Exhibit 10.1

 

Agreement and Plan of Voluntary Supervisory Merger Conversion

 

by and between

 

Peoples Bank SB

 

and

 

First Federal Savings & Loan Association of Hammond

 

 

 

 

TABLE OF CONTENTS

 

ARTICLE I THE VOLUNTARY SUPERVISORY MERGER CONVERSION 1     Section 1.1 Plan of
Voluntary Supervisory Merger Conversion. 1       Section 1.2 Manner of
Converting and Exchanging Stock. 1       Section 1.3 Approval by the Association
and Peoples 2       Section 1.4 Effective Date. 2       Section 1.5 Closing. 2  
    Section 1.6 Effects of the Merger. 3       Section 1.7 Further Assurances. 3
      Section 1.8 Board of Directors and Officers. 4       Section 1.9 Offices.
4       Section 1.10 Articles of Conversion and Bylaws of Peoples. 4      
Section 1.11 Voting Rights. 4       ARTICLE II REPRESENTATIONS AND WARRANTIES OF
THE ASSOCIATION 4     Section 2.1 Organization and Standing. 4       Section 2.2
Authority for Agreement. 5       Section 2.3 Financial Information. 5      
Section 2.4 Absence of Changes. 5       Section 2.5 Properties. 5       Section
2.6 Loans. 6       Section 2.7 Residential and Commercial Mortgage Loans and
Certain Business Loans. 7       Section 2.8 Allowance and Reserves. 8      
Section 2.9 Real Estate Held for Sale. 8       Section 2.10 Investments. 8      
Section 2.11 Deposits. 8       Section 2.12 Contracts. 9       Section 2.13 Tax
Matters. 9       Section 2.14 Employee Matters. 10

 

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Section 2.15 Employee Benefit Plans. 10       Section 2.16 Environmental
Matters. 11       Section 2.17 No Undisclosed Liabilities. 11       Section 2.18
Litigation. 11       Section 2.19 Brokerage. 12       Section 2.20 Insurance. 12
      Section 2.21 Representations Regarding Financial Condition. 12      
Section 2.22 Compliance with Laws; Governmental Authorizations. 12       ARTICLE
III REPRESENTATIONS AND WARRANTIES OF PEOPLES 13     Section 3.1 Organization
and Standing. 13       Section 3.2 Authority for Agreement. 13       ARTICLE IV
COVENANTS 13     Section 4.1 Conduct of Business. 13       Section 4.2 Access to
Information. 14       Section 4.3 Cooperation in Application Process. 14      
Section 4.4 Management Pending Effective Date. 14       Section 4.5 Acquisition
Proposals. 14       Section 4.6 Title Insurance and Surveys. 15       Section
4.7 Environmental Reports. 15       Section 4.8 Employees. 15       Section 4.9
Association’s 401(k) Plan. 17       Section 4.10 Health Plans. 17       Section
4.11 Indemnification. 18       Section 4.12 Core Data Processing Systems
Integration. 18       Section 4.13 Internal Controls. 19       ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF ALL PARTIES 19     Section 5.1 Approvals
and Consents. 19       Section 5.2 Qualification as Voluntary Supervisory
Conversion. 20       Section 5.3 Absence of Proceedings and Litigation. 20

 

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ARTICLE VI CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ASSOCIATION 20    
Section 6.1 Opinion of Counsel. 20       Section 6.2 Representations, Warranties
and Covenants; Performance by Peoples. 20       Section 6.3 Officers’
Certificates. 20       ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
PEOPLES 21     Section 7.1 Regulatory Approvals. 21       Section 7.2
Representations, Warranties and Covenants; Performance by the Association. 21  
    Section 7.3 Officers’ Certificates. 21       Section 7.4 Opinion of Counsel.
21       Section 7.5 Absence of Material Adverse Effect. 22       Section 7.6
Termination of Supervisory Agreement. 22       Section 7.7 Closing Book Value.
22       Section 7.8 The Association’s REO. 22       Section 7.9 Delinquent
Loans. 22       Section 7.10 Maximum Processing Agreement Penalty. 22      
Section 7.11 Loan Values. 22       ARTICLE VIII TERMINATION, AMENDMENT AND
WAIVER 22     Section 8.1 Termination. 22       Section 8.2 Effect of
Termination. 23       Section 8.3 Amendment. 23       Section 8.4 Extension;
Waiver. 23       ARTICLE IX MISCELLANEOUS 24     Section 9.1 Confidentiality. 24
      Section 9.2 Expenses. 24       Section 9.3 Modification of Structure. 24  
    Section 9.4 Notices. 24       Section 9.5 No Third Party Beneficiaries. 25  
    Section 9.6 Survival. 25

 

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Section 9.7 Specific Performance. 25       Section 9.8 Headings, Entire
Agreement. 25       Section 9.9 Counterparts. 25       Section 9.10 Binding
Effect. 26       Section 9.11 Governing Law. 26

 

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Agreement and Plan of

Voluntary Supervisory Merger Conversion

 

This AGREEMENT AND PLAN OF VOLUNTARY SUPERVISORY MERGER CONVERSION (the
“Agreement”) is made and entered into as of this 20th day of December, 2013,
between Peoples Bank SB, an Indiana stock savings bank based in Munster, Indiana
(“Peoples”), and First Federal Savings and Loan Association of Hammond, a
federal savings association based in Hammond, Indiana (“Association”).

 

WHEREAS, the respective Boards of Directors of the Association and Peoples deem
it advisable and in the best interests of each entity that the Association be
converted to stock form and simultaneously merged into Peoples pursuant to the
terms, conditions, plan and procedures set forth in this Agreement; and

 

WHEREAS, the Board of Directors of the Association further believes it is in the
best interests of its depositors and borrower members that the Association enter
into this Agreement.

 

THEREFORE, in consideration of the mutual covenants and agreements herein set
forth and for the purpose of prescribing plans for, and the terms and conditions
of, the voluntary supervisory conversion (the “Conversion”) of the Association
and the merger of the Association into Peoples (the “Merger”), the parties agree
as follows:

 

Article I

 

THE VOLUNTARY SUPERVISORY MERGER CONVERSION

 

Section 1.1            Plan of Voluntary Supervisory Merger Conversion. Subject
to the provisions and conditions herein specified, on the Effective Date (as
hereinafter defined), the Association shall convert to a federal stock savings
and loan association and simultaneously shall merge with and into Peoples in a
transaction that will qualify as a voluntary supervisory conversion and merger
(the “Merger Conversion”) under applicable law. The Merger Conversion shall be
accomplished in accordance with this Agreement and with applicable statutes and
regulations of the Office of the Comptroller of the Currency (the “OCC”), the
Federal Deposit Insurance Corporation (“FDIC”), and the Indiana Department of
Financial Institutions (“DFI”).

 

Section 1.2            Manner of Converting and Exchanging Stock. The manner of
converting and exchanging the shares of the constituent corporations’ stock at
the Effective Date of the Merger Conversion shall be as follows:

 

(a)                each of the 1,000 shares of common stock, without par value,
of Peoples outstanding immediately prior to the Effective Date of the Merger
Conversion shall remain outstanding immediately after the Effective Date of the
Merger Conversion.

 

(b)               upon receipt of approval of the Merger Conversion, the
Association shall issue 100 shares of common stock, $.01 par value per share, to
Peoples for $100 in the aggregate, or $1.00 per share, and immediately
thereafter each of the 100 shares of the common stock, $.01 par value per share,
of the Association outstanding immediately prior to the Effective Date of the
Merger Conversion shall be cancelled without consideration therefor.

 

 

 

 

Section 1.3            Approval by the Association and Peoples. This Agreement
has been approved by at least a majority of the directors of the Association and
at least a majority of the directors of Peoples.

 

Section 1.4            Effective Date. Following the closing of the Merger
Conversion, the transactions provided for herein shall become effective (the
“Effective Date”) on the date prescribed in the Articles of Merger (“Articles of
Merger”) as filed with the DFI and the Indiana Secretary of State (the
“Secretary”); provided that the Merger Conversion shall not be effective unless
and until approved by the OCC, the DFI, and the FDIC, and all applicable waiting
periods have expired. The Plan of Merger attached hereto as Exhibit 1.4 shall be
attached to the Articles of Merger when they are so filed.

 

Section 1.5            Closing. Subject to the provisions of Articles V - VII
hereof, the closing of the Merger Conversion contemplated by this Agreement (the
“Closing”), shall take place at the offices of Peoples, 9204 Columbia Avenue,
Munster, IN 46321, as soon as practicable after satisfaction of all of the
conditions to Closing. The date and time of the Closing shall be mutually agreed
to by the Association and Peoples. If no such agreement is made, the Closing
shall take place on the next business day following the date of the satisfaction
of all of the conditions to Closing, effective as of the close of business on
such date.

