10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended March 31, 2005

Or

Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Transition Period from _______________ to ___________________

Commission File Number 0-11244

German American Bancorp
(Exact name of registrant as specified in its charter)

INDIANA
(State or other jurisdiction of
incorporation or organization)
35-1547518
(I.R.S. Employer
Identification No.)

711 Main Street, Jasper, Indiana 47546
(Address of Principal Executive Offices and Zip Code)

Registrant's telephone number, including area code:  (812) 482-1314

Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES            NO   

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES            NO   

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class
Common Stock, No par value
Outstanding at May 1, 2005
10,822,948

CAUTION REGARDING FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

Information included in or incorporated by reference in this Quarterly Report on Form 10-Q, our other filings with the Securities and Exchange Commission (the "SEC") and our press releases or other public statements, contain or may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Please refer to a discussion of our Forward-looking statements and associated risks in Item 2 of Part 1 of this Report ("Management's Discussion and Analysis of Financial Condition and Results of Operations") at the conclusion of that Item 2 under the heading "Forward-Looking Statements and Associated Risks."

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets — March 31, 2005 and December 31, 2004

Consolidated Statements of Income and Comprehensive Income — Three months Ended March 31, 2005 and 2004

Consolidated Statements of Cash Flows — Three months Ended March 31, 2005 and 2004

Notes to Consolidated Financial Statements — March 31, 2005

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Item 4. Controls and Procedures.

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 6. Exhibits

SIGNATURES

EXHIBIT INDEX

PART I.        FINANCIAL INFORMATION
ITEM 1.        Financial Statements

GERMAN AMERICAN BANCORP
CONSOLIDATED BALANCE SHEETS
(dollars in thousands except per share data)

	March 31, 2005			December 31, 2004
	(unaudited)
ASSETS
Cash and Due from Banks	$	18,951		$	23,312
Federal Funds Sold and Other Short-term Investments		5,533			24,354
Cash and Cash Equivalents		24,484			47,666
Securities Available-for-Sale, at Fair Value		188,889			181,676
Securities Held-to-Maturity, at Cost (Fair value of $11,764 and
$13,636 on March 31, 2005 and December 31, 2004, respectively)		11,486			13,318
Loans Held-for-Sale		3,517			3,122
Total Loans		620,648			631,043
Less: Unearned Income		(1,151	)		(1,250	)
Allowance for Loan Losses		(8,968	)		(8,801	)
Loans, Net		610,529			620,992
Stock in FHLB of Indianapolis and Other Restricted Stock, at Cost		13,686			13,542
Premises, Furniture and Equipment, Net		19,708			20,231
Other Real Estate		255			213
Goodwill		1,794			1,794
Intangible Assets		2,273			2,378
Company Owned Life Insurance		18,729			18,540
Accrued Interest Receivable and Other Assets		17,122			18,622
TOTAL ASSETS	$	912,472		$	942,094
LIABILITIES
Non-interest-bearing Demand Deposits	$	122,873		$	123,127
Interest-bearing Demand, Savings, and Money Market Accounts		294,282			305,341
Time Deposits		304,286			321,915
Total Deposits		721,441			750,383
FHLB Advances and Other Borrowings		96,630			95,614
Accrued Interest Payable and Other Liabilities		11,287			12,428
TOTAL LIABILITIES		829,358			858,425
SHAREHOLDERS' EQUITY
Preferred Stock, $10 par value; 500,000
shares authorized, no shares issued		---			---
Common Stock, no par value, $1 stated value;
20,000,000 shares authorized		10,881			10,898
Additional Paid-in Capital		66,466			66,817
Retained Earnings		6,664			5,778
Accumulated Other Comprehensive Income / (Loss)		(897	)		176
TOTAL SHAREHOLDERS' EQUITY		83,114			83,669
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	912,472		$	942,094
End of period shares issued and outstanding		10,880,948			10,898,241

See accompanying notes to consolidated financial statements.

GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(unaudited, dollars in thousands except per share data)

	Three Months Ended March 31,
	2005		2004
INTEREST INCOME
Interest and Fees on Loans	$	9,914	$	9,705
Interest on Federal Funds Sold and Other Short-term Investments		87		28
Interest and Dividends on Securities:
Taxable		1,430		1,284
Non-taxable		573		759
TOTAL INTEREST INCOME		12,004		11,776
INTEREST EXPENSE
Interest on Deposits		2,889		3,133
Interest on FHLB Advances and Other Borrowings		1,116		1,165
TOTAL INTEREST EXPENSE		4,005		4,298
NET INTEREST INCOME		7,999		7,478
Provision for Loan Losses		482		402
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		7,517		7,076
NON-INTEREST INCOME
Trust and Investment Product Fees		564		456
Service Charges on Deposit Accounts		823		833
Insurance Revenues		1,245		1,137
Other Operating Income		773		435
Gain on Sales of Loans and Related Assets		236		182
Gain on Sales of Securities		---		5
TOTAL NON-INTEREST INCOME		3,641		3,048
NON-INTEREST EXPENSE
Salaries and Employee Benefits		4,596		4,615
Occupancy Expense		599		620
Furniture and Equipment Expense		509		563
Data Processing Fees		326		306
Professional Fees		414		367
Advertising and Promotions		165		229
Supplies		124		139
Other Operating Expenses		1,205		1,011
TOTAL NON-INTEREST EXPENSE		7,938		7,850
Income before Income Taxes		3,220		2,274
Income Tax Expense		809		322
NET INCOME	$	2,411	$	1,952
COMPREHENSIVE INCOME	$	1,338	$	2,580
Earnings Per Share and Diluted Earnings Per Share	$	0.22	$	0.18
Dividends Per Share	$	0.14	$	0.14

See accompanying notes to consolidated financial statements

GERMAN AMERICAN BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, dollars in thousands)

	Three Months Ended March 31,
	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	2,411		$	1,952
Adjustments to Reconcile Net Income to Net Cash from Operating Activities:
Net Amortization on Securities		179			397
Depreciation and Amortization		642			702
Amortization and Impairment of Mortgage Servicing Rights		(100	)		227
Net Change in Loans Held for Sale		(550	)		670
Loss on Investment in Limited Partnership		53			(20	)
Provision for Loan Losses		482			402
Gain on Sale of Securities, net		---			(5	)
Loss/(Gain) on Sale of Other Real Estate and Repossessed Assets		276			(1	)
Loss/(Gain) on Disposition and Impairment of Premises and Equipment		(5	)		---
FHLB Stock Dividends		(144	)		(162	)
Increase in Cash Surrender Value of Company Owned Life Insurance (COLI)		(189	)		(193	)
Change in Assets and Liabilities:
Interest Receivable and Other Assets		1,941			1,349
Interest Payable and Other Liabilities		(1,447	)		(1,886	)
Net Cash from Operating Activities		3,549			3,432
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Maturities of Securities Available-for-Sale		11,974			8,160
Proceeds from Sales of Securities Available-for-Sale		---			1,986
Purchase of Securities Available-for-Sale		(20,986	)		(7,570	)
Proceeds from Maturities of Securities Held-to-Maturity		1,830			2,382
Purchase of Loans		(2,245	)		---
Proceeds from Sales of Loans		5,689			1,250
Loans Made to Customers, net of Payments Received		6,388			1,620
Proceeds from Sales of Other Real Estate		141			264
Property and Equipment Expenditures		(147	)		(492	)
Proceeds from the Sale of Property and Equipment		444			---
Net Cash from Investing Activities		3,088			7,600
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Deposits		(28,942	)		7,113
Change in Short-term Borrowings		(378	)		(15,528	)
Advances of Long-term Debt		1,500			1,500
Repayments of Long-term Debt		(106	)		(106	)
Issuance of Common Stock		21			---
Purchase / Retire Common Stock		(389	)		---
Dividends Paid		(1,525	)		(1,530	)
Net Cash from Financing Activities		(29,819	)		(8,551	)
Net Change in Cash and Cash Equivalents		(23,182	)		2,481
Cash and Cash Equivalents at Beginning of Year		47,666			32,533
Cash and Cash Equivalents at End of Period	$	24,484		$	35,014

See accompanying notes to consolidated financial statements.

GERMAN AMERICAN BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005
(unaudited, dollars in thousands except per share data)

Note 1 – Basis of Presentation

German American Bancorp operates primarily in the banking industry. The accounting and reporting policies of German American Bancorp and its subsidiaries conform to U.S. generally accepted accounting principles. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. All adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods reported have been included in the accompanying unaudited consolidated financial statements, and all such adjustments are of a normal recurring nature. It is suggested that these consolidated financial statements and notes be read in conjunction with the financial statements and notes thereto in the German American Bancorp December 31, 2004 Annual Report on Form 10-K.

Note 2 – Per Share Data

The computation of Earnings per Share and Diluted Earnings per Share are as follows:

	Three Months Ended March 31,
	2005		2004
Earnings per Share:
Net Income	$	2,411	$	1,952
Weighted Average Shares Outstanding		10,894,953		10,936,799
Earnings per Share:	$	0.22	$	0.18
Diluted Earnings per Share:
Net Income	$	2,411	$	1,952
Weighted Average Shares Outstanding		10,894,953		10,936,799
Stock Options, Net		16,410		40,189
Diluted Weighted Average Shares Outstanding		10,911,363		10,976,988
Diluted Earnings per Share	$	0.22	$	0.18

Stock options for 264,938 and 177,974 shares of common stock were not considered in computing diluted earnings per share for the quarters ended March 31, 2005 and 2004, respectively because they were anti-dilutive.

Note 3 – Securities

The fair values of Securities Available-for-Sale are as follows (dollars in thousands):

	March 31, 2005		December 31, 2004
U.S. Treasury Securities and Obligations of
U.S. Government Corporations and Agencies	$	10,402	$	4,034
Obligations of State and Political Subdivisions		27,032		30,621
Asset-/Mortgage-backed Securities		135,375		131,201
Corporate Securities		501		503
Equity Securities		15,579		15,317
Total	$	188,889	$	181,676

As of March 31, 2005, net unrealized losses on the total securities available-for-sale portfolio totaled approximately $1,079. As of December 31, 2004, net unrealized gains on the total securities available-for-sale portfolio totaled approximately $543.

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The total carrying values and fair values of Securities Held-to-Maturity are as follows (dollars in thousands):

	Carrying Value		Fair Value
March 31, 2005:
Obligations of State and Political Subdivisions	$	11,486	$	11,764
December 31, 2004:
Obligations of State and Political Subdivisions	$	13,318	$	13,636

Note 4 - Segment Information

The Company’s operations include four primary segments: core banking, mortgage banking, financial services, and insurance operations. The core banking segment involves attracting deposits from the general public and using such funds to originate consumer, commercial, commercial real estate, and residential mortgage loans, primarily in the affiliate banks’ local markets. The mortgage banking segment involves the origination and purchase of single-family residential mortgage loans; the sale of such loans in the secondary market; the servicing of mortgage loans for investors; and the operation of a title insurance company. The financial services segment involves providing trust, investment advisory, and brokerage services to customers. The insurance segment offers a full range of personal and corporate property and casualty insurance products, primarily in the affiliate banks’ local markets.

The core banking segment is comprised of five community banks with 26 retail banking offices. Net interest income from loans and investments funded by deposits and borrowings is the primary revenue of the five affiliate community banks comprising the core-banking segment. Revenues for the mortgage-banking segment consist of net interest income from a residential real estate loan portfolio and investment securities portfolio funded primarily by wholesale sources, gains on sales of loans and gains on sales of and capitalization of mortgage servicing rights (MSR), loan servicing income, title insurance commissions and loan closing fees. The financial services segment’s revenues are comprised primarily of fees generated by German American Financial Advisors & Trust Company (“GAFA”). These fees are derived by providing trust, investment advisory, and brokerage services to its customers. The insurance segment consists of German American Insurance, Inc., which provides a full line of personal and corporate insurance products as agent under five distinctive insurance agency names from five offices; and German American Reinsurance Company, Ltd. (“GARC”), which reinsures credit insurance products sold by the Company’s five affiliate banks. Commissions derived from the sale of insurance products are the primary source of revenue for the insurance segment.

The following segment financial information has been derived from the internal financial statements of German American Bancorp, which are used by management to monitor and manage the financial performance of the Company. The accounting policies of the four segments are the same as those of the Company. The evaluation process for segments does not include holding company income and expense. Holding company amounts are the primary differences between segment amounts and consolidated totals, and are reflected in the Other column below, along with minor amounts to eliminate transactions between segments.

Three Months Ended March 31, 2005	Core Banking		Mortgage Banking			Financial Services		Insurance		Other			Consolidated Totals
Net Interest Income	$	8,073	$	33		$	8	$	3	$	(118	)	$	7,999
Gain on Sales of Loans and
Related Assets		132		104			---		---		---			236
Net Gain on Securities		---		---			---		---		---			---
Servicing Income		---		229			---		---		(31	)		198
Trust and Investment Product Fees		2		---			584		---		(22	)		564
Insurance Revenues		58		17			4		1,171		(5	)		1,245
Noncash Items:
Provision for Loan Losses		562		(80	)		---		---		---			482
MSR Amortization & Valuation		---		(100	)		---		---		---			(100	)
Provision for Income Taxes		1,320		67			28		95		(701	)		809
Segment Profit		3,173		102			43		105		(1,012	)		2,411
Segment Assets		880,750		26,565			2,159		7,394		(4,396	)		912,472

8

Three Months Ended March 31, 2004	Core Banking		Mortgage Banking			Financial Services		Insurance			Other			Consolidated Totals
Net Interest Income	$	7,461	$	84		$	8	$	(5	)	$	(70	)	$	7,478
Gain on Sales of Loans and
Related Assets		94		88			---		---			---			182
Net Gain on Securities		5		---			---		---			---			5
Servicing Income		---		231			---		---			(40	)		191
Trust and Investment Product Fees		1		---			478		---			(23	)		456
Insurance Revenues		20		7			8		1,129			(27	)		1,137
Noncash Items:
Provision for Loan Losses		462		(60	)		---		---			---			402
MSR Amortization & Valuation		---		227			---		---			---			227
Provision for Income Taxes		987		(74	)		7		73			(671	)		322
Segment Profit		2,656		(113	)		10		107			(708	)		1,952
Segment Assets		880,354		26,153			2,092		8,378			1,112			918,089

Note 5 – Stock Repurchase Plan

On April 26, 2001 the Company announced that its Board of Directors approved a stock repurchase program for up to 607,754 of the outstanding Common Shares of the Company. Shares may be purchased from time to time in the open market and in large block privately negotiated transactions. The Company is not obligated to purchase any shares under the program, and the program may be discontinued at any time before the maximum number of shares specified by the program are purchased. As of March 31, 2005, the Company had purchased 276,965 shares under the program including 25,000 shares during the three months ended March 31, 2005.

Note 6 – Stock Compensation

Compensation expense under stock options is reported, if applicable, using the intrinsic value method. No compensation expense has been recognized in net income. Financial Accounting Standard No. 123 requires pro forma disclosures for companies that do not adopt its fair value accounting method for stock-based employee compensation. Accordingly, the following pro forma information presents net income and earnings per share had the Standard’s fair value method been used to measure compensation cost for stock option plans.

	Three Months Ended March 31,
	2005		2004
Net Income as Reported	$	2,411	$	1,952
Compensation Expense Under Fair Value Method, Net of Tax		47		59
Pro forma Net Income	$	2,364	$	1,893
Pro forma Earnings per Share	$	0.22	$	0.17
Pro forma Diluted Earnings per Share	$	0.22	$	0.17
Earnings per Share as Reported	$	0.22	$	0.18
Diluted Earnings per Share as Reported	$	0.22	$	0.18

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Note 7 – Employee Benefit Plans

The Company acquired through previous bank mergers a noncontributory defined benefit pension plan with benefits based on years of service and compensation prior to retirement. The benefits under the plan were suspended in 1998. The following table represents the components of net periodic benefit cost for the periods presented:

	Three Months Ended March 31,
	2005			2004
Service Cost	$	---		$	---
Interest Cost		12			14
Expected Return on Assets		6			9
Amortization of Transition Amount		---			---
Amortization of Prior Service Cost		(1	)		(1	)
Recognition of Net Loss		8			7
Net Periodic Benefit Cost	$	13		$	11
Loss on Settlements and Curtailments		None			None

The Company previously disclosed in its financial statements for the year ended December 31, 2004, that it expected to contribute $21 to the pension plan during the fiscal year ending December 31, 2005. As of March 31, 2005 no contributions had been made to the pension plan.

Note 9 — Contingencies

Since December 31, 2001, the Company's effective tax rate has been favorably impacted by Indiana financial institution tax savings resulting from the Company's formation of investment subsidiaries in the state of Nevada by four of the Company's banking subsidiaries. The state of Nevada has no state or local income tax. During the first quarter of 2005, the Company received notices of proposed assessments of unpaid financial institutions tax for the years 2001 and 2002 of approximately $691,000 ($456,000 net of federal tax), including interest and penalties of approximately $100,000. The Company filed a protest with the Indiana Department of Revenue contesting the proposed assessments and intends to vigorously defend its position that the income of the Nevada subsidiaries is not subject to the Indiana financial institutions tax. Although there can be no such assurance, at this time management does not believe this potential assessment will result in additional tax liability. Therefore, no tax provision has been recognized for the potential assessment of additional financial institutions tax for 2001 and 2002 or for financial institutions tax with respect to any of the Nevada subsidiaries in any period subsequent to 2002, including the three-month period ended March 31, 2005.

Note 10 – New Accounting Pronouncements

Emerging Issues Task Force (“EITF”) Issue 03-1, “The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments”, contains guidance regarding other-than-temporary impairment on securities that was to take effect for the quarter ended September 30, 2004. However, the effective date of portions of this guidance has been delayed, and more interpretive guidance is expected to be issued in the future. The effect of this new and pending guidance on the Company’s financial statements is not known, but it is possible this guidance could change management’s assessment of other-than-temporary impairment in future periods.

FAS 123R requires all companies to record compensation cost for stock options provided to employees in return for employee service. The cost is measured at fair value of the options when granted, and this cost is expensed over the employee service period, which is normally the vesting period of the options. This will apply to awards granted or modified on or after January 1, 2006. Compensation cost will also be recorded for prior option grants that vest after the date of adoption. The effect on results of operations will depend on the level of future option grants and the calculation of the fair value of the options granted at such future date, as well as the vesting periods provided, and cannot currently be predicted. Existing options that vest after adoption date are expected to result in additional compensation expense of approximately $81 during 2006, $40 in 2007, $17 in 2008, $4 in 2009 and $1 in 2010.

SOP 03-3 requires that a valuation allowance for loans acquired in a transfer, including in a business combination, reflect only losses incurred after acquisition and should not be recorded at acquisition. It applies to any loan acquired in a transfer that showed evidence of credit quality deterioration since it was made. The effect of this new standard on the Company’s financial position and results of operations will depend upon the amount of such loans acquired in the future.

10

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

GERMAN AMERICAN BANCORP
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

German American Bancorp (“the Company”) is a financial services holding company based in Jasper, Indiana. The Company’s Common Stock is traded on NASDAQ’s National Market System under the symbol GABC. The Company operates five affiliated community banks with 26 retail banking offices in the eight contiguous Southwestern Indiana counties of Daviess, Dubois, Gibson, Knox, Martin, Perry, Pike, and Spencer. The Company also owns a trust, brokerage and financial planning subsidiary which operates from the banking offices of the bank subsidiaries, and two insurance agencies with five insurance agency offices throughout its market area. The Company’s lines of business include retail and commercial banking, mortgage banking, comprehensive financial planning, full service brokerage and trust administration, title insurance, and a full range of personal and corporate insurance products.

This section presents an analysis of the consolidated financial condition of the Company as of March 31, 2005 and December 31, 2004 and the consolidated results of operations for the three months ended March 31, 2005 and 2004. This discussion should be read in conjunction with the consolidated financial statements and other financial data presented elsewhere herein and with the financial statements and other financial data, as well as the Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Company’s December 31, 2004 Annual Report on Form 10-K.

MANAGEMENT OVERVIEW

This updated discussion should be read in conjunction with the Management Overview that was included in our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) in the Company’s December 31, 2004 Annual Report on Form 10-K.

The Company’s level of net income increased 24% during the quarter ended March 31, 2005 compared with 2004. The comparison of the two periods was positively impacted by improvements in both the Company’s net interest income and non-interest income. Net interest income continues to be the most significant component of earnings. Increased net interest income positively impacted earnings by $521,000 or 7% for the first quarter 2005 as compared with the same period of 2004. The comparison of non-interest income was positively impacted by recording in the first quarter of 2005 a $267,000 impairment recovery of previous mortgage servicing rights impairment, while during the first quarter of 2004 the Company recorded a $117,000 impairment charge. Also favorably impacting non-interest income was the positive trend of growth in trust and investment product fees and insurance revenues in the three months ended March 31, 2005 when compared with 2004.

These positive influences were partially mitigated by increased provision for loan losses of $80,000 in the first quarter of 2005 compared to the first quarter of 2004. The amount of provision for loan losses in the second quarter of 2005 may be affected by the developments in certain identified segments and credits in the Company’s commercial loan portfolio, as explained in greater detail below in “RESULTS OF OPERATIONS – Provision for Loan Losses,” and “FINANCIAL CONDITION – Non-Performing Assets.”

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The financial condition and results of operations for German American Bancorp presented in the Consolidated Financial Statements, accompanying notes to the Consolidated Financial Statements, and selected financial data appearing elsewhere within this report, are, to a large degree, dependent upon the Company’s accounting policies. The selection of and application of these policies involve estimates, judgments and uncertainties that are subject to change. The critical accounting policies and estimates that the Company has determined to be the most susceptible to change in the near term relate to the determination of the allowance for loan losses, the valuation of mortgage servicing rights, the valuation of securities available for sale, the valuation allowance on deferred tax assets and loss contingencies related to exposure from tax examinations.

Allowance for Loan Losses

The Company maintains an allowance for loan losses to cover probable incurred credit losses at the balance sheet date. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off. A provision for loan losses is charged to operations based on management’s periodic evaluation of the necessary allowance balance. Evaluations are conducted at least quarterly and more often if deemed necessary. The ultimate recovery of all loans is susceptible to future market factors beyond the Company’s control.

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The Company has an established process to determine the adequacy of the allowance for loan losses. The determination of the allowance is inherently subjective, as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on other classified loans and pools of homogeneous loans, and consideration of past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors, all of which may be susceptible to significant change. The allowance consists of two components of allocations, specific and general. These two components represent the total allowance for loan losses deemed adequate to cover losses inherent in the loan portfolio.

Commercial, agricultural and poultry loans are subject to a standardized grading process administered by an internal loan review function. The need for specific reserves is considered for credits when graded substandard or special mention, or when: (a) the customer’s cash flow or net worth appears insufficient to repay the loan; (b) the loan has been criticized in a regulatory examination; (c) the loan is on non-accrual; or, (d) other reasons where the ultimate collectibility of the loan is in question, or the loan characteristics require special monitoring. Specific allowances are established in cases where management has identified significant conditions or circumstances related to an individual credit that we believe indicates the loan is impaired. Specific allocations on impaired loans are determined by comparing the loan balance to the present value of expected cash flows or expected collateral proceeds. Allocations are also applied to categories of loans not considered individually impaired but for which the rate of loss is expected to be greater than historical averages, including those graded substandard or special mention and non-performing consumer or residential real estate loans. Such allocations are based on past loss experience and information about specific borrower situations and estimated collateral values.

General allocations are made for other pools of loans, including non-classified loans, homogeneous portfolios of consumer and residential real estate loans, and loans within certain industry categories believed to present unique risk of loss. General allocations of the allowance are primarily made based on a five-year historical average for loan losses for these portfolios, judgmentally adjusted for economic factors and portfolio trends.

Due to the imprecise nature of estimating the allowance for loan losses, the Company’s allowance for loan losses includes a minor unallocated component. The unallocated component of the allowance for loan losses incorporates the Company’s judgmental determination of inherent losses that may not be fully reflected in other allocations, including factors such as economic uncertainties, lending staff quality, industry trends impacting specific portfolio segments, and broad portfolio quality trends. Therefore, the ratio of allocated to unallocated components within the total allowance may fluctuate from period to period.

Mortgage Servicing Rights Valuation

Mortgage servicing rights (MSRs) are recognized and included with other assets for the allocated value of retained servicing rights on loans sold. Servicing rights are expensed in proportion to, and over the period of, estimated net servicing revenues. Impairment is evaluated based on the fair value of the rights, using groupings of the underlying loans as to type and age. Fair value is determined based upon discounted cash flows using market-based assumptions.

To determine the fair value of MSRs, the Company uses a valuation model that calculates the present value of estimated future net servicing income. In using this valuation method, the Company incorporates assumptions that market participants would use in estimating future net servicing income, which include estimates of prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, ancillary income, late fees, and float income. The Company periodically validates its valuation model by obtaining an independent valuation of its MSRs.

The most significant assumption used to value MSRs is prepayment rate. In general, during periods of declining interest rates, the value of MSRs decline due to increasing prepayment speeds attributable to increased mortgage refinancing activity. Prepayment rates are estimated based on published industry consensus prepayment rates. Prepayments will increase or decrease in correlation with market interest rates, and actual prepayments generally differ from initial estimates. If actual prepayment rates are different than originally estimated, the Company may receive more or less mortgage servicing income, which could increase or decrease the value of the MSRs. Other assumptions used in estimating the fair value of MSRs do not generally fluctuate to the same degree as prepayment rates, and therefore the fair value of MSRs is less sensitive to changes in these other assumptions.

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On a quarterly basis, the Company evaluates the possible impairment of MSRs based on the difference between the carrying amount and the current fair value of MSRs. For purposes of evaluating and measuring impairment, the Company stratifies its portfolios on the basis of certain risk characteristics, including loan type and age. If temporary impairment exists, a valuation allowance is established for any excess of amortized cost over the current fair value, by risk stratification, through a charge to income. If the Company later determines that all or a portion of the temporary impairment no longer exists for a particular strata, a reduction of the valuation allowance may be recorded as an increase to income.

The Company annually reviews MSRs for other-than-temporary impairment and recognizes a direct write-down when the recoverability of a recorded valuation allowance is determined to be remote. In determining whether other-than-temporary impairment has occurred, the Company considers both historical and projected trends in interest rates, prepayment activity within the strata, and the potential for impairment recovery through interest rate increases. Unlike a valuation allowance, a direct-write down permanently reduces the carrying value of the MSRs and the valuation allowance, precluding subsequent recoveries.

As of March 31, 2005 the Company analyzed the sensitivity of its MSRs to changes in prepayment rates. In estimating the changes in prepayment rates, market interest rates were assumed to be increased and decreased by 1.0%. At March 31, 2005 the Company’s MSRs had a fair value of $3,189,000 using a weighted average prepayment rate of 14%. Assuming a 1.0% increase in market interest rates the estimated fair value of MSRs would be $3,760,000 with a weighted average prepayment rate of 9%. Assuming a 1.0% decline in market interest rates the estimated fair value of MSRs would be $1,879,000 with a weighted average prepayment rate of 35%.

Securities Available-for-Sale

Securities classified as available-for-sale are securities that the Company intends to hold for an indefinite period of time, but not necessarily until maturity. Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported separately in accumulated other comprehensive income (loss), net of tax. The Company obtains market values from a third party on a monthly basis in order to adjust the securities to fair value. Additionally, securities available-for-sale are required to be written down to fair value when a decline in fair value is other than temporary; therefore, future changes in the fair value of securities could have a significant impact on the Company’s operating results. In determining whether a market value decline is other than temporary, management considers the reason for the decline, the extent of the decline and the duration of the decline. As of March 31, 2005, gross unrealized losses on the securities available-for-sale portfolio totaled approximately $2,701,000.

Emerging Issues Task Force (“EITF”) Issue 03-1, “The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments”, contains guidance regarding other-than-temporary impairment on securities that was to take effect for the quarter ended September 30, 2004. However, the effective date of portions of this guidance has been delayed, and more interpretive guidance is expected to be issued in the future. The effect of this new and pending guidance on the Company’s financial statements is not known, but it is possible this guidance could change management’s assessment of other-than-temporary impairment in future periods.

Income Tax Expense

Income tax expense involves estimates related to the valuation allowance on deferred tax assets and loss contingencies related to exposure from tax examinations.

A valuation allowance reduces deferred tax assets to the amount management believes is more likely than not to be realized. In evaluating the realization of deferred tax assets, management considers the likelihood that sufficient taxable income of appropriate character will be generated within carryback and carryforward periods, including consideration of available tax planning strategies. As of March 31, 2005, the Company has a deferred tax asset of $3.3 million representing various tax credit carryforwards. Based on the long carryforward periods available, management has assessed it more likely than not that these credits will be realized and no valuation allowance has been established on this asset. At March 31, 2005, the Company also has a deferred tax asset representing unrealized capital losses on equity securities. Should these capital losses be realized, management believes the Company has the ability to generate sufficient capital gains to realize the tax benefit of the capital losses during the available carryforward period, including the use of tax planning strategies related to mortgage servicing rights, appreciated securities and appreciated FHLB stock. As a result, no valuation allowance has been established on this asset.

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Loss contingencies, including assessments arising from tax examinations and tax strategies, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. In considering the likelihood of loss, management considers the nature of the contingency, the progress of any examination or related protest or appeal, the opinions of legal counsel and other advisors, experience of the Company or other enterprises in similar matters, if any, and management’s intended response to any assessment. During the first quarter of 2005, the Company received notices of proposed assessments of unpaid financial institutions tax for the years 2001 and 2002 of approximately $691,000 ($456,000 net of federal tax), including interest and penalties of approximately $100,000. The Company filed a protest with the Indiana Department of Revenue contesting the proposed assessments and intends to vigorously defend its position that the income of the Nevada subsidiaries is not subject to the Indiana financial institutions tax. Although there can be no such assurance, at this time management does not believe this potential assessment will result in additional tax liability. Therefore, no tax provision has been recognized for the potential assessment of additional financial institutions tax for 2001 and 2002 or for financial institutions tax with respect to any of the Nevada subsidiaries in any period subsequent to 2002, including the three-month period ended March 31, 2005.

RESULTS OF OPERATIONS

Net Income:

Net income increased $459,000 or 24% to $2,411,000 or $0.22 per share for the quarter ended March 31, 2005 compared to $1,952,000 or $0.18 per share for the first quarter of 2004. The increase in net income during the first quarter of 2005 compared with 2004 was attributable principally to an increase in net interest income of $521,000, increased non-interest income, and relatively stable non-interest expense. The increase in non-interest income was primarily attributable to increased Trust and Investment Product Fees of $108,000, Insurance Revenues of $108,000, and an MSR impairment recovery of $267,000 in the first quarter 2005 compared with a MSR charge of $117,000 in the same period of 2004.

Net Interest Income:

Net interest income is the Company’s single largest source of earnings, and represents the difference between interest and fees realized on earning assets, less interest paid on deposits and borrowed funds. The following table summarizes German American Bancorp’s net interest income (on a tax-equivalent basis, at an effective tax rate of 34%) for each of the periods presented herein (dollars in thousands):

	Three Months Ended March 31,				Change from Prior Period
	2005		2004		Amount			Percent
Interest Income (T/E)	$	12,328	$	12,199	$	129			1.1%
Interest Expense		4,005		4,298		(293	)		-6.8%
Net Interest Income (T/E)	$	8,323	$	7,901	$	422			5.3%

Net interest income increased $521,000 or 7% ($422,000 or 5% on a tax-equivalent basis) for the quarter ended March 31, 2005 compared with the same quarter of 2004. Net interest margin is tax-equivalent net interest income expressed as a percentage of average earning assets. For the first quarter of 2005, the net interest margin increased to 3.93% compared to 3.75% for the same period of 2004. The Company’s increase in net interest income during the three months ended March 31, 2005 compared with the same period of the prior year was largely attributable to an increase in the net interest margin that was fueled by a decline in the Company’s cost of funds. The Company’s yield on earning assets remained relatively stable at 5.84% for the first quarter of 2005 compared with 5.80% for the first quarter 2004. The Company’s cost of funds (expressed as a percentage of average earning assets) during the quarter ended March 31, 2005 was 1.91% compared with 2.05% for the same period of 2004. The Company’s cost of funds was lowered due primarily to an increased level of non-maturity deposits including non-interest bearing demand accounts and less reliance on time deposits and borrowings.

Also contributing to the increased net interest income was a modest growth in earning assets. Earning assets increased $9.8 million during the first quarter of 2005 compared with the first quarter of 2004. This increase was primarily attributable to a growth in average total loans outstanding. Average total loans increased $19.2 million, during the quarter ended March 31, 2005 compared with 2004. Average commercial loans increased $25.8 million or 7% and average consumer loans increased $9.1 million or 8%. Partially mitigating the growth in the commercial and consumer loan portfolios was a continued decline in the average residential mortgage loan portfolio. Average residential mortgage loans declined $14.8 million or 13% during the three months ended March 31, 2005 compared with the same period of 2004.

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Provision for Loan Losses:

The Company provides for loan losses through regular provisions to the allowance for loan losses. The provision is affected by net charge-offs on loans and changes in specific and general allocations of the allowance. Provisions for loan losses totaled $482,000 during the quarter ended March 31, 2005 compared with $402,000 in the first quarter of 2004. The increased level of provision for loan losses during the three months ended March 31, 2005 compared with the same period of 2004 was primarily the result of an increase in the level of specific allocations on internally classified loans and an overall higher level of net charge-offs. Net charge-offs totaled $316,000 or 0.20% of average loans outstanding during the first quarter of 2005 compared with $231,000 or 0.15% during the same period of 2004.

The provisions for loan losses made during the quarter ended March 31, 2005 were made at a level deemed necessary by management to absorb estimated, probable incurred losses in the loan portfolio. A detailed evaluation of the adequacy of the allowance for loan losses is completed quarterly by management, the results of which are used to determine provisions for loan losses. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. The Company’s allowance for loan losses and subsequent provisions for loan losses are typically analyzed at the individual affiliate bank level, the segment level, and finally at the consolidated level.

