, either individually or in the

aggregate, would not have a Material Adverse Effect.

 

     2.10 Compliance with Applicable Law.

 

     (a)   Except as disclosed in ASC Disclosure Schedule 2.10,

(i) ASC and American have all permits, licenses, certificates of

authority, orders and approvals of, and have made all filings,

applications and registrations with, federal, state, local and

foreign governmental or regulatory bodies that are required in

order to permit them to carry on their respective businesses as

they are presently being conducted and the absence of which could

reasonably be expected to have a Material Adverse Effect; (ii)

all such permits, licenses, certificates of authority, orders and

approvals are in full force and effect; and (iii) to the best

knowledge of ASC and American, no suspension or cancellation of

any of the same is threatened.

 

     (b)   Neither ASC nor American is in violation of its

Articles of Incorporation, Charter or Bylaws, or of any

applicable federal, state or local law or ordinance or any order,

rule or regulation of any federal, state, local or other

governmental agency or body (including, without limitation, all

 

 

 

                              12

 

banking, securities, municipal securities, safety, health,

zoning, anti-discrimination, antitrust, and wage and hour laws,

ordinances, orders, rules and regulations), or in default with

respect to any order, writ, injunction or decree of any court, or

in default under any order, license, regulation or demand of any

governmental agency, any of which violations or defaults could

reasonably be expected to have a Material Adverse Effect, and

neither ASC nor American has received any notice or communication

from any federal, state or local governmental authority asserting

that ASC or American is in violation of any of the foregoing

which could reasonably be expected to have a Material Adverse

Effect.   Except as set forth in ASC Disclosure Schedule 2.10,

neither ASC nor American is subject to any regulatory or

supervisory cease and desist order, agreement, written directive,

memorandum of understanding or written commitment (other than

those of general applicability to all commercial banks issued by

governmental authorities), and has not received any written

communication requesting that it enter into any of the foregoing.

    

      2.11 Deposit Insurance.   The deposit accounts of American

are insured by the Bank Insurance Fund administered by the FDIC

to the maximum extent permitted by the Federal Deposit Insurance

Act, as amended ("FDIA"), and American has paid all premiums and

assessments required by the FDIA and the regulations thereunder.

    

     2.12 Certain Contracts.

 

     (a)   Except as disclosed in ASC Disclosure Schedule 2.12(a),

neither ASC nor American is a party to, is bound by, receives, or

is obligated to pay benefits under, (i) any agreement,

arrangement or commitment, including without limitation, any

agreement, indenture or other instrument relating to the

borrowing of money by ASC or American (other than in the case of

federal funds purchased and securities sold under agreements to

repurchase in the ordinary course of business) or the guarantee

by ASC or American of any obligation, (ii) any agreement,

arrangement or commitment relating to the employment of a

consultant or the employment, election or retention in office of

any present or former director or officer of ASC or American,

(iii) any contract, agreement or understanding with a labor

union, (iv) any agreement, arrangement or understanding pursuant

to which any payment (whether of severance pay or otherwise)

became or may become due to any director, officer or employee of

ASC or American upon execution of this Agreement and the

Agreement of Merger or upon or following consummation of the

transactions contemplated by this Agreement or the Agreement of

Merger (either alone or in connection with the occurrence of any

additional acts or events), (v) any agreement, arrangement or

understanding to which ASC or American is a party or by which any

of the same is bound which limits the freedom of ASC or American

to compete in any line of business or with any person, or (vi)

any other agreement, arrangement or understanding to which ASC or

American is a party and which is material to the business,

results of operations, assets or financial condition of ASC or

American taken as a whole (excluding loan agreements or

agreements relating to deposit accounts), in each of the

foregoing cases whether written or oral.

 

     (b)   Neither ASC nor American is in default or in non-

compliance under any contract, agreement, commitment,

arrangement, lease, insurance policy or other instrument to which

it is a party or by which its assets, business or operations may

be bound or affected, whether entered into in the ordinary course

of business or otherwise and whether written or oral, which

default or non-

 

 

                              13

 

compliance would have a Material Adverse Effect, and there has not

occurred any event that with the lapse of time or the giving of notice,

or both, would constitute such a default or non-compliance.

 

     (c)   Neither   ASC nor American is a party or has agreed to

enter into an exchange traded or over-the-counter equity,

interest rate, foreign exchange or other swap, forward, future,

option, cap, floor or collar or any other contract that is not

included in ASC's unaudited financial statements at and for

September 30, 2004 and is a derivatives contract (including

various combinations thereof) (each, a "Derivatives Contract") or

owns securities that are referred to generically as "structured

notes," "high risk mortgage derivatives," "capped floating rate

notes" or "capped floating rate mortgage derivatives."

 

     2.13 Properties and Insurance.

 

     (a)   All real and personal property owned by ASC or American

or presently used by them in their respective businesses is in

adequate condition (ordinary wear and tear excepted) and is

sufficient to carry on the business of ASC and American in the

ordinary course of business consistent with their past practices.