 

(a)                At the Closing of the Merger Conversion, Peoples shall
deliver to the Association the following:

 

(i)                 an opinion of their counsel dated as of the Effective Date
contemplated by Section 6.1 hereof;

 

(ii)               the officers’ certificate contemplated by Section 6.3 hereof;

 

(iii)             copies of the resolutions of the Board of Directors of
Peoples, certified by the Secretary of Peoples, relating to the approval of this
Agreement and the Merger Conversion;

 

(iv)             the Articles of Merger signed by Peoples; and;

 

(v)               such other documents as the Association or its legal counsel
may reasonably request.

 

(b)               At the Closing of the Merger Conversion, the Association shall
deliver to Peoples the following:

 

(i)                 an opinion of its counsel dated as of the Effective Date
contemplated by Section 7.4 hereof;

 

(ii)               the officers’ certificate contemplated by Section 7.3 hereof;

 

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(iii)             the stock certificate representing all of the shares of the
common stock, $.01 par value per share, of the Association;

 

(iv)             copies of the resolutions adopted by the Board of Directors of
the Association, certified by the Secretary of the Association, relating to the
approval of this Agreement and the Merger Conversion;

 

(v)               the Articles of Merger signed by the Association; and

 

(vi)             such other documents as Peoples or its legal counsel may
reasonably request.

 

Section 1.6            Effects of the Merger. At the Effective Date:

 

(a)                the separate existence of the Association shall cease, and
the corporate existence of Peoples (the “Resulting Association”) shall be
continued under the name Peoples Bank SB.

 

(b)               the Resulting Association shall, without further transfer,
succeed to and thereafter possess and enjoy all of the public and private
rights, privileges, immunities, powers and franchises, and be subject to all of
the public and private restrictions, liabilities and duties, of each of Peoples
and the Association; all property (real, personal and mixed) of, all debts (on
whatever account) due to, and all choses in action and each and every other
interest of or belonging or due to, each of Peoples and the Association shall be
taken by and deemed to be transferred to and vested in the Resulting Association
without further act, deed or other instrument; and the title to any real estate
or any interest therein, vested by deed or otherwise in either of Peoples or the
Association, shall not revert or be in any way impaired by reason of the Merger
Conversion;

 

(c)                all rights of creditors and all liens (if any) upon the
property of either of Peoples or the Association shall be preserved unimpaired
by the Merger Conversion; and all debts, liabilities, obligations and duties
(collectively, “Obligations”) of either of Peoples or the Association shall
become the responsibility and liability of the Resulting Association, and may be
enforced against it to the same extent as if such Obligations had been incurred
or contracted by it; and

 

(d)               each Deposit Account in the Association at the time of the
consummation of the Merger Conversion shall become, without further action by
the holder, a Deposit Account in Peoples equivalent in withdrawable amount to
the withdrawable value, and subject to the same terms and conditions (except as
to voting and liquidation rights) as such Deposit Account in the Association
immediately preceding consummation of the Merger Conversion. Holders of Deposit
Accounts in the Resulting Association shall not, as such holders, have any
voting rights. For purposes of the foregoing, the Deposit Accounts of the
Association shall mean all withdrawable deposit accounts, including all savings
accounts, certificate accounts, and demand accounts, of the Association.

 

Section 1.7            Further Assurances. If at any time the Resulting
Association shall consider or be advised that any further assignment, assurance
or other action is necessary or desirable to vest in the Resulting Association
the title to any property or right of the Association or otherwise to carry out
the purposes of the Merger Conversion or of this Agreement, the proper officers
and directors of the Association shall execute and make all such proper
assignments or assurances and take such other actions; and the Board of
Directors and the proper officers of the Resulting Association are hereby
authorized, in the name and on behalf of the Association or otherwise, to do any
of the foregoing.

 

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Section 1.8            Board of Directors and Officers. The Board of Directors
of the Resulting Association shall be comprised of those persons serving as
directors of Peoples immediately prior to the Effective Date. The officers of
the Resulting Association shall be comprised of those persons serving as
officers of Peoples immediately prior to the Effective Date and Sheldon Cutler
who shall become a Vice President of the Surviving Corporation.

 

Section 1.9            Offices. The home office of Peoples at 9204 Columbia
Avenue, Munster, Indiana shall remain the home office of the Resulting
Association. The Resulting Association will operate branch offices at the
locations of Peoples’ branch offices immediately prior to the Effective Date and
at the home office and branch office of the Association immediately prior to
Effective Date.

 

Section 1.10        Articles of Conversion and Bylaws of Peoples. The Articles
of Conversion and By-Laws of Peoples in effect immediately prior to the
Effective Date shall be the articles and bylaws of the Resulting Association.

 

Section 1.11        Voting Rights. As of the Effective Date, all voting rights
in the Association, which are currently held by the members of the Association,
will be held exclusively by NorthWest Indiana Bancorp, as sole shareholder of
Peoples.

 

Article II

 

REPRESENTATIONS AND WARRANTIES OF THE ASSOCIATION

 

On or prior to the date hereof, the Association has delivered to Peoples a
schedule (“Disclosure Schedule”) setting forth, among other things, items the
disclosure of which is necessary or appropriate either (i) in response to an
express disclosure requirement contained in a provision hereof or (ii) as an
exception to one or more representations or warranties contained in this Article
II or to one or more covenants contained in Article IV.

 

The Association represents and warrants to Peoples as follows:

 

Section 2.1            Organization and Standing. The Association is a mutual
savings association duly organized, validly existing and in good standing under
federal law with full power and authority to carry on its business as now
conducted and to own or lease or operate its properties in the places where such
business is now conducted and such properties are now owned, leased or operated.
The Association is subject to the terms and conditions of the Supervisory
Agreement referenced in Section 4.1(a) of this Agreement. The Association is
duly authorized to conduct its business, all subject to the supervision of the
OCC and the FDIC. The Association does not own any corporation, partnership,
joint venture or other entity in which the Association has, directly or
indirectly, an equity interest representing 50% or more of any class of the
capital stock thereof or other equity interests therein (a “Subsidiary”).

 

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Section 2.2            Authority for Agreement. The execution and delivery of
this Agreement and the consummation of the transactions contemplated by this
Agreement, have been duly authorized by the Board of Directors of the
Association, and, subject to the requisite approval of federal and state
regulatory authorities, this Agreement constitutes a valid and legally binding
obligation of the Association enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency and similar laws affecting creditors’
rights and remedies generally and to general principles of equity, whether
applied in a court of law or court of equity. The approval, execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement will not result in the breach of any term or provision of or
constitute a default under any indenture, mortgage, deed of trust or other
material agreement or instrument to which the Association is bound.

 

Section 2.3            Financial Information. Except as set forth in the
Disclosure Schedule, the audited balance sheet of the Association as of December
31, 2012, and related audited income statement for the years ended December 31,
2011, and December 31, 2012, together with the notes thereto, and the unaudited
periodic financial statements of the Association for the nine months ended
September 30, 2013, together with notes thereto (if any) (collectively,
“Association Financial Statements”), copies of which have been provided to
Peoples, have been prepared in accordance with generally accepted accounting
principles (“GAAP”) (except as may be disclosed therein, and in the case of
interim statements, for the absence of footnotes and normal year-end
adjustments) and fairly present, in all material respects, the consolidated
financial position and the consolidated results of operations, and cash flows of
the Association as of the dates and for the periods indicated.

 

Section 2.4            Absence of Changes. Except as set forth in the Disclosure
Schedule, since September 30, 2013, no events or transactions have occurred
which have resulted in a Material Adverse Effect as to the Association. For
purposes of this Agreement, “Material Adverse Effect” means any change, event or
effect that is both material and adverse to (1) the financial position or
condition, results of operation, future prospects, the assets or business of the
Association, or (2) the ability of the Association to perform its respective
obligations under this Agreement, other than (A) the effects of any change
attributable to or resulting from changes in economic conditions, laws,
regulations or accounting guidelines applicable to depository institutions
generally or in general levels of interest rates, or (B) employee terminations
after announcement of this Agreement.

 

Section 2.5            Properties.

 

(a)                A list and description of all real property owned or leased
by the Association (including any property acquired in a judicial foreclosure
proceeding or by way of a deed in lieu of foreclosure or similar transfer
(“OREO”)) (collectively, the “Real Property”), is set forth in the Disclosure
Schedule. The Association has good and marketable title to all Real Property
owned by it, in each case free and clear of any charges, mortgages, pledges,
security interests, claims, liens or encumbrances (“Liens”) except (i) liens for
taxes not yet due and payable, (ii) such easements, restrictions, encumbrances
and imperfections of title, if any, as are not material in character, amount or
extent, and do not materially detract from the value, or materially interfere
with the present use of the properties subject thereto or affected thereby, and
(iii) liens arising as a matter of law in the ordinary course of business as to
which there is no known default. All Real Property owned by the Association is
in a good state of maintenance and repair (normal wear and tear excepted) as
reflected by its appraised value and to the best knowledge of the Association
conforms in all material respects with all applicable ordinances, regulations
and zoning laws. To the knowledge of the Association, none of the buildings,
structures or other improvements located on any Real Property owned by the
Association encroaches upon or over any adjoining parcel or real estate or any
easement or right-of-way.