During the first quarter of 2005, the Company, in accordance with its standard methodology for the identification of potential problem credits, downgraded the internal risk classification on two specific credits which resulted in an increase in the level of specific allocation of the allowance for loan losses attributable to these credits. The Company is closely monitoring developments in the status of these two credits, one of which is a local manufacturing entity which has ceased operations and is currently in negotiations for the sale of their facility. The indebtedness owed the Company as of May 5, 2005 on this credit, which is secured by all the borrower’s assets, is approximately $2.0 million. The second of these two specific credits, which is extended to a borrower operating a retail grocery chain, is a 10% interest (with a current balance of approximately $4.8 million) in a secured credit facility that is led by Harris Trust & Savings Bank, Chicago, Illinois. The borrower on this credit filed for Chapter 11 relief on May 4, 2005. The Company will continue to assess the internal classification of these credits and the level of specific allocation of the loan loss reserve attributable to these credits based upon the best available information, including the status of the sale of the manufacturing facility and the analysis of information that the Company expects to receive from Harris as agent for the lending syndicate and the syndicate’s counsel in connection with the pending reorganization plan of the retail grocery operation. The Company also continues to monitor other specific individual credits within the real estate development, manufacturing and lodging industry segments that have not yet benefited from the improving economic climate.

Non-interest Income:

Non-interest income increased $593,000 or 19% for the quarter ended March 31, 2005 as compared with the same period of 2004. The increase was predominately attributable to increases in Trust and Investment Product Fees, Insurance Revenues and Other Operating Income.

Trust and Investment Product Fees increased $108,000 or 24% during the three month period ended March 31, 2005 compared to the same three month period of 2004. The increase was primarily attributable to increased production by the Company’s financial services subsidiary, German American Financial Advisors & Trust Company (GAFA).

For the three months ended March 31, 2005, Insurance Revenues increased $108,000 or 10% as compared to the quarter ended March 31, 2004. The increased insurance revenues were primarily the result of increased contingency revenues by the Company’s property and casualty insurance agency, German American Insurance, Inc.

Other Operating Income increased $338,000 or 78% for the quarter ended March 31, 2005 as compared with the same period of the prior year. The increase was primarily attributable to a recovery of mortgage servicing right impairment totaling $267,000 compared with an impairment charge of $117,000 for the same period of 2004.

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For the quarter ended March 31, 2005, Net Gains on Sales of Loans and Related Assets increased $54,000 or 30% compared with the same period of 2004. The increase was primarily attributable to an increased level of residential mortgage loan originations and subsequent sales of loans to the secondary market as compared to 2004. Loan sales totaled $14.0 million during the three months ended March 31, 2005 compared with $10.5 million in 2004.

Non-interest Expense:

Non-interest Expense increased $88,000 or 1% during the quarter ended March 31, 2005 compared to the quarter ended March 31, 2004. The increase was primarily attributable to increased Other Operating Expense as well as increased Professional Fees with offsetting decreases in Salaries and Employee Benefits, Furniture and Equipment Expense, and Advertising and Promotion.

For the quarter ended March 31, 2005, Salaries and Employee Benefits Expense remained relatively stable with a modest decline of $19,000 as compared to the same quarter of 2004. Furniture and Equipment Expense decreased $54,000 or 10% for the period ended March 31, 2005 compared to the period ended March 31, 2004. The decline was primarily attributable to a lowered amount of depreciation expense for certain network related fixed assets which fully depreciated in 2004.

During the three months ended March 31, 2005, Professional Fees Expense increased $47,000 or 13% compared with 2004. Increased legal and accounting fees were the primary contributors to the increase in Professional Fees. Advertising and Promotion decreased $64,000 or 28% for the quarter ended March 31, 2005 compared with the same quarter of 2004. The decline was the result of a concerted effort to use more directed advertising campaigns during 2005.

Other Operating Expense increased $194,000 or 19% during the three months ended March 31, 2005 compared with 2004. Increased operating losses of $73,000 realized at an affordable housing limited partnership investment contributed to the increase in Other Operating Expense. During the quarter ended March 31, 2004, a property tax accrual adjustment at the affordable housing limited partnership investment positively impacted earnings which resulted in a lower level of operating losses in the period ended March 31, 2004 as compared with the first quarter 2005. Also contributing to the increase in Other Operating Expense were modest increases in Training / Education Expense of $22,000 and Collection Expense of $32,000.

Income Taxes:

The Company’s effective income tax rate approximated 25% of pre-tax income during the three months ended March 31, 2005 and 14% during the three months ended March 31, 2004. The higher effective tax rate during the quarter ended March 31, 2005 compared with the same period of 2004 was the result of a higher level of before tax net income, a lower level of tax-exempt investment income, and a lower level of tax credits generated by investments in affordable housing projects. The effective tax rate in both 2005 and 2004 was lower than the blended statutory rate of 39.6% resulting primarily from the Company’s tax-exempt investment income on securities and loans, income tax credits generated from investments in affordable housing projects, and income generated by subsidiaries domiciled in a state with no state or local income tax.

Since December 31, 2001, the Company’s effective tax rate has been favorably impacted by Indiana financial institution tax savings resulting from the Company’s formation of investment subsidiaries in the state of Nevada by four of the Company’s banking subsidiaries.  The state of Nevada has no state or local income tax. During the first quarter of 2005, the Company received notices of proposed assessments of unpaid financial institutions tax for the years 2001 and 2002 of approximately $691,000 ($456,000 net of federal tax), including interest and penalties of approximately $100,000. The Company filed a protest with the Indiana Department of Revenue contesting the proposed assessments and intends to vigorously defend its position that the income of the Nevada subsidiaries is not subject to the Indiana financial institutions tax. Although there can be no such assurance, at this time management does not believe this potential assessment will result in additional tax liability. Therefore, no tax provision has been recognized for the potential assessment of additional financial institutions tax for 2001 and 2002 or for financial institutions tax with respect to any of the Nevada subsidiaries in any period subsequent to 2002, including the three-month period ended March 31, 2005.

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FINANCIAL CONDITION

Total assets at March 31, 2005 decreased $29.6 million to $912.5 million compared with $942.1 million in total assets at December 31, 2004. Securities available-for-sale increased $7.2 million to $188.9 million at March 31, 2005 compared with $181.7 million at year-end 2004. Loans, net of unearned income and allowance for loan losses, decreased $10.5 million to $610.5 million at March 31, 2005 compared to $621.0 million at December 31, 2004. The decline in loans for the three months ended March 31, 2005 was primarily due to a decrease in commercial loans.

Total Deposits at March 31, 2005 decreased $28.9 million to $721.4 million compared with $750.4 in total deposits at December 31, 2004. Demand, savings, and money market accounts decreased $11.1 million along while time deposits declined $17.6 million. FHLB Advances and Other Borrowings increased $1.0 million to $96.6 million at March 31, 2005 compared with $95.6 million at December 31, 2004.

Non-performing Assets:

The following is an analysis of the Company’s non-performing assets at March 31, 2005 and December 31, 2004 (dollars in thousands):

	March 31, 2005			December 31, 2004
Non-accrual Loans	$	4,954		$	5,750
Past Due Loans (90 days or more)		590			831
Restructured Loans		---			---
Total Non-performing Loans		5,544			6,581
Other Real Estate		255			213
Total Non-performing Assets	$	5,799		$	6,794
Allowance for Loan Loss to Non-performing Loans		161.76	%		133.73	%
Non-performing Loans to Total Loans		0.89	%		1.04	%

The decline in the level of non-performing loans was primarily the result of the resolution of a single commercial real estate credit that was on non-accrual status at year-end 2004. Management considers the level of non-performing assets to be manageable within the Company’s normal course of business, and continues to actively work with the borrowers that comprise the non-performing loan portfolio. The Company is also continuing to monitor the manufacturing credit which was on non-accrual status at March 31, 2005 and the retail grocery chain credit that was not on non-accrual status at March 31, 2005 that were previously discussed in the “RESULTS OF OPERATION – Provision for Loan Losses” as well as specific individual credits within the real estate development, manufacturing and lodging industry segments that have not yet benefited from the improving economic climate.

Capital Resources:

Federal banking regulations provide guidelines for determining the capital adequacy of bank holding companies and banks. These guidelines provide for a more narrow definition of core capital and assign a measure of risk to the various categories of assets. The Company is required to maintain minimum levels of capital in proportion to total risk-weighted assets and off-balance sheet exposures such as loan commitments and standby letters of credit.

Tier 1, or core capital, consists of shareholders’ equity less goodwill, core deposit intangibles, and certain deferred tax assets defined by bank regulations. Tier 2 capital currently consists of the amount of the allowance for loan losses which does not exceed a defined maximum allowance limit of 1.25 percent of gross risk adjusted assets. Total capital is the sum of Tier 1 and Tier 2 capital.

The minimum requirements under these standards are generally at least a 4.0 percent leverage ratio, which is Tier 1 capital divided by defined “total assets”; 4.0 percent Tier 1 capital to risk-adjusted assets; and, an 8.0 percent total capital to risk-adjusted assets ratios. Under these guidelines, the Company, on a consolidated basis, and each of its affiliate banks individually, have capital ratios that exceed the regulatory minimums.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) requires federal regulatory agencies to define capital tiers. These are: well-capitalized, adequately-capitalized, under-capitalized, significantly under-capitalized, and critically under-capitalized. Under these regulations, a “well-capitalized” entity must achieve a Tier 1 Risk-based capital ratio of at least 6.0 percent; a total capital ratio of at least 10.0 percent; and, a leverage ratio of at least 5.0 percent, and not be under a capital directive. All of the Company’s affiliate banks are categorized as well-capitalized as of March 31, 2005.

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At March 31, 2005, management is not under such a capital directive, nor is it aware of any current recommendations by banking regulatory authorities which, if they were to be implemented, would have or are reasonably likely to have, a material effect on the Company’s liquidity, capital resources or operations.

The table below presents the Company’s consolidated capital ratios under regulatory guidelines:

	Minimum for Capital Adequacy Purposes		To be Well Capitalized Under Prompt Corrective Action Provisions (FDICIA)		At March 31, 2005		At December 31, 2004
Leverage Ratio		4.00%		5.00%		8.65%		8.50%
Tier 1 Capital to Risk-adjusted Assets		4.00%		6.00%		11.10%		10.63%
Total Capital to Risk-adjusted Assets		8.00%		10.00%		12.37%		11.83%

Shareholders’ equity totaled $83.1 million at March 31, 2005 or 9.1% of total assets, a decrease of $555,000 from December 31, 2004. The decline in total equity was the result of an increase in the unrealized loss on available for sale securities.

Liquidity:

The Consolidated Statement of Cash Flows details the elements of change in the Company’s cash and cash equivalents. Total cash and cash equivalents decreased $23.2 million during the three months ended March 31, 2005 ending at $24.5 million compared with $47.7 million at year-end 2004. The decline in cash and cash equivalents was due in large part to net cash outflows from financing activities of $29.8 million, which included a $28.9 million decline in total deposits. From December 31, 2004, interest-bearing accounts and time deposits decreased $11.1 million and $17.6 million, respectively. Cash outflows from financing activities for the period ended March 31, 2005 also included $1.5 million in dividends paid to shareholders. During the three months ended March 31, 2005, cash flows from operating activities provided $3.5 million of available cash, which included net income of $2.4 million. Cash inflows from investing activities totaled $3.1 million during the first quarter of 2005 and were primarily the result of an overall decline in the Company’s loan portfolio.

The Company uses funds at the parent company level to pay dividends to its shareholders, to acquire or make other investments in other business or their securities or assets (such as the previously reported non-controlling investments that the Company has made (or has agreed to make, subject to regulatory approval) in three community banks in nearby larger metropolitan markets), and to repurchase its stock from time to time. The parent company does not have access at the parent-company level to the sources of funds that are available to its bank subsidiaries to support their operations. The Company derives most of its parent-company revenues from dividends paid to the parent company by its bank subsidiaries. These subsidiaries are subject to statutory restrictions on their ability to pay dividends to the parent company. The parent company in March 2005 (effective as of February 28, 2005) modified and extended its revolving line of credit with JPMorgan Chase Bank, N.A., Chicago, Illinois under which the parent company may borrow up to $20 million for the purpose of funding stock repurchases, acquisitions of other businesses or assets, and to satisfy parent company working capital needs, and for other general corporate purposes. Under the loan agreement and revolving note evidencing the line of credit, the Company is obligated to pay the lender interest on amounts advanced under the line of credit based upon 90-day LIBOR plus 1.25%, with a commitment fee ranging from 0.15% to 0.30% on the unused portion of the line of credit. The Company borrowed $12.0 million under the new line of credit as of February 28, 2005, to renew its indebtedness for advances that had been made under the prior line of credit. The new line of credit will contractually mature on August 31, 2006, and as of the maturity date of the line of credit the amounts of all advances then outstanding will be due and payable. The line of credit includes usual and customary covenants and conditions, including a covenant that requires that the Company maintain the capital ratios of the Company and of its affiliate banks at levels that would be considered “well-capitalized” under the prompt corrective action regulations of the federal banking agencies.

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The Company intends to utilize dividends that are available from its banking subsidiaries as the primary source of repayment for its borrowings under this line of credit. Statutory and regulatory requirements may restrict the payment of dividends by the bank subsidiaries, depending upon their earnings and capital positions, during the period ending August 31, 2006, in amounts sufficient to retire the indebtedness of JPMorgan Chase Bank, N.A., in full by such time, in which event the Company may seek to extend the line of credit or refinance the amount outstanding with that lender or seek other sources of equity or debt capital.

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

The Company from time to time in its oral and written communications makes statements relating to its expectations regarding the future. These types of statements are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The Company may include forward-looking statements in filings with the Securities and Exchange Commission (“SEC”), such as this Form 10-Q, in other written materials, and in oral statements made by senior management to analysts, investors, representatives of the media, and others. Such forward looking statements can include statements about the Company’s net interest income or net interest margin; adequacy of allowance for loan losses, levels of provisions for loan losses, and the quality of the Company’s loans and other assets; simulations of changes in interest rates; litigation results; dividend policy; estimated cost savings, plans and objectives for future operations; and expectations about the Company’s financial and business performance and other business matters as well as economic and market conditions and trends. They often can be identified by the use of words like “expect,” “may,” “will,” “would,” “could,” “should,” “intend,” “project,” “estimate,” “believe” or “anticipate,” or similar expressions. In Item 2 of this Quarterly Report, forward-looking statements include, but are not limited to, the statements in “RESULTS OF OPERATIONS – Provision for Loan Losses” concerning the possibility that developments in the sale of a manufacturing facility and the recent bankruptcy proceeding related to certain loan customers may affect the classification of the credits and the level of specific allocation of the loan loss reserve, the statement in “RESULTS OF OPERATIONS — Income Taxes” regarding management’s belief that a certain assessment of unpaid financial institutions tax by the Indiana Department of Revenue will not result in any additional tax liability, and the statement in “FINANCIAL CONDITION – Liquidity” that the Company’s long term plan is to utilize dividends from its subsidiary banks to repay amounts borrowed by the parent company from JPMorgan Chase Bank, N.A. under its line of credit.

It is intended that these forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the forward-looking statement is made. Readers are cautioned that, by their nature, forward-looking statements are based on assumptions and are subject to risks, uncertainties, and other factors. Actual results may differ materially from the expectations of the Company that are expressed or implied by any forward-looking statement.

The discussions elsewhere in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” list some of the factors that could cause the Company’s actual results or experience to vary materially from those expressed or implied by any forward-looking statements. Other risks, uncertainties, and factors that could cause the Company’s actual results or experience to vary materially from those expressed or implied by any forward-looking statement include the unknown future direction of interest rates and the timing and magnitude of any changes in interest rates; effects of changes in competitive conditions; acquisitions of other businesses by the Company and costs of integrations of such acquired businesses; the introduction, withdrawal, success and timing of business initiatives and strategies; changes in customer borrowing, repayment, investment and deposit practices; changes in fiscal, monetary and tax policies; changes in financial and capital markets; changes in general economic conditions, either nationally or regionally, resulting in, among other things, credit quality deterioration; developments in the sale of a manufacturing facility and in the bankruptcy of the borrower operating a retail grocery chain; the impact, extent and timing of technological changes; capital management activities; actions of the Federal Reserve Board and legislative and regulatory actions and reforms; changes in accounting principles and interpretations; the inherent uncertainties involved in litigation and regulatory proceedings which could result in the Company’s incurring loss or damage regardless of the merits of the Company’s claims or defenses; and the continued availability of earnings and excess capital sufficient for the lawful and prudent declaration and payment of cash dividends by the Company and by its subsidiaries. Investors should consider these risks, uncertainties, and other factors, in addition to those mentioned by the Company in its Annual Report on Form 10-K for its fiscal year ended December 31, 2004, and other SEC filings from time to time, when considering any forward-looking statement.

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Item 3.    Quantitative and Qualitative Disclosures About Market Risk

The Company’s exposure to market risk is reviewed on a regular basis by the Asset/Liability Committees and Boards of Directors of the holding company and its affiliate banks. Primary market risks which impact the Company’s operations are liquidity risk and interest rate risk.

The liquidity of the parent company is dependent upon the receipt of dividends from its bank subsidiaries, which are subject to certain regulatory limitations. The affiliate banks’ source of funding is predominately core deposits, maturities of securities, repayments of loan principal and interest, federal funds purchased, securities sold under agreements to repurchase and borrowings from the Federal Home Loan Bank.

The Company monitors interest rate risk by the use of computer simulation modeling to estimate the potential impact on its net interest income under various interest rate scenarios, and by estimating its static interest rate sensitivity position. Another method by which the Company’s interest rate risk position can be estimated is by computing estimated changes in its net portfolio value (“NPV”). This method estimates interest rate risk exposure from movements in interest rates by using interest rate sensitivity analysis to determine the change in the NPV of discounted cash flows from assets and liabilities.

NPV represents the market value of portfolio equity and is equal to the estimated market value of assets minus the estimated market value of liabilities. Computations are based on a number of assumptions, including the relative levels of market interest rates and prepayments in mortgage loans and certain types of investments. These computations do not contemplate any actions management may undertake in response to changes in interest rates, and should not be relied upon as indicative of actual results. In addition, certain shortcomings are inherent in the method of computing NPV. Should interest rates remain or decrease below current levels, the proportion of adjustable rate loans could decrease in future periods due to refinancing activity. In the event of an interest rate change, prepayment levels would likely be different from those assumed in the table. Lastly, the ability of many borrowers to repay their adjustable rate debt may decline during a rising interest rate environment.

The table below provides an assessment of the risk to NPV in the event of a sudden and sustained 2% increase and decrease in prevailing interest rates (dollars in thousands).

Interest Rate Sensitivity as of March 31, 2005

	Net Portfolio Value		Net Portfolio Value as a % of Present Value of Assets
Changes In rates	$ Amount	% Change	NPV Ratio	Change
+2%	$122,180	4.35%	13.80%	33 b.p.
Base	117,088	---	12.91	---
-2%	103,811	(11.34)	11.25	(93) b.p.

Item 3 includes forward-looking statements. See “Forward-looking Statements” included in Part I Item 2 of this Report for a discussion of certain factors that could cause the Company’s actual exposure to market risk to vary materially from that expressed or implied above. These factors include possible changes in economic conditions; interest rate fluctuations, competitive product and pricing pressures within the Company’s markets; and equity and fixed income market fluctuations. Actual experience may also vary materially to the extent that the Company’s assumptions described above prove to be inaccurate.

Item 4.        Controls and Procedures.

As of March 31, 2005, the Company carried out an evaluation, under the supervision and with the participation of its principal executive officer and principal financial officer, of the effectiveness of the design and operation of its disclosure controls and procedures. Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information required to be included in the Company’s periodic reports filed with the Securities and Exchange Commission. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

20

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s first fiscal quarter of 2005 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II.        OTHER INFORMATION

Item 2.        Unregistered Sales of Equity Securities and Use of Proceeds

(e)        The following table sets forth information regarding the Company’s purchases of its common shares during each of the three months ended March 31, 2005.

Period	Total Number Of Shares (or Units) Purchased	Average Price Paid Per Share (or Unit)	Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1)
January 2005	5,000	$     15.57	5,000	350,789
February 2005	30,809(2)	$     15.30	---	350,789
March 2005	20,000	$     15.56	20,000	330,789

⁽¹⁾       On April 26, 2001, the Company announced that its Board of Directors had approved a stock repurchase program for up to 607,754 of its outstanding common shares, of which the Company had purchased 276,965 common shares through March 31, 2005. The Board of Directors established no expiration date for this program. The Company purchased 25,000 shares under this program during the quarter ended March 31, 2005.

⁽²⁾       During February 2005, the 30,809 purchased shares were acquired by the Company from certain persons who held options (“optionees”) to acquire the Company’s common shares under its 1999 Long-Term Equity Incentive Plan (“Plan”) in connection with the exercises by such optionees of their options during February 2005. Under the terms of the Plan, optionees are generally entitled to pay some or all of the exercise price of their options by delivering to the Company common shares that the optionee may already own, subject to certain conditions. The Company is generally obligated to purchase any such common shares delivered to it by such optionees for this purpose and to apply the market value of those tendered shares as of the date of exercise of the options toward the exercise prices due upon exercise of the options. Shares acquired by the Company pursuant to option exercises under the Plan are not made pursuant to the repurchase program described by Note 1 and do not reduce the number of shares available for purchase under that program.

Item 6.        Exhibits

The exhibits described by the Exhibit Index immediately following the Signature Page of this Report are incorporated herein by reference.

21

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date   May 9, 2005 GERMAN AMERICAN BANCORP


By/s/Mark A. Schroeder Mark A. Schroeder
President and Chief Executive Officer

Date   May 9, 2005 By/s/Bradley M. Rust Bradley M. Rust
Senior Vice President and
Chief Financial Officer

22

EXHIBIT INDEX

3.1 Restatement of Articles of Incorporation of the Registrant.

3.2 Restated Bylaws of the Registrant, as amended through April 22, 2004, is incorporated by reference to Exhibit 3.2 to the Registrant's quarterly Report on Form 10-Q for the quarter ended June 30, 2004.

4.1 Rights Agreement dated April 27, 2000.

4.2 No long-term debt instrument issued by the Registrant exceeds 10% of consolidated total assets. In accordance with paragraph 4 (iii) of Item 601(b) of Regulation S-K, the Registrant will furnish the Securities and Exchange Commission copies of long-term debt instruments and related agreements upon requests.

4.3 Terms of Common Shares and Preferred Shares of German American Bancorp found in Restatement of Articles of Incorporation are incorporated by reference to Exhibit 3.01 to Registrant's Current Report on From 8-K filed May 5, 2000.

10.1 Loan Agreement between JPMorgan Chase Bank, N.A., and German American Bancorp dated as of February 28, 2005, including form of Revolving Note.

31.1 Sarbanes-Oxley Act of 2002, Section 302 Certification of President and Chief Executive Officer.

31.2 Sarbanes-Oxley Act of 2002, Section 302 Certification of Senior Vice President and Chief Financial Officer.

32.1 Sarbanes-Oxley Act of 2002, Section 906 Certification of President and Chief Executive Officer.

32.2 Sarbanes-Oxley Act of 2002, Section 906 Certification of Senior Vice President and Chief Financial Officer.

EX-3.(I)

                  RESTATEMENT OF THE ARTICLES OF INCORPORATION
                                       OF
                             GERMAN AMERICAN BANCORP


                                   MAY 5, 2000


                                    ARTICLE I

                                      NAME

     The name of the Corporation is German American Bancorp.

                                   ARTICLE II

                               PURPOSES AND POWERS

     Section  2.01.  Purposes of the  Corporation.  The  purposes  for which the
Corporation  is formed are to transact any or all lawful  business  permitted by
applicable law and for which  corporations  may now or hereafter be incorporated
under the Corporation Law.

     Section 2.02. Powers of the Corporation. The Corporation shall have (a) all
powers now or hereafter authorized by or vested in corporations  pursuant to the
provisions  of the  Corporation  Law, (b) all powers now or hereafter  vested in
corporations  by common  law or any other  statute  or act,  and (c) all  powers
authorized by or vested in the  Corporation  by the provisions of these Articles
of  Incorporation  or by the  provisions  of its  Bylaws as from time to time in
effect.

                                   ARTICLE III

                                TERM OF EXISTENCE

     The period during which the Corporation shall continue is perpetual.

                                   ARTICLE IV

                           REGISTERED OFFICE AND AGENT

     The  street  address  of the  Corporation's  registered  office is 711 Main
Street, P.O. Box 810, Jasper,  Indiana 47546, and the name of its Resident Agent
at such office is George W. Astrike.



                                    ARTICLE V

                                     SHARES

     The total number of shares of capital stock the  Corporation  has authority
to issue shall be 20,500,000  shares consisting of 20,000,000 common shares (the
"Common  Shares") and 500,000  preferred  shares (the "Preferred  Shares").  The
Corporation's  shares  shall  have no par value.  Solely for the  purpose of any
statute or regulation  imposing any tax or fee based upon the  capitalization of
the  Corporation,  however,  all of the shares  shall be deemed to have a stated
value of $1.00 per share.

                                   ARTICLE VI

                                 TERMS OF SHARES

     Section 6.01.  General Terms of All Shares.  The Corporation shall have the
power to acquire (by purchase,  redemption,  or otherwise),  hold, own,  pledge,
sell, transfer,  assign, reissue,  cancel, or otherwise dispose of the shares of
the  Corporation  in the manner and to the extent now or hereafter  permitted by
the laws of the State of Indiana.  The power to purchase,  redeem,  or otherwise
acquire the Corporation's own shares,  directly or indirectly,  may be exercised
without  pro rata  treatment  of the owners or holders of any class or series of
shares.  The  Corporation  may not  purchase,  redeem or  otherwise  acquire the
Corporation's own shares if, after giving effect thereto,  the Corporation would
not be able to pay its debts as they become due in the usual  course of business
or the  Corporation's  total  assets  would be less than its  total  liabilities
(without regard to any amounts that would be needed,  if the Corporation were to
be dissolved at the time of the purchase,  redemption, or other acquisition,  to
satisfy  the  preferential   rights  upon  dissolution  of  shareholders   whose
preferential  rights are  superior  to those of the holders of the shares of the
Corporation being purchased,  redeemed, or otherwise acquired,  unless otherwise
expressly  provided  with  respect  to a  series  of  Preferred  Shares  in  the
provisions of these Articles of Incorporation  adopted by the Board of Directors
pursuant  to Section  6.03(a) of this  Article VI  describing  the terms of such
series). Shares of the Corporation purchased, redeemed, or otherwise acquired by
it  shall  constitute  authorized  but  unissued  shares,  unless  the  Board of
Directors  shall at any time  adopt a  resolution  providing  that  such  shares
constitute authorized and issued but not outstanding shares.

     The Board of Directors of the Corporation  may dispose of, issue,  and sell
shares in accordance  with, and in such amounts as may be permitted by, the laws
of the State of Indiana and the  provisions of these  Articles of  Incorporation
and for such  consideration,  at such price or prices, at such time or times and
upon  such  terms  and  conditions   (including  the  privilege  of  selectively
repurchasing  the  same) as the  Board of  Directors  of the  Corporation  shall
determine,  without the  authorization  or approval by any  shareholders  of the
Corporation. Shares may be disposed of, issued, and sold to such persons, firms,
or corporations as the Board of Directors may determine,  without any preemptive
or other  right on the part of the  owners  or  holders  of other  shares of the
Corporation  of any  class or kind to  acquire  such  shares  by reason of their
ownership of such other shares.


                                       2


     The Corporation  shall have the power to declare and pay dividends or other
distributions upon the issued and outstanding shares of the Corporation, subject
to the  limitation  that a dividend  or other  distribution  may not be made if,
after giving it effect,  the  Corporation  would not be able to pay its debts as
they  become due in the usual  course of  business  or the  Corporation's  total
assets would be less than its total  liabilities  (without regard to any amounts
that would be needed, if the Corporation were to be dissolved at the time of the
dividend  or  other  distribution,  to  satisfy  the  preferential  rights  upon
dissolution of shareholders whose  preferential  rights are superior to those of
the  holders of shares  receiving  the  dividend or other  distribution,  unless
otherwise expressly provided with respect to a series of Preferred Shares in the
provisions of these Articles of Incorporation  adopted by the Board of Directors
pursuant  to Section  6.03(a) of this  Article VI  describing  the terms of such
series).  The  Corporation  shall have the power to issue shares of one class or
series as a share  dividend  or other  distribution  in respect of that class or
series or one or more  other  classes  or  series,  except  as may be  otherwise
provided with respect to a series of Preferred Shares in the provisions of these
Articles of Incorporation  adopted by the Board of Directors pursuant to Section
6.03(a) of this Article VI describing the terms of such series.

     Section 6.02.  Terms of Common Shares.  The Common Shares shall be equal in
every respect insofar as their relationship to the Corporation is concerned, but
such  equality of rights shall not imply  equality of treatment as to redemption
or other acquisition of shares by the Corporation.  Subject to the rights of the
holders of any issued and  outstanding  Preferred  Shares under this Article VI,
the  holders  of  Common  Shares  shall be  entitled  to share  ratably  in such
dividends or other distributions  (other than purchases,  redemptions,  or other
acquisitions of Common Shares of the  Corporation),  if any, as are declared and
paid from time to time on the Common  Shares at the  discretion  of the Board of
Directors.  In the event of any liquidation,  dissolution,  or winding up of the
Corporation, either voluntary or involuntary, after payment shall have been made
to the holders of the Preferred Shares of the full amount to which they shall be
entitled  under this Article VI, the holders of Common Shares shall be entitled,
to the exclusion of the holders of the  Preferred  Shares of any and all series,
to share,  ratably according to the number of Common Shares held by them, in all
remaining   assets  of  the  Corporation   available  for  distribution  to  its
shareholders.

       Section 6.03.  Terms of Preferred Shares.

     (a) Preferred Shares may be issued from time to time in one or more series,
each such  series to have such  distinctive  designation  and such  preferences,
limitations, and relative voting and other rights as shall be set forth in these
Articles of  Incorporation.  Subject to the  requirements of the Corporation Law
and subject to all other  provisions  of these  Articles of  Incorporation,  the
Board of Directors of the Corporation may create one or more series of Preferred
Shares and may determine the preferences,  limitations,  and relative voting and
other  rights of one or more series of Preferred  Shares  before the issuance of
any shares of that series by the adoption of an  amendment to these  Articles of
Incorporation  that specifies the terms of that series of Preferred Shares.  All
shares of a series of Preferred Shares must have preferences,  limitations,  and
relative voting and other rights  identical to those of other shares of the same
series.  No series of Preferred Shares need have  preferences,  limitations,  or
relative  voting or other  rights  identical  with those of any other  series of


                                       3


Preferred Shares. Before issuing any shares of a series of Preferred Shares, the
Board of Directors shall adopt an amendment to these Articles of  Incorporation,
which shall be effective without any shareholder  approval or other action, that
fixes and sets forth the distinctive  designation of such series;  the number of
shares that shall  constitute  such  series,  which  number may be  increased or
decreased  (but not below the number of shares  thereof then  outstanding)  from
time to  time  by  action  of the  Board  of  Directors;  and  the  preferences,
limitations,  and relative  voting and other rights of the series.  Authority is
hereby expressly vested in the Board of Directors, by such amendment, to fix all
of  the  preferences  or  rights,  and  any  qualifications,   limitations,   or
restrictions  of such  preferences or rights,  of such series to the full extent
permitted by the Corporation Law; provided,  however,  that no such preferences,
rights,  qualifications,  limitations, or restrictions shall be in conflict with
these Articles of Incorporation or any amendment hereof.

     (b) Preferred Shares of any series that have been redeemed (whether through
the operation of a sinking fund or  otherwise) or purchased by the  Corporation,
or that, if  convertible,  have been converted into shares of the Corporation of
any other  class or series,  may be  reissued as a part of such series or of any
other series of Preferred Shares, subject to such limitations (if any) as may be
fixed by the Board of Directors with respect to such series of Preferred  Shares
in accordance with Section 6.03(a) of this Article VI.

     Section 6.04.  Terms of Series A Preferred  Shares.  The Series A Preferred
Shares of the Corporation  shall consist of four hundred  thousand  (400,000) of
the Preferred Shares specified in Article V and shall have the following rights,
preferences, limitations and restrictions:

     (a)  Dividends and Distributions.

          (i) Entitlement to Dividends.  Subject to the rights of the holders of
          any  shares  or any  series  of  Preferred  Shares  ranking  prior and
          superior to the Series A Preferred  Shares with respect to  dividends,
          and in  preference  to the  holders of Common  Shares and of any other
          junior shares,  the holders of outstanding  Series A Preferred  Shares
          shall be entitled to receive, when, as and if declared by the Board of
          Directors  out of funds legally  available for the purpose,  quarterly
          dividends  payable in cash on the last day of March,  June,  September
          and December, in each year (a "Quarterly Payment Date"), commencing on
          the first  Quarterly  Payment Date after the first issuance of a share
          or  fraction  of a Series A  Preferred  Share,  in a per share  amount
          (rounded  to the nearest  cent) equal to the greater of (A) $1.00,  or
          (B) subject to the provision for adjustment hereinafter set forth, 100
          times the  aggregate per share amount of all cash  dividends,  and 100
          times the aggregate per share amount (payable in kind) of all non-cash
          dividends  or other  distributions  (other than a dividend  payable in
          Common Shares or a subdivision  of the  outstanding  Common Shares (by
          reclassification  or otherwise)),  declared on the Common Shares since
          the immediately  preceding  Quarterly Payment Date or, with respect to
          the first  Quarterly  Payment  Date,  since the first  issuance of any
          Series A  Preferred  Share  or  fraction  thereof.  In the  event  the
          Corporation  shall at any time  after  April  27,  2000  (the  "Rights


                                       4


          Declaration  Date")  declare any dividend on Common Shares  payable in
          Common Shares, or effect a subdivision or combination or consolidation
          of the  outstanding  Common Shares (by  reclassification  or otherwise
          than by  payment  of a dividend  in Common  Shares)  into a greater or
          lesser number of Common  Shares,  then in each such case the amount to
          which holders of Series A Preferred  Shares were entitled  immediately
          prior to such event under clause (B) of the preceding  sentence  shall
          be adjusted by multiplying  such amount by a fraction the numerator of
          which is the number of Common Shares outstanding immediately after the
          event and the denominator of which is the number of Common Shares that
          were outstanding immediately prior to the event.