ASC and American have good and, as to owned real property,

marketable title to all material assets and properties, whether

real or personal, tangible or intangible, reflected in ASC's

consolidated balance sheet as of September 30, 2004, or owned and

acquired subsequent thereto (except to the extent that such

assets and properties have been disposed of for fair value in the

ordinary course of business since September 30, 2004), subject to

no encumbrances, liens, mortgages, securities interests or

pledges, except (i) those items that secure liabilities that are

reflected in said consolidated balance sheet or the notes thereto

or have been incurred in the ordinary course of business after

the date of such consolidated balance sheet, (ii) statutory liens

for current taxes not yet due, (iii) such encumbrances, liens,

mortgages, securities interests, pledges and title imperfections

that are not in the aggregate material to the business, results

of operations, assets or financial condition of ASC and American

taken as a whole, and (iv) with respect to owned real property,

title imperfections noted in title reports prior to the date

hereof.   ASC and American as lessees have the right under valid

and subsisting leases to occupy, use, possess and control all

property leased by them in all material respects as presently

occupied, used, possessed and controlled by ASC and American and

the consummation of the transactions contemplated hereby and by

the Agreement of Merger will not affect any such right in a way

that would have a Material Adverse Effect.   ASC Disclosure

Schedule 2.13(a) sets forth an accurate listing of each lease

pursuant to which ASC or American act as lessor or lessee,

including the expiration date and the terms of any renewal

options which relate to the same.

 

     (b)    The business operations and all insurable properties

and assets of ASC and American are insured for its benefit

against all risks which, in the reasonable judgment of the

management of ASC and American, should be insured against, in

each case under valid, binding and enforceable policies or bonds

issued by insurers of recognized responsibility, in such amounts

with such deductibles and against such risks and losses as are in

the opinion of the management of ASC and   American adequate for

the business engaged in by ASC and American.   As of the date

hereof, neither ASC nor American has received any notice of

cancellation or notice of a material amendment of any such

insurance policy or bond or is in material default under such

policy or bond, no coverage thereunder is being disputed and all

material claims thereunder have been filed in a timely fashion.

 

 

                              14

 

     2.14 Environmental Matters.   For purposes of this Agreement,

the following terms shall have the indicated meaning:

 

     "Environmental Law" means any federal, state or local law,

statute, ordinance, rule, regulation, code, license, permit,

authorization, approval, consent, order, judgment, decree,

injunction or agreement with any governmental entity relating to

(1) the protection, preservation or restoration of the

environment (including, without limitation, air, water vapor,

surface water, groundwater, drinking water supply, surface soil,

subsurface soil, plant and animal life or any other natural

resource), and/or (2) the use, storage, recycling, treatment,

generation, transportation, processing, handling, labeling,

production, release or disposal of Hazardous Substances.   The

term Environmental Law includes without limitation (1) the

Comprehensive Environmental Response, Compensation and Liability

Act, as amended, 42 U.S.C. 9601, et seq; the Resource

Conservation and Recovery Act, as amended, 42 U.S.C. 6901, et

seq; the Clean Air Act, as amended, 42 U.S.C. 7401, et seq; the

Federal Water Pollution Control Act, as amended, 33 U.S.C. 1251,

et seq; the Toxic Substances Control Act, as amended, 15 U.S.C.

9601, et seq; the Emergency Planning and Community Right to Know

Act, 42 U.S.C. 11001, et seq; the Safe Drinking Water Act, 42

U.S.C. 300f, et seq; and all comparable state and local laws, and

(2) any common law (including without limitation common law that

may impose strict liability) that may impose liability or

obligations for injuries or damages due to, or threatened as a

result of, the presence of or exposure to any Hazardous

Substance.

 

     "Hazardous Substance" means any substance presently listed,

defined, designated or classified as hazardous, toxic,

radioactive or dangerous, or otherwise regulated, under any

Environmental Law, whether by type or by quantity, including any

regulated material containing any such substance as a component.

Hazardous Substances include without limitation petroleum

(including crude oil or any fraction thereof), asbestos,

radioactive material, and polychlorinated biphenyls.

 

     "Loan Portfolio Properties" means those properties which

serve as collateral for loans owned by ASC or American.

 

     "Other Properties Owned" means those properties owned,

leased or operated by ASC or American which are not Loan

Portfolio Properties.

 

     (a)   Except as set forth in ASC Disclosure Schedule 2.14(a),

to the knowledge of ASC and American, neither ASC nor American

has been and are not in violation of or liable under any

Environmental Law.

 

     (b)   None of the Other Properties Owned is the subject of

liability under, or, to the knowledge of ASC and American, has

been in violation of, any Environmental Law except any such

violations or liabilities which would not, individually or in the

aggregate, have a Material Adverse Effect.

 

 

                              15

 

     (c)   Except as disclosed in ASC Disclosure Schedule 2.14(c),

to the knowledge of ASC and American, none of the Loan Portfolio

Properties has been in violation of, or is the subject of

liability under, any Environmental Law except any such violations

or liabilities which would not, individually or in the aggregate,

have a Material Adverse Effect.

 

     (d)   There are no actions, suits, demands, notices, claims,

investigations or proceedings pending or, to the knowledge of ASC

and American, threatened relating to the liability of the Loan

Portfolio Properties and Other Properties Owned under any

Environmental Law, including without limitation any notices,

demand letters or requests for information from any federal or

state environmental agency relating to any such liabilities under

or violations of Environmental Law, except such which would not

have or result in a Material Adverse Effect.

 

     (e)   ASC Disclosure Schedule 2.14(e) lists (i) any

environmental studies which have been undertaken by, or on behalf

of, ASC or American with respect to the Other Properties Owned

and (ii) any correspondence known to ASC or American with respect

to the Other Properties Owned and issues related to Environmental

Laws.

 

     2.15 Allowance for Loan Losses and Real Estate Owned.   The

allowance for loan losses reflected on ASC's consolidated balance

sheets included in the consolidated financial statements referred

to in Section 2.04 hereof, and as supplemented pursuant to the

Holdback Escrow Agreement referenced above in Section 1.07 and

attached as Exhibit D, is in the opinion of ASC's management,

adequate in all material respects as of their respective dates

under the requirements of generally accepted accounting

principles to provide for reason