 

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(b)               The Association has good and marketable title to all tangible
personal property owned by it, free and clear of all Liens, except such Liens,
if any, as are not material in character, amount or extent, and do not
materially detract from the value, or materially interfere with the present use
of the properties subject thereto or affected thereby. With respect to personal
property used in the business of the Association that is leased rather than
owned, the Association is not in default under the terms of any such lease.

 

Section 2.6            Loans. The Association represents and warrants as to each
of its loans to loan debtors that, except as may be set forth in the Disclosure
Schedule:

 

(a)                the Association is the sole owner and holder of the loan and
all servicing rights relating thereto. The loan is not assigned or pledged
(other than to the Federal Home Loan Bank of Indianapolis) (the “FHLB”), and the
Association has good and marketable title thereto;

 

(b)               except for any unfunded commitment, the full principal amount
of the loan has been advanced to the loan debtor, either by payment direct to
such debtor, or by payment made on the debtor’s approval, and there is no
requirement for future advances thereunder. The unpaid principal balance of each
loan and the amount of any unfunded commitment in each case as of September 30,
2013, is as stated in the Disclosure Schedule;

 

(c)                each of the Association’s loan documents is genuine, and each
is the legal, valid and binding obligation of the maker thereof. All parties to
the loan documents had legal capacity to enter into the loan documents, and the
loan documents have been duly and properly executed by such parties;

 

(d)               all federal, state and local laws and regulations affecting
the origination, administration and servicing of the loans prior to the
Effective Date, including without limitation, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit opportunity and
disclosure laws, have been complied with in all respects. Without limiting the
generality of the foregoing, the Association has timely provided all
disclosures, notices, estimates, statements and other documents required to be
provided to the loan debtor under applicable law and has documented receipt of
such disclosures, estimates, statements and other documents as required by law
and prudent loan origination policies and procedures;

 

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(e)                the loan debtor has no rights of rescission, setoff,
counterclaims, or defenses to the loan documents, except such defenses arising
by virtue of bankruptcy, creditors’ rights laws, and general principles of
equity;

 

(f)                the Association has not modified such loan or waived any
material provision of or default under such loan or the related loan documents,
except in accordance with its customary loan administration policies and
procedures. Any such modification or waiver is in writing and is contained in
the loan file to the best knowledge of the Association;

 

(g)               the Association has taken all actions to cause each loan
secured by personal property to be perfected by a security interest having first
priority or such other priority as is required by the relevant loan approval
report for such loan; and the collateral for each such loan is owned by the loan
debtor, free and clear of any Lien except for the security interest in favor of
the Association and any other Lien expressly permitted under the relevant loan
approval report; and

 

(h)               the loan debtor is the owner of all collateral for such loan.

 

Section 2.7            Residential and Commercial Mortgage Loans and Certain
Business Loans. Except as set forth in the Disclosure Schedule, the Association
represents and warrants as to each of its residential mortgage loan, commercial
mortgage loans and business loans that is secured in whole or in part by a
mortgage that:

 

(a)                the mortgage is a valid first lien on the mortgaged property
securing the related loan (or a subordinate lien if expressly permitted under
the relevant loan approval report), and the mortgaged property is free and clear
of all Liens having priority over the first lien of the mortgage, except for
liens for real estate taxes and special assessments not yet due and payable,
easements and restrictions of record, and, in the case of a home equity loan or
a mortgage securing a guarantee of a business loan, the permitted lien of the
senior mortgage or deed of trust;

 

(b)               to the Association’s knowledge, all taxes, government
assessments, insurance premiums, and municipal charges, and leasehold payments
which previously became due and owing have been paid, or an escrow payment has
been established in an amount sufficient to pay for every such item which
remains unpaid, except as otherwise provided in the Disclosure Schedule;

 

(c)                each loan for which private mortgage insurance was required
by the Association under its underwriting guidelines is insured by a reputable
private mortgage insurance company; each such insurance policy is in full force
and effect; and all premiums due thereunder have been paid;

 

(d)               there is in force a paid-up lender’s title insurance policy or
attorney’s opinion respecting the mortgaged property (other than with respect to
home equity loans or second residential mortgage loans) issued by a reputable
title insurance company in an amount at least equal to the outstanding principal
balance of the related loan. No claims have been made under such lender’s title
insurance policy, and the Association has not done, by act or omission, anything
which would impair the coverage of such lender’s title insurance policy;

 

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(e)                all appraisals have been ordered, performed and rendered in
accordance with the requirements of the underwriting guidelines of the
Association and in compliance, in all material respects, with all laws and
regulations then in effect relating and applicable to the origination of loans,
(i) which requirements include, without limitation, requirements as to appraiser
independence, appraiser competency and training, appraiser licensing and
certification, and the content and form of appraisals, and (ii) which laws and
regulations include, without limitation, regulations promulgated by the DFI and
the FDIC; and

 

(f)                to the Association’s knowledge, no mortgaged property is
contaminated or in violation of any Environmental Law (as hereinafter defined).

 

Section 2.8            Allowance and Reserves. Except as set forth in the
Disclosure Schedule, the loan loss allowance shown on the Association Financial
Statements as of September 30, 2013, is adequate as of such date under the
requirements of GAAP to provide for possible losses on items for which reserves
were made. Except as set forth in the Disclosure Schedule, the aggregate loan
balances outstanding as of September 30, 2013, in excess of the allowance as of
such date were, as of September 30, 2013, collectible in accordance with their
respective terms.

 

Section 2.9            Real Estate Held for Sale. The Association’s OREO is
recorded on the books of the Association at “as is” fair value less estimated
selling costs. When foreclosed assets were acquired by the Association, any
adjustment was charged to the allowance for loan losses. The adjustments for
OREO made in the loan loss allowance are adequate and management has no reason
to believe that the OREO is not saleable for the amounts at which the OREO is
recorded on the Association’s books.

 

Section 2.10        Investments. Except as set forth in the Disclosure Schedule,
none of the investments reflected in the Association Financial Statements as of
September 30, 2013, and none of the investments made by the Association since
September 30, 2013, are subject to any restriction, whether contractual or
statutory, which materially impairs the ability of the Association to dispose
freely of such investment at any time and each of such investments complies with
regulatory requirements concerning such investments.

 

Section 2.11        Deposits.

 

(a)                The Association has delivered to Peoples a true and complete
copy of the account forms for all deposits offered by the Association and a list
of its deposits as of a recent date. Except as listed in the Disclosure
Schedule, all the accounts related to the deposits are in material compliance
with all applicable laws, orders and regulations and were originated in material
compliance with all applicable laws, orders and regulations.

 

(b)               The Association’s deposit accounts are insured up to
applicable limits by the FDIC, and the Association has paid all premiums
required to be paid and is in compliance with the applicable insurance
regulations of the FDIC.

 

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Section 2.12        Contracts. The Disclosure Schedule lists or describes the
following:

 

(a)                each loan and credit agreement, conditional sales contract,
indenture or other title retention agreement or security agreement relating to
money borrowed by the Association other than reverse repurchase agreements;

 

(b)               each guaranty by the Association of any obligation for the
borrowing of money or otherwise (excluding any endorsements and guarantees in
the ordinary course of business and letters of credit issued by the Association
in the ordinary course of its business) or any warranty or indemnification
agreement;

 

(c)                each lease or license with respect to personal property
involving an annual amount in excess of $5,000;

 

(d)               the name, annual salary and primary department assignment as
of September 30, 2013, of each employee of the Association and any employment or
consulting agreement or arrangement with respect to each such person;

 

(e)                any agreement to which the Association is bound or a party
under which benefits will be increased, or the vesting or payment of benefits
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement;

 

(f)                each agreement, loan, contract, lease, guaranty, letter of
credit, line of credit or commitment of the Association not referred to
elsewhere in this Section which (i) involves payment by the Association (other
than as disbursement of loan proceeds to customers) of more than $5,000 annually
or $25,000 in the aggregate over its remaining term unless, in the latter case,
such is terminable within one (1) year without premium or penalty; (ii) involves
payments based on profits of the Association; (iii) relates to the future
purchase of goods or services in excess of the requirements of its respective
business at current levels or for normal operating purposes; or (iv) was not
made in the ordinary course of business;

 

(g)               each agreement which limits the ability of the Association to
compete in any line of business or with any person, or that involves any
restriction on the geographic area in which, or method by which, the Association
may carry on its business;

 

Final and complete copies of each document, plan or contract listed and
described in the Disclosure Schedule pursuant to this Section 2.12 (the
“Contracts”) have been provided to Peoples. The Association has performed in all
material respects all obligations required to be performed by it under the
Contracts and the Association is not in material default under, and no event has
occurred which, with the lapse of time or action by a third party, could result
in a material default under the Contracts.