          (ii)  Declaration  of  Dividends.  The  Corporation  shall  declare  a
          dividend or distribution on the Series A Preferred  Shares as provided
          in subparagraph (i) of this paragraph  immediately after it declares a
          dividend or  distribution  on the Common Shares (other than a dividend
          payable in Common Shares);  provided that, in the event no dividend or
          distribution  shall have been declared on the Common Shares during the
          period  between any  Quarterly  Payment  Date and the next  subsequent
          Quarterly  Payment Date, a dividend of $1.00 per share on the Series A
          Preferred  Shares  shall  nevertheless  be payable  on the  subsequent
          Quarterly Payment Date.

          (iii)  Accrual of  Dividends.  Dividends  shall begin to accrue and be
          cumulative on outstanding Series A Preferred Shares from the Quarterly
          Payment Date next  preceding  the date of issue of the shares,  unless
          the date of issue of the  shares is prior to the  record  date for the
          first  Quarterly  Payment Date, in which case  dividends on the shares
          shall begin to accrue from the date of issue of the shares,  or unless
          the date of issue is a Quarterly  Payment  Date or is a date after the
          record  date for the  determination  of holders of Series A  Preferred
          Shares  entitled  to receive a  quarterly  dividend  and  before  such
          Quarterly  Payment  Date,  in either of which  events the shares shall
          begin to accrue and be cumulative  from such  Quarterly  Payment Date.
          Accrued but unpaid  dividends shall not bear interest.  Dividends paid
          on the  Series A  Preferred  Shares in an  amount  less than the total
          amount of the  dividends at the time accrued and payable on the shares
          shall be allocated pro rata on a share-by-share basis among all shares
          at the time outstanding.  The Board of Directors may fix a record date
          for the determination of holders of Series A Preferred Shares entitled
          to receive  payment of a dividend or  distribution  declared  thereon,
          which  record  date  shall be not more than 60 days  prior to the date
          fixed for the payment thereof.

     (b) Voting Rights.  The holders of Series A Preferred Shares shall have the
following voting rights:

          (i)  Number  of  Votes.   Subject  to  the  provision  for  adjustment
          hereinafter set forth, each Series A Preferred Share shall entitle the
          holder thereof to 100 votes on all matters  submitted to a vote of the


                                       5


          shareholders of the Corporation. In the event the Corporation shall at
          any time declare or pay any dividend on the Common  Shares  payable in
          Common Shares, or effect a subdivision or combination or consolidation
          of the  outstanding  Common Shares (by  reclassification  or otherwise
          than by  payment  of a dividend  in Common  Shares)  into a greater or
          lesser number of Common  Shares,  then in each such case the number of
          votes per share to which  holders of Series A  Preferred  Shares  were
          entitled  immediately  prior  to  such  event  shall  be  adjusted  by
          multiplying  that number by a fraction,  the numerator of which is the
          number of Common Shares  outstanding  immediately  after the event and
          the  denominator  of which is the  number of Common  Shares  that were
          outstanding immediately prior to the event.

          (ii) No Class  Voting.  Except as otherwise  provided  herein,  in any
          other Articles of Amendment  creating a series of Preferred  Shares or
          any similar shares or by law, the holders of Series A Preferred Shares
          and  the  holders  of  Common  Shares  and  any  other  shares  of the
          Corporation  having  general  voting rights shall vote together as one
          class  on all  matters  submitted  to a vote  of  shareholders  of the
          Corporation.

          (iii) No Special  Voting  Rights.  Except as set forth  herein,  or as
          otherwise  provided by law, holders of Series A Preferred Shares shall
          have no special  voting rights and their consent shall not be required
          (except to the extent they are entitled to vote with holders of Common
          Shares as set forth herein) for taking any corporate action.

     (c) Certain Restrictions.

          (i)  Dividends  in  Arrears.  Whenever  quarterly  dividends  or other
          dividends or distributions payable on the Series A Preferred Shares as
          provided  in  paragraph  a. are in arrears,  thereafter  and until all
          accrued  and  unpaid  dividends  and  distributions,  whether  or  not
          declared,  on Series A Preferred  Shares  outstanding  shall have been
          paid in full, the Corporation shall not:

               (A)  Declare or pay dividends or make any other distributions, on
                    any shares  ranking  junior  (either as to dividends or upon
                    liquidation,  dissolution  or  winding  up) to the  Series A
                    Preferred Shares;

               (B)  Declare or pay dividends,  or make any other  distributions,
                    on any shares ranking on a parity (either as to dividends or
                    upon liquidation, dissolution or winding up) with the Series
                    A Preferred  Shares,  except  dividends  paid ratably on the
                    Series A  Preferred  Shares and all  parity  shares on which
                    dividends  are  payable or in arrears in  proportion  to the
                    total  amounts to which the holders of all those  shares are
                    then entitled;


                                       6


               (C)  Redeem or purchase or  otherwise  acquire for  consideration
                    shares  ranking  junior  (either  as to  dividends  or  upon
                    liquidation,  dissolution  or  winding  up) to the  Series A
                    Preferred  Shares,  provided that the Corporation may at any
                    time redeem, purchase or otherwise acquire any junior shares
                    in exchange  for shares of the  Corporation  ranking  junior
                    (either as to dividends or upon dissolution,  liquidation or
                    winding up) to the Series A Preferred Shares; or

               (D)  Redeem or purchase or  otherwise  acquire for  consideration
                    any Series A Preferred  Shares,  or any shares  ranking on a
                    parity  with  the  Series  A  Preferred  Shares,  except  in
                    accordance  with a  purchase  offer  made in  writing  or by
                    publication (as determined by the Board of Directors) to all
                    holders  of those  shares  upon  such  terms as the Board of
                    Directors,  after  consideration  of the  respective  annual
                    dividend rates and other relative  rights and preferences of
                    the respective  series and classes,  shall determine in good
                    faith will result in fair and equitable  treatment among the
                    respective series or classes.

          (ii) Limitation on Subsidiaries.  The Corporation shall not permit any
          subsidiary  of the  Corporation  to purchase or otherwise  acquire for
          consideration  any shares of the  Corporation  unless the  Corporation
          could,  under  subparagraph  (i) of  this  paragraph  c.  purchase  or
          otherwise acquire those shares at such time and in such manner.

     (d) Reacquired Shares. Any Series A Preferred Shares purchased or otherwise
acquired  by the  Corporation  in any manner  whatsoever  shall be  retired  and
canceled  promptly  after the  acquisition  thereof.  All such shares shall upon
their  cancellation  become authorized but unissued  Preferred Shares and may be
reissued as part of a new series of Preferred  Shares  subject to the conditions
and restrictions on issuance set forth in the Articles of  Incorporation,  or in
any Articles of Amendment  creating  another  series of Preferred  Shares or any
similar shares or as otherwise required by law

     (e)   Liquidation,   Dissolution  or  Winding  Up.  Upon  any  liquidation,
dissolution or winding up of the Corporation,  no distribution shall be made (1)
to the  holders  of  shares  ranking  junior  (either  as to  dividends  or upon
liquidation, dissolution or winding up) to the Series A Preferred Shares unless,
prior thereto,  the holders of Series A Preferred Shares shall have received the
greater  of (A) $100 per  share,  plus an amount  equal to  accrued  and  unpaid
dividends and  distributions  thereon,  whether or not declared,  to the date of
such payment, or (B) an aggregate amount per share, subject to the provision for
adjustment  hereinafter set forth, equal to 100 times the aggregate amount to be
distributed  per share to holders  of Common  Shares,  or (2) to the  holders of
shares  ranking  on a  parity  (either  as to  dividends  or  upon  liquidation,
dissolution  or  winding  up)  with  the  Series  A  Preferred  Shares,   except
distributions  made ratably on the Series A Preferred Shares and all such parity
shares in  proportion  to the total  amounts  to which the  holders  of all such


                                       7


shares are entitled upon  liquidation,  dissolution  or winding up. In the event
the  Corporation  shall at any time  declare or pay any  dividend  on the Common
Shares  payable in Common  Shares,  or effect a subdivision  or  combination  or
consolidation of the outstanding Common Shares (by reclassification or otherwise
than by payment of a dividend in Common  Shares) into a greater or lesser number
of Common Shares,  then in each such case the aggregate  amount to which holders
of Series A Preferred Shares were entitled immediately prior to that event under
the  proviso  in clause  (1) of the  preceding  sentence  shall be  adjusted  by
multiplying  that amount by a fraction  the  numerator of which is the number of
Common Shares  outstanding  immediately  after the event and the  denominator of
which is the number of Common Shares that were outstanding  immediately prior to
the event.

     (f)  Consolidation,  Merger,  etc. If the Corporation  shall enter into any
consolidation,  merger,  combination  or other  transaction  in which the Common
Shares are exchanged for or changed into other securities, cash and/or any other
property,  then in any such case each Series A Preferred Share shall at the same
time be similarly  exchanged  or changed in an amount per share,  subject to the
provision for adjustment hereinafter set forth, equal to 100 times the aggregate
amount of shares, securities,  cash and/or any other property (payable in kind),
as the case may be,  into  which or for which  each  Common  Share is changed or
exchanged.  In the event the  Corporation  shall at any time  declare or pay any
dividend on the Common Shares payable in Common Shares,  or effect a subdivision
or  combination  or   consolidation   of  the  outstanding   Common  Shares  (by
reclassification  or otherwise  than by payment of a dividend in Common  Shares)
into a greater  or lesser  number of Common  Shares,  then in each such case the
amount set forth in the  preceding  sentence  with  respect to the  exchange  or
change of Series A Preferred Shares shall be adjusted by multiplying such amount
by a fraction,  the  numerator of which is the number of shares of Common Shares
outstanding  immediately  after the event  and the  denominator  of which is the
number of Common Shares that were outstanding immediately prior to the event.

     (g) No Redemption. The Series A Preferred Shares shall not be redeemable.

     (h) Rank.  The Series A Preferred  Shares  shall rank,  with respect to the
payment of dividends and the distribution of assets, junior to all series of any
other class of the Corporation's Preferred Shares.

     (i) Amendment.  The Articles of Incorporation of the Corporation  shall not
be amended  in any manner  that  would  materially  alter or change the  powers,
preferences or special  rights of the Series A Preferred  Shares so as to affect
them  adversely  without  the  affirmative  vote  of  the  holders  of at  least
two-thirds of the outstanding  Series A Preferred  Shares,  voting together as a
single class.



                                       8


     (j) Expiration of Rights Agreement.  In the event that the Rights Agreement
dated as of April 27,  2000  between  the  Corporation  and UMB Bank,  N.A.,  is
terminated  or expires  prior to the issuance of any Series A Preferred  Shares,
all Series A Preferred  Shares shall become  authorized  but unissued  Preferred
Shares and may be reissued as part of a new series of Preferred  Shares  subject
to the  conditions and  restrictions  on issuance set forth in these Articles of
Incorporation  or in any amendment  hereto creating a series of Preferred Shares
or any similar shares or as otherwise required by law.

                                   ARTICLE VII

                                  VOTING RIGHTS

     Section  7.01.  Common  Shares.   Except  as  otherwise   provided  by  the
Corporation Law or by the provisions of these Articles of Incorporation  adopted
by the Board of  Directors  pursuant  to  Section  6.03(a)  of Article VI hereof
describing  the  Preferred  Shares  or a series  thereof,  and  subject  to such
shareholder  disclosure and recognition  procedures (which may include sanctions
for  noncompliance  therewith to the fullest extent permitted by the Corporation
Law) as the Corporation may by action of the Board of Directors  establish,  the
Common Shares have unlimited voting rights. At every meeting of the shareholders
of the  Corporation  every holder of Common Shares shall be entitled to one vote
in person or by proxy for each Common Share  standing in such  holder's  name on
the share transfer records of the Corporation.

     Section 7.02.  Preferred Shares.  Except as required by the Corporation Law
or by the provisions of these Articles of Incorporation  adopted by the Board of
Directors  pursuant to Section 6.03(a) of Article VI hereof describing the terms
of Preferred  Shares or a series thereof,  the holders of Preferred Shares shall
have no voting rights or powers.  Preferred Shares shall, when validly issued by
the Corporation,  entitle the record holder thereof to vote on such matters, but
only on such  matters,  as the holders  thereof  are  entitled to vote under the
Corporation Law or under these Articles of Incorporation adopted by the Board of
Directors  pursuant to Section 6.03(a) of Article VI hereof describing the terms
of  Preferred  Shares or a series  thereof  (which  provisions  may  provide for
special, conditional, limited, or unlimited voting rights, including multiple or
fractional  votes  per  share,  or for no right to vote,  except  to the  extent
required by the Corporation Law) and subject to such shareholder  disclosure and
recognition procedures (which may include sanctions for noncompliance  therewith
to the fullest extent  permitted by the Corporation  Law) as the Corporation may
by action of the Board of Directors establish.

                                  ARTICLE VIII

                                    DIRECTORS

     Section 8.01.  Number.  The number of Directors shall be fixed by, or fixed
in accordance with, the Bylaws.  Whenever there are nine or more Directors,  the
Bylaws may also provide for  staggering the terms of the members of the Board of
Directors by dividing  the total  number of  Directors  into two or three groups


                                       9


(with each group  containing  one-half or one-third of the total, as near as may
be) whose terms of office expire at different times.

     Section  8.02.  Election of Directors by Holders of Preferred  Shares.  The
holders of one or more series of  Preferred  Shares may be entitled to elect all
or a  specified  number of  Directors,  but only to the  extent  and  subject to
limitations  as  may  be set  forth  in the  provisions  of  these  Articles  of
Incorporation  adopted by the Board of Directors  pursuant to Section 6.03(a) of
Article VI hereof describing the terms of the series of Preferred Shares.

     Section  8.03.  Vacancies.  Vacancies  occurring  in the Board of Directors
shall be filled in the  manner  provided  in the Bylaws or, if the Bylaws do not
provide for the filling of vacancies,  in the manner provided by the Corporation
Law.

     Section 8.04. Removal of Directors.  Any or all of the members of the Board
of  Directors  may be  removed,  with or  without  cause,  at a  meeting  of the
shareholders  called expressly for that purpose,  by the affirmative vote of the
holders of at least 80 percent of the  outstanding  shares then entitled to vote
at an election of  Directors.  However,  a Director  elected by the holders of a
series of Preferred  Shares as  authorized  by Section 8.02 of this Article VIII
may be  removed  only by the  affirmative  vote of the  holders  of at  least 80
percent of the  outstanding  shares of that series  then  entitled to vote at an
election of Directors. Directors may not be removed by the Board of Directors.

     Section 8.05.  Liability of Directors.  A Director's  responsibility to the
Corporation shall be limited to discharging his duties as a Director,  including
his duties as a member of any committee of the Board of Directors  upon which he
may serve, in good faith,  with the care an ordinarily  prudent person in a like
position  would  exercise  under  similar  circumstances,  and in a  manner  the
Director reasonably believes to be in the best interests of the Corporation, all
based on the facts then known to the Director.

     In discharging  his duties,  a Director is entitled to rely on information,
opinions,  reports  or  statements,  including  financial  statements  and other
financial data, if prepared or presented by:

     (a) One or more officers or employees of the Corporation  whom the Director
reasonably believes to be reliable and competent in the matters presented;

     (b) Legal counsel,  public accountants,  or other persons as to matters the
Director  reasonably  believes are within such person's  professional  or expert
competence; or

     (c) A committee  of the Board of which the  Director is not a member if the
Director reasonably believes the committee merits confidence;

but a  Director  is not  acting  in good  faith if the  Director  has  knowledge
concerning  the matter in question that makes  reliance  otherwise  permitted by
this Section 8.05 unwarranted. A Director may, in considering the best interests


                                       10


of the  Corporation,  consider  the  effects  of  any  action  on  shareholders,
employees, suppliers, and customers of the Corporation, and communities in which
offices  or other  facilities  of the  Corporation  are  located,  and any other
factors the Director considers pertinent.

     Directors shall be immune from personal liability for any action taken as a
Director,  or any failure to take any action, to the fullest extent permitted by
the applicable provisions of the Corporation Law from time to time in effect and
by general principles of corporate law.

                                   ARTICLE IX

                     PROVISIONS FOR REGULATION OF BUSINESS
                     AND CONDUCT OF AFFAIRS OF CORPORATION

     Section 9.01. Bylaws. The Board of Directors shall have the exclusive power
to make,  alter,  amend, or repeal, or to waive provisions of, the Bylaws of the
Corporation  by the  affirmative  vote of a majority of the number of  Directors
then in office,  except as provided by the  Corporation  Law. All provisions for
the regulation of the business and management of the affairs of the  Corporation
not stated in these Articles of Incorporation shall be stated in the Bylaws. The
Board of Directors may also adopt Emergency  Bylaws of the Corporation and shall
have the exclusive power (except as may otherwise be provided  therein) to make,
alter,  amend, or repeal, or to waive provisions of, the Emergency Bylaws by the
affirmative vote of a majority of the entire number of Directors at the time.

     Section 9.02. Amendment or Repeal.

     (a) Any  amendment,  change or  repeal of  Section  8.04 of  Article  VIII,
Sections  9.02 or 9.03  of  Article  IX,  or  Article  X of  these  Articles  of
Incorporation,  or any other amendment of these Articles of Incorporation  which
would  have  the  effect  of  modifying  or  permitting  circumvention  of those
provisions,  shall require the affirmative vote, at a meeting of shareholders of
the Corporation,  by the holders of a least 80 percent of the outstanding shares
of all classes of Voting Shares of the  Corporation  (considered for purposes of
this Section  9.02(a) as a single class and as defined in Article X) and, if the
amendment,  change  or  repeal  shall be  proposed  by or on behalf of a Related
Person (as that term is defined in Article  X), by an  Independent  Majority  of
Shareholders  (as defined in Article X);  provided,  however,  that this Section
9.02(a)  shall not apply to, and such vote shall not be required  for,  any such
amendment, change or repeal recommended to shareholders by the favorable vote of
not less than two-thirds of the Board of Directors and, if the amendment, change
or  repeal  shall be  proposed  by or on  behalf  of a  Related  Person,  by the
favorable  vote of not less than  two-thirds  of the  Continuing  Directors  (as
defined in Article X and computed with reference to the Related Person who shall
propose such amendment,  change or repeal),  and any such  amendment,  change or
repeal so recommended shall require only the shareholder vote required under the
applicable provisions of the Corporation Law.

     (b) Except as otherwise  expressly  provided in Section 9.02(a) above,  the
Corporation  shall be deemed,  for all  purposes,  to have reserved the right to


                                       11


amend,  alter,  change or repeal any  provision  contained in these  Articles of
Incorporation  to the extent and in the manner  now or  hereafter  permitted  or
prescribed by statute,  and all rights herein  conferred upon  shareholders  are
granted subject to such reservation.

     Section 9.03. Removal of Chairman of the Board and President.  The Chairman
of the Board and the President,  and each of them, may be removed from office at
any time, with or without cause,  at a meeting of the Board of Directors  called
expressly for that purpose,  but only by the  affirmative  vote of two-thirds of
all other members of the entire Board of Directors,  Any vacancy  created by the
removal of the Chairman or the President  may be filled only by the  affirmative
vote of two-thirds of all remaining members of the Board.

                                    ARTICLE X

                        APPROVAL OF BUSINESS COMBINATIONS

     Section 10.01. Supermajority Vote. Except as provided in Sections 10.02 and
10.03 of this Article X,  neither the  Corporation  nor any of its  Subsidiaries
shall become party to any Business Combination with a Related Person without the
prior affirmative vote at a meeting of the Corporation's shareholders:

     (a) By the holders of not less than 80 percent of the outstanding shares of
all classes of Voting Shares of the Corporation  considered for purposes of this
Article X as a single class, and

     (b) By an Independent Majority of Shareholders.

Such favorable votes shall be in addition to any shareholder  vote that would be
required  without  reference  to  this  Section  10.01  and  shall  be  required
notwithstanding  the fact  that no vote may be  required,  or that  some  lesser
percentage  may be  specified by law or in other  Articles of these  Articles of
Incorporation or the Bylaws of the Corporation or otherwise.

     Section 10.02. Reduced  Supermajority Vote for Fair Pricing. The provisions
of  Section  10.01  shall  apply  to a  Business  Combination,  except  that the
percentage vote required by Section 10.01(a) shall be reduced from not less than
80 percent to not less than  two-thirds,  if all of the  conditions set forth in
subsections (a) through (d) of this Section 10.02 are satisfied.

     (a)  The  fair  market  value  of  the   property,   securities   or  other
consideration  to be  received  per share by  holders of each class or series of
capital shares of the Corporation in the Business Combination is not less, as of
the  date of the  consummation  of the  Business  Combination  (the"Consummation
Date"), than the higher of the following:

          (i) the  highest per share price  (with  appropriate  adjustments  for
          recapitalizations  and for  share  splits,  share  dividends  and like
          distributions)  including brokerage  commissions and solicitation fees


                                       12


          paid by the Related  Person in  acquiring  any of its holdings of such
          class  or  series  of  capital  shares  within  the  two-year   period
          immediately  prior to the first  public  announcement  of the proposed
          Business  Combination  ("Announcement  Date") or in the transaction in
          which it became a Related Person,  whichever is higher,  plus interest
          compounded  annually,  from the  later of the  date  that the  Related
          Person became a Related Person (the "Determination Date"), or the date
          two years before the Consummation Date, through the Consummation Date,
          at the rate  publicly  announced  as the "prime  rate" of  interest of
          Citibank,  N.A. (or of such other major bank headquartered in New York
          as may be  selected by a majority of the  Continuing  Directors)  from
          time to  time  in  effect,  less  the  aggregate  amount  of any  cash
          dividends  paid and the fair  market  value of any  dividends  paid in
          other than cash on each such  share from the date from which  interest
          accrues under the preceding clause through the Consummation Date up to
          but not exceeding the amount of interest so payable per share; or

          (ii) if such class or series is then  traded on an  exchange or is the
          subject  of  regularly   published   quotations  from  three  or  more
          broker/dealers who make a market in such class or series for their own
          accounts,  the fair market  value per share of such class or series on
          the  Announcement  Date, as  determined  by the highest  closing sales
          price on such  exchange or the  highest  closing  bid  quotation  with
          respect to such shares during the 30-day period immediately  preceding
          the  Announcement  Date. In the event of a Business  Combination  upon
          consummation  of  which  the   Corporation   would  be  the  surviving
          corporation  or  company  or would  continue  to exist  (unless  it is
          provided,  contemplated  or  intended  that as  part of such  Business
          Combination  or within one year after  consummation  thereof a plan of
          liquidation or dissolution of the Corporation  will be effected),  the
          term "other  consideration  to be  received"  shall  include  (without
          limitation)  Common  Shares  and/or the  shares of any other  class of
          shares retained by shareholders of the Corporation  other than Related
          Persons who are parties to such Business Combination;

     (b) The  consideration  to be  received  in such  Business  Combination  by
holders of each class or series of capital  shares other than the Related Person
involved shall,  except to the extent that a shareholder  agrees otherwise as to
all or part of the shares  which he or she owns,  be in the same form and of the
same kind as the  consideration  paid by the  Related  Person in  acquiring  the
majority  of the  capital  shares of such class or series  already  Beneficially
Owned by it within the two-year period ending on the Determination Date;

     (c) After  such  Related  Person  became a Related  Person and prior to the
consummation  of such Business  Combination:  (i) such Related Person shall have
taken steps to insure that the Board of Directors of the Corporation included at
all times representation by Continuing Directors proportionate to the ratio that
the  number  of  Voting  Shares  of  the  Corporation  from  time  to  time  not
Beneficially  Owned by the  Related  Person  bears to all  Voting  Shares of the
Corporation  outstanding at the time in question (with a Continuing  Director to
occupy any resulting fractional position among the Directors);  (ii)such Related


                                       13


Person shall not have acquired from the Corporation, directly or indirectly, any
shares of the  Corporation  (except upon  conversion of  convertible  securities
acquired by it prior to  becoming a Related  Person or as a result of a pro rata
share  dividend,  share  split or division  of shares or in a  transaction  that
satisfied  all  applicable  requirements  of this Article X); (iii) such Related
Person shall not have acquired any additional  Voting Shares of the  Corporation
or securities  convertible  into or  exchangeable  for Voting Shares except as a
part of the  transaction  which  resulted in such  Related  Person's  becoming a
Related  Person;  and (iv)  such  Related  Person  shall not have  received  the
benefit,  directly or indirectly (except  proportionately as a shareholder),  of
any loans,  advances,  guarantees,  pledges or other financial assistance or tax
credits provided by the Corporation or any Subsidiary,  or made any major change
in the  Corporation's  business or equity capital  structure or entered into any
contract,  arrangement or  understanding  with the  Corporation  except any such
change, contract,  arrangement or understanding as may have been approved by the
favorable  vote of not less than a majority of the  Continuing  Directors of the
Corporation; and

     (d) A proxy  statement  complying with the  requirements  of the Securities
Exchange  Act of 1934  and the  rules  and  regulations  of the  Securities  and
Exchange Commission thereunder, as then in force for corporations subject to the
requirements of Section 14 of such Act (even if the Corporation is not otherwise
subject to Section 14 of such  Act),  shall have been  mailed to all  holders of
Voting  Shares  for the  purpose  of  soliciting  shareholder  approval  of such
Business  Combination.  Such  proxy  statement  shall  contain  on the face page
thereof,  in a prominent place, any  recommendations  as to the advisability (or
inadvisability) of the Business Combination which the Continuing  Directors,  or
any of them,  may have  furnished  in  writing  and,  if deemed  advisable  by a
majority  of  the  Continuing  Directors,  a fair  summary  of an  opinion  of a
reputable  investment  banking  firm  addressed  to  the  Corporation  as to the
fairness (or lack of fairness) of the terms of such  Business  Combination  from
the point of view of the holders of Voting Shares other than any Related  Person
(such  investment  banking  firm to be selected by a majority of the  Continuing
Directors,  to be furnished with all information it reasonably requests,  and to
be paid a reasonable  fee for its services  upon receipt by the  Corporation  of
such opinion).

     Section  10.03.  Director  Approval  Exception.  The provisions of Sections
10.01 and 10.02 of this  Article X shall not apply to, and such votes  shall not
be required, if:

     (a) The Continuing  Directors of the  Corporation by a two-thirds  vote (i)
have expressly  approved a memorandum of  understanding  with the Related Person
with respect to the Business  Combination  prior to the time the Related  Person
became  a  Related  Person,  or  (ii)  have  otherwise   approved  the  Business
Combination  (this  provision is incapable  of  satisfaction  unless there is at
least one Continuing Director); or

     (b) The Business  Combination is solely between the Corporation and another
corporation,  100  percent of the Voting  Shares of which are owned  directly or
indirectly by the Corporation.



                                       14


     Section 10.04. Definitions. For the purpose of this Article X:

     (a) A "Business Combination" means:

         (i) the sale, exchange, lease, transfer or other disposition to or with
         a Related  Person or any Affiliate or Associate of such Related  Person
         by the Corporation or any of its Subsidiaries (in a single  transaction
         or a Series of Related  Transactions) of all or  substantially  all, or
         any Substantial Part, of its or their assets or businesses  (including,
         without limitation, any securities issued by a Subsidiary);

         (ii)  The  purchase,  exchange,  lease  or  other  acquisition  by  the
         Corporation or any of its  Subsidiaries  (in a single  transaction or a
         Series of Related  Transactions)  of all or  substantially  all, or any
         Substantial  Part, of the assets or business of a Related Person or any
         Affiliate or Associate of such Related Person;

         (iii) Any merger or  consolidation of the Corporation or any Subsidiary
         thereof into or with a Related  Person or any Affiliate or Associate of
         such Related  Person or into or with another  Person which,  after such
         merger or  consolidation,  would be an  Affiliate  or an Associate of a
         Related  Person,  in each  case  irrespective  of which  Person  is the
         surviving entity in such merger or consolidation;

         (iv) Any  reclassification  of  securities,  recapitalization  or other
         transaction  (other than a redemption in  accordance  with the terms of
         the security redeemed) which has the effect, directly or indirectly, of
         increasing the proportionate amount of Voting Shares of the Corporation
         or any  Subsidiary  thereof which are  Beneficially  Owned by a Related
         Person, or any partial or complete liquidation,  spin-off, split-off or
         split-up  of the  Corporation  or  any  Subsidiary  thereof;  provided,
         however,  that  this  Section  10.04(a)(iv)  shall  not  relate  to any
         transaction  of the  types  specified  in this  Article X that has been
         approved by a majority of the Continuing Directors; or

         (v) The acquisition upon the issuance  thereof of Beneficial  Ownership
         by a Related  Person of Voting  Shares or securities  convertible  into
         Voting Shares or any voting  securities or securities  convertible into
         voting  securities  of  any  Subsidiary  of  the  Corporation,  or  the
         acquisition  upon the  issuance  thereof of  Beneficial  Ownership by a
         Related Person of any rights, warrants or options to acquire any of the
         foregoing or any  combination of the foregoing  Voting Shares or voting
         securities of the Subsidiary.

     (b) A "Series of Related  Transactions" shall be deemed to include not only
a series  of  transactions  with the same  Related  Person  but also a series of
separate  transactions  with a Related  Person or any  Affiliate or Associate of
such Related Person.



                                       15


     (c) A "Person" shall mean any individual, firm, corporation or other entity
and any partnership, syndicate or other group.

     (d) "Related  Person" shall mean any Person (other than the  Corporation or
any of the Corporation's Subsidiaries) who or that:

         (i) is the Beneficial Owner,  directly or indirectly,  of more than ten
         percent of the voting power of the outstanding Voting Shares;

         (ii) is an  Affiliate  of the  Corporation  and at any time  within the
         two-year  period  immediately  prior  to the date in  question  was the
         Beneficial Owner, directly or indirectly, of ten percent or more of the
         voting power of the then outstanding shares of Voting Shares; or

         (iii) is an assignee of or has otherwise succeeded to any Voting Shares
         which were at any time within the two-year period  immediately prior to
         the date in question  beneficially owned by any Related Person, if such
         assignment  or  succession  shall  have  occurred  in the  course  of a
         transaction or series of  transactions  not involving a public offering
         within the meaning of the Securities Act of 1933.

A Related Person shall be deemed to have acquired a share of the  Corporation at
the time when such Related Person became the Beneficial  Owner thereof.  For the
purposes of determining  whether a Person is the Beneficial Owner of ten percent
or  more  of the  voting  power  of the  then  outstanding  Voting  Shares,  the
outstanding  Voting Shares shall be deemed to include any Voting Shares that may
be issuable to such Person pursuant to a right to acquire such Voting Shares and
that is therefore  deemed to be  Beneficially  Owned by such Person  pursuant to
Section  10.04(e)(ii)(a).  A Person who is a Related  Person at (i) the time any
definitive  agreement  relating to a Business  Combination is entered into, (ii)
the record date for the determination of shareholders  entitled to notice of and
to vote on a Business  Combination,  or (iii) the time immediately  prior to the
consummation of a Business Combination, shall be deemed a Related Person.

     (e) A Person shall be a "Beneficial Owner" of any Voting Shares:

         (i)  which  such  Person  or  any  of  its   Affiliates  or  Associates
         beneficially owns, directly or indirectly; or

         (ii) which such Person or any of its  Affiliates or Associates  has (a)
         the right to acquire (whether such right is exercisable  immediately or
         only after the passage of time), pursuant to any agreement, arrangement
         or  understanding or upon the exercise of conversion  rights,  exchange
         rights,  warrants or options,  or  otherwise,  or (b) the right to vote
         pursuant to any agreement, arrangement or understanding; or



                                       16


         (iii) which are  beneficially  owned,  directly or  indirectly,  by any
         other  Person  with  which  such  Person  or any of its  Affiliates  or
         Associates has any  agreement,  arrangement  or  understanding  for the
         purpose  of  acquiring,  holding,  voting or  disposing  of any  Voting
         Shares.

     (f) An  "Affiliate"  of, or a person  Affiliated  with, a specific  Person,
means a Person that directly,  or indirectly through one or more intermediaries,
controls,  is  controlled  by,  or is under  common  control  with,  the  Person
specified.

     (g) The term "Associate"  used to indicate a relationship  with any Person,
means (i) any  corporation  or  organization  (other than this  Corporation or a
majority-owned  Subsidiary  of this  Corporation)  of which  such  Person  is an
officer or partner or is, directly or indirectly,  the Beneficial  Owner of five
percent  or more of any  class of  equity  securities,  (ii) any  trust or other
estate in which such Person has a substantial beneficial interest or as to which
such  Person  serves as trustee or in a similar  fiduciary  capacity,  (iii) any
relative or spouse of such Person,  or any relative of such spouse,  who has the
same home as such Person,  or (iv) any investment  company  registered under the
Investment  Company Act of 1940,  for which such Person or any Affiliate of such
Person serves as investment advisor.

     (h) "Subsidiary"  means any corporation of which a majority of any class of
equity security is owned, directly or indirectly, by the Corporation;  provided,
however,  that for the purposes of the definition of Related Person set forth in
paragraph  (d) of this Section  10.04,  the  term"Subsidiary"  shall mean only a
corporation  of which a  majority  of each  class of equity  security  is owned,
directly or indirectly, by the Corporation.