 

Section 2.13        Tax Matters. Except as set forth in the Disclosure Schedule,
the Association has filed with the appropriate governmental agencies all
federal, state and local income, franchise, excise, sales, use, real and
personal property and other tax returns and reports required to be filed by it.
The Association is not (a) delinquent in the payment of any taxes shown on such
returns or reports or on any assessments received by it for such taxes; (b)
aware of any pending or threatened examination for income taxes for any year by
the Internal Revenue Service (the “IRS”) or any state tax agency; (c) subject to
any agreement extending the period for assessment or collection of any federal
or state tax; or (d) a party to any action or proceeding with, nor has any claim
been asserted against it by, any governmental authority for assessment or
collection of taxes. The Association is not the subject of any threatened action
or proceeding by any governmental authority for assessment or collection of
taxes. The reserve for taxes in the unaudited financial statements of the
Association for the quarter ended September 30, 2013, is, in the opinion of
management, adequate to cover all of the tax liabilities of the Association
(including, without limitation, income taxes and franchise fees) as of such date
in accordance with GAAP.

 

9

 

 

Section 2.14        Employee Matters.

 

(a)                Except as may be disclosed in the Disclosure Schedule, the
Association has not entered into any collective bargaining agreement with any
labor organization with respect to any group of employees of the Association,
and to the knowledge of the Association, there is no present effort nor existing
proposal to attempt to unionize any group of employees of the Association.

 

(b)               Except as may be disclosed in the Disclosure Schedule, (i) the
Association is and has 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.

 

Section 2.15        Employee Benefit Plans.

 

(a)                Each (i) nonqualified deferred compensation or retirement
plan or arrangement that is an employee pension benefit plan (“Employee Pension
Benefit Plan”) as defined in § 3(2) of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”), (ii) qualified defined contribution
retirement plan or arrangement that is an Employee Pension Benefit Plan, (iii)
qualified defined benefit retirement plan or arrangement that is an Employee
Pension Benefit Plan (including any multiemployer plan as defined in § 3(37) of
ERISA), or (iv) employee welfare benefit plan (as defined in § 3(1) of ERISA) or
material fringe benefit program or plan of the Association (each plan described
in (i), (ii), (iii) and (iv), an “Employee Benefit Plan”) (and each related
trust, insurance contract, or fund) complies in form and in operation in all
material respects with the applicable requirements of ERISA, the Internal
Revenue Code of 1986, as amended (the “Code”), and other applicable legal
requirements. No such Employee Benefit Plan is under audit by the IRS or the
U.S. Department of Labor.

 

(b)               All contributions (including all employer contributions and
employee salary reduction contributions) that are due have been paid to each
Employee Benefit Plan that is an Employee Pension Benefit Plan, and all
contributions for any period ending on or before the Effective Date that are not
yet due have been paid to each Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the Association and will be paid
when due to such plan. All premiums or other payments for all periods ending on
or before the Effective Date have been paid with respect to each Employee
Benefit Plan that is an Employee Welfare Benefit Plan.

 

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(c)                The Association has provided to Peoples copies of its
Employee Benefit Plans.

 

Section 2.16        Environmental Matters.

 

(a)                As used in this Agreement, “Environmental Laws” means all
local, state and federal environmental, health and safety laws and regulations
in all jurisdictions in which the Association has done business or owned, leased
or operated property, including, without limitation, the Federal Resource
Conservation and Recovery Act, the Federal Comprehensive Environmental Response,
Compensation and Liability Act, the Federal Clean Water Act, the Federal Clean
Air Act, and the Federal Occupational Safety and Health Act.

 

(b)               Except as may be disclosed in the Disclosure Schedule, no
activity or condition exists at or upon the Real Property that violates any
Environmental Law, and no condition has existed or event has occurred with
respect to the Real Property that, with notice or the passage of time, or both,
would constitute a violation of any Environmental Law or obligate (or
potentially obligate) the Association to remedy, stabilize, neutralize or
otherwise alter the environmental condition of any of the Real Property, where
the aggregate cost of such actions would be material to the Association. Except
as may be disclosed in the Disclosure Schedule, and to the knowledge of the
Association, after reasonable investigation, the Association has not received
any notice from any person or entity that the Association is or was in violation
of any Environmental Law or that the Association is responsible (or potentially
responsible) for the cleanup or other remediation of any pollutants,
contaminants, or hazardous or toxic wastes, substances or materials at, on or
beneath any such property.

 

Section 2.17        No Undisclosed Liabilities. The Association does not have
any material liability, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due (and there is no past or present fact,
situation, circumstance, condition or other basis for any present or future
action, suit or proceeding, hearing, charge, complaint, claim or demand against
the Association giving rise to any such liability) required in accordance with
GAAP to be reflected in an audited consolidated balance sheet of the Association
or the notes thereto, except (i) for liabilities set forth or reserved against
in the Association Financial Statements as of September 30, 2013, (ii) for
liabilities occurring in the ordinary course of business of the Association
since September 30, 2013 , (iii) liabilities relating to transactions
contemplated by this Agreement, and (iv) as may be disclosed in the Disclosure
Schedule.

 

Section 2.18        Litigation. Except as set forth in the Disclosure Schedule,
there is no action, suit, proceeding or investigation pending against the
Association or to the best knowledge of the Association threatened against or
affecting the Association, before any court or arbitrator or any governmental
body, agency, or official involving a monetary claim for $10,000 or more or
equitable relief (i.e., specific performance or injunctive relief). The
Association is not aware of any facts that would reasonably afford a basis for
any such action, suit, proceeding or investigation.

 

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Section 2.19        Brokerage. There are no existing claims or agreements for
brokerage commissions, finders’ fees, or similar compensation in connection with
the transactions contemplated by this Agreement payable by the Association.

 

Section 2.20        Insurance. All material insurable properties owned or held
by the Association are adequately insured by financially sound and reputable
insurers in such amounts and against fire and other risks insured against by
extended coverage and public liability insurance, as is customary with banks of
similar size. The Disclosure Schedule sets forth, for each material policy of
insurance maintained by the Association the amount and type of insurance, the
name of the insurer and the amount of the annual premium. All amounts due and
payable under such insurance policies are fully paid, and all such insurance
policies are in full force and effect.

 

Section 2.21        Representations Regarding Financial Condition.

 

(a)                The Association is not entering into this Agreement in an
effort to hinder, delay or defraud their creditors.

 

(b)               The Association is not insolvent and will not be rendered
insolvent as a result of the transactions contemplated by this Agreement.

 

(c)                The assumption of the Association’s liabilities in connection
with the Merger Conversion represents fair and reasonable equivalent value for
the assets to be transferred and liabilities to be assumed hereunder.

 

(d)               The Association has no intention to file proceedings for
bankruptcy or insolvency or for the appointment of a receiver, conservator,
trustee, or guardian with respect to its business or assets prior to the
Effective Date.

 

Section 2.22        Compliance with Laws; Governmental Authorizations. The
Association is in material compliance with all statutes, laws, ordinances,
rules, regulations, judgments, orders, and decrees, which apply to its business
or properties. All permits, concessions, grants, franchises, licenses and other
governmental authorizations and approvals necessary for the conduct of its
business have been duly obtained and are in full force and effect, and there are
no proceedings pending or, to the Association’s knowledge, threatened which may
result in the revocation, cancellation or suspension, or any materially adverse
modification, of any thereof. The consummation of the Merger Conversion and the
other transactions contemplated hereby will not result in any such revocation,
cancellation, suspension or modification. The Real Property complies with all
applicable requirements of the Americans with Disabilities Act.

 

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Article III

 

REPRESENTATIONS AND WARRANTIES OF PEOPLES

 

Peoples hereby represents and warrants to the Association as follows:

 

Section 3.1            Organization and Standing. Peoples is a stock savings
bank duly organized and validly existing under Indiana law with full power and
authority to carry on its business as now conducted and to own or lease or
operate its properties in the places where such business is now conducted and
such properties are now owned, leased or operated. Peoples is duly authorized to
conduct its business, all subject to the supervision of the DFI and the FDIC.

 

Section 3.2            Authority for Agreement. The execution and delivery of
this Agreement and the consummation of the transactions contemplated by this
Agreement, have been duly authorized by the Board of Directors of Peoples, and,
subject to the requisite approval of federal and state regulatory authorities,
this Agreement constitutes a valid and legally binding obligation of Peoples
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors’ rights and remedies generally
and to general principles of equity, whether applied in a court of law or court
of equity. The approval, execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement will not result
in the breach of any term or provision of or constitute a default under any
indenture, mortgage, deed of trust or other material agreement or instrument to
which Peoples is bound.

 

Article IV

 

COVENANTS

 

Section 4.1            Conduct of Business. From the date hereof until the
Effective Date, the Association covenants that it shall:

 

(a)                comply in all respects with the Supervisory Agreement entered
into with the Office of Thrift Supervision dated as of January 12, 2011, any
related PCA orders, and any requirements of regulatory examinations of the
Association (the “Supervisory Agreement”);

 

(b)               use its best efforts to maintain all its material structures,
buildings, equipment and other tangible personal property in good repair, order
and condition, except for ordinary wear and tear and damage by unavoidable
casualties; provided that any capital expenditures with respect to such property
that will cost in excess of $5,000 must be approved in advance by Peoples;

 

(c)                perform in all material respects all of its obligations under
agreements, contracts and instruments relating to or affecting its properties,
assets and business;

 

(d)               comply in all material respects with all statutes, laws,
ordinances, rules and regulations applicable to its operations and properties
and to the conduct of its business;

 

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(e)                promptly advise Peoples or its designee in writing of any
correspondence or communication with any governmental authority having
jurisdiction over the Association relating to any examination, report, inquiry
or investigation of the Association;

 

(f)                not take any voluntary action which would result in a
violation or breach of this Agreement or any provision hereof;

 

(g)               promptly advise Peoples in writing of any materially adverse
change in the condition (financial or otherwise), operations, business or
prospects of the Association; and

 

(h)               notify Peoples in writing of the commencement of or any threat
of any material claim, litigation or proceeding against the Association.

 

Section 4.2            Access to Information. The Association shall give to
Peoples or its representatives, full and free access, during normal business
hours and upon reasonable notice, to its properties, books, records, contracts
and commitments, and will furnish promptly to Peoples or its representatives all
such information and documents relating to its properties and business as
Peoples shall reasonably request, including all interim financial statements and
reports as they are prepared and become available. Such right of access and
examination in and of itself, however, shall not diminish or in any manner
affect the representations, warranties and covenants of the Association
hereunder or constitute a waiver or relinquishment on the part of Peoples of any
of its rights to rely upon the representations, warranties and covenants of the
Association hereunder.

 

Section 4.3            Cooperation in Application Process. Peoples shall be
responsible for preparing and filing of all applications required in connection
with the contemplated transaction, including the Form AC to be filed with the
OCC by the Association; although the Association shall be responsible for
obtaining the tax opinion required for the Form AC. The Association and its
officers shall use their best efforts to cooperate in the application process
and shall provide Peoples with the various forms and documents required for the
applications that call for preparation or execution by the Association or its
officers or directors. Copies of the applications will be provided to the
Association and its counsel for their comments before the applications are
filed. Peoples and the Association shall use their best efforts to secure all
necessary approvals of regulatory authorities that shall be required in order to
effect the transactions contemplated hereby as soon as possible after the date
hereof.

 

Section 4.4            Management Pending Effective Date. During the interim
period after approval of this Agreement by the Board of Directors of the
Association and the Board of Directors of Peoples and until the Effective Date,
the day-to-day management of the business of the Association shall continue to
be conducted by the Association in its regular and ordinary course. Prior to
consummation of the transactions contemplated hereby, Peoples shall not control
or attempt to exercise control of the business or affairs of the Association.

 

Section 4.5            Acquisition Proposals. The Association agrees that it
shall not, and it shall cause its officers, directors, agents, advisors and
affiliates not to, solicit or encourage inquiries or proposals with respect to,
or engage in any negotiations concerning, or provide any confidential
information to, or have any discussions with, any person relating to, any tender
or exchange offer, proposal for a merger, consolidation, sale of assets and
assumption of liabilities, or other business combination involving the
Association or any proposal or offer to acquire in any manner a substantial
equity interest in, or a substantial portion of the assets or deposits of the
Association, other than the transactions contemplated by this Agreement (any of
the foregoing, an “Acquisition Proposal”).

 

14

 

 

Section 4.6            Title Insurance and Surveys. The Association shall
deliver to Peoples prior to the Effective Date copies of its most recent owner’s
closing title insurance binder or abstract and surveys on each parcel of the
Real Property (other than the OREO), or such other evidence of title reasonably
acceptable to Peoples. Association shall also provide to Peoples updated title
reports, abstracts or surveys on such Real Property (other than the OREO) at the
Closing, as Peoples shall reasonably request. Peoples shall pay the costs of any
such updated reports, abstracts or surveys.

 

Section 4.7            Environmental Reports. Association shall provide Peoples
copies of any environmental reports it has obtained or received with respect to
the Real Property within five business days after the date hereof. Peoples, in
its discretion, within 20 days after the date hereof, shall order a phase one
and/or phase two environmental report with respect to any real estate of the
Association; provided, however, that no such reports may be requested with
respect to single family non-agricultural property of one acre or less unless
Peoples has reason to believe that such property might contain any waste
materials or otherwise might be contaminated. Peoples shall have 15 business
days from the receipt of any such environmental reports to notify the
Association of any dissatisfaction with the contents of such reports. Should the
cost of taking all remedial or other corrective actions and measures with
respect to all of such real estate, (i) required by applicable law, or (ii)
recommended or suggested by such report or reports or prudent in light of
serious life, health or safety concerns, in the aggregate, exceed the sum of
$10,000 as reasonably estimated by an environmental expert retained for such
purpose by Peoples and reasonably acceptable to the Association, or if the cost
of such actions and measures cannot be so reasonably estimated by such expert to
be such amount or less with any reasonable degree of certainty such
circumstances shall be deemed an “Environmental Problem.” Upon the occurrence of
an Environmental Problem, Peoples shall have the right to terminate this
Agreement. All costs of any phase one investigation and any phase two
investigation or environmental report requested pursuant to this Section which
does not recommend or suggest the taking of any remedial or corrective actions
shall be at Peoples’ sole cost and expense. Association agrees to pay the costs
of any phase two investigation prepared or conducted at Peoples’ request
pursuant to this Section which recommends or suggests the taking of remedial or
corrective action. Peoples does hereby agree to restore at its cost any property
for which it has undertaken an environmental investigation to the condition
existing immediately prior to such investigation if the investigation does not
recommend or suggest the taking of remedial or corrective action.

 

Section 4.8            Employees.

 

(a)                Peoples shall offer substantially similar salaries, duties
and benefits as are available to similarly situated employees of Peoples, to
those employees of the Association whom Peoples elects to hire and who satisfy
Peoples’ customary employment requirements, including pre-employment interviews,
investigations and employment conditions, uniformly applied by Peoples and
Peoples’ employment needs. Peoples and the Association will establish a mutually
acceptable process for the orderly interviewing of employees for employment by
Peoples; the Association will give Peoples a reasonable opportunity to interview
the employees.

 

15

 

 

(b)               Peoples shall give notices to the Association's employees
terminated by it on or after the Effective Date as are required for it to comply
with the Consolidated Omnibus Reconciliation Act of 1985 (“COBRA”) or any
applicable state law with respect to continuation of healthcare coverage
following the Effective Date. The Association shall provide such continuation
and/or conversion notices to the employees as are required under federal or
state law as a result of the employee’s termination of employment prior to the
Effective Date. Peoples shall be responsible for providing such health
continuation coverage and performing such related responsibilities as required
by law following the Effective Date.

 

(c)                This Section 4.8 shall not confer any rights or benefits on
any person other than Peoples and the Association, or their respective
successors and assigns, either as a third party beneficiary or otherwise.

 

(d)               Peoples agrees that those employees of the Association who
become employees of Peoples on the Effective Date (“Former Association
Employees”), while they remain employees of Peoples after the Effective Date
will be provided with benefits under employee benefit plans during their period
of employment that are no less favorable in the aggregate than those provided by
Peoples to similarly situated employees of Peoples except as otherwise provided
herein. Unused vacation time that has been accrued as of the Effective Date by
any Former Association Employees shall be paid to such employees at current rate
of pay with applicable taxes withheld by the Association on or before the
Effective Date. Except as hereinafter provided, at the Effective Date, Peoples
will amend or cause to be amended each employee benefit and welfare plan of
Peoples in which Former Association Employees are eligible to participate, to
the extent necessary and allowable under applicable law, so that as of the
Effective Date:

 

(i)                 such plans take into account for purposes of eligibility,
participation, vesting, and benefit accrual (except that there shall not be any
benefit accrual for past service under any qualified defined benefit pension
plan), the service of such employees with the Association as if such service
were with Peoples;

 

(ii)               Former Association Employees are not subject to any waiting
periods or pre-existing condition limitations under the medical, dental and
health plans of Peoples in which they are eligible to participate and may
commence participation in such plans on the Effective Date unless (and only
during periods) Peoples elects to continue any such employee welfare benefit
plans of the Association;

 

(iii)             for purposes of determining the entitlement of Former
Association Employees to sick leave and vacation pay following the Effective
Date, the service of such employees with the Association shall be treated as if
such service were with Peoples provided that vacation time awarded under Section
4.8(d) shall be considered in determining those days under Peoples’ vacation pay
policy; and

 

16

 

 

(iv)             Former Association Employees are first eligible to participate
and will commence participating in Peoples’ qualified retirement plans on the
first entry date coinciding with or following the Effective Date.