     (i) "Continuing Director" means any member of the Board of Directors of the
Corporation  (the  "Board"),  other than the  Related  Person who  proposes  the
Business Combination in question and his Affiliates and Associates, who (i) is a
member of the Board at the time this  Article X first  became  effective or (ii)
was a member of the Board prior to the time that the Related Person who proposes
the  Business  Combination  in  question  became a Related  Person or (iii) is a
successor of a Continuing Director who was recommended to succeed the Continuing
Director by a majority of Continuing Directors then on the Board.

     (j)  "Independent  Majority  of  Shareholders"  shall mean the holders of a
majority of the  outstanding  Voting Shares that are not  Beneficially  Owned or
controlled,  directly or  indirectly,  by the Related  Person who  proposes  the
Business Combination in question.

     (k)  "Voting  Shares"  shall  mean all  outstanding  capital  shares of the
Corporation or another corporation entitled to vote generally in the election of
Directors,  and each  reference to a proportion of shares of Voting Shares shall
refer to such proportion of the votes entitled to be cast by such shares.



                                       17


     (l)  "Substantial  Part" means properties and assets involved in any single
transaction or a Series of Related  Transactions having an aggregate fair market
value of more than ten percent of the total consolidated assets of the Person in
question  as  determined  immediately  prior to such  transaction  or  Series of
Related Transactions.

     Section  10.05.  Director  Determinations.  A  majority  of the  Continuing
Directors  shall have the power to determine for the purposes of this Article X,
on the bases of  information  known to them:  (i) the number of Voting Shares of
which any Person is the Beneficial  Owner, (ii) whether a Person is an Affiliate
or Associate of another, (iii) whether a Person has an agreement, arrangement or
understanding  with another as to the matters  referred to in the  definition of
"Beneficial Owner," (iv) whether the assets subject to any Business  Combination
constitute a Substantial Part, (v) whether two or more transactions constitute a
Series of Related  Transactions,  and (vi) such other  matters  with  respect to
which a determination is required under this Article X.

     In connection  with the exercise of its judgment in determining  what is in
the best interests of the  Corporation  and its  shareholders  when evaluating a
business  combination  or a  proposal  by  another  Person or  Persons to make a
business  combination or a tender or exchange offer  (regardless of whether such
proposal is otherwise  subject to this Article X), the Board of Directors of the
Corporation  shall, in addition to considering the adequacy of the consideration
to be  paid  in  connection  with  any  such  transaction,  consider  all of the
following  factors and any other factors that it deems relevant:  (i) the social
and economic effects of the transaction on the Corporation and its Subsidiaries,
employees, depositors, loan and other customers, creditors and other elements of
the  communities in which the Corporation  and its  Subsidiaries  operate or are
located; (ii) the business and financial condition and earnings prospects of the
acquiring  Person or Persons,  including,  but not limited to, debt  service and
other  existing  or likely  financial  obligations  of the  acquiring  Person or
Persons and their  Affiliates and  Associates,  and the possible  effect of such
conditions upon the Corporation and its  Subsidiaries  and the other elements of
the  communities in which the Corporation  and its  Subsidiaries  operate or are
located;  and (iii) the competence,  experience,  and integrity of the acquiring
Person or Persons and its or their management and Affiliates and Associates.

     Section 10.06. Fiduciary Obligations Unaffected.  Nothing in this Article X
shall be construed to relieve any Related Person from any fiduciary duty imposed
by law.

EX-4

- --------------------------------------------------------------------------------


                                RIGHTS AGREEMENT

                                     between

                             GERMAN AMERICAN BANCORP

                                       and

                         UMB BANK, NATIONAL ASSOCIATION

                                 as Rights Agent

                           Dated as of April 27, 2000


- --------------------------------------------------------------------------------

                                      INDEX

                                                                   Page

Section 1.     Certain Definitions . . . . . . . . . . . . . . . .   1
Section 2.     Appointment of Rights Agent . . . . . . . . . . . .   4
Section 3.     Issuance of Right Certificates. . . . . . . . . . .   4
Section 4.     Form of Right Certificates. . . . . . . . . . . . .   6
Section 5.     Countersignature and Registration . . . . . . . . .   6
Section 6.     Transfer, Split Up, Combination and Exchange
               of Right Certificates; Mutilated, Destroyed,
               Lost or Stolen Right Certificates . . . . . . . . .   7
Section 7.     Exercise of Rights; Purchase Price;
               Expiration Date of Rights . . . . . . . . . . . . .   7
Section 8.     Cancellation and Destruction of
               Right Certificates. . . . . . . . . . . . . . . . .   8
Section 9.     Availability of Capital Stock . . . . . . . . . . .   8
Section 10.    Record Date . . . . . . . . . . . . . . . . . . . .   9
Section 11.    Adjustment of Purchase Price, Number of
               Shares or Number of Rights. . . . . . . . . . . . .  10
Section 12.    Certificate of Adjusted Purchase Price
               or Number of Shares . . . . . . . . . . . . . . . .  16
Section 13.    Consolidation, Merger or Sale or Transfer
               of Assets or Earning Power. . . . . . . . . . . . .  16
Section 14.    Fractional Rights and Fractional Shares . . . . . .  18
Section 15.    Rights of Action. . . . . . . . . . . . . . . . . .  19
Section 16.    Agreement of Right Holders. . . . . . . . . . . . .  19
Section 17.    Right Certificate Holder Not Deemed
               a Shareholder . . . . . . . . . . . . . . . . . . .  19
Section 18.    Concerning the Rights Agent . . . . . . . . . . . .  20
Section 19.    Merger or Consolidation or Change of
               Name of Rights Agent. . . . . . . . . . . . . . . .  20
Section 20.    Duties of Rights Agent. . . . . . . . . . . . . . .  21
Section 21.    Change of Rights Agent. . . . . . . . . . . . . . .  23
Section 22.    Issuance of New Right Certificates. . . . . . . . .  23
Section 23.    Redemption. . . . . . . . . . . . . . . . . . . . .  24
Section 24.    Exchange. . . . . . . . . . . . . . . . . . . . . .  25
Section 25.    Notice of Certain Events. . . . . . . . . . . . . .  26
Section 26.    Notices . . . . . . . . . . . . . . . . . . . . . .  27
Section 27.    Supplements and Amendments. . . . . . . . . . . . .  27
Section 28.    Successors. . . . . . . . . . . . . . . . . . . . .  27
Section 29.    Benefits of this Agreement. . . . . . . . . . . . .  27
Section 30.    Severability. . . . . . . . . . . . . . . . . . . .  28
Section 31.    Governing Law . . . . . . . . . . . . . . . . . . .  28
Section 32.    Counterparts. . . . . . . . . . . . . . . . . . . .  28
Section 33.    Descriptive Headings. . . . . . . . . . . . . . . .  28


                                RIGHTS AGREEMENT

     This  Agreement  is made and  entered  into as of April 27,  2000,  between
German American Bancorp, an Indiana  corporation (the "Company"),  and UMB Bank,
National  Association,  a national  banking  association,  as rights  agent (the
"Rights Agent").

                                    RECITALS

     The Board of  Directors  of the  Company  has  authorized  and  declared  a
dividend of one preferred share purchase right (a "Right") for each Common Share
(as hereinafter  defined) of the Company outstanding as of the Close of Business
on May 10,  2000 (the  "Record  Date"),  each  Right  representing  the right to
purchase one one-hundredth (.01) of a Series A Preferred Share of the Company (a
"Preferred Share Unit"), upon the terms and subject to the conditions herein set
forth,  and has further  authorized  and directed the issuance of one Right with
respect to each Common  Share that shall become  outstanding  between the Record
Date and the earliest of the  Distribution  Date,  the  Redemption  Date and the
Final Expiration Date (as such terms are hereinafter defined).  The Rights Agent
has  agreed to  accept  its  appointment  as such,  and to carry out the  duties
imposed on it hereunder.

     In  consideration  of the  premises  and the mutual  agreements  herein set
forth, the parties hereby agree as follows:

     Section  1.  Certain  Definitions.  For  purposes  of this  Agreement,  the
following terms have the meanings indicated:

     (a)  "Acquiring  Person" shall mean any Person (as such term is hereinafter
defined) who or which,  together with all  Affiliates  and  Associates  (as such
terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as
such term is  hereinafter  defined)  of 15% or more of the Common  Shares of the
Company then outstanding,  but shall not include the Company, any Subsidiary (as
such term is hereinafter  defined) of the Company,  any employee benefit plan of
the Company or any  Subsidiary  of the  Company,  or any entity  holding  Common
Shares  for or  pursuant  to the  terms of any such  plan.  Notwithstanding  the
foregoing,  no Person  shall  become an  "Acquiring  Person" as the result of an
acquisition  of Common  Shares by the Company  that,  by reducing  the number of
shares  outstanding,  increases the proportionate  number of shares beneficially
owned by such  Person to 15% or more of the Common  Shares of the  Company  then
outstanding;  provided,  however,  that if a person shall become the  Beneficial
Owner of 15% or more of the Common  Shares of the Company  then  outstanding  by
reason of share  purchases by the Company and shall,  after such share purchases
by the Company,  become the Beneficial Owner of any additional  Common Shares of
the Company, then such Person shall be deemed to be an "Acquiring Person".

     (b) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such  terms in Rule  12b-2 of the  General  Rules and  Regulations  under the
Exchange Act (as such term is hereinafter defined).





     (c) A Person shall be deemed the "Beneficial  Owner" of and shall be deemed
to "Beneficially Own" any securities:

         (i) which such Person or any of such Person's  Affiliates or Associates
     beneficially owns, directly or indirectly;

         (ii) which such Person or any of such Person's Affiliates or Associates
     has (A) the right to acquire (whether such right is exercisable immediately
     or only after the passage of time) pursuant to any  agreement,  arrangement
     or  understanding   (other  than  customary  agreements  with  and  between
     underwriters  and selling  group members with respect to a bona fide public
     offering  of  securities),  or upon  the  exercise  of  conversion  rights,
     exchange rights, rights (other than these Rights),  warrants or options, or
     otherwise;  provided,  however,  that a  Person  shall  not be  deemed  the
     Beneficial Owner of, or to Beneficially Own,  securities  tendered pursuant
     to a tender or exchange offer made by or on behalf of such Person or any of
     such Person's  Affiliates or Associates until such tendered  securities are
     accepted for purchase or exchange; or (B) the right to vote pursuant to any
     agreement,  arrangement or understanding;  provided however,  that a Person
     shall not be deemed the Beneficial  Owner of, or to  Beneficially  Own, any
     security  if the  agreement,  arrangement  or  understanding  to vote  such
     security (1) arises solely from a revocable  proxy or consent given to such
     Person in response to a public proxy or consent  solicitation made pursuant
     to,  and  in  accordance   with,  the  applicable   rules  and  regulations
     promulgated  under the Exchange Act and (2) is not also then  reportable on
     Schedule  13D  under  the  Exchange  Act (or any  comparable  or  successor
     report); or

         (iii) which are  Beneficially  Owned,  directly or  indirectly,  by any
     other Person with which such Person or any of such  Person's  Affiliates or
     Associates has any  agreement,  arrangement  or  understanding  (other than
     customary  agreements  with and  between  underwriters  and  selling  group
     members with respect to a bona fide public  offering of securities) for the
     purpose of acquiring, holding, voting (except to the extent contemplated by
     the proviso to Section  1(c)(ii)(B))  or disposing of any securities of the
     Company.

     Notwithstanding  anything in this definition of Beneficial Ownership to the
contrary,  the phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of such
securities  then  issued  and  outstanding  together  with  the  number  of such
securities not then actually issued and  outstanding  which such Person would be
deemed to Beneficially Own hereunder.

     (d) "Business Day" shall mean any day other than a Saturday, a Sunday, or a
day on which banking  institutions  in the State of Indiana or State of Missouri
are authorized or obligated by law or executive order to close.


                                       2


     (e) "Close of  Business"  on any given  date shall mean 5:00 P.M.,  Eastern
Standard  Time,  on such  date;  provided,  however,  that if such date is not a
Business  Day it shall  mean  5:00  P.M.,  Eastern  Standard  Time,  on the next
succeeding Business Day.

     (f) "Common  Shares" when used with reference to the Company shall mean the
shares of the  Company  designated  in its  Amended  and  Restated  Articles  of
Incorporation  as "Common  Shares."  "Common Shares" when used with reference to
any Person other than the Company  shall mean the capital  stock or other equity
interest  with the greatest  voting power of such other Person or, if such other
Person is a Subsidiary of another Person, the Person or Persons which ultimately
control such first-mentioned Person.

     (g) "Company" shall have the meaning set forth in the preamble hereof.

     (h)  "Distribution  Date"  shall  have the  meaning  set forth in Section 3
hereof.

     (i)  "Exchange  Act" shall mean the  Securities  Exchange  Act of 1934,  as
amended.

     (j) "Exchange  Date" shall mean the time at which such Rights are exchanged
as provided in Section 24 hereof.

     (k)  "Exchange  Ratio"  shall have the meaning  set forth in Section  24(a)
hereof.

     (l) "Final  Expiration  Date" shall mean the Close of Business on April 26,
2010.

     (m) "Person" shall mean any individual,  firm, corporation or other entity,
and shall include any successor (by merger or otherwise) of such entity.

     (n)  "Preferred  Share  Unit"  shall  mean  one  one-hundredth  (.01)  of a
Preferred Share of the Company.

     (o) "Preferred  Shares" shall mean the shares of the Company  designated in
the Restated Articles of Incorporation of the Company,  as amended, as "Series A
Preferred Shares".

     (p) "Purchase  Price" shall  initially be $75.00 for each  Preferred  Share
Unit  purchasable  pursuant to the exercise of a Right,  and shall be subject to
adjustment  from time to time as  provided in Section 11 and 13 hereof and shall
be payable in lawful money of the United  States of America in  accordance  with
Section 7(c).

     (q) "Record Date" shall have the meaning set forth in the second  paragraph
hereof.

     (r) "Redemption  Date" shall mean the time at which the Rights are redeemed
as provided in Section 23 hereof.


                                       3



     (s)  "Redemption  Price"  shall  have the  meaning  set forth in Section 23
hereof.

     (t)  "Right"  shall  have the  meaning  set forth in the  second  paragraph
hereof.

     (u) "Right  Certificate"  shall have the meaning set forth in Section  3(a)
hereof.  (v) "Rights  Agent"  shall have the  meaning set forth in the  preamble
hereof.

     (w) "Rights  Agreement"  shall have the  meaning set forth in Section  3(c)
hereof.

     (x) "Security" shall have the meaning set forth in Section 11(d) hereof.

     (y)  "Shares  Acquisition  Date"  shall  mean  the  first  date  of  public
announcement by the Company or an Acquiring  Person that an Acquiring Person has
become such or such  earlier  date as a majority of the  Directors  shall become
aware of the existence of an Acquiring Person.

     (z)  "Subsidiary"  of any Person shall mean any corporation or other entity
of which a majority of the voting power of the voting equity securities or other
equity interest is owned, directly or indirectly, by such Person.

     (aa)  "Trading  Day" shall  have the  meaning  set forth in  Section  11(d)
hereof.

     Section 2.  Appointment of Rights Agent.  The Company  hereby  appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof,  shall prior to the Distribution  Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof,  and the Rights Agent hereby accepts such  appointment.  The Company may
from time to time  appoint  such  co-Rights  Agents as it may deem  necessary or
desirable.

     Section 3. Issuance of Right Certificates.

     (a)  Until  the  earlier  of (a) the tenth  business  day after the  Shares
Acquisition  Date or (b) the tenth  business  day (or such  later date as may be
determined by action of the Board of Directors  prior to such time as any person
becomes an Acquiring  Person) after the date of the  commencement  by any Person
(other than the Company,  any  Subsidiary of the Company,  any employee  benefit
plan of the Company or of any  Subsidiary  of the Company or any entity  holding
Common Shares for or pursuant to the terms of any such plan) of, or of the first
public announcement of the intention of any Person (other than the Company,  any
Subsidiary  of the Company,  any employee  benefit plan of the Company or of any
Subsidiary of the Company or any entity holding Common Shares for or pursuant to
the  terms of any such  plan)  to  commence,  a tender  or  exchange  offer  the
consummation of which would result in any person  becoming the Beneficial  Owner


                                       4



of Common Shares  aggregating 30% or more of the then outstanding Common Shares,
including  any such date which is after the date of this  Agreement and prior to
the issuance of the Rights (the  earlier of such dates being herein  referred to
as  the  "Distribution   Date"),  (i)  the  Rights  will  be  evidenced  by  the
certificates  for Common Shares  registered in the names of the holders  thereof
(which  certificates  shall also be deemed to be Right  Certificates) and not by
separate  Right  Certificates,  and (ii)  the  Rights  Certificates  will not be
transferable except as a part of the transfer of certificates for Common Shares,
and until the  Distribution  Date (or the earlier of the Redemption  Date or the
Final Expiration Date), the surrender for transfer of any certificate for Common
Shares  outstanding on the Record Date, with or without a copy of the Summary of
Rights  attached  thereto,  shall also  constitute  the  transfer  of the Rights
associated with the Common Shares  represented  thereby.  As soon as practicable
after the  Distribution  Date, the Company will prepare and execute,  the Rights
Agent will  countersign,  and the Company will send or cause to be sent (and the
Rights Agent will, if requested, send) by first-class,  insured, postage-prepaid
mail,  to each record holder of Common Shares as of the Close of Business on the
Distribution  Date,  at the address of such  holder  shown on the records of the
Company,  a separate Right  Certificate,  in substantially the form of Exhibit A
hereto (a "Right  Certificate"),  evidencing  one Right for each Common Share so
held.  Following the Close of Business on the Distribution Date, the Rights will
be evidenced solely by such Right Certificates.

     (b) The Company will make available,  as promptly as practicable  following
the  Record  Date,  a  Summary  of  Rights  to  Purchase  Preferred  Shares,  in
substantially the form of Exhibit B hereto, to any holder of Rights from time to
time prior to the Expiration Date upon the request of the holders.

     (c)  Certificates  for Common Shares issued after the Record Date but prior
to the  earliest of the  Distribution  Date,  the  Redemption  Date or the Final
Expiration  Date  (whether  as an  original  issuance  of Common  Shares or as a
transfer or  re-registration  of outstanding Common Shares) shall have impressed
on, printed on, written on or otherwise affixed to them the following legend:

          THIS  CERTIFICATE  ALSO  EVIDENCES  AND  ENTITLES THE HOLDER
          HEREOF TO CERTAIN RIGHTS AS SET FORTH IN A RIGHTS  AGREEMENT
          BETWEEN  GERMAN  AMERICAN   BANCORP  AND  THE  RIGHTS  AGENT
          THEREUNDER (THE "RIGHTS AGREEMENT"),  THE TERMS OF WHICH ARE
          HEREBY  INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH
          IS ON FILE AT THE  PRINCIPAL  EXECUTIVE  OFFICES  OF  GERMAN
          AMERICAN BANCORP. UNDER CERTAIN CIRCUMSTANCES,  AS SET FORTH
          IN THE RIGHTS  AGREEMENT,  SUCH RIGHTS WILL BE  EVIDENCED BY
          SEPARATE  CERTIFICATES  AND WILL NO LONGER BE  EVIDENCED  BY
          THIS  CERTIFICATE.  GERMAN AMERICAN BANCORP WILL MAIL TO THE
          HOLDER OF THIS  CERTIFICATE  A COPY OF THE RIGHTS  AGREEMENT
          WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST  THEREFOR.
          AS DESCRIBED IN THE RIGHTS  AGREEMENT,  RIGHTS ISSUED TO ANY
          PERSON WHO  BECOMES AN  ACQUIRING  PERSON (AS DEFINED IN THE
          RIGHTS AGREEMENT) SHALL BECOME NULL AND VOID.



                                       5



     (d) In the event that the Company  purchases or acquires any Common  Shares
after the Record Date but prior to the Distribution  Date, any Rights associated
with such  Common  Shares  shall be deemed  cancelled  and  retired  so that the
Company shall not be entitled to exercise any Rights  associated with the Common
Shares which are no longer outstanding.

     Section  4. Form of Right  Certificates.  The Right  Certificates  (and the
forms of  election  to purchase  shares and of  assignment  to be printed on the
reverse  thereof) shall be  substantially  the same as Exhibit A hereto and may,
have such marks of identification or designation and such legends,  summaries or
endorsements  printed thereon as the Company may deem appropriate and as are not
inconsistent  with the  provisions of this  Agreement,  or as may be required to
comply with any  applicable  law or with any rule or  regulation  made  pursuant
thereto or with any rule or regulation of the National Association of Securities
Dealers, Inc. or any stock exchange on which the Rights may from time to time be
listed or quoted, or to conform to usage.  Subject to the provisions of Sections
11, 13, and 22 hereof,  the Right Certificates shall entitle the holders thereof
to purchase  such number of Preferred  Share Units as shall be set forth therein
at the price per Preferred Share Unit set forth therein (the "Purchase  Price"),
but the amount and type of  securities  purchasable  upon the  exercise  of each
Right and the Purchase  Price thereof shall be subject to adjustment as provided
herein.

     Section 5. Countersignature and Registration.

     (a) The Right  Certificates  shall be  executed on behalf of the Company by
its Chairman of the Board, its President, or any of its Vice Presidents,  either
manually or by facsimile  signature,  shall have affixed  thereto the  Company's
seal or a  facsimile  thereof,  and shall be attested  by the  Secretary  or any
Assistant Secretary of the Company,  either manually or by facsimile  signature.
The Right Certificates  shall be manually  countersigned by the Rights Agent and
shall not be valid for any purpose unless countersigned.  In case any officer of
the Company who shall have signed any of the Right  Certificates  shall cease to
be such officer of the Company before  countersignature  by the Rights Agent and
issuance and delivery by the Company, such Right Certificates, nevertheless, may
be  countersigned  by the Rights  Agent and issued and  delivered by the Company
with the same  force and  effect as though  the  person  who  signed  such Right
Certificates  had not ceased to be such  officer of the  Company;  and any Right
Certificate  may be signed on behalf of the  Company by any person  who,  at the
actual  date of the  execution  of such  Right  Certificate,  shall  be a proper
officer of the Company to sign such Right  Certificate,  although at the date of
the execution of this Rights Agreement any such person was not such an officer.

     (b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept,  at its  principal  office or such  other  office  designated  for such
purpose,  books for registration and transfer of the Right  Certificates  issued
hereunder.  Such books  shall  show the names and  addresses  of the  respective
holders of the Right Certificates, the number of Rights evidenced on its face by
each of the Right Certificates and the date of each of the Right Certificates.



                                       6



     Section  6.  Transfer,   Split  Up,   Combination  and  Exchange  of  Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.

     (a) Subject to the  provisions of Section 14 hereof,  at any time after the
Close of  Business  on the  Distribution  Date,  and at or prior to the Close of
Business on the earlier of the Redemption Date or the Final Expiration Date, any
Right  Certificate  or  Right   Certificates   (other  than  Right  Certificates
representing  Rights that have become void pursuant to Section  11(a)(ii) hereof
or that have been exchanged  pursuant to Section 24 hereof) may be  transferred,
split  up,  combined  or  exchanged  for  another  Right  Certificate  or  Right
Certificates  entitling  the  registered  holder to  purchase  a like  number of
Preferred  Share  Units (or other  securities,  as the case may be) as the Right
Certificate or Right  Certificates by the surrender of the Right  Certificate or
Right  Certificates  to be  transferred,  split up, combined or exchanged at the
office of the Rights Agent  designated  for such  purpose,  duly  endorsed  with
signature guaranteed as provided for in the form of Right Certificate,  and with
the  Certificate  as to beneficial  ownership  duly  executed by the  registered
holder.  Thereupon the Rights Agent shall  countersign and deliver to the Person
entitled thereto a Right Certificate or Right Certificates,  as the case may be,
as so  requested.  The Company or the Rights Agent may require  payment of a sum
sufficient  to cover  any tax or  governmental  charge  that may be  imposed  in
connection  with any  transfer,  split  up,  combination  or  exchange  of Right
Certificates.

     (b) Upon receipt by the Rights Agent of evidence reasonably satisfactory to
them of the loss, theft, destruction or mutilation of a Right Certificate,  and,
in case of loss,  theft or destruction,  of indemnity or security of the Company
and the Rights Agent  reasonably  satisfactory to the Rights Agent,  and, at the
Company's  request,  reimbursement  to the Company  and the Rights  Agent of all
reasonable expenses  incidental thereto,  and upon surrender to the Rights Agent
and  cancellation of the Right  Certificate if mutilated,  the Rights Agent will
make and  deliver a new Right  Certificate  of like  tenor for  delivery  to the
registered holder in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.

     Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.

     (a) The registered  holder of any Right Certificate may exercise the Rights
evidenced  thereby (except as otherwise  provided herein) in whole or in part at
any time after the  Distribution  Date upon surrender of the Right  Certificate,
with the form of election to purchase on the reverse side thereof duly executed,
to the  Rights  Agent at the  office of the  Rights  Agent  designated  for such
purpose,  together with payment of the Purchase Price for each  Preferred  Share
Unit (or  other  securities,  as the case may be) as to  which  the  Rights  are
exercised, at or prior to the earliest of (a) the Final Expiration Date, (b) the
Redemption Date, or (c) the Exchange Date.

     (b) The Purchase Price for each Preferred Share Unit (or other  securities,
as the case may be)  pursuant  to the  exercise of a Right  shall  initially  be
$75.00, shall be subject to adjustment from time to time as provided in Sections
11 and 13 hereof and shall be payable  in lawful  money of the United  States of
America in accordance with Section 7(c) below.



                                       7



     (c) Upon receipt of a Right Certificate  representing  exercisable  Rights,
with the form of election to purchase duly  executed,  accompanied by payment of
the  Purchase  Price for the shares to be  purchased  and an amount equal to any
applicable  transfer  tax  required  to be paid  by the  holder  of  such  Right
Certificate in accordance  with Section 9 hereof by certified  check,  cashier's
check or money order payable to the order of the Company, the Rights Agent shall
thereupon  promptly (a) (i) requisition from any transfer agent of the Preferred
Shares  certificates  for the  total  number  of  Preferred  Share  Units  to be
purchased (and the Company hereby  irrevocably  authorizes its transfer agent to
comply  with  all  such  requests),  or  (ii)  requisition  from  the  Company's
depositary  agent,  if any,  depositary  receipts  representing  such  number of
Preferred Share Units as are to be purchased, in which case certificates for the
Preferred Shares represented by such receipts shall be deposited by the transfer
agent with the  depositary  agent (and the Company hereby directs its depositary
agent to comply with such request),  (b) when appropriate,  requisition from the
Company the amount of cash to be paid in lieu of issuance of  fractional  shares
in  accordance  with  Section  14 hereof,  (c)  promptly  after  receipt of such
certificates (or depositary receipts), cause the same to be delivered to or upon
the order of the registered holder of such Right Certificate, registered in such
name or names as may be  designated  by such  holder  and (d) when  appropriate,
after receipt, promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate.

     (d) In case the registered  holder of any Right  Certificate shall exercise
less than all the Rights evidenced thereby,  a new Right Certificate  evidencing
Rights  equivalent to the Rights  remaining  unexercised  shall be issued by the
Rights Agent to the registered  holder of such Right  Certificate or to his duly
authorized assigns, subject to the provisions of Section 14 hereof.

     (e) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company  shall be  obligated  to undertake  any action with
respect to a registered holder upon the occurrence of any purported  exercise as
set forth in this Section 7 unless such  registered  holder shall have completed
and signed the  certificate  contained  in the form of election to purchase  set
forth  on the  reverse  side of the  Rights  Certificate  surrendered  for  such
exercise;  and  provided  such  additional  evidence  of  the  identity  of  the
Beneficial  Owner (or  former  Beneficial  Owner) or  Affiliates  or  Associates
thereof as the Company or the Rights Agent shall reasonably request.

     Section 8.  Cancellation and Destruction of Right  Certificates.  All Right
Certificates  surrendered  for the  purpose  of  exercise,  transfer,  split up,
combination  or exchange  shall,  if surrendered to the Company or to any of its
agents,  be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered  to the Rights Agent,  shall be cancelled by it, and no Right
Certificates  shall be issued in lieu thereof  except as expressly  permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights  Agent for  cancellation  and  retirement,  and the Rights Agent shall so
cancel and retire,  any other  Right  Certificate  purchased  or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall destroy
such  cancelled  Right  Certificates  in  accordance  with  applicable  laws and
regulations, and in such case shall deliver a certificate of destruction thereof
to the Company.




                                       8




     Section 9. Availability of Capital Stock.

     (a) The Company  covenants and agrees that it will cause to be reserved and
kept  available  out of its  authorized  and  unissued  Preferred  Shares or any
authorized  and issued  Preferred  Shares  held in its  treasury,  the number of
Preferred  Shares that will be  sufficient to permit the exercise in full of all
outstanding  Rights in  accordance  with  Section  7, and  shall,  to the extent
reasonably  practicable,  so reserve and keep  available a sufficient  number of
Common  Shares  (and/or  other  securities  which may be  required to permit the
exercise in full of the Rights) pursuant to the Agreement. The Company covenants
and agrees that it will take all such action as may be  necessary to ensure that
all securities  delivered upon exercise of Rights shall, at the time of delivery
of the  certificates  for such  securities  (subject to payment of the  Purchase
Price),  be  duly  and  validly   authorized  and  issued  and  fully  paid  and
nonassessable.

     (b) The Company further  covenants and agrees that it will pay when due and
payable any and all federal and state  transfer  taxes and charges  which may be
payable in respect of the issuance or delivery of the Right  Certificates  or of
any Preferred Shares (or Common Shares and/or other securities,  as the case may
be) upon the exercise of Rights. The Company shall not, however,  be required to
pay any transfer tax which may be payable in respect of any transfer or delivery
of Right  Certificates  to a Person  other than,  or the issuance or delivery of
certificates or depositary  receipts for the Preferred  Shares (or Common Shares
and/or other  securities,  as the case may be) in a name other than that of, the
registered  holder of the Right Certificate  evidencing  Rights  surrendered for
exercise or to issue or to deliver any  certificates or depositary  receipts for
Preferred Shares (or Common Shares and/or other securities,  as the case may be)
upon the  exercise  of any  Rights  until any such tax shall have been paid (any
such tax being  payable by the holder of such Right  Certificate  at the time of
surrender)  or  until  it  has  been  established  to the  Company's  reasonable
satisfaction that no such tax is due.

     (c) The Company  covenants and agrees that it will (i) prepare and file, as
soon as practicable after the Distribution Date, a registration  statement under
the Securities Act of 1933, as amended (the "Securities Act"), on an appropriate
form with respect to the securities  issuable upon exercise of the Rights,  (ii)
use its best efforts to cause the registration  statement to become effective as
soon as  practicable  after filing,  and (iii) use its best efforts to cause the
registration  statement  to remain  effective  (with a  prospectus  at all times
meeting the  requirements  of the Securities  Act and the rules and  regulations
thereunder)  until the  earlier  of the  exercise  of all of the  Rights and the
Expiration  Date. The Company will also take all actions required to comply with
the state  securities  laws  applicable to the Rights and  Preferred  Shares (or
Common  Shares  and/or  other  securities,  as the  case may be)  issuable  upon
exercise of the Rights.  The Company may  temporarily  suspend,  for a period of
time not to exceed 90 days, the exercisability of the Rights in order to prepare
and file the registration statement. Upon any such suspension, the Company shall
issue a public  announcement  and notice to the Rights  Agent  stating  that the
exercisability  of the Rights has been  temporarily  suspended,  and the Company



                                       9




shall  issue a public  announcement  and  notice to the  Rights  Agent  when the
suspension  is no  longer  in  effect.  Notwithstanding  any  provision  of this
Agreement  to  the  contrary,  the  Rights  shall  not  be  exercisable  in  any
jurisdiction in which any requisite  registration or qualification  has not been
obtained or any requisite notice of exemption has not been filed.

     (d)  The  Company  agrees  to  provide  to the  Rights  Agent,  immediately
following  the later to occur of an event  described in Section  11(a)(i)(B)  or
Section 13 hereof or the Distribution  Date, an opinion of counsel acceptable to
the Rights  Agent that the Common Stock  underlying  the Rights have been or are
being properly  registered  under the Securities Act and all securities or "blue
sky" laws of the various  states,  as  applicable,  or in the  alternative,  the
Rights  are not  subject to  registration  under the  Securities  Act and/or any
securities or "blue sky" laws of the various states.

     Section 10.  Record  Date.  Each person in whose name any  certificate  for
Preferred  Shares (or Common Shares and/or other  securities as the case may be)
is issued upon the  exercise of Rights  shall for all purposes be deemed to have
become the holder of record of the  Preferred  Shares (or Common  Shares  and/or
other  securities  as  the  case  may  be)  represented  thereby  on,  and  such
certificate shall be dated, the date upon which the Right Certificate evidencing
such  Rights was duly  surrendered  and payment of the  Purchase  Price (and any
applicable transfer taxes) was made; provided however,  that if the date of such
surrender and payment is a date upon which the Preferred  Share (or Common Share
and/or other  securities  as the case may be) transfer  books of the Company are
closed,  such person  shall be deemed to have  become the record  holder of such
succeeding  Business  Day on which the  Preferred  Share (or Common Share and/or
other  securities  as the case may be)  transfer  books of the Company are open.
Prior to the  exercise of the Rights  evidenced  thereby,  the holder of a Right
Certificate  shall not be entitled to any rights of a holder of Preferred Shares
(or Common  Shares  and/or  other  securities  as the case may be) for which the
Rights shall be exercisable,  including,  without limitation, the right to vote,
to receive  dividends  or other  distributions  or to  exercise  any  preemptive
rights,  and shall not be entitled to receive any notice of any  proceedings  of
the Company, except as provided herein.

     Section 11.  Adjustment  of Purchase  Price,  Number of Shares or Number of
Rights.  The Purchase Price, the number and kind of shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.

     (a) (i) In the event the  Company  shall at any time after the date of this
     Agreement  (1)  declare a  dividend  on the  Preferred  Shares  payable  in
     Preferred  Shares,  (2) subdivide the  outstanding  Preferred  Shares,  (3)
     combine the outstanding Preferred Shares into a smaller number of Preferred
     Shares or (4) issue any securities in a  reclassification  of the Preferred
     Shares   (including  any  such   reclassification   in  connection  with  a
     consolidation or merger in which the Company is the continuing or surviving
     corporation),  the Purchase  Price in effect at the time of the record date
     for such dividend or of the effective date of such subdivision, combination



                                       10




     or  reclassification,  and the number  and kind of shares of capital  stock
     issuable on such date, shall be proportionately adjusted so that the holder
     of any Right  exercised  after such time shall be  entitled  to receive the
     aggregate  number and kind of shares of capital stock which,  if such Right
     had been  exercised  immediately  prior to such date and at a time when the
     Preferred  Share transfer books of the Company were open, such holder would
     have owned upon such  exercise  and been  entitled  to receive by virtue of
     such   dividend,   subdivision,   combination  or   reclassification.   The
     adjustments  provided for in this Section 11(a) shall be made  successively
     whenever  such a  dividend  is  declared  or paid  or  such a  subdivision,
     combination or consolidation is effected.

          (ii) In the event (1) any Person alone or together with its Affiliates
     and Associates shall become an Acquiring Person, or (2) during such time as
     there  is an  Acquiring  Person,  there  shall be any  reclassification  of
     securities  (including  any reverse  stock  split) or  recapitalization  or
     reorganization of the Company which has the effect,  directly or indirectly
     of increasing by more than 1% the  proportionate  share of the  outstanding
     shares of any  class of  equity  securities  of the  Company  or any of its
     Subsidiaries beneficially owned by any Acquiring Person or any Affiliate or
     Associate thereof, each holder of a Right shall, for a period of sixty (60)
     days after the later of the  occurrence  of any such event or the effective
     date of the registration  statement referred to in Section 9 hereof, have a
     right  to  receive,  upon  exercise  thereof  at a price  equal to the then
     current  Purchase Price in accordance with the terms of this Agreement such
     number of Common Shares of the Company (or, in the discretion of the Board,
     Preferred   Share  Units)  as  shall  equal  the  result  obtained  by  (x)
     multiplying  the then  current  Purchase  Price by the number of  Preferred
     Share Units for which a Right is then exercisable and dividing that product
     by (y) 50% of the then  current  per share  market  price of the  Company's
     Common  Shares  (determined  pursuant to Section  11(d) hereof) on the date
     such Person became an Acquiring  Person. In the event that any Person shall
     become an Acquiring  Person and the Rights shall then be  outstanding,  the
     Company  shall not take any action  which would  eliminate  or diminish the
     benefits intended to be afforded by the Rights.

     From and after the  occurrence  of the earlier of the events  described  in
     clauses  (i) and  (ii)  above,  any  Rights  that are or were  acquired  or
     beneficially  owned by such Acquiring Person (or any Associate or Affiliate
     of such Acquiring Person) shall be void and any holder of such Rights shall
     thereafter  have no right to exercise  such Rights  under any  provision of
     this Agreement.  No Right Certificate shall be issued pursuant to Section 3
     that  represents  Rights  Beneficially  Owned by an Acquiring  Person whose
     Rights would be void pursuant to the preceding sentence or any Associate or
     Affiliate  thereof;  no Right  Certificate shall be issued at any time upon
     the  transfer of any Rights to an  Acquiring  Person  whose Rights would be
     void  pursuant to the  preceding  sentence or any  Associate  or  Affiliate
     thereof or to any nominee of such Acquiring Person, Associate or Affiliate;
     and any Right Certificate  delivered to the Rights Agent for transfer to an
     Acquiring  Person  whose  Rights  would be void  pursuant to the  preceding
     sentence or any Associate or Affiliate thereof shall be cancelled.




                                       11




     In case any event described in clauses (i) and (ii) above shall occur, then
     the Company shall as soon as practicable  thereafter give to each holder of
     a Right Certificate,  in accordance with Section 26 hereof, a notice of the
     occurrence  of such event which  notice shall  describe  such event and the
     consequences  of such  event to holders  of Rights  under  this  Section 11
     (a)(ii).

          (iii) If there shall not be  sufficient  Common  Shares issued but not
     outstanding  or  authorized  but unissued to permit the exercise in full of
     the Rights in accordance with the foregoing  subparagraph (ii), the Company
     shall take all such  action as may be  necessary  to  authorize  additional
     Common  Shares for  issuance  upon  exercise of the Rights,  including  the
     calling of a meeting of  shareholders.  If the  Company  shall,  after good
     faith  effort,  be unable to take all such  action as may be  necessary  to
     authorize such additional Common Shares, the Company shall substitute,  for
     each  Common  Share that would  otherwise  be issuable  upon  exercise of a
     Right, a number of Preferred Share Units (or a security with  substantially
     similar rights, privileges,  preferences, voting power and economic rights)
     such that the current per share  market price of one  Preferred  Share Unit
     (or such other  security) is equal to the current per share market price of
     one Common  Share as of the date of issuance of such  Preferred  Share Unit
     (or other security).

     (b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of  Preferred  Shares  entitling  them (for a
period expiring within 45 calendar days after such record date) to subscribe for
or purchase  Preferred Shares (or shares having the same rights,  privileges and
preferences  as  the  Preferred  Shares  ("equivalent   preferred  shares"))  or
securities convertible into Preferred Shares or equivalent preferred shares at a
price per Preferred Share or equivalent  preferred share (or having a conversion
price per share, if a security  convertible  into Preferred Shares or equivalent
preferred  shares)  less than the then  current  per share  market  price of the
Preferred Shares (as defined in Section 11(d)) on such record date, the Purchase
Price to be in effect after such record date shall be determined by  multiplying
the  purchase  price  in  effect  immediately  prior  to such  record  date by a
fraction,  the  numerator  of which  shall be the  number  of  Preferred  Shares
outstanding  on such record date plus the number of  Preferred  Shares which the
aggregate  offering  price  of the  total  number  of  Preferred  Shares  and/or
equivalent  preferred  shares so to be offered  (and/or  the  aggregate  initial
conversion price of the convertible  securities so to be offered) would purchase
at such current market price and the denominator of which shall be the number of
Preferred  Shares  outstanding on such record date plus the number of additional
Preferred  Shares  and/or   equivalent   preferred  shares  to  be  offered  for
subscription  or purchase  (or into which the  convertible  securities  so to be
offered are initially convertible).  In case such subscription price may be paid
in a consideration  part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board of
Directors of the Company,  whose determination shall be described in a statement
filed with the Rights Agent.  Preferred  Shares owned by or held for the account
of the  Company  shall not be deemed  outstanding  for the  purpose  of any such
computation.  Such adjustment shall be made successively  whenever such a record
date is fixed; and in the event that such rights, options or warrants are not so
issued,  the  Purchase  Price shall be adjusted to be the  Purchase  Price which
would then be in effect if such record date had not been fixed.




                                       12




     (c) In case the  Company  shall  fix a  record  date  for the  making  of a
distribution  to all  holders  of  the  Preferred  Shares  (including  any  such
distribution  made in  connection  with a  consolidation  or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription  rights or warrants  (excluding those referred
to in Section  11(b)  hereof),  the  Purchase  Price to be in effect  after such
record date shall be  determined  by  multiplying  the Purchase  Price in effect
immediately  prior to such  record date by a fraction,  the  numerator  of which
shall be the then current per share market price of the Preferred Shares on such
record  date,  less the fair market  value (as  determined  in good faith by the
Board of Directors of the Company,  whose  determination shall be described in a
statement filed with the Rights Agent) of the portion of the assets or evidences
of indebtedness so to be distributed or of such subscription  rights or warrants
applicable to one  Preferred  Share and the  denominator  of which shall be such
current per share market price of the Preferred Shares; provided,  however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of the Company to be issued upon
exercise of one Right. Such adjustments shall be made successively whenever such
a record date is fixed; and in the event that such  distribution is not so made,
the Purchase  Price shall again be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.

     (d) (i) For the purpose of any  computation  hereunder,  the  "current  per
     share market price" of any security (a  "Security"  for the purpose of this
     Section  11(d)(i))  on any date  shall be deemed to be the  average  of the
     daily  closing  prices per share of such  Security  for the 30  consecutive
     Trading Days (as such term is  hereinafter  defined)  immediately  prior to
     such date; provided,  however, that in the event that the current per share
     market price of the Security is  determined  during a period  following the
     announcement  by  the  issuer  of  such  Security  of  (1)  a  dividend  or
     distribution  on such  Security  payable  in  shares  of such  Security  or
     securities   convertible   into  such  shares,   or  (2)  any  subdivision,
     combination  or   reclassification  of  such  Security  and  prior  to  the
     expiration of 30 Trading Days after the ex-dividend  date for such dividend
     or distribution,  or the record date for such  subdivision,  combination of
     reclassification, then, and in each such case, the current per share market
     price shall be  appropriately  adjusted to reflect the current market price
     per share equivalent of such Security. The closing price for each day shall
     be the last sale price,  regular  way, or, in case no such sale takes place
     on such day, the average of the closing bid and asked prices,  regular way,
     in  either  case as  reported  in the  principal  consolidated  transaction
     reporting  system with respect to securities  listed or admitted to trading
     on the New York  Stock  Exchange  or,  if the  Security  is not  listed  or
     admitted  to trading on the New York Stock  Exchange,  as  reported  in the
     principal  consolidated   transaction  reporting  system  with  respect  to
     securities listed on the principal  national  securities  exchange on which
     the  Security is listed or  admitted to trading or, if the  Security is not
     listed or admitted to trading on any national securities exchange, the last
     quoted  price or, if not so  quoted,  the  average  of the high bid and low
     asked prices in the  over-the-counter  market,  as reported by the National


                                       13


     Association  of  Securities  Dealers,   Inc.  Automated  Quotations  System
     ("Nasdaq")  or such other  system then in use,  or, if on any such date the
     Security is not quoted by any such organization, the average of the closing
     bid and asked prices as furnished by a  professional  market maker making a
     market in the  Security  selected by the Board of Directors of the Company.
     The term  "Trading  Day" shall mean a day on which the  principal  national
     securities  exchange on which the Security is listed or admitted to trading
     is open for the  transaction  of business or, if the Security is not listed
     or admitted to trading on any national securities exchange, a Business Day.

         (ii) For the purpose of any  computation  hereunder,  the  "current per
     share  market  price"  of the  Preferred  Shares  shall  be  determined  in
     accordance with the method set forth in Section 11(d)(i).  If the Preferred
     Shares are not publicly traded, the "current per share market price" of the
     Preferred  Shares shall be conclusively  deemed to be the current per share
     market  price of the  Common  Shares  as  determined  pursuant  to  Section
     11(d)(i) (appropriately adjusted to reflect any stock split, stock dividend
     or similar transaction occurring after the date hereof),  multiplied by one
     hundred. If neither the Common Shares nor the Preferred Shares are publicly
     held or so listed or traded,  "current per share  market  price" shall mean
     the fair  value  per  share as  determined  in good  faith by the  Board of
     Directors  of the  Company,  whose  determination  shall be  described in a
     statement filed with the Rights Agent.

     (e) No  adjustment  in the  Purchase  Price shall be  required  unless such
adjustment  would require an increase or decrease of at least 1% in the Purchase
Price;  provided,  however, that any adjustments which by reason of this Section
11(e) are not  required  to be made  shall be  carried  forward  and taken  into
account in any subsequent  adjustment.  All  calculations  under this Section 11
shall be made to the nearest cent or to the nearest one-hundredth of a Preferred
Share or one-  hundredth  of any  other  share or  security  as the case may be.
Notwithstanding  the  first  sentence  of this  Section  11(e),  any  adjustment
required by this Section 11 shall be made no later than the earlier of (a) three
years from the date of the transaction which requires such adjustment or (b) the
date of the expiration of the right to exercise any Rights.

     (f) If, as a result of an adjustment made pursuant to Section 11(a) hereof,
the holder of any Right  thereafter  exercised  shall become entitled to receive
any securities of the Company other than Preferred Shares, thereafter the number
of such other  securities  so  receivable  upon  exercise  of any Right shall be
subject  to  adjustment  from  time to time in a manner  and on terms as  nearly
equivalent as practicable to the provisions with respect to the Preferred Shares
contained in Sections  11(a) through  11(c),  inclusive,  and the  provisions of
Sections 7, 9, 10 and 13 with  respect to the  Preferred  Shares  shall apply on
like terms to any such other securities.

     (g)  All  Rights  originally  issued  by  the  Company  subsequent  to  any
adjustment  made to the Purchase  Price  hereunder  shall  evidence the right to
purchase,  at the adjusted  Purchase Price,  the number of Preferred Share Units
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.




                                       14




     (h) Unless the Company  shall have  exercised  its  election as provided in
Section  11(i),  upon each  adjustment of the Purchase  Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding  immediately
prior to the making of such adjustment  shall  thereafter  evidence the right to
purchase,  at the adjusted  Purchase Price, that number of Preferred Share Units
obtained by (a) multiplying (x) the number of Preferred Share Units covered by a
Right  immediately  prior to this adjustment by (y) the Purchase Price in effect
immediately  prior to such adjustment of the Purchase Price and (b) dividing the
product so  obtained  by the  Purchase  Price in effect  immediately  after such
adjustment of the Purchase Price.

     (i) The  Company  may elect on or after the date of any  adjustment  of the
Purchase  Price  to  adjust  the  number  of  Rights,  in  substitution  for any
adjustment in the number of Preferred Share Units  purchasable upon the exercise
of a Right.  Each of the Rights  outstanding after such adjustment of the number
of Rights shall be exercisable for the number of Preferred Share Units for which
a Right was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights shall become that number
of Rights obtained by dividing the Purchase Price in effect immediately prior to
adjustment  of the Purchase  Price by the Purchase  Price in effect  immediately
after  adjustment  of the  Purchase  Price.  The  Company  shall  make a  public
announcement  of its  election  to adjust the number of Rights,  indicating  the
record date for the  adjustment,  and,  if known at the time,  the amount of the
adjustment  to be made.  This record date may be the date on which the  Purchase
Price is adjusted or any day  thereafter,  but, if the Right  Certificates  have
been  issued,  shall  be at  least 10 days  later  than  the date of the  public
announcement.  If Right  Certificates have been issued,  upon each adjustment of
the number of Rights  pursuant to this  Section  11(i),  the Company  shall,  as
promptly as  practicable,  cause to be distributed to holders of record of Right
Certificates  on such  record  date Right  Certificates  evidencing,  subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Right  Certificates  held by such holders prior to the date of  adjustment,  and
upon  surrender  thereof,  if required by the  Company,  new Right  Certificates
evidencing  all the Rights to which such  holders  shall be entitled  after such
adjustment.  Right  Certificates so to be distributed shall be issued,  executed
and  countersigned  in the manner provided for herein and shall be registered in
the names of the  holders of record of Right  Certificates  on the  record  date
specified in the public announcement.

     (j)  Irrespective  of any adjustment or change in the Purchase Price or the
number of Preferred  Share Units  issuable upon the exercise of the Rights,  the
Right Certificates theretofore and thereafter issued may continue to express the
Purchase  Price and the number of Preferred  Share Units which were expressed in
the initial Right Certificates issued hereunder.

     (k) Before  taking any action that would cause an  adjustment  reducing the
Purchase Price of the Preferred Shares issuable upon exercise of the Rights, the
Company  shall  take any  corporate  action  which  may,  in the  opinion of its
counsel,  be necessary  in order that the Company may validly and legally  issue
fully paid and nonassessable Preferred Shares at such adjusted Purchase Price.




                                       15




     (l) In any case in which this Section 11 shall  require that an  adjustment
in the  Purchase  Price be made  effective  as of a record  date for a specified
event,  the Company may elect to defer  until the  occurrence  of such event the
issuance  to the holder of any Right  exercised  after such  record  date of the
Preferred Share Units, Common Shares or other securities of the Company, if any,
issuable upon such exercise over and above the number of Preferred  Share Units,
Common  Shares or other  securities of the Company,  if any,  issuable upon such
exercise on the basis of the Purchase Price in effect prior to such  adjustment;
provided  however,  that the Company  shall deliver to such holder a due bill or
other  appropriate  instrument  evidencing  such holder's  right to receive such
additional shares upon the occurrence of the event requiring such adjustment.

       (m)  Anything in this  Section 11 to the  contrary  notwithstanding,  the
Company  shall be entitled to make such  reductions  in the Purchase  Price,  in
addition to those adjustments  expressly  required by this Section 11, as and to
the extent that, it, in its sole discretion,  shall determine to be advisable in
order that any (i)  consolidation or subdivision of the Preferred  Shares,  (ii)
issuance wholly for cash of any Preferred Shares at less than the current market
price, (iii) issuance wholly for cash of Preferred Shares or securities which by
their terms are convertible into or exchangeable for Preferred  Shares,  or (iv)
dividends on Preferred Shares payable in Preferred Shares or issuance of rights,
options or warrants referred to hereinabove in Section 11, hereafter made by the
Company  to  holders  of its  Preferred  Shares  shall  not be  taxable  to such
stockholders.

       (n) Anything in this  Agreement to the  contrary  notwithstanding  in the
event that at any time after the date of this Rights  Agreement and prior to the
Distribution  Date,  the Company  shall (i)  declare or pay any  dividend on the
Common Shares payable in Common Shares or (ii) effect a subdivision, combination
or consolidation of the Common Shares (by  reclassification or otherwise than by
payment of dividends in Common Shares) into a greater or lesser number of Common
Shares,  then  in any  such  case  (A)  the  number  of  Preferred  Share  Units
purchasable  after such  event  upon  proper  exercise  of each  Right  shall be
determined by  multiplying  the number of Preferred  Share Units so  purchasable
immediately  prior to such event by a fraction,  the  numerator  of which is the
number  of Common  Shares  outstanding  immediately  before  such  event and the
denominator  of which is the  number of Common  Shares  outstanding  immediately
after such event, and (B) each Common Share  outstanding  immediately after such
event  shall have issued  with  respect to it that  number of Rights  which each
Common Share outstanding immediately prior to such event had issued with respect
to it. The  adjustments  provided for in the  preceding  sentence  shall be made
successively whenever such a dividend is declared or paid or such a subdivision,
combination or consolidation is effected.

     Section 12.  Certificate  of Adjusted  Purchase  Price or Number of Shares.
Whenever an  adjustment  is made as  provided  in Sections 11 or 13 hereof,  the
Company shall promptly (a) prepare a certificate  setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the  Rights  Agent and with each  transfer  agent for the  Preferred  Shares and
Common  Shares a copy of such  certificate  and (c) if a  Distribution  Date has
occurred,  mail a brief summary  thereof to each holder of a Right  Certificate.
The Rights Agent shall be fully protected in relying on such certificate,  shall
not be obligated or responsible for calculating any adjustment, and shall not be
deemed to have  knowledge  of any  adjustment  unless  and  until it shall  have
received such certificate.




                                       16




     Section 13. Consolidation,  Merger or Sale or Transfer of Assets or Earning
Power.

     (a) In the event, directly or indirectly, (i) the Company shall consolidate
with,  or merge  with  and  into,  any  other  Person,  (ii)  any  Person  shall
consolidate with the Company, or merge with and into the Company and the Company
shall  be the  continuing  or  surviving  corporation  of such  merger  and,  in
connection  with such merger,  all or part of the Common Shares shall be changed
into or exchanged for securities of any other Person (or the Company) or cash or
any other  property,  or (iii) the Company shall sell or otherwise  transfer (or
one or more of its  Subsidiaries  shall sell or otherwise  transfer) , in one or
more transactions, assets or earning power aggregating 50% or more of the assets
or earning power of the Company and its  Subsidiaries  (taken as a whole) to any
other  person  other  than  the  Company  or one  or  more  of its  wholly-owned
Subsidiaries,  then, and in each such case,  proper  provision  shall be made so
that (1) each holder of a Right  (except as  otherwise  provided  herein)  shall
thereafter have the right to receive, upon the exercise thereof at a price equal
to the then current  Purchase Price  multiplied by the number of Preferred Share
Units for which a Right is then  exercisable,  in  accordance  with the terms of
this  Agreement  and in lieu of  Preferred  Share  Units,  such number of freely
tradeable Common Shares of such other Person (including the Company as successor
thereto or as the surviving corporation), free and clear of any liens, rights of
call or first refusal,  encumbrances or other adverse claims, as shall equal the
result obtained by (A) multiplying the then current Purchase Price by the number
of Preferred Share Units for which a Right is then exercisable and dividing that
product  by (B) 50% of the then  current  per share  market  price of the Common
Shares of such other Person (determined pursuant to Section 11(d) hereof) on the
date of consummation of such consolidation,  merger,  sale or transfer;  (2) the
issuer of such Common  Shares shall  thereafter be liable for, and shall assume,
by virtue of such consolidation,  merger, sale or transfer,  all the obligations
and duties of the Company  pursuant to this  Agreement;  (3) the term  "Company"
shall  thereafter  be deemed to refer to such issuer;  and (4) such issuer shall
take such steps (including,  but not limited to, the reservation of a sufficient
number of its Common Shares in  accordance  with Section 9 hereof) in connection
with such  consummation as may be necessary to assure that the provisions hereof
shall  thereafter be applicable,  as nearly as reasonably may be, in relation to
the Common Shares thereafter deliverable upon the exercise of the Rights.

     (b) The Company shall not consummate any such  consolidation,  merger, sale
or transfer unless prior thereto the Company and such issuer shall have executed
and  delivered to the Rights Agent a  supplemental  agreement  providing for the
terms set forth in Section 13(a) hereof and further  providing  that, as soon as
practicable  after the date of any  consolidation,  merger,  sale or transfer of
assets mentioned in Section 13(a) hereof, such issuer at its own expense shall:

          (i)  prepare  and file a  registration  statement  under  the Act with
     respect to the Rights and the securities  purchasable  upon exercise of the
     Rights on an  appropriate  form,  will use its best  efforts  to cause such
     registration  statement to become  effective as soon as  practicable  after
     such  filing  and will  use its best  efforts  to cause  such  registration
     statement to remain  effective  (with a prospectus at all times meeting the
     requirements of the Act and the rules and regulations thereunder) until the
     Expiration Date;




                                       17




          (ii) use its best  efforts to qualify or  register  the Rights and the
     securities  purchasable upon exercise of the Rights under the blue sky laws
     of such jurisdictions as may be necessary or appropriate; and

          (iii) deliver to holders of the Rights historical financial statements
     for such issuer and each of its  Affiliates  which  comply in all  material
     respects  with the  requirements  for  registration  on Form 10  under  the
     Exchange Act.

     (c) The Company shall not enter into any  transaction  of the kind referred
to in this Section 13 if at the time of such  transaction  there are any rights,
warrants,   instruments   or  securities   outstanding   or  any  agreements  or
arrangements  which, as a result of the consummation of such transaction,  would
eliminate or substantially  diminish the benefits intended to be afforded by the
Rights.  The provisions of this Section 13 shall  similarly  apply to successive
mergers or consolidations or sales or other transfers.

       Section 14.  Fractional Rights and Fractional Shares.

     (a) The Company  shall not be required to issue  fractions  of Rights or to
distribute Right Certificates which evidence  fractional Rights. In lieu of such
fractional  Rights,  there shall be paid to the registered  holders of the Right
Certificates  with regard to which such  fractional  Rights  would  otherwise be
issuable  an amount in cash equal to the same  fraction  of the  current  market
value of a whole  Right.  For the purposes of this  Section  14(a),  the current
market  value of a whole Right shall be the closing  price of the Rights for the
Trading Day immediately  prior to the date on which such fractional Rights would
have been  otherwise  issuable.  The closing price for any day shall be the last
sale price,  regular  way,  or, in case no such sale takes place on such day the
average of the  closing  bid and asked  prices,  regular  way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities  listed or admitted to trading on the New York Stock  Exchange or,
if the  Rights  are not  listed or  admitted  to  trading  on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national  securities exchange
on which the Rights are listed or  admitted to trading or, if the Rights are not
listed or  admitted to trading on any  national  securities  exchange,  the last
quoted  price or, if not so  quoted,  the  average of the high bid and low asked
prices in the  over-the-counter  market,  as  reported  by Nasdaq or such  other
system then in use or, if on any such date the Rights are not quoted by any such
organization,  the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the  Company.  If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.




                                       18




     (b) The  Company  shall not be  required to issue  fractions  of  Preferred
Shares (other than fractions which are integral  multiples of one  one-hundredth
of a Preferred Share) upon exercise of the Rights or to distribute  certificates
which  evidence  fractional  Preferred  Shares (other than  fractions  which are
integral  multiples of one  one-hundredth  of a Preferred  Share).  Fractions of
Preferred Shares in integral multiples of one one-hundredth of a Preferred Share
may, at the  election of the  Company,  be  evidenced  by  depositary  receipts,
pursuant to an  appropriate  agreement  between  the  Company  and a  depositary
selected by it;  provided that such agreement  shall provide that the holders of
such depositary  receipts shall have all the rights,  privileges and preferences
to which  they  are  entitled  as  Beneficial  Owners  of the  Preferred  Shares
represented by such depositary receipts.  In lieu of fractional Preferred Shares
that are not integral  multiples of one  one-hundredth of a Preferred Share, the
Company shall pay to the registered  holders of Right  Certificates  at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Preferred Share. For the purposes of
this Section 14(b),  the current market value of a Preferred  Share shall be the
closing  price of a  Preferred  Share  (as  determined  pursuant  to the  second
sentence of Section  11(d)(ii)  hereof) for the Trading Day immediately prior to
the date of such exercise.

     (c) The holder of a Right by the acceptance of the Right  expressly  waives
such holder's  right to receive any fractional  Rights or any fractional  shares
upon exercise of a Right (except as expressly provided above).

     Section  15.  Rights of  Action.  All  rights of action in  respect of this
Agreement,  except the rights of action given to the Rights Agent under  Section
18  hereof,  are  vested  in the  respective  registered  holders  of the  Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares),  without the consent of the Rights
Agent  or of the  holder  of any  other  Right  Certificate  (or,  prior  to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit,  enforce, and may institute and maintain any suit, action or proceeding
against  the Company to enforce,  or  otherwise  act in respect of, his right to
exercise the Rights  evidenced by such Right  Certificate in the manner provided
in such Right Certificate and in this Agreement.  Without limiting the foregoing
or  any  remedies  available  to  the  holders  of  Rights,  it is  specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the  obligations  under,  and  injunctive  relief  against  actual or threatened
violations of the obligations of any person subject to, this Agreement.

     Section  16.  Agreement  of Right  Holders.  Every  holder  of a Right,  by
accepting  the same,  consents  and agrees with the Company and the Rights Agent
and with every other holder of a Right that:

     (a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of the Common Shares;




                                       19




     (b) after the  Distribution  Date, the Right  Certificates are transferable
only on the registry  books of the Rights Agent if  surrendered at the office of
the Rights Agent designated for such purpose,  duly endorsed or accompanied by a
proper instrument of transfer; and

     (c) the Company and the Rights Agent may deem and treat the person in whose
name the Right  Certificate (or, prior to the Distribution  Date, the associated
Common Share certificate) is registered on the registration books of the Company
as  the   absolute   owner   thereof  and  of  the  Rights   evidenced   thereby
(notwithstanding any notations of ownership or writing on the Right Certificates
or the associated Common Share certificate made by anyone other than the Company
or the Rights  Agent) for all purposes  whatsoever,  and neither the Company nor
the Rights Agent shall be affected by any notice to the contrary.

     Section 17. Right Certificate  Holder Not Deemed a Shareholder.  No holder,
as such,  of any Right  Certificate  shall be deemed  for any  purpose to be the
holder of the Preferred  Shares or any other securities of the Company which may
at any time be issuable on the exercise of the Rights represented  thereby,  nor
shall  anything  contained  herein or in any Right  Certificate  be construed to
confer upon the holder of any Right  Certificate as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof,  or to give or
withhold  consent to any corporate  action,  or to receive notice of meetings or
other actions  affecting  shareholders  or to receive  dividends or subscription
rights,  or  otherwise,  until  the  Right or  Rights  evidenced  by such  Right
Certificate shall have been exercised in accordance with the provisions hereof.

     Section 18.  Concerning the Rights Agent.  The Company agrees to pay to the
Rights Agent reasonable  compensation for all services  rendered by it hereunder
and, from time to time, on demand of the Rights Agent,  its reasonable  expenses
and counsel  fees and other  disbursements  incurred in the  administration  and
execution  of this  Agreement  and the exercise  and  performance  of its duties
hereunder.  The Company  also agrees to  indemnify  the Rights Agent for, and to
hold it harmless  against,  any loss,  liability,  or expense,  incurred without
gross  negligence,  bad faith or  willful  misconduct  on the part of the Rights
Agent,  for anything done or omitted by the Rights Agent in connection  with the
acceptance  and  administration  of this  Agreement,  including  the  costs  and
expenses  of  defending  against  any claim of  liability  in the  premises  and
reasonable  counsel  fees and  expenses.  The  indemnity  provided  herein shall
survive the expiration of the Rights and the termination of this Agreement.

     The Rights Agent shall be protected and shall incur no liability for, or in
respect of any action taken,  suffered or omitted by it in connection  with, its
administration  of this  Agreement  in reliance  upon any Right  Certificate  or
certificate for the Preferred Shares or Common Shares or for other securities of
the  Company,   instrument  of  assignment  or  transfer,   power  of  attorney,
endorsement,   affidavit,  letter,  notice,  direction,   consent,  certificate,
statement,  or other  paper or  document  believed by it to be genuine and to be
signed, executed and, where necessary,  verified or acknowledged,  by the proper
person or  persons,  or  otherwise  upon the  advice of  counsel as set forth in
Section 20 hereof.




                                       20




     Section 19. Merger or  Consolidation or Change of Name of Rights Agent. Any
corporation  into which the Rights  Agent or any  successor  Rights Agent may be
merged or with which it may be consolidated,  or any corporation  resulting from
any merger or  consolidation  to which the Rights Agent or any successor  Rights
Agent shall be a party, or any  corporation  succeeding to the stock transfer or
corporate  trust  business of the Rights Agent or any  successor  Rights  Agent,
shall be the  successor  to the Rights  Agent under this  Agreement  without the
execution  or filing of any paper or any  further  act on the part of any of the
parties hereto, provided that such corporation would be eligible for appointment
as a successor  Rights Agent under the provisions of Section 21 hereof.  In case
at the time such  successor  Rights Agent shall succeed to the agency created by
this Agreement any of the Right  Certificates  shall have been countersigned but
not delivered, any such successor Rights Agent may adopt the countersignature of
the   predecessor   Rights  Agent  and  deliver  such  Right   Certificates   so
countersigned;  and in case at that time any of the Right Certificates shall not
have been  countersigned,  any successor Rights Agent may countersign such Right
Certificates  in its name as the successor  Rights Agent;  and in all such cases
such  Right  Certificates  shall  have  the full  force  provided  in the  Right
Certificates and in this Agreement.

     In case at any time the name of the Rights  Agent  shall be changed  and at
such time any of the Right  Certificates  shall have been  countersigned but not
delivered,  the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been  countersigned,  the Rights Agent may
countersign such Right  Certificates  either in its prior name or in its changed
name;  and in all such cases such Right  Certificates  shall have the full force
provided in the Right Certificates and in this Agreement.

     Section 20. Duties of Rights Agent.  The Rights Agent undertakes the duties
and obligations  specifically imposed by this Agreement upon the following terms
and  conditions,  by  all  of  which  the  Company  and  the  holders  of  Right
Certificates,  by their acceptance thereof, shall be bound and no implied duties
or obligations shall be read into this Agreement against the Rights Agent:

     (a) The  Rights  Agent may  consult  with legal  counsel  (who may be legal
counsel  for the  Company),  and the opinion of such  counsel  shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.

     (b)  Whenever in the  performance  of its duties under this  Agreement  the
Rights Agent shall deem it  necessary  or  desirable  that any fact or matter be
proved or  established  by the Company  prior to taking or suffering  any action
hereunder,  such fact or matter  (unless  other  evidence in respect  thereof be
herein  specifically  prescribed)  may be deemed to be  conclusively  proved and
established by a certificate signed by any one of the Chairman of the Board, the
President, any Vice President, the Treasurer or the Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full  authorization
to the Rights  Agent for any action  taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.




                                       21




     (c) The Rights Agent shall be liable hereunder to the Company and any other
Person only for its own gross negligence, bad faith or willful misconduct.

     (d) The  Rights  Agent  shall not be liable  for or by reason of any of the
statements  of fact or  recitals  contained  in this  Agreement  or in the Right
Certificates (except its countersignature  thereof) or be required to verify the
same, but all such  statements and recitals are and shall be deemed to have been
made by the Company only.

     (e) The Rights  Agent shall not be under any  responsibility  in respect of
the validity of this Agreement or the execution and delivery  hereof (except the
due  execution  hereof by the Rights  Agent) or in respect  of the  validity  or
execution of any Right Certificate (except its  countersignature  thereof);  nor
shall it be  responsible  for any  breach  by the  Company  of any  covenant  or
condition contained in this Agreement or in any Right Certificate;  nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section  11(a)(ii) hereof) or any adjustment in
the terms of the  Rights  (including  the  manner,  method  or  amount  thereof)
provided  for in  Section  3,  11,  13,  23 or 24,  or the  ascertaining  of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Right  Certificates  after actual
notice  that such change or  adjustment  is  required);  nor shall it by any act
hereunder  be  deemed  to  make  any   representation  or  warranty  as  to  the
authorization  or  reservation of any Preferred  Shares,  Common Shares or other
securities to be issued  pursuant to this Agreement or any Right  Certificate or
as to whether any Preferred Shares, Common Shares or other securities will, when
issued, be validly authorized and issued, fully paid and non-assessable.