 

(e)                On the Effective Date, Peoples agrees to appoint John Freyek,
President and CEO of the Association, to the Board of Directors of Peoples as a
Director Emeritus upon the same terms and conditions as are enjoyed by other
Directors Emeritus of Peoples to serve until John Freyek reaches the age of 76
and to pay him an annual fee of $12,248.50 for such service. In addition, on the
Effective Date, John Freyek and Peoples shall enter into a two-year consulting
contract pursuant to which Mr. Freyek would be paid $12,248.50 per year in
consideration for his services as a consultant to Peoples to assist with the
business and operations of the Resulting Association.

 

(f)                Subject to the terms and conditions of Section 4.8, Peoples
agrees to retain Sheldon Cutler to serve as a Vice President of Peoples
following the Effective Date, on such terms and conditions as Peoples, the
Association, and Cutler shall agree.

 

(g)               Peoples agrees to honor the Association’s obligation to pay
the health insurance premiums of Irene Rybarczyk, who is currently 102 years of
age, until her death. All other agreements to pay health insurance premiums of
directors or executive officers of the Association shall terminate as of the
Effective Date.

 

Section 4.9            Association’s 401(k) Plan. Prior to the Effective Date,
the Association:

 

(a)                by resolution of its directors, shall terminate the First
Federal Savings and Loan Association of Hammond 401(k) Profit Sharing Plan (the
“401(k) Plan”) as of the day before the Effective Date. The account balances of
the 401(k) Plan participants, including any alternate payees or beneficiaries of
deceased participants, including any accrued but unpaid contributions, as
determined by the 401(k) Plan administrator, shall thereafter be distributed or
otherwise transferred in accordance with the applicable plan termination
provisions of the 401(k) Plan, as soon as administratively feasible following
the plan termination date; and

 

(b)               shall continue to make all non-discretionary employer
contributions which it is required to make to the 401(k) Plan, including
elective deferral contributions of those 401(k) Plan participants who are
employed by the Association. In addition, the Association shall continue in full
force and effect, until the Effective Date: (i) the fidelity bond, if any,
issued to the Association as described in ERISA Sec. 4.12; and (ii) the ERISA
fiduciary liability insurance policy currently in effect, if any, for the
benefit of the covered fiduciaries of the 401(k) Plan.

 

Section 4.10        Health Plans. After the Effective Date, Peoples shall
continue to maintain fully insured employee welfare benefit plans of the
Association at the Effective Date, until such time as Peoples determines, in its
sole discretion, to modify or terminate any or all of those plans. Claims
incurred under the employee welfare benefit plans prior to plan termination
shall be paid in accordance with the applicable plan’s claim submission
procedures and deadlines.

 

17

 

 

Section 4.11        Indemnification.

 

(a)                For a period that will last as long as tail coverage is
obtained under Section 4.11(c) of this Agreement, as provided therein, Peoples
agrees to indemnify and hold harmless each present and former director and
officer of the Association (each, an “Indemnified Party”), against any costs or
expenses (including reasonable attorneys’ fees), judgments, fines, amounts paid
in settlement, losses, claims, damages or liabilities incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of matters existing or
occurring at or before the Effective Date (including the transactions
contemplated by this Agreement), whether asserted or claimed before, at or after
the Effective Date, as they are from time to time incurred, in each case to the
fullest extent such person would have been indemnified or have the right to
advancement of expenses pursuant to 12 CFR § 145.121.

 

(b)               Any Indemnified Party wishing to claim indemnification under
Section 4.11(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify Peoples thereof, but the failure to so
notify shall not relieve Peoples of any liability it may have hereunder to such
Indemnified Party if such failure does not materially and substantially
prejudice Peoples.

 

(c)                Peoples shall use its reasonable best efforts to maintain the
Association’s existing directors’ and officers’ liability insurance policy
covering persons who are currently covered by such insurance for the tail
coverage period permitted under such policy; provided, however, that in no event
shall Peoples be obligated to expend, in order to maintain or provide insurance
coverage pursuant to this Section 4.11(c), an amount per annum in excess of 100%
of the amount of the annual premiums paid by the Association as of the date
hereof for such insurance.

 

(d)               If Peoples or any of its successors or assigns (i)
consolidates with or merges into any other person or entity and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person or entity, then, and in each such case, to the extent
necessary, proper provision shall be made so that the successors and assigns of
Peoples assume the obligations set forth in this Section 4.11.

 

(e)                The provisions of this Section 4.11 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her representatives.

 

Section 4.12        Core Data Processing Systems Integration. From and after the
date of this Agreement, the Association and Peoples agree to fully cooperate
with and assist one another in connection with the transition and conversion of
the Association’s data processing files to the data processing platform of
Peoples. The Association and Peoples shall, and shall cause their respective
data processing vendors to, cooperate in such transition and conversion. In
connection with such transition and conversion, the Association will take all
necessary actions to terminate the Master Agreement between Harland Financial
Solutions, Inc. (“Harland”) and the Association, dated September 15, 2009, and
its related Exhibits and orders pertaining to the Association’s data processing
services and the Master Agreement between the Association and Fiserv Solutions,
Inc. (“Fiserv”) dated January 31, 2010, and its related Exhibits and orders
pertaining to the Association’s check processing services (collectively, the
“Processing Agreements”).

 

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Section 4.13        Internal Controls.

 

(a)                Between the date of this Agreement and the Effective Date,
the Association shall maintain controls and procedures that are effective to
ensure that material information relating to the Association is made known to
the President and Chief Executive Officer and Chief Financial Officer of the
Association to permit the Association to record, process, summarize and report
financial data in a timely and accurate matter; (ii) such officers shall
promptly disclose to the Association’s auditors and audit committee any
significant deficiencies in the design or operation of internal controls which
could adversely affect the Association’s ability to record, process, summarize
and report financial data, any material weaknesses identified in internal
controls, and any fraud, whether or not material, that involves management or
other employees who have a significant role in the Association’s internal
controls; and (iii) the Association shall take appropriate corrective actions to
address any such significant deficiencies or material weaknesses identified in
the internal controls.

 

(b)               Between the date of this Agreement and the Effective Date, the
Association shall, upon reasonable notice during normal business hours, permit
representatives of Peoples to meet with officers of the Association to discuss
the integration, as of the Effective Date, of appropriate disclosure controls
and procedures and internal control over financial reporting relating to the
Association’s operations with the controls and procedures and internal control
over financial reporting of Peoples for purposes of assisting Peoples in
compliance with the applicable provisions of the Sarbanes-Oxley Act of 2002
following the Effective Date. The Association shall cause its employees and
accountants to fully cooperate with Peoples, at Peoples’ sole expense, in the
preparation, documentation, review, testing and all other actions Peoples deems
reasonably necessary to satisfy the Sarbanes-Oxley Act of 2002.

 

Article V

 

CONDITIONS precedent TO OBLIGATIONS OF ALL PARTIES

 

The obligations of Peoples and the Association to cause the transactions
contemplated hereby to be consummated shall be subject to the satisfaction on or
before the Effective Date of all of the following conditions, except as such
parties may waive such conditions in writing:

 

Section 5.1            Approvals and Consents. All orders, consents, approvals,
agreements, forbearances and waivers necessary for the lawful consummation of
the transactions contemplated hereby have been received from each regulatory
authority having jurisdiction over the Merger Conversion, including the OCC, the
FDIC, and the DFI in form and substance reasonably satisfactory to Peoples and
its counsel. All applicable statutory waiting periods shall have expired, and
all necessary approvals and consents hereof shall have been provided by third
parties.

 

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Section 5.2            Qualification as Voluntary Supervisory Conversion. The
application submitted to the OCC has been processed as a voluntary supervisory
conversion transaction, and the OCC shall not require the establishment of a
liquidation account in connection with the Merger Conversion or require a vote
of the members of the Association on the Merger Conversion.

 

Section 5.3            Absence of Proceedings and Litigation. No order shall
have been entered that remains in force at the Effective Date restraining or
prohibiting the Merger Conversion in any legal, administrative or other
proceeding, and no action or proceeding shall have been instituted or threatened
on or before the Effective Date seeking to restrain or prohibit the Merger
Conversion.