     (f) The  Company  agrees that it will  perform,  execute,  acknowledge  and
deliver or cause to be performed, executed,  acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying  out of  performing  by the Rights Agent of
the provisions of this Agreement.

     (g)  The  Rights  Agent  is  hereby   authorized  and  directed  to  accept
instructions  with respect to the  performance of its duties  hereunder from any
one of the  Chairman  of the  Board,  the  President,  any Vice  President,  the
Secretary or the  Treasurer of the  Company,  and to apply to such  officers for
advice or instructions in connection with its duties, and it shall not be liable
for any  action  taken  or  suffered  by it in good  faith  in  accordance  with
instructions  of any such officer or for any delay in acting  while  waiting for
those instructions.

     Any  application  by the Rights  Agent for  written  instructions  from the
Company may, at the option of the Rights Agent,  set forth in writing any action
proposed to be taken or omitted by the Rights Agent under this Rights  Agreement
and the date on and/or after which such action  shall be taken or such  omission
shall be  effective.  The Rights  Agent shall not be liable for any action taken
by, or omission of, the Rights Agent in accordance  with a proposal  included in
any such application on or after the date specified in such  application  (which
date shall not be less than five  Business  Days after the date any such officer
of the Company actually receives such application, unless any such officer shall
have  consented in writing to an earlier date) unless,  prior to taking any such



                                       22




action (or the  effective  date in the case of an  omission),  the Rights  Agent
shall  have  received  written  instructions  in  response  to such  application
specifying the action to be taken or omitted.

     (h) The Rights Agent and any shareholder,  director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other  securities
of the Company or become pecuniarily  interested in any transaction in which the
Company  may be  interested,  or  contract  with or lend money to the Company or
otherwise  act as fully and freely as though it were not Rights Agent under this
Agreement.  Nothing  herein  shall  preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.

     (i) The Rights  Agent may execute and  exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its  attorneys  or  agents,  and the Rights  Agent  shall not be  answerable  or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the  Company  resulting  from any such  act,  default,
neglect or misconduct,  provided  reasonable care was exercised in the selection
and continued employment thereof.

     (j) No provision of this Agreement shall require the Rights Agent to expend
or risk  its own  funds  or  otherwise  incur  any  financial  liability  in the
performance  of any of its duties  hereunder or in the exercise of its rights if
there shall be reasonable  grounds for believing that repayment of such funds or
adequate  indemnification  against  such  risk or  liability  is not  reasonably
assured to it.

     (k) The Rights  Agent  shall have no  responsibility  to the  Company,  any
holders of Rights, any holders of Common Stock or any holders of Preferred Stock
for interest or earnings on any monies held by the Rights Agent pursuant to this
Agreement.

     (l) The Rights  Agent  shall not be required to take notice or be deemed to
have notice of any fact, event or determination (including,  without limitation,
any dates or events defined in this  Agreement or the  designation of any Person
as an Acquiring Person,  Affiliate or Associate) under this Agreement unless and
until the Rights Agent shall be specifically  notified in writing by the Company
of such fact,  event or  determination,  and all notices  shall be  effective if
given in  accordance  with Section 25 hereof,  and in the absence of such notice
the Rights Agent may conclusively assume that no such event or condition exists.

     (m) If, with respect to any Rights  Certificate  surrendered  to the Rights
Agent  for  exercise  or  transfer,  the  certificate  attached  to the  form of
assignment  or form of election to purchase,  as the case may be, has either not
been completed to certify the holder is not an Acquiring Person (or an Affiliate
or Associate  thereof),  the Rights Agent shall not take any further action with
respect  to such  requested  exercise  of  transfer  without  receiving  written
instructions of the Company.

     Section  21.  Change of Rights  Agent.  The Rights  Agent or any  successor
Rights Agent may resign and be discharged  from its duties under this  Agreement



                                       23




upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Preferred  Shares and Common Shares by registered or certified  mail, and
to the holders of the Right  Certificates  by first-class  mail. The Company may
remove the Rights  Agent or any  successor  Rights  Agent upon 30 days notice in
writing,  mailed to the Rights Agent or successor  Rights Agent, as the case may
be, and to each  transfer  agent of the  Preferred  Shares and Common  Shares by
registered or certified  mail, and to the holders of the Right  Certificates  by
first-class  mail.  If the  Rights  Agent  shall  resign or be  removed or shall
otherwise become  incapable of acting,  the Company shall appoint a successor to
the Rights Agent.  If the Company shall fail to make such  appointment  within a
period  of 30 days  after  giving  notice of such  removal  or after it has been
notified  in writing of such  resignation  or  incapacity  by the  resigning  or
incapacitated  Rights Agent or by the holder of a Right  Certificate (who shall,
with such notice,  submit his Right  Certificate for inspection by the Company),
then the registered holder of any Right Certificate or the retiring Rights Agent
may apply to any court of competent  jurisdiction  for the  appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or by
such a court, shall be (i) a corporation  organized and doing business under the
laws of the United  States or the State of Indiana (or of any other state of the
United  States so long as such  corporation  is  authorized  to do business as a
banking  institution),  validly existing and which is authorized under such laws
to  exercise  corporate  trust  or  stock  transfer  powers  and is  subject  to
supervision or  examination  by federal or state  authority and which has at the
time of its  appointment  as Rights  Agent a combined  capital and surplus of at
least $50 million or (ii) a subsidiary of a corporation  described in clause (i)
of this sentence. After appointment,  the successor Rights Agent shall be vested
with the same  powers,  rights,  duties and  responsibilities  as if it had been
originally  named as Rights Agent without further act or deed and the duties and
obligations  of the  retiring  Rights Agent shall cease and  terminate;  but the
predecessor  Rights  Agent shall  deliver and transfer to the  successor  Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance,  conveyance, act or deed necessary for the purpose. Not later
than the effective  date of any such  appointment  the Company shall file notice
thereof in writing with the predecessor  Rights Agent and each transfer agent of
the Common Shares or Preferred  Shares,  and mail a notice thereof in writing to
the  registered  holders of the Right  Certificates.  Failure to give any notice
provided  for in this  Section 21,  however,  or any defect  therein,  shall not
affect the  legality  or validity  of the  resignation  or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.

     Section 22. Issuance of New Right Certificates.  Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary,  the Company may,
at its option,  issue new Right  Certificates  evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Right Certificates made in accordance with the
provisions of this Agreement.

     Section 23. Redemption.

     (a) The Board of Directors  of the Company may, at its option,  at any time
prior to the tenth  business day after any Person  becomes an Acquiring  Person,



                                       24




redeem all but not less than all of the then outstanding  Rights at a redemption
price of $.0001 per Right,  appropriately  adjusted to reflect any stock  split,
stock  dividend or similar  transaction  occurring  after the date hereof  (such
redemption  price  being  hereinafter  referred to as the  "Redemption  Price");
provided,  however,  that  during  the time  period in which the  Rights  may be
redeemed, the Board of Directors of the Company may extend the time during which
the Rights may be redeemed for a time period as may be  determined  by the Board
of  Directors.  Notwithstanding  anything  contained  in this  Agreement  to the
contrary,  the Rights shall not be exercisable after the first occurrence of the
event  described in Section  11(a)(ii) until such time as the Company's right of
redemption  hereunder has expired.  The redemption of the Rights by the Board of
Directors of the Company may be made  effective at such time,  on such basis and
with such  conditions  as the Board of  Directors  of the  Company,  in its sole
discretion,  may  establish.  The Company may, at is option,  pay the Redemption
Price in cash,  Common Shares (based on the current  market price at the time of
redemption) or any other form of consideration  deemed  appropriate by the Board
of Directors.

     (b) In  addition,  in the  exercise  of its sole  discretion  the  Board of
Directors  of the  Company  may  redeem  all but not  less  than all of the then
outstanding  Rights at the Redemption Price following the occurrence of a Shares
Acquisition Date but prior to any event described in Section 13(a) either (a) in
connection  with any event  specified  in Section  13(a) in which all holders of
Preferred  Share  Units are  treated  alike and not  involving  (other than as a
holder of Preferred  Share Units being  treated like all other such  holders) an
Acquiring  Person or an Affiliate  or  Associate  of an Acquiring  Person or any
other Person in which such Acquiring Person, Affiliate or such Associate has any
interest,  or any other Person acting  directly or indirectly on behalf of or in
association  with any such  Acquiring  Person,  Affiliate or  Associate,  or (b)
following  the  occurrence  of an event set forth in, and the  expiration of any
period during which the holder of Rights may exercise the rights under,  Section
11(a)(ii)  if and for as long as the  Acquiring  Person  is not  thereafter  the
Beneficial Owner 15% or more of the outstanding  Common Shares,  and at the time
of redemption there are no other persons who are Acquiring Persons.

     (c)  Immediately  upon the action of the Board of  Directors of the Company
ordering  the  redemption  of the Rights,  and without any  further,  action and
without any notice, the right to exercise the Rights will terminate and the only
right  thereafter  of the holders of Rights  shall be to receive the  Redemption
Price.  Within ten days after the action of the Board of Directors  ordering the
redemption of the Rights,  the Company  shall give notice of such  redemption to
the holders of the then  outstanding  Rights by mailing  such notice to all such
holders at their last  addresses as they appear upon the  registry  books of the
Rights Agent or, prior to the  Distribution  Date, on the registry  books of the
transfer  agent for the Shares.  Any notice which is mailed in the manner herein
provided shall be deemed given,  whether or not the holder  receives the notice.
Each such notice of redemption will state the method by which the payment of the
Redemption Price will be made.  Neither the Company nor any of its Affiliates or
Associates  may redeem,  acquire or purchase for value any Rights at any time in
any manner other than that  specifically set forth in this Section 23, and other
than in connection with the purchase of Common Shares prior to the  Distribution
Date.




                                       25




     Section 24. Exchange.

     (a) The Board of Directors  of the Company may, at its option,  at any time
after any person becomes an Acquiring  Person,  exchange all or part of the then
outstanding  and  exercisable  Rights (which shall not include  Rights that have
become void pursuant to the provisions of Section  11(a)(ii)  hereof) for Common
Shares  at an  exchange  ratio of one  Common  Share  per  Right,  appropriately
adjusted  to reflect any stock  split,  stock  dividend  or similar  transaction
involving  either the Preferred  Shares or the Common Shares occurring after the
date hereof (such exchange ratio being hereinafter  referred to as the "Exchange
Ratio").  Notwithstanding  the  foregoing,  the Board of Directors  shall not be
empowered to effect such  exchange at any time after any Person  (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or any such  Subsidiary,  or any entity holding Common Shares for or pursuant to
the terms of any such plan), together with all Affiliates and Associates of such
person,  becomes the Beneficial Owner of more than 50% of the Common Shares then
outstanding.

     (b)  Immediately  upon the action of the Board of  Directors of the Company
ordering  the exchange of any Rights  pursuant to Section  24(a) and without any
further  action and without any notice,  the right to exercise such Rights shall
terminate  and the only right  thereafter of a holder of such Rights shall be to
receive that number of Common  Shares equal to the number of such Rights held by
such holder  multiplied by the Exchange  Ratio.  The Company shall promptly give
public notice of any such exchange; provided, however, that the failure to give,
or any defect in, such notice  shall not affect the  validity of such  exchange.
The  Company  promptly  shall mail a notice of any such  exchange  to all of the
holders of such Rights at their last  addresses as they appear upon the registry
books of the  Rights  Agent.  Any notice  which is mailed in the  manner  herein
provided shall be deemed given,  whether or not the holder  receives the notice.
Each such notice of exchange  will state the method by which the exchange of the
Common  Shares for Rights  will be  effected  and,  in the event of any  partial
exchange,  the number of Rights which will be  exchanged.  Any partial  exchange
shall be  effected  pro rata based on the number of Rights  (other  than  Rights
which have become void pursuant to the provisions of Section  11(a)(ii)  hereof)
held by each holder of Rights.

     (c) In any  exchange  pursuant  to this  Section  24, the  Company,  at its
option, may substitute  Preferred Shares (or equivalent preferred stock, as such
term is defined in Section  11(b)  hereof) for some or all of the Common  Shares
exchangeable  for Rights,  at the initial rate of one  Preferred  Share Unit (or
equivalent  preferred  stock) for each Common Share, as appropriate  adjusted to
reflect  adjustments in the voting rights of the Preferred Stock pursuant to the
terms thereof, so that each Preferred Share Unit delivered in lieu of each share
of Common Stock shall have the same voting rights as one share of Common Stock.

     (d) The Company  shall not be required to issue  fractions of Common Shares
or Preferred Share Units or to distribute certificates which evidence fractional
Common Shares or Preferred Share Units. In lieu of such fractional Common Shares
or Preferred Share Units, the Company shall pay to the registered holders of the
Right  Certificates  with  regard  to which  such  fractional  Common  Shares or



                                       26




Preferred Share Units would otherwise be issuable an amount in cash equal to the
same  fraction of the current  market value of a whole Common Share or Preferred
Share Units. For the purposes of this Section 24(d), the current market value of
a whole Common Share or Preferred  Share Unit,  shall be the closing  price of a
Common Share (as determined  pursuant to the second sentence of Section 11(d)(i)
hereof) for the Trading Day immediately  prior to the date of exchange  pursuant
to this Section 24.

     Section 25. Notice of Certain Events. (a) In case the Company shall propose
(i) to pay any  dividend  payable  in stock of any class to the  holders  of its
Preferred  Shares  or to make  any  other  distribution  to the  holders  of its
Preferred Shares (other than a regular  quarterly cash dividend),  (ii) to offer
to the holders of its Preferred Shares rights or warrants to subscribe for or to
purchase any additional  Preferred Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a  reclassification  involving only the subdivision
of outstanding  Preferred  Shares),  (iv) to effect any  consolidation or merger
into or with, or to effect any sale or other  transfer (or to permit one or more
of its  Subsidiaries  to  effect  any  sale or other  transfer),  in one or more
transactions,  of 50% or more of the assets or earning  power of the Company and
its  Subsidiaries  (taken as a whole)  to, any other  Person,  (v) to effect the
liquidation, dissolution or winding up of the Company, or (vi) to declare or pay
any  dividend  on the  Common  Shares  payable  in Common  Shares or to effect a
subdivision,   combination   or   consolidation   of  the   Common   Shares  (by
reclassification  or otherwise  than by payment of dividends in Common  Shares),
then,  in each such  case,  the  Company  shall  give to each  holder of a Right
Certificate,  in  accordance  with Section 26 hereof,  a notice of such proposed
action,  which  shall  specify  the record  date for the  purposes of such stock
dividend,  or  distribution  of rights or  warrants,  or the date on which  such
reclassification,    consolidation,   merger,   sale,   transfer,   liquidation,
dissolution,  or  winding  up is to take  place  and the  date of  participation
therein by the holders of the Preferred Shares, if any such date is to be fixed,
and such  notice  shall be so given in the case of any action  covered by clause
(i) or (ii)  above at least 10 days  prior to the  record  date for  determining
holders of the Preferred Shares for purposes of such action,  and in the case of
any such other action,  at least 10 days prior to the date of the taking of such
proposed  action or the date of  participation  therein  by the  holders  of the
Preferred Shares, whichever shall be the earlier.

     (b) In case the event set forth in Section  11(a)(ii)  hereof  shall occur,
then (i) the Company shall as soon as practicable thereafter give to each holder
of a Right  Certificate,  in accordance with Section 26 hereof,  a notice of the
occurrence  of such  event,  which  notice  shall  describe  such  event and the
consequences of such event to holders of Rights under Section  11(a)(ii)  hereof
and (ii) all references in the foregoing Section 25(a) to Preferred Shares shall
be deemed thereafter to refer also, if appropriate,  to Common Shares and/or, if
appropriate, other securities of the Company.

     Section 26. Notices.  Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right  Certificate  to
or on the Company  shall be  sufficiently  given or made if sent by  first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:




                                       27




        German American Bancorp
        711 Main Street
        P.O. Box 810
        Jasper, Indiana 47547-0810
        Attention: President

Subject to the provisions of Section 21 hereof,  any notice or demand authorized
by this  Agreement  to be given or made by the  Company  or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently  given or made
upon receipt if sent by registered or certified mail, postage prepaid, addressed
(until another address is filed in writing with the Company) as follows:

        UMB Bank, N.A., as Rights Agent
        P.O. Box 7015
        Kansas City, MO 64141-7015
        Attention:  Corporate Trust Department

Notices  or  demands  authorized  by this  Agreement  to be given or made by the
Company or the  Rights  Agent to the  holder of any Right  Certificate  shall be
sufficiently  given  or  made  if sent by  first-class  mail,  postage  prepaid,
addressed  to such holder at the address of such holder as shown on the registry
books of the Company.

     Section 27.  Supplements and Amendments.  The Company may from time to time
supplement or amend this Agreement  without the approval of any holders of Right
Certificates  in order to cure any  ambiguity,  to  correct  or  supplement  any
provision contained herein which may be defective or inconsistent with any other
provisions  herein,  or to make any other  provisions with respect to the Rights
which the Company may deem necessary or desirable,  including but not limited to
extending  the Final  Expiration  Date,  any such  supplement or amendment to be
evidenced  by a writing  signed by the Company and the Rights  Agent;  provided,
however,  that this  Agreement  shall not be amended in any manner  which  would
adversely  affect the interests of the holders of Rights.  This Agreement  shall
not be amended in any manner which would  adversely  affect or change the duties
of the Rights  Agent or provide  any  additional  duties or  obligations  to the
Rights  Agent.  The  Company  shall  provide  Notice to the Rights  Agent of any
supplements and amendments.

     Section 28. Successors.  All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.

     Section 29. Benefits of this Agreement.  Nothing in this Agreement shall be
construed  to give to any  Person or  corporation  other than the  Company,  the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution  Date, the Common Shares) any legal or equitable right,  remedy
or claim  under  this  Agreement  and this  Agreement  shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the Common Shares).




                                       28




     Section 30. Severability.  If any term, provision,  covenant or restriction
of this  Agreement  is  held  by a court  of  competent  Jurisdiction  or  other
authority  to be invalid,  void or  unenforceable,  the  remainder of the terms,
provisions,  covenants and  restrictions  of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.

     Section  31.  Governing  Law.  This  Agreement,  each  Right and each Right
Certificate  issued  hereunder  shall be deemed to be a contract  made under the
laws of the State of  Indiana  and for all  purposes  shall be  governed  by and
construed in accordance  with the laws of such State  applicable to contracts to
be made and performed  entirely  within such State,  except for Sections 18, 19,
20, and 21 hereof and  relations  to rights,  duties and  obligations  of Rights
Agent,  which shall be  governed  by the laws of the State of  Missouri  without
reference to its choice of law rules.

     Section 32.  Counterparts.  This Agreement may be executed in any number of
counterparts and each of such  counterparts  shall for all purposes be deemed to
be an original,  and all such counterparts shall together constitute but one and
the same instrument.

     Section  33.  Descriptive  Headings.  Descriptive  headings  of the several
Sections of this  Agreement  are  inserted  for  convenience  only and shall not
control or affect the meaning or construction of any of the provisions hereof.




                                       29




     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed, all as of the day and year first above written.

                                GERMAN AMERICAN, BANCORP




                                By:  /s/ Mark A. Schroeder
                                   --------------------------------------------
                                   Mark A. Schroeder
                                   President and Chief Executive Officer



                                UMB BANK, N.A., As Rights Agent



                                By:  /s/ Frank Bramwell
                                   --------------------------------------------
                                   Frank Bramwell
                                   Senior Vice President



                                       30





                                    Exhibit A
                                    ---------

                            Form of Right Certificate

Certificate No. R-                                              _________ Rights

                NOT  EXERCISABLE  AFTER APRIL 26, 2010,  OR EARLIER IF
                REDEMPTION OR EXCHANGE OCCURS.  THE RIGHTS ARE SUBJECT
                TO  REDEMPTION  AT $.0001 PER RIGHT AND TO EXCHANGE ON
                THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.

                                Right Certificate

                             GERMAN AMERICAN BANCORP

     This certifies that  __________________________,  or registered assigns, is
the  registered  owner of the  number  Rights  set  forth  above,  each of which
entitles the owner thereof,  subject to the terms,  provisions and conditions of
the  Rights  Agreement,  dated as of April 27,  2000 (the  "Rights  Agreement"),
between German American Bancorp, an Indiana corporation (the "Company"), and UMB
Bank, National  Association,  as Rights Agent, (the "Rights Agent"), to purchase
from the  Company  at any time  after  the  Distribution  Date (as such  term is
defined in the Rights Agreement) and prior to 5:00 P.M.,  Eastern Standard Time,
on April  26,  2010,  at the  office of the  Rights  Agent  designated  for such
purpose,  or at the office of its successor as Rights Agent,  one  one-hundredth
(.01) of a fully paid and  non-assessable  Preferred Share (the "Preferred Share
Units") of the Company,  at a purchase price of $75.00 per Preferred  Share Unit
(the  "Purchase   Price"),   upon  presentation  and  surrender  of  this  Right
Certificate  with the Form of Election to Purchase duly executed.  The number of
Rights  evidenced by this Right  Certificate  (and the number of Preferred Share
Units which may be purchased  upon  exercise  hereof) set forth  above,  and the
Purchase  Price set forth above,  are the number and Purchase  Price as of April
27, 2000,  based on the Preferred  Share Units as  constituted  at such date. As
provided in the Rights Agreement, the Purchase Price and the number of Preferred
Share Units which may be purchased upon the exercise of the Rights  evidenced by
this Right  Certificate  are subject to  modification  and  adjustment  upon the
happening of certain events.



                                      A-1


     This Right  Certificate  is subject  to all of the  terms,  provisions  and
conditions of the Rights Agreement,  which terms,  provisions and conditions are
hereby  incorporated  herein by  reference  and made a part  hereof and to which
Rights Agreement  reference is hereby made for a full description of the rights,
limitations  of rights,  obligations  the  Company  and the holders of the Right
Certificates.  Copies  of the  Rights  Agreement  are on file  at the  principal
executive offices of the Company and the  above-mentioned  offices of the Rights
Agent.

     This Right  Certificate,  with or without  other Right  Certificates,  upon
surrender at the  principal  office of the Rights  Agent,  may be exchanged  for
another  Right  Certificate  or  Right  Certificates  of  like  tenor  and  date
evidencing  Rights  entitling the holder to purchase a like aggregate  number of
Preferred Share Units or other  securities as the Rights  evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right  Certificate or Right
Certificates for the number of whole Rights not exercised.

     Subject to the provisions of the Rights Agreement,  the Rights evidenced by
this  Certificate  (i) may be redeemed by the Company at a  redemption  price of
$.0001 per Right or (ii) may be exchanged in whole or in part for the  Company's
Common Stock, without par value.

     No fractional Preferred Share Units will be issued upon the exercise of any
Right or Rights  evidenced  hereby (other than fraction shares that are integral
multiples of one one-hundredth of a Preferred Share,  which may, at the election
of the Company,  be evidenced by depository  receipts),  but in lieu thereof,  a
cash payment will be made, as provided in the Rights Agreement.

     No holder of this Right  Certificate  shall be  entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred  Shares or of
any other  securities  of the  Company  that may at any time be  issuable on the
exercise hereof,  nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder  hereof,  as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof,  or to give or
withhold  consent to any  corporate  action or to receive  notice of meetings or
other  actions  affecting   shareholders  (except  as  provided  in  the  Rights
Agreement),  or to receive dividends or subscription  rights, or otherwise until
the  Right or  Rights  evidenced  by this  Right  Certificate  shall  have  been
exercised as provided in the Rights Agreement.

     This Right  Certificate  shall not be valid or obligatory  for any purchase
until it shall have been countersigned by the Rights Agent.


                                      A-2

     WITNESS the facsimile signature of the proper officers of the Company,  and
its corporate seal. Dated as of ___________________, 20__.


ATTEST:                                    GERMAN AMERICAN BANCORP


________________________________           By___________________________________

Countersigned:
________________________________



By______________________________
  Authorized Signature




                                      A-3

                    Form of Reverse Side of Right Certificate


                               FORM OF ASSIGNMENT
                               ------------------

               To be executed by the registered holder if such
               holder desires to transfer the Right Certificate)


     FOR VALUE RECEIVED __________________________________________ hereby sells,
assigns and transfers unto  ____________________________________________________
                               (Please print name and address of transferee)


_______________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ___________________  Attorney, to
transfer the within Right Certificate on the books of the within-named  Company,
with full power of substitution.

Dated:__________________, 20___


                                        ________________________________________
                                        Signature


Signature Guaranteed:

     Signatures  must be  guaranteed  by a member firm of a registered  national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.

                                   CERTIFICATE
                                   -----------

     The undersigned  hereby  certifies that the Rights  evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).



                                        ________________________________________
                                        Signature

                                      A-4


             Form of Reverse Side of Right Certificate --- continued

                          FORM OF ELECTION TO PURCHASE
                          ----------------------------

                      (To be executed if holder desires to
                        exercise the Right Certificate.)

To German American Bancorp:

     The undersigned  hereby  irrevocably  elects to exercise  _________  Rights
represented by this Right Certificate to purchase the Preferred  Shares,  Common
Shares or such other  securities  issuable  upon the exercise of such Rights and
requests that  certificates  for such  Preferred  Shares,  Common Shares or such
other securities be issued in the name of:

Please insert social security
or other identifying number: ___________________________________________________
________________________________________________________________________________
                   (Please print name and address)


________________________________________________________________________________
If such  number of Rights  shall not be all the Rights  evidenced  by this Right
Certificate,  a new Right  Certificate for the balance  remaining of such Rights
shall be registered in the name of and delivered to:

Please insert social security
or other identifying number: ___________________________________________________
________________________________________________________________________________
                   (Please print name and address)



Dated: _________________, 20____



                                        ________________________________________
                                        Signature


                                      A-5

Signature Guaranteed:

     Signatures  must be  guaranteed  by a member firm of a registered  national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.

                                   CERTIFICATE
                                   -----------

     The undersigned  hereby  certifies that the Rights  evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).



                                        ________________________________________
                                        Signature


                                     NOTICE
                                     ------

     The  signature in the  foregoing  Forms of  Assignment  and  Election  must
conform to the name as written upon the face of this Right  Certificate in every
particular, without alteration or enlargement or any change whatsoever.

     In the event the certification set forth above in the Form of Assignment or
the Form of  Election to  Purchase,  as the case may be, is not  completed,  the
Company  and the  Rights  Agent  will deem the  beneficial  owner of the  Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate  thereof (as defined in the Rights  Agreement) and such  Assignment or
Election to Purchase will not be honored.



                                      A-6


                                                                       Exhibit B

                          SUMMARY OF RIGHTS TO PURCHASE

                                PREFERRED SHARES

     On April 27, 2000, the Board of Directors of German  American  Bancorp (the
"Company") adopted a Shareholder Rights Plan (the "Rights Plan"). The purpose of
the Rights Plan is to deter  certain  coercive  takeover  tactics and enable the
Board of Directors to represent  effectively the interest of shareholders in the
event of a takeover attempt.  The Rights Plan does not deter negotiated  mergers
or business  combinations  that the Board of Directors  determines  to be in the
best interest of the Company and its shareholders.

     To implement the Rights Plan the Board of Directors  declared a dividend of
one preferred share purchase right (a "Right") for each outstanding common share
of the Company (the "Common Shares"). The dividend is payable to shareholders of
record on May 10, 2000 (the "Record  Date").  Each Right entitles the registered
holder to purchase from the Company one  one-hundredth of a Preferred Share (the
"Preferred  Share  Units")  at a price of $75.00 per  Preferred  Share Unit (the
"Purchase  Price"),  subject to  adjustment.  The  description  and terms of the
Rights are set forth in a Rights Agreement (the "Rights  Agreement") between the
Company  and UMB Bank,  National  Association,  as  Rights  Agent  (the  "Rights
Agent").

Rights Attach to Common Shares Initially

     Initially and until a  Distribution  Date (as defined  below)  occurs,  the
Rights are  attached to all Common  Shares and no separate  Rights  certificates
will be issued. During this initial period,

     *    the Rights are not exercisable;
     *    the  Rights  are  transferred  with  the  Common  Shares  and  are not
          transferable separately from the Common Shares;
     *    new Common  Shares  certificates  or book  entry  shares  issued  will
          contain a notation  incorporating  the Rights  Agreement by reference;
          and
     *    the transfer of any Common Shares will also constitute the transfer of
          the Rights associated with those Common Shares.

Distribution of Rights

     Separate  certificates  evidencing  the Rights will be mailed to holders of
record of the Common Shares on the "Distribution Date." The Distribution Date is
the earlier to occur of the  following  two events (or such later date as may be
determined by the Board of Directors):



                                      B-1


     *    10  business  days  following a public  announcement  that a person or
          group of affiliated or associated persons (an "Acquiring Person") have
          acquired beneficial ownership of 15% or more of the outstanding Common
          Shares; or

     *    10 business days (or such later date as may be determined by action of
          the Board of  Directors  prior to such time as any  Person  becomes an
          Acquiring  Person) after the  commencement  of, or  announcement of an
          intention to make, a tender offer or exchange  offer the  consummation
          of which would result in the beneficial ownership by a person or group
          of 30% or more of such outstanding Common Shares.

     Acquisitions  by the  following  persons  will  not  result  in the  person
becoming an Acquiring  Person:  the Company,  any subsidiary or employee benefit
plan of the  Company,  or any other  person  approved in advance by the Board of
Directors.

     After the Distribution  Date, the Rights will be tradeable  separately from
the Common Shares.  After the Distribution Date and after the Company's right to
redeem (as described  below) has expired,  the Rights will be exercisable in two
different ways depending on the circumstances as set forth below.

Right to Purchase Company Stock

     After the  Distribution  Date and after the Company's  redemption right has
expired,  each holder of a Right (except those held by the Acquiring  Person and
its affiliates and associates)  will have the right to purchase,  upon exercise,
that  number of Common  Shares (or, in certain  circumstances,  Preferred  Share
Units or other similar  securities of the Company in lieu of such Common Shares)
having a market value of two times the exercise  price of the Right,  subject to
the availability of a sufficient number of authorized but unissued Common Shares
(such right being called the "Subscription  Right"). The Subscription Right will
be  exercisable  for a 60-day period after the effective  date of a registration
statement  under the  Securities  Act of 1933,  as amended,  covering the Common
Shares (or Preferred Share Units or other securities).

Right to Purchase Acquiring Person Stock

     Alternatively,  if the Company is  acquired  in a merger or other  business
combination  transaction  or 50% or more of its  consolidated  assets or earning
power  are  sold,  each  holder  of a Right  will  thereafter  have the right to
receive,  upon the exercise  thereof at the then current  exercise  price of the
Right,  that number of shares of common stock of the acquiring  company which at
the time of such  transaction will have a market value of two times the exercise
price of the Right (such right being called the "Merger Right").  Each holder of
a Right (other than an Acquiring  Person) will continue to have the Merger Right
whether or not such holder exercises the Subscription Right.



                                      B-2


Exchange of Company Stock for Rights

     At any time after the  acquisition  by a person or group of  affiliated  or
associated  persons of  beneficial  ownership of 15% or more of the  outstanding
Common Shares or the announcement of a tender or exchange offer resulting in the
beneficial  ownership  by a Person  or  group of 30% or more of the  outstanding
Common Shares and prior to the  acquisition by such Person or group of more than
50%  outstanding  Common  Shares,  the Board of  Directors  of the  Company  may
exchange the Rights  (other than Rights owned by such person or group which have
become void),  in whole or in part, at an exchange ratio of one Common Share per
Right (subject to adjustment).

     With  certain  exceptions,  no  adjustment  in the  Purchase  Price will be
required until  cumulative  adjustments  require an adjustment of at least 1% in
such Purchase Price.  No fractional  Common Shares or Preferred Share Units will
be issued and in lieu  thereof,  an adjustment in cash will be made based on the
market price of the Common  Shares or Preferred  Share Units on the last trading
day prior to the date of exercise.

Adjustment of Shares

     The Purchase  Price  payable,  and the number of  Preferred  Share Units or
other securities issuable, upon exercise of the Rights are subject to adjustment
from time to time to prevent  dilution (i) in the event of a stock  dividend on,
or a subdivision, combination or reclassification of, the Preferred Shares, (ii)
upon the grant to holders of the Preferred  Shares of certain rights or warrants
to  subscribe  for or  purchase  Preferred  Shares  at a  price,  or  securities
convertible  into Preferred Shares with a conversion  price,  less than the then
current market price of the Preferred  Shares or (iii) upon the  distribution to
holders  of  the  Preferred  Shares  of  evidences  of  indebtedness  or  assets
(excluding  regular  periodic  cash  dividends  paid out of earnings or retained
earnings or dividends payable on Preferred Shares) or of subscription  rights or
warrants (other than those referred to above).

     The Purchase  Price  payable,  and the number of  Preferred  Share Units or
other  securities  issuable,  upon  exercise  of the Rights are also  subject to
adjustment  in the  event of a stock  split  of the  Common  Shares,  or a stock
dividend  on the  Common  Shares  payable  in Common  Shares,  or  subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.