 

Article VI

 

CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ASSOCIATION

 

The obligations of the Association under this Agreement shall be subject to the
fulfilment, at or prior to the Effective Date, of each of the following
conditions (unless waived in writing by the Association in the manner provided
in Section 8.4 hereof):

 

Section 6.1            Opinion of Counsel. The Association shall have received
an opinion, addressed to the Association and dated the Effective Date, of Barnes
& Thornburg LLP in form and substance satisfactory to the Association to the
following effect: (a) Peoples is duly organized and validly existing under the
laws of Indiana, and has full power and authority to carry on its business as
now conducted and to own or lease or operate its properties; (b) this Agreement
has been duly authorized by all necessary corporate action on the part of
Peoples and constitutes a valid and binding obligation of Peoples enforceable in
accordance with its terms subject to applicable bankruptcy, insolvency and
similar laws affecting creditor rights and remedies generally and to general
principles of equity, whether applied in a court of law or court of equity; and
(c) no consent, approval, order or authorization of any governmental authority
is required in connection with the execution and delivery of this Agreement by
Peoples or the consummation on the part of Peoples of the transactions
contemplated by this Agreement, except for such consents, approvals, orders or
authorizations as shall have been obtained prior to the Effective Date.

 

Section 6.2            Representations, Warranties and Covenants; Performance by
Peoples. The representations and warranties of Peoples contained in Article III
of this Agreement shall be true, complete and correct in all material respects
as of the Effective Date, with the same force and effect as though made as of
the Effective Date, and the covenants of the Peoples in Article IV of this
Agreement shall have been complied with in all material respects.

 

Section 6.3            Officers’ Certificates. Peoples shall have furnished to
the Association a certificate, dated the Effective Date, signed by the President
and the chief financial officer of Peoples, to the effect that all conditions
set forth in Section 6.2, have been satisfied to the best of their knowledge and
belief.

 

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Article VII

 

CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PEOPLES

 

The obligations of Peoples under this Agreement shall be subject to the
fulfilment, at or prior to the Effective Date, of each of the following
conditions (unless waived in writing by Peoples in the manner provided in
Section 8.4 hereof).

 

Section 7.1            Regulatory Approvals. None of the licenses, approvals and
consents of any relevant federal, state or other regulatory agency required for
the Merger Conversion shall have imposed any conditions upon Peoples or the
Merger Conversion that Peoples, in its sole discretion, concludes are unduly
burdensome.

 

Section 7.2            Representations, Warranties and Covenants; Performance by
the Association. The representations and warranties of the Association contained
in Article II of this Agreement shall be true, complete and correct in all
material respects as of the Effective Date, with the same force and effect as
though made as of the Effective Date, and the covenants of the Association in
Article IV of this Agreement shall have been complied with in all material
respects.

 

Section 7.3            Officers’ Certificates. The Association shall have
furnished to Peoples a certificate, dated the Effective Date, signed by the
President and the chief financial officer of the Association, to the effect that
all conditions set forth in Section 7.2, have been satisfied to the best of
their knowledge and belief.

 

Section 7.4            Opinion of Counsel. Peoples shall have received an
opinion of Enslen, Enslen & Matthews addressed to it and dated the Effective
Date, in the form and substance satisfactory to Peoples, to the following
effect: (a) the Association is a mutual savings association, and the Association
is duly organized, validly existing and in good standing under federal law, and
has full power and authority to carry on its business as now conducted and to
own or lease or operate its properties, (b) this Agreement has been duly
authorized by all necessary corporate action on the part of the Association and
constitutes a valid and binding obligation of the Association enforceable in
accordance with its terms subject to applicable bankruptcy, insolvency and
similar laws affecting creditor rights and remedies generally and to general
principles of equity, whether applied in a court of law or court of equity, (c)
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not conflict with or result in a violation
of, or constitute a default under any provision of the Charter or Bylaws of the
Association, any order, statute or regulation of the FDIC or the OCC applicable
to the Association, or, to the best of its knowledge, any mortgage, indenture,
lease, agreement or other instrument, permit, concession, grant, franchise,
license, judgment, decree, or ordinance to which the Association is subject, and
(d) no consent, approval, order or authorization of any governmental authority
is required in connection with the execution and delivery of this Agreement by
the Association or the consummation on the part of the Association of the
transactions contemplated by this Agreement, except for such consents,
approvals, orders or authorizations as shall have been obtained prior to the
Effective Date.

 

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Section 7.5            Absence of Material Adverse Effect. The Association shall
not have experienced a Material Adverse Effect between the date of this
Agreement and the Effective Date.

 

Section 7.6            Termination of Supervisory Agreement. The OCC shall
terminate the Supervisory Agreement in its entirety on or before the Effective
Date.

 

Section 7.7            Closing Book Value. The Closing Book Value of the
Association at the end of the month prior to the Effective Date (excluding any
reduction which might occur as a result of reasonable expenses relating to the
Merger Conversion) shall not be less than $800,000. As used in the preceding
sentence, the term “Closing Book Value” shall mean the amount of the members’
equity of the Association as of the end of the month immediately preceding the
Effective Date, determined in accordance with GAAP.

 

Section 7.8            The Association’s REO. The value of the Association’s
OREO calculated as at the end of the month prior to the Effective Date,
determined in accordance with GAAP and all applicable bank regulatory laws,
rules, and regulations shall be no greater than $2.2 million. As of the end of
the month prior to the Effective Date, liquidation values of the Association’s
OREO shall not be less than 50% of the carry value on such date.

 

Section 7.9            Delinquent Loans. The aggregate amount of the
Association’s Delinquent Loans as of the end of the month prior to the Effective
Date (the “Computation Date”) does not exceed 7.0% of total loans. The
Association’s Delinquent Loans shall mean the total of (i) all loans with
principal or interest that are 30 days or more past due; (ii) all loans with
principal or interest that are nonaccruing; and (iii) restructured and impaired
loans.

 

Section 7.10        Maximum Processing Agreement Penalty. The total fees
required to terminate the Processing Agreements, including deconversion fees,
shall not exceed $265,000 and Harland and Fiserve shall have signed releases
indicating they have been paid in full upon the termination of the Processing
Agreements for an aggregate amount not exceeding such amount.

 

Section 7.11        Loan Values. The aggregate market value of the Association’s
loans as at the end of the month prior to the Effective Date shall not be less
than 90% of the value recorded on the Association’s books for such loans on such
date.

 

Article VIII

 

TERMINATION, AMENDMENT AND WAIVER

 

Section 8.1            Termination. This Agreement may be terminated and
abandoned at any time prior to the Effective Date:

 

(a)                by mutual consent of the respective Boards of Directors of
the Association and Peoples evidenced by appropriate resolutions; or

 

(b)               by Peoples if (i) any representation or warranty of the
Association set forth in Article II shall be found to be or to have become
untrue, incomplete or misleading in any material respect and such breach has not
been cured within 15 days following receipt by the Association of notice of such
discovery, (ii) if any of the covenants of the Association contained in Article
IV have not been substantially performed in all material respects and such
failure has not been cured within 15 days of receipt of notice Peoples of such
failure, or (iii) if any of the conditions provided in Articles V or VII of this
Agreement shall not have been fulfilled and shall not have been waived by June
30, 2014; or

 

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(c)                by the Association if (i) any representation or warranty of
Peoples set forth in Article III shall be found to be or to have become untrue,
incomplete or misleading in any material respect and such breach has not been
cured within 15 days following receipt by the Association of notice of such
discovery, (ii) if any of the covenants of Peoples contained in Article IV have
not been substantially performed in all material respects and such failure has
not been cured within 15 days of receipt of notice from the Association of such
failure, or (iii) if any of the conditions provided in Articles V or VI of this
Agreement shall not have been fulfilled and shall not have been waived by June
30, 2014; or

 

(d)               by either the Association or Peoples in the event the
transactions contemplated by this Agreement are not consummated on or prior to
June 30, 2014.

 

Section 8.2            Effect of Termination. If this Agreement is terminated as
provided for in Section 8.1 hereinabove, (a) this Agreement shall forthwith
become wholly void, of no effect and without liability to any party to this
Agreement, except with respect to Section 9.1 hereof, and (b) each party hereto
shall pay its or his own fees and expenses incident to the negotiation,
preparation and execution of this Agreement and the obtaining of the necessary
approvals thereof, including fees and expenses of its counsel, accountants,
financial advisors and other experts. Notwithstanding the foregoing, termination
of this Agreement shall not relieve a beaching party from liability for any
willful breach of this Agreement giving rise to such termination.

 

Section 8.3            Amendment. The parties hereto may amend, modify or
supplement this Agreement only by an agreement in writing executed and delivered
by the Association and Peoples.

 

Section 8.4            Extension; Waiver. At any time prior to the Effective
Date, Peoples or the Association may (a) extend the time for the performance of
any of the obligations or acts of the other, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document or instrument pursuant hereto, and (c) waive compliance with any of the
agreements, covenants or conditions contained herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing duly executed and delivered on behalf of such
party.

 

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Article IX

 

MISCELLANEOUS

 

Section 9.1            Confidentiality. All information about the Association
obtained by Peoples and its agents and all information about Peoples obtained by
the Association, will be held in strict confidence by the parties, except to the
extent that such information (i) was already known to them, (ii) hereafter
becomes lawfully obtainable from other sources, or (iii) is required to be
disclosed by the party obtaining the information in any documents to be filed
with any governmental agency or authority, but only in connection with such
filing, and all copies thereof will be returned promptly to the party supplying
the information at its request in the event the transactions contemplated hereby
are not consummated. Neither party shall publicly disclose any information
concerning the transactions contemplated hereby without coordinating its
disclosure with the other party.