Redemption

     At any time prior to the close of business on the tenth day  following  the
acquisition  by a  person  or group  of  affiliated  or  associated  persons  of
beneficial  ownership  of 15% or more of the  outstanding  Common  Shares or the
announcement of a tender or exchange offer resulting in the beneficial ownership
by a Person or group of 30% or more of the outstanding Common Shares and subject
to extension of the  redemption  period by the Board of Directors,  the Board of


                                      B-3


Directors of the Company may redeem the Rights in whole,  but not in part,  at a
price of $.0001 per Right (the "Redemption Price"). The redemption of the Rights
may be made  effective at such time,  on such basis and with such  conditions as
the Board of Directors in its sole  discretion may establish.  Additionally  the
Company may,  following  the time that a person has become an Acquiring  Person,
redeem the then outstanding  Rights in whole, but not in part, at the Redemption
Price provided that such  redemption is (i) in connection with a merger or other
business combination transaction or series of transactions involving the Company
in which all holders of Common  Shares are treated  alike but not  involving  an
Acquiring  Person or any person who was an Acquiring Person or (ii) following an
event  giving  rise to, and the  expiration  of the  exercise  period  for,  the
Subscription Right if and for as long as no person  beneficially owns securities
representing 15% or more of the Company's outstanding Common Shares. Immediately
upon any  redemption  of the  Rights,  the right to  exercise  the  Rights  will
terminate  and the only right of the  holders of Rights  will be to receive  the
Redemption Price.

Expiration of Rights

     The Rights will expire on April 26,  2010,  unless the  expiration  date is
extended by amendment  as  described  below or unless the Rights are redeemed or
exchanged by the Company as described above.

Amendments

     As long as the  Rights  are  redeemable,  the  terms of the  Rights  may be
amended by the Board of  Directors  of the  Company  without  the consent of the
holders of the Rights,  except that no such  amendment may adversely  affect the
interests of the holders of the Rights.

Miscellaneous

     The number of  outstanding  Rights and the number of Preferred  Share Units
issuable  upon  exercise of each Right are subject to  adjustment  under certain
circumstances.

     Because of the nature of the Preferred  Shares'  dividend,  liquidation and
voting  rights,  the value of a Preferred  Share Unit that may be purchased upon
exercise of each Right should approximate the value of one Common Share.

     Until a Right is  exercised,  the  holder  thereof,  as such,  will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.

     A copy of the  Rights  Agreement  has been filed  with the  Securities  and
Exchange  Commission  as an Exhibit to a  Registration  Statement on Form 8-A. A
copy of the Rights  Agreement is available  free of charge from the Company upon
request to the Corporate Secretary of the Company.



                                      B-4


     This summary  description of the Rights does not purport to be complete and
is qualified in its  entirety by  reference  to the Rights  Agreement,  which is
hereby incorporated herein by reference.


                                      B-5

EX-10

LOAN AGREEMENT

Between

GERMAN AMERICAN BANCORP

And

JPMORGAN CHASE BANK, N.A.

Dated as of February 28, 2005

TABLE OF CONTENTS

		Page
1.    DEFINITIONS		1
1.1	General Terms	1
1.2	Accounting Terms	4
1.3	Other Definitional Provisions	4
2.    CREDIT		4
2.1	Revolving Credit Commitment	4
2.2	Repayments and Prepayments	5
2.3	Borrower's Loan Account	6
2.4	Interest	6
2.5	Use of Proceeds	7
2.6	Term of this Agreement	7
2.7	Advances, Continuations and Conversions	7
2.8	Method of Requesting Advances, Conversions and Continuations	7
2.9	[Reserved]	8
2.10	Additional Costs, Etc	8
2.11	Indemnification for Losses	10
2.12	Taxes	10
2.13	[Reserved]	12
2.14	Certificate	12
3.    CONDITIONS OF ADVANCES		12
3.1	Notice	12
3.2	Financial Condition	12
3.3	No Default	12
3.4	Representations and Warranties True and Correct	12
4.     WARRANTIES		13
4.1	Existence; Etc	13
4.2	Financial Statements	13
4.3	Transaction is Legal and Authorized	14
4.4	No Defaults or Restrictions	14
4.5	Governmental Consent	15
4.6	Taxes	15
4.7	Compliance with Law	15
4.8	Restriction	15
4.9	No Material Adverse Change	15
4.10	Reserve for Possible Loan and Lease Losses	15
4.11	Regulatory Enforcement Actions	16
4.12	Pending Litigation	16
4.13	No Liens	16
4.14	No Misstatement	16
4.15	[Reserved]	16
4.16	Survival of Warranties	16

- - i -

5.    AFFIRMATIVE COVENANTS		17
5.1	Financial Statements	17
5.2	Regulatory Capital	18
5.3	Taxes, Assessments, Etc	19
5.4	Insurance	19
5.5	Inspection	19
5.6	Information	19
5.7	Maintenance of Existence	19
5.8	Compliance with Laws	19
5.9	Notice Re Defaults	20
6.    NEGATIVE COVENANTS		20
6.1	Indebtedness	20
6.2	Liens	20
6.3	Disposal of Interests in Bank Subsidiaries	20
6.4	Mergers or Consolidations	20
6.5	[Reserved]	21
7.    DEFAULT, RIGHTS AND REMEDIES OF LENDER		21
7.1	Defaults	21
7.2	Waiver of Demand	23
8.    MISCELLANEOUS		23
8.1	Waiver	23
8.2	Costs and Attorneys' Fees	23
8.3	Reliance by Lender	24
8.4	Parties	24
8.5	CHOICE OF LAW	24
8.6	CONSENT TO JURISDICTION	25
8.7	SERVICE OF PROCESS	25
8.8	WAIVER OF JURY TRIAL	25
8.9	SEVERABILITY	26
8.10	Payments Set Aside	26
8.11	Section Titles	26
8.12	Notices	26
8.13	Equitable Relief	27
8.14	Indemnification	27
8.15	Regulation FD	28
8.16	Counterparts	28

- - ii -

LOAN AGREEMENT

        This Loan Agreement (this “Agreement”), entered into as of the 28th day of February, 2005, between GERMAN AMERICAN BANCORP, an Indiana corporation (“Borrower”), and JPMORGAN CHASE BANK, N.A., a national banking association, being the successor by merger to BANK ONE, N.A., formerly a national banking association with its chief executive office in Chicago, Illinois (“Lender”).

W I T N E S S E T H:

        WHEREAS, Borrower desires to borrow up to Twenty Million Dollars ($20,000,000) from Lender on certain terms, and Lender is willing to make certain loans and to extend credit to Borrower of up to such amount upon the terms and conditions set forth herein;

        NOW, THEREFORE, in consideration of the terms and conditions contained herein, and of any loans or extensions of credit heretofore, now or hereafter made to or for the benefit of Borrower by Lender, the parties hereto hereby agree as follows:

1. DEFINITIONS.

1.1 General Terms.    When used herein, the following terms shall have the following meanings:

“Advance” shall mean an advance under this Agreement made by Lender to Borrower, representing a portion of the Revolving Loan which shall be either a Base Rate Advance or a LIBOR Rate Advance.

“Authorized Officer” shall mean, at any time, an individual whose signature has been certified to Lender on behalf of Borrower pursuant to a Signature Authorization Certificate actually received by Lender at such time and whose authority has not been revoked prior to such time in the manner prescribed in such Signature Authorization Certificate.

“Bank Subsidiaries” shall mean German American Holdings Corporation, The German American Bank, First American Bank, Citizens State Bank, Peoples Bank, and First State Bank, Southwest Indiana.

“Base Rate” shall mean the Prime Rate minus 50 basis points. Any change in the Base Rate shall be effective as of the effective date stated in the announcement by Lender of a change in the Prime Rate.

“Base Rate Advance” shall mean an Advance bearing interest calculated by reference to the Base Rate.

“Business Day” shall mean a day, other than a Saturday or Sunday, on which banks in Chicago, Illinois are open for the transaction of banking business and in the case of the borrowing, continuation, conversion, payment or interest rate selection of a LIBOR Rate Advance, on which dealing in Dollars are carried on between banks in the London interbank market.

“Default” shall mean the occurrence or existence of any one or more of the events described in subsection 7.1 hereof.

“Dollars” and the sign “$” shall mean freely transferable lawful money of the United States.

“Event of Default” shall mean an event which through the passage of time or the giving of notice or both would mature into a Default.

“Financing Agreements” shall mean, collectively, all agreements, instruments and documents, including, without limitation, this Agreement, and any loan agreements, notes, guarantees, intercreditor agreements, reimbursement agreements, and all other written matter that may now or hereafter be executed by or on behalf of Borrower or any other guarantor of any part of the Liabilities and delivered to Lender, together with all agreements, documents and instruments referred to therein or contemplated thereby.

“Fiscal Year” shall mean the fiscal year of Borrower, which shall begin on January 1 of each year and end on December 31.

“GAAP” shall mean generally accepted accounting principles in the United States of America as in effect on the date hereof and as applied in preparation of the Financial Statements.

“Governmental Authority” shall mean any nation or government, any state or other political subdivision thereof any entity exercising executive, legislative, judicial or regulatory or administrative functions of or pertaining to government, including without limitation the Board of Governors of the Federal Reserve System (“FRB”), the Federal Deposit Insurance Corporation (the “FDIC”) or the Indiana Department of Financial Institutions (“DFI”).

“Interest Period” shall mean with respect to any LIBOR Rate Advance, a period of three (3) months commencing on a Business Day. Each such Interest Period shall end on (but exclude) the date which numerically corresponds to such date three (3) months thereafter, provided, however, that if there is no such numerically corresponding day in such third succeeding month, such Interest Period shall end on the last Business Day of such third succeeding month. If any Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day.

“Lender” shall have the meaning given that term in the preamble hereto and shall include Lender’s successors and assigns.

- - 2 -

“Liabilities” shall mean all of Borrower’s liabilities, obligations and indebtedness to Lender of any and every kind and nature, whether heretofore, now or hereafter owing, arising, due or payable and howsoever evidenced, created, incurred, acquired or owing, whether primary, secondary, direct, contingent, fixed or otherwise (including obligations of performance) and whether arising or existing under written agreement, oral agreement or operation of law, including, without limitation, all of Borrower’s indebtedness and obligations to Lender under this Agreement and the other Financing Agreements.

“LIBOR Base Rate” shall mean, with respect to a LIBOR Rate Advance for the relevant Interest Period, the rate determined by Lender to be the rate at which deposits in Dollars are offered by Lender to prime banks in the London interbank market at approximately 11:00 a.m. London time one (1) Business Day prior to the first day of such Interest Period, in the approximate amount of the relevant LIBOR Rate Advance and having a maturity approximately equal to such Interest Period.

“LIBOR Rate Advance” shall mean an Advance bearing interest calculated by reference to the LIBOR Rate.

“LIBOR Rate” shall mean the annual rate of interest, rounded upward to the nearest 1/16th of 1% determined by Lender with respect to an Interest Period, in accordance with the following formula:

LIBOR Rate = LIBOR Base Rate divided by (1- Reserve Rate)

“Lien(s)” shall mean any lien, claim, charge, pledge, security interest, deed of trust, mortgage or other encumbrance of any kind or other arrangement having the practical effect of the foregoing or other preferential arrangement of any other kind and shall include the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement.

“Person” shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, limited liability company, corporation, institution, entity, party or government (whether national, federal, state, provincial, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof).

“Prime Rate” means that interest rate established and publicly announced from time to time by Lender as its Prime Rate; the Prime Rate may not be the lowest interest rate charged by Lender for commercial or other extensions of credit.

“Prior Agreement” means the Loan Agreement dated as of March 20, 2003, by and between Borrower and Lender.

- - 3 -

“Reserve Rate” shall mean the maximum reserve rate (including, without limitation, basic, supplemental, marginal and emergency reserve requirements), expressed as a decimal, determined by Lender to be the rate which would be applicable to the relevant Interest Period under Regulation D of the FRB (or any successor or similar regulation relating to such reserve requirements) with respect to eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D) of a member of the FRB, whether or not such fundings were outstanding.

“Signature Authorization Certificate” shall mean a certificate substantially in the form attached hereto as Exhibit B now or hereafter executed on behalf of Borrower and delivered to Lender.

“Subsidiary” shall mean any corporation, association, partnership, joint venture or other entity of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) or other equity interests in case of Persons other than corporations is at the time, directly or indirectly, owned or controlled by Borrower.

“Termination Date” shall mean August 31, 2006, or such earlier date on which the Revolving Credit Commitment shall be terminated or reduced to zero in accordance with the terms of this Agreement, including without limitation subsection 2.2(F).

1.2 Accounting Terms.    Any accounting terms used in this Agreement which are not specifically defined herein shall have the meanings customarily given them in accordance with GAAP and as used in reports filed with the FRB, the FDIC and DFI.

1.3 Other Definitional Provisions.    Whenever the context so requires, the neuter gender includes the masculine and feminine, the singular number includes the plural, and vice versa. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and references to any Article, Section, subsection, Annex, Schedule, Exhibit and like references are references to this Agreement unless otherwise specified. References in this Agreement to any Person shall include such Person’s successors and permitted assigns.

2. CREDIT.

2.1 Revolving Credit Commitment.    Provided there does not then exist a Default or an Event of Default, subject to the provisions of Section 3 below, and subject to the other provisions and conditions of this Agreement, Lender shall advance to Borrower before the Termination Date on a revolving credit basis (such advances are herein referred to, collectively, as the “Revolving Loan”), up to an aggregate amount not to exceed $20,000,000 or such lesser amount as may be specified by Borrower pursuant to subsection 2.2(F) (the “Revolving Credit Commitment”). Each advance to Borrower under this subsection 2.1 shall be in integral multiples of $100,000, subject to subsection 2.8 regarding LIBOR Rate Advances. The Revolving Loan made by Lender to Borrower under this subsection 2.1 shall be evidenced by a promissory note of even date herewith in the form attached hereto as Exhibit A (the “Revolving Note”) with the blanks appropriately completed. The unpaid balance of the Revolving Loan shall bear interest and shall be due and payable as provided in this Agreement and the Revolving Note. Payments to be made by Borrower under the Revolving Note shall be made at the times, in the amount and upon the terms set forth herein and therein. The Liabilities evidenced by the Revolving Note shall be due and payable in full on the Termination Date, unless they are due and payable sooner as otherwise provided in this Agreement.

- - 4 -

2.2 Repayments and Prepayments.

(A) The aggregate outstanding principal balance of the Revolving Loan shall not at any time exceed the Revolving Credit Commitment. Borrower shall, if at any time any such excess shall arise, promptly pay to Lender such amount for application to the Liabilities as may be necessary to eliminate the excess.

(B) Borrower may prepay all or any part of the Revolving Loan at any time upon at least one (1) Business Day’s prior irrevocable written notice to Lender of the amount of the principal prepayment, the application as between any LIBOR Rate Advance and Base Rate Advance and the Business Day for prepayment; provided, further, however, that no prepayment or payment of any LIBOR Rate Advance may be made on any day other than the last day of the Interest Period with respect thereto or if an Event of Default or Default has occurred and is continuing or would occur as a result of such prepayment or payment.

(C) Borrower will pay to Lender in immediately available funds, at its office at the address specified in subsection 8.12, or such other address as Lender shall specify in writing, all amounts payable to it under the terms of the Revolving Note and all other Liabilities, without any presentation of such Revolving Note.

(D) If any payment to be made by Borrower hereunder shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing any interest in respect of such payment.

(E) In addition to all other payments required under this Agreement and the other Financing Agreements, Borrower hereby agrees to pay to Lender a commitment fee of 15 basis points per annum on the daily unborrowed portion of the Revolving Credit Commitment from the date hereof to and including the Termination Date for amounts of $5,000,000 or less, plus 30 basis points per annum on the daily unborrowed portion for amounts greater than $5,000,000.

- - 5 -

(F) Borrower may, upon not less than one <ERROR>(1) Business Day’s prior written notice to Lender, at any time and from time to time, permanently reduce, without premium or penalty, the Revolving Credit Commitment to an amount not less than the aggregate principal balance of the Revolving Loan that is then outstanding.

2.3 Borrower’s Loan Account.    Lender shall maintain a loan account (the “Loan Account”) on its internal data control systems in which shall be recorded (i) all loans and advances made by Lender to Borrower pursuant to this Agreement, (ii) all payments made by Borrower on all such loans and advances and (iii) all other appropriate debits and credits as provided in this Agreement, including, without limitation, all fees, charges, expenses and interest. All entries in Borrower’s Loan Account shall be made in accordance with Lender’s customary accounting practices as in effect from time to time. Borrower promises to pay to Lender the amount reflected as owing by it under its Loan Account and all of its other obligations hereunder and under any of the other Financing Agreements as such amounts become due or are declared due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) pursuant to the terms of this Agreement and the other Financing Agreements.

2.4 Interest.    Borrower shall pay to Lender interest on the outstanding principal balance of (i) the Revolving Loan (other than LIBOR Rate Advances) at a fluctuating rate per annum equal to the Base Rate as from time to time in effect, and (ii) LIBOR Rate Advances, during each Interest Period applicable thereto, at a rate per annum equal to the LIBOR Rate for such Interest Period plus 1.25%, it being expressly understood and agreed that interest with respect to any Advance shall be computed by charging interest for the first day in the applicable Interest Period but not for the last day in such Interest Period; further provided, however, that following the occurrence and during the continuance of a Default, Borrower shall pay to Lender interest from the date of such Default at the rate set forth above for each of the Liabilities plus an additional three percent (3.00%) per annum on the outstanding principal balance of the Liabilities. Interest in respect of Liabilities other than LIBOR Rate Advances shall be payable (i) in arrears quarterly on March 31, June 30, September 30 and December 31 in each year (commencing on March 31, 2005), (ii) on the termination of this Agreement, and (iii) upon and during the continuance of a Default and after maturity, as provided above or, if sooner, upon demand of Lender. Interest in respect of LIBOR Rate Advances shall be payable (i) in arrears quarterly on March 31, June 30, September 30 and December 31 in each year (commencing on March 31, 2005), (ii) on the termination of this Agreement, and (iii) upon and during the continuance of a Default and after maturity, as provided above or, if sooner, upon demand of Lender. Interest under this Agreement shall be computed on the basis of a 360-day year for the actual number of days elapsed.

- - 6 -

2.5 Use of Proceeds.    The proceeds of the Revolving Loan shall be used to renew and modify indebtedness outstanding under the Prior Agreement, for the purchase from time to time of shares of Borrower common stock that Borrower may elect to purchase, to fund the payment of dividends to Borrower’s shareholders and (subject to compliance with the negative covenant of subsection 6.4) the payment of the purchase price for the purchase of businesses or assets, and for Borrower’s general corporate purposes.

2.6 Term of this Agreement.    This Agreement shall terminate (except for provisions which are stated by their terms to survive such termination) upon termination of the Revolving Credit Commitment and payment and performance in full of the Revolving Loan and all other Liabilities and termination of all other Financing Agreements.

2.7 Advances, Continuations and Conversions.    The Revolving Loan shall consist of either Base Rate Advances or LIBOR Rate Advances, as duly requested by Borrower pursuant to this Agreement. In addition, at any time prior to the occurrence of a Default or an Event of Default, Borrower may request with respect to the Revolving Loan the continuation of a LIBOR Rate Advance or the conversion of any Advance from one type of Advance to another pursuant to this Agreement; provided that continuations and conversions of all or any portion of a LIBOR Rate Advance may be made only as of the last date of the Interest Period applicable thereto; and provided, further, that such continuation would not violate any other provisions of this Agreement.

2.8 Method of Requesting Advances, Conversions and Continuations.    LIBOR Rate Advances, continuations of LIBOR Rate Advances and conversions of any Base Rate Advance to a LIBOR Rate Advance with respect to the Revolving Loan, may be made upon irrevocable written notice given to Lender by Borrower no later than 12:00 noon, Chicago, Illinois time, three (3) Business Days prior to the commencement of the Interest Period applicable thereto. In each such notice, Borrower shall specify the amount of the Advance to be made, continued or converted, and the requested effective date of the Advance, continuation or conversion. In the event that a Base Rate Advance is to be converted into a LIBOR Rate Advance or a LIBOR Rate Advance is continued or converted into another LIBOR Rate Advance, such conversion or continuation shall be automatic on the date specified by Borrower. LIBOR Rate Advances shall automatically continue as LIBOR Rate Advances at the end of the applicable Interest Period unless Borrower gives the requisite notice in accordance with procedures set forth above to convert the same as Base Rate Advances. Borrower shall not be entitled to request, convert or continue a LIBOR Rate Advance if the provisions of this Agreement would require Borrower to repay or prepay any portion of such LIBOR Rate Advance prior to the end of the Interest Period applicable to such LIBOR Rate Advance.

- - 7 -

(i) Each notice described in this subsection 2.8 shall be given by an Authorized Officer of Borrower either by telephone (but only if Lender so permits in its sole discretion), telecopy, telex, or cable, and, if by telephone promptly confirmed in writing, which shall be irrevocable by and binding on Borrower.

(ii) Lender shall be entitled to rely conclusively on each Authorized Officer’s authority to continue Advances on behalf of Borrower. Lender shall have no duty to verify the authenticity of the signature appearing on any notice or other writing delivered pursuant to this subsection 2.8 and, with respect to an oral request for the continuation of an Advance, Lender shall have no duty to verify the identity of any individual representing himself as an Authorized Officer. Lender shall not incur any liability to Borrower as a result of acting upon any telephonic notice referred to in this subsection 2.8 which notice Lender believes in good faith to have been given by an Authorized Officer or other individual authorized to continue an Advance on behalf of Borrower or for otherwise acting in good faith under this subsection 2.8 and, upon the continuation of an Advance by Lender in accordance with this Agreement, pursuant to any such telephonic notice, Borrower shall be deemed to have continued such Advance hereunder.

2.9 [Reserved]

2.10 Additional Costs, Etc. With Respect to LIBOR Rate Advances.

(i) If, in the determination of Lender, any applicable “law,” which expression, as used in this subsection 2.10, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any Governmental Authority or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to Lender by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), adopted, becoming effective, or any change in the interpretation or administration thereof, or compliance by Lender in maintaining any LIBOR Rate Advance, in each case after the date hereof, shall:

(a) subject Lender to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to LIBOR Rate Advances (other than taxes imposed on or measured by the overall net income of Lender), or

(b) change the taxation of payments to Lender of principal or interest on or any other amount relating to any LIBOR Rate Advances (other than taxes imposed on or measured by the overall net income of Lender), or

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(c) impose or increase or render applicable any special deposit, assessment, insurance charge, reserve or liquidity or other similar requirement (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by Lender, or

(d) impose on Lender any other conditions or requirements with respect to LIBOR Rate Advances, and the result of any of the foregoing is:

(I) to increase the cost to Lender of making, funding or maintaining its LIBOR Rate Advances, or

(II) to reduce the amount of principal, interest or other amount payable to Lender hereunder on account of LIBOR Rate Advances, or

(III) to require Lender to make any payment or to forego any interest or other sum payable under this Agreement,

then, and in each such case, Borrower will, upon demand made by Lender at any time and from time to time and as often as the occasion therefor may arise (so long as such demand is made on or before the later of the termination of the Revolving Credit Commitment and payment of all Liabilities), pay to Lender such additional amounts as will be sufficient to compensate Lender for such additional cost, reduction, payment or foregone interest or other sum.

(ii) Lender shall not in any event be responsible to Borrower in any way if Lender is not able for any reason beyond its control to quote a LIBOR Rate with respect to any proposed Interest Period. If, on any proposed date of determination of a LIBOR Rate, Lender shall determine (which determination shall be conclusive and binding on Borrower) that it is unable to determine the LIBOR Rate with respect to any proposed Interest Period, Lender shall promptly notify Borrower of such determination. In such event, any then pending notice by Borrower requesting (i) the conversion of any Base Rate Advance to a LIBOR Rate Advance shall be deemed withdrawn, (ii) the continuation of any LIBOR Rate Advance shall constitute a request for conversion to a Base Rate Advance, and (iii) the making of any request for a LIBOR Rate Advance shall constitute a request for a Base Rate Advance.

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(iii) If Lender determines that either maintenance of a LIBOR Rate Advance would violate any applicable law, or that deposits of a type and maturity appropriate to match fund any LIBOR Rate Advance do not accurately reflect the cost of making or maintaining such a LIBOR Rate Advance, then Lender shall suspend the availability of LIBOR Rate Advances so long as any such condition exists, and all affected LIBOR Rate Advances outstanding shall be immediately repaid upon notice to Borrower from Lender to do so or at Lender’s election converted to Base Rate Advances without further action by Borrower.

2.11 Indemnification for Losses.    Without limiting any of the other provisions of this Agreement, Borrower will, on demand by Lender, at any time and from time to time and as often as the occasion therefor may arise (so long as such demand is made on or before the later of the termination of the Revolving Credit Commitment and payment of all Liabilities), indemnify Lender against any losses, costs or expenses which Lender at any time or from time to time sustains or incurs with respect to LIBOR Rate Advances as a consequence of:

(i) the failure by Borrower to borrow, convert to or continue any LIBOR Rate Advance on the date of borrowing, conversion or continuation designated by Borrower, or

(ii) the failure by Borrower to pay, punctually on the due date thereof, any amount payable by Borrower under this Agreement, or

(iii) the accelerated payment of Borrower’s obligations under this Agreement as a result of a Default, or

(iv) any voluntary or mandatory repayment or voluntary or mandatory prepayment of any principal of any LIBOR Rate Advance on a date other than the last day of the Interest Period relating to the principal so repaid or prepaid or so converted.

Such losses, costs or expenses will include, but will not be limited to, the reimbursement for any loss, expense or cost in liquidating or employing deposits acquired to fund any affected LIBOR Rate Advance.

2.12 Taxes.

(A) Any and all payments by Borrower hereunder with respect to the Revolving Loan which are made to or for the benefit of Lender shall be made without setoff or counterclaim and free and clear of and without deduction for any and all present or future taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature, penalties, interest and all other liabilities with respect thereto (“Taxes”), excluding taxes imposed on Lender’s net income or capital and franchise taxes imposed on it by the jurisdiction under the laws of which Lender is organized or any political subdivision thereof (all such nonexcluded Taxes being hereinafter referred to as “Covered Taxes”). If Borrower or Lender shall be required by law to deduct any Covered Taxes from or in respect of any sum payable hereunder, or under the Revolving Loan or the Revolving Note (Lender shall in such case include any Person who acquires any interest in this Agreement, the Revolving Note, or the Revolving Loan pursuant to the provisions hereof) (any such Person or Lender in that event being referred to as a “Tax Transferee”), (i) the sum payable shall be increased as may be necessary so that after making all required deductions of Covered Taxes (including deductions of Covered Taxes applicable to additional sums payable under this subsection 2.12 Lender or such Tax Transferee, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions and (iii) Borrower shall pay the full amount so deducted to the relevant taxation authority or other authority in accordance with applicable law.

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(B) In addition, Borrower agrees to pay any present or future stamp, documentary, excise, privilege, intangible or similar levies that arise at any time or from time to time (i) from any payment made under any and all Financing Agreements or (ii) from the execution or delivery by Borrower of, or from the filing or recording or maintenance of, or otherwise with respect to the exercise by Lender of its rights under, any and all Financing Agreements (hereinafter referred to as “Other Taxes”).

(C) Borrower will indemnify Lender and any Tax Transferee for the full amount of (i) Covered Taxes imposed on or with respect to amounts payable hereunder, and (ii) Other Taxes, and any liability (including penalties, interest and expenses) to the extent arising therefrom or with respect thereto. Payment of this indemnification shall be made within thirty (30) days from the date Lender or such Tax Transferee provides Borrower with a certificate, certifying and setting forth in reasonable detail the calculation thereof as to the amount and type of such Taxes. Any such certificate submitted by Lender or such Tax Transferee to Borrower shall, absent manifest error, be final, conclusive and binding on all parties.

(D) Within 30 days after having received a receipt for payment of Covered Taxes or Other Taxes, Borrower will furnish to Lender, at its address referred to in subsection 8.12 the original or a certified copy of a receipt evidencing payment thereof.

(E) Without prejudice to the survival of any other agreement of Borrower hereunder, the agreements and obligations of Borrower contained in subsections 2.11, 2.12 and 2.13 shall survive the payment in full of the Liabilities and termination of this Agreement.

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2.13 [Reserved]

2.14 Certificate.    A certificate signed by an officer of Lender, setting forth any additional amount required to be paid by Borrower to Lender under any provision of subsections 2.10, 2.11, and 2.12 and the computations made by Lender, to determine such additional amount, shall be submitted by Lender to Borrower in connection with each demand made at any time by Lender upon Borrower under any of such provisions.

3. CONDITIONS OF ADVANCES.

        Notwithstanding any other provisions contained in this Agreement, the making of each Advance and the continuation of any LIBOR Rate Advance and the conversion of any Advance to another type of Advance provided for in this Agreement shall be conditioned upon the following, both before and after giving effect thereto, in each case to the satisfaction of Lender (and each request for an Advance or continuation or conversion of an Advance shall constitute a representation and warranty by Borrower on the date of such Advance, continuation or conversion, both immediately before and after giving effect thereto, all of the following statements are true and correct and all of the following conditions have been satisfied):

3.1 Notice.    (i) As to any LIBOR Rate Advance (including, without limitation, the continuation of any LIBOR Rate Advance and the conversion of a Base Rate Advance to a LIBOR Rate Advance), Lender shall have received written notice of the type required by subsection 2.8 within the time period required by subsection 2.8 and (ii) as to any Base Rate Advance, Lender shall have received by 12:00 p.m. (Chicago, Illinois time) on the date such Advance is to be made a written request (or telephonic request promptly confirmed in writing) from an Authorized Officer of Borrower for such an Advance specifying the principal amount thereof. In addition prior to continuing or converting any Advance, Lender shall have received notice as required by subsection 2.8 hereof within the time period required by subsection 2.8 and copies of all other documents required to be delivered to Lender under subsection 5.1 hereof.

3.2 Financial Condition.    No material adverse change in the consolidated financial condition or results of operations of Borrower shall have occurred at any time or times subsequent to the balance sheet date of the most recent annual financial statements provided pursuant to subsection 5.1 hereof.

3.3 No Default.    There shall not have occurred any Default or Event of Default which is then continuing.

3.4 Representations and Warranties True and Correct.    The representations and warranties of each of Borrower contained in this Agreement and in the other Financing Agreements to which Borrower is a party shall be true and correct in all material respects on and as of the date of the continuation or conversion of the Advance, as the case may be, as though made on and as of such date.

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4. WARRANTIES.

        Borrower represents and warrants that as of the date of the execution of this Agreement, and continuing so long as any Liabilities remain outstanding, and (even if there shall be no Liabilities outstanding) so long as this Agreement remains in effect:

4.1 Existence; Etc.

(a) Each of Borrower, and the Bank Subsidiaries: (i) is a corporation, bank, limited liability company, or other entity, respectively, duly organized and validly existing and in good standing under the laws of the jurisdiction of its organization as set forth on Schedule 4.1 hereto; (ii) is duly qualified as a foreign corporation and in good standing in all states in which it is doing business except where the failure to so qualify would not have a material adverse effect on Borrower or any of the Bank Subsidiaries, or their respective businesses; and (iii) has all requisite power and authority, corporate or otherwise, to own, operate and lease its properties and to carry on its business as now being conducted. Borrower and the Bank Subsidiaries have made payment of all franchise and similar taxes and in all jurisdictions, except for any such taxes: (i) (A) which are not yet due and payable, where the failure to pay such taxes will not have a material adverse effect on Borrower or any of the Bank Subsidiaries or (B) the validity of which is being contested in good faith by appropriate proceedings diligently conducted, and (ii) for which proper reserves have been set aside on the books of Borrower and the Bank Subsidiaries.

(b) Borrower’s Annual Report on Form 10-K for its fiscal year ended December 31, 2003, sets forth all direct or indirect subsidiaries of Borrower, and each class of stock of Borrower, together with the issued and outstanding shares of each class, as of December 31, 2003, and there has been no material change in such information after December 31, 2003.

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4.2 Financial Statements.    Borrower has delivered to Lender copies of the consolidated financial statements of Borrower as of and for the year ending December 31, 2003, audited by its certified public accountants (the “2003 Statements”), as included in its Annual Report on Form 10-K for its fiscal year ended December 31, 2003. The 2003 Statements are true and correct, are in accordance with the respective books of account and records of Borrower, and have been prepared in accordance with GAAP applied on a basis consistent with prior periods, and fairly and accurately present the consolidated financial condition of Borrower as of such date and the results of its consolidated operations for the year then ended. Since December 31, 2003, there has been no material adverse change in the financial condition, business, properties or operations of Borrower. In addition, Borrower has delivered to Lender copies of the reports of condition and income (hereinafter referred to as “call reports”) filed by each of the Bank Subsidiaries for the period ending December 31, 2003, and copies of Form FRY-9LP and FRY-9C filed by Borrower for the period ending December 31, 2003 (such call reports and Forms FRY-9LP and FRY-9C, together with the 2003 Statements, the “Financial Statements”). Each of such reports filed by Borrower or the Bank Subsidiaries with any Governmental Authority with respect to this Agreement, or the Revolving Credit Commitment, is true and correct and is in accordance with the respective books of account and records of Borrower and the Bank Subsidiaries, and has been prepared in accordance with applicable banking regulations, rules and guidelines on a basis consistent with prior periods, and fairly and accurately presents the financial condition of Borrower and the Bank Subsidiaries and their respective assets and liabilities and the results of their respective operations as of such date.

4.3 Transaction is Legal and Authorized.    Each Advance under the Revolving Note, the execution and delivery of this Agreement and the other Financing Agreements and compliance by Borrower with all of the provisions of this Agreement and of the other Financing Agreements are within the corporate and other powers of Borrower. This Agreement and the other Financing Agreements have been duly authorized, executed and delivered by Borrower and each of this Agreement and the other Financing Agreements is the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally, and general principles of equity.

4.4 No Defaults or Restrictions.    Neither the execution and delivery of this Agreement or any of the Financing Agreements nor compliance with their terms and conditions will conflict with or result in breach of, or constitute a default under, any of the terms, obligations, covenants, conditions or provisions of any corporate restriction or of any indenture, mortgage, deed of trust, pledge, bank loan or credit agreement, corporate charter, bylaw or any other agreement or instrument to which Borrower or any of the Bank Subsidiaries is now a party or by which any of them or any of their properties may be bound or affected, or any judgment, order, writ, injunction, decree or demand of any court, arbitrator, grand jury, or Governmental Authority, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any property or asset of Borrower or any of the Bank Subsidiaries under the terms or provisions of any of the foregoing. Neither Borrower nor any of the Bank Subsidiaries is in material default in the performance, observance or fulfillment of any of the terms, obligations, covenants, conditions or provisions contained in any indenture or other agreement creating, evidencing or securing indebtedness of any kind or pursuant to which any such indebtedness is issued, or other agreement or instrument to which Borrower or any Bank Subsidiary is a party or by which Borrower or any Bank Subsidiary or any of their respective properties may be bound or affected.

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4.5 Governmental Consent.    No governmental orders, permissions, consents, approvals or authorizations are required to be obtained and no registrations or declarations are required to be filed in connection with, or contemplation of, the execution and delivery of this Agreement or any of the other Financing Agreements, which have not been obtained or filed.

4.6 Taxes.    Borrower and each of the Bank Subsidiaries have filed all United States income tax returns and all state and municipal tax returns which are required to be filed, and have paid, or made provision for the payment of, all material taxes which have become due pursuant to said returns or to any assessment received by Borrower or any of the Bank Subsidiaries, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. Borrower is not is aware of any audit, assessment or other proposed action or inquiry of the Internal Revenue Service or any other taxing authority with respect to any tax liability of Borrower or any Subsidiary in an aggregate amount greater than $1,000,000.

4.7 Compliance with Law.    Borrower and each of the Bank Subsidiaries are in compliance with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof, having jurisdiction over the conduct of their respective businesses or the ownership of their respective properties, except where any such failure would not have a material adverse effect on the consolidated financial condition or results of operations of Borrower.

4.8 Restriction.    Except as set forth as an exhibit to Borrower’s Form 10-K for its fiscal year ended December 31, 2003, or described therein, neither Borrower nor any of the Bank Subsidiaries is a party, nor is bound by, any material contract or agreement or instrument, or subject to any charter or other corporate restriction, that is of a type that Borrower is required to file as an exhibit to its Form 10-K annual reports or otherwise describe therein.

4.9 No Material Adverse Change.    There has been no material adverse change to the business, operations, properties or assets of Borrower since December 31, 2003.

4.10 Reserve for Possible Loan and Lease Losses.    The reserve for possible loan and lease losses shown on the Financial Statements was considered by Borrower’s management to be adequate in all respects to provide for Borower’s possible specific losses, net of recoveries relating to loans previously charged off, on loans outstanding at December 31, 2003, and included an additional amount of unallocated reserves for unanticipated future losses at a level considered adequate by Borrower’s management as of December 31, 2003.

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4.11 Regulatory Enforcement Actions.    None of Borrower, or any of the Bank Subsidiaries, or any of their respective officers or directors, is now operating under any currently effective written restrictions agreed to by Borrower or any of the Bank Subsidiaries, or agreements, memoranda, or written commitments by Borrower or any of the Bank Subsidiaries (other than restrictions of general application) imposed or required by any Governmental Authority nor are any such restrictions threatened or agreements, memoranda or commitments being sought by any Governmental Authority.

4.12 Pending Litigation.    Neither Borrower nor any of the Bank Subsidiaries is party to or has received notice of any actions, suits, proceedings or written agreements pending, nor, to the best knowledge of Borrower, have any such actions, suits, proceedings or written agreements been threatened or proposed, against Borrower or any of the Bank Subsidiaries at law or in equity or before or by any federal, state, municipal, or other governmental department, commission, board, or other administrative agency, domestic or foreign which are reasonably likely to have a material adverse effect on Borrower’s condition (financial or otherwise), business or operations, on a consolidated basis; and neither Borrower or any of the Bank Subsidiaries is in default with respect to any order, writ, injunction, or decree of, or any written agreement with, any court, commission, board or agency, domestic or foreign, except where any such failure would not have a material adverse effect on Borrower or any of the Bank Subsidiaries. For purposes of this subsection 4.12, a “material adverse effect” shall not be deemed to exist with respect to a matter that involves primarily a claim for money unless the amount of such claim, including all related claims, exceeds $1,000,000.

4.13 No Liens.    Borrower is not a party to any agreement, instrument or undertaking or subject to any other restriction pursuant to which Borrower has placed, or will be required to place (or under which any other Person may place), a Lien upon any of its properties securing indebtedness, either upon demand or upon the happening of a condition, with or without such demand, except for tax liens with respect to real estate taxes not yet due and payable.

4.14 No Misstatement.    No information, exhibit, report or document furnished by Borrower or any of the Bank Subsidiaries to Lender in connection with the negotiation or execution of this Agreement or any of the other Financing Agreements contained any material misstatement of fact or omitted to state a material fact necessary to make the statements contained therein not misleading in light of the circumstances in which they were made, all as of the date when furnished to Lender.

4.15 [Reserved]

4.16 Survival of Warranties.    All representations and warranties contained in this Agreement or any of the other Financing Agreements shall survive the execution and delivery of this Agreement.

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5. AFFIRMATIVE COVENANTS.

        Borrower covenants and agrees that, so long as any Liabilities remain outstanding, and (even if there shall be no Liabilities outstanding) so long as this Agreement remains in effect:

5.1 Financial Statements.    Borrower shall deliver to Lender:

(i) as soon as available, but in any event not more than 90 days after the close of each Fiscal Year of Borrower, Borrower’s annual report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”);

(ii) as soon as available, but in no event later than forty-five (45) days after the end of each calendar quarter, a copy of all call reports, filed with any state or federal bank regulatory authority for the Bank Subsidiaries;

(iii) as soon as available, but in no event later than forty-five (45) days after the end of each calendar quarter (other than the fourth quarter), a copy of Borrower’s quarterly report on Form 10-Q as filed with the SEC; Borrower shall furnish Lender, at the same time as the annual report and the quarterly reports referred to in subsection 5.1, a quarterly compliance certificate in the form set forth as Exhibit C hereto, which certificate shall state that: (A) Borrower is in compliance in all material respects with all covenants contained in this Agreement; (B) that no Default or Event of Default has occurred or is continuing, or, if there is any such event, describing such event, the steps, if any, that are being taken to cure it, and the time within which such cure will occur; and (C) all representations and warranties made by Borrower herein (other than in subsection 4.2) continue to be true, accurate, and complete as of the date of such certificate. Such quarterly compliance certificate shall be signed by the principal executive officer or the principal financial officer of Borrower and shall also contain, in a form and with such specificity as is reasonably satisfactory to Lender, such additional information as Lender shall have reasonably requested by Borrower prior to the submission thereof;

(iv) to the extent permitted by law, promptly after the same are available, copies of: (A) each annual report, proxy or financial statement or other report or communication sent by Borrower to the stockholders of Borrower; (B) each registration statement which Borrower may file with any Governmental Authority or with any securities exchange; and (C) all special reports which Borrower may file or be required to file with any Governmental Authority or with any securities exchange that relate to the overall financial condition or results of operations of Borrower;

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(v) immediately after receiving knowledge thereof, notice in writing of all charges, assessments, actions, suits and proceedings (as well as notice of the outcome of any such charges, assessments, orders, actions, suits and proceedings) that are proposed or initiated by, or brought before, any court or governmental department, commission, board or other administrative agency, in connection with Borrower or any of the Bank Subsidiaries, other than ordinary course of business litigation or proceedings which, if adversely decided, would not have a material adverse effect on the consolidated financial condition or operations of Borrower; and

(vi) promptly upon receipt thereof, one copy of each written report submitted to Borrower by its independent auditors, and

(vii) promptly after Lender shall request the same, such other information respecting Borrower or any Bank Subsidiary, as Lender may reasonably request.

5.2 Regulatory Capital.

(i) Borrower shall, and shall cause each of the Bank Subsidiaries to maintain a “Total Risk-Based Capital Ratio” (Total Capital to Total Risk-Based Assets) in excess of ten percent (10%) at all times. All ratios set forth in this section shall be measured quarterly and shall be derived from the applicable quarterly financial statements filed with the appropriate Governmental Agency. For purposes of this Agreement, “Total Risk-Based Capital” shall be determined in accordance with the rules and regulations of the appropriate Governmental Agency, as amended from time to time.

(ii) Borrower shall, and shall cause each of the Bank Subsidiaries to maintain a “Tier 1 Risk-Based Capital Ratio” (Tier 1 Capital to Total Risk-Based Assets) in excess of six percent (6%) at all times. All ratios set forth in this section shall be measured quarterly and shall be derived from the applicable quarterly financial statements filed with the appropriate Governmental Agency. For purposes of this Agreement, Total Risk-Based Assets shall refer to the average total assets as set forth in the relevant Report for the applicable quarterly period.

(iii) Borrower shall, and shall cause each of the Bank Subsidiaries to maintain a “Leverage Ratio” (Tier 1 Capital to Average Total Assets) in excess of five percent (5%) at all times. All ratios set forth in this section shall be measured quarterly and shall be derived from the applicable quarterly financial statements filed with the appropriate Governmental Agency. For purposes of this Agreement, Tier 1 Capital shall be determined in accordance with the rules and regulations of the appropriate Governmental Agency, as amended from time to time.

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5.3 Taxes, Assessments, Etc.    Borrower shall, and shall cause each of the Bank Subsidiaries to, promptly pay and discharge all taxes, assessments and other governmental charges imposed upon Borrower or any of the Bank Subsidiaries or upon the income, profits, or property of Borrower or any of the Bank Subsidiaries and all claims for labor, material or supplies which, if unpaid, might by law become a Lien upon the property of Borrower or any of the Bank Subsidiaries, except for tax liens with respect to real estate taxes not yet due and payable. Neither Borrower or any of the Bank Subsidiaries shall be required to pay any such tax, assessment, charge or claim, so long as the validity thereof shall be contested in good faith by appropriate proceedings, and adequate reserves therefor shall be maintained on the books of Borrower and the Bank Subsidiaries.

5.4 Insurance.    Borrower shall, and shall cause each Bank Subsidiary to, maintain bonds and insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as are usually carried by owners of similar businesses and properties in the same general area in which Borrower and each Bank Subsidiary, operate, and such additional bonds and insurance as may reasonably be required by Lender.

5.5 Inspection.    Borrower shall permit and cause each Bank Subsidiary to permit Lender through its employees, attorneys, accountants or other agents, to inspect any of the properties and the corporate and financial books and records of Borrower and each Bank Subsidiary, at the locations at which such properties and books and records are kept, at reasonable times, as often as Lender reasonably may request.

5.6 Information. Borrower shall, and shall cause the Bank Subsidiaries to, provide Lender with such information concerning the business, operations, financial condition and regulatory status of Borrower and the Bank Subsidiaries as Lender may from time to time reasonably request.

5.7 Maintenance of Existence.    Borrower shall, and shall cause each Bank Subsidiary to, do or cause to be done all things necessary to maintain, preserve and renew their respective existence and rights and franchises, and comply with all related laws applicable to each of Borrower and each Bank Subsidiary, except where any such failure would not have a material adverse effect on Borrower’s consolidated financial condition or results of operations.

5.8 Compliance with Laws.    Borrower shall, and shall cause each of the Bank Subsidiaries to, comply with all applicable statutes, rules, regulations, orders and restrictions in respect of the conduct of their respective businesses and the ownership of their respective properties, except where any such failure would not have a material adverse effect on Borrower’s consolidated financial condition or results of operations.

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5.9 Notice Re Defaults.    Borrower shall promptly notify Lender, to the extent permitted by law, of the occurrence of any Default or Event of Default, regardless of the materiality thereof.

6. NEGATIVE COVENANTS.

        Borrower covenants and agrees that so long as any Liabilities remain outstanding, and (even if there shall be no Liabilities outstanding) so long as this Agreement remains in effect (unless Lender shall give its prior written consent thereto):

6.1 Indebtedness.    Borrower shall not, and Borrower shall not permit any Bank Subsidiary to create, assume, incur, have outstanding, or in any manner become liable in respect of any indebtedness for borrowed money, other than the amount of the Liabilities and other than borrowings in the ordinary course of business of the Bank Subsidiaries and in accordance with applicable laws and regulations and safe and sound banking practices. For purposes of this Agreement, the phrase “indebtedness” shall mean and include: (i) all items arising from the borrowing of money, which according to GAAP now in effect, would be included in determining total liabilities as shown on the balance sheet; (ii) all indebtedness secured by any Lien on property owned by Borrower or any Bank Subsidiary whether or not such indebtedness shall have been assumed; (iii) all guarantees and similar contingent liabilities in respect to indebtedness of others; and (iv) all other interest-bearing obligations evidencing indebtedness to others for borrowed money.

6.2 Liens.    Borrower shall not, and shall not permit any Bank Subsidiary to create, assume, incur, suffer or permit to exist (other than (i) in the ordinary course of business of the Bank Subsidiaries and in accordance with applicable laws and regulations and safe and sound banking practices, and (ii) tax liens with respect to real estate taxes not yet due and payable), any Lien of any kind or character upon or with respect to any of its assets or properties, whether owned at the date hereof or hereafter acquired, or assign or otherwise convey any right to receive income.

6.3 Disposal of Interests in Bank Subsidiaries.    Borrower shall not dispose of any stock or other interest in the equity of any of its Bank Subsidiares, by sale, assignment, lease or otherwise, now owned or hereafter acquired, without the prior written consent of Lender, which consent shall not be unreasonably withheld.

6.4 Mergers or Consolidations.    Borrower shall not, and shall not permit any of the Bank Subsidiaries to, purchase substantially all of the assets of, or merge into or consolidate with or into, any other person, entity or corporation, without the prior written consent of Lender, which consent shall not be unreasonably withheld; provided, however, that no such consent shall be required unless the purchase, merger or consolidation would be considered to involve a significant business combination as determined for purposes of the pro forma financial information filing requirements of Article 11 of Regulation S-X of the Securities and Exchange Commission.

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6.5 [Reserved]

7. DEFAULT, RIGHTS AND REMEDIES OF LENDER.

7.1 Defaults.    If any of the following events (“Defaults”) shall occur:

(A) Borrower fails to pay any of its Liabilities when such Liabilities are due or are declared due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such default is not cured within five (5) Business Days after written notice by Lender to Borrower of such failure;

(B) Borrower fails or neglects to perform, keep or observe any of its covenants, conditions or agreements contained in any of the subsections of this Agreement or any of the other Financing Agreements and such failure or neglect shall continue for thirty (30) consecutive days after written notice by Lender to Borrower of such failure or neglect;

(C) any warranty or representation now or hereafter made by Borrower to Lender is untrue or incorrect in any material respect when made, or any schedule, certificate, statement, report, financial data, notice, or writing furnished at any time by Borrower to Lender pursuant to the requirements of this Agreement is untrue or incorrect in any material respect, on the date as of which the facts set forth therein are stated or certified, or any of the foregoing omits to state a fact necessary to make the statements therein contained not misleading in any material respect;

(D) a proceeding under any bankruptcy, reorganization, arrangement of debt, insolvency, readjustment of debt or receivership law or statute is filed (i) against Borrower or any Subsidiary and an adjudication or appointment is made or order for relief is entered, or such proceeding remains undismissed for a period in excess of sixty (60) days, or (ii) by Borrower or any Subsidiary, or Borrower or any Subsidiary makes an assignment for the benefit of creditors or takes any corporate action to authorize any of the foregoing;

(E) Borrower voluntarily or involuntarily dissolves or is dissolved, terminates or is terminated;

(F) Borrower or any Bank Subsidiary becomes insolvent or fails generally to pay its debts as they become due;

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(G) Borrower or any Bank Subsidiary is enjoined, restrained, or in any way prevented by the order of any court or any administrative or regulatory agency from conducting all or any material part of its business affairs;

(H) if the FRB, the FDIC, DFI or any other Governmental Authority charged with the regulation of bank holding companies or depository institutions: (i) issues to Borrower or any Bank Subsidiary, or initiates through formal proceedings any action, suit or proceeding to obtain against, impose on or require from Borrower or any Bank Subsidiary, a cease and desist order or similar regulatory order, the assessment of civil monetary penalties, articles of agreement, a memorandum of understanding, a capital directive, a capital restoration plan, restrictions (other than board resolutions adopted at the direction of a Governmental Authority) that prevent or as a practical matter impair the payment of dividends by any Bank Subsidiary or the payments of any debt by Borrower, restrictions (other than board resolutions adopted at the direction of a Governmental Authority) that make the payment of the dividends by any Bank Subsidiary or the payment of debt by Borrower subject to prior regulatory approval, a notice or finding under subsection 8(a) of the Federal Deposit Insurance Act, as amended, or any similar enforcement action, measure or proceeding; or (ii) proposes or issues to any executive officer or director of Borrower or any Bank Subsidiary, or initiates any action, suit or proceeding to obtain against, impose on or require from any such officer or director, a cease and desist order or similar regulatory order, a removal order or suspension order, or the assessment of civil monetary penalties, unless any such orders or penalties would not reasonably be expected to have a materially adverse effect on Borrower’s consolidated financial condition or operations;

(I) if any Bank Subsidiary is notified that it is considered an institution in “troubled condition” within the meaning of 12 U.S.C. Section 1831 and the regulations promulgated thereunder, to the extent Borrower is legally permitted to disclose the reason for such consideration, or if a conservator or receiver is appointed for Borrower, or any Bank Subsidiary;

(J) if Borrower or any Bank Subsidiary continues to be in default in any payment of principal or interest for any other obligation or in default in the performance of any other term, condition or covenant contained in any agreement (including, but not limited to, an agreement in connection with the acquisition of capital equipment on a title retention or net lease basis), under which any such obligation is created the effect of which default in performance is to cause or permit the holder of such obligation to cause such obligation to become due prior to its stated maturity, unless any such acceleration of payment of any such obligation would not reasonably be expected to have a materially adverse effect on Borrower’s consolidated financial condition or operations; or

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(K) a Change of Control shall occur or Borrower shall cease to own and control all of the issued and outstanding capital stock of any Bank Subsidiary (as used herein, the term “Change of Control” shall mean at any time that (a) any individual or entity, either individually or as part of a “person” (as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) shall own, beneficially or of record, 20% or more of the issued and outstanding common stock of Borrower for purposes of this definition, “beneficial ownership” shall have the meaning set forth in Rule 13d-3 of the Exchange Act);

then Lender may, upon notice to Borrower, terminate the Revolving Credit Commitment and Lender’s obligation to make, continue and convert Advances to Borrower pursuant to this Agreement and/or declare all of the Liabilities to be immediately due and payable, whereupon all of the Liabilities shall become immediately due and payable, except that in the event a Default described in subsection 7.1(D) hereof shall exist or occur, all of the Liabilities shall automatically, without notice of any kind, be immediately due and payable. For purposes of subpart (J) of this subsection 7.1, a “material adverse effect” shall not be deemed to exist with respect to a matter that involves primarily a claim for money unless the amount of such claim, including all related claims, exceeds $1,000,000.

7.2 Waiver of Demand.    Demand, presentment, protest and notice of nonpayment are hereby waived by Borrower. Borrower also waives the benefit of all valuation, appraisal and exemption laws.

8. MISCELLANEOUS.

8.1 Waiver.    Lender’s failure, at any time or times hereafter, to require strict performance by Borrower of any provision of this Agreement shall not waive, affect or diminish any right of Lender thereafter to demand strict compliance and performance therewith. Any suspension or waiver by Lender of a Default under this Agreement or any of the other Financing Agreements shall not suspend, waive or affect any other Default under this Agreement or any of the other Financing Agreements, whether the same is prior or subsequent thereto and whether of the same or of a different kind or character. None of the undertakings, agreements, warranties, covenants and representations of Borrower contained in this Agreement or any of the other Financing Agreements and no Default under this Agreement or any of the other Financing Agreements shall be deemed to have been suspended or waived by Lender unless such suspension or waiver is in writing signed by an officer of Lender, and directed to Borrower specifying such suspension or waiver. All Defaults shall continue until the same are waived by Lender in accordance with the preceding sentence.

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8.2 Costs and Attorneys’ Fees.    Irrespective of whether any Revolving Loan is made, Borrower will promptly pay all reasonable costs and expenses of Lender incident to the transactions contemplated by this Agreement including, but not limited to, all costs and expenses incurred in connection with the preparation, negotiation, delivery, and execution of this Agreement, and in connection with any modification, amendment, alteration of this Agreement, and in connection with the enforcement or collection of this Agreement, including, without limitation, Lender’s out-of-pocket expenses and the charges and disbursements of counsel retained by Lender. Furthermore, if at any time or times hereafter Lender employs counsel in connection with any matters contemplated by or arising out of this Agreement or any of the other Financing Agreements, whether (a) to prepare, negotiate or execute (i) any amendment to or modification or extension of this Agreement, any other Financing Agreements or any instrument, document or agreement executed by any Person in connection with the transactions contemplated by this Agreement, (ii) any new or supplemental Financing Agreements, or any instrument, document or agreement to be executed by any Person in connection with the transactions contemplated by this Agreement, or (iii) any instrument, document or agreement in connection with any sale or attempted sale of any interest herein to any participant, (b) to commence, defend, or intervene in any litigation or to file a petition, complaint, answer, motion or other pleadings, (c) to take any other action in or with respect to any suit or proceeding (bankruptcy or otherwise), (d) to consult with officers of Lender to advise Lender, or (e) to enforce any rights of Lender, then in any of such events, all of the reasonable attorneys’ fees arising from such services, and any expenses, costs and charges relating thereto, including, without limitation, all reasonable fees of all paralegals and other staff employed by such attorneys.

8.3 Reliance by Lender.    All covenants, agreements, representations and warranties made herein by Borrower shall, notwithstanding any investigation by Lender, be deemed to be material to and to have been relied upon by Lender.

8.4 Parties.    Whenever in this Agreement there is reference made to any of the parties hereto, such reference shall be deemed to include, wherever applicable, a reference to the successors and assigns of Borrower and the successors and assigns of Lender, as the case may be, and the provisions of this Agreement shall be binding upon and shall inure to the benefit of said successors and assigns. Notwithstanding anything herein to the contrary, Borrower may not assign or otherwise transfer its rights or obligations under this Agreement without the prior written consent of Lender. Without in any way limiting Lender’s rights, Lender may sell participations in the Liabilities or sell or assign its rights hereunder and under the other Financing Agreements, in whole or in part, on such terms as Lender may determine.

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8.5 CHOICE OF LAW.    THIS AGREEMENT SHALL BE DEEMED TO BE EXECUTED AND HAS BEEN DELIVERED AND ACCEPTED IN CHICAGO, ILLINOIS BY SIGNING AND DELIVERING IT THERE. ANY DISPUTE BETWEEN THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS AND NOT THE CONFLICTS OF LAW PROVISIONS OF THE STATE OF ILLINOIS.

8.6 CONSENT TO JURISDICTION.    LENDER AND BORROWER AGREE THAT ALL DISPUTES BETWEEN THEM ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE OR FEDERAL COURTS LOCATED IN COOK COUNTY, ILLINOIS, BUT LENDER AND BORROWER ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF COOK COUNTY, ILLINOIS. BORROWER WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.

8.7 SERVICE OF PROCESS.    BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND IRREVOCABLY APPOINTS ICE MILLER, 135 SOUTH LASALLE STREET, SUITE 4100, CHICAGO, ILLINOIS 60603 (ATTENTION: MARK BARNES), BORROWER’S AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF PROCESS WITHIN THE STATE OF ILLINOIS. LENDER AGREES TO PROMPTLY FORWARD BY REGISTERED MAIL (NO RETURN RECEIPT REQUIRED) A COPY OF ANY PROCESS SO SERVED UPON SAID AGENT TO BORROWER AT ITS ADDRESS SET FORTH IN SUBSECTION 8.12 HEREOF. BORROWER HEREBY CONSENTS TO SERVICE OF PROCESS AS AFORESAID. BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF THE COURTS REFERRED TO IN SUBSECTION 8.6 HEREOF IN ANY SUCH ACTION OR PROCEEDING BY MAILING COPIES OF SUCH SERVICE BY REGISTERED MAIL, POSTAGE PREPAID TO IT AT SAID ADDRESS. NOTHING IN THIS AGREEMENT SHALL AFFECT THE RIGHT OF LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW BUT ANY FAILURE TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS.

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8.8 WAIVER OF JURY TRIAL.    BORROWER AND LENDER WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LENDER BORROWER ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO OR THERETO. BORROWER AND LENDER HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

8.9 SEVERABILITY.    WHEREVER POSSIBLE, EACH PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS AGREEMENT SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS AGREEMENT.

8.10 Payments Set Aside.    To the extent that Borrower makes a payment or payments to Lender or Lender exercises its rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

8.11 Section Titles.    The section titles contained in this Agreement shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties.

8.12 Notices.    Except as otherwise expressly provided herein, any notice required or desired to be served, given or delivered hereunder shall be in writing, and shall be deemed to have been validly served, given or delivered (i) three (3) days after deposit in the United States mails, with proper postage prepaid, (ii) when sent after receipt of confirmation or answerback if sent by telecopy, or other similar facsimile transmission, (iii) one (1) Business Day after deposited with a reputable overnight courier with all charges prepaid, or (iv) when delivered, if hand-delivered by messenger, all of which shall be properly addressed to the party to be notified and sent to the address or number indicated as follows:

(i) If to Lender at:

JPMorgan Chase Bank, N.A.
120 South LaSalle Street
Chicago, Illinois 60603
Attention: John L. Spalding, FVP
Telecopy:  312/661-9511
Confirmation:  312/661-6875

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(ii) If to Borrower at:

German American Bancorp
711 Main Street
P.O. Box 810
Jasper, Indiana 47547-0810
Attention: Mark A. Schroeder
Telecopy:  812/482-0745
Confirmation:  812/482-0703

or to such other address or number as each party designates to the other in the manner herein prescribed.

8.13 Equitable Relief.    Borrower recognizes that, in the event Borrower fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy at law may prove to be inadequate relief to Lender; therefore, Borrower agrees that Lender, if Lender so requests, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages and the granting of any such relief shall not preclude Lender from pursuing any other relief or remedies for such breach.

8.14 Indemnification.    Borrower agrees to defend, protect, indemnify and hold harmless Lender and each of its officers, directors, employees, attorneys, consultants and agents (collectively, the “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for and consultants of such Indemnitees; in connection with any investigative, administrative or judicial proceeding, whether or not such Indemnitees shall be designated a party thereto), which may be imposed on, incurred by, or asserted against such Indemnitees (whether direct, indirect, or consequential and whether based on any federal or state laws or other statutory regulations, including, without limitation, securities, environmental and commercial laws and regulations, under common law or at equitable cause or on contract or otherwise) in any manner relating to or arising out of this Agreement, or any act, event or transaction related or attendant thereto, the agreements of Lender contained herein, the making of the Revolving Loan, the management of the Revolving Loan or the use or intended use of the proceeds of the Revolving Loan (collectively, the “Indemnified Matters”); provided that Borrower shall have no obligation to any Indemnitee hereunder with respect to Indemnified Matters to the extent caused by or resulting from the willful misconduct or negligence of such Indemnitee. To the extent that the undertaking to indemnify, pay and hold harmless set forth in this subsection 8.14 may be unenforceable because it is violative of any law or public policy, Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Matters incurred by the Indemnitees. Parent’s and Borrower’s obligations hereunder shall survive any termination of this Agreement and the payment in full of the Liabilities.

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8.15 Regulation FD.    Lender acknowledges that Borrower may become obligated under this Agreement to disclose to Lender from time to time information regarding Borrower that may be considered material nonpublic information within the meaning of Regulation FD adopted by the Securities and Exchange Commission. Lender expressly agrees to maintain any material nonpublic information in confidence.

8.16 Counterparts.    This Agreement may be executed and accepted in any number of counterparts, each of which shall be an original with the same effect as if the signatures were on the same instrument. The delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement.

        IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year first above written.

GERMAN AMERICAN BANCORP


By:  /s/  Mark A. Schroeder Mark A. Schroeder, President and Chief Executive Officer


JPMORGAN CHASE BANK, N.A.


By:  /s/  John L. Spalding Title:  Senior VP

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$20,000,000	Chicago Illinois
	February 28, 2005

REVOLVING NOTE

FOR VALUE RECEIVED, the undersigned, German American Bancorp, an Indiana corporation ("Borrower"), hereby unconditionally promises to pay to the order of JPMorgan Chase Bank, N.A., a national banking association, being the successor by merger to Bank One, N.A. ("Lender"), at the office of Lender at 120 South LaSalle Street, Chicago, Illinois 60603, or at such other place as the holder of this Note may from time to time designate in writing, on the Termination Date (as defined in the Loan Agreement), in lawful money of the United States of American and in immediately available funds, the principal sum of TWENTY MILLION AND 00/100 DOLLARS ($20,000,000.00), or, if less, the aggregate unpaid principal amount of all advances made by Lender pursuant to Subsection 2.1 of the Loan Agreement. This Note is referred to in and was executed and delivered pursuant to that certain Loan Agreement, dated as of February 28, 2005, between Borrower and Lender (as amended, modified or supplemented from time to time, the "Loan Agreement"), to which reference is hereby made for a statement of the terms and conditions under which the loans evidenced hereby were made and are to be repaid. All terms which are capitalized and used herein (which are not otherwise specifically defined herein) and which are defined in the Loan Agreement shall be used in this Note as defined in the Loan Agreement.

Borrower further promises to pay interest at said office on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in subsection 2.4 of, or as otherwise provided in, the Loan Agreement. Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed.

Subject to the provisions contained in the Loan Agreement relating to the determination of Interest Periods for LIBOR Rate Advances, if any payment hereunder becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to the next succeeding Business Day, and interest shall be payable thereon during such extension at the rate specified above. In no contingency or event whatsoever shall interest charged hereunder, however such interest may be characterized or computed, exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that Lender has received interest hereunder in excess of the highest rate applicable hereto, Lender shall apply such excess to the reduction of the unpaid principal amount hereof or if such excess exceeds the unpaid principal balance refund such excess interest to Borrower.

Except as otherwise agreed in the Loan Agreement, payments received by Lender from Borrower on this Note shall be applied first to the payment of interest which is due and payable and only thereafter to the outstanding principal balance hereof, subject to Lender's rights to otherwise apply such payments as provided in the Loan Agreement.

At any time a Default has occurred and is continuing or as otherwise provided in the Loan Agreement, this Note may, at the option of Lender, and without prior demand, notice or legal process of any kind (except as otherwise expressly required in the Loan Agreement), be declared, and thereupon immediately shall become, due and payable. This Note shall also become immediately due and payable upon termination of the Loan Agreement.

Borrower, and all endorsers and other persons obligated hereon, hereby waive presentment, demand, protest, notice of demand, notice of protest and notice of nonpayment and agree to pay all costs of collection, including reasonable attorneys' fees and expenses.

This Note has been delivered at and shall be deemed to have been made at Chicago, Illinois and shall be interpreted and the rights and liabilities of the parties hereto determined in accordance with the internal laws (as opposed to conflicts of law provisions) and decisions of the State of Illinois. Whenever possible each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note.

This Note evidences a renewal and a modification of indebtedness evidenced by that certain Revolving Note dated March 14, 2003, in the original principal amount of $15,000,000.00 made by the Borrower payable to the order of the Bank, which indebtedness continues and subsists and is now evidenced by this Note.

Whenever in this Note reference is made to Lender or Borrower, such reference shall be deemed to include, as applicable, a reference to their respective successors and assigns. The provisions of this Note shall be binding upon and shall inure to the benefit of said successors and assigns. Borrower's successors and assigns shall include, without limitation, a receiver, trustee or debtor in possession of or for Borrower.

German American Bancorp

By:________________________

Name: _____________________

Title: ______________________

[Exhibit B - Form of Signature Authorization Certificate; Exhibit C - Form of Quarterly Compliance Certificate; and Schedule 4.1, List of German American Bancorp Subsidiaries; have been omitted from the Loan Agreement as filed with the Securities and Exchange Commission (the "SEC"). The omitted information is considered immaterial from an investor's perspective. The Registrant will furnish supplementally a copy of any of the omitted Exhibits and the omitted Schedule to the SEC upon request from the SEC.]

EX-31

Exhibit 31.1

Sarbanes-Oxley Act of 2002, Section 302 Certification for President and Chief Executive Officer

I, Mark A. Schroeder, President and Chief Executive Officer of German American Bancorp, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of German American Bancorp, (the “registrant”):

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

May 9, 2005

Date

By/s/Mark A. Schroeder

Mark A. Schroeder

President and Chief Executive Officer

EX-31

Exhibit 31.2

Sarbanes-Oxley Act of 2002, Section 302 Certification for Senior Vice President and Chief Financial Officer

I, Bradley M. Rust, Senior Vice President and Chief Financial Officer of German American Bancorp, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of German American Bancorp (the "registrant"):

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

May 9, 2005

Date

By/s/Bradley M. Rust

Bradley M. Rust

Senior Vice President and Chief Financial Officer

EX-32

Exhibit 32.1

Sarbanes-Oxley Act of 2002, Section 906 Certification for President and Chief Executive Officer

I, Mark A. Schroeder, President and Chief Executive Officer of German American Bancorp, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, (the “Periodic Report”) which this statement accompanies fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

(2) information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of German American Bancorp.

This certificate is being furnished solely for purposes of Section 906 and is not being filed as part of the Periodic Report.

May 9, 2005

Date

By/s/Mark A. Schroeder

Mark A. Schroeder

President and Chief Executive Officer

EX-32

Exhibit 32.2

Sarbanes-Oxley Act of 2002, Section 906 Certification for Senior Vice President and Chief Financial Officer

I, Bradley M. Rust, Senior Vice President and Chief Financial Officer of German American Bancorp, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, (the “Periodic Report”) which this statement accompanies fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

(2) information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of German American Bancorp.

This certificate is being furnished solely for purposes of Section 906 and is not being filed as part of the Periodic Report.

May 9, 2005

Date

By/s/Bradley M. Rust

Bradley M. Rust

Senior Vice President and Chief Financial Officer