 

Section 9.2            Expenses. Each of the parties hereto shall assume and
bear all expenses, costs and fees incurred or assumed by such party in the
preparation and execution of this Agreement and in complying with the covenants
and conditions herein. The Association acknowledges and agrees that the fees
payable to Crowe Horwath LLP for the preparation of the tax opinion required for
the Form AC and the legal fees of its counsel in reviewing and revising the
regulatory applications required for the Merger Conversion shall be a cost of
the Association. Peoples acknowledges and agrees that the costs of any
examination of the Association by the DFI in connection with the transactions
contemplated by this Agreement shall be a cost of Peoples.

 

Section 9.3            Modification of Structure. Peoples shall have the right,
at its option to cause the transaction to be structured in a manner other than
as set forth in this Agreement, provided that such change of structure shall be
no less acceptable to the regulatory authorities required to approve the
transaction than the structure set forth in this Agreement. If such a change of
structure is adopted, the terminology of this Agreement shall be deemed modified
to the terminology that would correctly denote the revised structure of the
transaction.

 

Section 9.4            Notices. All notices and other communications pursuant to
this Agreement shall be deemed to have been duly given if in writing and
delivered personally or if mailed, first class, postage prepaid, as follows:

 

If to the Association, to:

 

First Federal Savings & Loan Association of Hammond

130 Rimbach Street

Hammond, Indiana 46320

Attn:John A. Freyek    President and CEO

 

with a copy to:

 

William T. Enslen, Esq.

Enslen, Enslen & Matthews

142 Rimbach Street

Hammond, Indiana 46320

 

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If to Peoples, to:

 

Peoples Bank SB

9204 Columbia Avenue

Munster, Indiana 46321

Attn:David A. Bochnowski   President and CEO

 

with a copy to:

 

Claudia V. Swhier, Esq.

Barnes & Thornburg LLP

11 South Meridian Street

Indianapolis, Indiana 46204

 

Section 9.5            No Third Party Beneficiaries. Except as provided in
Section 4.11(e) hereof, this Agreement is not intended nor shall it be construed
to create any express or implied rights in any third parties.

 

Section 9.6            Survival. None of the representations, warranties,
covenants and other agreements in this Agreement or in any instrument delivered
pursuant to this Agreement, other than those contained in Sections 8.2 and 9.1
and in Section 9.6 of this Agreement, shall survive the termination of this
Agreement if this Agreement is terminated prior to the Effective Date. None of
the representations, warranties, covenants and other agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants and other agreements, shall survive the Effective Date, except for
those covenants and agreements, which by their terms apply or are to be
performed in whole or in part after the Effective Date.

 

Section 9.7            Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any covenants in this Agreement were
not performed in accordance with their specific terms or otherwise were
materially breached. It is accordingly agreed that, without the necessity of
proving actual damages or posting bond or other security, the parties shall be
entitled to temporary and/or permanent injunction or injunctions to prevent
breaches of such performance and to specific enforcement of the terms and
provisions in addition to any other remedy to which they may be entitled, at law
or in equity.

 

Section 9.8            Headings, Entire Agreement. The headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. This Agreement constitutes the
entire agreement between the parties hereto and supersedes and replaces any
prior written or oral agreements or understandings between them relating to the
subject matter hereof.

 

Section 9.9            Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same instrument. A telecopy, facsimile, or email
transmission of a signed counterpart of this Agreement will be sufficient to
bind the party or parties whose signature(s) appear thereon.

 

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Section 9.10        Binding Effect. Except as otherwise provided in Section 9.3
hereof, this Agreement shall not be assignable by either Peoples or the
Association.

 

Section 9.11        Governing Law. This Agreement and the legal relationships
between the parties shall be governed by and construed in accordance with the
laws of the State of Indiana, without taking into account provisions regarding
the choice of law, except to the extent that certain matters may be governed as
a matter of law by federal law.

 

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SIGNATURES

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above written.

 

  Peoples Bank SB Date:  December 20, 2013       By: /s/ David A. Bochnowski
Attest:       Its: Chairman and Chief Executive Officer /s/ Leane English Cerven
    Leane English Cerven, Secretary     First Federal Savings & Loan Association
of Hammond Date:  December 16, 2013       By: /s/ John A. Freyek Attest:      
Its: President and Chief Executive Officer /s/ John Tokarz     John Tokarz,
Secretary    

 

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Exhibit 1.4

 

Plan of Merger

of

Peoples Bank SB,

an Indiana savings bank,

and

First Federal Savings and Loan Association of Hammond,

a federal savings association

 

1. The names of the corporations proposing to merge (the “Merger”) are First
Federal Savings and Loan Association of Hammond, a federal savings association
(the “Association” or “Merging Corporation”) and Peoples Bank SB, an Indiana
savings bank (“Peoples” or the “Surviving Corporation”), pursuant to an
Agreement and Plan of Voluntary Supervisory Merger Conversion dated December 20,
2013.

 

2. The Surviving Corporation has 1,000 authorized shares of common stock of no
par value, of which 1,000 shares of common stock are presently issued and
outstanding.

 

3. The Merging Corporation has 1,000 authorized shares of common stock, $.01 par
value per share, of which 100 shares of common stock are presently issued and
outstanding.

 

4. The effective date of the Merger shall mean the date and time specified in
the Articles of Merger relating to the Merger that are filed with the Indiana
Secretary of State (the "Effective Date").

 

5. Upon the Effective Date, the Association shall merge into and with into
Peoples. Peoples shall be the surviving corporation in the Merger (the
“Surviving Corporation”) and the separate existence of the Association (the
“Merging Corporation”) shall thereupon cease.

 

6. Upon the Effective Date:

 

(a)each of the 1,000 shares of common stock, without par value, of Peoples
outstanding immediately prior to the Effective Date of the Merger shall remain
outstanding immediately after the Effective Date of the Merger.

 

(b)each of the 100 shares of the common stock, $.01 par value per share, of the
Association outstanding immediately prior to the Effective Date of the Merger
shall be cancelled without consideration therefor.

 

7. The Surviving Corporation shall, without further transfer, succeed to and
thereafter possess and enjoy all of the public and private rights, privileges,
immunities, powers and franchises, and be subject to all of the public and
private restrictions, liabilities and duties, of each of the Association and
Peoples; all property (real, personal and mixed) of, all debts (on whatever
account) due to, and all choses in action and each and every other interest of
or belonging or due to, each of the Association and Peoples shall be taken by
and deemed to be transferred to and vested in the Surviving Corporation without
further act, deed or other instrument; and the title to any real estate or any
interest therein, vested by deed or otherwise in either of the Association or
Peoples, shall not revert or be in any way impaired by reason of the Merger.

 

 

 

 

8. All rights of creditors and all liens (if any) upon the property of either of
Peoples or the Association shall be preserved unimpaired by the Merger; and all
debts, liabilities, obligations and duties (collectively, “Obligations”) of
either of Peoples or the Association shall become the responsibility and
liability of the Surviving Corporation, and may be enforced against it to the
same extent as if such Obligations had been incurred or contracted by it.

 

9. Each Deposit Account in the Association at the time of the consummation of
the Merger shall become, without further action by the holder, a Deposit Account
in the Surviving Corporation equivalent in withdrawable amount to the
withdrawable value, and subject to the same terms and conditions (except as to
voting and liquidation rights) as such Deposit Account in the Association
immediately preceding consummation of the Merger. Holders of Deposit Accounts in
the Surviving Corporation shall not, as such holders, have any voting rights.
For purposes of the foregoing, the Deposit Accounts of the Association shall
mean all withdrawable deposit accounts, including all savings accounts,
certificate accounts, and demand accounts, of the Association.

 

10. The Articles of Conversion of Peoples shall continue to be the Articles of
Conversion of the Surviving Corporation upon and after the Effective Date until
changed or amended in accordance with the terms thereof.

 

11. The By-Laws of Peoples shall continue to be the By-Laws of the Surviving
Corporation upon and after the Effective Date until changed or amended in
accordance with the terms thereof.

 

12. The directors of the Surviving Corporation immediately prior to the
Effective Date shall continue to hold such positions following the Merger, and
such directors shall hold office until such time as their successors shall be
duly elected and qualified. The officers of the Surviving Corporation shall be
comprised of those persons serving as officers of Peoples immediately prior to
the Effective Date and Sheldon Cutler who shall become a Vice President of the
Surviving Corporation.

 

13. The home office of Peoples at 9204 Columbia Avenue, Munster, Indiana, shall
remain the home office of the Surviving Corporation. The Surviving Corporation
will operate branch offices at the locations of Peoples’ branch offices
immediately prior to the Effective Date and at the home office and branch office
of the Association immediately prior to the Effective Date.

 

2